Dáil Éireann debate -
Thursday, 26 Apr 1990

Vol. 397 No. 10

Finance Bill, 1990: Second Stage (Resumed).

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

Mr. Jacob

Last evening I was speaking on the building industry. I am sure we are all absolutely delighted that that industry is thriving at present, and not before time. From 1981 up to the last couple of years that industry went through a very bad period. The positive spin-off effects when the industry is thriving, as it is now, are well known and well appreciated by all of us. Unfortunately, this industry is still riddled with abuse in terms of tax evasion. Cowboy operators are still functioning happily in that area to the detriment of workers and bona fide builders who are prepared to work within the law and to get on with the job in a proper manner. I am delighted the Minister has taken action to stamp out that abuse and I would advocate that he continue doing so.

The Confederation of Irish Industry brought forward some proposals which I passed on to the Minister. These proposals were designed to deal with the cowboy operator and would be instrumental in further assisting the progress of the industry. I am confident that the Minister will consider the proposals carefully.

I welcome the continuing process of decentralisation recently announced by the Minister. We all know that it is a great advantage to those areas which are fortunate enough to have a Government Department set up in their midst. It has very positive social and economic implications for such areas. I have said before that the chosen location does not have to be 150 or 200 miles from Dublin to be deemed appropriate. The Minister and his colleagues should seriously consider the siting of the new forestry company, Coillte Teoranta, in County Wicklow, the premier forestry county. Wicklow has suffered serious economic setbacks in recent years and such a move by the Government would be a major shot in the arm for the county and a recognition of the commitment to forestry given by the people of Wicklow over the years. The southern part of the county is economically devastated but forestry is flourishing there and could be further developed. I urge the establishment of the headquarters of Coillte Teoranta in Wicklow. People in Wicklow have to put up with the havoc caused to county roads by the heavy trucks coming out of the forests and the locating of Coillte Teoranta there would be some compensation.

Great progress has been made in regard to farmer taxation. Farmers are often criticised for their alleged aversion to paying taxes but farmers of my acquaintance are quite willing to pay tax in a fair and equitable way. They are seeking fair treatment and equality with the PAYE sector. This is a very reasonable request. They are not saying they do not want to pay tax; they are quite prepared to do so. I would ask the Minister to consider the recommendations and requests made recently. I have written independently to him on the matter and I would ask him to consider this matter and accede to the very reasonable proposals from the farming community, perhaps before the finalisation of this Bill.

When the business expansion scheme was introduced it was considered by all to be a very positive and worthwhile scheme but, like many other such schemes, it was open to abuse. It was a major innovation and has certainly generated economic activity. The Minister has taken steps to arrest abuses but I have no doubt that people will be endeavouring to find further loopholes. The Minister will, however, keep an eye on that and in due course will address any problems. It is an excellent scheme which should be continued in view of its job creating characteristics, once the abuse factor is removed.

Inflation is now very much under control. We have reasonable interest rates and a steady and responsible approach to taxation. We are not rushing into measures which will plunge the country into difficulties such as those which prevailed up to 1987 when Fianna Fáil first took over. We are not doing anything rash but are adopting a steady, responsible and realistic approach. That is the way to progress in regard to the review of taxation and it is to the benefit of the hard-pressed PAYE sector who have been carrying the can for so long. That is recognised by the administration and we are now well on the way to correcting problems. During the next few years we will see the aims set out in the Minister's budget speech being realised, to the benefit of the country as a whole.

Yesterday my colleague, Deputy O'Donoghue, referred to the suggested closure by An Post of some 300 sub-post offices. I have already experienced the closure of rural post offices in my constituency. I wonder if the people responsible for devising this plan fully realise what a post office means in a rural area. It is a focal point where people gather. If we do away with such institutions we will kill off the rural community. I have seen it happen and villages virtually evaporate as a result. This is fact, not fiction. It is false economy. I realise that these people have to consider the economics but such a proposal would change the character of rural Ireland. I would ask the officials in An Post to think again on this particular issue and try to find other ways to cure their economic ailments.

An Ceann Comhairle

I should like to tell the Deputy that the time available to him is almost exhausted. Perhaps he would bring his remarks to a close.

Mr. Jacob

I will accede to your promptings and I will finish my contribution.

Mr. Deenihan

At the outset I welcome the improvements in the tax bands and also the exemption limits proposed in the Bill. I also welcome the setting up of the trust for community initiatives. This trust will receive corporate donations and apply them to assist suitable projects. Tax relief will be given on the corporate donations made directly to the trust. This is a welcome initiative, especially since we set up 13 rural pilot development projects thrughout the country. The trust could apply the donations to assist these pilot projects, otherwise it would be very difficult for them to get the necessary money to develop the various proposals which no doubt will be made for those areas. It is a welcome initiative and one that could be developed in the future.

Having welcomed both those aspects of the Finance Bill I regret to say I could not share the same optimism about the prospect for growth in our economy for 1990 as the Minister and his party colleagues. It seems certain that interest rates will rise again in the near future. Interest rates have risen four times in the last 12 months. A further increase seems inevitable. If there is a further increase it will discourage investment which, in turn will lead to fewer jobs being created in our economy. This will lead to more emigration and more hardship for our people. Farmers and mortgage holders are under considerable pressure because of the increases in interest rates. Farmers face the prospect of substantial decreases this year in the price of a gallon of milk which will result in the loss of 20p per gallon. This will affect farmers in all parts of the country. They are also faced with the problem of a drop in the price of calves and beef cattle. Because of that loss of income plus the increased interest rates the prospect for farmers this summer looks bleak. A number of farmers were forced to borrow large amounts of money in order to build slatted units and to take other anti-pollution measures on their farms during the past three years. They will now find that it will be very difficult to repay those loans at 18 per cent. Many of our farmers will go to the wall this summer if the present trend in prices and interest rates continues.

Deputy Noonan referred to the fact that a case must be made for introducing a new Euro loan for farmers along the same lines as that introduced in 1984-86 when farmers were experiencing severe difficulties because of weather conditions. At this stage, consideration could be given to introducing a similar type Euro loan to help them. Deputy Jacob referred to the fact that farmers, despite the public perception, are willing to pay their tax but only if they are given equal treatment with all other sectors of the community. At present it is unfair that farmers are not being allowed an allowance similar to that of the PAYE sector. Because farmers are now being taxed on a current year basis, as are the self-employed in general, farmers and the private sector should be granted the special PAYE allowance. Deputy Noonan will be introducing an amendment to give effect to that in the Finance Bill and I ask the Minister to give it serious consideration. A case was made previously that because farmers were not taxed on a current year basis they were not entitled to this allowance, but now that they are entitled to this allowance it should be granted.

The Commission on Taxation suggested that farmers should have the same concession as the PAYE sector. Not only are farmers affected by the higher interest rates but also mortgage holders. I am aware of several young families who will be forced to return to rented accommodation because they are unable to pay back their loans. I am sure the Minister is aware of similar cases. A case should have been made in the Finance Bill for a restoration of the 100 per cent mortgage interest relief and even now it is not too late for the Minister to give consideration to it. Younger families are experiencing more difficulties than families who have been paying mortgages over a period. It will create much hardship for several young families. They are entitled to some help to ease their burden and this is one way it can be done. If we cannot control interest rates we could at least give a concession to mortgage holders by restoring the full interest relief.

The increase in mortgage interest rates has affected the building of houses in our economy. It has been mentioned here already that the economy depends on the building industry. In the last few months there was a downward trend in house building. That is because of the increase in interest rates and mortgage interest rates. Young families especially in the lower and middle income groups are holding back to see what will happen. If there is not some indication that interest rates will stabilise the possibility is that those young people will remain in rented accommodation until they see some more positive signs.

I would like to refer to the whole area of capital acquisitions tax. The announcement in the budget that the thresholds for inheritance tax and gift tax would be adjusted each year to take account of inflation did not deal with the real issue or the anomalies which have been identified in capital acquisitions tax. The central fact is that thresholds have not been raised since 1978 and have now fallen so far behind property values that only a major initial increase in the thresholds, together with yearly adjustments for inflation, would significantly alter the situation. The Minister should have amended the law on inheritance tax in this Bill to take account of recent increases in the value of property.

Inheritance tax is a worry to young farmers, many of whom would be forced to borrow money or dispose of part of their holding to pay the tax. That is very unfair. It is a very bad start for many of our young farmers. It is a disincentive for farm owners to transfer their lands to their family, be it sons or daughters. It is time this whole area was looked at very seriously.

As I said, the threshold changed and this applies not only to farms. It applies to any gift or inheritance and it is particularly onerous where a family business, for example, a shop or a public house, is being transferred to a son or a daughter. In these circumstances there is no relief which corresponds to agricultural relief. The beneficiary is liable for tax on everything above the £150,000 threshold. The Minister should raise significantly the thresholds for liability and make new arrangements for transfers between brothers and sisters who have lived together all their lives. In this area as property values increase people are going to encounter more problems.

An area which has not been mentioned so far in this debate is higher education grants. As has been indicated in the recent hike in fees in UCC, it is obvious the policy of the Government is that the students will pay more for higher education rather than the State. That is wrong. The State — I know at a cost — should share most of the burden for our third level education. Fees have risen by more than the inflation rate in every year since 1980 under all Governments. It is worth noting that the amount of money this country spends on higher education is relatively low compared to other countries. Ireland spends only about 2p out of every £1 on higher education, and the fact that Ireland has a larger number of young people in the population compared with other countries must also be borne in mind. For example, in the UK there are no fees for students studying most courses in universities and polytechnics, and young Irish people going to England are exempt from fees. The whole area of third level education is becoming a major burden on the lower and middle income groups especially, and neither the budget nor this Finance Bill has recognised that fact. In this respect the PAYE sector has been victimised over the years. There should be some provision in this Finance Bill to ease their burden.

I suggest that the whole covenant system be reviewed. At the moment parents can covenant 5 per cent of their total income after allowances to one of their children for higher education purposes. This amount should be raised to 10 per cent at least and parents should be allowed to covenant more than one child. There is a case to be made — I know it will probably upset the tax base — for extending tax relief in lieu of fees paid. This could be done on a scale basis so that the richer section of the population would not benefit most and it would not be abused. Parents in the lower and middle income groups who do not qualify for grants should be granted some tax relief in lieu of the fees they pay for their children at university.

I am glad the Minister of State at the Department of Education is here today because I want to make a point. There should have been some provision in this Bill to extend section 32 of the Finance Act, 1984, which provided a means for organisations and individuals to give to the arts a donation free of corporation tax or income tax. A similar concession was made in the Finance Act, 1986, for sporting organisations, and a case could be made for having this extended to charitable organisations, seeing that most youth organisations are charitable organisations. They would benefit considerably from this.

The Chancellor of the Exchequer in England, Mr. John Major, introduced such a scheme in his budget recently to provide that companies or individuals could donate substantial amounts of money to charities and get tax relief on it. A case could be made for introducing such a scheme in this country, and I hope I will be permitted to put down an amendment to effect that on Committee Stage.

Overall, I see nothing major in this budget that would raise my hopes about the prospects of increasing employment in the coming year. Consumer spending in many sectors has gone down in the past month or so. For example, fewer cars are being sold, and in my constituency three factories went on short time after Easter because of the level of orders they have received for the next six months. If that is a reflection of what is happening in the rest of the country I cannot share the optimism the Minister propounded in his speech. We could be faced with a very difficult summer.

The GATT negotiations which will take place in October could have major implications for Irish farmers. I appeal to the Taoiseach and the Minister for Agriculture and Food to use every means at their disposal to ensure that the family farm will not be further threatened for people who grew up on the family farm and live in the heart of the country. Daily, farmers are leaving the land or thinking about leaving it. This is a very negative attitude created by the uncertainty both in Europe and now in world negotiations. It is time for this Government and the Commissioner for Agriculture to stand firm and defend the cause of the Irish farmer, especially small and medium Irish farmers. The larger farmers will survive. The small and medium farmers are the most under threat. The tax concession I proposed to be put on the same basis as PAYE would help, but there are aspects other than that affecting farmers at the moment. It will take strong Government action both at home and in the EC to offset the major disadvantages farmers are being exposed to at the moment.

Deputy Jacob and my fellow countyman Deputy O'Donoghue, referred to the closure of rural post offices. I accept that An Post are a semi-State body and enjoy a certain amount of independence but the House should have some say in their serious proposal to close about 300 sub-post offices in rural Ireland. That move will have major repercussions for rural communities. It represents a further move towards the wholesale destruction of rural Ireland. It is time that some person accepted responsibility for An Post and intervened in this decision. That may be independent of the House but the Minister cannot afford to stand idly by and allow this to happen to rural Ireland.

When the sub-post office in my village was closed recently it had serious implications for the local community, particularly the older people who must now travel a long journey to collect their pensions. That closure has caused a major disruption in their lives. If An Post are to adopt a similar attitude to other rural areas our old people will suffer greatly. It is most unfair to do this to them. An Post should be forced to reconsider that move which will affect rural communities now and in the future. I understood that every effort was being made to build up the population in rural areas but the move by An Post represents a total contradiction of that. In my view it runs contrary to stated European and Government policy.

I welcome certain provisions in the Bill such as the improvement in the tax bands and exemption limits but there is little in it that will give cause for optimism for employment creation this year.

Minister for Industry and Commerce (Mr. O'Malley)

The 1990 Finance Bill sets out proposals for some of the most fundamental changes in our taxation system for many years. It delivers in a major way on the commitments to tax reform agreed between my party and Fianna Fáil in the Programme for Government.

The 1990 budget, and the Finance Bill which translates budget proposals into legislative form, have gone beyond what many expected in the area of tax reform. They begin significantly the move towards creating a more efficient, effective and equitable tax system. There is clearly still a considerable distance to go before we have a taxation system which does more than the present one to encourage productive enterprise and endeavour and in which the burden of necessary taxation is fairly shared between taxpayers according to their ability to pay — whether they are individual or corporate taxpayers.

Among the most significant proposals in the Bill are those which cover the move announced in the budget to a single current year basis of assessment for self-employed and certain other taxpayers. This development is essential if further progress is to be made in the system of self-assessment. For this to happen it is necessary that incomes from different sources, including trading and investment income, are all assessed for tax on the same basis rather than continue with the present system under which some income is assessed on a preceding year basis while other income is assessed on a current year basis. The present system gives rise to a considerable and unnecessary administrative burden for both taxpayers and the Revenue Commissioners. Returns for two years have to be made, checked and assessed before the liability of a taxpayer for a particular year is finalised. The result is both increased and unnecessary administrative involvement and uncertainty.

The proposals now included in the Finance Bill will facilitate the introduction, in due course, of a full obligatory self-assessment system and provide greater efficiency, finality and certainty in dealing with tax returns by reducing the administrative burden for both taxpayers and the Revenue. It will release further resources to improve tax collection and enforcement. It will bring the taxation of the self-employed more into line with that of the PAYE system and in this way mark a further move towards a taxation system which is seen to be consistent and fair in its treatment of individual taxpayers.

The Bill also contains significant new proposals to tackle tax evasion and abuse. The need for determined action in this area was recognised and agreed in the Programme for Government. The proposals in the Finance Bill include many of the provisions advocated by my party for a number of years. As I have indicated, the administrative resources which the introduction of a current year basis of assessment for the self-employed will release will facilitate additional action on this area.

The business expansion scheme holds considerable potential to give an impetus to productive enterprise by providing a very attractive incentive for the introduction of risk capital. Unfortunately, a great deal of the enterprise which the scheme has fostered is of the unproductive type. Tax advisers and investors have shown considerable ingenuity and imagination in devising schemes which largely obviate the risk for investors in putting money into certain projects. This is particularly the situation in the case of certain schemes for hotel investment, schemes involving quasi-guarantees on the return to investors and schemes which seek to combine interest relief for directors in purchasing shares in their companies with BES relief.

These abuses are tackled in the proposals of this Bill. The objective is to direct BES activity back towards the type of productive, enterprising projects which involve both high risks and high potential rewards for investors; in other words, to use the BES for the type of high risk, productive enterprises it was designed to help in the first instance.

It is my observation, and that of many others, that private sector investors in Ireland tend to be unduly risk-averse.

This is one of the main reasons we have so far failed to build a strong, indigenous industrial sector in Ireland and why we still have to depend, perhaps to an unhealthy degree, on internationally mobile overseas investment as the main source of output and employment growth. It has, therefore, been disappointing but not wholly unexpected to see the way that many in the business sector in Ireland have tended to seek ways to use the BES as a relatively riskfree source of capital, in effect subsidised by other taxpayers, for relatively unproductive projects. This is the type of behaviour that the proposals in the Bill in relation to the BES aim to prevent. The economic value of the project must now become paramount, not the tax relief element of the scheme.

I have previously drawn attention to the fact that while domestic-sourced section 84 loans provide relatively cheap finance for companies trading in goods and services this is at a considerable cost to the Exchequer. A high proportion of the loans involved accrue to companies involved in non-manufacturing activities such as leasing operations where the employment content is usually low, and sometimes negligible. Even in the case of manufacturing activities section 84 loans have tended in many cases to be taken up in a way which is neither selective nor related to the developmental needs of our economy. There is, therefore, an incontrovertible need for the restrictions announced in the budget on section 84 loans and given force in the proposals included in the Finance Bill.

The volume of section 84 loans will be reduced to 75 per cent of the volume outstanding at 12 April 1989. To the extent that this new ceiling prevents the draw-down of certain section 84 loans, either negotiated or in negotiation on budget day by manufacturing projects being supported by the industrial development agencies, special transitional arrangements will apply. These arrangements will ensure that commitments already entered into during negotiations by the agencies on budget day can be honoured. The transitional arrangements are consistent with the approach taken by successive Irish Governments over the years which has ensured that commitments correctly made as part of an incentive package to support the development of new manufacturing projects are fully honoured. This has been a central feature of our approach to the promotion of industrial projects over the years and no departure from it could be contemplated.

The 10 per cent rate of corporation tax has been a powerful tool in helping the development of the manufacturing sector in Ireland. For reasons somewhat similar to those underlying the way in which the business expansion scheme has been exploited beyond what was intended or reasonable, the definition of manufacturing activities for the purpose of the 10 per cent rate of corporation tax has also widened over the years as a result of certain decisions of the courts and of the Appeal Commissioners to include activiies which could not reasonably be considered to be manufacturing in any ordinary sense. Such extended definitions of manufacturing have been at a considerable cost to the Exchequer and, thereby, to taxpayers in general.

The Bill, therefore, includes proposals to exclude from the 10 per cent rate of tax a range of activities currently benefiting from the low rate but which are clearly not the type of manufacturing activities for which the relief was intended when introduced in the 1980 Finance Act. The proposals are designed to exclude only those activities which could not reasonably be regarded as manufacturing activities. There is no intention to exclude in any way normal manufacturing activities which will continue to benefit from the 10 per cent rate of corporation tax.

Other areas where abuses of the taxation system will be tackled under the proposals in the Bill include restrictions on certain tax incentives in designated areas which were being used to avoid taxation at a level never intended when the incentives were introduced. These restrictions cover the definition of a qualifying lease for double rent allowance purposes, and the availability of double rent allowances in contrived and artificial cross letting situations or where they would result in an amount of tax foregone which is greater than the actual rent paid; and, restrictions to prevent the abuse of Shannon exempt dividends for bank guaranteed investment schemes designed primarily for tax avoidance purposes.

The Progressive Democrats have, for a considerable period of time, advocated the widening of the tax base as an essential element of tax reform. The budget and the Finance Bill proposals contain significant measures to achieve this. I have already referred to how this will be done in the case of the restrictions on the business expansion scheme and section 84 loans and by narrowing the applicable definition of manufacturing for the purpose of the 10 per cent rate of corporation tax. A further widening of the tax base will result from the phasing out of accelerated capital allowances by April 1992 — apart from those that apply in the case of the financial services centre, the Shannon customs free zone and the special incentives for buildings in the areas designated for urban renewal. These measures will also help to remove from our incentive system any bias towards the support of capital rather than employment creating investments.

In the case of projects approved for grant assistance by the industrial development agencies on or before 31 December 1990, the existing rules on capital allowances will continue to apply as a special transitional arrangement. This will ensure that commitments made by the agencies before budget day in the course of negotiations on new investment projects can be honoured in line with normal practice.

In future the Irish branches of foreign parent companies located here will be able to deduct patent royalty payments against their income for tax purposes. These royalty payments are genuine business expenses. Such payments are already allowed as a deduction against income for tax purposes in the case of an Irish resident subsidiary of a foreign company. The extension of a similar provision for branches of such companies will remove the anomaly which exists at present and help the promotional activities of the IDA.

A central objective of the proposals of the Progressive Democrats for tax reform is to reduce the standard rate of income tax to 25 per cent by 1993. This objective was fully accepted as part of the Programme for Government agreed with Fianna Fáil last summer. The Finance Bill proposals provide for a substantive move towards the achievement of this objective. The standard rate of income tax is being reduced from 32 per cent to 30 per cent and the top rate from 56 per cent to 53 per cent. Provision is also being included for a widening of the tax bands.

The result of these changes is that the marginal rate of income tax for the majority of taxpayers will fall. We have taken a significant and decisive step towards achieving the commitment we have made of having a standard rate of income tax of 25 per cent by 1993 together with one single higher rate.

These are important changes in removing the disincentive to work and to enterprise which has resulted from the increasing burden of income tax borne by taxpayers over the past 20 years. Assuming a continuation of reasonably favourable international economic conditions over the next two to three years, there is little doubt but that the commitments to income tax reform agreed in the Programme for Government will be fully achieved.

The reforms at present under way will do a great deal to tackle the enforced emigration from our country of some of our best qualified and most talented people. It is an undoubted anomaly of the labour force at present that, hand in hand with the unacceptably high levels of unemployment which persist, go unfilled vacancies for highly skilled workers. In many cases this is a direct result of the high income tax burden faced by highly qualified people who have skills that are in demand in other countries where the income tax burden is significantly lower than it is here. This is a situation that we cannot allow to persist.

The availability of a young, highly skilled, adaptable work force has been a major positive factor in promoting Ireland as a base for internationally mobile projects in the manufacturing sector, and increasingly so in service type activities in areas such as computer software design and development and financial services. As a country we have invested heavily in our educational system in achieving this potential comparative advantage. We simply cannot now undermine what we have to offer in this area by persisting with an income tax system that effectively drives some of our best qualified and most competent people into employment in other countries. That is why the Programme for Government establishes the achievement of lower income tax rates as an objective of the highest priority — an objective we are now well on the way to achieving.

Recent developments in relation to the economic integration of the European Community have removed many doubts about the commitment of the Community to the achievement of a single market by 1992. For that reason the proposals set out in the Finance Bill to reduce the standard rate of VAT from 25 per cent to 23 per cent mark an important move toward the harmonisation of indirect taxes required as part of that process and as agreed in the Joint Programme for Government. The reductions in excise duties announced in the budget will bring these rates more into line with the situation in other EC countries and make a contribution toward the control of price inflation.

When the 10 per cent rate of tax for manufacturing was introduced in 1980 assurance to potential investors as to its availability over a period sufficiently long for business planning purposes was given by the inclusion of a legislative provision that the rate would run to the end of the year 2000. That end/date is now little more than 10 years away. Major manufacturing projects considering location options at present will not be completed for a number of years. Neither will they be in full production and generating the income needed to remunerate their initial investment for some years after that again. In fact, many major projects which are being contemplated at present clearly could not be in profit until the year 2000 or later. In these circumstances uncertainty as to the rate of corporation tax which will apply to manufacturing projects after the end of the year 2000 has become an increasingly negative factor in seeking to promote industrial projects in Ireland in recent years. This uncertainty has affected potential projects not only of overseas origin but also projects of domestic origin which, increasingly, in recent years have been considering the possibility of locating activities in other countries. This degree of uncertainty cannot be allowed to continue.

These difficulties have been exacerbated by the fact that corporation tax rates facing manufacturing enterprises have been falling steadily in other European countries over the past ten years so that the 10 per cent rate of tax here is no longer as attractive as it was when it was introduced in 1980. This is especially true when account is taken of the enhanced level of incentives for new manufacturing projects available across Europe compared with the situation 10 years ago — including the availability of zero corporate tax rates for manufacturing projects in certain regions of many European Community countries.

Given the present unacceptably high level of unemployment, the real difficulties in reducing it and the need to remove any obstacles to achieving such a reduction the Government have decided that uncertainty in relation to the rate of taxation that will apply to the manufacturing sector after the end of the year 2000 should be removed by announcing now the continuation of the 10 per cent rate of taxation for manufacturing to the end of the year 2000. An amendment to give effect to this decision will be introduced by the Government on Committee Stage.

I understand that in the course of the debate yesterday comment was made by a number of speakers that no studies appeared to have been carried out as to the desirability or otherwise of the continuation of the 10 per cent corporation tax rate for manufacturing after the year 2000. Of course, those references are not accurate. The matter has been studied in great detail over the past 12 months, in particular in my Department, in the Department of Finance and in the IDA and various international studies have been commissioned as well because what is crucial here are the international comparisons.

The continuation of this incentive for a further ten year period, at least so far as manufacturing industry is concerned, was, of course, only one of the options which was considered. Several other options were considered in terms of incentives which would be directly related to the cost of labour, grants and other variants, but the overwhelming conclusion was that what is now proposed is in the best interests of this country and for the future generation of investment and employment here.

I should like to quote what one of the studies commissioned by the IDA had to say about the significance of this incentive. The Plant Location International Analysis of Ireland's International Competitiveness completed on 13 October 1989 states:

Changes in the corporation tax rate have a major impact on Ireland's relative competitiveness. The corporation tax rate increase from 10 per cent to 15 per cent reduces competitiveness significantly.

For six projects evaluated, a five point increase in the tax rate would lead top an average loss of profitability of 4.3 per cent. This would have a critical effect on the gap between Ireland and competitor locations and on likely market share of mobile investment obtained.

I want to assure the House that before the Government made this decision — it is a decision of some consequences which will have effect for many years to come — they considered various alternative possibilities open to them. These studies came before the Government and, like the great majority of those who had carried out the studies, they came to the conclusion that it would be very unwise not to take the decision which was taken. I am satisfied this is the right decision and that it is in the interests of the Irish economy.

I want to emphasise that the amendment to which I referred will be introduced on Committee State and will relate only to manufacturing industry. I do not want it to be taken from that that the other sectors to which I referred earlier will not necessarily have the benefit of the 10 per cent rate after the end of the year 2000. Unlike manufacturing, there is no great urgency in regard to those investments because the lead-in times involved are quite short and it will be time enough to include them in next year's Finance Bill.

The 1990 Finance Bill provides the legislative underpinning for the first budget introduced under the joint Programme for Government agreed between the Progressive Democrats and Fianna Fáil last June. It is one of the most substantive and important Finance Bills introduced for many years. It, therefore, fairly reflects the effective partnership that has been forged at Government between my party and Fianna Fáil. It provides clear evidence of the ability of this partnership to tackle our economic and social problems in a convincing, structured and imaginative way.

Mrs. T. Ahearn

The Finance Bill, 1990, as published, is the longest Bill introduced in the last decade. It contains a wide range of issues and its aim, according to the Minister for Finance, is to promote the development of the economy. Regrettably, I have to question its ability to provide any stimulus to our economy, to create more employment, to curb emigration and, more importantly, to improve the position of the poorer and weaker sections of our community. Consequently, the Bill is worthy of deep analysis and is in need of major amendment on Committee Stage.

I welcome the reduction in the income tax levels to 53 per cent and 30 per cent, but unfortunately I regret that no such reduction has been made for those in the middle bracket who pay 48 per cent. Many people in this category find it extremely difficult to make ends meet and are striving to survive without any allowance or privileges. They received no reduction whatsoever. In reality, the PAYE taxation relief provision contained in this Bill does not do much to help peopole at work. What has gone almost unnoticed is that the personal allowances of £2,050 and £4,100 have not been altered at all despite the fact that the tax rates have been reduced from 56 per cent to 53 per cent and from 32 per cent to 30 per cent respectively which has had little effect on the take-home pay of employees. For example, a single employee earning £5,000 will take home an extra 75p per week while a single person earning £30,000 will take home an extra £15 per week. Likewise, a married couple earning £5,000 per annum will take home an extra £1.80 per week while a married couple earning £30,000 will take home an extra £13 per week. While I welcome the reduction in the tax rates I contend not sufficient benefit will accrue to the lower paid. Surely that is a reflection of the attitude of this Government to the lower paid? There is no good news for them in this Bill.

Section 4 of this Bill provides for a reduction in the level of life assurance relief from 80 per cent to 50 per cent. This is a major reduction, a real blow, to the many responsible people whose only means of providing security for their families, in the absence of assets, is to have a life assurance policy. It is regrettable the Minister found it necessary to take this step in order to meet the cost of the budgetary income tax reliefs. It is my hope that it will not have a deterrent affect on life assurance policies in general. Nevertheless it must be admitted that a major incentive to holding life assurance has been removed by this reduction in relief.

I will turn now to the question of mortgage interest relief. The Minister congratulates himself on having left the relief on mortgage interest at 80 per cent. Steps must be taken immediately to investigate the possibility of restoring mortgage interest relief to 100 per cent. Rising interest rates along with an alarming escalation in house prices create pressure and enormous strain on young people who purchase their homes and on others, whose mortgages are extremely high, to retain them. Sadly, the reality is that in recent times an alarming number of people are being forced to put their homes on the market because of their inability to keep pace with rising mortgage interest rates.

I would seriously ask the Minister to consider giving 100 per cent relief on mortgage interest to new house buyers, say, for the first ten years. In that way they would be helped through the most expensive, demanding stage of their mortgage repayments. Surely it is good economics and sound social policy to encourage people become home owners? It is unconvincing to justify restrictions of mortgage interest relief in the light of other income tax reliefs. Indeed, reality proves that this is not good economics. While I admit the Government provide a substantial level of support for those with mortgages. I contend exceptions should be made for new house purchasers for the first ten years. They are the people subject to most strain in endeavouring to purchase their homes and remain home owners.

I welcome the extension of the qualifying period for urban renewal tax incentives for designated areas. It is not sufficient to have this provision written into this Bill; it must be applied in reality. While the scheme is excellent, if every potential area must await designation as long as my home town of Clonmel, then we must question its real benefits. The designation of the town of Clonmel has been promised on innumerable occasions. It was to have been designated before Christmas; then we were told after Christmas; then by St. Patrick's Day; we are now told it will be announced next week. At this point we await its designation impatiently. While I congratulate the Government on the initiation of this scheme, it will prove to be useless unless there is considerable progress made by the relevant Department in this regard.

The provisions of this Bill are a major disappointment from an agricultural point of view. We must remember that a strong, dynamic agricultural industry is the backbone of our economy. It is regrettable the Minister did not avail of this opportunity to bring about the reform of inheritance tax so urgently needed. While I welcome the indexation of reliefs and allowances, nonetheless to ensure the survival of many family farms and removal of the threat of misery and impoverishment for many young farmers the threshold applicable to inheritance tax must be raised. It is unbelievable that that threshold still remains at the 1976 level. It must be raised by way of amendment on Committee Stage. It is essential that it be adjusted upwards to a realistic level taking account of prevailing land prices and the present high value of milk quotas. Unless the Minister gives this matter his urgent attention the threat will remain to many farmers' livelihoods.

It is my belief that inheritance tax was never intended to be applied to many of the people who now find themselves saddled with it. What was intended originally to be a wealth tax — because of the present high value of land and increasing value of milk quotas — is now applicable to very smallholders at a level they are incapable of paying. Indexation is not sufficient; the relevant threshold must be raised. Many young farmers who today experience difficulty developing an agricultural base, particularly in acquiring a milk quota, are threatened further by this penal inheritance tax.

If Irish agriculture is to develop, to compete successfully on the larger European market, our young farmers must be given incentives. The sooner the Minister realises that inheritance tax, in its present form, is a major threat to many family farms the better. Unless he avails of this opportunity to adjust the 1976 threshold upwards, then it will be the Government who will be responsible for crippling Irish agriculture.

I welcome the introduction of the current year basis of assessment for the self-employed, replacing a cumbersome system and we hope leading to greater efficiency. Surely the provisions of a Finance Bill should aim at creating equality? Yet, discrimination is created in this area in that its provisions do not grant a PAYE allowance to farmers and the self-employed in conjunction with the introduction of that current year basis of assessment. A few moments ago the Minister for Industry and Commerce, speaking on the introduction of the current year basis of assessment said:

It will bring the taxation of the self-employed more into line with that of the PAYE system and in this way mark a further move towards a taxation system which is seen to be consistent and fair in its treatment of individual taxpayers.

I cannot understand why the Minister does not admit that the PAYE allowance has not passed on to the self-employed and farmers. This is a serious omission from this Bill. We must remember that the PAYE allowance was first introduced in 1980. The justification for its introduction given by the then Minister for Finance was to offset the disadvantage to PAYE taxpayers, who were the only taxpayers assessed on a current year basis. Now that farmers and the self-employed will be taxed on a current year basis of assessment there is indeed justification for an extension of the PAYE allowance to them. There is no justification whatsoever in depriving them of the equivalent of the PAYE allowance. Indeed, as a result of the provisions in this Bill tax allowances in respect of a family farm will amount to £2,172 less than a corresponding PAYE family with both spouses working. This is a major difference between the two categories and the Minister's refusal to grant them equivalent allowances is nothing short of blatant discrimination. Farmers are now paying virtually the same rate of PRSI as PAYE taxpayers, 7.25 per cent as against 7.75 per cent. Therefore the Finance Bill should allow them to receive the £286 allowance given to PAYE taxpayers. All sections of the community must pay their fair share of taxation but they must also get their fair share of allowances. Therefore I urge the Minister to consider granting the PAYE and PRSI allowances to both farmers and the self-employed.

The Bill, as the Minister has said, is a major and lengthy one and therein lies its importance and impact. My one regret is that it fails to bring about more equity and fairness in the personal taxation system. I also regret the Minister's refusal to correct all the flaws in the inheritance taxation system and that he has only gone half way. The Bill contains no strategy for dealing with either the symptoms or the disease of rising interests rates. While its aim is to achieve more economic growth and jobs, again I regret to say that it has no hope of achieving this aim and therefore is a major disappointment.

Minister of State at the Department of Tourism and Transport (Mr. Lyons)

Tá an-áthas orm seans a bheith agam páirt a ghlacadh sa díospóireacht ar an mBille Airgeadais atá os comhair an Tí.

The purpose of the Finance Bill is to give statutory effect to the taxation measures announced in the budget. It also makes a number of miscellaneous financial provisions. The Finance Acts are of course one of the main instruments of financial and economic policy in the State and the broad aim of the Government in a Finance Bill is to continue to build on the success of the constructive and developmental policies adopted by the Government during the past three years.

The tourism and transport sectors of the economy have made tremendous strides during the past three years. I need hardly remind the House that the development of the tourism sector has been given priority attention by the Government. Tourism, because of its potential for job creation and generating foreign earnings, is of vital importance to the development of the economy. During 1989 there was a continuation of the tremendous upsurge in tourism which started back in 1987 when we came into Government. The performance of tourism in 1989 broke new barriers. Estimates show that the number of overseas visitors grew by over 15 per cent to 2.8 million. Foreign tourism revenue more than kept pace with this growth and was close to the £1 billion mark. In the three year period, 1987-89, the number of visitors increased by 900,000 or almost 50 per cent while revenue increased pro rata. This increased tourism activity has been responsible for the creation of 18,000 new jobs in that period.

This performance highlights the enormous growth potential of the industry and justifies the priority which we in Government have afforded tourism since assuming office. The results have been brought about by a series of progressive and co-ordinated measures initiated by the Government in areas such as access transport, product development, marketing, involving the State agencies, private sector and industry alike. The new partnership being forged between the Government and the industry has played a vital role in restoring growth to tourism. The results are that the industry is now on course for achieving the five year growth targets set by the Government in 1987 for a doubling of visitor numbers and the creation of 25,000 new jobs by 1993.

When that programme was introduced many people were sceptical and indicated that the programme was too ambitious and the targets were not likely to be achieved. We realised that the targets were ambitious but were confident they were realisable. As the House is well aware, Ireland is on the brink of an exciting new decade with international travel forecast to increase by 6 per cent during the next ten years and travel to Ireland targeted to double by 1993. We are well on the way to ensuring the development of a tourism industry which can compete and prosper in the decades ahead when tourism will become the world's biggest economic activity.

Having said this it is vital that we remember that sustained success can only come about through vigilant attention to planning in all areas of tourism-manpower, marketing, product, financial feasibility, research, service and environment. Above all, there is a need to recognise the ultimate limitation of all growth and its relationship to environmental conservation. It is the latter on which, to a major degree, our tourism industry depends and we must all be aware of the inherent dangers in overdevelopment and over-exploitation of natural resources. Ireland, like any other country with an active tourism industry, has many problems to face and resolve. These problems have been identified and we continue, in co-operation with all others I have mentioned, to resolve these problems. The good news is that the results to date, for 1988 and 1989, show that the industry has responded magnificently to these challenges and that investment in new tourism products and infrastructure in Ireland has reached an all-time high.

We have pinpointed the importance which tourism is to have in the development of our economy for at least the next three years. To facilitate investment and job creation the Government have also decided the respective roles the public and private sectors need to play in the development of the industry. In this regard I cannot over-stress the importance of local initiatives in tourism promotion. It is fair to say the Government's management of tourism has been as flexible as possible during the past three years, allowing the administrative structures and investment institutions to operate in a climate of confidence and growth.

The operational programme for tourism announced in January of this year is critical to the achievement of the Government's ambitious targets. Under this programme £146 million in EC Structural Funds will be made available for investment in our tourism product by both the public and private sectors. Investment will be directed at extending and upgrading the range and quality of the product as well as towards marketing and training. It is expected that the programme will generate total investment of well over £300 million. When account is taken of other investment outside of the programme in areas such as accommodation, catering and transport services, total investment over the period of the programme 1989-93 is likely to top the £600 million mark.

Investment in our tourism amenities and attractions will be complemented during the next four years by a range of other European Community-assisted works in the areas of access transport, roads and environmental services all of which are crucial to the overall development of the industry. In the coming years we should see radical improvements in our tourism plant which will ensure that we have a world class saleable product which will generate a significant increase in tourist traffic and create the required additional 25,000 new jobs which has been set as a target by us for the industry.

The Government's initiative on tourism and aviation has ensured a continuation of growth of passenger traffic at State airports. Total passenger numbers through the airports in 1989 was over seven million, an increase of 13 per cent on 1988. I am very happy to say that growth in Cork Airport rose by 16 per cent in 1989 to 627,000 passengers, a very substantial improvement which augurs well for the future. The substantial increase in traffic through State airports over the past few years looks set to continue and a consequence has been extra pressure placed on existing facilities. To relieve that pressure and provide for continued growth in passenger numbers, it is intended that the major capital investment programme undertaken in recent years will be expanded into the 1990s. Expenditure of up to £21 million has been authorised for State airport development in 1990. Projects planned for commencement this year include an extension of the passenger terminal and car parking facilities at Dublin Airport. A new extension is being provided at Cork Airport and work on this project is currently underway. The programme also includes improvement to the passenger terminal and other facilities at Shannon Airport.

Under the national development programme expenditure of the order of £100 million is envisaged in the period up to 1993. This programme will provide first rate international facilities for both passenger and freight traffic to cater for the expected increases in traffic which will stem from further liberalisation of air transport within the Community and also economic growth.

Traffic through the regional airports has also experienced significant growth in recent years. Passenger movements through this network rose from 280,000 in 1988 to over 400,000 in 1989. This growth is expected to continue this year and in the years ahead. Development of the regional airports is an essential element in the creation of a complementary and integrated national network and is also an essential element in the Government's access transport policy on strategy to reduce Ireland's peripherality. Financial assistance totalling £5 million was given in 1988-89 for the upgrading of facilities at these airports. Further investment in regional airports is under consideration in the context of EC Structural Funds. The planned expenditure on airport infrastructure is necessary not only to cater for the growth in passenger traffic but also for the growth in freight as we gear ourselves to the needs of the Single Market, the achievement of which is now less than 1,000 days away.

The Government's National Development Plan 1989-1993 published last year focused national and Community attention on the apparent disadvantages which Ireland will have to face in the Single European Market. Principal among these is the fact that transport costs for the Irish exporters to Europe account for between 9 per cent and 10 per cent of export sales values, a figure which is approximately twice that incurred by our counterparts trading with one another on the European mainland. The future performance of the Irish economy requires that this gap in competitiveness be reduced significantly. There are many facets to this problem but a key requirement which the European Commission has accepted in principle is infrastructural investment. This investment is being directed at reducing, as far as possible, the locational and cost disadvantages which arise because of Ireland's peripherality in the Community. The strategic emphasis is on improving access to Community markets. A major expansion on upgrading of facilities will, accordingly, need to be undertaken at Irish ports as well as at airports in order to meet the future needs of Irish trade and tourism in the EC. In addition, road and public transport networks will require to be substantially improved to our key ports and airports in particular.

On foot of the commitment from the EC to provide Structural Funds money to assess and assist such infrastructural developments, the Department of Tourism and Transport are preparing, in conjunction with other relevant Departments, an operational programme for roads and other transport infrastructure which will be formally submitted to the European Commission soon. The Minister and I are hopeful that the necessary EC Structural Funds money will become available for these new developments in the autumn of this year.

In association with these planned investments, the Department have commissioned a major consultancy study the main objective of which is to recommend and evaluate possible investment strategies appropriate to the development of better sea and air freight services to our major Community trading partners. This study which should be available within two months is being steered by a committee representative of the Department of Tourism and Transport and the Department of the Marine as well as the European Commission. The study will examine organisational factors in the Irish transport sector which affects the competitive position of Irish exports and exporters vis-à-vis our European trading partners. Recommendations arising from the consultancy study will be given careful consideration with a view to improving Ireland's links with our Community partners.

The Government have pursued a radical and dynamic air transport policy both at bilateral level and within the European Community having regard to the fundamental importance of air transport for the development and expansion of our economy in terms of trade, industrial, tourism and social relations with the EC and the rest of the world and bearing in mind Ireland's location on the periphery of Europe.

The second phase of air transport liberalisation in the EC is a major priority in the transport programme of Ireland's Presidency during which it will be adopted by the Council of Transport Ministers. During the recent Council of Transport Ministers meeting substantial progress was made in developing the measures which form the second phase package and there is no doubt these measures will result in more open and competitive air transport within the Community which will enable Irish airlines to build on the success achieved under the terms of the initial phase of liberalisation which came into effect in January 1988. While the Government will continue to support the dismantling of unnecessary restrictive regulations and intervention in the air transport market, they also recognise the need for a balanced approach which promotes healthy competition and, at the same time, deals with predatory or exploited practices.

The success of the Government's liberal and forward-looking policies on air transport are there to be seen in terms of passenger growth which has seen passenger throughput at our airports virtually double over the past five years. This growth has been paralleled by the rapid development and expansion at regional airports most of which are now served by direct services to the UK and by other connections at Dublin to a wider range of international destinations. In addition, the recent decision to modify the requirements in relation to transatlantic charter services in order to allow charter flights to operate directly between North America and Cork and Connacht Regional Airports should result in new charter business being brought to these airports and the regional hinterland which they service. I know that Cork interests are already active in making arrangements to exploit to the fullest extent possible the change of circumstances of that airport. All of the foregoing developments are bringing and will continue to bring significant benefits to tourism and industrial development at both regional and national level.

Turning to more immediate issues which have a bearing on tourism and transport plans for 1990 I am glad to report that the Government grant of £500,000 together with the repayable loan of £500,000 which was made available to Swansea-Cork Ferries Limited for the provision of a service in 1990, have ben taken up by the company. The service will commence on 9 May and will operate to the end of September 1990. I expect that the service will be of significant benefit to tourism interests in the south-west region, and in that regard, I am glad to report that the response so far to the service has been very encouraging. Indeed, the promotional drive by the company in the south-west is also very encouraging.

In a general context, the Government fully support the maintenance and expansion of our ferry services in the interests of tourism and trade. I must stress, however, that it is Government policy that access transport services should operate on a commercial basis. In those circumstances, Swansea-Cork Ferries Limited have been informed that the Government have decided that no further Exchequer assistance will be available to the company from 1990 onwards. Judging by the initial impact of the service and the encouraging signs that are there for the company to provide the service, I am confident that this need will not arise. Of course, it is now up to the people of the Cork and Kerry region to support the service and prove that a self-sustaining service can be maintained beyond 1990. In this matter, I know the people of the south and south-west will not be found wanting.

The B & I have recently negotiated improved sailing slots at Holyhead port, which I believe will help the company's performance in 1990 and beyond. I am confident that B & I management and staff will continue in their efforts to turn the company around and make it a commercially viable concern. Although substantial progress has been made, major challenges lie ahead and it should be clear to everybody concerned that there is a long way to go. Last year, the B & I reported a net loss of just under £1.5 million as compared to a loss of £10.7 million in 1987 and this represents an improvement of over £9 million in just two years. We are all aware that legislation giving effect to an increase of £7 million in the authorised share capital of the company has recently been passed by the Oireachtas. We will continue to monitor the performance of the B & I.

The continued growth in air traffic has given rise to the need to expand the capacity of the national airline as well as the need, to which I have already referred, to expand and develop the airports. The estimated expenditure for the 1990 public capital programme by Aer Lingus amounts to over £189 million, or more than double the previous year's out-turn. The bulk of this expenditure relates to fleet replacement — £131 million approximately. This covers the scheduling of eight new aircraft for delivery to the company this year, bringing to 14 the number of new aircraft acquired by the company since 1987. The need for these new aircraft reflects the expansion in traffic arising from the general liberalisation of European air transport and the increase in inbound tourism resulting from Government policy. In addition to the airline's expenditure on aircraft, the company will also be making substantial investment in airline related activities, most notably the establishment of a wide bodied hangar at Dublin Airport. This project, which involves an investment of £35 million, is scheduled to come on stream in early 1991. It will be capable of servicing the largest aircraft currently in operation, notably the latest Boeing 747-400, and the new facility will be targeted at a world market.

Substantial IDA grants have been approved by the Government for the project which is expected to create 560 new jobs mainly for skilled people by 1997. This development is very much in the spirit of the Programme for National Recovery to which Aer Lingus are making a substantial contribution in terms of employment creation, not only in their subsidiary companies but also in the frontline areas of their air transport business.

Aer Rianta like Aer Lingus have been looking forward and outward in their development plan. The company's achievement in securing very valuable joint venture contracts with the Soviet airline, Aeroflot, was a very major breakthrough. These activities commenced in 1988 with the establishment of facilities for the painting and refurbishment of aircraft at Shannon and the opening of duty free shops at Moscow Airport. In summer 1989 duty free shops were also opened at Leningrad Airport. Onboard sales on Aeroflot international flights out of Moscow also commenced in 1989. A downtown shopping centre in the Pribaltiskava Hotel — I do not know how I got my tongue around that — in Leningrad was also opened on a joint venture basis in December 1989.

Other joint venture projects in the USSR include the establishment of duty free shops at Vyborg on the Finnish border, Kiev and Tashkent which are also due to open in 1990. Arising from the company's strong relationship with Aeroflot, other business opportunities are being developed by Aer Rianta in Eastern Europe. The have also recently secured a contract for the setting up and management of a new duty free shopping complex at Bahrain airport. These developments are influenced by Government policy for the State sector to use their resources to the best advantage of the national economy.

The expansion of aviation activity both in Ireland and worldwide has had an unfortunate side effect in adding to air traffic congestion. Air traffic congestion is a costly ineffiency that we can ill afford. The problems it causes in terms of its impact on tourism, trade and commerce have been well documented. Given the predicted increases in air traffic, Ireland has used its Presidency of the Council of Transport Ministers to push this issue to the top of the agenda for urgent action.

At the March Transport Council meeting, the Minister for Tourism and Transport presented a series of proposals geared towards increasing co-operation between the EC Commission and Eurocontrol, the European body responsible for the control of air traffic, to eliminate air congestion. I am happy to say, and I was present at the meeting, that after a marathon session these proposals were unanimously agreed and adopted by the Council. The day before yesterday Ministers of the 23 European Civil Aviation Conference States, including Ireland, committed themselves jointly to a comprehensive and pragmatic strategy which aims to provide increasing airspace and control capacity in Europe. Eurocontrols in co-operation with the EC Commission, will undertake centralised management of the project and will, first, harmonise standards, specifications and procedures and, second, will integrate systems so that the operations of the whole system functions as if it were a single unit.

Irish air space forms part of the European air space where congestion problems are of serious dimensions. So far as we can, we have designed all our new navigation and communications systems so that they will be compatible with similar developments which are currently being planned and implemented in Europe. There are no instant solutions to the problems of air traffic congestion, but remarkable progress has been made on domestic and international fronts to ensure that the system and its capacity are expanded in a safe way to meet the increasing demands of the public whether travelling for business or pleasure purposes.

Coming down to earth, so to speak, there are two other matters that I wish to mention before concluding, namely, international road haulage and domestic passenger transport legislation. I am pleased to report that the first months of the Irish Presidency have seen major steps towards liberalisation of the road haulage sector. At the Council of Transport Ministers meeting in March an increased allocation of authorisations for 1990 for international haulage within the Community was agreed. It is hoped to obtain agreement at the June Council on increases for 1991 and 1992 and so bridge the gap to the completion of the international transport market.

From 1 July a new system will allow a limited number of hauliers from a member state to operate point to point haulage within another member state for the first time. This will offer further prospects for Irish hauliers to exploit the opportunities of the expanding internal market. Discussions are now under way on the framework within which Community hauliers can operate in a completely liberalised market after 1992. It is obvious therefore that new markets are opening up for Irish hauliers in Europe and I am confident that the Irish haulage industry can rise to these new challenges.

The radical review of the Road Transport Act, 1932, and all the issues associated with the update and replacement of legislation is taking place against a background of increasing competition in the Irish transport industry. Any new legislation must take account of the legitimate aspirations of the private sector for more open access to the provision of public transport services. The needs of the general public for improved and more cost effective transport services must also be met while remaining mindful of the need to provide a socially desirable service. I am confident this new Bill, which will be published later in the year, will meet these needs while injecting a meaningful and realistic degree of liberalisation into the bus transport area.

Mr. Boylan

I want to make a few brief comments on the Finance Bill which is the statutory basis for the taxation measures announced in the budget. Some of the measures are very welcome, some did not go far enough and others are very vague indeed. While the Minister of State at the Department of Tourism and Transport is present — he has spoken at length on tourism and I have a particular interest in that matter — I want to say that, having regard to my own region over the last two to three years, I am at a loss to know how he came up with these increased figures for tourism. Certainly, it is not reflected in the northern region of the country, in the Cavan-Monaghan area. I cannot see the upswing in the numbers. I will be constructive because I am interested in this matter. We are only scratching the surface in relation to tourism in this country but there is a great potential in this area. Many people are concerned about the health hazards of sun holidays and are now looking to the less warmer climates. We have a lot to offer in that regard in the line of fishing, scenic walks and picnic areas but we are not promoting it. There is no point in saying the numbers have increased and there has been an increase in revenue because people with accommodation tell me week in and week out that they have not got the bookings.

Mr. Lyons

Local initiatives.

Mr. Boylan

Perhaps the tourists are going to other regions but certainly in the Sligo, Donegal, Cavan, Monaghan and Leitrim region the general comment is that the people were disappointed last year with the number of tourists to the area. I admit there was a vast improvement in the numbers going to the south and south-east but for some reason the tourists are not being directed to the north-east and north-west and I would ask the Minister to redress that imbalance. That area is entitled to its fair share of tourists. Perhaps one of the reasons for this imbalance is that the point of entry is far removed from the north-east and north-west. There should be signposts at Dublin airport pointing out the north-east and north-west as the lakeland regions for fishing, scenic walks and so on. All the signs are directed towards Killarney, Wexford, Waterford and Galway.

I am concerned about the attitude in relation to infrastructure in the northern regions. In my county we can boast of 365 lakes, one for every day of the year, but it is well nigh impossible to get to them. Hopefully, the road structure will be highlighted in the national programme. There is no alternative but to highlight this problem and have action taken on it. Members are well aware that the road structure has deteriorated, as I have pointed out often enough, but for some reason the message does not seem to be getting home to the Minister for the Environment or the Government who have the final say in giving finance to Cavan and Monaghan County Councils to upgrade the county roads which are the main means of access for tourists to our lakes and rivers where there is such great potential.

In regard to the upgrading of accommodation, we missed out on the grants in the late seventies and early eighties because people were reluctant to invest due to the troubles in the Border region at that time. Obviously the grants were taken up in other parts of the country. There is a special case to be made for the Border region for grant aid to upgrade and develop new accommodation for tourism and I would ask the Minister to take note of that.

There is also the problem of the price differential and that has a devastating effect on the whole economy of the Border region. I would be the first to admit that a step forward was taken in this budget in relation to VAT on electrical goods such as television and videos. That was recognised and has been of immediate benefit. The greatest problem is the differential in the price of the gallon of petrol. I have been told that it stands at 75p per gallon. People within a radius of ten miles of the Border cross the Border to buy their petrol and I cannot blame them. They can save £7.50 on a fill of petrol and that is a substantial saving to the family budget.

I have no objection to people travelling north or to people from the North coming to the South. I do not want to live in isolation from my friends and neighbours in Northren Ireland. I would like to see a cross-flow of traffic. I have no objection to a family outing to Enniskillen, Newry or Belfast for a day's shopping but likewise I would like to see people coming from Belfast, Newry and Enniskillen for a day's shopping to Cavan, Navan or Dublin. We must have that cross-flow of traffic, with people mixing and getting to know each other but it is all one way traffic; it is all heading north. The car tanks are being filled with petrol in the North and the boots and back seats of the cars are being filled with groceries. As a result small businesses along the Border are devastated.

The price differential for petrol ranges from 75p to 80p a gallon. People will say it is £1 but I cannot honestly say if that is the case because, on principle, I do not buy petrol across the Border. I have no objection to and I cannot blame people for travelling north of the Border. Many grocery items are equally competitive in price south of the Border as they are north of the Border but because of the development of major supermarket complexes close to the petrol pumps, when the husband is filling the car with petrol the wife decides to do her shopping there, too.

Obviously there is a major differential but I do not believe it would be necessary to equalise the price of petrol to stop the flow of people buying it in the North. If the price differential was within 20p or 30p per gallon that problem would be resolved. It will not be done this year but perhaps some move could be made towards it next year. I would like to encourage traffic both ways and I would encourage people who have made the saving on petrol to come back and spend that money on household needs south of the Border. If this could be done it would give our shopkeepers some assistance over the next few years.

Many of our towns and villages along the Border, such as Clones, Belturbet, Castleblayney and Ballybay, have gone into a poor state of repair. Shop fronts and buildings have become very dilapidated and the shops are not stocked as well as the modern shopper demands. There is a case to be made for special grant aid to small businesses in the Border region. These would be equalisation grants, financed either by the Government or by Brussels. This is a problem pertaining to the Border and it should be taken to Brussels. It is unfair that because of an artificial Border a small grocery business cannot compete with a competitor one hundred yards up the road on the other side of that Border. This is not only due to price structure but to the lower throughput. Prices must be slightly higher in an attempt to eke out an existence. Equalisation grants of 100 per cent could be paid to people living on the Border, reducing to 75 per cent grants for those within two or three miles of the Border and reducing appropriately within a ten mile range. Such a grant would start at £1,000 per annum. It would be a major life to a small businessman, enabling him to give his shop a facelift and stock a wider range of goods. An increased turnover would enable such a business to become even more competitive. We could then encourage people who have saved on petrol north of the Border to come back and do business in brighter, better stocked shops. A campaign on those lines over a four-year period could bring about significant results.

I question whether we are serious about the problems of the Border region. Very little has been done other than the imposition of the 48 hour restriction, which was of no benefit to the immediate Border area. Certainly it stopped the flow of traffic from Dublin, Cork and Galway. People on radio and television were blowing out of all proportion the savings which could be made in Newry and Belfast. This was a great disservice to this country.

I welcome the reductions in income tax to 30 per cent and 53 per cent but I am at a loss to understand why the Government should treat the self-employed and the farmers in a different way. A husband and wife running a small farm or business, working seven days a week, will be over £2,000 per annum worse off than a PAYE worker who's wife is working. The self-employed businessman or farmer is paying PRSI at only a slightly lower rate but will not be getting the same tax credit. That is unfair and I would ask the Minister to reconsider it.

I welcome the extension to the year 2010 of the 10 per cent rate for manufacturing industry, but I do not understand the curtailment of the 10 per cent rate. I had representations yesterday from people who are in the business of breaking bulk, that is, they take in gas in bulk and put it into small household cylinders which they deliver around the country. They have had the benefit of the 10 per cent rate but they have received advice that they will no longer benefit from it. This would have a major effect on their business. It is difficult to say what the Minister intends to do. Vast amounts of raw materials are imported. A roll of wire is imported by a manufacturer who breaks it down into nails; he is therefore manufacturing nails. Will that man be disadvantaged by the removal of the 10 per cent rate? Sheet steel is broken down into component parts for industry. Will people involved in that business be exempt from the 10 per cent rate? This matter is very vague and people are concerned. We know what civil servants can do when they draw a very narrow line. If they decided that deserving businesses are no longer to benefit there will be a major effect. The Minister should tread warily in this regard and consider those businesses which have developed and expanded as a result of the 10 per cent rate. It should not be taken from them overnight.

I now turn to the registration for VAT for small businesses. At present it is necessary to register for VAT if turnover is in excess of £500 per week. This is a very small amount. A person registered for VAT must submit accounts to be verified by an accountant. A £25,000 turnover per annum is very small and would yield a profit margin of about £2,500. It is a great hardship to require such a small business to employ an accountant to certify their accounts for the purpose of registering for VAT. Some time ago I asked the Minister to increase the ceiling to £1,000 per week but he indicated that, in registering for VAT there were benefits to be obtained which businesses might lose out on. If that is the case the ceiling for small businesses should be raised to £1,500 or £2,000 per week for up to £100,000 of a turnover so that those people could submit their accounts without the requirement to have them certified by an accountant. I do not think that consideration of that proposal would prove impossible for the Department. Its implementation and workability could be backed up by a system of spot checks. The business person would realise that it was in his own interest that his accounts be properly presented and kept up to date.

In regard to the overall budget strategy, there has been no increase in the creation of jobs. People are still leaving the country in great numbers. An example was given to me recently by a very wise man as to how one could compare the numbers leaving the country: last year as many people as would fill Croke Park on an all-Ireland day left Ireland and generally it is young and middle aged people who assemble there. When we realise that that number are leaving annually we know that we have not stemmed the flow of emigration. The thrust of the budget has got to be wrong when the emigration trend is continuing.

We hear all about the new jobs and the opportunities that are being created but a number of factories where people felt they had secure jobs for life have closed down; some were household names in the world of manufacturing but some were multinationals where the decisions were taken outside this country. This must give cause for concern. It is devastating for people in the relatively early age group of 40 to 50 to suddenly find themselves without jobs and having to compete in the marketplace with school leavers with very little hope of obtaining employment.

Our dependence on multinationals to come in and create jobs was a policy that had major shortcomings. I always maintained that the local small business, for which there was very little initiative, had a better chance of succeeding. There was pride in the family business. Often where four or five people were employed in manufacturing initially, the number was extended to ten or 12 eventually. There is more hope for job creation through that type of activity than in encouraging multinationals to come here. There is usually a big day for the launch of the project, a sod turning ceremony or whatever, at which it is announced that 300 or 500 jobs are to be created in 12 or 18 months. In some cases the company never opens; in other cases 20 or 30 jobs may be provided.

Sometimes these multinationals take over for a period of 12 or 18 months and when the various grants have been recouped they disappear. Yet down the road there could be a family business in need of some cash injection to get them off the ground and they are told that nothing is available for them, that they cannot be grant aided. That system needs to be changed because there are many people in Ireland anxious to remain here but they need a small cash injection to get them off the ground. We should look seriously at that issue.

While travelling home last night I heard a recording of an announcement by the Taoiseach of the £200 million Goodman project. He was talking about further development of our meat industry. He spoke about the great potential in this for job creation and the opportunity it afforded farmers to increase production. Over the last three or four years not as much as one penny of that has been taken up. Despite the hype and expectations it generates, it has had nothing but a depressing effect throughout the country. When the Government come to make another announcement the attitude of the people will be to take it with a grain of salt, that they have heard it all before. That is bad in a major agricultural industry where farm incomes were never as low as they are at present. The beef industry is at rock bottom, cattle prices are tumbling, calf prices are £100 down on what they were at this time last year.

In the dairy section, the king-pin of the industry, milk prices are coming down by 10p, 15p and 20p. What will they be next month and the following month? A farmer said to me that if the price levelled out at £1 per gallon he would get by, but the figure now projected is 80p per gallon this summer. Farm incomes are now one third of what they were ten years ago. No other section of the community would put up with this. The pig industry has its ups and downs. At present it is going through a very difficult period, prices are tumbling. Enterprising farmers decided to branch out into alternative enterprises and so the mushroom industry, for instance, expanded. It is a marvellous industry and great credit is due to the people concerned. However, poor quality imports were allowed into Europe from Poland and dumped on the market with the result that that industry became depressed. This happened because we did not have people there to take a stand and say: "This is an industry we have developed and we cannot allow dumping on the marketplace to the detriment of people who have made major investments." I have great hope that that market will pick up again because I have met with the people, particularly the Kiernans in Foxfield Mushrooms in my own county, and I was impressed by their constructive attitude, by their confidence that they can survive this particularly bad period, that the name we have for quality will hold in the marketplace and that people will come to realise that quality always wins out. There is hope in that industry. Our Ministers were found wanting during the last two or three months when it was necessary to step in and do something about this dumping of a poor product on the European market. Commissioner MacSharry should have had first hand knowledge of what was happening in that industry. These are the few points I wanted to raise and I hope they will be taken on board in the manner in which they were presented. I do not wish to appear to be negative in this Chamber but at times when one reads the Government documents one cannot help but be negative and wonder if the various proposals will ever see the light of day and if the opportunities which are present will be grasped.

Dr. Hillery

Before referring to some specific aspects of the Finance Bill I want first to comment on the financial strategy for Government and on the recovery in the economy. No proper discussion of the Finance Bill can take place without placing in context the general government financial strategy over the past four budgets. When Fianna Fáil returned to office in 1987 they were faced with an economy which had shown no growth for more than six years and which had financial imbalances which greatly hindered any potential recovery from this depressed situation. Despite substantial increases in both direct and indirect taxation over the period of the coalition administration, the Exchequer deficit was at a level which was significantly out of line with international experience and which resulted in the ratio of national debt to GNP moving in an ever upward direction. The problems associated with this increasing debts level were not just the theoretical concern of academic economists. In practical terms it meant the Government had to increase each year the load on an already overburdened taxpayer just to pay the higher interest bill. We were having to run faster all the time to stand still.

Undaunted by the size of the task confronting them, the Government immediately set about reducing borrowing and stablising the debt level. They set the ambitious target of reaching a point within five years where the ratio of national debt to GNP would no longer be increasing. In the event, progress had been a good deal quicker than anybody anticipated. Government borrowing had been reduced to a level which was almost unimaginable by even the most ardent monetarists four years ago. In each of the past four budgets borrowing has been reduced and is now one sixth of the level prevailing when the coalition left office in 1987. It is the lowest recorded level of borowing in Ireland since the fifties and among one of the lowest of the entire OECD area. Moreover, as a result, the Government have achieved their target of debts stabilisation some three years ahead of schedule. We can now look forward to a situation in the near future where the overall Government accounts will be in balance.

We were all made painfully aware of the vicious circle phenomenon of the middle eighties. High borrowing was leading to higher interest payments which in turn led to even higher borrowing resulting in even higher interest payments and so on. Now low borrowing is propelling the system in the opposite direction and allowing the Government to reduce borrowing and debt while at the same time facilitating an overdue easing of the burden of taxation. Of course, the reduction in Exchequer borrowing is not the only manifestation of the improved financial environment. A broader measure of the financial state of the nation is the balance of payments which measures the gap between what we pay foreigners for goods we buy from them and what we earn or what foreigners pay to us for our exports. Again, throughout the early and middle eighties the balance was negative and out of tune with accepted practice for economies internationally which were themselves regarded well for pursuing sound financial policies, but in 1987 we were able to record a surplus on the balance of payments for the first time in 20 years and this surplus has been increased and maintained over the past two years. On this measure we now rank with the Germanys and Switzerlands of this world in terms of sound economic practice.

Inflation too has come down sharply and the exchange rate has been a model of stability within the European monetary system. Indeed, you need not rely solely on my word as to the improved international standing of the Irish economy. International investors have been voting their confidence in the country with their cheque books. Some of the larger financial institutions in the world have been investing heavily in the Irish financial system and more than £1 billion flowed into Irish Government securities from this source last year. This flow of money has facilitated Irish interest rates being maintained at a level a good deal lower than otherwise would have been the case. Between early 1987 and the middle of 1988 interest rates were almost halved and, although some of these falls have been reversed again in the past year because of events in Germany, Irish interest rates are still substantially below those in Britain.

Turning to the recovery in the economy, important though the improvements in financial ratios have been, they are by no means the only successes that have flowed from the financial disciplines that have been pursued over the past four budgets. The whole process of correcting financial imbalances was not an end in itself. It was to create a confident environment in which a lasting and soundly based economic expansion could take place and where employment levels could increase. At the time the process of financial correction was begun it was envisaged that improvement in financial balances would have to come first before any serious recovery in economic growth could get under way. Here again the actual performance has been well ahead of what appeared to be ambitious targets at the outset. There is now an overwhelming body of evidence that economic activity started on an upward trend again around the middle of 1988 and it has continued apace ever since. Whereas the decade of the eighties will go down in Irish economic history as one of the major gloomy ten-year periods of our independence, it is comforting to know that we left the decade with the economy back on a soundly based growth path again. There is now no doubt that the year 1989 was far and away the best year of the eighties for our economy.

Evidence of the recovery in confidence in the economy is readily available. One does not have to be a master statistician to know that car sales, for example, have increased significantly again. A causal perusal of 89 D and 90 D registrations would have told you that, but for the record it is worth noting that the official statistics put growth in car sales last year at 25 per cent. Other items of consumer spending recovered as well, and it is now estimated that the overall volume of retail spending increased by more than 4 per cent last year, once again the best performance for a full decade.

However, it is not just consumer spending that is on the increase. Indeed, were that the case we would have plenty of cause to worry. Any casual observer of trends in the British economy is now well aware of the consequences of allowing booming consumer spending to persist for too long. Overheating occurs and you eventually reach a point where another period of slack economic growth is required to cure the financial and inflationary problems that arise. Our experience of recession in the eighties is recent enough to make us ensure that we do not return to that environment for some time. It is reassuring, therefore, to know that the recovery in consumer spending has been more than matched by a recovery in investment levels as well. That is exactly what we want. The best evidence of this is in the building industry, a sector of the economy that suffered most in the recession years of the eighties. Between 1982 and 1987 activity in the building sector was more than halved, and whole sections of the industry were forced to close and to move to more buoyant environments across the Irish Sea. We have overwhelming evidence of a recovery in activity. New building output increased by some 16 per cent last year and a similar rate of increase is widely predicted by forecasters for 1990. Moreover, the recovery in output last year was stimulated by private investors in the industrial and commercial sectors without reliance on public sector funding. The recovery in building is being translated into employment as well. We all know there is a great distance to go there, but employment in private sector building has increased by over 20 per cent since the low point of early 1988. Indeed, the strength of the recovery has been such that shortages of certain types of skilled labour have emerged and are now being met by a return of workers from the UK where prospects for construction are now a good deal more gloomy then in Ireland.

Evidence of the success of Government policies is easily seen in the stock market too. One of the consequences of the high borrowing policies of the eighties was that the Government absorbed an unduly large amount of domestic savings in financing deficits. The private sector was crowded out with no funds available for it to finance new investment. The position has been reversed and nowadays it is totally different. The Government deficit is now so low that it makes no demands at all on the cash flow of the major savings institutions such as life assurance companies and pension funds. The appetite of international investors for Irish Government stock is so large that these institutions can divest themselves of previous purchases of Government stock and make even more funds available for companies. It is no surprise therefore, that the company sector was able to raise a record amount of funds on the Irish market last year. Over £800 million was raised, which is almost four times the amount of funding that was done before the process of fiscal correction was embarked upon.

Thus, with the growth in consumer spending being augmented by a surge in investment, we can look forward to an economic recovery soundly based and translated into increased employment and reduced emigration. Indeed, there is already evidence that this is happening. I noted already developments in the building industry and in the broader economy the figures now suggest that this is spreading. The numbers registered as unemployed are now more than 30,000 less than when Fianna Fáil came back into office in 1977. It is admitted that they are still too high.

I have already noted in several places that the results of the past three to four years were a good deal better than what seemed to be ambitious targets only a couple of years ago. Nowhere is this more true than in the case of income tax relief. Very few economists believed that the overall fiscal deficit could be cut from 13 per cent to 2 per cent of GNP in a matter of three years. I would hazard a guess that none believed that that could have been done and at the time that we could have moved significantly down the road of income tax reform. However, that is exactly what the Government have achieved. The standard rate of income tax has been cut from 35 to 30 per cent and the top rate from 58 to 53 per cent, and there have been significant increases in bands and allowances. We are now in sight of the objective of having a system of two rates of tax and the amount of actual relief is three times what was envisaged in the Programme for National Recovery. Such deductions in marginal tax rates are an essential ingredient of any successful programme for economic recovery.

Of course more needs to be done. The tax rates are still too high and people on relatively low incomes move into higher tax brackets at far too early a stage. Despite the progress on income tax relief, I share the Minister's view that we must be careful not to do too much too soon. Again, the British experience of the last few years is a useful reminder of what can go wrong if too much progress is tried too quickly. The British budget of 1988 introduced a very commendable system of tax rates of 25 per cent and 40 per cent but the proceeds of the reduction were instrumental in stimulating a consumer boom that has landed them in the inflationary mess that they now find themselves in. The ultimate bill for the system is going to be much higher than first seemed likely and, indeed, one could not rule out some reversal of those cuts in the next budget or two. The British experience is a very useful reminder to engage in cautious, informed and soundly based progress in our fiscal and financial strategy.

I welcome the further moves in the Bill on improving the collection system for taxation by bringing the self-employed on to a current year basis of self-assessment. This improved system of collection has played no small part in achieving progress in correcting the fiscal imbalances at a rate much faster than originally planned. It has also served to reduce the inequalities of the system as between PAYE and non-PAYE taxpayers. The extent of the relief for PAYE taxpayers of the past few years would not have been possible without the very substantial increase in revenues that have accrued as a result of the move towards self-assessment for the self-employed. Not alone has more revenue accrued but resources employed in timely administration of the tax affairs of those who made no effort to avoid their due liabilities have been freed up to pursue those who seek to defraud the system. In the past, and I should like to emphasise this, the Revenue Commissioners spent too much time dealing with the honest taxpayer and too little time chasing tax avoidance.

I should like to refer briefly to the business expansion scheme. I have already noted the progress the overall economy has made since the dark days of the mid-eighties when recession and stagnation seemed to be with us forever; there was a very gloomy outlook indeed. However, a key part of the sustainability of this recovery is that it is accompanied by an appropriate level of investment in new plants and projects. In this respect there is a structural problem in the savings sector that needs to be overcome. The main savings institutions, pension funds and life assurance companies, have very strong cash flows. It is because of the relatively young age structure of the population that these institutions make very little payments by way of redemptions and still experience strong cash flows up front. A lot of money is actually available. In fact, now that the Government have ceased borrowing from these funds altogether the problem for the institutional managers is to find suitable outlets for funds under management but the nature of the responsibilities and liabilities on these funds do not allow them direct any significant portion to start-up and to small enterprises.

There is a rationale, therefore, for the Government providing direct incentives to individuals to invest in such projects and diversify savings away from the mainline institutions. In this context the basic philosophy underlying the BES scheme is very laudable and should be maintained. However, of late the spirit of the scheme has been undermined by a series of devices. Effectively, what was happening was that companies were receiving cheap bank finance at the expense of the Exchequer. Courtesy of the Government, investors were guaranteed up to 20 per cent tax-free return without exposing themselves to any of the inherent risks in the projects at all. Even if the projects were complete failures and were liquidated investors would still receive their guaranteed return. There are few who will quarrel, therefore, with the elimination of the guaranteed BES schemes, but we must be careful not to throw out the baby with the bath water. The underlying philosophy of the BES is a sensible one and we must allow it sufficient flexibility to compete with much more standard investment outlets such as ordinary stocks and shares. In this respect liquidity of investment is important. People may well be willing to share the risks of a particular project but they will want some mechanism for realising their investment at market value in the future. We should be careful, therefore, not to confuse guaranteed mechanisms with mechanisms that provide methods for raising the investment after five years.

I should now like to turn to corporation tax charges. The most important theme of the Commission on Taxation that sat some years ago was the concept of extending the tax base by eliminating allowances and concessions and actually reducing tax rates. In this report recent changes in corporation taxes have been very much along the lines of these proposals. In the last number of years the standard corporation tax rate, for example, has been reduced from 50 per cent to 40 per cent and has been balanced by the eventual elimination of accelerated capital allowances. That makes very good sense from an economic incentive point of view. For too long our industrial incentives have been geared towards subsidising capital while we impose taxes on labour. Such policies make little sense in an economy with a rate of unemployment like ours. Accelerated capital allowances have this same feature.

Industrialists were encouraged to invest in machinery rather than labour and avail of the tax incentive in the process. The combination of lower taxes and the abolition of special capital allowances contributes to levelling the playing field when the industrials come to choose between labour and capital. It is my hope that the philosophy that underlies this move on corporation tax will be carried through to all our industrial promotion policies. I should like to make a plea for that.

The Bill also attempts to close certain loopholes that have allowed non-manufacturing enterprises avail of the 10 per cent manufacturing relief, clearly in breach of the original legislation. Once again there are few who would quarrel with the sentiment underlying the provisions in the Bill. However, it seems to me that we must be careful that the desire to correct what were clear abuses does not exclude enterprises that were genuinely availing of the relief. The problem, of course, is to define what is and what is not manufacturing. No matter what definition is arrived at there will always be grey areas at the edges in deciding who is included and who is not. The Bill states activities which are not manufacturing rather than coming up with any clear definition of what is included. In this respect there is one disturbing phrase which excludes any activity which is not undertaken in an industrial building which, in turn, is defined as a factory or a mill. This would appear to exclude small, home-based enterprises which are clearly involved in manufacturing processes. Such a measure is against the spirit of encouraging the small entrepreneur and I intend to return to this on Committee Stage.

I want to refer to a category of the population for whom some moves have been made in the budget and I commend the Minister for Health in this respect. I refer in particular to services for the elderly and I wish to link those services to the support in the budget for community services. It is Government policy to change the emphasis towards care in the community away from institutions, where appropriate, for our elderly population. We must ensure that elderly people receive the services they need at the appropriate time. The working party on services for the elderly examined the health, welfare and housing needs of the elderly. The report entitled The Year Ahead — A Policy for the Elderly, is a comprehensive review of policy and the Minister for Health has already taken action to implement its recommendations.

The serious intent of the Government in relation to the elderly is evidenced by the fact that an additional £5 million has been made available for services for the elderly in this year's budget. This will indeed improve community care services in a concrete way and I am sure the Minister for Health will elaborate on this in his contribution. Very briefly, some £2.5 million will go to strengthen home nursing and home help support which will allow nearly 2,000 extra people a year to be nursed at home. About 3,000 more elderly people will receive additional hours home help service. A sum of £2 million will be used to provide more facilities for day care, short-term and long-stay care for the elderly and the improved treatment of respiratory disorders. The remaining £500,000 of the £5 million I mentioned will be used to implement proposed changes in nursing home care.

The elderly, of course, are an important segment of our population. As I understand it, 10 per cent of the national population are over 65 years of age. In the Borough of Dún Laoghaire, part of the constituency I represent, some 14 per cent of the population are over 65 years of age and, therefore, the question of services for the elderly is a matter of particular interest in that area.

Nationally there are some 30 beds per 1,000 elderly for long-term care and welfare. In Dublin, however, there is a under-provision of beds for the elderly because the figure is only 17 beds per 1,000. In my constituency of Dún Laoghaire there are indeed four day care centres for the elderly and a fifth is due to open shortly in Blackrock, which is to be welcomed. Furthermore, I am glad that care facilities for the elderly are on the agenda for St. Michael's Hospital in discussions between the hospital and the Department of Health.

In the context of the elderly it is worthy of note that multi-purpose units for them are part of the current programme for the Eastern Health Board subject, of course, to funds being earmarked for that purpose. It is envisaged that these multi-purpose units for the first of which, as I understand it, a site has been identified in Dalkey, will cater for convalesence, respite care beds, some long-term beds and community care and rehabilitation facilities. I hope the Dalkey project will be advanced soon as it will clearly be of benefit to the elderly who live locally.

Another area which will contribute to addressing the problem of accommodation for the elderly is that envisaged in the Nursing Homes Bill which is at Committee Stage in the Dáil and which Bill I welcome. It is envisaged in the Bill that flexibility will be applied both as to means and disability in respect of elderly patients. As matters stand, £40 is the maximum subvention available from the health boards for the elderly who enter nursing homes. I think — I am glad the Minister is here — that ceiling is too rigid. One can envisage circumstances in which an elderly pensioner can get limited funds from the family, together with the £40 subvention, but could still end up not having enough to pay the nursing home. This all or nothing approach leaves scope for improvement. If the health board were to apply a means test, for example, then those who deserve more than the £40 per week subvention — let us say £60 — would find that the increase could make all the difference in relation to a deserving elderly person entering a nursing home. Furthermore, in terms of cost to the State this could be very welcome and money well spent. A long-stay bed in a health board hospital at present costs about £200 per week and if the same health board were in a position to increase the £40 maximum subvention by a very modest sum, savings to the health board would be very obvious. Therefore, I am calling for a more flexible grants system which would meet the genuine needs of some elderly patients and, at the same time, be a very cost effective way of approaching the problem from the point of view of the health boards and, therefore, of the taxpayer.

In conclusion, I should like to summarise my main points in relation to the Finance Bill. I welcome the broad thrust of the Bill before us. The task confronting the Minister for Finance was to devise a financial strategy which continued the process of fiscal correction which has been underway since 1987 while, at the same time, making progress towards changing those provisions of the tax code that most inhibit enterprise and growth. The balance achieved has been admirable; borrowing will again come down and there will be another significant reduction in the debt-GNP ratio. This should ensure orderly growth in the economy at large, underpin our position of financial respectability among the international financial community and avoid the British disease of overheating. At the same time marginal tax rates will come down and we are in sight of the ultimate objective of a tax system with just two rates. Collection systems have improved and we can pursue the tax evader in a manner not possible before. In the corporation tax code the balance between labour and capital is redressed and will contribute to the already improving prospects for employment.

On the whole the Government have now got together a formula which will ensure that the dismal performance of much of the 1980s will not be repeated in the 1990s.

Mr. Currie

Leaving aside the summary of his remarks at the end of his speech I am in agreement with Deputy Hillery when he put emphasis on community care and encouraged the Minister to go further in that direction. That probably would have widespread support throughout the House.

The Deputy is a reasonably intelligent man — some people would say he is an intelligent man — and I was disturbed that during the course of his remarks he found nothing of concern or disagreement in relation to current Government economic policies. I would have thought he might have had some reservations in regard to some items. Is the outlook really rosy? Are the Government achievements as great as he and other Deputies suggested in this debate? I accept there is often an element of exaggeration in politics, indeed on occasions I have been guilty of exaggeration. I accept the contention that sometimes it is necessary to exaggerate in order to make a point. However, I would have thought there was a limit to exaggeration, that it should occur within some acceptable limits.

I was more than mildly surprised by some of the comments made by the Minister yesterday. Having stated that the underlying objective of Government policy is, of course, to maximise growth and thereby jobs, and this is how the Government wish to be judged, the Minister then said "we have now resumed our position as one of the top performers in the world league". I wonder to what league he was referring.

Having listened to his speech, I notice that the Irish Independent published two tables giving our position in the world league. Even though the rest of his remarks would seem to suggest that he was not referring to those tables, I wonder if he was. The table under the heading “OECD jobless rate for 1989” shows that Ireland — I presume this means, as it usually does, the Republic of Ireland — has a jobless rate of 17.8 per cent; Spain, 17.3 per cent; Italy, 12 per cent; the United Kingdom, 6.5 per cent; the United States, 5.2 per cent and Japan, 2.3 per cent. Ireland is certainly heading the world league in that regard The second table gives the EC jobless rates from February 1990. Again Ireland heads this league table with a rate of 17 per cent; Spain, 16.1 per cent; Italy, 11.1 per cent; the United Kingdom, 6.2 per cent; West Germany, 5.8 per cent; Portugal, 5.2 per cent and Luxembourg, 1.8 per cent. Ireland is heading those league tables.

Even though the Minister said yesterday that we have resumed our position as one of the top performers in the world league, there seems to be a very considerable disparity between what he has said and those official figures. As I have said, there is room for exaggeration but there can be too much exaggeration on occasion and reality should dictate what we say. I have some knowledge and experience of the area which has the worst unemployment rate. On a number of occasions the Taoiseach has described that area as a failed political entity. We should give some consideration to this so that there will be less exaggeration in the future.

The Minister emphasised that the Government were to be judged on their performance in job creation. He said that the underlying objective of Government policy is to maximise growth and thereby jobs. An article in yesterday's Irish Independent under the heading “Job Hope Here Much Lower” says that Irish graduates are more pessimistic about job prospects in their country than their counterparts in Scotland or England. This survey which was carried out by a TCD post-graduate student, is of considerable importance in terms of our economic hopes and our future.

Deputy Hillery referred to the position in the UK. The Minister said that despite some moderation in growth internationally and, in particular, the weakening of the position in the UK we can look forward confidently to our economic future. Deputy Hillery is right to be worried about the UK economy. I share his concern about the future of the UK economy and its effects on us. All the economic indicators in the United Kingdom suggest that that country is going into a recession. The adverse trade figures published yesterday underline this suggestion. These figures have caused very serious ripples among those in financial circles who in the past have been reasonably good at predicting the economic future. The monthly balance of trade figures published yesterday are the second worst on record. They show that there has been a jump of 7.5 per cent in imports and exports are down by I per cent. If this very worrying trend continues it could have serious effects on this country and on the Government's predictions for the future.

When the Chancellor of the Exchequer, Mr. Nigel Lawson, tendered his resignation some months ago we were told it was as a result of a difference between him and an economic adviser to the Prime Minister. I was not alone in wondering whether this was the real reason for his resignation. I suspected at the time, and my suspicions have grown since then, that he resigned because he recognised things had started to go wrong and he knew that his reputation as an economic and financial Minister was in jeopardy. If that was the reason for his resignation, his judgment in that respect at least proved to be good because all the indications are that the British economy is in for a difficult time, and we will suffer as a result of that slump. Ministers ought to be careful when basing projections on our future economic performance which rely to some extent on the British economy performing reasonably well.

I was delighted to hear the Minister say that there is no question of the Government being unconcerned about those paying mortgages. It is nice to know that and I am sure it will be a source of great satisfaction to many people in my constituency and elsewhere who lie awake at night worrying about how they will pay their mortgages. This morning I spoke to a person who is paying £100 more per month in mortgage repayments than he was last year. This is a very serious issue in what has been described on many occasions in the past as a property-owning democracy. More concern should have been expressed about their position than those words of the Minister - that there is no question of the Government being unconcerned about those paying mortgages.

I was interested also to note from the Minister's introductory remarks the number of measures he finds it necessary to take now in order to counter what he described as abuses and loopholes. I wondered why - I still wonder - so many abuses and loopholes have had to be eliminated within such a short period. For example, the Minister referred to abuse of tax incentives in the designated areas package. He referred also to abuses of the exemption for Shannon dividend income. He referred also to abuse of the definition of "manufacturing", to abuses and loopholes in the application of the capital allowances regime and to abuses in relation to stamp duty. Why are there so many abuses? Why was it not anticipated that creative accountants and others would find such loopholes? Why did not the Department foresee the possibility of such potential abuses and loopholes? It is extraordinary that there should have been so many abuses and loopholes within such a short period. I find myself like Unionists who wonder how many abuses there are of the Extradition Acts, how many loopholes there are to be found in those Acts. I should have thought the Minister and his Department would have had sufficient prescience to have safeguarded against such abuses and loopholes before others discovered them.

Government claims on the job front are seriously exaggerated. In particular the latest budget was seriously deficient in relation to poverty. I do not think the findings of the Combat Poverty Agency and of the Conference of Major Religious Superiors-whatever the Taoiseach may think about organisations with the words "major" and "superior" in their titles — can be ignored in the way they have been in the budget, in the Minister's latest introductory remarks or in Government policy generally. Sometimes there is advantage in people, new to a set of circumstances, to a new area, taking a fresh look at problems through different eyes, from a different perspective. From my experience I have no doubt that the rich are getting richer and the poor becoming poorer. If not already there, we are heading into circumstances in which growing deprivation and alienation will cause serious problems on this part of the island.

I spent some time recently in the Neilstown area of my constituency and I was appalled to see some of the conditions under which these people were living — their standard of living, their lack of income, lack of educational opportunities, and general attitudes in that and other areas. I am sorry to have to predict that, if such circumstances are allowed to continue, we will run into serious problems, some of which have been experienced in the other part of this island.

The late Willie Bermingham who will be buried on Saturday next felt real anger at the deprivation and underprivilege in this community. Bravely he spoke out against what he saw as injustice, poverty, under-privilege and deprivation. Resulting from my experience in parts of my constituency and elsewhere, I share at least some of that anger. I wonder about a society in which on the one hand roses are imported by private plane from Bolivia for a wedding and, on the other, the poverty and deprivation to be seen in so many areas and to which so many people are subjected.

I wonder about a society, basically a rich one, in which there is plenty of money in circulation, in which people can do that, import roses from Bolivia when last year Dublin Corporation built six houses only and Dublin County Council built 29 only. I am told this year they hope to increase that to the great number of 50. One must ask oneself if this society got its priorities in order in such circumstances. Apart from those people who cannot get a house, who live with inlaws, who pay exorbitant amounts for rented accomodation, what about those people who have houses but whose living conditions are totally inadequate? The extent of the problem does not even appear to be recognised.

In my previous political existence in the other part of this island I was partially responsible for initiating a housing condition survey which took as its base certain conditions that should apply to adequate housing. That survey was conducted on that basis when many people were surprised to discover just how bad were housing conditions in Northern Ireland. If such a survey were conducted in this part of the island I suspect the findings might be as bad or even worse. I would urge the Government to consider conducting such a survey throughout the State to ascertain precisely what are the conditions in which people live, to examine particularly the older housing stock but also the newer stock of the past 20 years or so to ascertain how it has withstood the test. However, I very much doubt the Government would undertake that task. Such a study might disclose facts they would not want to know.

If I have a major criticism to voice of this Government it is that, in relation to poverty, to deprivation, to under-privilege, there does not appear to be any fire in the belly to deal with such matters. All too often the attitude is I am all right Jack; they close their eyes to the social and living conditions of so many of our people. I contend that is extremely dangerous. The exaggeration to which I have referred already is also very dangerous. It is much better to know the exact position, to examine it carefully, to look at the face, warts and all, to recognise the reality and hopefully, on that basis, to do something about it. However, I suspect that the Government have not the fire in their bellies to tackle those problems.

There are a few other matters I would like to refer to. Thankfully, the punt has been strong for some time, yet the benefits of this are not being passed on to the consumer in lower retail prices on imported goods. The previous speaker, Deputy Hillery, made reference to the increase in consumer spending. He also made reference to the number of cars sold during the past quarter but I have not noticed any reduction in the price of imported cars despite the fact that there is now at least a 25 per cent difference in the exchange rate between the pound and the yen. Certainly there should be a reduction in the price of cars imported from Britain. The same would not be true in the case of cars imported from Germany as we are all members of the EMS and there is not the same disparity but why has there not been a noticeable reduction in the price of imported goods given the way in which the value of the punt has gone up in recent times and the way in which it has strengthened against nearly all other currencies?

I continually find myself making comparisons between North and South. Sometimes I make comparisons which show up the North badly but at other times I make comparisons which show up the South badly in comparison to the North. It is useful to make these comparisons but I find it extremely difficult on occasion to recognise why there is so much of a discrepancy in the price charged for certain items North and South. Recently, my wife picked up a packet of tissues in our house in Lucan and when she looked at the price she could not believe it was nearly double the price charged in the North. Indeed, I am told that the Northern tissue is better in so far as it is a pink tissue. The tissues purchased in Lucan were white. I do not pay much attention to these things but I am told the pink tissue is usually more expensive than the white one but why is there such a discrepancy in the prices charged for a whole range of items?

They were expensive enough when compared to the prices charged in the North and the United Kingdom before the recent change in the relationship between the pound and the punt, but why in recent times, given that the pound and the punt have nearly come together, is there such a disparity between the prices charged North and South for so many items?

I give notice to the Minister for Industry and Commerce that I intend to pursue this matter in much greater detail in the coming weeks and months. I will ask him to explain to me, to Members of the House and, more importantly, to consumers why there is such a difference in the prices charged on a large range of items. I will ask him to break these things down. The Minister for Health might have more than a professional interest in this matter, living as he does so close to the Border. He might have some interest in some of the questions I will be putting down which will be of some concern to his constituents as well as to my own in Dublin West and others also. It is a matter which should be the source of serious concern. A Government who are committed, and rightly so, to keeping inflation down should be concerned about the fact that the benefits of the increase in the value of the Irish pound are not being passed on to the consumer in lower prices on imported goods. That is a wider question which will require some explanation.

There is nothing in the budget which will lead to an increase in educational opportunities. The key to the elimination of poverty and deprivation is the provision of educational opportunities. If there is an alternative to emigration for the young man or woman living in a deprived area, it is the taking up of a job or availing of educational opportunities. I have been asked on occasion to make comparisons between deprived areas in my own constituency and deprived areas in Belfast. There are many similarities in the quality and standard of life and in the reasons people are deprived but I have also found that the fellow or young girl from a deprived background in west Belfast has one advantage over people from similar areas in my constituency in Dublin West and that is that they are able to avail of educational opportunities. I cannot over-emphasise the fact that there is nothing in Government policy or in the Financial Statement which will lead to an opening up of such opportunities for these people. That is a matter of serious disappointment to me.

A Leas-Cheann Comhairle, you represent a Dublin constituency just as I do and I am sure you share my concern that in so many areas of Dublin things appear to be getting worse in terms of poverty and deprivation. I am also sure that you would share my concern, and wonderment on occasion, that these problems are not being sufficiently recognised at national level. From my forays around the country the concerns of the west about emigration and rural deprivation and the problems facing farmers are recognised easily. I have no difficulty in recognising the problems facing farmers and I sympathise with them because I once represented a largely agricultural constituency and like to think I have some knowledge of agricultural problems and matters of concern for dwellers in rural areas. I also found that very often people are not aware of the problems affecting Dublin, of the level of unemployment, the rate of emigration or the poverty — they minimise it — in Dublin or the environmental problems facing dwellers in Dublin. They read about smog but they do not have much experience of dealing with it. When they think of environmental problems they think of how they affect fish and so on rather than human beings. They do not recognise the extent to which deprivation and poverty are allied to ill health and health problems. There is a direct correlation between health problems that people have and the environment in which they live in terms of bad housing, unhygienic surroundings and quality of life. This must be recognised.

An Leas-Cheann Comhairle

Deputy Currie, thank you for your unsolicited representation for my constituency. Nevertheless the Deputy will have to contemplate using the phrase "in conclusion" because his time is almost up.

Mr. Currie

How long have I got?

An Leas-Cheann Comhairle

About a minute.

Mr. Currie

I was not just making representations on behalf of your constituents. I was concerned mostly about my own.

The matter of law and order also gives rise to serious concern and it arises out of some of the social problems that I have been talking about. There are opportunities in that area for the people who do not believe in the constitutional process. In my constituency I have had reason to pay attention to the activities of these people. They recognise the opportunities that are presented by people in bad health who live in bad social and economic conditions. These are the people who can create difficulties. The problem of law and order is extremely serious and it seems to be increasing daily, certainly in my constituency. I get complaints from very responsible members of the community that law and order is not being adequately enforced. I draw attention to that alienation. We know it in a different society. Be careful of that alienation here.

I would advise the Government and the Minister for Finance in particular that there is a lot to be said for telling people how things are without exaggeration. It is not necessary to blame another party or parties for all our economic problems. The "no problem" syndrome is out of date. We should face reality. We are not helped by exaggerating; that only contributes to the cynicism of ordinary people about politicians and the motives of the politicians. That cynicism includes cynicism about our political institutions. That is the road to ruin and we should be extremely careful about it. Thank you for your patience, Sir.

Minister for Health (Dr. O'Hanlon)

I listened to Deputy Currie with interest, particularly to his last comment that we should tell it as it is. I agree with him. He did not, however, adhere rigidly to that philosophy himself. For example, he referred to the lack of support for the less well off in the budget. I would have thought that it was well recognised that the amount of money provided in the budget would have a major impact in helping the less well off.

Deputy Currie also wondered about whether things were so rosy in the economy. Again all impartial observers recognise the great achievements of the Government since 1987 with low inflation rates, Exchequer borrowing requirement reduced from 13 per cent to 2.4 per cent and personal taxation, which was increasing at a very rapid rate throughout the mid-eighties, reduced. We accept that unemployment is a problem but again that increased very rapidly throughout the eighties until 1987. While there has been some small reduction, naturally none of us is satisfied as long as there is anyone in our State who wants to work and has not got a job.

The Finance Bill gives statutory effect to the measures announced in the budget and no debate on the finances of this State can disregard the health services which account for such major expenditure. In 1987 the Exchequer borrowing requirement consumed no less than 13 per cent of gross national product. In money terms this represented over £2 billion and was clearly at a level which could not be sustained if we as a nation were to avoid economic collapse.

Faced with the unavoidable necessity to protect the national finances the Government set about a rigorous examination of all areas within the public expenditure programme to ensure that taxpayers were getting full value for money. Inevitably areas of waste were identified and had to be eliminated if a better return on Government investment in the public expenditure programme was to be achieved.

The result of this hard discipline has seen a reduction in the Exchequer borrowing requirement to 2.4 per cent of GNP compared to 13 per cent in 1986.

However, given the size of the National Debt and the high cost of servicing it, the Government must continue to operate within the tight financial constraints. As part of the Government's overall policy of containing expenditure in the public sector all areas of health spending by the public agencies have been critically examined over the last three years to ensure that resources are managed in the most efficient way possible. Health service managers, particularly those managing hospital services, have continued to manage services effectively through a period of rapid change. None of the decisions taken over the last three years were easy and great credit is due to staff and management alike for the manner in which they adapted to a changing service.

In implementing new policies management have shown great commitment, flexibility and imagination at a time when it was often impossible to give them the level of resources required to deliver services in the manner in which they would have liked.

In the current year over £1.5 billion will be spent on public health services, £130 million more than in the previous year; some 21 per cent of all Government spending will be devoted to these services. The 1990 allocations to health agencies reflect this Governments' continuing commitment to maintain and enhance where possible the level of services available. For example the allocations to the health boards and voluntary hospitals have increased by over £100 million or 10 per cent when compared with the original 1989 provision.

I have already indicated in my speech to the House on 6 February that the hospital sector will maintain during this year the level of activity provided in the latter end of 1989 at a minimum.

The Government provided £13.4 million for the health services in this year's budget over and above the original Estimate. Within the amount £5 million was provided to enhance services for the elderly; £3 million was made available to the health boards to improve the level of dental services; a further £2 million was provided to improve services for persons with a mental handicap; and £3.4 million was provided to cover increases in the rates of certain health allowances from July.

The additional measures included in the budget represent a further significant boost to health funding. Last year the Government provided an extra £33 million in the Supplementary Estimate to address, inter alia, particular difficulties which had arisen in the provision of acute hospital services. This year's Estimate for Health shows an increase of £79 million in the net non-capital provision over the estimated 1989 out-turn. The additional 1990 budget provision clearly demonstrates the Government's commitment; it also indicates clearly that the Government are committed to ensuring that additional resources will be channelled into the areas of greatest need.

Western Europe has in recent years experienced an unprecedented increase in the number of people over 65 years of age. This has arisen largely through better living standards and improved medical care. According to the 1986 census there were 382,000 people in this country over 65 years of age of whom 143,000 were over 75 years. Population projections indicate that by the middle of the next decade the population over 65 will have increased to over 405,000. This will include a substantial rise in the number over 75 years. These trends have considerable implications for the health and social services in this country, as I am sure Deputies are aware.

Elderly persons have the same entitlements to health services as the rest of the population but because of their special needs it is necessary to structure services to meet those needs. It is Government policy to develop services in such a way that the elderly can remain within their own communities, spending the minimum amount of time necessary in institutional care. A range of community services is available to support his objective and to ensure that the elderly can remain at Home or in their communities when ill. These include the general medical service, the public health nursing service, and the home help and meals-onwheels services.

The Working Party on Services for the Elderly, examined in detail the health, welfare and housing needs of the elderly and presented its report to me in October 1988. The report The Years Ahead — A Policy for the Elderly was a comprehensive review of policy and of services which took account of the medical and social development of recent years and the implications of future demographic trends for the provision of these services. The report emphasised the need for a coherent and co-ordinated approach by all those involved in providing services and helping the elderly. It underlined the need to ensure that no elderly person is admitted to institutional care unnecessarily and that as far as possible we must try to anticipate the needs of our expanding elderly population and develop the kind of services we would like to see in existence when we ourselves grow old.

The emphasis must continue to be placed on community care. We should endeavour to ensure that the elderly can lead active and fulfilling lives in their old age and to live in the environment of their choice — their home. It is their right that they should be able to live in their own home and we should provide support services for them to do that.

Families are the great carers in Irish society. We must take note of the work of carers and this was recognised in the budget by the new carer's allowance which was introduced by my colleague the Minister for Social Welfare and I will refer to this later. The working party report indicates the direction that must be taken and it shows clearly that resources will be needed in order to achieve the objectives.

The Government have accepted, in principle, the recommendations in the report and decisive action is being taken to implement its recommendations. Five million pounds was provided in the budget to improve a whole range of services for the elderly. Of this £2.5 million will be allocated to home care services, including home nursing and home helps; £2 million will be provided to develop community facilities such as day care centres, respite care and long-stay care accommodation and £0.5 million will be allocated for the subvention for elderly people in nursing homes, reflecting the Government's commitment to implement the Health (Nursing Homes) Bill, 1989, when enacted.

Deputy Hillery has also referred to the Bill this afternoon which has reached Committee Stage. He asked for a more flexible approach with regard to subventions and I wish to assure him and other Members of the House that this will be the case. There is provision in the new legislation that the health boards will be able to make a subvention both on the means of the elderly person and on the amount of care the person needs, so that a person who needs more care will qualify. for a larger subvention than those who may be up and walking around and, therefore, need less care. I accept that this flexibility is not in the present system but provision is being made for it in the new Bill.

The additional funds have been allocated to the health boards on the basis of their share of the elderly population of the country as a whole. The boards have been asked to prepare service plans to indicate how it is proposed to deploy these funds, what additional services will be provided and how many additional elderly people are likely to benefit.

The Government have been aware for some time of the inadequacies of the dental service being provided by the health boards for eligible persons. In most areas the provision of routine treatment for adults has been virtually suspended since the mid 1980s and the only treatment available has been an extraction to relieve pain. As a result, waiting lists have grown and many medical card holders have been experiencing discomfort and inconvenience.

The provision of orthodontic treatment has been the subject of much discussion in this House during Question Time. Deputies will be aware that the problem with regard to orthodontic treatment is not merely financial but is also related to the difficulties the health boards have experienced in recruiting suitably qualified orthodontists. The Government made £300,000 available to the health boards late in 1989 to enable treatment to begin immediately on 500 priority cases. The health boards were given discretion with regard to the arrangements they would make to provide this treatment. This enabled them to make those arrangements which would best suit local circumstances. At present only one health board has their own orthodontist. Indeed, my predecessor, Mr. Barry Desmond, when Minister for Health made an effort to recruit orthodontists but without any great success. It is not merely a question of finance.

The Government decided at budget time to make an additional £3 million available to the health boards dental service in order to bring about an improvement in services for eligible adults and to treat further top priority orthodontic cases. This amount brings to over £16 million the amount allocated to the health boards' dental service in the current year. This budget allocation is especially targeted for services for adults and for orthodontic services for children with severe handicapping orthodontic conditions.

In many health board areas routine dental services for adults have been curtailed for up to five years and the only service available has been an emergency service provided by the health boards own dental staffs. I have been aware of the difficulties being experienced by medical card holders for some time and I established a working party to review the situation in 1988. That working party concluded that it was essential to provide additional funds to enable the health boards to expand their services to again provide a routine dental service of fillings, extractions and dentures for adults.

It is in this context that the additional funds are now being provided. I am most anxious that these additional funds be expended in an efficient and effective way. However, I am mindful that it is vital that there be an immediate response to the problem and I have given the health boards a degree of autonomy with regard to the arrangements they put in place to treat adult patients.

The health boards recently received a notification of the amounts they will receive in the period from April to June for the expanded adult dental service and have been asked to supply detailed information to my Department on the number who are treated during that period. It is likely that about £2.2 million of the additional allocation will be made available for adult dental services. This high proportion reflects the situation which has developed with regard to adult dental services and the need for increased revenue to provide an effective solution.

The special allocation of £300,000 to the health boards late in 1989 enabled orthodontic treatment to commence on 500 children with priority orthodontic problems. A further allocation for orthodontics will be made from the special £3 million allocation in the 1990 budget. This will enable treatment to commence on a further 1,300 cases.

I am again reviewing the conditions attached to the posts of consultant orthodontist in the health board dental service. These posts have been advertised on a number of occasions and only one of the posts has been filled to date. The direct employment of consultant orthodontists has long been regarded as the most efficient method for the delivery of orthodontic services, a fact borne out by achievements of the one serving consultant orthdontist, and it is hoped that improved conditions for the posts will attract further suitable candidates to the health boards. The Government are confident that this special allocation for dental services will bring about a great improvement in services for those who rely upon the health boards to provide necessary dental treatment.

Funding for mental handicap services has been protected in real terms since 1986. While the rise in the CPI between 1986 and the current year will be approximately 13 per cent, the allocations to the voluntary agencies funded directly by my Department grew from £61 million in 1986 to about £76 million in 1990, representing an increase of about 25 per cent. Expenditure by the health boards on these services also increased significantly. The 1990 allocation of £76 million to the major voluntary agencies represents an increase of 12 per cent on the 1989 allocation of £68 million. In 1990 a total of about £140 million will be spent on services for some 11,000 people with a mental handicap. The co-ordinating committees have been re-established, with representatives from the health boards, the Department of Health and the voluntary organisations, to draw up plans for the next five years in each of the health board areas. In advance of these plans they identified the priority needs to cater for people who had either no service or a completely inadequate one and a special provision of £2 million provided in the 1990 budget has been allocated for this purpose.

It is expected that the more co-ordinated approach now being adopted in relation to the delivery of services will result in a greater number of people being served. In addition to the special provision of £2 million in this year's budget there are a number of other provisions which will benefit people with mental handicap. For example, the disabled persons maintenance allowance was increased substantially from £47.20 in 1989 to £52 in 1990, an increase of 10 per cent. There are some 24,000 recipients of this allowance, about one-third of whom have a mental handicap and live in the community.

The 1990 budget also made welcome changes in the free travel scheme. Many recipients of the disabled persons maintenance allowance were unable to fully utilise the scheme previously because a companion brought along to assist was required to pay. In future, the free travel scheme will allow a companion to travel with recipients of this allowance.

The budget also introduced a new carer's allowance of £45 per week in recognition of the care required by permanently incapacitated people. Part IV of the Social Welfare Act, 1990, includes an enabling provision to extend the carer's allowance to recipients of the disabled persons maintenance allowance who are so incapacitated as to require full-time care and attention. These extra resources will relieve the anxiety of many hard pressed families. I regard the care of people with mental handicap as a priority area and I will continue my commitment to the further development of these services.

Last October when I received the report of the Commission on Health Funding, I asked the key groups and organisations involved in providing health services to consider the report's recommendations and advise on how best these recommendations could be used in developing services. I announced last February an action programme for the health services for 1990 and beyond as part of my response to the report's findings. The action programme includes two major initiatives. The first of these initiatives involves an immediate efficiency review of acute hospitals headed by Mr. Noel Fox. The review is being carried out in conjunction with the efficiency audit group established by Government to examine the working practices of public service organisations. Mr. Fox's task is to determine the scope for improvement in the utilisation of resources within health boards and voluntary hospitals. The specific terms of reference of Phase I of the study are to address the factors affecting efficiency in the operation of six major hospitals; the adequacy of management information in the hospitals under review; the management arrangements required within each hospital to improve efficiency; and the optimum timetable and methodology to be adopted.

Phase II will be longer term and countrywide and will commence immediately on completion of Phase I. The results of the study should give a clear picture of the resources required to meet service objectives and lay the foundation for policies and procedures in the years ahead. I will be reporting to Government before the end of June on the progress and outcome of Mr. Fox's examination.

The second initiative involves an examination of the Dublin hospital services by Mr. David Kennedy, formerly of Aer Lingus. Mr. Kennedy is assisted by an expert group and the initial remit of the group includes: the adoption of admission policies and outpatients arrangements in the acute hospitals to ensure that necessary services are provided to patients in an optimum manner and provided in the most convenient way; to develop more effective working relationships between general practitioners and other company based services and the hospital service so that demands which do not need to be placed on the hospital service are avoided, to plan the management of beds in Dublin hospitals to provide a reasonable balance between the requirements of elective patients and the other immediate needs of emergency admissions; to introduce appropriate discharge arrangements for the care of patients who will need community support of other institutional care after hospitalisation; and reviewing arrangements for referral of patients from outside the Eastern Health Board area to ensure that resources are used appropriately. The group have been very active since their establishment and I look forward to having a progress report on my desk by the summer.

As a further response to the commission's recommendations the Government will be announcing, before the summer recess, decisions on the future structures relating to the administration of the health services. Other matters relating to funding and service eligibility will be considered when the Government receive the review body report which is addressing the employment conditions of consultants.

I have also requested the health boards and voluntary hospitals to review their present outpatient appointments system as a matter of urgency. I feel that there may be opportunities to increase the efficiency of these systems so as to enable people to spend the minimum necessary waiting for appointments in outpatient departments. I have also asked the health boards and voluntary hospitals to examine ways of improving their communication with patients and their immediate relatives. In line with the objective of improving communications between service providers and patients, health agencies have been asked to examine the possibility of establishing structures to enable patients to indicate to the service providers their level of satisfaction with patient care.

A significant area of dissatisfaction in recent years has been among those who have had their applications for medical cards rejected. Up until now these people have had no formal means by which they could appeal this decision. I am therefore establishing a formal appeals procedure to redress this situation; the system to be put in place will be wholly impartial and will allow people with a genuine grievance to have an easily available means of appeal.

The outline of services which I have just given to the House demonstrates the considerable progress which has been made in recent times both in providing an adequate level of resources for the health services and also in putting in place the appropriate structures to manage these resources. The developments that I have set out clearly show that the state of the health services is fundamentally sound. This Government are committed to maintaining a high level of services for all the community and their actions since they came to office have clearly demonstrated that commitment. I am confident that the people of this country will continue to enjoy one of the best public health systems in the world.

Mr. Belton

I wish to share my time with Deputy Gay Mitchell.

An Leas-Cheann Comhairle

Is that agreed? Agreed.

Mr. Belton

As this is my first time to speak on a Finance Bill I should like to wish well the Minister for Finance, my constituency colleague, in his position.

I refer first to the self employed and the need for similar allowances to those given to the PAYE sector. In recent weeks I and my colleagues have been lobbied by members of the ICMSA and other farm organisations. The IFA have also called for this allowance for farmers. There is a very strong case for this relief especially since self assessment is on a current year basis. I appeal to the Minister to deal with this matter.

I wish to highlight the problems facing farmers, especially smaller farmers, due to the failure of the Government to pay their headage grants. I do not know the reason for this grave injustice. Perhaps there is a lack of will on the part of the Government to pay their entitlements or perhaps funds are being held in the national coffers. Farmers throughout my constituency are very angry and many of them are suffering severe financial hardship due to the failure of the Department of Agriculture and Food, and of the Government to pay these grants. Yesterday Deputy Carey wondered if these problems had arisen only in County Clare and suggested that these grants had been paid in Longford-Westmeath. During the past few weeks a number of people have pleaded with me to do something about their payments. One man and his wife have called to see me three times during the past two weeks and they are at their wits end to carry on, due to the failure of the Government to meet their responsibilities to pay out these headage grants. This is a very shabby exercise which cannot be tolerated.

I now turn to the effect on my constituency of the overall strategy pursued by this Government and by the previous Administration. Both Governments put forward job creation as the main thrust of their policy. In the Longford area of my constituency 900 jobs have been lost in the past three years, a shattering blow to any community. The morale of the people of County Longford has hit an all-time low in recent weeks due to the closure of Cashmore in Longford and Manford in Ballymahon, as a result of which 150 workers were given the shattering news that their jobs were gone. These people are of the highest calibre in loyalty, workmanship and service and they surely deserve more.

I want to tell the Minister for Industry and Commerce, Deputy O'Malley, that the people of County Longford are very angry and depressed and starting to lose hope. The Minister for Finance is fully aware of this situation and had meetings with these workers during the past week. The IDA are making every possible effort to find replacement industries. The Cashmore factory had been in operation less than two years. Major questions must be posed about an operation backed by the IDA which had serious problems from its inception. I am aware that some unfortunate problems arose but the fact remains that this was a new industry backed by the State which was giving badly needed employment to a very willing workforce, yet they went out of business in a very short time. I am asking the Minister for Industry and Commerce and the Minister for Finance to consider this problem immediately. A task force has been set up which is due to report shortly. Various groups have been involved. While I welcome the task force, I am certain that more than a report is needed. The Minister for Industry and Commerce must make a special effort. Requests are being made by Longford County Council to meet the Minister and I would urge him to accede. Perhaps the Minister could come to Longford and meet the various interests. I reiterate that the workforce in Longford are willing and able.

Apart from the specific problems I have mentioned, the situation in recent years has been one of decline. There was a high level of employment in Bord na Móna but jobs have been lost through redundancy. Places like Granard have also been badly hit and various requests have been made by the Granard Town Commissioners for a suitable industry for a vacant factory on the Longford Road in Granard. This is another indication of the level of concern throughout County Longford. I have had meetings with the workers' representatives of Cashmore and with the workforce of Manford during the past week. It is very depressing to see workers who have given their all in their efforts to keep an industry going suddenly being told that their jobs are gone. I am aware that every effort is being made by the IDA and I am hopeful some results will be forthcoming but even if most of those who lost their jobs in the most recent closures can be re-employed, a major jobs boost is still needed in the area. The IDA frequently announce new jobs coming on stream but not in County Longford. I ask again that Longford be given immediate priority for future industrial development and that a major industry be encouraged to locate there.

The Minister should consider seriously the proposals for a regional airport in Abbeyshrule, which is ideally situated between the major towns of Longford, Athlone and Mullingar. This would boost the morale and the economy of the whole area. It is my duty to raise these important matters and to voice the fears and worries of my constituents.

The Minister should consider the effect of rising interest rates on mortgage payments. In many cases mortgage holders are finding it impossible to meet repayments. Surely the Government must try to give some support. While interest rates were declining there was a case for less relief; however, in present circumstances the case can equally be made for Government relief. I am voicing the demands that have been made to me and I hope the Minister will listen to these calls and to what I have said about the problems in my constituency. This is extremely urgent.

Debate adjourned.