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Dáil Éireann debate -
Thursday, 31 Jan 1991

Vol. 404 No. 5

Financial Resolutions, 1991. - Financial Resolution No. 6: General (Resumed).

Debate resumed on the following motion:
That it is expedient to amend the law relating to customs and inland revenue (including excise) and to make further provision in connection with finance.
—(The Taoiseach).

The budget shows that the priority of the Government is survival, not reform. It is designed to enable the coalition partners to hang together for a period. Decision-making, of any serious nature, is no longer a matter of interest to them. This is bad for the country because we have huge problems which need to be solved by Government decision.

The NESC drew attention to the fact that even with real economic growth of 3.75 per cent, much higher than the Government are projecting for this year on current policies, we will still have the same level of unemployment in 1994 as we have today.

The budget offers no indication that the Government have any intention of changing any of the policies that the NESC predict will lead to that dismal result. In fact they are quite complacent about it.

The Minister is indeed quite proud of the fact that he is only adding £462 million to the national debt this year. That £462 million means that he is adding £7,660 to the national debt for each child that will be born in Ireland during 1991.

The Deputy said that yesterday.

These children will eventually have to repay that debt. That is our bequest to them along with the burdens already loaded on them in 20 years of political cowardice in the management of the finances of this nation. The budget is built on very shakey foundations.

It assumes that the Government will collect about £8.3 billion, or £400 million extra, in taxes in 1991 because the economy will grow by 2.25 per cent. It also assumes, even more incredibly, that people will increase their spending on consumer goods by about 3.25 per cent. Yet a number of independent economists say the economy will only grow not by 2.25 per cent but a mere 1 per cent in 1991. If that happens, the Government will not get in the taxes they are counting on, and the budget and its arithmetic will collapse.

The budget also assumes that we will have an average level of unemployment next year of 228,000. On that basis we will need to spend £3 billion on social welfare in 1991 — that is over a quarter of all Government spending.

Well, if the economists are right, and the economy only grows at 1 per cent there will be more than 228,000 people unemployed in 1991. Furthermore, if the British economy slumps, and more people return home from the building industry in Britain as many predict or as some say is already happening, the level of unemployment will grow even further. The really big unknown in this budget is emigration. The Minister is banking on emigration continuing. That hope underlies his entire budgetary arithmetic. He hopes that emigration will relieve him of finding unemployment benefit or unemployment assistance. If emigration stops or if unemployed emigrants return, the figure will go completely astray. It is a budget founded on the continuance of emigration.

The Government estimate that they will have to spend £2 billion on interest payments next year — almost two-thirds as much as they are spending on social welfare. What happens if interest rates go up? The Government's £2 billion bill will go up accordingly. This week we saw the most unusual spectacle of the German Finance Minister, Theo Waigel, being told by the European Community that he is borrowing too much and that if he continues to do so he runs the risk that he will push up DM interest rates and thereby push everybody else's interest rates as well. What happens if the German Finance Minister does not take the advice being proferred to him by President Jacques Delors and the European Commission? Then our interest rates will go up too and the Minister will have to revise upwards the £2 billion figure which he has set aside to meet interest payments.

To sum up, this year the Minister estimates that, on the one hand, he will collect about £8.5 billion in taxes. Against that he will spend £9 billion, but the £8.5 billion could be a serious overestimate because of slower growth and higher unemployment. Likewise, the £9 billion on spending could be an underestimate: £2 billion of it — interest payments — could go up because of higher interest rates; £3 billion of it — social welfare — could go up because of higher unemployment and less emigration. The gap could start widening quite quickly on both sides of the equation.

There are a number of phoney elements even in the budget figures presented to us. One-off savings on tax collections of £15 million are included as if they were recurrent revenue. We are asked to believe that six different Departments in the past three weeks made so called "estimating" mistakes in their original 1991 Estimates published a few months ago, and that now they can suddenly "save" an extra £23 million through correcting estimating mistakes. At the very best, all this is just a deferral of expenditure.

The concessions announced in the budget will also cost a lot more in a full year than appears in the Minister's arithmetic. I estimate that the tax and social welfare concessions will cost almost £80 million more in a full year than is shown in the Minister's 1991 arithmetic. These sorts of miscalculations do not matter very much if the wind is at your back and the international economy is buoyant, but they can be seriously aggravated if things begin to go wrong.

The effect of the Gulf War on the international economy is incalculable. The Minister warned us earlier this month of the prospective costs of EC tax harmonisation. He told us that the amount we are collecting from deposit interest retention tax, which currently brings in £300 million, would have to change drastically. They were the Minister's words. That was not reflected in any provision in the budget. He admitted that our VAT and excise duties would have to move much closer to those in Britain. In a Europe without frontier posts, wide divergencies in purchase taxes are literally impossible and unenforceable. The NESC calculate that the maximum divergence we could afford between our rates of excise duty and VAT and those applying in Britain is 3 per cent. It could cost us £300 million to reduce our purchase taxes to levels that would be sustainable in a barrier-free Europe. The budget ignores this problem.

The simple fact is that in a barrier-free Europe, neither taxes on income, taxes on spending nor taxes on capital can be kept at a higher level than taxes in other competing areas within the barrier-free European union. This is particularly the case for poorer peripheral regions.

Even without penal taxes, the Irish Central Bank, in a 1988 study, estimated that money and resources will naturally tend to flow, in a monetary union, from the poorer peripheral regions like Ireland towards richer central areas like Germany and Southern Britain. So, if there is an added handicap of higher taxes in the peripheral region, the outflow of resources from Ireland to the central parts of the Community will be all the greater. The budget makes no real provision to deal with that.

There is another threat on the horizon — the dismantlement of the CAP and the introduction of what I would describe as an "Indian reservation" style of agricultural policy advocated by Commissioner MacSharry. The farmers are to be paid to stay down on the farm so long as they produce nothing. That is quite literally creating an Indian reservation where people will live in enforced idleness in rural Ireland. I have the gravest fears about what that will do to the spirit of our people, yet that is being proposed by Commissioner Ray MacSharry in the name of reform of the CAP.

The budget takes no account of the effect of Commissioner MacSharry's policies on the budget arithmetic or the Government's tax revenue. Commissioner MacSharry's policies are specifically designed to destroy intensive commercial, grass-based livestock production in Ireland, yet this is the core of Ireland's agricultural economy. The commissioner would meanwhile shift the advantage in agricultural competition in Europe away from grass-based production to grain-based livestock production systems of the type which are particularly competitive in continental Europe and uncompetitive here because of our climatic conditions. He is shifting the advantage towards the Continent and away from Ireland. Irish farmers are to be bought off with acreage-based payments designed to discourage intensive production. Commissioner MacSharry's proposals may be beneficial for some farmers but they will be disastrous for the Irish economy and disastrous for all those who make their living by selling things to commercial farmers who are in serious production or buying things from those farmers. The entire economy which has been built around commerical agriculture, mostly employing people in the PAYE sector, will be destroyed by Commissioner MacSharry's proposals. It will damage the tax base and reduce PAYE revenue but the Government have taken no account of the need to provide replacement revenue.

These policy changes in the CAP will have a disproportionate effect on the Irish economy. The IMF did a study some time ago to find out which European Community countries would suffer a net loss from the lower agricultural and food prices that would be caused by the dismantlement of the CAP. This study showed that Ireland and Denmark would be the losers. We are alone with the Danes at the negotiating table in Brussels defending the CAP. The threat is very great of a loss in income to this country through the dismantlement of the CAP. That threat is entirely ignored in this budget. All the other countries, including Ireland and Denmark would be unaffected once the consumer benefits of lower food prices were set against the agricultural losses of lower farm incomes, but there would be major revenue losses to the Irish Exchequer and to employment in the Irish food industry if the Common Agricultural Policy is undermined either by internal reforms or by concessions to the United States on export refunds for Irish products going to third countries.

I would like to draw the attention of the House to the fact that Commissioner Leon Brittan and the European Community Ambassador in the United States recently said, in the United States where presumably they have a favourable audience, that the European Commission is prepared to put a ceiling on export refunds. That is a major climb down on the European Community's negotiating position and is the first indication of a collapse in the Community's negotiating position in defence of the Common Agriculutral Policy in these world trade talks. There has been no protest from the Irish Government against that statement by Commissioner Britten, no protest at all from either Commissioner MacSharry or Minister O'Kennedy about that matter. So we must assume that Commissioner Brittan and the EC ambassador were speaking with the approval of the Irish Government and the approval of the European Commission in making that very serious statement so far as Irish agriculture is concerned. This budget ignores that danger entirely.

To sum up the Minister's budgetary targets may be said to be vulnerable on five fronts. First, there is the likelihood that there will be slower economic growth at home — that is in fact stated in the budget arithmetic. Second, there is the strong possibility that there will be higher unemployment at home because of reduced emigration and lower economic growth. Third, there is the possibility of higher internationl interest rates. Fourth, there are the costs, for which the Minister has not made any provision, of EC tax harmonisation. Fifth, there are substantial revenue losses on the horizon because of the dismantling of Ireland's major industry because of the Common Agricultural Policy being dismantled.

The Government have made no attempt whatever to quantify, let alone prepare for, these five potential threats. They have committed themselves to substantial increases in public expenditure under the Programme for Economic and Social Progress. They have stated that "resources will have to be reallocated" to meet the cost of these commitments. They give no clue at all, however, where this money might be found to pay for this extra expenditure. The Government have actually committed themselves to increases in public spending covering three-quarters of the entire area of Government spending. The Government have admitted in clear language that there will be cuts, so presumably such cuts will have to be made in the remaining one-quarter of public spending that the Government are not committed to increasing.

The House is entitled to know where the Government intend to make these cuts. They have said they will make cuts. They have asked the social partners and this House to approve this budget on the basis of the proposed expenditure increases over the next few years, but they have told us nothing about the cuts. They are asking this House and the social partners essentially to buy a pig in a poke, to agree to something when they are only being told about the good features of the vehicle but not that there are many defects in the engine, that the vehicle is unlikely to start when the attempt is made to do so. I do not think it is particularly good to ask the Irish people to buy the used car that is presented by this Government with its lack of commitment to consumer information.

The Government have no clear fiscal target. All they have stated is that "the aim of fiscal policy will continue to be to reduce the national debt/GNP ratio towards 100 per cent by 1993". Think about that for a minute. What does it mean? Does it mean anything at all, a Cheann Comhairle?

All the Government are saying is that they must reduce the ratio towards 100 per cent by 1993. They do not say when they will actually reach 100 per cent, if ever. The word "towards" is put in there so that they will have an escape route at any time. Nor does the Minister say, anywhere in yesterday's budget, what he expects the ratio to be at the end of 1991, or by the end of 1992. We will not know whether he is progressing according to plan at any time between now and 1993.

In any event, the debt/GNP ratio is like a mirage. It is the relationship between the two figures either of which can vary up or down at any time. One never knows how close one is to one's target until one has actually passed it. A more unsuitable target for coherent planning would be hard to imagine.

In any human endeavour there is no point in setting oneself a target unless one can tell, at any given time, how far one is away from it. The target of debt/GNP ratio does not meet the test of being a useful target for management because we do not know, and the Government do not know, how far away we are from it at any given time, nor do the Government propose to indicate any milestones along the way to the target towards which they are moving.

As far as the public finances are concerned, therefore, it can truthfully be said that the Government have no definite or clear target at all. I wonder if the social partners, for whom the soundness of the national finances is obviously a matter of vital interest, have ever really studied the shaky financial foundations on which their concordat with the Government is based.

Let me turn to the content of the budget itself. It is clear that tax reform has been abandoned; indeed, reform of any kind has been abandoned. The Fianna Fáil minority Government, without the Progressive Democrats, actually had more of a commitment to tax reform than the present Fianna Fáil/Progressive Democrat Coalition. This shows that the Progressive Democrats are burned out as a force for reform. Indeed, their presence in the Government this time is entirely negative. They continue to hang around to haunt Fianna Fáil with memories of past feuds that should be long forgotten, thereby frightening their Fianna Fáil colleagues at the Cabinet table so much that Fianna Fáil are afraid to make any decision that could prove even slightly unpopular, but the Progressive Democrats are unable, themselves, to do anything about their own much vaunted reform programme. This Government, consisting of two parts, is a classic case of mutual paralysis. The Progressive Democrats have paralysed Fianna Fáil and Fianna Fáil have paralysed the Progressive Democrats, and nobody is doing anything about the problems of the country. Quite literally, the Government is a disgrace.

The Progressive Democrats cannot keep their promises even in the areas in which they had ministerial office. After a year and a half, the Minister for Industry and Commerce has not yet produced a competition Bill which his own party was able to draft and present to this Dáil three years ago. He has now been in office as Minister for Industry and Commerce for a year and a half and has not been able to produce a Bill with all the assistance of the officials in the Department of Industry and Commerce that his own party in Opposition were able to produce three years ago. He is clearly not up to his job. As a result of this failure the Minister for Finance had to say this year in regard to the reduction in VAT and the lack of competition in our economy that last year "some businesses were shown not to have reduced prices following the VAT cut in the 1990 budget". Between the two of them, the Minister for Finance and the Minister for Industry and Commerce have had a whole year to come up with an answer to the problem. Now all they say is that they "will be working closely together to ensure that the customer gets full benefit this time". Is there anyone in this House who believes that, or believes them? Frankly, I do not believe them.

Without a competition Act, which the Minister for Industry and Commerce, Deputy O'Malley, has negligently failed to produce, the Government simply do not have the legal means to ensure that the benefits of any VAT reduction are actually passed on to the consumer. The VAT reductions will not be passed on to the consumer, but the VAT increases will most certainly be passed on because there is no competition in this economy and there is a Minister who has failed and failed again to produce the necessary legislation to create competition in this economy.

It is significant also that the only area in which real, as distinct from "estimating", cuts were made in spending in the past three weeks was in the job-creating bodies, which are the specific responsibility of the Minister for Industry and Commerce. In SFADCo there was a cut of £1 million; the IDA had a cut of £1.3 million; science and technology had a cut of £1.65 million; and NADCORP had a cut of £1.5 million. These are all job creating agencies which are the responsibility of the Minister for Industry and Commerce. I wonder was he away on the day the Estimates were discussed at Cabinet? In my view if the Progressive Democrats devoted as much energy to job creation, to tax reform and to minding their own ministries as they did to so enthusiastically removing Deputy Lenihan from the Government, they might have more to show for the past year and a half.

For a country that needs to develop employment, our present tax policy for foreign investment is perverse. We should have a tax policy that would encourage foreign companies to locate labour or brain-intensive parts of their worldwide business here in Ireland. In fact we have a tax policy that is quite the reverse of that. Fine Gael question the wisdom of the Fianna Fáil promise to continue with a maximum of a 10 per cent corporate tax rate up to the year 2010. If we want foreign firms to create really permanent jobs here in Ireland, we must get them to set up their research and marketing operations here. It is only if that part of their business is in Ireland that any of the jobs here will be really secure. But a 10 per cent tax, a low corporate tax policy, which Fianna Fáil want to continue up to the year 2010, actually encourages multi-national companies to keep research and development and marketing operations out of Ireland at all costs. This is because marketing and research cost money, and things that cost money are expenses which may be set off against tax. In order to minimise tax you locate operations that cost money where you can get the maximum set off against the maximum rate of corporate tax. So the lower the tax rate, and our industrial policy is based on having a low tax rate and virtually nothing else of interest to industrialists, the less value you get from a tax deduction. As a result companies will not locate their R & D or marketing operations or things that cost money in this country but will locate them somewhere else in their worldwide network of locations. They will locate in Ireland high profit, low cost and low skill elements of their operation — in other words precisely the type of operation that we do not want is being attracted here and the type of operations that we want is being dissuaded from coming here. That is the essence of our industrial policy at present, presided over by the Minister for Industry and Commerce and the Minister for Finance in an economy in which 228,000 people are unemployed. It is a perverse and bad industrial policy, which should be changed.

There has been some quite ill-informed criticism of the provisions of the Programme for Economic and Social Progress as far as public service pay is concerned. The Government postponed certain pay increases due in 1987, 1988 and 1989 until 1991 and 1992. At the time they made these postponements the Government were congratulated by most of the academic economists for having done so. Now these same economists and critics are complaining that the money has to be found in 1991. I do not make that criticism. The money is due and should be paid.

However, there is one thing I do question. I question why the Government failed, in the course of the recent negotiations to get agreement that public service conciliation and arbitration schemes be amended for the future so as to require arbitrators to formally take account of the state of the national finances in deciding pay awards. Arbitrators at present, and this is why we have a problem with special pay increases, are required to ignore the state of the nation's finances in making their awards. That is why the awards are so generous. They are required by the terms of their conciliation and arbitration scheme to ignore — and being good lawyers they always follow their terms of reference — the state of the nation's finances and concentrate solely on pay relativities. That is why we constantly have not only basic increases in pay but also an ever-enlarging pile of special pay increases on top of them.

Having a conciliation and arbitration scheme that formally ignores the state of the nation's finances at any given time is ridiculous. It should be changed. Fianna Fáil had an opportunity during the negotiations on the recent programme to attempt by agreement — I emphasise — to have this changed. Fianna Fáil failed to raise this matter in the past few months and they failed to negotiate a change in this unrealistic aspect of public service pay determination in Ireland: a classic action of a Government that can look no further ahead than six months. It might have cost them some money this year and they were not interested in it as they have no sense of the long term interest of this country.

The tax provisions of the budget are deceptive. Rates of tax have, of course, been reduced but tax bands and tax allowances remain virtually unchanged. Some people will find that as a result of pay increases the top slice of their income will be moving into the 48p band from the 30p band and they will thus lose more by this than they will gain from the slight reduction in the 30p band. This will not happen to everybody but the people who will suffer in this context are those whose incomes are at or just below the average industrial wage — the classic case of the people in the PAYE sector. A person at or below the industrial wage will find that his income from work is too high to benefit from the increases that the budget offers in exemption limits while being too low to benefit from the cuts in the top tax rate, that the Minister has also made in this budget. A workers on the average industrial wage or just below it gains nothing at all from this budget, in fact he will suffer quite considerably from it. He is further adversely affected by the fact that the Government failed to adjust the PRSI and PAYE allowances in line with inflation. The worker in the middle to lower income groups and in the PAYE sector is suffering under this budget in order that those at higher levels and elsewhere in the economy can gain.

Much has been made by Government spokesmen of the increases that have been granted in the family income supplement and in the exemption limits for those on lower incomes. It has been suggested that these measures are designed to ease the burden on low income families with children. I believe the use of exemption limits and the use of the family income supplement is not the best way to help those people. In fact, the use of exemption limits and the family income supplement actually creates new poverty traps in the tax and social welfare code for people at or below the average industrial wage. These people find that if they do some overtime and go over the income tax exemption limit they suddenly lose their family income supplement. When they go above the income tax exemption limit they face a very steep increase in the rate of tax.

I hesitate to interrupt the Deputy but wish to advise him that some five minutes now remain.

I will not be able to finish my speech at that rate. For such families the prospect of a little bit of overtime work must be especially unwelcome. The overtime may also cost them their medical card and push up their differential rent.

I believe that these families should be helped by the reintroduction of a child tax allowance and by the introduction of a single universal taxable child benefit, payable to all whether on social welfare or at work. This would remove all poverty traps and would give low income families a genuine chance to cease to be low income families and to become, through their own efforts, middle income families instead. Fine Gael want changes like this, because we believe that Ireland's problems can be solved if we unleash the energies of our people. The Minister made a big deal yesterday of the fact that he was not changing mortgage interest tax relief. He seems to have forgotten that many mortgages nowadays are in the form of endowment mortgages which have a strong life assurance element. His decision to cut the life assurance tax relief will hit these families and these mortgage holders very hard indeed.

The changes in the business expansion scheme to eliminate asset-backed investments are a direct reversal of a Fianna Fáil initiative taken in 1987. I believe the 1987 decision was wrong and I am glad it has been reversed but I fail to understand why there is any need to limit companies to £500,000 under the BES. If genuine jobs are being created, why limit growth in this way?

The personal limit of £50,000 relief makes no sense either, other than as an expression of begrudgery. If the tax relief is creating jobs, and that is its purpose, what is the need to limit the extent to which any one taxpayer can avail of it?

I note that the Minister is still negotiating on a 24-hour rule, to replace the 48-hour rule on cross-Border purchases which was declared illegal by the European Court. I want to ask a question. Is the 48-hour rule still in operation, pending the introduction of the 24-hour rule? If so, are goods being confiscated under it? If they are, then the Revenue Commissioners are engaging in flagrant law breaking, in defiance of constitutional rights. If this is happening — and I believe I am right — it is a scandal.

I believe that the health aspects of the budget are particularly deceitful. The Minister is giving health boards an extra £8 million but they have already accumulated deficits of £20 million. Meanwhile, they are being asked to cater for extra patients from the higher income groups who are now eligible for free hospitalisation. In effect, the Government so far as hospital beds are concerned have reduced the resources available and increased demand. That is a recipe for longer waiting lists in our hospitals.

I see that the bank levy is being retained for another year. This is an arbitrary tax, justifiable only as a temporary expedient. It would make more sense if the Government were to investigate the high margins being charged by banks on interest rates to their borrowers over the interest paid to their depositors and if they were to look at the excessive charges to small businesses. The budget does nothing about that.

This budget has failed to do anything about the problem of our transport policy. We have a chaotic transport policy, with three different Departments being responsible, with nobody really in charge and with transport costs here twice what they are in other countries.

There are some improvements in education which are welcome but no targets have been set for Irish education. We should have an external audit of Irish education to see how our standards actually compare with those being achieved in other countries. We should get away from the tyranny of the written exam which is stultifying the brains of our young people and move towards a system of continuous assessment involving teachers under an externally moderated scheme.

The agricultural aspects of the budget are particularly disappointing. There is no clear programme for the future, just a series of minor adjustments. Indeed one of the cuts in the budget, which was hidden away in the Principal Features of the Budget is a reduction of £5 million in the amount available for rural development.

This budget shows that the Government have run out of steam. They are living from day to day. They do not, any longer, have the ideas needed to overcome the challenges of the next decade. It is Fine Gael's job to let the Irish people see that this Government have run out of ideas and to show the people of Ireland, in the next five months that this party, the Fine Gael Party, have the ideas necessary to unleash the energies of the Irish people, to take the decisions that must be taken in respect of the urgent and difficult challenges we are facing as a nation. We are able and willing to do the job and the sooner we have the opportunity to do it the better.

There are some items in the budget presented yesterday by the Minister for Finance which I want to talk about: unemployment, housing, agriculture and especially the health area for which I have responsibility as Labour Party spokesman. The Minister for Finance is a racing man. He is a man who likes to have a bet, like many a punter in this country. When he attends the race courses he sees the man with the three card trick because that is the first greeting when you attend most race courses in Ireland: you see the table, you see the man with the three cards; now you see the trump, now it is gone from you and then you see it again. Rarely does the person playing the cards with these tricksters get any benefit for themselves. One could summarise yesterday's budget as being in that same league.

This morning nobody, whether commentators, economists, working people, taxpayers, unemployed or sick people, can see any hope of an improvement for themselves. Yesterday's budget was an instrument which the Government could have used to improve job opportunities, to improve the health services to make an impact on the daily lives of the people of this country and for those emigrants who will return because of the collapse of the British and American economies. Nobody who is unemployed, depending on levels of unemployment assistance, can hope to see an improvement in their overall situation at the end of 1991 as compared with the end of 1990. The first problem they will face under the provisions of this budget will be the difficulty in obtaining gainful employment in their own country a matter that should be the concern of all Governments and particularly the Minister for Finance.

There is no idea in any of the Minister's speech yesterday which would indicate there is a commitment by this Government to tackle the scourge of unemployment or to improve people's standards of living. Certainly, there are basic minimum increases in social welfare for the unemployed in or about the inflation rate of 4 per cent but there are no programmes to create jobs which we all want. People who are condemned to the dole queues would love to have an opportunity to work in their own country. Because of the number of emigrants returning, the dole queues will grow longer. It is obvious from the figures published by this Government that they expect the dole queues to get longer because this budget has had to take account of these figures before they were published in the knowledge that it was inevitable.

The area of housing for our people has been almost neglected in this budget. It certainly has been neglected by the Government over the past number of years in the number of new housing starts in any of the county council areas. New house starts are almost negligible. Now this Government are referring back to a procedure to give an incentive to people to leave local authority houses and go into private housing and in that way to try to address the crisis in the housing waiting lists. This system was in place previously but this Government and the previous Fianna Fáil minority Government abolished it because, according to the Minister, the best people were being taken out of the local authority housing areas.

Reference has been made already this morning to agriculture. Public meetings are taking place throughout the country on the problems in the sector and on the revision of the Common Agricultural Policy. People in rural Ireland know that one of the ways they can survive is by getting assistance from the disadvantaged areas scheme. The lists for the extension of the disadvantaged areas scheme are almost a public scandal. At public meetings which I, and my colleagues in the Labour Party, attended secret lists of disadvantaged areas were exposed by Fianna Fáil Deputies. Some of their colleagues do not have these lists and nobody is sure which areas are included or excluded. No procedure has been put in place whereby appeals can be made for the inclusion of areas which are not included. There is certainly no evidence to suggest that the Government have made any effort to reclassify existing disadvantaged areas.

The disadvantaged areas scheme which is almost 70 per cent funded by the European Community gives poor people in rural areas an income to enable them to remain in their own hinterland. These people do not want to be shepherded into villages and towns where they will be unhappy and will not have adequate housing or jobs. The Government have failed to avail of the opportunity to reclassify the disadvantaged areas and include as many areas as possible in the scheme. If they had done that it would have given some hope of survival to the people who live in disadvantaged areas.

It is an accepted economic fact that as 70 per cent of the funds needed for this scheme is provided by the European Community, taking into account the additionality required by the Government, this scheme can be self-financing if it is operated to the maximum extent possible by including the maximum number of areas and beneficiaries and easing the regulations which the Government put in place as part of the programme.

I want to refer to the health services which are of concern to Deputies on all sides of the House. Some time ago the Taoiseach admitted he was not aware of the extent of the problems in the health services. In his budget speech yesterday the Minister for Finance said that £8 million will be provided for community care, £4 million of which he will borrow, beg or remove from the national lottery. We support the channelling of additional funds into the health services from whatever source they come. The needs in this area have been identified by the professionals involved. Who does the Minister think he is kidding by providing £8 million to deal with the crisis in community care? One million pounds has been identified as the appropriate sum for the handicapped. However, last year the Government gave an additional £2 million to the handicapped which, to use the Minister's words, provided 140 extra places. I should like the Minister to say if these 140 extra places were provided and, if so, where they were provided. If 140 extra places were provided with £2 million last year, how many places will be provided this year for the handicapped? Going on last year's figures, only 70 extra places will be provided for them.

What have the professionals suggested is necessary for the handicapped, both adult and non-adult? They say that at least 2,000 places are needed. What are the Government doing for the handicapped or their loved ones who have to look after them? What are they doing for this category of people to whom we all have a commitment? The Government say they have a commitment to these people but what have they done for them in monetary terms? They have insulted them by providing a miserly £1 million, half of which will come from lottery funds, for additional places. I do not think any Deputy would disagree if the Government invested £10 million for the next seven years in these services. We would be willing to allow them invest £70 million in services for the handicapped even if — I am being honest about this — it meant we had to forfeit money from other areas. That is the commitment the Government should make to the handicapped; it is a commitment we have made to these people.

Today is a crisis day for many health boards. Some of the figures are on record and I want to refer to some of them. As I speak, the Southern Health Board in my region are holding a crisis meeting. This board have a deficit of £1.8 million and the Government have refused to help them. After the budget, and the Estimates which were published last December, this board will have a deficit of £1.8 million. The members of that board, the majority of whom are members of the Fianna Fáil Party, are now faced with the dilemma of having to curtail their services further and close wards. Today medical card holders are entitled to the transport service but tomorrow that service may not be available for them. Tomorrow medical card holders in south Tipperary who live 40 miles from an acute hospital will have to hire a taxi to take them to hospital if the health board decide today to cut back on transport.

It is well known that the beds the Government, and the previous minority Fianna Fáil, Government closed in 1987 are still closed and that staff who were made redundant have still not been reemployed. These problems still exist in the health board areas. In the Programme for Economic and Social Progress the Minister said he will extend eligibility to these services to all people. How can he extend eligibility for beds in hospitals if the beds are not available and wards have been closed? Recently on “The Pat Kenny Show” the Minister said he will not open any extra beds and will not employ any additional nurses. Who is being fooled in this debate about what the Government will or will not do in regard to health services?

I want to refer to the waiting lists in the region with which I am most familiar, the south-east region. On 31 December 1990, one month ago, 2,453 patients were waiting for operations while 5,014 outpatients were waiting for beds. In January the Government agreed to a programme which will make everybody eligible for a hospital bed at a time when there are no beds available for the people who are eligible. I would ask the Minister if we are really serious about what we are doing.

We made a big play of not changing the tax relief on VHI premiums. We now tell people who have VHI cover that they cannot get a bed in a public hospital because the number of private beds in public hospitals is negligible. One would say: "let them go to the Blackrock Clinic", but the Blackrock Clinic has its limitations too. If people want cover for that clinic their premiums will be exorbitant. I am particularly concerned about people with medical cards and those who pay PRSI contributions towards health services. A 25 per cent increase in hospitals charges for the first ten days in hospital was announced by the Minister in Christmas week and was opposed in this House by us. We will be putting down a motion to rescind this draconian measure.

We are now extending eligibility to all those people but there are not enough beds to cater for them. We should be honest with the people we represent and tell them that this Minister in particular has presided over the destruction of the health services. I admit it was by no means a perfect service when the Minister came to office but at least it had been protected from the worst effects of the cutbacks in previous years. One indication of the way in which it had been protected was that throughout the four years during which Barry Desmond was Minister, spending on health services was kept constant as a proportion of national wealth. Mr. Desmond was criticised on so many occasions in this House that it was nauseating to listen to. The present Minister occasionally when he is under pressure reverts to criticisms of Barry Desmond, one of which is that he allowed health boards to over-spend. The health boards consist of a majority of Fianna Fáil people who vote for spending. The health boards who have been careful about spending are still overspending because they are not getting enough money from the Government to carry out the minimum service required by the Minister. The budget is so tight that they are unable to carry out their work properly.

I would interrupt the Deputy to inquire whether he is the main spokesperson for his party.

That means the Deputy has 40 minutes.

Could you tell me, a Leas-Cheann Comhairle, what time Deputy Ferris is due to finish?

It might be better if the Deputy did not remind us of Barry Desmond.

I will remind the Minister further about Barry Desmond because he was one of the best Ministers this country ever had. Health board members are now asking us to bring back Barry Desmond.

Of course they are.

Fianna Fáil Ministers might laugh at that. Fianna Fáil Deputies physically assaulted Mr. Desmond when he was in office.

We heard he was back yesterday.

He is not too far away. It is nice to be able to quote him in the context of some of the figures he made available and the changes he made in health boards, whom this Government have totally neglected ever since. It is an indication of what this Government seem to be comfortable with when they talk about borrowing, the Exchequer borrowing requirement or the current budget deficit. They always say: "Look how much we are reducing these things by as a proportion of our national wealth or GNP", but if you apply that to the health service the crisis becomes clear immediately.

As Barry Desmond said when in office, we were spending £7 out of every £100 of national wealth on our health service. After three years of this Government that figure has been reduced to £5.90 out of every £100. That is an indication of the crisis in the health service. This Government have not maintained the level of spending on health as did Barry Desmond and the Government in which we were a partner, and, as we know, that was not a perfect system. In real terms every percentage point of national wealth is equal to £190 million. That means that in real terms we are spending £210 million less on our health services this year than we did in 1987 when Barry Desmond was the Minister. If we keep the spending constant for the next four years as a proportion of national wealth we will have invested £1 billion less in the health services than when Barry Desmond was Minister. The Minister can put that in his pipe and smoke it. This is supposed to be a period of economic and social progress. Those are the relevant figures and they indicate why there is a crisis in the health service.

In the 1991 Estimates the Minister allocated an extra £100 million to the Department of Health, but he failed to enlighten us that he was bringing in a Supplementary Estimate of £37.5 million. Why did he have to do that? Because the 1991 Estimates were already seen to be deficient, requiring a Supplementary Estimate. The Minister based his projections for this year on the 1990 figures before he readjusted them. Therefore the real increase for the health services is not £100 million but just over £60 million when you take into account the shortfall, which we had to vote for separately before Christmas. I questioned then how the budgeting of health boards could have reached such a point, with a £20 million deficit, and I will put on the record the figures for the various health boards as I proceed.

Here we have £60 million plus the £8 million provided for in yesterday's budget, but if we taken into account the increase of 4 per cent proposed in the programme for national recovery for the nursing and hospital staff, community care workers, public health nurses and hospital consultants, together with a cost of living increase, it is a very paltry sum. Increased demands will be made on health boards for supplementary welfare allowances and disabled person's maintenance allowances, all of which have been increased in the budget. It is in that context that we should consider the additional funding for the health boards.

As I have said, the Minister was interviewed on Pat Kenny's radio show one morning and I spent three-quarters of an hour trying to get through on the telephone but so many people were trying to talk to him that I was unable to get through. It is appropriate that the public would have an opportunity to give their views to the Minister, and today I have the opportunity to put forward my view. On that programme in reply to a question from a listener the Minister admitted that he was not going to hire one additional nurse or indeed to provide or reopen one single hospital bed. This admission by the Minister for Health immediately implied that there would be no reduction whatsoever in the waiting lists which I have identified in the south-east — the position is the same throughout the country. There will still be long queues of people waiting for hospital beds. This is not taking into account the Minister's proposal in the Programme for Economic and Social Progress to give equal access to the health services to everybody in the community.

The Labour Party have always been committed to a comprehensive health service. They want it free at the point of access, funded by general taxation, and we have been to the forefront in campaigning for this basic right. Unfortunately, the Minister, because of his proposals in the programme, appears to have aspirations only instead of something realistic. When you take his promises into account and compare them with what has been allocated in the budget and the Estimates, it is obvious that extra resources are needed if we are to live up to the challenge of the programme and the promises made. Under the provisions of the programme the Minister stated that people with incomes of over £16,000 will now be eligible for free consultants' treatment in a free public bed. That is untrue because it is not possible to do this, especially since Fianna Fáil came back to Government. Their minority Government introduced hospital charges excluding medical card holders. People paying pay related social insurance, including a fraction for the health services, were asked to pay an additional cost for the bed for the first ten days in a hospital. Before Christmas the Minister increased that charge by 25 per cent, to £12.50 per day. We have tabled a Private Members' Motion to nullify that order although we will not get the support of the House in that regard. However, it is appropriate that the public should know what is going on in regard to this three card trick which can be applied to any section of the budget.

The Minister also failed to comprehend that the abolition of the income limit for eligibility for free hospital consultant care would cause overloading in the public system. One does not have to be an economist or a genius to work out that if you give everybody eligibility without the beds being available one cannot deliver the goods. It can be compared to a car with four seats and the owner promising to drive ten people. How can you drive ten people in a four seater car? You cannot so the other six are left on the waiting list. The Minister is now telling everyone that they are entitled to a drive in this four seater car instead of providing seats in a bus. How can you tell people that hospital beds are available if they do not exist?

Extra money is needed to open hospital beds. The sum of £8 million provided yesterday is in the community care area and it is welcome as there has been a scarcity of community care workers for many years. We never really addressed the problem, even when the Taoiseach was Minister for Health, and wanted to increase the number of workers in the health service. I welcome the extension of the community care assistance scheme. I hope it will increase the number of public health nurses and ensure that they have transport to get to people. There should also be an extension of eligibility for home help because there are old people in all constituencies who will not be kept in acute hospitals and who cannot go into sub-acute hospitals because the Minister has closed them. The hospital beds which the Minister closed at the non-acute level would have been the cheapest form of looking after people who needed to recuperate after an operation. Sometimes the only alternative for these people is to go home and often there is only a pensioner there who is unable to look after the patient who has been discharged. Of course the public health nurse does her best, she assists in putting the patient into a wheelchair and promises to be back in two hours to help in getting him out but, very often, she is unable to fulfil her promise.

There are fewer beds available in geriatric hospitals and we must wait for people to die before others can be admitted. At the geriatric level the need for beds is becoming greater because people are living longer — which is good and an indication of good care — but we must take account of their needs in the community because that is where we want to keep them. We need more community care and public health workers and home helps. There should also be a revamping of the carer's allowance which the Minister for Social Welfare introduced. The odium of the means test must be removed. This need exists in Tipperary and in every other constituency. I could give examples forever but I do not want to embarrass the families concerned.

Unfortunate general practitioners are being subjected to pressure from families and they, in turn, tell the families to contact their local Deputy who might be able to help. The doctor cannot convince the hospital that a patient should be admitted although at times hospitals are forced to succumb to pressure because the need is there. It is embarrassing to have to beg for a legitimate entitlement under the Health Act, 1970. Perhaps the Minister, instead of saying that all workers are entitled to a public hospital bed, should say that everybody is entitled to a free general practitioner service, which might solve the problem. Perhaps we should review the guidelines in relation to medical cards, maybe we should make it possible for more people to be able to afford to go to their local GP and perhaps if he treated them from the very beginning people might not finish in hospital beds, the most expensive medical care there is. We should extend medical care at the point of delivery, that is the GP, but it cannot be done if there are rigid guidelines in relation to medical cards which are based on gross pay and which bear no relation to the take-home pay of unfortunate people who are paying large taxes, rent and/or mortgages. Their take home pay is slightly above the medical card limit and they neglect their health because they are unable to afford £10 or £12 to their local doctor two or three times a week, which they often have to do, to stay as healthy as possible so that they can work to pay their mortgage. If the Minister wants to revolutionise the health service perhaps he should deal with the question of community care. However, the sum of £8 million will not address the problem.

The Minister needs additional funds to be able to cope with the crisis of bed numbers. How does he propose to service or deal with the extra workload if this proposal is to be funded? Has the Minister even discussed this with the people operating the system? Has he talked to the consultants in hospitals to tell them how he would like their work practices to change? Has he discussed with them the obvious loss of income they will suffer as a result of this new system? Have the consultants a common contract with the Minister? How will the Minister convince doctors that they should make changes when their livelihood is affected? Other Ministers, from time to time, tried to do this, but, without proper consultation with people in influential and important positions, the outcome was not successful. If you disregard the people at the coal-face delivering the service you will immediately be subjected to aggravation and disagreement. The Minister's pious aspirations, outlined in the programme, will be set at nought. The ink used to write the programme in regard to health will not even be dry when we find that we will not be able to deliver it. I suggest therefore that he immediately enter into consultations with the consultants to ensure that this grandiose scheme can be put in place, but not at the expense of medical card holders who are at present entitled to a service and who are on waiting lists. If he is serious about this I suggest that he enter into negotiations. Indeed, it would appear that he is in breach of the contract which the Minister present agreed with the consultants. He was careless almost to the point of being irresponsible in announcing a radical proposal without accompanying it with a detailed outline of the necessary allocation of resources, of which no mention was made in the budget, and without the agreement of those who will be expected to operate it. Regard must be had to people's rights.

The Minister for Social Welfare is already well aware of this. After all, it was he who tried to extend the dental scheme, which was welcome, to the spouses of insured workers but without the agreement of those who operate the scheme. As a result only a very small number of spouses have benefited. I supported the Minister——

The Deputy will be glad to hear that the number now stands at 265 dentists.

The position is improving slowly but how many dentists would the Minister like to see taking part? If he had got their agreement, they would be taking part.

The effect of the health cuts is visible all around us. As we debate the budget, health boards are preparing to debate the services which will have to be cut, the number of beds which will have to be closed, even though the Minister said he does not want to see any beds closed and what staff they will have to let go in order to live within the allocations made by the Minister — no provision has been made for these areas in the budget either. Is it nonsense then for the Minister to attempt to tell us that the number of beds will be maintained at last year's level? Is it legitimate for us to ask how this will be done? I hope the Minister will answer those questions.

How does the Minister propose, for instance, to deal with the crisis at the hospital in Kilkenny where there is overcrowding and people have to be treated in the corridors? Both the Minister and the Taoiseach have seen the position at first hand. Indeed, this matter was raised in the House by Deputy Pattison and me yesterday by way of question. A sum of £140,000 is needed and the people in Kilkenny and I, as spokesperson for the Labour Party, want to know if this hospital will receive the extra funds which are urgently required.

What about the Tallaght hospital project? Can the Minister deny or confirm that this project has been deferred for another year, despite all the promises made by himself and the Government that a new hospital would be built? The figure for the Western Health Board stands at £3.2 million, £4 million for the Southern Health Board and £1.8 million for the South-Eastern Health Board where a crisis meeting has just begun — and no attempt was made in the budget to deal with that crisis — the NorthEastern Health Board £2 million, and the list goes on.

If we take into account the proposed cutbacks for this year, the crisis in the health service will become a major political talking point. We do not want this to happen but we have a responsibility to ensure that the Minister is aware of this. Indeed, we hope the Taoiseach is listening, unlike two years ago when he had to admit that he did not realise there was a crisis. The health boards of which Fianna Fáil councillors and Senators, including the Cathaoirleach of the Seanad, are members will confirm that there is a crisis.

Whatever else they may claim, the one thing that the Government cannot claim is that the people have given them a mandate on health. The electorate gave them a very clear message but it has been totally ignored by them. I would remind them at the beginning of a new decade that they have a major responsibility to the poor, the underprivileged, the sick, the lonely and the handicapped. I also wish to emphasise that the handicapped, despite all the promises, still find themselves in a crisis, and I ask the Minister to address their plight in his reply to this debate as the public are entitled to know what the Government intend doing in this area.

In many ways this is a "stay as you are" budget which is all very well if one is happy where they are, but approximately one-third of our people are not allowed to participate in the economy in any manner consistent with a decent standard of living. If they had any expectations of some improvements in this budget they would have been very severely disappointed indeed. Anybody in the two-thirds one-third society we now have, and which this budget reinforces, who expected the Minister to use the opportunity of the annual budget to improve their position and give some of them the opportunity to go back to work, has been gravely disappointed. It is a totally standstill budget; it leaves us as we were. Those of us who are fortunate enough to be in employment and on a reasonable income way be able to tolerate that in the context of the current international climate, but for those people at the bottom of the heap it is a gross disappointment.

The budget actually predicts, forecasts and plans for an increase in the number of people out of work. That projection — just under 4,000 people being added to the live register — is a gross underestimate. I will return to this later. However, it seems that, as the Taoiseach can manage to usurp the functions of the Minister for the Gaeltacht and the Minister for Defence, he would have very little difficulty taking over the role of the Department of Finance if the budget is to be the measure of the ingenuity and imagination the Minister put into it.

This is the kind of unimaginative and penny-half-penny budget which could have been produced on auto pilot. At best, it is a conjurer's budget rather than a budget of a Finance Minister who has a fiscal strategy for the country. It confuses tax reform with tax reductions which are more imaginary than real and it continues the policy of social welfare relief rather than social welfare reform. As I said, it actually makes provision for an increase in the live register from 224,700 people to 228,000 people. It is a budget which accepts the divisions in our society today and proposes to sell off one of our most successful State companies at a time when market conditions could not be more gloomy.

The Minister's speech contains as much disinformation and hype as the average press release from the Pentagon or Baghdad. On closer scrutiny it would appear that the Minister has made tax concessions to consumers and taxpayers of the order of £170 million while imposing new taxes on the same consumers and taxpayers to the extent of about £135 million on a hit and miss basis. There is no strategy, direction, plan or overview.

It may be claimed by the Government that there is an objective to reduce the standard rate of tax to 25 per cent by 1993. I dispute vehemently that such a move constitutes real tax reform or a strategy on personal taxation. In the area of indirect taxation there is nothing but confusion and making it up as you go. If the cost of harmonisation is agreed by all sides of the House to be of the order of £600 million, it is impossible to detect where the Government are headed on indirect taxes. The reduction in the 23 per cent rate was virtually obligatory as a result of imminent harmonisation, so the Minister concedes £98 million with one hand and takes back £61 million with the other hand by increasing the 10 per cent rate to 12.5 per cent. The latter measure is especially regrettable since it will aggravate the marginal position of low income groups and cause further hardship to the old and poor who will now pay more for their heating fuel.

The Minister's words yesterday must be measured against the evidence from the ESRI survey on income distribution Poverty and Usage of State Services which shows the alarming figure that just under one in every five households under the poverty line are paying income tax or PRSI. This highlights the absurdity of the prevailing obsession that if only we had a standard rate of tax of 25 per cent we would have achieved tax equity. Nothing could be further from the truth. The equity issue concerns how quickly a family on low income becomes liable to income tax. How quickly do they come into the tax net? That is the equity issue.

For the Minister to make the ritual claim that his new tax exemption limits will take 18,000 people out of the tax net is no more than meaningless rhetoric. The ink was scarcely dry on his script before that statement was invalidated, and I will explain that to the Minister because it cannot be challenged. The new tax exemption limits are equivalent to an increase of 4.6 per cent, but the workers targeted here will have received a pay increase of 4 per cent when and if the trade unions accept the terms of the Programme for Economic and Social Progress. However, since the category of workers we are talking about are obviously in the low income bracket, a floor of £5 is provided in the Programme for Economic and Social Progress. In other words, if your pay increase of 4 per cent comes to less than £5 you must get a floor of £5. The obvious impact of that for somebody, for example, paying tax at £70 a week is that we will get a £5 increase, which is equivalent to 7 per cent, and that brings him back into the tax net. For somebody earning £100 a week the £5 minimum pay requirement under the programme is equivalent to 5 per cent; so for that unfortunate category of workers earning in the region of £100 or less, as soon as the pay agreement becomes operable — and, of course, it will become operable retrospectively in some cases if it is accepted by the trade unions depending on the expiry dates of particular company-union agreements across industry — they will be back in the tax net. So much for the claim that we have taken people out of the tax net and for some of the facile coverage one had time to glance at or listen to this morning which suggested this did something for the lower paid and that somehow disproportionately they benefited. They did nothing of the kind and the argument I have advanced in the taxation area is repeated despite protestations to the contrary in the social welfare area.

I am glad to see the Minister for Social Welfare in the House because he very expertly communicates the contents of the budget to give the impression that somehow there has been major progress on this occasion. Nothing could be further from the truth. You can do anything with statistics. I thought the highlight was the commentator this morning who said the general increase of 4 per cent is quite generous because it is 25 per cent ahead of the expected inflation rate, in other words, inflation was predicted at about 3 per cent, and the general social welfare increase is 4 per cent, the implication being that the 1 per cent increase was equivalent to an increase of 25 per cent. Did you ever hear a greater abuse of language? The recipients of the 4 per cent general increase will be very fortunate indeed——

It is actually 33? per cent.

That makes it even more fantastic. It proves you can do anything with figures. What does it give the social welfare recipient? For a start, I do not accept that the Minister can predict with any certainty that the inflation rate will be about 3 per cent. It is extremely difficult in present international conditions to make that claim.

I recall the remarks the Minister made yesterday on the question of interest rates and how favourably we have been doing, which we have compared to our major partners in the EC and especially our link to the German economy. However, it is very interesting to note that the policy of the present Conservative Government in Germany seems to be to bear the brunt of the unification of Germany through monetary policy rather than through fiscal measures. If that continues and if the German Government refuse to impose taxes to pay for the cost of unification, that will have a serious impact on our interest rates before this year is out. That kind of expectation, leaving out any impact a worsening in the Gulf might have, poses very serious question marks over the projection here. In any event, to pretend that for general social welfare recipients a 4 per cent basic increase is something to write home about is ridiculous; it would scarcely do more than pay for the stamp. Much more was needed for those in receipt of the basic social welfare.

Child dependant welfare allowance is another area where the Minister made the most of statistics. The Workers' Party pre-budget submission argued that child dependant allowances ought to be on the basis of a fixed percentage of the adult rate. Anybody who has children will understand why that should be the case. The cost of clothing, rearing children and so on, can very easily be related to a reasonable percentage of the adult rate. What the Minister did was increase the lowest rate of £11 by £1, a 9 per cent increase, bringing the allowance to the princely sum of £12. Our proposition of 40 per cent of the basic adult rate would be 40 per cent of £55, or £22, which, incidentally, I understand is the same proposal put in a different way by the Conference of Major Religious Superiors who suggested it should be doubled.

The commission suggested £10 which would be the equivalent of the £12.

How long ago?

In current terms.

Forty per cent of the basic rate at present would be about £22; the new rate is £12. If we want to revert to what the commission suggested let me take up the Minister on that point. In 1985 the commission recommended that the minimum subsistence rate for the various categories should be a range of between £50 and £60 per week. No Government have ever undertaken to even target its implementation.

It is in the Programme for Economic and Social Progress.

Perhaps the Minister would be patient — I am coming to that — because I know very well what is contained in the Programme for Economic and Social Progress. I had not sufficient time to read yesterday's document and one finds all is not as it may seem. Initially I was delighted when I heard that what was in the programme was that the Government would now seek to implement the rates recommended by the Commission on Social Welfare by the end of 1993 which I understood — and which most trade unionists currently balloting on this understood — to be the updated rates. In fact, that is not what has happened. The Combat Poverty Agency were the original authors of taking the medium figure of £50 to £60 in 1985, updating it on current values which, at current money values, is worth £62 as the minimum rate. Is there anybody on either side of this House who would argue that it is possible to live with any kind of decency at a level of income below £62 per week?

The priority rate is £54.60 in current terms.

That is precisely the point, the actual commitment in the programme talks about aiming to introduce what are called priority levels by 1993. If one reverts to the recommendations of the Commission on Social Welfare one finds that the priority levels are an entirely different matter because what is referred to is the minimum of that scale, £50, not the medium point. Therefore, people who might have expected to receive £62 will now receive something of the order of £55 — I think that was the figure we agreed on television yesterday but when I came back in here and examined the Principal Features of the Budget, I notice there are still categories on a basic rate of £50 a week.

That is why they were given 11 per cent in the budget. The Deputy will understand it all in due course. The extra money was given to the lowest categories.

Is it still not the case that there are certain categories of social welfare recipients now in receipt of an income of £50 per week?

The short term unemployment assistance and supplementary allowance recipients.

The Chair does not suffer from jealously. However, I would suggest that Deputy Rabbitte should address the Chair. This is not a Committee Stage debate but rather Deputy Rabbitte making his contribution, not a question and answer session.

Not the "Pat Kenny Show".

I apologise for having ignored the Chair and promise not to do so for the remainder of my contribution. But we have now established that, for short term single recipients, the rate is still £50 only, which was the point I was trying to make. For many people the target set in the Programme for Economic and Social Progress falls far short of their expectations. If one's income is around £50 or £55 a week I should suggest, there is a hell of a difference between being in receipt of £50 and £62. There is hell of a difference in the target figure being £68 at the end of 1993, as a great many people anticipated, and being in receipt of £58, which is what will now turn out to be the case, give or take, depending on the rate of inflation obtaining.

Similarly, in the case of an adult dependant, the Minister has ignored the recommendation that it should be a fixed percentage of the adult rate——

Which is 60 per cent.

——and much too low, as any dependent spouse will tell the Minister and has no regard to the longstanding recommendation that it should be paid directly, where possible, to that dependent spouse.

I remember last year when the carer's allowance was introduced the Minister gave us the impression, at the early stages, that that allowance would be extended to people who had the onerous responsibility of looking after a handicapped relative, child or whoever. Now the Minister has extended it to the DPMA. Of course that does not include very many handicapped persons being looked after at home. I am greatly surprised at this having regard to the current controversy about the crisis in the mental handicap services. It is very difficult to appreciate how the Minister cannot recognise the invaluable contribution, for example, of parents who have the responsibility, every single day of the week, of caring for a mentally handicapped child. Surely there is an irrefutable case that in all cases the carer's allowance ought to be available to them?

The domiciliary care allowance is paid up to the time they get their DPMA. Therefore, the Deputy will see that there is actually a payment for children. The Deputy may argue about its adequacy but there is a domiciliary care allowance.

I do argue its adequacy. I repeat the arguments advanced in the Mansion House a few nights ago by the Parents Against Mental Handicap who very clearly made the point that the DPMA applied to a fraction of their members only. I find it very difficult to understand why the carer's allowance is not extended to them.

I would welcome an intervention by the Minister on the question of child benefit if he wants to challenge my figures. As I read the derisory increase in child benefit, it means that a family with more than three children will receive an increase of £7.10 per month which — if one had civil servants to do the calculations — probably works out at 24p a day; that is the level of increase in child benefit. How, in God's name, can that be made out to be a budget taking into account the interests of people in the lower income categories? Child poverty is endemic in our society and, as we know from recent surveys, is growing. The Minister had an opportunity to tackle child benefit and instead we have a derisory increase of £7.10 per month.

I welcome the increase in the FIS but I am very disappointed that there has been such a low take-up rate of this benefit. The Department of Social Welfare must see what measures can be taken to improve the level of take-up of this benefit. To my certain knowledge a great many families do not understand the scheme and the conditions they must comply with in order to get this benefit. The Minister has accepted that there is an argument to be made for the very low paid but all this does for me is to make a more compelling argument for a national minimum wage. That is the only way we will tackle the question of low pay. The myth has long been shattered that poverty is the preserve of the unemployed. A great many people on low pay are in the poverty trap, and I cannot understand the resistance of the Government to the concept of a national minimum wage.

The commitment given in the national programme under this heading is virtually worthless. The programme records that the Irish Congress of Trade Unions proposed that there should be a statutory minimum wage and that the employers stated their opposition to this proposal. The programme went on to say that during the currency of the agreement a committee of some kind would be set up to report on and examine the proposal. That is a great pity as this is the only way we can tackle this question. There is not any commitment by or enthusiasm on the part of the Government to implement a statutory minimum wage despite the exploitation, of which the Department of Labour are aware, of workers in many sectors, the services sector in particular. I do not take any joy from the Programme for Economic and Social Progress that that is likely to be met.

I welcome the decision on mixed insurance. My union has been concerned about this for a long time. Some workers in State companies are at a disadvantage because of this mix of PRSI and State company schemes. This proposal is certain to be welcome. The Minister in his response should address the question of whether the Department regard this as a matter of urgency because, without being too crude about this, if the change is not implemented soon many of the beneficiaries will no longer be around. I also welcome the extension of PRSI cover to part-time workers. I do not know whether the extension of this benefit will be as outlined in the Bill published before Christmas in terms of the hours defined and so on——

It is a different matter. It will come in the Social Welfare Bill and in the regulations.

The Bill on part-time workers published before Christmas stipulates an hours threshold above which one would qualify for certain benefits. That threshold is eight hours and I sincerely hope that the extension of PRSI will have a reasonable yardstick in terms of the definition of a part-time worker.

I will refer now to a scheme that raised quite a brouhaha last night in the financial resolutions, the business expansion scheme and the Government's measures to close some of the loopholes in it. I have not seen Fine Gael as excited in a long time as they were last night. They really got worked up about this. I had little sympathy with them last night but, having reflected on it overnight, my sympathy such as it was then, and it was not very great, has diminished. There is a compelling argument for the total abolition of the scheme.

It is very difficult, within our complex fiscal system, to target a particular area of the economy for development because one is competing with a whole industry of tax specialists, accountancy firms and former officials of the Revenue who have been poached for the specific purpose of teaching industry how to get around new measures, and how to find loopholes. On radio this morning a tax specialist advised that she did not think the Taoiseach could do this, that it was illegal and open to challenge. She was anticipated last night by Deputy McCreevy who described himself as an ordinary man. If the Trade Descriptions Act applied to such a description he would have been arrested leaving the House last night. Deputy McCreevy who seems to know a great deal about this, as I would expect, also challenged whether the Taoiseach could legally tighten up this scheme. That is evidence of the power of the organised lobbies when the Government tighten up a loophole.

I took the view last night, and am more confirmed in it today, that one cannot bleat about closing off loopholes in the tax code and then complain when the Government bring in a measure to shut off a loophole. I am prepared to accept that abolition may not be prudent and that if the scheme can be focused on small manufacturing industry and to where it genuinely attracts capital for risk purposes, that would be all very well.

The problem is that the loss to the Exchequer has been enormous. The loss was £40 million and not, as Deputy Barry said, an imaginary loss to the Exchequer. It was real income tax lost to the Exchequer because it was generated within this economy. A similar figure would be lost this year if corrective measures were not taken. Corrective measures have to be taken.

The tourism industry has been one of the greatest areas of abuse. It is important to point out that, contrary to what Deputy Sean Barrett said, it is perfectly legal. Nothing illegal is being done. These people are availing of this scheme as a tax shelter and are entitled to do so. The question about it raising badly needed capital for the refurbishing of hotels on the west coast, for example, seems not to hold a great deal of water. What it does is displace other hotels that do not benefit. The net addition is minimal and if there is an argument for discriminating in favour of the west coast — and remember most of these BES take-ups have been in Dublin — that should be done by some kind of grant subsidy to suitable tourism projects rather than by financing the kind of tax shelter that has been abused so disgracefully. I am aware of a study which is to be published very soon on 24 such projects. I emphasise that none of these include the infamous Shannon rip-off. In the case of these 24 projects, the majority of them in tourism, very few jobs were created. I am aware that the BES was availed of in the shipping area and I predict that when the jobs become available it will be a bigger scandal than Shannon. This study will show that the cost per job is in the region of £20,000, compared to an IDA average of £15,000. We cannot allow that to go on. Those who have benefited are financial institutions and taxpayers with disposable income. The financial intermediaries have made a fortune at both ends of the transaction. I have heard some fantastic stories, for instance that a person went into a bank and raised £20,000 which he put into a project like this, then got his £20,000 back and put it in the bank. That kind of abuse is incapable of being supervised by the Revenue Commissioners and it is high time that we eliminated this system of double relief.

I stand over The Workers' Party decision of last night. I am prepared to look at the limitations now imposed on genuine manufacturing enterprises. The £500,000 ceiling was the subject of considerable argument yesterday. On reflection, I am not so sure that it is a major issue. When that limit is reached, the businessmen concerned set up a new company.

I am disappointed at the cowardly stance of the Minister on the question of corporation tax. It is deplorable in the context of the profits which have been made in recent years and during the currency of the Programme for National Recovery that he has decided to make no changes in corporation tax. That is a scandal in an economy which has sprung a leak. A total of £2.5 billion has been repatriated in profits, yet there is no change in corporate tax because the Government have bought the CII lobby. That lobby points to the yield, which has increased. There are two reasons for the increase, namely, the base was minimal and the enormous profits generated under the Programme for National Recovery give the appearance of corporation tax being increased. It is a copout in terms of tax reform that we should approach it in the context of personal taxation and any question of broadening the tax base into the corporate sector, capital taxes, property taxes and so on does not seem to feature. We must get a minimum tax from these companies. It is almost meaningless to have a 40 per cent tax rate because almost nobody is paying 40 per cent. Anybody who has a tax adviser knows how to circumvent it. It is not too much to ask and would not deter any industry if there were a minimum rate of 10 per cent.

This is a standstill budget that does not reckon with the fact that international demand for our exports and products is already falling and is likely to fall further. I predict that the borrowing requirement will not be held at £462 million. It is the height of folly to float the shares of one of our most successful State companies in present market conditions with a view to making a contribution to achieving that EBR figure. It is highly regrettable and I ask the Minister to keep it on hold until the market conditions are more certain. Now that we have made the tragic decision to privatise that company, we should allow its shares to realise something commensurate with its real value.

The measures outlined by my colleague the Minister for Finance yesterday build on the real progress we have made over the past four years.

Our economic strategy set out in the highly successful Programme for National Recovery has been highly successful. This budget will improve the position of workers generally, provide more jobs and protect and improve living standards for those who depend on social welfare. The exceptional performance of the Irish economy under the Programme for National Recovery will be enhanced by the measures agreed with the social partners under the Programme for Economic and Social Progress. This budget is the Government's first step in implementing the programme.

While continuing our strategy of sound economic management, we are also making substantial progress, despite international uncertainties, in key areas like the reduction of taxes, the creation of employment, greater social equity and welfare improvements. This strategy will also keep public finances under control, keep inflation down, and provide growth, a favourable balance of payments and a stable exchange rate. The scene is set for business to invest and flourish in Ireland.

We have always been a caring and compassionate people. The public want our services to reflect this deeply humanitarian outlook. Our welfare services already have a number of unique and enlightened features. We have special regard for those on low incomes, the elderly, their carers, and the handicapped. We want to continue this approach and at the same time make the system more efficient, sensitive and responsive to the needs of people.

The package of improvements for those on social welfare or at work on low pay in this year's budget costs £164 million in a full year and £71 million this year. This brings the gross expenditure on social welfare schemes and services to over £3 billion for the first time.

Let us look at the increases. It is now official that we have the lowest inflation rate in the EC (2.7 per cent) and this budget is designed to keep inflation down to about 3 per cent. Against this background, the general increase of 4 per cent provided for those who depend on social welfare will clearly keep them ahead of inflation. This increase alone more than meets the Government's commitment under the Programme for Economic and Social Progress. It costs £104 million in a full year and some £45 million this year.

We are doing more than this. This is the fourth year in a row in which extra resources have been found to give special increases to the lowest paid. The personal rates of supplementary welfare allowance and short term unemployment assistance are being increased by over 11 per cent this year. Families on these payments will receive increases of over 9 per cent when one takes in the total amount to the family. Some 100,000 people will benefit from these special increases. Families of those on unemployment benefit and disability benefit are also getting special increases ranging up to 7 per cent.

Following this budget, all long term rates of social welfare payments now reach or exceed the Commission on Social Welfare's priority rate of £54.60 for 1991. Those who are on old age pension, lone parent's allowance, long term unemployment assistance, pre-retirement allowance and disabled person's maintenance allowance will have a personal weekly rate of £55 and a married rate of £88. Those who are on contributory pensions will have higher rates of up to £64 per week for retirement and old age pensions and £110 per week for a couple who are both over 66.

Short-term payments such as disability benefit, unemployment benefit, short term unemployment assistance and supplementary welfare allowance are being increased to a new personal weekly rate of £50. This represents increases of between 4.2 per cent and 11.1 per cent and is a major step towards achieving the commission's priority rate by 1993 for these short term payments, and anyone who is objective about the rates will accept that.

The payment of £31 for an adult dependant is now being increased to £33, an increase of 6.5 per cent. The new rate of £33 per week from next July will ensure that the relationship which the Commission on Social Welfare recommended should exist between the personal rate and the adult dependant allowance (60 per cent) will continue to be maintained. The Widowers' Association brought to my attention the need for some continuation of adult dependants payments following the death of a spouse. I am therefore making provision for a 6 weeks payment of the adult dependant allowance to widowed persons which will apply to short term payments.

Considerable progress was made last year when I introduced a minimum weekly rate of £11 per child and reduced the number of child dependant rates to 6. This year the minimum rate is being increased by over 9 per cent to £12. The new rates are £12, £14 and £15.60. Only four years ago, we had an extremely complex system involving 36 different rates of child dependant allowance. Now we have only three.

In addition, the higher rate of child benefit will from October next be payable for the fourth and subsequent children. This will mean an increase of £7.10 per month or £85.20 per year for all families with four or more children.

I am also bringing up to 21 years the age to which child dependant allowances are paid for the long term unemployed, old age pensioners and invalidity pensioners where the child is in full-time education.

The continuation of child dependant allowances during the summer for those children over 18 and in full-time education will be welcomed. The present practice of discontinuing payment for the summer holidays and paying arrears due if the child re-enters full-time education in the autumn is cumbersome for both the client and the Department.

In recognition of the burden which parents have to endure following the sad loss of a child, I am continuing payment of child dependant allowances for 6 weeks after the death of a child.

The tax exemption limits for married couples will be increased by £300 to £6,800. In addition, child exemption limits will be increased from £300 to £500 for the third and subsequent children.

The family income supplement scheme is a useful means of directing resources to lower paid workers with children. It also helps to preserve the incentive to work.

In line with commitments given in the Programme for Economic and Social Progress. I am pleased to announce substantial improvements in the scheme as follows: income limits are being increased to £140 per week for a family with one child and £276 for a family with eight children, the restriction on the amount of the weekly payment is being abolished, and the scheme is being extended to cover children from 18 to 21 years of age who are in full-time education.

As a result of the combined family income supplement and child tax exemption changes aimed at the low paid, a married person with 2 children earning £135 a week will get an extra £10 per week. Similarly, a married person with 4 children earning £162 a week will get an extra £13.80 a week due to the combined family income supplement, child tax exemption, and child benefit improvements.

Full social insurance cover will be extended to part-time workers with effect from 6 April of this year. This is a further important step in the process of widening the social insurance base, which I initiated in 1988 with the extension of cover to the self-employed.

Part-time employment is becoming more widespread. There are now over 70,000 regular part-time workers in the country, representing 6.4 per cent of all regular workers. This amounts to a doubling in the proportion of part-time workers in the labour force in the last decade. The majority of these workers already enjoy full insurance cover by virtue of being employed for 18 hours or more a week. However, a sizeable minority who are employed for less than 18 hours per week are covered only for occupational injuries. Married women and young single people comprise the bulk of part-time workers, many of whom either cannot obtain or are not in a position to take up full-time employment. They have no entitlement to unemployment benefit, when out of work, or disability benefit, when ill, and they are not covered for pensions. It is essential that these workers do not lose out on social security protection, through no fault of their own. As a result of the changes which I will put in place, up to 21,000 additional part-time workers will have access to the full range of social insurance benefits.

The Class A PRSI contribution rate, which is applicable to most employees, will be extended to part-time employees. At present, entry to Class A insurance is dependent on the employee having worked for 18 hours or more in the week in question. It is proposed to change this condition so that all private sector employees whose weekly income is above a minimum threshold will be subject to Class A insurance, irrespective of the number of hours worked. Regulations outlining the new conditions will be made shortly and employers will be notified of the new arrangements.

As a result of these changes many part-time workers on low incomes will have access to benefits for the first time. For the bulk of part-time workers entitlement to short term benefits generally will commence in January 1993. As far as pensions are concerned this would, needless to say, take longer and we will be asking the pensions board, in their final report, to give some further advice in relation to that area. The provisions generally for benefit entitlement for part-time workers will be laid out in the Social Welfare Bill which will be available soon.

The new carer's allowance scheme was a historic development. Traditionally, payments have been made to compensate a household because of unemployment, illness or the death of a breadwinner. The new allowance formally recognised the need of carers for a direct form of income support in their own right.

From next October, the scheme will be extended to cover carers of recipients of disabled person's maintenance allowance and those persons getting a pension from another member state of the EC or from a country with whom Ireland has a bilateral social security agreement. The increase in the maximum personal rate from £45 to £50 weekly dates from July next.

Many recipients of disabled person's maintenance allowance live in residential care and are not able to benefit from the free travel arrangements. Last year I introduced the "companion" travel pass which covers 12,000 handicapped persons. In future DPMA recipients will be able to retain their entitlement to free travel when they enter residential care. This will enable them also to avail of the "companion" pass and I am sure that is welcomed by Members here in the House.

Persons who enter insurance at the class A rate early in their career and subsequently become insured for periods at the public service modified rate, the people who are known as the mixed insurance people, may not qualify for any retirement or old age pension under the social insurance system because they will not have a sufficient average over the relevant period. We are taking action now to tackle this problem and from November next pro-rata pensions will be paid to the persons concerned which will be in a proportion to the periods of insurance thay have completed at the class A rate. The new arrangments will be similar to those that apply under EC regulations to persons with a mixture of insurance in a number of EC member states. This will ensure that all persons with mixed insurance will be treated in the same way. My Department estimate that up to 2,500 persons will qualify for a pro-rata pension and the cost in the full year will be £3 million.

I am making a number of improvements in the means test this year. Income derived from casual employment as a home help will be disregarded. This will ensure that those who give of their time to help the elderly and disabled will not be penalised by having the value of their small income eroded by a corresponding reduction in the means tested payments. This is something which Deputies had pointed out in the House during our various discussions.

I am introducing a minimum weekly payment of £5 for those whose current entitlement is less than £5 and whose only means is the yearly value of the benefit and privilege derived from board and lodgings at home. If they only qualify for 50p, £1 or £1.50 they will still receive a basic payment of £5.

I have also arranged that in future income derived from the Haemophilia HIV Trust Fund will be disregarded for means test purposes.

Last year I introduced a new pre-retirement allowance for those on long term unemployment assistance and over the age of 60 years. This scheme gives them the option of transferring to a pension book system which they cash at their local post office. I am glad to be able to annouce that the age limit for this scheme is being reduced from 60 to 58 years.

The next item refers mainly to farmers and persons who follow a subsidiary occupation who are not regarded as unemployed from their main occupation unless they satisfy a special condition of having at least 78 contributions paid in the three years preceding the date of claim, or that the profit from their subsidiary occupation does not exceed £4 a day. This mainly affects landholders who may obtain regular seasonal employment. The income limit is now being increased from £4 to £10 a day.

I am very happy to be able to continue the grants to locally based women's groups, and this has been very much welcomed. There will be a grant of £500,000 to women's groups, which is a rise from the £350,000 allocated last year. A number of projects received core funding of £10,000 each last year — the North Wall Women's Centre in Dublin's inner city, Ronanstown Self-Development Group in Clondalkin and the Little Bray Family Resource and Development Centre, and this year they will each be receiving £11,000. Grants will also be made to organisations who provide refuge for women who are the victims of domestic violence: these will include Women's Aid in Rathmines, the Aoibhneas Centre in Ballymun and the Meath Women's Aid Association. An evaluation of the scheme has shown that it has been particularly effective and very widely welcomed by women and has been very valuable in terms of local community development. I am also extending the benefits of a nationwide community development programme which I introduced last year to include new projects in areas like Darndale in north Dublin, Waterford, west Cork, Kilkenny and north Wicklow and some others which have yet to be determined.

The Government are also providing special once-off grants. I am providing £75,000 to the Catholic Social Services Conference towards the refurbishment of a hostel for the homeless in Eccles Street and a further residential hostel for homeless boys in Lennox Street. A sum of £50,000 is also being provided to the Simon Community towards their work with the homeless. A sum of £100,000 will be provided for co-operative housing projects for single parents and the disabled. This will be seed money to assist in what is being done by the Minister for the Environment.

The Irish Wheelchair Association, who provide many services for people dependent on welfare, are getting a special grant of £75,000 to help them with the costs they have accumulated in this area. I am also providing a once-off grant of £25,000 to the National Association for the Deaf for the installation of telecommunication devices for the deaf. A grant of £25,000 will be provided to the Catholic Marriage Advisory Council and a further £25,000 for marriage counselling services generally.

One of the major commitments in the Programme for Economic and Social Progress is the integrated area based strategy for the long term unemployed. We will be putting a great deal of time and effort into the scheme and we will also ensure that we have very close links with FÁS in providing all the options we can for those who work with us. I intend to designate officers in our local offices who will assist individual unemployed persons in their quest for work. This initiative will be implemented in close liasion with the area based strategy for the long term unemployed agreed by the social partners.

We will implement a £20 million crackdown on PRSI related fraud. We will be overhauling the PRSI registration system, ensuring that employers comply with their PRSI obligations for their employees and we will be recruiting additional staff at a cost of £1 million. We intend to be in a position to increase the number of investigations of firms to £10,000 by late summer this year and to 15,000 investigations a year when the staff are in place. Unscrupulous employers who cheat the taxpayer, their competitors and their employees will face stiff penalties. The new arrangements will be widely publicised and employers will be well informed about their obligations. My Department will shortly take over from the Revenue Commissioners responsibility for allocating RSI numbers. This will lead to a more co-ordinated approach to the issuing of RSI numbers and the provision of benefits.

In conclusion, the package I have outlined will have a major impact on those people who depend on us for support. The fruits of the Programme for National Recovery coupled with the co-operation of the social partners in the new Programme for Economic and Social Progress have made these improvements possible. We depend on that stability and growth to be able to provide improvements in social welfare. We can all look forward to the nineties with confidence. I know that these measures which the Government have introduced will be widely welcomed, not only by those in industry for whom they provide investment and stability but also by those who are at work on low pay or those dependent on social welfare. It is a good package for those who depend on social welfare and it is a further major step in reaching the levels we want to achieve. Indeed, some of our rates have come very close to them already.

I wish to pay tribute to the Minister opposite for introducing quite a number, although not all that one would have liked, of improvements in the social welfare code and which Members on all sides have been calling for over the past couple of years. One thing that makes it worthwhile being a Member of this House is that sometimes somebody is listening to us and that somebody takes cognisance of what is said and does something about it, even though it may not go as far as we would like. We should congratulate the Minister for quite a number of improvements in that area.

Having said that, I am afraid I have to end my compliments and talk in general terms as best I can on the budget. First I will refer to what is in it and then to what is not in it. May I comment on the reaction from the two parties in Government when the sides were reversed a few years ago? At the end of the budget speech there was a general outcry that the budget was Thatcherite, unfeeling, heartless "economistic" and cold and showed no feeling of having regard for the real needs of the people. This was trotted out regularly through the media and by the various press officers. However, all of a sudden, budgets seem to have taken on a new meaning when one listens to what comes from that side of the House.

One thing that amuses me is the manner in which Governments can emphasise what they see as the positive elements thereby hoping to deflect attention from the less positive elements. For example, note how many times the rate of inflation will be quoted in the context of the budget and how many times we will be reminded that we now have the lowest inflation rate in Europe. However, there is no reference to how that came about.

Or no reference to interest rates.

This is the point I am coming to. Nobody from that side of the House has mentioned a word about interest rates. There is no emphasis on interest rates now and they have been conveniently ignored because they are among the highest in Europe and that leaves us in a most vulnerable and very awkward position. Nobody from that sides of the House has mentioned — I am still hoping that some speaker will do so — the extraordinary interest rates. This budget is unimaginative, colourless, tasteless and odourless and gives me the impression that somebody somewhere had decided — as Deputy Rabbitte said earlier — to put the whole economy on auto-pilot and to assume that everything will work all right. That is a very peculiar and a very dangerous thing to do especially at a time when there is so much trauma in the world outside. There are so many factors that can have a bearing on this economy that it is extremely dangerous to do that.

Let us take the area of personal taxation and again I refer to the good vibes which are emanating from that side of the House. From listening to the Budget Statement yesterday and reading it carefully today one would automatically assume that there is something great in it for everybody but on closer examination — particularly for the low paid workers — the amount of benefit and relief is minimal. Where the whole relief system starts off at the lower end of the scale there are so few people on that level of income as to make it useless in terms of benefit to the large masses of the people. The Minister for Industry and Commerce is present and I am fully aware of the commitment of the Progressive Democrats to a reduction in the standard rate of income tax to 25 per cent and I note the moves in that direction. I would point out to the House that with each passing year modifications, and the implementation of a standard rate of 25 per cent, are less and less meaningful simply because the people who are hardest hit are the people who are carrying the burden of responsibility in the State in terms of taxation, those at the middle rate of 48 per cent. We all have ample opportunity to speak with people every weekend who are in that tax band, in that income group: they are the people who are disappointed and who are receiving little or no relief. As a matter of fact following a little juggling with figures they end up with £1.50 or £2 per week extra on the one hand, and by the end of the year, by some mysterious means, if they receive a pay increase they are worse off. The move towards two tax bands is fine, but the big issue must now be the number of people in the middle band who will shortly move into the next one.

Another area which has been brought to my attention very forcibly this morning by my constituents is that we are now, as we had anticipated, getting the negative aspects of tax harmonisation. We are getting the increases but we are not getting the benefits in the other areas. In order to be like Europe we are getting the increases now and at some stage later when the auto-pilot has been set aside we will get the benefits — at least we hope we will — provided, of course, international factors do not intervene in the meantime, in which case we may have to wait a great deal longer. Even though in some cases the increase will only be 2½ per cent and in other cases ther is an imposition of VAT for the first time, in certain areas in this country the effect of this will be huge for the simple reason that the benefits of the so-called tax harmonisation are not being brought into effect by a consequent and pro rata reduction in personal taxation. If that were happening at least the people would recognise it for what it was and would say: “We understand, we are in Europe, it is 1992 and we know we have to meet certain deadlines”. That would be quite plausible and acceptable but that is not what is happening. We are getting the increases and the impositions of new rates of VAT and so on and we are paying that now on our telephone bills, our ESB bills, our shopping and grocery bills and, wait for it, clothing and footwear. That brings back personal memories in this House because I recall losing my seat in a general election which was fought on a budget proposal which was greatly maligned and was parodied around the country for at least six months after the election. In that budget was a proposal to impose VAT on clothing and footwear. That was not the point which received most attention but rather that it would apply to children's footwear and clothing.

A peculiar thing has happened. It goes to show that with the passage of time strange conversions can take place. Now this conversion has visited itself on the Government sitting opposite and they now see great merit where they could see no merit a few years ago, even though the budgetary situation at that time was much more critical than today. They can now see great merit in determining the difference between an adult and a child and being able to decide which rate of VAT applies or whether it applies. They have now discovered a secret formula and they will go ahead and apply it. I have often said previously in this House that the years and the changes from Government to Opposition bring about strange things. I can only hope and conclude that all the difficulties which the parties opposite saw at that time have now been resolved. I have a funny feeling that they have to go into the shops and the marketplaces with the measuring tape to determine the difference in the sizes and whether they apply to children or to adults. I think that will take some time and it sounds like an administrator's nightmare.

There is another area to which I should like to refer briefly. I am not being politically critical but it is necessary to say that a great deal of talk has centred recently around the health services. As a member of a health board I am brought into daily contact with the harsh realities so far as the health services are concerned. I am aware of recent indications emanating from discussions with the national and the social partners and so on and the proposals relating to consultancy treatment, free for all and sundry, and I see nothing wrong with that. The only question I would ask, as the previous speaker has done, is how to gain access to such treatment. Attempting to provide a service and in theory providing a service is fine but at the same time there is no framework within which the service can operate. The one problem that exists — and it is a serious problem — is that despite the best intentions there are no hospital beds. One can have all the consultant treatments one wants but they will be on the roadside because there are no beds and we should be fully aware of that.

There is another disgraceful situation which I must mention and I have raised it on countless occasions at health board meetings. It is this: nothing makes me sadder than to see what happens to the elderly in this country. Take, for example, a person of 59 or 60 years of age and examine their prospects in relation to hospital services and what they are likely to get out of the system. Having given their lifetime to working in the State the prospects that await them are this: if they are in the VHI and have credits built up over a number of years they will benefit to some extent but those credits soon run out if they have a prolonged hospitalisation. People in the age bracket from 62 to about 66 or 67 years of age who become immobile, confined to bed or confined to a wheelchair experience absolutely horrific problems. It is disgraceful that people in that age group should have been humiliated in that way over the past number of years.

If a person in this age group has to be hospitalised for a long period inquiries are quickly made to find out whether he owns a house. If a person's spouse is living in the home they have a possibility of holding on to their property but if a person lives alone his house will be sold. It is very difficult for an elderly person who knows he is dependent on the system to be told "I am sorry, but we must sell your house because we need the money to provide you with hospital services for the next few years". That is disgraceful. I have heard people at meetings of the Eastern Health Board trying to justify that action on the basis of financial necessity but I do not accept that. A person who has worked all their life and given their all to the system is entitled to be treated at least with a little respect at the end of their days. The most cruel cut of all is when the spouse of a person who has used up all his VHI credits is asked to pay for any emergency care he receives. Those people have to pay for services to which they should be entitled as of right. It is not at all unusual for a husband or wife to receive a bill of up to £25,000 after the death of their spouse. It is disgraceful that this should happen in a so-called Christian and caring society where so much emphasis is placed on our charity, Christianity and willingness to care for others.

I want to refer briefly to housing. I was amused to hear for the first time since I became a Member of this House the reference yesterday to social housing. That is new Euro-speak if ever there was one. There will be an increase of £10 million in the expenditure on social housing this year which will provide approximately 40 houses. Yet, there are about 15,000 families who are urgently in need of housing at present but who have no chance of being housed. The term "social housing" seems to indicate a certain concern for those unfortunate people who need housing but the simple fact of the matter is that the Government of the day are not dealing with the problems in the area of social housing, local authority housing, Department of the Environmental housing — you can call it what you like. People are being forced to live in intolerable housing conditions to the detriment of their health, harmonious marital relations and their general quality of life. The Government should cut out the waffle and try to do something about this problem.

The Minister for Finance referred to the provision of extra money for roads. No doubt the Minister for the Environment will also refer to this point. If one looks at the figures for the past five years one can see that in tandem with the so-called extra money spent on roads there was an equal reduction in the amount spent on local authority housing. One could automatically assume that there is no need for local authority housing and that these people find their own housing. I wonder if the Government are aware of the serious crisis in this area at present and whether they intend doing anything about it? Little reference was made to this problem in yesterday's budget speech and I do not expect any reference to be made to it from here on.

It is sad that we now seem to be moving towards the concept of social agriculture. Support systems and small benefits, a kind of social welfare, will be provided to keep farmers living on the land without having to produce anything. If that is not the greatest lunacy anyone could ever have thought up then nothing is. I cannot understand why a little more imagination cannot be used in this area. The Minister for Industry and Commerce is an advocate of the need for extra competition. I agree that competition is useful up to a point but I would point out — I do not think the Government are aware of this —that this is a food producing and food exporting country. I would ask the Government to remember that point in the context of GATT negotiations. I wonder if the competition we regard as so beneficial in the food area at present will be equally applied to the importation of raw materials, cars, machinery, etc. into this country.

Before I start my speech proper I should like to refer to some of the statements made in the House this morning by Deputy John Bruton, the Leader of Fine Gael. It seems he devoted most of his criticism to me and my party. I am quite prepared to take criticism when it is warranted from a quarter which is warranted but I find it very difficult indeed to accept criticism in regard to budgetary matters from the only Minister for Finance in the history of this State who failed to get a budget through.

Hear, hear.

Do not forget what was in the budget. The same provisions are in this budget.

In particular, I find it difficult to accept his criticisms of my party's alleged lack of concern for tax reform and reform of the public finances.

I took the opportunity in the few minutes available to me to look back at some comparable figures. In 1985, which was about the middle of the period of office of the then Government — and, therefore, I presume is reasonably representative — in which Deputy Bruton played a prominent part both as Minister for Finance and Minister for Industry and Commerce, the EBR was 12.9 per cent. I contrast that with the 1.9 per cent for this year. The current budget deficit was 8.4 per cent compared to 1 per cent this year. The income tax rates during that year were 35 per cent, 48 per cent and 60 per cent. I contrast those with the 25 per cent and the 48 per cent which are due to be implemented at the beginning of 1993.

During that period our national debt increased from £12 billion to £24 billion. Yet, I am expected to take lectures. In particular, I am told I am acting against job creation by having certain reductions in the Estimate of my Department. Deputy Bruton identified, for example, Shannon Development. I have looked at the revised estimate for industry grants for Shannon Development and I almost have to apologise to the House and the country for the fact that the industry grants for Shannon Development increased from £3.73 million last year to £10 million this year, an increase of 168 per cent at a time when the Government are getting the Exchequer borrowing requirement down from what it was last year. I am criticised for cutting back, for example, in regard to NADCORP when there is, in fact, an increase this year on the amount which NADCORP succeeded in spending last year. I am criticised for cutting back on the science and technology programme when in fact there is an increase from £13.6 million to £25.2 million, an increase of 85 per cent, under that heading. There is an increase for Córas Tráchtála for marketing from £24.6 million to £31.2 million, an increase of 27 per cent.

In so far as I have any comment to make on these final figures it is almost one of apology that the increases are so dramatically high, but they are in areas where there are shortcomings in the Irish industrial infrastructure, where they are needed and where, in terms of jobs creation and industrial development, they can be very well spent. It shows therefore how ill-founded are the ridiculous and hypocritical criticisms that were launched this morning by Deputy Bruton.

Why did the Minister not do that in the Book of Estimates?

The rest of them can be treated in the same light as the figures which Deputy Bruton so erroneously quoted and which he so badly misinterprets.

The 1991 budget is the second budget of the Progressive Democrats-Fianna Fáil Coalition Government. It represents a further step in the implementation of the Programme for Government agreed with our Coalition partners in July 1989. In considering the budget it is important to bear in mind four factors which were crucial in framing it: the Gulf War and the great uncertainty which exists at present surrounding international economic developments over the coming year and beyond; the Programme for Government agreed between the Progressive Democrats and Fianna Fáil in July 1989 and, in particular, the provisions which relate to public expenditure control taxation reform, employment creation, the health services, social welfare and the adoption of special measures for the unemployed in disadvantaged areas; the proposed Programme for Economic and Social Progress which has recently been negotiated and awaits final ratification; and the need to further improve the position of the disadvantaged in our society to the extent that this can be accomplished within the budgetary process.

The Gulf War is, of course, tragic by any standards. The suffering and loss of life involved are the issue of greatest concern and the most immediate reason why the Government, and the people of this country, would wish to see the was ended as quickly as possible. The economic consequences extend widely beyond the theatre of war itself to countries throughout the world. Ireland will bear its share of these consequences.

The percentage increase in oil prices that has taken place since August last and the currently projected increases from a number of expert sources are far less than the average rate of increase of over 300 per cent that occured during the previous oil price shocks of 1973-74 and 1978-81. This, together with Ireland's reduced dependency on oil compared with the seventies means that the direct economic impact of energy problems on this occassion is likely to be significantly less than during the previous oil shocks. The wage increases that have been negotiated under the Programme for Economic and Social Progress, while higher than the expected rate of inflation and those negotiated under the previous programme, are still modest by reference to those anticipated in our main trading partners and should help to dampen the inflationary impact of oil price developments and maintain and improve the competitiveness of the traded goods sector.

Apart from the direct oil price effect the Gulf conflict is also having a negative impact on new investment and expansion plans by the international business community. Even before the Gulf crisis the slowdown in economic activity across OECD countries over the past 18 months, and the projections of a further downturn in economic growth in 1991 had been forcing a slowdown in investment by many firms. This trend has been exacerbated by recent events in the Gulf.

Growth prospects in both the United Kingdom and the United States, which account for over 40 per cent of Irish exports, are particularly problematical over the next year or two and projections for these two economies are among the lowest across all OECD countries. On the other hand present indications are that the reunited German economy, which now accounts for some 12 per cent of Irish exports, will continue to show strong if reduced growth in 1991 and beyond.

In the case of internationally mobile investment the Gulf conflict means that the interest which many companies, especially those from the US and Japan, have had in the European market, including Ireland, in recent years will, at least temporarily, be reduced. In recent weeks a number of visits to Ireland from prospective investors have been postponed because of prevailing conditions including the perceived danger of terrorist attacks on air travellers.

This should be seen in the context of a level of site visits which had been running exceptionally well in recent months so that the overall position over the past 12 months has been quite buoyant. The IDA have been keeping in close contact with these firms and expect the site visits postponed to be resumed in due course.

The present uncertainty surrounding international economic prospects underlines how important it has been in Ireland's case to achieve a turn-around in the development of the economy in recent years under the joint programme for Government agreed in 1989 between the Progressive Democrats and Fianna Fáil. A benign international economic environment of relatively low oil prices and strong growth in the world economy and in our major trading partners has also been a crucial factor. We are now in a much better position to withstand the shocks to international economic development which are at present more prevalent than at any time over the past ten years. The public finances have been brought under control. The upward spiral of national debt as a percentage of GNP, which had shown a continuous increase from the mid-seventies to an unsustainable peak of 131 per cent in 1987, has been reversed and in 1990 was brought down to less than 112 per cent. Inflation has been reduced to the second lowest level in the EC and is now running at the sort of low, single-digit levels that have not been seen on a sustained basis in Ireland since the sixties. Under the impact of moderate wage increases and the further expansion of the industrial sector the cost competitiveness of Irish industry increased significantly over the past three years. The improved competitiveness of Irish economy has been reflected in record balance of trade surpluses and in the significant addition to manufacturing capacity achieved in recent years from new investment projects.

We are now entering unknown territory in many ways with the major uncertainties surrounding the world economic order to which I have referred. This is one of the main reasons that the proposed Programme for Economic and Social Progress is to be welcomed and supported. The programme provides a structure and a framework for the development of economic and social policies over the next three years and beyond which can provide an important source of stability over that period. The programme is comprehensive in the range of economic and social policies which it covers and the budget has been set within the framework of the programme.

The overriding principle of the new programme remains the firm control of public finances so that there is a steady reduction in the ratio of national debt to GNP. This principle reflects the commitments made in the programme for Government agreed between the Progressive Democrats and Fianna Fáil in 1989. It has been made clear that the continued reduction in national debt as a proportion of GNP is now a fundamental tenet of Government policy which cannot be infringed in the implementation of the programme. The aim now is to reduce the national debt to GNP ratio towards 100 per cent by 1993 and to achieve a broad balance on the current budget by that time.

The budget represents a further step in achieving these aims taking into account the particular difficulties and uncertainties surrounding economic growth prospects at present. Current projections, taking the budget provisions into account, are that the Exchequer borrowing requirement this year will be further reduced to 1.9 per cent of GNP, including a current budget deficit of 1 per cent. Current propects are for a further worthwhile reduction in the debt-GNP ratio.

These objectives are better than many commentators had anticipated and underline the Government's commitment to the control of public expenditure. My party would have liked to have seen greater progress made this year in the control of public expenditure but given the constraints involved we consider the objectives set out in the budget as reasonably satisfactory.

These improvements, together with the Government's firm commitment to maintaining exchange rate stability within the EMS — a commitment successfully delivered on in recent years — the dismanting of exchange controls in preparation for the Single Market, our further commitment to the process of economic and monetary union within the European Community and the range of opportunities and incentives available will help to maintain the significant attractions of Ireland as a location for internationally mobile investment from both internal and external sources. The outcome should, therefore, lead to further significant increases in employment in 1991 but at a reduced rate compared with 1990.

The pay increases negotiated under the new programme will allow for a further increase in the living standards of workers and a share in the improvements in the profitability of the business sector generally and in the public finances achieved with the aid of the modest wage increases agreed under the Programme for National Recovery. The increases, which are likely to average little more than 4 per cent over the next three years, are subject to the condition of due regard being had to the economic and commercial circumstances of the particular firm, employment or industry. The proposed increases are still modest by comparison with those projected for our main trading partners and will allow for a further improvement in the wage competitiveness of our internationally trading firms. This is a major benefit at a time when the demand conditions in our main export markets are becoming significantly less favourable than has been the case over the past three to four years.

It will be essential to maintain tight control over the overall size of the public sector pay bill to ensure that unacceptable pressure on the overall level of public expenditure does not occur. For that reason I welcome the ceiling on the special increases in public sector pay set out in the new programme and that will apply over the period to end-1993. I also welcome the commitment to considering changes in structures and working practices as part of the discussions on pay increases above the basic levels set out in the programme and on the approach that will apply to the payment of such increases which involve additional costs beyond 1993.

It is in the interests of both the trade unions representing public sector workers and the Government to develop an agreed approach to the difficulties of an overall public sector pay bill increasing at a faster pace than public expenditure generally. Such an approach must encompass further public service reform which improves the effectiveness and efficiency of the public service, adequately recognises merit and provides greater job satisfaction and motivation for public servants.

The fundamental reform of our taxation system has been a central objective of the economic and social policies of the Progressive Democrat Party since their foundation. The aim is to remove the inefficiency and inequity that has been allowed to grow into the system over the years and to better encourage productive enterprise and effort. We made a commitment to achieving taxation reform, an essential part of the Coalition Programme for Government. In doing so we have recognised that the pace and structure of reform cannot ignore the changes necessary to achieve the harmonisation of indirect taxes that form an essential part of the Single Market programme.

The 1990 budget — the first of the coalition Government — took a decisive step in taxation reform covering: reductions in both the lower and higher rates of income tax; a reduction in the rate of corporation tax; phasing out of accelerated capital allowances; the restrictions on section 84 financing and relating the availability of such financing to the developing needs of industrial projects; increasing the tax and PRSI exemption for the lower paid; and reducing the standard rate of VAT to 23 per cent. The 1991 budget has continued the process of reform.

In the case of income tax the objective as set in the agreed Programme for Government is to achieve a lower rate of 25 per cent and a single higher rate by 1993 in order to improve the incentive to work and to enterprise which has been undermined by the burden of personal taxation imposed over the past 20 years. Following the reductions introduced in last year's budget the standard and top rates of tax are each being further reduced by one percentage point this year. In addition, the Government's formal objective is to reduce both rates of income tax by 2 per cent in each of the next two years.

In the case of corporation tax the major reforms introduced in recent years, together with the enhanced profitability of the corporate sector, has meant that receipts in 1990 amounted to £474 million and are expected to increase to over £520 million in 1991 — more than twice the level of receipts in 1987. The ending of export sales relief and growing restrictions on tax avoidance schemes will provide a further boost to the taxation yield from the corporate sector in future years, provided that we maintain the conditions within which the profitability of the sector is maintained and enhanced. Accordingly, no further significant changes are proposed in the corporation tax code for the coming year.

The restrictions imposed on section 84 finance in recent years has greatly reduced the scope for tax avoidance measures in this area. These were extremely costly to the Exchequer and derived from loopholes in the taxation code rather than from deliberately introduced instruments of industrial development. To counteract the abuses arising the use of section 84 financing was focused to a far greater extent on the needs of new industrial projects under the 1990 Finance Act. Further changes are announced in this year's budget to reduce the more costly elements of the scheme to the Exchequer.

There is a continuous need to crack down on unproductive tax avoidance schemes in order to reduce the tax burden on productive sectors of the economy. The business expansion scheme was established with the best of intentions to provide essential seed capital for small business enterprises which have difficulty in raising required equity. The scheme, however, was unceremoniously "hijacked" in recent years by imaginative tax consultants to finance projects far beyond the scope of what was intended. The Government, while extending the scheme for a further two years have, therefore, announced new restrictions with the aim of confining the scheme to the type of project for which it was originally intended — small productive projects in manufacturing amd international services. In a full year, three-quarters of the loss to the Exchequer will be saved.

Capital taxes have in the past contributed only a relatively small share of tax revenue. There is considerable scope for increasing the yield from capital taxes as part of the necessary process of widening the tax base which I and my party have advocated for many years. In 1990 the yield from capital taxes amounted to £71 million — more than twice the 1986 yield. There is considerable scope for further increases in yield while at the same time ensuring a more equitable system. Accordingly, a significant package of reform is announced in this area in the budget which should increase yield by an estimated £14 million and at the same time makes these taxes more equitable.

The budget makes provision for a further harmonisation of VAT rates with that required as part of the Single Market programme. A further significant reduction in the standard rate of VAT to 21 per cent from 1 March next is being offset to some extent by an increase in the low rate of VAT to 12½ per cent. The net result will be a reduction in yield of about £37 million which should quickly be reflected in reduced prices for most consumer and household goods. I will be asking the Director of Consumer Affairs to take special measures to ensure that the reductions are immediately passed on to consumers.

Accelerated capital allowances are being phased out over the period to 1 April 1992 as an important element in the reform of our taxation system. In this context we will need to look at the wear and tear allowances for plant and machinery to ensure that they are equitable and reflect their real rate of depreciation. This is a matter under discussion with the Minister for Finance at present and I expect that the Government's conclusions will be announced shortly.

Allied to comprehensive tax reform, a major priority of the Progressive Democrat Party has been the need to totally overhaul our PRSI system, particularly since it is such a penal imposition on lower paid workers. This priority led to the establishment after last year's budget of a major inter-Departmental study group to totally review the PRSI system. Their comprehensive report was received by the Government shortly before Christmas last.

I regret that it has not been possible to implement a significant reform of PRSI in the 1991 budget. The Government will, in the coming months, be examining the conclusions of the inter-departmental PRSI Study with a view to undertaking a major reform of the system. I am confident that a comprehensive reform of the PRSI system that would make it more progressive, and less of an imposition on lower paid workers in particular, can be put in place for implementation in the 1992 budget.

While our emphasis on comprehensive tax reform, with a view to stimulating enterprise and job creation, is undoubtedly a vital cornerstone in the battle to eliminate poverty from Irish society, it must be recognised that the likely rate of job creation in the foreseeable future will not to be adequate to meet the requirements of unemployed, particularly the 100,000 plus who have been out of work for over a year. Parallel and radical measures to tackle the poverty facing many families on social welfare, therefore, is absolutely essential. The 1991 budget, accordingly, introduces new measures to help larger families on social welfare and to alleviate the poverty trap which faces many lower paid workers.

The improvement in the very lowest rates of social assistance is a particular priority of the Progressive Democrats and has been reflected in both the 1990 and 1991 budgets. The improvement in the lowest child dependent allowance rates to £12 — an increase of 9 per cent — will also help social welfare families. The overall 4 per cent increase in social welfare payments will ensure further improvements. Those on the lowest payments, especially those with larger families, will receive more favourable increases of up to 11 per cent.

May I invite the House to agree to extend the Minister's time by one minute? Agreed.

The significant improvements in the family income supplement mean that the perennial complaint that it is not worth people's while to take on a job and that they would be better off on social welfare is now being effectively addressed through the allocation of additional resources to this scheme.

I believe that the introduction of the carers' allowance in last year's budget was a significant achievement by the Government. It is a major element not only of our policy in relation to social welfare but also is a key aspect in the development of a progressive community-based health programme. I am sure all of us in this House will welcome the inclusion of the carers of those on disabled person's maintenance allowance, DPMA, into the scheme and the 11 per cent increase in the basic rates of payment announced in the budget.

Reforms in company and competition and consumer protection law — areas for which I have particular responsibility — will make a major contribution to achieving the structural reforms needed to support a more efficient and competitive business sector in Ireland. Recently enacted company legislation, which had been many years in the stocks, will give companies experiencing trading difficulties the opportunity to reorganise and survive and maintain employment. It will also curb the abuse of limited liability; strengthen the position of creditors both in relation to preserving the assets of companies and giving them greater redress in cases of malpractice; give Irish companies the same flexibility in organising their equity as their foreign competitors enjoy; provide more effective means for dealing with insider trading.

In the area of consumer protection new measures are planned for this year which will, in the case of product liability, impose responsibility on the producers of products and their components, for injury or loss caused to persons because of a defect in the product without the consumer having to prove negligence. Measures will also be introduced to curb abuses in moneylending.

This budget is not very significant in that it does not make many radical changes and contains no surprises. We can say that it will lead to higher inflation which currently stands at 2.7 per cent, higher interest rates and higher costs in the economy. This erosion of our competitiveness could not have occurred at a worse time given the move towards the single European market and it will lead to a further increase in unemployment, if emigration does not take up the slack. Therefore, this budget will not contribute significantly to economic growth. Neither does it make any attempt at substantially restructuring our economy. As a consequence, it is very modest and will not achieve anything meaningful.

It will achieve a modest political objective and that is securing the support of the social partners in the forthcoming votes on the agreement which is to run for the next three years. It will also probably ensure that the Government do not lose support in the run-up to the local elections later this year. By any economic criteria the budget cannot be judged a success. Undoubtedly, the biggest problem this country faces is that of unemployment. It is true to say the State cannot increase employment by way of an increase in public service numbers. The only way to do so is to ensure that the right climate is created which will result in increased business activity and, as a consequence, more jobs.

We are all aware that the first objective of management in any line of business today is to rationalise, reduce costs and reduce the workforce. For example, in recent years CIE reduced their staff from 22,000 to 11,000. I do not know of one company who has not got as a key objective, in terms of cost restraint, a reduction in labour. Why is this so? Is it because Irish pay rates are out of line with those of our European competitors? The answer is no. Is it because we are paying ourselves too much? Again, the answer is no. The reason is that in order to put an extra pound in basic pay in an employee's pocket an employer will have to pay out £2.10 and for every £1 in overtime he will have to pay out in excess of £3. Therefore, in simple arithmetic, if managers and employers want to increase efficiency and cut costs they must reduce the workforce. As long as we continue to have such high rates of tax on payrolls unemployment will continue to increase and job shedding will continue.

The most significant paragraph in the speech of the Minister for Industry and Commerce is the one in which he acknowledges the total failure to reform in any way the PRSI system which falls very harshly on those firms which are labour-intensive and those on the lower rates of pay. It is both iniquitous and unfair. There is in excess of a 20 per cent surcharge for the pleasure and privilege of employing someone under the PRSI system. This is the main reason unemployment will remain high.

The Minister for Agriculture and Food is present in the House and I am sure he is aware that there is a great deal of fear an anxiety among the farming community, in particular among small farmers who fear they do not have a future and will not be able to make a reasonable living out of their 40,50, or 60 acres of land, because of the margins following the reform of the CAP, without some external source of income. Commercial farmers also face the prospect that all of the reductions will have to be met out of their profits as their costs will remain the same.

What attempt has been made in the budget to meet those fears? There is no tangible improvement or indication that a substantial extension of the disadvantaged areas will be sought. Neither is there any indication that there will be a new status for the disadvantaged farm or any other measure to ensure that there will be direct income aid. If farmers are to move to a position where instead of having a Common Agricultural Policy we will have a national agricultural policy with each member state financing their own farmers by way of VAT refunds or other direct income aids, this country will be heading for disaster. Agri-business will have no future if production levels drop and the Exchequer will not be able to support family farms in the way other European Governments will be able to support their farmers. The Government do not seem to realise there is such a crisis or aware of the position in relation to income and what needs to be done to resolve it.

One of the most significant factors is the timing of the budget vis-à-vis tax harmonisation and the single market. Later I will speak on matters in my specific area of responsibility — transport — but I have to say that time is running out in regard to tax harmonisation. The Minister has acknowledged that only 700 days remain before we have to face some huge issues. We will have to consider what impact the free movement of goods, capital and labour will have on us. First, in relation to the free movement of capital, France and other European countries do not have an interest retention tax. This will mean that Irish people will be able to move their savings to other countries where this charge on dividend or interest income is not levied. We must ask the question of how the shortfall of £230 million is going to be made up. No provision has been made for this and a huge hole will be left in the finances of the Exchequer. Similarly, I understand that VAT is not charged on imports at the point of entry in other member states. What is going to be done in an effort to fill in that hole of over £160 million?

There is nothing in the budget, not even an argued case for a derogation or exemption, which would give cause for comfort. All we have instead is the view that if VAT rates are harmonised we will meet our obligations. First, that will not prove to be the case and, second, if we proceed in the way suggested by the Government we will hurt our competitiveness. For instance, if we look at the items being increased, for example, telecommunications, electricity and fuel charges, we will see that each is vital in terms of our competitiveness, and the cost will have to be met by the services sector and others. If the intention is to meet the 21 per cent rate coming down and the 12.5 per cent rate coming up at 17 per cent to have a convergence, this will have a serious year on year effect on our competitiveness and is the wrong way to go about it.

The final area in relation to harmonisation is the stipulation by the Community that border to border the variation in relation to indirect taxation would be a margin of 3 per cent. There is no doubt that we will not be able to reach this objective in our customs and excise duties in a number of areas. Not that I am opposed to it in any way, but I quote the increase in taxation on cigarettes. I think it is a good thing, but that is one area where we will simply have to refocus our minds. My understanding is that there can be only a 3 per cent variation in the price of cigarettes North and South of Ireland. That has not been addressed seriously in this budget.

Assumptions have been made in relation to growth in the economy of 2.25 per cent. I believe growth this year will be around 1 per cent. However, I can say in my direct area of responsibility that within the last fortnight in the air transport sector there has been a 30-50 per cent cancellation of flight bookings. We are facing collapse and a disaster in the transport sector unprecedented in 20 years. This is extremely serious and will have direct implications for growth in the economy. This is not necessarily the Government's fault but planning will have to take account of the changes that are taking place weekly. I understand all the US multinational firms who trade worldwide and have increasing interests in Europe have given direct instructions to all their personnel departments not to travel. I understand that this will not only bring about a potential collapse in commercial trade and a deferral of investment decisions, but will be of disastrous proportions for tourism. Aer Lingus this year may lose £40 million, a staggering loss on air transport services. I fear many airlines throughout the world will be obliterated by what is happening.

We export 80 per cent of what we produce. We are an island economy on the periphery of Europe and we are dependent on access transport. We will catch pneumonia if the rest of Europe catches a cold because of the Gulf War and transport recessionary factors. Therefore, I say the 2.25 per cent growth is mythical at this stage and the figure should be immediately recalculated. However, as I said, I fear there is a political element in this budget, that there will be no changes prior to the local elections and the agreement with the trade union movement, and that we will have a supplementary budget at the end of the year.

I would like to refer to two social areas of concern. In every county and urban area there is a major problem with housing. Housing lists are growing, house construction is down to 10 per cent of the mid-eighties level. This is unacceptable. People cannot afford accommodation of their own. If the Government are not prepared to have a major capital housing propramme they will have to adopt a new policy to ensure that the private sector build houses and giving rent subsidy to eligible applicants. I believe it is possible to do a deal with the Construction Industry Federation to build high quality accommodation units for families on local authority housing lists. We would solve the problem by putting people into this accommodation and giving them a subsidy of £50 a week instead of the present differential rent subsidy of £90 a week.

The second social area of concern is mental handicap. This is an area of growing need because people are living longer and their quality of life has to be improved. This means an improvement in residential care, day care services and community care services and this costs money. There is no other way round it. We need a five year plan to deal with it. The neglect of the mentally handicapped in this budget is quite shameful. Last year an extra £2 million as provided, but this year there is no mention of that.

I would like to say a few words about transport. I have held this brief for only a fortnight but certain things strike me as being very significant. First, I understand that the internal transport costs to get goods to our ports is 9 per cent of the added value of what is in the container. That is twice what it costs other Europeans to transport their goods to their ports. Two thirds of that cost differential is due to an inadequate road infrastructure. It takes longer and is more costly to move around Ireland. I find the delay in establishing a national roads authority to deal with 6 per cent of our national primary routes, port to port key route development, quite inexplicable since that legislation has been ready since 1988. We need to spend £3 billion to develop our road infrastructure to European standards. What do we get from the Government? In the five years 1989-93, there is a net reduction of 19 per cent in Exchequer support for road building over that provided in 1984-88. We have used this once off extra Europen money to substitute for Exchequer money. This is shameful given our transport problems.

We have structural problems, and we have a road authority and county engineers acting on their own at present in individual local authorities. We have problems because of a lack of power and a lack of legislation by the Department of the Environment. This needs to be addressed urgently. On top of that internal transport problem we have the access transport penalty of £400 million because we are an island and growth in underpinning the social and economic programme. Growth has to pay for the debt reduction, improved social services and tax cuts. Growth is vital, but how are we to have this growth unless we have a competitive infrastructure in place?

I would like to refer in passing to a number of topical issues. I cannot understand why the Government have still not brought forward any proposals to liberalise competition in the internal road passenger services. We are confined by the 1932 Road Transport Act which gives a monopoly to CIE. We could have greater variety, greater choice, reduced fares, increased options and increased frequency of transport facilities if we liberalised and brought competition into the area of road transport for bus services — inter-city, provincial and within Dublin. I believe CIE and Dublin Bus will still have a very strong role to play, but I cannot understand why this legislation continues to be delayed and the losses continue to pile up in CIE and their subsidiaries.

The Minister for Transport has signally failed to develop a two airline policy between Ireland and the UK. We have seen the number of carriers on the Irish Sea reduce from six to three. We know the difficulties of Ryanair and of their losses. Ryanair developed new routes, for example into Farranfore. What did Aer Lingus do? They put on an identical route 20 minutes before the flight, reduced the prices and the result was two loss making routes. Once there was no air fare and no route out of Farranfore, now there are two, both losing a fortune, and in the couple of years there will be none. What does that do for regional airports? Absolutely nothing. We do not have a coherent two airline policy. We need sensible rationalisation. Of course there should be competition on the key Dublin-London route and I will come back to that, but we need to develop regional airports in a rational, orderly way based on a break down on what can be serviced by Ryanair and what can be serviced by Aer Lingus. Morover, the deregulation of air fares was introduced in 1986, fares came crashing down and there was plenty of competition. Now companies are going bust and foreign carriers are withdrawing. When the fares came down; the Minister said he would not allow them to increase the fares even though fuel costs had increased by 100 per cent yet he has capped the increases on fares which has led to sustained losses and potential disaster where we would move back to an Aer Lingus monopoly.

My firm view is there should be no price control where there is adequate competition. If one wants a free market and deregulation then one cannot interfere with the market by capping fares. The Minister's short-sighted policy to temporarily fiddle the numbers in tourism had led to circumstances which, in the long term, mean we are heading back to a monopoly on the part of Aer Lingus and the extinguishing of Ryanair. That would be a disaster for this country, something for which the Government only can take full responsibility.

We are told that the B & I Line are facing liquidation or other prospects. I should like to make it clear that, as far as I am concerned, I am prepared to support the B & I Line going out of State hands provided their employees share options and that the Government would have a buy-back option if this body were ever to get into the hands of a foreign-owned firm; provided that, at all costs, there would be an avoidance of liquidation, the strategic retention of routes on the Irish Sea and the avoidance of a monopoly by Sealink on the Irish Sea. Provided the Government pursue that clear agenda in relation to the B & I Line they will have my support. Otherwise we will be faced with major difficulties in the way that is handled.

I should like to say a few words now about our ports because, in terms of volume, 99.2 per cent of all our exports go by sea through our ports. The Harbours Act, 1946, regulates our ports. There are 23 or 24 people on the Dublin Port and Docks Board, with respect, who do not know the first thing about how to develop a port. There is no commercial approach which means that 60 per cent of our traffic goes through Northern Ireland, which is a disgrace.

In the short time available it is not possible to me to set out an integrated transport policy but, as far as I am concerned, one of the key elements of our competitiveness is to ensure that we have an integrated transport policy. The Government have worsened the position by increases in VAT and road tax in this budget. The failure of the Government to devise an integrated transport policy can only result in more job losses and additional emigration.

The overall Estimates with regard to the Agriculture and Food have been increased to £401 million, representing an increase of 31.5 per cent of the £305 million provided by the Government last year, a clear indication of the firm commitment of this Government to the farm sector and farming families.

Obvioulsy the economic background impinges more on the farming community than on many others. The provision of low inflation and lowest possible interest rates is of particular importance to the welfare of the farming sector. On the inflation front major progress has been made, with the most recent figures showing that Ireland currently has the lowest rate of inflation within the EC. Unfortunately, interest rates remain high because of factors beyond our control, particularly the upward movement in German interest rates during the past year. Nonetheless I hope that, with the commitment given in this budget to healthy public finances and our membership of the exchange rate mechanism of the European monetary system, some easing in interest rates can be expected in the year ahead. We do not want to see a repetition of the circumstances that prevailed in the mid-eighties when farm incomes were decimated because of lack of control of public expenditure here and inordinately high interest rates.

The year 1990 was a difficult one for farmers. Clearly, major challenges facing the industry in 1991. Among these challenges are the negotiations to be faced on the proposals for the reform of the Common Agricultural Policy, those on the GATT discussions which will resume shortly and the annual price negotiations which will be more difficult this year, more constrained than ever before.

Because of the vital importance of this sector to our economy — not merely because of the vital interests of farmers and farming families but for those of the nation overall — as part of the Programme for Economic and Social Progress, I have given a commitment to maintain the closest possible contact with all the relevant farm organisations in relation to the negotiations to which I have referred. Indeed, as soon as I have concluded my contribution to this debate I will be in consultation with all the farm organisations to discuss the agenda for the Council meeting in Brussels to be held on Monday and Tuesday of next week. In all of these negotiations I will be stressing the fundamental importance to this country of the agriculture and food sector. The need to maintain a vibrant, commercial farming sector must be accepted by the Community as part of a commitment to the long term competitiveness of the industry and our overall economy.

Some of the changes which may come about in the process of the reform of the Common Agricultural Policy — for instance, aimed at discouraging very intensive, non-family farm type agriculture should be supported. I am also very supportive of the continued commitment by the Community to rural development. In this regard I expect that the operational programme for rural development — which I announced in December last — should make an important contribution to generating additional income and employment opportunities in rural Ireland.

What I would like to emphasise here today is that, in today's world, more than one kind of farming is needed. We must have the fully efficient commercial sector — to which I have referred already — as the basis of an increasingly efficient food industry. We must also ensure that a range of choices is available to other farmers because, without such choices, we cannot properly safeguard the viability of our rural areas. These will be the two basic factors.

Understandably, farmers are concerned about the reform of the Common Agricultural Policy and the GATT negotiations. I want to assure the House that I will continue to defend Irish interests, as I have done in recent years and in particular in the course of the most recent GATT negotiations when we did not concede to American demands. I also want to repudiate the suggestion, particularly on the part of Deputy John Bruton this morning, that because Commissioner Leon Brittan made a statement to which I did not respond it meant that I automatically agreed with what he said. I must assert, of course, that that is arrant nonsense. If every statement made by every Commissioner of the EC — wherever or in whatever circumstances he may have made it — was to become part of this Government's policy unless we formally repudiated them, we would find ourselves lumbered with numerous policies we do not accept. I do not think Deputy Bruton should make such specious arguments as he did this morning in that instance.

With regard to farm taxation the Government are particularly concerned to encourage land mobility and its productive use on the part of young farmers especially. For that reason the Government have decided to introduce a number of measures, including the improvement of installation aid — to which I will refer again in a couple of minutes — in particular the following:

In order to encourage land mobility and its productive use, the exemption of leasehold income qualifying for income tax exemption is being raised to a figure of £3,000 from the existing £2,000. Where such leases are given for seven or more years an exemption of £4,000 will apply. A concern to facilitate structural change in agriculture also underlines some of the changes in the provisions for capital acquisitions tax. Among the changes in the general provisions for this tax which should benefit farmers are: the abolition of the top two rates of this tax so that, in the future the top rate will be 40 per cent and the introduction of an amnesty allowing taxpayers to settle all outstanding capital acquisitions tax liabilities without penalties and certain interest payments.

Of specific interest to agriculture is the change in the rate of agricultural relief from 50 per cent to 55 per cent. At the same time the qualifying conditions will be amended in order to facilitate farm transfers, which is vitally important.

The present system of stock relief for farmers is being renewed for a further two years. This is an important decision in the context of maintaining livestock numbers within the agricultural sector — which are at their highest ever level. The cost of this measure is estimated at £0.9 million in 1991 and £3.0 million in a full year.

The Government have decided also, as an exceptional measure, that the 50 per cent of accelerated capital allowances will be continued for two years to deal with farmyard pollution. This is an important decision in the context of the need to make further progress in eliminating farmyard pollution and in the light of the pressure on farm incomes. The expenditure is going to qualify for the allowances on a net-of-grant basis where incurred before 1 April 1993. The estimated cost of this measure is £3.0 million in 1991 and £9.0 million in 1992.

As Deputies are aware, I have made a strong case to the EC Commission for an extension of the area of the country at present classified as less-favoured by some two million acres, and for a re-classification of a further 1.5 million acres from less-severely handicapped, to more-severely handicapped status. That case is being pursued vigorously both at ministerial and official level and I am confident that the necessary proposals will be made by the Commission very shortly and approved in time to enable benefiting farmers to be catered for under this year's disadvantaged areas scheme. The effect of the changes, in so far as headage payments are concerned, will be that about 16,000 additional farmers will qualify for such payments for the first time and some 11,000 existing beneficiaries will qualify for increased payments because of re-classification. Thousands of farmers over and above that 27,000 will benefit from the increased headage payments we will put in place.

(Carlow-Kilkenny): When?

In parallel with the extension and re-classification of the disadvantaged areas, the intention is to increase and restructure headage payments to make them more effective and to modulate them to take account of the degree of handicap suffered. Deputies will appreciate that in advance of discussions with the EC Commission on the subject it would be entirely inappropriate for me to give details of the changes proposed. I can say, however, that among the proposals is a substantial increase in the basic amount payable for beef cow in the more-severely handicapped areas and an increase in the number of animals on which that basic payment would be made; and increase in the basic amount payable on other cattle and also an increase in the maximum amount payable per beneficiary. Increases are also proposed in the less-severely handicapped areas. These will be somewhat smaller to take account of the different degree of handicap. They will cost approximately £3 million this year and in a full year cost in the order of £12 million. The answer to Deputy Browne is that it will come into full effect this year. Deputies on all sides will agree that that is a matter of major importance at this point.

The Government have provided an additional £900,000 for the improvement of installation aid in line with the Programme for Economic and Social Progress. The installation scheme is providing an effective instrument in getting land into the hands of younger farmers. To date, nearly 1,600 young farmers have qualified for a premium of £5,600 each when they take over a farm for the first time. The total amount paid since the inception of that scheme is nearly £9 million.

Experience of the operation of the scheme has shown that certain conditions have been too restrictive. Up to now an applicant to qualify for the scheme, had to be a full-time farmer; he has had to have an enterprise of at least one man work unit and he had to own all the land he was taking over. They were too restrictive. I am now proposing that an applicant will be given two years within which to become a full-time farmer. He will also be given two years to reach the required level of enterprise. In addition account may be taken of leased land in assessing eligibility. These changes will extend the scope of the scheme considerably and so enable more of our smaller farmers to avail of the benefits.

Deputies will be aware that we are now increasing the standard costing on grant payments. I have been conscious for some time that it is essential to adjust these in line with inflation, although they had not been adjusted for many years. I made the necessary arrangements to increase the costings by 15 per cent last August.

It is now considered that a more satisfactory method of revising the costings would be to link them to an official index. The Government have now decided in the context of the Programme for Economic and Social Progress, that as and from August this year the costings will be automatically revised annually in accordance with a CSO index. The full year cost has been estimated at £2 million.

We are making £1 million available for aids to agricultural income. This is a positive response to the commitment given in the Programme for Economic and Social Progress to address the problems of low income farming families. It is my intention, in consultation with the Minister for Social Welfare, to draw up a suitable scheme which will assist those low income families who are dependent on farming activities for their income. The EC dimension will have to be respected and our intention is that the scheme now envisaged could be fitted into an improved EC scheme in the event of such a scheme being adopted.

The Minister is taking my advice at last.

Teagasc were established more than two years ago to amalgamate the agricultural research, training and advisory services thereby enabling those services to be delivered in a more cost effective and efficient manner. The reorganisation and streamlining of activities which Teagasc have undertaken since their establishment will enable them to fulfil their role in the development of the agriculture and food sector. The competition for markets both within the EC and elsewhere is becoming more intense. It is essential therefore if we are to remain competitive, that our producers and food processors be capable of competing with their international counterparts.

Teagasc, through their agricultural programmes, provide essential services for the agriculture and food sectors. The Government, in recognition of the important role Teagasc have in these vital sectors of the economy, have decided to provide an additional £1.2 million to that body. I am further exploring the possibility of drawing down further funds from European funds providing for the development of natural resources. I will be able to indicate that an extra allocation over and above what I am providing today will be forthcoming for Teagasc in the relatively near future.

As already announced the Government have decided to increase the grant-in-aid for CBF to £1.5 million in 1991, which compares to an original provision of £500,000 in 1990. In addition an amount of £750,000 will be provided for CBF from the Structural Funds this year. This means that the combined provision for the organisation from public funds in 1991 is £2.25 million which is £1.75 million up on the original provision last year and £1.5 million up on the 1990 outturn.

The programme which I expect CBF to put in place will also involve additional funding from the industry itself, structured in such a way that it is not an extra charge on farmers. The State contribution is conditional on those additional industry funds being available.

I made special provisions in the budget relating to the non-thoroughbred horse industry. I announced a national programme for the development and servicing of the industry in November 1988 and the response so far has been excellent. While that programme contained many specific proposals, a very important element of it was my commitment to establish a horse breeding advisory committee representative of the various sectors to advise me on relevant matters. Over the past 12 months great progress has been made and I am now providing £75,000 for this organisation to ensure that we can specifically represent the interests of the breeders in this very dynamic sector of our economy.

We are also making provision for a support grant of over £10,000 for the Connemara Pony Breeders' Society, a society that is know worldwide and has done dramatic work for agri-tourism. This is money that will be well repaid due to their considerable efforts.

Provision has been made in the budget to cater for the ongoing situation in relation to BSE. The BSE problem should be seen in proper context. Out of a total cattle population of 7 million we had 15 cases in 1989, of which five were animals imported from the UK; 14 cases in 1990, of which one was imported, and two cases to date in 1991. This trickle of cases, were it in respect of any other non-viral animal disease, would not be a matter of major concern. Yet, because of the unprecedented publicity which it has attracted and the unwarranted linkage with health concerns, the meat export trade has suffered. Our third country trading partners have been seeking certain guarantees and it is imperative that we do everything possible, within reason, to satisfy their requirements. The efforts I have made to convince our trading partners of the absolute safety of Irish meat will be successful.

In the light of the situation that has arisen, there is a general consensus among farming organisations, the meat trade and others that a voluntary depopulation by the herdowners of the herds that had cases of BSE would facilitate the certification requirements of third countries. Accordingly, I am providing for a Supplementary Estimate of £2 million this year, as was done last year, to fund the depopulation programme. That is a measure of the Government's commitment to maintain the status and image of the Irish beef herd and of Irish food abroad.

The Minister has two minutes at his disposal and I wonder if we should facilitate him now rather than bring him back after Question Time. Is that satisfactory? Agreed.

I emphasise that this BSE problem is not indigenous to Ireland and has no base in Ireland. What we have has been imported but because of the importance of beef and of beef exports to this economy we have taken steps that no other country has taken. It is an indigenous problem in Britain but they have not decided to depopulate every herd where it is found. We have decided to do that, at very considerable cost if necessary. Last year £2 million was provided and an extra £2 million is being provided this year in respect of a total of only 31 animals. The animals, of course, affect the herd in terms of compensation, even though they do not have any disease problem. That extra £2 million, which is a measure of our commitment to this sector, will guarantee that our reputation abroad will be protected and enhanced.

Deputy Stagg rose.

Debate adjourned.
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