Financial Resolutions, 1992. - Financial Statement, Budget, 1992.

Before calling on the Minister for Finance to make his Budget Statement, may I remind Members of the House that none of the confidential information which will be circulated in advance by the Minister to certain Members may be disclosed to anyone until the Minister has revealed it to the House. Premature disclosure of the information is considered to be a serious breach of privilege. Members should not take from the House any part of the Budget Statement before that part has been read out in the House.


In framing this budget I have been conscious that at present our society is facing great challenges. On the home front, the increasing numbers looking for work demand a truly exceptional employment performance — right through to the end of this decade. The overriding concern must, therefore, be to safeguard existing jobs and encourage the creation of new ones. As an essential element in this the public finances have to be kept on a sound basis.

At the same time, our other "homeland", the European Community, is embarking on historic ventures: the creation of a single market from January 1993, and the establishment of political, economic and monetary union. These present us with tremendous opportunity, and so the Government are determined that we should participate from the outset of both, but they will equally test our policies, our attitudes and our institutions.

I have, for both reasons, had to keep a prime focus on the changes that a more integrated and open Europe will require. I have had equally to recognise that successful participation in these great European ventures implies certain constraints. If we act wisely, we can share the economic prosperity of our successful partners. We can thereby make real and worthwhile progress in regard to employment and realistically aspire to the standards of social provision that prevail in our Community partners.

On the broader international front, the repercussions of near-recession in the world economy last year are readily apparent in aspects of our social and economic scene. I have had to take into account that fact and the expert view that recovery will be slow and patchy. At the same time, I was reassured by the resilience our economy had shown so far, fortified by the fundamental changes in policy and attitudes under theProgramme for National Recovery and the Programme for Economic and Social Progress.

Review of 1991 Budget Outturn

As the 1991 Exchequer Returns showed, last year's budget outturn was, in difficult circumstances, very creditable. The borrowing targets set at budget time were only slightly exceeded. Tax revenue, after a slow start, picked up in the later stages of the year and ended the year on target. Within the total, indirect taxes showed the effects of the difficult trading circumstances, particularly in some areas like car sales, while direct taxes took up the slack.

Non-capital supply services expenditure last year exceeded the post-budget allocation by some £130 million. The main causes of this overrun have been well documented. Had the Government not taken resolute action in mid year to contain the expenditure overruns then emerging, the excess of expenditure over budget would have been substantially higher.

In contrast to the current side of expenditure, Exchequer capital spending came in some £14 million less than the budget provision.

The outturns recorded in last year's current budget deficit and Exchequer Borrowing Requirement — 1.3 per cent of GNP and 2.1 per cent of GNP respectively — were better than had been expected. The overall borrowing figure of £501 million was less than the revised target adopted in July. Such an outturn was gratifying even allowing for the benefit of certain non-recurring factors, notably the carryforward of over £110 million of EC receipts from previous years.

When the proceeds of the flotation of Irish Life are taken into account, net borrowing for the year turned out at only 1 per cent of GNP.

The Economy in 1991.

Reflecting international trends, last year saw a slackening in economic activity here after the exceptional buoyancy of 1989 and 1990. But it was not, for Ireland, a year of recession. The following highly positive features of broad economic performance last year may be noted. There was a rise in output of about 2 per cent — almost as great as my predecessor forecast this time last year. There was a recorded rise of 7,000 in non-agricultural jobs in the year to April last. Later indicators also suggest that employment continued to hold up well, in contrast with the experience of many other countries. While unemployment rose steeply as I mentioned earlier, this trend reflected the return of emigrants rather than job losses here. Price rises were of just 3.2 per cent — in line with the EMS narrow-band countries; and there was a further — indeed a record — balance-of-payments surplus.

Although the exporting sectors put in a very creditable performance, slowing international activity and high real interest rates led to a fall in business investment. Consumption growth was very modest, despite rising real incomes; and demand for cars fell well short of the buoyant 1990 level. Nevertheless, our economy should be set to rebound as confidence and economic activity pick up worldwide.

Economic Strategy

The essential requirements for success, both in 1992 and beyond, are unchanged: a low-inflation economy; a stable exchange rate policy, with its positive benefits for interest rates, inflation and investor confidence; a moderate approach to incomes and public spending; structural reforms to help growth and maximise its employment intensity; and further progress towards social equity. These are the core ingredients of the strategy we need in order to give Ireland the highest possible employment and living standards over the years ahead.

The fiscal policy targets set out a year ago in theProgramme for Economic and Social Progress and reaffirmed in the Programme for Government envisage: the continued reduction of the national debt-GNP ration towards 100 per cent by 1993, principally through restraint on current public expenditure; reducing the Exchequer Borrowing Requirement to 1.5 per cent of GNP next year; and limiting borrowing for current spending to no more than 1 per cent. We kept those targets firmly in view as we set out the framework for the 1992 Expenditure Estimates and Budget.

As we approach Economic and Monetary Union, we must have particular regard to the pace of incomes growth in the narrow band EMS countries. To the extent that increases are not justified by productivity growth they simply translate into higher prices or lower profits, both inimical to our future prospects. Any exceptional pay increase should be contemplated only in the particular circumstances envisaged under the local bargaining clause of theProgramme for Economic and Social Progress.

Public Finances.

We have, after a period of intensive and very successful correction of our public finances, reached a point where our annual borrowing has been reduced to levels well in line with our Community partners. The size of our national debt, however, continues to be a problem. We have committed ourselves to reducing this over time to a ratio close to that of our European partners and this is a target we must reach. This means being even more vigilant in keeping borrowing lower than other countries with a smaller burden of debt. The containment of debt and borrowing is not simply a matter of prudent national bookkeeping. It is central to the Government's strategy for establishing and sustaining economic confidence in all its aspects — confidence in the currency, the confidence to invest and to expand. In brief, policy on borrowing is central to the Government's overriding concern with employment.

We have already, through the published Estimates, defined our broad spending plans for the year ahead. That leaves the issue of taxation to be dealt with today. I will be announcing later a number of major changes in taxation. However, in the budgetary context that exists, there is no scope for largesse; it is necessary for the revenue yield to be maintained.


Unemployment is the single greatest social problem we have to contend with. The Government are keenly aware of the needs posed by the continuing growth in the labour force.

The overall package in to-day's budget will give a considerable stimulus to employment. In consultation with the social partners we have undertaken a series of special initiatives to confront the problem of rising unemployment and to accelerate the provision of new employment.

New Employment and Training Schemes

Following discussions between the Taoiseach and President Delors, the European Commission has now agreed, with effect from 1 February, to provide substantial funds for two new schemes, a new employment subsidy scheme and a new in-company training scheme. The schemes have received the full support and co-operation of the employer organisations and ICTU.

The employment subsidy scheme will provide a subsidy of £54 per week for 12 months for up to 15,000 additional employees who have been on the unemployment register for at least two months. The scheme is open to a broad range of employers — the private sector, commercial State bodies and voluntary bodies. It will be administered by FÁS. It is aimed at creating additional stable jobs. In any event the employees in question must be retained for at least six months after the initial subsidised 12 months. The employers will pay the full going rate for the job to the employees covered by the subsidy.

The second scheme, the in-company job training scheme, will provide training on the employers' premises for up to 10,000 people who have been on the unemployment register for at least two months. It has been recognised by the Irish Government, the European Commission and the social partners as an important new development that should become a permanent feature of the Irish training system. It will be built on a solid basis in order to establish clear long term viability. The trainees will receive the standard training allowances. The training programmes will be drawn up in consultation with FÁS, who will also monitor the training provided. Training on the employers' premises in a business environment is likely to lead to greater employment opportunities than training conducted outside.

Both schemes will be heavily assisted by the European Social Fund and will not require any increase in total Exchequer expenditure. The European Social Fund will fund 75 per cent of the training allowance under the training scheme with the balance of 25 per cent being provided by employers. This is the first time that employer funds have been matched in this way under the European Social Fund for Ireland.

The employment subsidy of £54 per week will be co-financed 75 per cent by the European Social Fund. This employment scheme is also a new pioneering development in the use of the European Social Fund in Ireland.

Overall expenditure on the new schemes is estimated to come to some £70 million in the years 1992 and 1993. Of this, the European Social Fund will now contribute up to some £60 million with the remainder coming from Irish employers and the Exchequer. The schemes will take effect progressively in line with the take-up by employers. The funding of the schemes in 1992 is estimated at £24 million from the ESF; £3.5 million from Irish employers and £4.5 million from the Exchequer. The Exchequer contribution will be offset by an extra equivalent amount from the ESF in other areas of training so that there is, as I have said, no increase in overall Exchequer expenditure in this area.

I would like to acknowledge the significant practical assistance being given by President Delors and his colleagues through these schemes to help us alleviate our unemployment problem.

It is envisaged that there will be a formal launch of these new schemes at the beginning of February by the Government and the social partners so as to make sure that their benefits and opportunities are known to all concerned.

Area Partnerships to combat Long-Term Unemployment

TheProgramme for Economic and Social Progress outlined an integrated approach between the social partners, the community and public agencies to implement a community response, in 12 pilot areas, to long term unemployment. The public agencies concerned have put in place the necessary arrangements, including increased resources.

The total Exchequer expenditure in the partnership areas to combat long term unemployment through training, education and enterprise development across the range of industrial services, agricultural and tourism sectors is now estimated at some £60 million in 1992.

The European Communities welcome this new integrated way of dealing with the deep-seated economic and social problems of these deprived areas, with special reference to long term unemployment. The Irish Government have just agreed with the Commission that in keeping with the area-based strategy set out in theProgramme for Economic and Social Progress and also with the need to tap fully the local enterprise, initiative and support for industrial promotion that was identified in the report of the Industrial Policy Review Group, a new substantial global grant for local development will be instituted. Under this, European Structural Funds assistance will be provided to promote and assist local socio-economic development. The details of this grant, including the eligible actions and bodies, will now be worked out quickly in further discussions between the Commission and the Irish authorities. A contribution of about £8 million has been mentioned by the Commission.

A sum of £0.5 million was allocated in last year's budget to cover managerial and other overhead costs of the 12 local partnership companies. That provision has been repeated in the recently-published 1992 Estimates. I am today allocating an additional £0.5 million to meet the expenses which will arise this year from the full-year costs of the initiative in the pilot areas.

The employer organisations have, as part of their response to the area-based strategy, established an Enterprise Trust. The trust will fund projects identified by the partnerships. In the forthcoming Finance Bill, I will be providing that contributions to the trust will be eligible for relief of corporation tax.

Task Force on Employment

The Task Force on Employment, set up under theProgramme for Economic and Social Progress and representing the Government, State agencies, employers and trade unions have made a series of recommendations many of which have been, or are being, given effect. A principal recommendation made by the Task Force related to the desirability of in-company training which has now been taken up in the new in-company training scheme, funded by the ESF and employers that I have already described. Other important recommendations cover the involvement of State commercial companies in linkages to multinational companies, extra third-level places in education and more streamlined planning control measures. The Task Force, who function on a continuing basis, have provided a valuable new means of harnessing the ideas and insights of the social partners in stimulating employment and reducing unemployment.

Review of Industrial Policy

Also of major relevance to the issue of unemployment is the report of the Industrial Policy Review Group which has recently been published. This report represents a significant input to our approach to industrial policy and to how that policy can contribute to increasing employment and living standards in this country. It contains a large number of recommendations over a wide range of policy areas which will require detailed consideration by the Ministers and Departments responsible.

The Government have decided that a committee of Ministers, headed by the Taoiseach and including the other Ministers concerned, will be set up with a wide remit not only in regard to the recommendations of the group but also in relation to all reports on employment emanating from the Task Force on Employment and otherwise. The committee of Ministers will be assisted by a working party of officials and private sector individuals. The direct link with Government will ensure the highest priority for their activities.

Opening Budget Position

The opening current budget deficit, based on the published 1992 Estimates of Receipts and Expenditure is £294 million, after allowing for the deduction of £15 million for departmental balances and for the tax implications of the trend in car sales in the year to date. The opening Exchequer borrowing requirement is £541 million.


Public expenditure comprises services which are met from the Central Fund and the ordinary day-to-day expenditures voted by the Dáil for public services.

Central Fund Services and Debt Management

The 1992 Estimate for Central Fund Services is £2,808 million of which £2,411 million is in respect of debt service payments and £384 million is in respect of our contribution to the EC budget.

Last year, the savings target of £40 million set for the National Treasury Management Agency was achieved and, in addition, the agency were able to take advantage of favourable interest rate movements to achieve further savings of £56 million. Despite these positive developments it cost the Exchequer £2,353 million to service the national debt in 1991 — that represents one quarter of total current expenditure and almost three quarters of receipts from income tax.

The 1992 debt service estimate represents an increase of 2.5 per cent over the 1991 outturn. This increase is primarily due to the servicing cost of new Exchequer borrowing and to the higher cost of refinancing maturing debt. The estimate for debt service costs also takes account of £50 million savings to be achieved this year by the National Treasury Management Agency.

Non-Capital Supply Services

1992 Opening Position

The opening position on the non-capital supply services, as published in the White Paper on Receipts and Expenditure last weekend, is £6,770 million. The variation between this figure and that published in the Abridged Estimates Volume last December is attributable to additional pay costs and to the receipt in 1991 of EC funds which had been expected to carry-forward into 1992.

Public Service Pay

The White Paper included £3,720 million for public service pay and pensions. The expenditure adjustments which I will be announcing shortly will marginally increase the figure to £3,726 million. This is an increase of £311 million or about 9 per cent on the 1991 provisional outturn.

This increase is accounted for mainly by: the carryover cost of pay increases awarded in 1991; the usual provision for increments; various technical adjustments arising from such matters as the cost of an extra pay day in 1992 for many groups of public servants and adjustments to the Abridged Estimates Volume arising from the early receipt of moneys from the European Social Fund; and the cost of implementing the package of measures put forward by me on behalf of the Government on 17 January last in relation to the implementation of the second and third general increases under the pay agreement which forms part of theProgramme for Economic and Social Progress and outstanding balances of special pay increases.

Were it not for this package, I would have had to find more than £100 million extra to fund the cost of pay increases this year. I am very heartened by the positive response of public servants to the package. I trust that it will gain widespread acceptance in the weeks ahead and so provide a basis for a return to normal relations between the ICTU and Government and revive that particular part of the consensus approach which underpins theProgramme for Economic and Social Progress and on which the Government place such store.

The package is absolutely essential in 1992 to enable us to keep Exchequer borrowing under control. It represents the absolute limit of what can be afforded in 1992. Slippage on the overall provision being made for public service pay in 1992 cannot be contemplated. Full implementation of the package also commits us to a further substantial increase in the cost of public service pay next year.

The Government have accepted that commitment in the interests of maintaining the momentum of the agreed approach to solving our problems, both now and in the longer term, which is the essence of theProgramme for Economic and Social Progress. That being said, however, the Government and taxpayers cannot be expected to continue indefinitely to fund increases in public service pay costs way ahead of inflation. A far more critical approach needs to be adopted towards the relentless upward thrust in the public service pay and pensions bill both in absolute terms and as a proportion of total voted non-capital expenditure.

Renewed and vigorous efforts must be made throughout the whole public service to reduce administrative costs by achieving greater efficiency. A way must be found to ensure that any future moves in public service pay are matched by offsetting improvements in efficiency and effectiveness in the areas concerned. In that context the traditional approach whereby increases which are secured by a relatively small cluster of grades are spread unquestioningly to other groups which are far more numerous and radically different in terms of role and function will have to be challenged.

A new approach on these lines will raise difficult issues in relation to the determination of public service pay and public service unions will, obviously, have a critical interest in them. I would hope that discussions will begin with some of these unions fairly soon on an agenda which will enable these issues to be addressed.

Reassessment of 1992 Spending Allocations

Adjustments are now required to the White Paper figure for non-capital supply services, following a reassessment of requirements in the light of the 1991 out-turn and certain savings and adjustments made to meet part of the cost of the additional expenditure which I will announce shortly. These factors allow me to reduce the White Paper figure by £14 million, or £29 million when estimated departmental balances of £15 million are taken account of, bringing it to £6,741 million. Details of these changes are set out in thePrincipal Features of the Budget, which is being circulated separately.

Two of the adjustments to the opening White Paper expenditure position call for special mention.

Administrative Budgets

Three-year administrative budgets are now in operation in most Departments and offices. The costs of administration in these Departments in 1992 will amount to £572 million. Under the administrative budget arrangements heads of Departments and their line managers have been given much greater control over the resources at their disposal while being required to reduce costs as part of the new freedom they enjoy. They are required to plan their use of administrative resources over a three-year period rather than on a year-to-year basis as heretofore. This emphasis on a planned approach over the medium term is vital to fostering a "value-for-money" culture in the Civil Service.

The administrative budget arrangements provide an incentive by allowing for the carryover of certain savings from one year to the next. Savings totalling £13.7 million qualify to be carried forward from 1991 to 1992 of which some £11.8 million relates to non-capital allocations.

Contribution towards State Security Services

The second adjustment I want to mention relates to the State security services area. Both the Defence Forces and the Garda Síochána provide security, such as cash escorts, for the associated banks. Up to now, the costs of these security services have been met from public funds. I propose to seek a contribution from the banks towards these costs and am making a provision of £2 million for 1992 for this purpose, to be included as Appropriations-in-Aid of the Defence and Garda Síochána Votes.

Further Expenditure Measures

I now want to turn to the main non-capital areas where additional expenditure is proposed in this budget, starting with social welfare.

Social Welfare

In the past number of years the value of basic social welfare payments has been more than maintained against inflation. All long term rates of social welfare payments now exceed the priority rates recommended by the Commission on Social Welfare. Short-term rates have been improved also in recent years. The Government's aim is to bring them into line with the priority rates by 1993.

I am providing in today's budget for increases in weekly social welfare payments, and these increases once again will give full protection against inflation. In addition, I am providing for special real improvements and some significant initiatives in a number of specific areas. I will now outline the contents of the social welfare package.

Weekly Welfare Payments.

I am providing for a 4 per cent increase, with effect from late July, in weekly welfare payments, including health allowances. Thus for the fifth year in succession, the standard of living of social welfare recipients will be well safeguarded. By way of example, the rate of old age contributory pension for a couple under 80 will increase from £110 per week to £114.40. The 4 per cent increase will cost over £52 million in 1992 and almost £120 million in 1993.

Equal Treatment

Following detailed consideration of a recent decision of the European Court, the Government have decided to provide for equality of treatment in respect of the period of the delay in implementing the EC Directive which provided for the progressive implementation of the principle of equal treatment between men and women in matters of social security. The necessary legal provisions will apply retrospectively from the deadline for implementation, 23 December 1984, to the actual dates of implementation in May and November 1986. The precise details will be announced by the Minister for Social Welfare when the proposals are finalised.

Accordingly, I am providing £22 million in 1992 for the purpose of making substantial retrospective payments. Further significant payments will be made in 1993 and 1994.

Special Increase in Short-Term Rates

The Government wish to make further progress this year in moving the short term rates towards the priority rates recommended by the Commission on Social Welfare. I am pleased, therefore, to announce that, as from late July, all those on short term payments will receive a special additional increase of 2 per cent on top of the 4 per cent general increase. This will mean a £3 a week improvement in the personal rate of all short term payments. As a result, a married couple with three children in receipt of short term unemployment assistance or disability benefit will get an increase of £5.80 a week bringing the rate up to £124.80 per week.

The special increase in the short term rates will cost over £4 million in 1992 and just under £10 million in 1993.

Improved Back to School Payments

The Government are committed to giving additional support to low-income families dependent on social welfare, who have school-going children. In line with this, I am happy to announce significant improvements in the "back to school" payments. These will increase by £10 per child; to £35 in the case of a primary school child and to £50 in the case of a child in second level education. The cost of these increases will be £2.2 million in 1992.

Provision for Adoptive Mothers

The Government are particularly conscious of the pressures placed on adoptive parents by the lack of provision to facilitate absences from employment related to the adoption of young children. I am, therefore, very pleased to announce that we will be promoting legislation to provide for leave from employment for adoptive mothers and intend making available a benefit to these mothers along the lines of the existing maternity benefit scheme for women in employment. These new arrangements will operate for ten weeks immediately following the placing of the child with the adoptive parents and will be introduced later this year.

Increase in Adult Dependant Allowance with Old Age Non-Contributory Pension

I am moving in this budget to correct a particular anomaly in the area of adult dependant allowances. At present a person can suffer a reduction in their social welfare payment on moving from the pre-retirement stage to actual retirement at age 66. With effect from late July of this year, the adult dependant allowance payable with old age non-contributory pensions will be the same as that payable with other social assistance schemes.

As a result of this change and taking into account the general 4 per cent increase I have already announced, the full adult dependant allowance payable with an old age non-contributory pension will increase from £28 per week to £34.30 per week; an increase of £6.30 or over 22 per cent

Family Income Supplement

The family income supplement scheme has been very substantially improved in recent years. I am again providing for further improvements this year designed to ensure that, when taken with the effect of rate increases in social welfare schemes and changes in personal income tax, the incentive to work is protected and improved for those most likely to be affected. For example, a married employee earning £8,000 with two children will benefit by a total of £10 per week from combined family income supplement and tax changes. There will also be further publicity undertaken this year in order to ensure that as many potential beneficiaries as possible are made aware of this scheme.

Grants for Community and Voluntary Services

In recent years the Government have provided increased resources via the Department of Social Welfare to various community and voluntary groups, particularly in disadvantaged areas. The Government are committed to continuing this process and, accordingly, I am now providing a further £1 million for the support of these groups in this year's budget. This is in addition to the £2.36 million provided in the 1992 Estimates. The additional £1 million I am providing today will be spent as follows: £500,000 will be spent on the Community Development Programme. This is in addition to the £750,000 already included in the 1992 Estimates and it brings the overall allocation for the Community Development Programme to £1.25 million. The increased resources will enable the programme to be extended to a number of new areas. Details of these areas will be announced by the Minister for Social Welfare; £260,000 will be used to finance a number of pilot projects designed to develop new and more effective approaches to combat the problem of moneylending in low income households. Details of the pilot schemes will be announced by the Minister for Social Welfare; £240,000 will go on once-off grants to voluntary organisations. This is on top of the £360,000 already provided for this purpose in the Estimates. The overall allocation, therefore, for 1992 will be £600,000. The money will be used to assist a number of organisations working with the elderly, the disabled, the homeless and other groups with special needs. Some examples of the organisations that will be assisted are as follows: £50,000 will be given to Aontas for a development programme aimed at women in the home in disadvantaged areas; £25,000 to the national office of the Catholic Marriage Advisory Council and £25,000 to Marriage Counselling Services Ltd. and £40,000 to the Galway County Association for the Mentally Handicapped.

Full details of the other organisations being assisted will be announced by the Minister for Social Welfare.

Combat Poverty Agency

An amount of £250,000 is being provided for the Combat Poverty Agency in addition to the £1.1 million already provided for in the 1992 Estimates. This brings the agency's overall allocation for 1992 to £1.35 million. The additional resources will be used to fund a series of measures aimed at increasing supports provided by the agency for voluntary and community-based activities.

PRSI Rates and Ceilings

PRSI rates for employers, employees and the self-employed will remain at current levels in 1992-93. The PRSI ceilings will increase in 1992-93 from £19,300 to £20,300 for employers and from £18,000 to £19,000 for employees and the self-employed.

Total Cost of Social Welfare Improvements

The total cost of the package of improvements for social welfare recipients, which I have outlined in this budget, is £85 million in 1992 and £162 million in a full year. I trust all will accept that this is a very valuable package in a year of particular financial pressure.

Non-payment Aspects of Programme for Economic and Social Progress

The Government are committed to theProgramme for Economic and Social Progress and to implementing the economic and social policies set out in the programme. The programme did, of course, say that implementation by the Government of the various economic and social developments outlined in it would be subject to the overriding consideration that the programme's fiscal parameters would be observed.

It is not possible to achieve this year budgetary targets consistent with the programme and also implement in full all of the economic and social developments envisaged in the programme, but substantial progress is possible while meeting those targets and my budget provides for this. This, together with Government policy on public service pay, shows the Government's commitment to the programme.

The following steps will be taken.

Aids to Farmers in Certain Less Favoured Areas

The provision for the livestock headage schemes in the Abridged Estimates is £95 million. This provides for the increased headage rates to which the Government had given a clear commitment. Because of the budgetary situation last year, we were unable to bring these increases forward into 1991. We are, however, prepared to examine ways of compensating for the losses incurred by providing additional funding in 1993 and 1994. As a signal of our good intent I am now providing an additional £2 million in the current year. This has been decided on following discussions between the Government and the social partners, and is clearly an initial instalment. It is the Government's intention that discussions will be held with the farm organisations with a view to further instalments being paid in 1993 and 1994.


The Government are fully committed to the maintenance of an effective advisory and research effort in the agriculture and food sector. To this end, I am providing an additional £1 million to Teagasc to enable them to provide a better service to smaller farmers. This is a significant help to the organisation and to smaller farmers at this time. We are, of course, conscious of the fact that Teagasc face other considerable difficulties at present. The Minister for Agriculture and Food will be meeting the Teasgasc board in the coming weeks with a view to discussing these problems and arriving at a revised development plan which will enable the organisation to provide, in the best and most cost efficient way, the type of service which the industry needs in the nineties.

Food Inspection and Control

I am also proposing to provide a sum of £1 million in order to improve inspection at meat plants with a view to strengthening controls.


In the education sector, I am making available a further £4 million for variousProgramme for Economic and Social Progress-related initiatives to be introduced this year. This allocation is on top of the substantial increases already provided to cover the full-year costs of the significant measures introduced under the Programme for Economic and Social Progress in 1991.

Again the principal area to benefit will be the pupil-teacher ratio, which will fall further at both first and second levels with effect from next September. The 1992 cost will be approximately £2.1 million and the full-year cost about £6.5 million.

I am allocating a further £1.1 million to supplement the existing provision for caretaking and secretarial services, which will also fund the cost of extra posts of vice-principal and guidance teacher at second level. This will have a full-year cost of over £3 million.

Finally in the education sector, I am providing a further £0.8 million to meet the cost of several other measures, namely, those intended to contribute to the relief of problems of schools in disadvantaged areas, to expand the in-service training of teachers at first and second level and to facilitate the regional technical colleges in catering for their rapidly-growing intake of students.


The Government have always been conscious of their responsibilities in the social area and of the necessity to adopt a caring and responsive approach. This approach in relation to certain vulnerable groups was set out in detail in theProgramme for Economic and Social Progress. The process of implementing this aspect of the Programme for Economic and Social Progress was begun last year and I am continuing it in 1992. I am providing an additional £3 million for persons with a mental handicap. I am also providing £2 million for childcare and £1 million for the elderly. The Minister for Health will announce the details.

Olympic Games

To assist with the preparation and sending of the Irish team to the Olympics this year I am making an allocation of £250,000 available to the Olympic Council of Ireland.


Bhí méadú i líon na ndaltaí a fhreastail ar chúrsaí Gaeilge sa Ghaeltacht anuraidh agus tá an chosúlacht ann go leanfaidh an méadú sin i 1992. Tá sé socraithe agam mar sin £150,000 breise a chur ar fáil do scéim na bhfoghlaimeoirí Gaeilge atá á reachtáil ag Roinn na Gaeltachta.

Post-Budget Non-Capital Supply Services

As a consequence of the various new expenditure initiatives I have announced today, and a further measure costing £1 million which I will be announcing later in my speech, some £101 million will be added to the non-capital supply services in 1992, giving a new total of £6,842 million.

1992 Capital Expenditure

The summary Public Capital Programme, published just prior to the Christmas recess, provided for expenditure of £1,869 million. This, too, falls to be adjusted in the light of a review of expenditure needs. Adjustments amounting to a net increase of £10 million are required of which some £3 million relate to Exchequer funding. The effect is to increase the published 1992 Public Capital Programme to £1,879 million.

Non-Programme Outlays

The provision in the White Paper on receipts and expenditure for non-programme outlays is £45 million. As in previous years this allocation will allow the Government to meet, if required, any financial restructuring costs of State-sponsored bodies, together with various other miscellaneous capital payments.

European Funds

Ireland's receipts from the EC Structural Funds continue to grow, from just under £700 million in 1991 to over £800 million this year. This allows public investment to be set at a much higher level than would otherwise be possible without adding to the borrowing requirements. The Maastricht agreement to review the scope and size of the Structural Funds and set up a new Cohesion Fund will ensure that the support from the Community will continue to improve in future years.

Review of Tax Policy

In approaching the subject of tax reform I can do no better than quote the Review of the Programme for Government:

The Government are agreed on the necessity for a programme for pro-jobs tax reform. The constrained budgetary prospect for the next few years does not take from the urgency of progressing such reform.

This is the sentiment which informs all the changes I am about to announce.

There is wide agreement that we would be better served by a tax system with a broader base, allowing correspondingly lower rates. The message has been endorsed many times — by bodies representing the social partners such as the NESC and by expert commentators such as the Commission on Taxation, the European Commission, the IMF and the OECD. Indeed, this is the direction in which we have been going for a number of years now. TheProgramme for Economic and Social Progress signalled a continuation, even a reinforcement, of that thrust in the interests of both equity and economic efficiency.

The measures I will be announcing respond also to the recommendations on taxation of the Industrial Policy Review Group. We stated in the Programme for Government our intention to carry out a radical overhaul across the entire tax code. We made clear that funding the income tax programme which we set as our objective would, of necessity, involve the systematic curtailment of exemptions, shelters, allowances and concessionary tax regimes. In the budgetary circumstances that prevail, there is no other way to progress towards our objectives taken by finding the cost of mainstream reliefs elsewhere in the tax system. I make no apology for this: it is the essence of responsible tax reform. I am fully satisfied that the outcome will be a better system on all counts.

The exceptional buoyancy of revenues of a number of recent years allowed substantial net reliefs in income tax and indirect taxation, the latter with the advent of the Single Market in mind. There is, however, a limit beyond which unacceptable loss of Exchequer revenue would occur. Accordingly, today's measures will seek to achieve a balance between, on the one hand, reducing the deadweight of taxation on economic growth and the job-creation process and, on the other hand, maintaining the Exchequer's flow.

I will deal first with income tax.

Income Tax

Over the last few years, in conjunction with the massive reduction in public borrowing which was achieved, the Government made substantial progress in relation to income tax. The standard and higher rates of income tax were reduced by six points respectively. The personal and PAYE allowances were increased. The standard band was extended by over 40 per cent. Last, but by no means least, the exemption limits were increased, and by much more than simple inflation adjustment. Last October's Review of the Programme for Government set out the Government's intention to endeavour to achieve the objectives of a standard tax rate of 25 per cent with a single higher rate of 44 per cent in the next two budgets. The review also contained the objective of working towards a considerable widening of the standard income tax band. Accordingly, I am proposing the following measures today: the existing standard tax rate of 29 per cent will be reduced to 27 per cent. This rate will also apply to the withholding tax on professional fees and the deposit interest retention tax; the top rate of tax is being reduced from 52 per cent to 48 per cent, so that there will be just two tax rates, 27 per cent and 48 per cent; the standard rate tax band is being extended from £13,400 to £14,950 for a married couple and from £6,700 to £7,475 for a single person; the general exemption limits are being increased from £3,400 to £3,500 for a single person, and from £6,800 to £7,000 for a married couple. The exemption limits for elderly taxpayers are being increased by a similar amount. In addition, the marginal relief rate, which applies where income does not greatly exceed the relevant exemption limit, is being reduced from 52 per cent to 48 per cent.

I am also renewing the PRSI allowance for a further year, at a 1992 cost of £36 million.

The following are some examples of what these changes will mean in the basic income tax charge for different categories of taxpayers: a single person on PAYE with an income of £10,000 will gain up to £158; a single person with an income of £14,000 will gain up to £337; a married couple with an income of £18,000 will gain up to £254; a married couple with an income of £20,000 will gain up to £544.

Further details of the income tax changes, showing their effect on different income categories, are contained in thePrincipal Features of the Budget. As usual, the Revenue Commissioners will be sending an information leaflet about the exemption limit changes to low-paid taxpayers over the coming weeks; the leaflet will also alert such taxpayers to the family income supplement scheme operated by the Department of Social Welfare.

These measures will cost an estimated £168 million in 1992, excluding the cost of renewing the PRSI allowance. As I said, it has been necessary to look elsewhere in the tax system to provide the funding for these reliefs. Let me say at the outset that there will be no change in either the mortgage interest or health insurance reliefs.

Life Assurance Relief

The tax relief on life assurance, despite the curtailment of recent years, still costs an estimated £8 million a year in terms of tax foregone. I propose to abolish the relief in respect of all premiums paid on or after 6 April next.

Holding of Shares

The tax code, as it stands, contains a number of special reliefs connected with the acquisition or holding of shares. Having weighed up carefully the various arguments, I am satisfied that the cost involved is not justified by such support as they might give to the capitalisation of business and industry. Accordingly, I propose to restrict or abolish these concessions.

Tax Reliefs for Certain Dividend Income

Individual shareholders in companies liable for the 10 per cent rate of corporation tax are able to receive tax-free up to £7,000 or £9,000 in dividend income. When the relief was introduced in 1986, the purpose was to encourage equity investment by individuals in domestic manufacturing companies. In practice, however, the relief has been widely abused through contrived arrangements for directors and employees, serving its original purpose to only a very limited extent. In the circumstances, the relief is being withdrawn, and will no longer apply to dividends paid on or after today. Individual investors in manufacturing companies will still be in an advantageous after-tax position as compared to individual investors in non-manufacturing companies, because manufacturing companies pay corporation tax at a much lower rate.

Under both export sales relief and the Shannon exemption, the profits derived from the export of manufactured goods and from certain service activities at Shannon were exempt from corporation tax. This profits exemption ceased on 5 April 1990, but dividends from these exempt profits have continued to enjoy tax-exempt status and there is still an amount of exempt profits in company reserves which have yet to be distributed as dividends. The continued exemption of these dividends for the individual recipients is difficult to justify at a time when virtually all other income is subject to income tax. Furthermore, several instances have arisen where there has been manifestly unintended use of the exemption through the contrived substitution of these exempt dividends for normal taxable remuneration. This is clearly unfair to other taxpayers. It has, therefore, been decided that the income tax exemption for these export sales relief and Shannon dividends will be abolished on and from today, with the full tax charge being phased in over a three-year period. Further details are contained in the Principal Features.

Profit-Sharing Relief.

Income tax relief has been available in respect of shares allocated to employees under approved profit-sharing schemes. I propose to abolish this relief in respect of shares acquired by the trustees of such schemes with funds paid over to such trustees on or after today. The tax position of shares already allocated to employees before today will not be affected; neither will the position of shares acquired before today by trustees of approved profit-sharing schemes but not yet allocated to employees. Also unaffected will be shares purchased by trustees with funds paid over to them before today but not yet invested in shares, provided that the funds are invested in shares by 5 April next.

Share Options Relief

I am also abolishing the concessionary tax treatment which applies to share options issued to employees and directors. Again, this relief will be abolished in respect of options granted on or after today; the tax position of options granted before today will remain unchanged.

Relief to individuals on loans applied in acquiring an interest in quoted companies.

Income tax relief is available, subject to certain conditions, on interest on loans taken out by employees and directors to purchase shares in, or make a loan to, the company which employs them. In my view the rationale for this relief is dubious in relation to shares in, or loans to, quoted companies, which have access to capital through the stock market. I propose, therefore, to abolish the relief in respect of loans taken out on or after today to purchase shares in or lend money to such companies and to phase out the relief in respect of existing loans relating to such companies. Relief on existing loans relating to quoted companies will, accordingly, be available only on 70 per cent of the amount of qualifying interest paid in the 1992-93 tax year, and only on 40 per cent in the 1993-94 tax year; no relief will be available in 1994-95. For companies which obtained a quotation after 5 April 1991, the phasing out will not begin until the 1993-94 tax year. Where companies obtain a quotation from now on, relief will not be available in respect of loans taken out on or after the date of flotation; phasing out of relief on loans taken out before that date will begin in the second-next tax year after flotation.

“Tax-Efficient Remuneration”

So-called tax-efficient remuneration has come to play an increasing role in recent years. This phenomenon is not confined to Ireland; other countries have taken action in recent times to address the inequity this involvesvis-à-vis other taxpayers. I am proposing a number of measures with the aim of ensuring that the treatment of such benefits is brought more into line with that of ordinary remuneration, and that provisions designed to serve a particular purpose are not abused.

Company Cars

At present, a person whose car is provided by an employer is taxed on the basis of a sliding scale — 20 per cent of the original market value of the car where all costs are met by the employer, falling to 12½ per cent where the car only is supplied. These rates are very lenient when compared with the costs of private ownership. When the sliding scale was originally introduced in 1982, it was intended that these rates would be increased substantially for 1983-84 and subsequent years. This did not happen. I have now decided to increase the 20 per cent rate to 30 per cent for 1992-93, withpro rata increases in the other rates. In addition, I am increasing the level at which so-called tapering relief commences. This relief applies when business mileage exceeds 10,000 miles a year. I have decided to increase the threshold to 15,000 miles and the maximum tapering relief available will be reduced to 75 per cent of the full charge. These changes will yield an additional £16.2 million in 1992 and £27 million in a full year. Details of the new scale are set out in the Principal Features.

Preferential Loans

A second area where I consider a tax increase to be warranted is the level of the specified interest rates used to determine the benefit-in-kind charge for preferential loans made to employees by their employers. At present, the rate is 10 per cent in the case of mortgage loans and 12 per cent in the case of other loans. I propose to increase these rates to 11 per cent and 15 per cent respectively, to reflect more closely interest rates charged commercially. I should add that I propose from now on to review the level of these specified rates each year before the budget, to see if a change is warranted having regard to the level of commercial interest rates around the beginning of the year. The present increases will yield £0.6 million in 1992 and £1 million in a full year.

New Fringe Benefits Tax

In recent years, there has been a significant increase in use of fringe benefits in the payment of staff. These benefits are not confined to one segment of the workforce, but are widely available. An employees is liable to pay tax on these benefits unless they are specifically excluded from taxation. However, some benefits are difficult to tax accurately or adequately under present arrangements and this is obviously one of the reasons for their popularity. To the extent that they are undertaxed, the burden of taxation is increased for those taxpayers who do not receive them.

I am therefore, proposing a radical reform of the tax treatment of fringe benefits. There will be a new tax on fringe benefits, which will be payable by all employers, including those in the public sector, who make use of these benefits in paying their employees. The tax will come into force on 6 April 1993. It will follow the general lines of fringe benefit taxes already in operation elsewhere and it will have the following main features: for an initial period, company cars and preferential loans will be excluded from the scope of the tax. Employees who receive these benefits will continue to be liable for the tax on them; subject to certain other exclusions, to be specified in regulations, the tax will be payable in respect of all fringe benefits provided by businesses to their employees, pensioners and directors; the rate of tax will be the top rate of income tax, and will not be allowed as a deduction in the calculation of an employer's profits for tax purposes; detailed valuation rules will be included in the forthcoming legislation. The Finance Bill will contain enabling provisions in connection with this tax. Employers will, therefore, have about a year before the tax comes into force to adapt to the new regime.

There are one or two additional points that I would like to make about this proposal. First, it is very hard to predict what the specific yield from this tax will be. Employers who do not wish to pay it will be able to avoid doing so, by paying their employees entirely in cash which will be subject to PAYE and PRSI in the normal way. Second, since the tax need not be paid where cash payments are substituted for fringe benefits, its effect on costs should be limited.

I would like to sound one note of caution. The period between now and the coming into force of this new tax is not to be regarded as giving employers an opportunity to put in place fringe benefit "buy-out" schemes for capital sums which they might claim to be tax-free. I am asking the Revenue Commissioners to be on the look-out for any such action and, if necessary, I will have no hesitation in bringing in appropriate counter measures which will apply with effect from today.

Refunds of Superannuation Contributions

At present, where a taxpayer makes contributions to a superannuation scheme, he gets tax relief for them at normal tax rates; where contributions are later refunded, an income tax charge is imposed, but only at the rate of 10 per cent. Refunds of contributions are running at some £20 million a year and I propose to increase the 10 per cent rate to 25 per cent, in respect of refunds made on or after today. I would emphasise that there is no change in the tax relief available on the making of contributions to pension funds; it is only the tax charge on refunds that is being increased. I expect this change to yield some £2.5 million in 1992.

Taxation of Disability Benefit

As announced by my colleague, the Minister for Social Welfare, before Christmas, the Government have decided that weekly disability benefit and occupational injuries benefit payments would be treated as income for tax purposes, and that the mechanisms for implementing these arrangements were being examined by his Department. For operational reasons it will not be possible to implement taxation from 6 April next, and it will have to be deferred until later in 1992. The Minister for Social Welfare is continuing his discussions with the social partners about implementation, and he hopes to be able to announce the arrangements for taxation, and its commencement date, fairly shortly. There will be no change in the tax treatment of these payments until the commencement date.

Unemployment Benefit

The taxation of short term social welfare benefits has long been regarded as desirable, and will as I have said begin later this year as regards weekly disability benefit and occupational injuries benefit payments. The Government have also decided that unemployment benefit will be treated as income for tax purposes. In order to allow time for the Department of Social Welfare to implement the necessary arrangements, this change will not take place until 1993. The extent, if any, to which a recipient would pay tax will of course depend on the amount of other income arising in the same tax year. Enabling provisions to establish the tax charge on these benefits will be included in the 1992 Finance Bill.

Withholding tax on fees for professional services

The withholding tax, which was first introduced in the Finance Act, 1987, applies to payments for professional services supplied to accountable persons listed in legislation. The application of the tax involves the deduction of an amount equivalent to the standard rate of income tax from the payment and the transfer of that amount to the Revenue Commissioners. The money is then held on account against tax liabilities. Since full credit is given when the taxpayer finalises his liabilities with the Revenue Commissioners, no extra taxation is imposed on the taxpayer.

The current list of accountable persons, which has not been updated since 1988, covers Government Departments, most of the major non-commercial State bodies, the local authorities and authorised health insurers such as the VHI. From 6 June 1992, the list will be extended to include all the commercial State bodies and a number of other non-commercial State bodies such as Teagasc and An Bord Glas. This measure will yield an additional £2 million.

Deposit Interest Retention Tax

As part of the programme for the Single European Market, and as a further step towards European Monetary Union, Ireland is committed to the full liberalisation of capital movements by the end of this year. In preparation for this, we have already abolished most of our exchange controls. The main restrictions which remain are on the freedom of Irish residents to open current and deposit accounts abroad. These will be removed by the end of this year, a measure which will be of significance to the financial sector. The implications for future revenue from the deposit interest retention tax, and possible measures to deal with that situation, are under examination in my Department and any necessary legislative changes will be provided for in this year's Finance Bill. There are no implications for revenue in 1992.

Section 23/27 Relief

The relief on the cost of construction of residential accommodation for letting, generally known as "Section 23" was extended in the 1991 budget for one final year. A concession was given to the designated areas, with the specific aim of a better balance in urban renewal, so that after 31 March 1992, these areas would have exclusive access to section 23.

It has come to my notice that building firms are coming under pressure to accelerate work in the run-up to the final deadline, in order to ensure that all expenditure on ongoing projects qualifies for relief. This situation is not in the interest of the industry, or its workforce. Accordingly, I have decided that, where a development is in progress today, expenditure incurred up to 31 July next will qualify for relief.

I want to make it quite clear that this concession only applies to section 23 developments which have at least had their foundations already laid before today. It emphatically does not cover developments which are at site preparation stage, or which have not yet begun; in their case, the deadline of 31 March still applies.

But negotiated before the Finance Bill.

A farmer whose herd has been subject to compulsory disposals under statutory disease eradication schemes is currently allowed two accounting periods for restocking before a claw-back of previous stock relief can arise. It has been brought to my notice that there are circumstances where this period may be too restrictive. I have, therefore, decided to extend the concessionary postponement of potential clawback to three accounting periods. This will apply to disposals of diseased animals arising after 5 April next.

Overall Effect of Income Tax Measures

Today's package of income tax measures marks a major improvement in our tax system. In the first place, it involves a significant shift of the tax burden away from personal income.

Second, it brings considerably further the process of reform that has been underway over the past few years. The standard and top rates of tax are being reduced for the fourth budget in succession. The standard rate band is being extended for the fifth budget in succession and is now nearly 60 per cent wider than it was in 1987. The marginal income tax rate facing over 700,000 taxpayers is being reduced. Thirdly, the increase in exemption limits and reduction of the marginal relief rate will be of further benefit to the lower-paid taxpayer whose position has been dramatically improved over the past few years: some 11,000 taxpayers with 12,000 children will be exempted by the changes, and a further 21,000 taxpayers with 30,000 children will be brought into marginal relief. A further 69,000 taxpayers with 110,000 children, currently in marginal relief, will also benefit from the changes. Finally, an income tax code which has fewer and less generous reliefs but lower rates will focus incentive on the earning of income. I trust that employers, who have pressed for this, will respond positively. All in all, we will have gone most of the way to achieving the objectives contained in theProgramme for Economic and Social Progress and made a major step towards realising the goals set down in the Programme for Government.

As against the cost of the reliefs package I have announced, the reduction of concessions will yield £38 million, leaving a balance of £130 million still to be found through other tax measures.

I turn now to the area of business taxation.

Corporation Tax

I am making a number of changes in the corporation tax code which continue the process of reform. These changes involve closing loopholes, removing anomalies and harmonising tax treatment between different areas. They will also increase Exchequer revenue, helping to keep borrowing down, and contributing to the cost of the income tax measures — which will, of course, make for a better business environment. I will deal first with the financial sector.

Life Assurance Companies

(i) Acquisition Expenses

I am proposing a change in the tax treatment of the expenses incurred by life assurance companies in acquiring new business. These include commissions and relevant management expenses and arise predominantly in the initial stages of the term of the policy. As things stand, companies may offset these heavy initial costs for new investors against the investment yield relating to existing investors. As a result, the tax liability of the entire business can be greatly reduced. This factor is one of the main reasons for the relatively low tax yield to date from many life assurance companies.

In future, the expenses of acquiring new business will have to be spread over a seven year period instead of being fully offset in the first year. This adjustment will give a closer match between these expenses and the flow of income and capital gains arising from the investment of the relevant premiums. The change will apply from 1 January 1992, which is the most suitable date for administrative purposes. In order to give companies a sufficient interval to adjust to the new rules, there will be a three year phasing-in period, details of which are set out in the Principal Features.

(ii) Unit Trusts

Under existing rules, where a life assurance company owns units in an authorised unit trust a capital gains tax charge may, in practice, never arise. An authorised unit trust is not liable for the tax on the disposal of its investments and the life company would rarely dispose of the units. I am proposing, therefore, to introduce an annual charge on the assurance company's unrealised gains on the units. The assurance company, in such a situation, will be deemed to dispose of and immediately reacquire their unit holding at the end of each accounting period. The change will come into effect for accounting periods beginning on or after 1 January 1993. Details of the new charge will be contained in the 1992 Finance Bill.

In certain cases, a life assurance company may own units in and operate a non-authorised unit trust. It may be advantageous for commercial or other reasons for the company to change such a trust into an authorised trust which comes under the supervision of the Central Bank. In order to facilitate such a development, I am proposing to introduce provisions in the Finance Bill giving a company the option to make such a conversion, subject to the payment of an appropriate amount of capital gains tax on the unrealised gains on the units at the date of conversion.

Building Societies

There is to be a change in the tax rules for building societies on the capital gains arising from their disposal of Government securities. Under a long standing administrative practice, these gains were in effect treated as exempt for taxation purposes. Following a recent court decision and a detailed review of the matter, the Revenue Commissioners are now of the view that such gains should in future be treated as part of the societies' taxable trading income. Accordingly, the commissioners are changing their administrative practice and are advising the societies that this revised treatment will apply as and from today. In order to allow the societies a sufficient period to adapt to the new situation, I will be introducing a provision in the Finance Bill, having effect from today, which will phase in the tax charge over a four year period. The details are contained in the Principal Features. As a result of the change, the societies will be charged to tax on these capital gains in the same way as are the banks.

Removal of an anomaly in the case of certain branch operations

Certain banks and general assurance companies operating as branches in the Irish market have a taxation advantage over their competitors as a result of an unintended effect of a relief in the tax code. A financial institution which is set up in the State as a branch of a company resident outside the State is, in practice, able to avail of the tax exemption of Irish gilt income which was provided specifically for non-resident investors. This is a clear anomaly. These financial institutions are not genuine non-residents; they are carrying on substantial business activities in the Irish banking and general assurance markets. To provide equality of treatment, I have decided that this tax exemption will no longer apply in respect of gilts purchased after today where the purchaser companies hold the securities for the purposes of their trading activities in the State. The change will apply only to this limited category of companies. It will not apply to any other non-resident holders of gilts, because the anomaly in question simply does not arise in their case. In addition, the companies affected will not be entitled after today to any loss relief resulting from the exemption in question.

Co-operative Societies Tax Exemption

Certain trading profits of agricultural and fishery co-operatives currently enjoy an exemption from corporation tax. Since the introduction of the exemption many years ago, co-operatives have undergone radical transformation. The distinction between the co-operative sector and other commercial entities has now all but disappeared. The time has, therefore, come to have them operating under the same taxation rules as other businesses in the same trading areas. I have decided accordingly that this exemption will be abolished from 1 April next. Where currently exempt activities involve a manufacturing process they will, of course, qualify for the 10 per cent rate of corporation tax, while the other activities of the societies will become taxable at the standard corporation tax rate.

Ring-fencing of Certain Losses with a Company

The present position regarding losses of a 10 per cent company in a group structure is that they can be offset, for group relief purposes only, against the profits of another 10 per cent company within the group. I have decided to extend the same restriction to profits and losses in the same company. From 1 April next, trading losses arising from a 10 per cent activity of a company will no longer be allowed for offset against the 40 per cent profits of that company.

Definition of Scientific Research

Following a recent decision of the Supreme Court, it is my intention to amend the definition of "scientific research" which qualifies for tax allowance under section 244 of the Income Tax Act, 1967, so as to exclude expenditure incurred in the course of exploration for natural resources such as oil, gas or minerals. Further details of the proposed change are to be found in the Principal Features.


My predecessor announced in last year's budget that a special working group were being set up to examine the corporation tax regime applying to the banks and the role of the bank levy. The working group have since investigated the question at some length and considered various possible changes in the present regime.

As a result of this examination, I have decided to introduce new arrangements for bank taxation which will be reviewed again in three years' time. Under these arrangements, the annual bank levy will continue to be paid during the period 1992-94 at its 1991 level of £36 million. However, if a bank increases its corporation tax payment for the relevant accounting period by a sufficiently high amount so that it exceeds a certain tax threshold, all or part of its levy payment for that year will be offsettable against the excess corporation tax over that threshold. Further details will be contained in the Finance Bill.

I am confident that these proposed new arrangements, while giving the banks an incentive to pay extra corporation tax so as to offset their levy payments, will benefit the position of the Exchequer. This facility to offset the levy where a bank pays sufficiently high corporation tax will also assist the competitive position of Irish banks in the post-1992 EC Single Market.

Annual Wear and Tear Capital Allowances

As part of the programme of corporate tax reform, begun in 1988, under which the mainstream tax rate has come down to 40 per cent, the accelerated capital allowances for plant and machinery will terminate on 31 March next. In view of the consequent significance of the annual wear and tear capital allowances, and bearing in mind that these have remained unchanged since 1968, the Government decided that they needed to be reviewed. As a result of this review I have decided on certain changes to the existing wear and tear regime, which has rates of 10 per cent, 12½ per cent and 25 per cent per annum on a reducing balance basis.

From 1 April next, in the case of new plant and machinery, there will be a single wear and tear regime for all the assets involved. This will be a straight line depreciation system, which will mean a total write-off of the assets for taxation purposes by the end of the seventh year. The details are contained in the Principal Features. Where particular pieces of equipment have a shorter working life and are disposed of earlier, a balancing allowance will ensure full write-off at the time of the disposal.

Overall, the change will give Irish business a regime which will generally be on a par with the position in the majority of other EC member states. Being simpler to operate, it will also be of practical benefit to small business in the context of self-assessment. Furthermore, it will strike a reasonable balance between encouraging investment and promoting employment, which requires that substitution of capital for labour not be made attractive.

Motor Cars used for Business Purposes

The threshold for capital allowances and for allowable running expenses in respect of motor cars used for business purposes is being increased from £7,000 to £10,000. This increase will apply to capital allowances for cars provided after today and, in the case of running expenses, to expenses incurred after today. The cost of the change in 1992 will be £700,000 and the full year cost, which will not arise until 1994, will be £17.4 million. This change will be of benefit to companies providing cars for business purposes and also, of course, to the motor industry — for whom I will have further good news later.

International Financial Services Centre

The success of the International Financial Services Centre is now evident to all. Already over 200 companies to employ 3,000 persons have been approved to operate in the centre and there is now a significant and growing new tax return to the Exchequer from these companies. The Government will continue to encourage in every way possible new entrants who can contribute to the development of the centre to set up before the EC deadline of 31 December 1994. To date some 550,000 sq. ft. of offices have been completed. Negotiations are now in progress between the Custom House Docks Authority and the developers for a new agreement to complete the development including a museum, retail facilities, housing and a hotel as well as further office buildings.

Capital Taxes and Stamp Duties

I will now outline a number of changes I am proposing in the area of capital taxes and stamp duties.

Capital Gains Tax

As the House will be aware, capital gains tax has been on a self-assessment basis since last year. I am now proposing certain changes in the structure of the tax so as to streamline it, bringing it more into line with other pertinent areas of the tax code, and, limiting the scope for avoidance practices and the "sheltering" of income.

Rate Structure

The structure of the capital gains tax offers significant opportunities for tax evasion and avoidance. I propose to reform the tax so as to reduce this scope. I propose to replace the existing rate structure of the tax with a single flat rate of 40 per cent, effective from 6 April. One effect of this change will be to eliminate the incentive for companies to convert income into capital gains andvice versa. For individuals, the 40 per cent rate will reduce the attraction of schemes designed to ensure that gains are charged at the lowest existing rate, that is 30 per cent. One device being used to achieve this goal at present is the issue of loan notes. This measure is a major reform of the tax code, along the lines recommended by the Commission on Taxation. I expect it to be revenue-neutral.

Annual Exemption for Small Gains

I propose to reduce by half the current exemption threshold for capital gains tax — the "small gains" exemption. The new threshold will be £1,000 for a single person and £2,000 for a married couple. With the introduction of self-assessment, the original administrative argument for the exemption is no longer so strong. In addition, there is evidence that the exemption is abused through the practice of "bed and breakfasting" of shares, where shares are sold annually solely to realise a capital gain within the threshold. Today's measure will strike a balance between catering for genuine small gains and protecting the revenue base. As capital gains tax is collected on a previous year basis, these changes will have no direct revenue effect in 1992, but they will raise an extra £2 million in 1993.

Residential Property Tax

The residential property tax is payable at present by persons whose houses exceed £96,000 in value and whose income, combined with the incomes of those living with them, exceeds £28,500. These thresholds are due to be increased on 5 April next in line with the new house price index and inflation respectively. I propose to reduce the thresholds to £90,000 and £27,500 for 1992-93. The thresholds will be indexed in future years in the usual manner, but using 1992-93 values as the base. The new levels of these thresholds will continue to ensure that only those properties which are at the upper end of the property market will be subject to the tax. The extra yield from this measure in 1992 will be £1.5 million.

Stamp Duty Amnesty

Last year's Finance Act changed the nature of stamp duty so as to ensure that, where a potential liability arose, payment of the duty would be assured. It also updated the interest and penalties on late payment of duty with effect from 1 November 1991. There are still many old unstamped documents in existence which could remain unstamped as matters stand. In order to encourage those holding such documents to have them stamped and pay the duty, I propose to introduce an interest and penalty amnesty for documents executed before 1 November 1991. The full amnesty will be available from today until 30 June 1992. Interest will again start to run on 1 July and the amnesty will end on 30 September 1992. The expected yield from this amnesty is £10 million. Those holding unstamped documents should avail of this opportunity to put their affairs in order.

Other Stamp Duty Changes

I propose to make three other changes in stamp duty. First, I am raising the stamp duty on a range of instruments from £5 to £10. These fixed duties have not been changed since 1982. The change is to be implemented from 1 February 1992, and it will raise £900,000 in 1992 and £1 million in a full year. Details are available from the Revenue Commissioners.

The stamp duty on credit cards, which has not been raised since 1984, is to be increased from £10 per annum to £15. This measure will yield £2.3 million in 1992.

Finally, I propose to introduce a stamp duty of £2 per annum on ATM cards. These cards are increasingly used for a wide range of financial transactions, playing a not dissimilar role to cheques and credit cards which are already charged to duty. In the circumstances it is fair and reasonable that they should be subject to some charge, and the amount proposed is modest. This measure is expected to raise £1.5 million per annum.

General Background to Indirect Tax Policy

I will turn now to the areas of indirect taxation. For business people and consumers alike, the key feature of the Internal Market will be the removal of tax checks at borders within the EC. A main concern has to be to ensure that the differentials between our VAT and excise rates and those of other member states are consistent with safeguarding trade and revenue interests.

From the technical and administrative points of view, new VAT and excise duty regimes, embracing controls, rates and structures, must be put in place, conforming with the common EC rules. I hope to include in the forthcoming Finance Bill provision for these changes, to the extent that they have been agreed by the Community, in order to allow the maximum time for businesses and the administration to become familiar with them.

VAT Rates

In addressing VAT rates this year, I must have regard to agreements already reached at Community level. As the House is aware, the process of tax approximation within the Single Market requires not only that VAT rates in member states be aligned reasonably closely but also that the coverage of these rates be rationalised.

The outcome of the VAT approximation negotiations has given us the option to retain existing zero and certain other of our current reduced rates covering sectors of particular economic or social significance. However, we have also had to accept the prospect of tax increases in areas which have hitherto been favourably treated. Essentially, this means increasing the amount of consumer expenditure which is subject to the standard rate. Compared with other Community countries, of course, the coverage of the standard rate in Ireland has been limited.

The bulk of activities currently rated at 12½ per cent here are, under the terms of the agreements concluded, destined to be liable at the standard rate. While the adjustment process must be completed by next year, I would not propose to make the transition in one step. From 1 March, therefore, I am increasing the existing rate of 12½ per cent on a wide range of categories to 16 per cent. Among the items concerned will be telecommunications, personal services, repair and maintenance services and adult clothing and footwear.

That sounds familiar.

"Now you see it, now you don't".

This increase will not be applied to domestic energy products, to meals, to certain entertainment categories, to veterinary and certain agricultural services or to waste disposal services. All these will remain at the 12½ per cent rate. Neither am I adjusting the 10 per cent rate which applies to construction, hotel accommodation, newspapers and short term car hire, on this occasion.

I do not propose, this year, to make any alteration to the level of the standard rate of 21 per cent. One important consequence for the Exchequer of the new procedures will be the ending of the payment of VAT at point of entry on imports from within the Community. This change will entail a cash flow loss for the Exchequer in 1993 of the order of £200 million which cannot be absorbed. Accordingly, I have asked officials of my Department and of the Revenue Commissioners to examine ways of mitigating the shortfall. I intend to announce details in the Finance Bill.

Minor VAT Changes

By way of broadening the VAT base and promoting greater equity in the system, I intend to introduce a number of minor VAT measures in the Finance Bill. The use of all commercially organised sports and leisure facilities will be taxed at the standard rate of VAT, so will certain items which are currently zerorated whereas competing and similar products are standard-rated — I refer to snack foods made from corn or maize, bottled waters and certain frozen desserts. VAT registration will also be extended to farmers who supply to other farmers agricultural services to any significant extent.

I will also be introducing certain technical improvements to enhance security and compliance in relation to VAT.

What about the disadvantaged farmers?

Farmers' Flat-Rate Refund

To reflect changes in VAT rates in recent years, the farmers' flat rate VAT refund is being increased from 1 March to 2.7 per cent.

VAT Reliefs

I am also providing today for two VAT reliefs.

Relief on Donated Medical Equipment

For some years now, in recognition of the trojan work done by voluntary fund raising groups, a relief scheme has been in operation which provides a refund of the difference in VAT between the standard rate and the 10 per cent rate on certain donated medical equipment. I have decided to provide full relief of the VAT arising on the equipment concerned.

Special Trading Houses

In order to assist the export effort of the enterprises concerned, I hope to propose in the Finance Bill, with the necessary approval of the EC Commission, that supplies of goods to designated special trading houses should be treated as exports of goods and, hence, liable to the zero rate. This will provide a useful cash flow benefit to the trading houses and will put their small suppliers on a par with other exporters.


The estimated net addition of revenue arising from these VAT measures will be £56 million in 1992 and £91 million in a full year.

Excise Duties

I will now move on to excise duties. As I have already said, the advent of the Internal Market imposes major constraints regarding future adjustments of excise duty rates. With this in mind, I am limiting increases in excise duties to two areas. With effect from midnight tonight, I propose to increase the tax on cigarettes by 16p per packet of 20, withpro rata increases on other tobacco products, and to increase the tax on cider and perry by 3p per pint. Having listened carefully to the views of my colleague, the Minister for Health, I have concluded that there are sound health and social reasons for the proposed increase in the tobacco duties.

Take a bow Mary.

The Minister for Health has no hope after this.


Members will have ample time to discuss the details of the budget.

As far as cider is concerned, I believe that its tax treatment is unduly generous compared with that of beer, the current rate of duty on cider being only about one-third that for beer. At this point, I should mention that I propose to legislate during the year for a change to an end-product system in the method of levying excise duty on beer.

The initial excise duty on motor vehicles is an area of major budgetary significance. It is inevitably affected by Internal Market developments in that it is now border controlled. My intention is that the present initial excise duty on motor vehicles will be replaced by a first registration charge, designed to produce broadly equivalent revenue, but which would not be dependent on border controls for compliance. Many of the operational arrangements for the new system remain to be resolved. However, in bringing forward detailed legislative proposals in due course, my aim will be to cater for the new trading environment arising after 1992, while taking account of established administrative control and enforcement arrangements to the extent that revenue collection considerations allow.

More immediately, I am acutely aware of the difficulties currently being experienced in the motor trade and have decided to take a number of initiatives to tackle these problems within the overall budgetary constraints that exist.

From midnight tonight, I propose to cut the initial excise duty on cars under 2012cc from 21.7 per cent to 20 per cent. Taking into account the consequential VAT effects, this should reduce the retail price of the new cars concerned by 2.7 per cent. The customer should save over £300 on a £12,000 car. In taking this action, I must emphasise again that this does not herald a new era involving the regular lowering of car taxes. As I have already said, Exchequer requirements simply rule this out, notwithstanding the Internal Market.


The wide gap in petrol prices between here and Northern Ireland has been an important factor in cross-Border fiscal shopping in the past. Although the differential has narrowed in more recent times, it is still significant. Reducing tax differences clearly has a role to play in promoting an even closer alignment. Accordingly, I propose to reduce the tax on petrol from 1 May next by 2p per litre or by 9p per gallon——

We will buy our cigarettes in Newry.


A Deputy

But they make them in Dundalk.

The timing of this change should also provide a useful boost to the important tourism sector.

Taxation of Commercial Vehicles

The advent of the Internal Market will put an enhanced premium on competitiveness, particularly for those engaged in international trade. Nowhere will this requirement be more intense than in the transport and haulage industries, given our peripheral location. Consequently, I propose to abolish, with immediate effect, the initial 6.5 per cent excise duty on certain commercial vehicles. These will include articulated trucks, lorries, some vans and buses.

A Deputy

And white Hiace vans.

They should be visible at night.

This will help the commercial users of such vehicles to compete on an equal footing with their Community counterparts and facilitate cost containment throughout the distribution sector of the economy. The change will also benefit the tourism sector.

Financing of the Motor Vehicle Excise Restructuring

Reflecting the overall difficult budgetary circumstances, I must finance the large-scale motor duty reductions which I have just announced. I intend to do this in the following ways. I propose to increase immediately the excise on vans derived from either cars or jeeps to 12.5 per cent of the retail price. While these are nominally commercial vehicles, I am all too aware that in many instances they have been purchased as an alternative to cars for private motoring purposes.

I propose to increase the rate of road tax for commercial vehicles of up to three tonnes unladen weight by £50 and to increase the rates on other commercial vehicles by about 35 per cent. Finally, the road tax on private cars will be increased by about 20 per cent. These changes will take effect from 1 April next. I also propose to take advantage of the changes being made in road tax rates to further the restructuring of categories begun last year.

I estimate that the various motor vehicle taxation adjustments announced, including the relief on petrol, will cost £13 million in 1992 and slightly more in a full year.

Car Hire Sector

My attention has been drawn to the shortage of cars for hire which occurred at the peak of last year's tourist season. There are fears of a similar situation arising this year. Although the excise reduction on new cars which I have just announced should also be of benefit to the car hire sector, I consider that a further specific incentive is needed. Accordingly, I have decided to set aside £1 million with the primary intention of boosting the supply of cars available for hire to tourists in the peak season. There will be consultations with the interests involved to see how this can best be achieved.

Minor Excises

I now propose to make a number of other excise duty adjustments in anticipation of Internal Market requirements.

I propose to abolish, with effect from tonight, the remaining duties on larger televisions as well as the duty on video players and camcorders. I am also halving the duty on LPG used for non-automotive purposes from 1 July next. Finally, in relation to the excise duty on table waters — in other words, soft drinks — I have decided that the most appropriate course to follow is abolition. However, due to the difficult budgetary circumstances, this change will be made in two stages. To coincide with the proposed VAT standard rating of bottled waters, I propose to reduce the current duty on table waters generally by one third from 1 July next. The remaining duty will be abolished from 1 January 1993.

Excise Licences

Before I leave the excise duty area, I would like to mention two initiatives regarding excise licences which I will be bringing forward in the Finance Bill, in addition to adjustments of the rates for excise control licences. I propose that for public house licences charges will be based on the rateable valuation of the premises concerned. The operation of the rating system has been improved in recent years and now reflects turnover, thus providing a fair means of differentiating between pubs. Although the same general approach can be validly applied in relation to liquor licences for hotels, I propose, in designing the system, to take account of the fact that the valuation of such premises is based on much broader considerations than bar turnover alone.

I am also proposing that an annual duty of £100 should be imposed on non-gaming amusement machines.

The proposed changes in the excise duty in the licences areas which I have indicated will yield about £6 million in 1992 and £9 million in a full year.

It is estimated that the combined impact of the various excise adjustments which I have announced, other than those on motor vehicles and petrol, will increase the revenue yield by £29 million in 1992 and by nearly £17 million in a full year.

Concluding Remarks on Indirect Taxation

The wide-ranging indirect tax changes which I have just outlined are in harmony with EC developments to date and further advance our preparation for full participation in the post-1992 Europe. The net effect on inflation of these changes is estimated at about 0.3 per cent.

Tax Avoidance and Evasion

There is widespread concern both in the Government and in the country at large about the tax avoidance and evasion which have come to public notice within the last year. These practices have developed despite the sweeping changes in tax administration that have been made in recent years. It is quite clear that these measures have not been sufficient to deter those in the community intent on evading their tax obligations. I am determined to do all I can to stop this.

Tax avoidance was, I would emphasise, a particular consideration in a number of the general reforming measures I announced earlier. The incentive for avoidance is often a product of the tax code itself, flowing in particular from variations in tax rates and from differential rules. Addressing unintended use of these provisions, and ensuring that they are not exploited simply to reduce tax bills, is a continuing concern of the Government and the Revenue Commissioners. A less complex, more uniform, tax code would in itself foreclose opportunities. Moreover, lower rates will tend to reduce the incentive to engage in such practices. I would draw attention in particular to the steps taken in relation to share-owning incentives, fringe benefits and capital gains.

Tax Clearance

At present, people or companies applying to public bodies for grants or for contracts worth £5,000 or more must produce a certificate from the Revenue Commissioners proving that their tax affairs are in order. I propose to extend this very successful scheme significantly. The Finance Bill will contain provisions which will enable me to do this. I will be attaching tax clearance requirements to licences such as those for pubs, dance halls, employment agencies, bookmakers and so on. This scheme will apply only to licences where the holder can make money from possession of the licence; there will be no question of the scheme applying to licences such as TV licences or driver's licences. The yield from this measure is very difficult to predict. I have not, therefore, assumed any contribution from it in 1992.

New Enforcement and Collection Initiatives

The introduction of self-assessment, as well as changes in technology, are releasing Revenue staff resources from traditional areas of work. Arising from impending changes related to the EC Internal Market, Customs and Excise staff are also becoming available for other work. It is essential that these staff resources are used to the maximum in the continued drive for better collection and enforcement of taxes and detection of evasion and avoidance. As already announced, I have asked the Revenue Commissioners to put together in 1992 new initiatives in these areas. Full co-operation and flexibility will be required from the staff unions so as to achieve our objectives.

Last year the new Revenue collection initiatives brought in £30 million extra in tax revenue. It is expected that in the current year the yield from these intensified initiatives on the lines I have indicated will increase to £75 million. I have accordingly provided for a further £45 million in the budgetary arithmetic for 1992.

Increased Powers for the Revenue Commissioners

The Finance Bill will contain a number of significant measures which will strengthen the hand of the Revenue in the pursuit of tax evaders. I propose to extend their power to seek information from taxpayers, their agents and third parties, excluding financial institutions. The powers of the Revenue to search for information will also be strengthened. I have asked the Revenue Commissioners and my Department to examine the adequacy of existing penalties. The single rate of capital gains tax, which I referred to earlier, will greatly limit the scope for abuse by, for instance, the use of loan notes in so-called paper for paper transactions. The Bill will also contain other measures directed at this particular form of abuse. In this context also I will be examining the stamp duty treatment of companies whose assets consist of property. I will be extending the construction industry tax deduction scheme to other sectors and strengthening the legislation governing the Revenue's power to attach the assets of taxpayers. The fringe benefit tax and other related measures which I announced earlier will, of course, address the under-taxation involved in this method of paying employees.

Finally on this subject, I would make three points. First, I am concerned about the practice of backdating documents to try to get around deadlines in legislation passed by this House. The Revenue Commissioners will pay careful attention to cases where this practice is suspected and, where wrongdoing is discovered, all parties involved will be open to prosecution. Second, I am concerned about the possibility that some auditors and tax practitioners may be co-operating with taxpayers in the evasion of their liability. Any such practitioners will appreciate that they are leaving themselves open to prosecution, and should existing powers in this regard prove inadequate I will have no hesitation in amending the law. Third, I would point out that taxpayers generally who evade their liabilities are liable to prosecution. While in the past the Commissioners rarely pressed cases to this stage, that will be true no longer; the assistance of the Garda and the Director of Public Prosecutions will be sought more frequently in the future.

Post-Budget Current Revenue Position

The net gain to the Exchequer in 1992 of the taxation measures I have outlined is some £14 million. To this has to be added a factor of £21 million in respect of the revenue buoyancy effects of the budget. The post-budget tax revenue estimate comes therefore to £8,866 million. When non-tax revenue is added, taking account of additional national lottery receipts of some £8 million now expected in 1992, the total comes to £9,311 million.

Current Budget Deficit and Exchequer Borrowing

The targets for borrowing for the coming year are as follows:

Current Budget Deficit: £339 million, or 1.4 per cent of GNP.

Exchequer Borrowing Requirement: £592 million or 2.4 per cent of GNP.

Expressed in general Government terms — that is the broader statistical measure we will be using in line with the EC generally from now on — the target budgetary deficit would be within the relevant criterion under the budget deficit mechanism contained in the forthcoming Treaty on European Union.


This is a budget of realism. It set out to reconcile the desirable, from various perspectives, with the feasible — above all, to stay within responsible financial constraints. It has had to come to terms with conflicting pressures and tensions and I am satisfied that the correct balance has been struck.

It is equally a budget of ambition. It tackles in a fundamental way aspects of our tax system as a whole that are unsatisfactory, and where change has long been called for. It also takes major steps towards putting in place an indirect tax regime for, the post-1992 era. I believe that todays measures will not only make taxation more equitable but will also help in realising our economic potential to the fullest, especially our capacity to increase employment.

It is also a budget of social concern. The Government have shown by their actions, on a broad front, a real interest in the welfare of the weakest in our society, who of necessity rely on the rest of the community. A particular concern for the unemployed is at the heart of our total economic strategy, which aims at an economy which can generate sufficient sustainable jobs to meet our needs. Without that, it will be difficult to aspire to better social provisions and services in the future. At the same time, we recognise the need for new initiatives, and have put them in place to help address the overriding problem of unemployment. We are making progress in employment, though it has been obscured by recent migration trends. Yet we must show patience if what we have achieved is not to be put at risk.

Finally, this is a budget of determination. Difficult decisions have had to be taken: expenditure has had to be curbed and tax revenues to be preserved. Overall I can assure the House that the Government never considered any relaxation of the budgetary discipline that has been so important to recent economic progress and to putting employment back on a rising trend. We were no less determined to keep Ireland on course for full participation in economic and monetary union and for the benefits that can flow from this provided we have the capacity to withstand the competitive pressures that must ensue.

As I made clear at the outset, my primary concern, and that of the Government, was to produce a budget supportive of employment. To concentrate only on the period immediately ahead would not have made sense. The reality is that we will have pressing employment needs for several years to come. The core budgetary strategy is designed, above all, to protect and enhance growth and employment prospects, both now and over the medium term. Preserving hard won confidence in economic management is vital to jobs, new and existing. The budgetary targets set will maintain that and will engender the wider confidence that is so important for growth and investment.

The budget does not, however, stop there. It improves the climate for employment creation on a broad front, through measures such as: the fundamental tax reforms, especially in the area of income tax, which give us a system that is pro-work and pro-jobs; the updating of wear and tear allowances, addressing the need for soundly based investment by giving business a regime comparable with general EC standards, and one which will be much easier to handle by business; the rationalisation of motor vehicle taxation, which should help export competitiveness and also give a useful boost to the motor trade and the several measures that will be of assistance to tourism, a sector with considerable job potential.

Through resolution and single-mindedness, we have achieved a much better tax system and a transformation of the country's financial status. I am convinced that, with the same national commitment, we could look back with equal satisfaction at our employment record a few years hence.

I believe this is a budget that will serve the national interest well right through the nineties, and for that reason I commend it to this House.






1. Tax Revenue (including renewal of bank levy and PRSI allowance, and ongoing assessment of car sales).

1. Central Fund Services



2. Supply Services



2. Non-Tax Revenue (including extra £7.5 million receipts from National Lottery)


Adjusted for:Net revisions to Estimates



3. Deduct:

3. Social Welfare improvements


Income Tax reliefs:

Rate reductions, extension of standard band, and increased exemption limits


4. Other PESP-related Provisions:—Health: Mental handicap




Excise reliefs:




—Education (PTR, etc.)



—Agriculture (Headage)


4. Add:



Other Income Tax measures:


Other Excise measures:



Motor Vehicle Duty measures:


5. Non-PESP Provisions

VAT measures:


—Agriculture: Teagasc


Capital Tax measures:


Food inspection


Stamp Duty measures:




Collection and other measures




6. Deduct: Estimated Departmental Balances


5. Net effect on tax revenue of tax and spending changes


7. Current Budget Deficit





29 January, 1992




Budget Estimate

Provisional Outturn



Current Budget

1. Expenditure

(i) Central Fund Services



(ii) Supply Services





2. Revenue

(i) Tax



(ii) Non-Tax





3. Current Budget Deficit



Capital Budget

4. Expenditure

(i) Public Capital Programme



(ii) Other (non-programme)





5. Resources

(i) Exchequer



(ii) Non-Exchequer





6. Exchequer Borrowing Requirement for Capital Purposes



7. Total Exchequer Borrowing Requirement (3+6)



8. Total Exchequer Borrowing Requirement as % of GNP (estimated)



* This figure excludes £270 million received from the flotation of Irish Life plc.



Current Expenditure

Current Revenue



% of gross expendi- ture



% of total

Service of Public Debt

Budget Deficit (financed by borrowing)



Central Fund Services (part):




Sinking Funds, etc.






Tax Revenue

Economic Services




Industry and Labour



Excise Duties






Stamp Duties



Fisheries, Forestry



Income Tax






Corporation Tax



Value-Added Tax






Motor Vehicle Duties



Capital Taxes



Employment and Training







Agricultural Levies (EC)






Social Services







Non-Tax Revenue

Social Welfare



Fee Stamps






Interest and Dividends on




Exchequer Advances



Central Bank — Surplus Income






Proceeds of National Lottery Surplus















Gross Expenditure



Supply Service Receipts


Net Expenditure


Total Revenue








1991 Provisional Outturn

1992 (1) Estimate

% change 1992 over 1991







Service of Public Debt

Central Fund (part):









Sinking Fund etc.
















Economic Services

Industry and Labour























































Sanitary Services
























Social Services

















Social Welfare

























































Legal, etc.

















Central Fund (part):

EEC Budget
















Supply Services (2)
















Gross Total








Less: Supply Services Appropriations in aid, P.R.S.I. receipts








Net Current Expenditure(4)








Exchequer Pay and Pensions included in above(2)








(1) The 1992 Estimate corresponds to figures published in the White Paper on Receipts and Expenditure 1992.

(2) Includes provision for payments under the Public Service early retirement/voluntary redundancy schemes: £95.839 million in 1988, £17.886 million in 1989 and £4.943 million in 1990.

(3) Includes £86 million for the estimated cost of implementing the Government Package on public service pay announced on 17 January, 1992,

(4) The figures for 1988 and 1989 reflect actual audited expenditure.




Local Authorities(a)

Current Revenue

Non-capital Expenditure



State grants received

Rates collected




































1974 (April-Dec.)


















































































































NOTES:—(a)Local Authorities comprise County Councils, County Borough Corporations, Borough Corporations, Urban District Councils, Town Commissioners, Regional Health Boards, Vocational Education Committees and County Committees of Agriculture.

(b)The revenue of Local Authorities comprises rates, State grants (including payments on behalf of Health Boards to voluntary hospitals and homes in respect of general medical services) and other receipts e.g. rents and fees. Only State grants and rates are shown herein.


(d)These estimates are consistent with those in the 1992 White Paper on Receipts and Expenditure.

(Limerick East): Ag 5.35 p.m. pé rud eile a ndéarfaí faoin cháinfhaisnéis seo, níorbh é a locht a laghad ar aon nós?

This budget is being introduced in the strangest of circumstances. Since last summer the people have been shocked by scandal piled upon scandal——


(Limerick East):——from Greencore to the Telecom site, to the Aer Lingus helicopter affair, to the Kinsealy pipeline, to Carysfort and culminating in the Cathaoirleach of the Seanad seeking to implicate the Taoiseach in the telephone tapping scandal of 1982. These events have rocked the main Government party who are deeply and bitterly divided. These events have shocked the minor party in Government, who for six months now have sought to give the impression that they are only waiting for the first fine day to pull out of Government. Events seem to have come to a head. The resignation of the Taoiseach on the ultimatum of the Progressive Democrats is widely expected and the leadership struggle to fill the expected vacancy is well underway with the free use of all the weapons of such a contest, disloyalty, character assassination and the total disregard of the interests of the Irish people while private ambition is pursued.

Against this background is it not fair for me to ask clearly what is the status of this budget which is being presented here today? Is this the real 1992 budget or is it an agreed election platform for the warring factions within the Government? Will the budget survive the dismissal of the Taoiseach and the election of a new Taoiseach especially as the favourite for the vacancy is not even a member of the Cabinet? Will the present Minister for Finance be the Minister for Finance who introduces the Finance Bill? After drumming the former Tánaiste and the Taoiseach out of office where will the man from Laramie strike next when he wants to put an extra notch on his gun?


(Limerick East): It is hard to take this budget seriously against a background——

Members of this House must be referred to by their appropriate title and——


——titles are designated in Standing Orders.

How well you know who he was talking about, a Cheann Comhairle.

(Limerick East): The Chair will be familiar with the lyric “there is no coyote who could outshoot the man from Laramie”. I would have thought that the Chair would have recognised the Minister for Industry and Commerce from that description.

A Deputy

He did.

(Limerick East): It is hard to take this budget seriously against the background of widespread instability which prevails. This Government are now cruelly and bitterly divided. The only thing that prevents a general election is fear of the people which is widespread in both parties in Government, and mortal enemies have prepared this budget as a recipe for staying together because they know that if they do not hang together, they will hang separately. That is no way to run a country.

Looking at the figures on which this budget is based, we find that this is the first budget since 1987 based on an Exchequer borrowing requirement greater than last year's outturn. The outturn last year was £501 million and the Minister is budgeting now for a £592 million outturn. We should recall that since 1987 the Government, even though they have reduced the Exchequer borrowing requirement, have increased the national debt by over £4 billion. I accept that the Exchequer borrowing requirement declined each year but the debt has increased by over £4 billion since 1987. This year the taxpayer, according to the Minister's figures, will pay £2.4 billion in interest to service the national debt. That is over 10 per cent of GNP.

All Deputies will be familiar with the complaint that people do not get value for their taxes, that the level and efficiency of public services is less than they pay for. This is true. This year taxpayers will pay over £2.4 billion in servicing a debt for services already consumed in previous years. Naturally they will get no value for that money. We should remember that in circumstances where the factors of production are quite mobile, both in terms of people and capital, any tendency to increase borrowing will result in capital and skilled people moving to areas of lower taxation.

The best fiscal policy for any Minister for Finance is to keep downward pressure on the Exchequer borrowing requirement and I would suggest that the Minister has failed the first test. I replied to Commissioner MacSharry when he was Minister for Finance and to Deputy Albert Reynolds when he was Minister for Finance. They kept consistent downward pressure on the Exchequer borrowing requirement. This is the first Minister for Finance since 1987 who has taken his leg off the brake and is allowing the Exchequer borrowing requirement to rise again. The Minister has also deferred spending until 1993. This is very serious. It applies in particular to public service pay. When the public service pay bill, which the Minister says will rise by over 9 per cent this year, is destined to rise by 7.5 per cent next year, principally because the Minister has deferred pay costs from 1992 to 1993, then his 1993 position could continue the trend he has started in increasing borrowing and continuing to increase the debt.

I also note from the Minister's presentation that he is taking certain measures which will reduce or eliminate deposit interest retention tax. If DIRT is removed in 1993, as the Minister seems to indicate, there will be a shortfall of over £250 million which will have to be made up. Not only has the Minister broken the precedent of recent years and started to increase the Exchequer borrowing requirement again but he has put himself or his successor in a position from which it will be very hard to reverse because of the two aspects I mentioned, pay and DIRT in 1993.

The slide into further debt has recommenced. We should not be too surprised at this. The last time the Taoiseach and the Minister for Industry and Commerce, Deputy O'Malley, participated in the same administration between 1979 and 1982, the national debt tripled. The increases which took place from 1982 to 1987 were largely due to paying the interest on this colossal burden of debt which was put in place by the administration which preceded that of Deputy Garret FitzGerald.

I was hoping that a new Minister for Finance in tune with modern Ireland would have brought forward a blueprint for job creation which would be significant and satisfactory, something we could get behind, but I am afraid this budget will cause despair among the unemployed. Despite the massaging of the statistics by various means, the Government are providing in the Social Welfare Vote for an average number of 275,000 persons on the live register. Real unemployment has already passed 300,000. It is a sad reflection on the economic management of the Taoiseach that he leaves office with the highest level of unemployment since the foundation of the State, emigration over the past five years at its highest level since the Famine, the national debt at its highest level since the foundation of the State and over one million persons living below the poverty line. We are told by Fianna Fáil that this is a success. If this is success, I would hate to be around for a Fianna Fáil failure.

Despite record unemployment this budget has no strategy to put people back to work. The measures taken will tend to increase unemployment rather than reduce it. The Fine Gael proposal to establish a jobs forum is again ignored, even though every significant group, including the social partners, has come out in favour of it. The proposals of the Culliton Committee which I believe are worthwhile have been kicked so deep into touch that if Ciaran Fitzgerald's difficulties continue he could send for the Minister for Industry and Commerce — he would nearly be entitled to an Irish cap on the basis of how deeply he kicked the Culliton report into touch. It is a new device in public administration in Ireland that when you set up a committee or a commission and they report, you set up another committee or commission to look at the report, but the second time you call it a task force. Sometimes they are the same members, as in this case.

I ask a very serious question of the Members of this House and particularly of the Government. Do the Government believe that the present level of unemployment, which is continuing to rise, is sustainable? How long in their view can we sustain these figures of unemployment before social cohesion is threatened by the very levels of unemployment? How long will the unemployed take it before they resort to actions other than actions at the ballot box? This is a very serious situation. It is a tragedy that a budget speech which lasted almost two hours slithered over our greatest problem and did not come to terms with it in any way.

In the introduction to the section on income tax the Minister quoted from the agreement between Fianna Fail and the Progressive Democrats and said they were committed to a pro-job code of tax. We would all be committed to that, but there is a major difference between theory and practice. The Progressive Democrat theology maintains that there is some great connection between the marginal rate of income tax and employment. There is not an iota of evidence to support this theory. They have weighted down so much theory on top of the tax wedge theory to try to establish a connection between job creation and the marginal rate of income tax that they probably believe it themselves. If one says something often enough, people think it is the truth, even though it is not. If low marginal rates of income tax had a favourable impact on employment, why, during the period when the standard rate was reduced by six points from 35 per cent to 29 per cent and the higher rate reduced from 58 per cent to 52 per cent, was that reduction paralleled by the greatest unemployment in the history of the State?

If the trigger to put people back to work is to lower the marginal rates of tax, there was not much result from the reduction over the past two years. How can anybody seriously claim on budget day that although when the standard rate was reduced from 29 per cent to 25 per cent and the higher rate from 58 per cent to 52 per cent unemployment went up to 300,000, now because of his move from 29 per cent to 27 per cent and from 52 per cent to 48 per cent everybody will go back to work? It is the most hypocritical nonsense that has been perpetrated on the Irish people. People, especially those in the PAYE system, pay too much tax and if the Government were straight about it they would index the allowances and make the reliefs transparent. They would also extend the standard rate band far more significantly than proposed today. If people ended up paying less tax, that might have some marginal effect on employment but the theory that if one reduces marginal rates many people go back to work is nonsense and has no basis whatsoever.

While talking about the taxation proposals in the budget I would like to draw attention to a second aspect of taxation policy. For example, the Minister said:

There is widespread agreement that we would be better served by a tax system with a broader base, allowing correspondingly lower rates.

The Minister called, as witnesses, the social partners, the NESC, the Commission on Taxation, the European Commission, the IMF and the OECD. Of course, we would all agree with him but in this budget he does not broaden the base to effect lower rates. He states the theory but his practice in the budget is totally different. The tax reliefs in this budget are not funded by broadening the tax base; they are funded by deepening the level of other taxes across the spectrum of taxation.

The Minister continued to say that the Programme for Government agreed between Fianna Fáil and Progressive Democrats involved the systematic curtailment of exemptions, shelters, allowances and concessionary tax regimes. Fair enough; that is the theory, but the practice is different. Even though the Minister endeavours to give the impression, to overcome the difficulties in Cabinet that there is a major extension of the tax regimes — and he goes on to say henceforth there will be no life assurance relief, no support for the holding of shares or tax reliefs for certain dividend income, with about 13 or 14 different reliefs being changed — the sum total of the yield is £38 million out of a package of £168 million which is all the Minister achieves by eliminating tax breaks, reducing reliefs and all the rest. Yet, he pretends he is funding his income tax package in that fashion. He is not. What happened was that when it came to the hard talk within Cabinet the £2 billion in relief the Progressive Democrats identified last November evaporated. Once mortgage interest relief and relief on VHI premia were to continue all they could produce was £38 million so they had to find the money elsewhere.

One must ask: where did they find it? It is fairly obvious. First, they found it by doing something which is absolutely outrageous — they increased the 12.5 per cent rate of VAT across a range of items to 16 per cent but did not use the relevant revenue to reduce the standard rate of 21 per cent. They shifted it out of the loop and brought it across to the income tax side, which is where they got the £55 million or £56 million about which we are talking. The Minister created another £45 million by suggesting that better unspecified collection methods would yield that amount. The Minister also got some leeway by increases in excise, in particular, the 16p on a packet of 20 cigarettes andpro rata increases on tobacco.

When the Minister could not find any more money to deliver to the Progressive Democrats for the cut in the marginal rates he borrowed it. The borrowing has risen from an opening position of £541 million to £592 million so that, when he was short at the end, he borrowed £51 million to make up the shortfall; that is where it came from.

There is a very good case to be made for broadening the tax base, for reducing the rates. I can agree with the NESC, the Commission on Taxation, the IMF, the OECD and all the other notables quoted in support of the Minister's case but the Minister does not put into practice the theory he preaches. He got £38 million from the abolition of reliefs and so on and found the rest of the money elsewhere, which is what turns this into a totally bogus budget. I do not intend going into all the pluses and minuses — we have all heard the Minister read his Budget Statement — but a fair summary is as follows: if one does not smoke; if one does not tax one's car; if one does not drink cider; if one does not avail of services such as those provided by one's hairdresser or solicitor; if one holds no ATM card; if one does not eat in the company canteen in the factory; if one is an adult, provided one does not wear either clothes or shoes, then this budget — if one is on the average industrial wage — will put approximately £2 per week in one's pocket or approximately the price of two pints. On the other hand, if one does any of the above, one's relief begins to evaporate very quickly and if one engages in them all the relief disappears very quickly.

Indeed, the tables the Minister produced at the end of the section devoted to income tax purport to show relief for taxpayers at different levels of taxation. Of course, they are correct if one confines the figures within the income tax code. However, it must be remembered that the same taxpayer will be paying top rate PRSI on another £1,000 of income; the same taxpayer will be paying 16 per cent VAT on his telephone bill; will be paying 16 per cent VAT across a whole range of services; the same taxpayer will be paying 16 per cent VAT on clothes and footwear and will have his car tax increased by 20 per cent. If one looks at the car package one will note there is a marginal advantage if one buys a new car in 1992 but if one does not then one loses.

I am not accusing anybody of lying but we must nail the claim by the Minister that he has reduced the marginal rate of income tax from 29 per cent to 27 per cent and the top rate from 52 per cent to 48 per cent and has funded these reductions by expanding the tax base. He has not; he has done it by increasing VAT, increasing excise and, when he could not get the last £51 million, he borrowed it. That has all the signs of a Government who had reached crisis point so that on the final day somebody came up with the bright idea: why not borrow it; did we not do it before and got away with it?

The way the Government have treated VAT is absolutely disgraceful. For four years now this has been treated as a separate loop within the tax code when everybody knew that the top rate of VAT had to be reduced. It was reduced from 25 per cent to 21 per cent which was funded by increases in the lower rate of VAT which has risen from 10 per cent to 12.5 per cent. This time there is an increase in the lower rate of VAT up towards the standard rate, now risen to 16 per cent, with no compensatory reduction in the 21 per cent rate. This is bad for jobs, it is bad for industry because if VAT rates were reduced, it would create greater commercial activity here. That has not been done which is one of the great tragedies of this budget. The Minister for Finance has now gone totally counter to the practice of his predecessors and indeed to the spirit of our commitments to the EC to harmonise VAT and excise duty. It runs against the harmonisation process, using up resources which could be available for reducing the top rate of VAT and income tax.

I referred in passing to excise duties. I do not intend dwelling on them in any great detail — there, again, there are pluses and minuses — but the total effect of the package will have little or no effect on the creation of jobs or on the number of persons on the live register. It is quite clear the opening position of this budget was that the standard rate of tax had to be struck at 27 per cent and there had to be a single top rate of 48 per cent. Everything else was bent, shoved and broken to enable the Minister pay for them. That is not the way to budget for a country facing the degree of unemployment and the economic crisis ours faces at present.

Agriculture, our biggest industry, got very little mention in this budget; there is no policy whatsoever. The only significant measure related to agriculture is the decision of the Minister for the first time to tax the co-operative movement. The co-operative movement is one of the vehicles through which people can be got back to work. It is one of the major vehicles which can be used to avoid the depopulation of rural Ireland. This is being done at a time when the co-operative movement are readying themselves for a Europe which will be fiercely competitive, when large investments are being made. It is another blow to rural Ireland by people who just do not understand the position obtaining there. I am not simply talking about farmers, I am talking about every PAYE man and woman working in the food processing industry in our co-operatives.

There is great concern here about our health services. In the Minister's Budget Statement our deplorable health services were allocated six lines. An extra £3 million is being provided for care of the mentally handicapped. However, the Minister should have gone further. The health services are still in crisis. When we take into account that every health board overran their 1991 allocation, the amounts provided in the 1992 budget are insufficient. The waiting lists are growing longer and people are still waiting two and a half years for hip replacement operations. Everybody who works in or serves on a health board knows the list in their own particular area. It is time the Minister adopted the Fine Gael proposal and dedicated the proceeds of the national lottery towards cutting the waiting list. It is not fair that people should suffer for two and a half to three years before they can have an operation, especially in circumstances where, if one were to go private one could get attention fairly quickly and where if one were fortunate enough to have insurance cover for the Mater Private or the Blackrock Clinic one could probably get treatment even sooner. The present system is very divisive and many people on low incomes wait years for necessary surgery, often in pain.

As I said, I was surprised the Minister did not address the problems of the health service today and dedicate the lottery funds, many of which are used as a kind of prize fund for Government Deputies, frittered away and wasted on projects which are not always as worthy as the one I am proposing. A ready made solution to the problem was to dedicate the lottery funds to cut hospital waiting lists.

The Minister's social welfare proposals are unremarkable; he has barely covered inflation — an inflation rate of 4 per cent or about 3.7 per cent at the end of the year — and is deferring payment until the end of July so that the benefit will be for five rather than for six months of the year. This was a major missed opportunity. Effectively the Minister has neither targeted new categories in any significant way nor moved in any significant way to relieve the burden of poverty.

There is great merit in the approach advocated by the Conference of Major Religious Superiors. I know the Minister will be familiar with this. He could do worse than take the main proposals on board. I believe that if he did, they would have a major impact on the level of poverty. Unlike many lobbyists who come to Ministers and Opposition spokesmen, when they make a proposal they point out how the proposal could be funded, and I believe the Minister would be well advised to look at this approach. With increasing unemployment — there are over 300,000 people out of work — the Minister has a duty to make provision for the unemployed and their families, and over one million people are below the poverty line.

Last year when I replied to the budget I compared the country to an old banger of a car. This year the car has a new driver. I have no doubt but that the driver is skilled enough to negotiate the hairpin bends, to steer clear of the potholes and to avoid writing off the car in an economic drain or a political ditch, but this time next year we will be back where we started with little or nothing achieved. I recall the words of T.S. Eliot describing his anti-hero Prufrock: he said he measured out his life in coffee spoons. In this House we measure out our life in budgets. We go from budget to budget with all the false drama and phony excitement that budgets generate. In fact, budgets deal with less than 2 per cent of total Government expenditure for the year. They are very flawed vehicles for dealing with the kind of problems our country is facing.

For 14 years Irish politics have been dominated by two larger than life personalities: the present Taoiseach, Deputy Charles J. Haughey and the former Taoiseach, Deputy Garret FitzGerald. The departure of Deputy Haughey signals the end of an era. It is time to reflect on where we want to lead the people. I believe it is time for a departure and I suggest that we start here. No organised group anywhere in the country would conduct their business in the incompetent irrelevant manner that we conduct business in this House. If there were such a group I believe this House would intervene to prevent them acting in such a way. We must build a society which is democratic in its truest sense, where people take pride in the highest standards and take personal responsibility for their own lives. We must provide them with the legislative framework so that they can take personal responsibility for their lives. We must build a society where the teacher in the school, the nurse in the hospital, the Garda in the street and the worker in the factory are proud of what they do and know that the whole community are proud of their high standards. We must share in that pride in our country and we must protect our beautiful environment and its potential for one of the best lifestyles anywhere in the world. The environment is of crucial importance not only to our social life but to our economic life, in fact, it is too important to be left to the Greens.

For the past 30 years all our employment policies have been one dimensional. The theory was that if you could build a strong manufacturing base this would lead to jobs for everybody and rising living standards. The IDA and other agencies were mandated to lead this drive. It is as if because we missed out on the industrial revolution 150 years ago, we felt obliged to replicate it 150 years later. I am not one of those politicians who knock the IDA; they carry out their mandate well and have made a major contribution to the industrialisation of the country but they should be encouraged to proceed in a more focused fashion to attract as many new knowledge-based and high-tech industries as possible to the country. I believe this kind of industry is compatible not only with the environment but it is suitable for our highly educated population.

However, there are other ways to create jobs which would be equally useful and compatible with the environment and attractive to our young educated people. A job in a hotel, in a leisure centre, with a pop group, as a film maker, or as an actor is as real as a job in a factory and may provide a more satisfactory way of life for an educated young person. However, while the average cost of a job in manufacturing industry is £20,000, if you want to be an actor, or a film maker or if you want to go into the tourist business you will not get a single penny from any agency. Why is our attitude to job creation so one dimensional that manufacturing industry and service industries defined as manufacture, can attract such high levels of grant while we ignore many of the great strengths in our community as if they had no relevance to our lives? We have many strengths. For many years we have acted as if there was one string to the national bow. We had to attract foreign investment to create jobs in manufacturing industry. There was no other way of doing anything.

We must now play to our other strengths and a priority is the tourism industry. I am amazed that the tourism industry is totally neglected in the budget; it was completely neglected also in the Culliton report. That was a very serious omission from an otherwise fine report. I believe that a properly marketed modern high standard tourism industry could create thousands of extra jobs provided there was political will, a proper plan, a redirecting of investment to allow EC Structural Funds to be used for upgrading accommodation. In my view, we have never thought big enough in terms of tourism. There are many examples right across Europe, not only in places where the sun shines all day but in the northern European countries, where very successful tourism industries have been developed in which thousands of people are employed. We have the necessary fundamentals for enormous expansion in tourism given the new disposition of many European tourists to move away from the sun. Why should we not capitalise on our strengths — clean air, a beautiful environment, educated young people and pure and untainted food — and put many of our people back to work?

The food industry also need a new mandate. The Government promised this in 1987 when they fought the election. The beef tribunal is the measure of the Government's failure in the food industry. It is a national disgrace that we are not the pure food larder of Europe exporting untainted products at a premium price to the housewives of Europe and providing good jobs as a result. Any reform of the Common Agricultural Policy must make this a priority but all that it ever gets is lip service and passing references in the Agriculture Estimate. In the budget today one of the prime areas in regard to job and wealth creation has been totally ignored.

Likewise, the Government have no policy on the arts at a time when our young people are to the forefront of artistic activity. Young people in the western nations look on Ireland as a vast resource for musical talent while we are aware Irish made films are the height of fashion across the world and Irish drama is dominating again on Broadway. Yet, we have no policy on the arts and culture except the dilettantism of the Taoiseach posing as policy.

Would not a job in a drama workshop — I understand they are trying to develop one in Galway — be as good as a job in a factory for many a young person? Would it not be of benefit for somebody with no job? Would it not allow them to use their creative talents in an alternative way? Would not a job teaching English as a foreign language in Dublin be regarded as a good job for an Arts graduate? Yet, the Government, through the Industrial Development Authority, will invest £20,000 per job making widgets in Tallaght and will not spend one shilling to turn Dublin into a major centre of English language teaching.

We are not even getting the widgets in Tallaght either.

Or an arts centre.

(Limerick-East): There are areas of life which have huge potential for economic development and job creation as distinct from cultural development but all of these have been totally ignored.

I wanted to make these points because I believe the Government are looking at everything through the wrong end of a telescope. In effect, all the Minister has done is rearrange less than 2 per cent of Government spending today in a well packaged manner. He read his speech very well but at the end of the day it will not make one iota of difference to the economic or social life of the country. On the margins there will be winners and losers and there will be marginal winners and marginal losers but in terms of economic or social policy it would have been just as well if the Minister never came into the House.

We have a great country. Many people have a very good lifestyle and we could plan for other people to share this lifestyle but instead of this the Minister has presented us with what is, in effect, an accountant's budget, a budget which offers us no vision of how Ireland will generate growth and provide the jobs that are necessary to take the whole population forward in a modern Ireland.

If this budget has any purpose or priority it is to deliver, for the third year running, large tax cuts to those on high incomes under the guise of tax reform. Since 1988 the top 20 per cent of income earners in Ireland have scooped the pool in the almost slavish copying of the Thatcherite tax cuts implemented in the United Kingdom, under the entirely spurious guise of tax reform. Apart from that, this budget sets no national goals or objectives. It seeks to inspire nothing.

The budget I believe, must be judged primarily for the impact it makes on employment, tax reform and the increasingly critical social agenda. Unfortunately, it fails all these tests dismally. In fact, one of its most notable features is the wide range of needs about which the budget has absolutely nothing at all to say.

Specifically, on the question of job creation and unemployment, the overall impact of the budget, which will be neutral, will do nothing to stimulate investment or job creation. The continuing cutbacks in the Public Capital Programme will also have a serious negative impact. The budget reflects the incapability of the Government to recognise that special interventions in the form of job placement schemes for the long term unemployed are the only short term means by which they can hope to participate in paid work again.

In the budget, the Government are effectively turning their backs on the long term unemployed. The miserable schemes announced today, which will not involve one penny in extra spending by the Exchequer, will do little or nothing to help the unemployed, especially the long term unemployed. The switching of Structural Funds to areas of high unemployment, though welcome, is in effect robbing Peter to pay Paul and in any event involves a tiny amount of money.

The Minister has failed to protect personal and PAYE allowances against inflation. People on higher incomes are the main beneficiaries of this and the last three budgets. The hidden inflation tax on these allowances since 1986 amounts to £125 million in a full year. This hits the low and middle income earners in the tax system hardest. If there had been nothing but indexation, the income tax yield would have gone up this year by a sum of £190 million. As a result of all the reliefs the Minister has announced in the budget, income tax will still increase this year by £50 million. This figure will be further increased by the extra VAT imposition on a range of essential commodities, including telephone bills and transport costs which bear heavily on the unemployed and people of modest incomes. Nobody can describe this as a reforming budget where income tax is concerned.

The minimalist social welfare increases in the budget have been put back further in the year, to the end of July. Before they are received they will be swallowed up for many families in extra clothing and telephone bills and in higher VAT charges on a range of essential services. For the past few years the budget has been immediately followed by significant increases in local authority rents, for example.

In general terms, it is impossible to find any significant redistributive factor or measure in the budget, except one. The taxation of a range of short term benefits which people at work have paid for through social insurance is now a way of encouraging the poor in many cases to subsidise the very poor. In particular the disgraceful treatment of child benefit, for the sixth year in a row, shows how little the Government are aware of family poverty. Child benefit needs to be increased by between £2 and £3 per child to maintain the value it had in 1986. Instead, the Minister has done nothing and the net effect will be to reduce the real value of child benefit once more. The Minister, and the Government, owe £27 million to the mothers of Ireland. The increase in the back-to-school payments announced and the slight increase in the family income supplement will do nothing to alleviate poverty in any real or lasting sense and will not address the ongoing needs of mothers in every home in Ireland.

There is an unanswerable case for a radical extension of the carer's allowance and how can the Minister for Finance decide that 60,000 voluntary carers in Ireland, who save the State hundreds of millions of pounds each year, should not merit even a mention in this budget?

Extraordinarily, the budget is entirely silent on health. Everyone knows there is a crisis in this area. Indeed, most people have had personal experience of the acute shortage of resources which has applied for years. The people of Ireland will not easily forgive a Minister for Health who turns a blind eye to these critical needs with one high profile exception, the exemption of VAT on equipment which was purchased using voluntary contributions. The Minister has decided to forego a tax take on the voluntary contributions of ordinary citizens who are trying to make up for the deficiencies in the health services.

The Government are already £15 million behind in their commitments under their own report, "Needs and Abilities", which also recommends the spending of an extra £11 million in 1992 on vitally needed services and facilities for the handicapped. An extra £3 million this year will not even paper over the cracks.

I will now turn to the area of housing. Your experience in Dublin Corporation, a Leas-Cheann Comhairle, will give you an acute knowledge and awareness of the extent of the problem at present. The Government have been afraid to publish — I challenge them to do so — the statistics on homelessness which they have had since last May. It is well known that the so-called social housing scheme has been a bureaucratic disaster. Against this background the absence of any meaningful provision for house construction in the budget will make a bad situation considerably worse.

I now wish to turn to the areas of legal aid and overseas development aid, to take just two examples. I put it to the House — and indeed to this divided Coalition Government — that there is a consensus throughout the country that urgent extra resources are needed; the only place in which a consensus does not apply is in the Cabinet room itself. In many ways the failure to deal with legal aid and overseas development aid is a perfect example of the basic lack of generosity and imagination in the budget.

These are my initial reactions to the budget delivered to the House. However, I will give a more considered reaction, one which I attempted to anticipate in advance because I have known the Minister for Finance for some time. This budget could have provided hope, given a sense of direction and told us what a new and young Minister for Finance wanted to see for his country. It does not do a single one of these things. It is a timid and cautious statement from a tired and impoverished Government. We are not a poor people or an under-developed economy; our society, though under threat, is not fragile and our traditions of community are strong. However, we are seriously failing to tap those traditions and to build a consensus which would meet the employment needs of our people without impairing the equal needs for productive efficiency. In one word, the essence of our problem is leadership. I searched for leadership in this budget but I did not find it and I do not believe any objective commentator or analyst will find it; it is a conservative budget in the worst sense of that word. It is willing perhaps to tinker with existing structures but afraid of any real change or any kind of risk, unmoved by any sense of priority or commitment and completely without a vision of how Ireland should or could be.

This is the first time a budget has been overtly used as part of a campaign for leadership by an aspiring candidate. That is why, when the budget is assessed, it cannot be described as jobs or taxpayer friendly but it can most certainly be described as Bertie friendly. Its one and only purpose is to enable the Minister for Finance to tell his entire party that he is safe and that if they elect him as leader he may not do very much but at least he will not make too many mistakes, that he is a safe pair of hands.

Like the Deputy's leader.

Yes, indeed. Deputy Calleary would be lucky to have the same number of caps. When he has the same number he can make that kind of intervention.

I meant it well.

We have to wait until Saturday to see the next match but this debate is really one of confidence. It is the first part of the background against which this budget must be judged. The second part is that the budget debate is a confidence debate and it can and should be used to examine the performance of the Government over the entire gamut of economic, social and political issues. It is, after all, their response to those issues. Under any of those headings the Government have been an abject and dismal failure. I will be referring to the economic and social aspects of the Government's performance when I look at some aspects of the budget in detail. However, I must say a few words about their political performance.

A Leas-Cheann Comhairle, on the day this Government were formed if anyone had said that before they had been two years in office the Tánaiste, Deputy Lenihan, the Minister for Finance, Deputy Reynolds, the Minister for the Environment, Deputy Flynn, and three junior Ministers, Deputy Geoghegan-Quinn, Deputy Smith and Deputy Treacy would not just have resigned but would in effect have been sacked and that the Government would still be in office they would not have been believed. If anyone had predicted that the man from Laramie, whose title is the Minister for Industry and Commerce, Deputy O'Malley, would be in a Government which were the most scandal ridden in the history of the State, that the Taoiseach would be brought to his political knees, as no doubt you will have to preside over tomorrow, Sir, by the resurrection of GUBU by no less a person than Senator Doherty——

Deputy, you are experienced enough in the ways of the House to know that when I sit here I have only one duty and one interest. Normally, any occupant of the Chair is given that respect. I would not want any confusion between my office here and other offices I hold. I ask the Deputy to accept that because it is the third time he referred to it.

I accept that you are not confused in your diverse roles.

I am never confused about anything. I am asking you to stop referring to me other than as the Leas-Cheann Comhairle of this House.

Thank you, a Leas-Cheann Comhairle. As I was saying, if anybody had predicted even one of the things which I just described which are fact, he or she would have been regarded as insane and perhaps ruled out of order by you. However, two and a half years ago the Leader of the Labour Party said that one of the biggest questions they would face would be the way in which power would be exercised. He instanced a number of examples of unsavoury and secret behaviour of the outgoing Government and he warned that the style and substance of that kind of Government could not be allowed to continue. Alas, continue it did until we have now arrived at the point where it is not just a failed Government but a disgraced Government. They have only one reason to stagger on, fear of the electorate.

In May of last year, before any of these scandals broke, the Labour Party moved a Bill in this House, the purpose of which was to enable politicians on all sides of the House to operate with total transparency and to increase the extent to which we are willing to be accountable to the people and ourselves. We did not move that Bill because of sanctimoniousness but because we believed that accountability is good for politicians as well as for politics. The Bill, which was voted down by the combined forces of Fianna Fáil and the Progressive Democrats, was the Ethics in Government and Public Office Bill. In the course of the debate on tha Bill our spokesperson, Deputy Howlin, made the following point:

In the last couple of years we have debated issues of all sorts in this House. The Goodman affair, the principle of privatisation, broadcasting, the Gallagher bank collapse, the purchase of Carysfort, the refurbishment of the Temple Bar area, the Custom House Docks site, the Finance Bill are just some examples.

They all have one thing in common — they all involve sensitive commerical decisions and they all involved powerful interests outside this House. In other words, we are making decisions every day that can affect the economic interest of a wide range of groups and individuals. Inevitably, the potential for corruption in that situation is huge.

I am not saying or implying that there is corruption in our political system but I do believe very strongly that there have been many situations in the past, including several of those I just mentioned, when the political system — and more importantly the citizens who elect us — would have benefited greatly from the fullest possible transparency and accountability.

Those were prophetic words last May. Unfortunately for all of us the evidence of recent opinion polls confirms that the public now distrust all politicians when their anger and distrust should be focused on those politicians in Government who have brought about this situation.

This Government cannot ever say they were not warned about the scandalous situation they would face and the need for transparency in their approach. All of the warnings were spurned. As a result, the secretive and authoritarian style which has characterised this Government has led to a situation where this budget is being presented to the House under a dark and immovable cloud, the cloud of suspicion and disgrace.

As a consequence, this is an unreal budget. It does not matter in a sense whether it belongs to the Progressive Democrats or Fianna Fáil, even though both parties will undoubtedly make their own childish claims about it. This budget is unreal because the Government is unreal, uncertain of its timespan, consumed by personal animosities and committed to nothing except survival in office for its own sake; it is certainly not for the sake of the people who elected them.

There was a time in Ireland when we had an economy which existed to serve the people. It now appears that it is the people who serve the economy. It is pointless to talk about the economy doing well if the people who are supposed to be the backbone of that economy are suffering. It is pointless to talk about economic indicators as if the economy was somehow different from the people who live in it, who try to raise their families in it and who desperately want to work in it. It is pointless to talk about young people as our greatest asset if it is an asset we export in the largest quantities.

With each day that passes people are making choices. This week the people who live in the real Ireland are deciding what they must do without in order to put meat on the table. That is the kind of choice which will still have to be made next week and the week after. Nothing this Government do and, tragically, little or nothing in this budget is going to make those real choices any less agonising. Yet this Government say that the economy is doing well. However, the Estimates they published earlier and the budget published today are monuments to an economy without any real hope for those who are marginalised and disenfranchised. After all the years of hardship, it is as if the last few years of belt tightening and sacrifice had never happened.

When the Estimates were published before Christmas I pointed out that they provided an extra £276 million for the entire range of public services for the next year. Virtually every penny of that was already spent on pay and increments to which the Government are already committed together with extra spending on unemployment caused by the failure of the Government to translate extra wealth in the economy into enough extra jobs. What that meant was that across a whole range of essential social services — health, social welfare, education and the environment — not one extra penny was provided for vital social reconstruction or to even begin to address the fundamental shortfalls which have bedevilled social policy in Ireland for the past five years.

I said at the outset that I would be devoting most of my speech to economic and social issues. I make no apology for saying that I believe these issues can be summed up in three words — unemployment, unemployment and unemployment. Unemployment is at the very core of many of our fiscal problems. For example, the budget overrun last year was largely accounted for by the excess spending on unemployment-related payments. It is at the core of the grinding poverty that afflicts thousands of families. It is at the core of many of our mounting health bills, contributing as it does to thousands of cases of depression, stress-related conditions, violence in the home, alcoholism and a host of other problems. Most of all, unemployment is at the core of our equality crisis. It is not an accident that unemployment is at its highest in many of the devastated and alienated suburbs of our larger cities and towns. It is not an accident that it is at its highest in areas where access to education is poorest. It is not an accident that unemployment, poverty and disadvantage form part of an ever-ending vicious circle of inequality.

For me and the Labour Party, unemployment is a disease within the body politic which, if it is allowed to rise endlessly, will destroy this country by alienating its people and shattering the bonds of community. For the Labour Party, whose very name and origin are based upon the right to work and the rights of all workers in our society, it is now crucial that we find new ways, new policies and new ideas to provide meaningful work and a decent income for all who seek it. This is not a problem which can be easily solved — I readily accept that — but it is not and never will be acceptable that we are prepared to tolerate our present level of unemployment. Let us make no mistake about it, the people who are unemployed are the forgotten readers of this budget. What this budget is saying to them is that high unemployment is not only inevitable but is acceptable to the level of 275,000 for 1992. In other words, this budget effectively disenfranchises those without work.

We need to be honest about this. There is now an essential need to redefine the historic relationship between the industrial labour force and the needs of efficient and productive output. In the past the relationship between labour and output changed dramatically in the agricultural sector and we adapted successfully to that. Today with the advent of new technology we can and do produce more with fewer in manufacturing as well as in agriculture, and we have to adapt to that. If we were to deny this change we would be consigning ourselves to oblivion in the increasingly competitive world in which we live. As long as Ireland exports two-thirds of its output into a global economy competitiveness is vital to us. All modern political parties are basically agreed on this point.

However, beyond this common position it is now obvious that there is a clear distinction in Irish politics between Left and Right. There is a deep divide between us in the Labour Party, with our view of a social democracy where we need to make room for everybody, and the economic democracy of the Right of Fianna Fáil, Fine Gael and the Progressive Democrats where there is only room for those who are needed. The difference is that the Right regard the unemployed as basically surplus to requirements. They see the rights of citizenship being bound up with their concept of economic usefulness. On the other hand, the Labour Party believe that access to meaningful and sustaining work is a basic right for every citizen. It is also an essential requirement of our society if we are to maintain social cohesion and personal liberty and offer people any sense of equal choice. The combination of meaningful work and a basic income capable of sustaining choice is the fundamental objective of our political philosophy. We believe that Ireland can and must make room for every citizen, that Ireland needs every citizen. It would appear that our political opponents claim the right to pick and choose who is needed, and only for them will there be room.

Last year in the budget debate I referred to the 100,000 Irish citizens who were left high and dry by the prolonged increase in unemployment. By April 1991 the number of people out of work for 12 months or more exceeded 100,000 and the number out of work for six months or more was 145,000. When the previous Minister for Finance presented his budget in the House this time last year there were 232,807 people on the live register. Much to my regret, and I would say to the regret of the entire House, this new Minister or Finance is formulating his budget against a background of 269,214 people on the live register, an increase of almost 37,000 during the past year.

Last year we called on the Government to totally revamp the employment incentive scheme by increasing the level of subsidies, securing the active support of the social partners so that 20,000 of the long term unemployed could be guaranteed a quota of the available vacancies each year. Is it not a scandal that the one scheme which the Government can utilise to help the long term unemployed has not been fully utilised this year? Part of the Minister's unspent departmental balances were accounted for by underspending of the extremely small budget for the long term unemployed.

Instead of the tentative toe in the water approach to unemployment by the Government we believe that a back to work programme must be launched both at home and in Europe. Before we can start reducing unemployment we have to stop redundancies in going concerns and focus incentives to offer job guarantees to the long term unemployed. We have to promote incentives to increasingly share work rather than add to the numbers depending on social welfare to make a living. We have to put forward proposals which with the backing of Government, employers and the Irish Congress of Trade Unions, could make a real differnce to the unemployed. What the Government's policy on unemployment amounts to is in effect paralysis by analysis — reports, committees and task forces but no leadership and no real commitment to tackling unemployment.

When the data on the breakdown of unemployment by duration on the live register is available for October 1991 we will be looking at a figure of close to 130,000 people who have been out of work for 12 months or longer, and by April that figure could rise to 150,000. A feature of the rise in unemployment in the last year in particular has been the growth of unemployment among those under 25 years of age, a rise of 14,000 or 40 per cent of the increase. It could be argued that the real level of unemployment is already over 300,000 for two reasons. First, the total number of persons under 65 years of age who are on the pre-retirement allowance scheme is over 11,000 — the qualifying age was lowered from 60 to 58 years with effect from April 1991 — and, second, if we take into consideration the approximately 30,000 people on social employment schemes and on various training schemes offered by FÁS it is clear that the 300,000 figure has been broken.

What has been the Government's response? Did they launch an initiative to secure European Community action on unemployment for all of Europe prior to Maastricht? No. Did the Government finally admit that we have an unemployment crisis of potentially catastrophic dimensions? No. Have the Government responded to demands endorsed by all the Opposition parties, the Irish Congress of Trade Unions and voluntary bodies representing the poor for a forum on unemployment? No. Have the Government admitted the truth, even at this late stage, that their response to unemployment is stupefyingly conservative? No. Last year the Labour Party strongly objected to the minuscule provision of funding for schemes — £500,000 to be precise — to target the long term unemployed in particular and, indeed, all unemployed people so that they could return to work in the foreseeable future rather than remain prisoners of dole queues for the nineties.

Essentially my message this year is that what was needed above all on the issue of unemployment was leadership and hope — leadership from the Government and hope for the unemployed. I have some good news for the unemployed who may be dismayed by the contents of this year's budget. Labour have given a lead in that we have shown, as we did last year, that policies can be put in place which will offer work to the unemployed provided we have the political will to tackle the issue at home and carry the battle into Europe, particularly at the level of Heads of Government and the Council of Ministers but also in the European Parliament and, not significantly within the privacy of the Commission.

With a European Community labour force of about 150 million and 15 million European citizens unemployed in the Community, the problem of the 300,000 unemployed in Ireland can hardly be described as an insuperable problem in this context. Of course our unemployment level is intimately linked to the unemployment level being experienced in our largest trading partner, the United Kingdom, with whom we have had historically a common and shared labour market. When unemployment rises in Britain, just as night follows day, unemployment rises in Ireland through a combination of a fall in outlets for our school leavers and indeed the return of emigrants who have lost their jobs in the UK.

One might have thought that ten years of policies, largely based on the proposition that reductions in income tax automatically led to high levels of employment, would have been discredited completely not only as a way forward for the people of the United Kingdom but as a way forward for the Irish Government and the Irish people. Yet this budget is driven by the discredited proposition that reductions in tax rates are the key to solving the unemployment crisis. The budget has effectively put theProgramme for Economic and Social Progress on ice. The casualites of the budget, apart from those who are already on the rack of long term unemployment, will be seen later this year in the lengthening homeless queues, the waiting lists for hospital beds and in a whole range of areas which are largely covered by the Programme for Economic and Social Progress.

What has happened is that theProgramme for Economic and Social Progress has been put on ice in respect of the commitments and aspirations for progress in employment in particular and in some of the social services which the Government and the trade unions agreed to in October 1990. In their place have been substituted the priorities of the revised Programme for Government. On the second page of that revised programme are listed ten objectives for Government policy over the lifetime of this Dáil, which is clearly a moveable feast. None of those objectives refers to explicit measures to deal with unemployment. The section on employment creation refers to the task force which has been established and the special area programmes which are meant to address the issue of long term unemployment, albeit on a budget last year of £500,000 and this year of the princely sum of £1 million.

The key objectives outlined in theProgramme for Economic and Social Progress, apart from the first point of sustained economic growth, were, in the second and third points, a substantial increase in employment. However, the Labour Party do not believe we are powerless to achieve real progress on the employment front. We do not accept that unemployment has to keep rising and that we simply have to wait for somebody else to solve our problems when it is painfully obvious that we must take the lead. We must first make a commitment to ourselves that we will tackle unemployment in a comprehensive manner and with a well thought out plan. Once we have made the decision to tackle unemployment we must then focus on the long term, medium-term and short term response in terms of policies required. We must also look to policies that need to be adopted by the European Community so that we are not always working against the tide of factors which can overwhelm our best endeavours at national level to increase investment and employment.

The first critical issue here is industrial policy which needs to be changed fundamentally at European level so that Europe develops the industries of the future which can match both the Japanese and the United States, with the objective of maximising employment within the territories of the European Community. Second, we need a European Community-funded system of incentives for investment which will benefit all the regions. This of course must be preceded by a fundamental re-examination of the levels of national incentives which currently prevail in the stronger regions and which when combined with our inherent geographic and market disadvantages further exacerbate the problem of regions such as Ireland in attracting investment from within the Community and indeed from outside it.

Ireland's unemployment problem is not unique. There are other regions in Europe, not only in Spain, Portugal and Greece but also in the centre of Europe, which are suffering acute employment problems. It is with these regions that we must build positive alliances at Government level, trade union level and business level. It is now up to the Government not to assess the Culliton Report but to start to implement it. We have left it quite late in the day if not too late to develop our indigenous manufacturing industry. We have left it late in the day to build selected companies to a sufficient size and scale where they can produce self-sustaining long term growth in exports and jobs. It is absolutely vital that we now get on with implementing a policy of selectivity in placing our limited resources in the best possible sectors where we can hope to compete in Europe and, within those sectors, to concentrate on key Irish companies. However, we realise that even with the best will in the world and the necessary real political courage in implementing the Culliton Report we cannot expect the benefits from a new industrial policy to come through in substantial employment numbers until well past the mid-nineties.

The crucial political question then which may involve the survival of our democracy and our system of Government is what we are going to do about the 300,000 and, indeed, more of our citizens who will have no work unless we adopt the kind of radical proposals we have put forward. In this again, there are both national and European dimensions which must be addressed.

Nationally, we must make the commitment that we are going to tackle unemployment in a serious way now. An appropriate declaration to this effect would be a commitment from the Government as Government to participate actively and willingly in partnership with all the parties in this House, the social partners and representatives of the unemployed and the poor, so that we can quickly develop a consensus on policies and move ahead with their implementation.

We did it before. Seventy years ago, in 1922, this House divided on the Treaty imposed from outside but the New Ireland Forum reached a consensus on the national question which is now shared by every political party and which has effectively removed the divisive the Civil War which were so destructive of the national effort for over 50 years. We are not an impoverished people. We formed a consensus in the New Ireland Forum on the issue that most divided us on this part of the island. We should be able to do the same in the context of unemployment.

Second, at European level, we need the introduction of a special fund, an unemployment fund, which will be resourced from new resources added to the existing Community budget, and which can be made available to all the regions in Europe which are experiencing unemployment above the average rate for the Community.

We need a new institution to respond directly to the needs of the unemployed. We know, and nobody knows better than I, that FÁS must be reformed and unified in a specific agency that helps in the provision of proper on-the-job industrial training as recommended in the Culliton report. The remaining functions of FÁS and part of the working of the Department of Social Welfare should be transferred to a new body, which I would call Saothair, which would develop and manage a whole range of varied and carefully designed series of intervention programmes in the labour market. At present, Sweden, with just 4 per cent out of work in its labour force and a historic national commitment based on consensus to full employment operates the most successful labour market intervention agency in Europe. Ireland, with a 20 per cent rate of unemployment in general and 130,000 long term unemployed, many of whom are 25 years or younger, faces a unique challenge. We must respond and can respond with a range of targeted full-time and part-time commercial and community based initiatives to provide meaningful work for those who seek it in our community.

The Industrial Development Authority will face major changes in their role, as proposed in the Culliton report. I hope the Goverment have the courage to initiate this change. However, in addition to the change contemplated, I suggest that the Government seriously consider merging the IDA, CBI, as the CTT is now known, and Bord Fáilte personnel in locations abroad thus creating one stop agencies for Ireland.

In relation to the promotion of small industry, it is obvious to me at any rate, that there should be a much greater role for local authorities. The IDA may well need to shed some of their powers. The way to do this is to integrate the IDA activity on the ground with the local authorities in the immediate future. Indeed, at a time when Fianna Fáil were in the majority on Dublin City Council, the Council launched a proposal for some class of an enterprise board for Dublin. It is obvious that we must all travel down this road.

Above all, what we need in the next five years is a substantial rise in our productive capacity — that is a rise in productive investment, instead of infrastructural investment, however welcome such investment may be. The European Commission's Annual Report for 1991 noted that in Spain and Portugal the convergence towards the European Community average for living standards was investment-led, whereas in Ireland it was still export-led. The report concluded that the investment ratio was still relatively low here and has not increased in recent years. It suggested that more emphasis should be given to the development of production potential.

This, of course, leads to critical questions of choice in our industrial policy. It requires a commitment to providing equity finance on a long term basis for the develoment of selected indigenous Irish companies. It requires a much more selective approach by the IDA to inward foreign investment, because we know from the Culliton report — indeed we knew from the Telesis report ten years ago — that almost 40 per cent of the jobs created in grant-assisted foreign projects are gone after seven years. We simply cannot afford to repeat this disastrous level of performance for the remainder of the nineties.

While we can look to and, indeed, expect an increased share of the wealth which the new Single Market in Europe will generate, the primary responsibility for developing employment has been and will remain with ourselves in the medium-term. It is unrealistic for us to expect the development overnight of a large European-financed industrial budget or unemployment budget which could bring down the rate of unemployment to acceptable levels. None of us expects that. None is so naive. That does not mean, however, that it cannot be achieved in a longer time frame. We could seriously aim towards that if work was started on the political level. As is confirmed by today's budget we are in a bad situation right now, and it is becoming worse, at least temporarily. It is projected that 270,000 people will remain unemployed for the duration of 1992. But, as the Labour Party have shown, we can overcome our difficulties. There are some promising signs.

The external environment over the next year is likely to be more favourable than in 1991. World trade will grow by approximately twice the 2 per cent level achieved in 1991. This will be good for our exports which are already performing strongly and suggests that the Irish economy will have a minimum growth rate of 3 per cent and, indeed, could easily surpass the forecast growth rate in the Minister's budget. I welcome those positive signs and I hope they are maintained.

The OECD estimate that economic growth will be a full percentage point above that achieved last year. And, while GNP growth will be modest at 2.2 per cent it will be followed in 1993 by a further increase of 1 per cent over 3 per cent. So we are in an environment where economic recovery is taking place in the main industrial economies of the world to which we sell over 90 per cent of our industrial and agricultural products.

Unfortunately, in the immediate period ahead, that is 1992-93, independent forecasters suggest unemployment in the UK will continue to rise and this, of course, will have further major implications for our domestic unemployment level. Unemployment rose faster in the European Community as a whole in 1991 than in any year since 1983.

Let me raise the question of interest rates. The rate of interest also affects the unemployed. A matter which is of great concern to mortgage holders and small holders is the level of interest rates in our economy. Not everything started in 1987. A great deal of work was done a long time ago to bring about the low inflation level achieved since 1985. A low level of inflation, and our rising balance of payments surplus, in all other circumstances would point to the possibility of a sharp reduction in interest rates but that has not happened. When the German interest rate was raised before Christmas it was open to our Central Bank to wait and monitor the flows of capital and assess whether a matching increase in our rates was required. However, in reality, I do not think that option was open to the Central Bank. Just as an increase in rates in December 1990 was followed by a cut, I believe there is the climate now for reducing interest rates.

The domestic market is signalling that interest rates should come down. Monetary policy has in fact worsened the cash flow position to individuals and businesses and has contributed to an unnecessary credit squeeze which is reinforcing the lack of confidence which now exists. I am amazed that the Minister made no reference to the ongoing credit squeeze which is a fact of life in this economy and which is hurting severely small and medium sized enterprises. Anybody who has an ear to the ground must hear that message. The two main banks are consistently denying that there is such a credit squeeze, yet if there were a relaxation on interest rates, for which we believe there is some room, the credit squeeze could in fact be eased. It is somewhat of a mystery to me — and, I suggest, to most people in this country — that our interest rates cannot drop below those of the United Kingdom when, in terms of financial ratios, our economy is performing so much better than that of the United Kingdom. We also have the other ridiculous situation now that the Irish economy has interest rates that are one-quarter of a percentage point above the lowest rates available in the United Kingdom, If anything, the opposite should be the case.

I want the Minister for Finance, at the earliest possible opportunity, to call in the major financial institutions for talks to establish what their views are; what are the market rates of interest that currently apply to one-month and three-month money? The Minister for Finance should then convey a strong message to the Central Bank that interest rates are currently too high and are in excess of the levels required to maintain the position of the Irish pound within the narrow band of the EMS and sustain the appropriate level of reserves to protect our export and import requirements.

Of course, unilateral action by the German Bundesbank in raising interest rates for purely German domestic policy reasons should not have gone unremarked by our Government. Indeed, those economists in our society who were suggesting that we permanently link our currency to the Deutsche Mark were, in effect, saying that the German Bundesbank should become de facto the European Central Bank and the Deutsche Mark become the European currency without the need for establishing a real central bank with the full powers of a European Central Bank and accountable to some kind of democratic authority.

Unfortunately — and there is a certain irony in this — the German action cannot be taken as a one-off action and may be likely to recur later this year if inflationary pressures in the German economy prove too strong on the wage front. The appropriate action which Germany would be advising any other country in the European Community in such a situation would be to take proper fiscal measures, including increase taxes, to force down the level of domestic inflation. We need to press this point with the German Government in the Council of Ministers. There is no evidence to date that economies such as those of Ireland, Portugal, Spain, or indeed, the northern European countries are making that concerted point at the ECOFIN meetings.

I shall now turn to the issue of taxation. On examining the Exchequer returns this year, I believed that there was little scope for a tax-cutting budget unless social services were to suffer yet again. In a number of budgets the Minister for Finance has come into the House and announced reductions in the standard rate of tax. Any such reductions have on each occasion been welcomed by the Labour Party. However, what the Minister was giving with one hand he was taking away with the other. By not increasing personal allowances, by not increasing the PAYE allowance and by providing marginal increases in the standard rate of tax and tax bands which were below the increases secured in incomes each year, what in fact was happening was that the Minister was clawing back a substantial proportion of what he appeared to be giving in the reduction of the standard rate of tax by pushing larger amounts of income into the higher tax bands.

We in the Labour Party believe in a system of progressive income taxation. We believe that there should be higher rates of tax for those on higher incomes. But £10,000 per annum for a single person is not by any standard a high level of income; £12,000 is not a high level of income, nor, indeed is £15,000 if it comes to that. In this day and age, neither is an income of £25,000 a year in any sense a high level of income for a family with a mortgage and children to look after.

That is why our main objective for the next three years is to have all single taxpayers on incomes of up to £12,500 and married couples on incomes of up to £25,000 having their taxable incomes taxed at the standard rate and not at the higher rate.

What in effect has been happening is that over the past four budgets those on incomes in excess of £20,000 per annum have been getting substantial tax relief in each budget. When we are looking at the effects of any action the Minister takes on budget day we have to look at the combination of the interaction between the taxation measures on the income tax side with pay increases which, generally, apply in percentage terms and at the indirect taxation measures which are broadly regressive in that they take no account of income levels or ability to pay them. They affect the lower income group to a much greater extent than those on middle or higher incomes.

This year we calculated that it would take about £175 million of income tax relief in a full year to prevent the burden of income taxation rising. In formulating the Labour Party response to this year's budget, I submitted that the main relief should be in the areas of increasing personal allowances — in particular, the PAYE allowance — and by a substantial increase in the standard rate tax band of £7,500 for a single person and £15,000 for a married couple. We also proposed to give additional relief to those on lower incomes by utilising savings from restructuring the PRSI allowance and using the £58 million saving entailed to introduce an initial low rate of PRSI of 5 per cent.

In a budget which has given large tax cuts to those on incomes in excess of £30,000 per annum and which has ignored the totally regressive nature of PRSI levels, which unfairly hit the lower income groups, the only move which I mention unreservedly is the substantial increase in the standard rate tax band. At last this Government have acknowledged what we said before last year's budget as well as before this budget.

We identified sources of funding for our major programme measures on tackling unemployment. Basically we pointed to the elimination of tax loopholes in the corporate taxation area, one of which was signalled by Culliton, namely, the ending of section 84 soft loans. The ending of those measures would result in a figure of £125 million additional revenue.

Last year, in relation to the problems that might be envisaged by the harmonisation of VAT rates and the possibility of capital outflows after 1 January 1993 in relation to DIRT, I suggested to the Minister that he raise these issues at the European Community and discuss possible financial assistance or, indeed, other measures to ensure that there was to be no Exchequer loss in 1993. All that we have got so far is an indication that the Department of Finance and the Revenue Commissioners will consider that matter in the context of the forthcoming Finance Bill and that there will be no Exchequer or revenue effect in 1992. That we know, but in the light of the concern that has been expressed by all the financial institutions about the security of their deposit base, a more substantial statement was necessary today at budget time than the very slight and passing reference contained in the Minister's budget speech.

There had to be some Exchequer loss in reducing the main VAT rate, which has been recouped to some extent by an increase in the lower VAT rate, but I question the wisdom of any further reduction in the main VAT rate when the British rate is now at 17.5 per cent. However, it would have been opportune to take the VAT rate down to 20 per cent anyway and, as Deputy Noonan has already said, the additional revenue that will come from increasing the VAT rate from 12.5 per cent to 16 per cent in regard to some areas is not being used within the family of VAT to reduce the overall VAT load but, in fact, has been transferred to finance some of the savings on the income tax allowances that have been granted.

Many people will have an opportunity to speak in the debate and will have available to them more time to prepare than I had when listening to the Minister's speech of one hour and 45 minutes. However, when this budget is analysed and the measures that have been introduced are considered in detail, when the calculators are brought out and the measurements are applied, it will be shown to be a budget in which the Revenue Commissioners and the Department of Finance officials can take substantial pride because there is a great deal of administrative tidying up in it. Nine complicated and time-consuming loopholes and tax allowances, most of which only a small coterie of people have ever heard of, have all been abolished. The total saving, when that is all put together, amounts to the princely sum of £38 million. I am glad that the budget will make life easier for the officials and the citizens in the Revenue Commissioners and, perhaps, in the Department of Finance, but, in terms of radical change, there really is none. In terms of redistributing the load on the taxpayer with the concept of introducing some degree of equity this is a cautious and conservative — with a small "c"— budget.

The budget fails two tests. It fails the test of leadership, leadership which I expected from a Minister for Finance not only providing his first budget but who might be a contestant for another post if it becomes vacant — the judges are still out on that matter. The budget does not provide leadership. Nowhere in the budget is there a sense of what Fianna Fáil want for this country, what they can deliver or of what they hope for this country. One can hear the echoes of the drums of the Progressive Democrats looking for the simplification of two tax rates which they have now got. When one looks at all the other clawbacks there, this simplification of two tax rates will take more money from the pockets of the people who voted for Progressive Democrats, who thought that the Progressive Democrats were for tax reform, because in everybody's mind tax reform is confused with tax reduction. This will not reduce the tax load on the taxpayer; it will increase it in many cases. For many people who still do not have the assets of property which are substantially financed by mortgage income tax relief, they will be paying at the point of cash more for some of the services and luxuries they consider to be essential than they paid before this budget was introduced.

Leadership is absent in the major area of employment. Once upon a time Fianna Fáil were good in this area and had a reputation. They were considered to be capable of making radical changes and of taking radical risks in employment creation. Nowhere in the Minister's long speech is there a glimmer of hope for the 300,000 people who are unemployed tonight and tomorrow when they look at the analysis of this budget they will not see any prospect of employment next week, next month or the end of the year. That is the real failure. There is no leadership, there is no hope and there are no job creation policies built into this.

This is an election budget. The election it is designed to influence is not the next general election but the election to replace Deputy Haughey as leader of Fianna Fáil. It is cleverly constructed and cutely drafted. It is designed to give the impression of a lot of activity, a lot of change and a lot of reform, but when the initial excitement is over and people have a chance to examine the small print, and when the Finance Bill is published, they will realise that little has changed and that the vast majority of people are no better off than before.

This budget has been prepared against the background of the continuing soap opera about the Fianna Fáil leadership. At a time when the focus of public, political and media attention should be on the vital economic decisions which have to be made if we are to turn the country around, the preoccupation instead has been with the Fianna Fáil beauty contest. Will he really go this time? Will Bertie run? Will Albert make it? Will Brian back Mary? The danger is that Fianna Fáil are so desperate that they might even turn to Michael O'Kennedy and then we will all have to emigrate.

There are far more important questions facing the country. What is to be done about unemployment? When will those dependent on social welfare get a decent income? Why, more than ten years after the massive tax marches, are the PAYE sector still paying 90 per cent of all income tax?

Predictably, all the indications are that irrespective of the outcome of the Fianna Fáil leadership struggle, there will be no change in policy, and the new party leader and Taoiseach — whoever he or she may be — will still cling to the old discredited policies which have left the country in such a social, political and economic mess.

The budget is the one occasion that the Government choose to present new economic policies. If it does nothing, the Government are a failure. This budget is not about job creation or wealth creation. There are a few concessions here and a few clawbacks there, some welcome reforms here, some imaginative development there, but no real no fundamental change.

In our pre-budget proposals The Workers' Party demanded that this year's budget must give absolute priority to increasing employment and reducing poverty. This, we said, would mean taking new and imaginative steps on job creation, improving the living standards for those depending on social welfare, honouring national commitments made to employees and to society as a whole, and raising additional taxes from those who are not paying their fair share. Judged aginst these criteria, Deputy Ahern's first budget has to be judged a failure on almost every count.

Nowhere is the budget more disappointing than in its utter failure to come up with any significant proposals to deal with unemployment. The Minister correctly identified unemployment as the single biggest social problem facing the country, and at least, unlike his predecessor last year, talked about the problem, but he had nothing to offer the unemployed. He spoke at some length about the proposed new employment and training schemes, but this is at least the third time on which this scheme has been announced. It was announced at the Cáirde Fáil dinner on 28 November, it was reannounced by him to the Dáil on 17 December and is reannounced again today. The most telling point about this scheme is that it does not involve the expenditure of a single extra penny by the Government on job creation. Of course, we must acknowledge that this scheme is not about job creation. It is designed to take people off the live register rather than put people into productive employment.

This budget, like all budgets in the last ten years failed to tackle the tax dodgers. There were certainly a number of welcome changes announced by the Minister, but these dealt with smaller scale tax evasion rather than the massive schemes which we all know are here. I have no doubt that the Minister will now come under intensive lobbying by the vested interests to water down the changes before the Finance Bill is published. I also have no doubt that the tax experts and accountants and lawyers are already looking for yet more loopholes in these changes which will enable them to continue to exploit other taxpayers. Those outside the PAYE straight jacket can play games with their accountants and use all the tax dodges that have kept their tax bills so low for so long — gifts to friends and relatives, property investments, bogus share transactions, offshore consultancies and fake business expenses. These wealthy tax tricksters still have all the devices to evade their responsibilities. They have been let off the hook again. So much for leadership.

There is one thing as certain as night follows day. As long as this Government remain in power, the PAYE workers will end up paying for everyone. Fianna Fáil seemed to have totally surrendered to the Progressive Democrats on taxation. The changes announced today clearly reflect the obsession of the Progressive Democrats with tax rates alone to the virtual exclusion of other aspects of taxation. Major progress could be made towards a fair and equitable tax system by radically extending the tax bands without changing the tax rates at all.

The increase in the tax threshold of about 3 per cent is a sick joke. Those on low pay may find themselves taken out of the tax net for a few months, but they will be back in again as soon as they get their promised increases under theProgramme for Economic and Social Progress. The extension of the standard band was quite inadequate. The reduction of the upper rate means that people like Mr. Michael Smurfit and Mr. Dermot Desmond will be paying tax at the same rate as workers on the average industrial wage. The super rich in Irish society, who once paid tax at a rate of up to 80 per cent will now — when they pay tax at all — be able to pay at just 48 per cent while the Minister announces that he will also tax unemployment benefit. Those super rich will no doubt show their gratitude to Fianna Fáil and the Progressive Democrats in the traditional manner, and I hope the unemployed and the sick will show their gratitude in the traditional manner as well by turfing them out of office as soon as they get the opportunity.

The poor will continue to suffer too. The hidden cutbacks, emerging by the day, will bring new hardships in the increased cost of health care, education and basic services — everything from bus fares to local service charges are on the way up. VAT increases will come into effect in March but social welfare changes will not come into operation until late July.

The Minister made much of the fact that increases in social welfare will be slightly above the expected rate of inflation, but a policy of setting social welfare increases on or about the level of inflation would only be satisfactory if the basic social welfare levels were themselves adequate. This is clearly not the case. Even with the additional provision for those most in need, the increase for many people on the lowest level of social welfare will be no more than £3 per week. People will still be expected to exist on an income of £53 per week. Many of the most well off in society would spend as much on a single meal.

This budget does nothing for the PAYE taxpayer. It does nothing for the unemployed. It does nothing for the poor. It perpetuates the two-tier society. It is the first budget of a new Minister and we might have hoped for a new departure. He could have shown real leadership potential by beginning the process of real tax reform. All we got was the usual Fianna Fáil shuffle. He could have shown he was genuinely concerned about the plight of the unemployed. All we have got is continued reliance on the climatology school of economics and the introduction of tax on social welfare benefits, unemployment benefit and disability benefit.

The events of the past few months have shown that many of those at the top of Irish business have no interest in job creation, that they are far more interested in tax dodges, stratagems, offshore companies and secret share deals than in job creation. To paraphrase the famous statement by Winston Churchill, and apply it to some of our captains of industry —"never in the field of human endeavour have so few taken so much from so many".

Our democracy will not be a true democracy until the political leadership responds to the gross inequities in our society. Our unemployed, our young and our emigrants deserve better than bland faith in the old, failed policies.

This year we will mark 70 years as an independent State. What have we achieved after seven decades under successive Conservative Governments? I do not choose to use the small "c" as Deputy Quinn did when describing the Governments we have had. We have the highest rate of unemployment in the European Community, with those on the live register and the pre-retirement schemes amounting to more than 280,000 people. The number out of work has not been below 200,000 since the end of 1983. Between 1986 and 1991, 136,000 people emigrated. More than 750,000 people live in some degree of poverty. Children now make up a higher proportion of the poor than 20 years ago. The top 20 per cent of families enjoy 44 per cent of gross income, with the bottom 20 per cent having to do with less than 5 per cent.

Our Government are reduced to hoping that the recession in Britain and the US will end and that emigration will resume at a substantial level, reducing unemployment and thereby the financial burden of social welfare payments. That is the fundamental basis of Government policy but all the indications are that this is a vain hope. The British economy is now experiencing what many economists refer to as the "double dip" phenomenon. In other words, there was a partial recovery but the economy is now into decline again. In the United States last week the Chairman of the Federal Reserve, the equivalent of our Central Bank, warned that there was no sign of recovery in the United States.

But what is the point in being an independent State if we are going to meekly accept that we cannot do anything about our own economic problems and that we are totally dependent on policy decisions made in London and Washington? Everyone acknowledges, as I do, that in the modern world economies are to a large extent interdependent, but to argue that we cannot do anything until the British and US economies recover is to not only abandon our people but also to abandon political leadership.

There are many issues on which this Government deserve to be indicted, but there is none so serious as their utter failure to deal with unemployment and their shocking indifference to the plight of those without jobs. At a time when unemployment demands to be treated as a national emergency, it seems to merit little attention from the Government. It hardly figured at all in the Review of the Programme for Government. The Estimates for 1992 contained no initiatives, and, similarly, this budget is virtually a blank page.

The Government seem to have thrown in the towel and opted out of the struggle against unemployment. This Government appear to consider an average unemployment level for 1992 of 275,000 to be socially, politically, and economically acceptable.

Apart from the moral and social arguments as to why we should combat unemployment, it is also very clear that there is an unanswerable economic argument for urgent action to deal with the problem. Unemployment is penalising not just the unemployed but every citizen of the State.

The burden on the economy, arising from unemployment, is now so great that there does not seem to be any way in which the economy can be restored to full health until the majority of those on the dole queues are put back into productive work.

The full cost to the Exchequer of unemployment is notoriously hard to compute but from official figures it is possible to establish that the direct cost in terms of additional social welfare payments and income tax foregone is at least £2,500 million per year.

To this must be added indirect losses to the State such as lower VAT and excise returns arising from the reduced purchasing power of the unemloyed, lower rent returns to local authorities because of the structure of the differential rent system, extra health costs, supplementary welfare payments and so on. We can only speculate as to the cost of these elements, but when they are taken into account, the total cost of unemployment is likely to be closer to £3,000 million per year.

Shocking as these figures are, they are only part of the picture. Of even more significance is the human and social cost — the families broken, the lives destroyed and talents wasted by the scourge of unemployment. The abandonment of the unemployed by successive Governments is reaping a bitter harvest of poverty, crime, vandalism and social alienation. This is especially so in urban areas, where unemployment is demoralising and destroying entire communities, while in rural Ireland it is denuding the countryside of people.

The Workers' Party reject the notion that such levels of unemployment can ever be accepted as the norm in our society. Unemployment must be treated as the national disaster it is. We must force whatever Government are in power, whatever Taoiseach is in office, to give it the priority it demands. I am not suggesting that solutions are easy or without cost. I know there has to be a concerted national effort, with compromises on all sides.

I would argue that there is a fundamental underlying principle which must be accepted and that is that industrial development is the key to reducing unemployment.

Urgent consideration must be given to how the recent report of the Industrial Policy Review Group which makes important recommendations on tax reform, education, training policies and changes in the industrial infrastructure and support system, can be implemented. Many of these are recommendations which have already been made by The Workers' Party over the years. We welcome them and call for their early implementation. In particular, we endorse the report's emphasis on the necessity for tax reform through the reduction of regressive reliefs and the extension of the standard rate bands and for greater and more direct support for indigenous industry through State share-holdings rather than indiscriminate grant-aiding.

In The Workers' Party publication of November 1991 on the jobs crisis entitledBack to Business we argued that there were three vital ingredients in the solution to unemployment. They are radical tax reform — not the cosmetic exercise engaged in here today — social welfare reform, a more relevant and active industrial policy, and a thorough democratisation of all economic, political and industrial institutions and organisations. On industrial policy we argued strongly for greater selectivity and targeting in respect of State assistance given to business. We sought a policy which would direct the development of large, successful indigenous industry, allow small enterprise to flourish and provide good standards and guidelines for businesses of all kinds. We also advocated a much more active interventionist EC industrial policy with convergence of the regions and decentralisation of employment as major targets. In our view, to be effective such an industrial policy must be accompanied by the democratisation of all institutions involved, be they private companies, trade unions, local authorities, voluntary organisations or State bodies. People must be involved at all levels of decision-making. The empowerment of those who have been most excluded traditionally, whether for reasons of age, gender, disability, class or whatever, must be a priority. The Workers' Party do not perceive this as an afterthought or optional extra but rather perceive the real empowerment of people at all levels of organisations as an integral part, perhaps even a pre-condition, of the kind of industrial development required here, that is, the growth of industry which can create secure, well paid jobs from socially, economically and environmentally desirable activity.

Democratisation of the workplace must involve significant changes for women, including the majority who work in the home. The next step towards equal status for women who work in the home is to ensure economic and social independence through the provision of a guaranteed minimum income for every adult individual in society. We believe this can and should be achieved through radical reform and integration of the tax and social welfare systems. Ours was the first party in the Dáil to promote such a concept as a means of ending poverty traps, adult dependency and redistributing both work and income within our society. We welcome the fact that others see merit in such a mechanism and acknowledge that ways must be found to implement it during the nineties.

Individualisation of social welfare payments constitutes the necessary first step towards providing independent incomes for all adults in our society. For many years we have advocated the payment of adult dependant allowances directly to the adults concerned and contend that this simple, non-cost-increasing change, has been delayed far too long. In our budget submission we contended that ideally these allowances should be raised to approximately 70 per cent of the amount payable to the partner of the adult concerned. Clearly this cannot be achieved immediately. Nonetheless a reasonable timetable for its achievement should have been set beginning with this budget. Like many other things, that has not been done. However, no further delays can be tolerated in achieving the minimum social welfare payment levels recommended by the Commission on Social Welfare in 1986. Updating these levels at the midway point of the £50 to £60 per week recommended implies a minimum of approximatley £64 per week for every man and woman dependent on social welfare in 1992. The very lowest payment — now at £50 per week — would need to have been increased by £14 per week. Again that has not been done. Instead a miserly £3 per week has been added.

This budget has failed our children also, those at greatest risk of poverty here today, especially when born into large, low income households headed by mothers on their own, fathers who are unemployed or parents on small farms in rural areas. All relevant research points to the importance of child benefit as the most direct way of reducing this risk. Indeed I might add that child benefit here remains at about the lowest level within the European Community and should have been almost doubled. We contend it should be at least £30 per month per child and £40 per month for the fourth and subsequent children. Ideally it should be graduated according to the age of the child or young person, corresponding to three-quarters of the minimum social welfare payment. This budget does nothing except apply an inflation-related increase to child benefit. There is nothing in this budget to ensure that our children, those at greatest risk of poverty, can be prevented from living lives of misery.

The budget fails to acknowledge the enormous contribution of people, mostly women, who care for elderly, infirm relatives. In 1990 The Workers' Party welcomed the introduction of a carer's allowance, something for which we had long campaigned. We pointed out that the allowance then being introduced was seriously flawed and would not serve to provide adequate protection for all carers. In 1991 we said that the level of payment should be increased from its then level of £45 per week to £55 per week and upwards to £62, bringing it into line with the recommended minimum for other rates advocated by the Commission on Social Welfare. Other rates now stand at approximately £64 per week while the carer's allowance remains at £50 only. Again carers will receive the miserly inflation-related £3 increase which, in our view should have been increased to at least £57 per week this year and further next year.

We sought other changes in the carer's allowance which have not yet been implemented, such as the removal of the means test, contending that the allowance should be paid irrespective of the income of the person receiving care or of the carer's spouse; alteration of the requirement to provide full-time care and attention should be effected to allow greater flexibility in the forms of care provided. We also advocated allowing carers to receive credited PRSI contributions to maintain their health and social insurance cover. There appears to be no intention on the part of this Government to address this issue. We must remember that this State is saved millions of pounds by carers who look after elderly and/or infirm relatives. Yet we give them this miserly amount of money, means tested out of existence, which is so restrictive the vast majority cannot benefit from it. We must either provide proper support for people who look after relatives in this manner or cough up the money to provide for institutional care, which would be much more expensive than effecting the kind of reforms I am proposing.

The Government owe money to thousands of women who were in receipt of certain social welfare payments in 1984 to 1986. Those payments should have been increased in accordance with an EC equality directive but were delayed for 17 months with no retrospection ever being paid. Since then the Government have made various attempts, through the courts, to avoid payment of these moneys, the last of such attempts having failed in March and July 1991, respectively, when the European Court of Justice gave two unequivocal rulings against this State. The moneys due have not been paid to date. The Minister said today they would be paid in some kind of phased way, details of which are not yet available to us. This is a disgraceful way to treat women entitled to those increases at the time. Indeed I might suggest that they seek the interest which would have accrued to them in having allowed the Government withhold those moneys for so long.

I referred earlier to the matter of tax reform. There is little doubt that the case for fundamental tax reform is as pressing today as it was when The Workers' Party and others initiated the tax protests of the late seventies. The worthy reports of the Commission on Taxation have been the subject to great academic investigation. Meanwhile the overwhelming burden of taxation continues to be borne by the PAYE sector. The system is still characterised by widespread avoidance and evasion, tax breaks for the self-employed and corporate sectors, a bias in favour of capital and high marginal tax rates for employees on low levels of income. The inequitable distribution of the direct tax burden is compounded by the high level of indirect taxation borne disproportionately by those on low incomes. We have witnessed today the 12.5 per cent VAT rate being increased to 16 per cent, imposing yet another burden on those on low incomes.

Rate reductions on their own, as announced today by the Minister, do not constitute a reform of the taxation system. As I said the increase in the exemption limits will be wiped out as soon as workers receive theirProgramme for Economic and Social Progress increases. Real reform must involve a redistribution of the tax burden away from the PAYE sector to the self-employed and the corporate sectors. This requires a real commitment to tackling tax evasion and eliminating the plethora of reliefs and exemptions which reduce the tax base. It also means ensuring the progressivity of the tax allowances and rate structures which the Government and the budget have failed to do today.

Instead, it goes for the Progressive Democrats solution which benefits high income earners at the expense of low income earners. In our view we should have moved to a three-tier rate structure with a 25 per cent standard rate and higher rates of 40 per cent and 60 per cent, to substantially increase the exemption limits to take lower paid workers outside the tax net and to widen the standard rate band to avoid high marginal tax rates at modest levels of income. We should have moved to replace all personal tax allowances with tax credits, to freeze, with a view to eventually eliminating, the reliefs for covenants, business expansion schemes, non-mortgage interest and a whole range of other reliefs that should have been eliminated. We should have moved also to restrict the mortgage interest relief to the standard rate and eliminate the anomaly whereby a person working can get mortgage relief but when a person becomes unemployed they get no relief, they have to beg the community welfare officer to try to get a £5 note to help pay off a mortgage of something like £200 or £300 per month. That kind of mortgage relief should be converted into a housing subsidy which would enable people in all categories — whether working or unemployed — to be able to keep a roof over their head. We should have moved also to index link all PAYE allowances and credits, assuming that credits had been introduced.

On the question of corporation tax the Minister should have introduced a minimum corporation tax charge based on commercial profits and replaced reliefs, exemptions and so on with direct grants related to the levels of employment generated.

On the question of capital gains tax and capital taxes generally, the Minister has fiddled around the capital gains tax but he should have generally reduced the various reliefs and exemptions in both capital gains tax and capital acquisitions tax. He should have gone for the taxation of capital gains, gifts and inheritances of income at income tax rates and could have spread it over a number of years. He should have gone for the imposition of stamp duty at the full rate on transfer of shares in property companies and the imposition of capital tax on shares issued in unlimited companies. He did not do those things but instead fiddled around at the edges and pretended to give the impression he was engaged in trying to broaden the tax base when, in fact, he was doing nothing of the kind.

The area of tax evasion and avoidance remains a major scandal which successive Governments have shown an inexplicable reluctance to tackle. The report of the Comptroller and Auditor General, published last November, illustrated the extent of the problem when it disclosed that there was £2,718 million outstanding in uncollected taxes but that only about £426 million was likely to be collected. Why is that and what is the Minister doing about changing that situation? The same report revealed that four out of five income tax earners audited under the new self-assessment system, were found to be liable to additional taxation of an average of £11,000 each. What is even more alarming is that less than 1 per cent of those making self-assessed returns had been subjected to an audit. Dodgers probably have a far better chance of getting away with not paying their fair share than those people who buy their lottery tickets every week have of winning a few pounds on the lottery.

Every pound in tax evaded by business or the self-employed is a pound out of the pockets of PAYE workers or out of the pockets of the poor, the unemployed or those starving in the Third World. Despite the 1988 tax amnesty, which brought in £600 million, the report of the Comptroller and Auditor General shows tht evasion continues on a massive scale. It was admitted today by the Minister that that is the case although he refuses to bring in any significant changes to rectify that.

One area that could have been looked at immediately is the question of staffing in the Revenue Commissioners. I welcome the Minister's announcement that he intends to move the customs and excise staff, who will become surplus to requirements when the 1992 barriers fall, to the Revenue Commissioners. I hope a significant number of them will be used at the investigative end of the Revenue Commissioners because there is much to be done in that area.

This budget should have extended the withholding tax system currently applying to sub-contractors and professionals to other sectors such as farming but the Minister failed to do that.

There is no problem with that at the moment, the money is not there in most instances.

We will wait and see. The series of financial scandals which came to light during the past six months have highlighted the use of offshore companies to avoid the scrutiny of our company legislation and for tax evasion purposes. To tackle this the Minister should have introduced controlled foreign company legislation to tax offshore investment companies owned or controlled by Irish nationals but he did not do that. In addition we should seek greater EC-wide co-operation on the exchange of information regarding nonresident bank accounts, investments and capital flows. There is no indication that he intends to do that.

There are other things he did not bother to do. The housing crisis worsened significantly in 1991. In Dublin alone some 5,000 people are on the housing list. It is now nearly one year since new proposals for social housing were launched following one of theProgramme for Economic and Social Progress undertakings but to date the infrastructure which is needed to make these proposals effective has not been put in place.

The housing Bill promised last autumn has not yet appeared. Dublin Corporation have launched a pilot project for shared ownership of some 150 houses in accordance with the proposals and in advance of the legislation but it is far from clear how people on the housing list will finance such purchases and what the ultimate costs will be to those involved or how the bulk of those 5,000 people will fare in 1992.

The budget should have allocated realistic funds for social housing if this concept and the variousProgramme for Economic and Social Progress commitments are not to become a sad and discredited joke. It should also have scrapped the existing tax incentives for urban renewal, whose main effects have been to create surplus city centre office space and provide tax shelters for developers and well off investors and provide instead grant aid schemes for renewal of cities and their suburbs and provide proper town planning.

The budget should have replaced these misdirected tax shelters with flat rate subsidies for people who want to buy inner city residential property or to service providers to move into abandoned neighbourhood centres. There is one in Ballymun and a number of others in Finglas which could do with an injection of funds to encourage people to take over the shops which are lying vacant, thus creating major problems for the communities. Ballymun and Finglas are not alone in this; this is a problem throughout the country. The existing urban renewal schemes are not tackling that problem. It is time a new look was taken at how that can be done.

In relation to the health services, there has been consistent under-funding and the services continue to diminish in terms of the quality of care available to those in need. Many health boards faced appalling difficulties maintaining services during 1991 and these problems will intensify this year if funds are not increased again. There have been cutbacks in services and increases in charges without a great deal of media or public attention. The increase in daily hospital charges to £15, announced in December, represented an increase of 50 per cent in 12 months; the change in the drugs refund scheme, announced in October, was a particularly mean and underhand cutback. As recently as 1983 all expenditure on drugs above £16 per month was refundable. Now, a patient who spends up to £90 per quarter may get no refund at all. The system should be changed so that refunds are again made on a monthly basis and the amount should be increased to a realistic level.

People with a mental handicap and their families are among those who have suffered most as a result of the Government's failure to provide adequate resources for the health services and in the planning area. We fully support the call made by the Parents Association of People with a Mental Handicap, for a commitment over a five year period to an extra £22.5 million on capital spending and a phased increase in current spending to reach an extra £27.5 million on services. No serious attempt, however, has been made in this budget to deal with that matter — just a few pounds here and a few pounds there.

There is no planning in this area of crucial need and demand. The Government are ignoring the misery of thousands of families who are struggling to keep men and women with a mental handicap at home. They simply cannot manage because of old age and they are literally afraid to die because they do not know what will happen to their unfortunate children given that there is no residential accommodation available for them. It is time the Government did something about this problem.

Finally, I would like to deal with the question of development aid. There is no doubt in my mind — and I have been arguing about this for a long time — that there is a radical need to overhaul our development aid policy to enable Ireland contribute usefully to the needs of developing countries. The urgency of the situation facing developing countries cannot be under-estimated. At least 30 million people face the threat of starvation from famine alone in Africa. The Workers' Party welcomed the commitment given in the revised Programme for Government to achieve a higher contribution in overseas development aid by the end of the 1992-94 period. The Estimates announced last December proved to be an empty promise and, unfortunately, this budget proves it is still an empty promise.

The primary requirement of a development aid policy is that it be backed by adequate funding. Overseas development aid levels, therefore, should be brought up to the United Nations recommended level of 0.7 per cent of GNP on a planned basis. Given the extent of the crisis currently facing the developing world this target should be phased in over a five year period from 1992 to 1996. Additional funding of £30 million annually would be required to achieve this target, rising to an additional £47 million in 1996.

This is a substantial sum and I do not make any bones about it but it should be compared with the Government's request for funding of £6,000 million for the next phase of European Community Structural Funds to be allocated to Ireland. Whatever our problems, and they are monumental, they fade into nothing when compared with those of the Third World. Furhermore, the ESRI projections suggest a 38 per cent growth in Irish GNP between 1991 and 1996 which reduces the impact of the increases on budgetary planning.

Funding should have been provided also to re-establish the Advisory Council on Development Co-operation giving it an executive function related to planning and evaluation, but this has not been done. There is much window dressing on the range of issues I have mentioned today, including ODA, poverty, social welfare, jobs and tax reform. In relation to tax reform, there has never been a demand for tax rates to be reduced. What people have demanded is justice and fair play and that the tax burden be shared. They have never objected to paying for education, health, or providing for those on social welfare and living in poverty, or giving assistance to the Third World. If the Minister had come into the House today and announced that he was putting an extra penny on the tax rates — both the standard and top rates — to provide extra money for overseas development aid, or to provide proper education for our children, I am sure there would not have been a peep out of anybody and if he had announced that he was putting an extra penny on the tax rates to provide jobs, I am sure there would have been a cheer in the House, but no, this Government went for the easy option; they decided to follow the Progressive Democrats, cut the rates and pretend they were dealing with tax reform at a time when all these social, economic and political problems continue to fester and boil.

As far as I am concerned, this budget is a disgrace. It has dodged the real issues and failed to give any leadership. We are a sad country and have waved goodbye to more than 100,000 of our young people during the past ten years. Now they are coming home looking for jobs but we still do not have any for them. It is time the Government admitted that they do not know what to do and left office.

Sitting suspended at 7.55 p.m. and resumed at 8.25 p.m.