Deputy John Bruton.
Financial Resolutions, 1992. - Financial Resolution No. 22: General (Resumed).
Debate resumed on the following motion:
THAT it is expedient to amend the law relating to customs and inland revenue (including excise) and to make further provision in connection with finance.
—(Minister for Finance).
This debate is taking place in a very phony atmosphere. During the second half of last year the Taoiseach issued dire warnings about this being the most severe budget in the history of the State. We were told about major cuts in public spending that would have to be made and the Government gave an indication that they intended to take their responsibilities in this matter very seriously. Yet, on budget day we got a budget in which there are no cuts in spending and in which spending has been substantially increased. Indeed this is the first budget since the early eighties in which the Government deliberately set out to increase borrowing. There is a deliberate planned increase in borrowing for the first time in many years. Was all the talk before the budget dishonest? Was the budget never intended to be severe? Was the Taoiseach simply setting people up to be relieved on budget day after the dire warnings that had been given? Honestly, we do not know but it is an entirely dishonest procedure which is possible because we maintain budget secrecy. We maintain the nonsense in this House that on budget day something totally unknown previously will be produced by the Minister from his briefcase.
We would not be able to have the sort of misleading pre-publicity about the budget that we have had over the last number of months if we had the system of budget preparation which is used in other European countries. There the budget is published in draft form, perhaps in the month of September, prior to its introduction. It is discussed in a committee of parliament and members who disagree with the budgetary priorities, while they may have to accept the overall financial limits, have the freedom to move money from, say, health to education, or from one tax form to another. The parliament in virtually every other European democracy, with the exception of Britain, is taken into the confidence of the government before the budget is absolutely finalised and members of parliament have an opportunity to make an input to the budget. Any assumptions about projected tax revenue or projected consumption levels or employment levels which underline the figures, can be questioned in the parliament. If the government are making too pessimistic or too optimistic an assumption, that can be questioned. Parliament in virtually every other European democracy plays a constructive role in the preparation of the budget and the sort of mythology and misleading pre-publicity which suggested that this was to be a severe budget, when that was never intended, would not be possible in any other European country.
Why is it possible here? It is possible because we and you, a Cheann Comhairle, maintain this totally unnecessary system of budget secrecy, a myth which builds up budget day as something significant. In fact budget day is hardly significant at all. It is the day when the icing on the cake is slightly altered, but not the day on which the cake is baked. The cake was baked when the Estimates were settled two to three months ago. All we had yesterday was a slight rearrangement of some of the financial priorities, but the basic budgetary decisions were taken months ago. We in this House have not been allowed to play any part. That is bad for democracy and bad for the dignity of this House which is not allowed to play a constructive role in budget-making.
If there is cynicism about politicians, it is not just because of scandals, suggestions of phone tapping and suggestions of illicit meetings in private homes about financial matters which are properly public business. It is because the basic financial business of the country is not done in a democratic way which takes account of the fact that each one of us here is elected to do a job. I contend that you, Sir, as the guardian of the liberties of this House, somebody who stands aside from party politics and as chairman of the Committee on Procedure and Privileges, have a responsibility to try to change this system. I am addressing my remarks directly to you, a Cheann Comhairle, in this regard. You and other Members of the House have a direct responsibility in this matter.
This debate, which it is my honour to lead off, will be the biggest waste of parliamentary time this year — a total and complete waste of time. The Taoiseach will complain at the end of the session that there was not time to pass urgent legislation, yet we are to waste four or five parliament days discussing the budget. Not a single word said on either side of the House will alter a single comma or full stop in the Minister's Budget Statement. It is all fixed and agreed. This debate simply gives Members an opportunity to let off steam. That is no way to treat people, each one of whom is directly elected and has a serious parliamentary responsibility. If we had the type of parliamentary consideration of the budget which they have in other European countries, it would be possible for Members participating in debates on the draft budget in committee to have some impact on the final budget. Nothing will be changed by what is said in this debate. It will give Members an opportunity to make a series of party political speeches to which nobody will be listening. The media will have to give a certain amount of statutory coverage in case they might be criticised. This does not matter a jot.
Not only is this debate a waste of time for the reason I have given but it is also structured in such a way that there is not even a genuine discussion between participants after the announcement of the budget. That is because of the way in which this debate is conducted. I had an opportunity to visit the House of Commons in Westminster on Monday. The Speaker will allow a member to interrupt another member in a structured way. According to that system, if the Minister of State did not agree with something I was saying he would stand up, I would sit down and he would question what I was saying. I could then reply. We would have some sort of dialogue, even after the event, and we might learn something from the dialogue. In this House if the Minister of State were to attempt to get up to interrupt me, the Chair would make him sit down. We have no dialogue.
We have an entirely empty Press Gallery. The reason is that I supplied my prepared script in advance to the journalists, although I have not supplied in advance what I am now saying. They see no need to come here to listen to what I am saying. That is a complete farce. Because I have done them the credit of giving them a supplied script they are not here to listen to what I am actually saying. That tyranny of the supplied script means that if Deputy O'Sullivan, who is to speak next, also uses a supplied script he will not reply to anything I have said in my speech. Being a politician of integrity, perhaps he is not using a script and he will reply to my speech. If he does so, it will be the exception rather than the rule.
Virtually all Members particularly party leaders who feel a certain august responsibility to have prepared remarks delivered with a certain gravitas, never deliver spontaneous remarks. Almost invariably they have scripted remarks which bear no relationship whatever to anything anyone else says either before or after them. We have a completely word processed debate. We might as well not meet in this House because everything is already written somewhere else. We could supply the whole lot to the journalists and not meet at all. We must bear in mind that every day the Dáil meets it costs in the region of £10,000 in terms of extra expenses. This budget debate, which will last four or five days, will cost the taxpayer about £40,000 over and above the normal costs of running parliament. That money is completely wasted because, in the one case, nothing that is said here will change anything. Second, there will be no debate because people will not listen to what one another say, because they cannot interrupt and, anyway, they are all using prepared scripts. It is no good, Sir. It is not good enough and it should be changed. I have adopted this practice of departing from my prepared script today simply to make the point that this debate is a waste of time. It is a waste of time because you, Sir, do not allow interruptions, because the journalists insist on prepared speeches and because this House has not been allowed to debate the budget in Committee before being finalised and nothing can be changed by anything that is said here.
There is much talk in this House and within the Minister of State's party about electoral reform, about changing this, that and the other so that people will respect politicians more. The one reform we really need to effect in this House is the way in which we prepare the annual budget. In the preparation of the annual budget this House decides on how half of the entire income of this nation should be spent, because approximately half of the income of the nation is taken over by the House from the people and spent for them. That is the most important decision we take in this House; we decide how other people's money should be spent. One hundred and sixty-six of us decide how the money that belongs to 3.5 million people will be spent. There is no tennis club, no Gaelic football club, no business that would decide on the spending of money in the way this House decides. In the most minor organisation there would be a discussion, before the money was spent, about the priorities, what was the most important thing this year — for example should it be to put down new tennis courts, to build an addition to the pavilion, or whatever the argument might be about, but it would be discussed well before the money was spent by everybody in the club.
What happens in this House? We are not taken into account. One Member comes in and tells us what will happen. We then debate it safe in the knowledge that nothing we say will make the slightest difference. There is no other organisation here that would conduct its business in that manner. Yet this, the most important organisation here, spending the largest sum of money of any organisation in the country, sets its budget in a completely ridiculous way. I contend that this is the fault of everybody in this House, including yourself, Sir, because we have not stood up for parliamentary democracy in this House in the making of budgets.
If I say no more I hope I will have penetrated the indifference of the empty benches opposite, the indifference of the empty Press Gallery, in making this point. Indeed, Sir, I fear that something very serious happened in this House yesterday: when RTE wished to televise Question Time live, a matter that was entirely proper for decision by this House and by nobody else, or by the Broadcasting Committee appointed by this House, a member of the Government, who had no right to do so, said "no". We had a case here of the Executive trespassing on the proper rights of Parliament in taking a decision in that way. Again you, Sir, are the person primarily responsible to protect the rights of Parliament in a matter of this kind. I sincerely hope that, when this matter is raised at the Committee on Procedure and Privileges, you will take severe action in regard to it. It is arrogation to the Executive of the proper rights of Parliament, a procedure which caused civil war in other countries in the past.
If I may now return to the remarks I have supplied to the Press Gallery who, presumably, are busily sub-editing them at present, the most remarkable thing about this budget is that it has no developmental vision. It is exactly the sort of budget that would be prepared in a business by its financial director without consultation with those involved in production and/or marketing. There are some neat accountancy tricks, some clever revenue devices adopted, but there is no sense of going anywhere in particular in this budget.
If present trends here continue, without emigration, there will be half a million people, or 40 per cent of the workforce, unemployed by the end of this decade — half a million people unemployed and one million people only at work. Think of the effect of that on the tax burden. This will happen because the excess of school leavers over retirees will be 25,000 annually over that eight year period up to the end of this century. This excess will ease in the early part of the next decade so, in a sense, we face a temporary employment emergency but it will be temporary for the next ten years. In my view we have a genuine employment emergency, just as much an emergency as we experienced between 1939 and 1945 when exceptional measures were justified. There is no sense of any exceptional measures being taken to deal with the employment emergency here in the budget presented yesterday.
The most appalling aspect about public debate in Ireland today is the banal complacency that obtains about this obvious and entirely foreseeable jobs crisis because all the children who will be seeking work over the next eight years are now at school and can be counted. The political establishment, including the media, become excited about all sorts of issues, often ephemeral and personality-related — witness some of the controversy of the last few days — things that do not matter a jot occupying huge amounts of space while the same media and political establishment pay little attention to the real jobs emergency staring us in the face for the next eight years.
The Minister's handling of the Programme for Economic and Social Progress in the run up to this budget has been a disaster for jobs. The original Programme for Economic and Social Progress contained financial commitments totalling £900 million, all of which ultimately convert either into spending cuts or tax increases. Yet, by failing to identify how a single penny of that £900 million to be found, the Minister, in originally agreeing the Programme for Economic and Social Progress, started a cycle of financial uncertainty of the kind that directly discourages investment and, therefore, job creation because people do not know whether the tax regime will change radically next year and cannot plan ahead. A cycle of financial uncertainty was begun in the original Programme for Economic and Social Progress, aggravated gravely in this budget, as I will demonstrate with some quite remarkable statistics I hope to put before the House.
As Fine Gael foresaw at the time, the original Programme for Economic and Social Progress ran into almost immediate difficulty. The botched attempt at renegotiation added to the problem. By postponing 1992 pay commitments to 1993 and 1994 the renegotiation has prolonged even further the period of financial uncertainty which does so much damage to investment and job creation thereby further encouraging the holding back of investment plans until the implicit tax threat is cleared. The lack of moral courage of a Government who tried in the renegotiation of the Programme for Economic and Social Progress to postpone major financial commitments until after they expect to have left office is fatal for job creation. The biggest failing of this budget is a lack of moral courage, a lack of willingness to face today's problems today, a wish to put off today's problems until tomorrow in the hope that they will go away. The present Government created the present pay position under the Programme for Economic and Social Progress, and they should have dealt with it and not postponed it to have it dealt with by their successors in office.
It is a simple and sound principle of tax policy that if one taxes something one gets less of it and if one subsidises something one will get more of it. If one taxes one activity and exempts another, one will get less of the first and more of the second. In Ireland we have plenty of many things, plenty of land, property; the one thing we do not have plenty of is employment. Yet the present Irish tax policy is to tax employment severely and to subsidise, or exempt from tax, many activities other than employment. For a country with a jobs problem like ours, which is unique within Europe, with the possible exception of Portugal, this tax policy, which has continued for the past 15 to 20 years, is quite simply perverse. Our tax policy has meant that Ireland has fewer jobs than its economic growth would suggest it should have. For example, a table in the Culliton Report showed Ireland twelfth of 15 European countries, fourth from the bottom of the league, in employment growth over the past 30 years. That is a legacy of 30 years of failure as far as the most important priority of this country is concerned, and that is jobs. Why is that? It is because in Ireland work is taxed more severely than consumption; work is taxed more severely than saving; work is taxed more severly than the depletion of non-renewable energy resources. Work is taxed more severely than the holding of property, taxed more severely than profits, taxed more severely than the formation of new assets of all kinds. Is it any wonder, therefore, that we do not have enough work in this country? The problem of tax reform is simple, not complicated. One does not need to have a Ph.D. to understand that if you tax work more heavily than anything else, you will have less work than you need. That is what is wrong with this country and I wish people would understand it. I wish, in particular, that economists would stop making the problem complicated so that only they can discuss it. It is a simple problem, it affects everybody, it is everybody's business and, above all, it is our business in this House, yet this budget showed no sense of doing anything about it.
If we want to tackle the unique Irish jobs crisis which faces us over the next eight years, Fine Gael believe we must dramatically shift the tax burden away from work. My party are prepared to examine all other tax and spending reduction options, so long as the proceeds are used to reduce the taxation of work. Some of the measures that will have to be contemplated will be radical, difficult and, undoubtedly, unpopular.
I believe that an all-party jobs forum, encompassing the social partners, is the best place to prepare a truly radical shift — certainly that is not what we had in this budget — in Irish tax policy to promote work. Such a forum should be given an overall six month time-frame to work on radical plans to make this shift in the tax burden. This shift should take place within strict Exchequer borrowing requirement parameters and involve no extra borrowing.
Let me explain how such a jobs forum might work to make the big one-off difference to create more employment opportunities in this country. There should be an initial broad ranging discussion on all options in the forum for a three-month period. Having listened over that three-month period to the discussion of all parties and the social partners, the Government should then table their own proposals to make the radical shift to reduce the burden of tax on work. That should then be discussed in the forum for a further three months. At the end of the second three-month period the Government should then introduce radical proposals to change the tax burden to reduce the burden on work.
The use of a forum involving all parties and social partners for prior discussion of truly radical tax reform to promote work in this country would give the Government, when they finally made their decision after the six-month period, an immensely enhanced moral authority to take radical measures; moral authority of a kind that no Government have ever had in the past. Any Government that have attempted or contemplated truly radical tax reform were always afraid there would be obscurentest criticism from the other side of the House, exploiting the fears of individual special interest groups, and that the Government would lose short term popularity as a result. An all-party jobs forum would create the conditions uniquely in which truly radical once off tax reform can be made.
That is something Fine Gael hope to be able to do in Government. Radical tax reform of that kind would be far more effective than the sort of incremental tinkering with the tax code that we have had in each budget during the past ten to 15 years, particularly since the publication of the report of the Commission on Taxation. Annual tinkering at tax reform is actually harmful because no tax provision is considered to be permanent. Any concession given this year is liable to be withdrawn next year. Anybody who is creating a job is probably creating a commitment that will last for 40 years. How can you think of creating a climate which will encourage people to employ somebody if the rules are changed every year? That is what we do in this House by having an annual budget where a Minister has to have something new each year.
Ideally, if we had an all-party jobs forum to make a once-off radical shift in the tax burden, in favour of work, we should say that will not be changed for eight years, or five years, so that people could go ahead and plan their businesses on the basis that the basic structure of the tax system is set in store for a period of five years; then we might create work. The introduction of cosmetic schemes each year which are changed the following year, actually discourage people from creating work because of the constant uncertainty in the tax system.
This budget was particularly disappointing, when one bears in mind that it was prepared against the background of the wide-ranging recommendations on industrial policy from the Culliton group. The Culliton group recommended that we take a long term view of development in this country. There is no long term view of development in yesterday's budget.
The Culliton report held out a vision for industry in Ireland up to the year 2000. There was no vision in yesterday's budget. The Culliton vision was that by the year 2000, enclave-type production by branches of multinationals, now accounting for 70 per cent of industrial output in this country, should become less dominant and instead we should generate home managed firms with substantial head office and research and development functions in Ireland. The Culliton report recognised, as my party do, that we need to encourage firms to establish research and development facilities in Ireland. Research and development is one area in which our best technical graduates, some of whom have cost the taxpayer up to £40,000 to educate, are liable to stay in Ireland and put that money back into this economy. If we do not have research and development in Ireland those people, educated by the Irish taxpayer, will leave. In other words, we will export human capital.
Recent work by economists has identified research, development and training as the key components of successful economic growth policies. The old fashioned way — neo-classical economics — of looking at economic growth as a bi-polar relationship between two factors of production — capital on the one hand and labour on the other, with land of diminishing importance — is now being dumped by modern economists. They do not believe there are just two main factors of production any more. Economists now argue that there are at least four or five separate factors of production: capital, unskilled labour, human capital — skilled or well trained labour which might be measured by the level of education — and ideas, which might be measured by the number of patents and inventions in a particular country. There are at least four separate factors of production in accordance with new economic thinking. Yet, economic policy in Ireland is based on the traditional idea that it is simply a question of investment and labour.
Traditional Irish economic policy which continues is driven by the old idea that if you could attract enough foreign capital, in the form of foreign industry, to Ireland, that would provide jobs on a sustainable basis for this country. That is simply not true and it is not in accordance with economic reality and it is not working in this country because as the new economics, to which I have referred, demonstrate we are exporting much of our human capital through emigration. The value of human capital — in the form of Irish graduates emigrating — is a far greater loss to the economy than any financial capital the IDA activities may attract to this country. On a net balance we are losing capital all the time.
Our recent policies are not designed to keep human capital in Ireland. Indeed, they ignore the existence of human capital as a separate factor of production. There are large numbers of incentives in our tax code for physical capital but none for human capital. Quite simply, our tax policy is out of date, it is irrelevant so far as economic growth is concerned. Some argue that emigration is caused by unemployment. I think we should look at the issue the other way around. In my view unemployment is caused by emigration. If we could keep our best graduates in Ireland, they in turn would provide jobs for the rest of the community through their innovations. Once we lose our best graduates to another country, in most cases they never come back. Therefore, I believe we need a radically changed economic policy which will encourage the growth of the two previously neglected factors of production — human capital and ideas. I do not claim I have all the answers as to how that can be done but at least we can start a debate here on how it should be done. I have some suggestions to make. For example, we should have a tax concession on the repayment of student loans. This would encourage graduates to stay in Ireland, under the Irish tax code, for the initial period while repaying loans taken out to finance their education. We should also perhaps design a special tax regime for young people leaving school or college to encourage them to stay in Ireland. For example, tax exemptions for the first two years at work for people under 25 years of age would be particularly valuable in keeping good people, the people who ultimately do the work to pay all our pensions, in this country and would not be particularly costly if there was an age limit. I am not saying this idea is perfect but there was no development thinking in this year's budget. It was truly an accountant's budget.
The Cullition report made many recommendations on the creation of a more efficient infrastructure. It recommended a total change in the way in which we spend money on infrastructure. In this budget, although we are not debating it, almost £800 million is being approved for spending on infrastructure, all of which will be borrowed and have to be repaid. Yet, there is not a single reference anywhere in the Minister's speech to the far-reaching recommendations made in the Culliton report about achieving greater efficiency in the way we will spend that £800 million on infrastructure — roads, ports, air transport, telecommunications and energy. There were stinging criticisms in the Culliton report about the way in which that £800 million which we are being asked to approve is going to be spent. Yet, there is not a single line in the Minister's speech acknowledging anything the Culliton report said about the gross inefficiency of capital spending in Ireland.
A table in the Culliton report — here I revert back to a matter I referred to earlier — shows that Ireland has one of the lowest levels of spending in the European Community on research and development. It points out that a recent international survey placed Ireland 22nd of 23 countries in its capacity for innovation in the perception of international industrialists. Yet, as I said earlier, economists and economic policy makers reckon that capacity to innovate is the main factor determining economic growth, and we come second last. Our tax policy is designed to ensure that that is where we will stay.
It seems that for the Government to continue with a policy of saying that the maximum corporation tax rate on manufacturing will be no more than 10 per cent for the next 18 years, to the year 2010, is guaranteed to ensure that firms do not invest in research and development here in Ireland because research and development is a cost in a company's accounts. A multinational company will locate costs in those countries where they will be most tax-effective. Costs like research and development will be least tax-effective in a country like Ireland where the corporation tax rate is low.
For a country like Ireland, that has the graduates who could do research and development, to base its industrial policy on a low corporation tax rate, which we boast is the lowest in Europe, is perverse. It guarantees that we do not get the research and development element of multinational companies' activity here in Ireland. We will get the production plants because they generate profits, not costs, but we will not get research and development and the marketing headquarters or even the headquarters itself in Ireland because they generate costs and the best place to locate those is where they will be most tax-effective, in other words, not in a country where the corporation tax rate is lowest.
Our tax policy, the 10 per cent profits tax policy, is one that is suitable to an under-developed country with a surplus of unskilled labour, in other words, not Ireland. It is hard to see that a 10 per cent tax policy makes any sense for a country with a surplus of skilled labour, as Ireland now has. We have created this skilled labour at huge cost to the taxpayer. Yet, we continue with a tax policy for manufacturing which ignores that investment in human capital and encourages its free export to other countries. It just does not make sense because, again, it ignores human capital and ideas as independent factors of production and is contrary to modern economic thinking.
Each year Ireland receives about £800 million from the European Community towards its budgetary costs. We would have a budget defecit this year of somewhere in the region of £1,100 million were it not for the £800 million of free money we are getting from Brussels. Yesterday's budget speech completely ignored the most damning of all the conclusions of the Culliton report in regard to the way we spend the £800 million we get from Brussels. The Culliton report said of the use of European Community funds by the present Government:
We have observed a widely-held perception, in both the public and private sectors, that the Structural Funds represent in some way "free money from Brussels" the allocation of which requires to be less vigorously evaluated and accounted for than normal.
This is an appalling situation. I suggest that much of the European Community money coming to Ireland is being wasted. This extract from the Culliton report will be read by those in Brussels who are providing the money. Unless remedied quickly, it will do great damage. The concern expressed by Culliton echoes that of Fine Gael. When the Structural Funds were doubled in 1988, Fine Gael asked the Government to set out an explicit rate of economic return based on a cost benefit study for each European Community grant-aided investment in Ireland but this was never done. As a result, the Culliton report has now found that we have been wasting the money all along. I condemn the Minister for the fact that in his budget he ignored the Culliton report condemnation of the way in which we spent that money and instituted no measures to put it right.
I do not think that this is an honest budget. Not only does the budget increase borrowing in a planned way — this is the first planned increase in borrowing in the budget for many years, probably ten years; the Minister, Deputy Ahern, is the first Minister to plan an increase in borrowing in almost ten years — but it also has postponed until next year five major financial headaches amounting to a further £1,300 million. Let me itemise these five postponements.
First, in the Programme for Economic and Social Progress the Government and the social partners agreed that they were going to achieve a “broad balance on the current budget” next year. This means eliminating current borrowing. This year the Minister proposes to borrow £339 million. Next year he will have to eliminate all of that and he has given no clue in this year's budget of how he proposes to get rid of £339 million worth of borrowing next year. Yet, he is committed to doing so.
Second, arising from the recent renegotiation of the Programme for Economic and Social Progress the Government will have to find an extra £350 million, over and above the figure for this year, for public sector pay. No clue has been given in the budget as to how this will be found next year.
Third, one of the big revenue earners, deposit interest retention tax which brings in about £250 million a year, will, as the Minister has acknowledged, have to go next year. Again, no clue has been given as to where that £250 million will be found.
Fourth, the Minister has told us that in 1993 he will have to find a once-off sum of £200 million because of the end of VAT at the point of entry. Again, we have not been told how that will be found.
Fifth, we have the European Community requirement of approximating our standard rate of VAT, now 21 per cent, with that of our neighbours under the single market disciplines. The Northern Ireland standard rate is only 17.5 per cent, three and a half points below our rate. The Department of Finance estimate that we cannot afford to have a rate that is more than one or two per cent above our neighbours if there are not to be distortions. To bring our rate down to say 19 per cent, one and a half points above the Northern Ireland rate, we would have to find an additional £160 million.
If we take all five items together we have a total amount of £1,299 million worth of financial problems which have been postponed by the Minister for Finance until next year, on top of borrowings of over £400 million next year.
That is no way to run a household and no way to run a country. Let us look at the problem from another angle. Overall, the budget proposes to add an extra £592 million in borrowing to our debt this year. Let me put that in context. The extra borrowing being provided for in the budget works out at almost £10,000 for every child born in this country in 1992. That is the legacy of this Dáil to the children who will be born this year. That figure is on top of the £1,300 worth of benefits postponed until next year for every person at work.
The budget offers no strategy for economic growth, it offers no commitment to the development of a knowledge-based economic policy and it offers no strategy to shift the tax burden in favour of employment growth. It postponed £1.3 billion worth of this year's financial problems until next year. The budget is morally and financially dishonest.
I do not have a prepared script and perhaps I should take Deputy John Burton's advice in that regard. However, I hope I am not wasting my time by coming into the House to put the various points which I see as important to the people whom I represent in Cork North Central, particularly in relation to this budget. I have a job to do and I will do it to the best of my ability. I should like to impress on the Government — and the Minister in particular — the various points I see as important, not just in the budget but in planning for the future to try to alleviate the problems which effect the people who elected me to this House. As Deputy John Bruton said, this is not really a debate, it is just a matter of making ones views known, sitting down and letting someone else reply. This is one of the reforms which should be implemented in future.
My constituency is affected by a number of factors, unemployment, lack of housing, health, emigration and farming; it is an urban-rural mix. I looked very carefully at each heading in the budget to see if there would be any improvements in the aspects of life to which I referred. It is a clever budget orchestrated by a Minister who is skilled in negotiating different deals with various groups. It is a budget of give and take, with the emphasis on give. However, during the year it will become clear that there is no reason to get excited about it, unlike the spokesman for the Progressive Democrats this morning.
Does the budget attack the major problems affecting us? I refer principally to unemployment. It does not. In Cork North Central there are approximately 30,000 people unemployed, a frightening figure. In the city alone there are 16,500 people unemployed. I examined the budget to see if the problem had been addressed by the Minister but I cannot see any great improvement in the position. We asked him to make radical changes, we asked for an all-party committee to discuss, study and to come back to the House with recommendations so that we could radically change the situation in regard to unemployment. From unemployment come the social evils of vandalism and crime. We thought a new Minister for Finance would make radical changes but that has not been the case, which is disappointing. Last week a young man of 27 years of age told me that he had never had a permanent job. He is one of many and I am sure his case is multiplied in all our cities and towns. It is a time-bomb waiting to explode but the problem has not been addressed in the budget. The young man to whom I referred does not have much hope of getting back to work, indeed he said that at 27 he was becoming too old to be employed as employers are looking for younger people.
In pockets of Cork city there is unemployment of approximately 60 per cent, whereas the average is 22 per cent. For those people there is no improvement in the budget. There does not seem to be a will to tackle the problem, which worries me greatly, because the Government do not seem to be in touch with reality. Perhaps the events of the last few months have clouded their vision although they have been out of touch for years. The unemployed look to their public representatives for some improvement and method of getting them back to work but nothing is happening.
Nothing much was done in the budget in relation to health. I welcome the minor relief in relation to the handicapped and the abolition of VAT on collections made by voluntary bodies for various equipment. However, three of the major hospitals in my constituency, Cork Regional, the Mercy Hospital and the South Infirmary have had to close except for emergency cases and people have been waiting for treatment. Operations are being postponed continually because hospitals cannot cope with the demand. Unfortunately one of the hospitals in Cork was closed as part of the Government's bookkeeping exercise. If this hospital had been kept open it would have relieved much of the pressure on the people whom I represent. Advertisements have been placed in newspapers by hospitals — this is the first time I have seen this — to the effect that they are not accepting any cases other than emergency cases. The Regional Hospital in Cork, which was the flagship of the Southern Health Board, is now in a state of chaos. The non-acceptance of people into hospital reflects the attitude of the Minister and the Government to our health services. They seem to be saying that if people have VHI cover they can gain admission to hospital but if they do not they will have to wait for up to 12 months. That is a very sad state of affairs.
I was disappointed at the proposals in relation to housing. As every public representative and local authority know, there is a housing crisis at present. Cork Corporation have approximately 1,600 applications for housing. We built something like 25 houses last year. Some people have been on the waiting list for up to five years. These include young couples, single parents and elderly people. Cork Corporation are powerless to do anything about this problem. They have the plans and schemes prepared but the necessary funding has not been provided by the Department.
An unwelcome situation has now developed whereby young married couples and single parents have no option but to move into private rented accommodation. This is ridiculous because the health boards then have to subsidise their rent payments which sometimes can be as high as £50 or £60 a week. Because landlords know the health boards pay a rent subsidy they increase the rent further. Taxpayers are on a vicious roundabout in that they are paying rent to landlords through the health board. I think the health boards have indicated that they regard this as a racket, an easy way for people to gain substantially from other people's misfortune and misery. For some considerable time Cork Corporation have been seeking money to refurbish flats and low cost housing for people in private rented accommodation. There are approximately 300 vacant houses which were built at a low cost and need repair. Is the Minister going to do anything to help eliminate this vicious spiral, social evil, which exists? I have put down parliamentary questions to the Minister asking him if he can do anything to alleviate the misery of people who are caught in this trap.
Prior to the budget I met some people from the building confederation who told me what they believed should be done to prime the building industry. They hoped that the Government would make some moves in this direction and give employment to people. I read in this morning's paper that these people are very disappointed at the Minister's proposals. I would be the first to admit that one cannot please everyone but in view of the demand for housing and the number of people in the building trade who have been unemployed for a long time I believe there is a need to stimulate this industry. I am sorry to say that this has not materialised and that the Minister did not put forward any proposals which would enable the building industry to take off.
I will carefully scrutinise other aspects of the Minister's speech during the coming weeks. I felt I had to come into the House this morning to make known in no uncertain manner the views of the people I represent. As someone who was redundant for a long number of years, I know what it feels like to be redundant with no prospects of employment. Many people in Cork North Central are redundant. Most school-leavers wish to gain employment here and do not want to have to emigrate to Britain or the United States. I listened carefully to the Minister's speech but, apart from saying that returning emigrants had added to our level of unemployment, he made no reference to emigration. The Government now proposes to cut the grants given to emigrants in the United States because 16,000 Morrison visas have now been issued to Irish people there. As recently as last Sunday week the Catholic Church made a collection at all Masses to help our emigrants, particularly those in Britain who are facing serious problems due to the recession there. This money will be used to help alleviate problems such as housing and unemployment. The Government seem to conveniently forget about people who emigrate. The fact that the Minister made no reference to emigration seems to be an indication of the way the Government feel about our emigrants who have to go abroad to work.
I recently met young farmers who outlined the measures they believe would improve their position. In the light of events in Europe, they believe that we are being challenged and that nothing is being done to encourage them to stay on the land. I am very disappointed that the Minister made no provision for these young farmers.
On summing up, there is nothing in the budget for job creation or for health. This is appalling. There are no proposals to deal with the housing situation, which is disastrous. People are still emigrating and will continue to do so in the coming years. There is nothing for young people who wish to stay on the land. The Minister emphasised last night that there are concessions for the taxpayer, but when you consider the increase in VAT there will be no actual gain for these people. The services area will be greatly hit. People with cars may gain marginally but if they have to have their cars repaired they will have to pay through the nose because VAT on maintenance and repairs has been increased. There is an increase in VAT on all services. Any tax reform gain in the budget can be easily swallowed up by the VAT on services, particularly personal services.
I now call Deputy Rabbitte. I would remind the Deputy that the spokespersons for the parties have 40 minutes and other Deputies have 20 minutes.
I do not propose to take up my full time. I will only need about 20 minutes. I am delighted that there are two Progressive Democrats Ministers in the House because the formative influence the Progressive Democrats have made on this budget is palpably evident to all of us. At 8.55 this morning the queue for passports trailed half way down Molesworth Street. This is as eloquent a comment on this budget as any other. Those awaiting emigration opportunities will have no cause to change their plans arising from Deputy Ahern's efforts yesterday to placate the implacable Progressive Democrats. Unemployment, our greatest national challenge, was virtually glossed over and forgotten. The obsessive preoccupation of the Progressive Democrats with tax reductions has been the dominant formative influence on this budget. By Irish budget standards for more than a decade, at first glance there are not insignificant tax reductions for the higher paid, while those on unemployment benefit will be liable to tax for the first time. That neatly summarises the ideology of the Progressive Democrats.
Last night, Deputy Noonan for Fine Gael complained that the Progressive Democrats are a party driven by ideology. For me, it is the ideology itself that is unacceptable amid such poverty and hopelessness. The ideology of the Progressive Democrats is that the weak should be condemned to subsist on the margins of society while the strong, the educated, the assertive, the highly paid employed should be liberated — to use the words of Deputy O'Malley, the Minister for Industry and Commerce used today — to realise their full potential. It is a harsh, insensitive, uncaring philosophy which, like Thatcher, denies the very concept of society. To embrace such a philosophy is sudden death for the Minister for Finance's image that he is the trade unionists's friend.
This must be the first budget in the history of the State designed not for public consumption but to placate a party — in this case the Progressive Democrats — and to further the Minister's own leadership ambitions within Fianna Fáil. Rather than confronting the twin challenge of poverty and tax reform, the Minister has found himself responding to privilege and tax reductions, but in doing so he has fallen between two stools. When the misplaced euphoria of liberation day for the PAYE sector evaporates, as most certainly it will when the total impact of VAT, excise and other taxation measures become apparent, the Minister, Deputy Ahern, will find that the Progressive Democrats will come back with new demands on behalf of their privileged constituency. Secondly, whatever short term kudos the Minister has won from his backbenchers, they will not survive the weekend return to their constituencies. Lengthening dole queues, social welfare recipients scarcely protected from inflation, no increase in child benefit and looming taxation of unemployment benefit will serve as reminders to Fianna Fáil that they have been seduced by the Progressive Democrats.
The Progressive Democrats seem no longer content to dictate who may retain the leadership of Fianna Fáil; they also wish to dictate the shape of the budget, to the detriment of thousands of poor people who have traditionally reposed their confidence in Fianna Fáil. The Leader of the Progressive Democrats, Deputy O'Malley, is the Minister responsible for employment. Thus far such is the public perception of his role in protecting whatever little virtue this Government have left that he has escaped public opprobrium for the most calamitous unemployment figures in the history of the State. While the dole queues have lengthened and despair deepened, Deputy O'Malley has fiddled with ad hoc changes in industrial policy. He found it necessary to establish the Culliton review team to confirm criticisms of our industrial policy which have, for the most part, been floating about for a decade. Having bought time in this manner he has now opted for a task force to oversee implementation rather than bringing proposals directly and immediately before this House.
The Minister for Industry and Commerce, or perhaps the Minister responsible for environmental protection who is now in the House, will, I presume, today rationalise this obsession with delivering a two-tier tax structure of 25 per cent and 44 per cent ultimately on the basis that it will enhance job creation prospects. There is no evidence to bear out this expectation. Why, given the pattern of regular rates reductions over the last three years, has unemployment so drastically worsened over the same period? This vain aspiration is in keeping with the Progressive Democrats' conviction that if only we can create the right climate the jobs will come. That theory has been tested and found wanting. What did Mrs. Thatcher's similar approach to tax reductions produce in terms of employment in Britain? We know that at the same time as top earners in Britain were making a killing, unemployment rose from just below one million under the last Labour government to over three million during Thatcher's regime.
My attack is on the manifestly failed economic policies of the Progressive Democrats. I applaud the role of the Progressive Democrats in putting integrity and proper standards on the agenda for Government. Their success in doing so can be seen as an achievement for the concept of Coalition Government between compatible parties. However, the extent of the failure of their economic policies can be seen all around us. At the end of the day high standards of propriety will now get people back to work and neither will lower taxes.
Of course the PAYE taxpayer has been obscenely exploited since the seventies. The problem is that the PAYE workers have borne the brunt of our taxation obligations, and this budget only cosmetically broadens the tax base. Following the pattern of recent years, I predict that as soon as the lobbyists get to work on the reforming measures and concessions in the budget to broaden the tax base that progress will be even less real than the newspapers and other commentators imagine it to be today. Over the past few years in particular we have seen the accelerating impact of lobbyists and special interest groups on the Minister for Finance of the day between the publication of the budget and the subsequent publication of the Finance Bill. A number of the very nice sounding PR improvements to tackle fringe benefits in a far less rigorous way than expected in tightening up corporation tax loopholes will be negotiated away or greatly diminished in value between now and the publication of the Finance Bill.
As Deputy Harney is in the House, let me say that she as Minister of State with responsibility for environmental protection made the most dramatic speeches on behalf of the Progressive Democrats in the run up to this budget. She actually said that a sum of £2 billion was put at the disposal of the corporate sector in tax foregone, tax reliefs, tax shelters and grants of various kinds. I think her estimate is right and it is as good an approximation as we can find. The figure was not contradicted by the Culliton report or any other survey we have had, although the method of calculating the amount of tax foregone has changed over the past few years. The Minister of State led us to believe that this area would be raided in order to fund the changes they were insisting on in the tax bands. It now turns out to be otherwise. The changes that have been introduced in the tax bands are being funded by increases in VAT, customs and excise and other areas of taxation. It is typical of the sleight-of-hand that the Minister has engaged in that it is a "now you see it, now you don't" type of budget. The Automobile Association bore this out this morning when they pointed out that the reduction of 2p per litre in the price of petrol would be an approximate saving of £30 per annum to the average motorist but that the 20 per cent increase in road tax would cost the average motorist £30. The Minister balances one with the other throughout the budget.
The change people anticipated in response to the unprecedented extent of public outrage about the manner in which the rich and powerful in our society can avoid and evade their tax and societal obligations has not occurred and this problem has not been tackled in the budget. For example, the Minister made much of the capital gains tax concessions but a closer examination shows that from a three tier system with a top rate of tax of 50 per cent the Minister is now proposing a single 40 per cent rate. Those engaged in land speculation were up to now subject to a top rate of 50 per cent but it now turns out that they will be subject only to a 40 per cent rate of tax. The minimal tightening up that has been done in the exemption limits is a privilege and perk of the rich. Capital gains tax is structured in such a fashion that those who can engage in property or share dealings are the beneficiaries and they have escape hatches and shelters available to them that are not available to the PAYE worker.
The increase in VAT from 12½ per cent to 16 per cent is equivalent to an increase of 28 per cent on basic commodities, footwear, clothing and telephone bills. Only a few years ago telephone bills were not subject to VAT.
The Minister will get a great deal of good PR from the measures to deal with fringe benefits but when the special interest groups begin bargaining, such minimal concessions that have been made in response to the public outcry will again be cut back. Tax consultants are working already on how that can be exploited.
The low paid PAYE worker comes out of this least well. It is conveniently forgotten that the personal exemption for PRSI has remained at £286 for a number of years and the low income taxpayer suffers as a result of no change being made. However, the upper ceiling on PRSI payments continues.
The Minister claims to have made an attack on some of the loopholes and scams that were available to those who can afford the best tax advice but I would like to hear the Minister address that specifically. Last night I raised the question of profit sharing schemes for ordinary workers. Will the Finance Bill be able to draw a distinction between such schemes for ordinary workers and the type of rip-off we have seen directors and others who can afford it engage in? I do not know if it is possible to draw such a distinction in legislation but it seems to me that the thinking behind encouraging workers to take shares in their own enterprise is worthy. If this diminishes the limited take up there has been, it is a regressive change in taxation policy.
I wish to raise the question of share options. Last night the Taoiseach, speaking on behalf of the Minister for Finance, refused to deal with this matter in any detail. We have had pretty dramatic evidence of the rip-off facility that exists at present whereby directors and senior management can subscribe for shares at today's price for an almost indefinite number of years. If the shares increase substantially in value they can exercise that option. However, if they do not they do not have to exercise their option. It is virtually risk free. I suspect we will not have this clarified until we see the Finance Bill.
The major calamity of the budget is the failure to introduce measures to tackle the unemployment crisis. The budget is intended for internal consumption as it concerns the leaderships stakes in Fianna Fáil while attempting to keep the Progressive Democrats on board. The unemployed can only hope that the minimal increase in social welfare will keep pace with inflation. The refusal to budge on child benefit will mean that real pockets of poverty will continue.
Deputy Bruton devoted much of his address to the question of unemployment. The idea he put forward again of a jobs forum is one The Workers' Party put forward a considerable time ago. It is an idea that we still believe has a great deal of merit. It is regrettable that the parties in the House cannot find a way to combine their ingenuity, intelligence and input to concentrating on what is our greatest national problem. If the Government parties refuse to respond even at this stage, Deputy Bruton should consider convening the Opposition parties to determine whether we are agreed on what we mean by a jobs forum and to determine what proposals we could agree on for the debate on industrial policy which, belatedly, has been promised by the Minister for Industry and Commerce.
In conclusion, I am sorry that the Minister has decided to follow a course of tightening up on the kind of fringe benefits that in many cases impact on ordinary workers who require, for example, a motor car as a tool of trade, rather than tackling the tax shelters and reliefs that Minister Harney spoke so eloquently about a couple of months ago. I believe, for example, that an effective minimum rate of corporation tax of an enforced 10 per cent for the manufacturing sector and an effective rate of 20 per cent for the remainder would be a great deal more meaningful than the regime that pertains at present. It is all very well for the Confederation of Irish Industry to draw attention to the fact that the take from the corporate sector has increased substantially in recent years but the point that has to be taken into account is that that take has increased substantially from virtually a nil base. If we are to be able to fund meaningful tax reform, as distinct from tax reductions the base has to be broadened and that means taking tax from those who can afford to pay. So far all Governments have shied away from taking such measures.
Acting Chairman
I must ask you to conclude, please, Deputy.
Although there has been some concession to altering the levels at which people come into the tax net, it is too minimalist to merit the term tax reform, rather it represents tax reductions and, basically, tax reductions for the better paid.
This year's budget is a great landmark for the Progressive Democrats. It gives me great personal satisfaction to have contributed to the preparatory work involved, which has gone on since last August, leading to the revised Programme for Government agreed in October and now to this budget which is the first step in the implementation of the programme objectives for tax reform and control of public finances.
The philosophy and thrust of many of the reforming measures in the budget reflect the fundamental reassessment of the Irish economy that the Progressive Democrats have carried out in the past five years. That was honed and refined in the two months of intensified negotiations between the two Government parties in the Programme for Government review carried out in the autumn. That programme sets out in the most precise and elaborate terms the employment growth strategy of the Government and the central role that a pro-jobs tax reform programme can play. That is precisely the shape of the tax reform measures in yesterday's budget which, I believe, has been rightly hailed by all economic commentators in today's news media as being the most reforming budget in the past 20 years.
Besides the political innovation and hard work that was required of the Government collectively, the budget also required an extraordinary amount of input from the Government officials notably in the Department of Finance and Revenue. On behalf of the Progressive Democrats and, no doubt, of the Government as a whole, I thank those officials sincerely.
The budget represents a new deal for the ordinary workers of this country and offers real hope to the unemployed. We have taken a vital step to releasing the Irish economy from the mounds of fiscal red tape that have had it shackled. The new and exciting era now unfolding gives workers and employers alike the chance to increase output, employment and enterprise and to get a fair reward in their pockets for their efforts.
Before going on to outline the detailed strategy and achievement of the budget, I must comment first on the extraordinary conservatism displayed by all the Opposition party spokesmen in the debate last night. While the thunderous sound of the crunching of political sour grapes was understandable, the howls from Deputies Noonan, Quinn and Rabbitte against tax changes and the patent fairness now being brought into the tax code was extraordinary. On the Opposition benches of the House now sit the real conservatives. Apparently, all the Opposition parties want to conserve a taxation system that has cruelly penalised work, enterprise and investment and has spawned the raft of reliefs and exemptions which were a bonanza for the very few rich and their tax consultants. I hope that the ordinary workers and those without work have listened carefully to the howls of protest against the budget heard from the Opposition parties. Everybody knows that in this country we have until now levied far too much tax on work and on income but, clearly, Deputies Noonan, Quinn and Rabbitte want that to continue.
The key to a long term reduction in taxation, to increased sustainable employment and to an improvement in services is the ongoing reduction of the overall national debt and the associated cost of servicing it. This budget continues the process of bringing the national debt under control. The Exchequer borrowing requirement for 1992 will be less than 2.4 per cent and will remain on target to further reduce the Exchequer borrowing requirement to 1.5 per cent next year. That will require continuing strict control over expenditure. It is expected that the debt-GNP ratio will come down to less than 104 per cent of GNP for 1992, which again is on course to achieving our target of 100 per cent in 1993.
When the Progressive Democrats were formed six years ago the debt-GNP ratio was 118 per cent and increasing dramatically. In 1989, when we entered Government, it stood at 119 per cent. In 1985 the Exchequer borrowing requirement was 12.8 per cent with a current budget deficit of 8.2 per cent. The national finances were demonstrably out of control. This year the EBR target is approximately 2.4 per cent, with a current budget deficit of 1.35 per cent. There can be no better measure of the dramatic change in the way in which we manage our national finances, the roots of which achievement lie firmly in the new beginning offered to Irish politics by the establishment of the Progressive Democrats. Implementing the Government's commitment of achieving a standard income tax rate of 25 per cent and a single higher rate of 44 per cent next year, we are this year abolishing the higher rate of 52 per cent and reducing the standard rate to 27 per cent. Along with that, the standard band has been dramatically extended to £7,475 for single people and to £14,950 for married couples. This reform means that a married couple will not pay tax on earnings up to £20,236 above the new standard rate of 27 per cent this year. Given that the average industrial wage is now £13,900, that is radical tax reform, no matter how one looks at it, and the Opposition know that, too.
It is worth reviewing the history of taxation in Ireland in recent years. When the Progressive Democrats were formed six years ago to bring about change in our moribund political system we immediately identified the penal tax system as a major cause of the mess our country was in. We targeted tax reform as a major priority. We were scoffed at then by every other political party for trying to do the impossible. In 1986 the Government of the time and the other parties said that a 25 per cent tax rate was unworkable. I quote from an article by John Cooney which appeared in The Irish Times on 26 May 1986:
Government sources last night dismissed as unworkable the four-year programme of the Progressive Democrats to reduce the standard rate of income tax to 25 per cent, along with a flat rate of VAT at 15 per cent.
Based on the expectation that this programme would involve public expenditure cuts of £750 million in the four-year period, the sources said that this would leave the deficit at least at £1,250 million and would require a four-year pay pause.
"While the Progressive Democrats would be sorting out the tax system, the country would be going down the tube", a source close to the Government said last night.
At the end of the article comes the comment:
Fianna Fáil declined to comment on anything to do with the Progressive Democrats.
Nothing has changed.
All I can say is that we have travelled a long road since then.
In 1985 the top rate of income tax was 60 per cent and when that was added to PRSI, workers faced a combined tax/PRSI rate of 68.5 per cent. Put another way, it cost employers £3.56 to put just £1 extra in workers' pockets. Married couples earning more than £13,686 had to pay tax at the 48 per cent rate. We knew that that punitive rate of tax on such low incomes was a major disincentive to work and was holding back the economy.
When we entered into Government in 1989 a combined marginal tax/PRSI rate of 63.75 per cent faced people on incomes of £12,336 and above. Then, it cost employers £3.10 to pay a single person £1 in take home pay at the top marginal rate. Over the relatively short period of six years the tax rates structure has been simplified into two rates and much reduced. In that time the standard rate has come down from 35 per cent to 27 per cent while the top rate of income tax fell by an even more dramatic 12 points.
Along with changes in the structure of tax the amount taken from people on the average industrial wage has also fallen as average tax rates have come down. In 1985 about 36 per cent of wages of a single person on an average industrial wage was deducted in employee tax levies. This year this will have fallen to 31 per cent. It is far too high in our view but we are now most definitely on the right road. If we are to take the Opposition parties at face value they are obviously satisfied with excessive tax on work and on enterprise.
Both the average and marginal tax wedges have fallen significantly. These changes mean more money in people's pockets and they give more incentive to work. It will be less costly for employers to give their workers a pay rise. It cost an employer £3.56 to put £1 extra in a worker's pocket in 1985. This year it will be down to £2.53, almost a reduction of 30 per cent.
The recently acclaimed report of the review of industrial policy report stated that in no other area do the Government have at their disposal tools to make as far reaching and effective a reform to support an enterprise economy as in taxation. The Progressive Democrats agree with that assertion. The Government agree with that assertion. The Opposition parties obviously disagree. The purpose of our tax reform strategy is to boost employment. Despite the appalling unemployment crisis assailing the economy this strategy is working.
In 1985 when we came into existence 908,000 people were in non-agricultural employment. By 1989 this had increased to 927,000 and last year it stood at 966,000 people, an increase of more than 6 per cent over the six years. But, with declining employment in agriculture and an expanding workforce we must press on with still more reforms as quickly as possible. As part of our base broadening policy we have decided to introduce a benefit-in-kind or a fringe benefit tax to effectively tackle those forms of payment which are not taxed now. Some people enjoy significant packages of benefit which are usually given as tax free inducements to top up salary. It is intended to introduce a comprehensive tax on such benefits next year to ensure that all forms of income come within the scope of tax. We are providing one year's notice of this plan to enable employees and employers to regularise their employment contracts in the light of this change.
We have also decided to bring short term social welfare payments on a phased basis into the tax system. This is to ensure that all income whether wages, fringe benefits or social welfare payments will be treated the same under the tax code. The strategy for doing this is simple and straightforward. It is to introduce fairness, simplicity and transparency into our tax code and treat everybody in the same terms.
With regard to corporation tax, in 1985 the take from corporation tax stood at £217 million and accounted for just 3.4 per cent of all revenue. When we entered Government it stood at a mere £303 million and accounted for 3.9 per cent of revenue. This year the corporation tax take is set to rise to £678 million which will be 7.3 per cent of all revenue. This fundamental structural change in the overall composition of the Exchequer take, has enabled income tax reform to proceed. Increasing the contribution of the corporate sector was a major policy initiative of the Progressive Democrats, one which is clearly paying dividends. The July 1989, Programme for Government anticipated using such increased revenues for income tax reform.
Tax reform is not limited to income and corporation tax. In this year's budget we have carried out a significant restructuring of the capital gains tax system, replacing the existing three way structure with a single rate of 40 per cent which is also our standard rate of corporation tax. This is along the lines of the proposals of the commission on taxation. In parallel with this reform we are reducing the exemption limits on capital gains from £2,000 for a single person and £4,000 for a married couple to £1,000 for a single person and £2,000 for a married couple. This will ensure that the tax base is broadened by increasing the income which is subject to taxation. A shared burden is a reduced burden on everybody who pays tax.
We are very concerned about the level of uncollected tax and unidentified profits which escape tax. Because of this, the Government, in consultation with the Revenue Commissioners and mindful of the views of the public sector unions, are committed to increasing the resources devoted to tackling tax abuse. We have budgeted for substantial additional revenue from this exercise. As we continue to reform the tax system there should be less scope and incentive to avoid paying ones fair share. In essence, this is the core principle of the Progressive Democrats, namely, that everyone be they private individuals, companies, employees or self employed people pay their fair share of tax on all their earnings. We will continue to work towards this goal in the knowledge that only by doing this can we be assured that a significant barrier to our economic and social development is removed.
This budget also marks a major step in harmonising our indirect taxes for the completion of the Single Market. The differential between Ireland and the UK on standard VAT is now only 3.5 per cent and not a source of major trade distortion. However, a significant number of goods now taxed at our lower rate of 10 per cent or 12.5 per cent must move towards the standard rate. To achieve this we have decided to create a new interim rate of 16 per cent which will be used to phase the movement of goods from the low to the standard rate. We have also removed some excises such as those on televisions and videos to eliminate the obvious trade distortion which they would otherwise cause following the completion of the Single Market. We have also decided to reduce the excise on petrol which will be of major benefit to motorists. These changes, along with some restructuring of the VAT base to reflect a more coherent structure have been adopted this year. It is clear that further reforms will be required next year to complete the process of removing undue tax differentials which could distort trade with our EC partners and with Northern Ireland.
Turning to my departmental responsibilities, I was faced with the dilemma of increasing economic activity and growth in 1992, strengthening the infrastructure of the medium to long term development of the economy and at the same time ensuring that no increased burden fell on the Exchequer which would exacerbate the difficulties of the public finances. I have achieved a balance between these conflicting objectives. In 1992, the economic activity in the areas of energy and forestry as measured by total public expenditure will increase from £228 million to almost £300 million, an increase of 30 per cent, representing a welcome boost to employment and laying foundations for long term growth in our economy. These areas will be financed by availing of all possible non-Exchequer resources, EC funding and by retaining earnings of the State bodies. The overall result is that the net Exchequer expenditure will fall by over 2 per cent from £26 million to £25.4 million in 1992.
Expenditure in the energy sector under the public capital programme for 1992 at £234 million represents a 40 per cent increase over the 1992 figure. This expenditure increase will mainly be incurred by the ESB for the recalling of mothballed plants due to an expected growth in demand and by Bord Gáis Éireann for work on the interconnector pipeline project. This demonstrates the Government's continued resolve to further diversify and strengthen the security of energy supplies. Even in difficult economic times additional financial resources are being provided for forestry in 1992 to promote the further development of our forest resources. Capital investment will increase from £48 million to £51 million, financed by EC Structural Funds.
The gas interconnector pipeline to Britain is due to be commissioned by October 1993. The project will cost about £240 million in 1991 terms and will receive over £83 million in EC assistance. It is my intention that the completed pipeline will be operated under the control of a separate company with the majority participation of Bord Gáis and a minority participation by the ESB. I hope this company will attract private sector involvement also. The interconnector will initially give us access to the UK grid and eventually will give us access to the great European grid, affording us a considerable measure of security of supply. It will enable us to source our future gas supplies at the most competitive international prices and will allow us the opportunity to export any indigenous supplies surplus to our needs.
Recently I concluded an agreement with Marathon Petroleum (Ireland) Limited on a new programme for exploration activity. Under the agreement a total of seven exploration wells will be drilled and a programme involving the acquisition of 4,000 kilometres of new seismic data will be undertaken. The first of the wells will be drilled this year and the programme will continue to 1996. My Department are currently undertaking a complete review of licensing terms in order to identify and make the changes which are necessary to ensure that our terms relate to and reflect the circumstances and conditions of today and are conducive to promoting Ireland as an attractive exploration location.
We will be taking action also on the tax front, recognising that the continuing absence of any petroleum taxation legislation could be considered to be a negative factor when exploration companies conduct comparative assessments of competing exploration possibilities between Ireland and other countries. The Government have decided that such legislation is to be incorporated in this year's Finance Bill and that profits generated by hydrocarbon production will be subject to the general rate of corporation tax, currently 40 per cent.
Regarding Bord na Móna, I have published recently the report of the independent expert committee on the use of cut-away bogs. A number of the recommendations contained in the report have a direct bearing on the operations of the board. It is my belief and that of the Government that Bord na Móna should continue the development of the bogs they own on a commercial criteria basis and seek to dispose of cut-away according to the company's financial interests and market requirements. There is a fundamental principle set out in the report that the disposal and allocation of cut-away should be determined by market forces. I am in full agreement with this concept.
Regarding forestry, Deputies will be aware of the attractive grant increases which I announced on Friday last. Incentives for forestry have been substantially improved, showing further evidence of the Government's determination to develop this sector.
It is difficult to accept the comments coming from other political parties on the proposals in the budget. Politics may require them to seek to criticise, but perhaps a more generous spirit will emanate from the Opposition benches before the debate concludes in recognition that a major and radical change is taking place and will take place under this Government.
A major and radical change has taken place. I understand the Taoiseach has resigned. The raison d'etre of the Progressive Democrats was that Deputy O'Malley was not compatible with the Taoiseach. Perhaps we will now see a re-alignment in politics in that the Progressive Democrats may re-align with Fianna Fáil. It is ironic as we discuss this budget that media attention has been focused on the ongoing leadership battle within Fianna Fáil and the difficulties in relation to Deputy Haughey. It is ironic that the Progressive Democrats regard their input as being responsible for making this a liberating budget. Their moral righteousness has been reflected in the demand for the resignation of Deputy Haughey as Taoiseach and they have focused media attention on the leadership issue and away from the budget. I welcome the arrival in the Chamber of Deputy Kirk, the Minister of State at the Department of Agriculture and Food. We have not seen a Fianna Fáil presence all morning. I understand they had difficulties of their own.
What do the Progressive Democrats mean when they talk about liberation? Are they talking about the liberation of the 270,000 people who are unemployed? Many people believe the true figure is over 300,000. Are they talking about the one million people and more who live in poverty? That segment of the population has been alienated and they will not gain any kudos from this budget. The Minister stated that he was trying to redress the imbalance in relation to social welfare, particularly the poverty level. Has the Minister gone far enough? I contend he has not. The Commission on Social Welfare concluded that a single person needs in the region of £60-£72 per week to ensure a minimal standard of living. The Minister states we are making progress when unemployment benefit, invalidity benefit, unemployment assistance and supplementary welfare allowance are increased by 6 per cent to £53. There is still a considerable gap to be bridged in order to offer those on social welfare even a minimal standard of living. It is ironic that the Minister has also indicated that disability, invalidity and unemployment benefits must be taxed. Who would ever have though we would see the day when a Fianna Fáil-led Government would put a tax on sickness? I thought I would never see it. They have heralded themselves as the saviours of the socially deprived.
There has been much triumphalism over the extension of the tax bands and the reduction in rates. These moves are welcome but personal allowances remain virtually unchanged. A single taxpayer will move very quickly into the high tax band. It cannot be construed as imaginative tax reform. That the Minister did not touch mortgage interest relief is welcome. He had been warned on many occasions not to tamper with it. How could the Minister contemplate the idea when the Government have totally reneged on their commitment to housing? There is a severe crisis in regard to local authority housing and up to 30,000 people are on local authority waiting lists. The Minister knows that the Government have no remedy to alleviate the distress of these people. The Minister for the Environment announced on 14 February last a great social plan for housing. So far this has been a sham and a farce. The Minister abolished reconstruction grants which had provided a lifeline for many people. Houses were done up and this enabled people to move off local authority waiting lists. This was an imaginative scheme. The Minister should reintroduce reconstruction grants with some modifications to ensure that people on local authority housing waiting lists get first priority. If we are to resolve current difficulties we must consider imaginative proposals. It would have been suicidal for the Minister to have tampered with mortgage interest relief.
The Minister has left VHI relief untouched. One of the crazy, hare brained ideas in the Programme for Economic and Social Progress document was to bring 15 per cent of the population into the system where they would be entitled to treatment in a public ward of a hospital. The Minister knew this was a sham and that many of these people were covered by VHI. The health system would be totally incapable of coping. I welcome the decision not to impose VAT on charitable organisations who donate medical equipment to hospitals. While this is laudable it is also a sad commentary on our system of health funding.
There would appear to be an element of begrudgery in the budgetary provisions as they affect the middle and higher income tax brackets, people who have succeeded in business, when over the years such business people were given incentives because of our severe taxation system. The incentive that existed hitherto in regard to the provision of shares in companies and the payment of dividends to their employees was an imaginative one affording people a share-holding in their companies. This incentive has now been eroded. Many export-led companies who in the past enjoyed a ten per cent tax on dividends will henceforth be subjected to a 48 per cent tax imposition. The general manager of a progressive company contacted me this morning to complain about this, contending that it was a total contradiction of the policy that had obtained over the past seven years when the IDA and political commentators generally encouraged such people to take shares in their companies, to have a stake in them. This budgetary proposal, which will yield only a small amount of revenue, will act as a deterrent to people having a stake in their companies in the future.
Neither can I reconcile that decision when considering what has occurred on the jobs front. Perhaps the Government and Ministers have anticipated that they will be unable to attract additional overseas industries here. When one reads the Culliton report, when one talks about jobs and listens to the moral righteousness of the Minister for Industry and Commerce, indeed to the overall moral righteousness of the Progressive Democrats, it would appear that the Minister for Industry and Commerce remains totally unscathed by criticisms of his lack of achievement in the creation of jobs. In 1991 only one overseas industry was approved for the entire mid-west region, along with north Kerry and southern Offaly, which had come within the former ambit of the SFADCo mandate, now the responsibility of the IDA with regard to overseas industry. The industry to which I refer is one that established an advance factory in my home town of Newcastlewest. I like to think that even that would not have been established were it not for my constant vigilance and consistent requests to the IDA, SFADCo and the Minister for Industry and Commerce in order to alleviate the position that had obtained there. Is it not a shocking indictment of a Minister that that has been the net achievement, a possible 20 additional jobs created by overseas industry within that one company before Christmas? I leave people to analyise that commentary on the Minister for Industry and Commerce and his achievements in relation to his home scene.
It is principally on the jobs front the Government stand indicted when one analyses this budget. The Minister gives with the one hand in the reduction of the tax bands but quickly takes it away with the other by increasing the VAT rates. The Minister has contended that, in an effort to harmonise EC VAT rates he has found it necessary to increase the 12.5 per cent rate to 16 per cent, highlighted all the more when one considers the scenario created by the Fianna Fáil Party a few years ago in relation to the then budget. Have we not become very tolerant people when we observe VAT imposed on clothing and footwear for adults being increased from 12.5 per cent to 16 per cent and the rate on repairs and servicing of cars being increased, again, from 12.5 per cent to 16 per cent; when we hear the Minister in his Budget Statement extol the virtues of a reduction of excise duty on cars leading to a saving of approximately £300 on an average car costing £12,000 — which has always been excessively priced anyway — when we know that people who need their car to travel to and from work will not be able to afford a new one and that such people will be savaged by a road tax of £200 in addition to having to pay extra for the maintenance of their cars? The only concession such a motorist will enjoy from this budget will be a reduction in the cost of petrol. I suppose one must be thankful for small mercies. Nevertheless the Minister gives with one hand and takes with the other, which would appear to be the case in regard to our hard-pressed motorists.
Is it not ironic also that the road tax should have been increased in this budget when we remember the halycon days of 1977 when in the sale of the century, the great jobs offer, Fianna Fáil, in order to get back into Government, mortgaged everything and turned to the electorate saying: you will have no road tax; we will see to that. I remember at the time young owners of Honda motorcycles saying to me: we will vote for Fianna Fáil because they propose abolishing the road tax, even though what they were then paying was minimal. That was the type of politics engaged in at that time. We have turned full circle now when Fianna Fáil, rather than seeking a smaller increase, have decided to increase road tax by 20 per cent. Perhaps that is political maturity.
We must remember that the prime creator of wealth in this country is agriculture. I am sure that any farmer reading the provisions of this budget will ask himself: what is in it for me, and he will observe there is very little. The Programme for Economic and Social Progress, this great marketing blueprint introduced last year, which contained a package of promises, should have been entitled a programme for wages because the Government have already reneged on many of its promises and commitments. We have seen the scenario of the public sector wrestling with the Government, forcing them to accede to their demands. They were right to do so since they had been given such promises and commitments under this programme and had had their expectations so fuelled.
In 1991, under the terms of the Programme for Economic and Social Progress, farmers had been promised enhanced headage payments to the tune of £12 million, which commitment was quickly reneged on by the Government. In his Budget Statement, the Minister said he hoped this year to provide £2 million and in subsequent years more but went on to say that, before deciding to expend that £2 million, he would have to identify the priorities within agriculture. Therefore we must wait to see how the Minister, after consultation with the social partners, will spend that £2 million. Indeed many of the commitments contained in the Programme for Economic and Social Progress have been postponed to 1993. For example, it is envisaged that there will be a pay increase of up to 8 per cent for the public service in 1993, that there will be a dramatic reduction in deposit interest retention tax this year, and that we will lose out in 1993 on VAT at point of entry. This leads me to wonder whether in this budget the Minister has grasped the nettle or has decided to postpone all of the current problems to 1993. We must remember this is a Minister who has been praised by the media for producing an imaginative budget. I would contend that he has put off many problems until 1993. Perhaps he anticipates a general election this year. Perhaps the price of the sins to be committed in the year 1993 will not be realised this year by the electorate, who will pay the price in the future. Is it not all the more a farce when one considers that immediately preceding this budget, all the media leaks were contending that this would be the harshest budget in Irish history? Is it not all the more farcical when we are told there must be no leaks from this Chamber in relation to the contents of the budget when, immediately preceding its introduction, economists could predict many of its segments. In the light of the provisions of this budget one cannot but question all the media hype that preceded its introduction.
We all know the problems in relation to health, the waiting lists and so on. As my colleague, Deputy Michael Noonan, rightly asked yesterday, will this budget reduce the waiting time in the Mid-Western Health board area for hip operations which is now two and a half years?
This is a budget of failed opportunities, one on which an unnecessary gloss is being put by the Progressive Democrats. They may have achieved minor concessions but in trying to achieve a compromise between the Progressive Democrats and Fianna Fáil they have fallen between two stools. In a short time when the electorate have a chance to analyse it they will see that for themselves.
The budget introduced yesterday by my colleague the Minister for Finance provided a clear and unambiguous statement that this Government remain on course. We remain committed to the high objectives which we have set for ourselves and the agreed programme for Government. All instruments and resources at our disposal will be dedicated to the work which is in hand. To critics who have called into question our capacity to tackle effectively the economic issues which face us as a nation, this budget is the clearest signal of our resolution and that the will and commitment to carry through what we have started — the restoration of order to the economy and the settlement of the foundations to sustained economic growth — are steadfast.
The achievements of recent years have been remarkable in many respects but severe problems remain. No member country of the Organisation for Economic Co-operation and Development has a record which compares to Ireland's in relation to the public finances. Indeed, the last two years provide important lessons. In 1990 we saw what our economy is capable of achieving when we maintain discipline at home and take maximum advantage of favourable circumstances abroad, witnessed by record growth in our gross national product of some 7.5 per cent. Indeed, it took some time after the year finished before economists could reach an accurate figure, it was much lower than what they had been writing about. Nineteen ninety one showed that in the face of tremendous uncertainty, a worsening world economic climate and international recessions we were able to hold our nerve and maintain those financial disciplines which link us now and which will bond us in the future to our European partners. Maastricht is relevant in that context. Many of the key economic indicators are strongly positive. Inflation is low and with our commitment to the position of the punt in the European Monetary system will remain so. These factors provide a secure planning framework for much of our international trade. The balance of payments is positive. I was interested to note that The Economist, dealing with external balances, listed 16 countries who have a deficit on their current account balances and seven that are positive, the seven being: Denmark, Ireland, Japan, Belgium, Luxemburg, Holland, Switzerland and Norway whereas the United States, Britain, Portugal, New Zealand, Australia, Finland, Spain, Canada, etc. have deficits. That is an indication of the health of our economy. As the House is aware Exchequer borrowing is under control. These are not just remote academic concepts. They are the building blocks for future and sustained prosperity.
Turning to the budget itself, I think reasonable people will recognise that the budget is a coherent one. It does not seek solely to deal with large economic aggregates. It takes account of people, of their problems. It takes account of their needs and of their aspirations. Nobody denies that we have a grave problem of unemployment. Emigration has affected families throughout the country and the Irish diaspora across the world is a fact of life. I am not getting that information from the radical Sheikh, I know it, as I have told this House already, from my own family. The budget recognises all of this and seeks by further increments to deal with and to alleviate the problems which we face.
We are a caring society and this is a caring Government. This is reflected in our commitment to the maintenance of the value of social welfare payments which as my colleague the Minister for Finance has noted have been more than maintained against inflation. Long term rates of social welfare payments now exceed the priority rates recommended by the Commission on Social Welfare while there have been improvements also in short term rates. We shall continue to make progress in this area and this progress is not grudgingly made. It is an earnest of our commitment to ensure that economic progress and the fruits of economic progress are shared with those who, through no fault of their own, do not have access to them. Support for the family is a particular feature of our concern and I am particularly glad that additional improvements in family income supplement have been possible.
We do not seek to duck the unemployment issue or the problems of the unemployed and the budget makes substantial efforts to bring about improvements in this most difficult, most human and most intractable of our economic problems. A number of major initiatives was announced by the Minister for Finance yesterday and I am confident that they will have the support of the House. In stimulating employment we have to be mindful that our initiatives take account of the capacity of the economy to support them and to ensure that their impact is meaningful and productive. In this budget we seek to confront the problem of rising unemployment and to accelerate the provision of new employment. Our efforts are realistic. We are introducing new employment and training schemes which 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. We are providing an in-company job training scheme which will provide training on the employers' premises for up to 10,000 people who have been on the unemployment register for a similar period. The trainees will receive standard training allowance. These schemes will be taken forward in conjunction with our social partners. This social partnership which has been developed is another great achievement of the Government since 1987. They will receive significant support from the European Community. These are positive realistic efforts which I hope will serve to relieve the misery associated with unemployment and to release the potential available in individuals.
Together with these relief measures, the Government will be rigorous in looking at structural difficulties and structural obstacles in the way of job creation. In this we have had the major input of the industrial policy review group published recently. The recommendations contained therein will be pursued with vigour and in so far as they relate to my own responsibilities I am absolutely committed to this task.
We should remember in this context, and acknowledge, that those who wish to work hard want and are entitled to seek reward for their efforts. Much of our emigration has been of bright young people and sometimes the tax system was blamed for their departure. The budget marks a further substantial correction in this area of Irish tax policy. This will increase the incentive to contribute to our economy and will make staying at home more attractive to many of those tempted to leave for other pastures.
Turning to my own portfolio and the many responsibilities at the Department of the Marine, I shall seek during 1992 to deploy the resources, human and financial, which are at my disposal to achieve a number of major ends. First, I shall seek to underpin the productive capacities of the economy. This will be achieved through infrastructural developments at ports and harbours, a vital factor for an economy which trades internationally such a high proportion of its gross national product. Direct investments will also be made into the shipping sector and, through BIM, into the further direct development of the fishing and aquaculture industries. Development will also be supported through research at my Department's Fisheries Research Centre and, for inland fisheries, through the efforts of the central and regional fisheries boards.
Second, provision for marine safety is a major priority in my Department's spending programme. I will seek to maintain the momentum of the programme which I initiated, the most significant since the foundation of the State, to re-organise and to improve radically the marine safety infrastructure of the State. I identify this as one of my most important duties.
Thirdly, in keeping with my own philosophy, and in line with much current thinking, conservation and environmental protection efforts will be enhanced through research work, the optimum management of fisheries and the adoption of the highest international standards for the prevention of pollution. I will also bring my concerns here to bear on the assessment of projects which require approval from me before they proceed.
Given the national imperative to maintain the improvement in the large economic aggregate in the interests of sustainable growth in the future, financial discipline is a fact of life in my Department as in other Departments. This concentrates the mind and necessitates a reordering of priorities from time to time.
My overriding priority as regards sea fisheries in coming months will be to press Ireland's case for improved allocations of fish stocks under the terms of the Common Fisheries Policy which is at present under review. I am convinced that Ireland has a uniquely strong case for seeking additional quota allocations given in particular our low share of stocks in the Community as a whole, having regard to the size of our economic zone and also the severely under-developed state of the Irish fishing industry when the CFP quota sharing arrangements were established. The difficulties that lie in the way of Ireland achieving upward adjustments of quotas should not be underestimated. They used to say "give a dog a bone" but "give a cat a fish" might be more appropriate in this circumstance. We cannot get an increase without others taking a decrease. Any advances that I can make can only be achieved through other member states being prepared to give us some of their existing rights and the House is aware just how anxious they will be to do that. Nevertheless, I can assure this House and the industry that Ireland's case for a more equitable sharing of resources will be pursued vigorously both within the Council and through all other appropriate channels.
In pursuit of further development I have, for example, introduced within the last year a limited fishing boat licensing scheme designed to encourage a greater take-up of Ireland's under-utilised whitefish quotas off the south-west and west coasts and to generate increased processing activity on shore. White fish, some of which fetch £6,000 per ton, are not being caught whereas we are catching mackerel which is fetching £150 a ton and herring which is fetching £100 a ton in their tens of thousands. A total of 20 licences has been approved within the last month and I am pleased to report that the economic benefits of this initiative are already beginning to be evident.
While the provision for BIM in my Department's Vote for 1992 has reduced below what I would like it to be, it is necessary to view this in the context of large scale investments in previous years and also in the context of a sector which we wish to see more and more standing on its own feet and turning for finance to other sources. The foundations for this have been laid in previous years through investments in new assets and infrastructures. We will follow closely developments during the present year and seek the best value possible from State investment, with special emphasis on the creation of sustainable employment.
Last October I announced the launch of Ireland's operational programme 1991-1993 under STRIDE, Science and Technology for Regional Innovation and Development in Europe. The programme, which is, in essence, a funding package for the development of Irish natural resources, has as its main component a large marine sub programme. The marine sub programme of STRIDE has a planned total investment of £8 million and addresses the need to build up national capability and expertise in marine science and technology.
STRIDE funding is being well spread through the key marine centres of expertise in the country which are: my Department's Fisheries Research Centre; the Martin Ryan Marine Science Institute at University College Galway; and the Hydraulics and Coastal Management Laboratory at University College Cork. In addition, the upgrading of the national marine research vessel, the Lough Beltra, and the establishment of a national marine data centre will have positive implications throughout the marine research community.
The allocation of £3.5 million for developments at fishery harbours in the Estimates for 1992 ensures the continued vigorous implementation of my Department's fishery harbours development programme. This programme, which was launched in 1990, has seen major improvements at strategically located harbours around our coast, including Killybegs, Greencastle and Dingle. This year will see further progress on the ongoing development works at Rossaveal, Greencastle and Roundstone and the commencement of some new projects, including Keelbeg, Union Hall, in County Cork and Burtonport, County Donegal.
The money invested in these projects is, in my view, money well spent. It attracts EC Structural Funds assistance under the operational programme for rural development; it builds up the infrastructure of the most economically disadvantaged areas of the country; and it ensures that the facilities exist to maximise the contribution of the sea to the national economy.
Our commercial ports are of crucial importance to our economy in the run up to the completion of the internal market. Our commercial ports handled almost £17 billion of Ireland's total external trade of £26 billion in 1990 and over £9 billion of Ireland's total export trade of £14 billion in the same year, highlighting their key role in Irish trade and industry.
The Government have sought to ensure that Ireland will have the necessary port infrastructure to compete on equal terms with other member states in the completed internal market. Indeed, the management in ports should be aware of the necessity to be competitive and arrange their industrial relations and so on accordingly. Projects approved under the Operational Programme on Peripherality 1989-93, OPP, include the provision of new and improved handling equipment, extra berthage, docking facilities and port access routes, both road and rail. Total capital expenditure on commercial ports under the OPP will probably exceed £70 million by end December 1993. The bulk of the expenditure will occur at the four main commercial ports, Dublin, Cork, Waterford and Rosslare.
What about Dún Laoghaire?
That is my port. In 1991, I had the pleasure of announcing that EC grant-aid totalling £4.346 million was paid to ports in respect of work undertaken on projects included in the OPP.
It is estimated that capital expenditure on commercial ports in 1992 will be in the region of £27 million. Most of the work undertaken by harbour authorities will be on projects included in the OPP and thus will be eligible for EC grant-aid. This expenditure is on projects which will contribute to a substantial improvement in the operation of our ports. I will seek to ensure that the maximum level of EC grant aid available will be paid to the harbour authorities concerned.
I am keenly aware of the parallel need to ensure that our ports are competitive in all aspects of their operations, including their administration. As a parallel strategy to the port development works mentioned, a major review of the policy and legislation governing commercial harbours and pilotage is underway.
Also in the context of Irish trade and its efficient conduct, in conjunction with my colleague the Minister for Tourism, Transport and Communications, I am continuing to progress Ireland's application for EC aid for access transport, not an easy thing to get, under the Community Support Framework. It would be premature to forecast the outcome of our negotiations but it is my aim to seek appropriate EC funding for the fleet expansion which our economic recovery demands and cope properly with our peripherality requirments.
As I mentioned, I am committed to the continued improvement in our marine safety infrastructure. In this connection, the Government's acceptance of the main recommendation of the report of the review group on air/sea rescue services, the Doherty report, is an earnest of this. Notwithstanding financial constraints generally, we have devoted substantially increased resources to this area.
I am glad in this regard to report that on Wednesday, 20 January last my Department's permanent helicopter, a new sophisticated one, became operational. The new aircraft, a Sikorski 561, operating out of Shannon on a 24 hour basis is the most up-to-date medium range search and rescue helicopter in the country. The helicopter is capable of rescuing up to 15 survivors within a 200 nautical miles radius and of carrying more over shorter distances.
Since the helicopter service came into operation on 15 July 1991, the service has responded to 65 rescue missions and has saved 48 lives. Many of these missions were carried out in atrocious weather conditions. The raw statistics are evidence of the success of this service.
The economic course for this country is now firmly set. The Maastricht agreements on European union, which include agreement on economic and monetary union, will permit Ireland, along with our Community partners, to consolidate our economy with continued low inflation and sustained growth. The Community will proceed to the final stage — a single currency — in due course. But to achieve the maximum benefits from this great endeavour will require discipline, relentless discipline, in order to meet the conditions necessary on key factors like inflation and borrowing. The budget keeps us on target in that regard.
I said during my remarks that the Government were committed to doing all in their power to tackle the major economic and social problem we face, that of high unemployment and the concomitant emigration. I repeat that the budget is not just about numbers and statistics and the dry language of the economic forecasters. It is about people and it is about applying the resources and the energies and the talents of Government to ensure that ordinary people through their efforts can find work and reward.
I will conclude by mentioning a meeting at which a number of people spoke on the European scene. They pointed out something which I am adding by way of coda to what I said already, that the sole and only values acceptable should not, however important and dominant it is in economic thinking, as the American Vashinsky said at the same meeting, be the acquisition of goods and wealth as it cannot be an end in itself. There must be an added element but we have taken care of the main structural portion for the development of the economy.
I am sorry I cannot be as enthusiastic a supporter of the budget as the Minister for the Marine or, indeed, the Minister for Energy, which is understandable. However, I have other reasons for not supporting it. I do not accept that it is an imaginative, colourful or inspirational budget. It lacks all those qualities. I regard it as a dull, colourless and not very inspiring budget. As our party leader, Deputy John Bruton, said, it is a budget of accountancy, just tidying things up at the end of the year. It appears that business was not too good during the year and it appears that it will not be great this year either. In order to give an impression of being at ease, the accountants got together and decided to put a construction on it which they hoped would lull the people into a sense of security for the next 12 months.
Deputy John Bruton raised one important feature, the concept of borrowing from the future or postponing to a later date a number of issues which must be tackled. He identified £1.3 billion which must be found next year or the year after, by one means or another, to continue to run the country or to bring it into line with our colleagues in the European Community. That is a peculiar thing and it is a trait in budgets and budgeting which has emanated from the Progressive Democrats and the Fianna Fáil Party over the last number of years.
In 1977 the theory was to give the revenue from next year and the next decade to the present generation. It now seems to have changed slightly and we are taking away from future generations the means of providing themselves with the services they should rightly expect. The Government are bringing forward various payments — they have done so over the past three or four years — to such an extent as to endanger the entire fabric of the economy. In two or three years' time the precise danger of that kind of policy will be seen by everybody. For example, if a couple of hundred emigrants had been in the public gallery yesterday I wonder what they would have thought about the budget. Mind you, they could be pardoned for thinking that this country was an up and running and going concern, that everything was perfect, because at a time when 300,000 people are unemployed the Government decided to tax unemployment benefit. That is ironic at a time when so many of our people have had to leave because they do not have jobs. They leave the country because jobs are taxed out of existence and because they are not wanted here.
The Government over the last couple of years specifically ensured that not only do they not have jobs but no houses are provided for them either. Islington Borough council achieved the ultimate a couple of weeks ago when they bought houses for Irish emigrants so that they could live in this country. It is a sad reflection on any Government in the European Community that the people who were virtually driven from this island can only come back to live here when they are housed by another government's local authority. Fianna Fáil, the Republican party, must be really struggling with their name at present. They must really worry about their structures and traditions and what they are doing for the people. The same applies to the Progressive Democrats who, of course, originated in the Fianna Fáil Party.
There is nothing inspirational in the budget, there is nothing for our young unemployed, the sick, the homeless or anybody else mentioned in various election manifestos over the last five or six years. There is nothing but a continuation of the same with a further exacerbation of the problem caused by the system of borrowing from tomorrow and of postponing difficult decisions until a later date. The culmination of those two trends will ultimately leave the country in a far worse position.
What happened in the motor industry to offend the Government? Members of the present Government took part in a general election campaign in 1977 and extolled the virtues of motoring free of tax. Stickers were produced to illustrate the fact that the public would not have to pay car tax and the public, naturally, accepted the offer. They were told it had been well costed by economists; I recall a certain economist pointificating on the Sunday before the general election in 1977 that the banks said the Fianna Fáil deal was on; we found out since that it was not. I have scant regard for the views of some experts and economists since then. I am quite sure many people have had plenty of examples and opportunities to doubt the authenticity of some of the projections and figures produced by experts.
In the motoring trade not only has excise duty been shifted around to give an impression of gaining on the one hand while perhaps losing on the other, but motor taxation has increased by 20 per cent while at the same time the public are experiencing the negative aspects of being free of road tax for four years in the seventies. The road network has disintegrated but the Government now tell the motoring public that they do not intend to provide new roads because there is nothing in the Estimates which allows for this. To add insult to injury the Government intend to charge more for travelling on those roads.
The Government know that the motor trade is not doing well at present and that it has been affected by a number of factors, some of which can be dealt with by the Government. The Government obviously think motorists are getting off too light. If the potholes on our roads are not enough to slow them down the increase in motor taxation will do so. That is the message from the Government to motorists.
I am glad the Minister for the Environment is in the House. I hope he will take on board some of my remarks and address them. As my colleague, Deputy Finucane, said on St. Valentine's Day last year, the former Minister for the Environment announced the introduction of a housing programme. The public have been very disappointed at this much vaunted housing programme which was launched at considerable cost with the printing of brochures and placing of advertisements in the media — the cost of launching the programme probably amounted to the cost of building ten houses. This programme was entitled "Flynn's plan for social housing" but nothing has happened in regard to housing since then. Local authorities who bought houses, held them for a time, and rented them, are being financially strangled. No legislation has been introduced which would allow local authorities to proceed with the legal agreements. I ask the Minister not to further annoy the people who are affected but rather give them some cause for enthusiasm by introducing the legislation without delay. He should ensure that whatever legislation is introduced will be enforced. Enough time, effort and energy has been wasted and hours lost at a huge cost to the taxpayer in circumventing the labyrinth of notions and theories tossed up by the social housing plan during the past 12 months. All this has been to no avail and I ask the Minister to seriously address the problem.
There was nothing in the budget about which young people could be enthusiastic. The two parties in Government have spoken about the need to inspire people and so on. I wish to refer to another political objective. I worry about political objectives because the one thing which has cost this country dearly during my time in public life, and for some time before, has been the pursuit of political objectives by parties at the expense of the economy. That happened on a number of occasions. I referred earlier to what happened in 1977.
Some years ago the Progressive Democrats put forward proposals for lower taxes. At the time everyone asked how this could be done in view of our high level of public expenditure and our national debt. However, the Progressive Democrats said it could be done. Our taxes are being reduced but this is of little benefit to people. Every year at budget time we note the huge benefits being given to taxpayers but we gradually find out that the major benefits are given to people who scarcely come within the tax net because they do not earn enough money. That is what is happening now in relation to those in the lower tax band. In a few years time the lower rate of tax will be 25 per cent but there will be nobody in that band; everyone will be in the 48 per cent band. That is the way we are heading.
I wish to refer to the unfortunate people who took out endowment mortgages during the past few years. These mortgages are always well marketed by insurance companies building societies and the banks. Endowment mortgages are of considerable benefit to a number of people, particularly those in the middle to higher income group. I am sure these people are worried by the Minister's proposals in the budget. People in the middle income group are not safeguarded any longer, they cannot be sure of their jobs and do not have any excess money to play around with at weekends. Many of them are working to a very tight budget because interest rates have been excessively high. Indeed, apart from one period in 1987-88, interest rates have been excessively high over the past number of years. Many people changed their local authority mortgages to endowment mortgages on the advice of some members on the Government side of the House. The repayments on their endowment mortgages have exceeded their worst expectations, and this budget will further exacerbate their problems.
I cannot understand why the Government are so enthusiastic about the budget, which I believe does nothing. It does not contain any national plan and does not attempt to deal with social issues or the unemployment problem which is growing all the time. At the rate things are going, the whole nation will soon be on FÁS schemes. The budget contains no plan for the future. It is an absolute disgrace that there is no national plan which will inspire people. So-called experts, economists and others constantly tell us that the projections for the next six months are on target and that the projections for the last six months would have been on target if certain things had happened. When the Government say that the projections for the previous six months could have been right if X, Y and Z had happened we know the targets have gone off the rails. The projections should be on target and the Government should be in a position to tell the people where they see the economy going in the future.
At a time when almost 300,000 people are unemployed and the level of emigration is growing there is serious unrest and scepticism in the country, particularly among younger people, about politics and the institutions of the State. People expect, from past experiences, that they will be let down, misled and deceived if they listen too carefully to what happens in the institutions of State, for example, this House. I blame the Government for contributing largely to that feeling of annoyance among people. The Government should seriously consider working out a plan for the future.
I wish to refer to what happened in regard to the Programme for Economic and Social Progress. The various groups sat down before the budget and worked out an agreement which in effect strangled and hamstrung the Minister for Finance. That agreement laid down objectives which cannot be lived up to because representations have been made by various interest groups regarding the non-pay elements of it. This seems to indicate that there are several traps and pitfalls in this agreement. If the commitments in the Programme for Economic and Social Progress have been agreed between the Government and the social partners, how can the Minister for Finance put forward a budget which will do something for the country and inspire people? There is a need to look at the present system of collective bargaining. I am in favour of collective bargaining but not to the extent that it precludes all flair and imagination by a Minister preparing a budget and, ultimately, a national agenda.
I would now like to refer to agriculture. Agriculture was mentioned in the budget in relation to the refund of VAT, but there is nothing about disease eradication or the promotion of jobs in the food industry. Other European countries are investing vast amounts of money in the food industry but there is nothing to encourage job creation in the one area to which this country is particularly suited that is food production. No warnings were taken on board as to the numbers unemployed and no attempt was made to try to come to grips with that problem or to concentrate on what we do best, that is producing food.
There is no mention in the budget of housing, roads. In the area of taxation money is given with one hand but taken away with the other. A long budget speech was delivered by the Minister, who is a very decent man and sincerely believes in what he is doing, but in terms of setting the country's agenda, grabbing people's attention and ensuring that those who are listening to and looking at what goes on in this House have our confidence, there is nothing in the budget. That is one of the reasons people have become so sceptical. They are told by the experts, economists and Ministers that everything will be much better in the future, that they will be much better off, but as the year progresses they find that far from being much better off they are much worse off.
In conclusion, I do not know why the Progressive Democrats suddenly want to claim credit for this budget. I suppose the Fianna Fáil Party will feel somewhat assailed by the fact that the Progressive Democrats want so much of the credit for it. I would not wish to claim any credit for such a budget or to be associated with it because many people will be affected by it in a negative way and very few will be affected by it in a positive way.
I am sure the House will have learned with regret of the decision of the Taoiseach, announced this morning at our parliamentary party meeting, to retire from the office of Taoiseach. I would like to record my appreciation of his great contribution to the people of Ireland, of his great work on behalf of the people of Ireland, both in Europe and beyond, and also his exemplary statesmanlike behaviour on all occasions in this House. He was a supreme parliamentarian.
I am pleased to have the opportunity of contributing to this year's budget debate. The annual budget provides the Government with an opportunity to set out their strategy for economic development for the coming year, to introduce reforms to the existing taxation system, to provide incentives and encouragement for further economic development and to increase payment levels and introduce schemes for those who rely on the social welfare system. I certainly agree with Deputy Durkan that we all have to be concerned about creating jobs and about the level of unemployment, but I could not agree with him that there is nothing in yesterday's budget to tackle the very serious problem that exists. For example, two new programmes, the employment incentive programme and the training programme, which will create 25,000 jobs are innovations of this Government and will be appreciated by the people. Tax reform will help to create an even better environment for people to find jobs and to create more work. The budget is positive and it has boldness, compassion and resoluteness. The budget, as measured by the usual economic criteria, will meet whatever yardstick may be used to judge its effectiveness.
The Government's performance since 1987 shows that they are intent on achieving their main objective of ensuring that the country achieves sustainable economic growth which will lead to increased employment and higher real incomes for all sectors. Yesterday's budget builds on the advances made over the last number of years. The measures announced are in keeping with the review of the Programme for Government which has the major objective of promoting a comprehensive series of measures that will effectively tackle the unemployment crisis and ensure greater equity and social justice. Among the objectives advanced in the budget are the maintenance of strict control of public spending, progress in continuing pro-jobs tax reform to promote employment and further improvements to social welfare payments and health allowances for those in need of these services and who are the most vulnerable and deprived sectors of the community.
However, the budget must be seen as part of the Government's strategy for the enhancement of the economy. Since 1987, consistent policies have been implemented by this Government. This careful management of the national finances has enabled the Government, among other achievements, to reduce taxes, introduce reforms in the tax system and increase social welfare benefits over the years. Yesterday's budget continues this pattern which will lead to the creation of a better climate for investment and job creation. When we consider the progress made since 1987, such as the reduction of the ratio of Exchequer expenditure as a percentage of GNP from 54 per cent in 1986 to 42 per cent last year; Exchequer borrowing requirement as a percentage of GNP down from 12.7 per cent in 1986 to 2.1 per cent last year; low inflation rates; moderate interest rates and a favourable balance of payments, we must have the confidence to maintain and improve these favourable economic conditions. If we do, I am confident that our employment position must also improve.
After two years of good economic growth, the growth in GDP in 1991 was about 2 per cent. The slight disimprovement last year was due to recession in some of our main trading partners. Unemployment growth last year was due to a cessation if not a reverse of net emigration but it was not a result of a fall in employment. The recently published report of the Industrial Policy Review Group stated that "there are no short term solutions, no quick fixes and no soft options left". This is why the Government must stick to their programme which, together with the benefits arising from the Maastricht Summit, should provide confidence for the future. We must all work together to create and build that climate of confidence which brought such good economic growth and increases in employment in the 1987-90 period.
I am amazed at the negative attitudes expressed by the Opposition parties to the budget. They do not seem to understand that everything cannot be put right overnight, as the available resources are not limitless. The Government have to act responsibly in the national interest.
The budget is a well balanced set of measures which provides for increases in assistance to the less well-off sections of our community, improvements in income tax rates and tax bands, further reform of the tax system and improvement in the climate for employment creation on a broad front, as well as the measures I have referred to which will directly create 25,000 jobs in the coming year.
The budget also does something which I regret to say the parties opposite did not do when they were in power. It takes account of the need to keep a balance between prices on this side of the Border. and those on the other side of the Border. The economy of the Border towns was almost wrecked in the years 1982-86 and in 1987 my colleague, Ray MacSharry, as Minister for Finance, introduced measures which reversed that position and brought more realism to the Border area with the result that it is now uneconomical for people to cross the Border to buy goods.
They will go across to buy cigarettes.
This budget goes further and reduces the price of petrol, with effect from the month of May. The drafting of a budget is not an easy task for a Government but this Government have got the balance right. I will not itemise the measures for social welfare but if we look at social welfare as an example, the general increase is well ahead of inflation and increases have been made in a number of areas that are of special importance to those who are less well-off.
I want to refer to some of the areas for which I have responsibility. The various measures announced in the budget will assist the maintenance of growth in the economy this year. It is estimated that GDP growth will be around 2¼ per cent, which should stimulate further increases in employment. This is good news for the construction industry.
Almost all the increased spending under my Department's aegis arises on capital services. I am delighted that gross voted and non-voted capital spending will rise by £50 million or 12 per cent this year to £478 million. This is a reflection mainly of the increased funding being made available for national road improvements under the terms of the peripherality operational programme, up £27.5 million or nearly 20 per cent to £167.5 million, and rising levels of activity on social housing schemes, up £41 million or nearly 40 per cent to £145.5 million.
The level of activity may be rising but there are no houses.
The increase in capital spending by my Department is mirrored by the overall capital provision affecting the construction industry which will amount to £1,120 million in 1992, an increase of £81 million or nearly 8 per cent on the 1991 provisional outturn. This increase in investment will generate additional direct jobs in the construction industry and employment will also rise in the areas providing services to the industry, for example, the professions, suppliers, etc.
Apart from my Department, the principal increases are in the following areas: the energy programme will increase by £44.7 million which reflects increased investment by Bord Gáis in the construction of the gas interconnector, as well as investment by the ESB; Education expenditure — my colleague will elaborate on this — will increase by almost £14 million; and investment in health facilities will increase.
It is generally accepted that the wellbeing or otherwise of our economy is directly relevant to the construction industry. The construction industry serves the economy. Investment and employment in it derive from economic progress.
Deputies will recall, that during much of the eighties, the industry was in decline due to the general prevailing economic difficulties. Employment in the industry was down to about 70,000 at the end of 1987. But that position changed in 1987. Since then there have been significant changes in the fortunes of the industry — changes which were brought about by a general improvement in the economy and more enlightened and prudent management of the public finances from 1987 onwards. Output in the industry increased by 8 per cent in 1989 and my about 10 per cent in 1990. Direct employment increased in consequence; there was a 10 per cent employment increase or 7,000 extra jobs between April, 1989 and April 1990. While a small reduction is estimated to have occurred last year, I am confident that there may be modest growth in 1992.
The Government appreciate the significant contribution the industry makes to the economy especially in relation to employment. Consequently, the Government excluded the industry last year from the increase in VAT from 10 per cent to 12.5 per cent and again from the further increase this year. I know the industry will benefit from this decision. As to the future, the performance of the industry during the period of the Programme for Economic and Social Progress will mirror general economic progress which determines the climate for private investment and public expenditure. I welcome the Government's decision to extend the final deadline date for benefiting from section 23 relief for development in progress until 31 July next. This will ease the pressure on the industry and its workforce alike.
One of the most visible achievements of the Government over the past few years has been the outstanding success of the urban renewal programme. One of the yardsticks used for measuring the success of the scheme is the level of development activity and investment generated in areas shunned by the private sector. In all, the urban renewal programme has generated some £627 million worth of private——
Where?
——sector developments between projects completed, in progress or in planning. In response to Deputy Durkan, let me add the Custom House Docks Development in Dublin is valued at some £400 million. This investment provided over 13,000 construction jobs as well as generating a substantial amount of long term jobs.
What about Kildare?
I am keeping in touch with the progress of the negotiations between the Custom House Docks Authority and the site developer on a new agreement which would complete the development. Kildare has the best water supply in the country. If some of the Deputy's friends did not complain about it they might attract more people to the area.
The Minister met them last week and he ought to know the position.
Early agreement is desirable so that additional employment both in the construction of the balance of the site and long term employment can be created. It is clear that without the incentives offered under the urban renewal programme, the vast majority of these projects would not have gone ahead and decline in these areas would have accelerated. I firmly believe that the combination of incentives and the intensive promotion of the scheme by the local authorities, together with low inflation and stable interest rates, has succeeded in convincing private developers and investors to review their attitude that particular areas in our inner cities and towns were unmarketable and unworthy of investment.
The importance of an adequate road network to economic development has been often stated, as has the particular importance of the road network in our own case as a small island nation, with relatively short average journey lengths and a dispersed population. Stating the need for investment in our road network is not enough — resources have to be provided, priorities identified and actual works undertaken. This process is now well under way through the operational programme on peripherality.
Where? Around Dublin?
I will tell you shortly. The programme, for which my Department is lead Department, provides for a total investment of almost £900 million, in 1992 prices, in transport infrastructure over the period 1989-93. Roads, which are by far the most significant mode of overland transport for both passengers and freight, account for almost 75 per cent total investment under the programme. State road grants totalling £261.48 million will be made available to local authorities in 1992 for investment in public roads; £228.48 million will be provided for road improvement works; and the balance of £33 million will be provided for road maintenance. This investment cannot be viewed in isolation but in the context of the programmed approach which has been adopted by the Government, in partnership with the European Community, to the development of the Irish road network.
The provision for national roads is being increased substantially in 1992 with £167.48 million being allocated for improvements compared with £140 million in 1991. This provision will allow progress to be maintained at a satisfactory level in 1992 on a number of major schemes and will also allow work to start on some new schemes. This level of expenditure will also mean that all the available EC aid for roads will be drawn down in 1992.
State road grants totalling £73.3 million are being allocated for the maintenance and improvement of non-national roads. The allocation is almost twice the sum provided for this purpose in 1986. This continuing high level of support for non-national roads is being provided notwithstanding the very serious pressures on Exchequer finances.
My Department recoup costs incurred by 29 local licensing authorities in the registration and licensing of vehicles; in supervising the roadworthiness testing of commercial vehicles by about 100 designated private garages; and in the licensing of drivers. I am glad to say that, despite the overall financial constraints, the Government have increased the 1992 provision by £1.3 million from that published in the Abridged Estimates volume bringing the total to £11.3 million. The 1992 recoupment costs of £11.3 million represents about 5 per cent of the revenue collected by motor tax offices.
The increases in road tax announced in the budget will be offset in part by the decrease in the price of petrol of nine pence per gallon due to the excise reduction. Also, for people purchasing new cars, the excise reduction will mean a saving of £300 on a £12,000 car.
There has been a large investment over the past ten years in water and sanitary services, with almost £800 million spent on projects. We are still faced with a major task if we are to produce water of sufficient quality to meet the stringent standards set by the EC Directives, and of sufficient quantity to provide for the expanding needs of domestic and industrial users. Similarly, although our coastline, lakes and rivers do not suffer the level of pollution experienced by many of our European neighbours, we are obliged to upgrade facilities in order to ensure that our sewage treatment plants comply with the requirements of the recently approved Urban Waste Water Directive.
The Minister should keep going. What about Robertstown?
A sum of £630 million will be channelled directly towards protecting our coastal and inland waterways by installing sewage treatment plants. In recognition of the importance of the action programme and in spite of the current financial difficulties, the Government have provided £72.5 million for expenditure in the current year.
Because of the time limit, I am unable to go into any great detail on housing. There will be an opportunity to discuss the matter in greater detail when the Bill is before the House and we will then be able to highlight the advantages of the social housing programme.
We look forward to that.
The budget was framed against an extremely difficult economic background which made it necessary to make some spending reductions in order to control Exchequer and public sector borrowing. The Government recognise that this will be a difficult year for all sectors but we are determined to protect the more vulnerable members of society to the maximum extent possible. In addition, the income tax reductions will provide extra income for those in work. That should help to maintain and increase demand in the economy, which will help to create employment. I am confident we have struck the right balance in the budget.
One could easily describe the budget as a non-event. It is a lacklustre budget that offers nothing to the 300,000 unemployed people. The Minister recognised the unemployment problem by keeping social welfare benefit increases in line with inflation, but he has failed hopelessly to put in train any direct measures for improved job creation. Not one syllable in the Minister's budget speech gave a ray of hope for the 300,000 unemployed people for the creation of one extra job.
The budget will go down in history as robbing Peter to pay Paul. Perhaps the Minister was not au fait with the serious position here by virtue of the fact that he has not been in charge of the Department of Finance long enough to understand it. Ireland is fast approaching the day when there will be 500,000 people unemployed and only one million people gainfully employed. How could the one million people gainfully employed sustain the other two million of the population, comprising retired people, children and the unemployed? The Minister has failed to give a ray of hope to those who have been cast by the wayside.
Today Ireland has a very well educated young population but there are no jobs for them. The wealth of our nation is its youth and our greatest export now is the human export, our youth in search of jobs elsewhere. We have failed to ensure that the billions of pounds received from Europe since our entry to the EC were channelled towards the creation of employment here to make it a country worth living in. Down the years we have taken the easy way out; the money from Europe has been diverted to non-productive businesses and been gobbled up in interest payments on the colossal debt that hangs around the necks of our citizens.
In the budget the Minister has not given us any hope. It is a disaster for farmers, particularly those in disadvantaged areas. The Taoiseach, and the Minister for Agriculture and Food, promised £12 million in increased headage payments for disadvantaged areas under the Programme for Economic and Social Progress agreed with the farming bodies some months ago. Now the Minister for Finance had reduced that figure to a token £2 million this year. That is a disaster for the beleagured farmers in disadvantaged areas. Where and when will the other £10 million promised to the farming community be paid?
The allocation of an extra £1 million to Teagasc is insufficient, as that body require at least £2.5 million in order to maintain existing staff levels and research stations. The Minister for Finance, the Taoiseach and the Minister for Agriculture and Food have failed to grasp the nettle of the problems confronting our farming community.
I had the distinction of serving on the Cork County Committee of Agriculture for almost 25 years. In that time, the aid given to farmers changed dramatically. There is no soil testing and farmers are obliged to pay for any visit made to their farms by an inspector from Teagasc. As soon as the Teagasc inspector has finished his work on the farm a bill is sent by the Department. We have no cattle breeding schemes and there is no hope of agricultural education for you young farmers. I fail to recognise any measures in the budget by which the Minister will give a ray of hope to beleagued farmers.
The Minister has failed to extend the family income supplement scheme for farmers. By not giving the farming community the same personal allowances enjoyed by the PAYE sector, the Minister continues a social welfare and taxation bias against the farming Community. The family income supplement should and must be extended to the farming community if there is to be salvation for rural Ireland.
We are all aware of the debacle of the extension of the disadvantaged areas scheme. This country missed the bus as far as the extension of that scheme, is concerned. Our application to Brussels was bedevilled because of wrong information. The departmental inspectors did not carry out a proper inspection into the areas seeking admission to the disadvantaged areas scheme. Land that would not rear a snipe was refused admission while land of a Golden Vale nature was accepted.
Small farmers' milk quotas; of from 5,000 to 10,000 gallons have been reduced while farmers on mainland Europe producing millions of gallons of milk have been allowed to continue production. I thought that our entry to the EC would have ensured that small farmers would be protected and would be enabled to stay on the family holdings.
Will the Deputy come to the budget now please?
It is evident that nothing is being done for fisheries and tourism. Our prime industries are agriculture, tourism and fisheries. I do not know how the Minister had the audacity to introduce a tax rate for co-ops similar to that imposed in other industries. Co-ops employ 15,000 people of the 37,000 people who work in the food industry. The intention of the Minister to treat cooperatives like other commercial industries is a sorry reflection on the attitude to the agricultural industry.
The Minister has fallen into the trap of borrowing millions of pounds for nonproductive purposes. There have been income tax cuts of 4 per cent in the top rate while it is only 2 per cent in the lower rates. There has not been any reduction in tax for the middle income group who bear the brunt of our taxation system. In introducing this budget the Minister has lost sight of progress and growth.
The Minister for the Environment spoke about roads. Most of the Structural Funds which came here have been gobbled up by autobahns around Dublin while disadvantaged areas of the country are completely ignored. Cork south-west suffered the loss of the railway system in the early fifties and then we were promised that our roads would be upgraded. Not one mile of national primary road exists in Cork south-west. This is a sad indictment of successive Ministers for the Environment. Successive Governments have failed to develop tourism and fisheries in my area. Castletownbere is a primary fishing port but there is a very poor road network leading from Castletownbere. Admittedly a few miles at the Glengariff end have been greatly improved but the remaining 15 miles need urgent attention if the fishing industry is to prosper. The fishing industry creates valuable employment in a job-starved area. The Minister for the Environment should ensure that a proper road network is developed to enable heavy articulated trans-continental lorries to take fish products to the markets of Europe.
Tourism is another natural resource industry in that part of the country. The budget has not provided any finance to expand this industry. If we want tourists we must provide an adequate roads system. I was amazed that the Minister for the Environment could say a few moments ago that everything in the garden was rosy while we have hopelessly failed to get our rightful share of the national cake in the area of road fund grants.
Only 14 new houses are to be built in south-west Cork in 1992. In Bantry alone, up to 80 applicants are on the urgent waiting list. With regard to health, the waiting list for hip operations is rising day by day. There is a waiting list of from three to four years for hip replacements. Some of the unfortunate people awaiting this operation will see the light of Heaven before they see a hospital. It is a sad reflection on the Minister and the Department of Health. Successive Ministers have failed to recognise the urgency in this area. Successive Ministers are responsible for hospitals operating on a shoestring budget and discharging people who have not fully recuperated. Health boards are cash starved and cannot provide an appropriate level of care.
The building industry is stagnating. We all know that the building industry plays its part in providing much needed employment in rural areas. Nothing has been given in the budget to help this industry to thrive and expand in order to give jobs that are so badly needed. The retention of the 6 per cent stamp duty on house sales over £60,000 is a farce. The UK has zero-rating on house sales up to £250,000. In the Mickey Mouse approach of the Minister for Finance to this budget he has failed to recognise that this 6 per cent stamp duty is penal and unjust.
I believe the Taoiseach has signalled his intention to retire. I wish him the best of luck in his retirement and I hope he will be happy. Before he goes I would ask him to make sure that the Minister for Finance realises that the provision of jobs is of primary importance. If we do not create jobs we will not have prosperity. There is not much prosperity in extending the dole queues. Every incentive should be given to entrepreneurs to create extra jobs. Work begun is half done. The Minister has failed hopelessly in this budget and we will find at the end of the financial year that borrowings have escalated. He took the easy way out by borrowing millions to ensure that social welfare payments could be increased by 4 per cent. Borrowing for unproductive purposes will not pay dividends. I appeal to the Minister to think well during the next few weeks and to consider the calls from all sides to return this country to prosperity. We must have clear direction. The budget speech of yesterday lacked lustre, drive and courage to tackle the problems. There ends the story.
The total gross provision for the four Education Votes in the budget is nearly £1,598 million, which includes £170 million as appropriations-in-aid. The comparable gross outturn figure in 1991 is £1,483 million approximately. The amount being provided in 1992, therefore, represents an increase of over £114 million or 7.7 per cent over the 1991 provisional outturn.
This £1,598 million is a very substantial outlay on education. It is the highest ever provided by the State and at 6.4 per cent of GNP is one of the highest in the EC. This provision will help me to continue the vital work of promoting and implementing various educational reform measures and strategies which will ensure that the programmes provided in our schools and colleges are not only of relevance to the immediate needs of pupils today, but also will prepare them for living in the world beyond the year 2000.
The net provision for the Non-Capital Supply Services for 1992 is approximately £6,857 million and of this amount some £1,347 million is being allocated to fund services in the education sector. This amount represents almost 20 per cent of the Exchequer current expenditure on the supply services. Such a significant provision for the education sector is a clear and unequivocal indication by this Government of their commitment to maintain and develop the nature and quality of the Irish education system.
The education process is of its very nature a labour-intensive process and this is reflected in the Estimates. The provision for pay and pensions is £1,254 million approximately, which represents 83 per cent of the gross non-capital provision.
The overall provision also includes over £81 million for capital expenditure.
The budget provides an additional £2.735 million for improvements in the pupil/teacher ratio at primary and post-primary levels. At primary level teaching posts which would otherwise decline in number by 300 in the 1992-93 school year due to falling rolls will be retained at existing numbers. This will improve the pupil-teacher ratio to 25.2/1. At post-primary level the ratio will be improved to 19.25/1 for appointment purposes in the 1992-93 school year. This will involve an increase of 143 in the number of existing posts.
A phased programme, starting in 1992-93, will be introduced to provide for the recognition of vice-principals and guidance teachers on an ex-quota basis as outlined in the Programme for Economic and Social Progress. This will mean that from September next 87 vice-principals will be recognised as ex-quota thereby giving rise to a similar number of new teaching posts, and 62 schools will each benefit from the services of 0.5 whole time guidance teachers.
An extra £0.5 million is being provided for the introduction in the 1992-93 school year on a phased basis of a programme to expand the provision for caretaking and clerical services to all national schools with 100 pupils upwards and to second level schools with 200 pupils upwards. The phasing of the programme will be on the basis of school size, starting with the larger schools.
An extra provision of £0.265 million is being provided in the budget to address the in-service training needs of teachers at primary and post-primary levels. The substantial increases in this area in recent years and the present increase are evidence of the Government's commitment to the whole area of in-service training.
In this context I recently announced the establishment of a specialised unit to co-ordinate the work of my Department in relation to the in-service training needs of teachers. This unit will liaise closely with the National Council for Curriculum and Assessment (NCCA) whose remit includes advising me on in-service training needs.
In addition to the extra provision for in-service training a 43 per cent increase has been provided to strengthen the network of teacher centres. This network has proved to be highly responsive and adaptive to the in-service training needs of practising teachers. About 40,000 teachers are entitled to use these facilities at present. Considering the curricular changes currently being introduced, the additional funding represents an extremely worthwhile investment in meeting the needs of teachers.
The National Council for Curriculum and Assessment (NCCA) have been given the responsible task of reviewing and making recommendations on the nature, format and content of both the primary and the post-primary general curriculum. Much of the work of the reform of the curriculum for the 12-15 age group has been completed and is contained in the new junior certificate programme which will be examined for the first time next June, when the new examination will replace the intermediate and day group vocational certificate examinations.
The 1992 provision for the NCCA is being increased by 31 per cent to £425,000. This very significant increase will enable the council to proceed at a rapid pace in their review of the senior post-primary programme as well as proceeding with their task in relation to the primary curriculum. In their work it will take into account the curriculum needs and requirements of all pupils and will give particular consideration to the needs of underachievers and low achievers.
A draft of the Green Paper on Education has been completed and I hope to bring the proposals before Government shortly for consideration. The Green Paper will be a comprehensive discussion document, inviting all concerned interests to engage in a major debate designed to formulate a framework within which educational development should take place into the next century. It will deal with education at all levels and cover a number of important themes. These will include overall aims of education, quality of educational provision, equity in and access to education and organisation and management issues. My intention is to publish the Green Paper in the near future.
I am also pleased to have been able to provide for a significant increase in the provision for publications in Irish. The 1992 provision of £771,000 represents an increase of £248,000 or 47 per cent on the 1991 outturn. This provision will enable An Gúm to provide Irish language textbooks for a range of junior and senior certificate subjects for which there are no suitable texts available at the moment. This in turn will greatly facilitate all-Irish schools in their efforts to foster and promote the use of Irish.
In recent years a policy priority in the education area has been the raising of the quality of basic schooling for all our children. In the past, many young people especially those from disadvantaged areas left school ill-equipped and poorly prepared to play their part in modern society. My Department and I are fully committed to addressing social equity issues relating to education and are implementing and developing many strategies in this area. Resources have been, and will continue to be, targeted and initiatives developed which give special attention to the needs of the disadvantaged in our society with the specific intent to promote their personal development.
The provision for disadvantage was increased under Programme for Economic and Social Progress by £1 million in 1991. The 1992 budget provides a further increase of £0.25 million to assist in various areas of disadvantage at all levels of the education system. These funds are additional to those being provided in other ways including the £1.5 million ongoing provision for the primary area and the special funding arrangements for supplying extra teachers in schools in disadvantaged areas at post primary level.
I am also particularly pleased to have been able to make provision for the further expansion of the vocational training opportunity scheme in 1992. The establishment of a further 25 groups in September next will increase the total number of places provided under the programme by 500 to 1,560. The VTOS provides second chance education and training to long term unemployed trainees over 21 years of age. A training allowance is paid in lieu of social welfare entitlements and trainees receive free books and travel and meal allowances. The programme has been expanded with support from the European Social Fund from a pilot project for three groups in 1989 to a total of 78 groups in 1992.
The growth in the number of places provided under the vocational training opportunity scheme will be accompanied by a continuation of the scheme introduced by the Minister for Social Welfare whereby up to 200 long term unemployed adults may avail of third level education while continuing to receive their social welfare entitlements. A similar scheme operates to facilitate re-entry to education-training at second level with no limit on the number of places.
In order to ensure that there are no financial barriers to participation in these schemes a special fund has been included for the first time in the 1992 Estimates to cover the cost of books, travel and meal allowances, registration fees, etc. for long term unemployed trainees availing of education-training across a range of programmes outside the VTOS.
The 1992 Estimates include £503,000 for the runnning costs of the National Council for Vocational Awards launched on 29 October 1991 for vocational training programmes in the education sector outside the third level system. The objectives of the new council are to ensure that: trainees receive certification which is performance-based; certification issued will have a national status which will have credibility in the labour market; courses conform to objective and common standards within an overall framework which sets out clearly the relationships between the various levels of qualification and course provision is relevant to labour market needs in terms both of the content and numbers of trainees in the different disciplines.
The new council will structure courses on a modular basis, develop an appropriate framework of levels of qualification, establish guidelines, national criteria and standards for assessment by course providers, monitor compliance with criteria and standards, and certify trainees' performance based on the outcome of assessment by course providers with external moderation. In order to ensure that training courses respond to regional as well as national needs, a sub-national structure, with representation from concerned interests including the social partners, is being established to complement and reinforce the services provided by the national council.
The allocation for the capital building programme in the 1992 Estimates is, as stated earlier, some £81 million, which represents an increase of nearly 19 per cent on the 1991 provisional outturn.
The national school capital allocation of £14 million will be used to fund a number of major school building projects and on school buildings, mainly in rural areas, which are in poor condition and in need of improvements, extensions or replacement.
A capital allocation of £2.5 million is being provided in 1992 to allow for further development of special facilities for young offenders. This includes £2.2 million towards the cost of a new facility for young female offenders at Finglas. The remaining £0.3 million is required to meet the ongoing maintenance and development costs of the existing facilities for young offenders.
The provision of £17.225 million for second level capital will be used to maintain the on-going building programme which has the following priority areas: areas where there is local agreement on rationalisation of existing resources and schools which are sole providers in their respective areas in need of accommodation.
The provision for third level capital projects in 1992 is nearly £42 million, an increase of £18.7 million or 81 per cent on the 1991 outturn.
Some £33 million of this allocation will be provided to enhance the capability of the third level education sector to support industry in bridging the technological gap obtaining between Ireland and the more advanced regions of the European Community. This expenditure will attract support from the European Regional Development Fund.
The 1992 allocation for the Higher Education Authority sector includes provision for major building projects at Dublin City University, University College, Galway, St. Patrick's College, Maynooth and University College, Cork. It also includes £3 million for the creation of an additional 3,600 places in the universities in line with a Government undertaking to provide £15 million over a five-year period from 1990 for this purpose.
In the vocational education committee sector the 1992 allocation includes provision for the completion of phase 1 of the Tallaght Regional Technical College which will assist in making third-level education more accessible in an area noted for its low participation. Provision is also being made for phase 1 of a new College at Bishop Street, a major extension to the College of Catering, Cathal Brugha Street and new facilities and upgrading of laboratories in a number of regional technical colleges.
The gross third-level non-capital allocation in the 1992 Estimates is almost £310 million which corresponds to an increase of nearly 8 per cent on the 1991 provisional outturn of £288 million.
In the third-level education area there have been very significant developments in recent years. Over the last decade enrolments in this sector have dramatically increased by over 66 per cent with a consequential substantially increased output of well qualified graduates. At present there are some 75,000 students enrolled in higher education programmes. This corresponds to a transfer rate of almost 40 per cent for the relevant age cohort. This transfer rate is projected to increase still further as a result of Government policy to encourage those with the aptitudes and talents to pursue third-level education programmes. Indeed total enrolment is projected to increase to 100,000 students approximately by the end of the nineties.
The 1992 provision for higher education grants is over £32 million, an increase of 8 per cent to provide for the increase in student numbers eligible for grant aid arising from the increased provision of third-level places.
A range of major improvements in the higher education grants and related student support schemes will take effect in 1992. The principal improvements being introduced for new entrants to third level this year are: (a) the income eligibility ceiling for families will be increased by £2,000 for each child after the first child attending third-level education; (b) income eligibility will be assessed on current income rather than as heretofore, on the income in the year in which the student sat the leaving certificate; (c) mature students who secure a place in a third level institution will automatically be considered to meet the academic requirements for the award of a grant; (d) mature students may be assessed on the basis of their own incomes — and, if married, their spouses' incomes — rather than on their parents' income which has been the case up to now; (e) lone parent's welfare payments under the lone parent's allowance scheme will be excluded from the assessment of income for grant eligibility and (f) income limits and maintenance grants will be index-linked in 1992.
I am also setting up a new review committee to develop more equitable income assessment criteria.
Ireland has achieved many successes in international sport which have a very positive influence on our national life. In 1992 the Olympic Games will take place in Barcelona, Spain. To assist with the preparation and sending of the Irish team to the Olympics an allocation of £0.25 million is being provided to the Olympic Council of Ireland.
The provision for educational services in the 1992 budget is a clear indication of the importance this Government place on the role of the education sector in our society.
Debate adjourned.