Dáil Éireann debate -
Tuesday, 4 Feb 1992

Vol. 415 No. 3

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.)

Mr. Jacob

In the time remaining I will endeavour to cover a few points of interest to me. There have been major improvements in the area of taxation with particular emphasis on the PAYE sector which has laboured under a huge and inequitable load for so long. The standard rate was reduced from 35 per cent in 1989 to the 27 per cent proposed in this budget. It is a major step forward and it is to be welcomed. This has to be jobs oriented.

With regard to agriculture we are all aware the farming community are going through a difficult time and that morale is low. Measures to improve the situation are being taken but more needs to be done. There is a number of matters which are particularly close to my heart.

I welcome the inclusion of £2 million towards headage payments this year. Incorporated in that is the undertaking to honour next year the delayed increase in headage rates in accordance with the Programme for Economic and Social Progress last year. Agriculture must be perceived by those in power as a business. Modern business is totally dependent on budgeting and planning. Farmers do not know when they will receive the payments due to them and, therefore, they cannot run their business efficiently by planning ahead. These payments to which they are entitled must be made on time. I appreciate that the incumbent at the Department of Agriculture and Food, Deputy Woods, is well aware of this and that he is doing his best to deal with the matter in a satisfactory manner.

There is an anomaly with regard to Department of Agriculture and Food forms. A farmer may be an outdoor worker who is quite prepared to do his paper work and accounts, but if he makes an ordinary error on an application form the penalty is draconian. Such an error is categorised as fraudulent practice. It is acceptable that there should be some fine or punitive measure in the event of the incorrect completion of forms, but it is unacceptable that, because of a clerical error, a farmer should be deprived of what should be forthcoming for this year and the following year. This issue must be addressed quickly. I have spoken to the Minister about it and he realises the implications. He dealt with many such anomalies while at the Department of Social Welfare and I have no doubt he will continue his modus operandi at the Department of Agriculture and Food and deal with any improper practices.

I welcome the revitalisation of the Middle East market for beef and I compliment the then Minister for Agriculture and Food, Deputy O'Kennedy, on being so quick off the mark when Colonel Gadaffi made his announcement with regard to terrorism and terrorists. It would appear that good progress is being made and that is vital to our agriculture business.

I welcome the provision of money for Teagasc and the announcement by the Minister for Agriculture and Food, Deputy Woods, with regard to seeking European funding for that body. The continuing education of our young farmers is essential, as are the other services provided by Teagasc. The Minister has also taken steps to avoid the closure of certain Teagasc establishments.

I wish to refer to the Teagasc office at Baltinglass in my constituency. This office provides a viable service and its closure would make no sense. Baltinglass could be described as the main trading centre for west Wicklow. It is a market town dependent for its existence on the farming hinterland which stretches into the surrounding counties of Carlow and Kildare. It would be a devastating blow to that area of my county if this office were to close. The dependence of the farming and business communities and the general populace of west Wicklow on that service is beyond description. Any question of closure is unacceptable. I would not wear it and I want all concerned including my colleagues in Government, to bear witness to that. It is a meritorious and vital service in that area. Great strides are being made in rural development and it would be totally contradictory to the philosophy of rural development to endeavour to close such a facility in a rural area. Rural development is a priority objective of the European Regional Development Fund and there is a great commitment to it by this Government and by the European Community. The Leader programme has been established which will allow for pilot funding. I am very pleased that Wicklow has been accepted into that scheme. During the next year or 18 months over £2 million will be forthcoming, to be matched pound for pound. We must not defy and contradict that philosophy by closing down an important service provided by Teagasc in west Wicklow.

Major efforts in regard to tourism have been made and are continuing to be made by this Government. In 1987 the Taoiseach issued instructions and said he wanted tourism numbers doubled in five years. I am pleased we are on target. Our growth rate in tourism is 15 per cent, three times the world average of 5 per cent. These budgetary provisions lean in the upward direction of assisting the promotion of that vital industry to our economy, one destined to become the largest industry worldwide before the end of this century.

I welcome the fact that excise duties on beer and spirits have not been raised. I say that again particularly bearing in mind the tourist industry. Indeed, this is the third consecutive year these duties have not been raised and will be an enormous attraction for visitors who usually travel here with their cars. These budgetary provisions will ensure reasonable petrol, beer and spirit prices for tourists. I welcome the hands-off attitude of the Minister and the Government on excise duties on beer and spirits and welcome the proposed reduction in the price of petrol. The budgetary provisions to improve availability of car hire for tourists is to be welcomed. It is a sensible measure. We must continue to develop our tourism potential. Tourism is the most important area within which jobs can be created. We have the necessary infrastructure, back-up and training agency, CERT, turning out highly qualified young people in hotel mangement, chefs and so on.

An Leas-Cheann Comhairle

Deputy, on the matter of alcohol and your expertise in that area, it might be appropriate for me to say: Time, Gentlemen, please.

Mr. G. Mitchell

Drink-up time.

Mr. Jacob

I also welcome the fact that tax relief on mortgage interest or health insurance premiums has not been reduced. The construction industry is crucial to our economy and, when buoyant, the spin-off is much appreciated by all concerned. Therefore, the retention of relief on mortgage interest payments will be welcomed by the construction industry generally. In the same context perhaps the Minister might examine the grant for first-time purchasers of houses which has remained at £2,000 for some time. Perhaps it should now be increased since its importance to the construction industry is obvious.

I contend this budget does reflect realism on the part of its drafters. Once again the social concern of the Minister and Government is obvious. I welcome its provisions. A balance has been struck in drawing it up which will be appreciated by the community generally.

Mr. G. Mitchell

As far back as September last the Taoiseach ventured the opinion that the 1992 budget would be the toughest in living memory. It is plain for all to see that, yet again, the Government fudged when it came to dealing with the problem vis-à-vis our public finances. The Minister began his Budget Statement by telling us of an opening deficit of £541 million and finished having raised that same budget deficit by £50 million. For the first time in recent years the Exchequer borrowing requirement, as a percentage of gross national product, is set to increase. That is hardly an indication of a tough budget or one seeking to address the serious problem we encounter via-à-vis our public finances.

The budget purports to address the matter of tax reform. Certain elements need to be present in any package of the tax reform. Among the central elements of any such tax reform are a widening of the tax base by a more comprehensive definition of taxable income and the curtailment of reliefs and allowances. Certainly, the Minister has not gone the full way in this regard and whether he has gone in the right direction remains to be seen. Other elements are a reduction in marginal tax rates and in the number of taxpayers paying income tax above the standard rate, a reduction in the tax wedge — the difference between the cost to a company of hiring workers and their take-home pay. Another element is an increase in the total tax accounted for by taxes other than personal taxes. Yet another element is equivalent tax treatment of income from different sources, particularly between employees, the self-employed and farmers and lastly, there is the tackling of poverty traps created by the interaction of the taxation and social welfare codes. I am grateful to Davy Stockbrokers who, in their commentary on the budget, highlighted those points. It appears that the budget does not in any way adequately tackle the matter of tax reform. Indeed, I wonder whether any Government, not comprised of all the parties in this House, will ever be in a position to deal with tax reform. Without the existence of a national economic accord I wonder whether it is possible to bring about real tax reform, a really fair tax system, jobs-orientated, fair in its application to all taxpayers.

This Parliament is no more than a gadfly at the periphery when it comes to dealing with this budget, our public finances, the creation of jobs, tax reform, indeed tackling most issues facing our society. We have become irrelevant; Parliament has become no more than a rubber stamp. Debates in this House have become a charade, something I very much regret since I aspired to being a parliamentarian from a very young age. It is time all of us on a cross-party basis, put a stop to this charade. All Members know that this charade has continued for far too long. At the very least what is needed is a national economic accord, drawn up by Government and Opposition parties with the social partners, the representatives of youth organisations and the unemployed. I question whether even that would be sufficient. I want to avail of this opportunity to pose the question whether what is really needed is not a national Government. Seven years from the eve of the third millennium it is timely for us to examine the really difficult, underlying problems confronting us as a nation. We were not elected to this Parliament to serve ourselves or any party; we should put our country first. More importantly, I contend that each public representative must put his or her family first.

I remember from my old days as youth leader we were taught never to spend time serving the community if we had not spent time looking after our own family first. There is no point in being a street angel and a house devil. As a parent of four children I feel like all other parents of young children thinking of a future that appears hopeless, tweedledee and tweedledum, where one party is trying to shout that it has a better ism than the others, or trying to be more extreme or smart than the others, that it is time we called a halt now.

The Constitution allows for a seven-year Dáil. Is it not time that we at least gave consideration to an all-party agreement to tackle the real problems facing this country, in a seven-year Dáil which would bring us into the third millennium, to the 21st century. There are now 269,300 people registered as unemployed. That does not take into account the people who are really unemployed and who are on all sorts of schemes. The Government are providing for 274,000 on average as being unemployed this year. They understated their provision last year. Again, Davy and Company, Stockbrokers, suggest that the Government should provide for an average of 285,000. This country is heading for a potential unemployment number of 300,000 people by the end of this year, let alone what will happen at the end of the decade. I believe we should at least give consideration — I cannot say it is a panacea or that I know it will work — to the idea of a national Government consisting of all those parties who are prepared to put their country before their party and to participate in such a Government.

This could be done by putting the national interest before all sectional interests, which is not being done at present. Who represented the unemployed at the Programme for Economic and Social Progress negotiations? It could be done by changing the tax base from an asset-owning incentive system to a production-based incentive system; it could be done by removing tax breaks from machines and dropping the taxation of employment by removing the pay-roll tax; it could be done by eliminating the poverty trap by treating certain social welfare payments as income; it could be done by abolishing the duplication of State agencies involved in industrial promotion by ensuring that income from EC sources is put to maximum productive effort and not handed out on a political expediency basis; it could be done by ensuring a fairer tax system with incentives to produce by ensuring productivity from our public service in return for fair play and, perhaps, by requiring national service — both military and non-military — in return for minimum State payments.

People might say this is a very naive suggestion, perhaps it is. It is a suggestion which is worthy of debate and consideration and one which many people in this House would like to see considered, if not on a national economic accord basis then on a national Government basis, but we are terrified to suggest it. We know we are presiding over a disaster — and a disaster requires emergency action. It requires innovation, commitment and foresight now. We should be looking to those seven and eight years ahead to the turn of the century and asking ourselves what will the needs of the country be at that time.

The monarch of the day locked Stanley Baldwin and Ramsay MacDonald in a room and would not let them come out until they formed a national Government in 1937. Some people fear that participation in a national Government would prevent the party system from operating. I believe it would continue to operate. Any party worth its salt would continue to operate. After Churchill's national government during World War II was it not Attlee who won the election? People have nothing to fear about this. The trappings of power is not the objective. There would be certain downsides if there were to be a national Government: there would be downsides for people like myself because there would not be enough places for politicians. If we were to consider this, democratic accountability would have to be copperfastened. This could be done through a modern parliamentary committee system. At present we have a system whereby the social partners — who are really sectional interest groups — lock themselves away with the Government of the day, quite often civil servants of the day and they make a deal involving all sorts of things from condoms to public service pay and various others matters which really are the job of this House. They make decisions but not on the basis of the national interest. The Government of the day get a deal because it keeps the social partners happy: farmers go away because they can keep their members happy; the employers and the unions can say they got something out of it for their members. What about the number of unemployed, 260,000, growing to 300,000 and which perhaps will soon be 400,000? Who was at the Cabinet and social partners meeting to represent those people? We represent those people and we will never get to the stage of neutralising sectional interests because they will play one of us off against the other unless somehow, at the very least through a national forum but I suggest we should consider going even further to a national Government, we consider tackling these problems.

Democratic accountability in such a scenario would have to be copperfastened but this could be done through a modern parliamentary committee system. In those circumstances, there would be a proper role for committee chairpersons which would go some of the way to compensate for lack of ministerial opportunities. In those circumstances would it be too much to suggest that TDs should then be required to take an oath of office which would require us to put the national interest before all public duties, including our duty to our party. I am fed up listening to: "It is good for the party, it is good for my party, it is good for his party or their party". We did not come in here to serve our parties, we came in here to serve our country. We are not doing that because we are allowing ourselves to be played one against the other.

It is possible, far from undermining a democracy, that a national Government, together with a much strengthened parliament, could return national affairs to a democratic forum and away from the undemocratic corporate state-type, mutually beneficial, back-slapping operation which we have seen recently. It was all very well when the Programme for National Recovery operated well but we can see that the Programme for Economic and Social Progress went wrong. The national interest may not always be served by that sort of arrangement. If we were to look at other comparisons we would say to ourselves that we have not served the country to the best or our ability, we have not given it the best shot, we have not given it the maximum effort.

Austria, a country of 7.6 million people has an unemployment rate of about 4 per cent even though that country sustains a high immigrant population. In the event of their joining the European Community, as is expected, it will be a net contributor to the EC. This has been achieved from outside the EC and without the EC largesse which we have received. We could argue that not being a central European power and not being at the centre of the marketplace Austria is not a good example. Austria was an annexed country following the Anschluss before World War II. At that stage Austria was no more than part of the greater Germany and were on the losing side so to speak. We are talking only in terms of decades but for the last three decades we have been receiving money hand over fist from the European Community and we have been using it like drunken sailors. We have not been using it to the best advantage of this country in terms of need, employment, laying plans, telling vested interests where to get off and putting the national interest first.

The spectacle of a British local authority purchasing a house here for returned emigrants is an indication of just how bad things have become and how necessary it is for us to become more self-reliant. Exporting our unemployed is no longer the soft option it once was. A national concerted effort over a seven year period would ensure that every stone is turned. The vista as we approach the 21st century is too grave for us to do anything else.

There is a national emergency and we need a national response, I ask the House to bear in mind that the traditional budget speeches about the shillings spent here, the 5p there and the give and take elsewhere, are no longer on. What we need is vision. I want to know where my four children are going to be in the 21st century, in a little over seven years from now, and every parent wants to know the same thing, and whether I am in or out of politics, will not matter. It is time that we, in this House got together to tackle this national problem on a national basis.

Minister for Social Welfare (Mr. Daly)

Social welfare touches the lives of everyone in Ireland in some way, whether it be the elderly, families and children, workers, the unemployed, lone parents or the sick and disabled. We have always given priority to the support and care of those who depend on social welfare payments. In doing so, we identify and provide for the real needs of people.

The social welfare improvements announced in the budget continue the progress that has been achieved since 1987. They are further evidence of this Government's commitment to protecting the position of those dependent on social welfare as provided for in the Programme for Economic and Social Progress.

The social welfare improvements in this year's budget will cost £162 million in a full year and £85 million this year. Gross expenditure on social welfare schemes and services will, therefore, increase to almost £3.36 billion on a full year basis. This is a huge amount of money by any standards.

The main elements of this year's social welfare improvements are — a general 4 per cent increase in all weekly social welfare and health board payments; a special increase to £53 per week in all short term payments which is an increase of 6 per cent; further improvements in the family income supplement; the introduction on a phased basis starting this year of measures to give effect to an EC Court of Justice ruling on equal treatment; an increase of £10 per child in the back to school clothing and footwear allowance; the introduction of a new adoptive benefit scheme for women in employment; an extra £1 million for voluntary organisations to fight moneylending; an additional grant of £0.25 million to the Combat Poverty Agency; further improvements in the free travel scheme; a reduction to 55 in the qualifying age for pre-retirement allowance; a special increase in the adult dependant allowance payable with old age non-contributory pension in order to remove an anomaly; and the extension of the existing over 80 age allowance to those in receipt of invalidity pension.

I will now deal with some of the improvements in more detail. The Programme for Economic and Social Progress guarantees social welfare recipients protection against inflation. We are honouring that commitment again this year; indeed, we are doing more than that. The annual rate of inflation to November last was 3.6 per cent and it is anticipated that the average rate for 1992 will be 3.75 per cent. In this context the 4 per cent general increase will ensure, for the fifth successive year, that social welfare payments will keep ahead of inflation.

The 4 per cent increase will apply to all personal rates as well as adult dependant and child dependant allowances. It will come into effect from the end of July and will benefit 1.4 million people, i.e., 774,000 recipients and their dependants. The cost of this increase is almost £120 million in a full year and £52 million this year.

The policy adopted in previous years of giving extra increases to those on the lowest social welfare payments is being continued again this year. I am delighted that, for the fifth consecutive year, extra money is being provided which will enable me to give an additional 2 per cent increase to those on weekly short term payments. This is on top of the general 4 per cent increase and it will mean that the personal rate of short term benefits will rise from £50 to £53 per week. This special increase in the short term payments will cost over £4 million in 1992 and almost £10 million in a full year. The effect of these increases means a new personal rate of £53 per week for all short term payments such as disability benefit, unemployment benefit, short term unemployment assistance, supplementary welfare allowance and carer's allowance and a new personal weekly rate of £57.20 for all long term payments such as old age pension, lone parent's allowance, long term unemployment assistance, pre-retirement allowance and disabled person's maintenance allowance. Those on contributory old age or retirement pensions will have a higher personal weekly rate of £66.60. In addition, increases to the personal rate for adult and child dependants will also receive the general 4 per cent increases. I have some examples which I intend to circulate as I will not be able to cover all of them.

The Government are fully aware of the pressures that can often be placed on adoptive parents because of the lack of provision in the social welfare code to cover absences from employment during the initial adoption period. I am particularly pleased, therefore, to introduce a new payment to adoptive mothers along the lines of the existing maternity benefit scheme. These new arrangements will be introduced later this year and will operate for a period of ten weeks after the placing of the child with the adoptive parents.

The back-to-school clothing and footwear scheme, which was introduced in 1990 and significantly improved last year, is designed to assist recipients of social welfare and health board payments in meeting the cost of childrens' school uniforms and footwear. The existing allowance of £40 for each child at second level and £25 for each child at primary level represents a welcome boost to families faced with back-to-school expenses. Some improvements were made to the scheme in 1991 when the allowance was paid in respect of almost 220,000 children at a cost of about £6.2 million.

The amount of this allowance is being increased this year to £35 for each child at primary level and £50 for each child at second level. The increased allowances will greatly assist families dependent on social welfare and health board payments in meeting the costs associated with the return of children to school. The improvement in the scheme will cost £2.2 million this year bringing overall expenditure on the scheme to £8.4 million.

Voluntary and community groups play an important part in improving the quality of the lives of people dependent on social welfare payments. Through their flexible, innovative and caring responses, these groups can help overcome the sense of helplessness and isolation that many disadvantaged people feel.

Community development initiatives involve local communities coming together to identify and tackle the problems facing them and can make a major impact in improving the quality of life especially for those living in disadvantaged areas. I would like to avail of this opportunity to put on the record my personal appreciation of the invaluable work being carried out by voluntary and community groups throughout the country. Since my appointment as Minister for Social Welfare I have seen these groups at work at first hand and have been very impressed with their dedication and commitment and I am committed to supporting their work. This year an extra £1 million is being provided for community groups.

I recently had the opportunity to visit north Clondalkin, Tallaght and northwest Connemara to see some of the projects being undertaken. I am very glad we will be able to continue to support this invaluable work and would like to avail of this opportunity to express my deep appreciation to all volunteers who are working tirelessly with the officials of my Department, other Government Departments, State agencies and bodies, trying to ensure that community activity is co-ordinated and developed in a responsible way and responsive to the needs of communities.

In addition to maintaining the support I have already mentioned, we will make a number of once-off grants to voluntary organisations who are in need of special assistance or who have developed imaginative proposals for innovative services. We also propose to increase by £500,000 the amount available under the community development programme funded by my Department to enable that programme to be extended to a number of new areas. This brings the overall allocation for the programme to £1.25 million.

I also propose to introduce a pilot programme of advice and assistance to low income families to combat the problems associated with moneylending. This issue came to light some years ago and many people at that time were very helpful in trying to deal effectively with it. However, we still have a problem in specific areas which needs to be responded to and I hope that, by providing this assistance and by the establishment of these pilot projects in a number of key areas, we will come up with new initiatives to deal with this scourge which has created problems for many people, especially low income families.

I also intend to make a number of once-off grants to voluntary organisations each year in the budget. A sum of £360,000 had already been provided in the 1992 Estimates for this purpose and an additional £240,000 is now being made available which will bring the overall allocation for 1992 to £600,000. I am pleased to announce the allocation will be used to provide grants for a number of organisations spread throughout the country as follows: three groups affiliated to the Union of Voluntary Organisations for the Handicapped will receive a total of £90,000; £40,000 to Galway County Association for Mentally Handicapped; £25,000 to the Muscular Dystrophy Society; £25,000 to the Cheshire Foundation; £20,000 to the West Clare Mental Health Association; £20,000 to the Irish Deaf Society, and £10,000 to the Cystic Fibrosis Association; £30,000 to the Capuchin Centre for Homeless Men, in Dublin; £20,000 to Focus Point, and £20,000 to the Pioville Hostel, Fr. Matthew Quay, Cork; £30,000 to St. Canice's Housing for the Elderly in Kilkenny, and £25,000 to Dungarvan Care of the Aged; £50,000 to the Coolock Community Law Centre to resolve the centre's current financial difficulties; £25,000 to the Carers' Association, and £20,000 to Clarecare; £50,000 to the Catholic Marriage Advisory Council; £25,000 to Marriage Counselling Services; £25,000 to the Boyle Area Family Ministry Programme, and £10,000 to the Centre for Education, Counselling and Psychotherapy in Cork city.

I am providing £115,000 to six innovative projects which have recently come to our attention: £40,000 to Energy Action, Pearse Street, Dublin, towards their work in insulating the homes of needy elderly and low income groups; £20,000 to Barnardo's for the provision of a centralised administrative service for a number of small voluntary organisations; £20,000 towards the provision of a resource centre for the group, Vietnamese People Re-settled in Ireland; £15,000 to the Irish National Organisation of the Unemployed towards the employment of a worker to co-ordinate the provision of advice and information to the unemployed; £10,000 to the Anna Liffey Drug Project in Dublin towards their work with the families of drug dependants, and £10,000 to the Irish Association of Social Workers to set up a resource centre for social workers working in disadvantaged areas.

The amount of £500,000 has been provided for the very successful scheme of grants for locally based women's groups introduced in 1990. The emphasis of this scheme is on wide-ranging, practical activities undertaken by local women in disadvantaged areas or working with disadvantaged groups.

Last year core funding was provided to three major projects who each received funding of £11,000. That funding is now being increased to £20,000 each. The projects are: North Wall Women's Centre in Dublin's inner city; Ronanstown Self-Development Group in Clondalkin and Little Bray Family Resource and Development Centre in Wicklow.

A grant of £20,000 is being given to the Family Resource Centre, Inchicore, in Dublin to assist in the development of programmes for women in the area. A grant of £5,000 is being given to the Women's Development Project, O'Devaney Gardens, Marmion Court, Dublin, towards their start up costs, and a special once-off grant of £50,000 is being given to Aontas, the National Association of Adult Education, for a local and regional programme of activities aimed at women in the home in disadvantaged areas.

I have already referred to the importance of community development initiatives in involving local people in tackling the problems faced by their communities. An amount of £750,000 had been provided for this programme in the 1992 Estimates and I am extremely pleased that an additional £500,000 is being provided bringing the overall allocation to £1.25 million.

There are currently 21 projects participating in the programme. With the additional resources being made available this year, I intend to extend the programme to a number of new areas around the country and to make increased resources available to those projects who joined the programme late last year with limited funding. The new areas in which I propose to set up new projects include: Dundalk, Galway city, west Clare and the Mountwood- Fitzgerald Park area of Dún Laoghaire, County Dublin.

Arising from our increased involvement in supporting community development activity, it is evident that one of the major difficulties faced by local communities is finding suitably qualified people as development workers. I have decided, therefore, to make £20,000 available this year for a special bursary scheme to be administered by Maynooth College, to enable a limited number of people to undertake formal training in this area. It is very difficult to find suitably qualified people with the skills to undertake work like this and I am certain this new scheme will help to address the problem.

Deputies will be aware of the loan guarantee fund which is administered by the Society of St. Vincent de Paul on behalf of my Department. Based on our experience of the operation of the fund to date it is evident that a range of supports are needed to assist families on low incomes in financial difficulties. Key features of any such supports include the provision of professional advice on money management and home budgeting so as to break the cycle of dependancy on money lending as a solution to long term problems.

The allocation of £260,000 announced last week in the budget will be used to set up a number of pilot projects aimed at building new and more comprehensive approaches to combating the problems of money lending. These pilot projects will work closely with my Department through the new regional structure established last year. I also intend that the projects will develop close links with the community welfare service, local community development projects funded by my Department and other relevant local voluntary organisations. The areas in which pilot projects will be established include Limerick city, Waterford city, west Clare and Cork city.

The Combat Poverty Agency are widely recognised for the practical support they provide to community organisations and locally based groups. An additional amount of £250,000 is being provided to the agency bringing their overall allocation for 1992 to £1.35 million.

A major development in my Department's role in relation to voluntary activity in the current year will be in bringing to a conclusion the work already under way on the charter and White Paper on voluntary social services. All the preliminary work necessary for the preparation of a White Paper has been undertaken by my Department. I am currently finalising proposals for Government on this matter.

Deputies will be familiar with the difficulties which have arisen as a consequence of the delay in implementing the 1979 equal treatment directive which provided for the implementation of equal treatment between men and women in matters of social security. The deadline for implementation of the directive was 23 December 1984 and the necessary provisions to introduce equality of treatment in accordance with the directive were provided for by way of the Social Welfare (No. 2) Act, 1985. The provisions of this Act were brought into force in two phases in May and November 1986.

Following detailed consideration of the most recent decision of the European Court, the Government have decided to provide for equality of treatment in respect of the period of the delay in implementing the directive. As announced by the Minister for Finance, the necessary legal provisions will apply retrospectively from the deadline for implementation, 23 December 1984 to the actual dates of implementation in May and November 1986. The precise details of the proposals are being finalised at present. I can say at this stage, however, that the retrospective payments to the married women concerned will be made on a phased basis over the period 1992 to 1994. Under the first phase, all married women who received a reduced rate of benefit during the period of delay will receive the higher amount in 1992.

I have circulated to Deputies a brief on the various improvements in the social welfare area and I do not intend to go into these in any more detail at this stage.

Before I conclude I should like to refer briefly to the Taoiseach's impending resignation from office. Many tributes have already been paid to this man who has occupied a focal point in the public and parliamentary life of this country for many years. I should like to be associated with those words of tribute. The Taoiseach will leave behind him a formidable legacy of reforming social legislation. One quality which permeates that legacy, and which has remained consistent and ever-present during his 35 years in this House, is his understanding, concern, commitment and feeling for the less well off sections, the underprivileged and disadvantaged in our society.

He was an energetic and law reforming Minister for Justice in the early sixties. He was an imaginative Minister for Finance and will always be remembered for the introduction of free travel and free electricity for pensioners in 1967. He was an innovative Minister for Health and Minister for Social Welfare during the seventies. Looking at his range of activities as Minister for Finance, Minister for Health, Minister for Social Welfare and Minister for Justice, one can see the major improvements he introduced for the less well off members of our community: the occupational injury benefits scheme, free travel, free electricity, free television licences, invalidity pensions, death grants, retirement pensions, the deserted wife's allowance which was introduced in the seventies, the supplementary welfare allowance, the living alone allowance, the free telephone rental allowance which was introduced in 1978 and the pay-related social insurance contributions which were introduced in 1979.

As Taoiseach he has presided over the introduction of major improvements and developments in the social welfare system since 1987. These include the extension of social welfare insurance to the self-employed in 1988, the introduction of many new schemes and services to meet emerging needs in the social welfare area, the introduction of social insurance coverage for part-time workers last year and specific commitments in the Programme for Economic and Social Progress to protect and maintain the position of those dependent on social welfare.

It was a privilege for me to work with the Taoiseach in Government and to have been a Member of this House with him for so many years. I wish to thank him for the confidence he showed in me by appointing me to various ministries. On behalf of my constituents and on my own behalf I wish him every success and happiness in the future.

Mr. Yates

I welcome the positive aspects of the budget, which include some of the improvements in the social welfare area outlined by the Minister. However, the role of Opposition is to examine with a more critical eye the other aspects of the budget. The most significant thing about the budget is that it is one of two budgets that will bring us into line with the Single European Market which will come into operation on 1 January next year. I understand there will be some leeway given whereby the Irish Government will be allowed to introduce a budget at the end of January next year which will enable us to catch up with the rest of the Community. I am concerned about whether we will be in a budgetary position to meet all the objectives of the single market.

I want to refer specifically to the two matters of deep concern to me. The first related to the proposed abolition of VAT at the point of entry which I understand, in terms of loss to the Exchequer in cash flow, will cost approximately £200 million. This is a vast amount of money in any circumstances. In his Budget Statement last week the Minister for Finance said he would refer again to this matter when he was dealing with the Finance Bill. This is not satisfactory. The sum of money involved is so large that the Minister needs to give a more detailed statement when he is replying to the debate on how exactly he proposes to bridge that obligatory gap. I should also like him to give a much clearer indication of how he proposes to deal with the abolition of the DIRT tax. Even though this is one of our principal taxes all we have had are vague aspirations in this regard. A principal tenet of the Single European Market is the free movement of goods, capital and labour. If there is to be free movement of capital, there cannot be different taxes on savings throughout the Community. I have no doubt that the Government will be unable to advise people to retain large sums on deposit in banks, while the DIRT tax remains in place. Therefore, there is a credibility gap in this budget on how these items are to be dealt with. Unlike the matter of excise duty on car tax — the Minister has said he will introduce a registration tax — no indication has been given in the budget as to how resources in relation to the abolition of VAT at the point of entry or the abolition of the DIRT tax will be financed. We are dealing here with a sum in excess of £300 million.

My second major concern about the budget relates to the position in which it leaves the 1993 budget. As the House is aware, this budget marks an alteration from all other budgets since 1987 in so far as it does not lower further the Exchequer borrowing requirements. The projected Exchequer borrowing requirements for 1992 is £592 million or 2.4 per cent of GNP. For the first time, this figure is greater than the outturn for the previous year. Because the borrowing requirement for last year was approximately £290 million, due to the sale of Irish Life, this represents a significant easing of the pedal on restoring our public finances. What is even more disturbing is the position in which this leaves the 1993 budget. Not only will the Government have to recoup by extra taxation and cuts in expenditure the loss of VAT at point of entry and the loss of revenue from the DIRT tax but they will also have to meet many of the pay provisions which have been deferred until 1993. The arithmetic problem in this year's budget has been solved simply by postponing even bigger problems to 1993. It behoves the Minister for Finance to state explicitly what his budgetary objectives for 1993 are, because it will be a critical year when there is likely to be some pick-up in the international economy. However, sufficient attention has not been given in this budget to the 1992 outturn and the opening position for next year.

I have some reservations about the proposed VAT changes in the context of EC harmonisation. I understood that there would be a standard rate of VAT of 14 per cent and that this would give us an approximation to the VAT rates proposed in the United Kingdom, our nearest neighbour, which, in terms of our land Border with Northern Ireland, is very significant. It is proposed to increase the VAT rate on essential items such as clothing, footwear, telecommunications services and repair and personal services from 12.5 per cent to 16 per cent. I strongly believe that many of these services, such as car repairs, can often be done by people who operate in the black economy. If the Government increase the rates of taxation in these areas it will give a greater incentive to people to operate in the black economy. When Fine Gael were in Government there was a deliberate policy to bring down that rate of VAT which had got out of control because it suited people to undercut legitimate VAT-registered contractors as the VAT rate on personal and repair services was too high.

We all acknowledge that the pace of change in personal taxation is being led by the Progressive Democrats who, in their single issue agenda, wish to have two rates of tax, 25 per cent and 45 per cent. I do not think there is strong evidence to support the view that this is a panacea. It would be much more desirable to amend our tax structure in two other ways. It is wrong that people should go from a zero rate of tax to a 35 per cent rate of tax on modest and low incomes. We need to introduce a new low rate of taxation of about 15 per cent. Once your income is over a certain threshold, particularly in the case of single people, you go into the 27 per cent rate. When you add to that the employee's rate of PRSI of 8.5 per cent you are talking about going from virtually no taxation to a rate of 35.5 per cent. Therefore it would be much more desirable if, instead of reducing the top rate of taxation, with whatever reliefs are available, a new rate of taxation of 15 per cent was introduced, particularly for the low paid.

There is a huge disincentive to work so far as parents of large families are concerned because the more children you have the more money you get by way of social welfare while there is no tax free allowance for children. One can argue that in this budget the reduction in the rates from 29 to 27 per cent and from 52 to 48 per cent has not been funded by changing the personal allowances, but of greater significance is the fact that there is still no tax free allowance for children. One of the reasons it does not pay people with four children or more to work is that for every additional child, people get more money on disability benefit or on unemployment benefit, yet, apart from exemption allowances, there is no tax free allowance for children. Its abolition some years ago was a retrograde step.

There is not a very strong case for the super-rich to have the same rate of taxation as the middle income group. I do not agree with the abolition of the top rate of tax. Instead we should introduce, with whatever reliefs are available, a childrens' tax free allowance and, for the first time, a rate of tax for low paid workers of 15 per cent. Let there be a multiplicity of tax bands but relief should not be applied to the super-rich while people on very modest incomes have to pay PAYE, particularly married women whose husbands use up all their allowances and who only have a PAYE and PRSI allowance. These women find themselves paying income tax on income of about £27 per week, and that is totally unacceptable.

I would like to refer to some specific points in the limited time available to me. I understand that a particular difficulty has arisen for the car industry whereby garage proprietors who have stock in hand and have paid excise duty at wholesale level are caught because the cars in stock are £300 or £400 out of line with new stock on which excise duty has been reduced. In the case of vans the difference is about £1,000. I understand that discussions are taking place between the SIMI and officials of the Department of Finance in an effort to resolve this problem. However, there is an urgent need to allow a rebate of the excise duty concession for the limited number of cars involved. There is a precedent for such a step.

I would like to mention a few areas of expenditure that have been almost wilfully neglected by the Government since 1987 and where the crisis is continuing to deepen. Housing is the first area I would like to address. As a member of each of two local authorities I am well aware of the acute problems of lengthening housing lists. The Programme for Social Housing as put forward by the former Minister for the Environment in 1991 falls far short of what is required to deal with the problem. A regular feature of front page articles in my local newspaper is of families who are homeless, who have only a tent or a caravan or whose children cannot be discharged from hospital because the parents do not have proper accommodation for them. This budget has done nothing for the homeless and it will do nothing to reactivate the construction programme that is necessary for local authority housing.

There is huge under-funding in education in relation to remedial teaching and career guidance teaching, and that problem has not been addressed in the budget. In relation to social welfare 70,000 full-time carers are denied the carer's allowance, with only about 3,000 people availing of this scheme. Some full-time carers who have given up jobs cannot get this allowance because of the rigorous nature of the means test. Greater flexibility needs to be introduced into this scheme so that genuine bona fide carers who provide care on a seven day week basis can get the allowance.

In the health area there are still problems with regard to waiting lists. There are acute problems with the transport service whereby ambulance cover is restricted at night in many provincial towns and people who do not have a car have great difficulty in getting to outpatient departments in hospitals and other health centres. In the area of our dental care there is a stop-go service. Adult mentally handicapped people, particularly in the Eastern Health Board area, cannot be guaranteed residential care after their parents' death, and that is unacceptable. The areas I have mentioned — the provision of local authority housing, waiting lists for health services generally, with specific reference to mental handicap residential places, and dental and transport services — should have been addressed in this budget. Similarly remedial and career guidance services at primary and post primary level should have been addressed and the carer's allowance should have been up-dated.

In relation to the economy generally and to employment I would like to say a few words about transport, my own portfolio, but I would first like to refer to the depression in the agricultural sector. The extra £1 million for Teagasc falls far short of what is required to maintain all the services the Minister has promised to maintain in the west not to mention those in my constituency such as Clonroche horticultural centre, Johnstown Castle and other advisory centres. Some steps should have been taken in this budget to increase the threshold for capital acquisitions tax for young farmers inheriting land. This is out of date and needs to be brought into line to take account of milk quotas and other changes in the capital value of farms.

Finally, I would like the Minister to take up in the Finance Bill the question of depreciation of agricultural machinery vis-à-vis registered agricultural contractors. Since, obviously an agricultural contractor will use equipment at a much greater rate than an ordinary farmer he should be allowed claim in respect of depreciation of 50 per cent instead of being assessed in this respect in the same way as is a farmer who may use the same equipment over several years.

I would like to refer to transport, my own area of responsibility. If there is any issue that will become increasingly important in the context of the Single Market in 1993 it is transport, simply because we are dependent on exports. We export more than 70 per cent of the goods we produce. We are more dependent on exports than is Japan, and when you consider how much Japanese hi-fis, cars and televisions are an everyday feature of European and American life, you realise how vital our exports are.

We have more complex transport requirements than have other countries in so far as we have an inadequate road infrastructure and one of the most inefficient port structures in Europe. We must avail of sea transport which is costly or, alternatively, air transport though that accounts for only 0.2 per cent of cargo. In those circumstances we must improve our transport in terms of frequency, cost and reliability and of efficiency of services. We are getting money from the European Community on a once off basis to rectify the problem whereby our transport costs are twice the European average, representing over 9 per cent of export product value.

The first thing we need to do is stop the practice of sea transport from the Republic using the northern corridor. One in three of all container loads that either originates from or is destined for the Republic of Ireland goes through or comes through Northern Ireland. That happens for a number of reasons. Port costs on the central and southern corridor are three times higher than those in Northern Ireland. One reason for this is that we have not given the same capital grants in aid to our ports as has Northern Ireland, and that needs to be rectified through EC funding of 75 per cent. In the case of Dublin Port we need to remove the monopoly of stevedoring practices, and that can be done only by a generous redundancy package financed by the Government. We need most of all to update the Harbours Act, 1946, so that our ports operate commercially rather than bureaucratically as is the case of local authorities.

We need to update our national roads, which account for 6 per cent of our road network, to European standards. If we continue at the present rate of improvement, it will be the year 2020 before they are brought into line. We must remember that the Irish motoring public are paying £3.5 million per day in all taxes but they are not getting the roads they deserve. Delays due to inadequate roads are adding directly to our cost structure. If we take the haulage sector, in particular, we will see examples of where we are out of line. Excise duty on vehicles in the Republic is levied at 6.5 per cent but in the North it is zero. The excise duty on oil is a great deal higher in the South than in the North. VAT on diesel and on vehicles is levied at 21 per cent in the Republic but it is 15 per cent in Northern Ireland. When one also adds higher insurance and labour costs, one can see how the Southern hauliers have lost out. We should have a common EC policy and we should have a common rate of VAT of 14 per cent on both diesel and vehicles for the haulage sector. I welcome the Minister's decision to abolish the excise duty on road haulage vehicles but this is tempered by the savage increase of 35 per cent in road tax.

We oppose the proposal to abolish duty free concessions at EC level and the proposition to introduce intra-Community VAT on transport. The years 1992 and 1993 are inescapably crucial in putting a coherent transport policy in place, some of it is budgetary, some of it is policy and a great deal is EC related. Unfortunately, I see no evidence of any Government programme to meet that objective. There is no Government strategy to deal with the congestion problem in Dublin and there are no plans for a light rail transport system in the city. Such a system is required in the long term, to match the DART, right across the greater Dublin area, where 40 per cent of the population live. Unless these proposals are approved by this House and then by Brussels we will not be competitive in terms of our transport costs.

We have no real policy on how we will develop our rail service. Fine Gael believe that the National Roads Authority should be a national roads and rail authority, because it is unfair that the cost of maintaining the railway track, which is about £45 million per year, should be paid for solely by the transport user, Irish Rail, unlike any other mode of transport. Last Wednesday the Sligo Chamber of Commerce led a deputation to try to maintain the rail service to Sligo. The service to Sligo is getting slower and slower for safety reasons because of under-investment in the railway track.

We have no systematic programme for developing our ports and we are still awaiting the report of the Harbour Review Committee. This type of analysis and paralysis means that we are not in a position to convince our European partners that we have an integrated transport plan.

The first thing the new Taoiseach — Deputy Albert Reynolds I presume — should do when appointing his Cabinet is to ensure that the first steps are taken to put a coherent transport policy in place by appointing a Minister with responsibility for transport. At present the Minister for the Environment is responsible for roads, traffic and haulage issues, the Minister for Finance is responsible for budgetary matters, the Minister for the Marine is responsible for ports and the Minister for Tourism, Transport and Communications is responsible for shipping and aviation. It is totally fragmented and there is no interaction between Departments. In most other European countries, particularly Denmark, they have resolved the problem of the need for an integrated transport policy by making one Department responsible for all facets of transport policy. I hope we will have a new transport ministry in the new Cabinet.

We will be opposing this budget because while it has many innovative and new measures, it lacks the overall vision to give us the type of policies that will allow us in the competitive Single Market to create a greater market share for Ireland so as to increase the proportion of Irish goods and services sold abroad. Without this we will not resolve the unemployment crisis here.

Dr. Hillery

The budget is primarily a domestic measure but I wish to spend a few moments identifying features of the international context in which we live and trade. In the present context the current administration could hardly have been confronted with a more difficult task than framing this year's budget.

Over the last two years the international economy has turned decisively downwards after a seven year period of sustained and rapid expansion that spanned most of the eighties. In particular, difficulties in the United Kingdom economy have posed a special threat for us. Although there has been a significant shift away from dependence on the UK market over the past 30 years, it remains by a comfortable margin our largest export market. Hence, the recession in Britain, now in train for almost two years, has caused very grave difficulties for that portion of Irish industry dependent on export markets for a significant portion of its sales. The past year has been particularly disappointing in that the timing of the expected move out of recession by the major economies has been continuously pushed back. This time last year it had been hoped that the UK economy would be on an upward trend again by the middle of last year, now many forecasters do not see the upturn coming much before the middle of this year.

Equally, in the United States many indicators were suggesting that the economy was expanding again last summer, but those hopes have been conclusively dashed over the second half of the year. There is now overwhelming evidence available that the US economy ended 1991 on a very depressed note indeed and any recovery that may emerge in 1992 is likely to come later rather than sooner and will be slow and shallow when it does come.

This combination of events in the international economy has been particularly unfortunate from the Irish point of view. For much of the boom years in the international economy during the eighties, the Irish economy was so financially stretched that it was not able to participate. It was only after Fianna Fáil returned to power in 1987, and the decisive action taken to correct the large budgetary imbalances they inherited, that the economy was in a position to benefit from the buoyancy of the bigger economies. However, by this time the momentum was rapidly disappearing from the international boom and the Irish economy only participated in the very tail end.

Judged against the international difficulties facing policy makers, last year in Ireland there was quite a creditable performance. From the financial perspective, the economy remains very sound. Despite the much weaker than anticipated external environment, overall borrowing figures for the last year turned out only marginally higher than budget. That was in contrast to the almost hysterical fears of many commentators towards the middle of the year. It also compares very favourable with the experience in other countries. In Britain, for example, the budget has moved from a substantial surplus to a substantial deficit and in other European economies budget deficits have widened sharply. This year's target of £592 million will be the fourth year in a row in which the deficit is kept within the limit of 2 per cent to 2.5 per cent of GNP. That is sound financial management at its best.

The economy also performed well under the general headings of inflation and the balance of payments, the latter being the difference between what we sell to and buy from other countries. Since Fianna Fáil returned to power in 1987 we have had a surplus on this account. This year the surplus will be over 6 per cent of GNP and will be the highest in the entire OECD area — much higher than the financial powerhouses such as Japan, Germany and Switzerland. Inflation remains well under control and is in line with what is required by our membership of the European monetary system. This has enabled us to maintain our currency link with the Deutsche Mark and to continue to attract substantial flows of funds from international investors. In this regard it is important to note that the successful partnership approach based on consensus between the Government, trade unions and employers has been an integral part of the success on the trade and inflation fronts. Because of the provisions of the Programme for National Recovery and its successor, the Programme for Economic and Social Progress, Irish companies have been able to notch up substantial gains in competitiveness. This is now showing through in the export figures. Despite the very poor shape of the UK economy, Irish exports to Britain were increasing again in the latter months of 1991 as Irish companies won market share from their UK counterparts.

I am not suggesting that good financial ratios are an end in themselves. A large balance of payments surplus and low inflation are no substitutes for the jobs and employment that are necessary for those who do not have them at present but they are a prerequisite if we are to achieve the growth in the economy necessary, if we are to create those jobs. We would have no hope of generating such growth if we were to start from high inflation and large imbalances in the public finances and trade account.

I now wish to turn to the specifics of the budget. I have already noted that holding the overall borrowing requirement to just 2.4 per cent of GNP in the current difficult economic climate represents a very substantial achievement and compares very favourably with international experience. There have been many interesting innovations in the budget, but they have not been achieved at the expense of overall financial targets. Prudent financial management has been a hallmark of this Government for the past five years and it has been continued in this year's budget. The target set for the EBR in 1992 will provide the foundation for the achievement of the targets set in the Programme for Government agreed last summer.

The success of financial management has not been at the expense of the poorer sections of the population. Yet again, this year's budget provided for increases in social welfare rates comfortably ahead of the rate of inflation. That has been the case for the past five years and will remain so for as long as this Administration remains in power. Indeed, that caring and imaginative approach to the needs of the less well off has been characterised by the Taoiseach's behaviour and interest in the less well off during his entire public life. This year again I can see the hand of the Taoiseach, Deputy Haughey, in the provisions for social welfare.

Some years ago it was feared that the adjustment of the Irish indirect tax system to a level that was consistent with the establishment of the Single Market in 1992 would cause serious difficulties for the Irish Exchequer. Some suggested that the cost might be as high as £400 million to £500 million per annum. The year 1992 was on the lips of everyone as if it were some kind of economic ogre that would herald our death knell. Believe it or not, we are now in the so-called dreaded year and things do not seem nearly so catastrophic. The fact that this is so is testimony to the prudent planning of the previous two Governments.

The standard rate of VAT has been reduced to 21 per cent and whatever further adjustments are required when the barriers come down completely next January can be accommodated without any undue strain on the budgetary arithmetic. Let us not forget that the standard VAT rate was as high as 25 per cent just a few years ago and that many excise duties were way out of line with comparable rates in Northern Ireland — Border traders would testify to that fact without any undue provocation. To make the adjustment that has been made would have been difficult enough in any circumstances; to do so at the same time as major financial imbalances were being corrected was a remarkable achievement.

We have also witnessed again this year significant further progress in reforming the direct tax system. The standard rate of tax is now down to 27 per cent and there is only one higher rate of 48 per cent. That compares with the standard rate of 35 per cent and a higher rate of 65 per cent when Fianna Fáil began the process of 1987. There has also been a sharp reduction in the proportion of taxpayers paying marginal rates above the standard rate, down from an unacceptable level of 45 per cent in 1986 to 31 per cent in 1991.

Those reforms are an integral part of any comprehensive job creation programme. Recently we had the publication of one of the most comprehensive reviews of industrial policy and job creation in the history of the State, namely, the Culliton report. I congratulate Mr. Culliton and his team on producing such a timely and comprehensive report. The essential message in that report was that we must create the environment in which industry and jobs can flourish, rather than attempt to put in place a myriad of reliefs and grants in an effort to remedy serious basic disadvantages in the system. In the past our industrial policy was often compared to a health system that responded to an outbreak of a virus by building more and more hospitals rather than tackling the basic source of the disease in the first place. One of the more glaring anomalies in the previous system was that it subsidised capital and taxed labour. That was an odd combination of incentives for an economy that had, and continues to have, such a ready supply of young and well-qualified entrants into the labour force.

As a result of the system we adopted, the gap between the cost to the employer of hiring a worker was well in excess of the take-home pay of the employee. Economists call that the tax wedge and it constituted a serious deterrent to increasing employment. At the same time, Ireland was subsidising capital very significantly indeed. Apart from low corporate tax rates, there were accelerated capital allowances, capital grants and section 24 loans. This Government have not been shy when it comes to taking the tough decisions necessary to redress the imbalance between capital subsidies on the one hand and the cost of labour on the other. Most of those reliefs and grants have been significantly curbed, and potential employers can now make a much more balanced judgment in the choice between employing labour and machines when they start up a new project.

However, much remains to be done. Marginal tax rates which are effectively very high are still very much part of the system. There has been some reduction in the tax wedge but it is still very high in an absolute sense. We must make progress in the process of integrating the tax and social welfare codes and reducing the disincentives that remain in the system. In this context I should like to enter a plea for any further reform of the tax system that takes place. Reducing rates of income tax is a plausible objective, but right now it is no longer the rates of tax that are the main problem. A standard rate of 27 per cent and a top rate of 48 per cent are not excessively high by international or other standards. The problem that should now be recognised is that average income earners reach the top rate too quickly. Hence my plea: any further resources which are available for reform of the income tax code should be used to expand the standard rate band rather than reduce rates further still. That was an important element of the Culliton proposals and I endorse it wholeheartedly.

There are also other areas of employment policy that can and need to be progressed independently of what is done on the tax front. In particular, the Culliton report identified current training and education policy as being inadequate for the needs of a modern and growing economy. There is a need to de-emphasise the bias towards liberal arts and traditional professions — not; of course, to move away from them altogether — and to give higher priority to the acquisition of usable and marketable skills. A high quality stream of technical and vocational education needs to be developed, and that will require attention at both second and third levels.

Other parts of the environment and infrastructure also need to be developed. We must do something about the efficiency and cost of access travel, and in this regard I agree with the previous speaker, Deputy Yates. Ports on the east coast have become uncompetitive and have lost significant market share to their Northern counterparts.

In that context I wish to link the port issue on the east coast to Dún Laoghaire harbour, which is an important resource in my own constituency. I state straightaway that without the ferry at Dún Laoghaire there will be no Dún Laoghaire harbour. I strongly favour the retention of the ferry service, for which there are sound reasons. Dún Laoghaire is Ireland's premier passenger port; twice as many passengers use Dún Laoghaire — 1.2 million passengers last year — as use Dublin Port. Dún Laoghaire is 45 minutes closer to Holyhead by sea than Dublin Port. Dún Laoghaire is a beautiful port of entry for tourists and commercial users alike. Furthermore, it is visually attractive and adjacent to our biggest urban population of one million people. The harbour provides alternative competition to Dublin and it has an excellent record of industrial relations and a tradition for more than 150 years of running on time. While it is not envisaged that Dún Laoghaire would ever develop into a freight port only, nonetheless almost 5 per cent of the national exports now go through Dún Laoghaire. The capacity for freight handling is needed in a port near Dublin. The Tánaiste and Minister for the Marine, Deputy Wilson, had indicated his support on several occasions, very recently in the Seanad, for the retention of the ferry service to Dún Laoghaire. That is a matter of public record.

At present the ferry is by far the major source of revenue for the harbour. It is also quite clear that regardless of the other leisure type developments that may be undertaken in the harbour they will not generate sufficient revenue to maintain the harbour. I reiterate the main point of my argument: without the ferry there would be no Dún Laoghaire harbour.

The Culliton report identified areas that need attention in addition to the ports — the postal and telecommunications area, energy policy and prices to mention a few. I welcome the Minister for Industry and Commerce's endorsement of the overall thrust of the Culliton report. I also welcome the establishment of a committee of Ministers with the Taoiseach as chairman to progress the issues further. Many of these measures will take time to implement and we must avoid the temptation of the "quick fix".

Some relief will come from the two new schemes announced on budget day — the employment subsidy scheme and the in-company training scheme. Some 25,000 people will come off the live register as a result of these schemes which will be heavily assisted by the European Social Fund — 75 per cent — and the balance from employers. Such assistance is a major achievement in gaining European recognition for the special needs of our economy and I congratulate the Government negotiators, the Government, the Taoiseach, Deputy Haughey, in particular, for gaining European recognition for the special needs of our economy.

I congratulate the Minister on achieving a creditable balance between conflicting demands on him. The budget has maintained the oveall thrust towards prudent financial management which has formed such an integral part of Fianna Fáil policy since 1987. The budget has continued the process of radical reform of the income tax code, although more needs to be done, as people reach the top rate too quickly. The budget has changed the nature and structure of our indirect tax code to prepare us for the Single Market and it has overhauled the incentives in the corporation tax code. At the same time the budget has yet again more than protected the living standards of those most in need and has laid the foundation for strong and sustainable growth in employment in the nineties.

In relation to Dún Laoghaire harbour, central to the development plan is the retention of the ferry terminal. In that context I will congratulate and commend the chairman of the interim harbour board, Professor Dermot McAleese, and his colleagues for their committed work in developing an imaginative and exciting plan for Dún Laoghaire harbour. Without the ferry there would be no Dún Laoghaire harbour. The case for the retention of the ferry is founded on the strongest possible logical arguments.

Mr. Moynihan

Speaking on this budget it is no harm to refer to the response of the Conference of the Major Religious Superiors with regard to the areas in which they have a demonstrably clear interest. They say there is no redistribution of wealth to ensure that everyone has a minimal, adequate standard of living, that there has been a complete failure to close the gap between the poor and the better off and that, in fact, the gap has been widened. They say there has been little attempt to tackle widespread rural poverty, there has been a totally inadequate programme to tackle unemployment, there has not been any significant action to tackle child poverty, or any significant changes which would make it easier for unemployed people to work towards developing themselves and their communities, seeing that the jobs are not available, and that there has not been a serious attempt to eliminate poverty traps. They say also that there is no evidence that the emerging housing crisis will be tackled or that the Government recognise the need for an integrated approach to tackling poverty in the social divisions. I agree with their views on the redistribution of wealth and on the impact of this budget. The budget does not cater for the most vulnerable sections of our community. In most instances lower paid people will be worse off than they were before.

The Minister for Social Welfare clearly indicated Government policy in the area of social welfare with regard to disability and occupational injury benefits when he said the Government had decided that with effect from next April all weekly disability benefit and occupational injuries benefit payments would be treated as income for tax purposes, that the mechanism for implementing these arrangements was currently under urgent examination in the Department and that it was envisaged that it would include a combination of a statutory sick pay scheme under which, for an initial period of four weeks, responsibility for sickness payments would be transferred to the employer with an appropriate compensatory arrangement, and that for claims in excess of four weeks duration other arrangements to integrate disability benefit with employers' pay roll systems and with the taxation system generally, would be made.

This is the wrong time to bring disability benefit and occupational injuries payments into the tax code. Every insured worker knows that up to 1987 the insurance card gave full entitlement to free hospital services, but since 1987 that has changed and hospital day charges commencing at £10 per day were introduced. The charge has now been increased to £15 per day up to a maximum of ten days. In a family of five it would not be unusual to have two members of a family in hospital for up to ten days in any one year. This would impose a tax bill of £300 on that family.

The free drugs scheme has been dramatically altered and the insured worker has to spend £96 over three months before he can get any refund. With those new elements of taxation on the insured worker, this is not the time to introduce an assessment of disability and occupational injuries benefit for tax purposes. Occupational injuries benefit is a payment made to an insured worker who has suffered incapacity, perhaps the loss of a limb or an eye, or who might be confined to a wheelchair due to an accident at work. To think that the Government have seen fit to make a decision to include that benefit for tax purposes is very serious.

Apart from that, further changes have been made in the conditions for eligibility for disability benefit. Having discussed this with insured workers and others, I am convinced that neither the Government nor the Minister are conscious of the implications of these altered conditions. Heretofore an insured worker, having a base minimum of 208 paid contributions, on unemployment assistance or on credit, retained his right of eligibility for disability benefit at any time he or she became ill. All that has been changed by the decision of the Minister and the Government. The Government statement says that contribution conditions for receipt of social welfare benefits require claimants to have, in the first instance, a certain minimum number of paid or credited contributions in a recent contribution year. At present people can be entitled to short term social welfare payments mainly on the basis of credited contributions and without any recent record of paid contributions. The statement goes on that the Government have decided that, in the interests of better targeting of benefits, entitlement to disability and treatment benefits will be subject to a minimum number of paid contributions in the previous year.

There are 270,000 people unemployed for periods ranging up to seven years and more. If such a person is hospitalised after 1 April next, his or her eligibility to draw disability benefit will be gone because there will not be a minimum number of paid contributions in the 1991 tax year. The overwhelming majority of the unemployed have been insured workers and they are subsisting on unemployment assistance or on credit. In accordance with existing legislation their entitlement to that benefit should be continued. They are now to be ineligible for disability benefit during periods of illness or hospitalisation and they will not be able to draw unemployment benefit if they are not capable of working. Who will support a worker and his family in such circumstances during the period of incapacity? The State have opted out by introducing a disastrous new condition which will debar thousands of workers from receiving disability benefit. Who will support these families and individuals? The health boards have been dealing with supplementary welfare but their budgets are not adequate to deal with the massive cost of subventing disability benefit.

In line with the approach that schemes should be better targeted, the Government have decided that persons earning in excess of £25,000 will not be entitled to dental or optical treatment. It may appear that people with such earnings could pay for their dental and optical treatment but the PRSI structure is pay-related and these people have paid for these benefits. This is regarded by insured workers as the first step towards means testing the contributory record. There was never a means test previously.

The Government have also stated that they are concerned with recent trends in relation to the claiming of unemployment benefit which is being used to top up voluntary severance payments and early retirement packages. Measures to control this development are currently being worked out and details are to be announced in the Social Welfare Bill. Decisions with regard to redundancy or early retirement lie entirely in the hands of management. The worker has no say. He accepts the loss of his job and whatever benefits his trade union may negotiate for him. Since the introduction of redundancy legislation a period of 15 months on unemployment benefit was allowed, mainly aimed at giving that worker an opportunity to resettle in another job. Details are skimpy but it would appear that the Government are determined that the lump sum should be adequate compensation and it is unlikely that such people will qualify for unemployment benefit for the usual 15 months.

I have attempted to cover the four main attacks on social welfare, and these are most serious. People in the PAYE net make the greatest contribution in terms of taxes. Now their income from benefits is to be assessible for income tax. This represents double taxation. The increase of 4 per cent for such people is unlikely to bring any financial gain. It will not be payable until the last week in July, while the increases consequent on the budget are already in operation. At this point the increase for a single person in receipt of social welfare will not purchase a package of 20 cigarettes a week. The imposition of VAT at a higher rate on a variety of goods in everyday use will more than use up whatever benefits will accrue from the budget.

In Kerry, there is a frightening volume of stress and trauma arising from the delay in gaining admission to hospital. It was reported yesterday that the Southern Health Board will require to lay off possibly more than 150 people early this year. This will leave a vacuum. Their duties and responsibilities will be transferred to other people who are already overburdened due to serious cutbacks and it will not be long before the organisations catering for these people will be forced to take action which nobody wants. Their position is becoming desperate. I have a letter from a constituent undergoing renal dialysis, who must travel from Dingle to Cork three days weekly, leaving at 5.30 in the morning and returning at 5 o'clock in the afternoon. I might add that the community in Kerry have subscribed £90,000 for the provision of a dialysis machine. I implore the Minister to provide the remaining amount for the provision of this machine, thereby saving that man and 13 others the hardship of travelling so far for treatment.

I shall deal briefly with education and the proposed means-testing of European Social Fund grants. The excuse being given for the introduction of this means-testing is that many rich people, such as self-employed large farmers and professional people benefit from the scheme. It should be remembered that European Social Fund grants cover certificate and diploma courses only and that, whenever possible, the well-off, to whom I have referred already funnel their children into the professions. I might add that the duration of the degree courses would not attract the vast majority of European Social Fund course students whose parents are middle income or PAYE workers who generally cannot risk a four-year investment in a university degree course for their children. For them the European Social Fund affords them a breathing space in that, if their children have proved themselves to diploma level, the parents will have had an opportunity to accumulate a few pounds, possibly paying for a further two years' education.

The major source of public dissatisfaction with the present means-tested higher education grants is that rich people experience no problem in qualifying for State grants. Rarely can their income be proven, unlike their PAYE counterparts, whose actual income appears on their form P.60 and who are then assessed on gross income, constituting a grave injustice. If the self-employed and others experience little difficulty in being means-tested they will not be in any great hurry to avail of European Social Fund grants. I appeal to the Minister to restore these grants to the category of persons for which they catered, that is the middle income PAYE workers' children.

Mr. Power

I should like to congratulate the new Minister for Finance, Deputy B. Ahern, on having introduced his first budget, the drafting of which must have been a difficult task since he had not long been in charge of that portfolio. It would appear that the community generally welcome its provisions.

This budget will be viewed, with the benefit of hindsight, as a landmark in economic development, being pro-work, pro-tax reform, socially caring and supportive of investment. Indeed incentive to work is being restored as is the capacity of employers to remunerate workers without jeopardising their businesses. The disproportionate burden of taxation being borne by PAYE workers is being alleviated, the necessity for which will be appreciated by everybody.

The Industrial Policy Review Group, chaired by Mr. Jim Culliton, about which Deputy Brian Hillery has already spoken, found that our pre-budget taxation system contained a multiplicity of reliefs and exemptions without any consistent logic, thereby encouraging nonproductive tax avoidance activities, holding back industrial progress. The review group concluded that personal taxation was oppressive and unfair, going so far as to say that it stifled enterprise and eroded incentive to work.

I contend these budgetary provisions are an immediate response to removing obstacles to work in enterprise in that the top rate of income tax has been dramatically reduced to 48 per cent, a full four percentage points lower than the rate prevailing last year. Not only will it be those paying tax at the top rate who will benefit but also those paying at the standard rate, which has been reduced by two percentage points, with the tax bands being extensively widened so that henceforth we will have a much simpler tax code. I predict few taxpayers will weep for those affected by the abolition of some tax avoidance schemes which had the effect of increasing the overall taxation burden on the lower and middle income PAYE taxpayer.

We all recognise that the road to real reform of our taxation system is a long one. This budget is another positive step in that direction. This Government have set about remedying the anomalies that have obtained to date. The key issue in implementing tax reform is the reduction of the lower tax rate to the targeted 25 per cent level along with widening the standard rate income tax band. I am particularly pleased the Minister did not yield to the pressures on him to reduce relief on mortgage interest payments and VHI premiums, because any such action would have penalised many middle and lower income families. Everybody in this House will appreciate and recognise the importance people place on owning their homes so that any change in or reduction of the relief for mortgage interest payments could only have led to increased numbers on local authority housing lists nationwide. I am sure Deputy Dukes, who is present, will readily appreciate the Government's difficulty in endeavouring to house people. For example, there are 10 houses being handed over today in the town of Kill in my constituency but there were almost 200 people on the waiting list for those houses, an example that will readily demonstrate the difficulties confronting the Government in endeavouring to house people.

These budgetary provisions will benefit hundreds of thousands of workers, many of whom believed they were being treated unfairly under the tax code despite being in receipt of modest incomes. The Minister should be congratulated on these provisions which in addition to being pro-work, are pro-employment. The employment subsidy scheme which will benefit 15,000 people and the in-company training scheme, which will benefit 10,000, will be launched very soon. It should be remembered also that the European Social Fund is to contribute £24 million to the cost of implementation of these schemes. Everybody recognises and appreciates our huge and persistent unemployment problem, to which there is no simple solution. Indeed its present level of almost 270,000 on the live register is unacceptable and cannot be tolerated much longer. It is important that the Government create the right climate for the creation of the jobs so badly needed nationwide.

The Industrial Policy Review Group also found that there were no unused cash reservoirs to be trapped to provide early sustainable jobs, something which, deep in our hearts, we all knew was the case. As their chairman said, it is indeed time for change, to realise that Governments alone cannot provide permanent secure jobs and a growing standard of living; that borrowing for short term gain carries a huge price tag in terms of high taxation in order to pay its attendant interest bill. I am delighted that the Government have decided to establish a high level task force, reporting directly to the Taoiseach, to implement the many substantive proposals contained in the report of the Industrial Policy Review Group. I know the mood is prevalent to take hard decisions in the interests of creating jobs and greater competition. In this respect the members of that task force can rely on our full support.

The creation of jobs must remain the Government's main priority. While these budgetary provisions will directly or indirectly lead to the creation of thousands of jobs, the fact that the European Social Fund is to contribute £24 million to employment schemes must be welcomed also. I hope that additional moneys from the European Social Fund will be forthcoming in the future, because we must accept that these budgetary provisions will provide only temporary relief for the ever-growing numbers of unemployed persons. If we are to reduce that unacceptable figure a much more imaginative approach must be adopted. When one looks at the more successful economies around the world it is obvious they are using their natural resources in a very efficient and effective manner. In our own little island it is obvious we are not receiving the maximum benefit from our resources.

The fishing industry, despite major investment in recent years, is largely underdeveloped. In recent years governments have grant-aided certain industries where the market is saturated. We have ploughed money into those areas and got very little in return. Questions were raised in the recent past about our industrial policy and the fact that we are questioning that can only benefit the country in the long term. We must try to identify the areas where there will be growth, get in early and reap the rewards. There is a tendency to copy other countries and, unfortunately, when one takes that road it means we are years behind. It is very difficult to overcome that disadvantage. The fact that all our exports must go by sea or air places additional costs on exporters. It is vital that we produce top class goods if we are to remain competitive.

This budget is also a caring budget in that it will increase the spending power of most people on social welfare from July and protect all welfare recipients against inflation. That is a good thing. It is in line with the commitments in the Programme for Economic and Social Progress and in the tradition of Fianna Fáil. All social welfare payments have been increased for the fifth year in succession.

A serious attempt has been made in the budget to reward work and effort. We must all be aware of the large number of people on low pay. Indeed, the Government have acknowledged this by improving the family income supplement scheme. Successive Governments have provided significant increases for those on social welfare. In fact, during the last ten years the real value of long term payments has risen by over 18 per cent while during the same period the real value of dole payments for the long term unemployed has increased by 32 per cent. The Commission on Social Welfare recommended major increases in these areas and while they did not reach the levels recommended by the commission, nevertheless we must accept, when one takes into account the serious financial situation facing our country, the increases were very generous.

On the face of it, these increases reflect very well the humanity of successive Governments. However, on closer scrutiny one can see that a major problem is being created. We are creating a system where some people drawing the dole have more disposable income than some low-paid workers. If that is allowed to continue it will prove to be a disaster for the country. It is vital that we restore the incentive to work. The obvious way to resolve this problem is to cut the burden of tax for those on low pay. It is bad enough to have to tell almost 270,000 people that there is no work for them but if we have to tell those on low pay that, financially speaking, they would be better off joining the dole queues it will not be long before our unemployment figure reaches 300,000.

I admit to being somewhat concerned at the slippage in the planned borrowing needs of the Exchequer, £592 million compared with £460 million in 1990. We all accept that the Government have tackled our national debt in a serious manner. Despite the economic miracle — which we on this side of the House tend to call it — that has occurred since 1987 if we look at the figures we will see that our national debt in 1987 was £23,694 million and in 1990 that figure had risen to over £25 billion. While we can take great comfort in the fact that the debt is under control, nevertheless it is increasing. If we are to continue spending money at the same rate as we have done over the past few years we will no longer be able to contain the national debt. The cost of servicing the national debt in 1991 was £2,353 million, and the projected figure for 1992 shows a slight increase. I would like to think that the serious approach we adopted in 1987 will continue. We have reduced borrowing in every budget since 1987 and there should be no weakening of our resolve to keep the national finances on a sound footing.

I would like to deal with some of the items in the budget. The exemption threshold for capital gains tax has been halved to £1,000 for a single person and £2,000 for a married couple. I will be honest and say I was surprised to see this. Coming from a gambling county like Kildare, I am of the opinion that many people, if they have a few thousand pounds to spare, like to gamble on the Stock Exchange. This change will reduce the number of people who will be prepared to take such a gamble. I appeal to the Minister to have another look at that. VAT will be increased from 12.5 per cent to 16 per cent on telecommunications charges, personal services, repair and maintenance services and adult clothing and footwear. It may not create too great a burden on families, nevertheless it is an increase which will create difficulty in some quarters.

In the last few months many people have referred to the various scandals. I am delighted to note that the Minister and the Government have learned from them and have brought forward measures in the budget to deal with them. For example, tax relief on loans to buy shares in quoted companies has been abolished and the tax relief for company profit sharing schemes has also been abolished. Those changes are welcome. There should not be any tears that these reliefs have been abolished.

Road tax is being increased by 20 per cent. I am sure the motor industry will not be too happy about that but the price reduction in petrol should offset that. My profession — bookmakers — were not forgotten in the budget. It may be more difficult for them in the future in that they will have to have a certificate from the Revenue Commissioners to state that their tax affairs are in order when renewing their licence. The bookmakers are a very noble profession and that should not prove a problem for most of them.

I expressed concern about our national debt and the way it has increased. I am concerned also about the proposal to remove tax exemptions from agricultural co-ops. While it is true that some of the bigger publicly quoted food companies are now little different from private companies the same cannot be said of the small to medium agricultural and fishing co-ops who provide the infrastructure for growth in rural Ireland. Many of these co-ops estimate that the tax change will cost them the equivalent of 2p per gallon of milk. It is clear that this will be passed back to farmers who are already under pressure from price cuts and quota reductions. Many farmers had a difficult year and the future for them does not look very bright either. Given the proposals to reform the Common Agricultural Policy and the fact that the GATT negotiations are ongoing, I am sure many farmers feel they are in a limbo. This is an issue the Minister could look at again in preparing the Finance Bill.

I am glad, too, that the problems facing Teagasc have been recognised in the budget. The extra £1 million will enable them to put agricultural advisers to work directly with low income farmers who are not in a position to pay fees. This band of low income farmers were in danger of being completely overlooked and left behind if Teagasc were forced to rely more and more on commercial farmers to collect direct revenue for their advisory services.

Overall, this is a good, safe budget which has seen the most sweeping reform of the tax system since the introduction of PAYE and which will bring about greater equity and transparency in our society. As I said at the outset, given the commitments contained in the Programme for Economic and Social Progress, the Minister and the Government did not have an easy job framing and bringing in the budget, but overall the Minister has managed to bring forward and take prudent measures. While we would all like to see the tax system being reformed, as we can all appreciate this is not something that can be done overnight but rather has to be done gradually and I am delighted we are to continue along that road.

As I outlined earlier, certain steps are being taken in the budget to restore the incentive to work, and it is vital that it be retained. As I said, we have unacceptable levels of unemployment and if we fail to restore the incentive to work we will have little hope of reducing the escalating unemployment figure. I welcome the budget and hope the Minister will be around to bring in many more in the future.

Mr. Dukes

I am the only Member who has had the experience of getting four budgets through the House. With all the events on the other side of the House, I think I will hold that record for a good many years to come.

With all that behind me, I am far from being as starry eyed about this budget as Deputy Power is, but I was glad to hear that he has some worries about it, particularly in relation to what is a very silly proposal on capital gains tax, that is, to remove the difference between long term and short term capital gains, and to a very regressive and unnecessary proposal relating to the taxation of co-operatives. I hope Deputy Power has some success persuading the Minister to change his mind and I would be delighted, both as a constituency colleague and as somebody who shares his worries, to help him persuade the Minister to see the light.

Mr. Power

I will keep the Deputy informed.

Mr. Dukes

If pressed enough, the Minister will talk about it in public; he seems to talk about everything else in public as well.

I was disappointed but not surprised to see Deputy Hillery acting as if history began in 1987. That is a popular canard circulated by Fianna Fáil Deputies, and perpetuated by our absent friends in the gallery who are all no doubt glued to their monitors — if their fried eggs are not getting in the way at this time of the evening. I would like to remind Deputy Hillery and others on that side what happened before 1987. They may have forgotten, for example, that by the end of 1982 inflation was running at 20 per cent, but by the end of 1986 it had been brought down to 3 per cent; by the end of 1982 the Exchequer borrowing requirement was heading for 21 per cent or one-fifth of GNP, but, again, by the end of 1986 it had been brought down to a still very worrying figure, but a much less disastrous one of around 13 per cent and heading down. During that period, from 1982 to 1987, we saw the beginning of external surpluses which Deputy Hillery seems to think started in 1987.

While there are some grounds for feeling progress was made since 1987, it could not have been made without the action taken between 1982 and 1987. This year's budget gives me no confidence that the Government have the understanding of the social and economic imperatives of public policy that is required to continue that process. Neither does the budget give me any confidence that the Government are prepared or able to act in a way which responds adequately to the need for enlightened policies which are the only way of liberating public policy for the large scale pre-emption involved in the level of foreign debt interest payments we now have to make. There is nothing in the budget which gives me any confidence that progress will be made on that matter, in fact quite the contrary.

The reactions of the major economic interest groups to this year's budget have been very interesting. They have all had polite and positive things to say about some aspects of the budget but the interesting thing is — and they all have this in common — they all felt it necessary to add a rider — they are all worried that the Government have lost their commitment to restoring financial stability and fiscal commonsense. They all see in this budget, after the experience of 1991, yet another loosening of the Government's grip on that necessary reality and an absence of any evidence that the Government have any concrete, not to speak of creative, approach to what is now a deeply worrying structural problem in the public finances.

Lest there be any misunderstanding, the people who suffer most from serious structural problems in our public finances are not the economists, the gurus or the commentators Fianna Fáil and the press used love to hate but rather the people on social welfare, the children in overcrowded classrooms and the people waiting to get into hospital. Those are the people who suffer and who will suffer as a result of the Government losing their grip on the need to maintain financial commonsense and stability.

One firm of stockbrokers who are usually not given to very extravagant language published their budget newsletter which they called "Budget 92 — Botched Tax Reform". I have to agree with that. I will not name the firm concerned because they might think I am singling them out for some particularly bad form of treatment but those who read about these matters will know about whom I am talking.

The Conference of Major Religious Superiors — the organisation the Taoiseach likes to distrust; remember he said he does not like organisations who have in their name the words "major" or "superior", he thinks those adjectives ought to be reserved for himself — in recent years put a lot of work into thinking about public policy and making recommendations as to where the priorities should lie within the financial parameters. What did they say about this year's budget? They said, and I quote from their budget reaction "the 1992 budget fell well short of the structural reform needed; it was neither integrated nor comprehensive". That is a fair and perhaps over-restrained comment on this year's budget.

The 1991 budget which was introduced by the then Minister for Finance, Deputy Albert Reynolds, was a phoney. That budget juggled with the delays in payments from EC funds, £110 million, and the proceeds from the Irish Life privatisation, £65 million. By juggling with these figures, Deputy Reynolds partially concealed what was in fact a very substantial increase in the Exchequer borrowing requirement last year. There are no two ways about it, he used these figures to conceal the fact that he was setting out, quite deliberately, to increase the Exchequer borrowing requirement over what it would have been if he had not taken any action. He compounded the illusion by making the totally unjustifiable prediction that unemployment in 1991 would fall by 9,000. We all know that that was not what happened.

In mid-year the Government talked up a phoney crisis, letting us all feel that expenditure had got badly out of control and we had dark mutterings about the need for cutbacks and so on. That was done as an excuse for a number of very timid steps to reduce an emerging overrun on the current defict and on the borrowing requirement. It is a sad reflection on the quality of much of the political comment in our media that when the final outturn turned out to be only a little more awful than the budget projections, the media congratulated the Government on having saved us from a disaster. That was quite clever on the part of the Government, they talked up a crisis in the middle of the year, did a few little thing here and there to take the edge off it and were congratulated at the end because they brought the country into a disaster rather than a cataclysm. The Government have had a substantial degree of success in getting across that kind of thing and I fault the media — and many commentators — for falling for this kind of trick-o-the-loop prestidigitation which has been practised in recent years.

This year's budget is not one bit better. The much vaunted tax reform is nothing more than a failure to grasp the real issues of reform. There is almost a bewildering array of measures dealing with the taxation of motor vehicles and motoring, one of the effects of which, for example, will be to make transport or our exports more expensive — indeed they will hinder our exporters in their efforts. Last night a haulier told me that the effect of the budget measures will be to increase the road tax on each of his units by £250. I do not know what the Government think that will do for our exports; I know it will make services more expensive for people who are trying to provide employment.

The Government have resorted again this year to the old expedient of putting off yet more pay increases to some future year in the vague and forlorn hope that something will turn up. The budget leaves a whole series of expenditure issues unresolved, quite apart from the public pay issues. For example, farmers are owed £12 million in headage payments, which is dealt with in the Minister's speech under the heading "Aids to farmers in certain less favoured areas". Every farmer these days is in a less favoured area. What do the Government propose to do in regard to the money owed to them? They propose to give them £2 million this year as an initial instalment but there is no indication when they will get the rest. It is a real case of live horse and get grass.

Equal treatment of women in matters of social welfare is another area where decisions have been postponed. There are potentially 40,000 women who are entitled to payments on foot of recent court decisions; the Minister for Finance is making a provision of £22 million this year and my information is that that will cover 4,000 to 5,000 women to whom payments are outstanding. He went on to say that further "significant payments" would be made in 1993 and 1994 but he did not say what those payments would be, nor did he say whether they will amount to the full total of what falls to be paid out. If they do not amount to the full total, he has not given an indication of how long it will be before these full payments are made; it is another case of live horse and get grass.

The Minister on budget day informed us, apparently without really understanding the gravity of what he was saying, that the ending of the payment of VAT at the point of entry on imports from other European Community member states next year will entail a cash flow loss to the Exchequer of £200 million. It is not just a cash flow loss, it is a loss of £200 million to the Exchequer and no matter how many amateur accountants like the Minister call it a cash flow loss, it is revenue which they will not have. So far, the Minister tells us he has no idea how he will deal with this problem. We can only await the announcement of details in the Finance Bill with some considerable trepidation. Here we see one of Fianna Fáil's desperate stratagems in March 1982 coming back to haunt us. VAT at the point of entry was introduced in 1982 to avoid any difficult decisions in other areas of taxation. As I said, it is now returning to haunt the Government, next year it will be a millstone round their necks and, even more important, it will be a millstone round the taxpayers' necks because measures will have to be taken next year to deal with it.

It seems the Government have decided to charge the banks for cash escorts provided by the Garda and the Army. The Government decided to do this in the interests of public security, the banks did not ask for it as they are insured. However, the Minister said he will get £2 million from the banks this year; reading between the lines I gather that has not been agreed and if that is the case what will the Minister do about it? If that contribution is not forthcoming, what will he do? I wonder. It is dishonest to put a figure — even though it is only £2 million — in the budget when the Minister does not know if he can deliver on it. Mind you, that pales into insignificance beside the fictitious figure of £45 million which the Minister has built in for improved tax collection. I will believe it when I see it.

The Taoiseach presided over a phoney budget in 1981 which compounded the gross error made in 1977. It seems that he will now hand over to the author of the phoney budget of 1991, Deputy Albert Reynolds, who, if we are to believe what we are told, has a sweetheart deal on a dream ticket with the author of the 1992 phoney budget. It seems — I regret to say it — that the restoration of economic common sense which was in political terms, probably the main achievement of Deputy Garret FitzGerald's Government between 1982 and 1987 and which was carried on up to 1989 because of a very enlightened policy in Opposition by my party, is now rapidly being frittered away. This abandonment of common sense, this retreat from reality, is now being supported by the Progressive Democrats whose only apparent reward from this year's budget is, in the words of very respectable stockbrokers, a botched tax reform which does precious little for families on low incomes and virtually nothing for young people in the early years of their working lives.

I have looked through the budget to try to determine its effect on the pockets of ordinary people. On the revenue side I have added up the income tax measures, the flat rate VAT refunds to farmers, excise reductions on cars and petrol and so on. Then I added up the bewildering array of tax measures on the other side, all these things that are supposed to broaden the tax base but which do not. The net effect of the conglomeration of measures on the revenue and the expenditure sides means that the Government, by these decisions, are giving back this year £68 million more than they are taking from people. This amounts to approximately £20 per head of the population or approximately £60 per taxpayer. The Government can hardly expect that to have any fundamental effect on the economy. When one looks at the expenditure commitments which have been postponed from this year to future years — the rest of the equal treatment cost, the rest of the headage payments for farmers, the rest of the public pay commitments, etc. — one can see that this year's budget will not make any difference whatever even in the short term to the course of Irish economic development or to the well-being of the Irish taxpayer or citizen.

The changes in the income tax system have been very badly judged. To put it at its simplest, the Government would have achieved a much more equitable change in our tax system, a much more equitable redistribution of the tax burden, if the money which is being used to reduce the higher rate this year was instead used to widen further the standard rate tax band. This, of course, would have reduced the gain for top rate taxpayers but it would have improved the position for families on low incomes and single people. There is no doubt in my mind where the priority lies between those two groups. A few examples from the Principal Features of the Budget will show this.

A single person on £5,500 a year — a modest enough income — will gain £46.28p under this budget whereas a single person who earns £25,000 a year — and I am glad to say there are some people who earn this amount — will gain £777. A married couple without children, with both spouses earning, on a modest income of £11,000 a year between them will gain £92.56 under the budget whereas a couple earning £30,000 — and I am glad to say there are a number of these people — will gain £754. It is clear that if the Government wanted to deal with the problem of the tax wedge where it really bites they should have done more for the people at the lower end of the income tax scale. That is what stockbrokers mean when they say this tax reform was botched.

I do not have time to go into the VAT changes but I think it is enough to say that the Government have not used the changes in the VAT system this year to reduce the standard rate; rather it has been hijacked to give us this trick-o-the-loop reform of the income tax system. The Government have made the system more regressive. Deputy Power should look again at the list of items which will be subject to the new 16.5 per cent tax rate. If he does this he will find that they will bear more heavily on the lower income groups. This is a regressive change in our VAT system. I feel sorry for retailers because after a number of years — and I introduced budgets in the House for four of those years — when Fine Gael tried to simplify the system by reducing the number of rates the Government have added another rate this year. This will lead to more pain, worry and work for ordinary retailers who sell a wide range of products.

On all of those counts and indeed others I regard this budget as a further retreat from economic and fiscal reality. It is a very depressing omen for the future. Fianna Fail's dream ticket — the Taoiseach we are about to have and the Finance Minister we will continue to have, God help us — will turn out to be a nightmare for Irish people. What it consists of is an unholy alliance of two spendthrift illusionists supported by a bunch of spineless moralisers.

Mr. Dempsey

Deputy Dukes said that last year the Government talked the country into a crisis mid-year. However, his party have been talking us into a crisis since 1987 and they actually put us in a crisis between 1982 and 1987. In practically every budget debate in which he has spoken Deputy Dukes has accused this side of the House of starting their history in 1987. The history of his party seems to stop at 1982 all the time. I should like to point out that a number of problems, including a doubling of our national debt, arose in the period 1982-87, a period during which he proudly claimed to have been Finance Minister for four years. As I said, Deputy Dukes spoke today about the Government last year talking us into a crisis mid-year. During the budget debate last year and afterwards members of Fine Gael said we were in a crisis and that it was going to deepen. Yet, when the Government started talking about difficulties that might arise mid-year, lo and behold Deputy Dukes started blaming the Government for talking about a crisis.

I find it hard to accept his comment on the policy of "live horse and get grass". He referred to the equality directive and the postponement by the Minister of a portion of the payments under that directive to 1993-94. I need hardly remind the Deputy that the reason the payments have to be made now is because of the failure of his party when they were in Government between 1984 and 1986 to implement the equal treatment directive.

I wish to make some general points. I am still surprised at the number of people who refer to how little they get from the budget as if in the dim and distant past Governments handed our largesse in every budget. I thought people would have realised by now that the days of handouts are long gone. People have the impression — although I cannot remember it happening that often — that the Govenment handed out many goodies, so to speak, in budgets. As I said, those days are long gone. While people now have a more realistic attitude to the budget, as I said I am surprised at the number of people — some of whom are Members of this House — who expect the Government to hand out more money on budget day. I think most people realise that the money given out by the Government is taxpayer's money, that the Government do not produce it from nowhere and hand it out.

I think most people also realise there will be no extra money for anyone unless it comes from extra taxation, a reduction in expenditure in other areas or extra borrowing. Those options have been narrowed down considerably during the past number of years. Most people accept that all the Government can do with the taxation system is to try to remove some of the anomalies, broaden the base a bit more and ensure that those who have wealth are not able to fiddle the system and thereby avoid paying their fair share of taxation. The various measures announced by the Minister will go some of the way towards redressing the balance in favour of the ordinary PAYE worker who has no means of escape from the taxation system, the person whose tax is taken from him before he receives his pay packet. This budget will be a first step towards ensuring that people who can well afford to pay and who avoid doing so pay their fair share of tax.

In the area of taxation the one feature of the budget I welcome is that mortgage relief was left untouched. Various changes were mentioned but would have sent out the wrong signals to young people. There would have been cries from all sides of the House that it was wrong and that it was another attack on young people. It would be said that when the Government could not get rid of the people through emigration and could not provide jobs for them they were going to ensure that they would not be able to provide their own houses. The effect of a reduction in mortgage relief would have been devastating for young people, particularly for the less well off who, over the last three years, as a result of Fianna Fáil's tenant purchase scheme, were able to purchase their houses at very reduced rates — the so-called sale of the century of a few years ago. Commentators who say it is not equitable to have mortgage relief and that if people can afford to buy houses the Sate should not subsidise their mortgage repayments are out of touch with the ordinary people of the country who try to provide for themselves. Our record of home ownership is one of which we should be very proud and one which every Government should endeavour to maintain, and mortgage relief is one of the major ways of doing that.

I know there are financial arguments for altering or removing mortgage relief but the social reasons for maintaining it and, if the economic climate was right, increasing it, are much stronger. If Ireland was to be treated, as some commentators suggest, as a limited company trying to make a profit, and to hell with the social consequences, mortgage relief could be dispensed with and money could be saved, but luckily Governments and I include all Governments in this — have always been aware of the social dimensions of this policy, and I hope it will be maintained. It is important for people who are willing to help themselves that the State should, particularly in an area of high expenditure such as this, put forward and maintain policies to help them to do so.

There has been criticism that the higher rate of taxation was reduced by 4 per cent while the standard rate was reduced by only 2 per cent. It is important to point out that the Government's targets in reducing income tax are for a higher rate of 44 per cent and a lower rate of 25 per cent. The reduction this year of 4 per cent in the higher rate and 2 per cent in the lower rate goes half way towards achieving that aim within the lifetime of this Government. The widening of the standard rate tax band is much more important than reducing the income tax rate by 2 per cent or 3 per cent as we have been doing, because it prevents people getting caught in the poverty trap about which we hear so much. That is a move that should be continued in future budgets.

In the mid-eighties a single person on an income of just over £10,000 paid tax at 65 per cent, but much has changed since. The people who criticise the Government for reducing the higher rate of tax to 48 per cent would do well to remember that a huge percentage of single PAYE workers have to pay tax at that rate at a very early stage and it does not encourage savings, investments or house ownership. The Government should continue along those lines in future years.

The criticism of the reduction of the higher rate of tax is unjustified in that most of the reduction has been paid for by removing tax reliefs, tax shelters and other means whereby people on higher incomes avoid paying tax and also by the reduction of the threshold for residential property tax. The claims that many people on the higher rate of tax will be better off while the people on the lower rate will be only marginally better off do not hold water when you take account of the overall tax package and the changes in shelters and reliefs.

I do not think anybody was happy with the increase in the lower VAT rate of 16 per cent. However the Minister deserves the thanks of everybody in this House for granting a VAT-free status to donated medical equipment. All of us are aware of voluntary groups and organisations who have come together in various areas to raise money to purchase medical equipment for hospitals and health boards. In my constituency of County Meath there are many fine examples of such organisations. Two of the best known, to whom I pay tribute, are the Committee for the Friends of Our Lady's Hospital who have purchased thousands of pounds worth of equipment for the hospital and have helped to provide machinery and equipment that probably would not have been provided for some time, and the ICA who a number of years ago set about purchasing equipment and persuading the health board to set up a mammography unit in the hospital in Navan. They raised £80,000 in three or four years towards that end, convinced the health board that the unit was necessary and had a relatively easy job convincing the then Minister for Health, Deputy Rory O'Hanlon, to provide extra finance. In all, about £100,000 was collected, and it is a pity that after making such voluntary efforts, at the end of the day tax had to be paid on this money.

I welcome the fact that the non-pay elements of the Programme for Economic and Social Progress in regard to education will be implemented fully. Recently the question of the pupil-teacher ratio, the provision of caretakers and secretarial assistants and the appointment of career guidance teachers arose and I am glad the commitments given in regard to them will be honoured. Indeed, this will be welcomed by all involved in education. May I add that the recent Fine Gael statements on the provision of career guidance in our secondary schools were most welcome. I am delighted they are taking up the calls I made over the last number of years. I cannot help but remind them that in the early eighties they issued a policy document which underlined the importance of career guidance and counselling services in second level schools — a very important issue in this day and age — but when a Fine Gael Minister for Education got her hands on the finances she decimated the career guidance and counselling services in 1984 and 1985. The services were wiped out in smaller schools. Career guidance and counselling are most important. Indeed, the counselling service needs to be emphasised as much as the career guidance service. Some young people have to deal with the additional pressures of broken homes and problems in the marriage of their parents. I hope the commitment given will be fully honoured by the Government.

I wish to comment on the measures affecting the family. The family enjoys a special place in our Constitution. We often pay lip-service to this in the House but do very little by way of introducing practical measures. In this budget, however, as in previous budgets, some attempt has been made to put some measures into effect. Provision has been made for short term social welfare increases, for FIS increases and to provide for leave for adoptive mothers. This should be of benefit to families. However, I would like to see some special help being made available where one spouse, husband or wife, remains at home with young children. It is ironic that we give a tax free and PRSI allowance for both spouses who go out to work but there is no recognition of the sacrifice made by the spouse who chooses to remain at home or the hardship that decision might entail. I know that many go out to work by choice and they are entitled to do so but the parent who wishes to stay at home should also receive some help and encouragement from the State.

I should like to congratulate the Minister on his budget and, more particularly, on his appointment as Minister for Finance.

Mr. Deasy

I wish to refer to the £12 million promised in the Programme for Economic and Social Progress to farmers in disadvantaged areas for 1991. It will be a great disappointment that this money which was to be made available by way of increased headage payments was not disbursed in 1991. According to the Budget Statement only £2 million of the £12 million will be distributed in 1992 with the remaining £10 million being deferred until 1993 and 1994. Will it ever be paid?

Implicit in the Programme for Economic and Social Progress was the commitment that the £12 million would be paid in 1991. Many people made plans on the basis of an increase in headage payments and, therefore, increased income. They will not get the increase this year and they will only get a partial increase next year with a hope of getting the remainder in 1994. We are well behind other EC countries when it comes to the level of headage payments. It is unforgivable that the Government reneged on the promise given in the Programme for Economic and Social Progress on headage payments.

I do not think urban dwellers realise the significance of headage payments, and other subsidies, to farmers. It is not just the case that small farmers need the subsidy but medium sized farmers, and in some cases quite large farmers, need the subsidies to survive. Farm income has deteriorated so seriously that headage payments and subsidies constitute a significant proportion of many farmers' income.

I wish to make a number of specific points with regard to the headage payments and subsidies. First, they should be paid in a structured way. The present hit and miss method is intolerable. I know farmers who were virtually destitute — many were actually destitute coming up to Christmas—awaiting payments which had been promised for months. Repeatedly, we have to table questions to try to find out when they will be paid, if ever. Quite often, the payments are three and up to six months late. How can any farmer run a business or organise a household when that is happening.

These payments are similar to social welfare payments; they are the basic part of many farmers' incomes. There should be a specific arrangement whereby recipients know when they will be paid and the amount. I will go so far as to suggest that the Minister for Agriculture and Food, in conjunction with the Minister for Finance, set up a monitoring committee, consisting of representatives of the main farm organisations and officials of their Departments to keep people informed. The feeling is that payments are being deliberately withheld in order to swell the coffers of the Exchequer. It is not right that people should suffer because of maladministration or whatever. It is not just good enough.

I will now refer to the beef premium which was introduced in 1987. I was responsible for getting that concession from the EC. The Italians and the Greeks were being given that concession as a sop in very protracted negotiations and we demanded that Ireland get a similar type premium. People are being disqualified left right and centre on technicalities. It is a damn disgrace that they are not receiving that premium. It is no good saying the farmers are in breach of EC regulations. I am sure the Italians, in particular, do not disqualify their farmers, they make arrangements where the forms that are submitted can be corrected. However, there seems to be no such mechanism in this country. It is about time we set out to help people rather than injure, prosecute or discriminate against them.

Debate adjourned.