Dáil Éireann debate -
Wednesday, 31 Mar 1993

Vol. 428 No. 6

Financial Resolutions, 1993. - Financial Resolution No. 10: General (Resumed).

Debate resumed on the following motion:

THAT it is expedient to amend the law relating to customs and inland revenue (including excise) and to make further provision in connection with finance.

—(The Taoiseach).

Mr. McGrath

Last evening I listened to part of the contribution of Deputy Gallagher when he strongly criticised the leader of my party, Deputy John Bruton, for not specifying the costings of some of the proposals he advanced. I smiled to myself on hearing a Labour Party Member wonder from where all of these proposals would be funded. He must have a very short memory because I recall in the run up to the general election promises being given to semi-State bodies such as Aer Lingus, Bord na Móna and others expecting the big pay out or golden handshake. Unfortunately, they had not been costed, so that when the new Government assumed office they did not deliver the goods. It was somewhat hypocritical of Deputy Gallagher to voice such criticisms when he could not see the beam in his own eye.

I welcome this opportunity of contributing to the budget debate. The first budget of any new Coalition Government is particularly important in that it reflects the blend of ideologies and priorities of its partners. However, the budget of 1993 was a non-event and very quickly dismissed by the national media as an item warranting little attention. It would appear that the general public also found it a tremendous bore. At a time of record unemployment levels it was disappointing that a Government with the largest majority in the history of the State did not take positive action to eliminate the greatest ill of our times, unemployment. Sadly, that did not happen. Discussions that have taken place since then have focused more on the appointment of advisers and family members within the Government rather than on the real issue of how our unemployment levels can be reduced.

One positive provision of this budget was the increase in the carer's allowance, which is to be welcomed. Carers are tremendous people who devote their time and energies to the care of someone less fortunate than themselves, those who are unable to look after themselves, perhaps an elderly relative, one of their children or even a neighbour unable to care for herself or himself. These are the unsung heroes of our nation, thousands of whom perform this work of mercy daily without counting the cost on themselves.

The introduction of this carer's allowance a number of years ago was a long overdue recognition of their tremendous work. That recognition soon turned very sour when a stringent means testing system was implemented. Applicants for this allowance are assessed by the Department of Social Welfare, who base their decision on the income of the people involved without any regard to the loss of income incurred in caring for those who cannot look after themselves. It is disappointing that in this recent budget the Minister did not see fit to relax the qualifying conditions for such carer's allowance. There is an assumption abroad that anybody who looks after an elderly relative is automatically in receipt of this allowance. Sadly, only about 1,100 people nationwide are in receipt of the maximum allowance. Therefore, I am very disappointed the Minister did not do something for the other thousands of carers who do not at present qualify for this.

Another positive development in this budget has been the increase in child benefit, which generous improvement will be welcomed by many. However, it should be noted that this is an increase across the board and does not take into account the circumstances of people receiving the allowance. In other words, parents earning perhaps £40,000 per annum will receive the same increase in child benefit as others in receipt of a weekly dole allowance. The cost of this increase in a full year will be of the order of £50 million. Surely that £50 million could have been targeted more precisely at those most in need of help?

In addition, the 3.5 per cent increase in social welfare payments is to be welcomed. Here I should like to quote from the response of the Conference of Major Religious Superiors' in their document on the budget:

While we welcome the overall increases to social welfare recipients we regret that they are so low. We doubt that these increases will keep pace with inflation since they would be eroded by increases in differential rents and VAT. Also, we need to point out that these increased payments do not take effect until the end of July.

Raising social welfare payments to the minimum recommended by the Commission on Social Welfare, that is £65 for a single person and £104 per week for a couple, would have cost £150 million and could have been done. This would have the double effect of helping the vast majority of the poor and giving a valuable boost to the economy.

Another positive aspect of the budget is the increase in the family income supplement. I welcome this increase as it is an excellent way of ensuring that payments are made to those in need. We can ensure, through the family income supplement scheme, that it is worthwhile for a person with a family to continue working instead of going on the dole.

The single most objectionable aspect of the budget is the 1 per cent tax on employment to be paid by employees in receipt of £9,000 and over per annum. This is supposed to be a temporary measure but, like all other temporary measures introduced by the Department of Finance, it will quickly become a permanent feature. This is a straightforward tax on employment and will help to convince those already at work that perhaps they would be better off on the dole.

Another aspect of the budget which is particularly distasteful is the introduction of the 2 per cent probate tax. The significance and magnitude of this tax has probably not yet been understood or appreciated by the public at large. It represents the reintroduction of death duties. Children inheriting from their parents will have to pay an additional £1,000 on every £50,000 worth of property inherited. It will hit the business community particularly hard and will also be significant from the point of view of the agricultural sector.

Another aspect of this probate tax, which flies in the face of a recent Government direction, is that it will be imposed on a spouse who inherits from his or her partner. The Minister will allow the spouse to inherit the family home exempt from probate tax but any additional property, a business or farm, will be subject to this tax. This is a callous form of additional taxation which will cause severe hardship and the Minister should revoke it. I am sure many cases have already been brought to his notice to show that if this probate tax had to be paid it would have caused severe hardship for the spouse concerned. This is, as I said, an objectionable form of taxation and should be revoked.

The changes in the VAT rates represent a disincentive to job creation and will put many industries at risk. The change in the VAT rate on food and accommodation has been condemned by the tourism industry in general. It will help to reinforce the idea that Ireland is not competitive in the international tourism market and will result in many job losses.

The increase in the rate of VAT from 10 per cent to 12.5 per cent on newspapers represents a particular blow to the industry and will have a profound effect on our national newspapers. Up to 50 per cent of daily newspapers sold are now imported from Britain where newspapers are zero rated.

This new VAT rate represents a major blow to the smaller provincial newspapers which provide, particularly in my own area of County Westmeath, secure and pensionable employment. They also provide a flow of information in their own catchment areas which is invaluable to the community. Indeed, local newspapers fill a particular niche in that they record the history of their locality on a weekly basis, the local football match or a meeting of the local Fianna Fáil cumann, while some members may be lucky in having their speeches in this House published. The local newspaper has it all and records it for posterity.

Mr. M. Ahern

You still have a few branches.

Mr. McGrath

They distribute news on a local basis and record achievements and developments for posterity. Their reward for this invaluable service is an increase in the VAT rate this year. This follows the changes in the budget last year when it was stated that they would no longer be regarded as a manufacturing process despite the fact that the workers involved are skilled craftsmen having undertaken certified apprenticeship courses and examinations. The newspaper industry finds this particularly annoying and it will have a major effect on their profitability and ability to plough profits back into the business.

The lifting of the cap on RTE as well as competition from local radio has put existing jobs in this important sector at risk. How could a Government which pretends to care about jobs and which pays lip service to the need to create more jobs be so vigorous and ruthless in taxing existing jobs?

The change in the VAT rate imposed on the building industry is a source of major concern. The VAT rate on housing has been increased from 10 per cent to 12.5 per cent and this will add an additional £1,000 to a £40,000 house. This will be offset by the increase in the new house grant but it is not sufficient. Is this the incentive the building industry needs to get it off its knees? Has the Government turned its back on the industry in its time of crisis?

The supply sector to the building trade is concerned that the imposition of a 21 per cent VAT rate on readymix concrete and blocks will lead to an expansion of the black economy and pressure on jobs in the sector. Recently a supplier of readymix concrete in my own area contacted me to inform me that he had given a quotation for a job last January of £1,200 plus VAT at 10 per cent. The total cost to the customer was £1,320. He felt that this was expensive and, as usual in rural areas, he sought to have the job done without VAT being imposed. Following the budget when the VAT rate had been increased to 21 per cent the same job cost £1,452, an increase of £252. Needless to say the customer decided that he would not have the job done, that he would buy the material and do the work himself. I am sure the Minister appreciates that he will be able to buy some of the material without paying VAT and will employ local labour. There is a strong possibility that the job will be done by people on the dole with the result that the State will lose out. This increase in the VAT rate will drive many of our small builders into the black economy, hence revenue will be lost to the Exchequer.

Recently I visited a retailer in the rag trade in my constituency. I called to his shop on a Friday morning and in the course of conversation he pointed out that business was very poor. His total sales for that week amounted to approximately £100. When he became aware that the VAT rate on clothes would be almost doubled, I received an indignant telephone call from him. It was increased in 1992 to 12.5 per cent and it has been further increased this year to 21 per cent. This will have an effect on sales in the clothing business and will lead to job losses.

The farming community has expressed extreme disappointment at this budget. Faced with the repercussions of Common Agricultural Policy reform and the unfinished GATT negotiations the prospects for farming are disastrous. The imposition of the 2 per cent probate tax is yet another nail in its coffin. The day when the average family farm could support two families is long gone and for many farmers the light at the end of what had become a bleak tunnel was the proposed retirement scheme under the Common Agricultural Policy. In spite of the fact that 75 per cent of the funding will be provided from Brussels the Government is delaying its introduction and only £1 million has been allocated in the budget. The budget shows the farming community that the opportunity of providing the impetus to install young farmers on viable units is low on the Government's agenda. Indecision in regard to this scheme is depriving the agricultural industry of a much needed boost.

To add to the insult in regard to the retirement scheme it has come as a disappointment that no money has been included in this year's budget to allow additional payments for farmers in areas which may be included in the disadvantaged areas scheme as a result of pending appeals. This omission indicates clearly that the Government has no intention of completing the review and making payments in 1993. This is very disappointing from the point of view of the agricultural sector in particular.

In relation to education, one of the aspects of the budget that I welcome, and on which I seek further clarification, is the announcement that there will be an increase in the capitation allowance in respect of children in primary schools from £28 to £33 per head. However, it is unclear whether this will be paid in respect of every pupil attending primary school. Will the Minister clarify the position?

Are schools expected to apply for the increase or will they be automatically included if they meet certain criteria? One of the major disappointments of the budget was the failure to appoint a sufficient number of remedial teachers. In literature issued by the Labour Party before the election it identified a need for 1,000 extra remedial teachers in primary schools. There must have been the democratic deficit when the Programme for Government was introduced because in it the Government promised 500 extra remedial teachers to be appointed over the next four or five years. It is disappointing to note that very few of those will be appointed this year and that a very small amount has been provided for the appointment of these teachers at the beginning of the 1993 school year.

There are very few remedial teachers around the country. In the region of 2,000 primary schools have no remedial teacher service. Approximately 1,400 primary schools have the services of a remedial teacher. I was amazed at the result of a survey I conducted in my county and four neighbouring counties. I found that approximately 72 schools in the five counties had the services of a remedial teacher and of those schools only 15 per cent were satisfied that the service of those teachers was adequate. Many schools felt more pupils within the system required remedial help but who were not receiving it. It was also amazing to find that of the children receiving remedial help, approximately 62 per cent were receiving help for one hour or less per week. I am sure the new Minister for Education, who is a remedial teacher, would agree that one hour's remedial help per week in a primary school is totally inadequate. We must improve that system dramatically.

It was also interesting to note from that survey that about 8 per cent of children were receiving what I consider to be adequate time, that is, two hours per week or more. The INTO, and educational specialists, agree that unless a child is receiving approximately 20 to 30 minutes remedial help per day during the school week, the service is inadequate. The Minister for Education should ensure that remedial help is available to all schools. I appeal for a system that is equitable because our rural primary schools are discriminated against in the appointment of remedial teachers and this must be rectified as quickly as possible.

Mr. Ferris

I wish to address some of the points made by various speakers. This budget covers the whole economic development of the country for the next 12 months. It covers areas such as social welfare, tax bands, excise duties, education, health, the CAP, GATT reform, the disadvantaged areas and other issues which involve us. For some reason the Opposition, in particular, want to know what input the Labour Party has had into the budget after 80 days in Government.

Mr. McGrath

None.

Mr. Ferris

I was hoping to give the correct answer but, obviously, Deputies opposite want to surrender some of their suggestions, which I accept. I find it hard to understand the attitude of Fine Gael who criticised the Labour Party for wanting additional spending which may exceed the Maastricht guidelines for borrowing. In a debate on a motion taken in Private Members' Time, and in the budget debate, Fine Gael suggested that the Labour Party is too restrictive or has been involved in trying to balance some books. The Labour Party, at parliamentary party level in particular, realised that it was inevitable that the budget would be tough following the currency crisis and the collapse in the value of sterling.

Mr. McGrath

That is not what the Deputy's party told the public during the election.

Mr. Ferris

The framing of the budget was not easy but it had to be done in such a way as to get the economy moving. There is a responsibility on all of us — there will be a particular focus on the Labour Party in Government — to get the economy moving again and create jobs, not in 80 days, but during the life of the Government. We entered into that commitment with the Fianna Fáil Party, our partners in Government.

The Government indicated its intention to increase house building numbers to facilitate those on the housing list. The Minister of State with responsibility for the housing programme admitted that after four and a half years of trying to meet the needs in our constituencies for more housing there are still up to 10,000 people on the housing list. Although our housing programme is three to four times better than that produced last year it falls far short of the programme we would like to deliver. I know the Fine Gael Party, and their Leader in particular, has reservations about building local authority houses.

Mr. McGrath

That is not true.

Mr. Ferris

He said that where local public authority houses are provided ghettos are created but he does not realise that we need to house people living in mobile homes in developed housing estates and provide sufficient green areas and other facilities for them. Spokespersons from various parties, and former Cabinet Ministers, indicated that we need to create jobs in productive sectors, like the construction industry, compete in the marketplace to provide necessary services and use EC moneys to the best advantage. We need to create jobs in our constituencies.

Realistically to create jobs we must keep interest rates down. The Opposition parties have not commented on the lowering of interest rates. The Government, rightly, did not claim any credit for the lowering of interest rates but it has, with some dynamism, created an economic environment which may lead to a further reduction in interest rates. If interest rates remain high the Government, in the budget, undertook to indemnify people left in financial difficulty as a result.

The Fine Gael Party, in particular, when in Government had reservations about too much State involvement but in Opposition it wants dynamic State intervention in all areas. The Labour Party would welcome this but the reality is that if we are to create a balance in the ordinary business of the State as generated by the Government the private sector also has a role to play. In this budget the private sector has been given a stimulus to avail of the allowances being offered to take people off social welfare and provide them with work. However, very few entrepreneurs are willing to do this unless they can be almost guaranteed profits. In general they seek tax free profits. It is essential that all of us, those in the PAYE sector, the farmers and so on, must also pay a share towards creating the environment where jobs can be created.

The Progresive Democrats admitted last night that the influence of the Labour Party in this Government was created by its over emphasis on the disadvantaged. Let me tell the Progressive Democrats that we in the Labour Party owe no apology to anyone in Opposition for ensuring that the marginalised in our society, unrepresented in the past, will not be disadvantaged and that their needs will be met as a priority. The increase of £500 million in the public capital programme will create jobs on the ground. A series of projects have been identified by the Tánaiste on his return from Brussels and works on roads, rail, housing, sanitary services, communications, schools and hospitals will be included in the capital injection of £500 million. We have made a start in housing with the construction of 3,500 houses in our first year in office and given a commitment over the four and a half year period to continue the building programme, in spite of Fine Gael's reservations.

We want to see improvements in the system of apprenticeships and training. The social employment and the FÁS schemes were tottering from one year to another, with no commitment to specific projects, but we will ensure that the projects will maintain viable jobs in the future. I hope the announcement of the revamped social employment scheme, which the State will generate itself, will have the support of the Opposition instead of the nit picking which is so popular. Those people who are well heeled and not in need of State assistance can afford to nit pick.

The increase in child benefit is another example of this partnership Government's commitment to improving an areas that can be targeted effectively. This increase in child benefit is a fulfilment of our commitment. We, together with our partners in Government, will continue to ensure that child benefit will increase to the promised level over our period in Government. The Combat Poverty Agency and the Conference of Major Religious Superiors have identified large families on low income as a priority area of need.

Significant changes have been brought about in the social welfare code. The Minister of State at the Department of Social Welfare, Ms. Burton, responded publicly on Sunday to some of the criticisms levelled at her on her input to the social welfare code. We commend the Minister, Deputy Woods, for his knowledge and understanding of the subject. Already there have been significant changes in the area of entitlements. Why should there not be improvements? Through the PRSI system people have contributed to insuring themselves against sickness, ill-health or lack of work. Fine Gael sent out the call that a reduction in PRSI contributions would be the answer to everybody's problem. They fail to identify what would happen to the social insurance fund if there were no PRSI contributions going into it.

When considering areas of disadvantage let us not forget the elderly, particularly in this Year of the Elderly. Fortunately, the elderly are living longer, but this is putting extra demands on the service which nobody has managed to meet properly. People who should be accommodated in welfare homes or geriatric hospitals have to stay in private nursing homes without any subvention from the health boards. For the first time since the legislation was prepared four years ago, the Minister for Health, Deputy Howlin, has provided £4 million in subventions to medical card holders, in particular those in private nursing homes.

We have identified also other areas of health care need and we will discuss those in the next resolution. I will have the opportunity at 7 p.m. to remind the high spending Fine Gael Party of their attitude to the cuts in the health services over the past number of years, because they seem to be anxious to try to finger what members of the Parliamentary Labour Party said on record over the years. The only reason they do that is because they said nothing. The Fine Gael Party said absolutely nothing and abstained from votes on the health services.

Mr. Bradford

At least we do not have to go back on our word.

Mr. Ferris

Do not be preaching to us about what we said in the past or what we intend to do in the future.

Mr. Bradford

Nobody believes you.

Mr. Ferris

I will now deal with education. There is now a programme to bring schools on stream after years in the doldrums. The Minister has also made a commitment to increasing the capitation grants from next September. This is part of a planned response to what is happening in the economy, particularly as it relates to people in disadvantaged areas. A tough job faces us, but we in the Labour Party have always been prepared to face tough decisions. We have necks of steel.

At times we reminisce on the period we were in Government with a different party. The record speaks for itself. We had eventually to walk out because our partner would not listen to what we said needed to be done. In spite of their best efforts now, we have agreed a programme with our partners in Government and we have made a commitment to work together to ensure that this programme will work. All the catchcries from across the floor will not divert the Government, and particularly the Labour Party, from what we want to do in the budget. We are not ashamed to say that we have examined the area of social welfare, because who else will take responsibility for social welfare recipients? The Fine Gael Party cry for the abolition of PRSI, but this ignores the demands that may be made on the social insurance fund. We want to ensure that the State plays a role in developing and creating jobs as well as ensuring that the economic environment is rich and ready to adapt to the needs of the private sector. Furthermore, we are giving incentives to the private sector to do that. What more do the Fine Gael Party want us to do for the private sector?

I come from a rural constituency which has many mountainous areas. People are trying to survive on the land, but they are worried because of the review of the Common Agricultural Policy and the outcome of the GATT negotiations. I was disappointed that the President of the IFA, for whom I have a great deal of respect, commended the fact that the right wing were going to win in the French elections, and that this would be the saviour of the Irish farmers. He knows in his heart and soul that room for manoeuvre is limited and that the French right wing party cannot stop the changes that will take place. We have to ensure that the changes touch lightly on the poverty in rural Ireland. We must ensure that any liberalisation of the criteria for benefit under the disadvantaged areas scheme will be passed on and that the bureaucracy will not hinder it. There are commitments from the Minister for Agriculture, Food and Forestry that farmers' incomes will be protected and that the district veterinary offices will be more user friendly. There should be incentives for small farmers to continue to develop their farms and to continue to produce food for the marketplace and not for intervention, and with a dynamic marketing agency to which the State has a commitment, Ireland's produce can be sold on the European market where it has a good reputation. In spite of some of the things that happened in the beef industry and elsewhere, Ireland has a good image as a food producer. We should ensure that farmers continue to produce products, which when processed increase in value, for export to the Community. The Taoiseach and others have called for dynamism in the agricultural community. Farmers should not suddenly stop producing goods just because they receive an income supplement.

It should be remembered that half the world's population is hungry. We can produce some of the best products available and our farmers would be happier if they were allowed to do so. Basic incomes should be protected but there should not be disincentives to production. Otherwise there will be mass unemployment in the dairy and food processing industries. The co-operative movement has shown in the past that it has been able to take on the challenges posed by membership of the Community — we must remember that the farming community were the strongest advocates of membership. Inevitably changes had to be made and I have no doubt that rural areas will adjust to the further changes in the next couple of years.

We all hear complaints about the 1 per cent income levy, health charges and so on. Of course charges must be imposed. If the Government could produce a machine to print money, it would be a wonderful resolution to the problem but if we are to live within the guidelines of the Maastricht Treaty, to which the Government partners are committed, people must understand that they have a responsibility to make contributions.

Much more can be said on the budget and more action can be taken by the Government. This is the first of four or five budgets which will be introduced by it and we hope that the programmes initiated in the areas of housing, social welfare, health and so on are just a beginning. I am sure Fine Gael and particularly the Progressive Democrats will identify with what we are trying to do. We are not asking them to abstain on these matters. They can troop through the voting lobbies but the public know there is a job to be done and that the people on that side of the House cannot do it.

Mr. T. Foxe

In regard to capital acquisitions tax, I welcome the increase from 55 to 75 per cent in the relief for eligible assets. The increase in the exemption limit from £200,000 to £250,000 is also a welcome move. Perhaps we can look forward to the day when the relief on agricultural holdings of eligible assets will be increased to 100 per cent. I hope that will be done in the not too distant future. Not only will the changes in capital acquisitions tax benefit the individuals involved, they will also benefit the whole agricultural community in the sense that they will encourage farmers to retire at an earlier age, thereby handing over the farms to younger men.

The Minister has allocated £1 million this year to the introduction of a new retirement scheme, the terms of which have not yet been worked out. When we became a member of the EC in the early seventies a retirement scheme was introduced for farmers but it turned out to be a complete and utter disaster. I hope the powers that be will have learned from those mistakes and that the new scheme will be operated more effectively. I had a particular interest in that scheme because I was involved in its operation. Fortunately, few people in my area took part in the scheme — anybody who did lived to regret it. I hope the Minister will ensure that the new scheme is more beneficial to those who avail of it. As was the case in the seventies, the farming community will be anxious to take part in the retirement scheme. If the scheme is to be taken up in a meaningful way the £1 million allocated will not be sufficient. However, it is a beginning and I hope that if the scheme is successful the Minister will not let it fail through lack of funds.

The Minister has allocated an extra £1 million to Teagasc, the body which provides an advisory service to small farmers. In 1992 a sum of £1 million was also allocated to this body and in the region of 7,000 farmers benefited, including farmers in my county. In Roscomon — I am sure the position in other counties is similar — only farmers in the southern half of the county benefited from the scheme. Those in the northern half did not benefit because there were not sufficient advisers to implement it. Under this scheme farmers whose incomes are below a certain level are entitled to free advice. Up to about five years ago advice was freely available to all farmers but some whiz-kids decided that the farming community should pay for it.

In north Roscommon at present there are only three agricultural advisers, one of whom is involved full time in educational matters. There is no adviser with specific responsibility for the northern part of the county. About 90 to 95 per cent of farmers in this area are eligible for the scheme but due to the insufficient number of advisers, they will not be able to avail of it. I appeal to the Minister to allocate more money to Teagasc to employ more advisers to implement this very fine scheme. There is no point in introducing a scheme if the manpower is not available to implement it.

An agricultural environment scheme was introduced this year. Too often we rely on farmers as the sole caretakers of the environment. Farmers must accept some of the responsibility for pollution of wells and rivers. These people depend on agricultural advisers for increased production, but once they increased production, unfortunately increase in pollution also followed.

Debate adjourned.