I move:
"That, in view of the persistent unemployment crisis with nearly 300,000 people out of work, the annual influx of 25,000 into the labour force and the consequent social blight of crime, vandalism and drug abuse, Dáil Éireann calls on the Government to reduce the punitive levels of tax on employment and to dismantle the maze of obstacles impeding enterprise, risk-taking and job creation in the Irish economy, in particular by
—reform of the income tax and PRSI codes to reduce the gap between the cost of employment and take-home pay;
—the introduction of competition in areas of State monopoly;
—the implementation of the Culliton Report; and
—the introduction of a national community employment scheme to afford part-time work to the long term unemployed."
Last week a succession of Government Ministers, led by the Taoiseach, made a series of glowing up-beat statements about what the Fianna Fáil-Labour Coalition has described as a National Development Plan. In truth it was just a Fianna Fáil-Labour proposal to spend the hoped for £8 billion EC investment funds over the next seven years. The Government's plan did not even seek the approval of this House for its proposals. When we were informed of its contents the matter was already afait accompli in Brussels. When the Taoiseach introduced the plan he asked us to support it but he gave us no opportunity to do so. The Dáil Committees referred to earlier had no opportunity to make an input into the development of this so-called national plan.
Those proposals envisaged the creation of 75,000 net jobs during a period of seven years, or just more than 10,000 each year. During the same period the workforce is expected to grow by 25,000 each year. The so-called National Development Plan does not even, on its own terms, promise to contain unemployment growth let alone reduce it. Therefore, shorn of all the hype, and the Santa Claus style telephone number investment programmes, as I described them last week, the National Development Plan remains fatalistic about the Government's ability to deal with the most fundamental socio-economic problems facing our society. That is the reality of mass, long term unemployment with its associated corrosive blight of crime, vandalism and drug abuse. Faced with that fatalistic outlook of the Fianna Fáil-Labour Government's plan, the Progressive Democrats have deliberately chosen to focus their current Private Members' time debate on how we can make serious inroads in tackling the unemployment crisis.
Moreover, I intend to make plain in the course of this two night debate that this no mere rhetorical undertaking. The Progressive Democrats have always been a "can do it" party. We believe in the talent, enterprise and self-reliance of the Irish people. We can solve our unemployment crisis and the social ills that flow from it. However, we will not do it if we continue to tax work as if it were a luxury item. We will not do it if our tax and welfare systems destroy the incentive for people to take up lower paid jobs. Before anyone accuses me of favouring a low wage regime, let me reject that one straight off. I want everyone to earn as much as they possibly can, but I realise that every job cannot be a high income job. The entire workplace, in terms of employers and workers, cannot be a forest of mighty oaks. The workplace must also be able to accommodate the economic saplings which will grow in time. In fact, most of our successful indigenous companies started out as small operators.
I want to see an Ireland that is teeming with enterprise and self-reliance and where everyone at every level of the social ladder has a real incentive to work hard, take risks and, where possible, employ others. We believe enterprise should be the life blood of the Irish economy. Our people can make it to the very top in countries like Britain and the United States and are willing to work long and hard precisely because there is a real financial incentive to do so in those countries.
The Progressive Democrats want to ensure that a similar climate for enterprise prevails here. That is why our motion to the Dáil, goes on to spell out some of the key measures we believe must be undertaken if the Government is to take seriously what it proclaims as the unemployment crisis. These are the reform of the income tax-PRSI system to reduce the cost of employing people; the introduction of competition in areas of State monopoly to give people choice and put downward pressure on the price of such goods and services; the implementation of the Culliton report and the introduction of a national community employment scheme to provide part-time work for the long term unemployed.
Tonight, the Progressive Democrats are putting before this House the real issues on which Irish politics must focus. We are doing that in the form of a motion which, unlike last week's farce, calls for a decision on the issues that count. The Progressive Democrats are bringing before this House the basic political issues on which this Government has so far failed and by which this Government in the last analysis will be judged.
It is perhaps worth reminding ourselves of the reasons there are nearly 300,000 people on the dole. The social partners have through the last decade pursued a series of policies which amount to "human set-aside". What are the features of those policies? Work is taxed in Ireland at a rate and in a manner which is not even remotely approached in any other OECD country still less in any economy with a level of unemployment, economic development and population growth such as ours. Work is taxed at a rate more appropriate to a rare luxury good rather than a commodity that we have in alarming surplus.
With tax, PRSI and levies, a married person, with a non-working spouse and four children living in a local authority house has more disposable income on £8,000 gross pay than a person on £15,000, when the family income supplement, medical card, differential rents and the cost of getting to work are taken into acount. Post-budget figures supplied to my colleague, Deputy Cox, by the Department of Finance demonstrates that there is less disposable income for a person on £15,000 than on £8,000. In fact, they are worse off to the tune of £230 per year. On £12,000 gross earnings, such a person would have £1,300 less in disposable income than on gross earnings of £8,000. An unemployed worker with a dependent spouse and four children, living in a local authority house with the normal social welfare supports, needs to be offered £14,500 per year before that worker's family would have a greater net disposable income. What kind of crazy system is this? What incentive is there for that person to look for a job? What incentive is there for any worker to better themselves or work harder? Is there an incentive for any Irish person to establish an enterprise and give opportunities to others?
These are the employment economics of the madhouse. They have not just suddenly emerged. They have been carefully put in place by a generation of failed politicians, failed economists and failed social engineers whose legacy is massive dole queues and even more massive debt.
When the Progressive Democrats challenged this legacy in 1986, we were accused by every other party in this House of opportunism, buying votes and creating false expectations. When we proposed radical tax reform with a basic tax-PRSI rate of 25 per cent and an upper rate of 40 per cent we were told it could not be done. When we were established the upper rate of tax was 60 per cent, the middle rate was 48 per cent and the low rate was 35 per cent, not to mention PRSI. When we left office late last year, there were only two tax rates 27 per cent and 48 per cent. Had the 1993 budget carried through what was agreed when we were in Government, these rates would have been reduced further to a 25 per cent standard rate and a 44 per cent top rate.
At the moment, a single man or woman at work pays 48 per cent tax on marginal earnings well below the average male industrial wage. With PRSI and levies, the State takes almost 60p of every extra pound earned by a single worker earning less than the average industrial wage. No other country in the OECD brutalises the single low earner like that. When you add employer's PRSI, an employer has to lay out £1.12 to give such an employee 43p in take home pay or £2.60 for every £1 in take home pay. These, I repeat, are the employment economics of the madhouse.
Bearing in mind that the Government appears to be relying on emigration to solve the unemployment problem, it is worthwhile looking at what would happen if the average male industrial wage here was taxed at UK and insurance rates. The average male industrial wage in Ireland is £14,761.24. From that income 48.4 per cent is taken by the State in the form of PRSI, tax and levies. From the equivalent salary in the UK 32 per cent is deducted in tax and PRSI, in other words, there is a difference of over 16 per cent in the rates of pay here as opposed to the rates in the UK
At the average Irish male industrial wage, therefore, tax and social insurance contributions, including employer PRSI, are almost a half of the total cost to the employer of making this job available whereas in Northern Ireland and Great Britain, the state takes just under a third of the gross cost of creating a job. These figures not only undermine and destroy the competitiveness of Irish industry, but they are set to suck further jobs out of Ireland.
In the employment intensive clothing industry, for example, where there are minimum wage rates in operation, the Welsh Development Authority confirmed to my office today that they are receiving many inquiries from firms here about the possibility of establishing operations on that side of the Irish Sea.
A simple example illustrates the attractiveness of such a move. Having paid the relevant minimum wage rates, and after tax, levies and social insurance deductions are made, take-home pay in Ireland is IR£96.52, while in Britain it is IR£99.18. The British worker is better off despite the fact that his gross pay is only £113.96 whereas the Irish gross wage is £131.
The explanation of course is "our anti-jobs tax wedge". The total take by the State in Ireland on this wage is IR£50.46 while in Britain it is IR£22.30. What this means is that not only does it cost a British employer less to give a job, but even on the much lower wage, the British worker is still better off in terms of his take-home pay.
The clothing industry is the kind of labour-intensive activity where more jobs could be created, and if the Government was serious in its protestations about unemployment it would realise that. Yet in the past three years, over 3,000 jobs have been lost in that industry here. It still accounts for over 8 per cent of total manufacturing employment in this country, and the proposal from the Irish Clothing Manufacturers' Federation urging the virtual halving of employers' PRSI from 12.2 per cent to 6.6 per cent for workers in the industry earning up to £9,000 per year, or £175 per week, is the kind of practical tax reform measure this Government should undertake. It would not only improve the competitiveness of this labour-intensive sector, but it would also help safeguard the remaining 15,000 jobs there and improve the chances of generating additional employment.
Such a practical measure would be better than all the plethora of agencies, county enterprise boards and quangos so beloved of this Government. So crazy has the jigsaw of Government bureaucracy now become that the Department of Enterprise and Employment has recently produced a new internal directory so that the various staff there might know what each of them is supposed to be doing.
This Government is so hell bent on creating agency after agency, bureaucratic nonsense after bureaucratic nonsense that it has lost sight of what it should be doing. In truth, we have a vicious, job destroying anti-employment tax system that is so grotesque that one might be forgiven for believing that it was designed by a job-hater. We need radical pro-jobs tax reform which will bring down our tax rates further, expand the lower tax band greatly, and dramatically reduce the gap between payroll expenditure which must be met by employers and the take-home pay of workers.
I will add to some of the nonsense to which I have already referred by quoting from a letter dated 30 July from a compliant taxpayer who got into difficulties and was negotiating affairs with the Revenue Commissioners. The letter refers to the fact that the company had paid £4,000 of interest charged on liabilities because it was late in paying its tax and it now owes £8,319.53. In writing to the Revenue Commissioners they said:
Will the amount of £4,000 which has already been paid be offset against this new amount? As we interpret the scheme an amnesty has been granted for the previous period and had we not complied we would now receive an amnesty.
It would, as I'm sure you realise, be most unfair that we should be penalised for having already paid — when if we didn't we would now receive an amnesty. As complying taxpayers you must realise our disgust and upset at the treatment which we have received and are receiving which is completely different to the treatment of the noncomplying taxpayers who are undermining our business because of their non-compliance.
They are now to receive an amnesty while we continue to be pressurised by the Revenue for late payment.
This is unfair, frustrating and totally immoral. Surely it should be the other way around. We are being told "YOU PLAY BY THE BOOK AND NOT AN INCH, WHILE THE DEFAULTERS ARE BEING TOLD DEFAULT AND WE'LL HELP YOU"
and these are the people we are in competition with.
That letter was written on behalf of a very small business in the south-east. It sums up clearly what many business people feel about the Government's attitude to enterprise and initiative. During my speech on the National Development Plan I quoted extensively from an interview given by Patrick Campbell of Bewleys where he said that Bewleys had the capacity to employ 1,000 more people but that that would be done outside of this country.
The Progressive Democrats believe that Ireland needs a radical new programme of tax reform over a number of years during which tax, PRSI and levies will be amalgamated into a single upper rate, and a standard rate of 25 per cent. The standard rate must also be extended towards the average industrial wage. Such a programme will yield results. It will entail economies in public spending, a broadening of the tax base, and a concentration on real take home pay rather than paper increases in the public sector pay bill.
In combination with a new approach to long term unemployment that guarantees the unemployed part-time social employment and the freedom to earn whatever else they can for the remainder of the working week, these measures can overcome the poverty trap which is keeping around 300,000 Irish people in subjection and deprivation and a sector of our community confined to internal economic exile in a forgotten social Gulag, mainly on the outskirts of our major cities.
This Government professes to believe in Culliton, but in its one and only budget thus far, it did the exact opposite to what Culliton advised. It increased the tax wedge. It imposed an income levy which completely reversed the tax reform which the Progressive Democrats had achieved in the last few budgets by effectively pushing the 27 per cent standard tax rate to nearly 29 per cent.
The Minister now speaks of giving back the 1 per cent income levy but claims the cost to the Exchequer is great. The cost of keeping the income levy is greater still. We cannot afford to keep the socially corrosive anti-work tax system that we have. We cannot afford not to change it, but that is not the only area, of course, where the landmark Culliton report, commissioned by Deputy Des O'Malley, when he was Minister for Industry and Commerce, has been aborted, despite verbal protestations to the contrary. We have not got the integrated industrial development agency for indigenous industry; the one-stop shop where State assistance of all kinds, including research and development, marketing and cash grants or loans would be provided on a co-ordinated basis. Far from the agency integration advocated by Culliton, we have got from this Fianna Fáil-Labour Government a kind of agency mania, with one for every part of the country.
The current Aer Lingus tragedy is one example of how our State owned industry and employment are being destroyed by State protectionism, bureaucratic inertia, inadequate management skills and lack of political foresight. The need for competition and ending State monopolies was obvious when the Progressive Democrats called for it in 1988. A joint venture arrangement then might have saved Aer Lingus.
