Skip to main content
Normal View

Dáil Éireann debate -
Wednesday, 20 Oct 1993

Vol. 434 No. 9

Private Members' Business. - Tax on Employment: Motion (Resumed).

The following motion was moved by Deputy Harney on Tuesday, 19 October 1993:
"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."
Debate resumed on amendment No. 1:
To delete all words after "That" and substitute the following:
"Dáil Éireann notes that Ireland's recent employment performance, while falling short of our needs, compares favourably with that of the EC generally at a time of international slowdown; commends the strategy of the Government for tackling the problem of unemployment; and looks forward to the implementation of the proposals in relation to tax reform and job creation contained in the Programme for a Partnership Government and the measures to create employment contained in the National Plan."
—(Minister for Finance.)

The main thrust of the motion was to eliminate the poverty traps and make our taxation code conducive to employment. The dramatic events of today have superseded much of this activity.

The announcement in the media this evening that we may lose between £500 million and £800 million is frightening and intimidating. What is sad is that both the Taoiseach and the Tánaiste have distorted the facts. They must have been chancing their arm on this issue to a certain extent and what is happening now is very unfortunate. I hope, for the sake of this country, that we can get the EC on side.

Yesterday I spoke about the services sector and about creating an environment conducive to the creation of jobs. I spoke about the taxation and social welfare codes and the harassment of small businesses in recent times to such an extent that many of them regard it as unprofitable to stay in business. The document Deputy Richard Bruton produced contains many good suggestions which the Minister could take on board in order to stimulate jobs in the services sector.

I cannot understand why the Government is pumping so much money into training courses when there is a jobs crisis in the clothing and footwear industries. When we had a debate on that subject the public gallery was packed to capacity with people from that industry. It is ironic that some of those people have since gone out of business. They were concerned about the punitive rate of VAT on clothing and footwear and their views should have been taken on board. Although other factors contributed to some of those companies closing down it points up the need to create an environment that is conducive to creating jobs.

Under the national plan large sums of money are directed towards tourism. Every county council could be a job creation vehicle. The social employment schemes have been in operation for many years and there is a commitment in the National Development Plan to have 30,000 people on community enterprise development programmes next year. That is laudable. The county council of which I am a member in 1980 employed 346 outdoor road workers. They had a sense of pride at that time because they had their own patch of territory and we did not hear the same complaints we hear today. That number has been reduced to 170 because the road workers accepted the redundancy packages. I would like to think some stimulus could be given to local authorities. There is no point in trying to attract tourists unless we can create the right environment for them to have the type of holidays they want. We all know about the condition of our roads, that hedges are not cut, dykes not filled in and rubbish and debris is scattered all over the place.

We must ask ourselves if our economic policy has gone wrong when we are pumping so much money into training courses while at the same time every county council could create worthwhile sustainable jobs that would make the environment attractive for tourists. There is much work that could be done in that area. That suggestion could result in the creation of up to 10,000 jobs. Those involved in local authorities are upset at the moment of criticism levelled at them because of what happened over the years.

First, I congratulate Deputy Harney on becoming Leader of the Progressive Democrats. I have not had an opportunity in recent days to speak to her. I am very pleased at her appointment. She is very able and she is a woman although I know she will not thank me for saying that.

My colleague, the Minister for Finance, spoke on the general measures contained in the Progressive Democrats' motion with regard to finance and taxation and the general economic climate so I will not dwell on those matters. I hope to speak about a national plan for employment, referred to in the Progressive Democrats' motion. That party suggested the introduction of a national community employment scheme to afford part-time work to as many people as possible. I will outline what we are doing in that regard and what we hope to do in our plan for 1994.

I wish to share my time with Deputy Kirk and others, but I will speak for 15 minutes.

Is that agreed? Agreed.

I am pleased to have the opportunity to contribute to the debate. We all realise that opportunities must be created here and now to use and update the skills and talents of those out of work. The immediate task is to provide active opportunities for people in terms of local initiatives, training and ultimately reintegration into the workforce. That is why the approach for the 1990s requires a clear strategy built around assessing and meeting personal and local community needs. The community employment development programme will be the foundation stone of our efforts.

Deputy Finucane mentioned that much work could be done by local authorities. It is clear that within local authorities there is room for initiatives. On issues such as this we would have no quarrel with the Opposition. Much of our amendment embraces points in the Progressive Democrats' motion, particularly those about employment and creating a national community development programme for the country.

The programme we have outlined takes in matters such as heritage, environment work, infrastructural work, human resources, education, training, personal development and the various ideas that local authorities have come forward with. The programme has already become a reality operating on a pilot basis in the existing 12 area partnerships and the Government is at present deciding on the placing of the extra area partnerships. They will provide work and a training element with unemployed people participating on projects organised by and within local communities. We are determined that such projects and programmes will not just be what one would term dead end projects. They will combine a very strong training element. Initially we want to see a more tailored approach to the whole idea, that is why the area partnerships have been such a success throughout the country. In the past three or four months I visited all but two of the 12 area partnerships and met the people working on those projects. I admire the mix of characteristics which imbue each individual partnership — they are all different in the way they approached their task, they are people with diverse opinions, having started out with different agendas. The idea of bringing people together in that way to discuss the employment needs of a community is very good.

Perhaps we have been cavalier up to now in regard to matching people who wish to work on a project to the project in hand. This system sounds interventionist but there is no other way of proceeding. The key to succeeding rests in matching a person who has a latent or potential skill with a particular project, taking into account training and vocational skills. I met several area partnerships in which the chairperson comes from the business community or is strongly geared towards business. These people have opened doors which would not have been opened otherwise. They lobbied for jobs and match people to available jobs within local industry.

Will the supervisors come from the State or will they——

Is the Deputy talking about the supervisors in the CEDP?

In general, up to now, in the 12 area partnerships——

I am referring to the 100 people who have been recruited.

They are ordinary folk.

Were they taken off the dole?

Yes, they would have been on unemployment assistance. They have enormous talents in drawing out the skills of other people, identifying work to be done, ways to do it and furtherance of such projects. I am glad the Deputy asked the question. More debates should be conducted in that way whereby people would get information on various matters.

This programme has great potential and it is hoped it will be developed countrywide. The work involved will require high skills of motivation, leading eventually to job placement. That is where the industrial element is involved. That sector has the keys to unlock the entry to the workforce.

The CEDP will link the personal development needs of participants with the community development needs of cities, towns and rural areas in a unique way. It has become cliché to say that there is infinite work to be done at local level, but it is also recognised in the terms of the motion and by Father Sean Healy and others. There is work available for those who wish to work and money is also available for that purpose.

I have referred already to heritage, tourism, environment, arts and community service activities. The CEDP will set out to marry the skills to the projects available. There was an artificial cut-off point in the social employment scheme and very often people on such schemes would have gained very valuable skills although the project in hand would not have concluded. Under this programme we hope to link people to the length of the project that needs to be carried out rather than to an artificial time span which is often useless. There is much untapped potential at local authority level to further useful community work. I emphasise that practical solidarity between those in work and those out of work is essential if the scale of the problem is to be seriously addressed.

Will trade unions have a veto over these projects?

Much progress has been made in that area. In certain areas trade unionists experienced difficulties some of which have been resolved. However, in some counties there are difficulties still to be resolved.

Is Dublin one of those counties?

Yes. The emphasis on training and development must not stop with CEDP. Untimately our objective must be reintegration to the labour market for the maximum number of people. To do this we must offer appropriate training throughout the programme. There is also proven scope for local enterprise initiatives at community level. There is a need to harness and support communities. Sponsors will head the community group, a voluntary group who comes together to carry out worthwhile work in its community. I recently met many of these people who are experiencing difficulty because of their enormous responsibilities. The group may decide to carry out a project, heritage, building, restoration, compilation of historical data or any other such matter but in many cases it does not have the skills or the necessary resources to complete the project. While we have paid great attention to those coming on the course we need to consider the voluntary sponsors, to work out some way of giving them more confidence and ensure greater validity in the task before them. These people have been doing enormous work which to some extent, we take for granted.

This approach must positively discriminate in favour of those in the labour market who most need help, especially those longest out of work. As I said earlier, the selection of further areas must be carefully planned to reflect a mix of urban and rural, targeting recognised black spots and other areas around the country. I emphasise that the Government has very carefully planned, and is continuing to plan, a programme such as that outlined in the motion. I am very anxious to have a rounded programme involving a proactive, targeted, directed and employment geared plan, involving up to 30,000 people in the next few years. These people will work at local level because at that level their dynamism can be released.

Considering the amount of money that has been put towards this project, the work to be done and the number of people who clearly want to work, we should get a proper mix. Again I emphasise that we are talking about local development projects which are motivated, inspired and propelled by the local communities.

I wish to share my time with Deputies Broughan and Costello.

Is that agreed? Agreed.

I wish first to congratulate Deputy Mary Harney on her appointment as Leader of the Progressive Democrats and to advise her that I do not think there are any potential Progressive Democrats seats in the north-east.

The Deputy is joking.

She will be around.

You would be very welcome, Séamus.

This debate gives us an opportunity to reflect on the progress made in coming to grips with the ills which affected our economy during the early and mid-eighties. The escalation in the level of the national debt during that period threatened to bankrupt the country. However, the decisive action taken by the minority Fianna Fáil Government of 1987 led to much more sober and prudent management of our finances. While it still represents a hefty charge on the Exchequer each year, the national debt has been brought under control. We tend to lose sight of the fact that much credit for this is due to the decision taken by the Government at that time to establish the National Treasury Management Agency. This has proven to be an inspired decision and it has contributed enormously to controlling the level of our national debt.

In debates we tend to lose sight of the fact that a significant number of jobs have been created on an annual basis over the past five or six years. However, the great problem has been the loss of jobs in established industries, particularly those in the labour intensive sector — footwear and textiles. These industries by their nature are labour intensive. Unfortunately, due to competition from abroad, many of those industries have suffered significant job losses. Our majority industry is agriculture. However, rationalisation has led to fewer people being employed in the primary and secondary production sectors of this industry.

We all hope that the National Development Plan will herald a new era for the development of our economy. I very much welcome the allocation of more resources for infrastructural development. I think most economists agree that there is significant room for development in the tourism industry and that the very ambitious targets which have been set are achievable. As somebody who represents a constituency which is very much underdeveloped so far as tourism is concerned, I hope that people will grasp the opportunities now being presented to them to play a fuller and more significant role in the development of the tourism industry. I hope that when the arrangements for the development of our fishery harbours are finalised that places such as Clogher Head will be made a priority, as provided for in the small fishery harbours development programme contained in the last development plan. Due to inadequate infrastructure, much of the potential of this industry is not being fulfilled. A significant amount of resources is being provided for the development of this industry.

Unfortunately, time is very much against me. Hopefully, we will have an opportunity at a later stage to debate more fully the issue of job creation. We always tend to engage in macro-type debates and it might be beneficial from time to time to discuss the case histories of successful business people who have built up their industries from nothing and created significant employment. This would enable us to identify their formula for success. At a time of high unemployment it is only correct that we should have a greater appreciation for the work done by these people.

I, too, wish to congratulate Deputy Mary Harney on her appointment as Leader of the Progressive Democrats. Both Deputy Harney and I come from west Dublin and there is great pride among the people of that area that one of their daughters, so to speak, has been made the leader of an Irish political party.

Last night Deputy Harney said she would not be an ideologue in terms of her leadership of the Progressive Democrats. Yet she spent half an hour trotting out the same old clichés and mantras of discredited Thatcherite policies and "Reaganomics" which we left behind us in despair four or five years ago. She also referred to the level of taxation on the lower paid. It is the aim of the Government to drastically reform the taxation system.

It should be remembered that the proof of the pudding is in the eating. Today I looked at the budget figures for the years 1989-92, when the Progressive Democrats were in Government. When the Progressive Democrats came into office a person earning £4,500 paid £436 in tax, but by the time that party left office the amount of tax paid by that person was a whopping £523. Similarly, a person who paid £756 in tax on a salary of £5,500 when the Progressive Democrats came into office was paying £1,081 in tax when they left office. The impact of the Progressive Democrats, particularly when Deputy Harney was a Minister of State, on the lower paid was absolutely regrettable. The policy of the Progressive Democrats was to hammer the lower paid harder than they had ever been hammered previously.

I think it is fair to say that the Labour Party has been the party which has advocated a fair level of taxation for the lower paid. It was the Labour Party which established the 20 per cent rate of tax. As a distinguished long term Member of this House, the Ceann Comhairle will remember that it was the Labour Party, as part of the 1973-77 Government, which introduced the 20 per cent rate of tax for the lower paid. That rate of tax was abolished by a later Government. Before referring to Deputy Harney's leadership of the Progressive Democrats, one should refer to the record of that party in Government.

Deputy Harney referred in detail to the difficulties being experienced by the clothing industry. I fully agree with the points made by her in this regard. I was a Member of this House for only a matter of days when 150 jobs were lost in one of the biggest employers in my constituency, Gardeur Ireland Limited. One of the reasons for this is that the Progressive Democrats supported the infamous hard currency policy — hang on to the Deutsche Mark and your PD hat. In the process a significant number of jobs were lost. It was only when the Labour Party entered Government shortly afterwards that this regrettable policy was abandoned. As the Minister for Finance said last week, one of the criteria by which our currency policy is judged is its impact on employment. Our current policy is a key factor in the creation of employment. The manager of Cadbury's factory in my constituency told me that his workforce could be reduced from 2,000 to 1,500 if the currency policy was wrong. The record of the Progressive Democrats in regard to our currency policy does not bode well for Deputy Harney's future leadership of that party.

Did the Minister for Enterprise and Employment, Deputy Ruairí Quinn, not support the hard currency policy?

I do not——

Yes, he did.

That policy was changed within a few days of the new Government taking office. One of the regrettable aspects of the policies of the 1980s is that under the influence of Thatcherism and the influence of the Progressive Democrats here, we abandoned completely the full employment option. It is fair to say that in some countries where a labour party had some influence it was not abandoned, for example, Sweden, but in countries where this nefarious Progressive Democrats/ Thatcherism type economics was tried it was, unfortunately, abandoned. We are now facing the prospect of 350,000 people out of work.

I commend the Minister of State, Deputy O'Rourke, for the initiative she has taken with the Minister for Enterprise and Employment to set up new enterprises at local level. Indeed, I come to this House through that movement and it is worth reflecting on the fact that we have to empower people at local level to create jobs if we are to have any success.

I congratulate Deputy Harney for raising the issue of taxation reform so early in this session because it is obviously an issue that must be examined. However, my party's agenda is to have fair taxation for the lower paid and a fair taxation system for all, not like the situation that existed in the 1970s when we ran up a massive deficit because some people paid taxes, that is to say PAYE workers, and some people did not. That must not be allowed to happen again and we should commend the Minister for Finance and allow him proceed with the development of a fair taxation system.

I would like to congratulate Deputy Harney on her elevation to the leadership of the Progressive Democrats. I thought the Deputy hailed from the west, like myself.

I was born there.

I wish her well in her future leadership of the Progressive Democrats. I would like to concentrate on the specific and pragmatic issues that must be addressed in the coming months. This is an appropriate motion and indeed it shows the direction that the new leader of the Progeessive Democrats is taking with this rather umbrella, catch-all type motion covering the broad issues of employment, social problems, tax reform and so on. It is an appropriate motion to be discussing in the context of the National Development Plan and in the context of the negotiations on the new Programme for Economic and Social Progress.

The Programme for National Recovery and the Programme for Economic and Social Progress have served us well to a degree. The Programme for National Recovery was effective in dealing with the problems of public spending and containing the debt that had been increasing at a rather alarming rate. The Programme for Economic and Social Progress had directed itself to getting the fundamentals right in order that employment could be created. However, neither of them was effective in creating employment or dealing with the pool of unemployment which has increased at an alarming rate over the past number of years.

In the context of a new programme we must consider a new partnership which must be a comprehensive one between all the interests represented therein. We must recognise that there are advantages and disadvantages to our economy and to society on the levels of wages and unemployment. We must recognise also that all the partners have a role to play in deriving benefits from the partnership and to do that sacrifices must be made. From that point of view we must have an interventionist policy. In relation to job creation we have set out the targets in the National Development plan and we also have set up an agency to deal with job protection. Those are crucial areas to sustain the jobs that are already in place and to set targets that we will achieve.

Our clear focus must be on dealing with the pool of unemployment, the problem of low paid workers in our society and the inability to identify those who evade paying their taxes. We have introduced the tax amnesty, that must come to an end, and we must introduce measures to ensure that full tax collection takes place. There is little point discussing tax reform until we collect the tax that is not being paid at present. We must then come up with a series of strategies to deal with the pool of unemployment. We must look at the proposals put forward by the Conference of Major Religious Superiors; I am unhappy with a number of aspects of those but at least it is a strategy that has been introduced. We must examine the whole services sector and the very high level of taxation, 40 per cent, in that area. That must be reduced if we are to make progress in that potential area of job creation.

We must examine also the VTOS and as the Minister of State is present I have to say that I am very unhappy with the proposal in the National Development Plan which indicate that the number of people taking up voluntary training opportunities is remaining the same in every year for the duration of the plan. That is not satisfactory and we must examine it again. I welcome the debate on this motion and we must address, above all, the question of unemployment.

At this time the Chair was expecting to call a member of the Technical Group. I do not observe any members of that group present and, therefore, I now call Deputy Liz O'Donnell.

I would like to respond to points made by the Minister tonight. I am delighted that she has adopted such a local approach to job creation and in her speech she dwelt at length on the success, so far, of the area partnerships.

As a member of Dublin City Council I have been concerned over the past few years that Dublin Corporation, which has the potential to be a major employer by developing jobs in local communities in Dublin, felt itself unable to offer employment due to lack of funding and lack of power. Due to the cutbacks many of the jobs which involved maintaining the environment, rubbish collection, road maintenance, etc., were first to go at local authority level, whereas some of the more professional and higher paid jobs in the upper echelons of local authority employment remained. As city councillors, we felt that this had caused a diminution in the environmental services around the city and many of our citizens in Dublin felt that lanes, parkways and open spaces were being neglected due to lack of manpower to provide such services.

For example, in the Rathmines area which I represent, there are only two people employed to clean the lanes and sweep the roads. The Minister will agree that simple services such as those affect the quality of people's lives and lead generally to a feeling of despair, a feeling that the local authority is not giving a good service to the citizens of the city. I would be very heartened if jobs could be created at local level through the area partnerships to enable our amenities and facilities generally to be improved at local level.

I am very much in favour of the submission which has been made by the Conference of Major Religious Superiors. I believe the key to that proposal is that the fair rate for the job would be paid, that, perhaps, would overcome some of the union difficulties which had been experienced with the SES schemes. We have to believe that a large number of people who are unemployed genuinely want to work and that is the basis of the scheme and other schemes that have been put forward to the House. Workfare is a term which sends out wrong signals because it was introduced in the UK on a compulsory basis and I do not believe compulsion is the way forward, at least in the initial stages. If we present a voluntary workfare system, sufficient people would volunteer to take up jobs. They would work for their dole and then top up their money at a later stage. It would give them the dignity of working for their dole and also a reason for getting up in the morning. Many of the people to whom I have spoken, who form part of the long term unemployed group, have said they would be willing to participate in such a scheme. I think that, cross-party, there would be the belief that it would go a long way to improving the lot of the long term unemployed.

The other aspect on which I should like to comment is the taxing of the low paid. I would dispute some of the figures Deputy Broughan mentioned this evening, although I do not have sufficient facts before me to do so here.

Budget tables.

I do not think anybody would deny, least of all our former partners in Government, or would try to convince anybody even now in a revisionist manner that we did not succeed in our endeavours to bring down the tax rates. That objective was the cornerstone of my party and remains so.

They froze the tax bands of the lower paid.

Would the Deputy be allowed to speak without interruption? Interruptions are particularly unhelpful, if not disorderly.

We did succeed in lowering the rates. Unfortunately, the imposition of the 1 per cent levy went a long way to undoing any of the good we have achieved within the term of office of the previous Government.

I am glad that the Minister for Social Welfare — I have congratulated him in the past on this — has taken on a new job creation role as part of his ministerial brief. To constantly throw money at the long term unemployed is just not sufficient. Therefore the Minister's "back to work" schemes and others he has introduced are to be applauded. Certainly, they will have the support of my party.

I might refer at the outset to the amendment to the motion appearing in my name and those of Deputies De Rossa, Gilmore and McManus, although I accept that the Government amendment will be reached first. My party will be voting against the Government amendment this evening tabled in the name of the Minister for Finance because, ultimately, it reflects the complacency at the heart of this Government in tackling the jobs crisis.

We will support the priority which the motion in Deputy Harney's name affords the unemployment question, although we would prefer to have the facility in the House to substitute our framework for how precisely that should be done. For that purpose I should like to read the text of our amendment into the record of the House. Essentially, we concur with the priority Deputy Harney seeks to give this issue. However, our amendment reads:

To delete all words after "Dáil Éireann" and substitute the following:

"calls on the Government to give job creation the absolute priority it merits and to facilitate job creation in both the public and private sectors through

—the introduction of an EC common industrial policy to stimulate job creation in the peripheral regions such as Ireland;

—greater emphasis on the protection of jobs in existing enterprises, especially in view of the substantial increase in redundancies this year;

—measures to tackle the haemorrhage of capital out of Ireland and to ensure the reinvestment of at least some multinational profits in Ireland;

—reform of the tax system to end poverty traps and stimulate employment;

—the implementation of the Culliton report;

—a major community jobs programme designed to reallocate a proportion of the social welfare budget to the cost of creating 50,000 full and part-time jobs at the going rate in the public and voluntary sectors; and

—an end to job shedding by State companies and an examination of the potential of the public sector for an expansion in productive employment."

It seems to me that any fundamental change of policy towards the job crisis is not possible without hurting vested interests. The share-out of the supposed available resources in the National Development Plan avoided hard choices. The powerful vested interests which hector the Government got their allocations on the basis of lobbying power rather than on the basis of job creation potential. Now that it has emerged that the Government has been deluding itself and fooling the electorate about the extent of EC funding, it is very probable that it will be the most vulnerable and weakest sectors of our society who will pay the price for the Government's mismanagement and suffer the impact of the shortfall.

We believe that if there is to be a serious drive to increase job creation then virtually everybody in our society will have to make major changes and most people will have to make sacrifices. Those who will not have to make sacrifices will be the lower paid, but even they will have to change in the way they work and the way they think about work.

In essence, our comprehensive employment policy requires changes in European industrial policy, in Irish industrial policy, a massive overhaul of the taxation system, the creation of a basic minimum income and a substantial adoption of new ways of working which are flexible, competitive and which liberate workers from drudgery.

The creation of a Single Market, where the most competitive firms are also the largest, severely disadvantages peripheral areas like Ireland. Of all the political parties in this House Democratic Left has argued long and hard that, in the absence of a European-wide industrial policy which encourages large firms to locate their manufacturing plants in the periphery, there will be continued concentration of wealth in the rich heartland of Europe. Thus, Democratic Left calls for an active, intelligent, interventionist industrial policy which will discourage overinvestment and overcrowding in the centre of Europe and stimulate job creation in the peripheral areas. The European policy of the Government here is merely to have a begging bowl for more Structural and Cohesion Funds. We have had several examples recently that in the absence of such a policy at European level this country and Government, not to mention trade unions and workers here, are helpless in the face of the flight of capital and the decision by any major transnational company to pull out stocks in this economy and locate elsewhere. Most recently we saw it very dramatically in the case of the Digital plant, where there was really nothing that the trade union movement, or indeed the international trade union movement, could do about it — there was really nothing that the Government could do about it. We went through the exercise and seemed to be doing what we could in terms of the cosmetics of it, but the facts of the matter are that the decision was irrevocable and that we did not have any clout in the matter.

I do not understand if the Common Market initially — the European Community since then — can have as its cornerstone a common agricultural policy, why it is not possible to begin the process of constructing a common industrial policy to cope with the present extent of our unemployment problem. In the absence of the substantial transfer of Structural Funds from Europe it would have meant even higher unemployment here, but that is only part of the solution. Again, looking at the terms of the National Development Plan, it would appear that the Government does not view it as part of the solution but rather as its job creation policy — all of the eggs seem to be put in that basket.

It was interesting to hear the Minister of State at the Office of the Tánaiste say that it would strike into the heart of poverty and deprivation in our society, that a number of new programmes are being devised and a very substantial allocation of funding. I wonder how these will survive the present crisis that has finally hauled the Government back to reality. A sum of £500 million is a substantial amount and a very big discrepancy. As somebody remarked this morning, a three and an eight can look alike in the dark but £500 million is three times the rescue cost of Aer Lingus. I sincerely hope that whatever the shortfall — I hope it is not more than £1 million — it will not affect some of the programmes which the Minister of State at the Department of Finance, Deputy Eithne Fitzgerald, promised.

I still believe that the key to strong employment growth in the modern economy is the creation of service jobs as a spin-off from wealth generated in the manufacturing sector. That is going out of fashion to some extent in the sense that in all modern economies the service sector has become progressively more important and the manufacturing sector less so. Nonetheless, you cannot have the spin-off of service jobs to imitate the more advanced economies if you do not have a strong manufacturing sector. Our problem is that we have relied almost exclusively on the multinationals to provide that manufacturing base here. We have not managed to develop any significant indigenous base in our manufacturing sector. It is interesting to note that Ireland's growth in manufacturing was second only to Japan during the past decade — because we come from such a low base — yet the growth in service employment has been only half the average of rich economies. This is because the industrial structure created in Ireland in the past 30 years has been based on foreign companies which buy most of the materials and services abroad and which repatriate their substantial profits, largely untaxed, abroad.

We do not want to compete with Third World countries and labour intensive industries but to develop sectors where we can gain competitive advantage. We want to see the development of clusters or local industrial districts where such co-operative competition will help Irish firms to succeed in the international marketplace. Irish industrial policy must move from its preoccupation with physical infrastructure, financial incentives and low costs. The immense natural and human resource base of Ireland, with our strong scientific base, excellent education system and computer literacy are the basis of our industrial policy.

Irish State owned enterprises must be developed rather than privatised because they are some of the key companies here. In that regard I take issue with that clause of the Progressive Democrats' motion. Although the motion is carefully drafted to bring most of us on side in terms of supporting it, I do not think the engine of job expansion in this economy will necessarily come from privatisation of the remaining State enterprises, whose numbers we tend to exaggerate. The best have already been privatised: Irish Life in the financial sector and the former Irish Sugar Company, Greencore, in the manufacturing sector. That is also the pattern elsewhere where only the very successful companies are privatised. For example, an analysis in Britain shows that the outcome has not been more jobs but a tremendous benefit in terms of salaries to senior management who worked in those companies, tremendous gains to those who could afford to buy shares and tremendous job losses for the workers. I am not necessarily opposed to the point in the Progressive Democrats' motion which refers to competition in this area. I suspect that Telecom is the company referred to and that is a story in its own right, one that will break in this House before long in the context of the extent of the technological revolution in telecommunications. If the unfortunate consumers think the situation is bad they have seen nothing yet.

The Government, in its very smug and complacent amendment to the Progressive Democrats' motion is putting a lot of eggs in the basket of the Programme for a Partnership Government and the Programme for Economic and Social Progress. It is very difficult to accept an amendment from the Government which says we ought to “commend the strategy of the Government for tackling the problem of unemployment” when 300,000 people are unemployed. I look every day for something to commend in terms of reducing the numbers on the dole queue but the situation is getting worse. It reduces this House to the level of humbug and hypocrisy when the Government does not even take time to do a serious rebuttal of the Progressive Democrats' motion for debate in the House. This is no more than going through the motions. The Government amendment reflects the complacent, cosy approach of the Government parties who boast that there is no longer any tension in Government — and that seems to be the case but how it is claimed it is a good idea escapes me. I would have thought that if the Labour Party had anything distinctive to offer there would be tension in Government. The fact that they have so conveniently slipped into bed with Fianna Fáil and that everything is harmony and light should outrage the unemployed, the over-taxed and those in poverty traps.

The Progressive Democrats' motion also refers to the urgency of tax reform. It is drafted in such a way it does not say what is intended here but, clearly, there ought to be substantial and major reform of the tax system. However, I should clarify, in case there is any doubt about it, that I do not necessarily mean cutting the top rate of tax for a minority but a comprehensive shift from the massive array of tax allowances that have existed up to now. The policy of successive Governments has been to give more incentives, mainly through the tax system, and to create more tax shelters but it has not produced the jobs we were promised.

The policy has patently failed and it is time to consider the American idea of the alternative minimum tax. I heard Deputy Richard Bruton recently — I am not sure whether it was on an Adjournment debate or on a policy document he has published — referring to the tax regime on the service sector. Of course, it is a farce to pretend we have a special tax regime for the manufacturing sector who contrive, through various methods, to pay no tax and the service sector, where there is a national 40 per cent rate. Anybody who knows anything about creative accounting and who can afford expert tax advice does not end up paying 40 per cent tax on profits. Therefore, it would be much more effective if we had an alternative minimum rate of tax — a rate of tax that would be implemented so that the payment of tax could not be avoided as at present by the exploitation of loopholes. I think such an alternative minimum rate of tax is 20 per cent in most states and that seems to be a great deal more effective than the system where we have a notional rate of twice that — it was a good deal more than twice that until recently — which in effect, as the figures show for the corporate sector, has never made any major contribution.

I overheard Deputy O'Donnell argue in favour of the proposal by the Conferences of Major Religious Superiors for the creation of jobs for people currently on the dole. There is a reference in the Progressive Democrats' motion to "the introduction of a national community employment scheme to afford part-time work to the long term unemployed". Unfortunately, I missed Deputy Harney's submission on this point but I think it is out of desperation that this idea has caught hold. I am not sure what the Progressive Democrats approach to it is but I have reservations for a number of reasons about the Conference of Major Religious Superiors' approach to it. To expect people to work for their dole seems to be a straightforward workfare proposal — I am not suggesting that is what is being advanced, but I would like it clarified. I think an element of additionality has to be provided and if one does not provide for an element of additionality, the concept will not work.

It makes sense to reallocate a proportion of the huge social welfare budget, which amounts to more than £3 billion, to take a large number off the dole. Quite clearly it will not work if, for example, as has been the case in the social employment schemes, participants effectively lost their supplemental entitlements such as fuel vouchers, eligibility for a medical card or advantage under the differential rent scheme. If people lose those additional benefits the concept will not work.

The notion that is being worked on the CEDP is probably good but if people are taken off the dole to do jobs like cleaning up the environment or other socially useful work for the voluntary sector, we have to be prepared to pay an element of additionality. I think that means paying the rate for the job. The rate for the job in general operative type employment in the local authorities and health boards is basic and by all means we should not pay them any more than they would get on the labour exchange but they should get the rate per hour for the job and they are then free for the remainder of the week to do whatever they might. In a constituency like mine that does not mean anything but down the country it might mean something as one might find additional work. One is not going to find additional work in my constituency but nonetheless the provision is there and provided the other benefits such as fuel vouchers, medical cards and so on are preserved I see some merit in this idea.

It has taken the Government an inordinately long time to come up with the idea. It is a year ago last September since the all-party Oireachtas Committee came up with this proposal but nothing has happened since then. The new county enterprise boards although dramatically changed from what was advised under the former Government are still puzzling — even those of us who are members of these boards are puzzled by the overlap, the bureaucracy and the whole procedure which must be gone through.

The situation is so grave that it requires the Government, if it is going to come up with something like this, to enable us to get on with it because we are in a crisis. One would never suspect that from the amendment put to us tonight by the Government.

Cuireann sé áthas orm labhairt ar an ábhar seo. I dtosach báire ba mhaith liom comhgháirdeas a dhéanamh leis an Teachta Harney a bheith ceapaithe mar cheannaire ar an bPáirtí Daonlathach.

I compliment Deputy Harney on this motion. The motion is not very specific and I would not necessarily agree with all its parts as it talks in global terms about tax reform and poverty traps, but the time has come to talk in detail on the specifics. We need to be quite clear what we are talking about.

Last night I heard Deputy Harney refer to the fact that the Progressive Democrats Party was founded on the principle of tax reform. That was so and that was my memory — but tax reform for whom? At that time the thrust seemed to be that if we got the rate of tax down from 56 per cent, those on the high rates of penal tax would create employment for the masses. I never agreed with that, it was outside my experience of those who create jobs. As far as I am concerned most entrepreneurs who create employment are motivated by factors other than purely to create profits. I found that the serious tax traps are at the bottom of the social scale. Let me be specific: we start taxing people at £69 per week. What rate of tax does a person earning £73 per week pay? They are taxed on the marginal rate of 48 per cent because in order to avail of the exemption limit one pays the higher rate of tax. We must call a spade a spade and say what is needed to reform the tax system. What is needed is that people should not pay tax until they go above a certain basic income. This should be a reasonable amount of money and I think it should be set at £100 for a single person and double that amount for a married couple.

We have to ask ourselves what structures are needed to create that system because if we continue to use the exemption system that we have used to date we will run into crazy anomalies, for example, the marginal rate of tax being paid by those just over the basic tax threshold. We have to devise a progressive system which ensures that the point at which people first hit the tax net is raised considerably and, second, when they hit it they do not hit a brick wall as they do at present where the incentive goes out of it. I am concerned about the overlap of the family income supplement scheme and tax levels for those on the middle to low income group. In the west the description "the low to middle income group" refers to much lower income groups than on the east coast.

An béal bocht.

Cloisim go leor den bhéal bocht ó chathair Bhaile Átha Cliath i láthair na huaire agus bíonn sé ar bun ag muintir Chorcaí freisin.

The Deputy without interruption.

People in receipt of family income supplement find that their net pay is lower when they get a wage increase. If we are going to talk about tax reform we should start at the bottom. We should be specific and refer to the group most affected by tax. I pay tribute to the Minister for Finance because in many speeches recently he alluded to that matter as being a top priority.

If we want tax reform we must stop linking RSI rates to the medical card system — for example, free school transport which is 2 per cent of RSI — because such benefits are means tested. The medical card is then overvalued and people believe they are better off not progressing up the scale to earn more money. When this Government introduces tax reform I am sure it will direct its attention at that area of tax first because it is the area in most need of reform.

The interface of the tax and social welfare system needs to be examined and there has been much talk about that during the past number of years. I could write a book on the anomalies in the social welfare system and their effects on the tax system, but to my knowledge this is the first Government in which a Minister of State has been given specific responsibility for the nitty gritty of the tax system.

There has been much talk about obstacles impeding enterprise, but people should be specific. People starting up there own businesses are put off by the many layers of bureaucracy. We should not give the impression that certain forms of bureaucracy, planning and so on, can be disposed of. For example, Deputy Harney, as Minister of State at the Department of the Environment, was instrumental in setting up the Environmental Protection Agency. Also, many planning laws are in place. It is wrong to give the impression to those creating jobs that such agencies could be disposed of. We should be specific when talking about obstacles impeding enterprise. We should insist that there is easy and efficient access to State agencies and that the bureaucracy of the State works effectively. For example, there should be easy access to planning and environmental laws. It is wrong to give the impression that many of those agencies and provisions could be disposed of which at the same time proposing the imposition of further restrictions and the setting up of further agencies to monitor the position. That is similar to heading in two directions at the one time.

There are two problems in allowing competition in respect of State monopolies. Prior to supporting such a measure I would have to be sure that in the breaking of any State monopoly — for example, Telecom Éireann — there would be an absolute assurance that the law of the jungle would not apply and that the people in remote rural areas would not end up receiving an inadequate service at an unfair cost because it would not be efficient or cost effective for the big operators to provide them with the service. Where there is depopulation in one area and over-population in another, it is the State which picks up the tab by closing schools in one area and opening them in another and by letting the infrastructure run down in one area and replicating it in another. Therefore, prior to playing around with state monopolies one must consider whether people in general would gain by having an open jungle market in which the strong areas would develop and the weaker ones decline.

I agree with Deputy Ó Cuív's comments about the crazy catapulting of people through the exemption limit system into high marginal tax walls, withdrawals of family income supplement and so on. On behalf of the Progressive Democrats I tabled a series of amendments in that regard on Committe Stage of the Finance Bill. Regrettably, the Minister for Finance saw fit to reject all of them, although my primary concern was precisely, in philosophical and economical terms, what Deputy Ó Cuív has just recommended.

It is a poor day when one does not learn something and today was a day of considerable learning for me. I want to refer to the odyssey which began for the Taoiseach at Edinburgh when his Edinburgh dowry proved to be the fatal attraction for the Tánaiste seeking a new partner. That paved the way for the partnership Government between Labour and Fianna Fáil. However, it emerges — the Taoiseach told us this today — that the dowry was not in the bag when he returned from Edinburgh but that the Labour Party were well in the bag at that stage.


The Taoiseach told us today that a specific agreement was reached on £7.84 billion on 20 July last implying, in the famous word of another Taoiseach, that no "such" specific agreement was reached at Edinburgh. In regard to the £7.84 billion, the Tánaiste told us today that "we are still 100 per cent on target to achieve it," although signalling clearly some doubt in the matter by going on to state that "even as this House debates the issue we are taking the necessary appropriate and measured steps to ensure that that investment is secured in full". That was a curious form of words. Are we securing in full what we have already tied down in a specific agreement? Was there ever such an agreement, even on 20 July, when the Tánaiste found it necessary to reassure us today that steps were being taken to secure the £7.84 billion in full? I understand the Tánaiste is travelling to Brussels tonight in pursuance of that matter and, on behalf of the Progressive Democrats, I wish him well.

Hear, hear.

I hope when he arrives he has what the French would call “une bonne fourchette”, in other words, a hearty appettite in this case for fighting a rear guard action to save the day. For the first time the Tánaiste revealed to us today a new space within which that numbers game is being played. He talked of “indicative figures” to be expressed in “ranges” or in what he said, the Commission calls fourchettes. That is why I stated that one learns something new very day.

When I heard the Tánaiste use that word I asked myself is it animal, vegetable or mineral, or is it solid, liquid or, as I suspect, only gas. I looked up the second edition of the Collins French-English dictionary, published in 1990, to examine in depth the meaning of the word “fourchette”. On page 313 the word “fourchette” is described as a feminine noun, and defined as “a fork, as in margins or bands or a fork for eating with”. The fourchette is well and truly out of the bag in which the Taoiseach presumed there was £8 billion. Therefore, we are entitled to conclude that the Government, at its most senior level, has been speaking to the Irish public and to this House with a fourchette tongue since last July.

I hope the Deputy is not told to fork off.

The problem is whether the Government will fork out. This new line in fourchette speak was unveiled for the first time today and explained as meaning an indicative figure which, to quote the Tánaiste can be a “minimum or a maximum”.

The Deputy's figure was £4 billion.

The Deputy should not bale the water; the watch on the bridge is letting his side down. The minimum and maximum level reduced to a single figure could not be described as having a spread or being a fourchette. The Government had £7.84 billion in the bag and a National Development Plan signed, sealed and delivered to Brussels with no fourchette in sight. Its status and the credibility of the largest exercise undertaken to date by the Government hangs in the balance as we await the European Commission's decision. The Government has assured this House today it can expect a 100 per cent delivery and we wish it well in its task.

The Deputy does not really wish it well.

I do wish it well, but I hope we do not get more fourchette speak to explain the realities tomorrow if 100 per cent of what was promised and assured in this House today is not delivered. I am aware that one Commissioner today sought to have the matter postponed for a week and played for time. The meeting will take place tomorrow and a decision will follow.

Deputy Broughan made some play tonight of tax trends in the lifetime of the Progressive Democrats in Government. The Deputy quoted a number of figures. I would remind him——

Budget tables.

——that we reduced the lower tax rate to 27 per cent and the upper tax to a single rate of 48 per cent.

The lower paid were worse off.

We planned to reduce the tax rates to 25 per cent and 44 per cent during the lifetime of the last Government. The standard band during that period — the band on which the lower paid about whom the Deputy is concerned, would be taxed — increased by almost 50 per cent, reversing the trend of a decade. Under the Progressive Democrats the tax wedge was reduced every year. Under this Government, for the first time in six years, the tax wedge increased. The Deputy talked about going back to Reaganomics, that is a lot of bunkum. We are not going back. The problem is that the Government in its national plan and job targets cannot address the unemployment problem and fatalistically accepts outcomes rather than rail against them, find policies to fight against them and convert growth into more jobs. Deputy Broughan appeared to indicate that as the figures had gone soft the Labour Party had gone soft on the hard currency policy. I did not know the Labour Party was soft on the hard currency policy. The Deputy tonight pinned a gold medal on his chest for having caused a devaluation within weeks of entering Government. I am glad there are now two policies in Government, the official one and the Labour one, maybe that is the way the fourchette speak will emerge from now on as this Government winds its merry way through its lifetime.

Last night in the debate the Minister for Finance, Deputy Ahern, talked about the tax wedge not being important. He said it was not a core problem. I will remind the House of the figures Deputy Harney quoted last might. She stated that an unemployed worker with a dependent spouse and four children needs to earn at least £14,500 before it is worth taking a job. That is crazy. In the labour intensive clothing industry the minimum weekly wage is much lower in Britain than here. Our minimum wage is IR£131 against IR£114 in Britain. However, the British worker has a higher take home pay than his Irish counterpart. The tax wedge driven into the heart of economic policy is killing the prospect of turning more growth into more jobs. That is why we tabled this motion. It is wrong to imply that growth numbers fall automatically and that nothing can be done to break the vicious cycle.

Last night the Minister for Finance, Deputy Ahern, also conceded that there is a trade off between pay increases for those in work and the rate of employment growth in the economy. As the Government contemplates a new round of wage bargaining and income policy, its handling of the pay issue should be the yardstick by which the public should be entitled to judge its credentials on jobs because the trade off is accepted. Having regard to the example I gave, we know that the real issue is not about gross but take home pay, the pay policy should focus on take home pay which would help to get the tax wedge monkey off the backs of employers.

Last week in pre- fourchette Ireland a spending plan was devised to draw down European money. Whatever money comes more growth will follow, that is not challenged by any Deputy in the House. The challenge facing the Government is how to convert that growth into jobs, that is the key issue. Last night the Minister for Finance, Deputy Ahern, listed seed capital schemes, BES, special investment accounts and a long list of schemes in the National Development Plan. The Government is becoming a scheme-driven junkie injecting a new scheme into society every week. However, the economy does not lack schemes. The real problem is that the basics are wrong, the tax wedge is wrong, the tax system is anti-jobs and the poverty traps are anti-people.

I acknowledge the free and open support of Fine Gael in regard to this motion in respect of a significant issue that divides this House in policy terms and is a crucial marker for the future.

I thank Deputy Rabbitte for a number of comments in regard to which the Progressive Democrats are ad idem. The Deputy asked about our approach to the proposed job scheme for the unemployed. It is caring, understanding and compassionate and we refuse to accept the human set-aside policy. We believe that the pay for the job should be on a pro rata basis for the hours worked and that should be the medium adopted. I am sure that if the Labour Party has gone soft on currency and the figures have gone soft in Brussels it might see the light of day and go soft in regard to Fianna Fáil. We call with confidence on this House to radically attack tax wedges, radically reform taxation in a pro-jobs way to tackle poverty traps and to turn more of the planned growth into jobs. That issue now divides this House and I ask people to stand for jobs on the basis proposed under the motion.

The Deputy should mind his fourchette.

Amendment put.
The Dáil divided: Tá, 68; Níl, 40.

  • Ahern, Dermot.
  • Aylward, Liam.
  • Bree, Declan.
  • Brennan, Matt.
  • Brennan, Séamus.
  • Briscoe, Ben.
  • Broughan, Tommy.
  • Burke, Raphael P.
  • Byrne, Hugh.
  • Callely, Ivor.
  • Collins, Gerard.
  • Connolly, Ger.
  • Costello, Joe.
  • Coughlan, Mary.
  • Cowen, Brian.
  • Dempsey, Noel.
  • Doherty, Seán.
  • Ellis, John.
  • Ferris, Michael.
  • Fitzgerald, Brian.
  • Fitzgerald, Eithne.
  • Fitzgerald, Liam.
  • Flood, Chris.
  • Gallagher, Pat the Cope.
  • Gallagher, Pat.
  • Geoghegan-Quinn, Máire.
  • Haughey, Seán.
  • Higgins, Michael D.
  • Hughes, Séamus.
  • Jacob, Joe.
  • Kavanagh, Liam.
  • Kenneally, Brendan.
  • Kenny, Seán.
  • Killeen, Tony.
  • Kirk, Séamus.
  • Kitt, Michael P.
  • Kitt, Tom.
  • Lawlor, Liam.
  • Lenihan, Brian.
  • Leonard, Jimmy.
  • Martin, Micheál.
  • McDaid, James.
  • McDowell, Derek.
  • Moffatt, Tom.
  • Morley, P.J.
  • Moynihan, Donal.
  • Moynihan-Cronin, Breeda.
  • Mulvihill, John.
  • Nolan, M.J.
  • Ó Cuív, Éamon.
  • O'Hanlon, Rory.
  • O'Keeffe, Batt.
  • O'Leary, John.
  • O'Rourke, Mary.
  • O'Shea, Brian.
  • O'Sullivan, Gerry.
  • O'Sullivan, Toddy.
  • Penrose, William.
  • Power, Seán.
  • Quinn, Ruairí.
  • Reynolds, Albert.
  • Ryan, Seán.
  • Smith, Brendan.
  • Smith, Michael.
  • Wallace, Dan.
  • Walsh, Eamon.
  • Walsh, Joe.
  • Woods, Michael.


  • Allen, Bernard.
  • Barrett, Seán.
  • Boylan, Andrew.
  • Bradford, Paul.
  • Browne, John (Carlow-Kilkenny).
  • Carey, Donal.
  • Clohessy, Peadar.
  • Connaughton, Paul.
  • Connor, John.
  • Cox, Pat.
  • Crawford, Seymour.
  • Creed, Michael.
  • Cullen, Martin.
  • Currie, Austin.
  • Deasy, Austin.
  • Deenihan, Jimmy.
  • De Rossa, Proinsias.
  • Finucane, Michael.
  • Fitzgerald, Frances.
  • Flaherty, Mary.
  • Flanagan, Charles.
  • Gilmore, Eamon.
  • Harney, Mary.
  • Harte, Paddy.
  • Higgins, Jim.
  • Kenny, Enda.
  • Keogh, Helen.
  • McCormack, Pádraic.
  • McDowell, Michael.
  • McGrath, Paul.
  • McManus, Liz.
  • Molloy, Robert.
  • Nealon, Ted.
  • O'Donnell, Liz.
  • O'Keeffe, Jim.
  • Owen, Nora.
  • Quill, Máirín.
  • Rabbitte, Pat.
  • Sheehan, P.J.
  • Yates, Ivan.
Tellers: Tá, Deputies Dempsey and Ferris; Níl, Deputies Keogh and O'Donnell.
Amendment declared carried.
Amendment No. 2 not moved.
Question, "That the motion, as amended, be agreed to" put and declared carried.