Deputy Broughan has 17 minutes left, and I understand he is sharing his time with his colleague, Deputy Shortall.
Financial Resolutions, 1994. - Financial Resolution No. 8: General (Resumed).
Debate resumed on the following motion:
That it is expedient to amend the law relating to customs and inland revenue (including excise) and to make further provision in connection with finance.
—(Minister for Finance).
This is by far the best budget for the low paid in 20 years. There has been very little recognition by the Opposition that the budget will improve the position of the low paid to the tune of £200 million in PAYE tax relief. The reductions in PAYE, health and employment levies and employers' PRSI will lead to an expansion of employment in the service sectors. It also opens up the possibility of employers offering work on a part-time basis to take advantage of the PRSI reductions. Even after the measures proposed in the budget, unemployment is forecast at a level of 289,000. This is not acceptable to the Government, and it is certainly not acceptable to me. I urge the Government to consider giving additional incentives in the Finance Bill which will prompt voluntary work-sharing on an extensive scale. I welcome the measures taken by the Minister for Finance to improve conditions for the low paid. To echo his comments in relation to tax collection, an essential characteristic of a good tax system is the collection of taxes which are due. That was one of the most significant remarks he made in his Budget Statement.
I wish to refer to one of the major changes in the area of taxation. Like my party, I welcome the move away from the imposition of taxes on income towards the imposition of taxes on property. We can see the logical progression in this area by the removal of some of the very unfair reliefs on mortgages at the higher rate and VHI contributions. With regard to the residential property tax, one can see from its history that the vast bulk of this tax was collected in the Dublin area. While many of us are very anxious to see movement in the creation of a structure of funding for local government which will bring in approximately £200 million per year, I suggest that the residential property tax, as currently framed, will not bring in that level of funding. I ask the Minister for Finance to reconsider this issue in the Finance Bill. The residential property tax is a very blunt instrument which impinges primarily on householders in the Dublin region.
It is one of many blunt instruments.
It is not Fianna Fáil policy; it is Labour policy.
I congratulate the Minister for Enterprise and Employment on the many measures in the budget which will encourage enterprises to develop. I am referring in particular to the fund of £100 million which will be administered by the Industrial Credit Corporation, the reduction in PRSI to 9 per cent for those earning £173 per week, the changes in capital gains tax, capital acquisitions tax, the BES limit and the roll-over relief. All these changes will give an incentive to entrepreneurs to develop.
On the question of entrepreneurial development, the budget will mark the end of what has been a bad phase in terms of taxation policy and hopefully the begining of a new phase in which the Government will play a much more direct role in job creation. I would urge the Government to look at the national work sharing programmes in Holland and France, which we could usefully copy to encourage more women into the workforce. Even with the additional 20,000 jobs which hopefully will be created as a result of the measures in the budget, we still need to develop this third method of employment. A national work sharing programme along the lines of that proposed by the Labour Party is the way forward.
I thank Deputy Broughan for sharing his time with me. Framing a good budget is probably one of the most difficult tasks undertaken by a Minister for Finance or a Cabinet. We all know of the many conflicting demands by various sectors, some of which are particularly articulate and well connected. I suppose it is necessary for a Minister for Finance to step aside from those pressures and to take an objective look at the economy. First and foremost, it is necessary for him to give considerable thought to the present position of the country and where we see ourselves in the future. Considerable thought also needs to be given to developing a vision for the country, deciding the kind of society we want and, having done that, working out a very clear strategy to bring about that kind of society.
The key social and economic challenges facing us can be easily summarised. We must ensure that economic growth translates into job creation, that those disadvantaged by the absence of jobs are enabled to lead lives of dignity and fulfilment and that they are freed from the kind of hopelessness and sense of futility which now saps the morale of many of our people and communities.
Labour's primary purpose in Government is to ensure that these challenges remain in the forefront of our thinking and that they are tackled with as much skill and ingenuity as we can bring to bear upon them. We must ensure that the combined resources of the State, the social partners, the financial institutions and the voluntary and community organisations are applied to tackling this emergency which is as threatening to our future as any emergency in the past.
In general, the direction of this budget deserves to be supported. Some steps have been taken which prepare the way for more fundamental reform in years to come. Some sensitive targeting of key areas and groups take account of concerns which the Labour Party has been voicing for some time. In this regard I welcome the targeting of low paid workers by the removal of the two levies and the shift in policy on PRSI for low paid workers. I have campaigned for this and I particularly welcome the fact that the employers' PRSI is now reduced to 9 per cent for employees earning below £9,000. Of course, there is still a long way to go before Irish jobs can fully compete with jobs in the United Kingdom and I hope that in future budgets we could reduce this to the 6.6 per cent rate which currently obtains in the UK. I hope, too, that employers' PRSI will be graduated so that a person who earns more than £9,000 is not immediately hit by the top rate.
I also endorse the remarks by my colleague, Deputy Broughan, in relation to work sharing. There is a need for an imaginative approach to the whole question of how we structure our working week as there is huge potential here for creating new job opportunities. I hope that the whole issue will be teased out in the near future and look forward to initiatives in that area over the coming year.
I also welcome the initiatives in relation to developing the community employment programme and the fact that there are plans to increase the number of places to approximately 40,000. There is great potential for developing the idea of community work schemes. This is in evidence in my constituency in the Ballymun and Finglas areas where schemes have been used to good effect to give recognition to the huge amount of work in the voluntary sector. I believe there is further potential there to develop work within the whole environmental area.
One of the main planks of the Labour Party's agenda is to continue with the local authority house building programme which commenced last year so that the unacceptably long housing waiting list can be significantly reduced in the shortest possible period. In this respect I welcome the fact that, as was the case last year, 3,500 new houses will be built this year and I look forward to this programme continuing at least at the present rate for the duration of the Government's term of office. The £21 million allocated to social housing is another welcome provision in this area.
I am particularly proud of the developments in education which are clear proof of our commitment to it. I congratulate the Minister for Education for securing this additional funding and commend her for the priority basis of her approach to education spending, in particular, the targeting of the disadvantaged and the significant increase in capitation for children in special schools.
A particularly notable provision is the £10 million for the further implementation on the Child Care Act. I hope the implementation of this Act, which is long overdue, can be speeded up over the coming years. I also welcome the increased grants to the many voluntary organisations. Another interesting pilot scheme announced is the imaginative scheme to develop "over the shop" residential accommodation. This has great potential and it will be interesting to see the outcome.
I welcome the abolition of the 1 per cent levy, people regard this as merely getting back what was always theirs, nevertheless its abolition is welcome. I also welcome the gradual move towards widening the tax base. Most of us will agree it is highly unsatisfactory that this State, with such high levels of unemployment, should rely to such a large extent on income taxes. Few will seriously argue with the principle that a greater proportion of tax revenue should be raised from sources other than earned income but if this principle is to be fully accepted as a legitimate and appropriate alternative source of revenue, it must be developed and applied with care and with a greater regard to perceptions of equity than we have shown up to now.
A comprehensive and fair property tax will cover much more than simply house property and it could be argued that the family home should be the last property to be hit. If it was fair it certainly would not militate against families, against those who have extended their homes to cater for growing children or who have older working sons or daughters living at home. It should not so heavily discriminate against urban dwellers, particularly those who have no intention of leaving relatively modest homes whose values have been artificially inflated by market conditions. As Deputy Broughan said earlier, effectively the property tax is a Dublin tax and it is very hard to justify a family living in a relatively modest home in Dublin having to pay property tax while a family with a similar income living in possibly a larger house outside Dublin is not obliged to pay.
That is Labour Party policy. Vote for change.
In framing an equitable property tax it must also be recognised that many houses are substantially owned by banks and buildings societies paying proportionately little to the Exchequer while those put to the pin of their collars to meet mortgage payments must find the extra tax on properties they do not expect to own for many years.
In relation to other provisions many of us will profoundly regret that we have been unable so far to develop a comprehensive anti-poverty strategy. Social welfare increases are disappointing. Keeping pace with inflation is a small achievement when the base payment is barely at subsistence level. It is remarkable how little attention is paid by commentators to the impact of the budget in the social welfare area. This area, of course, affects one in every three citizens at the very core of their lives while aspects of the property tax, affecting fewer than one in 20, consume acres of newsprint and hours of radio and television debate. Perhaps social welfare legislation is too complex for the commentators to understand but it is hardly more complex than the taxation system or the minutiae of the property tax. Yet it seems that columnists, commentators and talk show hosts continue to think in terms of a model which envisages only home owning salaried couples targeted by the advertisers who pay for newsprint and air time.
There is little in the budget to demconstrate that, as yet, we are prepared to afford the kind of priority we owe to children and families. In that respect it is regrettable that the progress made last year in improving the level of child benefit has not been continued.
It is regrettable that the major gainers from the tax changes announced are still the better off. I would have hoped that the Minister would have raised the exemption limits of PAYE. I look forward to further expansion of the standard rate in next year's budget. Of course, the major difficulty vis-á-vis the tax system is that, because of its complexity, it creates a large number of tax shelters. There was no attempt to streamline the tax system, which is regrettable. In addition, it was unfortunate that no extra resources were provided for tackling tax evasion.
While there was some reference in the budget to covenants, another area in need of major reform, there was no provision made for reform. I look forward to covenants being reformed under the provisions of the Finance Bill.
In relation to special allocations it is unfortunte that consideration was not given to the major problem of drugsrelated crime, particularly as it affects Dublin city. A special allocation in this area would have been money well spent.
I might make one other point in relation to the special allocation of £5 million for Croke Park. Many people will find this allocation particularly difficult to understand since the high profile campaign for the development of Croke Park was the subject of much opposition by my constituents, particularly those in the Drumcondra area. When that campaign was launched by the GAA one of its main selling points was that there would be no public money required. The £5 million allocated for that development could be spent much more beneficially among the many clubs struggling to survive.
Somebody once said it is a clear sign of mediocrity if one is niggardly in one's praise. A Minister for Finance in a position to lash out £300 million in any budget must help somebody. There are those nationwide who will certainly reap some benefit from this budget.
The series of decisions taken in the preparation of this budget is very difficult to understand. Clearly what has been produced does not form part of the Programme for Government but rather constitutes a critique and analysis of how the parties in Cabinet are performing internally. It is very obvious that there are strains and a certain amount of tension among them.
I should have said that I should like to share my time with Deputy Seán Barrett.
That is quite in order.
There has been a certain amount of pandering to the Labour Party as the junior partner in this Government. The Minister for Enterprise and Employment, who really is the Minister for unemployment — nice man that he is — presides over circumstances in which 400,000 people are out of work. We have witnessed the spectacle of Ministers, indeed some Ministers of State, travelling around the country pulling out segments of the £8 billion cheque from their pockets, referring to programme managers, telling people that this and that factory will be built, that they will bring industry to certain parts of the country, that they will look after the development of this pier and that port, that they will look after all the other problems, such as county roads and infrastructural developments, all of which will be dealt with out of European moneys. They claim that all these matters will be dealt with, saying in due course when the environmental impact analyses are submitted.
This budget is a bonanza of publicity for this Government. It affords them an opportunity to cover up every issue of importance to people in small and large towns nationwide. The projections already issued for 20,000 job losses this year make a mockery of what is supposed to be the core value in this Government's attempts to rectify the country's problems. For example, there has been the announcement of schemes to put 40,000 people working or participating in social employment schemes. This means that, together with the other job losses predicted, at the end of this year we will have somewhere between 360,000 and 400,000 people still out of work, given new entrants onto the labour market and so on. The corollary of this is that in January 1995 we will have another budget, carefully constructed, demonstrating that all had been well in 1994.
These budgetary provisions do not address the heart of Ireland's problem, which is that people are not at work, that the climate and environment conducive to the creation of jobs is not available to those who have money, initiative and enthusiasm. While the budgetary provisions go some small way to address those problems they do not address the core problem. The Minister had an unprecedented opportunity to do so on this occasion but failed miserably.
One element of exclusion from designated areas in urban regions which should be examined immediately is office accommodation. Probably it is fair to say that if one undertook an analysis of available office accommodation, particularly in the Dublin area, one would discover an over-supply. Outside Dublin, in towns where designated areas provisions apply or will apply, such survey would clearly show there is not an over-supply of office accommodation. If initiative and enthusiasm is to be fostered in existing designated areas outside Dublin, and in newly designated areas, surely office accommodation would be of immense importance to the development and carrying forward of that initiative for the creation of jobs. I call on the Minister to stipulate that, in designated areas outside Dublin, office accommodation can be included in respect of tax benefits for development.
I very much regret that nothing was done in this budget to alleviate the problems obtaining in the clothing and footwear industry. For example, a survey carried out by the Clothing and Footwear Federation illustrated clearly that up to 1,690 full-time jobs will be lost in 1994, a rising trend since that figure stood at 1,300 last autumn. It is very difficult for retailers, in a hard-pressed, competitive business, to make ends meet when they do not receive any assistance from the Government in real terms. Despite intense lobbying and the very clear expression of their difficulties by the Clothing and Footwear Federation I very much regret the Minister for Finance did not see fit to grant them some real relief.
So far as the general public are concerned, probably the central issue of this budget is the residential property tax. Many speakers will address this issue. It is beyond belief that the junior partner in Government, who said it would be absolutely invidious to have anything to do with a Fianna Fáil Party in Government, should produce a clear list of their stated intentions and then completely renege on them. The response to advertisements produced in the run up to the last general election clearly indicates that people voted for change on the promise that such matters would not be touched, but we find now that that is not the case. In the Dublin area Niall Andrews, MEP, decides to say that this is not Fianna Fáil policy. If it is not Fianna Fáil policy then it must be Labour Party policy and, if that is the case, somebody from the Labour Party should spell out exactly what it means.
I read with interest an interview by Damien Kiberd with the Minister for Finance, reported in The Sunday Business Post of January 30, 1994. In that interview it was very obvious that, in his replies to the interviewer about the residential property tax, all the Minister for Finance wanted to do was get away from it, to lessen its impact in the shortest possible time. For example, the interviewer said to the Minister: “You have a long term tax strategy and the bits are now in place” to which the Minister replied: “Yes, yes”. The interviewer then said: “It seems that only 20,000 pay at present and only another 12,000 will enter the net. This seems absurd”, to which the Minister replied: “The tax has never brought in...”. The interviewer went on to say “But it is unbelievable”, and the Minister replied that had been the Revenue experience, that it is a selfassessment tax.
In reply to a further question on whether the take would be significant, the Minister said that the maximum is £15 million.
The interviewer responded that many people expect property values to rise this year, to which the Minister replied that the tax had been in existence for 12 years but had not brought in anything substantial.
It is absurd that the Government, which has at its disposal the best experts and accountancy mechanisms in the land, can say that only an additional 12,000 will enter the property tax net. Surely it is obvious that this figure will be exceeded in the Dublin area. In general, the perception is that country people are against concessions being granted to Dublin but all Irish people believe that a man's house is his castle. It is morally unjust and unfair to tax a person's home, and by so doing grind him into the ground. Indeed in cases it could probably be unconstitutional. A person owning a detached or semi-detached house in Portmarnock, Malahide, Sutton, Howth, Raheny, Clontarf — and most areas south of the Liffey — will probably end up in the residential property tax bracket. It is absurd for the Government to say that only an additional 12,000 will be caught in the net. Does this mean that the Government has quietly told the Revenue Commissioners to note what assessment people put on their home and then to go after them? I think this tax was concocted at the midnight hour. It reminds me of a vampire tax in that it drives a stake through the heart of home ownership, through enthusiasm and initiative, and sucks the life blood of people who want to own their own home and better their position.
If the Government fail to appreciate the passion with which people will defend their rights to own their home and have it looking as well as it should, it is making a serious mistake. Residential property tax is the one issue in the budget causing great anxiety to those who come within its thresholds. It is also causing great stress to those on the verge of the thresholds who fear they will be sucked into the net next year. It is obvious that the Minister's figure is out of line. He should be up front and say that at least 100,000 houses in the country will now come into the tax net and asked to pay accordingly. Of the 400,000 people out of work many are highly qualified graduates who could be sent around the country for three weeks, even with a minimal method of valuation they would come back with the figure of at least 100,000 houses in the tax net. The Government is making a very serious mistake.
Before I conclude I will refer briefly to another matter — the report last week of Údarás na Gaeltachta's success in creating jobs in Gaeltacht areas. One of the greatest scandals in my country is that several Údarás factories lie empty on Achill Island. When the former Deputy O'Donnell was Minister for the Gaeltacht in the mid 1970s seven small industries were active in the Achill area and sustained the economy. The area is now dying on its feet due to a number of factors, emigration, the population structure and the fact that there is no employment in the area. Surely this is a challenge to Údarás na Gaeltachta, the Minister for Arts, Culture and the Gaeltacht and the Government. I do not know if the Minister for Arts, Culture and the Gaeltacht visited the Gaeltacht areas in Mayo, I know his Minister of State visited the area but he does not seem to have had the enthusiasm to travel to Gaeltacht areas apart from that in his own constituency. Given that people from the area are working in Boston, Chicago and London, the Tánaiste and Minister for Foreign Affairs knows what I am talking about——
Cuir ceist ar an Aire.
——and the fact that there are empty factories with sand blowing around the doors, some direction should be given by the Minister to Údarás na Gaeltachta to ensure that some enterprise is created there to give hope to an island community dying on its feet. Surveys indicate that up to half a dozen primary schools will either have to close or be reduced to the status of a one teacher school in the next number of years.
It is scandalous that in the week prior to the election last year the Minister for Agriculture, Food and Forestry was able to lash out 50,000 cheques for premium and headage payments to farmers around the country. It is beyond belief that farmers are expected to linger in uncertainty as to when premium payments, their due entitlements, will be paid. The PAYE sector would not stand for that, and rightly so. If the farming community have to apply for grants, premia and headage payments by a particular date they should be entitled to receive payment on a particular date. It would not matter what date is set but at least they should be guaranteed payment by a certain date. That makes good business sense. If we value farming as a business enterprise, we should ensure that farmers receive their due entitlements on time. Given the level of technology, efficiency and enterprise in the Department of Agriculture, Food and Forestry it is not beyond it to achieve this. I hope the Minister for Agriculture, Food and Forestry will make his mark in this area at least as he has failed dismally in so many others. Farmers have to wait anxiously for the postman to arrive to see if their cheques are in the post and I hope the Minister will ensure that in future they will receive their cheques by a particular date.
I wish to share the remainder of my time with Deputy Barrett.
I have in front of me an important message from Dick Spring.
The Tánaiste and Minister for Foreign Affairs.
——the Tánaiste and Minister for Foreign Affairs dated 25 November 1992. The message from the then Deputy Dick Spring goes as follows:
Fianna Fáil lies and distortions are dangerous. They are knowingly spreading these lies about Labour's policies to scare you away from change.
To set the record straight:
Labour's plans aim for a REDUCTION in income tax.
Labour has NO plans to introduce a new property tax or house tax.
Labour will NOT reduce mortgage interest relief — in fact we will INCREASE it while interest rates remain high.
Labour will NOT introduce a Wealth Tax.
Labour will NOT reduce VHI tax relief.
Labour will strongly OPPOSE the privatisation of our very valuable State enterprises . . .
The final sentence is as follows:
To put trust back into Politics, I am urging you to VOTE LABOUR.
That is a clear message.
A very clear message. I have had the pleasure of knowing the Tánaiste and Minister for Foreign Affairs for a very long time but I think this is what is destroying politics. We campaign and ask people to vote for us on the basis of certain policies. They voted for Deputy Spring and the Labour Party in their thousands at the last election. In fact, in Dún Laoghaire and Dublin South the party got almost three quotas between the two constituencies. People put their trust in the Labour Party because they were told it would put trust back into politics. Twelve months later not alone has the residential property tax increased but it is proposed to reduce the relief on VHI and mortgage interest payments. What do young people in particular think of politicians when they are told one thing at election time and as soon as the party gets into Government it does the direct opposite? I have to listen to some people who lecture us about ethics. They want us to disclose whether we own a house, a few shares or whatever we may have because we want openness, honesty and ethics in politics.
This is the sort of thing that annoys so many of us. I do not mind being beaten in a straight fight but these were blatant lies. The advertisement on 25 November 1992 was in response to a Fianna Fáil advertisement which made various accusations against the Labour Party. The words, "Labour's property tax is official", was printed by Fianna Fáil the Republican Party. Now that both parties are in Government, one party having accused the other at election time of going to do certain things while the other denied there was any truth in it, they do exactly what they accused each other of. The so-called property tax is so unacceptable that if I was a member of the Government and if I was to leave politics I would vote against the Government.
I listened to some Government Deputies complain bitterly about the property tax, Deputy Broughan followed by Deputy Shortall, saying how unjust this tax was and the other evening, Mr. Niall Andrews, MEP described this as a Labour Party tax. This is not a property tax, this is a home tax. There is no benefit-in-kind in having a home so that the Government can tax it. What benefit is the value of my home to me or to anybody else. I am not getting any income from it. Why choose to tax my home? Some people save their money and invest it in a nice house for their family while others invest their money in vintage cars or paintings. The Government has decided to tax the home rather than vintage cars or paintings. The original property tax was bad but to increase it is much worse.
A person living in a modest semi-detached house in my constituency or in Deputy Shatter's constituency of Dublin South, valued at between £100,000 and £120,000, would pay £650 approximately in property tax out of a taxed income. The person who has to pay £650 in property tax has to earn in the range of £1,300 net per month. A house in the constituencies of Dún Laoghaire-Rathdown or Dublin South worth £120,000 is no mansion; it is an ordinary semi-detached house in a reasonable area. It is not our fault that we were born in that part of the country and it is not our fault that we have to work from that part of the country.
Lucky you.
Is the Deputy telling me I am lucky that I will have to pay the property tax? This tax is so ridiculous when you compare properties in one part of the country with another; one owner will pay property tax and the other will not. Houses in the Tánaiste's constituency are probably twice or three times the size of the houses I am talking about in my constituency. If a house is located in a certain area the owner has to pay tax.
It was not bad enough to give the unfortunate home owner a shock over property tax but to add insult to injury the Government reduced the mortgage interest relief, despite the fact that the Tánaiste in his message on 25 November 1992 said Labour would not reduce mortgage interest relief. In addition to the property tax home owners will now have their mortgage interest relief reduced. The person who provides for his or her family in the event of illness will have the tax relief on VHI premiums reduced. Anybody who does anything to improve their position will get a lash; it is as simple as that. In his message of 25 November 1992, the Tánaiste said: "Labour will not reduce VHI tax relief". He said the Fianna Fáil lies and distortions were dangerous and complained about what Fianna Fáil said about the Labour Party.
The owner of a house who has children will suffer as a result of the property tax, the reduction in mortgage interest relief and on VHI premiums while the Government abolish the 1 per cent income levy. This is supposed to be the great favour to the PAYE sector. The 1 per cent income levy should not have been introduced. Taking into account the abolition of the 1 per cent income levy and the so-called tax reductions in this budget very few people will gain anything. All we have heard about this give-away budget and the tax relief are based on the fact that the 1 per cent income levy has been abolished. For the ordinary house owner there is nothing in this budget, despite all the propaganda and publicity, except hardship.
We now hear that the Government is considering means-testing those who are paying their PRSI and contributing towards a contributory pension, for example a widow's pension. Those who contribute will now be means-tested on the benefits they paid for. This is like suggesting that the person who invests in an insurance policy for a number of years should, when the policy matures, be means-tested on the benefits. One cannot change the rules in this way and retain respect with society.
Much has been said about unemployment. All Members share concern for the unemployed. A small number of people create the wealth to pay social welfare benefits to the unemployed, the old and so on and that figure is reducing. Soon a handful of people will be trying to earn a few shillings to help pay the State benefits to us.
I object to the fact that if one is employing people in manufacturing, one pays 10 per cent corporation tax whereas if one is employing people in service industry one pays 40 per cent. What is the justification for a 40 per cent corporation tax when we are being told that services are the area in which to create future jobs? This tax is crippling people. In the light of the Finance Bill which will come before us shortly, will the Government seriously consider reducing corporation tax to give people in service industry a reasonable chance to create wealth and reinvest?
I was delighted to be able to remind the Tánaiste of his message of 25 November, 1992 and I look forward to hearing his message this morning. In future when the Tánaiste is talking about ethics in politics he should not forget what he said on 25 November, 1992 —"Put trust back into politics, I am urging you to vote Labour." He said that Labour would not reduce VHI relief, mortgage interest relief and had no plans to introduce a new property tax.
To some extent I can understand the angst of the Fine Gael Party because whatever about people putting their faith in the Labour Party, the Fine Gael Party put their faith in a rainbow and as all people, even children, know, rainbows vanish. Deputy Bruton's rainbow vanished very quickly during the last election campaign.
When the budget was published last week I described it as another step on the road to fulfilling the promise we made in the general election last year, the promise to put justice into economics. Every objective comment I have read since then confirms that. Of course, if one wants objective commentary the first rule should be to ignore all the comments of the Opposition in this House. I never thought I would see the day when——
That is not democratic.
The second rule is to ignore everything one has previously said.
If one wants objective commentary, the first rule is to ignore all the comments made by the Opposition, including those just made.
I never thought I would see the day when Deputy Rabbitte would be revealed as being to the right of Deputy Yates, but we were all treated to that revelation during the course of the budget speeches last Wednesday. Deputy Rabbitte and his party have come a long way. They have undergone many transformations since I first came to know them in this House, but even the party with a habit of donning a new name and a new identity every couple of years must have been hard pressed to see themselves as the champions of the property owning classes. It was a heart rending sight to see Deputy Rabbitte and his colleagues in Democratic Left choking back the crocodile tears and trying to control their emotions as they launched a truly magnificent and impassioned assault on everything they believed in. Labour has often been unfairly accused by Democratic Left of struggling with its conscience, but I have never before seen a political party publicly beating its conscience to a pulp as they did in this debate last week.
On a point of order, are copies of the Minister's script to be circulated?
I am sure the Deputy will be provided with a copy of my script in the normal fashion.
It is normally circulated at the beginning of a speech.
The only thing that stopped Fine Gael struggling with its conscience over the tax reforms in the budget is that it has no conscience left. This is the party that is capable of proposing and opposing virtually everything and anything at the same time and sometimes, as in the case of the tax amnesty, on the same day. This is the party whose leader not so long ago published a six-point plan for job creation which included the taxation of all short term benefits immediately, and then a nine-point plan a few weeks later which did not. This is the party which cannot make up its mind, like the famous mugwumps of old, their mugs on one side of the fence and their wumps on the other. This is the party which is pro-reform unless it is controversial, in which case they opt for the status quo unless it is risky, in which case they shout and roar until they are all blue in the face and then we are sorry we upset them. I find it hard to expect objectivity from Fine Gael any more.
Fergus must have been up the whole of last night writing that.
Just listen to it.
(Interruptions.)
Deputy Barrett has had his say. The Minister without interruptions, please.
These days I would settle for a little consistency.
Consistency?
As I was saying——
Labour will not reduce VHI, tax relief on mortgages——
(Interruptions.)
Yellow pack soldiers. The Army is looking for Deputy Barrett because of the insult.
Acting Chairman
Deputy Spring, without interruption, please.
Consistency is the Progressive Democrats middle name. One can always rely on the Progressive Democrats. When they say something they mean it. They remind me of what David Niven once said about Errol Flynn "Errol was the most reliable man I ever met, you could always rely on him to let you down". Thus, when Deputy Des O'Malley says that he will not run for Europe, one can bet on it until he does, and when Deputy Pat Cox says that he will not run for Europe, one can bet on it until he does not. When Deputy Mary Harney says that she wants her loyal lieutenant with her in the Dáil at all times, one can bet on it unless I suppose one is the lieutenant.
With regard to consistency, the Minister could take a line from Saatchi and Saatchi.
We were fighting Saatchi and Saatchi and we won the fight.
Acting Chairman
We had gone through that part of the speech just before the Deputy came in.
(Interruptions.)
Unfortunately, when the Tánaiste preaches consistency we cannot let it lie. He should remind himself about what he said before he talks about consistency in this House.
Acting Chairman
The Minister, without interruption from either side. We want to hear what the Minister has to say.
I am available at any time to give some guidelines to Deputy Doyle on her leadership ambitions.
(Interruptions.)
Thank you, but with the Minister's track record in consistency I would fear to take it up.
Taken all together, they make a sorry excuse for an Opposition.
Tell us why you lied a year ago. It is simple.
Their response to the budget was incoherent when it was not being opportunist and irrational when it was not being expedient.
The Minister lied to the electorate. Tell us why.
It is no wonder that the people as a whole have lost confidence in the Opposition.
(Interruptions.)
The Minister conned the electorate and had the gall to talk about ethics in politics.
Put trust into politics. Do not lecture us about ethics.
There was a time when Fine Gael was polite.
Acting Chairman
The Minister, without interruption, please. I ask the Minister to refrain from begging for interruptions.
(Laoighis-Offaly): Learn from him.
Learn how to tell lies and win votes? It would not be worth prostituting ourselves. The electorate will not be fooled a second time.
Acting Chairman
The Minister, without interruption.
Why is Deputy Kemmy not over there in the corral?
(Interruptions.)
Last week's budget was pro jobs——
(Interruptions.)
The Labour Party propose the ultimate abolition of——
(Interruptions.)
Tell us the truth.
Acting Chairman
Will Deputy Doyle stop raising ructions?
I suspect that Deputy Doyle has an appointment in her constituency this afternoon. She obviously wants to attend it.
The Minister is wrong again. I will be here this afternoon.
(Interruptions.)
It was a budget carefully targeted——
It was not.
——at radical improvements for families with a lower income about which Deputy Doyle would not know much. It was a budget that began the process of tax reform and widening the tax base and did so courageously and sensitively.
Sensitively?
It was a budget that continued the work of improving essential services in health, housing, education, family services, culture and the arts. Above all, last week's budget contained the biggest improvements in take home pay for every PAYE worker of any budget in my time in politics. PAYE workers, in overall terms, are seeing significant relief for the first time in many years.
Last year our critics said the temporary levy was here to stay. Its total abolition proves them wrong — as usual. As a result of the abolition of the levy and other radical measures, take home pay after the budget will increase by approximately 2 per cent with higher increases for those on lower incomes; this is in addition to pay increases still being negotiated under the new pay round.
The budget displayed a wealth of imagination in big changes and in little ones and accomplished all its objectives while at the same time maintaining the necessary financial discipline to make our future more secure and to keep interest rates at their present low level. They are the kind of things that "justice into economics" demands and this budget delivers.
Make no mistake — this Government is determined to deliver on jobs. The budget will stimulate the economy in a responsible way improving even further the prospects for growth this year. No budget on its own can make the kind of impact we all want to see in the area of job creation but the three-pronged approach represented by the budget, the National Development Plan and the Public Capital Programme will bring new and realistic hope to thousands of unemployed families. The structured and coordinated jobs package in the 1994 budget is a major initiative in creating employment and in targeting that employment in areas and among communities of the greatest disadvantage. The incentives to enterprise, including a balanced new approach to employers' PRSI, will help to protect and create thousands of jobs.
In the area of tax reform, necessary and long overdue changes are handled sensitively to ensure that nobody is asked to bear an unfair share of the burden. The treatment of unemployment benefit as income for tax purposes is accompanied by significant increases in unemployment and disability benefit, for instance. Both this change and the introduction of a new widower's pension accompanied by a high income limit for all survivor's benefits in the future have all been recognised by objective commentators as equitable and fair.
What about the perks of the Minister of State Deputy Burton? What about widows?
The Deputy should not excite herself.
The Minister should excite himself about widows in Wexford.
The phased approach to the standardisation of mortgage interest relief and significant additional measures will protect first time buyers and continued careful management of our finances should ensure that interest rates remain low. This change, together with the change in VHI, have been recommended for many years by all those who have campaigned for fair tax reform. It has long been one of the most inequitable features of our system that those with high incomes derive more benefit from discretionary allowances than those on much smaller incomes. That inequity is now in the process of being ended.
It is equally true of the changes in the residential property tax that every serious analysis of our tax system, including every serious tax document produced by every political party in this State——
Why did the Tánaiste not tell the people that at election time?
——has argued that a shift in the burden from income to property is logical, progressive, necessary and fair.
Fianna Fáil lies and distortions.
(Interruptions.)
Ethics in Government.
Put trust back into politics.
The change in this budget, measured against the many recommendations that have been made on this subject over the years, is very modest indeed.
Talk about naïve.
Those changes are being made against a background——
The Tánaiste will not join the corral of death.
——radically different from the situation that obtained at the time of the general election just over a year ago. The PAYE and PRSI changes in the budget have meant——
It is a corral of death over there.
——that a family with £26,000 a year is approximately £650 a year better off. At the same time reductions in mortgage repayments on, say, a £40,000 mortgage have amounted to approximately £150 a month. Against that background an imposition of £25 a year on an £80,000 house or £125 on a £95,000 house represents a very small charge indeed.
Why did the Tánaiste not tell the people he intended to do this?
Much has been made, by one commentator in particular, of the possibility that all sorts of anomalies can arise in relation to the tax.
According to the Labour Party propaganda, the threshold will be £50,000 next year.
That criticism ignores the fact that this system is not new. It has been in place for a very long time and the only change is in relation to the income and value thresholds.
The Deputy's gate lodge will be caught next year.
I wish I had one.
Any anomalies relating to individual circumstances have been ironed out under the operation of the original legislation and if there are new ones they can and will be carefully examined but the House should not infer or assume that the Government can be made to bow to pressure in relation to this measure. I repeat that it is equitable and fair.
Will the threshold be £50,000 next year as promised by the Labour Party?
Acting Chairman
Deputy Doyle, please.
The comment has been made that the changes bear more heavily on Dublin than on the rest of the country and Deputy Barrett has repeated this. I acknowledge that there is a certain truth in that assertion——
Well done.
——although some of the claims made about the number of houses likely to be affected are wildly exaggerated.
It was where the Tánaiste's party won most of its seats and it should watch its back.
I must also point out that thousands of families living in rural areas would be more than happy to pay £25 or £50 a year to live surrounded by the amenities that most Dublin residents enjoy and who would like to believe——
They have to pay service charges.
——that their houses would attract and retain the same appreciation in value that many houses in the capital city have enjoyed in recent years.
There is now a Dublin supplement; it is a sin to live in Dublin; it is not politically correct. Let us hear what Deputy Upton thinks of it.
(Interruptions.)
Acting Chairman
The Tánaiste to continue without interruption, please.
I said last week that this was a budget of which every Labour Party member could be proud. It shows that partnership Government can work. In fact, it creates the spirit for a new partnership for jobs and growth — a spirit that I hope will be carried through in the new national programme at present under negotiation and it shows that the Labour Party in Government takes its promises seriously.
Take its promises seriously? It will be £50,000 next year.
Last night I was accused by Deputy John Bruton, leader of the Fine Gael Party, of a direct and personal breach of faith for agreeing to changes in the thresholds. Deputy John Bruton is the man who tried to put VAT on children's shoes in the past. Is that still his policy?
The Tánaiste was a member of the same Government.
(Interruptions.)
Deputy Spring was a member of that Government.
I do not deny that.
I wish to remind the House that the Tánaiste was a Minister of State at the Department of Justice; that he drew his salary at that Department and that decisions were taken collectively.
The Deputy should sit down and take it for a while.
Acting Chairman
Deputy Bruton should please resume his seat.
(Interruptions.)
I am delighted that Deputy Spring has brought up the question of VAT on shoes because the Labour Party formed part of the Government that made that decision.
If the Deputy had listened to advice at that time he would still be in power.
It was a Cabinet decision, not an individual one.
Acting Chairman
Deputy Bruton should please resume his seat; we wish to continue the debate.
(Interruptions.)
May I continue? I did not interrupt anyone in this debate.
Acting Chairman
Please, Deputies, please allow the Tánaiste to continue without interruption.
The party with no political balls. It never stands over anything.
The same Deputy Bruton sat in Cabinet which implemented a land tax and he supported and defended it at that time. Is that still his policy?
At no cost to the Tánaiste but at some cost to me.
Perhaps above all——
Acting Chairman
The Tánaiste should not invite interruptions.
The Tánaiste is telling the truth.
He is being abused.
(Interruptions.)
The precedent in this House is that speakers are allowed to contribute uninterrupted.
Acting Chairman
I am sure it is also the tradition that Members should not invite interruptions.
Provision is made in Standing Orders for interruptions, if the Tánaiste would care to read them.
Perhaps, above all, Deputy Bruton sat in the Cabinet that designed and implemented the residential property tax and he supported and defended it for years.
With the Labour Party.
Is that no longer his policy? Is the residential property tax now to be blamed on Deputy Dukes, the former leader of Fine Gael while the present leader plays Pontius Pilate?
No.
(Interruptions.)
Would the Tánaiste care to yield?
Sit down.
Deputies
Chair.
No, I will not yield.
(Interruptions.)
May I reply as provided for in Standing Orders?
Acting Chairman
Deputy Bruton, please resume your seat.
Perhaps the Tánaiste will yield as allowed under Standing Orders to allow me to reply?
I will not yield; the Deputy should listen to the facts.
The Tánaiste should debate the issue.
The Tánaiste has made his speech——
The Deputy will not listen to it.
Provision is made in Standing Orders for a reply. I would be grateful to the Tánaiste if he would yield and allow me to reply to the charges made against me.
The Deputy had his opportunity to speak in the debate.
Acting Chairman
Deputy Bruton should please resume his seat.
I will have no further opportunity. The Tánaiste has brought my name into this debate and I would ask him, if he is a man at all, to allow me to reply to the charges he made.
Acting Chairman
Deputy, please resume your seat.
(Interruptions.)
I am entitled under Standing Orders to make an orderly interruption and I am asking the Tánaiste to allow that. Will the Tánaiste yield?
I am going to continue with my speech.
The Tánaiste is not willing to hear a reply. He is afraid to hear a reply.
It is about time——
Well, Sir, if the Tánaiste is not man enough to allow a Member he is attacking to reply, that Member has no option but to withdraw from this Chamber.
If you cannot stand the heat, leave the kitchen.
(Interruptions.)
You got Fergus Finlay to write your rubbish——
(Interruptions.)
No wonder they need a policy to protect their coalition.
(Interruptions.)
I assume, a Chathaoirligh, we are now going to witness the leadership succession race with all the aspirants, instead of supporting their leader, undermining him.
The Tánaiste does not like to hear the truth.
The Labour Party is supposed to be the ethical party.
If Fine Gael is now disowning the residential property tax it supported for many years it should change its name to the "Auctioneers and Valuers Party", and do it quickly. The accusations by Deputy Bruton are a gross distortion of the truth and a gross simplication of the difference in economic and fiscal terms of what has taken place since this Government came into office. We had then and still have no plans for a new property tax. If ideas emerge, for example, that can resolve the crisis in local authorities and at the same time further reduce the burden of income tax, we are prepared to examine them seriously and objectively and to measure them against the criterion of fundamental fairness, but we are not seeking to impose any unfair or unmanageable burden on anyone.
You have started doing it already and you will be judged by your actions, not your words.
You can talk until the cows come home because I put no value on your opinions and neither do the people.
(Interruptions.)
This is a statement, not action.
The entire range of changes proposed in this budget will leave the vast majority of taxpayers here appreciably better off. The reforms are just and fair, and the package has to be examined in its overall context. If I am to be criticised now for responding vigorously to an attempted attack in the course of the last election, at least let the criticism take account of the wide range of changes that have been made for the benefit of taxpayers throughout this country.
(Interruptions.)
It is a pity the party opposite had not got some literature of its own. If it had literature, it might not have lost ten seats in the election.
(Interruptions.)
It is advertisements like that referred to that won the Labour Party 33 seats.
Let us remind them of it.
(Interruptions.)
Acting Chairman
Deputies, please, this conduct is disgraceful.
Where is the Fianna Fáil support in the Chamber?
Where are Fianna Fáil Members now? Are they running the Niall Andrews campaign, saying this is a Labour tax? There is not a Fianna Fáil Deputy in the Chamber.
I am particularly proud of the changes in the budget that will benefit people on low incomes. If the budget could be attacked on the basis that it was taking money from the pockets of the rich in order to give it to the poor, I would be happy to stand over and defend that. In fact the only difference between rich and poor in this budget is that the gains to the less well off have been better designed and targeted than in the past——
Tax the widows.
——particularly in relation to the income levy and the health and employment levies for those on low incomes. In overall terms this is a budget in which the fruits of growth and careful management are fairly distributed.
What has the result been? I will restate, for the benefit of the Opposition. Personal tax allowances are up this year as much as in the past six years put together. The standard rate tax band has been widened by four times the most recent rate of inflation. Before this budget an ummarried worker with the usual PAYE-PRSI allowances would pay the top rate on an annual income of £10,936. Now he or she can earn up to £11,636.
What about widows?
A married couple in similar circumstances would pay the top rate of tax at £20,786 per annum. That has gone up to £22,186 per annum. In both cases the PAYE workers at the top of the standard rate band would have to increase their earnings by more than three times the rate of inflation before moving on to a higher rate of tax. Overall, thousands of workers are out of the tax net altogether, take home pay will increase as a direct result of the budget by approximately 2 per cent and by up to twice that for people on low incomes.
I would like to deal briefly with some of the other highlights of the budget. In the Book of Estimates we allocated a great amount of extra money for local authority housing. Our principal purpose in the past two years in relation to local authority housing has been to begin to undo the damage of recent years, especially the years that the Progressive Democrats were in Government——
With your partner, Fianna Fáil.
The people you are in bed with.
——to thousands of families in urgent need of shelter.
(Interruptions.)
Political amnesia might be acceptable after ten years but not after ten minutes.
In the budget we allocated £12 million more for local authority house building to enable last year's 3,500 house starts to be repeated.
Who wrote this rubbish?
This year as a result there will be 7,000 houses under construction. The spin-off in terms of direct and indirect jobs will be of the order of 14,000 jobs and the social progress represented by the restoration of a decent building programme is very considerable. We have also allocated £10 million extra to maintain and accelerate the attack on health waiting lists on top of extra resources already announced in the Estimates. Last year the Opposition sneered——
We did not.
——when the Minister for Health announced his intention to ensure that an extra 17,000 operations would be carried out within the year to make massive inroads into the delays being suffered by patients all over the country. They stopped sneering when in the course of the past six months that target was exceeded——
(Interruptions.)
——and more than a third of all patients on waiting lists were finally treated. This year we intend to finally bring to an end the era of the long waiting periods for necessary treatment. In addition £100 million from the amnesty will be used to address long-running health board financial problems. It is, perhaps, not generally appreciated that the financial problems of health boards have had serious knock-on effects in local economies with many small suppliers often being forced to struggle to make ends meet because of the difficulty in having their bills paid by the health boards. For that reason this once-off injection will not only have a beneficial effect on the efficiency with which the health boards can deliver services, it will also help to protect and sustain thousands of jobs at risk. The measure will be accompanied by stringent legislation to ensure that we will not see a recurrence of the massive debt problems which have plagued the delivery of health care here in the past.
A Deputy
Are you blaming the boards?
In the local elections of 1989 the Labour Party campaigned for a crash programme to ensure that every house which needs a bathroom will get one. It is inconceivable that in the 1990s there are several thousand houses in Ireland whose occupants do not have and cannot afford some of the most basic sanitary facilities. Perhaps some of those who are complaining about the very modest changes in property taxation might do well to remember that there are others forced to live in conditions to which they would not subject their families. This year we will end this hidden scandal once and for all.
It will be ended anyway.
In education we have allocated an additional £5 million towards extra secondary school buildings to bring total investment in school and college buildings to £98 million this year. In addition to the housing problem I mentioned a moment ago, the Minister for Education has identified 200 national schools which do not have the basic facility of proper toilets. This year that problem, which should have been addressed as a priority years ago, will also be eliminated.
This year, too, will be the year of special education. The budget contains a dramatic increase that will transform the resources available to special schools, on top of the extra money for mentally handicapped services already in the Estimates. Many schools with pupils with special educational needs have struggled for years with inadequate capitation grants and were often forced to rely on voluntary subscriptions for basic necessities. The changes announced in the budget will represent almost a doubling of average capitation grants in this area and will be carefully targeted to ensure that the rights of people with special needs, especially their right to aim at a full independent life, are further enhanced and developed.
In the area of infrastructure, one of the key complaints in recent years has been the deteriorating state of our county roads. An additional £20 million programme of investment in that critical area this year will not solve the problem but it will go a long way towards enhancing and improving the quality of life in many parts of Ireland, as well as contributing even further to our economic development.
In the arts, work will begin on a major new national cultural centre in Collins Barracks which is uniquely situated to make it accessible to people from all over Ireland. I look forward to the day when that barracks will contribute to a thriving, vibrant and accessible understanding of Ireland's heritage and promise for the future.
That would be worthwhile.
That promise will be further enhanced by the biggest allocation ever for the Arts Council which has been topped up in the budget to ensure that it meets all the demands.
In the past year interest rates have tumbled, exports have continued to increase at record high levels and Ireland has enjoyed a growth rate well above the European Union average. A spirit of confidence has re-emerged in the economy. The National Development Plan, coupled with this enlightened and imaginative budget and the public capital programme, demonstrates the Government's determination to continue to raise the growth rate and to translate additional growth into jobs on the ground. We are determined to do this while maintaining equity and fairness in social policy and through pursuing necessary tax reforms.
Ireland still faces many challenges. No Government can allow itself to become complacent while unemployment remains at its present level. No Government can allow itself to become complacent about the range of issues of equity and justice that still remain to be resolved.
I can assure this House that this Government will never become complacent. We are embarked, and have made a good start, on a programme of change and reform.
That happened a long time ago.
A 34 seat majority caused that.
We intend to continue to work with all the resources at our command to complete that programme so that we can face the people in 1997 on the basis of a job well done.
(Interruptions.)
There will not be any problems for Fianna Fáil.
I welcome the first full statement by the Tánaiste and Minister for Foreign Affairs on the budget. He was so quiet recently I was afraid he might have gone into hiding.
He was away.
We now know he spent his time in the bunker with Fergus Finlay and has been busy rewriting history. I was concerned that when the Labour Party made its first impact——
(Laoighis-Offaly): The Deputy is not too bad at doing that herself.
Deputy Gallagher had his say. I had hoped the Tánaiste and Minister for Foreign Affairs would at least sit here and listen to what the Opposition has to say, but obviously he will not. He expressed his arrogance and his view that the Opposition was not worth listening to and he is now displaying his arrogance further by walking out. It is an absolute disgrace that a Member who comes in here and abuses people is not able to take the heat. The Tánaiste and Minister for Foreign Affairs is not able to take the heat.
There is a very able substitute in the House to listen to the Deputy.
The empty chair speaks for itself. The man cannot take it.
He does not like being unpopular. We are not supposed to say anything critical about Dick.
It is obvious why the man cannot take it. He is a member of a party which is now in Government, which has abolished pay related benefit, is taxing unemployment benefit, diminishing reliefs on mortgages, on VHI and medical expenses and, the unkindest of all, is means-testing widow's pensions. I am trying to envisage what the Tánaiste and Minister for Foreign Affairs would be like in Opposition if a Government proposed introducing such proposals or if it was a Fianna Fáil Minister in Mr. Haughey's Government who——
Acting Chairman
The former Taoiseach, Mr. Haughey, is no longer a Member of the House and I would be obliged if the Deputy would refrain from mentioning his name.
I am sure Mr. Haughey would not mind his name being mentioned.
It was an historical statement. I was not criticising him. I am simply stating the historical context. If a Fianna Fáil Minister was alleged to have used his status as a TD to cadge business which resulted in fees of just less than £1 million going to his private firm, I would like to see the Tánaiste and Minister for Foreign Affairs dealing with that issue while in Opposition.
Did the Deputy not come into the Chamber yesterday to listen to him?
This is the Labour Party in Government, the old Labour Party deserting its constituency. Many people are part of that desertion. They are not even wrestling with their conscience.
(Laoighis-Offaly): We will look at Deputy McManus doing that.
Acting Chairman
The Deputy, without interruption, please.
They are building up a pack of U-turns, a U-turn on VAT on shoes, on the Matrimonial Home Bill and the property tax. We in the Opposition will have our work cut out to keep up with these U-turns without becoming dizzy. I am very proud of the record of the Democratic Left in that regard. We did not make promises before the election that we reneged on afterwards.
The Deputy's party does not vote on the Estimates so it is never responsible for anything.
Our job as Opposition Deputies is to pinpoint the hypocrisy and duplicity of the Labour Party in promises made before an election and broken afterwards. That is our job and I assure the Tánaiste and Minister for Foreign Affairs, in his absence, we will continue to carry out that job to the best of our ability.
We have had some time to put the budget into perspective. The financial statement the Minister made this day last week started with a claim that it formed part of a coherent strategy designed to give impetus to sustainable employment. Sadly, what followed that statement was an over-elaborate and over-extended budget which ultimately lacked both focus and coherence. The budget suffered from being over-hyped before it was published, from being over-blown while it was being published and as a result it is a major let down. It was not helped by the fact that the Minister took the opportunity to ramble around his and indeed other constituencies and to bring in much extraneous detail which served to blur and bewilder rather than to clarify and enlighten. On budget day last week the problems which relate to the process as it operates were highlighted. This debate should take place before the budget, not afterwards. The budget does not need to be the overblown affair it has become. As a process it has become such a mess that people outside are much more concerned about missing the wedding on Coronation Street than about what the Minister for Finance has to say. A little succinctness would not go astray.
It takes all of six minutes to read aloud the 1916 Proclamation. It takes 16 minutes to read the Downing Street Declaration, but it took the Minister for Finance, Deputy Ahern, more than two hours to read his budget. It is not up to me to say how history will judge this Coalition Government's 1994 budget, but I suspect that as a document it will not rest for long in Ireland's pantheon of historic statements. It is a muddled budget that reveals muddled thinking and it is incomplete because, at the end of the day, the publication of the Finance Bill will tell the real story. As Peter Faulkner, a representative of small firms, pointed out, the opera is not over until the fat lady sings; the budget is not over until the Finance Bill is published. It is not even clear yet what song the fat lady will sing.
The Minister's efforts to ward off adverse criticism by offering to review decisions already made served only to obfuscate and add to the confusion. He made a statement on the property tax which was promptly refuted by the Minister for the Environment who sits in Cabinet with him and presumably has some contact with him on such important matters.
The Minister for Finance declared his taxation proposals would be pro-jobs and as employment-friendly as practicable. He then went on to establish a set of criteria which would be translated into a set of guiding principles for policy. The concrete proposals in the budget are timid and merely tinker around with the present structure. There is not even the beginning of the root and branch reform of the tax system which we so badly need.
This budget displays the deep conservatism of the official mind which believes that nothing can really be done about unemployment. The minds of policy makers are set against the idea that there might be some intellectually respectable argument that Governments can do something about unemployment. If we do not properly weigh up the costs of unemployment — poverty, psychological and physical ill health, high taxation, crime and social strife — we tip the scales towards inaction and fatalism and threaten the very existence of our free society and our democratic policy.
The fundamentals have never been sounder, at least so we are infomed. The fundamentals are very sound indeed if, as Senator Joe Lee succinctly put it, we redefine the fundamentals by leaving out employment and emigration, the two traditional objectives of economic performance.
There is a great deal of shoddy thinking about economic policy. For example, it is commonly said that the objectives of an economy is to produce wealth. It is not. The objective of an economy is to produce well-being, that is, a flow of satisfaction. The provision of work for those wanting to work is a very important part of that flow. Economic theory had never been good at coping with the fact that most people of working age want a job — work is a plus, not a minus. The UN convention on Human Rights includes among those rights, the right to work — and that is as it should be.
However, when we return to our much vaunted "fundamentals" we find matters turned on their head. Interest rates, Government borrowing, balance of payments and debt-GDP ratio were once regarded as policy tools, a means to an end. Now they are the ends. This consensus, which redefined means into ends, was fully manifested when the Government of the time committed itself to the Maastricht Treaty's convergence criteria for monetary union.
It had been pointed out that Ireland has achieved very impressive levels of economic growth. This is true — although compared to some other late developers the increase in growth rates is less than spectacular. The real problem is that Ireland has a low translation of growth into actual jobs. In spite of high economic growth, policies have been skewed in such a way that each 1 per cent in GNP has generated at a rate of 0.08 per cent in employment. That rate is far lower than that of other countries.
The central developmental task for Ireland is the maximisation of employment growth. It is not growth, but the structure and composition of that growth, which is crucial in determining how we are to solve our unemployment crisis. There is little evidence that the Minister has turned his attention to the question of what kind of development pattern is appropriate and feasible.
Has the Minister really come to terms with the chronic failures of the recent past? Successive Governments have handed out vast sums of money to industry, in tax breaks and subsidies, in the hope that such measures would stimulate job creation. The consequence has been the mushrooming of multinational branch plants all over the country, conforming to no economic logic but the carrot of tax holidays and massive incentives. They were told they were wrong in 1980, by Telesis, in the mid-1980s, by the Commission on Taxation and more recently by Culliton, but they have proved to be remarkably hard of hearing.
A cornerstone in job creation is tax reform. Unless there is root and branch tax reform people and companies will invest in non-protective areas which do not create jobs. Even if they invest in manufacturing and the tax system greatly subsidises machinery, as is the case in Ireland, machinery will be substituted for labour. If the Government massively subsidises investment in property, money will flow into this unproductive area, at the cost of jobs elsewhere.
There is nothing in this budget that clearly outlines taxation as an incentive or disincentive system. What is more important than the overall level of taxation is how the structure of taxation is geared towards the needs of society, and how effectively tax revenue is spent. Professor Kieran Kennedy of the ESRI in his pamphlet "The Unemployment Crisis in Ireland", points out that taxation has always been regarded as a disincentive and that taxes can also be used as incentives to achieve social goals.
All aspects of the tax system contributed to job creation or job destruction. Many aspects of the tax system work against job creation, the chief one being the business expansion scheme, section 84 lending, low taxes on some unproductive areas, such as inheritances and property, and too many tax breaks going to the wrong businesses. The Government seems to have a myopic attitude to property in that it views it as the family home, but the term "property" covers a wider area, much of which escapes attention as regards taxation.
Research has identified a plethora of such tax incentives to invest in housing, other property and financial assets. The contradictions in the taxation system make such activities attractive, even at the expense of indigenous industry. A decisive approach needs to be taken to reduce the range of tax and other incentives applying to rent-seeking activities which would encourage a redistribution of wealth rather than its creation. Such an approach would probably be much more significant than the labour market disincentives arising from the tax and social welfare systems which have attracted considerably more attention.
The Joint Programme for a Partnership Government promised a third banking force from within the State sector. This was described as a significant force in banking with total assets of almost £3 billion, net profits of £25 million and a capacity to pay significant dividends to the Exchequer.
I would have thought that a budget package which included £5 million for Croke Park, £750,000 for marriage counselling services and £0.25 million for the new premises for the Sheriff Street youth club might have included the major initiative of providing a third banking force as promised in the Joint Programme.
There is a strong case for a third force in banking. We all know of the dominance the "Big Two" wield at present. There is a lack of competition in the banking market with the major banks operating an effective cartel over services and controls. A third banking force would do much to develop competitiveness and provide for commercial enterprises that find it difficult at present to secure investment.
A third banking force could play a vital role in industrial development as a long term backer of indigenous companies. However, it would appear that this opportunity has been dissipated and may be quietly buried. We have already seen how this Government, which makes clear and unambiguous commitments in its joint programme, can easily do a U-turn and make a contradictory commitment as soon as the temperature heats up. It is a Government that lacks the bottle necessary to deal with the Matrimonial Home Bill débâcle.
I have little confidence in a Government which, in its joint programme, specifically states that it will provide legislation to allow for joint ownership of the family home; proceeds to introduce dodgy legislation which has been thrown out on constitutional grounds and compounds its error by declaring that there will be no action — legislative or by way of referendum — to live up to its commitment in the joint programme. Women are not fools. They know what has happened and that a fundamental right has been denied to them not because of our Constitution which is open to change but because this Government lacks bottle.
The Government has walked away from its responsibility, from a promise it made, a commitment it said it believed in, and a legislative mess for which it is responsible. If this is the way it has operated in relation to the Matrimonial Home Bill will we see a jettisoning of the third banking force, abortion legislation or local government reform?
Its ability to set up a third force in banking and take on the huge vested interest that would be against such development is questionable. Many people had confidence in Fianna Fáil and the Labour Party. They voted at the last election for change. What they got in the budget was bits and pieces of change which have served further to undermine people's confidence that the Government is serious in intent and, in particular, is serious about employment.
For those living in sub-standard accommodation, in over-crowded conditions, the homeless, who have no hope of getting a council house in the immediate future, the budget did not offer any real recognition of the extraordinary length of the waiting list. We have a programme that offers a handful of houses if it is broken down into the various local authorities, but it is very limited. The budget did not provide any hope for the 1,000 or more families on the housing waiting list in my county of Wicklow. If these people were living in the constituency of the Minister for Finance would there have been a different response? Constituency massaging rules OK yet again.
In relation to the health spending section in the budget an opportunity was missed to provide equity within the VHI. Instead of withdrawing tax relief from cover for luxury hospitals, the Minister decided to reduce tax relief on all VHI premia, even those that apply to the ordinary hospital. This is the kind of cover that many people cannot do without. There is no justification for allowing tax relief to the super rich to subvent their service in private hospitals that cater for them. I have no problem with private hospitals — if people want to pay for more luxurious service, good luck to them if they can afford it — but I strenuously object to the idea that the taxpayer should somehow subvent a luxury service for these people.
Equally, the raising of the ceiling for tax relief on medical costs is insupportable. If the Minister for Health was serious about redirecting and reorganising health funding to be more effective and more efficient, he would concentrate his attention on primary care. Extending the GMS and widening the eligibility of people for the GMS would ensure that the pressure on hospitals and the concentration on hospital care that exists at the moment in the health care services would be reduced.
The Minister for Health seems to prefer the superficial modifications that have provided the photo opportunity rather than better health care and more appropriate targeting of resources. One of the most important determinants of good health is the level of poverty and the likelihood of unemployment. If you are a middle-aged, unemployed male, you are twice as likely to have a heart attack than an employed, middle-aged professional male. If you are unemployed and poor, you are more likely to suffer from depression, psychological disorders and lung cancer and you are more likely to get a stroke.
Right from birth, indeed prior to birth — even the level of stillbirths is related to poverty — people's health and life expectation are governed by the social class to which they belong. There has been absolutely no attempt by the Minister for Health to deal with this matter or in any way to target resources that would ameliorate and modify the effects of poverty on people's health. We have seen no attempt in this regard in the budget. Instead, those who are wealthiest in our society, those who are also the least unwell, are still getting the benefits of tax relief. The reality is that those who need the services least are those who can avail most quickly of them and enjoy tax relief in the process.
In 1993 the measles epidemic showed up the correlation between disease and poverty. In Dublin 4, the vaccination level against disease was 90 per cent whereas in the poor areas of Dublin, they were below 40 per cent and two children died of measles. In a developed country like ours this is a tragedy. It is a direct result of neglect by the Department of Health and its inability to focus on the causes of ill health and disease. We have seen yet again this blindness being displayed by the Minister in relation to this budget whereby the rich are yet again rewarded while the poor continue to be discriminated against.
The Conference of Major Religious Superiors criticised the budget for following the old and failed model. It argued that unless the traditional economic thinking of the Government is changed, the economic future will look even bleaker. In a year when 289,000 people are expected to be unemployed the Government has conceded that there will only be a minimal gain over the next six years. With the growth in the labour force and emigration, the likelihood is that at the end of the day the total unemployed will be at its current unacceptable high level.
Unemployment and poverty are the two key issues. More people in our society are getting poor and the gap that exists now between the poor and the better off, between the unemployed and the employed, is growing. This budget will do nothing to narrow that gap or to make any significant change of direction. Last year we were told by the Government that there was not time to bring any transforming element into the budget. This year the conditions could not have been better for transforming our tax system, our unemployment crisis and the conditions of poverty in which many thousands of our people live.
The Minister prepared this budget at a time when the conditions could not have been more favourable. He had the wind at his back and public opinion with him. He had an historic opportunity to redirect financial policy towards resolving the problems in our society instead of simply side-stepping them. Recognition is needed, as the CMRS said, that the labour market has changed, that we need to introduce a basic income guarantee for all and to build a society where all may work, even if it is not in full time jobs in the traditional sense. On those criteria, which are the only criteria that the budget can be judged on, this budget has clearly failed.
The 1994 budget rightly focuses on job creation and social justice. The budget confirms and re-emphasises the commitment of the Government to maintaining financial stability and creating confidence in our economy. Both financial stability and confidence are essential pre-conditions if we are to ensure stronger investment, increased output and more work opportunities. As a small, open economy we cannot escape the effects of international economic developments; we have to adapt to world market conditions in order to generate greater economic activity. The National Economic and Social Council's observation 20 years ago in the context of maintaining essential competitiveness is equally true today —"it is not possible to stop the world and let Ireland off".
We cannot be complacent about our relatively strong economic performance in recent years. We have to build on our success through further improvements in our competitiveness and productivity, and translate the results of our economic growth into fuller employment.
This year's budget is built around a series of central policy parameters. These are: first, to sustain the progress made in recent years in bringing order to the public finances; second, to maintain a stable exchange rate within the EMS; third, to foster a competitive climate for employment growth; fourth, to support the development of social and economic infrastructure and, fifth, to align a range of public policies, in particular in the taxation area, more closely to the primary objective of employment creation.
It is important at this point to refute the allegation that this is a "do nothing" budget, by pointing to specifics under each of these headings. The general Government deficit has been set, and will be returned, at less than the 3 per cent figure specified at Maastricht for the EU as a whole. Our disciplined fiscal stance, strong balance of payments and low inflation outlook will support our exchange rate objectives. The provision of substantial tax relief to the great bulk of taxpayers will prove a moderating influence on pay and on general input cost developments. The tax reliefs have focused in particular on the lower paid, in line with this Government's priorities. The expansion of the urban renewal scheme and the increased provision for social housing needs are practical examples of additional measures included in the budget which focus on the provision and upgrade of our economic and social infrastructure. Finally, the provision of low cost funding for small business and the grouping of a package of tax reforms to help business, especially small business, to create employment are practical examples of the way in which policy developments are being directed at areas where the maximum potential for returns in terms of employment exist.
We know that the low level of employment in Ireland relative to our partners in the European Union is at the root of the divergence in income levels per capita between Ireland and the EU as a whole. Therefore, the twin issues of under-development and unemployment are inextricably linked. It is not possible to address the structural problem of unemployment without tackling the more general question of economic development and overall growth. It is this strategy which forms the cornerstone of proposed investments under the National Development Plan and which is further developed in the context of this year's budget.
It is a regrettable fact that no-one can be satisfied at the performance of the labour market in Ireland in recent years, but it is important to put the issue in its proper focus. Employment has grown slightly in Ireland since 1990. In the European Union as a whole, it has declined significantly. Moreover, unemployment in Ireland has risen sharply in circumstances where net inflows to the labour force have increased, and will continue to increase, at a rate which is more than 12 times the European average. It is these facts, together with the challenge of increasing employment in the Irish economy which, quite simply, drive the need for growth to the top of the political and economic agenda.
Against this backdrop we have to ask ourselves does this budget help to create new jobs and protect existing jobs. I believe it does. The response of the social partners to the budget's contents and, in particular, the comments of those working in the small business sector suggest that there is general support for this view. In addition, the Construction Industry Federation has acknowledged that the budget lays the foundation for a recovery in the construction industry.
It is clear that this budget does not simply address the need for greater economic growth and employment. The Government fully accepts that the success of small open economies in creating jobs is strongly related to securing broadly based economic development across all sectors of the community. Social exclusion is a double edged sword. It is rooted in under-development or unbalanced economic development but it can also severely constrain an economy's ability to grow. The Government, therefore, sees a clear integration between progress towards social objectives in the areas of education, health, housing and income maintenance and the pursuit of purely economic objectives. It is not possible to attack the unemployment problem without complementary support policies in, for example, the areas of education and training. Given the scale and composition of the long term unemployment problem, issues of access and exclusion in those sectors are of critical importance to the ultimate success of our economic policy.
I want now to turn to a number of the contributions to this debate and, in particular, to the comments made by Deputy Cox last Wednesday. These comments threw more light on armchair critics of the budget than they did on the budget itself.
The first point I want to address is the notion that there is, in effect, a public expenditure spiral underway, a return to gross fiscal indiscipline, that all effort at expenditure control has been abandoned and that we are set for a tax and spend spree. All of this is heady stuff, unfortunately unsupported by the facts. How does the allegation stand-up against a debt-GNP ratio which was reduced from 106 per cent in 1990 to 100 per cent in 1992? How does it explain away the stability of EBR as a percentage of GDP in Ireland in the period 1990-92 when this figure increased by over 50 per cent for the EU as a whole? If there had been spiralling public expenditure our industrial competitiveness would have been undermined, but between 1990 and 1992 the index of hourly earnings in manufacturing industry in common currency terms for Ireland increased at the same rate as that of our main trading partners and of the EU as a whole, showing that our industrial competitiveness has not been eroded.
Deputy Cox's critique of the budget's approach to public expenditure policy raises other questions. The first is whether the remarks are for real or for effect. Do the criticisms apply to all public expenditure or just to current public expenditure? Perhaps he is suggesting that there are certain areas of capital spending on infrastructural provision and improvements part-funded by the EU which should not proceed. The Deputy should offer specific examples along with rhetoric. Social assistance expenditure covers the principal areas of social welfare delivery. Spending has increased from nearly £1.5 billion in 1990 to an estimated £2 billion in 1994. Spending on first, second and third level education increased from £1.2 billion in 1990 to £1.67 billion in 1994. Spending on health services increased from £1.3 billion in 1990 to £1.88 billion in 1994. While the increased level of public provision in these areas has run well ahead of the rate of inflation, it has done so for various reasons which were not pay-determined. These included increases in the number of recipients of the services in question, improvements in the basic standard of education and health services and higher real welfare payments for the least-well off members of our community.
The point I am making is not to justify each and every spending increase of recent years, but to illustrate the fact that this expenditure has ultimately resulted in reduced class sizes, better health services and increased social welfare payments among other changes. Is it enough, in the light of this fact, to offer broad ranging non-specific criticism of spending levels? Why not come off the fence and let us know where and how economies should be made, services eliminated, employee numbers reduced, pay levels cut and programmes abandoned? This budget demonstrates the Government's commitment to a sound fiscal stance in which control of the evolution of public expenditure has a key influence. The development of public expenditure is determined not solely by tax levels, spending commitments and needs but by the evolution of the broader economy.
Some of the comments made about the growth problem and the dual structure of Irish industry again neglect the budget's content; in particular, the unique packaging of employment driven tax breaks for business and the low cost finance being made available for expansion and development. It should be noted that many of these incentives are specifically targeted at small businesses.
However welcome the announcements of occasional spectacular inward investment projects and however professional and dedicated the work of the agencies operating in this area, the lessons of successful job creation in other countries demonstrate clearly that small and medium size enterprises are the bedrock of industrial performance and the principal engine of employment growth. There is a clear recognition of this reality in this year's budget. I believe that the package of measures announced last Wednesday will increase significantly the potential of small businesses as employment creators and as the engine of economic recovery. In fact, I am satisfied that the budget of 1994 will be seen as a milestone in enhancing the environment for indigenous small and medium sized enterprises; the measures announced last Wednesday will be seen as a part of a wider framework which will allow the small business sector to flourish and thereby guarantee the jobs we all aspire to create.
In this regard I want to point out three particular initiatives which will be of particular value to small companies. The provision of up to £100 million in low interest loan funding announced by my colleague, the Minister for Enterprise and Employment, will make it easier and cheaper for small companies to finance expansion and development.
The increase of the company value limit from £150,000 under the business expansion scheme for owners of companies who want to invest in their own business together with the drop in the capital gains tax rate from 40 per cent to 27 per cent on the disposal of shares in an unquoted company will make it more beneficial for entrepreneurs to invest in productive enterprises in this country and, thereby, in employment.
The directing of tax relief towards lower income levels directs the benefits of such reductions at employments which are the re-entry points into the workforce for most of those currently out of work. It is consistent with the growth of mobile, part-time and services employment which may, at least initially, fuel a significant proportion of employment growth. In this regard, I want to draw attention to the removal of the requirement for employer payment of the employment and training levy and the health levy for employees who have a medical card. In addition, employers' PRSI is being reduced by about 25 per cent in respect of low paid employees.
The demonisation of the Programme for Economic and Social Progress by its depiction as a millstone around the neck of Irish businesses ignores the flexibility shown in many company situations in both private and public sectors in coping with difficult economic circumstances in the recent past. It also overlooks the major benefits brought about through lower losses by way of industrial disputes and increased investor security and confidence. As this House will be only too aware, tax driven or not, foreign industry in Ireland accounted for almost 50 per cent of net manufacturing employment growth in the period 1987-91. If we are going to make progress in increasing employment we cannot ignore the potential offered by inward investment as well as indigenous industry.
The transport, energy and communications sectors, which come under my portfolio, have vital contributions to make in the realisation of overall economic objectives. In the case of transport, the primary objective is to support sustainable economic development and employment creation by, first, improving internal and access transport infrastructure and facilities on an integrated basis, thereby reducing transport costs and offsetting the negative effects on the economy of peripherality, and second, by improving the reliability of the transport system by removing bottlenecks, remedying capacity deficiencies and reducing absolute journey times and journey time variance.
My colleagues, the Minister for the Environment and the Minister for the Marine, and I will ensure that these objectives will be achieved over the coming years through an integrated programme of investment in our transport modes. In particular, I will be concentrating on upgrading and development of the national mainline rail network, with particular emphasis on strategic inter-urban links and on improving the accessibility of access transport facilities; ensuring substantial investment in implementation of the Dublin transportation initiative; development of Dublin, Shannon and Cork airports to ensure the provision of adequate infrastructure for the national and international aviation links required by the traded economic sector and to meet projected increases in these requirements; and increasing traffic at the regional airports.
On the latter point Deputy Cox, in his contribution to the budget debate, suggested that there is a lack of a level playing field as between the air services from regional airports and those from Cork airport. I would like to point out that the essential air services programme which I initiated for regional airports agreed by the Government last May was specifically designed to guarantee a minimum level of service to the six regional airports. Traffic at these airports fell by 36 per cent between 1991 and 1993. In the same period traffic at the three State airports increased by 12 per cent.
The European Commission insisted that our programme must comply with the very rigorous procedure set out under European regulations. My Department in turn asked the six regional airport companies for their views on the routes within Ireland to which public service obligations should apply and on the minimum level of air service necessary on those routes. Based on the information received, a detailed document was prepared and submitted to the European Commission for approval. The Commission approved the document and advertised the imposition of Irish public service obligations in the EU Official Journal as recently as 5 January last. The purpose of this advertisement is to see if any Community air carrier would be prepared to operate the routes without compensation. The next step in the procedure is to seek tenders, through the Official Journal, for the operation by any Community air carrier of the designated routes, either singly or as a group of routes. A tender document is in course of preparation. I have felt it important to enter these open and democratic arrangements for the essential air services in the record of the House. There is no question of tilting the level playing field — it is a question of striving to guarantee a minimum level of service to and from the regional airports.
As regards the development of Cork Airport, I know that Deputy Cox will have noted, from my reply to a question in the House yesterday, that a fund of £500,000, financed by Aer Rianta, has been established for the marketing of Cork Airport. The purpose of the fund is to enable Cork Airport to tackle promotion of the airport aggressively and to expand its share of tourist and business traffic in the region. I am convinced that improved marketing is the key to the development of traffic at the airport. The new fund, which compares to an amount of £116,000 spent on the marketing of the airport in 1993, will enable Cork Airport to build on its success to date and on the excellent facilities which it has to offer. I should add that the airport manager will chair a task force of business and commercial interests in the Cork area to coordinate the new marketing arrangements for the airport. These new arrangements are being designed to enable Cork Airport to maintain and expand its competitive position and to chart a course for its development up to the end of the decade.
In the area of energy, I previously outlined in this House my policy for tackling the factors which induce uncompetitive energy charges in the Irish economy, as well as minimising inefficiencies in fuel consumption and energy infrastructure. The investment that will take place in the energy sector over the next few years will cater for increased demand from the economy in general, secure improved efficiency in energy supply and consumption and result in a more cost competitive supply infrastructure. The impact of energy use on the environment has taken on an increasing importance both at national and international level in recent years. Much of the investment planned for the sector will have the effect of increasing the efficiency of existing supply technology, thereby reducing energy losses. Conservation measures will focus directly on the efficiency of energy consumption by end users in the domestic, industrial and commercial sectors.
I am satisfied that the relatively moderate adjustments to oil product prices, following the budget, will not in any way distort current North/South trading patterns. These moderate adjustments are being made at a time when there is downward pressure on the prices of petroleum products generally. This downward pressure arises from a combination of excess world crude production in the face of stagnant demand for products in the main markets. A substantial recovery in the level of international prices is not generally anticipated in the short-term.
I hardly need to emphasise to this House the importance of telecommunications for Irish economic output and employment. The importance is underlined by factors such as its geographic distance from the principal European markets, the relative openness of the Irish economy, which increases the importance of telecommunications for industry as a whole, and the long-standing industrial policy of attracting exportoriented foreign direct investment, much of which requires advanced telecommunications technology. Modern, efficient and competitively priced telecommunications services are essential in pursuing our objectives of greater competitiveness in our economy. Deputies will, of course, be aware of the progress made towards achieving competitively priced cost based telecommunications charges during the past year.
Telecom Éireann, as our national network operator, is investing about £182 million in the development of its network and services this year. Of this amount more than half will be spent on the development of both the local and national networks with the balance being spent on international networks, data communications, mobile communications and necessary support services.
In addition to developments within Telecom Éireann, increased competition has emerged in telecommunications with the Directives on Open Network Provision and, in particular, on Open Network Provision in Leased Lines having taken effect in the European Union in the recent past. These allow service providers to lease lines from national operatives, such as Telecom Éireann, at costbased tariffs and provide telecommunications services, including voice services, to closed user groups while allowing Telecom maintain exclusive rights on the infrastructure and on public voice telephony. Such competition is welcome from the national point of view in that it allows industry the advantage of securing telecommunications services on a cost effective basis and complies with the budgetary policy of maximising opportunities for job creation and retention in the economy as a whole. Subject to the protection of universal services requirements, active competition in telecommunications services can only work to the benefit of the Irish economy as a whole. Competition will, however, require that Telecom Éireann become a more efficient operator if it is to complete effectively in the liberalised market.
Our national postal operator, An Post, has also to face more liberalised market conditions. I am pleased to record, however, than An Post's financial performance has continued to improve in 1993. Moveover, an agreement on measures to restore the company to financial health was signed by An Post management, the Communications Workers' Union, the Communications Managers' Union and the Labour Relations Commission last September and implementation of the recovery measures began at the end of October last. I am confident that An Post can achieve the policy set out for it in the partnership programme for Government, namely to provide Irish business and domestic customers with a first class postal services at an affordable price.
Finally, in referring to the areas of telecommunications and postal services. I am pleased that the Minister for Finance has been able to allocate more than £70 million in the budget towards reducing the amount of the Exchequer debt to the superannuation funds of An Post and Telecom Éireann. While there was no question of the pensions of staff of the former Department of Posts and Telegraphs, which have been paid by the companies on behalf of the State being in any way in doubt, this meeting of obligations will no doubt be welcomed by the trustees of the funds.
In conclusion, I want to acknowledge that no budget can be panacea or recipe for all our economic and social ills. What the budget can do is help move the economy in a direction which will enable it to address certain economic and social priority objectives. Our over-riding economic and social problem is unemployment. The measures contained in this budget aim to address the immediate needs of those out of work in terms of income maintenance and by providing increased job opportunities and incentives through an extensive package of personal tax relief, especially for the lower paid. The great bulk of taxpayers will receive substantial tax breaks. Practical support and incentives are also provided for the enterprise sector, and small business in particular. The budget maintains the impetus of recent years for improved infrastructural provision and maintenance. In short, there is a consistent strategy, it is directed towards an objective shared by the whole community and I am confident that it will succeed.
I wish to confirm that 1 o'clock is the time at which I should conclude.
The Deputy has 5 minutes.
I will have great difficulty endeavouring to conclude at 12.55 p.m. but I certainly will conclude by 1 p.m. if that is acceptable to the next speaker from the Opposition.
Acting Chairman
I think co-operation reigns in the House.
Thank you. I am grateful, too, to the Minister for Transport, Energy and Communications for sharing his time with me. I also congratulate him on his excellent contribution and on his ministerial duties to date.
The current budget deficit, at £262 million, represents 0.9 per cent of GNP. When one compares that with the budget deficit from 1993, of £379 million, or 1.4 per cent of GNP, one sees that this represents a clear 35 per cent improvement over last year. While one can appraise or argue the provisions of any budget it must be said that this one, in the matter of bookkeeping, is much better than that of 1993. For example, Exchequer borrowing for capital purposes has also increased by 72 per cent which will certainly create more employment. It must also be pointed out that our total Exchequer borrowing this year is within the requirements of member states of the European Union, at £798 million, representing 2.7 per cent of GNP, whereas last year the latter figure was 2.8 per cent. That is a clear indication that the Government is keeping its budgetary and economic spending under control. As long as this Government continues to do so, people will have confidence in investing here, as will foreign investors.
This year the Minister for Finance had the benefit of the proceeds of the tax amnesty of £230 million and of decreased interest charges on national debt repayments, leaving him in a sound position with £141.6 million credit before announcing his budget and, having announced his budgetary provisions, finishing up with a debit of £261.9 million. The difference between that credit available to him and the debit difference with which he finished amounted to a total of £403.5 million which he put back into circulation, thus maintaining and further improving employment here.
In addition, the Minister raised £175 million in this budget, comprised of £21 million from income tax measures, £48 million on excise duties, a saving of £25 million in estimated departmental balances and a sum of £81 million representing the net effect on tax revenue of tax and spending — current and capital — changes. Again, he put that £175 million back into circulation. Therefore, it is utterly wrong for anybody to claim that the provisions of this budget do not help to maintain and-or increase employment.
I might refer briefly to the social welfare increases, with a general 3 per cent increase in respect of all weekly payments with effect from late July next. The disability and unemployment benefit personal rate is to be increased by 9.7 per cent. In addition the personal rate in respect of disability and unemployment benefit is to be increased by 7 per cent, and there will be an increase of almost 20 per cent for child dependants, old age, retirement and invalidity pensions. Also the personal rate in respect of supplementary welfare allowance and short term unemployment assistance is to be increased by almost 6 per cent and, where a person has an adult dependant, the rate has been increased by almost 5 per cent. Again, it is utterly wrong of anybody to suggest that Fianna Fáil in Government does not look after those on social welfare. I am proud to confirm that my party is looking after those in receipt of social welfare and will continue to do so. Child benefit has been increased from £23 to £25 per month for the fourth and subsequent children and from £20 to £25 for the third child, to take effect from September 1994. It cannot be said that the Minister for Finance did not cater for those in receipt of social welfare benefits. These budgetary provisions mean that at least such people will have more to spend on their families which, in itself, will help trade and commerce.
I welcome the £15 million allocated in the budget for county roads, which will be welcomed by all local authorities. However, this once-off payment, when shared between all local authorities nationwide — and I hope that it will be shared equally — will not resolve the serious condition of our many county secondary roads, laneways and cul-de-sacs This allocation will fill only one in every ten to 20 potholes on such roads. Indeed it is the opinion of many people that the condition of such roads will deteriorate further unless the Government make a realistic, serious effort to give some real help in this area. We must remember that many of our people live on these roads and they believe that the Government is not fully aware of the seriousness of the situation. I appeal to the Taoiseach and the Minister for the Environment, to listen to these people, to begin immediately to devise a national plan to help our local authorities to properly repair these county secondary roads, laneways and cul-de-sacs.
Hear, hear.
It is clear that local authorities are unable to undertake this task from their limited local resources.
Hear, hear.
For example, the allocation of £15 million for this purpose represents a 113 per cent increase on the 1993 allocation, standing at £28.3 million for 1994. This means that each local authority should receive at least double its allocation for 1993. As a result, Meath County Council should receive £400,000 to £450,000 in block grants for expenditure in 1994 on the 1,530 miles of country roads in the county whereas last year we received £200,000. Meath County Council spent an average of £3 million from its own resources over the past five years or so, with little or no visible improvement as far as many people are concerned. Meath County Council, and most other local authorities, with their limited resources, are doing their utmost to repair roads. However, people believe that, if some action is not taken immediately, we will end up with motorways for traffic and muckways for people.
I welcome the changes announced in the capital acquisitions tax which means that farmers will receive 80 per cent relief in respect of the first £300,000 gift value and 30 per cent on the balance. Farmers will also receive relief of 60 per cent on the first £300,000 inheritance value and 30 per cent on the balance. Other farming assets, such as livestock, machinery and so on, will qualify for 25 per cent relief on both gifts and inheritances.
Spouses will be fully exempted from probate tax. It should also be noted that the market value of agricultural land and buildings is to be reduced by 30 per cent for tax purposes, both measures to be retrospective to 18 June 1993. These measures certainly will encourage farmers to plan better for the future.
I welcome the extra £5 million allocated to Teagasc for research and rationalisation and the £2.5 million provided for the early retirement scheme for farmers, the £50,000 allocated to Macra na Feirme on their 50th anniversary, an organisation doing excellent work nationwide. I also welcome the £1 million for the rectification of storm damage, which will help horticultural farmers especially for the major losses they incurred as a result of recent storms.
This budget is pro-enterprise and positive and contains many changes and incentives to encourage business. This budget is the beginning of real reform, with a definite new taxation policy for future years. Its provisions are aimed at helping small businesses, with the less well off being given special attention, with somewhat more to spend on their families. This budget entails more spending which is bound to help trade, commence and alleviate unemployment. In addition, its provisions acknowledge the various organisations undertaking excellent work to improve social structures and sporting activities nationwide. I am confident that these budgetary provisions will improve the prospects of many in gaining employment. We must move tax from productive development and ensure greater control of public expenditure.
I wish to share my time with Deputy Bradford.
Acting Chairman
Is that agreed? Agreed. The Deputies have until 1.20 p.m.
With the benefit of hindsight my generous decision to share my time with Deputy Hilliard would appear to have been irresponsible and reckless in that he used his time trying to convince the nation, parents in particular, that an increase of £5 per month for the third and subsequent children, for children's allowance purposes, would generate economic activity throughout the community. I wonder what it takes to stand up and state seriously that an increase of £5 per month in the children's allowance for the third and subsequent children is of such advantage that it will end the terrible problems that people on social welfare have in trying to provide for their children. According to Deputy Hilliard it will generate economic activity. Let us wait and see.
Last week's budget won first prize for boredom. The level of boredom generated was evident on Wednesday last when the Minister for Finance formally confirmed the details that were already given to the nation on "Morning Ireland" and to the media in general in the run up to budget day. The only contest to the boredom we experienced on budget day was during the contribution by the Minister for Transport, Energy and Communications, Deputy Cowen, who almost roused the House from its slumber when he asked how much time he had left. Indeed, that is evidence of the boredom he experienced during the delivery of his rigmarole.
Sadly, the glamour, the intrigue, the uncertainty and the curiosity of budget day is now a thing of the past. The gallery is no longer crowded with eager and tense speculators wondering what the day might bring. Even the journalists have their headlines ready before the Minister for Finance stands up to speak. This is due, of course, to the fact that this is a media driven Government which is intoxicated with public image. It reveals and unveils all the crucial budget elements well in advance of budget day so as to keep on the right side of the one power to which it is a slave, the media.
We expect the budget to be dull, bland and unimaginative. The record of Fianna Fáil in Government is that it continues to tinker around rather than make radical changes which would require not only courage and imagination but more importantly clear vision of where one is going and what one wants to achieve. Sadly, this Government has neither of those two elements. The budget showed it had no positive idea or aspiration as to what it wanted to achieve for the country and for the people. It does not know where it wants to go. We listened to speakers dwell on the positive elements of the budget. What are they? The abolition of the 1 per cent levy is welcome but, in effect, the Government is undoing the damage caused by the introduction of this blatantly unjust and unfair tax last year. We on this side of the House protested strongly and urged the Government to reconsider this measure but it refused. Today, the Tánaiste tried to convince us that this tax was being removed because it was only a temporary measure but the dogs in the street know the trade unions forced the Minister for Finance to abolish the 1 per cent levy. They refused to start negotiations on a new programme for economic and social progress until it was abolished. The reality is that but for the trade unions the 1 per cent levy would still be in place.
The most appalling trend of the Government is its obvious attack on widows. For two successive years Fianna Fáil and Labour have singled out widows as a means of raising revenue. This is a brutal assault on women who need and deserve support at this very crucial period. In the 1993 budget, the Fianna Fáil and Labour Government introduced a probate tax, which was mainly a tax on widows. Last year I pointed out in my budget speech that I considered it antiwidow and orphan, in fact anti-woman. It is obvious that by its very nature the probate tax is generally payable by women who inherit land or property on the death of a spouse or partner. It penalises women at a most vulnerable period in their lives, a time of grief and despair. Its harshness was further deepened by the regulation that it had to be paid within nine months of death or interest at the rate of 15 per cent would be added. This ignored the ability to pay and, worse still, it ignored the contribution that women made by their work in the home or by their earnings.
I welcome the Government's conversion to our belief that probate tax is and always will be a tax on death, a tax on people who can least afford to pay it. This is another example of the Government's ill-considered measures. I congratulate the ICA and the farming organisations who carried on a massive campaign to make the Government see the reality of the probate tax. While I welcome the step taken in the budget, nevertheless the probate tax must be abolished, and the sooner the better. We must not pursue a tax on death. Now that the probate tax has been abolished for widows, let me remind the Government that it cannot ignore the anguish and despair of widows over the past 12 months. Nothing will compensate them for the agony caused by the unfair and unjust probate tax.
The budget brought no comfort for widows. The partnership Government of Labour and Fianna Fáil is determined to make widows pay and again singled them out for harsh treatment by introducing a means test for the contributory widow's pension. This is disgraceful and will be fought tooth and nail by this party until it is changed. It is an insult to people who contributed all their lives to prepare for a time which they hoped would never arrive but ultimately does when their partner dies, but it is absolutely appalling that any Government should try to cash in on widows. It is despicable and will not be accepted. Does any Member believe that this measure is fair or justified? Widows and widowers have been ignored in our tax laws and the additional expense imposed on them by the fact they have lost a partner is being ignored. Is the Government not on its heels when it turns such a cruel hand on widows and widowers? How can the Minister for Finance justify his belief that the demands and the burdens of widowhood only lasts 12 months? The Government will and should be judged on its determination to proceed with this measure.
The Labour Party has no interest in the marginalised in our society. The Labour Party, with Fianna Fáil, has singled out-widows for punitive taxation in two budgets. The Fine Gael Party is determined to fight to the bitter end in the interest of those people.
The Labour Party does not want to be reminded of its promises on property tax, VHI and mortgage interest relief. Yet it is wise to remind its members again of their party's election manifesto. I wish to quote the following from the Irish Independent of 25 November 1992:
Labour has no plans to introduce a new property or house tax.
Labour will not reduce mortgage interest relief.
Labour will not reduce VHI tax relief.
I consider it extraordinary that the Tánaiste and Minister for Foreign Affairs, Deputy Spring, in trying to justify his change of mind and his lies and deceit to the electorate pointed out in the House that other Deputies have changed their minds in relation to the European elections. In other words, if others can tell lies so can he.
I would like to point out to Deputy Spring that his deceit is costing taxpayers money and taking money out of their pockets.
Acting Chairman
I ask the Deputy to withdraw the allegation that Deputy Spring has told lies. That language is slightly unparliamentary. I ask the Deputy to reconsider the use of the word "lies".
He misled the public. He fooled the public. I will always agree to change my language but unfortunately I cannot change the facts and that is the most serious part of the case. The people are paying for the fact that he misled them. Labour stated that it would not introduce property tax; would not reduce VHI relief and would not reduce mortgage interest relief. That is what Deputy Spring said; he misled the public, he fooled them. This is costing people money.
These measures are anti family, the people who are prepared to go to work, the people prepared to be self-reliant, those who want to be independent and buy their own house and those who do not want to be dependent on the State for their medical expenses and who want to work. Those measures are regressive and show no compassion and understanding of the burden on people to meet their mortgage repayments. Ultimately, they will deter people from making the decision to buy their own home and we will have a longer waiting list for local authority houses.
In regard to VHI it is important that as many people as possible try to pay their own medical expenses. If they do, relief should be available to them. We are deterring people from being independent and self-reliant. Obviously, this is Labour Party policy. It is now against the worker, that is news to us and certainly to the worker. Labour in Government is anti-worker but at election time it is pro worker, pro unemployed — pro everybody.
This budget is a clear statement of contradiction and lack of consistency with Labour Party policy before the election and Labour Party action in Government. I hope the electorate will not forget that, because the budget has done immense damage to those who are working and trying to be self-reliant.
The budget failed to produce a comprehensive integrated programme to tackle the exclusion experienced by the marginalised in society. The end result will be a widening of the gap between the better off and the poor, whether they are on social welfare or in low paid jobs. The vast majority of people living in poverty before this budget will, sadly, still live in poverty when all its provisions are implemented.
If I examine the budget from my own constituency point of view I see no hope. I welcome the extension of the urban renewal programme announced in the budget but, unfortunately, it is a disappointment to the towns of Cahir, Cashel, Tipperary and Carrick-on-Suir — all of which were excluded from the new list of 12 small towns designated. I wish to remind the Government of the alarming unemployment level in south Tipperary. These towns would have benefited if they had been selected for designation. I am sad that south Tipperary has been ignored by the Government. No Government Department has been decentralised to south Tipperary and we have lost out hopelessly in attracting new industry. In the budget we were sacrificed yet again in that there was no mention of those towns for an extension of the urban renewal programme.
A budget hardly goes by without an attack on the cider industry, and industry, crucial to the economic life of south Tipperary where, in Clonmel, 450 people are employed. I had hoped that their competitive position would have been levelled out in this budget because the VAT increase in last year's budget put them at a serious disadvantage where they were trying to compete with other industries. This budget did nothing for them, it increased the price of cider by 3 per cent and left them — as they were before the budget — at a competitive disadvantage.
This budget has failed the people. We have the highest emigration rate in Europe, the second highest rate of unemployment, the highest dependency ratio, one of the youngest and growing populations in Europe but we have no jobs for them. We have the best educated students but we have no opportunities for them. This budget was a lost opportunity and I regret it did not make use of the resources it had for the benefit of the marginalised and the unemployed.
I presume I have about ten minutes at my disposal.
Acting Chairman
We will allow some flexibility.
You are very kind. I would like to take up where Deputy Ahearn left off in relation to the lost opportunities. During his budget speech last week, the Minister made the point that it was a budget for jobs. Since then Government speaker after Government speaker strongly reinforced the argument that this is a budget for jobs, as we also heard 12 months ago. Now we have fewer jobs and more unemployment.
This is a budget for schemes rather than for jobs. Certainly there will be many new schemes and much tinkering with old schemes. Perhaps there will be jobs in the administration of these new schemes but how many jobs will be created for the unemployed? That will be the test of the budget. When we return here in 12 months time for the 1995 budget how many extra people will be in permanent employment? I welcome any attempt to create new jobs even if it is part of the system of new schemes. I support the view of the Minister for Enterprise and Employment that up to 1,000 people should be taken on, on a trial basis, under the proposals put forward by the Conference of Major Religious Superiors. I hope this will be a pointer in a new direction. Because the Minister was willing to go down that road I had hoped he would also have given consideration to the proposals which have been before his Department and the Department of Social Welfare for the past ten years. Those proposals from Cork County Council simply request — it is a very reasonable and commonsense request — that moneys be transferred from the Department of Social Welfare to allow the employment of extra road-workers by Cork County Council. At a time when our roads are in a state of disrepair, when unemployment figures are higher than ever the transfer of moneys from the Department of Social Welfare to the Department of Enterprise and Employment would solve two problems by creating jobs and filling our potholes. While the Minister is willing to examine some schemes I ask him to examine the scheme from Cork County Council.
This is an ideological budget. This time last year we debated the 1993 budget in the aftermath of the general election. People on this side of the House made the point that the Labour Party had sold out and it was entering Government for Government's sake. Unfortunately, we all forgot that the flexibility of the Fianna Fáil Party and its willingness at all times to grasp power for power's sake, to use power and to hold it, would be a Godsend to the Labour Party. The 1994 budget proved to be an ideological victory for the Labour Party. It appears that the economic driving force behind this budget comes from the Labour Party.
I apologise to it for suggesting that 12 months ago its input to Government policy would be mainly about social programmes such as the divorce referendum and, dare I say, the Matrimonial Home Bill. As far as I can see the Labour Party has done much better in that it has taken over the leading economic role of Government and put its socialist stamp on the Government. I disagree with that analysis but I concede it is a Labour budget. Of course, thare will be costs to the country from this Labour budget because it has created a clear political and economic divide. Frequently, many of us have to contend with the argument put forward by commentators and others that there is no difference in the political parties and that one Government is the same as the next. This budget disproves that theory because it lays the foundation for a clear political and economic divide between the Government parties and the majority of the Opposition parties.
The Government is in favour of more taxation, more spending and more bureaucracy whereas the vast majority of Opposition Deputies want to reduce bureaucracy, to promote enterprise and employment, self-sufficiency and home ownership. We want to advocate rather than condemn profits so that at the end of the day we will have more jobs.
The budget is a severe attack on the middle classs. It is an attack on the people who pay their way, who do not have medical cards, who do not get education grants, rent relief for local authority housing. This is a severe attack on hundreds of thousands of our citizens. The budget is a product of those who speak platitudes about low paid and unemployed people but whose only solution is pathetic tax reform for those in low paid jobs and small social welfare increases for those who are unemployed. Fine Gael say that the only answer to low pay and unemployment is to introduce real projobs changes in the tax system and social welfare code. Deputy Ahearn referred to those in the poverty trap and the budget certainly has not let them out. At the end of the day, as acknowledged in the response of the Conference of Major Religious Superiors, we have been given more of the same. This budget will provide some short term solutions but it is not a pro-jobs budget.
There are some features of the budget which I wholeheartedly welcome. I congratulate the Minister for allowing an extension of the urban renewal scheme to take in part of Mallow town. This will be a welcome boost to Mallow and it is something which Mallow Urban District Council and local politicians advocated for some time.
The Tánaiste referred this morning to the increase in the provision for local authority housing. There has been an increase but it has been an increase from a very low base. One hundred per cent of nothing is still nothing. Other measures will have to be taken to tackle the housing crisis. I had hoped for an announcement of an increase in the new house grant. A £5,000 new house grant would be almost self-financing because it would take a number of people over the threshold and enable them to build or purchase a new house rather than depend on the local authority. I had also hoped for an announcement in relation to house improvement grants. The basic fabric of houses in many rural constituencies is very poor and people will be forced to apply for council housing unless their accommodation can be improved. Even if the house improvement grants scheme was reintroduced on a means test basis it would help to take people off the council housing lists. It would make far better sense to give an improvement grant of even £10,000 than to have to provide a local authority house which could cost the State £30,000 to £40,000.
I welcome the allocation of an extra £15 million for the country roads network. Speakers at local authority meetings continuously decry the condition of county roads which have never been worse. As one speaker said, we have highways, roundabouts and by-passes, but our byways are fast deteriorating. The allocation in not sufficient but it is a step in the right direction.
With regard to agriculture I welcome the change in the probate tax although the change only corrects a problem which the Government created last year. Probate tax in itself is unfair. It is designed to put a severe burden on families at a time of bereavement. It is immoral and it should be withdrawn.
I welcome the changes in the capital acquisitions tax but as far as young farmers are concerned the changes are not enough. If we want to transfer land to the younger generation, retirement pensions are a help but capital acquisitions tax and inheritance tax are a hindrance and we need to make more changes. The farm installation grant paid here is one of the lowest in the EU. EU regulations allow for an increase in the grant. I hope the Government will sanction such an increase as it would pay for itself.
I thank my colleagues opposite for giving me extra time to heap more criticism on them although I welcomed some features of the budget. I hope to take up this debate again on the Finance Bill.
I am pleased to have an opportunity to contribute before we adjourn. The Opposition Deputies should look to their own manifestos in relation to the types of tax now in place, some of which the Opposition were responsible for. Personal taxation has been reduced to 27 per cent and 48 per cent from 38 per cent and 65 per cent when the Opposition Parties were in Government.
In assessing the budget we must look to the conditions that prevailed last year. We had extremely high interest rates, speculation against the IR£ and a general lack of confidence in the economy. We now have historically low interest rates, the lowest inflation rate for 30 years and there is confidence in the Government and in the economy, giving rise to a general mood of prosperity due to the measures adopted by this Government. The budget should not be assessed in isolation but as part of the Government's overall plan to set the economy on a sound footing. The primary focus of the budget is undoubtedly job creation and to help the less well off in our society. The Minister has succeeded in tackling the problem of low pay.
Debate adjourned.
Sitting suspended at 1.30 p.m. and resumed at 2.30 p.m.