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Dáil Éireann debate -
Wednesday, 9 Feb 1994

Vol. 438 No. 5

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.)

Deputy Richard Bruton is in possession and he has some 15 minutes left of the time available to him.

It would be most appropriate to start with a quotation from the Minister for Finance in his budget speech. When referring to last year's budget he said:

It is a second, major, step in the implementation of the strategy for economic and employment growth which lies at the heart of the Programme for a Partnership Government.

We would have to classify the Minister for Finance as the great Don Quixote of economic reform. He is great at casting aside his crumpled armour, donning his golden shirt and expressing his wild ambitions to attack every windmill. When it comes down to real change that can produce economic progress his effort is sorely wanting. He has no problem in expressing his ambition. If one refers to last year's budget one will see evidence of that. He announced, with great flourish, that we would have a jobs fund. This was to be a multi million pound fund to carve out a new direction for economic progress and job creation. We have not heard one word since the 1993 budget about that jobs fund. It vanished into thin air like the mists on a spring morning.

Equally, we heard the Minister promise in his budget speech that 9,000 extra jobs would be created in the building and construction industry during 1993 as a result of the Governments new leap forward of economic investment. A Cheann Comhairle, you will know what happened to the building and construction industry in 1993. That industry suffered the most severe decline in several years and lost 6,000 jobs. In 1993 the Government collected from the taxpayer an extra £950 million, in the name of its employment strategy, and received from the European Union in excess of £1,000 million to fuel a so-called economic leap forward. Instead we had a dismal performance from the Irish economy in 1993.

The Minister likes to pride himself on his ambition to reform our tax code, but let us look at his efforts to date. The 1 per cent income levy was the most anomalous tax ever imposed in this country. Thanks to the efforts of the trade union movement and the Opposition parties we succeeded in getting the Minister to withdraw that tax. The 2 per cent probate tax, introduced last year, extended to unemployed families who would inherit their parents home. They were expected to pay perhaps £1,000 for their inheritance. How can an unemployed family pay that amount of money? This was a dismal tax and I am glad the Minister has started the process of dismantling it. His third great innovation was the imposition of the 10 per cent DIRT tax on deposit accounts. This year he makes great virtue of the need to shift economic resources away from safe havens of investment into job creation and forgets about the 10 per cent DIRT tax. He reserved the lowest tax rates for people who take no risks, who sit on investment accounts, while people struggling to create employment in the service sector bear 40 per cent tax on their profits, 21 per cent VAT on produce sold to consumers and 21 per cent PRSI on the workers they employ. The reality is that many service employers are just glorified revenue collectors. For every pound spend in a typical shop in the service sector the Government takes 60p, and there is little left to keep either the business or the worker in operation.

The Minister, who boasts that he is protecting the interests of Dublin, is presiding over a situation where not only do we have this insidious residential property tax but a decision that 4,000 jobs should be taken out of Dublin and transferred to other parts of the country, despite the fact that unemployment in Dublin is now higher than in the rest of the country. The Government has presided over a 30 per cent decline in Dublin's industrial base. That is the reality of what it is to live and work in Dublin.

I heard the Minister say this morning that the residential property tax reforms would be made more fair and that there is no question of this being the thin edge of the wedge. I would like to quote what the Minister for Finance said on 29 January 1992 — Official Report, column 371 — when he lowered the thresholds:

The thresholds will be indexed in future years in the usual manner... The new levels of these thresholds will continue to ensure that only those properties which are at the upper end of the property market will be subject to the tax.

How hollow those words were in the budget of 1992. The Minister is trying to tell the public today that although he misled them in 1992 he now means what he says. He is a great bed convert, claiming he will not sin again. The record speaks for itself. The promise in today's newspapers was made previously and it proved hollow.

I do not need to rehearse the inequities of the residential property tax. I ask the Taoiseach to listen to his own councillors in Dublin Corporation who would be more eloquent than I on the inequity of taking account of the mortgage on that property, the inequity of totting up all household incomes regardless of whether those people can contribute to the tax, the inequity of Dublin's much higher house property values. Even ordinary families will soon be in that margin. The talk about indexing in future years and ironing out anomalies was hollow and the imposition of the 1 per cent levy was a serious blunder. Let us go back to the drawing board and correct them.

I wish to turn to the more serious issue of employment in this economy. It is important to review what happened during the course of the last national plan and the Programme for Economic and Social Progress, because later this week the Taoiseach will publish ambitious plans to illustrate how partnership will create the leap forward, how things will be transformed and how we will have EU money and things will never be the same. We shall hear once again that this Government is committed to employment. During the last national plan unemployment grew by 81,000, emigration, according to the Taoiseach's figures, increased by 98,000, 90,000 of whom were young people under the age of 25. Long-term unemployment grew by 40,000 to an astonishing figure of 150,000 people, who have been out of work for more than a year and whose prospects for finding work is grim. This occurred at a time when Ireland enjoyed the highest rate of economic growth in Europe and transfers of £1 billion per year from European funds. Those transfers amounted to 11 per cent, cumulative, of GNP for the years 1989 to 1993.

We achieved economic growth because we got transfers from Europe, but it is clear that Government policy proved incapable of transforming these transfers into real jobs growth. The only thing that grew during the period of the national plan was Government spending which grew in excess of consumer prices by 5 per cent per year. There was a relentless growth in spending but it did not trickle down to the unemployed or create new employment opportunities. During the course of the national plan new industrial start-ups which were a core strategy of the plan, fell by 50 per cent as a direct consequence of the taxation policies pursued by the Government throughout that period.

The Government continued its emphasis on foreign industry. The amount of grant-aid during the period of the national plan available to a foreign industry meant that a foreign industry creating a job received 66 per cent more to create that job than an Irish firm. What sort of strategy was that? The policy was pursued in the name of national consensus and national partnership. What has six years of consensus produced for the unemployed? It has produced nothing, and any fair assessment would agree.

There is a strange lethargy that condones the failure of the last national plan as if it was inevitable. Because no one else is doing any better, we should not blame the Government which is doing its best. Will the Taoiseach read a document called Employment in Europe, 1993, which shows Ireland's employment performance at the very bottom of the scale? Every other country is performing ahead of Ireland. That is the most recent document on employment in Europe. We received the lion's share of Structural and Cohesion Funds to transform our performance but we sank to the bottom of the league. The Taoiseach must re-examine the policies being pursued.

Unemployment is concentrated among young people here. There are currently 84,000 unemployed people under the age of 25. The rate is twice that of the rest of the population. The number of children who left school without a qualification grew by 36 per cent and these children experience 62 per cent unemployment. What kind of blot on our record is that? This is the rate of unemployment among young people after 90,000 of them left the country during the course of the last national plan.

We will hear ample talk from the Government about our high growth rate, our great balance of payments surplus, our low borrowing and our low inflation but behind these aggregates are the grim realities of economic life, unemployment, emigration, a decline in new business start-ups and districts of chronic disadvantage, particularly in the city of Dublin. The inescapable conclusion is that our policies have failed to convert growth in output and wealth into economic growth that creates jobs. I earnestly request the Taoiseach to look again at the serious flaws in the policies being pursued, the very inadequate response to the Culliton report which called for an end to the grant culture and a rationalisation of our industrial schemes. The Taoiseach has given us 36 new grant-giving, form-filling bodies but this is not the way to deal with the serious challenge of creating employment in our economy.

On the county enterprise boards structure, it has long been said here that we should have a bottoms-up approach and give local initiative and ideas an opportunity so that people could make decisions on the ground. It is a new idea worth trying. It cannot but add more local involvement and community involvement.

It is the same old stable — grant-giving, form-filling bodies.

Deputy Bruton had his say devoid of interruption. Let us hear the Taoiseach now without interruption.

The budget this year was first and foremost about jobs. In fact, it is more employment-orientated and pro-enterprise than any previous budget. There are an unprecedented 20 or more measures, designed to promote or support employment.

The budget had three interconnected aims: to boost economic activity and employment creation; to begin in earnest a new phase of tax reform and to continue the development of an enlightened and caring social policy.

We anticipate that the budget will boost economic activity and contribute to the creation of a net 21,000 new jobs in 1994, the largest increase in employment since 1989-90. Since 1987 net employment increased by 56,000. In putting 21,000 more people to work, we will not just have reserved the employment decline of the mid-1980s, we will have more people at work than at any time since the early 1950s. The end-January figures, which show a large seasonally adjusted decrease on the live register of over 6,000, are the best in years. Improving trends are beginning to assert themselves.

This is an ambitious and progressive budget. While most European countries have had to raise taxation to counter budget deficits, far above the Maastricht guidelines, we are virtually the only country to have stayed within the guidelines, while at the same time reducing taxes.

Good economic and Financial management made an imaginative and innovative budget possible in 1994. We are now able to translate our healthy economic data simultaneously into more jobs, better services and lower taxation, as well as a continuing decline in the debt burden.

The Exchequer borrowing requirement continues to be under 3 per cent. The current budget deficit, once a major problem, will in 1994 be under 1 per cent of GNP. The debt-GNP ratio was reduced from 127 per cent of GNP in 1986 to 100 per cent in 1992. Devaluation caused a slight blip in the downward trend, which will resume this year.

Ridiculous accusations have been made that the Government is embarked upon a policy of "tax and spend". Total Government expenditure was 52 per cent of GNP in 1986. Public expenditure in 1994 remains more than 10 per cent lower of GNP, around 41 per cent, recent EC figures show that Ireland now has the lowest public expenditure as a percentage of GDP in the Union — so much for the allegation of higher and higher expenditure.

The increase in current expenditure has, in fact, been on a declining trend since the Progressive Democrats resigned from office. Current spending increased by 7.8 per cent in 1991, by 8 per cent in 1992, but under this Government increased by 7.3 per cent in 1993 and by 5.6 per cent in 1994, taking the public service pay deal just agreed into account. The underlying trend has been set in train by this partnership Government. The underlying position is even better, because that increase includes once-off expenditure resulting from the tax amnesty. Opposition parties who believe we should cut expenditure faster might indicate their choices for cuts in services in health, education or social welfare.

We have always aimed to spend less on unproductive debt servicing and more on worthwhile public services. This shift is now occurring. We have every intention of maintaining Government expenditure very well under control.

Taxation was crushing during the mid-1980s, with a 1 per cent income levy, a 65 per cent top rate of tax, and a 35 per cent standard rate of VAT. The Border regions were crucified by lack of competitiveness. We were very careful in this budget to keep indirect tax increase at a modest level, to prevent a recurrence. One of the key components in public expenditure is public service pay. Failure to control public service pay was one of the principal causes of budget over runs in the past.

The pay increases of around 8 per cent under the new programme over three years are comparable to the 7.5 per cent agreed under the Programme for National Recovery, rather than the 10.75 per cent under the Programme for Economic and Social Progress. We have capped the additional cost of any outstanding claims and those arising from the Programme for Economic and Social Progress, at 3 per cent over three and a half years. The era of large special pay increases is over.

The budget helps to underlin the new programme, by ensuring that employees gain real wage increases, when nominal wage increases and tax reductions are combined. I congratulate all the social partners on their achievement in reaching a draft agreement. It reflects a shared conviction that this is the path to improved competitiveness, industrial peace and stability and balanced economic and social progress. Social partnership is a better way of managing our affairs, despite right-wing criticisms from people who dislike national programmes because of an antipathy to trade unions. The central aim of the new programme is to increase the number of people at work and to reduce unemployment. An important contribution to the programme came from the National Economic and Social Forum, which includes representatives of the unemployed.

The tax changes in the budget, which benefit low and middle income taxpayers, resume the process which I started in 1989 of reducing tax levels. Our tax policy will alleviate the burden on workers with low incomes particularly those with families, and will raise the threshold for the higher rate. The increase in personal allowances is the largest in ten years. The standard tax band has been increased by nearly 7 per cent, far beyond indexation Those on lower incomes will benefit by exemption from health and employment levies amounting to 2.25 per cent. This April, employees on less than £9,000 a year will notice a significant improvement in take-home pay.

Higher income groups will benefit from the abolition of the 1 per cent levy and from the personal allowance and band changes. We said the 1 per cent levy was temporary and we demonstrated it when circumstances improved. It is easy to claim now that last year's levy was not necessary. Ireland has an oversupply of hindsighted decision-makers. The 1993 budget triggered a huge fall in interest rates. The mortgage rate today is only about half what it was a year ago. Overall, most taxpayers with mortgage gain substantially.

We continued to recognise the needs of first-time house buyers, giving them 100 per cent mortgage interest relief for the first five years and exempting them from the de minimis reduction. We also maintained the higher ceiling of £5,000 for a married couple.

The residential property tax was introduced over ten years ago by a Fine Gael Minister for Finance, Deputy Dukes. In 1986, he abolished the tax allowance for children. I reinstated it in 1990. Who, then, was anti-family? Where does the cap fit best? In the late 1980s, Fianna Fáil recognised that the tax had a certain usefulness in dampening down inflationary pressures at the upper end of the property market, pressures which led to deep recession in the British economy.

Higher income taxpayers stand to gain substantially from the budget changes taken as a whole. Marginal relief on incomes up to £30,000, as well as child relief, will go some way towards mitigating the impact of the new thresholds for residential property tax on most taxpayers. The Government is prepared in the Finance Bill to look at possible anomalies in the extension of the tax that may arise in particular circumstances, as the Minister for Finance said yesterday.

This Government will not reintroduce rates, which were found unconstitutional and iniquitous, and will continue to encourage the widest possible level of home ownership. The reaction from the Opposition parties to the budget show that they have no serious commitment to tax reform. Fine Gael's election manifesto states that in Government they "will immediately go ahead with their comprehensive programme of action", set out in Towards the Jobs Economy in May 1992 which states on page 15:

Tax cuts in work and enterprise will have to be funded... Among the areas, we shall be examining to fund this switch are... to raise more revenue from property taxes, and to define more strictly the terms on which tax allowances are granted.

That last phrase means, in other words, curtailment of mortgage interest relief and VHI relief.

Fine Gael planned in Government to raise more revenue from property taxes. What could that mean? Does it mean a revival of the wealth tax, which exempted the family home or are they now saying that property tax does not include tax on household property; more inheritance tax on family farms and businesses; a land tax on farmers; a lot more from residential property tax or do Fine Gael intend to introduce a general property tax on all householders? Logically, it must have been not just one but many of those things. It is a fair bet that Fine Gael's proposals involved raising a great deal more than the extra £5 million this year from the residential property tax. My advice to Fine Gael is not to try to fool all the people all the time.

The distasteful public spectacle of the main Opposition party enbracing a special interest group outside Leinster House, trying to whip up public resistance, runs directly counter to the political testment of former Taoiseach, Dr. Garret FitzGerald. In his last speech as Taoiseach, delivered in this House on 19 December 1986, he warned that there needed to be a concerned stand against the demands of interest groups who played the parties in this House off against each other and who have promoted distortions in the tax code. He said as reported at columns 3843-44, volume 370, of the Official Report:

If one party, through its leader or through a Front Bench representative, gives a particular group reason to believe that their claim for special benefits at the cost of the taxpayer will be met if only the group put their organised strength behind the party in question, then not alone is the public interest put in grave jeopardy, but our democracy is itself devalued.... We all know that it is wrong, desperately wrong to succumb to the kind of pressures that I have referred to. As Leader of Fine Gael, I pledge my party to hold fast on these issues.

Did Fine Gael hold fast to that pledge? No, it did not. Regrettably, it is prepared to let democracy be devalued in the interest of short term political expediency.

Deputy Harney stated on television last week that the Progressive Democrats had never advocated a property tax. Yet, its 1988 policy document "Employment, Enterprise and Tax Reform" advocated the vital elimination of mortgage interest relief, leaving a miserable credit of £300 for a married taxpayer. It also proposed to introduce a poll tax or local community charge on every household, other than those on social welfare. It aimed to raise £125 million, or more than eight times what we expect to raise from the increase in residential property tax.

During the review of the Programme for Government the Progressive Democrats produced another document looking for "the radical elimination of tax reliefs and allowances", the abolition of the PRSI ceiling for employers and employees, which, by itself, would have a negative impact on middle class incomes, and the abolition of the PRSI allowance with the overall objective of reducing the top tax rate to 44 per cent. It rings hollow for the Progressive Democrats to oppose any increase in the PRSI ceiling, when it wanted the ceiling abolished.

Deputy McDowell once said the Progressive Democrats has to be radical or redundant. It has obviously opted for redundancy. A party that once claimed to be policy driven is now reduced to policy incoherence. Its leader's claim that 40 per cent of households in Dublin have an income in excess of £25,000 and a house worth more than £75,000 is an example of such incoherence. There are no statistics to back up this silly claim, made only to frighten people.

It was extraordinary to listen to Deputy Rabbitte attack the extension of the residential property tax. There used to be an old socialist saying that "property is theft". Now, as a new middle class revisionism takes over Democratic Left, it is a tax on property that is theft.

This budget is a further instalment in tax reform, not the first step. The introduction of self-assessment in the late 1980s was a major and very successful reform of the tax system, as was the reduction in excessively high tax rates when I was Minister for Finance.

Our policy is to combine tax reform with an overall reduction of the tax burden. A KPMG-SKC study published in the Sunday Business Post ten days ago showed that the tax on take-home income of a married person with three children and a salary of £40,000 a year has dropped from 38 per cent of income in 1986-87 to 32 per cent in 1993-94. If that represents increased taxation or war on the middle classes, I am sure they would like more and more of it.

The Culliton and Moriarty reports and the Task Force on Services stressed that the priority must be to build up indigenous industry and small businesses, now the main source of new employment in Europe and America. Business start-up rates are low in Ireland. The budget, above all else, creates a better climate for small business.

We reduced employers' PRSI to 9 per cent for those earning less than £173 per week. This will help labour intensive industries, such as clothing and footwear, and numerous small commercial services. We are reducing the cost of finance to small business. Providing £100 million of cheap European loans to business, at 3 per cent below the market rates, is a key measure. We are alleviating VAT obligations on small firms through a substantial raising of the VAT threshold, and also through an easing of procedures. We have raised the company value ceiling for BES relief for an enterpreneur's investment in his or her company. We are reducing capital gains tax on shares in unquoted companies, from 40 per cent to 27 per cent for shares held for five years. We are increasing capital allowances for cars to a more realistic level. This will also give new confidence to the motor trade, a big employer. We are improving the annual capital allowances for hotels to encourage tourism, a labour intensive industry. We have eased the capital tax situation for family transfers of small businesses, and exempted spouses from probate tax. We have made it more attractive to work in the family business, by extending the PAYE allowance to the children of proprietary directors and the self-employed. We provided £100 million from the amnesty to pay off health board debts. This will help solve the problem of late payments seriously affecting many small businesses.

They are just ten ways in which the budget is helping business and jobs. The Finance Bill will do more.

The extra £15 million provided for county roads increases the total grant for their upkeep and improvement by a massive 36 per cent from £75 million in 1993 to £102 million in 1994.

Construction will benefit, through the 9 per cent increase in the Public Capital Programme affecting the industry. The budget added an extra £29 million, including large projects at Dublin Castle, and Collins Barracks. Lower interest rates and the pick-up in economic activity will also help construction.

We are deeply committed to urban renewal. It has vastly improved our towns and cities, as well as stimulating new business. A further 12 towns are now included. A new scheme in August will include a more targeted approach in our main cities, and accelerated allowances for industrial buildings, to promote inner city employment. We are doubling the allowance for refurbishment work. There is also an incentive to encourage people to live over business premises. These measures represents part of a larger move over recent years to more enlightened planning policies.

The budget benefits farmers also. They have already enjoyed a 37 per cent income increase over the past two years. We have greatly eased probate tax and capital acquisitions tax, so that most family farms being handed on will incur no major tax liability.

We are speeding up the payments of premia, an increasingly important part of farm income under CAP reform. Those who employ workers on their farms will benefit from a reduction in PRSI. Family members employed will now receive the PAYE allowance. We are bringing a range of EU-backed schemes into effect such as early retirement, the installation aid, the agri-environment scheme, and improved forestry incentives. Under the new national programme we are providing improved capital allowances for all farm buildings and additional funding for headage payments in disadvantaged areas.

The budget complements measures in the National Development Plan aimed at unemployment. It promotes the expansion of small indigenous enterprises and provides additional education, training and work experience for the unemployed to facilitate their ultimate re-integration into employment.

Given better economic conditions foreseen for 1995 and thereafter we should be able to achieve under the new programme a net increase in employment of 20,000 a year. We are also stepping up community employment, FÁS training and other vocational schemes from 56,000 to 71,000 this year and to 100,000 a year by the end of the programme.

A feature of unemployment everywhere is that the number of long term unemployed does not decrease significantly, even in times of economic growth. This reflects a combination of poor educational attainment and length of time out of the workforce. People feeling that they might be less well off moving from welfare to employment or to training opportunity is also a factor.

Community employment is a major feature of our drive to tackle unemployment, particularly long term unemployment. It builds on the experience of the social employment scheme, Teamwork and the community employment development programme operating in the Programme for Economic and Social Progress partnership areas. Community employment will apply nationwide and will include up to 40,000 participants by the end of the year. It incorporates on-the-job training and own-time training. In certain cases participants may be re-engaged by sponsors for periods in excess of one year. It targets the older long term unemployed, with 25 per cent of places reserved for those over 45 and unemployed for three years or more. All participants retain their secondary and other benefits.

We can no longer sustain a situation where a large section of the population is not able to contribute productively to the community and are being relegated to the margin and to the end of the queue. Community employment gives people the opportunity to use and develop existing skills and restores a sense of pride in being part of the workforce again. It should be the first step in a progression to better education, improved skills through training, to an end result of sustainable jobs or self-employment. The budget provides for additional places in education and training.

This is not a "make work" programme. Many laudable voluntary groups have operated SES, CEDP and Teamwork schemes with great benefit to participants and to communities served by these organisations. There are many good projects waiting to be undertaken, including environmental, heritage, cultural and tourist improvements, and many badly needed improvements in all our local authority areas. Community employment will have a particular focus on disadvantaged areas designated under the local development programme of the national plan. It will serve as a building block in the re-integration of the unemployed into a more productive life in the community.

A distinctive feature of the Programme for Economic and Social Progress was a focus on an area-based response to long term unemployment. In Tallaght, in April 1992, I stated my own commitment to this approach. Ensuring that everyone is able to participate in the benefits of economic growth is now a core element of the national plan.

I am happy to announce that another element of the local development programme has now been put in place with the designation by the Government of areas to be targeted under the programme. Tackling long term unemployment and disadvantage will happen through a concerted effort to bring about local socio-economic development. The focus of each partnership is on local action to meet area needs by using the full range of services and incentives for employment, education, training, and economic development. Twelve areas were chosen under the Programme for Economic and Social Progress pilot initiative and, based on very satisfactory experience, the Government has now decided to expand the area-based approach to the pivotal element of the local development programme.

In designating the areas, the Government focused on coherent areas characterised by long term unemployment, under-employment and social exclusion. The Government took careful note of the views of the National Economic and Social Forum. Given differing circumstances, there will be a greater variety in the size of partnership and range of activities to be provided, and in the rate of progress towards the ultimate aim of a full partnership structure. The 12 areas chosen as the Programme for Economic and Social Progress pilot areas will continue, with extensions to boundaries in some cases. Eleven new urban areas will be included in the programme.

The Government has also decided to designate ten disadvantaged rural areas to have the full benefits of the partnership structure. Ultimately, these areas will benefit from the new LEADER programme now being negotiated with the European Union. The exact boundaries of these areas are being decided following local consultation. Underlining the central importance of this approach and my personal commitment to it, the local development programme and community employment in these areas will operate under my Department.

This is also a socially caring and progressive budget. For many years we have given general increases somewhat in excess of the expected rate of inflation. There are special increases to fulfil the Commission on Social Welfare recommendations. For the second year there is a targeted increase in child benefit, concentrated on the third and subsequent children. Child benefit is a more equitable way of helping all families than the child tax allowance, which the Fine Gael Party abolished eight years ago. As a contribution to equity, we are introducing a pension for widowers.

There are many other social measures in the budget. We have provided money for a further initiative on hospital waiting lists. We have given extra funding for those with disability. We have provided extra money for post-primary school building. We have topped up resources for social housing, for remedial works, and for the special task force for the elderly to improve their living conditions. We have at last rectified the sense of injustice felt by former Irish Shipping employees.

There is a number of other welcome features of the budget. This partnership Government is continuing its vigorous support for cultural development. The additional £1 million for the Arts Council brings funding to £13.25 million, more than the £12-£13 million committed in the programme for Government. We have also given the go-ahead for the development of the National Museum at Collins Barracks to display stored collections.

We are giving financial support to a number of bodies involved in North/South reconciliation and which organise holidays for children, such as Glencree, Iniskeel, Between, Children's Community Holiday Scheme and the Irish School of Ecumenics. For many years these bodies have brought communities together and given children from the areas worst affected by the Troubles a real holiday.

The year 1994 will see economic growth of 4 per cent to 5 per cent, buoyed by the lowest interest rates in 20 years and the lowest inflation rates in 30 years and more consumer spending. The completion of a new National Agreement between the social partners, the first year of our National Development Plan, and this expansionary budget, that will benefit nearly 1 million people, will provide a framework for visible progress. All those factors continue to increase the Government's determination to meet the challenge of creating more and more jobs for our people.

A Cheann Comhairle, I will wait for the exodus to take place.

I am sorry I cannot stay.

Deputy Treacy will not be missed, but I am sorry to see Deputy Mattie Brennan go. He made a huge impression in Europe, a much better splash than even the Tánaiste.

I sometimes wonder if there is any need for a Budget Statement because the contents of the budget are nowadays sometimes known weeks in advance. This year's budget was no exception. Two years ago, when the present Taoiseach was Minister for Finance, the new tax rates were known in advance and were announced on RTE radio on the morning of the budget. As a Member of this House and as a Cabinet Minister, I always assumed that leaking of highly confidential information was a criminal offence and would be dealt with under the Official Secrets Act. I still think that is the case, but it is being ignored by the authorities. It is a shameful way to operate. If the Official Secrets Act does not cover Ministers then it should be changed so that it does cover members of the Government. The Budget Statement becomes irrelevant when the details are leaked in advance. It is criminal for people to benefit by knowing the details in advance and to make a killing on the Stock Exchange, in property dealings and financial dealings of any kind. It is a dangerous precedent that has been set in this House for the past two years at least.

I do not intend to dwell so much on the mechanisms and structures of the budget as on the manner in which it is perceived. I want to deal also with the question of jobs and the lack of an approach in the budget conducive to reducing substantially our unemployment level.

I do not wish to be unkind to people, but if I am to tell the truth I must be. The most nauseating spectacle I have witnessed in my 20 years as a Member of the Houses of the Oireachtas was the moral cowardice shown by Government Deputies during the past two weeks in the way they ran scared in respect of the residential property tax issue. I am speaking mainly about Dublin Deputies in that regard. They have shown no backbone in relation to this issue. It was not a question of whether the measure was correct but of whether it was politically popular. Unfortunately, this House has become a forum where people frequently look over their shoulders and count votes in regard to certain issues and speak accordingly afterwards. I recognise, of course, they must vote according to the party whip. They size up the matter to ascertain if it is a vote loser or a vote gainer. I have seen some despicable examples of cowardice in this House. We need a more manly approach to all issues. The level of manliness or "womanliness"— I must include all genders or I will be berated — in this House has declined during the past number of years.

Our forerunners in the Dáil of 1923 and subsequent years may not have been as highly educated or qualified as most Members of the House today, but they had backbone and principle. I do not see much of that around nowadays. An approximation of what I believe makes a politician of any standing is a person whose make-up consists of about 75 per cent "bottle"— it would be unparliamentary to use the other word — and 25 per cent ability. That would equal commonsense, which means that people act according to their instincts and for the betterment of the country. I am worried about the consequences of people running scared because they are afraid of losing votes on an issue. Everybody in the country should be worried, too. That is an unsavoury form of politics. Is it any wonder that this House is regularly brought into disrepute and that the public are cynical about the activities of politicians? This happened to a lesser extent in the past week or two in respect of the two new county councils, namely, Dublin South and Fingal. We heard members swearing they would not vote for service charges, that they would allow the council to be abolished before doing so. Yet, yesterday they meekly voted in favour of service charges because they thought they could scare the Minister for the Environment, to whom credit is due for standing up to them and calling their bluff. One of the most interesting radio programmes I heard recently was an interview with the chairman of Fingal County Council on "Morning Ireland". He was asked why he did a U-turn and we were greeted with ten seconds of silence. He did not have an answer. It is pitiful that elected representatives have not got the gumption or backbone to stand by decisions. The future of democracy may not be as secure as we might believe. God help Ireland when Dáil Deputies, whom people should be looking up to, MEPs and Euro candidates, who are supposed to be top rankers in politics here, run scared because an issue might be politically unpopular.

Perhaps it would be better if many of our representatives had less education and more backbone, similar to those who represented this country in the 1920s and 1930s. From an educational point of view the quality of Members of this House may be far greater than that of Members in the 1920s and 1930s, but the quality of Members today, when it comes to standing their ground in respect of unpopular issues, is pathetic. A large number of Members of this House have a qualification. I am a school teacher and there are many more school teachers in politics. There are also many farmers, solicitors and doctors, highly qualified people, in politics. However, high educational qualifications do not make good politicians. We might be better off with a few dozen Paddy Sheehans and down to earth people in this House, as long as they have principles.

As I said already, the reaction of Government Deputies to an issue which might be politically unpopular was nauseating. I witnessed another nauseating spectacle in this House approximately eight months ago which made me lose faith in the sincerity of people. The public elect many candidates nowadays because they are supposed to be feminists and represent a certain constituency. Last June criminal justice legislation relating to the legislation of homosexual acts was introduced in this House and a number of sections of the legislation imposed increased penalties on prostitutes for prostitution and the running of brothels. Those penalties affect probably the most unfortunate element of our society. At the time I stated that I did not believe it was correct to introduce such measures under the Criminal Justice Bill. Not alone was I greeted with silence and antagonism, but Members seemed to disappear as if I had the plague. Where are the people who are elected to defend the rights of the underprivileged?

A few months ago I wrote to the Council for the Status of Women asking if it made a submission to the Minister for Justice to defend that most unfortunate section of our society, but I did not even get a reply. One of the most unfortunate groups in society were effectively let go to hell by some representatives who were elected on the basis of promising to represent that group. Other supposedly interested bodies and movements, mainly middle class, tend to label associating with such a group as "dirty". That view is blatant hypocrisy. Some Deputies in my party were of the opinion that I would be crucified for advocating that instead of pilloring unfortunate elements of society such as prostitutes, prostitution and brothels should be legalised. My constituency, like that of the Acting Chairman, is mainly rural and my constituents are mainly conservative. However, I was pleasantly surprised that my constituents supported my view. That unfortunate group need support and it is hypocritical to pretend otherwise.

The public are much more discerning and intelligent than politicians give them credit for. They see through hypocrites. A politician might consider a man they meet in their local pub to be thick but he could teach many Deputies lessons in common sense and principle. Many people get fed up dealing with people who have no principles, they despair and turn to drink. I do not blame them because of what I saw in the House during the past year, particularly in regard to episodes eight months ago and in the past few weeks.

The practice of counting votes and Deputies deciding how they will react is dangerous because they will cave into pressure groups who now have the more respectable name of interest groups. Pressure groups may lobby Deputies on the run up to a general election and claim they can deliver 500 votes if Deputies back them on a particular issue, such as itinerant halting sites. There is a poor future for this country if politicians can be bought by pressure groups. Such practices challenge the relevance of this House and if the right type of people are not elected it will become more and more irrelevant.

I see no improvement in the performance of this House despite the debate on Dáil reform in March last year, the establishment of the committee system and televising the Dáil. Because of the committee system we are enacting more legislation but it is not being implemented. The Wildlife Act, 1976, was one of the most complicated Bills to pass through both Houses of the Oireachtas. It was approximately one inch thick but I am sure that less than 2 per cent of that legislation was implemented. It dealt with the protection of wildlife, habitats and so on. One or two wildlife rangers were appointed in each county but most of the provisions of the Act were not implemented. The manner in which it was treated is indicative of much of the legislation passed in this House. We do not seem to have the will to follow through the legislation and implement it. I am not impressed by people telling us that we passed twice as much legislation here this year than ever before due to the establishment of the committee system. The public — and Deputies — are interested in the implementation of legislation.

The advent of televising the Dáil has proved interesting although it has led to stupidity. I have not stood in this part of the Chamber for some time, I generally sit in the back row. I am not one of the celluloid stars of the RTE television era. I am told I do not smile enough. I probably do not wear glamorous clothes or get my hair styled by David Marshall. What happens in this House does not just affect Dublin 2. The area where I am standing is of prime importance. The television cameras can zone in on Deputies on the Front or back benches and they will be viewed by their constituents, an appearance on Oireachtas Report is as important as a Deputy tabling 25 questions on the Order Paper or making a two hour speech every week the Dáil sits. It is important for Deputies to get in the picture. People will say they saw you on television last night, that you looked great and were wearing a lovely tie. It is a great pity "Scrap Saturday" was dropped. Perhaps Gerry Stembridge and Dermot Morgan would give the boys such a lashing that they would not retain their posts on the Front Benches and would have to retreat to the back benches. The Acting Chairman is also in a disadvantaged position but I am in it of my own free will. The television of the Dáil has become a charade. It would be better if we had live coverage of some Dáil proceedings, not necessarily of debates of this kind. The Dáil debate has become irrelevant. I will not give details of facts and figures and blind Deputies with percentages of what our party promised and what the Government parties promised. I am speaking about the nittygritty of what makes this House irrelevant. Three Deputies are present for this debate, four including the Acting Chairman.

For many debates only two Deputies are present which highlights the irrelevance of Dáil debates. The public are fed up with debates in this House as they have heard it all before. Some, Dáil proceedings, particularly Question Time and the more interesting debates, should be broadcast live. RTE will have to be more discerning in respect of its television and radio coverage. It tries to keep everybody happy. It reports that Joe Bloggs spoke on a particular Bill regardless of whether his contribution is relevant. Its intentions are good but it is not serving the public interests. It must separate the wheat from the chaff and I hope it will be more discerning in regard to its coverage of Dáil proceedings in future. I understand that in certain public places these people are called "posers". There are also the prima donnas — I am talking about highly educated people. Some of us are graduates, but one of these people has been known to preface her remarks to committees by saying: "I would like to let you know I am a practising lawyer". I am a practising politician and that is as far as it goes. There are enough prudes around without my zoning in on any particular one. Practising politicians is what we need here.

A question which I am sure we all ask is, who runs this country? One gets the impression, particularly at budget time, that the Taoiseach, Tánaiste, Minister for Finance and the Cabinet are running the country, but I have my doubts. I sometimes think that a traffic warden or a garda has much more power than any Dáil Deputy, and sometimes more than some Ministers, depending on the strength of the Minister concerned and the way in which he imposes his will, personality and character on his brief in the Department he controls. Power is more centred in the Department of Finance than it is in the Government. I am sure that sounds shocking to members of the public. We often get the impression that the strings are being pulled by senior officials in the various Departments, particularly Finance.

Power is based to a considerable extent not just within the senior echelons of Government Departments but in State and semi-State bodies, the great untouchables. If I ask a question in this House about a State or semi-State body, whether it be CIE, Telecom Éireann, An Post, Aer Lingus or whatever, the relevant Minister will tell me, "It is not a matter for me or my Department, it is a matter for the body concerned". We as politicians have as little influence on those bodies as we have on the man in the moon. It is about time we had more influence over State bodies, what they do and how they spend their money. If that was the case the disasters that occurred in companies such as Aer Lingus might not have occurred.

An Oireachtas Joint Committee was set up to examine the affairs of State bodies, but I do not believe that committee has the time or the professional back-up to investigate these bodies. Because of the make-up of committees it could take two, three, four or five years before they get around to examining a specific State body. If this committee was on its toes and was informed would we have experienced the massive scandals that arose in the Sugar Company and Telecom Éireann?

These State bodies are monstrosities and their lack of accountability and reporting back to this House is a disgrace. They act as if they are independent empires, as if they are not to be touched, and that is not good enough. Massive sums of public money are involved and these bodies should be answerable to the politicians, who in turn are answerable to the public. However, this is not the case. It is a case of remote control — I emphasise the word "remote". These bodies have as much as, and perhaps more power than, any Government Department, and we are absolutely powerless when it comes to looking into their affairs.

I wish to dwell on the position with regard to jobs and to ask a relevant question, but I know I will be shouted down and criticised if I do. In terms of the national wage agreement, is the trade union movement more concerned with the unemployed or the employed? I get the impression that its first obligation in all these negotiations is to the employed, and God help the unemployed. Who will look after those 300,000 people? What hope is there for them in the future? I was surprised there was no reaction to a comment on "Morning Ireland" last week by the President of the Chambers of Commerce of Ireland, Dr. Pat Loughrey, in which he stated that instead of trying to reach a wage agreement if there was a wage freeze 50,000 jobs would be created. I am talking about sustainable, productive jobs, not about training courses or temporary schemes. I would like to ask the experts, the Government, is that true? If so, there is something seriously wrong that we cannot discuss it.

Is it true, as has been alleged to me, that massive overtime is being paid to employees in major State companies and that the unions support the paying of that overtime rather than the taking on of additional workers? If overtime was eliminated as many as an extra 50,000 people could be taken on. Could it be that in some of these State companies there are skilled people earling as much as £600, £700 and £800 a week while there are comparative skilled people on the unemployment register? Another 50,000 could be taken off the live register through job-sharing. The number of people on the live register could be halved if the will was there and if there was less protectionism. I would say to the unemployed that they are getting a raw deal from the people they expect to represent them.

The contribution by the previous Deputy was thought-provoking and I agree with many of his sentiments. If politicians do not stand up and say what they believe in, the attacks that have been made on them, particularly in recent years, will continue. All the U-turns that have been made have done nothing whatsoever for the profession of politics. I hope in the future that people will give the facts and tell the truth instead of being opportunistic on all occasions.

In his Budget Statement the Minister for Finance said: "This budget forms part of a coherent medium term strategy designed to give a substantial impetus to sustainable employment in Ireland". That objective must continue to be the Government's foremost concern because on its success depends real and lasting social progress. In 1987 Fianna Fáil inherited an economy whose finances were at an advanced stage of crisis. Since then Fianna Fáil-led administrations have achieved a dramatic turn about through prudent management of the economy, including changes in the taxation system, the elimination of wasteful expenditure and the negotiation with the social partners of national agreements such as the Programme for National Recovery and the Programme for Economic and Social Progress which have resulted in a stable economy and set the scene for the progress achieved over the past number of years. Another agreement will shortly be announced. Such an agreement is essential if we are to make the necessary progress in solving the problems facing our small economy, particularly the problem of unemployment.

Between 1983-87 the Exchequer borrowing requirement ranged between 13 per cent and 16 per cent of GDP. Since then the EBR has been reduced to 3 per cent or less. It is essential that the Government continues to keep control of our EBR. If in the years ahead we are to avoid a repeat of the situation which faced us in the mid-1980s we must keep control of our Exchequer borrowing requirement. If this is not achieved debt servicing will gobble up the resources which are urgently required in many areas, for example, social welfare, tax reduction, job creation, road improvements and education.

The reduction in interest rates, the tax amnesty and improved tax compliance gave a great boost to the Exchequer coffers last year and gave the Minister an opportunity to make improvements, one which was not available to many Ministers in previous years. I hope the hiccup in regard to interest rates in the United States during the past few days will not have an adverse effect on the Irish economy. The Minister had room for manoeuvre in this budget and the general consensus is that he introduced a well balanced budget.

Accusations by Opposition speakers that the Government is a tax and spend Government are meaningless because every Government taxes and spends. The important issue is the amount of tax deducted and collected and the way in which that tax is spent. Under the Fine Gael-led coalition Government from 1983-87 VAT reached a rate of 35 per cent, income was increased to 65 per cent, there was a 1 per cent levy and huge increases in excise duties. However, the expenditure of the tax collected under these measures did very little to improve social services or infrastructure. During that time the national debt doubled from £12 billion to £24 billion which put an intolerable burden on succeeding administrations. The repayments on that debt seriously restricted the ability of succeeding Governments to make improvements in our economy. Under Fianna Fáil-led Governments since 1987 we have seen a reduction in income tax and VAT rates and a control on Government expenditure which has increased the confidence of investors and financial markets in our economy, a factor which is critical for future growth.

This budget continues the improvements already made in the taxation system. Tax allowances have again been increased and tax bands have been widened. The Government has shown its continued concern for the lower paid by increasing the tax exemption level, increasing allowances for children and reducing the marginal rate of taxation from 48 per cent to 40 per cent. Over many years in my business I have heard concern expressed by the children of self-employed people, for example, proprietors and those engaged in farming, that they were not eligible for the £800 PAYE allowance even though they were working as hard or harder than many of those who were receiving this allowance. I am delighted the Minister has decided to grant that allowance to the children of the self-employed and proprietors.

The probate tax was a source of great concern to the husband or wife of a deceased spouse. This tax was unfair in that it did not take into account the fact that many of the surviving spouses did not have enough cash to pay the tax. This tax which applied to small shops, small farms and other types of businesses, many of which were eking out a living, was responsible for putting many people out of business. I am glad the Minister has decided to do away with the payment of a probate tax by the surviving spouse and has given some reliefs for agricultural land.

As previously stated, job creation is of prime importance. The Minister has taken note of the necessity to introduce some tax changes which will boost employment, for example, increasing the BES limit to £250,000 and extending the urban renewal scheme to many towns. However, I am disappointed that some of the towns in my part of the constituency, for example, Youghal and Cobh, which have been badly hit by unemployment in the past ten years and which need an incentive to develop——

The Deputy got Mallow.

Yes, but it is on the other side of the constituency.

Fair dues to Ned.

I welcome the inclusion in the scheme of Mallow, a fine town with a high unemployment level which needs all the help it can get. The Minister should review the urban renewal scheme and not limit it to towns of a certain size. Rather he should look at the needs of an area and include it in the BES if it deserves it. Instead of including one or two towns in a constituency he should look at each case on its merits.

The need to help new industry and businesses, particularly small enterprises, has been recognised by the Government as essential if it is to make inroads into reducing the high level of unemployment. The measures taken in this regard include the setting up of the county enterprise boards to provide grant aid of up to £50,000 for new businesses which will employ up to 12 people. I am aware that a number of small businesses set up in my constituency have been aided by the county enterprise boards and I am confident that many similar businesses will be established in the future. The success of this scheme — I predict it will be an outstanding success — will depend to a large extent on the chief executive of the board, and if there is a bad chief executive the scheme may be a failure. Most of the chief executives with whom I have had dealings are doing an excellent job.

The provision of £100 million for low interest loans is timely and vital. The provision of grants did help in the setting up of new industries but offering a loan is a better incentive to help people succeed. In many countries grants are not paid but low interest loans are offered to people wishing to set up businesses and they tend to have a greater degree of success.

The reduction of PRSI by 25 per cent for lower paid workers and for industries such as the clothing industry is most welcome. I have had a number of letters already from people in the clothing industry and other low paid industries who are delighted that their costs have been reduced. The removal of the employment and the training levy has also reduced employers' costs and these are welcome provisions.

The cash basis of accounting for VAT where turnover is less than £250,000 per annum is something which I demanded for many years because many businesses were burdened by having to pay their VAT on an invoice basis. Payment by creditors at times can be very slow but the Revenue Commissioners are obliged to pursue VAT payments that are due and this places severe pressure on many businesses. I am glad that some concession has been given in that area. Indeed, the increases in the exemption limits was long overdue.

Tourism is one of our fastest growing industries and the £5 million for its promotion is most welcome. In my area of east Cork, which was not a noted tourist area, there has been great development in the past two years, mainly due to the opening of the Midleton Heritage Centre, the Queenstown Project and Fota. Approximately 500,000 people now visit the region and every assistance must be given to this service industry.

The community employment programme announced recently is most welcome. The social employment scheme, which the programme will replace, played an important part in many community projects over the past number of years but some of the drawbacks of those schemes, such as the 12-months limit and the age limit of 25, will now be abolished. The three-year term limit and reduction of the age limit to 21 will be of great benefit to the people partaking in those programmes.

Farming is an important sector in our society and despite remarks by some Deputies over the past week or two I have seen at first hand an increase in the tax take from farmers due to their increased incomes and a reduction in the capital allowance available to them. Where capital expenditure is incurred because of compulsory pollution/ environmental work, capital allowances up to 100 per cent should be available in the year of expenditure. The two main concerns in the tax area expressed to me by the farming community over the past year related to probate tax and stamp duty. I am glad that the issue of stamp duty is being addressed under the new agreement because a great burden was put on young farmers taking over land and who then would have been required to pay family settlements in addition to putting new investment into the farm. The addition of stamp duty placed a great burden on these young farmers.

I also welcome the additional funding for Teagasc. This country needs a research institute peopled by scientists of high calibre to carry on research continuously in order to ensure that new products are developed to keep Ireland in the forefront of the world markets. Teagasc is highly regarded in the agri-scientific world and its development must be continued and supported. The allocation of additional funding is an indication that the Government is thinking on those lines.

As I have said, the budget is basically for people. It is for those who are employed, it is for pensioners and it is for those who are dependent on social welfare payments. The Government will give general increases of 3 per cent to social welfare beneficaries which is above the rate of inflation and, in addition, a further 3 per cent to short term weekly recipients in order to bring them up to the priority rates recommended by the Commission on Social Welfare. During my years in Dáil Éireann I have met many widowers who had to give up work in order to rear their young children but who had no pension whatsoever. I am especially glad that the Minister, Deputy Woods, has extended social welfare insurance to cover widowers and this year 4,500 people will benefit with more people benefiting in each subsequent year.

Some years ago Deputy Woods introduced a carer's allowance to give an income to carers who had no income. This year he has made a significant step forward by providing for the disregarding of £100 income in respect of working spouses which will mean an extra income for existing carers and will also bring hundreds more into the scheme.

Money lending has been the scourage of our society and many people have been helped by the current projects to combat the problem. The Minister is setting up additional projects in 1994 and these, together with the St. Vincent de Paul Society and other agencies, will help to rid our society of the scourge of money lending. Other welcome developments in social welfare are the introduction of an adoptive development scheme and the increase in unemployment assistance for single persons living at home from £5 to £10. This is a recognition of the dignity of those individuals.

Under the free travel scheme the spouse of a person who has a free travel pass can travel with that person but if travelling alone has to pay. However, there are cases where the spouse with the free travel pass is in hospital, the companion is required to travel to and from the hospital to visit and is obliged to pay for travel on those occasions. I would like the Minister to consider those cases because in hardship cases the companion should also be afforded free travel.

As a result of the budget allocation of £100 million, the Minister for Health will be in a position to clear the debts of the health boards and the other voluntary hospitals which may be in deficit. It is important that statutory controls be introduced as soon as possible to ensure that wasteful spending is not incurred which may result in debts accruing again.

On many occasions in the past requests for donors have appeared in the newspapers and have been heard on television and on radio. At any one time there could be up to 150 patients awaiting transplants in this country. I suggest that everyone should be considered a donor. Of course, there would have to be an opt-out approach for those not wishing to participate in any donor programme. This could be achieved several ways, for example, by the holding of a non-donor card, by ticking a box on one's income tax form, by registering on a countrywide non-donor urban registry or simply informing one's doctor or family that one did not wish to participate.

Before concluding, I would request the Minister to consider granting a 10 per cent tax rate to the proposed industrial park at Cork Airport. Shannon Free Airport Development Company has special concessions which attract industry to that area to the detriment of Cork, Waterford and other regions of the country. The Financial Services Centre in Dublin was also granted special concessions and——

Barry Roche is doing a good job.

——I would ask the Minister also to consider granting special concessions to Cork. This budget meets the two criteria which underline the further economic and employment prospects of this country and caters for those dependent on the social welfare system. I should have said at the outset that I wish to share my time with Deputy Martin.

Acting Chairman

Is that agreed? Agreed.

How much time is available to me?

Acting Chairman

The Deputy has eight minutes.

First, I welcome the opportunity to speak on this budget. It is very significant in terms of taxation reform and specific employment initiatives which will assist the overall employment problem. In many cases the Minister has signalled a fundamental shift in taxation in favour of lower paid employees. We have had considerable debate in recent years on the relationship between our taxation structures and employment creation. It has been generally agreed that at the lower end of the scale taxation has been too high for people on low incomes and for those on social welfare, the difference between coming off social welfare and taking up employment has not been sufficient to justify taking up that employment.

Therefore, there was a clear need to deal with that tax wedge or poverty trap. This budget, more than most, moved significantly and progressively on that front. It should be pointed out that in excess of £350 million in a full year will be the cost of the taxation measures proposed in this budget which will alleviate the position of many low paid workers. Indeed, in many ways this budget has been very favourably disposed towards lower paid workers. That fact should be put on record. I predict that people will begin to realise that only when the full impact of these taxation measures flow through to their pay packets.

I should like to raise this matter of the relationship between taxation and employment growth. Perhaps we have focused overly on this issue to the detriment of others which can also contribute to employment growth. In my view there is not political consensus on taxation reform. In 1983 we had a top rate of 65 per cent under the then Fine Gael led Government and a VAT rate as high as 35 per cent. It will clearly be seen that there has been significant progress over the past ten years, particularly since 1987, in reducing taxation rates and widening the bands but there remains that lack of consensus on such measures and implementing tax reform.

By and large, there is no great stomach on the part of our people for any more fundamental taxation reform. We had the reaction to the residential property tax, which would affect quite a number of people and it would appear there would be absolute opposition to the reintroduction of rates. There have been continuous nationwide campaigns in relation to service charges. Therefore, it appears that any new taxes or significant moves to introduce new taxes would not meet political consensus in this House or throughout the country. Let us be honest, we have had our share of hypocrisy on the part of other political parties in this House in relation to tax reform. For many of them it is time to put up or shut up because they are not embracing any significant tax reforms. Indeed, their stances now, as opposed to those they adopted while in Government, are quite different. For example, for some time the Fine Gael Party proposed the abolition of employers' PRSI while in a recent policy document, it rescinded that and proposed an increase. This budget does something practical in that regard, in that it reduces employers' PRSI for low-paid workers. The figure is £173 which has been welcomed by many labour-intensive industries employing a significant number of low-paid workers.

In my view the critical issue, apart from personal taxation and so on, is that we reduce the cost to an employer of recruiting staff. If we take into consideration the entire gamut of legislation governing the recruitment of an employee, in addition to the taxation involved — I am referring to the financial commitments into which an employer must enter — we see there a significant obstacle to employment. In future budgets I would prefer that the emphasis be placed on the cost to the employer of recruiting an employee, particularly small businesses who may employ just two or three people. For those concerned it will be a big decision to recruit one extra person because of the legislative and taxation constraints. That is a very important issue. The budgetary provisions move very significantly in the employment area. Certainly taxation reform will help to an extent but it is not the only issue or obstacle to employment creation.

We should focus more on industrial policy. We have had the Culliton report and so on but it appears that we have not considered how to attract mobile investment here. There was a regrettable attack on and condemnation of attracting overseas industries here in the early 1980s when we heard phrases such as do not bother bringing in multinationals as they will take the grants and run away after five years. That type of over-simplistic view gained ground to the extent that we appeared to shift focus away from actively competing in order to attract mobile investment here.

The recent NESC report on cost competitiveness in our economy indicates that overseas industries still play a critical role in our economy in terms of direct and indirect employment creation and of contributing to tax revenue. I predict that we shall encounter a major problem in this respect in future years, not only in maintaining what we have in terms of overseas investment but in attracting more here.

We must attack the issue of employment and our industrial policy within a European context. We must approach our European partners and appeal for greater cohesion, greater benefits for peripheral member states. We must remember that the most developed member states within the European Union offer the most attractive rates and financial incentives to industries from America, Japan, Asia and so on to locate in their countries to the detriment of us and other peripheral member states. That is the critical issue because the gap between our incentive package and those of other member states has narrowed considerably over the past decade resulting in a significant decline, compared with the 1970s, in the amount and degree of investment here. We have not focused on that area sufficiently. It would be my hope that the new bodies under the aegis of the Industrial Development Authority will examine the packages we offer to overseas investors to ascertain whether we can improve them leading to a fresher, more innovative or aggressive approach to attract foreign industry here. Such an exercise could well have a greater influence on forcing the European Union into developing strategic policies and a cohesive approach to industrial promotion in the case of peripheral member states.

Due to our demographic base and other factors we will have a significant unemployment problem obtaining to the end of this decade, if not into the next century. Therefore, I warmly welcome the improved budgetary measures within the context of the community employment development programme which will, hopefully, provide 30,000 places this year and, eventually 40,000.

It is essential that we honour this commitment because many people would much prefer to participate in a community development employment programme than remain on the dole. For far too long we have not considered the demoralising effect being on the dole can have on an individual. The debate tends to focus on finance, how much we spend on social welfare; the old stereotype view that one is either in receipt of social welfare benefit or in employment, that there is nothing in between. There is an inbetween. I know people who participated in schemes run by Cork Corporation whose lives were rescued socially and psychologically in terms of self-development through such participation. That is a significant point. There have been too many people knocking and undermining the value of such schemes. Indeed, a whole range of activities and people have benefited significantly from the old social employment schemes; they are not just "cleaning up the cemetery" type schemes. For example, practically all art organisations have benefited significantly, as have many educational establishments, by much creative work——

Acting Chairman

I intervene to inform the Deputy that he has one minute remaining.

I think my colleague excelled in his enthusiasm.

I welcome this budget, the most significant, progressive one on the taxation front for many years in that its provisions will significantly assist the lower paid. That fact should be placed on the record. In addition it contains many strong employment measures, such as the community development employment programme, and the measures proposed to assist small businesses.

The budget certainly will go down on record as one of the biggest botches in modern Irish politics. The Government with an historic 35-seat majority and some flexibility in relation to spending options had plenty of time to put together a credible, well through out economic incentive package to generate greater economic activity and make serious inroads into the unemployment crisis. What we got instead was a budget that sought to be too clever by half. The Minister and this administration, weighted down by advisers, programme managers and handlers of all kinds, attempted to be popular with everyone but ended up falling between all stools. Their "one for everyone in the audience" approach ended up, inevitably, satisfying hardly anybody. Altogether we have witnessed a totally wasted opportunity to set some proper direction for the Irish economy and to provide real incentives for people to invest, to employ and to work harder. These facts are graphically borne out by this week's The Irish Times opinion poll where no fewer than 89 per cent of those polled felt that their living standards would remain static or fall and a mere 7 per cent felt that their standard of living would actually improve.

Undoubtedly the reductions in employer's PRSI liabilities for workers on lower pay, up to a ceiling of £9,000 or £173 per week, is welcome. It will improve the take home pay of people in that wage category and enhance the employment potential in sectors such as clothing and textiles. However, it is absolutely stupid for a Government allegedly committed to tackling the unemployment crisis to levy an additional £550 per year for every worker employed at a wage of up to £25,000. That is one aspect of the budget provisions that seems to have received little or no attention, even though it is a very serious matter, because the point at which employers' PRSI has to be levied will be increased by a gross figure of almost £5,000. This is a blatantly anti-employment measure and it dramatically increases the cost of employing people in middle income ranges. Already one major company, Guinness Ireland, has indicated that this will add £1 million to its payroll costs this year and many other employers have indicated that it will certainly prevent them from taking on extra workers. There are many firms here, firms bigger than Guinness Ireland, employing highly skilled people at the wage rates common to Guinness Ireland. I have in mind many of the electronics and software companies in this country.

The appalling contrast between the Government's positive measure in relation to alleviating the payroll cost of workers earning less than £173 per week and the totally unacceptable imposition on workers at middle income levels highlights the lack of coherence and the lack of a thought-out strategy in this budget. These two measures simply do not hang together; they totally contradict one another.

One of the most misleading contentions in relation to this year's budget is the attempt by various Government speakers to suggest that every taxpayer is better off. The key to this subterfuge is to include in the calculation the abolition of the nefarious 1 per cent income levy introduced last year. To classify the removal of this further levy on work as tax reform is preposterous. This is a levy that should not have been introduced and indeed, was not necessary to the Exchequer last year. Its removal was not only essential but constituted nothing more than restitution to the workers here, who will have paid out approximately £130 million by the end of the current tax year at the beginning of April, when the levy expires. It is therefore utterly misleading to include the removal of the 1 per cent levy in estimating how taxpayers fare on foot of the various changes in the budget.

More than anything else, the budget of 1994 represents an ill-thought out, anomalous and contradictory assault on people on middle incomes. They are the people who are paying through the nose for everything and who have to carry the necessary burden of funding essential public services and the welfare entitlements of the elderly and the disadvantaged in our society.

A central figure that gives one a clue as to what really happened in this budget and how we stand so far as personal taxtion and tax reform is concerned is the following. I am quoting from the calculation on the budget of the RTE economists. After mentioning a small increase in personal allowance and a small extension of the standard rate band, which is only a fraction of what was obviously needed at this time, they say that the threshold at whch the higher tax rate becomes payable for a single person will now be £11,636 per annum. In weekly terms that means that a single person earning £223 is liable for tax at the higher income tax rate.

Ireland must be the only country in the world where the managing director earning £100,000 or more pays the same rate of tax as the typist in his office earning £223 per week. Any country would regard that situation as lunacy. It makes no sense that somebody in such a junior and relatively lowly paid position, earning such a small sum of money, pays the same rate of tax as the highest earner in the country. If this is a step towards tax reform, God help us. I want to lay emphasis on the figure of £223, because that is the figure at which people pay the top rate of tax. That, above all else, is what is crucifying this country and leads to the levels of employment experienced here. I emphasise the fact that nothing worth while has been done towards tax reform. In that context I wish to speak briefly about the property tax, which has caused such a furore.

I would have no objection, nor would my party, to some form of tax on assets that would help alleviate tax on work if it were being introduced at a time when a genuine effort was being made to reduce tax on work; but that is not the case. An enormous increase in the residential property tax will affect not only the 10,000 or so extra homes the Minister for Finance talked about, but perhaps 50,000, 60,000 or 70,000 additional homes and families. The residential property tax is being introduced at a time when an opportunity existed for tax reform, tax reduction and tax rationalisation; but that opportunity was cast aside. The proof it was cast aside is that somebody earning £223 per week pays the top rate of tax in this country. I repeat that that is lunacy.

I have always said that it would be preferable if we had some form of levy or tax on unproductive assets. What we have now is a tax on assets imposed on people with relatively low incomes where the net worth of their assets may be nil. It is no wonder that, at a time when there is no real relief on income tax, there should be an outcry that this should happen at the same time. I can see why people regard that as unacceptable. It is regrettable that the matter was handled in such a way that it seeks to make it even more difficult to have future reform of the taxation system. There is a feeling here that assets are sacrosanct, when they should not be. People feel so strongly about it because they are so heavily penalised on their income no matter how small it is. They feel that this is a double assault on whatever limited assets they have — in net terms they may be almost nothing — and it is unacceptable. The Government has planned this extremely badly and it has caused something of a public outcry. I would contrast that with the lack of a public outcry about a far greater scandal in terms of taxation last year — the so-called tax amnesty. That was, and I described it as such at the time, probably the most retrograde step taken by any Government in the history of this country in terms of equity between citizens and observance of the law and of one's obligations as a member of society. Is it not curious that the outcry on that was so muted compared with the outcry on something which the Minister for Finance claims will raise only £5 million?

If we have time we would be well advised to analyse why the reaction is different to two things, one extremely serious and the other very much less serious. The residential property tax, which seems to cause such a furore and which causes the Minister to backtrack from what he announced in the budget, is, at worst, political misjudgment. It is not anything more than that. It may be something with which one disagrees, but it is not any more than a matter of misjudgment. On the other hand, the amnesty was a disgrace and it has caused little or no furore.

The Minister for Finance announced in today's papers that there will not be any further increases in the residential property tax and that the thresholds both for income and property value will be index-linked and that therefore things cannot get any worse in the future. If anybody believes that, he is very naive indeed. The residential property tax that existed in a rather mild form for the past ten years or so was index-linked up to about two years ago, but that did not prevent any Government from changing it. An assertion by the Minister for Finance that he will not change it in the future is not binding either on him or on any future Government; there is no way that he can bind this House or any of his successors. If that is his way to placate public anger, people would be very native to accept it, because it is a pathetic effort simply to dampen down the anger which people feel.

It is only right that people should feel anger, but their anger is misdirected. The thing people get most angry about — and this is one of the great quandaries of all in politics — is often the wrong thing. The property tax does not matter that much. There are so many other things that matter, and the particular thing that matters here is that a single person pays the highest rate of tax at £223 per week. That is what people should be angry about and striving to change. The reason we have extraordinary penal rates of personal taxation and taxation on work is that our expenditure is extraordinarily high. The Minister for Finance in his Budget Statement went to great lengths to point out that the Government this year will remain within or below the Maastricht guideline on borrowing, which is 3 per cent of GDP. What the Minister did not point out is that there are two guidelines strictly laid down under the Maastricht Treaty. The other one, totally ignored in this country because it does not suit the Government, is that the public debt/GNP ratio should be 60 per cent. Our figure in the past year has increased to 103 per cent, while a few years ago it was as low as 100 per cent. We are the second most heavily in debted country in the OECD. Instead of aiming for the Masstricht guideline, which our partners in the years to come will insist on, we are going in the other direction. This is a very serious matter, caused by the incredibly high level of public expenditure, which appears to continue unabated.

There is a far more significant matter in today's papers than the backtracking or U-turning of the Minister for Finance allegedly in regard to some aspects of the residential property tax. A far more significant matter is an article in page six of The Irish Times by Mr. Jackie Gallagher, the industry and employment correspondent, drawing attention to what the headline calls “Concessions to public sector in pay deal”. I would recommend that Members of this House read the article. I do not have to recommend it to members of the Government because they presumably already know about it. There is a very ominous ring about what has now apparently been agreed. This new deal was to be launched tomorrow but I understand that because of difficulties in agreeing much of the detail, it is to be put back until next Monday.

That is not true.

It will be launched next Monday with the usual fanfare, probably in Dublin Castle, and there will be lunch for all and sundry.

The Deputies will be all part of it themselves, so they should not worry about it.

If I could draw attention to some aspects of what this article addresses today I might be doing some service in giving it a wider audience than it might otherwise have. Mr. Gallagher says that the Government has made significant concessions to the public sector trade unions in order to win their support for the new national pay agreement and he sets out in some detail what the concessions are. He says that the agreement title has been slightly altered from "A Programme for Work" to "A Programme for Competitiveness and Work" and that the inclusion of the word "competitiveness", which is a buzz word of the Irish Business and Employers Confederation, reflects the deal's emphasis on pay matters rather than on unemployment. I am afraid it does.

Where is the competitiveness in increasing the employer's payment of PRSI on middle income people by £550 a year, adding £1 million to the payroll cost of one medium-size firm alone, and preventing the employment of workers by countless firms throughout the country? When I saw the deal that had been done in the context of these talks between employers and unions in the private sector, I thought it was extremely damaging to competitiveness. I could not understand how IBEC agreed because it was damaging to its member firms, industry and business generally and the creation of employment. I thought that increases in the public sector could not be as high because, by definition, every firm in the private sector must be solvent or it would not survive. The Exchequer is the most insolvent institution in the country, it owes £28.5 billion. Therefore, it clearly cannot afford to pay anything like the rate solvent and mainly profitable private sector companies pay, but what do we find? Not alone does it pay the same, it pays more and I see the seeds of enormous difficulty in the years to come.

My colleague, Deputy Cox, our party spokesman on Finance said on budget night — Official Report, 26 January, column 1861:

From 1990 to 1993 the period of the Programme for Economic and Social Progress, the public service pay bill went up by £880 million from a base of £3.16 billion. It was an increase of 28 per cent when the cumulative inflation was 8.2 per cent. That is not sustainable.

How right he is — it is totally unsustainable, but we now have a situation where inflation is even lower. The latest official figure for inflation is 1.5 per cent for the year to mid-November last. According to Mr. Gallagher, industry and employment correspondent with The Irish Times:

The public sector deal has been the most controversial. It provides for increases of 11 per cent over 3.5 years with a pay pause to June — a general rise of 8 per cent and another 3 per cent for productivity increases.

The concessions made to the unions in effect give automatic entitlement for every public servant to the first 1 per cent pay of the 3 per cent for productivity on April 1st, meaning that the pay pause will only last for three months rather than five.

To qualify for the 1 per cent, public servants need to be "in negotiations" for special rises. Almost every group of public servants is in this category.

Where are we going? Will this simply be a repetition of what happened under the Programme for Economic and Social Progress? What did the Programme for Economic and Social Progress achieve in terms of employment creation? It increased the number unemployed by over one-third. Deputy Cox continued by saying how unsatisfactory it is that major decisions regarding the economic strategy for this country for a number of years to come are made behind closed doors by unelected and unaccountable people. How right he is. In the Chamber normally we have a succession of Members from the Government backbenches or Government Ministers reading out prepared scripts to tell us all is well. If the last programme, whose major feature was this enormous increase in public sector pay, increased our rate of unemployment by more than one-third what can this be expected to do? We should ask ourselves the real questions in relation to these matters rather than the superficial things in the budget that are commented upon. This was a great opportunity for a major revamp, a fundamental strategic change in how we would approach taxation and expenditure, but that has been lost. The public sector pay bill is the most crucifying single element of the problems that face us. At the end of the article in The Irish Times, Mr. Gallagher said that the public service deal is not conditional on the unions accepting a new pay-determination system. In other words we are back to what we have had for years and years. I give away no secrets when I say that time and again I heard the Minister for Finance say that the pay determination system would have to come to an end, that we had an opportunity around this time to bring it to an end and that if we failed to grasp that opportunity we were condemning ourselves to another ten or 15 years of the kind of lunacy we have seen in the past.

The Deputy has three minutes remaining.

Thank you, Sir. The system under which pay is determined in the public sector generally is crazy because if an increase is given to some small group of people, who are working for way below what they should be working for in particularly stressful or difficult jobs and in anybody's judgement are underpaid and entitled to an increase, that pay increase is given not only to that group of 50 or 100 people but can apply automatically to 10,000 or 20,000 others who say they have a relationship in terms of pay with the first group. If this report is right, and I have no reason to believe it is not, we are in a very perilous position because the public pay bill is likely to get out of hand under the new programme which has been negotiated in private and which is just handed to people when it has been agreed by those who are unelected and unaccountable to the public. If it will have the same effect as the last one, I think we are in a very serious situation indeed because of the figures I quoted.

I would love to have the opportunity to talk about industrial development and the situation that now exists but I have only a minute or two remaining. If, as Minister for Industry and Commerce, I had presided over what has gone on during the past 12 months in what is now the Department of Enterprise and Employment and caused the mess I venture to think I would be hounded out of office and almost hounded out of this House. It is an absolute disgrace that almost two years after Culliton reported we are still in the situation that all we can do to try rationalise the industrial development, of which he was very critical, is to do the direct opposite of what he recommended. We now have something like 40 quangos where previously we had three or four. That is a great tragedy and a matter which should be properly debated in this House. Unfortunately, I do not have the opportunity to do so now but I hope that others will take that opportunity as they get it.

I wish to share my time with Deputy Hugh Byrne.

This budget contains compelling evidence of the Government's commitment to the creation of real and lasting employment. The strategy which underlies all our efforts is to create economic and social conditions where this objective can be achieved.

We must maintain, and build upon, the financial stability and confidence which are the preconditions for investment and growth. We also need to foster enhanced competitiveness and productivity to sustain real economic progress. A coherent taxation system and modern infrastructure will assist in this. Finally, we need to keep public policies generally under review to ensure that they are increasingly supportive of employment and investment. Although our economic and social difficulties cannot be resolved overnight, the climate for growth which this budget creates, will in time provide the additional jobs our economy, and our people, desperately need.

While working for growth and employment we must at the same time acknowledge that the less fortunate in society — those without employment or with limited means — must be catered for in the short term also. We are, therefore, increasing the value of social welfare payment in real terms and we are ensuring through a range of other social measures, that those who are underprivileged are provided for. The expanded housing programmes for which I am responsible are but one example of this.

A central component in our overall economic strategy is the reform of the taxation system where policy, which, in common with most budgetary measures, is directed at creating the conditions to resolve our difficult unemployment situation. In a nutshell, our tax system must not be a disincentive to work. For this reason there is a growing consensus that the burden of taxation should fall less heavily on earned income and that low to middle income earners should be assisted through raising the tax thresholds. The Government has taken steps in this budget to address both these concerns, to focus tax reliefs or similar incentives on areas of greatest need and to modify the impact of PRSI. We will continue to simplify and streamline tax legislation to ensure that, consistent with maintaining effective collecting machinery, the system is as employment-friendly as possible.

Income tax is not the only tax measure which impacts upon employment — there are wider implications to be considered. The decision in last year's budget to reduce the VAT rate across a whole range of labour intensive services is being maintained, at least for the medium term. Similarly, it is our intention to maintain the status quo for the construction industry. In doing this, we are availing fully of the transitional period afforded by the European Union VAT Directive but we will press for the retention of the current position in relation to labour intensive services and the construction industry in the review of the VAT regime to be carried out at European level.

Sufficient time has now elapsed since budget day to allow most commentators to have their say. We have been treated to the usual diversity of views, some well informed, others less so, especially where they originated across the floor of the House. One conclusion which can be drawn from reaction so far is that there appears to be an expectation that the Government should be able to continue its programme of tax reform in such a way that the outcome is uniformly favourable for everyone. This is nonsense. The penny must drop sometime. If the word "reform" is to mean anything, the consequences cannot be to confer equal benefits in each and every individual case. Reform in taxation, in addition to leading to a more rational, equitable and effective tax system with a greater incentive to work, must inevitably affect some of those who derived particular benefits from the status quo.

Much the same point can be made in relation to the other aspects of the budget which draws together numerous strands of Government fiscal and economic policy. It is, by definition, a complex undertaking. It is easy to single out a particular item, or items, for criticism just because someone, or some vested interest, stands to lose out. Budgetary policy cannot be argued, or at least argued cogently, from the particular to the general. In passing judgement on the budget, the overall impact of its provisions has to be assessed, both at the level of the individual and for society as a whole. In other words, the budget is a package and should be considered on that basis. Looked at in this way, I am convinced that this budget is an excellent medium-term stimulus for the economic growth and social progress our country needs. Recent opinion polls, which indicate a continuing upturn in the Government's rating, suggest that the electorate think so also.

I will devote the remainder of my remarks to the programmes for which I am directly responsible.

I have spoken at some length about budgetary policy to show that difficult choices must sometimes be made to serve the common good and that attempts to please all the people all the time are the opposite to what good Government is about. I was particularly disappointed, therefore, at the failure of South Dublin and Fingal County Councils to adopt their estimates of expenses on schedule and strike rates for 1994. The adoption of annual estimates is one of the fundamental responsibilities of local authority elected members and where a local authority fails to adopt an estimate steps must be taken quickly and effectively to avoid causing serious hardship to the general public, employees of the local authorities concerned and those in other employments whose jobs are dependent on the continuance of essential local services.

I do not want to shatter the Minister's parish priest image but if he gave us a decent rate support grant there would be no conflict.

Fine Gael's policy is to reduce public expenditure; Deputy Owen is being inconsistent in seeking to increase it.

The Minister should talk to his party's councillors about inconsistency.

For the reasons given I indicated in unequivocal terms that I would have no alternative but to remove the councillors from office in the absence of a clear and unambiguous commitment from those councils that they were willing to discharge their statutory obligations in a responsible manner by the adoption of estimates of expenses. I welcome the response I received from both councils yesterday and I responded immediately by giving them extensions of time until Thursday, 17 February 1994 to enable their decisions to be given full statutory effect.

The well-being of the construction industry is influenced principally by the prevailing economic climate. Nevertheless, the Government plays an important role in stimulating activity in the industry through influencing private sector investment and by direct expenditure on a range of public sector projects. Through the Public Capital Programme, we continue to make a real contribution to maintaining a strong and vibrant construction industry.

Public Capital Programme expenditure affecting the industry is estimated at £1,480 million this year, an increase of £124 million, or 9 per cent, on last year's outturn. This will benefit the industry in general, help to secure the jobs of those who work in it and create additional employment. In real terms, Public Capital Programme expenditure affecting the industry has arisen by about a quarter since 1990. It is a pleasure these days to drive down the canal in this city and see the cranes and activity which has been stimulated by Government decision.

Why then did the Minister interfere with development of the canal?

The industry is a cornerstone of the employment market, giving direct employment of about 71,000 and a further 29,000 or so indirect jobs in ancillary industries and services. In other words, about 10 per cent of those at work depend on the industry for a living. The Public Capital Programme allocations will be the catalyst for creating a net 2,600 direct jobs in the industry during 1994 — with a significant number of indirect jobs being created in ancillary industries also. The recovery of private demand for general contracting should be substantially boosted by projected economic growth under the national plan, low interest rates and the recovery in business and consumer confidence.

For the second year in succession, the water and sanitary services programme will enjoy an historically high provision. The capital provision of £122 million is a major injection to the programme and will enable continued progress to be made in the design and construction of new and improved water and sewerage facilities. A considerable proportion of 1994 expenditure will receive aid through the various European Union programmes. Selected projects will be cofinanced through the Cohesion Fund, ENVIREG, INTERREG and the Structural Funds programme attracting estimated aid exceeding £89 million this year.

This year, the Cohesion Fund will again give a major boost to the programme. Thirty-four major water and sewerage projects have been submitted for approval since the inception of the fund. These include projects which will provide new and improved sewerage facilities, along with sludge disposal arrangements, for Ringsend, Howth and Dún Laoghaire in Dublin, Cork, Galway, Limerick, Waterford and Wexford. In addition, water supply projects at Ballymore Eustace, Limerick, Tuam, Lough Mask and Ballyjamesduff have been put forward for assistance. Aid of almost £41 million has been approved for 23 projects under the Interim Cohesion Fund Instrument and additional approvals are expected in the coming weeks.

The 1994 capital provision will ensure that the necessary funds are available for construction work to continue on new and improved water and sewerage facilities located throughout the country, including Clonmel, Killybegs, Kanturk, Baldoyle, Tuam, Ballina, Nenagh, Athlone, Monaghan, Dublin, Edgeworthstown and Inagh in County Clare.

New sewerage treatment plants are being constructed at a number of coastal towns under the ENVIREG initiative. Construction work will continue in 1994 on several major schemes, including those at Greystones, Dingle, Kenmare, Killorglin, Caherciveen, Ballybunion, Tralee and Drogheda.

The water and sanitary services programme is not concerned solely with compliance with European law, important though this undoubtedly is. It builds up infrastructural capacity and helps to ensure that economic activity is environmentally sound and sustainable. It assists in the achievement of balanced economic development and job opportunities through the regional location of industry and other economic activity. It contributes to the competitiveness of industry by helping to reduce capital and operational costs. It is crucial to the development of tourism, which is largely dependent on a clean, attractive environment, and to the exploitation of natural resource-based industries, including food and fish processing.

My Department, as part of an ongoing process, will continue to assess and prioritise the economic and environmental importance of all projects in the programme to maximise the benefits of proposed investment. All schemes must be fully cost effective. Adequate capacity, which allows the potential for development, must be incorporated at design stage; but overcapacity for its own sake is not acceptable. Treatment methods must be effective and appropriate to the needs of the particular scheme. The construction phase must be completed on time and within budget and due regard must be taken of ongoing operational costs.

The plan for social housing put in place a wide range of responses to the needs of those households who are unable to secure decent accommodation from their own resources. These responses include the direct provision of local authority and voluntary housing accommodation and other measures, such as the shared ownership system, to assist low income house purchasers. We must maintain and develop this range of responses to meet increasingly numerous and diverse housing needs.

In 1993 we made real progress in all of our social housing programmes and this year we will see the benefits in greatly increased social housing output. This year local authority, voluntary and other programmes, together with vacancies arising in the local authority rented housing stock, will secure accommodation for 9,000 households compared to 7,000 in 1993 and 6,100 in 1992. Put another way, social housing output will increase by 50 per cent in just two years.

About 3,800 local authority houses were started last year and 1,500 were completed or acquired by local authorities. In 1994 the vast majority of last year's starts will be completed and a further 3,500 dwellings will be started to maintain the impetus of the programme. This is being achieved without recourse to large-scale local authority housing on greenfield sites. The emphasis in the programme remains on the provision of smaller infill sites and on developments which are integrated with existing communities.

Each local authority will be notified shortly of the number of new starts they may undertake this year. The capital allocation for the programme was increased by over 60 per cent in 1993 and, taking account of the budget increase of £12 million, we are providing for a further increase of almost 95 per cent to £129 million in 1994.

For voluntary housing, a total of £33 million — an increase of 70 per cent — is being made available to provide accommodation for special category housing needs, including people with disabilities, elderly persons, homeless persons and family households on the local authority waiting lists. This will give rise to 1,000 additional units of accommodation. The shared ownership system is proving increasingly attractive and £40 million — funding about 1,100 transactions — is being provided for shared ownership in 1994.

Last year we provided the highest allocation ever for the remedial works programme at £17.2 million. In 1994 this provision is being increased to £20.7 million, a further increase of over 20 per cent. This will allow local authorities to accelerate progress on the 70 or so existing remedial works projects and will allow designation for funding of a number of other estates during 1994.

The programme for Government commitment to a £4 million programme to provide bathroom facilities in local authority dwellings which still lacked them has been honoured. The allocation for the bathrooms sub-programme has been increased in the budget from £2.5 million to £4 million this year to accelerate progress.

A special allocation of £3 million has been made in the budget towards a window replacement programme for local authority flats. This once-off provision will supplement the internal resources of local authorities and enable them to address quickly and effectively a source of long term dissatisfaction among tenants.

I am particularly pleased that the provision for the scheme of special housing aid for the elderly has been doubled, from £2 million to £4 million. Under this scheme, which is funded by my Department and operated by health boards, essential improvements are carried out at no cost to the applicant to the houses of old people who are living alone in unfit or unsanitary accommodation. As a result, many old people have been able to stay in their own homes instead of moving into local authority accommodation or health board care. About 20,000 applicants have already been assisted since the scheme was first introduced. The increased allocation will allow work under this scheme to be speeded up.

The Government's commitment to home ownership and our concern for the position of first time purchasers is reflected in the mortgage interest relief changes announced in the budget. For the first five years of the mortgage a first time purchaser will now enjoy two important benefits: relief can be claimed on 100 per cent of interest, compared to 80 per cent for other mortgage holders; and the minimum threshold will not apply. In other words, the first £200 of interest paid in the case of a couple will not be disregarded for income tax relief.

These concessions will be applied so that first time owner occupiers who purchased in the 1990-91 tax year or any time since will benefit in 1994-95. In making these changes the Government is targeting mortgage interest relief at the category of greatest need and ensuring that wider changes in mortgage interest relief will not adversely affect the ability of potential house owners to acquire their first home.

The year 1994 is a pivotal year for our road network. On 1 January the National Roads Authority assumed responsibility for the development of national primary and secondary roads. Starting this year, investment of over £1,250 million pounds is planned for national road improvements over the period of the national development plan, and almost half a billion pounds is allocated to regional and county roads over the plan period.

Over the period to 1999 we plan to spend £1,137 million on improving the national primary network and £115 million on the national secondaries. This represents an increase of almost £500 million in investment in national primary roads compared with the period 1989-93 and almost a doubling of investment in national secondaries.

The National Roads Authority now has the mandate and legislative framework necessary to provide a strategic focus to the development of the national network. The Authority will draw on and exploit the expertise and experience of local authorities in undertaking projects. It will also be able to explore a range of financing options.

I do not propose to deal with nonnational roads today, because I have addressed the issue as recently as last Tuesday in this House. I will simply point out that the overall provision for non-national roads for 1994 is £101.9 million as against £75.3 in 1993, a massive increase of 35 per cent. These figures speak for themselves.

The built environment will also benefit from the budget. Despite the success of the present urban renewal scheme, much work remains in revitalising the physical and economic condition of core inner areas of our cities and towns. The new urban renewal scheme announced on budget day will continue to build on progress already achieved. It will place greater emphasis on residential accommodation and on the restoration and refurbishment of existing premises.

Urban renewal policy must encourage people to move back into city and town centre communities. Recent experience has shown that the right incentives, together with environmental improvements in inner city areas, will create and sustain a demand for urban living. For this reason the new scheme retains the owner-occupier allowance for new residential units. We are also doubling this allowance in the case of refurbishment works to promote the restoration of existing buildings. This will assist in preserving the integrity of our streetscapes and the historic character of our cities and towns. The "section 23" allowance in respect of the provision, improvement and conversion of private rented accommodation is also being retained.

Other new initiative involve increasing the floor area limits of apartments which qualify for incentives and an accelerated capital allowance of 50 per cent for industrial units. These will facilitate family size apartments, avoid the crude carve-up of buildings such as old Georgian houses into multiple units that have no regard for their existing character, and exploit the scope for a variety of small industrial type ventures in many inner urban areas.

The scheme is being extended to the 12 towns of Ballinasloe, Dungarvan, Enniscorthy, Killarney, Mallow, Monaghan, Mullingar, Navan, Nenagh, Newbridge, Roscommon and Wicklow to build on what has already been achieved elsewhere. The designated areas in the existing provincial towns will in general be retained, while those in the five county boroughs will be reduced to about one quarter of their size to sharpen the focus of the scheme to specific areas in these cities.

We face complex challenges in creating the economic progress necessary to give employment to all our people. There never are simple answers to complex questions. But the strategy which underlines this budget is good for employment and social progress. It will foster the economic and social development on which our country depends.

As Minister for the Environment, I am glad to be able to report record spending and the greatest support ever for local authorities at £850 million for capital and current expenditure this year.

Mr. Byrne

I am pleased to preface my remarks by heartily congratulating the Minister on a job well done. This budget is pro-jobs and pro-economic growth. For the first time a beginning has been made in fundamental tax reform. On the crucial underlying issue of the national debt, our debit ratio to GNP will be well within Maastricht limits. Last year, I was critical of the budget's lack of progress in the areas of tax reform and debt reduction. I felt an opportunity, albeit a very limited one, had been missed. This year, I can reasonably offer no such criticism.

On the question of income tax, every serious study of our economic affairs in the past 20 years has concluded that we must shift taxation from earned income. This year that work has begun. To balance the equation, we must as a society decide if we will forego spending in the form of State services, or maintain spending and consequently widen our tax base.

There is no general willingness to reduce State services on a significant scale. Accordingly, to achieve the aim of reducing personal taxation, we must broaden our tax base. This has been a generally accepted principle for some years. To the credit of the Minister, Deputy Ahern, it was he who pushed the boat out on budget day. Unfortunately, for the quality of economic debate in Ireland, Deputies Yates, Cox and Rabbitte lost their nerve at the last minute. I sincerely hope that this fit of opportunism will not have a long term negative effect on the maturity of our deliberations.

It is hardly necessary to point out that the positions adopted on the property tax by the Opposition are a direct contradiction of its long standing positions. The long term widening of the tax base, coupled with prudent management of public expenditure, can alone permit fundamental tax reform in Ireland. Any pretence to the contrary is cant and hypocrisy.

The Minister rightfully removed the variety of 1 per cent levies. They were nothing more than a crude form of fund raising measures. Taking the basket of measures adopted by the Minister to ease the tax burden on the low paid as a whole, an incisive pro-employment measure has been taken. If we want at the same time to reduce unemployment and squeeze the black economy, we must leave people better off at work than on the dole. Change in this direction has begun and I welcome it.

The residential property tax, if people's incomes and ability to pay are taken into account, is a reasonable measure. The Minister's decision to take account of hardship in assessing individual cases is welcome. The position of Deputies Yates, Cox and Rabbitte is complete hypocrisy.

What about the position of Government backbenchers? Deputy Andrews is looking after his European seat. Has he been slapped on the wrist?

Mr. Byrne

The spectacle of that popular front manning the barricades on "millionaire's row" does not intimidate me. I would remind my colleagues on this side of the House that these are early days and that the Government will run its full term. It is imperative that we hold our nerve.

It is all happening up on the fifth floor now.

Mr. Byrne

The Government has taken a high ground. Reason, common sense and good economic management are all behind this measure.

When negotiating its participation in Government in 1989, the Progressive Democrats explicitly demanded a reduction in the level of tax relief on mortgage interest and VHI premiums. That is a matter of public record. Deputy Cox now describes the same policy as an attack on self-reliance. Indeed, the Progressive Democrats in an earlier policy document entitled Employment, Enterprise and Tax Reform called for local government change. The levy, so far as their proposal then was concerned would be paid by a wider group of people than the proposed arrangement.

It was Fine Gael in Government in 1983 who introduced a property tax in the first place. The position of the Opposition is untenable. I am convinced that by reason of its argument, the Government can and should prevail in respect of this matter.

I will now outline how this budget affects the constituency of Wexford. One year ago, on my return to this House, I decided that my priority in 1993 would be to improve the educational infrastructure in my county. With the co-operation of the Minister for Education, Deputy Bhreathnach and the Minister of State, Deputy Alyward, great progress is being made in that respect. Moneys have been allocated to Raheen national school, Ramsgrange community school and Adamstown vocational school. Existing buildings will be repaired and new buildings will be constructed. That is an investment by this Government in Wexford's future and I am grateful for it. The morale of teachers, parents and pupils will be raised by this recognition of their long campaign for a quality education infrastructure. However, there are some inequities in respect of education grants. For example, it was brought to my notice recently that a person earning £27,000 per annum and with two children attending college did not receive a grant. The take home pay in that case was £16,800. It costs approximately £5,000 per annum in rural Ireland to put a child through third level education. The person to whom I refer had a mortgage of £2,500 a year, leaving him with approximately £80 and £90 per week on which he and his family had to live.

The Deputy should have shown those figures to the Minister for Finance in which case he might not have introduced the residential property tax for those same people.

Mr. Byrne

Many worthwhile provisions were introduced in the budget, but I hope the inequities to which I have referred are examined.

In spite of the generally favourable trends in agriculture, farmers in south Wexford suffered badly this year. Weather conditions were horrendous and caused devastation. The RathanganBridgetown area was particularly badly affected where yields fell dramatically. In that area beet production, which is normally 18 tonnes per acre, decreased to five or six tonnes per acre. Barley production, which is usually between two to two and a half tonnes per acre, decreased to between 0.5 and 0.7 tonnes per acre. At the same time, farms were awash in more than 200 per cent of normal rainfall. Merchants have discontinued credit facilities and many farmers are relying on relief from the South Eastern Health Board. However, from discussions I have had with officials in the Department of Agriculture, Food and Forestry, I am aware that the Minister, Deputy Walsh, has submitted a proposal for aid to Brussels. This is the first time in my 20 years in local and national government that there has been a plea from the farmers of south Wexford. Therefore, I ask the Minister to take their case on board. I commend the budget to the House.

This budget is a major disappointment to the ordinary people of Ireland. It is a mean budget and lest the Minister think the Government's problems are over following the residential property tax debacle, in my view the meanest and most subversive element of the budget is the attack on widows in terms of contributory pensions.

I will illustrate to the Government the opportunities it lost in preparing this budget.

Debate adjourned.
Sitting suspended at 1.30 p.m. and resumed at 2.30 p.m.
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