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Dáil Éireann debate -
Wednesday, 20 Apr 1994

Vol. 441 No. 6

Finance Bill, 1994: Second Stage (Resumed).

Question again proposed: "That the Bill be now read a Second Time".

During the past few years I have queried whether the traditional Finance Bill is the most effective way to address the problems of the economy. I have asked how appropriate is this inherited ritual in tackling the problems of a modern society. I repeat these questions in the context of the 1994 Finance Bill.

Although the paternity of recent Finance Bills may have been the same, they have lacked any definite or comprehensive approach to fiscal policy and have often been internally inconsistent. For example, in 1992 the Minister for Finance claimed to have shut down or altered 39 concessionary taxes. The Minister was exaggerating, but I applauded him then and I do so now for tackling some of the more disgraceful tax shelters and loopholes and limiting some of the more unproductive and wasteful schemes. Unfortunately, the Minister has now revived many of these tax breaks in this Bill, albeit in many cases in a different fashion.

There are several other contradictions. Last year the Minister introduced a modest probate tax which he vigorously defended on Committee Stage. This year he has undermined the tax in response to a well-headed campaign. This chopping and changing and ad hoc planning is serving little purpose in economic terms. I suspect there is a diminishing political dividend in terms of political expedience. For example, the Minister set out to make certain changes in the residential property tax in the budget. I predicted on budget day that this would incite middle income earners to fury. That is what happened. As a result this Bill reflects the changes which were forced on the Government and introduced by the Minister.

The ink was scarcely dry on the Finance Bill when the Taoiseach announced that it was the intention of the Government to replace the residential property tax. One cannot be certain from one year to the next what changes will be effected in any aspect of tax, or that a direction settled on for one year will not be reversed the following year. The impression is that if the lobby is powerful and persistent enough, it can hope to win any change and almost any concession. There must be great uncertainty as to the significance of the Taoiseach's recent statements, notwithstanding extraordinary briefings yesterday by some of his spokespersons to the effect that we ought not to take too seriously what the Taoiseach said in Killarney.

On the same weekend in Killarney, at the IMI Conference, the Taoiseach said: "We want a return to the type of low tax economy that was in operation in the 1960s". He went on "The burden of personal taxation will continue to be reduced as the Government works it way back to 1960 levels". I know, a Cheann Comhairle, that in fine weather Killarney has strange effects on people. Only a week earlier it led Minister Burton to promise the women at the meeting she attended that the Government was about to backtrack not only on the residential property tax but on the taxation of unemployment benefit. There was no basis for Minister Burton's statement. She absented herself from the House for more than a week afterwards and has never stated publicly why she made that statement in Killarney or why, if she was reported incorrectly, she did not seek a correction. The Government has not withdrawn its decision to extend taxation to unemployment benefit.

The Taoiseach, in Killarney also, whatever it is about the Kerry air, went on musing nostalgically about a return to 1960s levels of taxation. I do not know what our over-stressed captains of industry at this £1,500 per person weekend business meeting really thought of the Taoiseach's ramble down memory lane. I am amazed that none of our economic commentators has done an assessment of the implications for tax revenue of a reversion to 1960s levels. I find it hard to believe that people have already forgotten the Taoiseach's recent bravura performance in the United States where he recalled in sparkling fashion his own casual acquantance with the tax man in the 1960s when he was in business in the midlands. I cannot imagine that the Minister for Finance would be too pleased about his reverting to 1960s levels of taxation if we were to follow the Taoiseach down that road. It is remarkable that he should have made the speech the same week Deputy Trevor Sargent called for the abolition of income tax. It would appear that Deputy Sargent and the Taoiseach are closer on this issue than Deputy Sargent realises. Only fools and PAYE earners paid tax in the 1960s, and we have the Taoiseach's own word for it. However, the Minister for Finance, Deputy Ahern, has advanced in this House on a number of occasions a distinctly post-1960s concept of tax policy and tax reform. I will quote what he said because, as it happens, I agree with it:

It was never expected and never intended by the advocates of tax reform that widening the tax base and reducing tax rates would produce a lower tax bill for everyone. On the contrary, it was always inherent in this strategy that there would be trade-offs between, on the one hand, improvements in the mainstream income tax regime and, on the other hand, curtailment of reliefs which benefit limited groups or sectors. This was common ground among the proponents of tax reform and was explicitly stated by, for example, the Commission on Taxation. As the Commission said in its first report, tax reform is a collection of measures each of which affects some individuals adversely and others favourably. Those who will not benefit are those who are over-favourably treated under the existing system.

I happen to agree that that is a fair enough statement of the intentions and aspirations of those of us who have been campaigning for genuine tax reform for a long time, but for the life of me I cannot reconcile the two positions held by the two most senior members of Government on this critical question. I cannot see how we can have a reversion to 1960s levels of taxation, as the Taoiseach wants, and at the same time some minor improvements for income tax payers and a curtailment of reliefs and shelters to business, as the Minister for Finance says he wants.

I do not know if the Taoiseach wants us all, in this reversion to 1960s levels of taxation, to head off for San Francisco with flowers in our hair and tell the taxman, as he did, that we are only joking. There is an apparent conflict between the Minister for Finance and the Taoiseach on tax policy, and it is not the only apparent contradiction in Government policy in this area. At the same IMI Conference the Taoiseach advocated the reintroduction of rates. He said: "I think people will feel happier paying for services that they are getting." The point is that people are already paying for services, which, in some cases, they are not getting. It would appear that for the Taoiseach, language means whatever the Taoiseach wants it to mean at the time. The Taoiseach seems to have decided to replace the controversial residential property tax by an as yet unspecified nationwide tax. You are witness, a Cheann Comhairle, to the extent that you have been troubled in the last few days by attempts by Members on the Opposition side to establish what exactly the Taoiseach meant by what he said in Killarney. As of now, we have failed in that objective of finding out what is this nationwide tax that he proposes as a replacement for the residential property tax.

It would appear that the Taoiseach is calculatedly sending out two distinct and different messages. He is telling people in Dublin in particular, and perhaps in other urban areas, not to worry about the residential property tax, which is the Labour Party's idea, that he has now persuaded them to abolish the residential property tax and that the rest of the country will be got to pay a substitute tax. He has not told us yet what that substitute tax is going to be. Then he sends out a different message to the rest of Ireland along the lines that there is some turbulence in Dublin, that Niall Andrews, John Stafford and Olive Braden — I should not forget her name just because Fianna Fáil do — are having some difficulty on the doorsteps because of this residential property tax; that because it is election time the Government wants to be able to tell them that the tax has been abolished but that the rest of the country should not take too seriously the suggestion that it is intended to reintroduce rates.

Then, right on cue, the rural "Buddha", Deputy Michael Smith, reassures the rest of Ireland that, like Horatio, he will man the bridge and ensure that whatever else happens rates will not be reintroduced for the rest of the country. As a result we do not know where we are, and Minister Smith has got tremendous headlines. The headline yesterday morning was "I'll fight the reintroduction of rates, says Smith". Classically, Fianna Fáil now have it both ways: residential property tax will be scrapped, there will not be a reintroduction of rates and, so far as Fianna Fáil are concerned, the Labour Party can put on their sandals and take their own Aqua Libra bottles to the bottle bank; they can provide their own service. We are getting rid of residential property tax and we will not reintroduce rates.

On a point of order, will the Deputy not reflect a little and consider that the provisions in our Constitution for religious toleration should make him hesitate before comparing Buddha to the Minister for the Environment? That is insulting to Buddhists.

It is certainly not a point of order.

On reflection, the Deputy has a point and I withdraw that statement. I did not intend offending the supporters of Buddha, the silence and gravitas of the Minister for the Environment brought to mind that image. If the Taoiseach's position is dominant, it is fair to ask if we are reverting to a 1960s level of tax, a low tax economy, high emigration and high unemployment. It appears there are free tickets for the World Cup on offer to anyone who can find a poverty group not participating in some forum established by the Government with a view to making policy recommendations. Of course the real Government ignores the recommendations and implements decisions such as the extention of tax code to unemployment benefit. The Chair has pulled me up before about referring to the Minister of State, Deputy Burton, as the Minister for poverty but, in fairness, she is a self-styled Minister for poverty. I did not create that term.

The Chair is merely invoking the Standing Orders of the House which clearly state that Members shall be referred to by their appropriate titles, Deputy, Minister, Tánaiste or Taoiseach.

I stand corrected and will refer to her as the Minister of State at the Department of Social Welfare. She can be relied on to go around the country telling women's groups that whatever they find unpalatable the Government will change, without compunction for the fact that it may never see the light of day or be considered in legislation. Until this morning we had not seen her since her last gig in Killarney. The Finance Bill has been published but does not contain a provision about the Minister withdrawing the decision to extend taxation to unemployment benefit. As someone who has more contact than other members with the unemployed I am aware there is a very hostile reaction to the fact that at a time when there are still serious inequities and injustices in the taxation code the Government, comprised of Fianna Fáil and the Labour Party, should seek to extend taxation to unemployment benefit.

I am amazed that the Minister of State, Deputy Burton, should seek to defend her lamentable record by commenting on a number of occasions, most recently in the Sunday Tribune last weekend, that anybody who seeks to expose that lamentable record is attacking her as a woman. It is preposterous in an age of equality and given her disposition in the matter that she should argue that those of us in Opposition cannot point to the contradictions in her position before the election and since she became a Minister of State.

The Finance Bill, 1994, is complex legislation. Many of the 147 sections are of a technical nature and will require careful consideration and debate on Committee Stage. We had hoped for earlier publication of the Bill and a longer period of time between Second and Committee Stages. It is quite an imposition on the Opposition to expect it to come up with relevant amendments to the more complex areas of the Bill in the time allowed.

Two of the most significant developments in taxation in recent months are not included in the Bill. The decision to impose a tax on unemployment benefit was passed by order of the Dáil last February. Therefore, we will not have an opportunity to deal with that matter although I presume an amendment in that regard on Committee Stage, notwithstanding the fact that the order has been passed by the Dáil, would be in order. The Taoiseach's announcement at the weekend concerning a poll tax was significant in terms of taxation. It is regrettable that the Opposition has been forced into debating the Finance Bill on Second Stage without establishing the Government's position on that critical issue. Apparently it is the intention that as soon as the strategy committee agrees this tax — whether in the form of poll tax or the reintroduction of rates — it will be a home tax and presumably will not be considered here until the next Finance Bill. As the Minister did not refer to it in his introductory address he must do so when replying to this debate.

The Bill continues the pattern in recent years of providing additional reliefs and concessions for business with merely cosmetic changes for the PAYE sector. Despite the impression at the time of the budget, it is clear that the supposed benefits for the PAYE sector were largely a mirage and that many low and middle income families will be worse off as a result of this Bill. The Minister was successful in promoting his budget as pro-PAYE, a line which initially was uncritically accepted by many commentators, some of whom described it as a bonanza budget. When the 1994-95 tax certificates started to come through letter boxes, the majority of PAYE workers discovered that improvement was marginal and that many were worse off.

There were two reasons for this. The few concessions provided for the PAYE sector were little more than token, especially when considering the level of tax most PAYE workers pay. In addition, the combination of the reduced interest rates over the last year and the budget decision to start reducing the level of interest relief available meant that virtually all mortgage holders — apart from recent buyers — had their allowances cut and lost heavily. While much public attention focused on the changes in the residential property tax, which in their modified form the Minister tells us will take in an additional £3 million, the real sting in the tail is the provision in section 6 which reduces mortgage interest relief. It is remarkable that public controversy has focused on the residential property tax and does not appear to be aware of the changes the Minister is introducing, almost by stealth, in section 6. People may be shocked at what it costs them this year, but mortgage holders must look at the picture for the coming three years. The cost to taxpayers this year of the reduced mortgage relief and similar cuts in the allowance for VHI contributions and medical expenses will be £8 million. Three years down the road the annual cost of the changes in the mortgage interest relief and VHI allowance to home owners will be £81 million. It is extraordinary that the imposition of £81 million on mortgage holders can be slipped through when there is such a public outcry about the proposal to raise an additional £3 million in residential property tax. Mortgage holders and householders generally will discover that as the Minister's graduated reduction to standard level takes effect over the next three years, the £81 million will have a remarkably greater impact than the £3 million he proposes to raise in residential property tax. The Taoiseach has delivered another body blow to householders with the announcement at the weekend of a new merged property tax and service or water charges on domestic dwellings. I know the Taoiseach was a great admirer of Mrs. Thatcher's economic policies and, given the problems it created for the Iron Lady, I am somewhat surprised that he intends to ape her by introducing an Irish version of the poll tax.

There is no justification for asking householders to pay additional taxes, and such a tax would be an additional one. If the Minister was to say there was a visible commensurate reduction in personal income tax of householders, perhaps he would have a case to argue on the floor of the House. However, there is no argument for the proposition to impose an additional tax on householders, especially when the drift of government policy for many decades has been to encourage people to invest in the private housing sector. The Minister may reply that he proposes to give back £330 million in income tax this year. However, that is not a big deal having regard to the buoyancy already evident and that figure includes the revenue from the 1 per cent levy, which should not have been imposed and the repeal of which the Minister cannot claim credit for.

If the Taoiseach believes he can get away with effectively reintroducing rates under any other name, he has seriously misjudged the mood of the public. By comparison, the extension of the property tax involves a relatively small number of people. The proposed poll tax will hit every household. The anger it is likely to create will make the row over the residential property tax look like a Legion of Mary prayer meeting. If I interpret correctly what the Taoiseach said under pressure yesterday morning and today, I believe he acknowledges he has misjudged the mood of the public and is rapidly back-tracking. He denies he ever said anything about a poll tax, a property tax or the reintroduction of rates; but it is a rose by any other name so far as the public is concerned. There is no doubting the intention of the Taoiseach in this regard and presumably we will not see its precise shape until after the forthcoming local and European elections.

I am mesmerised as to why the only property Fianna Fáil considers taxing is that of the family home. Why will it not tax wealth, land, works of art, race horses, luxury yachts and other forms of property——

It does already.

——but will insist the family home is levied yet again. In the 1970s Fianna Fáil abolished a modest wealth tax. In the late 1970s Fianna Fáil not only abolished a resource tax but refunded the money to those who had paid it. For a few years in the 1980s there was land tax; but Fianna Fáil, as usual, abolished it. Fianna Fáil's view is that all property, except the family home, is untouchable. Perhaps that is not a surprising view for Fianna Fáil, but it is certainly surprising that the Labour Party appears to have joined it in this view.

The principle objection to Albert's poll tax is that it will be paid largely by the already overtaxed compliant taxpayers. The plan for the new tax cannot be considered in isolation from the huge burden the PAYE sector continues to bear and the failure of successive Governments to deliver on promises of fundamental tax reform. In real terms the tax burden is now worse than that which brought hundreds of thousands of people on to the streets in the great tax marches more than a decade ago. At that time only one taxpayer in a hundred paid tax at the top rate, now more than a third do. The PAYE sector still pays roughly the same amount: approximately 90 per cent of all income tax, and income tax contributes nearly two-fifths of all Exchequer revenue.

The comparison between the way in which the financial thumbscrew has been turned on the PAYE sector and the manner in which farmers have been allowed get away with paying token amounts of tax is particularly outrageous. Figures given by the Minister in reply to Dáil questions show that between 1989 and 1992 tax paid by PAYE workers increased from an average of £3,122 to £3,662. That represents an increase of 17 per cent, more than twice the rate at which salaries and wages increased in the same period. However, in that period the average tax paid by farmers decreased by 9.3 per cent. Farmers now pay less than one-fifth of the average tax paid by a PAYE worker. However, many farmers are on low incomes, but nobody could seriously suggest that those tax returns are a fair reflection of income levels of the two communities.

While some progress has been made in regard to the self-employed, that sector is still paying on average more than £200 less than PAYE workers. Given that the self-employed category includes many potential and actual high earning professions, that figure is difficult to explain. There is now evidence of a substantial evasion by the self-employed. The president of the tax officials branch of IMPACT, Mr. Mark Flanagan, told its recent conference in Waterford that audits of self-employed found average underpayments of £22,000. Their average tax payments of £3,431 are incredible. As minimum random sample audits of their returns discovered on average underpayments of £22,000, there is a compelling argument to increase the minimal audit carried out at present. That is an area on which the Minister should concentrate and deploy staff. Every audit of the self-employed brought in about six times the average tax paid. According to Mr. Flanagan, tax fraud is still taking place on a considerable scale within the self-employed sector and those figures would seem to confirm that. However, he claimed the Government was refusing to allocate additional resources to increase the number of audits carried out by the chief inspector of taxes.

One need not resort to illegal evasion if one can afford tax experts and consultants, one can set up legal avoidance schemes. Last November the Assistant Secretary to the Revenue Commissioners, Mr. Seán Moriarty, gave a graphic description at the annual conference of the Foundation of Fiscal Studies of how a high income earner, earning in the region of £150,000 per annum, could use a range of tax reliefs and incentives to avoid paying any tax. I emphasise that these are not my views but those of the Assistant Secretary of the Revenue Commissioners, Mr. Seán Moriarty. He gave a graphic description to the conference through charts and explanations of how, if you are earning £150,000 per annum as distinct from £150,000 per annum, you can arrange your affairs in such a manner that you pay no tax at all. He said many of the so-called tax avoidance schemes depended for their effectiveness on being hidden from detailed Revenue scrutiny. He said: "In practice the Revenue is involved in a continuous battle of wits, seeking to ensure that higher income groups are subjected to the appropriate rate". The official tax returns for the self-employed and the figures quoted by Mr. Flanagan seem to indicate that the Revenue is losing the battle of wits.

Figures such as these incense people on PAYE who week in, week out, see one-third or more of their salaries disappearing in tax and PRSI. In my experience most people on PAYE do not object to paying tax, but they do object very strongly to having to pay so much tax when wealthy self-employed people, who can afford the necessary expertise, can minimise their tax liability through various devices, including loan interest on borrowings to invest in companies and partnerships, covenants, business expansion schemes, designated area reliefs, capital allowances and plain fraud.

Deputy Dukes, who is in the House, may think this is going too far and no doubt he will have his own views on this matter. I will give an example of what I call the Minister's 50-50 cash back. I am not aware that the Minister has answered questions in the House on this matter. He presented this proposal last year as a main plank of his taxation policy to stimulate enterprise and employment, but a year later it has created only 18 jobs. If that is not true I would like the Minister to deal with this question in his reply.

There is a myriad of new reliefs in the Finance Bill for the business and commercial sectors. The Bill has received a very broad welcome from the business sector, but whether that is an indication that it will be more successful in creating jobs and stimulating enterprise remains to be seen. Most of the new reliefs introduced by the Minister are justified on the grounds that they are designed to encourage enterprise and investment and thus promote job creation. In his statement on the publication of the Bill, he identified 17 such initiatives, but there does not seem to be any coherent or through-out strategy behind them. It reflects what I described in my budget speech as a buckshot approach — scatter the reliefs and resources all over the place in the hope that something will strike the target.

Virtually every Finance Bill in recent years contained a similar range of schemes, incentives and reliefs, all supposedly to promote job creation, yet our live register figure hovers close to 300,000. It is time that a qualitative cost analysis of these schemes was carried out. One of the most widely promoted reliefs has been the business expansion scheme. We know that no less an authority than the Comptroller and Auditor General has raised some very interesting questions about the efficacy of the business expansion scheme and whether there should be a more conventional cost-benefit approach in terms of the scheme's contribution.

I wish to refer briefly to the apparently optimistic forecasts of the ESRI which, although some of its conclusions are very tentative, suggest that there is a relative improvement in our economic prospects — that is better than the position up to now which is that there has been an improvement for relatives of the Government. Unless the 300,000 unemployed can see some prospects of being reemployed, talks of boom and bloom are very hollow for them.

If the Government is serious about jobs being at the top of its agenda it is inexplicable that the Minister has not acted on one of the greatest disincentives to research and development — I am referring to the VAT rates that apply to laboratory and research equipment. This punitive tax on progress causes foreign research foundations to scout around for other less taxing locations. Instead of encouraging the indigenous development of new products, technologies and processes, the Government appears hell bent on thwarting such developments at every turn. This Bill does nothing to change that. I would ask the Minister to consider that matter.

I would also ask him to consider the abuse of C45 certificates. I am surprised, since I know that trade unions have directly canvassed the Minister on this matter, that there is nothing that suggests this abuse is being brought under control. I have a letter from a member of the Labour Party which he sent to the chairman of that party, Deputy Kemmy. As he understands it, the Labour Party has not been successful in persuading the Minister to tackle this area of abuse. He said:

As a member of the Labour Party and worker in the construction industry, I feel compelled to write to you concerning a disturbing trend, which is emerging in the industry. I am referring to builders preferring to have their workers become "Self-Employed SubContractors" and work on C45 certificates.

I enclose a copy of an article from a recent issue of "Construction Today" which highlights the benefits to builders who opt for this system and the erosion of welfare entitlements of the new "Self-Employed". As a result of the increasing acceptability of C45s it is only a matter of time before:—

1. The "Black Economy" becomes the norm.

2. Safety standards deteriorate even further.

3. The role of and indeed need for Trade Unions will come under scrutiny.

4. The role of the Labour Party, now in Government and seen as in a position to influence national policy, in being part of a Government turning a blind eye to the erosion of workers conditions of employment is questioned.

Alleluia, at last one of them is waking up.

Yes, he is a member of the Labour Party and there is no reason I should not give his name, it is Mr. David Norris, No. 1, Kilakee Gardens, Firhouse, Tallaght. He is bringing to light a problem that is especially widespread in my constituency in Tallaght where a good deal of construction work is under way and C45 certificates are being widely abused.

I do not have time to deal with the article from Construction Today, but it sets out the serious implications for workers and calculates that savings to the employer on holiday pay was 13 per cent; pension and sick pay, 4 per cent; guaranteed week, 15 per cent; meal, travel and tool allowances, 8 per cent; PRSI 12.25 per cent — which is a loss to the Minister — and the training levy, 1 per cent, giving a total of 53.25 per cent. It can be readily seen why, if the matter is not policed and the abuse is not wiped out, employers would want to avail of it.

A very eloquent calculation.

For Deputy Rabbitte's information, the black economy committee is working with the unions, Revenue and the Department of Social Welfare in trying to seek ways to address this matter. I accept there is a problem and it is being examined.

I welcome that examination which is overdue. There is a very real problem in this area.

I wish to add my voice to what Deputy Yates and Deputy Cox said in respect of the excise duty on cars, not as it relates to the SIMI position of cars at the top of the range, but specifically to the question of the cubic capacity of middle range cars that have had to be adapted in order to comply with best environmental requirements. The insertion of the catalytic converter in particular has, as I understand it, produced a situation where there is a threat to market share, certainly in the case of one particular make of car. If it is accepted that the reasons for the change are genuinely for environmental considerations, it is unreasonable that the excise duty should penalise them for seeking to do that. I ask the Minister to address that area also.

I also want to give the Minister notice of my intention to raise on Committee Stage the question of the unfair application of the tax code to cohabiting couples. The Minister told me last year that he was favourably disposed towards this but that he wanted to await the implementation of legislation to allow the right to remarry. I would not like to be on the verge of getting married and waiting for this divorce referendum — and the way things are going, I would not count my chickens on it being held this year either. The Government seems to be getting cold feet on the issue and in particular the employment of consultants to make its arguments is an indication that some Fianna Fáil Ministers, not to mention backbenchers — and I do not include the Minister for Finance in this — will be hiding and taking both sides of the road with them. It is time we tackled this inequity for cohabiting couples in the tax code. If it is good enough for the social welfare code it is good enough for the tax code and we should make that change.

May I remind the House that the former Finance spokesperson for the Labour Party, now Minister Ruairí Quinn, described the then attempt to extend taxation to unemployment benefit as "harsh and uncharacteristically cruel". If it was harsh and uncharacteristically cruel when Deputy Quinn was on these benches, I can assure him — although he may come into contact with fewer unemployed people these days — that it is still harsh and uncharacteristically cruel and I will be fighting that particular measure tooth and nail on Committee Stage.

It should be remarked that it is not entirely usual in a debate on a Bill as important as this that the alternation of speakers in the House passes once without anybody contributing from the Government benches. It would seem that the Government Deputies are so ashamed or so worried about provisions in this Finance Bill that none of them wants to come into the House to say anything about it on Second Stage. I wonder what that will mean on Committee Stage. Is it perhaps due to the fact that the Fianna Fáil Parliamentary Party and the Labour Parliamentary Party are currently meeting, as indeed is my own party, but according to what I hear the debate in the Fianna Fáil Parliamentary Party meeting this morning will be about this extraordinary succession of statements and retractions from Ministers on the other side: the Taoiseach's gaffe about a combination of residential property tax and service charges, the Minister for the Environment's denial that the Taoiseach had any grounds for saying what he said and the various other rumblings we have heard from that side of the House.

I am sure the Minister will agree with me — although not too loudly, he is a polite fellow — that it would be far more interesting to be a fly on the wall at the Fianna Fáil Parliamentary Party meeting this morning than it would be to be here debating the Finance Bill. I wonder what the atmosphere will be like at the Labour Parliamentary Party meeting this morning when they discuss the combination of residential property tax, which was one of its favourite pieces of candy back in 1983, with service charges which — although its own leader at the time when he was Tánaiste and Minister for the Environment introduced them in this House — they tried to subvert around the country and are still trying to do it. Now they find themselves locked into a Government that apparently has a Taoiseach, one of whose aims in life now is to find a way of combining this draft residential property tax with a perfectly sensible system of local charges which both of the Government parties have opposed tooth and nail around the country. I wonder what the Labour Party will make of that. It will require a fair amount of ingenuity and not a little political accommodation in those two parties to arrive at any sensible view on whether some action is to be taken on foot of the Taoiseach's statements in Killarney or indeed whether the Minister for the Environment will win the argument.

Let us remind ourselves that there has been an interesting history in recent years of statements by Ministers for the Environment concerning property taxes and local charges. I am sure the Minister for Finance remembers well that there was a time when a Fianna Fáil Minister for the Environment, now gone to other pastures in Brussels, seemed to be talking about introducing a new form of local property tax. He tried valiantly several times to give the impression that the Government intended to do this until he was slapped down and was eventually so browned off with this that he allowed himself to be exported to Brussels. I know his daughter is trying to carry on the family tradition in his constituency, although she has not much hope of doing that.

Over the period of the last Fianna Fáil-Progressive Democrats Government, various tentative steps were taken in the direction of a more comprehensive local property tax to resolve some of the problems that the Government envisages with its tax programme. I wonder what that tax programme is, because the Minister for Finance and the Taoiseach have been trying to persuade us that they are involved in a deliberate programme of tax reform and that they want to increase revenue in some areas in order to reduce the burden of taxation on individuals. I see no evidence of any systematic move to reduce allowances in order to be able to reduce personal taxes.

If one considers what is taking place now, much of what is taking place in both directions is contradictory. As Deputy Rabbitte said, in this Finance Bill we have some improvements of reliefs in various areas of taxation. There is an extension of the urban renewal scheme to new areas. That is an extension of a relief which will be welcomed by many people especially in the new areas, including the town of Newbridge which is in my constituency. That is an additional relief that because the schemes that have already come in under the terms of the reliefs were introduced in previous years remain and the benefits of those tax reliefs continue.

There are a number of extra reliefs included in this Finance Bill in relation to capital allowances for various kinds of economic activity, including agriculture, where a strong case can be made for what is contained in this Bill. These are areas where we have some reliefs and the Goverment might say that it is extending reliefs where they will help to promote economic activity and in some of these areas, not all of them, that is probably true.

We then come, however, to areas where the Government is introducing new impositions in the context of this Bill and immediately we find an economic area where it is not a relief that is being brought in but a new imposition — the change in the rules relating to corporation profits tax, for example, and the modification of the definition of products that come within the scope of the 10 per cent profits tax. One of the buoyant areas of production in rural Ireland is the production of mushrooms. Under the provisions of this Bill it will be subject to a higher rate of corporation profits tax. The Minister cannot say he has a consistent approach to relief for productive enterprises that can expand employment. The Government says it wants to reduce personal taxation yet there are a number of new impositions in the Finance Bill, for example, mortgage interest relief will effectively disappear by 1997; VHI allowances against tax liability are restricted and the expenditure threshold for unusual medical costs before tax relief can be claimed has been raised. There is no discernible strategy that one can find in the Finance Bill regarding the productive sector or personal taxation and it is futile for the Minister to pretend otherwise.

Mortgage interest relief has been a target of tax reformers for many years, going back to the first report of the Commission on Taxation. The Government has not come clean in this area. Neither this Government nor its predecessor had the courage to give a programme of taxation over the next few years. The experts and pundits say it is impossible to have tax reform piecemeal because the opposition to any reduction in relief is more vocal than the support for a reduction in overall levels of taxation. That is a fact and is part of human nature. It is something Governments must deal with. This Government will fail, as its predecessors did, to get the message across that there is a coherent tax reform policy in place because it does not give the two sides of the equation. The Government has not given sufficient priority to the idea of tax reform in order to resist the pressures that arise in the latter part of the year when there are arguments about the Estimates, putting a budget together and the fact that the Government need an extra few million pounds in taxation to tie the two ends of the budget together. The Minister may deny that but he knows it is true. That is why the Minister for Finance has given us some daft taxation legislation — the last minute panic measure that is required in order to keep the Minister's figures somewhere near the overall fiscal targets he has set. It resulted in the 1 per cent income levy last year which the Minister tried brazenly to present as part of a comprehensive, long-term tax reform strategy. What happened to it? It was abolished this year because the Government found out it did not need it after all.

That was what we said we would do. We said we would abolish it.

That is no way to present comprehensive tax reform. The Minister will try to defend his position but he knows that is the truth.

VHI relief will be halved shortly. Many VHI members are worried about whether they will face extra charges if they need hospitalisation or treatment and draw on their VHI benefit. There is the particularly mean change in the tax relief for unusual medical expenditure. Up to now, if one spent over £50 on medical expenses which was not recoverable, one could claim tax relief. The limit has been trebled and is now £150 a year. For many people whose income is above the medical card threshold level but who are not well off, this was a useful provision and one which I advised constituents to use. It is not a well known provision.

There is the argument about residential property tax and whether the Government plans to combine it with service charges. It is nonsensical. Much of what Deputy Rabbitte said about wealth tax and so on is totally unjustified, unsystematic and out of keeping with any real analysis of what taxation is about. The residential property tax — I say this in the full knowledge of the history of that tax — is one of the worst taxes ever introduced. There was only one tax which was worse, namely the 1982 Fianna Fáil strategy of VAT at the point of entry. That was a matter of pure desperation but the property tax is just stupid. It was brought in because of the kind of nonsense Deputy Rabbitte goes on with.

There was a feeling some people were not paying enough income tax, therefore a wealth tax must be introduced. Since we do not know what paintings, yachts or jewellery people have stashed away in bank vaults or at home — not that they keep much at home these days — we should introduce a wealth tax in the form of a property tax. I had that argument with the Tánaiste and the late Deputy Cluskey. What they are saying is they are not happy the income tax system works properly at the high level. Deputy Rabbitte said there was no tax on these other forms of wealth but there is. If you have the good fortune to be a high income earner and pay full income taxation you then pay all the normal expenditure taxes when you purchase goods. If you buy a big car you pay tax; if you buy a yacht, paintings or jewellery you pay VAT. The proposition now is that you should pay a third level of taxation on your after tax income. That is nonsense. If the feeling is that such people have not paid sufficient tax then we should work on improving the income taxation system.

I remember the howls of outrage from Fianna Fáil when in 1983 I took real steps to improve the income tax collection system. They erupted and went berserk any time we proposed to make it incumbent on the self-employed to make and produce evidence of their returns. We gave the Revenue Commissioners new powers to do that. However, Fianna Fáil has finally seen the light and their is no more enthusiastic exponent of efficiency in tax collection than the present Minister for Finance.

The Deputy's colleagues hounded us two years ago when we extended the powers.

All his colleagues who had apoplexy in 1983 and 1984 are now cheering on our Bertie because he is doing a grand job. Nobody likes a Minister for Finance who makes the taxation system work but they all joyfully spend the money he gets. I am delighted that it is now acceptable in the political culture of this country that one makes the income tax system work efficiency. However, that means the Minister should take the opportunity to get rid of nonsenses such as the residential property tax. It was such an idiotic construct from the beginning that it should never have had any place in our system.

I want to refer very briefly to one or two other matters — I will deal with them in greater detail on Committee Stage. Section 16 amends a scheme introduced under, I think, the 1992 Finance Act which provided relief for expenditure on significant buildings. Under the scheme relief was given for expenditure on the unkeep of a building or garden which was open to the public for one month during the year, for example, maintenance and restoration work, etc. This scheme was introduced because it had been determined that a number of buildings and gardens were significant works in themselves and we needed to ensure that they could be maintained. Section 16 imposes a number of other obligations on the owners of such buildings or gardens: it extends the opening period to 90 days, including not less than 60 days during the period commencing 1 May and ending on 30 September.

The Minister should reflect on this provision which will make section 16 tourism policy, which was not intended in the original scheme. The original section in the 1992 Finance Act was intended to cover heritage policy under which relief could be given for the undoubtedly high costs of maintaining parts of our cultural heritage; it was not intended to keep gardens and buildings open for tourism. In many cases — the Minister can check this for himself — the 90 days opening requirement, including not less than 60 days during the period commencing 1 May and ending 30 September, is an excessively onerous imposition which will cause enormous problems. It may well result in some of these properties falling out of the net, not being maintained as they should and some properties deteriorating to the point that they will no longer be available to anybody. The Minister is incorrectly changing the original purpose of the scheme.

I join Deputy Rabbitte in encouraging the Minister to take concrete steps to improve the position of cohabiting couples under our tax law without waiting for the divorce referendum. Cohabiting couples have the worst of both worlds — the Revenue Commissioners treat them as if they were married, with the resultant penalties and the Department of Social Welfare treats them as if they were single, with all the disadvantages involved. One of Deputy Rabbitte's constituents first brought this matter to my attention a good many years go. Some steps have been taken to rectify the anomalies in this area in the meantime, but a conceptual leap is required to make our tax and social welfare laws equitable. This problem is causing suffering to a good many people and the Minister should avail of the opportunity to introduce improvements on Committee Stage.

I congratulate the Minister on the many major worthwhile concessions granted to all sectors of the community in this Bill. It is one of the most broadly based Finance Bills introduced in recent years and is acceptable to the vast majority of people. It is right to point out that its foundations were laid in 1987 under the Haughey-MacSharry administration which, because of the very poor state of the national finances, had to operate like a wartime cabinet. When Fianna Fáil came into Government in 1987 the country was on the verge of bankruptcy and people were afraid that the World Bank would have to be called in to put our house in order. Successive Fianna Fáil led Governments managed to rectify the state of the national finances in the intervening years. The recently published ESRI report highlighted many of the strong aspects of our economy and the factors which will lead to a climate for investment.

The previous Fianna Fáil led minority Government was strongly criticised at the time by many people, including, regrettably, our present partners in Government who are now reaping the rewards of the years of austerity which led to Ireland having one of the fastest growing economies in the Western world. The climate for investment was never more favourable than today. One has only to look at the Custom House Docks development, which has gone from success to success, to see proof of this. The location in that centre of approximately 140 financial services companies from all corners of the globe must be seen as a vote of confidence in our economy. It must be remembered that the Financial Services Centre is not funded by the Exchequer. Under legislation no grants have been payable to the Authority since December 1991; indeed the Authority is required to make a contribution to the Exchequer. To date the Authority has contributed £3 million to the Department of the Environment and this level of contribution from a development which is still in its infancy, so to speak, must be very welcomed.

Section 33 deals with the urban renewal relief scheme and I am very glad that the Minister decided to include Mallow, one of the oldest towns in North Cork and the largest in my constituency. This news has been widely welcomed in Mallow which has a high rate of unemployment. It is one of the fastest growing towns in County Cork and I look forward to the many developments and substantial investments which will be made as a result of its inclusion in the scheme.

I welcome the seed capital scheme which is very important for start-ups. This scheme, which has a great deal to offer to interested people, should be more widely advertised. The business expansion scheme has been very successful. I welcome the increase in the company value under this scheme from £150,000 to £250,000. These two schemes will be of great benefit to people who have the incentive to invest in business and they should be more widely advertised.

The measures being introduced to assist agriculture, in conjunction with the early retirement scheme, will greatly change the face of the agricultural sector and will lead to a substantial number of farms being transferred from older to younger farmers. Young people are the lifeblood of any industry and the early retirement scheme will help to stimulate higher levels of investment in agriculture and lead to more efficient production systems.

The reliefs granted in stamp duty and capital acquisitions tax for young farmers have been long awaited by farming organisations, including Macra na Feirme. These reliefs will help to lessen the burden on many families in the transfer of agricultural land which has a high value. I have lobbied for many years for a change in the capital allowances for farm buildings. Farmers can now claim relief at a rate of 15 per cent for the first six years. However, I would like to have seen the rate increased to 25 or 30 per cent to take into account the changing face of farmyard developments — a farm building which was regarded as modern five years ago is now regarded as out of date. I refer to buildings such as milking parlours, livestock houses, potato sheds and housing for sheep and pigs. EU directives and animal welfare regulations have led to rapid changes in this area. It will be necessary to provide for a shorter period for write down of relief for farm buildings if farmers are to invest in their farms, thus ensuring a modern agricultural industry.

A new aspect being highlighted is that of dairy hygiene. If we do not have proper standards in this area we will be unable to tap the resources of the world food market. There is also the matter of animal welfare on which we have not even touched as yet. However, I understand that the Minister for Agriculture, Food and Forestry is making a provision by means of some EU grant aid. That will go part of the way only. If there is to be development and investment to allow us put our house in order and keep pace with EU directives and regulations, we will have to examine additional changes in the provisions of the Finance Bill of next year vis-à-vis capital allowances. Such investment creates development and stimulates a rural economy, particularly bearing in mind the moneys spent on equipment, steel, iron, cement, gravel and labour. Many rural areas are very dependent on this type of small building industry. It has always been the backbone of rural villages and their economy. This area must be re-examined in the preparation of next year's Finance Bill. I have no doubt that people will be reminding the Minister of that necessity. I am aware of his helpful approach in this area. He understands the position well and is prepared to consider any necessary changes to keep us abreast of modern developments.

The change in probate tax on agricultural land is a welcome announcement which has been applauded by all who lobbied for such change. Those measures go a long way to alleviating a very serious problem for our agricultural industry and rural areas generally. If our economy is to grow there must be substantial investment in this area. There is no way that we can substantially increase public expenditure or reduce our national debt without such investment.

Two areas of concern to me are health and education. It is only a few years since we were closing hospitals and curtailing health expenditure, yet we appear now to be expanding. While I do not want to appear to be anti-health or education, they comprise two spending areas that can be funded only through taxation. We must keep a watchful eye on them because it was those areas that brought our economy into difficulty previously. A new hospital is being built at Tallaght, but the county hospital in Mallow has now a 64-bed complement where there used to be some 100 beds. Some money should be channelled into investment in that hospital to retore its full bed complement, which would not go to waste in that rural area. While a new hospital may be required in Tallaght we must examine its economics and the necessity within our economy overall.

A problem always facing our economy is our vulnerability to any change that takes place in the financial business sector in London or Germany. A few weeks ago we observed an increase in American interest rates occasioned by a shift of funds from Europe to the American market in order to benefit from those high levels of interest. Markets across Europe shuddered. When the Irish punt is fairly high against the £ sterling, at 97 pence, many difficulties are created for our exporters particularly those engaged in the production of food and other indigenous produce. We must maintain a watchful eye on this area at all times. We should align ourselves with some European currency to protect ourselves from the serious crisis we experienced in late 1992/early 1993 when our interest rates soared to heights of 30 per cent plus, doing irreparable damage to confidence in this economy. Many people were frightened, which led to a lack of investment. However, that overall scene changed rather rapidly. Within the European Union context we must examine a single currency. It would be in the interests of our economy to continue to promote the establishment of a single currency, particularly within an enlarged European Union with four additional member states. It is in the interests of this island that we vigorously pursue this objective and I am aware of the Taoiseach's commitment to it.

I have always been convinced that we must keep a close eye on the United Kingdom market which accounts for 30 to 40 per cent of our trade. They are our nearest neighbours and comprise a market of approximately 60 million people, who speak the same language, and have the same tastes in food. This renders it easy for us to trade with them. I want to refer also to the excellent budgetary fillip given our motor industry. Canvassing recently for the European elections, I called to a few garage owners to ascertain their views on the present position within their industry. They all spoke of the buoyancy within the motor industry, all expressing gratitude at the budgetary provisions to aid their industry. By and large the provisions of this year's budget and Finance Bill are progressive and should lead to a greater level of investment. The numbers of new cars, large and small, to be observed on our streets is further proof that the budgetary measures are effective as are the capital allowances.

I note the Minister of State at the Department of Agriculture, Food and Forestry, Deputy Hyland, is present. A small percentage of the mushroom industry is located in my constituency but it is big business in Minister generally and in the North East. Our mushroom industry exports approximately £51 million of produce to the United Kingdom and other markets annually. The total value of the crop is in the region of £65 million, providing a total of 5,000 jobs within the industry. The total level of production is 40,000 tonnes, of which 30,000 tonnes are exported. Our mushrooms are of the best quality and flavour. We are now known to be the best mushroom producers worldwide. Our greatest success is that we have allowed this be a labour-intensive industry and have not opted for mechanisation. If we seek to change our methods of production because of the changed taxation structure we will have to opt for a mechanical system of growing mushrooms or not engage in the process at all. If we have to mechanise mushroom growing we should remember we will be in danger of damaging the spawn. The mushrooms will lose their flavour and juices, rendering them of little value in the marketplace. They will become of comparable quality and standard to those produced by our competitors who are jealous of some of the concessions our producers enjoy. I appeal to the Ministers for Finance and Agriculture, Food and Forestry to aid and protect this very valuable indigenous industry which has thrived in recent years.

Another matter that concerns me is that money has not been paid to fruit and vegetable growers who suffered from the hazards of the weather of 1993 when many horticultural crops were lost. Commitments were given that these growers would be aided. I understand a substantial number of applicants for such aid await payment. Many of them may not be deemed deserving of payment. With the expertise now available to the Department of Agriculture, Food and Forestry and Teagasc, surely an assessment of their problems should have been undertaken by now. We are into another season, another growing year. Many growers who did not have the requisite funds to invest in their businesses this year have had to borrow at expensive rates from financial institutions. I ask that urgent action be taken in that area since budgetary provision was announced some months ago.

There has been much concern expressed about the behaviour and attitude of the Revenue Commissioners in their examination of books and documentation maintained at marts and marketplaces, instilling fear in the owners of those establishments and the people who trade with them. The Revenue Commissioners must adopt a more flexible, discretionary approach to the self-employed if we are to get our economy up and running. It is in that area that we must see investment and an appropriate climate generated. There is no point in the Revenue Commissioners hunting, badgering or chasing these people. Even small entrepreneurs are in fear. If we want to get away from the dole mentality, we must change our overall thinking and move in a different direction. If we are to become an enterprising society we must have more control over the Revenue Commissioners, lessening the type of taxation culture that has tended to be developed.

It has been a great week for the Opposition because of the Taoiseach's statement at the Irish Management Institute Conference in Killarney that he was examining new areas of taxation, rates or other impositions that would help to broaden the taxation burden, thereby creating a new climate.

An issue which was mentioned in discussions has been picked up by the Opposition and leads me to wonder whether the end of the world is approaching. There have been calls for taxation changes and different methods of taxation but when any new method is introduced to broaden the tax base there are screams to the effect that it will not work and Opposition campaigns are organised. We are then left with a few reliables such as capital tax, the PAYE structure and personal taxation.

Service charges were introduced under the Electoral (Amendment) Act, 1983, and a property tax has now been introduced. There was great merit in the Taoiseach's suggestion in Killarney to set up a committee to examine the co-ordination of the property tax and service charges. There is a willingness on the part of the public to pay some form of tax especially if it goes to local authorities. This would mean that they would have a broader financial base rather than being dependent on central government.

In New York, for example there are three taxes; the federal tax, the state tax and the county tax. There is room for change here and we should not make this a political issue because of the European or local elections.

I am pleased to have had the opportunity to praise the Government and the Minister. When I see all the concessions that have been introduced it is difficult to understand why there will be a division on the Bill this evening. The personal allowance has been increased by £175 for a single person and by £350 for a married couple thus bringing them to £2,350 and £4,700 respectively. That is a major step forward.

I am glad to have the opportunity to contribute to the debate. I contributed to debates on previous Finance Bills and participated in Committee Stage debates. A Finance Bill is complex and is only teased out effectively on Committee Stage. On that Stage it is a pity the Minister does not respond to suggestions. For example last year we raised several issues which were causing concern, one of which was the 1 per cent income levy and as a result the Minister abolished that levy this year. I opposed the probate tax and described it as a death duty. Its introduction was regrettable considering the small amount of revenue collected. Fine Gael opposed its extension to spouses. I am glad that subsequently the Minister saw the wisdom of our views and made amendments to that tax. He should have gone all the way and abolished the tax.

On Committee Stage of last year's Bill our amendments were not accepted. On occasions when one puts forward constructive suggestions they are not appreciated. For example the Finance Bill, 1993, was flagged as being concerned for business, particularly small business. We were told about a provision in it — the seed capital scheme — which was intended to give a boost to entrepreneurs to set up businesses in the form of a financial incentive. During the debate we pointed out that the regulations of the scheme would retard progress. Subsequent events proved us right because I understand the take-up under the scheme was minimal. The scheme proved a disappointment. I am pleased there are amendments in this year's Bill to relax some of the regulations of the scheme. The barriers and restrictions which prevent people setting up in business should be removed.

Out of our concern to stimulate employment in the clothing and footwear industries we made a major issue of the 21 per cent VAT imposition last year. Subsequently events proved us right in that those industries have been hammered and many jobs lost. This year's Bill I had hoped would contain provisions to reduce the amount of VAT.

The issue of mortgage interest relief has been of concern to many people. It is important to recall the history of that relief and its objective which was to encourage people to buy or build their own houses. That was achieved because there has been a phenomenal increase in home ownership. We must give positive inducements to encourage people to buy their own homes because during recent years very few local authority houses have been built. That means that the waiting list has considerably increased. If those people were to build a house they would need to be given some encouragement. The mortgage interest relief was a positive encouragement towards home ownership. I recall when the mortgage interest relief maximium stood at £4,800. Subsequently it was reduced to £4,000, and recently it has been reduced to £3,200. The relief is being systematically reduced.

Certain changes in the Bill, will impact on people who wish to own their houses. I am concerned that many provisions will hammer the middle income category. For example, the PAYE person who may not be eligible for higher education grants for his children will be affected by the reduction in mortgage interest relief and VHI premium relief.

On VHI relief, the House will recall a provision in the Finance Bill two years ago concerning people who sought treatment in public hospitals. It appeared laudable at the time and many people were penalised by a subsequent increase in their PRSI contributions in order to pay for this change. Money was taken out of the pockets of people who would not necessarily avail of public hospitals and who would use their VHI to avail of private treatment.

The Joint Committee on Commercial State-sponsored Bodies, of which I am a member, recently reviewed the operations of the VHI who will have to face more competition in the future. I was concerned about the mid-west region which has a population of 320,000 people. While the Limerick Regional Hospital is very good many specialist facilities are not available there. For example, there is not a cardiologist — I understand such a specialist will be appointed shortly — a dermatologist or a neurosurgeon. However, the VHI did not encourage local business people who were prepared to establish a private hospital; it would not subvent VHI patients. That is unfair to the people in the mid-west as it means the VHI member does not have a choice. Where a private facility is not acceptable to the VHI, patients are referred to Galway, Cork, Kilkenny and other centres. It is regrettable that the VHI could not support that service. The issue of balance billing generated a great deal of publicity and I am concerned about its effects on the VHI and the Hospital Consultants Association. At the Joint Committee on State-Sponsored Bodies I supported the move to ensure the GPs would inform patients whether consultants operate under the VHI or balance billing system. It is regrettable that news of the squabble between the chief executive and the chairman of the VHI has percolated through the national newspapers and the attendant publicity is certainly not doing the cause of the VHI or its 1.3 million members any good. Perhaps it is symptomatic of the fact that the VHI has only five board members whereas most semi-State bodies have nine. They should have at least nine board members and I supported this at the Joint Committee on State-Sponsored Bodies. I hope the unseemly squabble will be resolved because it is not in the interests of VHI.

On Valentine's day 1991 the then Minister for the Environment Mr. Flynn, announced his social housing plan. It was a laudable package but it has not lived up to what was envisaged. It has been disastrous for the local authorities who were asked to implement it because they were not given the necessary finance.

I am sure Members have received literature from the confectionery industry about the 12.5 per cent VAT rate which puts the industry at a competitive disadvantage compared with operations in the UK and Northern Ireland. The newspaper industry also is subject to severe competition from British newspapers which operate under more favourable economic conditions. Last year we discussed the rate of VAT on newspapers but no changes were made in the Finance Bill.

The Minister claimed that this Finance Bill was pro-enterprise but there are very few examples in the Bill to show that. I see a contradiction in the approach to enterprise. County enterprise boards — I am a member of such a board — operate with a certain degree of success. They act as a launching pad for service and manufacturing industries which in the past would not have been entertained by the State agencies responsible for industrial development. On the other hand the enterprise allowance scheme which gave many unemployed people the lift off to start a business and supported them in its first year of operation has been suspended and I have been informed it is unlikely to be reintroduced. It is regrettable that a scheme that encouraged people to go into business has been discontinued.

The Minister for the Environment has written to all the local authorities asking them to ensure they get value for money. I support this initiative. We are all aware that the implementation of EC legislation is being foisted on local authorities but no finance has been provided for this. The classic example is the Abattoirs Act. During recent years the county council in my area has had to spend £1 million in implementing the provisions of legislation, such as the Abattoirs Act, the health and safety Act, the maintenance of courthouses and so on. It did not have to do this in the past but finance was not provided for this additional role. It is regrettable that it is reducing the asset base of local authorities.

In my county council area we are probably losing £300,000 per annum on the operation of the refuse service but the greatest barrier to implementing an alternative system is Fianna Fáil councillors. I suggest the Minister should tell all Fianna Fáil councillors that he wants local authorities to get value for money. The onus rests on all county councillors to act responsibly instead of sneaking a mean political advantage, as happened in this situation. If the Minister wants local authorities to behave responsibly he should instruct members of his own party accordingly instead of expecting certain councillors to accept such responsibilities.

During my contribution to the budget debate I said I was bitterly disappointed at the allocation of £15 million for county roads. Whereas residential property tax generated a great deal of opposition in urban areas, where it was rightly condemned, the state of county roads is the contentious issue in rural areas. There is hardly a councillor who has not been approached at functions by people who are angry at the damage caused to their cars by the potholes. The general public has run out of tolerance and is extremely concerned about the country roads. In my area we were allocated £570,000 from the £15 million but there was a sleight-of-hand because we finished up with £40,000 less in our block grant for regional and county roads. Is that not a three card trick job? The impression is being given that the council will get an extra £570,000 over what it got in the previous year but it ends up with £40,000 less.

I wish the Minister of State, Deputy Hyland, well in the European elections. It is reported that with the support of the European Union there is £31 million at national level to be allocated subject to certain restrictions for county roads and we await with interest the announcement of the allocations. It is anticipated that my county council will get an additional £1 million which I am sure we will put to effective use. The sooner the announcement is made the better. Our party leader proposes that in relation to county roads we need to adopt a five year strategy and I fully support that. It is estimated that it will cost £24 million to bring the county roads in my area up to reasonable standard and the allocation of £4.5 million this year will be a step in the right direction, although it is not enough.

We must be realistic; we will not be given £24 million but given that funding has been allocated in a piecemeal way there should be a five year strategy which would allow us to plan ahead. We should eliminate the "drip feed" system whereby the local authorities have to speculate when discussing the estimates and how much they will be allocated. If it is possible to map out a five year strategy for the National Development Plan it should be possible to do the same in regard to county roads.

It is also proposed to extend the urban renewal scheme which was introduced originally by John Boland. This scheme has been a breath of fresh air and injected new life into many towns, including Portlaoise and Limerick. I would like to see more towns included in the scheme. I am thinking of towns in my own county such as Newcastle West, Rathkeale and Kilmallock, which are steeped in history. If some encouragement was given towns such as these would be given a major lift. It is only when we canvass at election time that we become aware of the number of derelict sites and buildings in small towns. I encourage the Minister to expand the number of towns included in the urban renewal scheme as the cost involved in stimulating activity would not be excessive.

I am pleased to have this opportunity to contribute to the debate and I hope to have another opportunity on Committee Stage to express reservations about certain aspects of the Bill.

I pay tribute to the Minister for Finance for bringing forward a Bill which will greatly enhance business confidence, particularly in the small business sector. There have been significant changes in taxation which will benefit taxpayers.

This Bill must be seen in the context of the 1992 and 1993 Finance Acts. The Minister is consistent in the financial management of the economy. The Bill must also be seen in the context of the Government's overall economic strategy as enshrined in the National Development Plan and the need to restrain public spending, to maintain strict budgetary discipline and to enter into responsible wage agreements under the Programme for Competitiveness and Work.

Accountants and accountancy bodies will acknowledge that the system is now more simple with the result that there is a greater degree of tax compliance. In 1992 and 1993 the Minister was attacked from all sides for introducing measures which were considered too severe but the system is working reasonably well and is being improved all the time.

In relation to the report of the task force on small businesses it is clear that the Government has put small businesses and their vital role in job creation to the forefront of its economic strategy. I welcome the measures in the Bill to improve the performance of small businesses. It is clear from the latest ESRI report and reports emanating from small firms and businesses that confidence is picking up and an economic recovery is under way. Small businesses have reported an increase in orders.

It is important to maintain this momentum and for the Government to remove as many obstacles as possible in the way of small businesses. Measures have been taken but we must go further. It is critical that long term finance at cheap rates is provided to allow small businesses to expand and develop and create extra jobs. When one considers the number of jobs dependent on small businesses it is easy to see how important it is to provide as many resources as possible for this sector.

The taxation changes in this Bill will improve significantly the position of the individual taxpayer. Personal allowances have been increased by £350 for a married couple and £175 for a single person while the standard rate tax band has been widened substantially from £15,350 to £16,400 for a married couple and from £7,675 to £8,200 for a single person. The Minister has been saying for some time that if we want to reduce taxation for the PAYE taxpayer in particular we must broaden the standard rate tax band. The Minister wants to continue this process and increase personal allowances to eliminate poverty traps and the disincentives to take up work. Many arguments have been put forward as to why people on social welfare are reluctant to return to work. The only way to tackle this problem is to reduce taxation and to allow as many people as possible to pay tax at the standard rate. The Minister made a significant advance in pursuing that strategy in this Bill. I also welcome the reduction in marginal relief from 48 per cent to 40 per cent.

There has been much hypocrisy from the Opposition benches on the question of tax reform.

Not only from there.

Last week the Progressive Democrats, the so-called mould breakers who made tax reform the cornerstone of their economic strategy, were hysterical when property taxes or rates were mentioned. The Opposition parties should be honest and spell out what they mean by tax reform and a proper system of local government funding. Fine Gael, the Progressive Democrats and Democratic Left all said in their manifestos that they are in favour of a proper system of local taxation and broadening the tax base.

For far too long politicians have been pulling the wool over people's eyes and pretending that tax reform equates with tax reductions. If we want to reduce taxation we must change the existing system. This would have implications for certain sectors or individuals who benefit from significant reliefs. If we wish to move in a certain direction we will have to curtail some reliefs but that is the choice we must make. We will have to listen to the people to see if they are anxious to make this choice but we cannot pretend that we can continue to reduce taxation without eradicating reliefs. I am talking in particular about VHI and mortgage interest relief.

Politically, the reintroduction of rates is not on. It must be accepted, therefore, that only a certain degree of progress can be made in reducing income tax. The Progressive Democrats' attack last week on the Taoiseach, who was making an intelligent and straightforward point about our taxation system, calls into question its sincerity about broadening the tax base and reducing taxation. Only a few options are open to us — to take in tax through income taxation, through VAT or indirect taxation, by way of property-based tax or as some form of rates. We have a huge debt that acts as a major constraint on what we can do from year to year. We still have a significant borrowing requirement each year which must be serviced and taking into account annual budgetary constraints, there is little room for manoeuvre. The other side of the coin is that there are increased demands from both Opposition and Government benches and the spending departments for increased expenditure on health, education and social welfare.

I welcome the merited, badly needed exemption for people on unemployment benefit who are participating in systematic short-time working arrangements. In that respect, the taxation of unemployment benefit and disability benefit could have a too severe impact on many people affected.

Although we are removing tax reliefs, perhaps we should assess their value as an instrument for developing certain sectors of the economy. The Commission on Taxation and other committees which met to consider the reform of taxation came down heavily against reliefs and called for their elimination. We should take a more flexible approach and look at sectors of the economy which could benefit from the application of tax reliefs, specifically the child care area. The second report of the Commission on the Status of Women dealt with child care and the employment opportunities it represents for thousands of women. It made a clear case for providing tax incentives, particularly where people are providing child care facilities that involve a significant capital cost. The Minister should look carefully at that recommendation.

That report also included a minority report dealing with tax relief for people who engage child minders. Many people are employed in that capacity on an irregular and informal basis. If there were generous tax reliefs child minding could be brought into the formal economy. This would generate a considerable number of jobs. Young couples have drawn my attention to the need to do something to alleviate the cost of child minding. Generous tax reliefs in this area would, in addition, to helping the parents involved give child care the recognition and respect it deserves. There is a strong economic argument, too, in favour of such relief because, although there might be some loss to the Exchequer in terms of tax foregone, it would give a badly needed stimulus to the child care area and generate considerable returns to the State.

I regret the decision to increase the thresholds on medical expenses relief.

Vote against it.

I accept that there have been no increases for quite a long time. However, the increases are too severe and perhaps the Minister will consider phasing them in.

Will the Minister put an extra tax on cigarettes and direct the resulting yield towards cancer research? Cancer remains a major killer in Irish society? There has been significant progress in the world generally and in our own country in the area of research into the causes of cancer etc. This has resulted in increased chances of survival. Research is vital because it allows the medical profession to detect cancers early, to treat them, and where possible, to cure them. I am not sure that we are giving to research the level of assistance that is needed. People complain about taxation on the "old reliables". The correlation between cigarette smoking and cancer is recognised. If the extra taxation on cigarettes was allocated specifically to aid cancer research, there would be a broad degree of acceptance for it. Prior to the budget, Ogra Fianna Fáil, a body with which I am associated, produced a policy document making that suggestion. That was from young people who feel strongly about this whole area. It is the kind of innovative thinking we need and that the Minister should consider seriously.

I welcome the increased incentives for the film industry, an important area which can enhance the profile and prestige of our country, create a significant number of jobs and generate considerable revenue. There will be many spin-offs if we can develop our film industry. The Minister for Arts, Culture and the Gaeltacht is doing a significant job in that area.

I welcome the proposals in this Finance Bill which enhance measures taken in earlier Finance Acts. The arts is an area which requires imaginative and generous treatment by the Exchequer. Studies carried out in the UK show that, pound for pound, the arts give a better return for public expenditure, assist urban renewal and give a high profile and prestige to areas and cities. Generous taxation measures would not be wasted on the film industry or on the broader arts area. In Cork there is a thriving arts infrastructure which gives a considerable degree of employment, retaining many graduates in the area where they find fruitful activity in the arts, in film, theatre, etc. That is something the Minister should bear in mind.

The urban renewal measures are also welcome. The designated areas status has improved many areas throughout the country and in the main cities. The city of Cork has benefited substantially with considerable urban renewal taking place in the heart of the city. The development in Cork is taking place mainly because people are striving to meet the deadlines of the old scheme. I look forward to the implementation of the new scheme which will come into effect on 1 August and ask the Minister, together with the Minister for the Environment, to follow through with its implementation and ensure that in all areas designated for urban renewal relief the local authority selects a team of officials to act in an integrated manner to sell the area and ensure it is developed. It is pointless for one arm of the State to put forward an incentive package if it is not followed through down the line. It is essential to have a more integrated approach by local authorities whose departments should work as a team to sell the scheme to developers and businesses and ensure it is successful. Such co-ordination was lacking in some previous schemes. I hope the new measures are taken on board in Cork and will have a significant impact on the city in future.

I referred to the overall impact of the Finance Bill. The decision on vehicle registration tax has had a dramatic impact on car sales which is a useful barometer in terms of increased consumer spending and economic progress. It is clear that we are on the right road, the ERSI report paints the picture.

It certainly does.

We must intervene in manpower policy and so on. With due respect to Deputy Durkan this and previous Governments in which Fianna Fáil has been a majority partner have been far more successful than Governments before 1987 in terms of budgetary constraint, financial management and sectoral development of our economy.

Fianna Fáil is running out of partners, it has had the Progressive Democrats, the Labour Party and now, it seems, the Unionists. What did they do for Fianna Fáil?

The Unionists are very impressed with the economic rejuvenation which has taken place in the South and would like similar financial managerial skills in their jurisdiction.

They were not impressed by the proposal and I am sure neither was the Labour Party.

They were very impressed.

I welcome the opportunity to speak on this Bill. Deputy Martin referred to its clarity. I am glad he can see its clarity and transparency because I cannot. It follows in the path of similar Bills which I referred to as being bandaged. It proposes improvements in areas which do not require improvement whereas areas crying out for improvement are being ignored. We have a mish-mash of the thinking of the Government parties. There is bound to be confusion. Deputy Martin is proud of the performance of this Administration but I warn him not to be overly possessive and proud in that respect having regard to the questions raised and the trauma suffered by backbenchers in the two Government parties since the budget. I will not go into the details because I do not wish to hurt members of the Government.

Democracy in progress, the trauma is being suffered by the Members opposite.

The vehicle registration tax raised the hackles of one of the partners. I am not sure as to which party one should give the credit for the introduction of that tax in its present form.

It was the Deputy's party who introduced it.

Neither party is willing to claim full responsibility for its introduction, but the reverse is the case in respect of other provisions.

Let us consider how some of the proposals in the budget are now being put into statutory form. I pity the poor PAYE worker. After the Minister for Finance made his budget speech in January we heard Members on the Government benches proclaim how benign the budget was in relation to PAYE workers. PAYE workers and their spouses looked forward to the Finance Bill as a progressive instrument to lift their taxation burden and cast out the demons which had bedevilled them for some time. What did they get? On 5 April they received their tax free allowance certificates from the Revenue Commissioners, acting in accordance with the guidelines laid down in the budget and the Finance Bill, which revealed that instead of relief there would be more damnation, hassle and an increased burden of taxation. That was an amazing performance in the light of the impression the Government had succeeded in giving at the time the budget was announced — that it was a benign Government, willing, anxious and eager to help those unfortunate people carrying a huge burden of taxation. The hopes raised then were quickly dashed. I was surprised that not a backbencher from either party cried out in alarm at what was being done to the unfortunate PAYE sector, for example, in regard to the provisions for mortgage interest relief and so on.

Section 7 deals with a revision of medical insurance relief. I consider it desirable that people take out insurance to protect them in the event of illness, but obviously some Member opposite does not think so and proposed that the relief provided up to now be narrowed and phased out. That is regrettable because it hits people when they are most vulnerable — the elderly and families with members who are ill. This is a peculiar measure from a progressive Government. The proposal in respect of unimbursed medical expenses is dealt with by this progressive, caring and considerate Government in section 8 where it proposes to shift the thresholds in such a way as to make life more difficult — from £150 to £300 in respect of families and from £50 to £150 in respect of individuals. I do not know the intention of the person responsible for that proposal but obviously he or she did not intend to make life easier for unfortunate people in need of medical attention. It will hit hardest at old age pensioners. The over 65 age group is not a huge lobby and it no longer seems to matter. Indeed it is viewed with suspicion by the Government. Whether those older people become ill, or take out medical insurance the Government taxes them. Likewise death taxes are increased. I do not understand that extraordinary attitude from the Government. Numerous people have asked me why the Government targets that group of people. How did they offend the Government? Why did the Government decide to reduce the allowance in respect of medical insurance and at the same time raise the medical expenses threshold? That it was not a benign move intended to help the people concerned, it was to take back with one hand what the Minister attempted to give with the other. That is a cold and callous attitude, not one of a caring Government. I was surprised and upset there was no public outcry about it. There was a time when a public outcry was common, but that has passed. There is certainly no outcry from Opposition backbenchers because they agree with taking money from old age pensioners and making life more difficult for them.

Exemption limits have been increased in those areas.

Deputy Durkan would hardly expect Deputies on this side to oppose them.

I know the Government expects a great deal from the Opposition and calls for clarity, honesty, integrity and forthrightness, that it is important for it to live up to those high standards. However, how does it expect us to put them into operation unless it does the honourable thing and takes its rightful place in Opposition? We will then deal with the matters it failed to deal with. That time will come sooner or later despite the shifting sands——

The Deputy is sinking in those sands.

He is in quicksand.

——and overtures initially to the unfortunate Progressive Democrats and then to the Labour Party, it is now seeking a third partner in the Unionists by offering something to which the people will be entitled following an election. I am bemused at the speed with which the Fianna Fáil Party is going through partners, at this rate it will soon not be able to find a partner here and will have to seek one abroad.

The Deputy wants another rainbow coalition. His party was not able to form a Government with three partners.

I emphasise that point because I am surprised that the Government backbenchers, usually the soul of Government, did not question raising the threshold from £150 to £300 in respect of unreimbursed medical expenses. Many of the public are more surprised than I, and some are shocked, that this caring Government should introduce such a callous measure. The Government should take note because the public want this matter dealt with. The Opposition cannot beat the Government in a vote but it should not forget that the public can.

That is not reflected in the opinion polls.

It does not matter how large the Government's majority is or how arrogant it becomes it can and will be caught.

Famous last words.

I do not know whether the Labour Party or Fianna Fáil is responsible for the most recent proposals on local taxation. The party responsible should own up because the public would like to know whether it intends to extend the RPT to include everybody or impose a graduated scale of local charges for which there are no effective services.

The Deputy is letting his imagination run away with him.

I was amazed — I am sure the Taoiseach was too — when the Minister for the Environment responded immediately when he heard reports from the IMI conference that this proposal was in the offing. I do not know if the scripts get mixed up. I would have thought that the opposite would have been the case, that the Minister would have made a statement and that the Taoiseach would have said it was not discussed in Cabinet, but the lines got crossed. A Government with such a large majority should not flounder, if it wishes to make an announcement it should do so. It should not skulk in committees and try to introduce a system which it does not have the guts to introduce in the House, especially in the run up to an election. The Government should have the courage of its convictions and be forthcoming about its proposals. When the Opposition and the public have heard them they will be better informed as to who to vote for. The public wish to know a party's proposals in advance of an election. Many measures introduced by the Government during the last 12 months were not outlind before the people voted in the last general election and the public are upset about that. It will be more upset on the next occasion it votes. The public believed the promise made by both parties in Government in the run up to the last general election and voted accordingly, but it cannot be blamed for that. The fact it was misled is incidential, neither of the Government parties is concerned about that but the public are upset. At this stage the Government should be forthcoming about its proposals. It would be desirable if it had information at its disposal in respect of the Government's proposals for the new taxation system or poll tax in advance of the local and European elections to be held in June and the by-elections which will be held whenever the Government makes a decision. The public should also know which party in Government is sponsoring that proposal.

The Deputy's concern is touching.

A single person who is ill and who has been unemployed in the previous tax year following submission of medical certificates to the Department of Social Welfare will receive £25 as a result of measures imposed by the two caring partners in Government. That figure is less than half the amount that person would receive if he or she was in receipt of unemployment assistance. This matter was contentious at the last general election when the dirty dozen was introduced. There are now a dirty dozen and a half, six were removed and 12 introduced in their place. The public cannot win. How many Government Deputies are fully aware of the impact of that hardship on a person who may be ill in hospital or recuperating at home? This Government does not care for the people who elected them.

It is wrong for the Deputy to give that impression. Nobody has to live on £25 a week.

Carlow-Kilkenny): That statement should be contradicted.

The Deputy is misleading the House.

It is said that a Minister of State does not know the position.

The position must be unique to County Kildare.

It is not unique. The procedure is that if people consider they are suffering hardship they can apply for supplementary welfare benefit.

I am pleased the Deputy clarified the matter.

We all know how that system works. It is difficult for a person recuperating from an illness at home or ill in hospital to collect that benefit. The Government's performance in this regard is amazing. I do not wish to be personal but the fact that a Minister was not aware of how the system operates highlights the fact that the position is worse than I thought.

I know as much about the situation as the Deputy.

A number of my colleagues or I will be more than happy to give the Government details of how some of the stringent measures imposed by it has affected honest, hard working people.

Medical research should be carefully considered and requires ongoing finance.

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