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Dáil Éireann debate -
Wednesday, 8 Feb 1995

Vol. 448 No. 7

Financial Resolutions, 1995. - Financial Statement, Budget 1995.

Before calling on the Minister for Finance to make his Budget Statement I desire to inform Members of the House that, in accordance with the precedent set last year, a copy of the Minister's speech is being made available to all Deputies. Notwithstanding the concerns expressed regarding the alleged premature leaking of the Minister's speech, Members should be mindful of their own responsibilities in maintaining confidentiality.

(Interruptions.)

The House will appreciate that media speculation as to the details of the budget cannot influence the Chair, who is obliged to ensure, as far as possible, that the arrangements set down by the Committee on Procedure and Privileges are adhered to. That is my position.

It is Government leakage, not media speculation.

The annual budget is about establishing priorities. It reflects choices and it affirms values. It is an indication of the type of society that we want for ourselves over the next 12 months and beyond and it contains some at least of the means to bring that about.

This is my first budget. It is in fact the first budget ever introduced by a Labour Minister for Finance.

The Minister is right there.

It is also a careful distillation, arrived at through honest and open negotiation, of the best ideas brought to the table by the three parties which make up this Government.

It is a radical budget. It sets out to achieve a number of objectives and is very far-reaching in its consequences. It is a budget for people at work and especially for those in modest circumstances. It will have profound effects upon families. It will give heart to young people seeking to broaden their horizons. It will demonstrate a commitment to the social fabric of our community, one of the most valuable assets we have.

It is also the first of three budgets which this new Government intends to introduce before the next general election. Accordingly, I want to set out three objectives for the budget.

This budget will reward work, promote enterprise and strengthen social solidarity.

Deputies

Good, that is very good.

Work is the key to our success as a people and as a society. It is the way that we fulfil ourselves as individuals. It is the way that we create wealth as a community. We must have more people at work. We must ensure that they are rewarded for working. We must provide the opportunity to work for those without work.

To achieve this, we have to develop, foster and promote enterprise throughout our society, in both the public and the private sectors. We have to promote excellence and demand quality in the services and products which we provide and sell both at home and abroad. We must encourage companies to prosper and grow. We must assist people to start their own enterprises. We must help families who want to develop their own businesses. We have to ensure that those businesses can pass safely from generation to generation. We must encourage employees to participate in the prosperity of their own enterprises by encouraging them to purchase shares in the companies in which they work. Above all, Ireland must become a good place to do business in, and to do business with.

We should do all these necessary things, which I have just described, so that we can afford to do the worthwhile things which we want to do. In our concept of a republic and a community, we are committed to equality and to solidarity. That means recognising that every individual has an equal right to belong, and an equal right to a full measure of human dignity. Neither age nor disability, lack of educational opportunity nor individual resources, can be allowed to deprive any member of our community of that dignity. Ours is a community that is willing to reach out, to reconnect and redirect the energies and strengths of our people towards each other.

In short, this budget represents a "growth dividend" for the people. Our economy could not be in the strong position that it is in, without considerable sacrifice on the part of many thousands of families and people at work. The years that we have spent reconstructing the economy, and building a firm base for the future, would not have been possible without that sacrifice. Now is the time to start recognising that, and to ensure that everyone gets a fair share of the growth being generated.

The Economy in 1994

Last year was a good year for Ireland. The Irish economy was one of the best performers in the European Union. All the main economic indicators showed positive signs of growth. In turn, this strong growth resulted in an impressive increase in the numbers at work.

—Employment increased by 36,000 last year or 3 per cent.

—Average unemployment fell by 12,000 from 294,000 to 282,000.

—Investment in our economy grew by over 7 per cent in real terms, and consumer spending increased by 5 per cent as domestic confidence improved.

—Our exports are estimated to have increased by 10.5 per cent and this strong performance reflected both the continuing success of Irish industry in overseas markets and the improved international environment.

We achieved all this while continuing to have a low rate of inflation at 2.4 per cent on average for the year.

The Outlook for 1995

The position now for 1995 looks favourable.

—Overall GDP is projected to grow by about 6.25 per cent while GNP will grow by about 5.25 per cent.

—Inflation will remain at about 2.5 per cent reflecting moderate domestic cost pressures and low inflation internationally.

—Growth in personal consumption is projected to increase by 5.25 per cent. With business and consumer confidence remaining strong, an increase of 9.25 per cent in the volume of investment is projected.

—The balance of payments surplus will remain substantial.

—Employment will increase by some 31,000 jobs.

—Unemployment is forecast to fall by a further 16,000 on a live register basis giving an average level of 266,000 for the year.

—On exchange rates, our policy is to pursue a stable exchange rate for our currency. This is essential to the maintenance of low inflation and competitiveness. On interest rates, basic mortgage rates are at their lowest levels since the mid-1960s. These low interest rates have cut costs for business and increased the attractiveness of investment. Our adherence to the Maastricht criteria on the public finances will continue to support the currency and interest rates, contributing to the overall competitiveness of the economy and, thereby, to employment.

Review of the 1994 Budget Outturn

The budget outturn for 1994 produced an Exchequer Borrowing Requirement of £672 million or 2.2 per cent of GNP.

—This outturn was £131 million below the EBR of 2.7 per cent of GNP which was targeted in that budget; for the first time since 1966-67 the current budget returned a surplus of £15 million; the general Government deficit, which is calculated under the arrangements agreed in the Maastricht Treaty, is estimated at 2 per cent of GDP compared with the budget estimate of 2.7 per cent. The general Government debt declined as a proportion of GDP from 96 per cent in 1993 to about 90 per cent last year, and this outturn places Ireland among the strongest in terms of fiscal performance in the European Union in 1994.

At this point I want to acknowledge and pay tribute to the performance of my predecessor as Minister for Finance. The fiscal achievements of the previous Coalition Government, in which Labour was a partner, have provided me as Minister for Finance with a very positive opening position.

However, I want to pay a special tribute to the Irish workforce which has, in the course of last year, made possible the very impressive performance which I have just described. I hold the view, strongly, that without the planned and responsible contribution which the workforce has made through the Pro-gramme for Competitiveness and Work many individual firms and, indeed, the overall Irish economy, could not have recorded the figures I have just outlined. I also want to pay tribute to the many small Irish companies which weathered the currency turbulence of 1992-93 and went on to develop and grow in 1994. I salute the leadership and the contribution of the social partners and assure them of the Government's appreciation of their work. We will continue to work closely together to maintain and develop the progress that has been achieved to date. The Programme for Competitiveness and Work is the foundation upon which that progress will be made.

I should point out that full details of the performance of the economy over the past 12 months and prospects for this year are being circulated today in the Economic Background to the Budget. Details and costings of many of the measures which I will be announcing today are contained in the Principal Features of the Budget.

Public Service Management

The Government is committed to the reform and development of our public service, to improve the quality of its work, the efficiency of its performance and the accountability of public servants.

The Strategic Management Initiative, launched by the previous Government, will be supported and implemented by this Government. In addition, the 1924 Ministers and Secretaries Act will be amended to provide for needed reforms. We will modernise the public service to ensure greater devolution of responsibility and accountability. We will provide for improved financial and personnel management, greater transparency and openness. In addition, we will introduce simplified procedures with a new emphasis on treating the citizen as a customer who is entitled to an efficient and effective service.

If we are to achieve our overall economic and employment targets, we will have to adhere strictly to the cost parameters of the Programme for Competitiveness and Work pay agreement in both the private and the public sectors. This Government will honour in full the Programme for Competitiveness and Work commitments to public servants.

Provision has been included in the Estimates for the general increases arising under the programme and for honouring the Programme for Competitiveness and Work commitment to negotiations on claims outstanding from the Programme for Economic and Social Progress. However, the Government expects in return that these negotiations will result in the achievement of genuine change which raises the level of efficiency, effectiveness and quality of public services and that the cost parameters agreed with the social partners will continue to be observed.

Public Service Pay Determination

Agreement was reached late last year on a new scheme of conciliation and arbitration for the Civil Service. The amended scheme for the Civil Service provides a model for other areas of the public service and negotiations are continuing in these areas. I would expect that the negotiations will be finalised in the coming months, so that a more transparent and realistic system of pay determination can be seen to operate throughout the public service.

Debt Management

The 1995 debt service estimate of £2,410 million takes account of £59 million in savings carried over from 1994 and a target of £100 million in savings to be achieved by the National Treasury Management Agency in 1995.

I acknowledge the important and valuable work which has been done by the agency. Indeed its success has attracted complimentary international attention.

Public Finances

As outlined in A Government of Renewal, firm management of the public finances is a necessary part of this Government's approach to employment and social justice. In the light of the heavy burden of existing debt, which pre-empts valuable resources each year in servicing costs, we must reduce that debt as a proportion of GNP and restrain borrowing comfortably below the 3 per cent GDP limit envisaged in the Maastricht Treaty.

We must also keep expenditure to levels which we can afford within this constraint. We said we would keep the increase in current expenditure this year to 6 per cent over last year, and we have done so.

I am not adopting a restrictive approach to the public finances just because of the Maastricht criteria; still less for book-keeping purposes. It is simply that lower borrowing is the best course for growth and employment. Lower annual deficits will encourage lower interest rates, thus encouraging investment and enterprise. Continued employment growth on a sustainable basis is impossible without such investment.

The opening Exchequer borrowing requirement, allowing for balances of £58 million, is £594 million. Having made provision for the measures I am announcing today, my targets for this year are:

Exchequer Borrowing Requirement £813 million or 2.4 per cent of GNP;

Current Budget Deficit £310 million or 0.9 per cent of GNP;

General Government Deficit 2.5 per cent of GDP.

Is that the effect of the leak?

These targets represent continued budgetary discipline and today's improvements have been formulated within that framework. There are special one-off factors this year which allow for such an approach. These will not of course be available in 1996 while the full-year costs of the measures concerned will also have to be borne at that stage. This will reduce considerably the budgetary room for manoeuvre in future years.

REWARD WORK

Let me turn now to the first of the three objectives of this budget and indicate how I intend to reward those at work.

PRSI and Income Tax

In order to direct relief to those on low incomes generally, including those outside the current income tax net, the Government has decided to introduce an allowance of £50 per week for full rate PRSI contributors. This means that for such workers, £50 of their weekly wages will be disregarded in calculating their PRSI contributions, thus affording a significant reduction in PRSI to those on lower pay. It has also been decided to renew the existing income tax PRSI allowance available to full rate contributors at £140 per annum rather than £286.

For example, for full rate PRSI contributors, this will result in gains up to £143 per annum or £2.75 per week for those exempted from income tax or on marginal relief. For those on the 27 per cent income tax rate the gain will be up to £103 per annum or just under £2 per week, and for those on 48 per cent the gain will be up to £73 per annum or £1.40 per week, before any income tax changes.

It has also been decided to provide a £10 per week allowance to those on the modified PRSI rate and to the self-employed. These groups do not get the income tax PRSI allowance. The PRSI ceiling applicable to employees and the self employed will increase from £20,900 to £21,500.

The standard rate income tax band is being widened by £1,400 to £17,800 for married couples and by £700 to £8,900 for single persons.

We had expected better.

The personal allowance is being increased by £300 to £5,000 per annum for married couples and by £150 to £2,500 per annum for single persons with an increase of £150 being applied also to widowed, single parent and widowed parent allowances.

The increases in the personal allowances and the standard band provide substantial relief for the vast majority of taxpayers even after taking account of the reduction in tax relief on mortgage interest and VHI premia which will occur in 1995-96 as provided for in last year's budget.

The general — under 65 — income exemption limits below which no income tax is payable are being increased by £200 to £7,400 per annum for married couples and by £100 to £3,700 per annum for single persons. To provide greater assistance to the elderly, the exemption limits for those aged 65 or over are being raised by £400 in the case of married couples and £200 for single persons.

The thresholds for payment of the employment and training levy and the health levy are being indexed in line with the 2.5 per cent general basic pay increase in the Programme for Competitiveness and Work. The threshold is being raised by £250 to £9,250 per annum or by £5 per week, from £173 to £178 per week.

The impact of the tax-PRSI package on a family with two children and only one spouse earning £15,000 on full PRSI and PAYE will be to leave them better off by £185 per annum or £3.56 per week.

It is estimated that all these changes taken together will remove 10,000 taxpayers from the tax net. In addition, the percentage of taxpayers paying tax at the lower rates will be increased from 62 per cent in 1994-95 to 64 per cent in the coming year or, in other words, almost two-thirds of all taxpayers will pay tax at the standard or marginal relief rate.

Preferential Loans

I propose to reduce by half of one per cent the specified rates used to determine the benefit-in-kind charge for preferential mortgage and other loans made to employees by their employers.

Profit Sharing Schemes

To promote worker participation and involvement in their companies I propose to increase the existing annual limit on relief for approved employee profit sharing schemes from £2,000 to £10,000.

Taxation of UB/DB

The Government's policy agreement states that the method of taxing unemployment benefit and disability benefit will be restructured, to improve the position of those most adversely affected. This commitment is being met in the first instance by the income tax improvements which I have already announced. However, a number of special additional measures are also being introduced.

Firstly, to assist families, the child dependant additions payable with unemployment benefit and disability benefit will be exempt from tax. Secondly, the special relief for systematic short-time workers introduced in the Finance Act, 1994, will be extended for a further year and broadened to include all such workers. Finally, the first £10 per week of unemployment benefit will also be exempt from tax from 6 April next.

Why not go the whole way?

This £10 exemption will be phased out over three years.

Rent Relief for Persons in Private Rented Accommodation

For the first time I am introducing a tax relief for all tenants living in private rented accommodation. The new relief will be effective from 6 April next and will give an annual allowance, at the standard rate, of £500 for a single person, £750 for a widowed person and £1,000 for a married couple. The over 55s will continue to enjoy the existing scale of reliefs.

Back to the absentee landlords.

Landlords will love that.

The cost of the relief will be reduced by an additional tax yield from landlords.

The relief will be worth up to £135 a year or £2.60 a week to a single person living in private rented accommodation. For a married couple the benefit will be up to £270 per annum or £5.20 per week.

Tax Allowance on Service Charges

Arising from the commitment by the Government in its policy agreement, I will be providing an income tax allowance at the standard rate up to a maximum of £150 in respect of local authority service charges which are paid in full and on time. This allowance will commence in the tax year 1996-97 for charges paid in respect of 1995.

I thought they were to be abolished.

Would Members please wait?

Let us hear the Minister without interruption.

Residential Property Tax

In the policy agreement, the Government undertook to reverse the reduction in thresholds for property value and income introduced last year in relation to residential property tax. The new thresholds reflect the 1993 thresholds indexed to 1995 values, and will be £94,000 for property, and £29,500 for income. The tax will be at a flat rate of 1.5 per cent.

That is what they call abolishing it.

The future of this tax will be considered in the context of the professional study on local Government financing as indicated in the Government's policy agreement.

(Interruptions.)

Kick for touch.

(Interruptions.)

The Minister without interruption.

PROMOTING ENTERPRISE

I now turn to ways in which I propose to fulfil my second objective, that of promoting enterprise.

Business Taxation

I will deal first with business taxation. This area covers employers' PRSI, corporation tax, capital gains tax and capital acquisitions tax.

Employers' PRSI

I have decided to increase the income threshold below which the lower rate employers' PRSI of 9 per cent applies from £9,000 to £12,000 or from £173 per week to £231 per week in terms of weekly earnings. This measure will cost £28 million in 1995 and £46 million in a full year. An increase from £9,000 to £12,000 in the threshold for the application of the lower 9 per cent rate of employers' PRSI will assist employers in maintaining and creating employment. For example, a business employing 20 people each earning about £11,000 a year or £210 per week would see its labour costs reduced in a single year by £7,000 or £135 per week. This measure will support some 170,000 existing jobs and reduce the cost of taking on new employees. Nothing like it has ever happened here before.

The Minister can say that again.

(Interruptions.)

I am also extending the employers' PRSI exemption scheme to include all under-23 first-time workers who meet the conditions of the scheme. Details will be published with the Social Welfare Bill. It has also been decided to maintain the ceiling on employers' PRSI at last year's level of £25,800 per year.

Corporation Tax

The Government has decided to reduce the standard corporation tax rate of 40 per cent and to continue on that road in the next few years as resources allow to secure a standard rate of corporation tax comparable with overseas competitors. Accordingly the standard rate of corporation tax will be reduced to 38 per cent with effect from 1 April this year as a first step on that road. This reduction will cost little in 1995 but will have a substantial cost in 1996 and future years.

It will help the banks.

I am also amending the application of the 20 per cent surcharge on certain close service companies. Details are in the principal features.

Capital Acquisitions Tax

As regards capital acquisitions tax, I am increasing the relief for business property transferring by gift or inheritance to a flat rate of 50 per cent for all qualifying assets. I am also introducing more favourable instalment terms for payment of capital acquisitions tax on business property which will give business owners with liquidity constraints the option of spreading these payments over 5 years at an annual interest rate of 9 per cent instead of the 15 per cent which prevails at present. These changes will greatly assist the transfer of family businesses from generation to generation. This will encourage both early retirement and the renewal of the management of the businesses.

Capital Gains Tax

As regards capital gains tax, I am providing for a number of improvements to the retirement relief available on the disposal of family business assets by entrepreneurs who are over 55 years of age. I am relaxing some of the conditions applying to rollover relief on equity investment by entrepreneurs in order to make it more widely available and give further impetus to new business start-ups. The proposed changes to retirement relief and rollover relief will take effect from 6 April this year.

Stamp Duty

In relation to stamp duty, I am abolishing from today the duty on the transfer of property and shares between associated companies. This measure will reduce the cost to Irish companies wishing to restructure their operations.

Seed Capital Scheme

I propose to improve the conditions attaching to the seed capital scheme. These changes relate principally to allowing the injection of funds by an entrepreneur over a longer period than provided for at present and increasing the maximum investment on which tax relief can be obtained from £75,000 to £125,000. I will be examining before the Finance Bill what other initiatives might be used to assist persons seeking seed capital to set up in business.

Bank Levy

Corporation tax payments by the banks have now risen to levels well beyond those needed to offset the bank levy of £36 million. The Government has decided to phase out the bank levy over three years beginning this year. Arrangements have been agreed with the banks to make good the resultant cash flow loss to the Exchequer through earlier payments of corporation tax as appropriate.

Now we know who are the friends of the banks.

A Deputy

Did Deputy Rabbitte agree to that?

Let us hear the Minister, without interruption.

In this connection, I have secured the agreement of the banks to develop and enhance their support for small and medium-sized businesses.

The Minister should not hold his breath.

The tax position of the banks will be kept under continuous review and responsible tax planning by all financial institutions is expected.

The Minister is the bankers' friend.

Revenue Preference

Section 115 of the Finance Act, 1986 secures the position of the Revenue Commissioners in the collection of certain taxes where a bank holds a fixed charge on the book debts of a company. The Small Business Task Force report stated that this section causes problems for small companies seeking bank finance. I intend to amend section 115 to limit this difficulty. My Department, in conjunction with Revenue and the Department of Enterprise and Employment, will consult with the banks and the business sector on a suitable form of amendment for the Finance Bill.

International Financial Services Centre

Last year was a very good year for the International Financial Services Centre in the Custom House Docks area in Dublin. About 100 excellent projects were approved. Direct employment now totals over 2,000. In addition, the European Commission approved a six year extension to the 1994 marketing deadline. In order to encourage the rapid development of the physical infrastructure of the centre, I have decided to extend the deadline of the urban renewal tax incentives for the area for a further two years, to 25 January 1999. Also, I am applying the terms of the seed capital scheme to trading activities on the Dublin Exchange facility with a view to facilitating local involvement in trading on the Exchange. I will propose a number of other legislative changes for the Finance Bill which will assist the continued development of the centre.

Pilot Renewal Scheme for Traditional Seaside Resorts

It has been decided to introduce on a pilot basis a renewal scheme for traditional seaside resorts. The aim of this scheme is to renew and update the tourist amenities and facilities in certain old seaside resorts. The tax incentives envisaged are broadly similar to those available under the urban renewal scheme. The pilot resorts where the scheme will apply are Achill, Ballybunion, Bundoran, Kilkee, Lahinch, Tramore, Westport and Youghal.

What about Salthill?

What about Blackrock in County Louth?

(Interruptions.)

This new scheme should not be regarded as a precedent for granting similar reliefs to other areas or sectors of the economy. The full details of this initiative will be announced by the Minister for Tourism and Trade.

Have they not heard of Salthill?

Or Barleycove?

They will not be very welcome unless changes are made to that list.

Motor Cars used for Business Purposes

I propose to increase to £14,000 the car-value threshold used for calculating capital allowances and allowable expenses in respect of new motor cars used for business purposes.

Special Savings Accounts

I am proposing to increase the 10 per cent rate of tax which applies to special savings accounts to 15 per cent with effect from 6 April, 1995. This will help to redress the imbalance between the tax treatment of deposit interest and other income sources. This change will provides Irish resident depositors with a competitive after tax return on their investment. Special investment accounts, which are required to invest substantially in Irish equities, will continue to be subject to the 10 per cent tax in respect of income and capital gains.

MEASURES TO ASSIST AGRICULTURE

Turning to farmers' taxation, I am increasing agricultural relief under capital acquisitions tax by raising to 50 per cent the current 30 per cent rate of relief for land and buildings over £300,000 and the 25 per cent rate for livestock and machinery. I am also introducing improved instalment payment provisions for capital acquisitions tax on agricultural property similar to those proposed for business property. These changes will give further assistance to the transfer of family farms to young farmers.

I am also introducing with effect from 6 April next a capital gains tax relief which will allow a farmer, whose land has been acquired by a compulsory purchase order for road-building or roadwidening purposes, to defer payment of capital gains tax subject to certain conditions.

Farmers' Stock Relief

Stock relief for farmers was due to cease on 5 April next and I have decided to renew it at the existing level of 25 per cent for a further two years as an incentive for farmers to increase livestock numbers. In accordance with the commitment in the Government programme, a new scheme of stock relief at a rate of 100 per cent is being introduced for young qualifying farmers for a limited period. This new scheme is targeted at this particular group to enable them to establish economic viability. In cases where a farmer has to restock as a result of the compulsory disposal of his entire cattle herd in compliance with a statutory disease eradication programme, 100 per cent stock relief is also being allowed over a two year period on the profits arising from this disposal and reinvested in replacement stock.

Does that apply to female farmers?

Farmers' Charter

In addition, £5 million has been provided to finance the investment associated with the charter of farmers' rights. The investment will go towards improved information technology, upgrading office accommodation and some increase in staff numbers as well as additional training for staff in the Department of Agriculture, Food and Forestry.

Agricultural Flood Relief

In view of the recent damage caused by flooding, I am providing up to £2 million for a scheme of compensation payments to farmers who have lost livestock or fodder in the floods. The scheme will be co-ordinated by the Minister of State at my Department with responsibility for public expenditure.

What about the roads?

How does that compare with your scheme?

(Interruptions.)

There will be ample time for debate. Let us hear the Minister.

Thank, you, a Cheann Comhairle.

TAX ADMINISTRATION

In pursuit of the simplification and streamlining of tax administration and legislation, I intend to consolidate the existing legislation dealing with income tax corporation tax and capital gains tax and I have received proposals from the Revenue Commissioners in this regard. Such consolidation, which will be a major task, has not been done in respect of income tax since 1967 and is long overdue. In addition, I intend to introduce a direct debit facility for the payment of preliminary tax under the self-assessment system. I also propose, following consultation with representative interests, to replace the VAT monthly control statement with antievasion arrangements less onerous on traders.

SOCIAL SOLIDARITY

Let me now turn to the third of the three objectives which I set out at the commencement of this statement and indicate the measures which will strengthen social solidarity.

Social Welfare

In this year's budget the Government's main social welfare objectives are: (1) to protect the spending power of social welfare recipients; (2) to take the first step towards a basic income system for children, as envisaged in the Government's policy agreement; (3) to reform the deserted wife's benefit and lone parent's allowance schemes; (4) to improve considerably the carer's allowance scheme; and (5) to give additional assistance to voluntary and community organisations.

Weekly Welfare Payments

I am providing for a 2.5 per cent increase in all personal weekly payments and adult dependant allowances.

What about Democratic Left's policy?

Let us hear the Minister out.

The Government has decided also that payment of this increase — and this is the part the Deputies opposite will not like — should be brought forward and come into effect six weeks earlier than usual, in mid June rather than end July.

We have heard about that already. Even in the darkest days we gave more.

It is unbelievable.

This will be sufficient to compensate recipients of these payments for the expected increase in prices.

(Interruptions.)
Child Income Support

I am providing for a £7 per month increase in child benefit, or the childrens's allowance as many people call it still. The monthly rate will now be £27 for the first two children and £32 for the third and subsequent children. This is the biggest increase ever, and will be of great benefit to all families with children. A mother with three children——

What about the father?

——will now get £86 a month or just over £1,000 a year. A mother with four children will now get £118 a month or just over £1,400 a year.

What will a pensioner get?

The Deputies opposite are as sick as parrots.

Deputy Cowen, let us hear the Minister out. There will be plenty of time for debate. There will be days and weeks of debate later.

Bearing in mind the value to families with children of this £7 increase and reflecting the intended new approach to child income support, I am leaving unchanged the current child dependant allowances, the family income supplement income limits and the child addition to the income tax exemption limits.

On child income support, the Government's policy agreement proposes moving towards a basic income for children. Briefly, this will involve moving away from the current general reliance on child dependant allowances and the existing family income supplement and towards a child benefit supplement. This supplement will be paid to social welfare recipients and low to middle income families. When fully developed, this new approach will help alleviate many of the employment and poverty traps inherent in the current system. I intend to develop the system in an integrated way so that, for the future, I will be relying on a more selective or targeted approach, via a child benefit supplement rather than the universally available and more costly child benefit. I am asking the expert group on the integration of the welfare and tax systerms to assist me in planning a strategy for the period ahead.

It will have to do a good deal of work.

I am also extending the coverage of child benefit to include 18 year olds in full time education and on FÁS courses. The package of child benefit improvements will come into operation from the beginning of September at a full year cost of over £100 million. The effect on take-home pay for a range of earners and family situations of the improvement in child benefit, taken together with the changes in income tax and PRSI already announced, is set out in the Principal Features.

Reform of Deserted Wife's Benefit and Lone Parent's Allowance

Under present arrangements, only women can qualify for social welfare payment on grounds of desertion. The Government has decided to remove the concept of desertion as a basis for qualification for a social welfare payment. This decision will require structural changes in the existing deserted wife's benefit and the means tested lone parent's allowance schemes. The Government has decided that these changes would be best handled through the amalgamation of both schemes to form a new unified scheme.

The Minister has abolished the deserted wife's benefit.

The proposed new scheme will not be a means tested one; however, it will be structured on a basis which will facilitate the gradual withdrawal of payment over a specified income range. This tapered approach will minimise the possibility of poverty traps and maintain the incentive for lone parents to return to employment.

The Minister has abolished the deserted wife's benefit.

It is the same difference.

Not only will the new scheme conform to the principle of equality of treatment——

That is just semantics.

——but it will also provide for a less intrusive approach by the State in the sensitive area of marital breakdown.

Carer's Allowance

The Government has decided that a number of improvements should be made to the carer's allowance scheme. These involve a widening of the coverage of the scheme to include non-social welfare pensioners who are over 66 years of age and a further significant relaxation in the means test. Full details of these measures will be announced today by my colleague, the Minister for Social Welfare.

We heard them last night.

(Interruptions.)
Miscellaneous Improvements

I am also providing for a wide range of other improvements in the social welfare code, which will be of special benefit to particular categories of social welfare clients. These include the following: (1) an increase from £10 to £25 in the minimum unemployment assistance payment to single people living in the family home; (2) an increase of £5 in the back to school clothing and footwear payments; (3) extension of the free colour TV licence to all social welfare pensioners currently getting an electricity allowance; and (4) an additional allocation for grants to voluntary and community organisations and the enhancement of the current employment support services operated by the Department of Social Welfare.

Details of all these valuable improvements are being announced today by the Minister for Social Welfare.

They were announced yesterday.

Total Cost of Social Welfare Package

The total cost of the package of social welfare measures which I have announced today will be £90 million this year and about £215 million in a full year. This level of spending makes the package one of the most significant in recent years, and will ensure that the interests of the disadvantaged members of the community and those in need of support, in particular families with dependent children, are well catered for.

Long Term Unemployment

Despite the continued improvement in the performance of the economy, the long term unemployed are not sharing in the benefits of our economic growth. I do not share the naive belief that market forces will solve this matter. The State must play its role. Throughout the European Union, structural long term unemployment has become the major social and economic problem facing member states. Ireland is not alone. The ESRI forecasts of positive economic growth for Ireland between now and the end of the century also indicate that long term unemployment will not simply go away.

The National Economic and Social Forum is one of the bodies that has looked in detail at our problems here. Its analysis is clear and comprehensive. We have to develop new methods and new systems to intervene systematically with the necessary help and assistance which is required.

Employment Service for the Long Term Unemployed

The Government's policy agreement proposed that an intensive guidance and placement service should be established for the long term unemployed which would be based on the concept developed by the National Economic and Social Forum. I am today providing a sum of £6 million to enable this service to be introduced on a pilot basis.

Following the NESF report, a task force was set up to examine the report and make proposals for better targeted and more effective services for the long term unemployed. The recommendations of the task force will form the basis on which final decisions on the new service will be taken by the Government.

Community Employment

The Community employment programme was introduced in March 1994 to replace a number of existing employment schemes. Average participation on these schemes last year was 31,000 at a cost of over £195 million. Provision for an average participation level of 35,000 in 1995 has already been made in the Estimates at a cost of £232.5 million. I am today making an additional net provision of £11 million so as to achieve an average participation of 38,500 this year.

Equal Treatment Payments

The Government's policy agreement contains a commitment to payment of the legally determined entitlements of married women to social welfare equality payments. We undertook that a budget and timescale for the payments would be set out, having regard to budgetary constraints and the costs involved, and that the process would be completed within four years.

The judgment of the High Court on this matter was delivered last Friday, 3 February. The judgment will require careful consideration by the Government, advised by the Attorney General, given the costs and the importance of the legal issues involved. While it has not yet been possible to fully complete that consideration, I am including a provision of £60 million as a first step this year. Should it prove necessary to spend more on these exceptional payments this year, there are funding possibilities open to me through the disposal of State assets.

(Interruptions.)

My budget target for the EBR would not then be increased by making further payments. The assets I will consider disposing of are not in commercial semi-State bodies.

Free Travel for Pensioners— North and South

The ceasefire of the 31st August last has continued to underpin and deepen the peace process on this island. The fear between neighbours, North and South, has been gradually reduced. To speed up this process, and in the interests of our neighbours, I propose to extend the free travel scheme to include pensioners in Northern Ireland undertaking cross-Border journeys.

Deputies

Hear, hear.

Is Deputy Currie eligible for that?

The existing free travel arrangements for pensioners in this part of the island will also be improved to put them on a similar basis.

We suggested that.

Seven years wasted.

I am glad the Minister took up my idea, he is welcome to it.

This means, in effect, that Dr. Ian Paisley can travel free on CIE and I hope he does.

Will the Minister check his ticket on the train?

Please allow the Minister to be heard.

Tax relief for donations to Third World Charities

Beyond Ireland's shores, many parts of the world are, unfortunately, enduring war, pestilence and hunger. In the Third World, famine has become a plague in a World of plenty. Irish people have instinctively responded to this human tragedy and many Irish organisations are actively involved on the ground in trying to alleviate this human plight.

Our response is out of all proportion to our numbers. Perhaps it is because we still carry with us, as President Robinson said last Thursday, some memory of the horror of our own great famine, which began this spring one hundred and fifty years ago.

I intend to mark that anniversary by providing tax relief at the standard rate on donations by individuals to designated Irish Third World charities. Taxpayers will be able to make their contributions in the range of £200 to £750 to the designated Third World charity of their choice. That body will receive the tax associated with the contribution from the Revenue Commissioners. This means that a donation of £750 will be worth just over £1,000 to the charity concerned.

This new measure will, for the first time, allow people to exercise choice with regard to the agency to which they wish the State to contribute part of our official development assistance. We are committed in the programme for Government to increase, each year, our ODA. This measure will help us to continue to do that as the tax component of the donations will form part of our ODA assistance.

A clawback.

Agency for Personal Service Overseas

In addition, I am introducing arrangements which, for the future, will enable time spent on voluntary work abroad with the Agency for Personal Service Overseas by Irish public servants on a limited basis to be reckonable for pension purposes. These measures will further strengthen the links of support and solidarity between this country and the Third World.

County Roads

Many of our county roads are in poor condition.

The rest are impassable.

The changing pattern of use and the increased weight of agribusiness trucks have taken their toll on traditional roads which have poor foundations. The recent bad weather and flooding have aggravated this already difficult situation. As an immediate response, I am providing £8 million extra this year——

It was £20 million last year.

——which will bring the total Exchequer allocation to over £100 million for this purpose in 1995.

In addition, the Minister for the Environment, as a matter of urgency, will prepare a report for Government on the situation. This report, which will be completed within a matter of months, will enable us to develop a coherent and integrated plan to bring our county roads up to an acceptable standard over the next ten years.

Will there be a grant for boats?

Hospital Waiting Lists

The Government's policy agreement contained a promise to continue with the initiative to reduce hospital waiting lists. I am providing £8 million for this purpose in 1995.

Another reduction totalling £12 million.

The Arts

The arts play an important role in developing our culture, promoting Ireland abroad and increasing employment at home. I am providing additional funding of £2 million to the Arts Council.

Tax relief for heritage

It is important that we as a nation can collectively enjoy our rich cultural heritage. Therefore, I intend to introduce a special tax relief for donations to national collections of important heritage items, including paintings. The details will be published in the Finance Bill.

Miscellaneous

I propose to provide additional funding of £2.3 million for tourism promotion, £3.5 million for preparatory work related to Ireland's Presidency of the EU in 1996——

More trips for Gay.

—— and £2.1 million for certain sporting, cultural and social projects, details of which are set out in the Principal Features.

Third Level Fees and Covenants

The Government has decided to phase out over two years fees for third level undergraduate students in publicly funded colleges and to abolish fees for post leaving certificate courses.

There are no fees for those——

Details of this important change will be given today by my colleague, the Minister for Education.

In conjunction with this change, I am extending the restrictions which currently apply to parent-child covenants to all covenants. This entails the application of a 5 per cent income limit and the abolition of tax relief on covenanting to minor children other than incapacitated children. These changes will apply to new covenants taken out on or after today and to existing covenants from 6 April next. In addition, from next year when fees are abolished, I will be abolishing tax relief on covenants generally. Tax relief will be retained for certain covenants, including those for the elderly and incapacitated, as set out in the Principal Features. The changes do not affect covenants for maintenance payments between separated spouses.

Provision will be made for tax relief on fees paid to private colleges in respect of approved courses. This relief will be introduced for the academic year 1996-97. It is also intended that maintenance grants under the higher education grants scheme will be extended to approved courses being followed by Irish students abroad with effect from the 1996-97 academic year.

INDIRECT TAXATION

VAT/Excise/Motor vehicle taxation

I propose to make no changes in VAT rates or their coverage today. Existing arrangements will, of course, continue to be kept under review having regard to both domestic and EU considerations.

In the excise area, I propose to seek an additional revenue contribution from a tax increase of 12p per 20 cigarettes, with pro-rata increases on other tobacco products, which will apply from midnight tonight.

Poor P. J. Carroll.

This adjustment, which will assist the financing of Government priorities in other areas, should not give rise to cross Border trade diversion or add unduly to inflation.

I intend to introduce a scheme which will give a vehicle registration tax relief of £1,000 where a car at least 10 years old is scrapped and the owner purchases a new vehicle.

What about the Minister's Volkswagen?

Schemes of this nature, which can have environmental advantages, have been employed with success in other countries. The proposed measure will be once off, running from 1 July 1995 to the end of next year. It will apply to those older cars which, at the time of purchase of the new car, have been continuously taxed and insured by the purchaser of the new car over the previous two-year period.

What will happen to the 42,500 English imports?

Post-Budget Expenditure and Revenue Position

The cost of the various taxation and PRSI measures I have announced will be £159 million, while expenditure additions total £143 million. The budget targets already indicated take into account these costs and the effects on revenue buoyancy of the totality of the measures announced today. These targets reflect the commitment of this Government to the prudent budgetary strategy set out in the Government's programme.

Medium Term Outlook

While I acknowledge that this year's budget is benefiting from certain once-off factors the absence of which will create pressures in future years, I want to confirm that the central direction of this budget will underpin the policy of this Government, as set out in A Government of Renewal, over the next two years.

We will need firm discipline and strict adherence to our commitments if we are to meet the targets we have set for ourselves in the policy document A Government of Renewal.

I am therefore inviting people to begin to plan for the future within the parameters in this budget and set out in the Government's programme. The provision of certainty in a rapidly changing world is one of the major positive components which a government can provide to a community which needs to plan and wants to invest.

In this regard the existence of the social partnership, and the framework for dialogue and consultation which it provides, is an essential part of our way of doing business.

The existence of the Programme for Competitiveness and Work, the National Development plan, and the commitment of this Government to maintain its budget strategy, which I have outlined here today, provides a secure future within which I am inviting the Irish people to plan and invest.

Vision 2010

I am now inviting you to do more, because planning for the next three years is not enough. We need to lift our eyes and focus on the horizon of the near future, which will take us into the next century. The year 2010 is only 15 years away, which may seem a long time forward, but is as close to us as 1980.

Our political, economic and social energies must be co-ordinated to focus on a set of goals to which we can aspire and which we can also achieve. Nobody else will do this for us. As a sovereign people, we must do it for ourselves. In 15 years time Ireland should and can have the average per capita income of the European Union, provide full employment for those seeking work——

Programme managers and all.

——have the best preserved and the best managed environment in the European Union, possess the most efficient and effective public administration in European and be perceived, outside Europe, as the best place in which to invest and do business in Europe.

These goals, which can only be achieved with leadership, teamwork and imagination will, if implemented, transform our lives and the lives of all of the Irish people who will come after us.

All of the components required to enable us to achieve these goals are within our control. We are truly, at last, a sovereign people. What we need to do now is to begin to exercise that sovereignty. We can build a society which admires success, rewards work, celebrates excellence and also promotes opportunity, demands equality and treats misfortune with compassion and solidarity.

CONCLUSION

This budget is but one small step in that direction. Some of the measures it contains may not work as effectively as we intend. If so, in time, we will correct them, but all of them, taken together, will move us in the direction of the objectives I have described. They will reward work, promote enterprise and strengthen social solidarity.

Beyond that they will enable us, as a people, to embrace the future with confidence and to shape it with courage.

TABLE EXPLANATORY OF CURRENT BUDGET, 1995

Revenue

£m

Expenditure

£m

£m

1. Tax Revenue

11,193.0

1. Central Fund Services

2,986.9

Adjusted for: modified renewal of PRSI income tax allowance

-17.6

£m

Bank Levy provision (of which £12million Corporation Tax)

36.0

2. Non-Capital Supply ServicesAdjusted for net revisions to Estimates

8,702.7-24.8

11,211.4

8,678.0

2. Non-Tax Revenue

346.4

Add:3. Social Welfare improvements, including Health element

90.2

Income Tax reliefs:

£m

4. Equal Treatment Provision:

—increases in personal allowance, standard rate band, and exemption limits

-88.6

Cost of Budget commitment Less balance on Social Insurance Fund

60.0

10.0

—Other Income Tax concessions

-22.2

-50.0

-110.8

10.0

Capital Tax Measures, Including RPT

-5.5

5. Contribution Initiatives (impact on Supply spending):

Corporation Tax measures

-2.0

PRSI concessions

92.7

Threshold for Employment & Training Levy

-0.8

Threshold for Health Contribution

1.1

Stamp Duty Measures

-0.4

93.8

-119.5

6. Employment Measures:New/expanded schemes (net expenditure change)

17.0

4. Add:

Other Income Tax measures:

10.0

Excise Duty measures

25.7

7. Education: Third Level Fees

10.0

35.7

—Health: Waiting List

8.0

—Environment: County Roads

4.0

—Foreign Affairs: EU Presidency preparations

3.5

5. Net effect on tax revenue of tax and spending changes

68.0

—Agriculture: Farmers' Charter; Flood relief—Arts Council

4.02.0

—Various

2.8

6. Current Budget Deficit

310.1

34.3

8. Estimated Departmental Balances

-58.0

11,852.2

11,852.2

TABLE 1

1994 BUDGET OUTTURN

1994

Budget Estimate

Provisional Outturn

£m.

£m.

Current Budget

1. Expenditure

(i) Central Fund Services

2,758

2,821

(ii) Supply Services

8,357

8,367

11,115

11,188

2. Revenue

(i) Tax

10,458

10,835

(ii) Non-Tax

388

368

10,846

11,203

3. Current Budget Deficit/(Surplus)

269

(15)

Capital Budget

4. Expenditure

(i) Public Capital Programme

2,379

2,256

(of which, Exchequer PCP)

1,148

1,112

(ii) Other (non-programme)

77

120

2,456

2,376

5. Resources

(i) Exchequer

691

545

(ii) Non-Exchequer

1,231

1,144

1,922

1,689

6. Exchequer Borrowing Requirement for Capital Purposes

534

687

7. Total Exchequer Borrowing Requirement (3+6)

803

672

8. Total Exchequer Borrowing Requirement as % of GNP*

(2.6)

(2.2)

* This ratio is calculated on an estimated GNP outturn which reflects CSO revisions announced subsequent to the 1994 Budget.

TABLE 2

CURRENT GOVERNMENT EXPENDITURE AND REVENUE IN 1994

Current Expenditure

Current Revenue

Item

£m

% of gross expenditure

Item

£m

% of total

Service of Public Debt

Budget Surplus

(15)

(0.1)

Central Fund Services (Part):

Interest

2,004

14.6

Sinking Funds, etc.

223

1.6

Total

2,227

16.2

Tax Revenue

Economic Services

Customs

191

1.7

Industry and Labour

389

2.8

Excise Duties

1,960

17.5

Agriculture

524

3.8

Stamp Duties

279

2.5

Fisheries, Forestry

42

0.3

Income Tax

4,062

36.3

Tourism

35

0.3

Income Levy

51

0.5

Corporation Tax

1,140

10.2

Value-Added Tax

2,603

23.3

Total

990

7.2

Motor Vehicle Duties

249

2.2

Capital Taxes

120

1.1

Employment and Training Levy

171

1.5

Infrastructure

90

0.7

Agricultural Levies (EU)

9

0.1

Total

10,835

96.9

Social Services

Health

2,111

15.4

Education

1,875

13.6

Non-Tax Revenue

Social Welfare

3,903

28.4

Fee Stamps

27

0.2

Housing

4

0.1

Interest and Dividends

Subsidies

169

1.2

on Exchequer Advances

104 127

0.9 1.1

Total

8,062

58.7

Central Bank — Surplus

127

1.1

Income

Proceeds of National

91

0.8

Security

1,012

7.4

Lottery Surplus

19

0.2

Miscellaneous

Other

1,358

9.9

368

3.2

Total

Gross Expenditure

13,739

100.0

Supply Service Receipts

2,551

Net Expenditure

11,188

Total Revenue

11,188

100.0

TABLE 3

CURRENT GOVERNMENT EXPENDITURE 1991-1995

1991

1992

1993

1994 Provisional Outturn

1995 (1) Estimate

% change 1995 over 1994

£m

£m

£m

£m

£m

%

Service of Public Debt

Central Fund (part):

Interest

2,149

2,142

2,159

2,004

2,138

7

Sinking Fund etc.

204

213

231

223

268

20

Sub-Total

2,353

2,355

2,390

2,227

2,406

8

Economic Services

Industry and Labour

246

286

320

389

464

19

Agriculture

494

551

576

524

561

7

Fisheries

25

29

30

36

36

Forestry

5

5

7

6

7

17

Tourism

26

27

28

35

33

-69

Sub-Total

796

898

962

990

1,101

11

Infrastructure

Roads

33

34

34

57

47

-18

Sanitary Services

2

1

1

1

1

Transport

36

40

39

32

26

-19

Sub-Total

71

75

74

90

74

-18

Social Services

Health

1,535

1,722

1,907

2,111

2,159

2

Education

1,415

1,569

1,727

1,875

1,970

5

Social Welfare

3,186

3,534

3,743

3,903

3,993

2

Housing

8

5

4

4

5

25

Subsidies

167

167

170

169

164

-3

Sub-Total

6,311

6,997

7,551

8,062

8,291

3

Security

Defence

389

395

403

427

435

2

Garda

333

362

391

412

422

2

Prisons

79

85

91

98

99

1

Legal, etc.

50

57

65

75

85

13

Sub-Total

851

899

950

1,012

1,041

3

Other

Central Fund (part):

EEC Budget

348

354

453

507

544

7

Miscellaneous

22

17

26

87

33

-62

Supply Services(2)

557

577

648

764

837

10

Sub-Total

927

948

1,127

1,358

1,414

4

Gross Total

11,309

12,172

13,054

13,739

14,327

4

Less: Supply Services Appropriations in aid, P.R.S.I. receipts

2,236

2,373

2,535

2,551

2,641

4

Net Current Expenditure

9,073

9,799

10,519

11,188

11,686

4

Exchequer Pay and Pensions included in above (2)

3,392

3,761

4,097

4,370

4,613

6

Notes:

(1) The 1995 Estimate corresponds to figures published in the White Paper on Receipts and Expenditure 1995.

(2) The figures for 1991, 1992 and 1993 reflect actual audited expenditure.

TABLE 4

RECEIPTS AND EXPENDITURE OF THE EXCHEQUER AND OF LOCAL AUTHORITIES 1972-1995

Exchequer

Local Authorities (a)

Current Revenue

Non-capital Expenditure

Expenditure

Revenue (b)

State grants received

Rates collected

£m

£m

£m

£m

£m

1972—73

659

665

240

138

70

1973—74

793

803

298

183

71

1974 (April-Dec.)

651

744

292

190

61

1975

1,091

1,350

481

332

84

1976

1,470

1,672

567

404

109

1977

1,757

1,958

684

504

111

1978

2,023

2,420

831

670

82

1979

2,384

2,906

1,007

820

91

1980

3,155

3,702

1,313

1,062

103

1981

3,973

4,775

1,565

1,284

102

1982

4,908

5,896

1,878

1,560

95

1983

5,711

6,671

2,093

1,749

105

1984

5,952

6,991

2,302

1,888

122

1985

6,331

7,615

2,493

2,066

141

1986

6,710

8,105

2,633

2,160

153

1987

7,151

8,331

2,699

2,223

170

1988

7,690

8,007

2,387

1,862

194

1989

7,756

8,019

2,552

1,931

231

1990

8,269

8,421

2,761

2,116

239

1991

8,776

9,076

3,000

2,349

252

1992

9,360

9,806

3,285

2,591

265

1993

10,140

10,519

3,383

2,683

280

1994(c)

11,203

11,188

3,647

2,996

305

1995(d)

11,539

11,690

3,807

3,195

320

NOTES:—(a) Local Authorities comprise County Councils, County Borough Corporations, Borough Corporations, Urban District Councils, Town Commissioners, Regional Health Boards, Vocational Education Committees and County Committees of Agriculture.

(b) The revenue of Local Authorities comprises rates, State grants (including payments on behalf of Health Boards to voluntary hospitals and homes in respect of general medical services) and other receipts e.g. rents and fees. Only State grants and rates are shown herein.

(c) Provisional.

(d) These estimates are consistent with those in the 1995 White Paper on Receipts and Expenditure.

Where is Deputy Rabbitte, has he gone to ground?

I have the honour of being the last Opposition spokesperson to reply to a formal Budget Statement such as the one given today because if the events of the past fortnight are anything to go by and if the contents of the Budget Statements are leaked in the way this one was, this will be the last time we will have to go through this charade. There will be no need for the Government to hold a constitutional referendum on Cabinet confidentiality if what happened before this budget continues to happen. As my party leader said this morning, in the past we may have been too concerned about budget secrecy. It is a serious matter when all of the budget is leaked in advance.

Even as we sat here today a Minister of State decided to issue a press release at 4.08, when the Minister for Finance had only been on his feet for eight minutes, discussing the budget and the various matters contained therein. The Ceann Comhairle asked Members of the House not to do this during the Budget Statement. This release was issued during the speech this evening and I take it the Ceann Comhairle will take up this matter with the Committee on Procedure and Privileges in the near future.

I can laugh at myself and many aspects of my life and I do not take myself seriously all the time. However, when dealing with serious matters of State there is a need to treat them as such. We cannot allow a situation where a Government — Whether it is made up of three or any number of parties — can allow the kind of leaks that have occurred in the recent past. I know the Taoiseach will heed my concerns in this regard. I ask him to take action because, if it had been planned to increase the bank levy or make other major taxation changes in today's budget, there would have been a run on the financial markets. Ministers who have recently joined the Government should be conscious of that before telling their programme managers and advisers what is in the budget.

This is being observed from abroad and Deputy Quinn, who is a student of history, will recall that a British Chancellor of the Exchequer, when walking into the Chamber to deliver his budget speech, happened to mention an aspect of his budget to a person who told a journalist. Arising from that the Chancellor resigned that evening, not because it had made any difference to the financial markets but on a point of principle. I hope this will be the last time we proceed like this. I am open enough to say that perhaps the spending Estimates of the budget could be discussed long in advance but we cannot have the position we have had recently.

One of the newspapers this morning, in giving all the details of the budget, said the Department of Finance was leaking like a sieve. To my certain knowledge, the permanent civil servants in that or any other Department have not been involved in the leaking of this budget. It is a slur on the public servants who have served this State long and well——

——and especially on the Department of Finance, which if I may say so goes to the other extreme. They would hardly say what day tomorrow was if it could be avoided. It is a pity that has been said and I hope an opportunity will be taken to correct it.

When I was a student a colleague of mine, Deputy Power, used to bring me in here to listen to the budget. I sat in the Public Gallery. One day I wanted to take notes because I was an accountancy student and an usher told me I could not even do that. That shows what a serious change has taken place. I do not say this lightly. Not everything should be covered up — I am all for openness — but in a matter like the budget I ask the Taoiseach not to proceed on this basis in the future.

I say this at the outset because I regard it as serious. There are matters about which I can be flippant or goodhumoured but this is not one of those matters and I am sure the Taoiseach and the Minister for Finance fully agree with me.

This budget has been the best heralded in the history of the State. When Deputy Quinn talked about the 2010 strategy, one of the backbenchers on this side of the House referred to a space odyssey. I would describe this budget as being rather like the "Star Trek" TV programme, which has the great line: "Beam me up, Scotty". This budget is more like "Beam us up, Ruairí" into a world of fantasy where no one will pay bills either now or in the future. If the lessons of the past are not learned by the politicians of today, we will all pay a heavy price.

I am good humoured about political, private and other aspects of my affairs. I have paid a heavy political price for warning years ago about the dangers of a Government or political parties going down the road we did. It took us a long time to recover from it. I say this with the utmost sincerity. Certain Members on the opposite side of the House agree with me although they may not be in a position to do anything about it — and that includes certain members of the Government. If we go back the road from whence we came we are making a fundamental mistake for which this generation of politicians will not be forgiven by anyone.

I toyed with a number of options as to how I might open my address on budget day 1995.

Perhaps with a few bars of "The Rose of Tralee"?

The first was to reread into the record of the House the budget contributions from the last number of years by Deputies Bruton, De Rossa and Rabbitte, comparing their then proposals with what has been offered today by the Minister for Finance. I will spare the blushes of the Deputies opposite, not out of any generosity on my part. What useful purpose would it serve?

One could argue that as a result of such an exposé an amount of political embarrassment would accrue to the parties now forming the rainbow coalition. However, it has been decreed from the pinnacle of the high moral ground on Carrauntwohill, as enunciated and given an imprimatur by the high priests of political correctness, that only Fianna Fáil does political u-turns. All other political parties make policy adjustments in the best interests of the country but never in their own interests, that being the preserve of those uncouth, muck savages, unprincipled and power hungry members of Fianna Fáil.

The Deputy only speaks for himself.

He has a persecution complex.

I also considered a second option in approaching my address. This involved my Fianna Fáil colleagues and I, especially the members of the last Government, breaking down in tears at a prearranged signal and lamenting our luck in being out of Government at this time. Whether our opponents inside or outside the House care to acknowledge this, it is the policies of Fianna Fáil-led Governments since 1987 which have put the economy into its healthy state today.

The House will be glad to know I discarded the approach of crying in public. Although it had much to recommend it to me, it was out of tune with our carefully crafted media image of being untruthful, heartless, unprincipled, etc. However, I feel like shedding a tear for the unfortunate Irish taxpaying public which in the last few months has had thrust upon it an inter-party Government of such divergent philosophies, policies and ideas that it is difficult to imagine any coherent medium-term strategy being followed, let alone long term planning.

There are positive aspects of this budget and these I heartily welcome. Although it has been said previously, it can be stated honestly on this occasion that rarely if ever in the history of the State has such an opportunity been afforded to any Minister for Finance. I have some sympathy for the predicament of the present Minister but even he cannot reconcile the irreconcilable. His colleagues have been spending the largesse in advance.

As I pointed out on the publication of the Book of Estimates, it did not provide for expenditures which the Minister and at least some of his colleagues know must be paid for in 1995. I also pointed out that over £180 million in spending financed by the tax amnesty was included in the 1994 base figures, which means the underlying rate of rise in the 1995 figures was about 6.5 per cent, not 4.1 per cent as announced on 27 January. If a Government is not prepared to face up to the realities at the outset of its term and make decisions on priorities, what chance is there of tough decision making as we head nearer to a general election? The answer is absolutely none, which is another blow to openness, transparency and accountability.

Without a shadow of doubt the success of the past eight years has been bought at a high price. For a certain number of politicians the price has been to be sent to this side of the House, or to be in Dáil Éireann no longer. More than anything else, however, much hardship was imposed on some sectors of the Irish community, and necessary decisions had to be made. The irony of the current situation is that the 1987 election campaign was run on the basis that we could not, with an overall majority, be trusted with the State's finances.

The areas of borrowing, interest rates and inflation are interlinked. Low interest rates and low inflation were the biggest contributors to economic improvement in the last eight years. The record of the Fianna Fáil Party in Government — governing alone from 1987 to 1989, then with the Progressive Democrats and following that with the Labour Party — led by Fianna Fáil Ministers and Taoisigh contributed to that success.

The Minister for Finance knows that interest rates have started to rise internationally. He and other Members of the House know that prudence is required. I have always been dubious when analysts and experts agree on a point or when they say that things will lead in a certain direction. It is a little like politicians and political commentators predicting how things on the political scene will be for some time to come. We have seen in the recent past how foolhardy were the predictions made by all of us. The Minister will be aware that difficulties face us in the future. Interest rate hikes will affect the gains in this budget in taxation, welfare and all other areas. They sap and erode confidence, lead to higher debt service costs and send us on the downward spiral again. Inflation is the enemy of the poor.

I wish to outline for the benefit of the House and those commentators who over that period of eight years have not given us the credit we deserve regarding the country's finances and economy — not that they will write anything flattering about us in the morning — the situation as it was at the end of 1986 when we came into power. The Exchequer borrowing requirement at the end of 1986 was £2,145 million which was 12.1 per cent of GNP. The current budget deficit was £1,395 million or 7.9 per cent of GNP. At the end of 1994 the total Exchequer borrowing requirement was published as being only £672 million or 2.2 per cent of GNP but it was even lower than that, because in answer to a question I asked two weeks ago the Minister for Finance conceded that about £130 million of EU money which was scheduled to arrive in 1994 had not arrived and had been pencilled in for 1995. If one adds in special once-off payments to Aer Lingus, An Post, etc. it is obvious that we had a lower Exchequer borrowing requirement.

Despite such payments there was a current budget deficit of zero for the end of 1994 — in fact, there was a surplus of £15 million. Fianna Fáil politicians see the difficulty in winning either way. Some of the criticism levelled against our leader, Deputy Bertie Ahern, was that he was not being tough enough on the public finances while he was Minister for Finance. Yet he achieved in three years something we had not achieved in the previous 27. This was the first current budget surplus for 27 years. I made a semi-political career out of being tough about the public finances, together with the late Deputy John Kelly — a man of eminent common sense. Deputy John Bruton proposed at one stage in the 1980s that if we ever achieved a current budget surplus we should introduce a law so that never again would that barrier be broken. That was considered not only by Deputy Bruton but also by a wide cross section of opinion in this House. However, today we seem to be hellbent on going back to where we were.

I welcome individual features of the budget but its overall financial strategy is flawed. Its most serious defect is the Government's refusal to plan for a balanced current budget in 1995. Some people would say that we should plan for a surplus in 1995 as we are probably at the top of the economic cycle now and prudence dictates, in business or in running a country, that that is the time to make the tough decisions, not when one is at the bottom end of the scale because that day will come as well. Officials who have served in the Department of Finance would agree with me. Many Members of the House, not least the Minister for Finance, might agree with me but it has not been done. For the first time in a quarter of a century a small current account budget surplus arose last year. It is quite extraordinary that a Government led by Deputy John Bruton would in this economic climate even countenance a return to the policy of running a current budget deficit.

While it should not be a mortal sin for a politician to change his or her mind — except, of course, if one is a Fianna Fáil politician — I refuse to believe that Deputy Bruton and other Fine Gael Members have so changed their thinking on this policy issue. It has proved exceptionally difficult for successive Governments, with attendant hardship for the public depending on public services, to get the public finances into some kind of order over the last eight years. The policy experiment of current budget deficits was the main contributory factor in nearly bankrupting this country in the 1980s. I repeat what I, Deputy Bruton and others said many years ago on this topic — as an experiment or option, there was nothing inherently wrong in adopting a policy of current budget deficits in the short term. However, the policy was a failure. Of their very nature current budget deficits have no lasting economic benefit. Worse still, they increased our national debt problems to mountainous proportions, the servicing of which imposes a severe financial burden on the taxpayer.

It should be remembered that although our financial problems have improved, servicing the debt will cost over £2,100 million in 1995. Politically, it proved nearly impossible to correct that slide. Surely, we as politicians have learnt some lessons from the policy errors of the past. The difficult corrective process took its toll not alone on politicians but on the public. The vast majority of the public accepted the tough medicine but they did so on the explicit understanding that, having corrected the imbalances, no Government would ever repeat those mistakes. It is amazing that Deputy Bruton and his party, who were passionate advocates of correcting the stupidity of the policy of current budget deficits not so long ago, have now been silenced. Having got back economically near to the point from where we set out a quarter of a century ago it is daft to re-start the same crazy economics again.

The Minister for Finance had the opportunity to plan for a balanced budget and make a bulwark decision which would make it practically impossible for any future Administration — regardless of what parties it included — to stray from that policy except in the most exceptional political or economic circumstances. As the Minister has not done that today it will never be done, at least not in my political lifetime.

In the recent past there has been considerable debate inside and outside this House about the disrespect in which politicians and the political process are held. This phenomenon did not start in 1994. It had its genesis in the foolhardy economic decisions in the 1970s. We were not then prepared to live within our means as a nation and Governments of all persuasions were politically unable to stop the merry-go-round. In 1995 there was an opportunity for this Government to make a categories statement in this regard which would have lasted into the future. I am not just saying this to embarrass my good friends the Minister, Deputy Quinn. Most sensible people and people who have thought about the way we have progressed in the past 20 years — indeed since the time Deputy Quinn and I were students in Earlsfort Terrace — realise that we have made chronic mistakes economically. At least my party, as was demonstrated in the past eight years, has learnt from them.

Many things were said against our party in the 1970s and 1980s. Everybody spoke about the problems, there were programmes to eliminate budget deficits and get the finances in order over four or five years and so on. Everybody said that Fianna Fáil would never do it, but Fianna Fáil started the process, and in fairness to everybody, did it. Former Deputy Garrett FitzGerald, the late John Kelly, the Taoiseach, Deputy Bruton, Deputy Dukes and others spoke about it, but no party was able to do it. Despite the best will in the world it was politically impossible to proceed until former Deputy Haughey came to power in 1987 and set in course the trail which my party, at least, has followed, resulting in Deputy Bertie Ahern's arrival and the happy situation which exists today.

Will the Deputy give any credit to Deputy Dukes for the Tallaght Strategy?

I am the one person in the Fianna Fáil Party who publicly, on television, praised Deputy Dukes for the Tallaght Strategy, at the time he was pursuing it, not when he was gone. In addition, I praised him at the time in the House, as the record will show.

Look at the Deputy now.

There is an inextricable link between the levels of taxation and the level of public service. There is no economic or political benefit in any Government or parties creating the impression that levels of public service can increase without an attendant rise in taxation or an increase in economic activity. Our high rates of taxation are a direct result of high borrowing to finance day to day expenditure from the past. There is little point in promising more services if, as a nation, we do not create more economic wealth to be in a position to pay for them. Deputy Quinn must have been livid when every morning for the past two weeks he read in the papers parts of what he intended to do in the budget. He was not responsible for this, nor were any of his officials or anybody who works for him, even in a political context. I have asked the Taoiseach to take corrective action on this.

The largesse we have today would not have been possible without Fianna Fáil, who created it. However, social welfare recipients have not benefited. The Minister announced that they will receive a 2.5 per cent increase. However, despite the problems and difficulties since 1987 no Fianna Fáil-led Government ever announced an increase of this kind of less than 3 per cent since then. We gave an increase of 3 per cent in 1987, when things were at their worst, 3 per cent in 1988 and 1989, 5 per cent in 1990, 4 per cent in 1991 and 1992, 3.5 per cent in 1993 and 3 per cent in 1994.

I understand the difficulties of making ends meet, but last year, Deputy Rabbitte, the man who knows a little bit about everything and not too much about a whole lot——

He was not here today.

He was missing again.

I understand Deputy Rabbitte is on television, announcing some of the good news to the public which he had announced over the past few days himself, but he now believes it is better to do it directly, rather than in the earlier manner. On budget day last year, the Deputy said that the basic increases in welfare, at 3 per cent, would barely enable social welfare recipients to keep their heads above water.

That was before the flood.

Deputy Rabbitte said on budget day last year that this modest increase of 3 per cent for social welfare recipients would not take effect until July 1994 — brought back by Deputy Quinn today in his budget — while other measures, such as the tax on unemployment benefit would take effect from 5 April 1994. However, according to Deputy De Rossa's programme manager, or adviser, who leaked it this morning to the Irish Press— and I even recognise from the photograph the nice slogan I thought up while I was Minister for Social Welfare — the present budget is wonderful. Regarding the moneys being provided to social welfare. Deputy De Rossa, speaking on the Social Welfare Bill, 1994, stated in the Official Report, 1 March 1994; Vol. 439, cols. 1128 and 1129:

This Bill is a totally inadequate response to the plight of those dependent on social welfare. While the Bill contains some marginal improvements, such as increasing social welfare benefits in line with inflation, there is no evidence of any overall coherent strategy on social welfare reform, no acknowledgment of the seriousness of the plight of those on social welfare and no indication that the fight against poverty is to be moved up the political agenda ...

... Those on social welfare had a right to expect some measures to substantially improve their position but once again they were passed over and virtually forgotten. Most of the increases provided are minimal and will do nothing to improve their living standards. The miserable level of most increases tell their own story [this excerpt is really good] — £2.10 extra for a contributory old age pensioner; £3.40 for a pensioner with a dependant aged over 66 and the figures for non-contributory pensions are worse — £1.80 and £2.90, respectively...

... It is fair to anticipate that not too many bottles of champagne will be cracked open when these increases are eventually paid. The wonderful increase of 40 pence per week for the child of a person on disability or unemployment benefit would scarcely pay for a bottle of milk, never mind a bottle of champagne.

While I was Minister for Social Welfare, the Department produced statistics which have been published. These include social welfare statistics for 1993 and weekly rates from July 1994. The 2.5 per cent increase announced today is not even that, because it only applies to the personal rates, and, for the first time, it does not apply to the child dependency allowances. Those who are receiving social welfare benefits today and who, therefore, believe they are to receive an increase of 2.5 per cent will be disappointed.

A principal feature of the budget is that an old age pensioner, for whom Deputy De Rossa said last year that an increase of £2.10 was not enough, will receive an increase amounting to the wonderful sum of £1.80 per week.

Disgraceful.

Deputy De Rossa may go on to talk about the child benefit allowances. According to statistics from the Department of Social Welfare, the numbers of people in receipt of old age pension contributory, old age pension non-contributory and retirement pension amounted to 241,272 recipients in July 1993, covering, with dependants and children, a total of 293,959.

Notwithstanding the miracles of hormonal science, it may be taken for granted that most of those people will not benefit from the child benefit allowances in the next few months. Therefore over 250,000 people will receive no benefit from the child benefit allowances. Not too many bottles of champagne will be cracked open when these allowances are paid. Bill McLaren, the well known Scottish rugby correspondent, was inclined to remark when Wales was doing well: "Oh they will be singing in the valleys tonight". However, Granny Maloney in Finglas will not be dancing tonight, whatever else she may be doing. These increases are less than those granted at any time previously. No matter how bad the circumstances, we never gave 2.5 per cent. If we are not prepared, when things are going reasonably well, to look after old people it is not the kind of society I wish to be part of.

I welcome the increase in child benefit allowance and I agree with the commitment in the Programme for Government that more resources will be devoted to that area. I support those reforms which have been advocated in excellent reports to various Ministers over a long number of years. The expert analysts have had enough say, it is time to get on with it.

The increases to the old in our community are miserable. They are not members of an organisation with large numbers of programme managers and press advisers who will be giving out leaflets and appearing on television tonight to say how wonderful things are. Those 241,000 people have to live from day-to-day and I am proud that my party provided well for the old and the sick over the years.

Deputies

Hear, hear.

People who regard themselves as being of the left persuasion in Irish politics think they are the only people who ever did anything for the old. Various Taoisigh and Ministers for Finance and Social Welfare of this party brought about major improvements for the elderly over a long period.

I could hear loud sighs from my former Cabinet colleagues on the Fianna Fáil benches when the Labour Minister for Finance announced changes in the residential property tax. I am sure that I speak for all my colleagues in the last Government when I say that we are pleased to witness another Pauline conversion of the Labour Party, particularly on residential property tax, so beloved by it since the mid-1980s. It was so loved in the 1990s that it had to be changed for the 1994 budget.

In this era of transparency, I do not think that I am letting out a secret in telling the House that it was in the interests of partnership that my party agreed to the changes suggested by the Labour Party for the 1994 budget. Let it be a lesson to Deputy Bertie Ahern, if he is in such comfortable position again, that that was what partnership taught us in the end. I always thought that the residential property tax — and it has been sold as such — was the brainchild of the Labour Party because it first came into being in the Labour-Fine Gael Government of 1982-87. Some time ago, I had the great privilege of reviewing a book — I must admit that I did not read all of it but I read most of it — by Dr. Garret FitzGerald entitled All in a Life.

At least the Deputy is honest.

No wonder the Deputy did not read the whole lot.

I cannot finish his column in The Irish Times on Saturdays.

I have great affection for Dr. FitzGerald and a great deal of respect for his opinions on various matters, but not necessarily on economics. One of the most interesting parts is on page 436 and relates to property tax. He states: "The income related property tax was an idea of mine of which I had worked during 1982 with my daughter-in-law, Eithne,——"

Where is she? Bring her back in.

(Interruptions).

Deputy McCreevy, without interruption.

I assure my colleagues that this gets even better. "——a social economist who is a Labour Party county councillor and has since 1982 been a Dáil Labour candidate". Is this the same Eithne Fitzagerald who is now a Minister of State? It looks like it. I always thought that the Labour Party loved this idea and that it was theirs. However, he seemed to get a bit uppity that he did not get the credit for it. On page 437 he says: "Naturally enough, when I put this to Dick Spring during our post election discussions he was happy to accept my proposal, which came to be seen in due course as a "Labour" tax, despite the fact that I never made any secret of the fact that it was my idea".

I am willing to give credit to Deputy Fitzgerald for the idea. I can visualise Dr. Garret FitzGerald and Minister of State, Deputy FitzGerald — or councillor as she was then — at a barbecue, and while someone else was cooking the steaks, they were discussing this wonderful idea about residential property tax. It looks as if it was a Fine Gael idea taken over by the Labour Party. I am quite certain that the people of Dublin South will be more than interested in the fact that Deputy Eithne Fitzgerald thought up this idea in the first place.

They will be listening to Deputy Michael McDowell.

It is quite a big book and there are other great things in it.

The first chapter.

He always went on a lot.

Is there a case for residential property tax? Last year it brought in around £12 million. There was a great deal of hullabaloo about the changes, it caused a great deal of annoyance to many people and was not worth it. I will not surprise Deputy Quinn, or any other members of the Labour Party who were in Government with me, when I say that I regard this tax as nonsensical. The record of the House will show that in various budget speeches, since the tax was introduced in the 1980s, I always referred to it as a nonsensical tax. It was dreamt up between Dame Eithne and Dr. Garret at some family function. I give a commitment on behalf of my party that we will abolish residential property tax when we are back in power.

And we will not write a book about it.

No, we will not.

Do my ears deceive me?

(Interruptions).

I welcome the changes in pay related social insurance, tax bands and allowances; however, there is nothing tremendous about them. In 1994, allowances for a married person were increased by £350, the band was increased by £1050 and the income levy was abolished. We had agreed with the Labour Party that in the lifetime of the Government the PRSI thresholds would go from £9,000 to £11,000 to £13,000 to £15,000. This began with the changes brought in by Deputy Bertie Ahern last year, as Deputy Quinn well knows. I welcome the fact that he has continued that process and exempting the first £50 is a good idea. However, there are difficulties in doing this because it creates other problems. I do not want to say too much on that area in case I would be seen as knocking the idea with which he has come forward or his continuing the idea which we began in last year's budget. The Minister and others will recognise that setting thresholds creates other problems. However, I welcome the changes.

The whole idea is to get more people at the lower levels out of the tax net. The simplest way, of course, of doing that is to increase the thresholds. It is quite expensive but the greatest improvement can occur there. Widening tax bands does not benefit the low earner because he never reaches the 48 per cent level and pays a great amount in PRSI. The classic situation is that working does not make him better off. If the Minister can keep increasing the thresholds in this way, he will shortly arrive at a point where it will seem better to lower the rates overall. Perhaps, in the longer term, that is a better approach. However, I recognise what he has done.

I see that the Minister is paying for the £60 million provision for equal treatment payments by taking £50 million from the Social Insurance Fund. Will the Minister for Social Welfare explain that when he addresses the House?

Will the Minister for Social Welfare explain, when he comes before the House, what the Minister for Finance is doing there because I note in his Budget Statement that he is taking credit for departmental balances. However, he is raiding the Social Insurance Fund and distorting the expenditure figures and I want to know what he is doing in that regard. As far as I know there are no underlying assets remaining in the fund. Will the Minister for Social Welfare clear up this point because in the year of openness and transparency it is important to know exactly from where everything is coming? On taxation measures, Fianna Fáil Ministers for Finances since 1987 took a responsible attitude towards the State's finances and introduced various measures, as circumstances allowed, such as the widening of bands. There are conflicting economic theories as to whether low rates of taxation always stimulate economic activity. Although there is not universal agreement on that — Deputies on my extreme right might disagree — there is full agreement that high rates of taxation are a disincentive not only to PAYE workers but to the self-employed, whether they are farmers, shopkeepers, builders, factory owners or whatever. Although politicians on the left of the political spectrum would have us believe otherwise, the most successful economies in the world are those where people are allowed to work without massive State intervention. This is people empowerment in its fullest sense.

The State should from employment taxation redistribute services to those in society who are not so lucky. However, if a taxation system reaches a point where the incentive to people to work is lessened, legitimate economic activity grinds downwards, the black economy flourishes and less taxation is collected in order to provide services. Borrowing is then increased to make up the shortfall and/or desirable services must be cut and we continue on the downward spin. It may surprise some, but I do not believe in a low rate of taxation per se. An economy approximately 3,000 miles west of Ireland has very low rates of taxation, but an ordinary person would have to mortgage his home a couple of times over to pay medical expenses if he had to spend a period in hospital. This is not the type of system in which I believe and neither does my party or the vast majority of Irish people.

I welcome the change in the budget which alleviates the burden of PAYE and PRSI on the low paid. Perhaps the Minister could have gone a little further, but I welcome the change as a step in the right direction. Changes in PRSI for employers are to be welcomed. It is difficult for outsiders to make sense of a system which imposes a tax on employers for keeping people at work while, at the same time, 280,000 people are unemployed. There is a myriad of schemes, agencies and support services to get people back to work, but, at the same time, a tax is placed on employers who take them on. This contradicts the objectives of the job creation measures. High levels of taxation on income or capital results in extraordinary non-productive resources being devoted to ways of avoiding making a payment to the State. These are constructed in such a way that no payment at all is made to the Exchequer.

It should now be evident that there would be a greater return from the State's finances if capital gains tax was levied at the lower rate. Such thinking may not necessarily appeal to socialists. They prefer high rates and little return, rather than a realistic rate and a good return to the State. Less capital gains tax is collected but any financial adviser in this city will tell one that a large proportion of the major deals are organised so as to minimise liability to capital gains tax. Would it not be much better to have a realistic rate of such taxation? There would be a better return to the Exchequer, a pro-business culture would be assisted and business people would devote more of their energy to wealth creation and less to devising schemes to hold onto their wealth and avoid State taxes. The ongoing battle of wits between the Revenue Commissioners and tax advisers, with one side finding loopholes and the other closing them in successive budgets, would lessen and the released intelligence could be far more productively employed.

The Minister changed corporation tax from 40 per cent to 38 per cent. While I welcome the Minister, Deputy Quinn's commitment to downward rates of corporation tax, he has gone about it the wrong way, because the banks will be the main beneficiaries. The Minister announced the amount the levy will bring in over coming years and has entered an agreement with them. It may surprise people that the take from corporation tax is made up approximately as follows: 64 per cent of total coporation tax is from companies at the 10 per cent rate, while the remaining 36 per cent is at the 40 per cent rate. Over £170 million was taken in 1994 from companies in the Financial Services Centre. It has been an outstanding success and those who thought of the idea should be congratulated, rather than denigrated. Fianna Fáil ran with the idea, although it came from Mr. Desmond — I will make no secret of the fact that he is a friend of mine — who was pilloried inside and out side the House for a long time. It was fundamentally his idea and Mr. Haughey and the Fianna Fáil Government ran with it. It is a big success storey and it is only fair, given the level of denigration that man suffered, to state that it was his idea. He made a lasting contribution to the State not alone because the Exchequer receives corporation tax, but because it has given Dublin and Ireland a profile as a place in which to do business. It has enhanced the value of doing business in Ireland and made it a respectable place for financial people in which to operate. This is also why — and the Minister knows I mean this — leaks about the budget harm our image. I make political points at various times but these leaks damage our respectability as a financial centre. We should not lose that respectability.

If the Financial Services Centre, construction companies and banks, which pay approximately £140 million in corporation tax, are omitted, one is left with quite a small figure. It would be much better to go down the route of targeting a much lower corporation tax rate, perhaps 25 per cent in year one, down to 10 per cent in year two. This has been recommended by all those who have submitted reports on the services sector. Reducing corporation tax by 2 per cent for everyone is not a targeted or structured approach and not one report has recommended such a move and continuing that downward spiral. The Minister knows that the rainy day will come and the temptation for any Minister for Finance, irrespective of political party or Administration, will be to push it up again.

The services sector where jobs are being created could be targeted. All the growth in the number of jobs in the past number of years has come from this sector and small Irish companies. There used to be a corporation tax system under which profits below a certain figure were liable to a lower corporation tax rate. I advise the Minister, between now and his next budget, to go down this route. It will be of more benefit because those companies are contributing. There are approximately 160,000 small companies and why not have a lower corporation tax rate for profits, for example, below £80,000? It would be easy to work it out and I ask the Minister to target particular companies. It is worth considering.

The question of third level fees is a priority but the Minister has not dealt with this properly. As the public finances improve, there is merit in abolishing third level fees. It first appeared as a commitment from Fianna Fáil in the 1992 general election but it is not the way to go now, given the constraints on the public finances and the number of people in education. There are various expert reports and much agreement on this matter. It is politically attractive to do it and I do not deny that but I do not think it is the route we should take. We had a debate in the House quite recently and there was a good airing of views but the Minister's proposal will not give one additional third level place in education and that is where the problem fundamentally lies. All experts agree that the more educated people become the better chance they have of getting a job and all that follows from that; the better lifestyle a person is going to have. It is attractive politically and if there was plenty of money about, I would certainly do this in the manner the Minister has done now, but I do not think this is the time to do it. Certainly before the election, presumably in 1997, it should be done. That is my only quibble about it.

As someone who was elected in 1977, like lots of Deputies here including the Minister, Deputy Quinn, the abolition of local authority rates springs to mind when I see the abolition of third level fees. It was well heralded and everyone welcomed it. It was a good idea but it starved local authorities and took away their independence. They are now paying the price. I am afraid the same thing will happen regarding universities and in a few years every university will have other devices to get money from people.

I welcome the tax change the Minister made regarding students attending private colleges etc. and going abroad. Perhaps that is the route he should have taken in regard to the whole area. I am sure it is an option he would have considered. It would have been less expensive and he might have worked towards the abolition of fees in due course. What is the equity of a person earning £70,000, a Cabinet Minister for example, receiving free fees? The Minister may argue that covenants are being ended, and I will come to that later. Instead of giving the £70,000 earner partial tax relief on fees by way of covenant, the Labour Party is deciding now to give them the whole lot. I am sure the socialist conscience of Deputy Quinn, well heard of when he was in University College Dublin, knows that it is a nonsense. It just does not add up and there is no redistribution.

I welcome what the Minister said in his speech regarding covenants and how he is going to deal with them. I ask him to be very cautious in that regard. I am sure the Revenue Commissioners have been looking at these figures quite lately but I would be very uncertain that they will be able to extract exact numbers and loss to the Exchequer, despite a parliamentary reply quite recently as to the exact numbers of people benefiting from educational covenants. It is not an easy figure to extract. I know he intends not to adopt a broad blanket approach and is going to allow covenants to the handicapped. Religious orders will also have to be accommodated. People in religious orders covenant their income to the order or covenant it to older priests, brothers or nuns in that order. He would want to be careful.

Private third level colleages will be disadvantaged too. I think, and this is really a Finance Bill approach, that there are certainly likely to be court challenges to his proposals, if they go ahead. Section 49 of the Income Tax Act, 1967 restricts the type of covenant that will qualify for tax relief. One of the key requirements for the type of covenant affected by the Minister's proposal is that the convenant be paid for a period of six years. The changes that the Minister is putting into place will change those rules. It is very much like abolishing, say, industrial buildings allowances for hotels. A person building an hotel would have been told that for the next ten years they would be allowed to write off 10 per cent of the cost against taxable income. If the relief was abolished half way through it would lead to a court challenge under the doctrine of legitimate expectations. Many people have entered into legal obligations in this regard and I do not think it will be very easy for the Minister to extricate himself in this respect. It is a matter that will have to be considered in the Finance Bill but I, at least, am uncertain.

The Minister has granted £1,000 tax relief for the motor trade and I welcome it. I cannot for the life of me see how it will have a tremendous effect but the Society of the Irish Motor industry has supported the idea and I congratulate the Minister on taking up the idea. The Minister for Finance last year made a change in VRT which had a tremendous effect on the number of new cars sold and a large number of jobs was created. I do not think this change will have the same effect as Deputy Ahern's change last year but I welcome it for what it might do. I am sure the Minister took the view that it cannot cost a whole lot and we might as well try it. I welcome the type of thinking. The change in VRT last year was a monumental change. It was a gamble by the Minister for Finance and the Government but it worked well and I hope this one works half as well.

I know the Minister is proposing some change, presumably in the Finance Bill, in benefit-in-kind legislation regarding cars and I think he should. The story is well told, and there is not much point in repeating it, that the reason for change in the benefit-in-kind legislation is that it was probably thought up by a civil servant who was on his way to work one morning and got a little upset to see the managing director of some company going by. It might just be like that. It should be changed.

I also ask the Minister to consider some additional relief in the Finance Bill for workers living in the Republic but working in Northern Ireland. It may be possible to introduce some type of allowance to get over the problem of certain cross-Border workers. I caution the Minister, as I can see further anomalies being created by changes that might be made there, but it is something that should be considered, particularly in the light of events of the past six months or so.

I congratulate the Minister also on his change in capital acquisitions tax. I hope something further can be done there.

As a former Minister for Tourism, I note the idea regarding holiday resorts throughout the country. As the Minister for Finance well knows, that was a hobbyhorse of my own and we were hoping to get it into the budget this year. I was considerably helped and I knew I would not have difficulty incorporating it into the budget because I too was going to include Ballybunion.

I would have included Salthill as well for Deputy Geoghegan-Quinn and Deputy Molloy.

Robertstown.

It is welcome because some resorts have been declining since the 1960s and some of the people in business there have suffered bad times. Not all resorts are like that but some are decrepit and run down. A tax break scheme is a good idea. I welcome the Minister's idea and I hope it works well for him. The tourism industry can help create more jobs than any other sector. There is a projected increase of 35,000 over the next few years and that is before we ever had the results of peace and of the ceasefire.

What has happened to the third banking force? The Minister has included £83 million, presumably from the sale of Irish Life shares, in the Estimates as published last weekend. Has the third force been forgotten about and what is going to happen? If he goes ahead with the third force there will be a gain to the Exchequer of a considerable amount of money. What is he going to do with that fund? I hope it is not going to be spent on current expenditure.

I think we should take some credit on this side of the House for the public capital programme. The public capital programme this year is up by 18.6 per cent from £2,242 million to £2,659 million. It is the highest public capital programme since 1990 and it is as a direct result of the EU funding which the last Government secured in Europe. We suffered a lot of abuse, both inside and outside the House, as to that whole debate. This is the result of it and many worthwhile projects of a capital nature, which will have a spin-off in jobs and lasting economic benefit to the country, are the result of it. I would like people to give us some credit in that particular regard.

The buzz word is transparency. In this budget speech and in the Estimates you are unlikely to see better examples of the opaque as opposed to a policy of transparency. I am not decrying the Government or this Minister in following the footsteps of many others. If transparency is to mean anything it must mean that the Government does not, at worst, seek to deceive or at a lesser but still unforgivable level seek to confuse or obfuscate and in general use language and procedures which are not readily comprehensible.

With regard to the Estimates I would guess that a maximum of six people in the country fully understand what they are about. I may be flattering myself but I think I fall into a larger but still very small group of people who have a reasonable grasp on most of the issues involved. I am not among that six, I can assure you. That is not because I am a chartered accountant. The reason is that I have spent many years trying to decipher the Estimates. They aggravated me so much that I spent that amount of time trying to understand them. Exactly the same is true of the budget. The figures are presented with the deliberate intention of deceiving. I know that is a strong thing to say but I think we are so far away from clarity that we have moved through the stage of deliberate confusion and into the stage where deception is the order of the day. Why does the Minister not begin by saying: "We owe approximately £30 billion, of which £12 billion is for non-Irish institutions and individuals. The balance is owed to Irish-based institutions and individuals. Our income this year from taxation will be approximately A coming from the following sources [and list them]. We estimate that we will spend X on the following. The shortfall will be made up by borrowing Y. That means that at the end of the year we will owe X minus Y plus the outstanding amount we begun with. Projections for future years include the following ...". At this point the Minister could go on and explain his medium and long term strategy. That is not the way it is done.

I intend to bring up in the future something I mentioned recently. We will have to change the Irish national accounts and the New Zealand method is the one to copy. Before we get to the method of accrual accounting we should have gross accounting because the accounts or the Estimates do not show the true picture. For agencies and other bodies it is a total mess. Agencies spend time at the end of the year devising ways and methods to confuse the situation. I urge the Minister to go down the route I advocate. You cannot plan at all unless you know where you are or where you are going.

Regarding investment, this budget has been heralded as pro-jobs. I hope that improvements and the numbers of people in work increase and multiply over the figures from last year which was the most successful year ever for the creation of jobs. More people were at work at the end of 1994 than ever in the history of the State. What is wrong with making Ireland an attractive tax location for the wealthy? Is it not better to have the wealthy residing in Ireland with resulting economic investment here? I do not understand the mentality of politicians and opinion-makers who appear to advocate a type of financial puritanism in this area. Maybe it is another virulent form of political correctness.

The furore over the so-called passports for sale debate makes me wonder if I am living in the same island economy as some commentators. The economy in which I reside has 280,000 persons unemployed. It is situated on the periphery of Europe, has a population of only 3.5 million, has too small a demand economy, does not have any great indigenous resources of wealth, needs entrepreneurs to start and encourage business development and is very short of equity and low in capital at realistic rates. Our economy is not one which can afford to turn away £1 million investments in Irish business. In my experience it is Irish business starved of cheap finance who are seeking foreign investors, not the other way around. Certainly let us provide adequate safeguards for the integrity of the Irish passport. Let us also be pragmatic and realise that what we need here is more, not less, investment. Just in case that has not yet dawned on some we have competitors for such investment. We Irish are justifiably proud of the Irish passport but it has no greater kudos than many others.

Something which has always struck me as peculiarly Irish is our unique form of begrudgery. It seems to be particularly flourishing of late. The disease has reached epidemic proportions in the last decade. The virus would appear to be particularly prevalent among certain politicians, certain segments of the middle class and wildly contagious in the media. The exponents of this uniquely Irish phenomenon hold that for a business person to make a profit is quite unseemly. No account can be taken of the fact that that particular person may have worked exceptionally hard, taken risks and created jobs for many. This person — be it a farmer, shopkeeper, financier or factory owner — is to be castigated at every opportunity. Strangely, the same people also appear to know what is right for the underprivileged and the poor, although very few of them come from ordinary working class backgrounds. If this country is to succeed we must encourage the risk-taker, give him or her a fair return for their investment, have a taxation system that rewards incentive, and not alone encourages the business person but gives hope to the unemployed and the less well off so they can succeed in life. I am proud of my party's record over the past eight years. I am proud of the way we have turned this country around economically, with great difficulty. Many people would have said we would not have been prepared to do it and we would never have succeeded in doing it. That was the sense of despair prevalent at the end of 1986. I have sympathy for all the political problems there were in the 1980s but no one did it except us. It is time our party activists around the country were proud to take credit for that, not just the politicians in this House.

I conclude by saying that the budget is a major disappointment. It has been heralded so well in advance that there have been no surprises. That is not the real disappointment. I am really disappointed that we have not learned anything from the mistakes of the past. We ought to have more people employed next year. Everyone should have a chance of a proper return. I say this to those of a socialist, hard-left persuasion.

Are there any?

Whether one is a business person, a person at home or unemployed everyone likes some incentive. People of the left say they will create jobs. No Government anywhere in the world ever created a job. If it did create them it was in the public service, paid for by the taxation of others. Business people create jobs or the unemployed person goes out and does something in the expectation of getting a small margin. Depending on the scale of the operation the business person says "I won't invest unless I get a 10 per cent return". A person in a small business will invest money if there is an even chance of getting it back with a small return. Encouragement should be given to the unemployed person at home so that if the opportunity arises of doing some work he or she will take that opportunity rather than say they are better off sitting at home. That is the problem in Irish life which we have to face. "Profit" and "incentive" should not be dirty words. The tax breaks the Minister has introduced should be linked to job preservation or job creation. There is no point in having a wide range of agencies and supports throughout the system if people simply take the money and cut down the number of jobs. We must find some method of linking those breaks to the supports that are given. Governments do not create jobs.

I am sorry the Minister for Finance has been put in a position that he has not been able to do the things he would realistically want to do himself. He did something I expected of him. He gave some credit to his predecessor, Deputy Ahern, for the improvement in the public finances in the past year. That I welcome. Maybe it shows a realistic appreciation by the Minister of what was achieved in the past eight years.

I feel sorry that we as a political establishment seem hell-bent on going down that road again. I hope the Minister is not pulled and dragged by his partners in Government and we do not go back down that road. I wish the Minister and all the people of Ireland well. Maybe budget day 1996 — if we ever have one again after all the leaks — will be somewhat different.

Deputy McCreevy made reference to leaks. I think the House should be aware that the Minister of State at the Department of Finance, centred in the Office of Public Works, at 12.15 p.m. today leaked the entire budget in a fax which he sent to a number of newspapers, a copy of which I have here.

Very serious.

When I heard you, a Cheann Comhairle, giving me and the other Members of this House the annual reminder about confidentiality, I thought when I looked at this fax which went out four hours before the Minister rose to his feet, that there was a certain lack of reality in the high standards which you seek to maintain in this House and by which some of us are supposed to be bound. It is remarkable that a Minister of State who was involved in the budgetary process should issue a fax message incorporating the whole of the budget to the media four hours in advance of his senior Minister's budget speech.

The Committee of Procedure and Privileges is going to be busy.

In case there was any doubt about this, or in case he had not told enough about what was in the budget, he added to the front of his fax message, "For more info, contact Tim Rea" and he gave the telephone number of the Office of Public Works.

It is a resignation matter.

I cannot understand, in these circumstances, how this House——

It is a resignation matter. He has to go.

——is entertained to the annual charade of invoking confidentiality in relation to budget matters when the very Minister representing the Fine Gael Party in the budgetary process——

He has to go. Resign.

——actually committed himself to writing and leaked the entire budget — lock, stock and barrel — to the media four hours in advance of the Minister's speech. I find that a most remarkable state of affairs and I wonder what will happen in this Government. We had a long lecture from advisers at the Committee on Legislation and Security about people behaving in an underhand manner towards their partners in Government.

We will be down to 16 Ministers of State soon.

We had a long lecture about how wrong it was that certain doors were locked. I do not think I have ever heard of a situation where a Minister of State at the Department of Finance leaked the entire budget four hours in advance to the media. I demand an explanation this evening on that issue and I demand to know how it happened.

He has got to go.

That is a very important issue.

Let us get on to the budget.

Deputy McCreevy pointed out, and rightly so, that in the 1945-50 Labour Government in Great Britain the then Chancellor of the Exchequer, Hugh Dalton, was forced to resign because of an inadvertent leak which came from his lips and went into the public domain. I was thinking of the difference in standards between that man, who certainly did not intend to leak anything, and this administration, which tells people who receive faxes to contact programme managers for more information and that they will hear more, presumably. That is a most remarkable change in 50 years.

I was also thinking about that Labour administration because it brought to mind a phrase about Clement Attlee, the then Labour Prime Minister, that he was "a modest man with a lot to be modest about." I wondered about this Minister for Finance and whether that applied to him. I do not think he can claim to be modest but this budget is one about which he has a lot to be modest. The Minister claims on the first page of his Financial Statement that this is a "radical" budget. By the end, I am glad to see, reality had dawned because on the last page we are told that this budget "is but one small step in that direction." Something is radical on page 1 but by the end it has petered out and whimpered out to the point of being one small, faltering, tottering step towards improving our tax system.

I also note, and this is one of the most alarming confessions of intellectual and political bankruptcy that I have ever heard, that this budget amounts to a distillation of the best ideas brought to the Cabinet table. God save us from the worst ideas. We should look at what is in this budget and look at real people and what effect this budget will have on ordinary Joe Soaps and Josephine Soaps around the country. We should sweep away the propaganda and the verbal hype. Let me put before the minds of Members an employee earning £240 a week somebody who is earning below the average industrial wage, earning about £13,000 per annum. That person is £5 per week gross better off, on the Minister's calculations. That person, if one takes into account the fact that he or she may make VHI and mortgage payments, is probably going to have the price of 20 or 30 cigarettes extra in his or her weekly wage, after the increase today. That is the change for somebody earning below the average industrial wage. We are asked to accept that that is radical change and that this is a radical budget, that to give somebody who is paying tax at 55.75 per cent, including PRSI, £3 a week more — or £5 if he or she has no mortgage or VHI payments — is radical change. If this is the best that the Labour, Fine Gael and Democratic Left Parties can do for single workers earning below the average industrial wage, if this is their best shot in good budgetary circumstances, I say: "Go now and get out now." I fear that when the budgetary circumstances become significantly worse and one has a tighter budgetary situation, which the Minister has presaged in his budgetary speech, there will be a complete end to any sensible and far-reaching tax reform.

I look at what the Labour Party's record in Government has been since it entered Government in 1992.

It is better than yours.

We will come to that in a moment. At every single hand's turn, there has been a simple, cynical lack of determination in relation to the taxation system. It was the Labour Party that introduced — and let us not forget this — the infamous 1 per cent levy on incomes. The Labour Party imposed a fifth new tax on work which was only in position for one year and was then abandoned when the trade union movement threatened to rebel. That is what happened. It was the Labour Party that introduced the income levy and abandoned it. It was the Labour Party that insisted on widening residential property tax. Deputy McCreevy told us how they managed to persuade Fianna Fáil, at the eleventh hour, to do that. This year, in coalition with two other parties, the Labour Party abandons it. I wonder what it is about the Labour Party that it seeks two new taxes, residential property tax, which has this peculiar parentage that Deputy McCreevy told us about——

It is a Fianna Fáil tax, actually.

—— and the income levy, which was thought up by a Labour-dominated coalition — and abandons them within a year. Why is it so lacking in any overall vision of the taxation system that it brings in measures of this kind and abandons them in such short order? Perhaps this is what should be called 10:22 a.m. — type Government. Perhaps the real measure of the Labour Party in Government is that it can change its mind cynically by putting up its finger and feeling what way the wind is blowing, either on which party it will coalesce or what it actually believes in. There is no central philosophy to this budget and what the Minister has said about solidarity and enterprise and rewarding effort is, I suggest, an overblown piece of rhetoric that does not stand up to examination when you look at the real effect on a real person.

What about your record in health and social welfare?

Somebody earning below the average industrial wage still has to pay tax on the margin at 55.75 per cent after this Labour Minister's budget. They still have to pay on the margin. More than half of their extra earnings, increases or overtime or whatever, has to go to the Minister of Finance. That happens to people who are below the average industrial wage. If this is the Labour Party's vision of how our tax system should be, I despair.

We have a system where the standard rate of tax is 27 per cent, which is far too high. On top of that PRSI is levied at 7.75 per cent which means that a level of 33 per cent tax applies to people who are even lower down the wages pecking order. The simple fact is that we have an anti-work tax system and that this particular set of changes is nothing like radical reform.

If you look at the proposal to increase the single person's standard rate band by £700 it sounds like something until you realise that when you hold it up to the light it is very little indeed. In real terms it is half its nominal value, because it is 6 per cent of the wages level at which it comes into effect and if you allow for 2.5 per cent or 3 per cent inflation it really means that we are dealing with a total change in the real value of that band of approximately 3 per cent. That is not radical tax reform, nor is the £150 increase in the personal allowance. If it was indexed to a 3 per cent inflation rate it would have to go up by more or less half that amount, so when you are talking about the tax allowances and the tax bands that have been altered in this budget, allowing for inflation, there is a change of between 3 per cent and 4 per cent in real terms. That is not the stuff of radical tax reform.

I endorse abolishing PRSI on the first £2,500 worth of income because it is a step in the right direction but I am surprised that portions of it are clawed back immediately by an elimination of the PRSI tax allowance for those who are working. In any event, it still leaves the infamous levies of 1 per cent and 1.25 per cent on all income because the exemption of the first £2,500 applies to only those paying the 5.25 per cent PRSI rate. This will not be dealt with in marginal incremental changes over a number of budgets.

The tax system took more in 1994 out of the income tax payers' pockets than it did in 1993 and it will take more in 1995 out of their pockets, despite all these changes, than it did in 1994. The reason for that, of course, is that income tax grows at a faster rate than the rate of inflation because it is paid by people on the margin. If you have 2 per cent or 3 per cent inflation in any given year you will have a 5 per cent or 6 per cent automatic rise in the yield of income tax in the same year. Therefore, Ministers who claim that they are giving away tax and that there is money available for tax reductions never acknowledge, at the end of the year when they again crawl sheepishly into the House to explain what happened in the last year, that more people ended up paying more money into the Exchequer because of the viciously progressive tax system which exists in this country.

I note that the Minister, Deputy Quinn, went through the annual ritual of announcing that 10,000 people would be taken out of the tax net this year. Dr. Séan Barrett, the Trinity College economist, has gone through old budget speeches to see how many people have in fact fallen out of the tax net and he has come-up with the interesting statistic that in recent years over one third of a million people have been counted out of the tax net by various Ministers for Finance at the beginning of a year by reference to changes in marginal relief, tax exemption levels and the like, but when it comes to the end of the year they are back in there again. Like the commentator on the Falklands war, you count them all out and count them all in again and they all come safely home to roost like jackdaws at the end of the day. They will be back where they were, paying tax, because we have this viciously anti-work tax system which takes account of inflation. The Minister may claim that on paper 10,000 tax payers are exiting the tax paying class this year but they will be back. However, they will all receive increases of varying amounts during the year and they will be back paying tax at the end of the year, as always happens on these occasions.

What this country needs is radical tax reform. There is something radically wrong with our tax system and it needs something radical to put it right. An incrementalist, marginal view of the world which changes the real value of income tax allowances and bands by 3 per cent in real terms has nothing to do with radical tax reform. A system that leaves people who earn below the average industrial wage paying 55.75 per cent of their overtime or extra earnings to the State is radically wrong. Such a system needs extensive surgery to make it right but nothing that has been done in this budget even suggests that this message is understood in Merrion Street.

There is a reason we cannot afford to continue our complete obliviousness as to the effects of our tax system in future. Now that the peace process is in train and we have peace on our island, now that investment decisions as between, say, Dundalk and Newry are real decisions about which real foreign investors will have to make up their minds, we must face up to the fact that anybody who intended to locate a labour intensive industry in the north east of this island would be simply mad to locate it in Dundalk if he or she could get any similar terms for locating it in Newry. The reason of course is that the difference between what the British Exchequer imposes by way of income tax and payroll levies on the wage bill on a factory in Newry is dramatically less than the Irish Exchequer imposes on a factory of a similar kind located in, say, Dundalk or Drogheda.

We must now face up to the fact that we now belong to a single labour market with the United Kingdom. Of course there are barriers in terms of travel and establishment for Irish workers going to and from the United Kingdom, but we now know that in Border counties, workers are crossing the Border in pursuit of employment. They know the very dramatic difference between paying United Kingdom tax and Irish tax on their income and that will have a magnetic effect in drawing employment and employment centred investment north of the Border. We are living in a fool's paradise in this country if we believe that we can maintain our system of high payroll taxes without any regard to what are, in economic terms, laws as immutable as the law of gravity.

The difference between this party and other parties in this House is that we believe that tax rates matter. I note that in our negotiations recently with the Labour Party, which were inconclusive, we were told that tax rates do not matter. Of course they do. As Deputy McCreevy pointed out, when someone risks their capital or their effort in any enterprise, they want to know what the return is. If the State, for its part, insists on taking half of the return back to itself, it has about the same effect as if Deputy McCreevy, when betting at Naas racecourse, faced a 50 per cent tax on his winnings. It would definitely make him much slower to put money on odds-on favourites.

The tax system has the same effect on enterprise in this country. It is not the case that people simply carry on as normal and resent the rate of tax. People change their behaviour to meet the tax system and I agree with Deputy McCreevy that our system of capital gains tax radically affects business decisions made daily in this city and country. Many people have gone abroad because of our capital gains tax system and many deals are done in a convoluted way to minimise exposure to capital gains tax. That is why I put down a question recently to the Minister for Finance to ask him what would the cost be to the Exchequer of reducing the 40 per cent rate of capital gains tax to 20 per cent.

The remarkable answer was approximately £14 million per annum. That £14 million, which in budgetary terms is insignificant, has nothing to do with real tax equity. However, it has a massive disincentive effect on real enterprise in Ireland. As Deputy McCreevy said, our rates of capital gains tax are so penal that most people avoid the transactions which would attract that taxation in the first place, whereas if one were to look to lower rates of taxation one would in the last analysis increase the volume of transactions dramatically and thereby increase the return to the Exchequer. That applies not only to capital gains tax but also to income tax.

The universal international experience is that low marginal rates tend to attract into the tax net and out of the black economy, out of tax avoidance and evasion and into the real economy where it can be taxed a significant flow of income. This country should not be afraid to have lower rates of tax. As long as we maintain high rates of tax, particularly on employment, as long as we continue to tax work as though it was a luxury in an economy where it is a dire necessity, as long as we continue to tax work and effort in the way we do, this country will not escape from the vice the present tax system constitutes as far as enterprise is concerned. We need something radically different and we need politicians above all who are determined to seek something radically different.

It is clear beyond contradiction that the provision for tax reform in this budget is minimalist; it is a few percentage points here and there and will not have a dramatic effect on the Irish economy. Furthermore, all the public comment of the politicians involved in framing this budget has been universally of the kind that so much money will be available for tax reduction at the end of the budgetary negotiation process. I believe in a totally different approach to budgetary policy. Any Government worth its salt should say "Over three or four years, this is the tax system we will achieve; these are the stages by which we will achieve it; expenditure and borrowing must conform to arriving at this particular tax model at the end of the four year period".

If taxation was regarded not as the residual, the bottom line balancing item in the budgetary process, but was regarded as the cornerstone, the point of departure for every budget in the life of a Government, and if a Government set out to achieve a radically different tax reform and insisted that public spending must play second fiddle to taxation reform and must be controlled in the interests of taxation reform, then this country could have taxation reform. It is clear beyond contradiction from this budget that the Government does not believe in that.

If one looks at A Government of Renewal programme there is not one single measurable taxation target. When this Government goes out of office — the sooner the better — there is not one single thing by which people will be able to say that it did or did not achieve what it set out to do in relation to taxation because it has set itself no targets of any kind. That is the difference between this Government and the Government that might have been had the Progressive Democrats participated in it. We would have insisted that tax reform be the cornerstone, the point of departure and the ultimate measuring stick of budgetary policy, and we would have driven a process which could have transformed this country into a pro-work, pro-enterprise economy in a matter of years.

As it is it will fall to other politicians — hopefully ourselves — to achieve that result sooner, I hope, rather than later. We pledge ourselves never to abandon our conviction that taxation reform is the single most important step that any Government can take to bring about a pro-enterprise, pro-employment society. It is not just we who say that; it was embodied as a central canon of the Culliton committee's report. It said that if there was one thing Government could do to affect the economy in a fundamental way and make our economic policies make sense, it was to tackle the issue of taxation reform.

There are two problems with the political system in this country in relation to tax reform. First, we have had, unfortunately, a generation of politicians who do not understand the problem. Second, they are advised fundamentally by people who are unsympathetic to the notion that our tax system at present is part of the problem rather than part of the solution. Therefore, we have in large measure advice coming into the Government system which suggests the tax system should be used to stimulate economic activity rather than an acknowledgement, which I believe lies at the heart of economic truth in this country, that the taxation system is the problem rather than the potential solution to our economic problems.

I have advanced the view that one could easily have over four budgets, if one decided to divert economic growth into resources available for tax reduction and tax reform, a system which was fundamentally far fairer than the present system, far less antagonistic to work and enterprise, and far more geared to economic participation. There is room for a system which has a standard rate of tax of 20 per cent and a top rate of tax of 40 per cent. It is possible to achieve that and to get rid of employee PRSI in a four year programme. It is possible to transform employer PRSI into a single digit payroll levy without a ceiling at a much lower rate than the present 12.2 per cent. It is possible if a Government acknowledges that PRSI is simply a tax and sets out to integrate the taxation system and the PRSI system and have a dramatically different code of taxation which favours work.

The real tragedy of this budget is that the circumstances have never been better to set off on the first stage of the journey from tax madness to tax sanity. All we have had is a weak-minded whimper of a budget in which the changes are marginal at the very best. For instance, we have in real terms a 3 per cent increase in the value of the standard rate band and a 3 per cent increase in real terms in the value of the personal allowance. The Minister, Deputy Quinn, has the remarkable political cheek to describe that as a radical budget. We are told that is the distillation of the best thinking of the Ministers in this House. It is a sad reflection on the poverty of imagination and the utter absence of political will as far as tackling our tax problem is concerned.

It is a curious irony that the New Zealand Government has done more with our Commission on Taxation report than we have. The reason is that a generation of politicians have made day to day, darn and stitch decisions to keep in place the mad anti-work tax system we have rather than face up to the painful political decisions which tax reform involves. Saddest of all is that now, with comparatively good budgetary circumstances, when the pain would be all the less in radical tax reform this Government chose to cast aside the opportunity and to attempt to achieve many things, to run in many directions which are mutually contradictory.

It is also strange that the Minister should announce that in next year's budget an allowance will be introduced in respect of local government charges. Why is that being announced this year for next year? Why is that commitment being made this year for next year? It does not make sense as a tax allowance; it does not add to the sanity or the order or rationality of our tax system. It seems to be a sop to the Democratic Left and it makes little economic sense.

The day it was first announced in this House, I described it as Tommy Cooper economics, which is precisely what it is. It moves from one thing to another, but it makes no sense and it complicates a person's tax code immeasurably.

As regards the system of taxation generally, there is a better way. It requires political courage and vision and a sense of strategy which is totally absent from a set of parties which have engaged in U-turn after U-turn in recent years in relation to taxation. As I said, this Government would do us all a favour if it put aside its ideological divisions and settled down to a programme of radical tax reform or quit office at the earliest available and least embarrassing opportunity.

I welcome some features of this budget, in particular the decision on child benefit, because they deserve our support. It is correct to use that mechanism to redistribute income in our society to those who need it most. It is the most direct way of achieving social justice for those who are not even guaranteed a place in the employment market. It is something which I would never criticise. Since we have a demographic tide flowing with us in relation to the provision of support for children, we should avail of it and be brave. Each year approximately 30,000 children fall out of the category entitled to receive child benefit because of a decline in the birth rate. That in itself married to economic growth gives this society a unique opportunity to divert resources towards families with children in a way which does not distort the economic behaviour of adults. Some have suggested that there should be a basic income for children, which is a good concept. This society should go in that direction as circumstances permit. By contrast, I do not believe that the notion of a basic income for adults is sensible. The universalisation of benefits would have two effects; it would alter people's participation rate in the economy, while at the same time it would put downward pressure on the process of redistribution targeted at those who need it.

It is worth saying that the rate of increase for social welfare recipients at 2.5 per cent in circumstances where the Minister for Finance will not state as a matter of certainty that inflation this year will be held at 2.5 per cent — he is vague on that subject in his budget speech — is one of the meanest examples of cheese-paring and retrenchment I have ever seen. One sees the Democratic Left and the Labour Party in Government bringing in a series of social welfare increases which seem on the face of it to be pegged only at the most optimistic estimate at or below the rate of inflation in a growing economy. It is remarkable to contrast that with the fact that those of us who are accused from time to time of not being as caring as the left wing parties have never, while in office or supporting a Government, produced such a mean minded result for those most in need in our society. Although there are two left wing parties in Government, the increase in benefit for an old age pensioner is pegged at or below the rate of inflation in a society where there is economic growth. Where is the solidarity there? I suggest that the only solidarity is between the ears of the ideologues who believe that because they are left wing they can get away with meanness to the point of injustice. I wonder how Democratic Left and the Labour Party can endorse a budget in which they have pegged benefits to those who most need them, non-contributory and old age pensioners, at or below the likely rate of inflation. What is it about this society this year that convinced the left in Irish politics that they must punish those who have least in terms of resources and a capacity to fend for themselves?

As far as the spending of this Government is concerned, much has been made — and Deputy Hogan's much talked about press release made more of it — about the wisdom of the financial decisions and the curtailment of expenditure which was implicit in this budget. A black political lie is being peddled by those who claim A Government of Renewal contains a commitment to sensible economic policies as far as expenditure is concerned. The published net current supply services, the day to day expenditure of Government, last year was £8.3 billion from which one must take once-off amnesty-related expenditure of £192 million. That was adjusted in 1994 to £8.165 billion. This year's Estimates are for expenditure of £8.703 billion. If one adds budget day increases of £162 million to that, we have a revised expenditure this year of £8.865 billion. If one leaches out of last year's figure the once-off fruits of the tax amnesty, there is an underlying growth in public spending in 1995 compared to 1994 net of tax amnesties of 8.6 per cent. That is the real measure of expenditure growth this year.

In claiming a 6 per cent growth in expenditure, the Government is pretending to the electorate that the once-off tax amnesty is something which happens each year in some shape or form. The facts speak for themselves. If one leaches the tax amnesty out of the figures, one is left with expenditure growth of 8.6 per cent in circumstances where inflation, about which old age pensioners will know much in the coming year, is 2.5 per cent, there is a substantial growth in public spending and a growth rate which is not paralleled by any other Government in the EU.

If the Government could practise the virtue of fiscal continence and keep expenditure and taxation down and divert the real fruits of economic growth into making available resources to reduce and reform the tax system, we could achieve radical results with little pain as long as the current rate of growth of between 3 and 5 per cent of GNP persists. I believe the contrary has been demonstrated today. This Government which had all the opportunities to effect some economies in areas where there must be waste — we are all aware of waste in public expenditure — has completely shied away from doing that.

We work in a building where £10 million is to be spent on refurbishing and adding new wings. This Government proposes to give £50 million to Irish Steel. This Government is proposing to plough £175 million into Aer Lingus and take away from Bord na Móna its accumulated debts, which are horrendous in proportion, and pretend they are a separate account either to be funded by taxpayers' money or to be given to the National Treasury Management Agency to look after as if it had nothing to do with the organisation which incurred the debts in the first place. We live in a society where there is a massive wasteful expenditure and in circumstances in which growth in public spending, both capital and current, is not under control. It is that absence of control that creates the conditions in which public spending grows and the opportunity for tax reform is lost.

I have never made a habit of researching what the Labour Party in my constituency thinks on various issues, but when it published a pamphlet yesterday on this subject, I felt that I should impart it to this House. It was part of a document in which it was examining the proposals of the Minister for Education on the question of third level education. The Labour Party in Trinity College proposed this pamphlet. I do not want to go into the details of what it proposed — much of it makes a lot more sense to my mind than that which its more senior party colleagues are trying to peddle to the public — except to say that I am struck by its final paragraph. It states: "We, as Labour Party Members, as socialists, as people committed to social justice and above all, as people seeking a fair and just society, believe that this Labour-led Government, with its Labour Party Minister for Education and its Labour Party Minister for Finance, has an obligation to this country to examine these proposals with the utmost expediency." The phrase that struck me was that, in the view of the Labour Party, this is a "Labour-led Government." That is what members of the Labour Party think.

I searched today's budget to see if there is evidence to the contrary. Is this an exaggerated claim made by a group of young students whose political ambitions are overvaulting themselves? On the contrary, it is not. If one looks to this budget to see where Fine Gael's rhetoric about enterprise, risk taking and the individual taking responsibility for himself is to be found, there is not, in the last analysis, one sentence which makes even the slightest obeisance to that point of view. This budget is about increased public spending at an 8 per cent level over 1994's real level. This Government's budget is about tinkering with the tax system, not radically altering it. It makes a few cosmetic changes to the tax system but leaves in place a system where ordinary people earning below the average industrial wage in Ireland, alone of any country in the European Union and the OECD, find their earnings confiscated by the State at 55.75 per cent. That still exists and this Labour and Democratic Left dominated Government has done nothing for the single worker earning below average industrial earnings except to make a minimalist gesture in their direction.

Another feature of this budget which has been brought to my attention is the concession to the Society of the Irish Motor Industry on the scrapping of old cars and a £1,000 reduction in VRT for those who exchange a ten year old banger for a brand new car. I do not know precisely what group of the population are masochistic enough to drive a ten year old banger which would be worth scrapping because it is worth less than £1,000 and have sitting at home in the piggy bank enough money to buy a brand new car and are waiting for the stimulus to do so. I was impressed by the SIMI's statement that it believes this has worked in other countries. What worries me about such a proposal is that, in the last analysis, it may well be that the improvement the SIMI did deliver last year on employment was as a result of pent up unwillingness on the part of the people to buy cars because of the VRT system that existed until lastyear and that it will not be able to replicate the same results this year. I hope I am wrong and I wish it every success in putting together new jobs in its industry.

If the Government would only expedite the MOT testing to make Irish cars of whatever age — especially older ones — safe, there would be far more employment created. That is not only a matter of employment creation for its own sake. We are obliged, by membership of the EU, to bring about such a transformation in the car maintenance laws. That would have a much more dramatic effect on employment in the motor industry than this proposal.

However, the idea is a striking one. The SIMI is showing a deal of radicalism. It is willing to get rid of the ten year old bangers in favour of something brand new. That contrasts with the spirit behind this budget. We are dealing with a Government of ten year old bangers, a clapped out tax system and a vehicle whose wheels are wobbling, if not already fallen off. This Government is a car with four wheels; I emphasise four because there is no steering wheel anymore. It goes in this direction or that, depending on what the Labour Party perceives to be its political interest. It goes forward and backwards on employment levies and the residential property tax. This banger, this clapped out wreck of a Government, has the neck to come into this House and say that it has something new on offer. It has no such thing. Today's budget was the greatest lost opportunity and we will, over the next few years, realise how serious our tax situation has become by reason of the failure of this Government, due to ideological confusion and political cowardice, to face up to the challenge of tax reform.

There, are those in our society who seem to believe that risk taking is wrong, that an entrepreneur is in some way a chancer, that profit is somewhat dirty and that growth in a man's business represents some kind of selfish preoccupation rather than hard work. The extract from Dr. FitzGerald's memoirs, which were read here by Deputy McCreevy, containing words which are part of what I believe is a failed view of Irish society, from a group of social democratic social engineers who believe absolutely that the higher the tax rate, the greater the opportunity to create social justice. I deny that proposition completely. High tax and social justice are not allies; they are mutual enemies. A society that goes for a high taxation option always ends up with injustice. In Ireland, we do not have the resources, sophistication, location or the entrepreneurial heritage to sustain a system of taxation which is more savagely anti-work than that in Sweden. However, we have, by contrast, a group of politicians who behave as though we had an economy of that kind.

I was struck by the words of Eoghan Hynes, the Chairman of the Irish Small and Medium Enterprises Association, on the fate of the Irish entrepreneur. He said something on which many of us should reflect in today's Irish Independent.

He wrote that an owner/manager on a gross salary of £30,000 per annum — established in business, exporting and giving employment to 15 people — will take home £1,000 less than a civil servant on the same salary and £400 less than any of his own employees to whom he pays a wage equivalent to his own. That is how we treat entrepreneurial activity in Ireland. We tax, hound and harrass it. Although we have not yet made it unlawful, we have done our best to ensure that in our society it is dealt with as though it is economically dishonourable. We need a radically different approach to enterprise and risk taking. If this budget was serious about this matter, for £14 million the Minister for Finance could set out in the Finance Bill to halve the rate of capital gains tax to 20 per cent and let real economic activity flow and emerge.

Hugh Daltons's Prime Minister, Clement Attlee, was described by his rather sharp-tongued opponents as a modest man with a lot to be modest about. This budget was introduced with a fanfare of exaggeration and rhetoric. It was represented as radical. The Taoiseach says it is the best budget the country has ever had. If that is the best budget we have ever had, we have had a very sorry litany of budgets to date. If this is radical, I would hate to see the Minister, Deputy Ruairí Quinn, in a conservative humour. He may think that as a socialist he has to cosy up to the enterprising elements in Irish society and represent himself as socialism's uncle Tom to the capitalists in our society. If this is his best effort, God help us if things get significantly worse next year.

This party, for its part, will continue to advocate and build public support for radical change in the way our economy is run. We will deny the mantle of tax reform to those who produce 3 per cent changes and call this a major pro-jobs and radical budget. We will make the arguments at every level in our society that social justice and high taxation are enemies and that the greatest ally of social justice is participation. A budget which plans for 266,000 people out of work, even though there are to be 38,000 people in social employment schemes, represents a fatalistic and downhearted approach to the problems of this country. There would and will be a dramatic change in Ireland when the people have a Government in place which will set out a four year programme to change dramatically Ireland's budgetary and taxation policies. Until that happens the claims made by Deputy Quinn for this budget will be repeated in more or less similar terms next year but with very little effect.

He concluded his speech by asking people to consider the kind of country we will have in 15 years time. He talked about it being only 15 years to 2010. The 2010 vision of Deputy Quinn is a new concept. It sounds cock-eyed to me because none of the things he held out as the fruits of industrial growth will result from budgetary policies of this kind. The only thing I guarantee he will achieve from his wish list is that Irish people will have the average EU disposable income but this will come about because by 2010 half of eastern Europe will come into the EU. Failed socialist experiments will push us up the average league. That will be a lasting monument to red Ruairi's socialist vision of 2010.

Sitting suspended at 7.05 p.m. and resumed at 7.10 p.m.
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