Dáil Éireann debate -
Wednesday, 8 Feb 1995

Vol. 448 No. 7

Financial Resolutions, 1995. - Financial Resolution No. 3: Income Tax.

The Taoiseach

I move:

(1) THAT, as respects any payment or crediting of relevant interest (within the meaning of Chapter IV (Interest Payments by Certain Deposit Takers) of Part I of the Finance Act, 1986 (No. 13 of 1986)) made on or after the 6th day of April, 1995, subsection (1) of section 31 of the Finance Act, 1986, be amended by the substitution in paragraph (a) of the definition of "appropriate tax" (substituted by section 22 (1) (a) (i) of the Finance Act, 1992 (No. 9 of 1992)) of "15 per cent." for "10 per cent.".

(2) THAT, as respects the year of assessment 1995-96 and subsequent years of assessment, subsection (3) of section 14 of the Finance Act, 1993 (No. 13 of 1993), shall apply and have effect as if this Resolution had not been passed.

(3) IT is hereby declared that it is expedient in the public interest that this Resolution shall have statutory effect under the provisions of the Provisional Collection of Taxes Act, 1927 (No. 7 of 1927).

This resolution provides for an increase in the rate of deposit interest retention tax on special savings accounts from 10 per cent to 15 per cent with effect from 6 April 1995. Interest paid or credited to a person's account prior to 6 April 1995 will be subject to DIRT at the current 10 per cent rate while interest paid or credited on or after this date will be subject to a 15 per cent rate of deposit interest retention tax.

Special savings accounts were introduced in 1993 following the abolition of exchange controls to counteract the threat of capital outflows while preserving deposit interest retention tax revenues as far as possible. Their introduction was dictated by the failure to reach agreement at EU level on common rules governing the taxation of deposit interest. These accounts which have attracted funds in excess of £3 billion have enhanced the competitiveness of Irish financial markets and have contributed to a stable, healthy deposit base in the country. The Government is satisfied that such benefits can continue to be achieved with a 15 per cent deposit interest retention tax rate. This will help to reduce the imbalance between taxation on earned and unearned income while maintaining an attractive fiscal incentive for deposits to remain in the State.

A 15 per cent rate, being the final liability to tax on interest received, will still leave depositors with a competitive after tax return on their investment. The increase in the rate of deposit interest retention tax will yield an estimated £4 million in 1995 and £7 million in a full year. No change is proposed in the 10 per cent rate applying to special investment accounts operated by stockbrokers, insurers and unit trusts. The Government consider it appropriate to have a lower rate for these investors which, unlike investors in special savings accounts, are required to invest at least 55 per cent of their portfolio in Irish equities with 10 per cent of the portfolio in small to medium-sized companies.

Mr. Martin

Will the Taoiseach comment on the case made by Deputy McCreevy who asked if the Government is satisfied that it will not be open to legal challenge on the abolition of covenants? The de Buitléir report commissioned by the Minister reported on tax covenanting for education and advised the Government that certain tax covenants are for a five or six year period and it had entered into a contract with those taxpayers. The Government has gone against the spirit of the report and its recommendation that tax covenanting should be phased out, with existing covenants being allowed run their course. The Government should be seen to deal honourably with the people in whatever contracts it enters into with them. One could argue that a dishonourable approach is being adopted towards these people.

There are 90,000 students in third level education and 60,000 of them do not pay any fees. Some 30,000 students will benefit from the abolition of fees but it is estimated that 38,000 students benefit from tax covenants. There are 8,000 students who will lose out completely as a result of this measure. We do not know who they are; they may be the parents of PLC students. There are 12,500 post leaving certificate students who may benefit from tax covenants. They do not pay fees so they could lose substantially. A con job is being perpetrated on PLC students. It is appalling for the Government to pretend it is abolishing fees for students who do not pay any fees.

Mr. Rabbitte

They pay fees in my constituency.

Mr. Martin

They do not do so in my constituency.

Mrs. O'Rourke

There are no national PLC fees.

Mr. Martin

As far as PLC students are concerned the issue is maintenance. No one in the educational field will argue with that.

Mrs. O'Rourke

Maintenance and materials.

Mr. Martin

We are talking about low socio-economic groupings in many respects, people who may not be able to attend university or other third level institutions. As was illustrated yesterday, it will be cheaper for higher income earning groups to send students to university than it will be for someone earning £7,000 or £8,000 to send a student to attend a PLC course in Ballyfermot. That is the reality. We need clarification on this. We have not been given much information on the breakdown of revenue yield.

As regards tax covenants, the de Buitléir report estimated that the Exchequer has foregone £20 million. Two weeks ago during a Private Member's motion the Minister for Education estimated that it would be £25 million and today it has been estimated that it will be £34 million. There is confusion about the estimated yield.

Mr. Sargent

As regards covenants, measures to close off gross abuse are a step in the right direction. There is still inequality in the way covenanting operates. Those with highest incomes are set to benefit most by the use of covenants even after the measures taken in the budget. Those on low incomes cannot avail of the procedure. The fact that covenanting exists, even as a temporary measure pending the abolition of third level fees, highlights the need to replace it with something along the lines of a maintenance grant.

Mr. M. McDowell

These two resolutions require separate analysis. I have no difficulty with increasing the 10 per cent rate to 15 per cent. I have always believed that the 10 per cent taxation rate on these accounts was remarkably generous bearing in mind other tax rates which people have to pay. We tax those earning below the average industrial wage at 57 per cent of their marginal earnings. It often occurred to me that it is a strange society which does that and then says that somebody with a significant amount of money to put on deposit in one of these accounts should get 90 per cent of their interest tax free. I appreciate that the 10 per cent rate was established in order to prevent an outflow of capital but people who must work hard to get money must blanche when they see a person with money in one of these accounts having the income from their interest taxed at 10 per cent while if they work an extra hour of overtime they are taxed at 55 per cent. Therefore, it is sensible to endeavour to introduce rationality into all of this. While the lower rate was established to prevent an efflux of capital, it may be that over time all income will be taxed at the same rate and there will not be these special concessions for particular accounts. I take the distinction drawn by the Taoiseach between equity-based investments and simple deposits; at least in the former category there is some element of risk, whereas in the latter there is absolutely none.

In relation to covenants, while today is not the day to discuss education policy, I strongly recommend that the Taoiseach read the pamphlet prepared by Labour Party students of Trinity College, Dublin on the issue of what is being done. It is fair to say that it we are being asked to amend the law in relation to covenants, we should realise the context within which and the purpose for which it is being done. Having taken everything into account, including the cynical views as to whether or not this is politically popular, I have to say it is deeply wrong and offensive to my conscience that these reforms proposed by the Minister for Education should be proceeded with within a society in which there is so much social disadvantage and educational exclusion. To apply scarce resources to that category of society, irrespective of their means, who are paying university fees at a time when only 3 per cent or 4 per cent of university students come from working class backgrounds, when children from those backgrounds need remedial teachers, need more money put into primary education, need greater opportunities to remain in secondary education, seems to me to be an outrageous proposal from a Labour Minister.

The Taoiseach should obtain a summation of what the Labour Party students of TCD contend the Minister is endeavouring to do. He will be gratified to read that they are shocked at this proposal coming from what they term "a Labour-led Government". I would ask the Taoiseach to assert some leadership in favour of what is right——

Mr. Rabbitte

Obviously, they cannot count.

Mr. M. McDowell

—— and stop taking on board what is wrong.

In relation to the technicalities of covenants, I was contacted by people on Sunday and Monday last asking whether they should make covenants. My advice to them was that they should because it is highly unlikely that the Government will be able to introduce retrospective legislation. I believe that the leaking of some of the contents of the budget is substantially wrong and gave some people, who gave credence to what they read in the newspapers, substantial advantage over their neighbours who might have thought that this was mere speculation.

While I accept the apology the Taoiseach has tendered to the House on behalf of the Government, it is not simply an apology that is required but an investigation as to why somebody thought it right to reveal the contents of the budget in the way that has been done over the past few days. It has been deliberate and consistent, to the extent that people would telephone me and ask whether or not they should act on those leaks. That is most unfair. Whatever about the explanation of the Minister of State, Deputy Hogan, to the Taoiseach — that he intended this to go out later — if one looks at the front page of the document in question, it is very clear that somebody knew precisely what they were doing because they wrote the time of the release on it and urged people to contact the Minister's programme adviser for further information on the budget. That is not good enough. Many people today will wonder whether they were right or wrong to have missed the boat on Sunday or Monday last. Many who dithered on whether they would execute a covenant realise today that those people who took the leaks seriously have a very significant advantage over them.

The Taoiseach referred specifically to what he considered to be a somewhat suspicious tendency on the part of uncles to give nieces and nephews money. If one thinks about it, there is a common sense explanation for that. Normally, parents give their children what they can. Very frequently a parent may ask a slightly better-off relative to do the needful for young John or Sheila who wants to go to university by using the covenant facility. From my experience very frequently — and it is not an abuse — a better-off uncle who wants to do something for a married sister or brother with a large family will do his bit by executing a covenant in favour of a niece or nephew, who is a deserving case of assistance, to attend college. It is not good enough to say simply that they seem to do more than parents. Parents have many draws on their incomes and better-off relatives very frequently, out of the best of motives, try to do something for nieces and nephews, to give them a leg up, because, for instance, the farm or family business has been left to one of them or whatever. It is not fair for the Taoiseach to imply there is something suspect about an uncle giving a niece or nephew money. In my view it is perfectly natural. It is decency that inspires the execution of most of these covenants.

Acting Chairman (Mr. Leonard)

As there are 11 speakers I would request brevity to allow everybody an opportunity to contribute.

Mr. O'Dea

I can bear out what Deputy Michael McDowell has just said because a number of accountants have contacted me over the past few days inquiring whether leaks that appeared in the newspapers were correct, asking whether they should accede to requests from their clients to make covenants on their behalf.

While I accept the Taoiseach's explanation, to put it at its mildest I find it somewhat inadequate. I have a specific question to pose to the Taoiseach on this matter. My understanding is that the Government's strategy is to abolish fees for third-level students. However one might feel about the validity or otherwise of that proposal — and I have certain misgivings about it, particularly at present — in order to compensate for it I note the Government is introducing a strategy on covenants which would appear to me to be two-fold. First, the usual type of 5 per cent of gross income — restricted covenant in favour of children is being abolished and, second, it would appear from a reading of the Resolution, that the Government is extending the 5 per cent restriction to all other covenants, that is covenants that will not be abolished. I do not think one leg of that strategy necessarily follows from the other. I can see what the Government proposes to do in relation to covenants in favour of students whose parents henceforth will be relieved of the responsibility of paying fees.

However, the Government must bear in mind that covenants are used by many other people for many other purposes. For example, people covenant money to secondary schools to enable those schools to make up the shortfall not provided by the Government in relation to the teaching of natural sciences and such subjects. I am not too worried about that because it would be most unusual for a parent or resident to covenant more than 5 per cent of their gross income to such a school. I might point out also that many people who must provide for elderly relatives, particularly in nursing homes, use the covenant system for that purpose. The Taoiseach, the Minister for Finance, and certainly the Minister for Health will be aware — as will most Members working on the ground — that the provision made for the nursing home regulations, which implement the subvention system for nursing homes, is pitifully inadequate to meet the need. The only way many people can maintain their elderly relatives in nursing homes in relative comfort is to use the covenant tax concession. If it is the intention of the Government to restrict this to 5 per cent of gross income it will cause catastrophic hardship in individual cases. Is that the Government's intention and, if it is an unintended consequence of the manner in which the Resolution is drafted, could it be changed?

Dr. O'Hanlon

I support my colleagues, Deputies Martin and O'Dea. Those who pay income tax will not be very satisfied with what they heard today from the Minister for Finance. Last year, when the present Taoiseach, then Leader of the Opposition, opened the debate on the budget he told the House that Fine Gael had costed to the nearest penny the widening of the income tax bands, that they could extend them to £20,000, constituting an increase of £5,000. It must have come as a major shock to the public today that those bands have been increased to only one-third of that projected figure.

On the question of covenants, the case has been well made by Deputies Martin, O'Dea and Michael McDowell. I would advise the Taoiseach to tread with caution here. The Government has recognised the problems of the incapacitated, who will be exempt from the exclusion from such covenants. I have not the slighest doubt that if we pass this Resolution this evening there will be very many other deserving cases, at present benefiting from covenants for bona fide reasons — not because somebody wants to evade paying tax, but because they are genuinely supporting or helping some other person with a particular need who will suffer considerable hardship. The Government should consider the position even at this late stage and ensure that we do not need to come back here to tell it that some people are genuinely in need and are dependent on covenants, but will not be able to avail of them because of this resolution.

Does the Taoiseach consider it wise to tell people who have covenanted for seven years that from 6 April they can no longer benefit from them?

The Taoiseach

They can still use the covenant.

Dr. O'Hanlon

Yes, but they can no longer avail of tax relief in respect of it.

The Taoiseach

The same thing applies to a mortgage if there is a change in the mortgage tax relief.

Dr. O'Hanlon

Some people may have genuine bona fide reasons for supporting people with a particular need. They are now being told having signed a contract that they can no longer avail of tax relief and that may pose a problem for them. It is anti-rural for the Government to abolish covenants on the basis that third level education fees will be paid by the State next year. Many aspects of the budget are anti-rural, such as, the reduction in the allocation for county roads and the 2.5 per cent rise in respect of social welfare. The real problem facing people in rural areas is student maintenance costs. While rural students will benefit from the State payment of third level education fees they are disadvantaged visà-vis people who live in towns and cities in which there are third level institutions.

On special savings accounts is the Taoiseach satisfied that increasing the interest rate to 15 per cent will not result in a withdrawal of money from accounts because the State has benefited substantially from investment in them over the years? With the freer movement of money within the European Union now, is there any danger that an increase in the interest rate will result in money being withdrawn from institutions?

An Leas-Cheann Comhairle

I now call Deputy Hilliard and will then call Deputy O'Rourke. I have a list of Deputies before me.

Mr. J. Mitchell

Should the next speaker not be from this side of the House?

Mr. Ferris

Will the Chair call somebody from this side of the House?

Mr. J. Mitchell

On a point of order, it is not the procedure that Deputies should be called from both sides of the House?

An Leas-Cheann Comhairle

There was a list of Deputies here when I came into the Chamber and I thought I should follow it. I know the normal procedure. I have called Deputy Hilliard and the Deputy can be assured that we will revert to the norm.

Mr. J. Mitchell

On a point of order, is it not normal to rotate between speakers from both sides of the House. Is it not only fair that the Chair should do so?

An Leas-Cheann Comhairle

I have called Deputy Hilliard and we will leave it at that for now.

Mr. Hilliard

On the special savings account I understood the Taoiseach to have said he envisages £4 million extra revenue in 1995 and a further £7 million revenue in 1996 as a result of new budget measures. Is the Taoiseach aware that many old age pensioners with two pensions and savings are taxed on interest they receive? Will the new budgetary measures affect them financially? The Taoiseach asserted that people use convenants to evade tax or gain the best possible benefit from tax measures. A family earning £30,000 per annum who can afford to invest 5 per cent of their income in a convenant and pay tax at 47 per cent would probably save in the region of £700 in income tax whereas fees cost a minimum of £2,000 per annum. I cannot understand the Taoiseach's logic in saying he is changing the provision in respect of covenants in order to save money and prevent people avoiding tax, while at the same time giving them a saving of £2,000 per annum in fees.

Families earning £17,000 to £22,000 do not qualify for education fees or maintenance because their income is above the maximum qualifying threshold which is in the region of £16,500 per annum. Their children are now allowed take up places in third level colleges and do not have to pay fees. However, many people will not be able to pay the maintenance costs to put their children through third level colleges. Will the Government introduce any measures to increase the bands for maintenance purposes?

An Leas-Cheann Comhairle

Eight Deputies have indicated their wish to speak. The Taoiseach may wait until they have spoken before he replies, but if he wishes to intervene he may indicate his wish to do so to the Chair. He may intervene on one or more occasion in the course of the debate. I now call Deputy Ferris.

Mr. Ferris

I assure the Taoiseach of widespread support for phasing out tax relief in respect of covenants and linking them to the abolition of fees. Covenants benefit some people but free third level education fees will benefit all people who want to send their children to third level education.

Mr. O'Malley

They do not.

Mrs. Doyle

The Deputy is just saying that because the measure will be introduced too late for him to avail of it.

Mr. Ferris

I listened to Deputy McDowell, who spoke on behalf of the Progressive Democrats Party, suggest that this was the wrong way to allocate resources. His party always expressed concern for people in special income brackets. Some people whose income is marginally above the qualifying income threshold for maintenance and education grants suffer greatly, find it very difficult to cope and cannot afford to enter into tax covenants.

Mr. Lenihan

The grants should be increased.

Mr. Ferris

Tax relief in respect of covenants will be phased out in two years.

Mr. M. Ahern

Maintenance grants should be increased.

Mrs. O'Rourke

Why not increase maintenance grants?

Mr. Ferris

Deputy O'Rourke, we have had a difficult time convincing you of the merits of this proposal.

An Leas-Cheann Comhairle

If the Deputy addressed the Chair, perhaps it would be less provocative. Deputy Ferris please, without interruption.

Mr. Ferris

I also got a copy of a letter complaining about this proposal from students privileged to be attending university.

Mr. Cullen

They have a right to be there.

Mr. Ferris

They are entitled to express their opinion, but there is nothing wrong with trying to ensure that people disadvantaged because their parents cannot afford to send them to university——

Mr. Cullen

The abolition of fees will not make it any easier.

An Leas-Cheann Comhairle

Deputy Ferris, without interruption.

Mr. Ferris

It is a question of sour grapes as far as all the Deputies opposite are concerned.

Mr. Power

That is an outrageous comment.

Mr. Ferris

This proposal should be welcomed. There is a groundswell of support for it.

Mr. Hilliard

A Cheann Comhairle——

An Leas-Cheann Comhairle

Deputy Hilliard, the Member in possession should be allowed to continue without interruption. It would help if the Deputy addressed his remarks through the Chair.

Mr. Ferris

I am trying to do that. It is amazing that when one wants to make a short contribution — the first on this resolution — one is subjected to such criticism from the other side.

Mr. E. O'Keeffe

The Deputy is misleading the public.

Mr. Ferris

Deputy O'Keeffe misled them on many occasions in the past, but we will leave that aside. This proposal will receive widespread support from the community. If Deputies were honest and listened to the people, they would know that ordinary PAYE workers who are just above the thresholds——

Mr. E. O'Keeffe

They will be the losers.

Mr. Ferris

——and who are penalised at present because they cannot afford to send all their children to university welcome this proposal. They have said that the Minister should not be stopped by vested interests who do not want this proposal to pass. I am delighted the Government is committed to it, that in 1996 fees for third level education will be abolished and tax relief on covenants phased out other than for the handicapped and the elderly. I support the Taoiseach's efforts in this regard.

The Taoiseach

I do not propose to respond to all the points raised, but Deputy Martin raised a very interesting matter, one which occurred to the Government when considering this issue. He referred to the possibility of a legal challenge to the removal of tax relief from an existing arrangement. There will be no legal difficulty in that regard. I understand tax provisions relating to existing covenants were changed in 1937 and 1979 and those changes were not challenged. It is also fair to say that there has never been a legal challenge to the Government's right to change the tax treatment of existing life assurance policies, mortgages or other long term arrangements. To the best of my knowledge, the question of a constitutional legal difficulty does not arise in this regard, but there may be a policy difficulty about which the Deputy is entitled to argue. However, the ingenuity of lawyers knows no limit.

Mr. S. Brennan

The Attorney General told the Taoiseach that; therefore, it must be true.

The Taoiseach

Deputy O'Dea and others made interesting points about people who may be affected, not merely by this measure but by the long term arrangements. In the debate of the Finance Bill Deputies may refer to specific cases and I am sure the Minister for Finance will be willing to consider them in a reasonable light.

In response to Deputy McDowell, evidence shows that there are very heavily organised tax covenants, not between uncles and nephews and so on but between complete strangers who realise that under the present arrangement, to which the 5 per cent limit does not apply, they can have a circle of covenants. This does not just involve covenating from one person's child to another and from that person back to their child, but a "coalition" of covenants, perhaps 15 or 20 back to back covenants and all those involved benefit from tax relief. That carousel of covenants is an obvious abuse of the system and will be brought to an end tonight.

Approximately 26,000 students benefit from covenants, not 38,000 as stated by Deputy Martin.

Mr. Martin

Do 38,000 people in general benefit?

The Taoiseach

Twenty six thousand students benefit.

Mr. Martin

I said 38,000 people in general.

The Taoiseach

I apologise, 38,000 people in general benefit. I thought the Deputy was referring to students.

Mr. Martin

It would be helpful if the Taoiseach could give a statistical breakdown of the number of people benefiting from covenants. As this would clarify the matter for many Members, will he give a commitment to do that?

The Taoiseach

I will supply the Deputy with as much information as possible but it may take a week or two.

Mrs. O'Rourke

I wish to comment on the matter of covenants. I would like the Taoiseach to express his true feelings on this measure because he has always spoken about the need to give reliefs where they are needed and not allocate them in a blanket manner. When I was Minister for Education and the Taoiseach was Opposition spokesperson I recall him stating on many occasions that he wanted reliefs targeted in that fashion. Does he really believe the proposal in this resolution is the best way to assist students?

Mr. J. Mitchell

As the Deputy said, that was then but this is now.

An Leas-Cheann Comhairle

The Deputy, without interruption, please.

Mr. D. Ahern

If Deputy Mitchell keeps quiet he might get a position.

Mrs. O'Rourke

I believe he will chair a little committee.

Mr. D. Ahern

He might even get the position of a junior Minister.

Mrs. O'Rourke

How can the Taoiseach say these covenants will benefit students who need help? The Minister for Education released a statement today which states in effect, that from January 1996 access to third level education will be free. If I were Willie Fagan, the Director of Consumer Affairs, I would accuse her of false advertising. Does anybody on the Government side have to put money in their children's pocket every Sunday evening as they leave their home towns to attend third level institutions in Dublin, Cork, Galway or elsewhere?

The Taoiseach

What about Athlone?

Mrs. O'Rourke

Relief in respect of income eligibility and maintenance grants would help PAYE workers — to whom Deputy Ferris referred — who are just over the limit. A generous increase in income eligibility and maintenance grant levels would greatly assist them. A Minister who lives in a city constituency in a dogged obdurate way decided that students in rural areas do not really matter to her. She will not be looking for votes in those areas.

Mr. Ferris

That is most unfair and the Deputy knows that. She has done more for education in rural Ireland than anyone.

Mrs. O'Rourke

With respect, the Labour Party will not be seeking many votes in rural constituencies. This is a pigheaded, dogged and obdurate measure. I am surprised the Taoiseach, who poses as the exemplar of probity and righteousness has not seen——

The Taoiseach

I do not know how to do that.

Mrs. O'Rourke

He does it all the time. He puffs out his chest and tells us how wonderful he is.

The Taoiseach

That is quite improper.

Mrs. O'Rourke

"Quite improper", what a thing for the Taoiseach to say?

Mr. J. Mitchell

It is a sexist remark.

The Taoiseach

I am not an exemplar of probity.

Mrs. O'Rourke

The Taoiseach tries to pretend he is. Will he also say what he proposes to do for the 7,000 post graduate students who benefit from educational covenants? What will they do now? They will not be able to avail of covenants and will not get Minister Bhreathnach's wonderful windfall, but they are told daily that post graduate courses are the way forward, that research, development and PhDs are the additional benefits students need when pursuing careers. I am addressing the Taoiseach but he is chattering to his colleagues.

The Taoiseach

I apologise. I am still listening to what the Deputy is saying.

Mr. D. Ahern

His left wing colleagues.

Mrs. O'Rourke

There is no need to be smart, Taoiseach. It does not suit you and it is an entirely false way to conduct an interview. Do you intend to listen, Taoiseach?

The Taoiseach

Yes.

Mrs. O'Rourke

You are not listening, you are talking to your colleagues. If you think that is the way to conduct your Government, I do not.

An Leas-Cheann Comhairle

Perhaps the Deputy would address her comments to the Chair.

Mrs. O'Rourke

How does the Taoiseach propose to help the 7,000 post graduate students, stripped of covenants by the Minister and ineligible for access to free education, whom he constantly extols as the road to the future for proper educational research and development? When the Taoiseach has recovered from his comic interlude perhaps I could have a response.

The Taoiseach was courteous and good enough earlier to give us an explanation of the action of his Minister of State, Deputy Hogan, who came into the House and disappeared rapidly when what he had done became known at 12.15 p.m. I put it to the Taoiseach that some months ago that same Minister of State stood here and lambasted a member of our Government on a much smaller issue, called for his resignation and treated him in an outrageous fashion. Yet the Taoiseach stood here tonight and expressed no amazement or outrage. We have been startled by the way the Taoiseach has treated the issue. If the Taoiseach was in Opposition and we were in Government there would be no end to the hullabaloo he would create. There would be no end to the outrage he would express and store up and we would be treated as if we had committed an act of treason. Yet the Minister of State has done something which no Minister has done on the occasion of a budget since the foundation of the State——

An Leas-Cheann Comhairle

I must interrupt the Deputy. Allegations of a serious nature against an office holder should only be made by substantive motion. I ask the Deputy to conclude.

Mr. J. Higgins

As a person who has benefited to a limited degree from the covenant scheme I believe, irrespective of the arguments put from the other side of the House, that it is a fundamentally flawed system. It is fundamentally flawed on the basis of the defence which Deputy Michael McDowell tried to advance in favour of the retention of the covenants, that is that uncle John can covenant his nephew young Willie for an unrestricted amount. He does that on the basis that he is able to feed finance from one member of the family to another. That is not the way to advance. That type of cross covenanting is what has discredited the entire system. The principle is fundamentally good but the operation is bad. The figures given by the Taoiseach prove that point. Deputy Martin made a valid point on post leaving certificate courses because, in those circumstances, people who have been covenanted in good faith will lose out. We have to approach the problem from the angle that PLC students do not pay fees——

Mr. Martin

That is what I said.

Mr. J. Higgins

—— and introduce the grants scheme to enable them to get maintenance.

Mrs. O'Rourke

The Government is doing away with fees for PLCs.

Mr. J. Higgins

Technically that can be done in regard to people who will have their covenants withdrawn because the two schemes are being phased in simultaneously.

Mr. Martin

Why was it not done in the budget today?

Mr. J. Higgins

It may well be done yet. What people have got to recognise in the context of an overall package is that the most significant financial assistance given since the introduction of the grants scheme to hard pressed middle income families has been introduced today.

Mr. Martin

That is not true.

Mr. J. Higgins

Does Deputy Martin realise that fees for law and European studies in the university in Deputy O'Dea's constituency are £1,980 or, to an average middle income family, £40 a week? That is real money, it is not a tax allowance. When you give a tax free allowance you get 27 per cent or 48 per cent. Every pound gained by way of a concession in regard to fees is a pound in the pocket. In two years time a person who has three children attending university will get up to £6,000 by way of a saving.

Crocodile tears have been shed in this House tonight. A former Minister for Education, Deputy Seamus Brennan, introduced a 40 per cent increase in the grant thresholds for maintenance but it failed miserably to iron out the warts in the system. At the end of the day it was still based on gross income, not on net income. It did not take into consideration mortgage, medical expenses and all the other running costs of the average household and it proved that the system is flawed. At the end of the day, irrespective of how well meaning and substantial these reforms, it means that the son or daughter of a garda, a teacher, a health board worker or the average civil servant still cannot qualify. Under this series of measures they will qualify for up to £2,000 for each student each year. Let nobody dismiss that as being insignificant.

I was a teacher and I looked down at my own protégés who were capable of getting top points and getting into university. I welcome students' entry into university and access to all faculties. That is what the system is about. Some of my teacher colleagues helped students obtain a high standard of education while their children were unable to attend college simply because they could not afford the fees. We should not disparage the most significant package of education reform in relation to helping the middle income groups.

Mr. Martin

We have not disparaged——

Mr. J. Higgins

Deputy McDowell referred to social exclusion and said we were not getting at the bottom end of the market, the primary education sector, the bottom up approach as in a pyramid. We will be pressing for this because we have got to tackle it from the bottom up. One of the major changes introduced, and for which everybody has been pressing for some time, is the relief for those who have to go overseas because they cannot gain admission to universities here. That is a significant development and should be welcomed but it has not been acknowledged by the other side of the House.

I have listened to Deputy O'Rourke who for four years was Minister for Education.

Mrs. O'Rourke

No, five years.

Mr. Martin

One of the best Ministers ever.

Mr. J. Higgins

We pressed her day in day out, week in week out and all we got was report after report, task force after task force, study group after study group and no action.

Mrs. O'Rourke

The Deputy did not get a job.

Mr. J. Higgins

Do not begrudge the action we have taken. I might get one yet. The Deputy will be a long time waiting.

Mr. M. Ahern

I understand that job creation is one of the planks of this Government unless they have already done another U-turn. Research and development is essential for job creation and job retention. I am pleased the Minister of State at the Department of Enterprise and Employment, Deputy Rabbitte, is present as he has responsibility for research and development.

Mrs. O'Rourke

Is it time for the baby's bottle?

A Deputy

Which baby?

Mr. N. Ahern

Is there any feed for the baby?

An Leas-Cheann Comhairle

The Member in possession should be given an opportunity to contribute without interruption.

Mr. M. Ahern

Will the Taoiseach confirm what amount will be lost to the universities from covenants made to them in respect of research? If that money is taken out from the universities will the Government provide money towards those research and development projects? For many years all our graduates in science, information technology and many ohter areas left en masse for Siemens and Philips on the Continent and were lost to job creation in Ireland. I would like the Taoiseach to look at this aspect.

The Taoiseach

How does that relate to covenants?

Mr. M. Ahern

I am referring to covenants to universities for research projects. I would like the Taoiseach to clarify that point.

The Taoiseach

Most of these are corporate covenants and they are not affected.

Mr. J. Mitchell

It is amazing that Fianna Fáil is leading the opposition to the abolition of third level fees. If I remember correctly, when Donogh O'Malley surprised the nation with the abolition of second level fees Fianna Fáil opposed that measure but he got his way because he hijacked the then Government. I am sorry Deputy McDowell is not here because I was very amused at that Deputy posing as the great advocate of social equity. He argued against the abolition of covenants and in turn the abolition of college fees on the basis that it is not socially equitable. I know Deputy McDowell is held in high esteem by many Members of this House, but in their wildest dreams nobody would consider him as the great advocate of social justice or social equity. Indeed some would say he knows very little about it.

Mr. Martin

That remark should be withdrawn. It is a slur on a Member of the House.

Mrs. Doyle

The Deputy should try to keep a straight face when he says that.

Mr. Martin

There is no basis for that statement.

Mr. Power

The Deputy should be excused because there is a full moon.

Mr. J. Mitchell

I am not surprised that a member of the Law Library is one of those most vocal in opposing the abolition of covenants because it is the highest earners in the land who benefit most from covenants. The richer you are, the more you benefit. Among the highest earners are people in the Law Library who can commend £1,800 per day or more.

I strongly support the abolition of third level fees and paying for them by the phasing out of covenants. The question of maintenance grants is not addressed; that is an associated but different question. To hear Deputies talking one would think that those who pay fees do not pay maintenance costs. Those who pay fees also pay maintenance costs. As a Deputy who has been elected for 20 years mostly by working class urban votes, I know many constituents who had the qualifications to go to university but whose parents simply could not afford to send them because their gross earnings were above the grant limit. I heard of two cases last year where students had the necessary points but their parents did not have the means to keep them in college. I have heard of so many such cases down the years that I discussed with a number of people the idea of setting up a special scholarship fund to assist people in that category.

The measure announced today by the Government will greatly help those whose income is above the means limit for grants. It amounts to a transfer from the very rich to those on middle income. People on middle income deserve relief because generally they are the people on PAYE, those who pay their mortgages and are not entitled to medical cards. Many of them are the new poor. The relief in today's budget is socially equitable, but that is not to say that these measures are the last word in improving the position for those in third level education. Undoubtedly there is a question of maintenance costs, but that should not be confused with the abolition of third level fees and covenants.

When I spoke to a group of students in the College of Marketing in my constituency yesterday I met one young student who said that she receives a maintenance grant of £40 per week, but if she was on a FÁS course she would receive £70 per week. She said that she and her family are under severe pressure and that it would be much easier for all concerned if she went on a FÁS course. These are issues that will have to be addressed. Today's budget is only one step in the right direction and further reforms are needed.

There are many other issues to be addressed such as overcrowding in our universities and the unfair pressure put on students in terms of points requirements for third level education. I appeal to Deputies to welcome the abolition of fees as a move in the right direction. It should be acknowledged that in most other European Union countries, particularly in north-western Europe, there are no tuition fees. By this measure, we are achieving equality with the United Kingdom and other European Union countries, which is welcome, but more needs to be done.

I thank the Taoiseach for coming in so readily with an explanation about the Minister of State. He has set a headline which should be followed by future Taoiseach and Ministers when something goes wrong.

Mr. B. O'Keeffe

I wish to refer to the Taoiseach's statement on the leaks and in doing so I acknowledge that the Minister of State, Deputy Hogan, is probably one of the most affable people in the House and an extremely able man. A great discipline occurred within his office today. The problem is that the timing of the press release was 12 o'clock, in time for the evening newspapers, and it included a page from the budget.

An Leas-Cheann Comhairle

The Deputy may not proceed in this fashion at this time. There are ways of dealing with that matter by way of substantive motion. It cannot and will not be debated at this time. The Deputy should address the motions before the House.

Mr. B. O'Keeffe

Before you came in, a Leas-Cheann Comhairle, the Ceann Comhairle allowed Deputy Ahern to ask a question and the Taoiseach responded.

An Leas-Cheann Comhairle

The Chair has indicated the procedure at this time. There are two motions before us which the Deputy should address.

Mr. B. O'Keeffe

The indiscipline that has occurred in the Fine Gael Party could undermine the Taoiseach's authority and credibility and everything he yearns for. It is extremely serious and merits further debate.

The abolition of third level fees will be well received because obviously people who pay £2,000 a year for a university course will be glad to see the end of those fees. Last year when three of my children were in college I paid £6,500 and was unable to avail of any grant. From a political viewpoint this measure is opportune for the Government and will be well received, but I wonder down the road if it will be considered economic madness. I know the Minister of State, Deputy Rabbitte, will agree that this scheme was not designed for the person earning £50,000, £60,000, £70,000 or £100,000 a year. I do not think that is what the Government had in mind. The problem with this measure is that while the Exchequer is well endowed at the moment the day will come when we may not be able to afford the amount required for third level education and PLC courses. The great sufferers then will be the colleges and schools running those courses. As happened in the case of local authorities, there will be inadequate Exchequer funding and colleges and universities will have to levy a capitation grant which will be increased every year.

I accept that there were major inequities in the system. The perception was that the self-employed and the farmers did very well out of the system, thus leaving the middle income group feeling very hard done by. Those who can afford to pay fees should be asked to pay them and should not be given any thanks for doing so. This decision will be well received from a political point of view but the day of reckoning still has to come.

This measure will be very costly and will not lead to even one extra student admission to a third level college or a PLC course. This will be the major problem in the future. Despite the fall in the birth rate and the decrease in the number of students attending primary and secondary schools, the number of students seeking third level places will continue to increase dramatically for many years to come. The Government has not addressed this problem.

I wish to refer to PLC courses, many of which are run in vocational and secondary schools. Many of the students attending these courses live at home and there is no maintenance factor. In many cases the cost of the course is negligible, it is an affordable commodity. The vast majority of people attending these courses come from the lower socio-economic group. Students on PLC courses whose parents are unemployed will believe that a social inequity has been perpetrated on them by the decision to abolish third level fees for those students whose parents have a business and may be earning £70,000 per year. I appeal to the Taoiseach to give special consideration to PLC courses and the maintenance element. Many of the students attending these courses are already at a disadvantage and I ask the Taoiseach to introduce a provision which will alleviate their hardship.

One must be rational when referring to covenants. The carousel to which the Taoiseach referred is intolerable and should be rooted out. However, many of the families availing of the covenant are on a standard salary of £11,000. These families will find it difficult to pay the maintenance fees for their children. While people on salaries of between £11,000-£15,000 do not benefit greatly from the covenant system, it nevertheless eases the burden on them. I urge the Taoiseach not to make this the final word on the covenant system and to consider the introduction of a system which will enable people in that income group to avail of a tax relief option which will be of benefit to them and their children.

Mrs. T. Ahearn

I very much welcome the measure in the budget which will ease the burden of third level costs on parents and students. There was no problem for those who came within the grant eligibility threshold while those in the higher income brackets could avail of worthwhile covenants. The people who have borne the burden in recent years have been just over the threshold limit for grant eligibility; they are the people whom the budget will benefit. The majority of students come from this group. Teachers, nurses and gardaí have had to endure an unbearable burden in order to give their children a third level education. There is no third level college in my constituency and the families whose children did not qualify for a grant had to bear the cost of maintenance and fees. I do not know how the Deputies opposite can criticise the abolition of fees and support the covenant system.

Mr. M. Ahern

Who is criticising them? The Deputy should get her facts straight.

Mrs. T. Ahearn

The Deputies do not welcome the proposal. The covenant system is inherently unfair.

Mr. M. Ahern

The Deputy is twisting our words, which is typical of Fine Gael.

Mrs. T. Ahearn

People on £40,000-£50,000 benefit under the covenant system.

Mr. E. Ryan

If the Deputy talks to the Minister of State, Deputy Rabbitte, he will give her the facts.

Mr. Ring

The Deputies opposite were in Government for seven years, yet they did nothing.

An Leas-Cheann Comhairle

Deputy Ahearn without interruption, please.

Mrs. T. Ahearn

Some families barely over the income threshold guidelines cannot afford to enter into a covenant. I know people who have been forced to re-mortgage their houses in order to fund their children's third level education.

Mr. E. O'Keeffe

The Deputy should not exaggerate.

Mr. Ring

She is telling the truth.

Mrs. T. Ahearn

It is the truth. The sad thing is that the Deputies oposite do not know the reality on the ground. I know families who had places deferred for a year so that one child would have finished their course before another one began. I also know students who had to refuse a place in college and opt for a place in a regional college where the fees were paid. I believe the position in south Tipperary is the same in every constituency. That is the reality on the ground.

Mr. O'Dea

We know the reality on the ground.

Mrs. T. Ahearn

I have received numerous phone calls welcoming this provision.

Mr. Martin

We want it to apply across the spectrum.

Mrs. T. Ahearn

For the first time the hard pressed PRSI sector will get some help in funding their children's third level education.

(Interruptions.)

Mrs. T. Ahearn

Families which did not qualify for grant assistance had to pay fees which could amount to £2,000 and maintenance costs which could amount to £80 per week for students living away from home.

(Interruptions.)

An Leas-Cheann Comhairle

Deputy Ahearn without interruption, please.

Mrs. T. Ahearn

A covenant is not the solution to easing the burden for those on modest incomes who do not qualify for a grant.

Mr. O'Dea

Who said it was?

Mrs. T. Ahearn

The elimination of fees will be a tremendous help to families who have more than one child in college. This measure is a step in the right direction——

Mr. M. Ahern

Why not take two steps?

Mr. O'Dea

The ideological right direction.

Mrs. T. Ahearn

Nobody on this side of the House said it was the proper solution but it is a step in the right direction and it will be welcomed by the electorate. I would like to hear the views of members of the Opposition next Tuesday having returned from their constituencies—

Mr. Cullen

We do not have to go back.

Mrs. T. Ahearn

——and listened to the views of those who have been burdened with the cost of third level education.

Deputy McDowell spoke about the lucky people who have a wealthy uncle or aunt who can covenant large sums of money to them. That may be the case among his circle of friends but not everyone finds themselves in this healthy position. Each Deputy opposite knows that people cannot cope with the cost of third level education.

There is another matter that needs to be addressed: students from Dublin have to travel to Cork to pursue a science course and vice versa. This is dictated by the points system. Nevertheless, additional costs are imposed on parents who are not in a position to meet them.

Mr. E. O'Keeffe

What about maintenance grants?

Mrs. T. Ahearn

This is a step in the right direction. I have argued in favour of it for a long time. Many third level students are happy today. I say to those students who are studying for their leaving certificate in 1995 that at least they will not have to cope with the fear that their parents may not be in a position to fund them through college.

I congratulate the Government for having the courage to make this brave decision. The Deputies opposite have mentioned that there is a need for equity but they have not told us how we can guarantee it. Our young people deserve an education. No student should be denied access because their parents are not in a position to send them to third level. Many have to go abroad where the fees are covered and to seek employment. We should send them abroad educated. This is a good investment from which there will be a return of which this Government can be proud.

Mr. O'Malley

I wish to refer to the matter of third level education which arises from this resolution. I accept what the Taoiseach said that certain covenants between non-relatives are abused. One hears stories to this effect. I could never understand why this facility existed, but what is wrong with a parent covenanting income to meet the cost of educating his child as it seems to be perfectly reasonable?

The Taoiseach

Nothing.

Mr. O'Malley

This is being abolished——

The Taoiseach

No, it is not.

Mr. O'Malley

——in the same way as all the others were abolished. If the system is being abused we should by all means eliminate the abuses but if something is perfectly straightforward and normal why should it be removed? I fail to see the point in this.

During the past few days since the proposal was leaked the justification given is that it will only do at third level what Donogh O'Malley did at second level. I feel I am qualified to express a view in regard to what he did. The argument that is being put forward in respect of this proposal is fallacious. Donogh O'Malley did what he did — Deputy Mitchell stated that he acted without this agreement, consent or support of the Fianna Fáil Party — in aid of poor or would be students who could not in 1966 gain access to second level education. Those who already had access and could afford to pay the fees did not benefit. This was commendable and has been regarded ever since as such.

What is being proposed today is very different. The effect of what is being proposed, if expressed in second level 1966 Donogh O'Malley terms, will be not to give access to second level education to those who cannot gain access but to pay the fees of those who attend Belvedere, Gonzaga, Glenstal, Clongowes and elsewhere. There would have been an outcry if Donogh O'Malley had done this at second level in 1966. Hundreds of thousands of young students throughout the country have been in a position to attend a second level school ever since, including those who live in relatively inaccessible parts of the country up to 20 miles from a secondary school because a bus service is provided.

What is being proposed will not allow any student who is unable to attend university to get there. This is regrettable because the degree of participation by the lower socio-economic groupings in our society in third level education is extremely low. One of the great drawbacks is that Donogh O'Malley did not follow through to third level education; there was a genuine opportunity until the end of second level, but suddenly it all came to a stop. The presidents of the universities here will tell us that between 3 and 4 per cent of undergraduates come from the lower socio-economic groupings. This does not constitute equal opportunity and is regrettable. We should be aiming to change this but instead we are aiming to perpetuate this inequality. This is wrong. The Taoiseach and the Government may say that this was not their intention, but that will be the effect. We should consider the consequences before this proposal is finally implemented.

It is not particularly easy to say this as I know a great many people, including myself, who will benefit in the short term and I have been through the mill more than most on this issue. I had one horrendous year when I had four children attending third level simultaneously. Happily, this lasted for only one year, but I had at least two children attending third level for many years and the pressure and strain were enormous.

I agree that this proposal will ease the burden and from that point of view I am glad, but in judging this and any other budgetary proposal one has to ask not whether it will benefit A, B, C or D but whether it will benefit our society as a whole. That is the criterion by which it should be judged. The criterion in regard to third level education today should be whether we can increase the level of participation by the economically weakest in our society. They may be economically the weakest but they are not the weakest intellectually and they have the same rights at third level as they have at second level and have enjoyed at first level for a long time. That matter should be rethought in that light and should not be put across in an inaccurate way.

I will conclude by again referring to what the Taoiseach said about what the Minister of State, Deputy Hogan, did today. I inquired from the Taoiseach whether he proposed to dismiss Minister Hogan; he said he did not. Perhaps the Taoiseach might tell us why he does not propose to dismiss him. The Taoiseach made an apology to this House and I acknowledge that but I notice Minister Hogan has not made any apology and I wonder why.

An Ceann Comhairle

Let us deal with the matter of the resolutions, Deputy.

Mr. O'Malley

I am dealing with an intervention of the Taoiseach in this particular resolution, Sir. It is a very serious matter that this happened. It did not happen inadvertently, it was deliberately sent out at 12.15 because it was dated for that time.

An Ceann Comhairle

There are ways and means of dealing with such matters, Deputy.

The Taoiseach

I wish to comment on a few points made by a number of Deputies in the debate. Some Deputies expressed concern about the cost of maintenance of students in third level. They pointed out, quite justly, that fees are not the only cost involved in third level education and, for some, they are not even the principal cost. Maintenance grants will be increased in line with the consumer price index from 1995-96 and income limits will also be increased in line with wage movements. There is, however, a commitment in the Programme for Government to further improvements in the area of maintenance and to improving access to third level education. The provision in regard to the abolition of fees is just one of the Government's aims in regard to third level education.

Points were made by a number of Deputies which they might wish me to answer. Deputy O'Rourke inquired about postgraduate students. I am sure she is well aware that postgraduate students who satisfy the means test will continue to qualify for maintenance and fee support under the existing scheme. That is not affected in any way.

Mr. Martin

But they lose the covenants.

Mrs. O'Rourke

That is not the point——

The Taoiseach

I know the point Deputy O'Rourke is making. I am merely putting another point. I understood what the Deputy was saying.

Mrs. O'Rourke

The Taoiseach did not answer it.

An Ceann Comhairle

Let us hear the Taoiseach, without interruption.

The Taoiseach

I am putting another point which the Deputy had omitted to make which is relevant when calculating costs in regard to postgraduate students. If their means are below a certain level they qualify for fees and maintenance.

Mrs. O'Rourke

So does every student.

The Taoiseach

The position was aptly put by Deputy Batt O'Keeffe where he pointed out that the abolition of third level fees will be a popular measure. To listen to some speakers one would think there was something wrong with a measure just because it was popular and that only unpopular measures should be put forward. Critics should ask themselves — if Deputy O'Keeffe is right and I believe he is — why the abolition of fees is a popular measure. I believe it is popular for two reasons which justify it as a decision. It will assist a group who were finding it particularly difficult to maintain their families in third level education, those who are above the limit for qualifying for fee and grant support, who are not on a very high income and to whom the cost of third level education is a matter of indifference.

Mrs. O'Rourke

We agree with all that.

The Taoiseach

Furthermore, it is worth pointing out — and this was not mentioned by anyone in the debate and it is quite surprising — that the biggest benefit from any tax allowance and, in particular, a covenant tax allowance is achieved by people who have the largest income.

Mrs. O'Rourke

The greater benefit from this will be for those with the largest incomes.

The Taoiseach

In fact, a tax relief on a covenant system of support for third level education is regressive in that the more one earns, the more one benefits.

Mrs. O'Rourke

Exactly.

The Taoiseach

The point that Deputy Ahern and others made was that we had a peculiar system of third level education support with high levels of support at the bottom of the income scale — those who were below the limits qualified for everything; virtually no support for those in the middle income bracket where one paid the fees and, at the top income bracket, where one could obtain the maximum benefit from covenants, there was even greater support. That irrational situation is now being changed by giving support in the middle income area, particularly where fees are an important factor. That is the first argument I wanted to advance which does not seem to have been taken on board by some of the Deputies, although it was undoubtedly understood by Deputy Batt O'Keeffe.

There is another important reason and this point was validly made by Deputy O'Malley when he pointed out that in certain socio-economic groups only 3 to 4 per cent of students are in third level education——

Mrs. O'Rourke

One per cent.

The Taoiseach

——or even lower, and I will concede the point to Deputy O'Rourke if it is 1 per cent, come from that group. It is fair to ask ourselves why that is the case because fees are certainly not a problem for that group nor is maintenance because they qualify for maintenance grants. I believe it is primarily a psychological, socio-economic and cultural issue in that people from that group in society do not have relatives who have been in third level education and, therefore, its benefits are not immediately obvious to them.

Mr. Gregory

It is a psychological problem on the Taoiseach's part.

Mr. Martin

The Taoiseach is very patronising.

The Taoiseach

One of the ways in which that will be changed will be by the abolition of fees because the fact that third level education will now be free will create a sense that it is now accessible to people. It is not simply a question of doing the arithmetic on the finances of the matter. The fact that no fees are charged and that it is now free, as secondary education is free, will have a disproportionate psychological effect in that they will know that third level education is accessible to them.

Mrs. O'Rourke

But they do not pay the fees.

The Taoiseach

I accept that from a rational point of view, as the Deputies pointed out, if they take the trouble to make the inquiries, they will find their income is below a level where the fees do not arise. By abolishing fees, however, one creates a sense that third level education is open to all in much the same way that Aneurin Bevan, by introducing the free health service in Britain in the 1940s, created a sense that health services were available to all. It could have been argued that the idea of a free health service — no prescription charges even for people who were millionaires — was not, strictly speaking, economically rational. However, from the psychological point of view of conveying to people that the health service was an entitlement freely available to them, the introduction of the free health service had a disproportionate psychological effect.

Mrs. O'Rourke

They are drawing back on it now in the UK.

The Taoiseach

I may be proven wrong but I believe there will be a similar disproportionate sense that third level education is now open to all in society by virtue of the decision to abolish the fees.

Mr. O'Malley

Bevan was a socialist; the Taoiseach is not supposed to be.

The Taoiseach

We should not categorise people. We should be willing to listen to an argument from any quarter, regardless of its provenance.

An Ceann Comhairle

I wish to dissuade Members from making long speeches and going into details on educational or income tax matters. The detail should be left for the general debate on the budget. This is a time for elucidation, not for debate. I call Deputy Micheál Martin.

Mr. N. Ahern

Am I not next on the Chair's list?

An Ceann Comhairle

I am sorry, Deputy, I choose who speaks in this House. I have called Deputy Martin.

Mr. O'Dea

On a point of order, the Leas-Cheann Comhairle made out a list and, as far as I can ascertain, Deputy Ahern's was the next name on it.

An Ceann Comhairle

I am not subject to any list. I call the Deputies as I think fit.

Mr. Martin

Let me put the debate in perspective. The litmus test of measures should not be whether they are popular or unpopular but whether they are socially progressive or regressive. Resources will become available as a result of this measure and as a result of the abolition of tax covenanting. The issue is how we apply those resources in a truly equitable manner across the full spectrum of education. We accept the inequities of the present education grants scheme as articulated by Deputy Ahern, of which I was a victim. Because my bus driver father worked too many Sundays and too much overtime, my brother and I did not benefit from the third level grant scheme. I need no lectures from anybody about how inequitable, unjust and harsh the system was for many middle income groups.

There are other options. Only two weeks ago in a Private Members' motion we asked the Government to increase substantially the income threshold levels. We could have simply implemented the recommendations of the de Buitléir report, increased income thresholds to £30,000 and brought in marginal relief and a sliding scale so that the higher up the income scale one is the less one gets back in grants and the lower down the more one gets. Up to 24,000 students in the third level system are excluded from the measures being adopted. I refer particularly to the 17,500 post leaving certificate students who will receive no maintenance grants and will also be denied the option of covenanting. There are over 7,000 post graduate students also.

An Ceann Comhairle

I again appeal to Members not to engage in long speeches. That should be left to the general debate on the budget proper. Has the Deputy concluded? His colleagues are anxious to participate and I am anxious to facilitate them.

Mr. Martin

This package has been introduced with a view to getting revenue in and expending it. The Taoiseach mentioned the tax sheltering that took place via the covenanting system. How can he guarantee that the people who benefited from such tax sheltering will not go elsewhere and seek other tax evasion methods?

The Taoiseach

They will certainly try.

Mr. Martin

The yield from this measure may not be what was anticipated. Most important, can the Taoiseach give a guarantee to the providers of education, the universities and the PLC colleges, that the Government will index-link all further block grants to these institutions so that they will not end up like the local authorities when the equivalent of the revenue from rates was not met by successive Governments and service charges were introduced? Can the Taoiseach give an absolute commitment that in four years time we will not see the introduction of university service charges or other mechanisms which would amount to fees under a different name? A structure must be put in place that will guarantee universities the income from the State that they are being denied by the abolition of fees.

Mr. Rabbitte

A bit like the car tax which comes back under another name.

Mr. N. Ahern

There have been abuses of the covenanting system and we should strive to cut out the anomalies. However, for several years I have often found myself recommending covenanting as a device to get around other anomalies or injustices. For example, if one employs a State registered nurse as a carer at night to look after an elderly parent, one gets tax relief, but not if one brings in a carer. The solution was to execute a covenant. I have dealt with a constituent in receipt of lone parent's allowance who gave up her £76 a week to go straight and officially live with her boyfriend who was working while she was not. Because they are not married they are treated as single persons for tax purposes. The only thing that could be recommended to them was the taking out of a covenant. In that case the limiting of the covenant to 5 per cent of income would seriously affect them. Minister Rabbitte proposed that amendment to the Finance Act last year but was turned down. This anomaly affects people like the couple I mentioned. I am not of the liberal wing of any party, but this measure will also affect people involved in divorce if it is introduced.

We look on covenants as being for educational purposes and yet a close friend of mine was refused because his son was not 18 years by the required date, so he did not get the benefit of any covenant during his first year in college. However, I accept the analysis of the Taoiseach and Deputy Theresa Ahearn. I welcome the abolition of fees — I pay £2,730 for my own son. Why did the Minister not go the whole way and include post leaving certificate students? A large group of people earning between £18,000 and £25,000 were hugely discriminated against, particularly in families where more than one child was attending a third level course. The Minister has certainly solved that problem. In 1992 Fianna Fáil were the first to recommend the abolition of fees. When Deputy Seamus Brennan recommended it then it was looked on as an election gimmick and the suggestion was shot down.

The Taoiseach

We did not bring that up.

Mr. S. Brennan

I wonder why. It was not for my good.

Mr. Rabbitte

We were saving it in case things got nasty.

Mr. N. Ahern

I accept that the two major anomalies have been removed. However, the Government has done nothing for the post leaving certificate students who comprise the other huge and much more deserving category. The Government has abolished university fees for people whether they are earning £30,000 or £130,000. The person who attends a PLC course at the local vocational education committee is being bypassed. The step forward is great, but why did the Taoiseach not take the second one?

Only 1 per cent of those in the lower social category go on to third level but many of them do a PLC course where they can get exemptions before proceeding to a third level course. Many do not get the minimum maintenance they could get and have to be up all night trying to earn a few bob, which hinders their progress to third level education proper. In Dublin nobody attending a PLC course lives away from home and the maintenance amounts to only £8 per week. I would prefer if the Taoiseach would take the step of providing maintenance for those attending PLC courses as well as taking the huge step of abolishing fees. The fees for PLC courses range from £250 to £300 and of that only £50 is regarded as fees and the balance is usually a registration fee to a professional body. I wonder if that will be included when the fees are abolished?

I welcome this step but there are certain anomalies in the resolution and I would like to hear how the Taoiseach will address them. The Taoiseach is creating anomalies as well as eradicating them.

An Ceann Comhairle

There is a number of Deputies offering and perhaps Members would be brief.

Mr. Cowen

Is Deputy Hogan offering?

Mr. Cullen

Over the weekend most Deputies were contacted on the issue of covenants and I received one very interesting call. In this family of four, two of the children have received third level education and have been lucky enough to get jobs while the two younger family members are in third level education. The father and the two who are working have taken out covenants to try to educate the others, one of whom is doing medicine, and they have a six to seven year plan to try to fund this serious drain on the family's resources and to ensure that the person can complete his studies.

Mr. Rabbitte

They will not have to pay fees.

Mr. Cullen

The real cost, as everybody knows, is the maintenance cost. Nobody on this side of the House is saying that the removal of fees in itself is a bad thing.

Mr. Rabbitte

It has swung that way in the past 20 minutes.

Mr. Cullen

But why, when the de Buitléir report has just been published and the Minister has just received the interim report of the HEA, when we await the White Paper on Education and there is a clear lack of facilities and spaces available in third level education, is there an urgency to rush out and remove fees, the one issue that none of the reports urged as a first priority in changing the basis of access to third level education?

Mrs. O'Rourke

Because Niamh threw a tantrum?

Mr. Cullen

Has the Minister for Education hypnotised the Cabinet or is her ego so large that everybody must kowtow to what she perceives as the clever political manoeuvre to satisfy her own market? Much of what the Taoiseach has to say is eminently sensible, strategic and coherent; but this throws overboard all the proposals on the table that have not been debated in this House and which, I am quite sure, have not been debated in Cabinet. Yet, the Taoiseach and the Government run in one direction, but nobody in the education system — neither students, educators nor economic advisers — has come out vociferously in support of this measure. I appeal to the Taoiseach not to proceed with this proposal.

I wish to make another point on the fees issue.

An Ceann Comhairle

I ask the Deputy not to elaborate.

Mr. Cullen

By abolishing fees the Taoiseach will create a short term effect for those who will benefit from not having to pay fees. This will remove the independence of universities as well as creating elitism in many of the courses offered. The private sector is funding a number of courses associated with research and development and universities will be forced to put a cost on individual students to attend such courses.

An Ceann Comhairle

We are having a great deal of elaboration which should be left for the general resolution.

Mr. Cullen

I am coming to a conclusion.

An Ceann Comhairle

This is not the procedure at this time and I have presided over many budgets.

Mr. Cullen

In my view the Government's approach is not rooted in the education reports.

Finally, the transfer of EU funds under the Community Support Framework runs to £800 million. On the one hand we are telling our European Union colleagues that we need substantial assistance for education, but at the same time we have the ability to remove university fees. The human resources operational programme report has not yet been published. I wonder why it is one of the last reports to be published. To my mind it is illogical that we spend millions of pounds of EU funding on a current basis and at the same time we turn around and remove university fees. I think the Taoiseach will rue the day, because this is a short term benefit and will do nothing for the provision of extra facilities at third level education.

Mr. Gregory

The Taoiseach was pondering on the question of why some socio-economic groups succeed in getting only approximately 1 per cent of their children to third level education. Perhaps I can be of some assistance to him. He came up with a novel view that it is some sort of psychological cultural problem. By coincidence I had tabled questions to the Minister for Education one of which also posed the same question, and I will quote briefly from the Minister's reply which might be instructive for the Taoiseach. She states that all the available evidence indicates that the struggle against disadvantage is won or lost at first and second level and consequently it is essential to target resources at primary and post-primary level in disadvantaged areas. Equally, by coincidence I had a letter from the board of management of a primary school in my own constituency and I am sure Deputy Mitchell got a similar letter today. It states:

Our school caters for 542 pupils. Because of approximately 80 per cent unemployment in the area our school has been designated disadvantaged. Despite its special status the school receives no support funds from the Department of Education for equipment to train for computer literacy, a skill which we feel would be essential to our students particularly as we accept that whereas some will progress to third level education most will not. ...Fund-raising at a local level is ongoing but extremely difficult due to the high unemployment.

By another coincidence a principal of a second level school in my area telephoned me and pointed out that he was experiencing great stress in having to ask students in second level classes to bring in the fees for the junior and leaving certificate examinations because in many instances unemployed families had two children in the school, one sitting the junior certificate and the other the leaving certificate, the combined fees for which are nearly £100. We were talking about free second level education earlier. People in those circumstances simply could not possibly afford this money and, in turn, this teacher was under pressure from the Department of Education to send in the examination fees before the end of February.

A very large primary school in my constituency is pleading for one additional remedial teacher and I tabled a question about it. I suggest these are the reasons that children in disadvantaged areas do not get through second level never mind third level. It has nothing to do with psychological or cultural problems but with social inequality. This measure and the abolition of third level fees has nothing to do with education and reform, it is simply political opportunism of the worst order.

Mr. Cowen

Hear, hear. That is it pure and simple.

Mr. O'Dea

We are not necessarily opposed in principle to what is proposed. There is no doubt it is popular and will help those who need to be helped.

Mrs. O'Rourke

It is past the Deputy's baby's bedtime.

Mr. B. O'Keeffe

Bring in the bottle.

Mr. O'Dea

I want to put it in context and cut through the socio-economic jargon we have heard from the Government side for the past two hours. Those who do not earn enough and satisfy the means test will not benefit from the proposal and those who do will benefit from it. It is peculiar that this measure forms part of a budget which gives a miserly increase of £1.50 a week to people in receipt of unemployment assistance and to those on disability benefit and increases the living alone allowance by 10p per week. That is the reality.

An Ceann Comhairle

I ask the Deputy to address the resolution before the House.

Mr. O'Dea

There is also a miserly increase in the maintenance grant for students. What will be done for the thousands of post-graduate students who will not benefit from the abolition of fees but who will be penalised as a result of the change in covenanting? What will be done for those whose income is so low that it satisfies the means test but who must use covenants to support their children at college? Those who do not satisfy the means test because their income is too high will benefit. What is the position in relation to people covenanting for elderly relatives in nursing homes? Is the amount they covenant restricted to 5 per cent of their gross income? How will the 5 per cent restriction apply in the case instanced by Deputy Ahern?

I have no hang up about increasing DIRT to 15 per cent. The special 10 per cent rate was brought in at a time when exchange controls were removed to prevent the flight of capital out of the country to avail of higher interest rates abroad. Have Irish interest rates on deposits increased to such an extent that we can increase DIRT on special savings accounts to 15 per cent without creating this danger?

Mr. Rabbitte

There will be no flight. I am sorry to disappoint the Deputy.

Mr. O'Dea

I am glad to have that assurance from the socialist super junior Minister in view of the fact that on the first occasion when he is in Government the living alone allowance is increased by 10p per week.

Mr. Cowen

He knows more about the flight of capital——

Mr. Rabbitte

Dash off another letter to Gordon Thomas.

Mr. Cowen

The Doheny and Nesbitt school is getting to you. The Deputy is spending too much time with his buddies. He should go back to Tallaght and see what the craic is.

Mr. O'Dea

The Government should be ashamed. That increase should get a nice warm welcome in Tallaght and deservedly so.

Mr. Cowen

The Deputy's street cred is out the door; an old age pensioner is getting an increase of £1.50 a week. Fair dues to Tomás Mac Giolla, he kept to his beliefs, a decent man.

An Ceann Comhairle

The Deputy must cease interrupting.

Mr. Cowen

The revisionists are shown up for what they are — self-serving careerists. The Deputy's smile is more smug than that of his colleague.

(Interruptions.)

Mr. E. O'Keeffe

On a point of order, what is the procedure for contributing to the debate? I would like to say a few words.

An Ceann Comhairle

I will try to facilitate the Deputy. Perhaps the Members offering will agree.

Mr. Power

I must correct Deputy Rabbitte.

An Ceann Comhairle

If the Deputy has something to say on the financial resolution he should say it. Let us not become involved in personalities.

Mr. Power

It is in relation to flight; one of them has taken off already. I listened to the debate on the proposed changes in education. It is not easy to bring forward a budget as Deputy Bruton and others will know. It is about striking a balance. We are living in difficult times and dealing with scarce resources which we are trying to distribute as evenly as possible, particularly to those areas where there is greatest need.

As Deputy O'Dea said, the living alone allowance has been increased by 10p.

An Ceann Comhairle

The Deputy is embarking on a speech which is more appropriate to the budget speech proper. If he has comments to make on the financial resolutions I will be glad to hear them, otherwise he must reserve his speech for the budget debate.

Mr. Browne

(Carlow-Kilkenny): We are not talking about the Kildare football team.

(Interruptions.)

Mr. Power

We have been discussing covenants and fees. I have been waiting for an hour to speak. I had to wait for about ten minutes before I could begin to speak and now you do not wish to hear what I have to say.

Mr. Browne

(Carlow-Kilkenny): Deputy Cowen caused the problem.

Mr. Power

The living along allowance has been increased by 10p a week and a person earning £100,000 a year will not have to pay fees for their children who attend third level education. We have our priorities all wrong. I know that at least half the members of the Government do not agree with this proposal. There is no reason we should allow this to be steamrolled through the House. I ask for common sense to prevail. There is no doubt that it would be a popular measure.

The Minister mentioned the money that had been saved as a result of our management of the national debt. If the Minister brought in a proposal to give everyone £10 it would be the most popular decision ever made in the House. I ask the Taoiseach, do we give the people what they want or what they need?

Mr. J. Mitchell

Fianna Fáil Deputies are acting as if they have not been in Government for years.

Mr. Cowen

We were in Government and that is why there is money to hand out today.

Mr. J. Mitchell

We hear cries about what is not in the budget.

An Ceann Comhairle

The Deputy must deal with the Financial Resolutions.

Mr. J. Mitchell

I am referring to criticisms made.

An Ceann Comhairle

No, the Deputy must refer to Financial Resolutions Nos. 2 and 3.

Mr. J. Mitchell

I am referring to criticisms levelled at those resolutions by Fianna Fáil, in particular the abolition of third level fees and the change in covenants. They have been whingeing about the need for increased maintenance grants and so on.

Mr. Cowen

The only tears are over there this evening.

Mr. Durkan

Given the noise on the other side of the House one would not know what was going on.

Mr. J. Mitchell

The same people are criticising the budget because the growth in public expenditure is greater than they planned in their budget. They cannot have it both ways.

(Interruptions.)

An Ceann Comhairle

There seems to be a debate going on; Deputy Mitchell cannot contribute. Deputy Jim Mitchell without interruption. Deputy Cowen is interrupting persistently. It is a cause of disorder.

Mr. J. Mitchell

I think he imagines he is still on "Prime Time".

An Ceann Comhairle

The Deputy should not add to my problems.

Mr. Cowen

At least I do not walk away from my friends like the Deputy. That is what has him where he is. Neither Deputy Dukes nor Deputy John Bruton trusts him now.

(Interruptions.)

Mr. J. Mitchell

I once heard a story about friends I will relate here. Fianna Fáil criticism is just not tenable because they contend we should not abolish third level fees——

Mr. Martin

We did not say that.

Mr. J. Mitchell

——but should spend more money on increasing maintenance grants.

Mr. Cullen

And increasing the thresholds.

Mr. Martin

Spread it more evenly or equitably.

Mr. J. Mitchell

We heard arguments in favour of more money for first and second level education.

Deputy Martin advocates funds being spread more evenly or equitably. The reality is that the budgetary proposals before us will ensure that such funds are spread more evenly.

Mr. Martin

There are 17,500 PLC students who will receive nothing from this budget.

Mrs. T. Ahearn

Did the people opposite give them anything either?

Mr. J. Mitchell

The abolition of third level fees——

An Ceann Comhairle

Time is fast running out. The Taoiseach may want to intervene to reply to certain questions raised.

Mr. J. Mitchell

I appreciate that, Sir, but the funding of the abolition of third level fees is being provided through the cessation of tax benefits to those who are very rich. It is more equitable if those in the middle income bracket receive more benefit than the very rich whereas at present the opposite is the case. This proposal is equitable. Fianna Fáil produced a draft budget when still in Government and proposed a lesser increase in public expenditure than is proposed in this budget. Yet in their contributions this evening they call persistently for more money for everything. They cannot have it both ways.

Mr. Martin

No, we called for a more equitable distribution of the existing cake.

(Interruptions.)

Mr. J. Mitchell

Nor can they argue it is less equitable to fund the abolition of third level fees through the elimination of these other tax concessions——

Mr. Cowen

It is.

Mr. J. Mitchell

——because it is very clear that, if one is in receipt of an income of, say, £200,000 per annum, and there are some people in this country in receipt of that type of income——

Mr. Cowen

They will get free fees from this Government.

Mr. J. Mitchell

——5 per cent of that income is much greater than four or five sets of fees. That is the point.

Mr. Martin

That is agreed. We understand that.

Mr. J. Mitchell

I am not surprised that Deputy Cowen does not understand that point. Five per cent of an annual income of £200,000——

An Ceann Comhairle

I intervene to remind Members that the main debate will take place on the General Resolution and should not take place now.

Mr. J. Mitchell

I think you will agree, Sir, that I am making a point on the abolition of third level fees, on the equity of that proposal. It is a move toward equity, not in the opposite direction. It is not correct for Members to contend otherwise.

I share a constituency with Deputy Gregory who dismissed the notion that the drop-out factor, particularly in second level, in the less well off regions has no cultural dimension. It has a cultural dimension and, if that is not recognised, we will never solve the problem.

Mr. Martin

Explain it.

Mr. J. Mitchell

There is a lot of peer pressure. There is a practice or habit of "dropping-out". That is the "in thing". It is that culture we must change. I know of many parents in my constituency who want their children to remain in school but cannot persuade them because they see their peers dropping out. It is a cultural phenomenon. Deputy Gregory is wrong to criticise the Taoiseach for having said so. To solve a problem, it must first be properly identified. To dismiss the cultural dimension of the practice to which I have just adverted is a mistake.

Mr. E. O'Keeffe

Much has been said on the subject of covenants and education grants but we cannot ignore the contents of Resolution No. 3 which is an attack on the small saver and depositor, proposing a 50 per cent increase in deposit interest retention tax. This is another attack on the small saver, the PAYE worker. I am astounded that Members on the Labour benches would allow such an imposition on small savers. Savings to the banks will amount to some £12 million in any given year whereas approximately £7 million will be extracted in a full year from the small saver. This is a retrograde step, representing a further kill of the people we should be endeavouring to foster and promote.

We must look at the budgetary provisions in their entirety and the possible proposal to sell some State assets, such as Irish Life and the like. This proposal is making way for that type of disposal of State assets. I listened with pride today to the Minister for Finance speak about the success of the National Treasury Management Agency. Its establishment can be attributed to none other than our former Leader and Taoiseach, Deputy Charles J. Haughey whose brainchild it was. That agency is working very effectively and is much envied by many people involved in the financial sector. We must give our former leader credit for many things achieved over the past seven years, including the benefits of this budget. Were it not for his ability and the austere measures put in place during his term of office we would not be enjoying our present growth rates and the Government opposite would not have the give-away of which they have been so boastful.

Mr. Martin

Well done.

Mr. E. O'Keeffe

I must warn that we are again entering an era of budget deficits. With a national debt of approximately £30 billion, if we do not create a friendly climate for savers, we are not moving in the right direction.

Mr. Martin

Hear, hear.

Mr. E. O'Keeffe

I am appalled that a Government, led by Deputy John Bruton — who talked so much about investment and has been so lavish in his praise of savings — is going down this road. It is my belief they are on an inflationary road again, that they pose a danger to our economy. If we have a further spiral of inflation we shall find ourselves in the same circumstances in which the former Taoiseach found himself when he assumed office some seven years ago. It is my firm belief that, before the end of this year, we shall see the introduction of another budget to take corrective action to put this economy right because inflation may well take off at a frightening rate.

I must examine another area within which we take money from the people. The banks will be recouped £12 million in a full year, while leaving old age pensioners and the disabled in our society £8 million short.

An Ceann Comhairle

The Deputy is now clearly embarking on a budget speech.

Mr. E. O'Keeffe

All that needs to be done is to give them an 0.5 per cent increase. I am speaking here in defence of the small saver.

An Ceann Comhairle

The Deputy must revert to the Financial Resolution before the House.

Mr. E. O'Keeffe

This resolution is most relevant because there are huge numbers of small savers within our society whose plight is being totally ignored. I made telephone calls to my constituency office this evening on the difficulties that will arise for them. It is my firm belief that next time Members meet the electorate on the doorstep those people with small deposits will treat them in the manner they deserve, remembering that this administration took 50 per cent of the interest yield on their deposits. That is not the way to treat small savers. Rather they should be encouraged in that type of small scale investment, which is best for our economy, giving everybody a share of the benefits within our society.

It saddens me to observe the direction in which this Government is going. I appeal to them to re-examine that proposal in the Finance Bill.

Mr. Cullen

The Minister of State, Deputy Rabbitte, has been smiling all evening. I do not think he has much to smile about.

Mr. Browne

(Carlow-Kilkenny): Deputy Cullen should try to smile himself. He would look better.

An Ceann Comhairle

Would the Deputy adhere to the Financial Resolution before the House?

Mr. Cullen

Deputy Rabbitte would need to take a good look at the 10 pence increase in the living alone allowance. It will cost more to administer. It is a gross insult——

Mr. Martin

Yes, an insult.

An Ceann Comhairle

Would the Deputy please adhere to the Financial Resolution before the House?

Mr. Cullen

Any reading of the Financial Resolution clearly illustrates the attitude of Democratic Left in Government. They got the cars and the perks and forgot about the people they were purporting to represent.

Mr. Durkan

Deputy Cullen thought he was heading for a car a couple of weeks ago.

Mr. Davern

The penny rolled the wrong way.

Mr. Cullen

Let us not cod ourselves. It is quite clear that the heat has been turned on the Minister of State, Deputy Hogan, quite rightly, because what he did was reprehensible. What he did merely represents the civil war that exists already within this Cabinet. If he has to pay the ultimate price the Taoiseach would be well advised to look to the other members of his Cabinet because he was merely following their bad example.

An Ceann Comhairle

Deputy Cullen and the House will appreciate that if serious charges are being made against any Member of this House or office-holder, there is a procedure — it must be done by way of substantive motion. The Chair will not tolerate allegations and/or accusations made across the floor of the House in this manner.

Mr. Cullen

It is a statement of fact. I am simply putting down a marker to the Taoiseach in that regard. The Taoiseach would want to think twice before offering a humble apology and trying to blame civil servants.

Minister of State at the Department of Social Welfare (Mr. Durkan)

I want to make a brief comment on the abolition of third level fees. My experience in recent years has been in relation to that group of students whose parents are in the income bracket just above the eligibility limit for higher education grants. The same position applies to mature students.

Mr. Martin

They get no help either. They do not get grants in respect of maintenance.

Mr. Durkan

They may return home having been away for a few years, decide to pursue third level education and discover they are assessed for grants on the basis of their own and their parents income. Often they find they are marginally above the qualifying threshold income level for grants. I do not understand why emphasis has not been placed on that aspect of the proposal from the Opposition benches, especially since they expressed that concern a few years ago.

Mr. Martin

We have dealt with that.

Mr. Durkan

Maybe they did not mean what they said, maybe it was an election gimmick but this is not an election gimmick, this is the Government doing something positive about a group of people who needed assistance and that was recognised.

Another group of people to whom Deputies referred are families who wish to send two or more members of their family to third level education. There were references from the Opposition benches in respect of people who are well off. I do not understand how a person earning £25,000 or £28,000 can be regarded as well off it they wish to send two or three members of their family to third level institutions.

Mr. Martin

There is no argument about the inequities in the existing system.

Mr. Durkan

If the Opposition agrees with that will they tell the public? From what they have said tonight it appears they are diametrically opposed to the proposal. Maybe when they reflect on it they will reach the conclusion that the proposal is a naturally progressive one that will be extremely beneficial to a group of people who receive no assistance and are not in the income group which enables them to qualify for benefits from covenants.

Mr. Cowen

I am delighted that the blue and yellow versions of the rainbow are here tonight, the red version does not appear to be present.

An Ceann Comhairle

Deputy, we are on the Financial Resolutions.

Mr. Cowen

In fairness, a Cheann Comhairle, on Financial Resolution 2——

Mr. Rabbitte

The Deputy may well get me to my feet.

Mr. Cowen

I hope I do because it is time he got on his feet.

Mr. Rabbitte

I never back down.

Mr. Cowen

I am anxious to address the motions. In fairness to Deputy Rabbitte, he always said there was an irreducible minimum.

An Ceann Comhairle

Speak on the motions, Deputy.

Mr. Cowen

We now know what the irreducible minimum is.

An Ceann Comhairle

Personalities may not be brought into debate.

Mr. Cowen

In relation to Financial Resolution 2, it amounts to 10p for the carer's allowance and £1.50 for old age pensioners. That is the irreducible minimum of the Democratic Left getting into Government. It is also unfortunate that we may have to amend the Ministers and Secretaries (Amendment) Act as the number of Ministers of State may be reduced to 15 tomorrow morning if this man practices what he preaches. However, he has done so many U-turns he does not know who his friends are and he had better hold on to the few he has. We will be putting down a substantive motion on that.

An Ceann Comhairle

Deputy Cowen, it is clear that the Deputy has no intention of dealing with these Financial Resolutions.

Mr. Cowen

I was wrongfully accused on one occasion of polluting north Kilkenny for a sum of £500.

An Ceann Comhairle

He is bringing in quite extraneous matter.

Mr. Cowen

On the tobacco matter——

An Ceann Comhairle

The tobacco matter has been disposed of.

Mr. Cowen

Unfortunately I was absent as I was speaking on a programme. It has been said that the champagne will not be cracked open. One will not be able to puff an Afton following this budget. The budget is an outrageous attack on the less well off. Deputies who have claimed throughout their political careers to be defenders of the poor are not seen too often in their company. The chickens have come home to roost this evening. If the Labour Party returns to the Government benches tonight — it may not as I understand it may be in conclave, pot boiling or awaiting a head that may be required tomorrow morning. Certainly the coherence or cohesiveness of this Government in dealing with Financial Resolution 2 and 3 is indicative of the cowardice and opportunism which has been the hallmark, not just of this Government, but of its members when in Opposition.

Mr. Rabbitte

That contribution certainly helps the argument.

Mr. Cowen

It certainly does.

Mr. B. O'Keeffe

The honour the Taoiseach did me by complimenting me is a dubious one and I will not return it. His brain seems to have gone into overdrive and he seems to have passed his speed limit when he suggested that by removing third level fees there would be a rush of people from the lower socio-economic group entering third level education and that their problems were psychological. That certainly does not smack of fundamentalist thinking and it is so far off the mark that I am extremely worried about the thinking behind the removal of those fees.

Does the Taoiseach understand the position that will pertain when fees are abolished? The Government and the Exchequer will be on one side and colleges with their demands on the other. The demands of colleges for increases in fees will not be entertained by Government. Therein lies the impasse and the only way it can be overcome is for the colleges to put an additional capitation fee on new students. That will bring us back to square one. How will the Taoiseach address that problem? In line with what Deputy Cullen said, a report has been presented on access to third level education. A unit cost analysis, a matter which I raised at a Committee of Public Accounts, of universities, regional technical colleges and PLC colleges has not been carried out. A cursory look at the comparative costs of attending UCC and Tralee Regional Technical College will reveal that it cost the Government approximately £4,500 to put a student through UCC and approximately £2,500 to put a student through a regional technical college. An analysis would also show it is likely that the costs would be lower than those figures. It is proposed to remove fees before the most effective approach to providing additional places for our students has been established. The proposal is based on a false premise. It is popular at present but it is not soundly based economically and I do not want to come back here at a later stage to say that.

Regarding the PLC courses and maintenance grants, the vast majority of students attending those courses come from a lower socio-economic background. Minister Rabbitte's brain must have gone into reverse since he went into Government because the concern he showed for the less well off in society appears to have evaporated.

Mr. Rabbitte

I never uttered a word all night.

Mr. Cowen

That is no defence.

Mr. Cullen

Minister Rabbitte spoke about something that would shake the foundations of the State, this budget did not shake the foundations of the State.

Mr. Rabbitte

They will never accept the Deputy. So he may as well enjoy this, his last Dáil.

Mr. Cullen

The Minister is very smug.

Mr. Rabbitte

The Deputy will have to win a nomination——

Mr. Cullen

The Minister need not worry about my winning any nomination.

An Ceann Comhairle

Deputy O'Keeffe, on the Financial Resolution.

Mr. Cowen

At least the Deputy will have to contest one, not like the Minister. It is the case of a south Mayo farmer's son returning home.

An Ceann Comhairle

Let order prevail.

Mr. Rabbitte

There is only one covenant Deputy Cullen need be concerned about and that is the one that puts a different Government on this side.

Mr. Cowen

Why did we write 80 per cent of it? What did you object to in it?

Mr. Rabbitte

That is the only covenant to which the Deputy objects.

Mr. Cowen

That is the depth of the Minister's philosophy.

An Ceann Comhairle

Let the interruption's cease.

Mr. Rabbitte

There is nothing underneath it.

Mr. Cowen

It came out of the Minister's mouth. He has just blown it.

(Interruptions.)

An Ceann Comhairle

I want this unruly behaviour to cease.

Mr. Cowen

I hope it is written in blood. The covenant that got the Minister over there is all that matters.

Mr. B. O'Keeffe

I wish to make a brief point.

Mr. Cowen

The south Mayo farmer's son returns home.

Mr. M. Ahern

The end justifies the means.

Mr. B. O'Keeffe

The caring attitude of the Minister, Deputy Rabbitte, seems to have disappeared in the combustion of the ministerial car.

An Ceann Comhairle

The resolution, Deputy.

Mr. B. O'Keeffe

Something must be done about maintenance for people undertaking post leaving certificate courses. This is a major issue and I would like the Taoiseach to give a guarantee to the House that he will address that matter immediately.

An Leas-Cheann Comhairle

As it is now 11 p.m. I am required to put the following question in accordance with an order of the Dáil of this day: "That Financial Resolutions Nos. 2 and 3 are hereby agreed to."

Question put.

The Dáil divided: Tá, 75; Níl, 66.

Tá

• Ahearn, Theresa.
• Allen, Bernard.
• Barrett, Seán.
• Bell, Michael.
• Bhamjee, Moosajee.
• Boylan, Andrew.
• Bradford, Paul.
• Bhreathnach, Niamh.
• Bree, Declan.
• Broughan, Tommy.
• Browne, John (Carlow-Kilkenny).
• Bruton, John.
• Bruton, Richard.
• Burke, Liam.
• Burton, Joan.
• Byrne, Eric.
• Connaughton, Paul.
• Gallagher, Pat.
• Gilmore, Eamon.
• Harte, Paddy.
• Higgins, Jim.
• Higgins, Michael D.
• Hogan, Philip.
• Howlin, Brendan.
• Kavanagh, Liam.
• Kemmy, Jim.
• Kenny, Enda.
• Kenny, Seán.
• Lowry, Michael.
• Lynch, Kathleen.
• McCormack, Pádraic.
• McDowell, Derek.
• McGahon, Brendan.
• McGinley, Dinny.
• McGrath, Paul.
• McManus, Liz.
• Mitchell, Jim.
• Connor, John.
• Costello, Joe.
• Coveney, Hugh.
• Crawford, Seymour.
• Creed, Michael.
• Crowley, Frank.
• Deasy, Austin.
• Deenihan, Jimmy.
• Doyle, Avril.
• Dukes, Alan M.
• Ferris, Michael.
• Finucane, Michael.
• Fitzgerald, Brian.
• Fitzgerald, Eithne.
• Fitzgerald, Frances.
• Flaherty, Mary.
• Flanagan, Charles.
• Moynihan-Cronin, Breeda.
• Mulvihill, John.
• Nealon, Ted.
• O'Keeffe, Jim.
• O'Shea, Brian.
• O'Sullivan, Toddy.
• Penrose, William.
• Quinn, Ruairí.
• Rabbitte, Pat.
• Ring, Michael.
• Ryan, John.
• Ryan, Seán.
• Shatter, Alan.
• Sheehan, P.J.
• Shortall, Róisín.
• Spring, Dick.
• Stagg, Emmet.
• Taylor, Mervyn.
• Timmins, Godfrey.
• Upton, Pat.
• Walsh, Eamon.

Níl

• Ahern, Dermot.
• Ahern, Michael.
• Ahern, Noel.
• Andrews, David.
• Aylward, Liam.
• Brennan, Matt.
• Brennan, Séamus.
• Briscoe, Ben.
• Browne, John (Wexford).
• Byrne, Hugh.
• Callely, Ivor.
• Clohessy, Peadar.
• Coughlan, Mary.
• Cowen, Brian.
• Cullen, Martin.
• Davern, Noel.
• Dempsey, Noel.
• de Valera, Síle.
• Doherty, Seán.
• Ellis, John.
• Fitzgerald, Liam.
• Flood, Chris.
• Foley, Denis.
• Foxe, Tom.
• Geoghegan-Quinn, Máire.
• Gregory, Tony.
• Harney, Mary.
• Haughey, Seán.
• Hilliard, Colm M.
• Hughes, Séamus.
• Jacob, Joe.
• Kenneally, Brendan.
• Keogh, Helen.
• Killeen, Tony.
• Kirk, Séamus.
• Kitt, Michael P.
• Kitt, Tom.
• Lawlor, Liam.
• Leonard, Jimmy.
• Martin, Micheál.
• McDaid, James.
• Moffatt, Tom.
• Molloy, Robert.
• Morley, P.J.
• Moynihan, Donal.
• Nolan, M.J.
• Ó Cuív, Éamon.
• O'Dea, Willie.
• O'Donnell, Liz.
• O'Donoghue, John.
• O'Hanlon, Rory.
• O'Keeffe, Batt.
• O'Keeffe, Ned.
• O'Leary, John.
• O'Malley, Desmond J.
• O'Rourke, Mary.
• Power, Seán.
• Quill, Máirín.
• Ryan, Eoin.
• Sargent, Trevor.
• Smith, Brendan.
• Smith, Michael.
• Wallace, Dan.
• Wallace, Mary.
• Walsh, Joe.
• Woods, Michael.

Tellers: Tá, Deputies Barrett and Ferris; Níl, Deputies D. Ahern and Hilliard.

Question declared carried.