I congratulate my colleague, and, I suppose, my political friend, Deputy Bernard Allen on his appointment as Minister of State at the Departments of Education and the Environment. It is my sincere conviction he will bring much good to his native city and to Cork North-Central. Indeed, I envy him his potential success in that area.
The Minister for Finance has been much criticised for his Budget Statement which concentrated on three points, two of which, reward for work and the promotion of enterprise, are of special concern to me as my party's deputy spokesperson on employment with special responsibility for science, technology and commerce.
It is my duty to congratulate the Minister for Finance and his officials on the improvement in the PRSI system for employers and employees, in addition to the welcome allevation of the PAYE burden which will help especially the lower paid worker.
The Minister has been generous in his public acknowledgment of the contribution of his predecessor, former Minister for Finance, Deputy Bertie Ahern, during his period in that Department from the end of 1992 to the end of last year. It must be remembered that not all Ministers for Finance enjoy finding the nation's books in such good condition, something for which former Minister for Finance, Mr. MacSharry, could vouch. Given the reasonably good state of the nation's finances and the objectives-aspirations so eloquently enunciated by the present Minister for Finance in his Budget Statement his 1995 budgetary proposals are most disappointing.We all want to develop, foster and promote enterprise. We all want to encourage companies to prosper and grow and to help families develop their businesses. This budget is not a radical one. The prose may be proud but the reality is a rudderless flight into fiction. The budget does not have a growth dividend.What will happen in 1995 that would not happen without this budget? Not a lot in terms of enterprise and employment. This budget, the first introduced by a Labour Minister and to be announced before the budget day, started last year with the Book of Estimates and will finish in the summer of this year with the passing of the Finance Bill, 1995. After all this time and effort the Minister announced changes in revenue of 1.4 per cent and an expenditure of 1.2 per cent. Is this a radical budget with a growth dividend? Those changes will cost £159 million and £143 million respectively which palls compared to £2,500 million needed in 1995 to service the national debt, in other words, to pay interest on past borrowings by Governments plus a further £813 million which will be borrowed by the Exchequer this year, excluding State-owned ventures which will also borrow more. Is this radical?Is it a dividend? Is it growth?
In his budget speech the Minister claims that by following a framework 1994 showed a small current budget surplus.In 1995 we have reverted back to current deficit budgeting not allowed to housekeepers and an increase in the Exchequer borrowing requirement-gross national product ratio from 2.2 per cent to 2.4 per cent. Where is the budgetary discipline referred to the Minister's budget speech? The Minister stated that these targets represent continued budgetary discipline and today's improvements have been formulated within that framework. That is not the position as I see it.
Being mindful of our interest bill of £2,500 million per year, I will consider some enterprise and employment aspects of the 1995 budget. There are 160,000 small businesses run mainly by families and small enterprises. Nearly all enterprises in Ireland are small businesses by European and international criteria. Small businesses here are very small indeed and need help. The small business owners still have to take a wage or salary from the business and pay personal tax and levies at a rate of more than 50 per cent. Motor vehicle registration tax remains high. Corporation tax, PRSI and communication costs are among the highest in Europe. The reduction of corporation tax by 2 per cent to 38 per cent which will cost £43 million a year will not trickle down in any noticeable way to very small businesses which should, as in many parts of the world, have a low corporate tax rate. Apart from banks and retailers the bigger companies in Ireland generally pay only 10 per cent manufacturing tax, which in reality is even lower due to various other tax reliefs.
The cost of borrowing for smaller businesses remains high due to commercial risk and it is not always easy to obtain loans and working capital. The proposals regarding banks taking a charge on book debts will be helpful. In almost all cases banks require personal guarantees as a pre-condition to any lending, thus denying the owners of the smallest businesses the right of limited liability and giving them the additional worry of placing all their personal and private assets, such as they may be, at risk. Some family business men and women who refuse to expose other family members have to borrow outside the mainstream lenders at iniquitous rates of interest or deny themselves the chance of expansion. People with small businesses are exposed already to hard work, long hours, responsibility for people working in the business and the strain and worry that goes with the turf.
With banks being the sole beneficiary of the abolition of the bank levy, which will amount to £36 million a year, and hardly a creator of jobs in recent years, surely now it is time to review their rigid policy regarding personal guarantees. I am not attacking the banks who provide a very necessary service and I welcome the abolition of the bank levy. I am sure banks will remember why it was introduced.Banks cannot underwrite bad lending, but I put it to the Minister that a reduction in the powers and entitlements of borrowers in respect of businesses employing people and seeking to create work should initially limit personal guarantees to a maximum of 40 per cent of assets held outside and not used for an enterprise. A business borrowing off the back of personal guarantees is not being given any favours by the lender.
The seed capital scheme improvements costing £4 million are to be welcomed and more details of what the Minister has in mind would be useful before the Finance Bill is published. The stock relief for farmers of £1 million and the stock relief of young farmers of £800,000, not subject to clawback, are to be welcomed as are the measures providing a compulsory disposal of livestock under the animal disease eradication programme.
The Minister recognised the position regarding the condition of county roads and the allocation of £8 million is a start, albeit a small one, to address a major problem for farmers and small businesses as well as other rural dwellers and tourists. A cogent tourism development plan is needed to develop one of our major natural resources. The additional £2.3 million allocation for tourism promotion is very welcome and must be spent to good effect. The pilot scheme for the renewal of traditional seaside resorts is an interesting idea. It is budgeted to cost only £1 million in 1995. Could it be expanded to include inland tourist centres? It is hardly fair to ignore the east coast, the Glen of Aherlow, scenic routes and the history and heritage attaching to those areas.
I would have expected a Labour-Democratic Left-Fine Gael Government to have introduced more measures to assist employment creation. The Minister addressed but did not resolve the tax wedge anomaly. Surely the £43 million adjustment in reducing corporation tax could be much better spent on a new 10 per cent rate of corporation tax for small companies. Remuneration taken out of companies would be taxed as normal. I also advocate a reduction of 1 per cent per annum for four years in the 9 per cent PRSI rate and an increase in the threshold of £12,000 up to £15,000 in stages. To create work and promote enterprise we need to keep improving the business climate and the taxation regime for the employer classes. In some respects the Minister is aiming in the right direction. May he change from aiming to delivering.
While this budget has something for everyone in the audience, and some of its measures are imaginative and of real benefit, there is no mention of science and technology or research. The arts and sporting projects are covered, but real science is not. We, a nation, have been very successful in attracting overseas employers to our shores due to sound Government, mainly under Fianna Fáil and policies used to good effect by the Industrial Development Authority. These industrial companies have brought developed products to Ireland such as electronics and computers.Research in Ireland is vital in order to sustain those jobs. Those companies are now facing another generation of product innovation. There are existing tax incentives for inventors. However, research is different and needs special treatment. Corporate tax relief is not suitable as Irish manufacturing subsidiaries pay a very low corporation tax and their mother companies are aware of the advantages of locating highly paid research jobs in other countries in which they operate where there are low personal tax and high corporate tax rates.
When Deputy Brennan was the Minister responsible for this area, he commissioned a report from the Science, Technology and Innovation Advisory Council, which was not completed before he left office. There does not appear to be any reason why that valuable report could not be officially published tomorrow. To avoid more leaks, the sooner that study is in the public domain, the sooner it can be implemented in full or with modifications.
There is a need to update Cork Regional Technical College. I appeal to the Government parties to agree to this and to change its name to a technological institute in line with what it was set up to do. It is to the forefront of technological education in the Cork area.
Much reference has been made in the House to third level undergraduate fees and covenants. The Minister intends to restrict tax relief on existing covenants and abolish tax relief on covenants generally, with humane exceptions for the disabled. Short of reducing the rate of income tax to zero per cent can this be done in respect of existing and binding contracts? If not, another Minister for Finance will face a large bill well into the future. However, the Deputy from Cork East will not double guess the wisdom of the Office of the Attorney General on the Act of covenants.
Deputy McCreevy alluded already to pitfalls in undergraduate fees. Approximately 60,000 out of 90,000 third level students pay no fees. The cost for the remainder has been put at £40 million. At an average cost of £2,000 in fees per student the cost could be higher still. It seems only a matter of time before graduates doing an MD, MA or research, for example, will be included. If we are going this road, approved post graduate degrees should be covered but what about night or part-time students?
Will the covenants be abolished? Will this save £23 million or £34 million? Certain other costs will emerge. Will free undergraduate courses result in the educational bodies increasing fees now that they are free of marketplace constraints?Will more students, who do not see a school leaving job on the horizon, apply? Probably "yes" and this will involve the State and the universities and colleges in capital costs for more buildings, lecture theatres, etc., plus more lecturers and professors with attendant back-up staff. Will the higher entrance requirements be made even tougher thus denying students education, apart from the question of who pays for it?
Free education is not like the property tax which arouses great anger. People would like it but they know they cannot afford it. Is the State obligated to set students off on a wealthy and privileged career for nothing? At present the fees paid represent about one third of the total cost with two thirds of students not paying anything and the remainder being heavily subsidised.Before proceeding further we should know the full cost — capital and current — as well as seeking to measure the effect on initiative of making everything "free". What about the effect on our national debt and the present annual bill of £2,500 million?
This money, whatever it amounts to, could be used to develop foreign markets and create jobs at home. The European Union will pay fees for universities and schools within the EU. Our young people should be encouraged to attend them or work abroad in South America, the Asia-Pacific zone as well as the continent of Europe. They could be given maintenance grants initially and loans at low rates of interest from the State and the private sector, to further develop and expand our overseas connections and markets, to learn Latin American-Spanish, German, Japanese or other languages and improve our marketing and exporting skills. You cannot learn French from a book or do satisfactory business in France without a knowledge of the customs and the spoken language. Under the proposals of the Departments of Finance and Education we would be exporting a surfeit of BAs, BScs with pass degrees and B.Comms.
Accountability is a word in vogue. The Minister invites us to begin to plan for the future. The Government should lead the way. The Irish Distillers, the Dairygolds and other Irish businesses do not budget 11 months ahead. Businesses have plans and budgets, targets and forecasts for five or more years ahead. Estimates are updated regularly. Governments should do the same and not just focus annually on adjustments of 1.4 per cent or 1.2 per cent of revenue or expenditure. In this way the people could see the growth in our national debt and where this is leading us. How do we plan now in good times for future changes in our funding from European funds? Must most of our income and PAYE taxes go out the door on unproductive interest repayments?
A Government keeps its books on a cash basis, like some other Governments, but unlike real businesses. This gives very odd results and should be changed to the worldwide normal accounting convention. In this way expenditure contracted for and incurred would appear in the books even if it was not paid for until after the calendar year. On the other side, Government Departments and agencies rush to spend their entire allotment of funds before 31 December in case it would otherwise reduce their allotment for the following year. In the real world the opposite is the case and management would be praised, encouraged and rewarded for keeping incurred expenditure down. Cash accounting does not disclose unpaid incurred costs.
Balance sheets are a must. The famous black hole of a few years ago would not have escaped attention if there were balance sheets at the start and at the end of the accounting periods. Accountability and transparency require proper accounting.
In the past few days many commentators claimed this budget will overheat the economy and send a new spiral of inflation with added interest rate increases which will further discourage the incentive for employment, job creation and industrial development. That is an alarming and frightening scene because it means debt is being piled upon debt.
From a constituency point of view I welcome the pilot scheme for the historic town of Youghal where the first potatoes were grown by Sir Walter Raleigh. I have no doubt this scheme will be availed of with vigour by the local community. In my constituency it is not ten year old cars but 100 year old roads that are a serious problem. The problem is to get goods and services delivered to the nearest point of activity. On the N73 from Mallow to Mitchelstown to Killarney during the beet season, approximately 50 trucks travel daily with loads of beet weighing from 20 to 40 tonnes. In that area we have the largest developed dairy enterprise in Europe which handles approximately 200 million gallons of milk which has an annual turnover of almost £1 billion. The transport of that product puts extraordinary pressure on the road structure.
The Government has failed in this budget to provide for the upgrading of secondary roads after the main arterial roads. This is necessary if we are to have the type of development that will maintain the jobs and enterprises. There are many other areas to which I could refer. The scenic route, the N72 Fermoy to Mallow forms part of the Rosslare to Killarney route brings many tourists and holidaymakers to the area. The N72 and the N73 are in need of restructuring and regrading. I have no doubt with the Minister of State at the Department of Enterprise and Employment, Deputy Rabbitte, in the driving seat today he will take note of what I have said and will ensure that extra funding is provided from the budget. Money is being spent anywhere and everywhere and it is very difficult to identify where it has been spent.
I look at Irish Steel where a commitment was given last July by the then Minister for Finance, Deputy Bertie Ahern, to an investment of £50 million to update and modernise that facility in the Cork harbour area. This is the last traditional industry remaining in the Cork Harbour area. Now we are being told of indecision in Government although the Tánaiste still favours it. We would like to see a statement of fact on that industry and the necessary funding put in place to boost morale where, I understand, there has been a substantial downturn in production during the past month or six weeks over last year's level of production. I want to see a statement clarifying the position without delay.
I congratulate the former Government, and in particular the former Minister for Agriculture, Food and Forestry, Deputy Walsh, on the upgrading of Mallow racecourse to become the Cheltenham of Ireland. Its development as a tourist attraction depends on a proper road structure. We do not have such a structure. I appeal for the upgrading of the N73 as a matter of urgency.
I do not want to sound over-critical of the budget but many people have been forgotten and there have been many bruises. Old age pensioners suffered most since the days when a Cuman na nGael Government, led by W. T. Cosgrave, reduced the old age pension. The budget was the nearest the Government came to reducing the old age pension. Under Fianna Fáil administrations there have always been social welfare increases especially for old age pensioners, the down and out and the disadvantaged in society in the region of 3 per cent to 4 per cent. The 2.5 per cent increase this year, the lowest increase in the history of the State, is an insult to those people. The worst measure in the budget is the 10p a week increase in living alone allowance. If a person in need came to your door you would give them more than that. Those are the harsh realities of the budget.
In every paper at the weekend there were headlines such as "Air Of Disappointment", "A Difficult Job Shirked", "Tax Decision Increases Brain Drain" and so on. There are many such paper cuttings from the various commentators, intelligent people who write fairly on matters. They would have written constructively on this budget if they had anything to write about, but there was merely a little for everyone. The measure on PRSI is a step in the right direction, but otherwise there is very little in the budget.
I wish to refer to the attack on the small saver — I referred to this matter on budget night — with the increase in DIRT from 10 to 15 per cent, a 50 per cent increase. That is an attack on the small investor, the old age pensioner, the person with money on deposit. Account should be taken of this matter in the Finance Bill and the figure should be reduced to its previous level of 10 per cent.
After a short time in Government the people want to see the end of this rainbow Coalition. Time constraints bring me to the end of my contribution on this rainbow budget, with shades of blue, purple, violet and indigo and an agenda of red, yellow and green. The Minister has designed a grey structure, with debt laid upon foundations of debt. The national debt of about £30 billion will be increased this year by £800 million. The Minister opposite is a good economist, a man I greatly admire, who had many answers when he was on the other side of the House — I am sure he will answer all the questions when he presents his case in a few minutes. How does he propose, in the event of a hiccup in the international economy, to deal with the finances? The Coalition Government of 1973-77 which inherited a strong economy from the then Taoiseach, Jack Lynch, ran riot with the finances, and the excuse it came up with was that there was an oil crisis. I wonder, at the end of the term of this rain-bown Coalition, with all its colours, what answers will it give when this economy is led into the ground and buried in debt.
