Dáil Éireann debate -
Wednesday, 22 Feb 1995

Vol. 449 No. 5

Financial Resolutions, 1995. - Financial Resolution No. 4: General (Resumed).

Debate resumed on the following motion:

That it is expedient to amend the law relating to customs and inland revenue (including excise) and to make further provision in connection with finance.

—(Taoiseach.)

Dr. Upton

Yesterday evening I had begun to talk about the number of worthwhile initiatives in the budget which will help to develop and enhance a society based on the principles of social cohesion. I referred to the major improvement in the children's allowance which represents the greatest step forward in enhancing the welfare of children for many years. A family with four children will be in receipt of £1,400 per year and that is an important step towards providing a basic income to support all children.

The initiative taken by the Minister to provide funds to sustain a further 7,500 people on community employment schemes is also welcome. That will allow them become part of the workforce and obtain work experience. It will also allow for the provision of more community schemes which will be of considerable benefit in many parts of the country. The Minister is to be commended on the full and frank way he has acknowledged the major difficulties involved in solving the problem of the long-term unemployed. If we are to solve this problem, we must face up to it frankly.

In this regard I ask the Minister to act on the proposal in the National Economic and Social Forum Report No. 4 which refers to the potential to create approximately 10,000 full-time jobs in local authorities. That is a worthwhile proposal and the Minister should act on it as soon as possible. Those jobs would be suitable for many long-term unemployed people. This work is necessary and will greatly enhance our country. It will also provide a framework which will be of considerable benefit, particularly to the tourism industry. I hope we will see some move to implement this worthwhile proposal. The net cost to the State would be relatively small, approximately £5,000 per job and, for a total investment of perhaps £20 million or £30 million, it should be possible to make considerable progress in that area.

The introduction of free travel for pensioners both North and South is an imaginative proposal. It will be of great benefit to pensioners and I hope many of them will avail of the opportunity to travel to the North and many people in the North will travel to the South. I hope people from Dublin will travel to Belfast and vice versa for shopping and other leisure pursuits. Such cross-Border traffic can only be favourable for everyone.

The proposal to remove third level fees is very welcome. It will relieve a great burden on many families struggling to put their children through college.There is considerable scope for further improvement in maintenance costs, etc., but it is an important first step and I have no doubt it will be of great help to many families. It will also help to change attitudes about going to college. It will provide a support framework and encourage many people to attend college who may have been deterred from doing so in the past because of the expense involved.

The Minister's proposal on Third World charities is welcome. It is particularly appropriate in the year in which we begin to commemorate the Famine. One of the paradoxes of this country's position in providing funds for overseas aid is that, while we remain at the bottom of the league in terms of the proportion of gross national product contributed in comparison to other OECD countries, our contributions over the past number of years have tended to increase while the contributions of many of the developed countries have tended to decline. We appear to be moving contrary to the international trend and that is encouraging. I hope the changes made in the budget will encourage people to make a special effort to contribute to Third World charities and it is appropriate that they will now be in a position to nominate the charity or aid group they wish to support.

The initiative to provide £1,000 for people selling a ten year old car is welcome.This idea arose from the efforts of the Society of the Irish Motoring Industry and, in particular, Mr. Cyril McHugh, its chief executive. I am glad the Minister has taken action in this regard. To a large extent it also came from the lobbying by the SIMI last year which proposed that, if certain changes were made in the budget, it would generate increased revenue and would increase the levels of employment in the motor industry. That happened and is one reason we can feel confident this proposal will further improve the motor industry and will have significant benefits in terms of improving the environment.

At the conclusion of his contribution the Minister outlined his vision of this country 15 years from now. He was right to set high objectives and standards for our country to be reached by the year 2010. There is nothing wrong with being ambitious but it will not be easy to achieve these targets. We will need to reach very high standards if we are to close the gap between average income in this country and European member states. To achieve this we will have to invest in products and services that can be sold in Europe and elsewhere so that we are as good as the best in terms of the quality of our goods and services. That objective will be considerably enhanced by the levels of infrastructural investment which will be available to this country from the Structural Funds. However, we need to go much further, in particular we need greater investment in science and technology, research and development than in the past.

The level of investment in science and technology has been pitifully low. I do not understand how we hope to develop products and services without investing in science and technology to a degree comparable with our competitors. If we do not, we will not be in the race in terms of creating new products, changing production processes and so on. Science and technology has been treated very badly in the past decade. I believe there is an element in Irish society that is quite ignorant of the value and significance of science and technology and how it can be harnessed to advance the country. I know that the Minister of State at the Department of the Taoiseach, Deputy Rabbitte, is responsible for the White Paper on Science and Technology and since he took up office he has sought to try to attract attention to the value of science and technology. He is beginning from a very low base and has a very steep hill to climb in terms of the levels of changes needed. I wish Deputy Rabbitte well but unless there is a considerable change in attitude among the Irish establishment it is difficult to see the levels of change that are needed coming about. However, they are essential if we are to attain the objectives the Minister for Finance set for the year 2000.

Considerable changes are needed in Irish industry. I believe most Irish industries are too small and it is necessary to consolidate, particularly in the food industries. If Irish food companies are to penetrate international markets, they have to attain a certain scale. Unless they are able to invest in marketing, research and development, infrastructure and capacity they will continue to supply commodities to the European and world markets but that is not the way forward. We have to be able to develop branded products so that the consumer will choose our products rather than being dependent on those who control what is sold in the outlets.

There is considerable scope for further investment in tourism, in areas of Dublin outside the city centre. There has been a reasonable level of effort and development in the city centre areas but there are attractions in the suburbs and the Dublin mountains. A sustained effort should be made to promote those attractions which to a large extent have been neglected. In the promotional literature on Dublin there is virtually no mention of the Dublin mountains or historic houses outside the city centre. I wish the new Minister well and hope he will do something about this.

The Minister for Finance is right to put the emphasis on enterprise and social cohesion because without social cohesion it would be very difficult to have enterprise and vice versa. We need to consider the best way forward. I wish there was greater anxiety to achieve co-operation and cohesion. To some degree Irish life has become preoccupied with cantankerous argumentative questions but that is not of much use in terms of making progress. Certainly there are questions but it is not so much that we want answers to the questions as solutions to the problems to which those questions relate. Instead of dissent we should be trying to generate harmony and consensus on how very serious problems can be resolved. The way forward is through the development of social cohesion and the promotion of enterprise.

I wish to comment on remarks made yesterday by the Minister of State at the Department of Social Welfare, Deputy Durkan, when he spoke about the changing attitude and cognitive restructuring when people move from this side of the House to the other. The only advice I give to Members on both sides is to exercise an element of restraint. Given the unpredictable nature of politics it is not easy to be sure where Members will be in the next few months or in the next few years and caution could save people the embarrassment of having to eat their words in future.

The reality of political life is that leaks are part of what we are: it is a dull Monday now that we do not have a leak to fill up the newspapers because as we all know Monday is a bad day for news. The phenomenon has developed to the point at which the same old stuff can be releaked with minor adjustments. I think the former Minister of State, Deputy Hogan, was unfortunate to be caught up in the works as to some degree all he was doing was taking one step further what others were doing anyway, in other words acting in a cavalier fashion. That is not to seek to justify what happened.

Éamon Ó Cuív

Tá an-áthas orm deis a bheith agam labhairt ar an gCáináisnéis.I dtosach báire ba mhaith liom a ráa, ag tagairt don rud adúirt an Teachta Upton, go dtagaim leis go gcaithfidh duine a bheith cúramach faoi cad a deireann sé ar an dtaobh seo den Teach. Tá súil agam, áfach, sa mhéid atá le rá agam, ainneoin go mbeidh cáineadh láidir le déanamh, gur cháineadh é a rinne mé nuair a bhí Fianna Fáil i Rialtais le dreamanna eile. Beidh mé ag rá rudaí a chreidim go diongbhálta.

I regret the overall thrust of the budget in returning to a current budget deficit. As far back as 1987 when I entered politics I said that current budget deficiting is spending our children's future. That is not acceptable and I cannot condone it.

If we look at the record for the past three years, a clear trend emerges, the actual out-turn for 1993 was a deficit of £379 million, for 1994, the post-budget project was a current budget deficit of £262 million but the actual out-turn was a surplus of £15 million.

What did we do in 1995? The post budget projection is for a current budget deficit of £310 million. I cannot understand the logic behind that or the justification for it. It is a weak argument to say we are talking about 9 per cent of GNP which was the figure given in the post budget deficit projection last year. The trend has been for the current budget deficit to come down in real terms. Once we cleared the hurdle of disposing with the current budget deficit we should have maintained it. There is no justification for what has happened. When does the Government intend to return to a current budget balance?

Borrowing for capital development is justified because if spent wisely it will create wealth and raise standards of living.I welcome some of the taxation features in the budget. Changes in capital gains tax, farmers' stock relief, motor cars for business purposes and capital acquisitions tax are all welcome. In the past there was great difficulty in transferring farms from one generation to another.

I welcome the changes in residential property tax but given the small amount of money collected it would be better to abolish it in total. I welcome the taxation and PRSI measures in the budget as far as they go but we are still tinkering with the system in a piecemeal fashion. We have had too little reform and we always further complicate a system which is riddled with anomalies. I welcome the £50 exemption limit from PRSI. Taxation, PRSI and the various levies must be amalgamated into one cohesive system. I have often spoken about the need to arrive at a position where there would be a £100 per week exemption from PRSI and levies for a single person and £200 exemption for a married couple, with extra exemptions for those with children.

I cannot understand how we got ourselves into the tax mess we are in and how we managed to devise a system which is so complicated. Many people, especially those on low incomes, are crying out for a simple taxation system which they can understand and which does not have myriad complications. They want one they can comply with easily but they do not want to end up going backwards instead of forwards.

The tax relief on service charges is a gimmick. The value of that little measure to somebody paying tax at the standard rate and living in Galway city is 23p per week, while in Galway county it is 51p per week. There should have been a better way of doing this as it is totally unfair to those living in rural areas.

I am not particularly enamoured with the BES or profit sharing schemes so beloved of those with high disposable incomes. Such schemes favour those with high discretionary disposable incomes who avail of them to give themselves very high tax free allowances. It is possible for a person with an income of £200,000 per annum to have a tax free allowance of up to £30,000 a year. When one considers that a widow has a tax exemption limit of £3,700 a year one realises there is something radically unfair about the system. Most people want to see an end to these schemes and a simple, no frills system put in place with greater basic allowances and decent tax exemption limits.

I am disappointed at the changes in tax exemptions and marginal relief. There was an increase in the personal tax free allowance of £150 for a single person and £300 for a married couple. The increase in the tax exemption limit was only £100 for a single person bringing it to £3,700 per annum and £200 for a married couple bringing it to £7,400 per annum. There was no increase in the tax exemption limit for children. Last year I supported the taxation of short term social welfare benefits, unemployment and disability benefit. However, I said it would only be fair if tax exemption limits were radically increased. I supported it because, in a family, one of the couple could receive unemployment or disability benefit throughout the year but the combined income could be £40,000. I supported the taxation of the total income because it does not make any difference where the income comes from. However, taxing unemployment benefit and disability benefit without raising exemption limits has led to those in seasonal work bearing an unfair burden of taxation.

At present the tax exemption limit for a married couple with four children is £9,600 or £184 per week. The family income supplement ceiling is £235 a week. If one is anywhere between the £184 and £235 the following is the effect of receiving a £10 wage increase per week. A person would lose £4 because he or she would be taxed at the marginal rate of 40 per cent, not 27 per cent. The person would lose £6 in family income supplement and 77p a week in PRSI. The net take home family income, including family income supplement, would decrease by 77p a week, although the person would have received a nominal pay increase of £10 a week. If you compare the net take home household income of a person with four children, earning £9,600 and someone earning £12,220, the person earning £9,600 is better off by £3.92 a week than the person earning £12,220. In other words, the person earning £51 more per week ends up with a net household income of £3.92 less per week, in addition to which, if one takes any intermediate point on that scale, one finds that one ends up somewhere between the two.

This Government has talked about incentive to work and it is about time we addressed that issue. In the case of a married couple with three children, the exemption limit is £172 per week and the family income supplement ceiling is £215 per week. A person unfortunate enough to get a pay rise of £10 per week from £172 loses £4 in tax relief, £6 on the family income supplement, 55p in social insurance and, because the levies hit one between the £172 and the £183, a loss of a further £4. Therefore, for the privilege of receiving an extra £10 per week one's net take home or household income is reduced by £4.55 per week. That is a total nonsense and leads to a poverty trap.

I might refer to another anomaly we are adding to our taxation system, that is the position of married couples, between one-earning families and two-earning families. Whereas we give lipservice to the role of the full-time homemaker in our society, in reality we penalise them to the hilt. Let us compare the position of a two-earner family on, say, £16,000 per annum with a one-earner family on the same income and how they are taxed or treated by the system. One discovers that the two-earner family will have a net household income of £7.62 per week more, or £396 annually, than the single-earning family. The reason which is quite simple has been aggravated this year. The single-earning family does not receive a double PRSI allowance, in addition to a single £50 PRSI exemption for the single-earning household. One might contend that in the double-earning household both are paying PRSI, but both will have the advantage of having social insurance paid and of being fully covered by the system.

The position of those on a higher income paying 48 per cent tax is worsened in that the difference in the household income between the one-earner and the two-earner family with the same annual income — in other words, where the two incomes are equivalent to the one income — is £11.44 per week better in the case of the two-earner family than the one-earner family, or £594 annually.

It might be said it is easy for me to highlight all of the shortfalls and weaknesses within the system but what can be done about them in practice? Last year, before the Minister announced his budget I proposed graphs showing how, as one's income rose, one's net household income dropped into a valley and rose again. In that exercise I was not taking into account the loss of indirect benefits such as medical cards. I was concerned about this. At the time I made proposals to the Economic and Social Forum on the issue. This exercise is relatively easy. I was able to draw a model giving a net increase in household income related to an increase in wages by effecting some very simple adjustments to the system. The first thing we should do is exempt the first £60 of income from PRSI contributions. The reason I chose the figure of £60 rather than £50 is that there is already a total exemption of £60. This means that at present £50 is disregarded if one's wages are in excess of £60 but the figure £60 is used if one's wages are under £60 so that, for the sake of the £10 involved, they should have abolished that anomaly.

Furthermore, the levies and PRSI contributions should be amalgamated into one two-rate system and there should be no connection between levies and eligibility for a medical card. I am advocating that on the first £60 of income one should not pay any PRSI contributions, on the next £140 — in other words between £60 and £200 — one should pay 6 per cent PRSI and, in excess of £200, one should pay 9 per cent contributions. This could be rendered revenue-neutral by adjusting the cut-off ceiling for employees' PRSI contributions. In addition, for administrative convenience, there is no good reason for not having the employers' and employees PRSI ceiling struck at exactly the same figure.

On taxation, a reduction should be effected in the number of allowances to include only superannuation, VHI and medical expenses and mortgage relief because all income, with the exception of child benefit, should be taxable. Then one could dramatically increase the basic allowance and widen the tax bands.

In the short term the exemption limits must be revised — I drew up some models in this respect — so that the tax exemption limits in all cases would be higher than the ceiling applicable to the family income supplement, thus abolishing the hollow, so that, as a person's income increases, their net household income also increases. I would favour also the reduction in the marginal rate of tax for people on low incomes, just above the exemption limit, to 35 per cent. Finally, in order to eliminate the anomaly to which I referred between the one-earner and two-earner family, all allowances to married couples should be doubled; in other words, irrespective of whether a married couple's income is derived from one or two sources, they should be treated as a couple in every way within the taxation system, as in the case of some of the basic allowances.

In regard to social welfare benefits, I was aghast at the 2.5 per cent increase and, when I observed that the child dependant allowance had not been increased. I was further dismayed. Last year, the corresponding increase was 3 per cent in addition to which certain other rates and categories were accorded an increase far in excess of that figure. For example, last year, there was the introduction of a widower's pension, a 10 per cent increase in the short term rate of unemployment and disability benefit whereas this year that increase is 2.5 per cent for adults and nothing in the case of children.

Last year also we saw the introduction of a significant exemption for carers accompanied by changes in the free television licence, ESB allowance and telephone rental schemes in addition to revisions in means-testing. Some progress has been made this year; for example, I am delighted that all social welfare recipients will qualify for a free colour television licence. The free travel allowance between North and South is a nice touch which I welcome. Nonetheless, the overall, general increase is meagre.

The argument has been advanced here that the reason for these most recent budgetary proposals is the encouragement of people to go to work. We must remember that there are 385,000 pensioners here. Is the Government proposing to put those people to work; are we going to forget those people who, through ill-health or old age, depend on us for their livelihood? Those people with children and those on social welfare fared relatively worse than those in receipt of a decent salary, the former might well have expected at least the 2.5 per cent increase in social welfare or the 40p given last year. Therefore, their real increase through the child dependant allowance amounts to £1.21 per week only whereas, for those of us on salaries, the real increase amounts to £1.61 per week.

While welcoming the principle of early payment proposed this year, I do not foresee my constituents, dependent on social welfare, dancing for joy at the crossroads because they will receive their increase of £2.40 or £1.50 per week six weeks earlier.

Minister of State at the Department of Education (Mr. Allen)

The women who have been waiting years for their equality payments are dancing for joy, at last having been awarded their just entitlements.

Éamon Ó Cuív

We will deal with that. Regarding child benefit, I welcome the increased rates and the extension of the scheme to include 19 years olds. The increases are welcome even for people in the middle class bracket. Most people pay tax and this increase in benefit in effect gives people the benefit of some of the tax they will pay at a higher rate towards the end of their working life at a time when they are under the most severe financial pressure due to the costs involved in educating their children and meeting their mortgage repayments.It does something to level out the position between families and people who do not have children. Having regard to the reduction in the cost of the scheme resulting from a 28 per cent average decrease in the birth rate during the past few years, it was inevitable that there would be an increase in child benefit.

I welcome the extension of the carer's scheme to non-social welfare pensioners.Many people caring for a widow of a garda and others were not entitled to the allowance because they were not social welfare pensioners. I would ask the Minister or the Minister of State to consider a position that often arises in rural Ireland where one family member stays at home and lives on a small farm with perhaps three cows and cares for an old person. The income earned from that small enterprise should be exempt, just as a spouse's income is. The present position is an anomaly and I hope it will be rectified in the forthcoming Social Welfare Bill.

I am appalled that means testing of unemployment assistance has not been mentioned in the budget. The worst off and most heavily penalised people, to whom enterprise can mean nothing, are those living on small farms, fishermen and craft workers who are dependent on social welfare. Small farmers in my constituency have no hope of ever being able to earn an adequate income from their farms to support their families. For every pound they earn a pound is deducted from their unemployment assistance. That is the most penal system operating in the State and it is time it was changed. I have raised this matter with many Ministers, but little progress has been made. It is time we grasped the nettle and recognised that small farmers need some system of income supplement which would enable them keep some of the fruits of their labour.

I am also very critical of the 10 per cent means testing of capital. What bank pays 10 per cent interest today? No bank is paying that rate, but small farmers and other social welfare recipients with £2,000 or £3,000 in the bank are penalised at the rate of 10 per cent as if banks were paying that rate of interest. To encourage people to be thrifty and having particular regard to money saved in credit unions, the first £5,000 of money saved should be exempt from means testing and the balance means tested at 50 per cent of the interest earned. That would ensure that people would take their savings from under their mattresses and save in the banks and other institutions. That measure would encourage thrift which we need to foster in society.

On social welfare, there is a need to unify the rates and introduce a single means test system based on the principle that the nearer one's income is to the basic social welfare payment the greater the proportion of one's earnings should be retained.

On rural issues covered in the budget, I am surprised that the amount of money allocated for county roads this year is 6 per cent less than last year. The greatest infrastructural problem faced by people in rural Ireland is the poor condition of roads. Not enough is being done to address that problem. All rural Deputies, irrespective of which side of the House they are on, particularly those from the more peripheral regions, would put that issue on the top of the agenda. The measure in respect of VRT relief is welcome and I had proposed something similar previously, but its operation will prove disastrous for rural Ireland and the poor. I would have favoured a measure which entitled everyone who handed in a scrap car to a rebate of £200, irrespective of whether they bought a new or secondhand car. Such a measure would ensure that many cars were taken out of the ditches of rural Ireland and that people in cities would not buy and use such cars for illegal purposes.

I hope to have an opportunity at a later date to speak on the provisions for third level education. I welcome free fees but it does very little for people in receipt of medium incomes in rural Ireland. People earning £23,000 a year with mortgage repayments of £3,000 per year and two children in college would not be eligible to qualify for maintenance grants for their children at present and would be left with a net income of £8,000 a year, which is equivalent to the income they would receive if they were on the dole. I hope the Minister will radically increase maintenance grants and the qualifying income limits otherwise the provision in respect of the third level fees is anti-rural, welcome as it is. Similarly, regarding second level education, the means test for islanders and people living in remote areas, who have children attending boarding schools in respect of whom they have to pay half the costs involved, should be abolished. I hope to speak on the matter in the Dáil at an early date. There is no provision for free travel for islanders in the budget as many islands do not have a ferry service. There is a need for a subsidised ferry service to all islands, irrespective of whether they are in Gaeltacht areas. The extension of free travel to the North is welcome, but such a provision should be extended to our islanders.

Regarding service charges, there is no mention of tax relief for people paying into the group schemes or for the unfortunate people who have to obtain their water supply from wells at great personal expense without any State assistance.

On the flood and storm damage allocation, I will make representations that this problem be treated seriously and that adequate funds be provided.

On the pilot renewal scheme for traditional seaside resorts, I cannot understand how none of the towns and seaside resorts in County Galway which, has a coastline stretching from Leenane in the north to Kinvara in the south, is included. My colleague from Galway west, Deputy Molloy, mentioned Salthill.I am very surprised that the town of Clifden was omitted from the scheme. I am sure that was an oversight on the part of the Minister. That town needs refurbishment and is totally dependent on seasonal tourism. I hope that when a final decision on the scheme is made both of those towns will be included.

Mr. Sheehan

Having listened for the past half hour to Deputy Ó Cuív, one would swear that he had the cure for all ills, but it is regrettable that he was not such a good spin doctor when his party was in power and that he did not have the necessary clout at parliamentary party meetings to have some of the good points he made in his contribution put into practice. This is a very positive budget but, naturally, there is room for improvement in some sectors. However, miracles do not occur overnight, especially in financial matters, in a country which has seen indiscriminate borrowing policies through the years.

The international economy during 1994 showed a rapid growth in the OECD area, with recovery extending to all major regions. Output expanded by 2.25 per cent, compared to 1.25 per cent in 1993 and inflation declined further. Nominal wage growth remained low against the background of continuing high unemployment in most countries. Employment increased modestly and unemployment declined in the second half of the year. Nevertheless, taking the bright outlook into consideration the public finance position remains unsatisfactory in nearly all countries. Debt remains high and the gross debt as a percentage of GDP continues to rise.

Individual countries showed differences in growth performance, reflecting the different phases of their economic cycles. In the United States, where the recovery is entering its fourth year, output expanded by four per cent, helped by the continued strength of private consumption and investment and an improvement in exports. Canada followed a similar pattern. In Japan, the wonder economy of the world, the recovery slowly gathered pace as private consumption strengthened in response to continued monetary easing for a substantial fiscal stimulus package. In the United Kingdom the recovery which began in 1992 intensified with GDP growth reaching 4 per cent.

World trade picked up considerably during 1994. It expanded by almost 9 per cent compared to 3.25 per cent in 1993 and this was mainly reflected by more buoyant trade among OECD countries. Ireland's markets for manufactured goods increased by 9 per cent. This was a very good performance when one considers we are the only island nation in the EU. However, unemployment in the OECD countries peaked during the first half of 1994 at about 35 million or 8.25 per cent of their labour force. However, it has been declining slowly, and I emphasise "slowly", since.

The Irish economy showed a GNP growth of 5.5 per cent in 1994. The pick up in the second half of 1993 continued apace in 1994. A very welcome aspect of last year's performance was the domestic contribution to growth. This approach of sharing the fruits of growth must continue in the interests of the many who will be unemployed in the years to come. It is also critical to future employment prospects that the opportunity afforded by this year's growth to further reduce the burden of debt on the economy is taken up. This will help to maintain the comparative improvement in interest rates, which has emerged over recent years and will ease the pressures on the public finances when it is inevitable that the present international recovery has run its course. It will also enhance both international and domestic investor confidence in Ireland's longer term prospects, further securing the foundations already laid for continuing strong employment growth.

I welcome the Minister's response in the budget to the demands of the trade unions for adjustments in the income tax code to enhance the real value of take-home pay in keeping with the objectives of the Programme for Competitiveness and Work. It is also appreciated that the Minister favoured the low paid section of the community as far as possible in the provision of additional income tax reliefs, especially in view of the fact that the tax adjustments in budgets of the past have tended to favour the better off disproportionately. However, the measures announced in the budget must be seen as the beginning rather than the end of a process of significant reform of our tax system.

The changes in employers' PRSI contributions, with other pro-business measures such as the reduction in corporation tax, should provide a further boost to employment prospects as long as the business community takes up the challenge. The budget offers a substantial carrot to employers to maintain and create additional jobs. In the package now available the Minister throws down the gauntlet and the employers' response to this challenge should be in the affirmative.

While I welcome the increase given by the Minister to social welfare recipients, there are anomalies which I wish him to correct if possible. It is nonsensical for the Department of Social Welfare to impose a law whereby widows aged over 60 years are entitled to free electricity, free telephone, winter fuel and so on only on the provision that their late spouses were in receipt of the same. This is a deplorable policy initiated by the previous Government. It is an anomaly which must be corrected as soon as possible. This regulation is totally unjust and should be completely erased by the Minister for Social Welfare. There is no difference between a widow whose husband was entitled to the free schemes and one whose husband was not in receipt of them. They are widows and should benefit from all schemes applying to widows. The Minister should be generous on this important matter and grant the same allowance for those free schemes to all widows and widowers over 60 years of age. That would not break the economy of the country, nor would it be the end of the national purse.

Social welfare officers who investigate the entitlement of old age pensioners for non-contributory pension purposes operate a criteria whereby all savings held by pensioners, for burial purposes etc., are subject to a flat interest rate assesment of 10 per cent. Where will you get 10 per cent rate of interest on your deposit at the moment? You would be lucky to get 2 or 3 per cent. This rate is completely nonsensical when one considers the fact that interest rates on deposits now range between 3 and 4 per cent per annum. Surely then it is not correct for the Department to be operating a flat interest rate of 10 per cent when estimating the income from pensioners' savings, much of which is put by to pay burial expenses.

I agree with Deputy Ó Cuív who said that the first £5,000 of all savings should be exempt from tax, especially for elderly people who have invested money to pay their undertaker's bill. I request the Minister for Social Welfare to have this matter thoroughly investigated and corrected if possible.

The forecasted acceleration in output growth in the industrialised economy in 1995 will provide a favourable external environment for continued strong growth in the Irish economy. Consequently, consumer spending should continue to grow strongly. Further increases in employment, with pay increases in line with those provided for in the Programme for Competitiveness and Work, the budgetary measures and moderate inflation, will lead to an increase in real personal disposable income of 6 per cent or more this year.

A continuation of the stronger consumer confidence evident in 1994 should lead to a further modest fall in the underlying personal savings ratio. The recovery in investment which began last year should strengthen in 1995 given the prevailing level of interest rates, increased European Structural and Cohesion Fund expenditure, and improved consumer and business confidence generally. Construction investment will benefit from increased expenditure under the Public Capital Programme and from further growth in private sector house building. An increase of about 9.5 per cent in the volume of construction investment is forecast.Investment in machinery and equipment seems likely to accelerate this year as firms increase capacity in response to a second year of strong growth in domestic and international demand.

The volume of total fixed investment is projected to grow by about 9.25 per cent. The 1995 budget will deliver strong employment growth this year. It will also increase the employment potential of the economy and actual employment, not only this year but in the immediate years to follow. Furthermore, the budget increases the reward to employers to employ more staff, the reward to workers for working and the unemployed to seek work. This is something we must try to foster and nurture because if we do not make it more attractive to the unemployed to seek work — rather than staying at home, idly drawing unemployment assistance — it will be a sad reflection on the Government of the day. It is of paramount importance for us to make it more attractive for a man or woman to get up in the morning to seek employment and not to laze about on unemployment and other social welfare benefits.

This budget shows the fruits of economic growth in a way that will ensure a continuation of that growth. The target set for the end of 1995 is an increase of 37,000 jobs in non-agricultural employment.It will also raise the living standards of those at work and support effort and enterprise. It is geared to produce a result that will record a fall, estimated at 16,000 people, in the number out of work by the end of 1995. It will also ensure that, on average, more employment training places will be provided for the long term unemployed than in 1994. It gives priority to actions and investments which will make important contributions to employment and growth. It will enhance international and domestic investors' confidence in the longer term prospects of the economy. Therefore, it will copperfasten the foundations for the long term strong employment growth which has evaded this country for far too long.

The generous increase of £7 per month in child income support will take effect from September and, in addition, child benefit is being extended to include 18-year-olds in full-time education and on FÁS courses. This is a step in the right direction, as is the introduction of increases in social welfare pensions and allowances that have been brought forward to June rather than paid out in August as previous Governments have done. In the carer's allowance a significant relaxation of the rules affecting assessment of income of the spouse of the carer will be introduced. I understand that for the first time, the first £7,500 of the spouse's income will be disregarded when assessing the income of an applicant for a carer's allowance. This is an important step because many geriatric people are cared for at home by the woman of the house. Her resources are extended to such a point that she finds it almost impractical to give that care without some help from the Department. This is a step in the right direction.

There is a serious anomaly in the carer's allowance regulations. The first £7,500 of the spouse's income is to be disregarded and rightly so. However, where the applicant is a widow trying to care for an elderly patient at home with no income other than her widow's pension, the latter is taken into consideration when estimating her means. The Minister for Social Welfare should go the full hog, take a compassionate view and exclude the survivor's pension being drawn by the widow when investigating her means pursuant to an application for the carer's allowance. The Minister must realise that the applicant, who unfortunately happens to be a widow caring for an elderly relative at home, should be entitled to have her pension exempt from means testing. It is not too much to ask the Minister for Social Welfare if, in his wisdom, he could incorporate that into the budget provisions.

I welcome the Minister's decision to increase, from £10 to £25, the minimum unemployment assistance payment to single people living in the family home. Many single people, boys and girls, are only sleeping at home because their parents cannot support them but will at least give them a bed for the night. They were being victimised by the means testing of social welfare applications to the extent that they were only getting £10 per week. Who could live on £10 per week? This is a step in the right direction and I welcome the long overdue concession in this area.

The Minister's generosity in allowing all pensioners currently entitled to free electricity to qualify for a free colour television licence should be praised, this erases another anomaly. It was only penny pinching and discriminated against the unfortunate people surviving on social welfare pensions who up to now had to rely on a black and white television licence. It is a step in the right direction introduced by a caring Minister.

The pilot renewal scheme for traditional seaside resorts will commence on 1 July 1995 for a three year period. It is aimed to cover the construction and refurbishment of tourist buildings and structures, including accommodation, approved for the purpose of the relief by the Minister for Tourism and Trade, in consultation with the Minister for Finance, on the recommendation of Bord Fáilte and in accordance with specific codes and standards laid down by the board.

I recognise that this is a pilot renewal scheme and that it is confined to seaside resorts which include Achill, Bally-bunion, Bundoran, Kilkee, Lahinch — Deputy de Valera's constituency seems to have got the greater part of it — Tramore, Westport and Youghal. However, it should be enlarged to cover other areas along the western and south western seaboards which can be described as natural areas for tourism development, and which have similar problems, to benefit from the scheme. The areas I have in mind are Courtmacsherry, Clonakilty, Glandore, Union Hall, Baltimore, Skibbereen, Ballydehob, Schull, Goleen, Crookhaven, Barley Cove, Durrus, Kilcrohane, Bantry, Glengariff, Castletownbere and the tourist resorts of south Kerry.

Mr. Howlin

Is that all?

Mr. Sheehan

I appeal to the Minister in his wisdom to try to include all the areas I have outlined in this pilot renewal scheme for traditional seaside resorts. It would be of immense benefit to promote and further the tourist industry in those traditional tourist areas. I also welcome the Minister's decision to continue the stock relief for farmers at 25 per cent for a further two year period. It is a step in the right direction. This measure will assist farmers in increasing their herds so that they will produce viable incomes.

I welcome the new scheme of stock relief at 100 per cent for young trained farmers under 35 years of age who qualify for the scheme of installation aid for young farmers and have completed a recognised agricultural course. I also welcome the decision of the Minister to make the relief available for four years from 6 April, 1995 in the cases of young farmers installed between 6 April, 1993 and 5 April, 1995 and for four years after installation in the case of young farmers who were installed between 6 April, 1995 and 5 April, 1997. There will be no claw back of this relief which will assist young farmers in building up stock to a viable level.

I also welcome the Minister's decision on the tax treatment of profits arising from cattle herd disposals under a statutory disease eradication programme. Profits arising from the disposal are excluded from assessment for tax purposes in the year in which the disposal takes place and instead will be deemed to arise in two equal instalments for the next two years of assessment.

All in all, this is a budget with which I am proud to be associated. It gives an impetus to the businessman, the developer, the farmer, the self employed, the chemical worker and the labourer. It gives every section of the community an opportunity to look forward and plan with confidence for the future.

Miss de Valera

With the permission of the House I would like to share my time with Deputy Dan Wallace and Deputy Ryan.

Acting Chairman (Mr. Foxe)

Is that agreed? Agreed.

Miss de Valera

At this stage in the budget debate, it is not an overstatement to say that this was perhaps the most heralded budget to date, not least because of the many leaks which took place, not only within days or 24 hours of its official publication but because of the many weeks of speculation and leaks.

Mr. Howlin

Transparency.

Miss de Valera

I accept transparency, but I am sure the Minister would agree that the budget, in particular, is a sensitive matter and should be announced first to the House, thereby paying the House its proper respect.

Mr. Sheehan

What about leaks from previous budgets?

Mr. E. Ryan

The Deputy should not try to defend the indefensible.

Miss de Valera

It is important to underline the fact that that was not done on this occasion.

Mr. Sheehan

There was a number of leaks.

Miss de Valera

That these leaks took place shows that proper parliamentary procedures were not followed. I hope that will not happen again. Due to our healthy economic state there were high expectations of this budget. Unfortunately, many sectors of our community are disappointed and dismayed with it. I am sorry I am not able to share the same confidence which Deputy Sheehan displayed this morning. The 2.5 per cent increase in social welfare allowances is disappointing, particularly for social welfare recipients.

Colleagues on this side of the House pointed out in detail the weekly meaning of that 2.5 per cent, but it is of little help to those who need financial aid from the State. It is difficult to accept that this Government has the interests of social welfare recipients and those who might need financial aid from the State in mind when it has given such a small percentage increase. Even in the 1987 budget, when Fianna Fáil was in power and had to clean up the economic mess of the previous coalition Government, there was a 3 per cent increase in social welfare. Fianna Fáil has been known to give greater increases than 3 per cent in social welfare down the years.

Mr. Howlin

What was the inflation rate that year?

Miss de Valera

It is amusing to note Deputy Rabbitte's remarks at that time when he said that the 3 per cent increase was low and should not be accepted by any Government. Yet he is now willing to stand over a 2.5 per cent increase, especially when we have a healthy economy with, for the first time in 27 years, a current budget surplus, and when the electorate had high expectations of this budget. I welcome the small changes in taxation and the relief to employers which may help to create further employment.

Like Deputy Sheehan, I want to refer to the pilot renewal scheme for traditional seaside resorts. He named a number of areas in his constituency which he felt should be included. I can also list a number of resorts which I would like included, in addition to Lahinch and Kilkee. The idea is good and I hope it will be extended in future years. Regardless of our political persuasions, we all recognise that tourism is a growing industry with tremendous potential for employment.

When Fine Gael was in Opposition it vehementaly opposed the residential property tax and stated so on numerous occasions. Yet, it is prepared to stand over the tax now that it is in Government.One may ask why I, a rural Deputy, am concerned about this tax. Representations were made to me by constituents, especially those living in built-up areas. This is a matter of concern and I hope the system will be changed. When Fianna Fáil took office, it said it would abolish the residential property tax and I supported that proposal.

One issue which affects everybody is hospital waiting lists. Deputy Howlin, when he was Minister for Health, recognised, along with his Fianna Fáil colleagues in Government, that this issue needed to be addressed and that an immediate injection of substantial moneys was needed to deal with this situation, which is causing anxiety and hardship for many people. For that reason, I was disappointed that this budget only allocated £8 million, instead of the substantial sum given in the last budget by a Fianna Fáil Minister for Finance. I will not discuss all the difficulties which older people, geriatric patients and those who need institutional care, face when trying to seek help and residential care.

One issue which has been raised on numerous occasions in this House during Question Time, on the Order of Business and in Private Members' time is flooding. In the budget £2 million was allocated for dealing with flooding in agricultural areas. It was interesting to note that the Minister for Agriculture, Food and Forestry, Deputy Yates, was shocked when he saw the extent of the damage in the west. He was able to visit Galway and if he had gone further south, he would have also seen the damage and hardship caused by flooding in County Clare. I mentioned this problem in the House. While the £2 million is welcome, it will not be enough to deal with the national problem. I understand, although I may be wrong, that the Government has not yet made a submission to the European institutions for assistance. It may not be possible for the Exchequer to provide funds to deal with this problem, therefore we need European funding, and I hope the appropriate submission will be made without delay. I was disappointed at the reference to roads in the budget because our country roads are in need of repair and maintenance, particularly after the flooding, and local authorities could not be expected to meet the costs involved. We hope the Government, when seeking assistance, will bear in mind the need to increase the allocation to deal with road repairs and maintenance. It will be interesting to hear the debate in the Seanad on the amendment to the Arterial Drainage Act. Perhaps this might move the Government to amend this Act.

I welcome the £2 million allocated for the arts programme. However, as I said in the House and elsewhere, the moneys which the Minister for Arts, Culture and the Gaeltacht sought to cover the cost of the arts plan for 1995 are not sufficient.The Arts Council has indicated it will need £19 million for its programme for 1995 alone and as yet £16 million only is available. I hope the Minister will make up the £3 million shortfall and I wish him well in bringing this about.

In the arts plan one notes the importance given to regionalisation and to arts in education. Arts and culture should not be seen as elitist interests or concerns.They should be shared by all within our community, men and women, the young, travellers, the disabled, etc. In years to come there will be more emphasis on the arts because of increased leisure time for those fortunate enough to have work and for the long-term unemployed.

There is a feeling of great disappointment about this budget. The Minister for Finance has the opportunity to make concessions in the coming weeks and he should do so, especially to help social welfare recipients.

Mr. D. Wallace

I thank Deputy de Valera for sharing her time. Because of the extremely healthy state of the national finances, most people looked forward to this budget with expectation and a degree of excitement. The background had not been as positive for a generation.

Various economic indicators — such as the balance of payments, exports and the ratio of national debt to GNP — reflected the dramatic improvement in our economy in recent years. The rate of inflation and interest rates were more favourable than could have been imagined a few years ago. Substantial EU funds were about to come on stream. Finally, the welcome development in Northern Ireland meant the Taoiseach, the Minister for Finance, Deputy Quinn, and their Cabinet colleagues were in an enviable position as they drafted the budget.

There was little doubt in anyone's mind that the main target of their efforts would be the two major outstanding problems facing our society, namely unemployment and poverty. Thus it is against this background one must evaluate the budget presented to the Dáil by the Minister. Was the central goal of his proposals to tackle these interlinked problems head on? It gives me no pleasure to say that whatever his main objective, it was a long way from dealing with these problems. It is only too easy for Members of the Opposition to claim this was simply an election budget, with Fine Gael attempting to consolidate its mainly upper and middle class support and Labour trying to hold on to its new constituency in the same classes. Similarly we might feel the social policies of Democratic Left have been largely ignored by the rainbow coalition partners. The main thrust of the budget supports such a cynical assessment. My primary concern is not to indulge in such speculation, rather it is with the many urgent needs of the disadvantaged in our society.

I am only too aware that people living in areas with high unemployment levels face an uphill struggle every day of their lives to make ends meet. At a time of tremendous growth and opportunity in our economy it is only fair and just that such people reap the first benefits. It is regrettable one has to search this budget to a point of desperation to identify isolated examples of some benefit to the most underprivileged.

Even the most blinkered supporter of the Government could not find anything to celebrate in the miserable 2.5 per cent increase across a range of social welfare benefits.

Ms McManus

The mothers are happy.

Mr. D. Wallace

It simply would not have been tenable for the Government to give anything less. In the current atmosphere of economic strength an increase of about 3.5 per cent would have been both financially possible and socially beneficial. The unspoken message from this budget is that people trapped in lives of poverty dare not hope the State will focus its substantial resources on the task of significantly improving their financial well-being.

It would be dishonest to say the budget does not have some positive features.The mild reforms of the PAYE and PRSI systems are to be welcomed. While these should improve to some degree the climate for job creation one gets the impression the system is being tinkered with rather than developed in an integrated manner.

Similarly a number of smaller items in the budget are worth while, including the provision of a free colour television licence for all social welfare pensioners currently receiving an electricity allowance; free cross-Border journeys for all pensioners north and south of the Border and improvements in back to school payments.

Two of the main provisions are the increase in £7 per month in the children's allowance and the decision to abolish third level education fees. I welcome the children's allowance increase since many families are dependent on benefit to supplement their basic income. The fact that such payments are made directly to the mother is desirable; in certain cases it may constitute the only direct income of the woman in the family. The benefit of the £7 increase will be especially evident in large families.

While I also see the benefit of free third level education in an ideal world, has the Minister for Education spent sufficient time establishing a sense of priority in her plans for developing education?It is highly unlikely that abolishing these fees will have a significant impact on the underprivileged since their participation rates are so low. The main educational problem regarding children from underprivileged homes is the tendency to finish their formal education prematurely. Substantial extra investment is therefore urgently required in first and second level education working class areas. Similarly, exciting projects such as the home/school liaison programme must receive financial support suitable to their needs.

With increased interest in third level education this sector is in need of capital expenditure to cater adequately for swollen student numbers and to allow for further expansion. Simply abolishing fees does not address the twin problems of low participation among the poorest sectors of society and adequate capital resources within third level institutions.

My overall concern about the budget is that it seems to have largely failed to achieve the necessary balance between the varying needs of different sectors of our society. Similarly, the opportunity to use the positive state of the nation's finances to take a bold step towards a greater degree of equality has not been taken. One has to ask why.

One might have expected the presence of the Minister, Deputy De Rossa, in the Department of Social Welfare would have ensured improvements in living standards for poorer families. He and his party have always highlighted the needs of the underprivileged in their public comments and policies. The simple truth is the budget shows little or no evidence that he or his party managed to ensure a meaningful input into the formulation and implementation of Government policy. Rather it shows that while Fine Gael may have reluctantly conceded to allowing Democratic Left into the rainbow coalition it does not intend to allow that party anything approaching a non-trivial role in that Government. Perhaps this is not so surprising since a few years ago Fine Gael was not willing at any cost to enter into discussion with Democratic Left for the purpose of forming a coalition Government.

The implication of the treatment of Democratic Left within this Government is quite serious. It suggests that parties whose policies are far apart within the political spectrum cannot work meaningfully together in Government.While for obvious reasons there might be attempts to paper over the many cracks in the Coalition, ultimately the total lack of inter-party cohesion must come into public view. If this budget is an indication of what lies ahead in the term of the rainbow Government, one cannot be optimistic about its survival in the short term.

I welcome many of the social welfare provisions and will articulate my views on them when the Social Welfare Bill is introduced in the House.

Mr. E. Ryan

I thank my colleagues for sharing their time with me. First, I congratulate my constituency colleague, Deputy Quinn, on being the first Labour Party Member for Finance to introduce a budget. However, what should have been a proud occasion for him and his party turned into a nightmare. The occasion was badly handled and showed a complete lack of cohesion and team spirit in the Government with information leaks that were unsurpassed by any previous Government in the history of the State. That culminated in the unfortunate resignation of Deputy Hogan who took the rap for other Ministers who had leaked far more detailed information. However, they are happy to see his head roll. If that is openness, transparency and accountability it is certainly not what many people would believe to be an honest way to conduct one's work.

I welcome many provisions in the budget, especially the tax cuts for lower paid workers. That policy was started by the previous Government and I hope will continue in future. There was a trap in the system previously and it had to be tackled. I wish to refer to a number of specific provisions. I welcome rent relief for persons in private rented accommodation in so far as it will be advantageous to the Exchequer in the long term. It will bring many landlords into the tax net and that is welcome. In my constituency — which I share with the Minister for Finance — there is a huge amount of rented accommodation. However, while this relief will be a boost for the Exchequer in the long term and for tenants in the short-term, I believe landlords will try to recoup their money by increasing rents. I do not wish to be negative about this measure — I welcome it — but perhaps we could devise a method to ensure that rents do not increase as a result of this relief.

I welcome the reduction in residential property tax. However, as I said last year when my party was in Government, I cannot understand why the Government has continued this tax. It is extremely unpopular and unfair and should be abolished. Despite the changes in the budget the reduction in tax for many people is not great. I look forward to the document on local taxation.The residential property tax is a poor method of taxing people — not only is it unpopular, but yields little revenue for the Exchequer.

Capital gains tax is an issue I have raised since I was a Member of the Seanad. It is important for Irish companies, large and small, to attract investment from individuals. I cannot understand why somebody who invests in an Irish company for periods of over five and ten years — investment that is badly needed by the economy — is taxed at the same rate as somebody who speculates on the Stock Exchange each week. There should be a lesser tax burden on somebody who has done what we have always encouraged them to do, to invest long term in Irish companies. Such people should benefit from a reduction in capital gains tax rather than have to pay exactly the same rate levied on somebody who trades in shares. I said the same when we were in Government and will continue to say it. The current situation is unfair and is not of great benefit to the Exchequer. We should encourage people to invest long term in Irish shares.

I welcome the pilot renewal scheme for traditional seaside resorts. This scheme was implemented in England and was extremely successful. Many seaside resorts around the country have suffered as a result of package holidays to sunnier countries. The scheme is imaginative and I do not doubt that it will be successful here. In the long term it will benefit the areas, many of them rural, where it is applied. I also welcome tax relief on donations to Third World charities. That is also an imaginative provision and continues a process initiated by Fianna Fáil when it was in Government with the Labour Party. It is a good means of encouraging people to donate to such charities and demonstrates a commitment on behalf of the Government and the country towards the Third World. In addition, volunteers of agencies for personal service overseas will be permitted to take into consideration time spent on voluntary work abroad for pension purposes. Many volunteers have sought such a provision and I welcome its inclusion in the budget.

However, I must refer to negative aspects of this budget and I am not doing so for political purposes. Like others, I welcome the increase in child income support. It is a good proposal. However, Democratic Left has lectured us for years and years about the poor of this country and what it would do for them if it were in Government. What does that party do when it is in Government and has a Minister for Social Welfare?It grants the lowest percentage increase — 2.5 per cent — in social welfare for 30 years. Since 1987 Fianna Fáil-led Governments have never given less than 3 per cent and more often have given 4 or 5 per cent. An old age pensioner will get £1.80 extra per week this year compared to an increase of £2.10 last year. Over 240 pensioners will not benefit from child benefit increases. Deputy De Rossa said, following the 1994 budget increases of 3 per cent, "the miserable level of most of the increases tell their own story". I would have expected him, as Minister for Social Welfare, to make imaginative proposals within his Department and to propose much larger increases.

I listened to Deputy Rabbitte attack Fianna Fáil last week because we had criticised him for the social welfare increases. I can understand why Deputy Rabbitte attacked us — he has to attack because his party has been humiliated in Government on this issue. I do not know how that party can face the electorate.Its members should be on their hands and knees each night praying that there will not be an election in the next year because the people will give them an answer for all the promises they have made over the years.

Deputy Rabbitte accused Fianna Fáil of reckless behaviour and said that we had caused all this country's financial problems. When we were in Government from 1987 to 1989 we had to make extremely difficult decisions regarding finances. Members of The Workers' Party, as Democratic Left was known then, opposed us at every single opportunity.They were the most opportunistic bunch of people who ever walked the political map of this country; they opposed everything. Now Deputy Rabbitte has the gall to stand in this House and tell Fianna Fáil that we are reckless, it is an outrage. The results of the reckless behaviour of his party are now coming home to roost. It will be remembered when he goes before the people that he and his party misled the people about the budget. Pointing the finger at this side of the House will not work. In the next budget we will ensure proper increases in social welfare above the rate of inflation. We will also ensure that the people who got this miserable increase will not be let down in the next budget, because we will embarrass Democratic Left into introducing appropriate increases. We will ensure that it sticks to the commitment it gave to people since the party was founded, and before that, when it was part of The Workers' Party.

I cannot understand how Democratic Left or how a Government which includes Democratic Left and the Labour Party allowed this to happen. Perhaps it was an oversight on their part because with a bit of imagination extra revenue could easily have been generated by not cutting the tax on the banks. Whether they fell asleep at the negotiating table or whatever is difficult to establish. However, they have let people down, and we will ensure over the next year that at the time of the next budget they will not let people down. We will highlight this at every possible opportunity, we will exert huge pressure on them to ensure that they do not let people down — the people to whom they promised so much over the years. From the viewpoint of Democratic Left this is a poor budget, and is getting a bad response.

Minister for the Environment (Mr. Howlin)

I am delighted to finally have the opportunity to speak on the budget. I am aware that other historic developments are ongoing today which I hope will bring significant benefit to the people of this island and the peoples of these islands generally. However, the daily, normal course of politics requires us to focus also on our domestic situation and on the budget which my colleague, the Minister for Finance, Deputy Quinn, introduced some time ago.

The annual budget is the fiscal framework adopted by the Government to give effect to its economic and social policies. The focus of this budget is specific, it is a budget for work. In this respect, and with regard to Deputy Ryan's comments on the bank changes, money was not foregone in the budget. The Minister abolished the levy, which was, in any event, set against capital gains taxes. These would have been foregone in the capital gains net, so what is not collected in levies would be collected in capital gains.

The thrust of the budget is towards jobs and job creation. Its effects will bring results in the short term. It will reward people at work, especially those with modest incomes, and existing employment will be more secure, because of it. Non-agricultural employment will expand significantly and unemployment should decline. If any Government has a duty and a responsibility, it is to tackle the scourge of unemployment, and that has been the message repeatedly given to parties in this House by the electorate.

In the longer term, the budget will assist in creating the conditions for real and sustainable employment for people who are not currently at work. The difficulties we face in securing employment for all our people are acute but not insurmountable. We must bring all our energies to bear on implementing a coherent medium-term strategy designed to boost sustainable employment.This budget — through its taxation and related measures, its promotion of enterprise and competitiveness, and its prudent management of the public finances — is an integral part of that strategy. It will assist in generating the increased employment so vital for the long term well-being of our economy and our society.

In the meantime, we must care for the unemployed and the other disadvantaged groups in our community. The budget does this through a range of measures: protecting the spending power of social welfare recipients; introducing a basic income for children and improving the carer's allowance scheme; reforming the deserted wife's benefit and lone parent's allowance and making available additional resources for voluntary and community organisations. Other actions by the Government take place outside the immediate parameters of the Budget Statement. For example, the Government's commitment to 7,000 social housing starts this year — which I, as Minister for the Environment, will oversee — is given substance in the spending Estimates and is further evidence of our dedication to the principle of social solidarity. I will return to this later.

A central component of our overall economic strategy is to reward those at work. It is not our intention to create a windfall for all of those in employment but rather to target those on low or modest incomes. We have done this by providing an allowance of £50 per week for full rate PRSI contributors, by widening the standard rate income tax band and by increasing the tax threshold.

The effects of these changes are twofold.The burden on individual taxpayers has been eased and we have maintained the shift in the relative burden of taxation away from earned income so that our tax system will not be a disincentive to work. There is a growing consensus that the burden of taxation should fall less heavily on earned income, that reliefs should be focused on low to middle income earners and that the tax wedge should be tackled by the Government. The Government has taken steps in this budget to address these concerns. In doing so, some of the preconditions for expanding economic growth and employment are provided for.

I will devote the remainder of my remarks to the programmes for which, as Minister for the Environment, I am responsible.

I have spoken already of the importance the Government attaches to the creation of employment; this is evident in our approach to the construction industry for which I have a special responsibility. In this respect, I know the Deputy on the other side of the House, who attended the south east construction industry dinner in Waterford recently, will be aware that I have taken responsibility to nurture and develop the construction industry in my term as Minister for the Environment.

The industry is a major segment of our economy. Building output is now approximately £4 billion per annum, or 11 per cent of gross domestic product, and the industry is especially important in the context of expanding employment opportunities. In the last few weeks I have had the opportunity to speak to construction developers and they are all approaching 1995, especially in the post-budget time frame, with enthusiasm and confidence, a confidence which many of them said they have not experienced in recent years.

The vitality of the construction industry is influenced principally by the prevailing economic climate. However, the Government plays a significant role in stimulating activity in the industry through influencing private sector investment and by direct expenditure on a range of public sector projects.

Through the public capital programme, we continue to make a real contribution to maintaining a strong and vibrant construction industry. Public capital programme expenditure affecting the industry is estimated at £1.7 billion this year, an increase of £270 million, or 18 per cent on last year's out-turn.This will benefit the industry in general, help to secure jobs and, significantly, create the conditions to create additional jobs.

The industry is a cornerstone of the employment market. It gives direct employment of about 79,000 with a further 32,000 or so indirect jobs in ancillary or support services. Put another way, 9 per cent of the work-force depend on the industry for a living.The public capital programme should sustain employment in the building industry at the high level attained last year, and jobs will increase later in the year as more and more projects come on stream.

In real terms, the public capital programme affecting the construction industry has risen by almost 50 per cent since 1990, and now accounts for 37 per cent of total investment in construction, compared with 30 per cent in 1990. I would like to see the private sector pushing ahead with projects to avoid an overdependence on the public sector to maintain growth and development in the industry. There is no reason this should not happen in the light of the favourable economic conditions which now prevail and the variety of incentives which this Government has made available to the construction industry.

The urban renewal programme has already stimulated private construction investment of £1.2 billion. The new scheme, launched on 1 August 1994, is the catalyst which will enable this investment to grow and develop, albeit with a greater emphasis on residential investment, and on restoration and refurbishment of existing buildings which most people concerned with the development of our inner urban areas will applaud and support. It is a good example of the kind of programme which assists the construction industry, while at the same time meeting important social, economic and environmental objectives.

I have spoken about the need for investment in the construction industry but I also want to see an efficient industry so that the benefits of investment, much of which is from the public sector, are maximised. The cost of any inefficiency in the construction industry is unacceptably high — each 1 per cent of inefficiency can cost the economy £40 million annually. An improvement of 30 per cent in efficiency between now and the year 2000 would enable us to save £1.2 billion on the construction content of our national development or to invest that amount in additional projects over and above the projects already outlined. I am not suggesting that economies of this scale are necessarily feasible, but the figures illustrate the importance of making progress towards the most efficient construction industry possible, which is my objective.

A fundamental study of procurement and contractual arrangements in the UK construction industry was completed last year. I am now considering, with the construction industry council, having a strategic study of the Irish construction industry undertaken jointly with my Department. I am well disposed to this, and I hope to develop proposals shortly to advance the matter.

The total public capital programme provision for housing has increased from £278 million in 1994 to £358 million in the current year — up almost 30 per cent. This very substantial increase in resources will allow for the annual target in the Programme for Government, A Government of Renewal, of 7,000 social housing starts to be met in 1995, the Government's first year in office. Within this total of 7,000 social housing starts, provision has been made for 3,900 local authority housing starts or acquisitions. This represents a further increase on the already greatly expanded programme of the two previous years when 3,500 starts or acquisitions were authorised.

The 1995 target of 7,000 starts also includes an expansion of voluntary housing activity and an increase in shared ownership. Additional capital is being provided for both these purposes. Those on local authority waiting lists will see the results of the expanded social housing programmes this year. When account is taken of casual vacancies and additions to the stock by way of completions or purchases, I expect that the needs of some 9,500 households will be catered for this year. This is in sharp contrast to the outturn of just three years ago, when only 6,000 households were accommodated. I hope to be in a position to announce the local authority allocations in the next day or two.

A sum of £18.4 million is being provided this year under the remedial works scheme, bringing the total allocated under this scheme to date to over £136 million. This will allow local authorities to continue progress on about 70 remedial works projects around the country as well as allowing the designation for funding of a number of new projects during 1995.

The allocation of £3 million for the bathrooms subprogramme will enable local authorities to continue the programme of providing bathrooms/ showers in their dwellings which still lack those facilities. Local authorities have a legal obligation to provide such facilities in all their rented dwellings by 1 January 1998, and I am satisfied that the 1995 provision should enable work to continue to allow local authorities to meet this statutory deadline.

A sum of £100,000 is being made available to assist local authorities in implementing selected pilot projects in the housing management area. These projects will be aimed at securing the kind of improvements which will deliver a better service to tenants and better value for money generally. Substantial expenditure continues to be incurred by local authorities in the management and maintenance of their housing stock, and there is a real need to maximise the efficiency and effectiveness of this large expenditure. The new initiative will assist this.

The introduction of income tax relief for rents paid by tenants in the private rented sector is a real and substantial breakthrough. It was first promised as part of the tenants charter in the Programme for a Partnership Government, and I am delighted that this budget has delivered on that promise.

This tax relief will have a number of important benefits. It will reduce the tax disadvantage suffered by those in rented accommodation compared with persons purchasing homes. It should also go some way towards making private rented accommodation more affordable to persons who, for whatever reason, do not intend to become owner occupiers. The tax relief will underpin demand in the private rented sector which has an important role in supplying accommodation to certain groups in the community and in providing for transitional needs and facilitating labour mobility.

In tandem with the operation of rent supplementation under the supplementary welfare allowances scheme, the new tax relief system will assist in bringing the private rented sector into the legitimate economy and ensure that landlords pay their fair share of tax on profits realised, which is an aspiration we all share. The introduction of the tax reliefs should not be seen as an assault on landlords. Together with other measures, such as rent books and statutory minimum standards, it is one part of an overall package of measures for the betterment of the private rented housing sector generally.

The creation of transport infrastructure networks capable of meeting our national development needs is a major focus of national and European Union investment priorities. The case for investment in the modernisation of our national road network has consistently been endorsed by economic commentators, industrial groups and the social partners, and is central to providing the infrastructure necessary for the social and economic progress we have outlined.

This year will see total State investment of £211 million in our national roads network, an 8.7 per cent increase on last year's provision of £194 million. A sum of £188 million will be invested in improving the national primary and secondary roads network, with a further £23 million being provided for the maintenance of these roads. This investment is the second instalment of the substantial funding for road improvement provided for under the operational programme for transport. It will enable the National Roads Authority, which has overall responsibility for the development of a safe and efficient network of national roads, to forge ahead with the ambitious development programme it has published.

Notable major improvement projects for which allocations will be provided this year include the Lee Tunnel in Cork, the Northern Cross Route in Dublin and the Portlaoise by-pass. Other major projects under way are improvements on the N4 at Jamestown-Drumsna in Leitrim and Collooney in Sligo; on the N9 at Bolton Hill in Kildare; on the N2 at North Road, Finglas in Dublin; on Broomfield, Castleblaney in Monaghan; the Bishops-town end of the South Ring Road in Cork, N8; and, also in Cork, the Mulcon Valley project, N28, and Dunkettle-Carrigtwohill on the N25.

Mr. Cullen

The Minister might note that there is not one in the south east.

Mr. Howlin

I assure the Deputy that there will be developments on both the N25 and N11 which service the south east. In fact, some of the largest developments of road infrastructure in recent times have been on those networks. I look forward in the immediate future to opening the most recent completed section of the N11, which will improve dramatically the road infrastructure between Dublin and the important town of Wexford.

Mr. Cullen

The Minister should not forget the rest of us.

Mr. Howlin

The bulk of the investment will be in the national primary roads which, although they comprise only 3 per cent of the total roads network in the State, carry 27 per cent of road traffic. Almost £172 million is being allocated for national primary improvement projects, with an additional £12 million provided for maintenance work on this network. The National Roads Authority intends to commence a programme to upgrade direction signage and delineation on national primary roads this year, which has been called for. I welcome this initiative as a valuable contribution to the safety and comfort of travellers on our major roads networks.

Our society has inherited an extensive network of non-national roads which, at one time, catered for the needs of twice our present population and were constructed for use by non-mechanised transport. These roads extend to over 87,000 kilometres, or 94 per cent of the overall length of our public roads network.Our combination of low population density, allied to a relatively low level of urbanisation, makes high dependency on roads for social and economic purposes inevitable.

By European standards, our ratio of population to road length is small; in fact, it is half that of Belgium, Denmark and France and only one-third that of Italy, the Netherlands and Spain. This presents difficulties in maintaining the network to an acceptable public standard.Other developments, such as increases in goods vehicle axle loadings and weather conditions, have further exacerbated the problems with our county roads.

Against this background, I wish to make it clear that the improvement of our network of non-national roads is a priority for this Government. Grants of almost £103 million will be provided to local authorities this year. This is a substantial increase on the total of £75 million provided in 1993 and, while it is marginally less than the 1994 provision, it must be remembered that the amount last year was boosted by a once off allocation from the receipts of the tax amnesty.

Mr. Cullen

Greatly appreciated and put to good use.

Mr. Howlin

When the exceptional tax amnesty provision is taken into account, the 1995 figure is seen to be well up on the underlying 1994 figure and on the figure for the previous year.

Taken with the resources which will be provided by local authorities themselves, an estimated £165 million will be spent on non-national roads in 1995. This level of investment will generate real progress in tackling the problems of poor regional and county roads. Future strategy in relation to these roads will be set against the background of a detailed analysis of the overall situation which is currently being undertaken by my Department. As promised by the Minister for Finance in his Budget Statement, I intend to prepare, in the near future, a coherent and integrated plan for the first time for bringing these roads up to an acceptable standard over the next ten years.

Reopening of cross-Border roads is an important and highly visible dividend of the peace process. Closure orders made by the Northern Ireland authorities were applied to 113 public roads. Following the rescinding of these late last year, 36 roads have been fully reopened on both sides of the Border, while reinstatement works on our side have been completed on a further 32 roads.

I am anxious to see the process of reopenings completed as soon as possible and intend to allocate about £1 million this year to the relevant local authorities for necessary works. Work should be well under way, or completed on all the remaining roads, by April, with the exception of a small number where progress will be mainly dictated by developments on the erection of replacement bridges by the Northern authorities. In the case of the only national road affected by closure, the N3 at Aghalane Bridge, I understand that the National Roads Authority has reached agreement with the Northern Ireland authority on the broad outline and financing of the works necessary to restore this link. Last week, I had the opportunity, under the framework of the Anglo-Irish Conference, to discuss these matters directly with my Northern Ireland counterpart. He shares my enthusiasm for bringing normality back to the road interlinks between Border counties.

The Government's policy agreement, A Government of Renewal, sets out a series of measures to ensure that consideration of the environment is strongly factored into Government policies and programmes. However, the major focus of work on environmental policy over the coming year will be the preparation of a national sustainable development strategy, as indicated in the Government programme.

Sustainable development strategies recognise the interrelationship between economic and social development and the natural environment, and works to maintain a balance between environmental protection and development activity. The new stategy will guide environmental policy into the next century and will be based on national and international experience on sustainable development. To provide a background and point of reference, I intend to publish shortly a report on current policy and development.

There is a series of other environmental measures to which the Government is committed which time does not permit me to address on this occasion as I must devote the remainder of my remarks to the major environmental infrastructure programme with which my Department is concerned, the provision of water and sanitary services. When the Oireachtas committee on sustainable development is established, which is a mould breaking new departure by Government, I look forward to sharing my ideas and those of my Department with Members in building a new development strategy for this country, acknowledging the importance of protecting, enhancing and securing our environment.

In acknowledging the importance of the water and sanitary services programme, its vital contribution to protecting and enhancing our environment, and the sustainable development of our industrial base, I am pleased to welcome the capital provision for the 1995 programme. The provision of £106 million, including £4.5 million for group schemes, is a substantial investment in the design and construction of water and sewerage facilities throughout the country.

The European Union, recognising the necessity for the provision of new and and improved water and sewerage systems, has agreed an aid package of £460 million for the period to 1999. The Cohesion Fund is, and to the end of the decade will continue to be, the main source of EU support. Almost £75 million of our 1995 expenditure will go towards Cohesion-funded projects which will qualify for aid of 85 per cent of eligible expenditure. Already, 47 major projects have been submitted to the EU for approval, and funding for 26 of these has been agreed. These include schemes to remedy drinking water deficiencies or quality deficiencies in Dublin, Limerick, Tuam and Ballyjamesduff.The provision of sewerage works, which will replace or upgrade existing facilities, include schemes at Dublin, Ringsend and Howth, Cork, Galway, Limerick, Wexford, Clonmel, Waterford, Dundalk and Drogheda. This investment will assist in complying with EU directives, particularly the urban waste treatment and drinking water directives.

The 1995 capital provision will enable the continuation of construction on already identified priority schemes, including new and improved sewerage schemes which will serve Ballinrobe, Bangor Erris, Bray, Athy, New Ross, Robertstown, Muinebheag, Greystones and Enniscorthy. Construction work will also progress on water supply schemes at Leixlip, serving north County Dublin, Lough Mask serving the Ballinrobe-Claremorris area, south Leitrim, Ballyjamesduff, Tuam, Dún Laoghaire and Templemore.

This infrastructural programme is, by its very nature, unobtrusive except where a deficiency occurs. Although its benefits are part of everyday life, we tend to be oblivious to them unless we are directly affected by shortcomings. Nevertheless, the importance of this programme is very real to the continued protection of the environment which is largely pollution-free; to providing drinking water in compliance with very high quality standards; to upgrading the treatment levels for seweage and other water-borne wastes in line with the exacting standards of national and EU law; and lastly as a catalyst in attracting and developing employment opportunities, including tourism.

The water and sanitary services programme will, in the years ahead, continue to benefit from very substantial capital investment. Every effort will be made to extract the maximum benefit from available resources, through capital appraisal of projects, application of optimal design techniques and rigorous management of the construction phase to build schemes on time and within budget.

No one has a monopoly of wisdom. No single budget can banish our economic problems overnight and no Government can bring about instant and universal prosperity and social justice, but we can make progress in meeting the economic and social aspirations of our people. This year we have taken real steps towards these aspirations in a budget which rewards work, promotes enterprise, fosters social solidarity and which is deserving of the support of all Members of this House.

Mr. Cullen

I welcome the move in relation to rented accommodation but I ask the Minister to bear in mind that there are thousands of students in rented accommodation, many of whom have to put up with the worst type of accommodation. Perhaps the Minister would discuss with his colleague the fact that students have no income on which to claim tax relief and the possibility that income tax relief should be made available to the parents or guardians involved. It would have a double-edged effect given what is happening and our need to get people into third level education.On the other hand it would achieve the aim of getting landlords to improve their facilities.

Any objective study of the previous Community Support Framework and the Community Support Framework for 1994-99 under the transport infrastructure programme would clearly show there is a disastrous imbalance regarding the availability of funds within the south-east region. Many independent commentators have pointed out this fact. I cannot find the answer to it. With regard to the Cohesion Funds specifically, I compliment the Minister on his initiative regarding the consultancy work on the development of the second river crossing in Waterford and the associated road infrastructure. I cannot be persuaded that that project which is central to the trans-European network — to which the Cohesion Fund is specific — could not and should not be funded under the programme. Of the major national roads that come through the south-east in terms of the corridors of access into Europe, three come through that junction in Waterford. This national infrastructure which is required would have great benefits not just for Waterford and the south-east but for the whole country.

I will be interested to hear the Minister's announcements in relation to the N25 and the N11, leaving aside large projects such as bridges. The Minister is fully aware of the difficulties at Sallypark in Waterford and the work which the corporation has done in getting Bus Éireann to transfer. Apart from building the road, which is a huge project in itself, can we please have the money for the roundabout to get the project up and running? It is £3 million and is a matter of concern. Originally we were to receive the full funding; later it was reduced to so much over so many years. Now it has been reduced to zero and Bus Éireann has moved out. I ask the Minister to examine that project, which is much smaller than those to which I have already referred.

It is extraordinary that there was no mention in the Minister's speech of service charges or property tax. I encourage the Minister not only to get the study group up and running but to complete its task. The Minister knows the advantage of the driven mood now prevailing in local government and if this issue was sorted out there would be a tremendous transformation. Local authorities should have the same status and developmental potential as their counterparts throughout the EU in regard to funding, etc. There are many examples of this. It is a problem that can be solved with all party agreement — perhaps I am speaking out of turn on behalf of my own party. I am simply saying we need to examine this problem immediately and I believe it can be solved.

The first question we must ask ourselves about this budget is why it has been given such a poor rating by so many independent commentators. The range of support for the 1995 budget runs a short distance between fair and poor. Did the Minister do something drastic and unexpected in his budget? Was not his budget well signalled in most areas? Did we not generally know what to expect on budget day? The answer is yes, we did.

The real signal in the Minister's speech was a return, after 27 years of striving to create a current budget surplus or at least a nil deficit, to a current budget deficit of the order of IR£310 million. This is a very worrying indicator of the Government's fiscal policy. I will return to this matter later.

The Minister for Finance has chosen to use the best possible economic indicators in each fiscal area and has allowed no room for manoeuvre if less than the best case scenario is achieved. Clearly there is concern at national and international level that interest rates, inflation and economic growth may not be as favourable as in the last few years. If one or more, or a combination of these pillars, comes unstuck then the impact on Government budgetary strategy, as well as the whole commercial wellbeing of Ireland incorporated could be very serious. The hard work and effort since 1987, which has seen a 360 degree turn in the fortunes of the Irish economy, could well be undermined.

The position of the Irish pound against sterling is this week moving towards breaking parity. The consequences of a serious difference between the Irish pound and sterling are all too clear. I use this to give one example of what is lacking. Ireland has a very open economy, still exporting between 50 per cent and 60 per cent of our goods to Great Britain. The effect of a serious move in the exchange rate between our pound and the pound sterling would have serious consequences for Irish exporters. On the last occasion when this occurred the State and the EU had to come to the rescue, providing many millions of pounds to help maintain jobs in many of our export-oriented companies. The Minister for Finance seems to have ignored this possibility, even though it has been well signalled over the last number of weeks. Clearly this is another issue where he should have allowed himself room to manoeuvre. All we have to do it look at the position of the Irish pound yesterday to see the nervousness of many of our exporters aiming at the UK market. There are serious doubts about the rainbow Government and its ability to deliver. This is causing a serious lack of confidence which, if not corrected, will in itself produce negative effects in the areas I have outlined.

The lack of authority by the Taoiseach and the independence being displayed by each of the three parties in Government to promote its own political agendas to the detriment of a coherent Government policy is, after two months, causing instability within the Government. This instability and lack of confidence have the capacity for a serious knock-on effect into the markets.If not arrested by the Government showing its authority and control, the results could be very damaging.

The Minister's decision to return to a current budget deficit was a serious error of judgment. What has so shocked the electorate is that the Minister had for the first time the greatest opportunity to make serious inroads into real tax reform and at the same time continue to keep downward pressure on public expenditure. The fact that he has done neither in real terms, and is once again borrowing money for day to day Government expenditure, is at best confusing and at worst incompetent.

The Minister has put party ideology ahead of economic sense. The decision to take this road, in a year when he was in his strongest budgetary position, is causing alarm. The Minister's potential room for manoeuvre in future budgets has been seriously limited. As a result of his decisions, the Minister will not be in as good a position in January 1996. The question must then be asked: will an increase in public expenditure, combined with minimal tax changes, be the way forward for this Government? It is reasonable to assume that is the direction the Government will take. This course of action would be hugely detrimental to the continuing development of the Irish economy.

For some years there has been much discussion on simplifying our taxation system, apart altogether from reforming it. I have sympathy with the Minister on this issue. I can understand why he has targeted new PRSI exemptions, introduced a £50 per week allowance for those paying full PRSI and raised the ceiling from £9,000 to £12,000 for the 9 per cent PRSI rate. The targeting of tax breaks for income groups and maximising their benefits has much to commend it, but I have a healthy scepticism on whether in real terms, this creates more employment or sustains more people at work. I am sure that it has made our taxation system more complicated and expensive to administer and has made it more difficult for employers and employees to be sure of what category they fall into.

The myriad of culs-de-sac for special tax allowances is not the way to reform and develop a simplified taxation system.PRSI rates, together with employment and training levies and the health levy, on top of our standard rate of tax, are the greatest enemies to creating and sustaining new employment. While it was necessary in recent years to target in the way we have done, we have probably reached the point where a broader approach needs to be taken to taxation.

The Minister's approach to personal taxation has been a total failure in this budget. The greatest opportunity in decades for substantial reform of personal taxation was presented to the Minister but he failed to seize it. He should have adopted an approach to a sustained reduction in overall levels of PRSI and a reduction in the standard and higher rates of personal taxation. That would be a better approach in the medium to long term to developing a more manageable and equitable taxation system.

The tax wedge cannot be removed by simply moving the goal posts. In effect all the Minister is doing is changing the numbers at which the tax wedge is most apparent. Workers earning just under £12,000 a year, when increased productivity provides the opportunity for overtime, will be slow to push their basic rate over the £12,000 income levels for fear of increased tax liabilities. This will totally remove the gains made by sustaining income below a certain level. There is an anomaly in this regard in that a company employing people at £13,000 a year will be aware at the start of the year that the full 12 per cent rate of PRSI will be payable but a company employing people at £11,500 a year which backloads increases towards the end of that year will not be liable for the higher rate of taxation on income already taxed it will be charged the full rate only on income over £12,000. This should be considered by the Minister. Perhaps the introduction of marginal relief would serve to alleviate that problem.

I commend the Minister on increasing the annual limit of relief for approved profit-sharing schemes from £2,000 to £10,000. I encourage all employees to participate in such schemes. There are many changes on the horizon for our semi-State companies and most if not all of them will be restructured in the coming years. I am anxious to ensure that in such restructuring employees should have a vested interest in the company and its performances by participating in meaningful profit sharing and share ownership schemes. Given the rate of change in recent years, which will continue in the immediate future, whereby employees have become involved in substantial profit-sharing or share ownership schemes, it is likely there will be greater involvement by the work-force in ensuring the well being of the company in the long term. Management in all companies should promote such schemes. The loyalty of workers and staff within companies, particularly in times of difficulty, is an essential ingredient in overcoming adversity. Where employees have more of an interest than simply drawing their weekly income, they have a greater drive to ensure the company's successful future.

The inequity in the residential property tax has been somewhat addressed by the budget, but this tax should have been abolished. I encourage the Government to consider the whole area of service charges and property tax. I sincerely hope the study of local government financing will not be a long drawn-out affair and that there will be a speedy conclusion with new directions. In regard to the £150 tax allowance for service charges to local authorities, will that allowance apply where private contractors are employed to carry out work on behalf of local authorities — for example, in many areas private contractors operate the refuse collection service — or will it apply only where the service charge directly relates to local authorities?If it applies to one and not to the other, major difficulties will arise for local authorities in terms of the fairness of schemes operated by them. This matter should be considered with some urgency. Clearly the role of local government is increasing in importance and it is essential that it is put on a sound footing. I urge the Minister to speed up this study and make its findings public.

One of the biggest surprises in the budget was the way the Minister approached the whole area of corporation tax. A 40 per cent corporation tax rate is far too high, particularly when measured against the 10 per cent manufacturing rate. The service sector is the greatest creator of new employment. This is in keeping with international trends. In many countries there is a breakdown of 30 to 35 per cent of job creation in the manufacturing sector and 65 to 70 per cent in the services sector.The potential in Ireland to increase employment in the services sector in the next few years is substantial and offers the Irish economy its most outstanding opportunity for employment growth. All available data, such as that from the task force on small and medium enterprises and studies commissioned by the National Economic and Social Forum, point to this potential.

The Minister has failed to understand that the major increase in employment is in small businesses, which are usually in need of a great deal of capital, particularly in their early years. By giving a general reduction of 2 per cent in the corporation tax rate the Minister has clearly favoured the major corporations such as banking institutions. The 2 per cent reduction was a miscue by the Minister. He should have substantially reduced corporation tax rates for companies below a certain profit — I am not saying what that should be, but we all have a reasonable idea. It would have been legitimate for the Minister to adopt a tiered approach to corporation tax applicable to the services sector and eventually he could have moved to reduce the overall levels of corporation tax. He should have adopted a targeted approach to this matter.

While the tax reduction of 2 per cent will be of negligible benefit to many of the companies making a profit of between £10,000-£20,000 per year, which create these jobs, it will be of significant benefit to major institutions which make profits of between £100 million-£200 million — the figures released last week show that the AIB made a profit of more than £300 million — but will not create even one extra job; these institutions are shedding jobs as technology takes over. There is no benefit to be gained from favouring major corporations. The Minister compounded this problem by removing the bank levy, thereby giving a belated Christmas present to the banking institutions.I urge the Minister to rethink this decision in the Finance Bill. I think he would be warmly applauded for adopting the approach outlined not only by me but by many independent commentators.

The introduction of the new urban renewal scheme for seaside resorts is to be warmly welcomed, particularly as it will benefit my constituency of Waterford through the designation of Tramore.It is vital that all the areas designated under the scheme should take full advantage of the opportunities which will be available in the next few years. This scheme affords traditional seaside areas a great opportunity to catch up and develop modern tourism products which can maintain and increase their existing market and bring them into the 21st century.

The Minister has shown an imaginative commitment through the introduction of a special stock relief rate of 100 per cent for young qualifying farmers. I know this measure, which should encourage the transfer of family farms to younger farmers, will be welcomed and I hope as many young farmers as possible will avail of it. We still need a substantial reduction in the age profile of farmers. There are many highly qualified and able young farmers in the farming sector and organisations such as the IFA will have to adopt a more direct approach in encouraging farmers to transfer their farms to their younger sons and daughters who are well able for the challenges which will face them in the years ahead.

While the maintenance of the existing level of stock relief of 25 per cent is welcome, this area has given rise to difficulties for farmers, many of whom have to pay tax on 75 per cent of paper profits.The current year assessment system causes a problem as in many cases stock is not sold within the same year, yet the profits have to be assessed for tax purposes.It is reasonable for profits to be taxed only when the sales have been completed, and I hope the Minister will look again at this issue in the Finance Bill.

The astonishing lack of commitment by the Minister to social justice in the budget has been one of the main talking points in recent weeks. The Minister for Social Welfare clearly got his priorities wrong, the general 2.5 per cent increase in social welfare payments is derisory and falls way below what is fair or what could have been done. This is the worst increase in social welfare since Fianna Fáil was returned to power in 1987. It is difficult to understand what the Leader of Democratic Left and his Cabinet colleague, the Minister of State, Deputy Pat Rabbitte, were thinking of when they agreed to this increase.

The Minister has clearly put much store on the increase of £7 per month in child benefit. It is difficult not to welcome such an increase but it is a contradiction in terms of the budgetary strategy.The Government has done everything to target PRSI changes at the lower paid and to remove poverty traps and tax wedges and at the same time it displayed tremendous largesse in agreeing to a £7 increase for every child irrespective of his or her parents' income. This would be acceptable in a perfect world where the State had the necessary resources to adopt such an approach, but it does not represent an equitable redistribution of scarce resources. Clearly, there is a need to substantially increase the child benefit allowance but it should not be available to all, irrespective of income. This increase will be of enormous benefit to less well off families but it will not make any significant difference to better off families. Increases in the children's allowance should be targeted to and heavily weighted in favour of those on lower incomes. Children's allowance is a significant and worthwhile payment and can mean an enormous amount to mothers in the home. However, the increase should have been more substantial and should have been targeted to those on lower incomes. Perhaps consideration could be given to the removal, in time, of the allowance from those on very high incomes.

The Minister's skewed approach to social welfare can be summed up by highlighting the magnificent increase of 10p per week in the living alone allowance, which is made available to people at a very traumatic time when they have lost a spouse and their income is halved. The Minister for Social Welfare took his eye off key issues in his brief, got totally caught up in some areas and missed the broader picture. That increase sums up the attitude he has adopted. Fianna Fáil is now the only party which not only speaks of justice and equality in our society but delivers on what it says. The credibility of the Government and, in particular, of the Labour Party and Democratic Left, has been smashed by their treatment of the old, single unemployed and childless unemployed couples and by all those who do most work for social justice in our society.

With regard to covenants, in spite of the many representations made to the Minister, the Government still does not seem to understand the position of a couple who have been separated for many years and where one or both spouses are in a new relationship. Recently, I was visited by a couple with four children who had been living together for 20 years. As the man, whose partner does not work, cannot avail of the full married allowance he covenanted a substantial portion of his income to her, thereby making up the difference of approximately £90 per week. This money is crucial to them in terms of looking after and educating their children. It is astonishing that the amount he can covenant will be reduced to 5 per cent of his salary. This is the wrong approach to adopt and the Government probably did not take the position of such people into account when it made this decision. The position of such couples must be addressed in the Finance Bill.

Debate adjourned.