Dáil Éireann debate -
Wednesday, 24 Jan 1996

Vol. 460 No. 4

Financial Resolutions, 1996. - Financial Resolution No. 7: 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.

—Minister of State at the Department of the Taoiseach (Deputy J. Higgins).

Mr. B. Ahern

The 1996 budget represents a poor return from a booming economy. From a taxpayer's point of view it is one of the most disappointing and insignificant budgets for many years. It is a complacent budget which does far too little for the PAYE taxpayer, the income needs of the long-term unemployed and the old. It is largely a marking time exercise which does not significantly advance progress where it is most needed, and does not deal with the major issues. Even if the Minister did not turn up in the House or in his Department this year, he started off with about £700 million being raised through the system. There are no proposals in the budget for capping our £30 billion debt, reducing our burden of taxation, making our tax and PRSI systems more competitive and the creation of employment more attractive. None of these issues has been dealt with in any more than a glib manner.

The underlying financial situation has deteriorated. The general Government deficit, which has been between 2 per cent and 2.5 per cent of GDP since 1990, has reached its highest level of 2.6 per cent. That is the true measure of the public finances. The primary budget surplus has been steadily falling. We continue to tolerate a situation where high marginal rates of tax are being paid on low incomes. We are missing the opportunity for real tax reform, at a time when overall tax levels can be reduced. We have low inflation, falling interest rates, buoyant tax revenues but even more buoyant public spending.

With the international recession out of the way and the backlog of special pay awards cleared, there was a unique opportunity in these last two years to accelerate a process of fundamental tax reform, already set in train by me in the 1992 and 1994 budgets on behalf of the Fianna Fáil Party, some of which is still working its way through the system. Instead, all the available resources have gone on increased Government spending.

This budget is clearly the best that the three warring partners in Government can agree on with the Fine Gael Ministers largely pushed out of the way in the spending stampede. That is why we face looming problems in the health sector. Cutbacks are on the way in several areas of the health service and other Departments and, as we saw outside the gates of Dáil Éireann last night, the nurses are on the march for the first time in over 15 years. There is no discernible overall economic strategy. In terms of content, it is a budget of bits and pieces, very thin on content. It will not frighten the horses on the international markets but it will not propel our society forward either. We will be relying even more heavily on our track record since 1987. When the social partners, the employers and the trade unions have more time to reflect on it, I doubt if they will be very satisfied.

The budget for all intents and purposes will be found in the revised Book of Estimates, that is why the Minister's speech was so short yesterday. If this Government cannot get it right in these boom conditions, it will never get it right. The whole thrust of this Government's policy is to underpin vast spending programmes which are not even always concentrated on essentials. We should spend more on the real priorities and less on the not so urgent items and optional extras. A few crumbs are being thrown to the low paid, employers and the well off.

The Minister is giving away nothing in this budget. This morning I want to go back over the figures and analyse them the morning after, as I am sure many people around the country will be doing. He is handing back to taxpayers by way of rebate a tiny and derisory percentage of what he hopes to raise from them this year. If you subtract the additional taxes that he hopes to raise, you are left with £60 million, being handed back. The cost to the Minister is further reduced by buoyancy effects to £12.5 million. For every pound the Minister collected in tax last year, he is collecting another 6.5p this year; for every pound paid in taxes, the Minister is handing back, on average, a rebate of about a halfpenny in the pound, which is costing him in net terms even less, one-tenth of one penny in the pound, or if one prefers one penny in every £10 collected. In other words, the Minister is giving back next to nothing after yesterday's great give-away budget. Over two years going on his pre-budgetary estimates, the Minister has made net tax concessions that cost him a princely £9.5 million. The buoyancy effect is a tacit admission that this year's tax cuts are nearly 50 per cent self-financing, a concept the Department of Finance was always loath to admit.

If the Government had kept strictly to its own current spending targets, it would have had an extra £212 million available to eliminate the current budget deficit, which is the policy of my party, and to provide an additional £130 million in tax or PRSI reliefs. There might be even more taking account of additional savings on the national debt interest from eliminating the current budget deficit, not to mention buoyancy effects.

Tax revenue will increase by £733 million this year. Without anything happening, £733 million more will be taken through the tax system. Of that almost £600 million or 82 per cent is being swallowed up by increased Government expenditure. This is based on the Government's figures of yesterday given to us in this House. Surely that proves, on its own admission, that we have a tax and spend Government. Fine Gael, especially the Minister for Agriculture, Food and Forestry, when I was Minister for Finance, used to go on in this House about tax and spend. They are strangely silent now. They are not even here. Agriculture was hardly mentioned yesterday, except for a reference to the mandatory EU refunds.

Our record growth and positive budgetary situation is the fruit of eight years' consistent economic performance under Fianna Fáil management with the support at different times of other parties and underpinned by social consensus outside of this House. It was a period in which we twice achieved 7 per cent growth in 1990 and 1994 and averaged over 4 per cent for the period. Last April net employment grew by 140,000 as the Minister stated, to the highest level since the 30s. Within two years of 1987, we moved within the Maastricht guidelines, and have remained there, with Exchequer borrowing below 3 per cent of GNP. Inflation remained in low single figures. In short, it was Fianna Fáil that transformed the worst performing economy in Europe into the best. Ireland was being portrayed as the Celtic warrior and tiger in 1994, well before the present Government came into office. The Government can claim the merit that the boom has continued under it, but that is all they can claim.

If we wish to continue on this path and avoid painful and disruptive adjustments in the future, as Deputy McCreevy pointed out yesterday, we have to think strategically and face up to serious challenges that lie ahead. The Minister, at the beginning of his budget speech, did not list the areas where we were underperforming last year. We have a huge national debt to which we added £1 billion last year and which went over £30 billion for the first time.

On this side of the House we find it both sad and amusing that the Government say we had a great year of celebration last year, a year we should all be happy about, yet we borrowed £1 billion more and thus increased our national debt to £30 billion. Public expenditure is not being kept under control and the Government's own targets have been missed by a large margin, even though it has been only a year in office.

Long-term unemployment as measured by the live register increased, not decreased, averaging 12,000 above last year's budget target and was 5,000 higher at the end of the year than at the end of the previous year. The Government's efforts to tackle it were an abject failure last year. In many areas our tax and PRSI system is uncompetitive and inhibits employment growth especially in the light of our strong economy and strong currency. Our inflation performance has slipped compared with other countries. Most of our partners had a rate below 2 per cent last year. I have no doubt this is creating major concern in the Central Bank and in the Department of Finance. A year ago we had one of the lowest inflation rates in the ERM countries; now we have one of the highest inflation rates and it is rising all the time with the indirect tax increases in yesterday's budget.

The servicing of the national debt this year will eat up £2.3 billion, more than 20 times the nominal value of the Minister's budget tax concessions. Last year the Exchequer borrowing requirement of £627 million resulted in a £1 billion addition to the national debt, pushing it up to more than £30 billion. Depending on exchange rate movements, this year's EBR may add another £1 billion to the national debt. This will have to be serviced this year, next year and into the far distant future.

In 1994 I, on behalf of my party, succeeded for the first time in almost 28 years in eliminating the current budget deficit. Last year the Minister not only restored the deficit but exceeded his target, coming in with an end year deficit of £362 million after a surplus of £15 million the previous year. The pre-budget White Paper on receipts and expenditure, with a small opening surplus, shows clearly that a current budget balance is within easy reach if there is more restraint in public expenditure.

Fianna Fáil, ESRI economists and the former Taoiseach, Garret FitzGerald, believe one of the budget's main priorities should be to avail of strong economic conditions to eliminate the deficit now and all borrowing by 1999. This is our target and political point of view. There are several reasons for this. At a time when the economy is growing it is prudent economic management to let borrowing fall.

I am glad that, despite the Minister's original target, the EBR fell from 2.2 per cent of GNP in 1994 to 1.9 per cent last year, even though this was not by the full half percentage point I considered desirable. If Fianna Fáil was in Government the EBR would fall to approximately 1.5 per cent this year and 1 per cent next year. That was the aim of the previous Fianna Fáil-Labour Government. Unfortunately the budget gives no indication that this is the Minister's target and, consequently, we are left to hope that conditions will be better than forecast.

The EBR figures are, of course, heavily manipulated as between 1995 and 1996, with payments and savings being transferred between years. For example, the 1995 savings on the national debt have been brought forward to this year while the hepatitis C payments have been brought back to last year. The purpose of this is to make the comparison between this year's EBR and last year's EBR look less bad and to mask the deterioration. The European markets and our colleagues in Europe judge our performance on the basis of the general Government deficit rather than the Exchequer borrowing requirement and the current budget deficit. The budget proves that there has been a deterioration in the general Government deficit from 2 per cent last year to 2.6 per cent this year, the highest increase since 1990. Unfortunately, the bad old days are drifting back again. While our colleagues in Europe may say that our economy is doing well the reality is that the general Government deficit has increased by 0.6 per cent, and they do not know the rest of the facts.

One of the features of Fianna Fáil's economic management during its eight years in office was its counter-cyclical approach. Between 1987 and 1990 we greatly reduced Government borrowing and the debt-GNP ratio. During the more difficult years from 1991 to 1994 when growth was expected to be lower we increased expenditure. The criticisms by the Government of the Fianna Fáil-Progressive Democrats Coalition Government for increasing expenditure at a higher level than the present level are wide of the mark. Given the depressed international conditions it was, broadly speaking, the appropriate response. In 1994 budget growth was forecast at between 3-4 per cent but it subsequently turned out to be 7 per cent and expenditure was set in the light of this. However, having got rapid growth a different response was necessary.

The Government has been boosting expenditure in a pro-cyclical manner in the full knowledge that there was a period of high growth. The difficulty will be to sustain such levels of expenditure if growth falters, which it will eventually, without breaching the Maastricht limits so that we can ride out the next international recession by causing as little damage to the economy as in the early 1990s.

The Government should be creating ample room for manoeuvre but unfortunately it is not doing so. The German Finance Minister is essentially correct in pushing for a 1 per cent borrowing limit during the good times and our Minister is wrong to oppose it. The general Government deficit of 2.6 per cent is much too close to the ceiling for comfort.

Another reason for eliminating borrowing is that we have the benefit of very substantial EU Structural and Cohesion Funds at present. Given the rapid progress made in catching up with our EU partners these funds are unlikely to continue at their present levels post-1999. If we wish to maintain the current levels of public investment we will have to do more from our own resources.

The most fundamental reason for eliminating borrowing is that it would give us a free hand to create a highly competitive low tax economy which would generate greater employment. This can be achieved in the present conditions without damaging the quality of our social services or our caring approach to the least well off in our society. In order to lay the basis for a low tax economy all we have to do is slow down for a period the rate of growth in public expenditure so as to bring expenditure and revenue into balance.

Despite its claims to the contrary the Government has not been exercising the necessary restraint. Last year current day-to-day Government expenditure increased by more than 8 per cent, in breach of the 6 per cent target. Nevertheless last year the Minister presented a budget consistent with that target. This year he has presented a budget which is already in breach of this year's target. This is some feat given that this is only 24 January. In a footnote to the "Principal Features of the Budget" the Government defines the increase in net current spending as 6.2 per cent. As those who have checked this document will know, one would need a microscope to find the figure of 6.2 per cent but it is there. There is one thing we must say about the Department of Finance; it will put in the figure somewhere, it will not go along with the Government and try to hide it. The figure of 6.2 per cent has been achieved by removing the £140 million in equal treatment payments from last year's base. This footnote signifies that the Government will increase current spending by 4 per cent in real terms this year rather than 2 per cent. This means that the target in the Programme for Renewal has effectively been abandoned. There is not much use looking at that document any longer as it is based on financial parameters which have been thrown out the window by the Government, and once this has been done one might as well tear up the rest of the document. It will be interesting to find out from what programme the Government is working — and my party will endeavour to find out this as the year goes on.

The Government claims that the rate of increase in expenditure is lower than under previous Governments in the early 1990s. That is not true as far as 1995 is concerned. If one includes all the equal treatment payments and excludes the once-off amnesty expenditure, as promised by me in 1994 on behalf of the then Government of which the Minister Deputy Quinn, was a member, the underlying rate of increase in day-to-day expenditure in 1995 was 10.6 per cent. By way of comparison, the underlying rate of increase was 6.9 per cent in 1994 and 8 per cent in 1993. There was no excuse for last year's double figure increase in expenditure during boom times and it is thoroughly misleading and economically illiterate to compare it with an increase of slightly more than 11 per cent in 1992 at the height of the international recession and the currency crisis.

From his jibes here it is clear the Taoiseach gets a few one liners from his handlers, spin doctors, programme managers and others and from what he said yesterday it appears he is economically illiterate. As I reminded him yesterday, a man who failed to get a Finance Bill through the House is obviously economically illiterate. I also had to deal with an overhang of special pay increases which has been frozen in the late 1980s. I managed to get those out of the system, thus making it easier for my successor to hold down public spending. The Taoiseach does not know anything about those agreements as he did not believe we should pay them, he did not believe in social consensus.

Mrs. O'Rourke

He does now.

Mr. B. Ahern

Members on this side of the House look forward with some relish to seeing the Taoiseach trying to negotiate with the 92 unions, employer bodies and the farming organisations while at the same time trying to deal with our colleagues in Europe. I wait with bated breath to see if he ever gets around to having a meeting.

If the Minister can undershoot his spending targets and come in with a current budget surplus this year we will welcome it. It would not have required a great effort on the part of the Government to have maintained a balanced budget on current account this year and it would have given a great boost to confidence. Most of the budget is contained in the Book of Estimates and the public capital programme. While the public capital programme is not referred to in the budget it has mushroomed very rapidly in recent years and has increased by more than £800 million or 38 per cent. While much of this is related to Structural Fund expenditure and is to be broadly welcomed, Exchequer capital spending increased by 14 per cent last year and will increase by 8 per cent this year. Exchequer capital borrowing of between £600 million-£700 million per year over the past three years is too high and needs to be gradually reduced and phased out.

To come back to my net point, if the Government had stuck to its original spending targets, which are little more than a year old, it would have been possible to bring in a balanced current budget yesterday and to have at least £130 million to spare for additional tax and PRSI concessions. The tax and PRSI concessions announced in the budget are minimal from the point of view of all but the lowest paid individual taxpayers. On the tax side, there is indexation plus, with a marginal widening of bands, allowances and exemptions.

In 1994, I widened the personal allowance by 8 per cent and the standard rate band by 7 per cent. The Minister is increasing the allowance by 6 per cent and the standard rate band by 5.5 per cent. The Taoiseach said this was a great achievement. Obviously, he does not remember the achievements of recent years. In a time of boom the Government has failed to match those figures. In 1992, I widened the standard rate band for a married couple by at least £1,500 compared with a figure of £1,000 this year or by 11 per cent.

No attempt is made at tax reform. For the first time in many years it is not mentioned, not even lip service is paid to it. I accept that some low income families will be a little better off, but for the middle income family quoted by the Minister, even on £15,000 a year — I am not sure if this could be considered to be in the middle income band any more — the difference will be extremely marginal, representing less than 1 per cent of gross income.

For most taxpayers the budget is a damp squib. It offers poor reward for pay restraint under the Programme for Competitiveness and Work. All the available money has gone towards extra Government spending both this year and last. As a result, apart from catering for the low paid, the cupboard is bare. Those on middle incomes will still find themselves taxed at a marginal rate of 56.75 per cent whereas the better off will face a marginal rate of just over 50 per cent. If one looks at the tax tables, the benefits are more modest than those provided in, say, the 1992 or 1994 budgets. Moreover, the benefit is least for the large middle income group who, intelligent as they are, will today consider the measures announced. A married couple with two earners, paying full PRSI, and with two children will gain just over £200 on incomes between £13,000 and £24,000. While this is billed as increasing the incentive to work the effect will be minimal. The vast majority of middle income earners will get next to nothing and remain over taxed.

I introduced the ambitious 1994 budget against a background of doubts about whether there would be a new national programme, the Programme for Competitiveness and Work which was subsequently ratified. I do not believe trade unionists and employers will ratify a new Programme for Competitiveness and Work on the basis of the 1996 budget. Paragraph 2.43 of the Programme for Competitiveness and Work stated: “The Government's priority in taxation reform for the period of the new Programme is to improve the treatment of earned incomes from employment and self-employment, with particular reference to the position of tax progress on lower middle incomes”. It went on to refer to major reliefs in general income taxation. There was little for anyone on middle incomes. The Government will have to do much better next year if it wants to underpin social consensus. The fact is that those on middle incomes have been conned and cheated.

The Minister has only tinkered with PRSI at the margins. The full rate of employers' PRSI at 12.2 per cent will be reduced to 12 per cent and the lower rate to 8.5 per cent with a marginal increase in the threshold.

The total social welfare budget has increased by 28 per cent in the past two years. The two year increase given to married old age pensioners and the long-term childless unemployed unable to supplement their incomes is a mere 5.5 per cent. I welcome the increase in the living alone allowance at £1.10 a week, but it will only benefit those living alone. The Government has short changed the old and, despite its professed concern for the long-term unemployed while trying to improve a little their employment prospects, it has not done anything for their incomes while they are unemployed.

I welcome the incentives to improve the security of old people in their homes. Another horrific death was discovered yesterday and many people have been reported missing. I regret the measure is discriminatory and, as Deputy Power pointed out on the Order of Business, nonsensical as most old people do not have a taxable income and, therefore, will not benefit. It is not fair that only the better off should be helped. Any old person can be viciously attacked, regardless of financial standing. A subsidy would have been more equitable and we will table an amendment to the Finance Bill to this effect. An old person with a taxable income of up to £2 million could invest in the film industry and obtain relief, but such people do not exist. If the Government wants to give old people a few pounds, it should give them a grant. Those aged 65 and over have pension books and are readily identifiable. We should not insult them. As we are all aware, many are afraid to complete tax returns. I welcome the new one parent family payment scheme in place of the lone parent's allowance and deserted wife's benefit scheme as a humane and progressive measure.

The budget contains a limited number of measures to help the long-term unemployed to which my colleagues will refer. The Minister has restored the 1,000 places cut from the vocational opportunities training scheme and taken the credit, but this was included in our policy document on long-term unemployment. We welcome it, nonetheless. A pilot full time jobs option for 1,000 people compares with the more ambitious proposals we included in our document.

I am not impressed by the £1 million provided for a recruitment subsidy for the long-term unemployed. We should stop conning the people and pretending this is a great scheme. Yesterday my party's Front Bench decided — this was good manners — not to interrupt the Minister who said he was doing us a big favour. When we examined the Principal Features of the Budget, however, we discovered that what he had said was not true. If it is not possible to give us a copy of the Principal Features in advance, perhaps my former colleagues in the Department of Finance will try to convince the Minister to include more information in the Budget Statement.

Despite all the talks about helping the long-term unemployed only £1 million will be provided for the recruitment subsidy. A subsidy of £80 a week or £4,000 per annum means that it would fund a grant total of only 250 of the long-term unemployed.

We are extremely grateful to the Government for introducing this huge measure. We will draw lots to see who gets what.

I accept there are some measures to tackle the tax wedge with family income supplement being raised and the retention of the child unemployment payment and medical cards for three years. This too is Fianna Fáil policy. The medical card is highly valued and those already in low paid employment will inevitably look with some envy on the retained privileges of those entering employment. However, the medical card system needs to be reviewed. Our policy document published last week by our deputy leader, Deputy O'Rourke, and finance spokesperson, Deputy McCreevy, states: "Fianna Fáil is examining the proposal that medical cards should be decided out of disposable income, after rent, income tax and PRSI have been deducted. The party will be proposing a system of tiered medical cards for those marginally over the present limit".

The budget leaves in place the residential property tax which was strongly criticised by Fine Gael and Democratic Left when in Opposition. Our view remains that it is unfair and should be replaced. The Minister of State, Deputy Stagg, can claim that the Labour Party won the battle on that issue and that Fine Gael failed in its efforts to get rid of it. Unfortunately, we cannot see where Fine Gael won in the budget, but our backroom staff are working on it.

Mr. M. McDowell

They are making the tea.

Mr. B. Ahern

There is very little in the budget for the farming community with the exception of the relief on capital acquisitions tax. Many in the farming sector could have benefited from a reduction in income tax. There is nothing either for the tourism industry. My party's spokesperson, Deputy Andrews, was almost ill since the Government had indicated repeatedly that it would give priority to this industry, but there is nothing in the budget for it, although it is one of our most important industries.

In the Book of Estimates Bord Fáilte's budget has been cut back by £3 million. Once again, as a Fine Gael Minister is responsible for tourism that area received nothing in the budget and those involved in tourism will know that is the reason they lost out.

The motor industry benefited by a marginal measure relating to benefit-inkind and it is difficult to understand how it works. It was probably the Revenue Commissioners, not the Department of Finance, who proposed the measure. To benefit from it company representatives must be out of the office for 70 per cent or more of their time and travel more than 5,000 miles, which would be difficult not to do unless they were walking.

Mr. M. McDowell

What about the Tánaiste?

Mr. T. Kitt

What about travel by air?

Mr. B. Ahern

One must be out of the office for 71 per cent of one's time and travel between 5,000 and 20,000 miles to benefit from a 30 to 26 per cent reduction under this so-called progressive measure.

There are no changes in stamp duty thresholds for housing, with the 6 per cent rate impacting increasingly on firsttime buyers. Some indexation would be desirable in that regard. While the exemption from health and employment levies for workers resident in the State but employed in Northern Ireland is welcome, I am not convinced it is sufficient to resolve the problem. I congratulate members of Fianna Fáil who fought for this measure in the debate on last year's Finance Bill and forced the Minister to promise that he would at least examine the matter.

The Book of Estimates shows the low priority this Government attaches to tackling crime. While Department overheads increased by 8 per cent, there was no increase — there was even a slight decrease — in the provision for the operational services of the gardaí, the prisons and the courts. Again, as a Fine Gael Minister is responsible for justice matters, the Department must suffer cutbacks.

The main change in section 35 relating to film making, in particular the reduction of relief to 8 per cent, is illadvised, but we have not had an opportunity to examine the matter in depth. The film incentives introduced by Fianna Fáil and Labour have been successful in attracting major films here, to the envy of our British neighbour. As we are in danger of killing the goose that lays the golden eggs, this measure should be reconsidered.

Fine Gael's lack of influence in Government is shown by the absence of implementation of the policies it put forward before the last election. One of its main documents, Towards the Jobs Economy, published in May 1992, stated that a current budget deficit would not be allowed and that the EBR would not exceed 2 per cent of GNP. It promised to reduce employers' PRSI to 6 per cent and there was a promise of an annual tax free allowance of £5,000 for every person up to the age of 23. The Fine Gael Party is the back marker in this Government and economic policy has been hijacked by Labour and Democratic Left, a party with 1 per cent of national support.

In its policy document, Ireland 2000, Democratic Left stated that it wanted to make us all love our tax cuts and its members lectured us on how they would seek to convince people of that. Its document stated: "Democratic Left will seek to convince people ... that taxation is not an evil but a positive". While undoubtedly there will probably be an election tax package next year, rainbow Governments prefer to spend and do not have a deep commitment to tax reform. The only hope for the people is that this Government's time in office is sufficiently short to prevent it from inflicting real economic damage. We must have real tax reform if we are to create more employment and achieve European living standards. We in this party are proud of having pulled the country out of the doldrums. When we came into Government in 1987 the World Bank and the IMF were at the door, the country was in economic ruin. I listened with amusement yesterday to Deputy Dukes ridiculing Fianna Fáil policies. It is amazing what one will get away with if one has a hard neck. During his time in office the Exchequer borrowing requirement was approximately 12 per cent and we borrowed roughly £1.5 billion in one year. His current budget deficits were unbelievable. He holds economic records in Europe for all the wrong reasons, yet he lectures our party who turned the country around. The Taoiseach is not the only economic illiterate on that side of the House.

We have outlined our tax policy in Pathways to Work, that is assuming we create the necessary fiscal space of a low introductory tax rate and PRSI combined with the benefit of middle income earners and a range of measures to tackle long-term unemployment, including reduced and more competitive employers' PRSI rates, reform of the medical card system and a more ambitious small business rate of corporation tax.

I hope I will not be on this side of the House for next year's budget. However, if that is the case I advise the Government to start working on it now and introduce a coherent policy. The Minister's initial reaction may have been to concentrate on the PRSI area, but he was pulled and dragged in different directions. Minister De Rossa and Minister of State Rabbitte wanted more. Minister of State Rabbitte called a press conference — the first time for a Minister to do so — to demand that he get £10 million but one week later he got only £4 million. The £6 million was probably spent on Minister De Rossa's handlers and spin-doctors and he could not argue about that.

There is no coherence. The economy is booming because of the healthy state in which we, in Government with Labour and the Progressive Democrats, left it. My colleagues were harassed by various sections of the public but we stood firm. It took us from 1987 until 1993 to get it right and one year later the Minister stated on television that the people believe he did nothing during the year. If he had played golf and stayed away from here we would have better results. It is the scroungers who make him spend more money who are causing the problems. If he had stayed out of sight during the year the officials in the Department would not have agreed to the expenditure and our economy would prosper. Instead, the general Government deficit has increased from 2 per cent to 2.6 per cent and inflation is increasing vis-á-vis our other partners. While difficulties with our exchange rate continues, the Minister did not mention a market development fund or an alternative in the budget. There is nothing in it for the food sector, agriculture or for many of the key industries which would help the country to prosper. The Government is ticking out its time in office, hoping that nothing will go wrong on the international scene before a general election. The large capital programme allows it to spend money like confetti at a wedding or snuff at a wake. If it continues to spend in this way we will not have money to spend. I know from previous experience that the officials in the Department do not agree with such spending. In a few years' time, the international recession will worsen, growth rates in our economy will decrease and we will be left with expenditure cast in stone. We all know how difficult it is to cut back on expenditure for programmes already in place. European money will diminish, there will be no Cohesion Funds and our EBR and current budget deficit will increase. Once again we will become the laughing stock of the world. I know that is the advice the Minister is receiving but, unfortunately, he is not listening. We are facing a slippery slope and a great deal of trouble. All both parties on this side of the House can hope for is that sooner rather than later we can get this Government out and get away from the leaks and so on.

I have sat on this side of the House for many budgets. I have been a Member for almost two decades. Ministers used to turn up to listen to the Opposition. I thank the Minister of State, Deputy Stagg, for turning up today but there are 34 Ministers and Ministers of State and nobody else is here. They are all out trying to thank Mr. Mitchell — we thank Mr. Mitchell as well — but they would do well to listen to us. They would do well to listen to what is going wrong with this country. We ask them during 1996 to look at what this party achieved in Government with the Progressive Democrats and with Labour. We ask them to try to keep this country and this economy right, and not to put us back into the mess we inherited in 1987 when debt was doubled, inflation was rampant and interest rates were through the roof. When I walked out of the Department of Finance only 14 months ago I asked them not to put us back in the mess we were in, but they did not listen to me.

Acting Chairman (Mr. T. Foxe)

I call Deputy Mary Harney.

Mr. Andrews

I am sorry to interrupt Deputy Harney, but is it not a matter of courtesy, of rules of the House and precedent, that when the Leader of the Opposition speaks, a senior Government Minister should be here?

Acting Chairman

You are cutting in on Deputy Harney's time.

Miss Harney

In response to Deputy Andrews, the Government is probably so ashamed of the budget that Ministers cannot stay here and listen. This budget does not offer any economic vision or strategy. It will not help unemployment and will certainly not reward the hard pressed taxpayer.

Before I deal in depth with the content of yesterday's budget, I will speak for a moment about the episode we experienced in the run-up to the budget. The extent of the leaks of Government information was unprecedented. Yesterday in this House I drew attention on the Order of Business to the fact that on page 14 of The Irish Times we were not alone given details of what might be in the budget but we were informed of the order and sequence of the Minister's speech and the various paragraph headings. This was all laid out before us and it is a serious matter.

Last year a Minister of State was made a scapegoat because of budget leaks. This year the Department of Finnace and to a large extent the Minister for Finance lost control of the budgetary process as the Government in exile in Busáras dictated the pace. It is a serious matter that the Minister's speech was given in fair detail to one of our leading business journalists. The budget debate and the budget speech itself have become somewhat a farce. The Taoiseach, Deputy Bruton, had this to say about Government leaks on 15 November 1994, while in Opposition in column 369 of the Official Report of that day: "If a Government leaks it is because it is not managed on a partnership basis, because people feel they are not getting an adequate hearing at the Cabinet table and must therefore make their views known to the media. Far from representing some form of excuse for the Taoiseach's behaviour, the fact that matters discussed at Cabinet have become public is an indication of a serious failure to leadership on his part".

I agree with that. It has been unedifying over the last few weeks to see the Minister, Deputy Rabbitte, call a press conference and issue a press statement to tell us he was going to lobby the Cabinet for an increase in the science and technology budget. My party put in a priority question for tomorrow to discuss this serious matter but it has been ruled out of order on the basis of Cabinet confidentiality. What a joke. We need to take the budgetary process seriously because otherwise we undermine confidence, not just in the budget but in the management of our economy.

Many people are seriously concerned that the left wing parties in this Government are running the show. This is not just my view. It is the view of many voters, of business people, of many members of Fine Gael. While Fine Gael is in Government it is certainly not in power. Martyn Turner's cartoon this morning summed the situation up. Fine Gael was making the tea — presumably it was Barry's tea. There was a time when Fine Gael was the opponent of Democratic Left and Labour, now it is merely their appendage.

Fine Gael and Deputy John Bruton in particular have placed great emphasis on the need for openness, transparency and accountability. The opening page of the Programme for Government speaks about the fact that Government and the people are damaged if the Government is not open and accountable. The leak of information is no substitute for accountability or openness. Instead of this Government being known for openness, transparency and accountability, it will be known for secrecy, evasion and deception. In this House yesterday legitimate questions to the Taoiseach about whether or not he was involved in discussions about the appointment of the QMP company to handle the Government's information contract were transferred by him to another Minister. I want to know if the Taoiseach was involved in any discussions about that matter and when he was told by the Labour Party that this company was to be given the contract.

This is an important matter because we are talking about the expenditure of public money. Whether it is £500,000 or £500 million the principle is the same. We must ensure that the procedures for awarding Government contracts are open, transparent and fair, that those procedures are followed, that everybody who tenders for Government work tenders on a fair and equal basis and that they are at least given the courtesy of being told when they are not successful.

I find the manner in which this issue has been handled very disturbing. We have heard from nobody over the past ten days since this came into the public arena except an unelected Government adviser. In my experience, when Ministers are in trouble, they roll out their advisers or their unfortunate civil servants to take the rap, but when it is good news the Minister is never shy about taking all the credit. I want to hear from the Taoiseach and Fine Gael when they knew about this matter. It is important in the interests of accountability; it is important if we are committed to transparency and it is certainly important if we are committed to open Government.

I said earlier that the left wing parties are dictating the pace in regard to economic matters in this Government and that is a fact. The only people who were happy last night were the left wing parties, and Democratic Left was happiest of all. Prionsias De Rossa and his politburo, some of whom I spoke with last night, are happy because they know they got their way. One measure in the budget in relation to work trials — I am not certain what they are — which is to be introduced by the Minister, Deputy Richard Bruton, can only be done after he has consulted the Minister for Social Welfare. The one thing that a Fine Gael Minister is going to do has to be done with the approval and support of the Minister for Social Welfare, the real leader of this Government, following consultation.

Reference was made yesterday to the fact that over 80 per cent of the voters voted for policies that were different from the policies of Democratic Left and Labour, yet that 80 per cent are not represented, for the first time ever in an Irish Government. Fine Gael is voiceless and powerless. It is so desperate to hang on to power that it will literally agree to anything. Fine Gael voters and supporters must be disillusioned with the manner in which their Government is behaving, not just in regard to economic matters but in relation to crime and issues like openness, transparency and accountability. I call on the Taoiseach in particular to assert his authority, to take control of his Government, to reassure people that the Government has regard for the 80 per cent of people who voted in the last election.

I will deal now with the specifics of this budget. We have heard great play being made of the reform of income tax. A couple on £15,000 per year — not big earners, a very average income family — will get £2.49 extra per year as a result of the measures introduced yesterday. That is hardly the price of a pint in many Dublin pubs. Net current spending as a result of this budget will go up by 6.2 per cent, that is, 4 per cent above the rate of inflation. That is as a result of what we see in Table F in the Prinicipal Features. In the text of the speech delivered yesterday the Minister told us a very different story. He tried to make the claim that this was the lowest increase in public spending for many years. That is not a fact.

Income tax will rise this year by £260 million according to the information supplied in the budget. This means that the average income tax payer will be hit for an extra £200 per year, or £4 per week, in taxes during 1996. A single person with gross earnings of £247 per week will pay 57 pence in every extra pound they earn in tax and PRSI to the Minister for Finance. This kind of worker is earning well below the average industrial wage. What kind of message does that send to that person? Somebody earning below the average industrial wage is expected to give 57 per cent of their marginal earnings in tax to the Government. That is not an incentive to work.

It is no wonder we read in this morning's newspaper comments from the head of RGDATA that the Irish Grocers Association is finding it difficult to fill 500 jobs in the retail sector because State benefits to the unemployed and the tax system act as a disincentive. Recently the chambers of commerce reported that their members were finding it difficult to recruit unskilled workers. Unskilled workers do not need to go on a FÁS course or to be trained, yet 22 per cent of companies according to the chambers of commerce in their economic quarterly survey for the third quarter of 1995 said that they were finding it difficult to find unskilled workers.

Mr. Stagg

If they paid decent wages, they would have no difficulty.

Miss Harney

The Minister should not talk to me about decent wages. There was a time when the Labour Party was concerned about the taxpayer, but suddently he has been abandoned. It is about time the Labour Party looked after working people and those who wish to work.

A single person on £247 a week, below the average industrial wage which is about £13,000 per year, pay 57 per cent on tax and PRSI and not even the Minister would agree that is fair. Nothing was done about it yesterday. Indeed, since the Progressive Democrats left office in 1992 there has been no change in the tax rates. The high rate of tax is still 48 per cent and the low rate is 27 per cent.

Mr. Stagg

The Deputy's party did nothing about it either.

Miss Harney

Ireland is the only country in the OECD where below average earners pay super tax. This budget has done nothing to change that. Some smug commentators in this morning's newspapers seem to have been taken in by the Government's propaganda. Last week these people were calling for radical tax reform, but that did not happen in the budget. How long must we wait until they return to tell us we need radical tax reform? We need radical tax reform because people who work and make an effort are becoming disillusioned each year as they realise that it is almost not worth their while in many instances.

The Taoiseach spoke at length this morning about long-term unemployment. Those of use who know something about it know that if somebody leaves school and is idle at home for a couple of months or a year, it will not be long before he finds something to do. The lack of opportunity and the failure to provide work even at low wages for young people is the reason we have such a high level of crime among that category. Many people in that situation feel there is no reason to get up in the morning and feel they are cast aside. My colleague Deputy McDowell referred to them as human set aside. Until we realise that people working even for low incomes is better than people not working, we will not make a serious indent into many of the crime problems as well.

Mr. Stagg

That would suit the Deputy's supporters.

Miss Harney

Many of the Minister's supporters would prefer to work than to be idle.

Mr. Stagg

The Deputy is arguing for a low wage economy.

Miss Harney

I am arguing for jobs at any wages. I believe in an economy with low tax where people work hard. Low tax will always increase the volume of tax collected because there is more effort and activity.

Mr. Stagg

The Deputy's party did not do much about it when in Government.

Miss Harney

We brought the high rate of tax down to 48 per cent and the low rate of tax down from 35 per cent to 27 per cent. Since we left office no Government has touched the rate of tax. I notice the Minister for Social Welfare does not want to listen to people anymore, he seems to know everything.

Proinsias De Rossa

I might listen if the Deputy had anything new to say.

Miss Harney

I have many new things to say. On the rate of corporation profits tax, I welcome the reduction from 38 per cent to 30 per cent for companies earning profits below £50,000. However, I regret no move was made to reduce the general 38 per cent rate. It is the first time for a number of years that there has been no move downwards in that regard. The reason that is important is that after the year 2010 the derogation we have in relation to the 10 per cent manufacturing tax will end. At that stage we will need a low standard rate of corporation tax — perhaps the 20 per cent and the 10 per cent could be married to an overall 15 per cent — or we will need to substantially increase the 10 per cent manufacturing tax. We cannot do that in one fell swoop; it must be done gradually and we must move in that direction.

I know for many the year 2010 is a long way off, but multinational companies and international investors are now making decisions on the basis of what will happen in that year. For them the horizon is close and there is no worse disincentive for investment than uncertainty.

I welcome the Government's concentration on the issue of long-term unemployment. Social alienation and loss of dignity is experienced by so many families with a number young people unemployed. However, the Government's response is very bureaucratic and, in many ways, it is an effort to massage the figures so they will look good by the end of the year. Some £1 million will be allocated in the middle of next year to provide 5,000 jobs for long-term unemployed people for a six month period. What effect will that have? It is a mere six month stop gap measure to massage the figures.

A number of years ago the Progressive Democrats published proposals on community employment. There is a great deal of work and many unemployed people in our community. People, particularly young people, working even for social welfare rates is better than people not working. They would be more fulfilled if they were involved in their community rather than being isolated. I urge the Government to ensure that every young person currently unemployed does some work on a part time basis, perhaps for two or three days a week, in return for existing unemployment benefits. We could start with young people under the age of 25 years. I have discussed this with many representatives of this sector and, contrary to a popular perception that this is right wing, many young people would like to be involved in a worthwhile activity for a number of days per week and their parents would support this. They would gain experience, feel included and would not be marginalised and isolated. Unless we do that, we are only tipping the iceberg by providing various schemes and we will have no effect on the long-term problem.

I welcome the reduction in employers PRSI by 0.2 per cent. The reduction is small but at least it is a recognition that PRSI is not social insurance but a penal tax on labour. We have five taxes on work if we include the different taxes, levies and PRSI. I can think of nothing more the Government could do to make work illegal than to impose those five taxes.

I welcome the Minister's commitment to introduce multi-annual budgeting. However, this will not happen until he leaves office. He gave us the reasons it cannot happen next year and anyway the Government is coming to the end of its term. For some time my party has advocated the need for multi-annual budgeting. In addition, we need a unified budget. Unless we make the spending, tax and revenue decisions together, the focus will never be on tax reform. It is inappropriate that in the middle of one year Government Ministers sit down to look at the spending options for the following year with each trying to get more for his or her Department, and then a number of months later the Minister for Finance must look at the revenue implications of trying to raise that money. It would be akin to a family sitting down at the beginning of the year to decide how much they wanted to spend and then trying to find a job to match their spending needs. We need to turn the process around. In particular, we need to make decisions in a unified way, which I very much favour.

In addition, we need to look at the whole issue of public sector reform. Excluding those who work for the commercial semi-State companies in Ireland, we have 222,000 employees who work for the State. The current public sector pay bill is £4.8 billion, which is 40 per cent of current Government spending. It is £600 million more than we raise in income tax. It is the one area of Government spending that is most difficult to control because of the sheer numbers in the public service. I appreciate that many members of the public service are badly paid. For example, clerical assistants on £178 a week are among the worst paid in this economy. However, I do not believe we will subsequently increase the pay of public servants unless we introduce performance related pay and control the sheer numbers in the public service. It is the numbers that cause the problem. There are ways of reducing the numbers. Through natural wastage and generous career breaks we could reduce the numbers by about 5 per cent per annum. That alone would save £200 million.

Recently at the Select Committee on Finance and General Affairs I put forward my ideas on how we could introduce performance related pay in the public sector. Each Government Department has to be autonomous as far as budgets are concerned. The management of each Department must have cash limits for pay and decide whether to employ extra people or have fewer people and pay them better. The incentive must be given to public servants to deliver the service and give better value for money. Unless public servants have that incentive, unless they benefit from delivering the service in a more efficent and cost effective way, we will not bring about the kind of change many of us would like to see. Change will only be effected if we bring the huge number of employees in the public sector with us. Those public servants deserve that. They have given great service to this country. They have loyally served Governments of different political persuasions. Many of them work extraordinarily hard, but the system does not reward effort because of the way it is structured and because of the way pay is structured. There is much talk now about reform. We will get meaningful reform only if we introduce some of the reforms I referred to earlier. With technological advances we could do the job with fewer people. Many different jobs that were done by the public service are becoming obsolete — for example, customs officials are no longer necessary. There is much we could do to improve productivity and get more out of fewer people, but that will only happen if public servants are rewarded for their efforts.

The Minister referred yesterday to a new national pay agreement to follow the Programme for Competitiveness and Work. I am concerned that such agreements are drawn up in an anti-democratic way. There are essentially agreements reached by non-elected people and with nobody representing the unemployed at the table. The whole focus of these agreements should be to increase employment in this economy. It is my view that an outgoing Government that has lost the confidence of the people, as this Government has, does not have a mandate to negotiate a new social agreement with the social partners, Whoever negotiates it, it must concentrate on net take-home pay, not on growth pay increases. Nominal pay increases are useless. What matters to workers, whether they work for the State or in the private sector, is what they take home. The tax changes advocated by my party — which could be implemented over four years if we had prudent management of the public finances and if public spending was kept to the rate of inflation — would allow us to have rates of tax of 20 per cent as a standard rate and 40 per cent as the higher rate. If the Progressive Democrats' tax plan was introduced, a clerical assistant on £178 a week would gain £21 a week.

Let me move now to the issue of public spending. There are parties in this House and many individuals in this country who think that more and more Government spending will solve every problem. Since 1990 spending on the health services has increased by 65 per cent or £900 million. No one could seriously argue that the public spending increase of 65 per cent has led to a matching improvement in the quality of services. Equally, expenditure on the prison service has gone up by 50 per cent in the last five years, but the number of prisoners has increased by merely 7 per cent. My point in giving those figures — I could give many more — is that more and more public spending does not guarantee improved service. We need to get better value for money.

We need to be more imaginative and more innovative. In particular, we need to reduce the size of Government. We have over 30 different Government Departments and offices and 32 different Ministers. If Westminster had the same number of Ministers per head of population as we have they would have 540 Ministers. I am not talking about the Minister of State, Deputy Rabbitte, who may be superfluous to requirements; I am not talking about any one person. We have to reduce the size of Government not just in terms of ministerial positions but also in terms of offices, bureaucracies and quangos. This country has become paralysed through establishing quangos, task forces, reviews and committees with all the people that are required to service them. Do we need to have FÁS offices nation-wide looking after the needs of unemployed people and also Social Welfare offices paying out money to the same group of people? Do we need to have the Revenue Commissioners collecting tax from people right around the country and the Department of Social Welfare paying out money to people in exactly the same place? We have to go for a slimmer, leaner way of running this economy. We have to lead by example. We have to ensure, because of the way public servants touch our lives, that we have an efficient and effective public service and that we administer this country in the cheapest and most effective way possible.

We need a competitive economy. We will not get competition unless in the first instance we look at the possibility of privatising many State assets and opening them up to competition. One of the things that disturbs me is a recent announcement by the Government that the ESB, in return for reducing manning levels, is to be given permission to build two more power stations. If that happens there will be no need for a competitor because there will be an oversupply and the ESB will control it all. I am very disturbed that this Government is not committed to competition. For example, a very reasonable proposal from Ryanair to open a private airport at Baldonnel has been shot down by the Minister for Transport, Energy and Communications. In 1984 and 1985 when my colleague, Deputy O'Malley, argued in this House for competition with Air Lingus in the airways, he was told that the country could not sustain competition, that it would be bad for the economy and bad for Air Lingus. We all know the effect of that competition — cheaper fairs, a boom in tourism revenue, increased employment, an increase in the number of passengers coming into Ireland. Ryanair now has the greatest number of passengers of all the carriers on the Dublin-London route.

We must have a competitive economy and we will only do so if we begin to tackle the anti-work tax system that is in place. A worker in Dundalk on £300 a week is £20 a week worse off than a worker earning the same amount in Newry. There has been much emphasis in this House on the need for an all-Ireland approach to so many things, about the need for North-South executive bodies, etc. We have economic partition here and yesterday's budget went further down the road of reinforcing that economic partition. It costs an employer in the Republic 50 per cent more than an employer in the North to give an employee £2 more in take-home pay. If we really want to create a single economy in Ireland we have to begin by lowering the anti-work tax levels that exist. Now that there is peace in Northern Ireland and it is a more attractive place for inward investment, this economy will lose out unless we begin to tackle our anti-work system.

We should control public spending, maintain low numbers in the public service instead of increasing them as we plan to do. Neither should we have redundancy packages as we had when Ray MacSharry was Minister, which cost us £130 million and in spite of which we have ended up with 30,000 more working in the public service than we had even then. That is not the way to go about it. We need pay-related remuneration in the public service which can be implemented through natural wastage and career breaks. We need to reform our tax system for public servants and all workers, and we need to make sure that this economy is proenterprise and pro-business.

I want to return to where I began and talk about Fine Gael's role in this Government. Some may think I take great pleasure from the fact that Fine Gael has been sidelined. It may be in Government but it is not really in power. It is a sad reflection on our political system that we have reached the stage where the left wing parties, who command less than 20 per cent support of the electorate, now control the economic policy and economic outlook of this Government of renewal. That is damaging for the economy and damaging and disillusioning for taxpayers. In particular, I am critical of the manner in which the Minister of State, Deputy Rabbitte, who is present, held a press conference to tell us he intended to lobby his colleagues in the Cabinet for more money for science and technology. The Minister for Social Welfare went on radio and, before we had even read about the report in the paper, rubbished his colleague, the Minister for Enterprise and Employment, Deputy Bruton. What a humiliating way to treat a fellow colleague in Government. That is a serious matter and one to which voters will respond when they next get the opportunity.

We need a Government which has an economic vision and which knows where it wants to take us in terms of spending, the national debt and taxation. This Government does not have any targets. When the Minister was talking yesterday about multi-annual budgeting he did not give us any idea of where he wants to take this economy as far as unemployment or tax is concerned.

In his budget speech last year, the Minister said he had budgeted for an average unemployment level of 265,000 during the year. The live register figures published at the beginning of this month show that that figure is 285,000, 19,000 higher than the average for which the Minister budgeted in last year's budget. This Government does not have a coherent view and it is not committed to radical reform of the economy, particularly of our anti-work tax system.

I wish to refer to the escalating rise in crime. People, particularly the elderly in our community, are genuinely frightened. Giving a tax allowance of £800 at the standard rate to taxpayers aged 65 or over who live on their own to provide an alarm is a cynical exercise. It sounds like a real bureaucratic solution to a serious problem — there is a problem, we must be seen to do something — so a scheme is introduced. The people who need help most will be unable to avail of this scheme because they do not have taxable incomes in the first instance.

Miss Quill

Widows.

Miss Harney

The way to deal with crime is not through gimmicks of that-kind which is how I would describe this scheme. The way to deal with crime is, first, to have effectve laws and, second, to implement them. On the Order of Business every week there are calls for more and more legislation; it is either more quangos, task forces, reviews or laws. If we implemented our current laws and efficiently use available prison spaces, we would not have the kind of problems we all woke up to hear about this morning.

We need to examine the management and operation of the Garda Síochána. The gardaí, too, must inspire confidence. We must ensure that the force is organised and managed on an efficient basis and that it is modernised to deal with the sophistication of modern crime. We need to ensure that our prisons are managed efficiently. If the prison expenditure has increased by 50 per cent and the prison population by only 7 per cent we must ask questions about the effectiveness of the management of our prisons.

We must also ask questions about our laws and the way they are implemented. Why is it that one of the godfathers of crime who availed of a tax amnesty two years ago was awarded a Dublin Corporation contract? It is an absolute scandal that a leading criminal known as "The Monk" was awarded a Dublin Corporation contract in relation to the MOT testing for the Department of the Environment. There is something really sick in a society where that person, having availed of a tax amnesty, can now get Government work. We need to seriously examine the kind of laws we have in this country because that is what disillusions people so much. It is not the lack of legislation but the failure to implement it. If different laws and a different system of justice are necessary to capture the godfathers of crime, then let us have it.

As the Taoiseach said this morning, the rights of accused persons are important, and that is true in any civilised society, but the rights that must come first are those of the victims, the ordinary law abiding citizens. They are getting a little fed up with all the rhetoric and the promises. We need laws to protect them because the first duty of any Government is to protect its citizens. I would prefer to see the Government doing much less in areas in which it should not be involved and much more in areas in which it should be involved, such as protecting its citizens.

If there is any message that must come from this budget it is that we need a different approach to many of the problems confronting our people. We need a Government which has a genuine mandate, a coherent vision for the economy and a strategic view of how we will reach the stage where this can be a competitive economy.

We currently get just under £2 billion in net receipts each year from our membership of the European Union but that will run out by 1999. Enlargement of the Community means that an additional £22 billion per year will have to be spent if we have the same Common Agricultural Policy and the same Structural and Cohesion Funds. The Germans, who fund 80 per cent of what is spent in the EU, will not make that kind of expenditure. We will have to survive on much less but there is not any recognition of that fact in yesterday's budget. There is no mention of living within our means or reducing the burden of national debt.

If this country is to survive following enlargement of the EU, particularly if we are in the European Monetary Union, we must get our house in order. As Deputy McDowell said yesterday, it is one thing to qualify for membership but it will be another when we are in the club. He said also that we will be the sick member of that club unless we get our house in order. The Germans may well insist on us complying with a 1 per cent budget deficit requirement.

Unless we begin to live within our means and make this a more competitive economy that supports work and the worker, the entrepreneur and those who invest in business, and unless we begin to reduce the burden of national debt, this economy will be unable to survive in what undoubtedly will be a much more competitive European Union. If we have a new Government with a different approach we can do that and I believe there are many exciting opportunities ahead for us if we can get our house in order.

In rejecting the strategy of the Minister and the Government in this budget, the Progressive Democrats recently published an extensive programme for tax reform which can be implemented, which is costed and which is achievable but only if we have a Government with the political will to say "no" to many of the lobby groups, to return an incentive to work and to have public spending increases matched to inflation. If we do all that we could have standard rates of tax of 27 and 40 per cent, we could return an incentive to the worker and those who are running this economy and paying all our salaries. Every ten people at work have 22 dependants. The more that figure of ten is reduced, the more difficult it will be for the dependants. Unless we make the national cake bigger by making this a more enterprising country, we will be unable to do a great deal in regard to social welfare, etc.

It is a sad reflection on the Government that social welfare payments will increase by 3 per cent but that the net take home pay of low paid employees will not be matched by that increase. That is a sad reflection on the dependency culture that has pervaded this country, particularly in recent years.

Minister for Social Welfare (Proinsias De Rossa)

There is innovation, as well as consolidation, in this Government's second budget. The major innovation is that for the first time an integrated approach has been taken, by the Government as a whole, to framing a budget which focuses primarily on the country's most pressing social, economic and human problem: that of long-term unemployment.

The result is a budget which is in every sense pro-work and pro-worker. It is a budget designed to encourage people to create new employment and to take up new employment opportunities — to make jobs and to take jobs. It gives improved incentives for employers and potential employers; it improves the position of existing workers and taxpayers and and gives greater encouragement and support to people who have been out of work, perhaps for many years, in their attempts to join or rejoin the labour force, or access education or training to advance their employment prospects. At the same time, this budget protects and improves the living standards of those people who are outside the labour force for other reasons, such as illness or age.

The special employment measures in this budget are of major significance. They are intended to give particular help to our unacceptably large number of people who are long-term unemployed because this group is not benefiting enough from the current dynamic growth in employment. Many new jobs are coming on stream but people who have been out of the jobs market for a year, two years, or even longer are not getting them. That group needs positive help and support and this budget provides it. It does so not only through the employment and training opportunities it creates but also through social welfare changes which will ease their transition into paid work and through tax and PRSI changes which will ensure they are better off working.

The primary objective of this budget is to stimulate economic activity and enterprise and to help people who are currently unemployed to share in this development. The success of this strategy is vital not only to those directly affected but for society as a whole. Ireland is a small and close-knit society and the pain and indignity of long-term unemployment affects everyone in some way, directly or indirectly.

This budget gives employers substantial relief, both on tax and PRSI. The new, low rate of corporation tax is something I have favoured and advocated as I believe that small and medium-sized enterprises, which will gain substantially, have a crucial role to play in the type of job creation we need. I hope that this more favourable tax regime, combined with the reduction of employers' PRSI and the new recruitment subsidy, will encourage new small and medium sized enterprises to establish themselves in the areas where unemployment is highest and the need for new enterprise is greatest.

As Minister for Social Welfare, with legal and departmental responsibility for ensuring that the social insurance fund can meet its short-term and long-term commitments, I want to record my views on the somewhat controversial issue of PRSI. Despite the oft-repeated wail that "PRSI is just another tax"— which we have just heard again from Deputy Harney — I must insist that it is no such thing.

A growing proportion of the workforce, including the self-employed, now pay PRSI. Together with employers they finance the insurance payments that make up some 44 per cent of all social welfare expenditure, with a very small contribution from the Exchequer — only 2 per cent last year. What this means is that workers and employers, between them, are currently financing £1,870 million worth of schemes and payments to insured persons, on the basis of their PRSI contributions. The cover provided to insured workers is substantial and compares more than favourably with the scope and quality of social insurance in the UK and elsewhere. Incidentally, this budget's PRSI changes mean, in relation to the UK, that our employee PRSI is lower at all income levels, our combined employer and employee PRSI is lower at all income levels over £110 per week, and employers' PRSI is lower where wages are between £210 and £250 per week.

All PRSI contributors in Ireland get exceptional value for money and PRSI is also an integral part of the social contract. Insured workers gain from a range of benefits, not only when they reach pension age but also during their working lives. Their employers gain indirectly through not having to provide as many occupational benefits as would otherwise be the case. Paying PRSI means they need to spend less on sick pay, maternity benefits and even pensions provision, since the majority of occupational schemes are built around the social welfare arrangements.

Also, of course, the State — the taxpayer — gains from the existence of a self-financing social insurance system which reduces pressure and dependency on the social assistance schemes that are entirely Exchequer-financed. Hence the move, in recent years, to include more and more workers in the system: first the non-manual workers on higher incomes; then the self-employed; then the part-time workers; and last year, new entrants to the public service.

This year I am taking another step forward by bringing workers on community employment programmes into full class A social insurance. This will improve their status and their entitlement to insurance benefits and payments and is a reform for which they themselves have been campaigning.

Critics of PRSI should bear in mind that the social partners have developed this system over many years. It represents a form of social solidarity between different generations and different sections of the labour force. It cannot and should not be lightly dismantled but must be maintained and developed. I intend, in accordance with the commitments in this Government's programme, to do precisely that. It should be borne in mind also that if PRSI were to be abolished, as some Opposition Deputies have advocated, the cost of the benefits to which people have built up entitlements would have to be transferred to income tax payers. This would mean raising the standard rate of income tax from 27 per cent to 33 per cent and the 48 per cent rate would have to go up to 62 per cent. I doubt if such increases would find favour with many taxpayers and I look forward to seeing these figures in the Progressive Democrats Party's next election manifesto, if they are determined to pursue this misguided notion.

I will, in the near future, be publishing a discussion paper on PRSI which I hope will generate some fruitful and informed debate on this important subject.

The social welfare dimension of today's budget is as important as tax and employment because it deals not only with the entitlements of insured workers but also with the entitlements and living standards of unemployed workers, of pensioners and of many thousands of families. In round figures about 27 per cent of social welfare spending goes to pensioners; another 28 per cent goes to the unemployed; and a further 28 per cent is spent on family income support. Five per cent goes on administration and the rest on illness payments. I now want to explain what the budget is doing for each group of beneficiaries.

All weekly payments and all adult dependant allowances are being improved in real terms. Inflation this year is expected to be 2.25 per cent and all payments will go up by more than this — on average by about 3 per cent. There will be at least an extra £2 per week on all personal rates and at least £1 extra on adult dependant rates, with special increases for carers and old age pensioners living alone. The full list of new rates is shown at Appendix 1 which I am circulating in the Official Report.

In real terms, these are among the best improvements in the past decade. During that time, there were three years in which the order of real increases was the same or similar and only one year in which it was significantly better. Contrary to Fianna Fáil propaganda, there were two years in which it was significantly worse and increases below inflation were given by none other than the then Fianna Fáil Ministers. The Leader of Fianna Fáil was quite consistent when he said last month that social welfare expenditure ought to be in decline, as his party colleagues tried to start this process in 1987 and 1989.

Dr. Woods

That is rubbish.

Proinsias De Rossa

The Leader of Fianna Fáil recently called also for an end to what he terms "endless incrementalisation" in social welfare payments. I am delighted to disappoint him. This year real progress has been made towards achieving the target rate set ten years ago by the Commission on Social Welfare. That target rate, updated from 1986, is now £68.10 per week. To bring every social welfare recipient to at least that rate would have cost £114 million and unfortunately this was impossible given the Government's other commitments and constraints — on public spending, Exchequer borrowing, stimulating employment and rewarding work. However, I am pleased to announce that this year's improvements bring more groups up to that target rate, that contributory pensioners continue to be well ahead of it, that for the first time widows, widowers and deserted wives have reached the target rate, that carers and invalidity pensioners are now on 99 per cent and 97 per cent of the rate, respectively; and that all other groups are either at 92 per cent or 95 per cent of the target rate. This is a major development when we consider that in 1985 some groups were only at 64 per cent and 66 per cent of that rate.

I very much hope that it will be possible to complete the process next year and to bring all groups to the Commission on Social Welfare's target rate. Meanwhile, in line with the commitment in the Programme for Government, I have commissioned the ESRI to review the minimum adequate income rates recommended by the Commission on Social Welfare and I look forward to their report on what, in their view, our new target rates should be in the light of all the changes that have taken place since 1986.

I would now like to describe in some detail the main social welfare improvements in this budget. The level of increase being given this year will ensure that the real standard of living of all social welfare recipients will increase in 1996. Examples of how different groups are affected are given in Appendix II of the table to which I have referred. This increase in weekly rates is by far the most expensive single item in the social welfare budget improvements this year, accounting for more than £57 million this year and almost £103 million in a full year. The increase in monthly child benefit — of which more in a moment — will be more than sufficient to ensure that social welfare recipients are at no net loss as a result of maintaining child dependant allowances at their existing level. Deputies will be aware that increasing child benefit rather than child dependant allowances is part of the Government's strategy of working towards a basic income for children as provided for in the programme A Government of Renewal.

The policy direction initiated by me last year with regard to financial support for children is being continued and further developed in this year's budget. Following the historic increases last year, child benefit this year is being increased by £2 per child per month from next September. This will bring the monthly payment to £29 for the first two children and £34 for the third and subsequent children. Taking the last two years together, a 45 per cent increase has been provided in respect of the first two children and a 36 per cent increase for other children. In cash terms, real support is now being provided to families rearing children. A family with four children will now get almost £30 a week in child benefit while a six child family will get almost £45 a week.

Child benefit remains one of our more effective means of tackling poverty as it channels resources directly to families most in need. It is a universal payment which is very well targeted to middle and lower income families. Over one million children and almost half a million families benefit from it. Only 5 per cent of spending on child benefit goes to those with incomes in excess of £30,000 per annum. It is of particular importance to families on low incomes as it is not taxable; it is not withdrawn when an unemployed parent takes up employment and it is not assessed as means for other secondary benefits, such as differential rents, medical cards, etc. It cannot act as a disincentive to taking up employment or improving wages; it cannot constitute an unemployment or poverty trap.

I am pleased to announce a budget increase in allowances for the parents of twins. This recognises the significant costs involved for the parents of twins. The current grant of £200 payable on the birth of twins is being increased to £500 and a new grant of £500 is being introduced which will be payable on the twins reaching the age of four and the age of 12. These subsequent increase are intended to help with particular points of financial pressure as the twins enter primary and secondary school.

The carer's allowance was introduced in 1990 as an income maintenance payment for those providing full-time care and attention to pensioners and certain disabled persons. I am glad to announce a further improvement this year. The weekly personal rate is being increased by £5, which is well in excess of the general 3 per cent increase in other weekly rates. The new weekly personal rate will be £67.50, which is an 8 per cent increase on the current rate. This new rate represents 99 per cent of the target rate set by the Commission on Social Welfare. Over 8,000 recipients will benefit from this special increase.

For pensioners, as for other categories of persons, I have devised a number of targeted measures in addition to the general increase. I am particularly keen to ease the position of pensioners on low incomes who find themselves just marginally outside the conditions or income limits for the various schemes. Accordingly, I am pleased to announce the following improvements: The living alone allowance is being increased to £6 a week, which represents an increase of 22 per cent on the current rate; the free schemes of electricity allowance, telephone rental allowance and colour television licence are being extended to low income pensioners who do not qualify at present because they do not get a social welfare pension. The weekly income limit being fixed for this purpose will be the new maximum rate of old age contributory pension, £75 per week, plus any increases for dependants, plus £30. Pensioners whose means are under these limits who only have access to free travel at present, will now, for the first time, have access to all the free schemes. Many widows, lower-paid public servants and people with low UK pensions will benefit greatly from this extension.

The additional means which are disregarded when assessing people's eligibility for the national fuel scheme was increased last year from £5 to £10. I am increasing the amount again this year to £15. This is the amount social welfare contributory pensioners can have over and above their social welfare pension and still qualify. The fuel allowance is worth a total of £130 to each householder over the 26 week period of the heating season from October to March each year.

An important change of benefit to pensioners is being made in the arrangement for pro rata pensions involving mixed insurance. There was an anomaly in the system whereby a person was not entitled to a pro rata, mixed insurance, pension if they qualified for certain other pensions, such as an EU pro rata pension based on insurance in more than one member state or a pension from a country with which Ireland has a social security agreement. To address this anomaly, amended provisions will allow a claimant to qualify for which-ever of the pensions mentioned is payable at the highest rate.

One of the conditions for the receipt of the free telephone rental allowance requires the pensioner either to live alone or with certain excepted persons, which includes children under 15 years of age. I am now extending that age limit to 18 years of age. It is estimated that this improvement will bring an additional 3,800 pensioners into the scheme. My next proposal is also directed specifically to this vulnerable group, pensioners who live alone.

The Government is determined to do all in its power to improve the security, both financial and physical, of elderly people and particularly those who live alone. The vulnerability of this group has been underlined by the horrific attacks and murders of recent days and weeks. Yesterday, the Minister for Finance announced that tax relief will now be available, at the standard 27 per cent rate and to a maximum of £800, to pensioners who live alone and wish to install burglar alarms. I urge all pensioners to take up this opportunity as soon as possible, if they are in a position to do so.

In order to complement this initiative and urgently address the needs of pensioners who are not in a position to avail of this tax incentive because their incomes are below the relevant tax exemption limits, I am today setting up a task force, which will be chaired by the director general of my Department, Mr. Eddie Sullivan. Following consultation with my Government colleagues, the task force will include representatives from the Departments of Justice, Health and the Environment and will also draw on expertise from companies, trade unions and voluntary and community organisations as required. I have asked it to report to me by the end of February 1996 at the latest, with recommendations as to how the security needs of this most vulnerable group can be most urgently and effectively addressed.

The traditional, more reactive "social welfare" role of providing benefits to insured workers and income support to those who need it is no longer sufficient in the light of the problems facing our country. The value and importance of that traditional role cannot and should not be understated, given the huge investment by my Department in ensuring that our income supports, covering a wide range of contingencies including a minimum income for those who fall through the net, are paid in a timely, efficient and courteous manner. However, an equally important role lies in the implementation of Government policies in the area of employment and unemployment, with particular reference to the needs of the long-term unemployed. Social welfare policy and practice must be integrated with the overall fiscal and socio-economic priorities of our country.

Taking on board this changed role has required a fundamental rethink and challenge to our old approach to unemployment. It is no longer acceptable to see unemployment as a passive state of long-term dependency on the State. It must be seen as a positive period of transition and development for people with the objective of returning them to the workforce as quickly as possible. It is equally unacceptable to see social welfare expenditure on unemployed people as a burden on society in general and the taxpayer in particular. The reality is that every pound expended is a social and economic investment in our people, our most valuable resource.

The challenge we face is to provide unemployed people with every opportunity to participate more fully in society and we can meet that challenge in two basic ways. First, we can devise new and positive measures which put unemployed people on a fairer footing in the labour market and, secondly, we can remove existing obstacles within the social welfare system which militate against unemployed people who look for work. The social welfare system must be sufficiently flexible to provide a springboard into employment and, at the same time, be sufficiently robust to provide continuing support for people until they get a firm foothold in the labour market.

It is a reality of the current social welfare system that, because of the widespread persistence of low pay and because welfare payments have risen in real terms, the system sometimes offers greater security to unemployed people to remain unemployed rather than risk taking up any employment opportunities which may arise, particularly if they are temporary or insecure. This is because weekly unemployment payments, by contrast, are secure and known in advance, whereas net income after employment may not be readily calculated, especially when statutory deductions are taken into account. This is particularly relevant where secondary benefits are payable in addition to normal weekly payments.

This budget sets out to address those aspects of our social welfare system by reviewing our existing range of work related incentives and devising a significant package of pro-employment measures which will facilitate unemployed people in seeking and taking up employment. I am pleased to announce the following measures as part of that package and I hope to improve on it even further in the coming year.

In this budget, employers, employees and the self-employed all receive substantial concessions in relation to their PRSI contributions. Employees on full rate PRSI, 5.5 per cent, will not now pay any contribution until their weekly earnings exceed £80, an increase of 60 per cent over the £50 allowance introduced last year. Meanwhile, the ceiling for their contributions has only been increased by about £15 per week, less than 4 per cent. The cost of this is £39.2 million in 1996 and £64.5 million in a full year.

Self-employed and `modified' contributors will not pay anything on the first £20 per week of their earnings and the minimum annual contribution payable by the self-employed is reduced from £230 to £215 to reflect this. The cost of this is £2.7 million in 1996 and £4.4 million in a full year.

The employers' package comprises a reduction in their lower rate from 9 per cent to 8.5 per cent; a increase from £12,000 to £13,000 per annum in the threshold over which the higher rate is paid; a reduction from 12.2 per cent to 12 per cent in the higher rate; and a modest increase in the ceiling from £25,800 per annum to £26,800 which will index the ceiling. These changes will cost £30.6 million in 1996 and £51 million in a full year.

I have supported and endorsed these very substantial PRSI reductions, which will cost a total of £72.5 million this year and £120.8 million in a full year, despite the fact that they represent a loss to the Social Insurance Fund and may mean a consequential increase in the Exchequer contribution to that fund in future. However, the purpose of the reductions is to stimulate new employment and to reward those workers and employers who are currently producing wealth and contributing to the State's finances. I am confident this will lead in turn to further increases in PRSI revenue; indeed, there is already evidence of considerable buoyancy in the fund so I do not consider that the concessions will in any way endanger its future.

I would draw attention to the absence of the Progressive Democrats. When Deputy Harney made her contribution, all she seemed to know about PRSI was that the employers' rate had been reduced from 12.2 per cent to 12 per cent. She did not seem to be aware that the incentive rate had been reduced from 9 per cent to 8.5 per cent or that the floor had been increased to £250 per week, at a cost of £120.8 million in a full year. That significant contribution will benefit all employers, particularly those in labour intensive industry and those who compete directly with industry in the UK. It was disingenuous of Deputy Harney to ignore that real benefit for employers. One of the disincentives against taking up employment identified by the expert working group on the integration of the tax and social welfare systems was the immediate loss of child dependant allowances when an unemployed parent takes up employment. This happens because the State compensates for the extra costs involved in rearing a family whereas an employer pays a wage which is not differentiated by reference to family size. Arising from a number of recommendations made to me by the expert working group in advance of this year's budget, I have been examining ways in which unemployed people could be assisted in overcoming that disincentive. I now propose to continue payment of child dependant allowances for a period of 13 weeks to people who have been unemployed for 12 months or more if they take up employment which is expected to last for at least four weeks. This innovative measure will come into effect next June when the weekly payments increase.

Family income supplement has proved to be a very important mechanism for assisting low paid workers with families. Accordingly, a number of improvements are being introduced from next June, as follows: the income thresholds governing entitlement to FIS are being increased by £10 a week at each point thus ensuring that most current recipients will get an increase of £6 a week. The qualifying period of six months in employment is being reduced to three months. This will ensure that an unemployed parent who benefits from the retention of child dependant allowances for 13 weeks can qualify for FIS, where appropriate, when payment of the allowances ceases. The FIS scheme is being extended to job-sharers, subject to the usual condition being satisfied. Payment is calculated by reference to weekly income and the number of children will be adjusted immediately on the birth of a child rather than having to wait until the annual review of FIS entitlement takes place. This will make the scheme more immediately responsive to workers with growing families. The number of hours which must be worked to qualify for FIS is being reduced from 20 to 19 hours a week to reflect the prevalence of the 39 hour week in most employments.

To simplify the system and improve the incentive for unemployed people to take up casual or part-time work opportunities, the provisions for the assessment of earnings from employment are being revised. The main features of the new arrangements are as set out in Appendix III. The purpose of the change is to make it easier for people to calculate how much better off they will be if they take up part-time or casual employment; and to ensure they will be better off than they are under the present system, if they do so.

Employment under the community employment programme is currently insurable under the Social Welfare Acts for the purposes of occupational injuries benefit only. Participants in community employment currently receive credited contributions but from next April, they will be insured at Class A PRSI, which will give them a paid contribution for each week and put them on a par with other Class A workers. The PRSI exemption scheme will be available to community employment sponsors to alleviate any additional costs arising on their side.

The range of support services which my Department provides to unemployed people, particularly the long-term unemployed, has been developed in the context of assisting unemployed people to achieve their full potential and to participate in society with dignity. The most successful of those services has been the back to work allowance which to date has encouraged over 10,000 long-term unemployed people and lone parents to return to employment, either as employees or in self-employment. The number of participants was increased to 10,000 last year and I am very pleased, in the light of its success to date, to announce a further increase in the number of participants to 15,000 for 1996. I have every confidence that the new target of 15,000 participants will be achieved by the end of the year. Furthermore, I am providing an additional sum of £150,000 this year to assist participants engaging in self-employment ventures with business advice, technical assistance and relevant training. I am also pleased to announce that the number of places on the student summer jobs schemes, which has proved very popular, will this year be maintained at its greatly-increased 1995 level.

The back to school clothing and footwear allowance is an important element of our family income support mechanisms. It provides assistance to families with school-going children at a particularly expensive time of the year. It is paid in the period June to September each year and benefits some 114,000 families with 270,000 children. The allowance is being increased again this year from £40 to £43 for each child in primary school and from £55 to £58 for each secondary school child. These new allowances represent increases of 23 per cent and 16 per cent respectively in the past two years.

The House will be aware that the supplementary welfare appeals system has attracted considerable criticism in recent years. Amongst those who have expressed concern about the adequacy of the system are the Ombudsman, agencies such as FLAC and Combat Poverty, and many Deputies in this House, including me, who have been made aware of the difficulties involved through contact with their constituencies.

I have now had the opportunity to consider the results of a review of the procedures in this area. To be effective and to gain the confidence of the public, an appeals procedure must be able to demonstrate independence, an adherence to fair procedures and a consistency of approach. The social welfare appeals system — administered by the Social Welfare Appeals Office — has those characteristics in abundance. This has been widely acknowledged by welfare rights groups and other commentators.

I have decided, therefore, that the Social Welfare appeals office will, in future, also take responsibility for SWA appeals. The SWA system plays a very significant role in the overall income maintenance arrangements. The quality of the valuable service provided by the various health boards across the country can only be improved through the existence of a demonstrably independent appeals system. The necessary legislative changes to give effect to this decision will be provided in the Social Welfare Bill, 1996. In the meantime, my Department is examining the administrative and other implications arising from this decision with a view to its implementation as soon as is practicable.

In line with announcements which have already been made in this regard, the existing lone parent's allowance and deserted wife's benefit schemes are being replaced with a new one-parent family payment which it is envisaged will be introduced with effect from next January. The necessary legislative changes to bring this new payment into effect will be provided for in the Social Welfare Bill, 1996. The new arrangements will ensure equality of treatment between men and women in the area of lone parenthood and will also remove the existing conditions requiring that desertion be proved.

Two measures are being introduced for the benefit of blind or visually impaired people. First, in relation to the means test for the blind person's pension, the maintenance element of the higher education grant will be disregarded with effect from next April. Furthermore, the free travel companion pass is being extended from July next to blind and visually impaired children. This will be of particular benefit to children attending special schools and who have to commute on a daily or weekly basis, by allowing them have a person of their choice travel free with them on their journey.

One of the contribution conditions for the receipt of dental and optical treatment benefits requires at least 39 contributions paid or credited in the governing contribution year of which at least 13 must be paid contributions. There are currently a number of categories which are exempt from this condition, such as the long-term sick and the long-term unemployed, and I am extending those exemptions to include recipients of carer's allowance.

Finally, I am improving the access to treatment benefits for widows and widowers whose late spouse was entitled to these at the date of their death. Their entitlement is being extended for life, irrespective of the age of their deceased spouse at the date of death. Currently, this concession is available only in respect of those whose deceased spouses were over age 60 years.

The House will be aware of the vital role that voluntary and community groups can play in improving the quality of life for people dependent on social welfare and in empowering them to change their situation for the better. My Department has had a leading part for some years in supporting local self-help and community development initiatives and I am delighted to be able to make additional resources available in this budget for those purposes. Overall, an additional £1,270,000 is being provided bringing the total allocation for 1996 to £9.15 million. The additional provision in 1996 includes an extra £775,000 for moneylending and budgeting advice services, an extra £425,000 for projects under the community development programme and an extra £70,000 for the scheme of locally-based women's grants.

I spoke at length last year about my conviction of the need for all citizens to have access to an independent community information service which would operate outside the scope of the official information providers. My Department has taken over responsibility for the National Social Service Board since last June and since September I have appointed a new chairperson and board. I am glad to provide an additional £600,000 to the board to enable it to further develop and fund its network of citizens' information centres around the country.

The Department of Social Welfare makes weekly payments to more than 800,000 people and nearly one and a half million people benefit from these. Over a billion pounds goes directly to supporting families, over a billion to pensioners and over a billion to the unemployed. Much of the expenditure that goes to the unemployed, to pensioners and to people who are ill helps to support families. Some 315,000 children depend on recipients of pensions, disability and unemployment payments. In addition, nearly half a million families receive monthly child benefit payment.

The Department of Social Welfare is about far more than dispensing weekly and monthly payments. It provides vital employment support services and supports many voluntary and community groups. It has a labour market impact, through the social insurance system which provides a range of entitlements for insured workers, through the FIS which supports low-paid workers, and through the way in which it assists unemployed workers. This labour market impact is being improved substantially by the pro-employment measures I have just described and my intention is to carry out even more improvements of this kind. I will soon be receiving the final report of the Expert Working Group on the Integration of Tax and Social Welfare and I am confident that this will assist me further in this task. Many of that group's interim recommendations are included in today's budget package.

In addition to its practical support for workers, pensioners and families, the Department of Social Welfare has a significant and growing role in developing policy and strategies for long-term social and economic development. It has, under its aegis, three important organisations — the Pensions Board, the Combat Poverty Agency and the National Social Service Board — which each contribute to policy formation and planning for important aspects of society's present and future needs. In the past year I have also got up and running, with the Government's encouragement and support, a National Anti-Poverty Strategy and a Commission on the Family. The former is carrying out an in-depth assessment of the institutional and other changes required in order to overcome poverty. The latter is considering the future role of Government in relation to families, given the many changes which have been taking place in Irish family life and the need for an integrated strategy to strengthen and assist all families to carry out their functions effectively in future.

This year I look forward to receiving further advice and recommendations from all these bodies and to being able to act on them in next year's budget. I view this year's budget as the second in a three-part series and I expect the third part to consolidate the improvements in the first two and introduce further innovations. In the meantime I am pleased that this budget represents a mix of pro-work and pro-family measures which add up to very significant reforms.

Maximum weekly rates from June 1996

Payment Type	Weekly Personal Rate	Adult Dependant	Each Child
Present	NEW	Present	NEW	Rate
	£	£	£	£	£
SOCIAL INSURANCE PAYMENTS
Retirement/Old Age Contributory Pension
(i) Under Age 80	72.80	75.00	under 66 48.10	49.50	15.20
(ii) Aged 80 or over	77.60	80.00	over 66 52.30	53.90	15.20
Widow's Widower's Contributory Pension/Deserted Wife's Benefit
(i) Under Age 80	66.10	68.10			17.00
(ii) Aged 80 or over	70.90	73.10			17.00
Invalidity Pension
(i) Under Age 65	64.20	66.20	42.30	43.60	15.20
(ii) Aged 65 and Under Age 80	72.80	75.00	42.30	43.60	15.20
(iii) Aged 80 or over	77.60	80.00	42.30	43.60	15.20
Disability/Unemployment Benefit	62.50	64.50	37.50	38.50	13.20
SOCIAL ASSISTANCE PAYMENTS
Old Age Non-Contributory/Blind Person's Pension
(i) Under Age 80	62.50	64.50	37.50	38.50	13.20
(ii) Aged 80 or over	67.30	69.50	37.50	38.50	13.20
Widow's Pension/Deserted Wife's/Prisoner's Wife's Allowance
(i) Under Age 80	62.50	64.50
(ii) Aged 80 or over	67.30	69.50
Lone Parent's Allowance (with 1 child)	77.70	79.70			15.20
Carer's Allowance	62.50	67.50			13.20
Supplementary Welfare Allowance	60.40	62.40	37.50	38.50	13.20
Unemployment Assistance
(i) Short-term	60.40	62.40	37.50	38.50	13.20
(ii) Long-term (including Small-holders)	62.50	64.50	37.50	38.50	13.20
Pre-Retirement Allowance	62.50	64.50	37.50	38.50	13.20
Disabled Person's Maintenance Allowance (DPMA)	62.50	64.50	37.50	38.50	13.20
HEALTH ALLOWANCE PAYMENTS
Infectious Diseases Maintenance Allowance (IDMA)	62.50	64.50	43.30	44.60	13.20
Blind Welfare Allowance¹ — Blind Pensioner ¹Payable to Blind People in receipt of a Blind Pension	20.10	20.70			3.40
OTHER SOCIAL WELFARE ALLOWANCES
Maternity Benefit — Minimum rate	75.70	75.70
Adoptive Benefit — Minimum rate	75.70	75.70
Health & Safety Benefit	62.50	64.50	37.50	38.50	13.20
Orphan's Pension/Allowance	41.40	42.60
Living Alone Allowance	4.90	6.00

Child Benefit (September 1996)

Number of Children	NEW
Monthly	Weekly Equivalent
	£	£
1	29	6.69
2	58	13.38
3	92	21.23
4	126	29.08
5	160	36.92
6	194	44.77
7	228	52.62
8	262	60.46

Family Income Supplement (June 1996)

FIS is calculated at 60% of the difference between weekly income and the income limit for family size

Family Size	Present Income Limit	Increase	New Income Limit
	£	£	£
1 child	185	10	195
2 children	205	10	215
3 children	225	10	235
4 children	245	10	255
5 children	270	10	280
6 children	290	10	300
7 children	307	10	317
8 children	324	10	334

Voluntary & Community Services

Additional allocations bringing total provision in 1996 to £9.15 million, as follows:

	£m
Community Development Projects	4.5
Grant Schemes	2.65
Moneylending and Budgeting Advice Services	2.0

Appendix II

Examples of Improvements for Different Family Circumstances

* A single person on long-term unemployment assistance or supplementary welfare assistance will get an increase of £2 p.w. or 3.2 per cent giving them a new weekly rate of £64.50.

* A carer with two children in receipt of the carer's allowance will receive a new weekly payment of £107.20, taking account of child benefit, which is an increase of £5.90 or 5.8 per cent.

* A carer without dependent children will receive a new weekly rate of £67.50 which is an increase of £5 or 8 per cent.

* An old age pensioner couple on old age (non-contributory) pension will have a new weekly payment of £129.00 which is an increase of £4 or 3.2 per cent on their current payment.

* A pensioner who lives alone will receive a total increase of £3.30, taking account of the living alone allowance. This brings his/her pension to £81 per week, an increase of 4.3%. If this pensioner is over 80, his/her pension rises to £86 per week, an increase of 4.2 per cent.

* All rates have moved closer to the Commission on Social Welfare's `target rate' (now £68.10 per week) except contributory pensions, which have moved further above it. They are now 110 per cent of the `target' rate and the lowest payments (SWA and STUA) are now at 92 per cent of the target.

Dr. Woods

I wish to refer to the equality and law reform aspects of the budget. The Government reneged on the promises it made before the divorce referendum in that it provided no money for families experiencing marriage breakdown. The Minister for Equality and Law Reform in the recent debate on the divorce referendum assured the House and the people that in the event of the people voting for divorce the Government would provide all the necessary services to protect the families experiencing marital difficulties. The Minister and the Taoiseach welcomed Fianna Fáil's five year strategic action plan to support and protect the family in the new environment of legalised divorce.

It has not taken long to expose the hollowness of the Government promises and assurances. The Estimate of expenditure for the Minister's Department published before Christmas contained no additional financial provision for any of the services that will be needed. No money was provided for additional counselling services. The existing voluntary counselling services, although achieving wonders on the scant resources available to them, are unable to cope with present needs. Similarly, the mediation service, notwithstanding its excellent work, cannot meet even the present demand. The amount set aside in the Estimates for the Legal Aid Board will cater only for the existing level of demand. No money has been provided for the services that will be necessary as a result of the introduction of divorce, the effects of which will be experienced by the board in the second half of this year — people with legal separations are already queuing up.

No money has been set aside for the measures outlined in our five year strategic action plan, which received a warm welcome before the referendum from the Minister and the Taoiseach. They stated their support for an action plan for the first few years after the introduction of divorce. It is now apparent that the Government did not use the budget as an opportunity to fulfil the assurances given before the referendum. That is barefaced duplicity. Has the Government any shame? Its behaviour in failing to meet its promises to the people before the referendum is typical of the underhand way the referendum campaign was managed, as we now know from recent relevations in the High Court about Quinngate, or the Finlay affair.

What we are witnessing now are the tattered remnants of openness, transparency and accountability. It is difficult to comprehend the breathtaking hypocrisy of the Government. It has debased these laudable virtues by using them as a camouflage for deceit and insider dealing. The Minister misled this House and failed to live up to his assurances to the people. He should take the honourable course open to him. As a member of a Government who preached ad nauseam about openness and accountability, he should practise what he preaches and ask the Tánaiste to resign.

The Minister and the Tánaiste are responsible for the referendum contract debacle. In a written reply to a parliamentary question yesterday the Minister for Equality and Law Reform said he was not aware of the letter to Mr. Fergus Finlay, special adviser to the Tánaiste and Minister for Foreign Affairs, until it was read out in court. In replying, the Minister failed to address the question of whether he was aware that in effect QMP has been given the contract. All he said was that he and other members of the Cabinet and Cabinet subcommittees on divorce were not aware of the letter until it was read out in court. That is disingenuous.

The core issue is how that letter, in particular, the following phrases, should be interpreted? First: "Following our discussions on May 2nd concerning our appointment to handle the advertising"? Second: "In the event that there is any comment within the Dáil or the media which suggests that our appointment is questionable" and, three: "The announcement of our appointment should be low key"? Taken with the overall tenor of the letter, these expressions reflect a position which any reasonable person or court would construe as meaning that an agreement had been reached that QMP was to be awarded the contract. The Minister simply avoided the reality of the communications revealed and appears unwilling to face the unavoidable consequences of the true meaning of what was indicated in that letter.

The only construction that could be placed on that letter was that the contract had been committed to QMP. A parole contract had been made and it only remained for the Minister to complete the technicalities. Therefore, these presentations on 22 June 1995 were simply a charade to placate and involve the Fine Gael and Democratic Left parties.

Acting Chairman (Mr. Browne, Carlow-Kilkenny)

I intervene to inform the Deputy that this debate is about expenditure and financial policy.

Dr. Woods

This point I have almost finished is about expenditure and the behaviour of the Government. I know the Minister for Social Welfare continued for practically 40 minutes instead of 30, that he likes to be treated the same as other party leaders and would need that amount of time.

Acting Chairman

Perhaps the Deputy will confine his remarks to the budget.

Dr. Woods

Responsibility for this shabby dealing must lie with the Tánaiste and Minister for Foreign Affairs whose unelected special adviser in the Department of Foreign Affairs, Mr. Fergus Finlay, was up to his neck in manipulating the position and with the Minister for Equality and Law Reform, Deputy Taylor, who carried responsibility for the procedures adopted in awarding the contract.

In commenting on the budgetary measures I must emphasise that the Government has not delivered on its promises in relation to the referendum on divorce. That was why I wanted it to give a commitment, prior to the referendum, but it replied that it would give its commitments thereafter. We know how hollow that rings and I understand how little the Government wants to hear about that at this stage.

This budget is a poor reward for pensioners and taxpayers in times of plenty, high growth, low inflation and low interest rates. This happy economic environment is one of the main products of the social partnership initiated and led by Fianna Fáil in Government. Under the Programme for Competitiveness and Work and its predecessor, workers agreed to restrain their wage demands in the interest of creating jobs and a competitive environment for industry and the farming and services sectors, which has largely been achieved. The pay-off for workers and society in general was to have been forthcoming in terms of tax reductions, in improvements for those dependent on social services and general improvements in the quality and standard of life here.

This budget fails to deliver on those promises in any real way. The country is awash with money which is being frittered away to the extent that its benefits are almost non-existent. When one sees a current budget deficit of 0.2 per cent one is forced to the conclusion that the Government may be misleading the House, that it really expects growth to be greater than indicated and the deficit to be translated into a surplus by the end of the year. If that is the reality, the Government is playing a very dangerous game because those dependent on social welfare and who pay income tax deserve better as a reward for their restraint and social partnership.

This is a bitterly disappointing budget for widows, pensioners and other social welfare recipients who last year received a derisory 2.5 per cent increase, the lowest for 30 years. We must remember that growth was substantial in 1995, when the work done in preceding years was beginning to pay off, when it was possible to have done much more for those most dependent on social welfare payments, widows, pensioners and others, it was not done. They were cheated last year in a time of plenty.

This year's budgetary provision of a 3 per cent increase in personal rates is miserable in these buoyant times; not only is that increase inadequate in 1996 but it does nothing to compensate for pensioners' deficit carried forward from 1995. At the end of the year, when it transpired that economic growth had been even greater than the Government had forecast at the beginning of the year, pensioners were fully aware that, at the very minimum, they had been cheated of 0.5 per cent. Last year, as a very minimum, pensioners should have received 3 per cent right across the board.

In the case of a widow with three children that reduction entailed a loss of an extra £1.90 per week or a total of almost £100 in a full year, which does not amount to very much in her case or that of a pensioner. While Members like to come into the House and talk glibly about percentages, about the recommendations of the Commission on Social Welfare back in 1986, what do percentages mean when one has only a couple of pounds in one's hand? Percentages do not mean anything to those people. What widows and pensioners need is a few extra pounds per week, so that they can begin to live and enjoy some of the economic growth and general development.

With all this extra money in the economy will the Minister for Social Welfare now pay pensioners those arrears and raise this year's increase to 3.5 per cent to compensate for the built-in loss in current personal rates for widows, old age pensioners and the long-term unemployed? It should not be forgotten that the 2.5 per cent awarded last year was not a once-off; that henceforth it will be built into their entitlement, will remain lost to them. There is no question that a 3 per cent increase was the absolute minimum that could have been awarded them this year with any semblance of decency. The Minister for Social Welfare did not cheat widows and pensioners in this budget, he awarded them the absolute minimum for which I suppose, like them, we should be grateful. Nonetheless it is a very poor reward for them and those genuinely unemployed in a time of plenty. We must not forget that this is a time of growth and plenty when many others are faring much better in present circumstances.

Although the Minister for Social Welfare would like to sell this budget as representing a gain for those on social welfare, the reality is it is yet another dismal disappointment to widows, pensioners and the unemployed. Indeed, the position was set out very clearly in the Irish Independent this morning, pointing out that, in the case of an unemployed married man with three children, his net gain at the end of the year will be £3.

I have no doubt that the net financial position of the unemployed will not be improved to any great extent as a result of this budget. They cannot afford to wait for times to get better to be given something more. These are good times and the unemployed are getting virtually nothing. It is not good enough to tell them that things may improve in the future. They have been neglected. Many of them live on or near the breadline and some below it and will not thank this Government for neglecting them. They know the increases given are derisory and that child dependent allowances are frozen. They will not be fooled. They know the Government proposes increasing ESB charges and television licence fees. They know they have been forgotten by this three-headed committee style Government which is desperately clinging to power, but they will not forget this shabby treatment.

There is no sign in the budget of the definitive policy for the unemployed. During the past ten days or so this budget was put forward as the definitive document that would provide the solution to the unemployment problem. The Minister of State, Deputy Rabbitte, was right to protest on an RTE programme when the Tánaiste described his report as the Government's definitive response to unemployment. The Minister of State was also right in saying it was not an adequate programme. Now that Fine Gael and Democratic Left have added their input to that of Labour, it is clear the three parties do not have a worthwhile idea between them.

The plan as revealed in this budget will not make any significant impact on the provision of worthwhile sustainable jobs. It is a rerun of existing schemes and projects. Even the needs of successful area partnerships have been ignored. Area partnerships were set up throughout the country to break the cycle of long-term unemployment and give people support.

Mr. Brendan Butler from the northside area partnership, who has experience of dealing with the unemployed and is working to implement the programmes of the Social Partners, said on a radio programme this morning that he was disappointed with the provisions in the budget and did not think they would assist the people he is trying to help. Changes in the northside area partnership may be taken as an example of changes occuring in other area partnerships. The population with which that area partnership deals has increased from 35,000 to 70,000. The number of long-term unemployed in that area has increased from 5,000 to 10,000. That area partnership is experiencing real success but it requires £1 million to meet the needs of its increasing population and £1.5 million to introduce the new initiatives spread over the next four or five years as it has a placement programme until 1999. These people are doing the work but this Government is all about exercises in PR, fancy statements, fleets of advisers and PR merchants who are turning out scripts and feeding the media which have an insatiable desire for scripts and daily presentations. In the past the daily newspapers were the next day's chip covers. I do not know where they end up now but they are ephemeral. The people working in area partnerships are doing the real work to tackle unemployment, but they are ignored and have been forgotten in this budget. There is no allocation in the budget to assist the people working in those areas. They have made representations, but they have not been given anything.

We should face reality and consider if this budget will make a significant impact. I believe it will not. The plan is a rerun of various schemes where even the needs of the successful area partnerships have been ignored. Last year unemployment rose on average by 12,000 per week. A few years before the numbers of unemployed had fallen, but suddenly last year the number increased. People question why that has happened. The Ministers and their staffs who are dealing with this problem daily, know what is happening and they should do something to tackle it rather than send out more PR messages. Last year the number of unemployed rose from an average of 266,000 to an average of 278,000. That figure will fluctuate, but the hard underlying figure is 278,000 unemployed. Before Christmas it had increased to 285,000.

This budget offers only token improvements which will have little beneficial effect on the underlying rate of unemployment. The cost of the special employment measures for the long-term unemployed in 1996 is estimated by the Minister at approximately £5 million which will be partly offset by savings in the Social Welfare Vote, reducing the figure to £2 million or £3 million. That was included in the Minister's statement yesterday and represents the Government's special contribution to the unemployed — the definitive response to tackling the problem. The unemployed could be excused for laughing at the cynical public relations, pre-election exercise of a Government which is out of touch.

There is no improvement in income tax rates. They stand at 27 per cent and 48 per cent. The improvement in the standard rate tax band is welcomed, but it is not substantial. Perhaps its effect is best summarised in the tables which show that the overall apparent gain in net income for a married couple with two children where one partner earns £18,000 per annum, including PRSI, tax liability and the increase in child benefit from September 1996, amounts to 1 per cent. That gain will be lost quickly when additional costs in terms of ESB charges, lower mortgage tax relief, television licence fees, petrol costs and Government bank charges are taken into account.

This is no compensation for the low wage increases accepted by the PAYE worker. The integrity of this Government in honouring its side of the bargain in the Programme for Competitiveness and Work is in serious question. This is not a good budget. People have been forgotten including people with disabilities, women at work who require child care facilities, homemakers, Women's Aid which is tackling domestic violence but needs assistance, the rape crisis centres and area partnerships. I welcome the £3 increase in the carer's allowance, the increase from £10,000 to £15,000 in the back to work scheme — that figure is rising and it will be allowed increase to £15,000. That is a scheme about which I know a good deal as I introduced it. I welcome the increase to 1,000 in the number of places on the VTOS, the improvements in the BIK and the tax relief for the elderly towards the purchase of alarm systems. However, the manner in which the Government introduced that measure is not the best approach. It ignored the opportunities to introduce a system through voluntary local groups who are in touch with people. That, rather than giving a tax allowance to the elderly, many of whom will not be able to avail of it, would have been a more appropriate approach. I welcome the changes introduced in the community employment programme, the living alone allowance and the extension of the payment of child dependant allowances for 13 weeks. Those measures are all welcome. I would be interested to know the deficit in the social insurance fund and how much is being provided by the Exchequer for it. It appears there is a £79.3 million deficit in the fund in which there was a surplus of approximately £50 million when we left office.

This is not a good budget. It tinkers with all the elements, but comes up with nothing. It smacks of a Government which is in a state of paralysis. The three heads of Government and their armies of special advisers and handlers are pulling in different directions. This budget, like this rainbow coalition, is not good for anybody. It is not good for pensioners, the unemployed, taxpayers or business. Matters can only get worse as we approach the next general election. The sooner we have a general election the better it will be for the Irish people.

Debate adjourned.

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