I welcome Democratic Left's policy in reducing unemployment by advertising a few positions in a widely circulated newspaper.
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).
The Deputy should wait until order is restored.
I want the Ministers to hear me before they leave. They have embraced office with such élan that their ability to return to their junior ministerial offices so quickly at the end of each Order of Business is a sight to behold.
An interesting aside to what has been happening in Government is its ability to advertise posts with Civil Service status in such an acknowledged job recruitment agency as Democratic Left. That is something we should behold at all times. The ability of Ministers to walk away smiling and guffawing when caught in the act should not surprise us.
In my opening remarks I pointed to the failure of the Government to understand what makes this economy tick and questioned whether the Government's priority is its commitment to reducing unemployment. It has been the successive failure of this Government one month after another during the past 12 months to keep the unemployment figure below the lenient target it set. That is the litmus test of any Government. Ministers who were members of the previous administration would be quick to acknowledge that one of the criteria for the success of that Government was its ability to reduce the number on the unemployment register month after month through the policies it pursued not only in the macro-economic sphere, but by timely interventions to ensure a decline in that number. It was a priority of Government to seek to reduce unemployment. The absence of strategy in this budget confirms there is not a focused approach to reducing the number unemployed.
We have seen an attempt by distinct parts of this coalition to put forward a myriad of schemes and modifications of existing ones to play to their constituencies. The notable exception is Fine Gael which has abdicated all responsibility for the economic management of the country. While the Minister for Finance is not a member of the Fine Gael Party, I would expect some Fine Gael influence in the preparation of the budget and the adoption of Estimates.
There is no evidence in the budget to suggest that the Fine Gael Party is exerting the level of influence one would expect given its strength in parliament, its supporters and its mandate in terms of the economic management of the country. That is a matter of disappointment to me because there are elements within that party who acknowledge and understand the workings of an economy based on free enterprise, on the creation of wealth by those risk-takers for whom it is the job of Government to provide the type of risk reward ratios that render investment more likely than unlikely, that render job creation a more imminent than distant aspiration. It encourages business to seek new markets in an enterprising manner if it feels it has the support of those vested with the responsibility of managing the economy. I am afraid we have seen the undermining of confidence of those prepared to take risks in our economy because, despite the most lenient spending targets it has set itself, this Government has exceeded them.
When I last spoke I pointed out that I thought we had at last dealt with that culture of Government of the late 1970s and early 1980s which failed to meet its targets. Regardless of political differences on the part of successive Governments from 1987 to date, at least it can be said that successive Ministers for Finance could confirm that the Government targets set for a given financial year had been met and, in many cases, had been bettered whereas this budget heralds a return to the old culture. By reason of the spending targets this Government has set itself, it is walking away from the inflation plus 2 per cent spending target set in the programme, A Government of Renewal. That is an indication, not of a good Government but rather one that has forgotten the reason it was formed in the first place which, on its own premise in economic management terms, was to provide spending estimates 2 per cent in excess of inflation. Those estimates have actually been 4 per cent and 4.5 per cent in excess of inflation. It decided to walk away from its own target which does not lend to credibility, individually, or collectively, in devising economic proposals for the management of our economy.
After the painstaking build-up there has been since 1987 — derided in Opposition by Fine Gael and others, by both Democratic Left and the Progressive Democrats — over the past few days we see the social partnership subjected to increasing strain as the trade union movement and employers have had an opportunity to examine in detail just what this Government is making available, of ascertaining the minimal extent to which it is prepared to return to workers and their representatives those benefits which have accrued to our economy because of its previous good management. Respectable members of the trade union movement, people who wield considerable influence within the large unions and the Trade Union Congress itself, state quite clearly that the prospects for a continuation of the social partnership model of this economy is at serious risk. The reason they are saying that is the feedback they are receiving from their workers. In the case of those earning up to £22,000 per annum, their maximum benefit in tax take terms is 1 per cent gross. In the case of those earning in excess of £22,000 per annum, the gross tax change in their favour will be 1.5 per cent which, when one takes into account reduced mortgage interest and VHI relief reduces that 1.5 per cent advantage to 0.75 per cent. That is what those workers are getting from this Government at the top of the economic cycle, having inherited an economy never going as well in macro-economic terms, certainly better than has been the case over the past decade. That is the benefit emanating from a Government which has, as its second and third member in command, those who claim, through the philosophy of the party to which they belong, to work on behalf of working people, who claimed that, once given the opportunity, they would ensure that working people were given their due desserts on the basis of an economy performing as well as ours at present.
Despite the huge possibilities for major reductions in taxes, paid particularly on the part of the PAYE sector, nothing has been forthcoming with the exception of a mere 1 per cent in gross terms for those earning up to £22,000 per annum and 1.5 per cent gross in the case of those earning in excess of that figure. That is a major disappointment to the vast majority of workers in this economy. Certainly it calls into question the commitment of the Government, not only in relation to its spending targets and its non-commitment to its programme of renewal, but also its commitment to the Programme for Competitiveness and Work, the social partnership arrangement which has been the real glue which has made this economy work, the real model devised since 1987 to overcome our difficulties, and to find common ground in the economic management of our economy and the provision of the type of socially caring policies widely accepted across the broad range of people with an interest in the running of our economy.
This budget, which comes at the best possible time for any Minister for Finance or any collection of politicians sufficiently lucky to be in Government, wrecks its own economic programme and places a severe strain on the third successive social partnership agreement introduced since 1987. That is the measure of this Government and, if people take achievement out of that, there are very limited horizons on the Government front benches. It is a major political and economic mistake on the part of this Government not to take cognisance of the binding commitments on whoever may be in Government for the duration of those programmes. The success of our economy has come about through the ability of successive Governments and social partners to work together, to decide on a common agenda, to make the necessary compromises. If there are Members of this House sufficiently naive to believe that, by being in Government, one can dictate without seeking a broad range of agreement within which one can operate we are heading into a very serious position.
The loss of confidence on the part of taxpayers, the trade union movement and business organisations has led them to realise this week how little has been done to ensure we have a competitive economy. Ultimately, the prosperity of this country is dependent not on whether a social welfare increase is 2.5 per cent or 3 per cent, on whether there is a make-jobs scheme here or there, certainly not dependent on the immediate editorial line in the newspapers and media generally resulting from a Government Minister making a Budget Statement in this House. The future prosperity of this economy will be dictated by the preparedness of the political system to work hand in hand with employers and employee representatives to devise policies which are workable, practicable and acceptable to all, driven home by a political impetus and a will to face down sectoral interests having reached those agreements. That is what is important.
The problem with this Government, and the three parties that form it, is its unfortunate capacity to settle with its own sectional political constituency, against the national interest in net terms, thus causing the problems now being witnessed within the political system and in terms of the under-performance of our economy we will see in ensuing years. The one criticism one can make of this budget is its complacency about the level of our performance.
Whenever our economy is performing better than usual, when people are doing a relatively good job, of course we must all acknowledge that performance. I suggest that it is happening because we are in Government and the other crowd is not is such simplistic idiocy it does no service to any Member of this House. At a time of critical economic development we have a Government walking away from the lenient targets it set itself.
I have nothing to say on this budget in relation to farming because there is nothing in it for the farming sector.
There is a sum of £15 million.
A sum of £15 million out of the total spend in that budget is ridiculous. Anyone who reads the projections for the sheep meat industry, agricultural research and the structure of Irish farming for the next ten years will know we cannot be complacent about agriculture. There is a mistaken belief that all farmers are doing well and we do not have to worry about them. While 50,000 commercial farmers are in a position to meet the competitive challenges of European agriculture in the years ahead 1,000,000 farmers are not in that position. There are 50,000 farmers whose viability is threatened. We have had nothing in this budget that is proinvestment. All the statistics show that while we have large dairying enterprises five times more profitable than any other sector of agriculture, the vast majority of farmers are not doing well because they do not have viable units and an average industrial wage.
The IFA, the ICMSA and lobby groups sought to bring forward investment plans for farming. We do not now have on-farm investment plans. We got rid of the farm improvement programme, and the control of farmyard pollution scheme is finished since June 1995. Is there any other business other than dairying that would say its most profitable sector will have 2,500 fewer working in it per year? If any other part of the economy had that prognosis for the next five or ten years there would be a revolution in this House. Unfortunately there is inherited complacency in Agriculture House with regard to the 50,000 commercial farmers who feel there is nothing they can do. Rural decline will be an accelerating factor in Irish life unless the Government and those in Agriculture House do something about it.
On Question Time today we heard the REPS would go some way towards improving the viability of small holdings. However, it is acknowledged that the scheme and other investment schemes are underfunded this year and that is the reason we had to stop them. We are moving in all the wrong directions. The Minister can point to improved exports, and improved productivity but anyone who reads the data behind those broad figures knows there is a serious issue arising for agriculture.
Fewer farm families will be in business at the end of the year. That trend has been there a long time. When we had an opportunity to do something about it we let it pass and the present Minister is as guilty as anyone.
With your permission I wish to share my time with the Minister for Agriculture, Food and Forestry, Deputy Yates.
I am sure that is satisfactory and agreed.
I welcome this budget which seeks to build on the strong foundations established last year. The strategy outlined by my colleague, the Minister for Finance, will sustain economic development and position our society to face the future with continued optimism and confidence.
Last year's budget was a success. Ireland's economic performance in 1995 was better than that of any other economy in the European Union or in the OECD. The results confirm that we have been successful in achieving the objectives set down at this time last year. Most encouragingly there are clear signs that the rapid economic growth is being translated into significant increases in the numbers of people at work.
At the same time the Government's social cohesion measures have ensured that those less well off in our society are being cared for. The Government remains committed to this principal and the latest budget strategy is consistent with this commitment. In particular, I welcome the new initiatives and improvements proposed to deal with long-term unemployment.
On the political tactics being used by the parties in opposition to try to divide this Government, the budget produced by the Minister for Finance was a Government budget and each Government party stands over all of its provisions.
Deputy Cowen misinformed the House when he referred to masses of increases in public expenditure when this year we are talking about a nominal increase of 2.5 per cent over the rate of inflation. This compares, in the period when Deputy Cowen was in Government, with increases of 11.8 per cent in 1994 and 11.9 per cent in 1993. This year we will have an increase of 4.8 per cent, including the increase in the rate of inflation. We are endeavouring — and will succeed — to keep interest rates and inflation low.
To answer the charges of Deputy Quill's party on income tax and other things we have not done in this budget, I would remind people that the last time Fianna Fáil and Deputy Quill's party was in Government a £40,000 mortgage cost £130 more per month than it does today. That is the reality of low interest rates instead of high interest rates. So far as the ordinary individual on a £40,000 mortgage is concerned, he or she is £130 per month better off today than during the term of the Fianna FáilProgressive Democrats Government. We have had enough lectures from those whose records do not show them in a good light.
The re-organisation of the Defence Forces and in particular the announcement by the Minister for Finance in his budget speech about the provision of £13 million for a voluntary early retirement scheme represents major developments in the defence area. There is widespread agreement on the need to modernise the structure and organisation of the Defence Forces. Its basic underlying framework has remained unchanged for decades. The review of the Defence Forces undertaken by the efficiency audit group, the main thrust of which has been approved by the Government, provides an opportunity to address many issues in the Army, Naval Service and Air Corps which require attention. A number of issues have been the subject of public debate for a considerable period.
An implementation group has been established to draw up detailed proposals covering the initial three year period of what will ultimately be a plan of approximately ten year's duration. I expect to receive the group's report very shortly and I will then be in a position to bring it to Government.
What is now contemplated is a structured set of reforms to modernise the Defence Forces to allow the current organisation to adapt to the necessary changes. The military authorities are fully engaged in and committed to this process having been involved in its development from the very outset.
The rising age profile of military personnel has been a concern for some time. It is one of a number of issues which will be addressed in the course of implementing the programme of reform in the Defence Forces. The implementation group will deal in its report with the question of a voluntary early retirement scheme as one of the measures which will address the age profile problem. The terms of the scheme to be introduced will, of course, be additional to the unique superannuation arrangements already in place for members of the Defence Forces. Until such time as the report is presented to me it would be premature to engage in speculation about the details of the scheme. However, I want to make it abundantly clear that there is no question of compulsory redundancies.
As an integral part of the process of addressing the age profile problem and the restructuring of the Defence Forces it is my intention to embark on a planned programme of recruitment. This will enable us to build a vibrant organisation that is in a position to take on the many challenges this process of reform will present. The first step in this recruitment programme will be taken later in the year. This review should not be seen as a mere cost cutting exercise. The EAG was not asked to review the Defence Forces in order to produce a programme of cut backs and closures. The objective of the Government is to have a properly equipped Defence Forces which are capable of meeting their roles in the most efficient and effective way. In addition, the Defence Forces of the future must have the capacity and flexibility to adapt to a changing environment. It is also important that the Defence Forces provide a challenging and rewarding career for all personnel in the Army, Naval Service and Air Corps and that their management, organisation and operation are in accordance with best practice.
A key objective in this regard is to release more personnel for operational duties. I know that this is what the military personnel want. In the context of developing and modernising the Defence Forces yesterday I announced the placing of a major contract worth approximately £5.5 million, representing the first phase of the replacement of the Army's primary tactical communications system. The placing of this contract represents a major step in the upgrading and re-equipping of the Defence Forces with the latest in modern radio communications equipment.
An important element in the organisation of the Defence Forces is their deployment in the various barracks. There has been a great deal of what I can only describe as alarmist talk in relation to the closure of Army barracks. I have decided and I have made it clear on many occasions in the recent past — that there will be no barrack closures as part of the initial plan on which we are about to embark. There will, however, be a study of facilities occupied by the Defence Forces towards the end of the plan. In the conduct of that study full regard will be taken of the socio-economic importance of local barracks.
I would wish to stress that during the entire process of reform and reorganisation there has been, and will continue to be, consultation with the various military representative bodies. The representative bodies have been kept informed of developments. I have met on a number of occasions with the Representative Association for Commissioned Officers, the Permanent Defence Force Other Ranks Representative Association and the Reserve Defence Forces Representative Association. Furthermore a sub-committee of the conciliation and arbitration system has been established and is dedicated to discussion with the representative bodies on issues surrounding the entire EAG process.
I would like to take this opportunity to pay tribute to the various elements of the Defence Forces — Army, Naval Service, Air Corps and Reserve — for their work at home and abroad. Irish troops serving overseas have attracted commendation and acclaim for the consistently high standards they have maintained over the years as peacekeepers often in very difficult circumstances. They have a proud record and tradition and they are deserving of our congratulations. It is particularly in the role of peacekeeping that the professionalism of members of the Defence Forces comes to the fore. Irish soldiers have built up an enviable international reputation as peacekeepers.
I wish now to turn to the marine area. Our inland fisheries are a valuable resources and it is a sector to which we look to create major employment in the coming years. A sum of £4 million is being allocated specifically to tourism angling this year. In addition to ongoing policy and structures reviews, we are focusing on the management of our all important salmon and seatrout. We will ensure that the new approaches and thinking which will emerge from this activity will energise the sector, expand its employment creation opportunities and allow its long-term development to proceed on a sustainable basis.
I continue to be convinced of the potential of our marine resources and of our capacity to translate this potential into real and sustainable jobs. The sea fisheries sector is important for the Irish economy not only because it provides more than 15,000 jobs and makes a significant contribution to the balance of payments but also because much of the economic activity and many of the jobs generated are in remote areas. The fishing industry is an important employment creator and an important means of keeping communities together in these areas.
The development of the sea fishing industry will proceed apace in 1996. Under the EU Operational Programme for Fisheries some £32 million will be invested in the various segments of the sea fishing industry this year. The fleet modernisation programme is integral to the success of this industry. The current investment programmes and the decommissioning scheme are geared to improving the structure and age profile of the fleet.
We must encourage young people to engage professionally in sea fishing. This year BIM will run training programmes, with 1,547 places covering new entrants and continuing training for those involved in sea fishing, aquaculture and processing. The fish processing sector which employs more than 2,200 people will be given priority attention, as will the marketing of fish at home and abroad. I have approved 95 projects, involving the upgrading and modernisation of premises at various locations, at a total cost of some £15 million.
Recent media reports have sought to give the impression that Spanish boats will have unlimited access to Irish waters and that we do not have either the legal right to limit them or the capability to detect and prosecute illegal entry or illegal fishing. This is not the case and I would like to set the record straight.
The current situation arises from the accession agreement negotiated with Spain and Portugal in 1986 which granted a ten year lead-in period for open access to the Irish Box from 1 January 1996. However, due to the position which the Government adopted in negotiations in Brussels at the end of 1994 and throughout 1995 further concessions were secured by Ireland to allow a continuing derogation from the principle of open access in the case of the Irish Box. Under the new arrangements which came into operation on 1 January the total number of Spanish vessels allowed in Irish waters remains limited to 93, the same number of vessels as have been permitted in our waters since 1986. Of the 93 vessels, 40 named vessels only are permitted to fish inside the Irish Box. Accordingly there is no overall increase in the number of Spanish vessels permitted to fish in Irish waters from 1 January this year. In addition, Spanish quotas have not been increased.
All vessels in Irish waters will be closely monitored and controlled. The fact that during 1995 the Naval Service boarded 928 vessels and detained 51 vessels for alleged fishing offences demonstrates the strength of our current efforts. Since 1 January the Naval Service has undertaken 25 boardings and three vessels have been detained. By way of essential complement to the Naval activities, the Air Corps CASA aircraft have made a big impact in helping to focus the efforts of surface patrols more effectively. During 1995, 267 missions were undertaken by the aircraft and 22 missions have been completed so far this year. Under new procedures a new mandatory entry-exit reporting system will apply to all vessels entering or leaving the Irish Box. This will greatly increase our ability to tackle illegal fishing in our waters.
It is my intention to strengthen still further the fisheries surveillance function. During 1995 in preparation for the new arrangements which apply to the Irish Box, I negotiated new regulations at EU level which will strengthen our surveillance effort. I achieved EU agreement to a fund of £12 million which will be made available during the period 1996 — 2000 to this country to fund operational needs of the protection service. In addition, Ireland will receive support for a significant programme of capital investment in fisheries surveillance equipment and this support will be at a higher rate than that available to other member states.
These new measures will further strengthen our protection services. I am satisfied that illegal fishing in our waters will be kept to a minimum. Any vessel arrested fishing illegally knows that we will prosecute and that our penalties are extremely severe.
In order that we may realise more fully the potential of our sea fisheries, it is essential that the facilities at our fishery harbours continue to be upgraded. To this end the Government will be investing some £3 million in 1996 as part of our continuing efforts to provide a well equipped fishery harbour structure at strategically located landing places around the coast.
I am continuing to give the highest priority to the important subject of maritime safety. My objective in this regard is to ensure that the highest standards of safety are set and enforced to minimise the risks to human safety on our waters. In light of recurring tragedies at sea involving fishing vessels, I recently established a high level fishing vessel safety review group to review the safety status of our fishing fleet. This group will conduct the most thorough and wideranging examination ever of the industry and I am determined there will be swift and comprehensive action taken on foot of the group's findings, which I look forward to receiving towards the end of May.
Over £5 million has been provided in 1996 on marine research, an increase of 8 per cent on the 1995 allocation. This reiterates the Government's strong commitment to marine research and its confidence that the marine resource offers promising potential for development, employment and wealth.
The Marine Institute has since its foundation made steady progress in line with its statutory obligation to undertake, promote, co-ordinate and assist marine research that will promote economic development, create employment and protect the marine resource.
Total investment in excess of £8 million has been earmarked for marine research under the Fisheries Operational Programme for 1994-99, again further evidence of the Government's strong commitment. Initiatives proposed include the provision of an enhanced research vessel capability, projects based research into the management and development of sea and inland fisheries and aquaculture, added value projects in the marine and fish processing sector and a national survey of marine resources.
As regards the shipping sector, I believe the Irish-flagged shipping sector has significant potential for employment creation in certain areas and is under severe competitive pressure to maintain employment in others. I intend to engage in intensive discussion with the interests within the sector in the next few weeks. My objective is twofold: first, to ensure that all options are explored which might assist employment in the sector and second, on foot of this in-depth assessment, to secure where considered feasible, changes which will deliver real Irish employment maintenance and growth in the sector.
Considerable progress was made in 1995 on the basis of the strategy and objectives adopted by the Government. I am confident the latest budgetary proposals will allow us to further build on this success and to look to the future with renewed confidence. I am also satisfied that they provide a solid base for the continued development of the marine sector and will enable us to meet the challenges on the defence side.
Agriculture is the most important indigenous sector in our economy, accounting for 15 per cent of GDP and one fifth of all employment. It is worth more than any other industrial sector in that 86 per cent of it is made up of Irish raw materials.
A number of factors in this budget will contribute to the enhanced prosperity of that sector through the guidance of this Government. First, there has been a demand by our food industry for increased supports by reducing its PRSI contributions. The reduction in employers' PRSI, from 12.2 per cent to 12 per cent, the increase in the threshold for the lower rate of PRSI and the reduction in the rate from 9 per cent to 8.5 per cent, will improve the cost competitiveness of our food industry.
I am especially pleased that the first £50,000 of income earned by small agribusinesses will be taken at the lower corporation profits tax rate. That is of direct relevance to people. It will encourage traders to incorporate their businesses and will be a worthwhile long-term step. The increase in the employees' PRSI tax allowance from £50 to £80 a week is also of significance, as is the widening of the 27 per cent tax band. The targeting of tax reliefs to the lower paid is the right strategy. I support the overall Government strategy, which is not to have tax giveaways and put resources into tax cuts at this time but to ensure that from the public finance perspective, the overall Exchequer borrowing requirement is progressively cut.
The Opposition has not acknowledged the facts as far as growth in public expenditure is concerned. When I was Opposition spokesman for finance, public expenditure was growing in real terms by up to 9 per cent a year. Nominally, it has been in double digits since 1990. In the period 1990-94, public expenditure increased by a whopping 40 per cent in nominal terms. However, that outturn has been reined in to under 6 per cent last year. Payments relating to hepatitis C — we were criticised for this — and other items were put into the 1995 year which could, perhaps have been put in for 1996. That is an indication of the real estimate of the growth in public expenditure and is almost a halving of what occurred in the past in nominal terms. It has been cut further this year to 4.8 per cent and that will be honoured. We may even have a current budget surplus this year. The current budget deficit is forecast at £82 million but considering the way revenue is growing, that will be superseded.
Deputy Ahern always prides himself on the fact that he was the first Minister for Finance since the 1960s to have a current budget surplus. However, that was only made possible through the proceeds of £230 million from the tax amnesty. That was a one off factor and was acknowledged independently as such. Therefore, there was no real underlying current budget surplus. This Government had to meet the latent unpaid bills of the beef fines and the hepatitis C and equality payments. In that regard, there has been a real improvement in the public finances. We have the lowest Exchequer borrowing requirement, at 2 per cent of GNP, for over 15 years. It is nonsense to say that this is a tax and spend Government. Its performance with the public finances will be seen in retrospect to have been a real improvement and in facilitating low interest and inflation rates, the latter of which may decrease to 2.25 per cent this year.
I have been anxious to deal with the question of land mobility, both in enhancing the farm retirement scheme and lowering the capital acquisitions tax. However, the main problem is that because of buoyancy in farm incomes land and quota prices have overheated. Therefore, there is restricted access to new entrants. The tax concessions for leasing land is another way of coming a that problem to ensure that people their lands. It is unlike commercial property where tenants hold all the rights after a few years. This is a way of facilitating young, energetic, well educated and qualified farmers to get access to land. The tax concessions announced in the budget, including the exemption of the transfer of stock in the year of retirement, the increase in the exemption limit for income from land leasing and the changes in capital acquisitions tax relief at 75 per cent, are significant and important developments in this regard.
The most important development for farmers is the increase in the VAT refund rate from 2.5 per cent to 2.8 per cent which will be worth £9 million in a full year. This is a direct cash aid to unregistered farmers who make up the vast majority of farmers.
I am also pleased, because of competitive pressure from France, Northern Ireland and Britain in the pigs and poultry sectors, that excise duty on non-automotive LPG has been cut by 2p per gallon. I hope this is part of a process which will see the duty reduced incrementally each year.
There is a pressing need to eliminate poverty traps. In our clinics we have all met people with large families who are better off remaining within the social welfare system than taking up a low paid job. The Government has announced imaginative measures to deal with this. These include the provision for the retention of the medical card for three years after entering employment where a person has been unemployed for one year or more; more flexible arrangements for the calculation of entitlement to unemployment assistance and the provision for the retention of full rate child dependant allowances — the single biggest factor which has prevented people from taking up employment as, unlike the Department of Social Welfare, employers do not pay on the basis of the number of children in a family. For the first time in 1995 economic growth was translated into job creation with an extra 40,000 jobs being created, but it is no coincidence that these were not taken up by the long-term unemployed, they were taken up by women returning to the workforce, school leavers and returned emigrants.
The agricultural sector had its best year in 1995 when farm incomes exceeded £2 billion, an increase of 6 per cent on the previous year. Since 1990 farm incomes have increased by about 30 per cent in real terms when lower interest rates and inflation are taken into account. Gross agricultural output also increased substantially last year, by 4 per cent, notwithstanding quota restrictions and so on.
Direct payments to farmers are now a vital component of farm income. We should not lose sight of the fact that the CAP is worth £1.5 billion to Ireland between direct income aids — headage and premium payments — and direct market supports. Everyone in the economy is heavily dependent on it, it is not just a farmer issue. In the context of enlargement, we have interests to protect in the next GATT Round, in terms of budgetary reform.
There are particular problems in the beef sector, arising from the cuts in export refunds, the deseasonalisation premium and the general level of disallowances to which I am committed to dealing.
A special deal was secured for sheep farmers under which it was agreed that an extra £26 million would be paid at the end of December, notwithstanding the fact that sheep meat prices were lower in other countries which received nothing. This is indicative of the strength of our negotiating position in Brussels in the context of the CAP.
The Estimate for my Department amounts to £614 million. The Government is committed to the development of the agricultural sector and will seek to enhance many schemes, such as the REPS and the early retirement and installation aid schemes which are financed from the FEOGA Guarantee Fund.
I am determined to ensure, through the Charter of Rights, that farmers are offered a speedy, efficient, friendly and customer oriented service by the Department. In that context, it is my intention to upgrade a number of departmental facilities this year, including the telephone service. If one telephones any of the 26 district veterinary or livestock offices, one will be put through to a head office, be it in Cavan, Castlebar, Portlaoise or Dublin, for the cost of a local call. We also look forward to the provision of departmental offices in Castlebar, Enniscorthy, Tipperary and Roscommon and the introduction of longer opening hours, recently agreed with the CPSU.
Most of the comments from the Opposition benches amount to little more than sour grapes that they threw away Government office. They are only now coming to grips with the reality that the economy is in safe hands. This is not a populist budget, but it is certainly an enduring one which will ensure continuity in terms of growth in employment and output and economic development.
It is obvious to everyone that the financial strategy outlined in the budget is wrong, reckless and dangerous. I predict that in years to come we will look back on this budget as the budget which set us in the wrong direction. The Government had an opportunity to do something solid, but failed to take it.
We will also look back on it as the budget that put Democratic Left in the driving seat and in respect of which there was an interesting and exciting competition between Ministers and their advisers to see which of them could leak more information about its various provisions in advance. Everyone knew what it contained prior to its announcement in the House. The photocalls were arranged well in advance to claim credit for various provisions. That was unprecedented.
Based on my short experience of two party Governments, it must be a horrendous experience in a three party Government getting into the queue for the photocalls in the days prior to the announcement of the budget to ensure the correct journalist is tipped off. For example, the Minister of State with responsibility for commerce and technology called a press conference and issued a press release in which he referred to the submission he had made to Cabinet. That was unprecedented. He indicated in public that a figure of £10 million was urgently needed for science and technology, but lo and behold only £4 million was allocated by the Minister for Finance in the budget. I am around long enough to know that this was only a public relations exercise. I have engaged in much public relations work during the years, but never tried to up the ante by announcing in public what was contained in a submission to Cabinet. This is a clear case of the tail wagging the dog.
There is no mention of tax reform in the budget. In Opposition the Deputies opposite, in response to the report of the Commission on Taxation, highlighted the need for reform, including reductions, but it seems this is no longer on the Government's agenda. Reducing the tax burden is no longer an apsiration.
The budget provisions are beginning to unravel. It was strongly criticised by SIPTU which indicated that it is not certain there will be another national understanding. National agreements and social partnerships, which in the past have been reasonable, have been good for the country. It would be tragic if the trade unions took the view that the Government has reneged on the commitments given in the Programme for Competitiveness and Work as this would make the negotiation of a new agreement much more difficult.
In Opposition the Taoiseach informed the House that he did not believe in national understandings as they only upped the ante, provided for increases the private sector could not afford, in general benefited the public sector and should be done away with. To be fair to him, when he became Taoiseach he changed his mind, which is welcome.
As I hope I will be able to demonstrate, the financial strategy outlined in the budget is reckless. It is a budget that demonstrates that a very small party is calling the shots. It has given up totally on tax reform and is already unravelling. Not only SIPTU but the small business sector have had strong things to say about it. It is also clear that the budget was full of tokenism and tinkering. It has a few bob for twins — if one happens to have twins — and for alarms; there are a few words about work trials and it throws in £2 per week. Are twins, alarms, work trials and £2 per week for the populace a budget? It is a public relations exercise, not the real financial and economic strategy which this country desperately needs. Some of these measures considered individually are quite insulting.
This is a wrong and reckless direction to take. I listened to the comments made by Minister for Agriculture, Food and Forestry about public spending. There is one difference when we discuss public expenditure in 1995 — this Government 12 months ago told this House that it had a spending target and would stick to it but it missed its target dramatically. It is also a reckless and wrong strategy because the current budget deficit is predicted to be £82 million. One might think that is small because it was £362 million last year. However, in this budget the Government is planning to borrow £627 million. Last year the Government borrowed £729 million. I have problems with this, as would any economics student or person who runs a household.
I doubt that there is an economist or an accountant in the country who believes that when there are large growth rates and substantial buoyancy in tax revenue one should borrow £700 million on top of that in order to further inflate the economy. That is why this is a reckless strategy. Some Government will sit on the Government benches in a couple of years time and have to cut health, education and other services because we are not doing what should be obvious now. When there are substantial growth rates, high tax revenue and all systems go in the economy, in other words, when we are doing well, one redistributes some of it but one makes sure that one does not run a deficit. If one runs a deficit in times of high growth and high tax yields one does not have the option to do that when, perhaps, it should be done which is during a recession.
There are signs of recession. The United States is slowing down and countries in Europe are finding it hard to meet the Maastricht guidelines. In order to meet them they will have to put a clamp on spending and that will slow the rate of growth in Europe. Things are acceptable now with between 5 per cent and 7 per cent growth rates but nobody in this country thinks that will last. When it stops, as it will in a few years, and when tax yields slow down as a result we will see Ministers for Finance coming into the House wanting to borrow not £700 million but £2 billion or £3 billion.
My strongest objection to this budget is its absolute short-sightedness and the highly political nature of its decisions. The growth rate was 7 per cent in 1995 and it is anticipated to be about 5 per cent in 1996. Tax revenues are climbing — in 1995 the tax yield was £11.3 billion and it is forecast to be £12 billion this year, which is an increase of £700 million. GNP has increased from £33.6 billion to £36.2 billion, an increase of £2.6 billion. It is financial treason, lunacy and political recklessness of the highest order when there are growth rates of 7 per cent, £700 million in additional tax revenue and a GNP growing by £2.6 billion to borrow £627 million instead of keeping the budget balanced as we did the year before last. No household would follow that reckless financial strategy. That is what it is and any amateur economist or economics student could tell us that.
There are two other reasons why the budget is reckless. The year 1999-2000 will see the dramatic slowing down of EU funding for this country. EU funds already provide a substantial portion of our current and capital budgets. Those funds will start to run out in 1999 but there is no provision for that in this budget. This emphasises why it is reckless and short-sighted. There is no provision to prepare for European Monetary Union. We are meeting the Maastricht guidelines of under 3 per cent but that is no big deal. However, we are not meeting them with regard to the debt; GNP ratio; we are still a substantial distance from that.
From the macro point of view it is clear that this budget has been put together for political purposes and as a compromise between two or three ideologies. It has been thrashed out with no sign of its framers having looked a couple of years into the future. There is no care for the health and education sectors and the public service which will suffer within a few years as a result of this budget. The opportunity was not taken to produce a solid surplus, reduce taxation and reduce the debt. That could have been done by the Government simply meeting its own targets on expenditure.
Much has been made about current spending. I do not wish to get involved in quibbling over figures but as Deputy McCreevy pointed out in his speech on the budget and as is clear on looking at the statement on the Principal Features of the budget, the figure is not 2 per cent but over 6 per cent. Current spending announced last January was £11.8 billion. However, the post budget spending figure in the documentation is £12.5 billion, an increase of £700 million. That represents 6 per cent, not the 2 per cent quoted by the Government.
It is clear that the strategy is wrong and dangerous. It is unfair to the working people who have sought tax reductions time and time again. I never thought I would find myself in agreement with SIPTU — that would not be my usual stance on economic matters. However, when they say that they were promised tax cuts and received none I must voice my agreement. It took this House and successive Governments eight to ten years to reduce the tax rate from 35 per cent to 27 per cent. Every year for eight years we knocked a little off. It was at 35 per cent for about a quarter of a century and was reduced to 27 per cent. What happened this year? It stopped; it could not be accommodated. A Government, particularly one comprising left wing personnel, could not organise a reduction in the tax rate. What kind of left wing people are in the Government when they cannot see that reducing ordinary people's income tax is the best possible way to let them breathe and make money for their families?
The Sunday Tribune of 28 January, 1996 devotes a full page to this budget. The article is entitled “Small Change in your Purse” and is worked out by Ernst and Young. They give six examples of its effect on families and others. The report states that a single woman earning £20,000 per annum will be better off by £1.50 per week, a widow aged 65 will be better off by £3 per week, a single woman in other circumstances as set out will be better off by £2 per week and a single person earning £9,500 per annum will be better off by £3.20 per week. Those in the middle classes — a derogratory term under this Government — for example, senior civil servants or executives who earn £50,000 per annum, will be worse off by £6 per week. The same applies to a couple who earn £25,000 each per annum. I accept that most of them can afford such a reduction, but that is not the point.
SIPTU is correct in that there have not been tax cuts or tax reform in this budget. The money was simply collected and wasted. The 7 per cent growth rate and the £700 million in income tax revenue were wasted. Ordinary taxpayers certainly did not benefit and that is obvious from the report of the independent accounting firm in the Sunday Tribune who compared the figures for this year and last year. I challenge anyone to dispute them.
The budget failed miserably in the area of tax cuts. I did not expect anything else from Fine Gael or Labour but I expected the Democratic Left to secure real tax cuts for people earning £9,500 per annum, not a tax cut of £1.50 per week. The clawback in VHI and mortgage interest relief payments will mean they will be worse off. The reduction from 37 per cent to 32 per cent in mortgage interest relief will take effect in a few weeks' time. Therefore, the £1.50 tax reduction will be useless. This is the hallmark of the Government. The social welfare increases are not targeted at any section, they are merely spread across the board so that the Minister can say he received a particular percentage for social welfare purposes. The increases are not targeted at the elderly or the needy, rather everyone will get a few bob, but very little in the long run.
It is proposed to set up a plethora of schemes ranging from tax relief on alarm systems to work trials. It will be interesting to see how they will work. This budget is the hallmark of double thinking and compromising. The Government does not have a clear economic strategy. One could forgive the big give-away if it was evident in people's wages. It is obvious from the report by Ernst & Young in the Sunday Tribune that nobody will be better off as a result of the budget. Where has all the money gone?
I welcome the £4 million funding for science and technology. However, rather than a strategic exercise to develop the science and technology area on foot of the Tierney report, it is propped up as a political handout in a couple of paragraphs of the Minister's speech.
Tax reduction following high economic growth is not a fancy right-wing notion. It affects ordinary people earning £9,000 to £15,000 per annum because they take home more pay, save more money and by buying more Irish goods generate growth in the economy. The notion that tax cuts affect only the rich must be dispelled.
On the Order of Business Deputy Ahern referred to the task force on security for the elderly. The advertisement in Sunday's newspapers in that regard is a cynical exercise. It states that the Minister for Social Welfare has decided to set up a task force that will make recommendations to him on how the security needs of pensioners, who are not in a position to avail of the tax relief initiative to install burglar alarms, can be addressed. In other words, a task force is required to implement a single recommendation that if people cannot avail of tax relief they must get grants. It is cynical of the Government to pretend that this will help elderly people, it will only add to their sense of insecurity. It would make some sense if a task force was set up to examine security for the elderly in general or to examine the income of the elderly in a broad context. However, the proposed task force will be given only one term of reference, to decide what to do for the approximately 100,000 people who cannot avail of the tax relief. Approximately 13,000 can avail of it. A child would know that if people cannot avail of tax relief they must get a grant and one does not need a task force to give political cover to do that. It is a simple decision and the Minister could make it himself. The advertisement specifically refers to pensioners who are not in a position to avail of the tax relief. The answer is obvious, they will get a grant or nothing.
What is the task force being set up to do? It is unfair to pretend to the elderly that there will be a massive overhaul of their security when the only answer the task force can come up with is to give a grant to those who cannot avail of the tax relief. If they do not have a taxable income they cannot get tax relief. The Government should withdraw the advertisement, forget about the task force and decide to pay a small grant, which would not dramatically affect public finances, to people who install burglar alarms and cannot avail of tax relief. This is the most cynical advertisement I have ever seen.
The Minister stated that he proposes to reduce the corporation tax rate from 38 per cent to 30 per cent on the first £50,000 of taxable income for all companies. The small business task force of which I was chairman for one year produced 109 recommendations, 20 of which have been put into effect. Many of the other 89 would assist small businesses and the Minister should consider them. The reduction in corporation tax will apply to all companies, not only to small companies. If one owns the Allied Irish Bank, the Bank of Ireland or Michael Smurfit's company, one can avail of this tax relief. The Minister made a similar mistake last year when he handed out a couple of million pounds to the banks. Rather than targeting the reduction in tax at small companies, particularly small service companies, he gave a 2 per cent tax cut across the board which meant that large companies benefited from a huge tax reduction. I am sure they welcomed that reduction, but it was neither necessary nor requested.
While I welcome the Minister's good intentions in respect of small companies and compliment him on proposing a figure of £50,000 he should not apply the reduction to all companies. It should be targeted at small companies, particularly service ones, otherwise they will not be able to provide employment. There are 150,000 small companies in the country. Of those, over 110,000 are service companies, and about 100,000 of those employ fewer than three people. That £50,000 will be of real assistance to those, which is why I support the idea. However, it was unnecessary and wrong to extend it to all companies in the State. It was not sought or demanded. There may be administrative reasons, but it was a missed opportunity to use the additional funds to target small companies rather than spreading the money across the board.
There is no mention in the budget of our State companies. How can a budget lay out the financial and economic strategy of this State for the next 12 months and not mention the semi-State sector which maintains the high ground of economic policy at the moment? There is no direction given to our State companies, and no debate allowed in this House. I have consistently sought information from the Minister for Transport, Energy and Communications about what is going on in Telecom Éireann. We are told there were nine companies bidding to buy one third of Telecom Éireann. Now I am told that, systematically over the past year, four of them have fallen away. We are down to five, and I predict that a few more will fall away before it is too late. What is going on in the Cabinet regarding the sale of shares in Telecom Éireann? Is there a problem at Cabinet level on the question of progressing the strategic alliance in Telecom Éireann? We can get no information. I have consistently sought documentation from the Government about what is going on in Telecom Éireann. This Government talks about doing things in the open. I have asked for a consultant study on the future of Telecom Éireann. I have asked for a debate in this House on the proposed strategic alliance which is nothing more than a sale of shares. The phrase "strategic alliance" is to cover the Democratic Left who, 12 months ago, were opposed to selling shares in State companies. Today, they sit quietly while we sell off one third of the jewel in the crown of State companies. We have heard not a cheep, not a heckle, across the floor from them regarding the sale of one third of the largest State company in the country. We can get no consultant's reports and no information from the Government, only negotiations going on behind closed doors with whoever the Government is talking to, and no public information.
What about the thousands of subscribers to Telecom Éireann who built up the company over the years? Are they being given a chance to buy a few shares in Telecom Éireann? Why should it be Singapore Telecom or some millionaires in Singapore or in the City of London who can buy a part of Telecom Éireann? Why can Irish pension funds not have a share in it? Why can Irish workers with their money in Irish pension funds not buy a couple of shares in Telecom Éireann? It is being sold off privately, quietly, with no discussion, no debate in this House, nothing from the left-wing parties, to the highest bidder internationally, probably at the far end of the world, and no chance for the ordinary Irish investor in this fine company. Instead, I am told that it is too important to be discussed here, that it is a strategic alliance and that we have to do it this way. It is disgraceful behaviour, and I will be pursuing the matter again very strongly in the weeks ahead. What is happening in Telecom Éireann now is a political, economic and financial disgrace and it has to stop. I will be interested to hear what the Deputies opposite have to say about that when the time comes.
I wish to share my time with Deputy McGahon.
That is in order.
It is interesting that within two days of the budget speech the Opposition has abandoned this year's budget as the focus of its political attack in favour of the crime issue. That is as much a commentary on the success of the budget and on the success of the Government's management of the economy as it is of the Opposition's concern about crime.
This budget has put the spotlight on long-term unemployment. In doing so, the Government has gone to the root of poverty, educational disadvantage, the cycle of dependency and the social problems on which crime and drug abuse breed.
Given the fiscal parameters to which the Government has rightly committed itself, this budget inevitably had to reflect choices. It simply would not have been possible, with the resources available, to satisfy every expectation in the areas of social welfare improvements and tax reliefs. Instead of attempting to please everybody, the Government has consciously and courageously decided to address directly this country's most serious social economic and human problem, that of persistent long-term unemployment.
By all the conventional economic measures, Ireland now has a very healthy economy. Economic growth is real, unprecedently high. That growth is real, as figures for activity at our seaports which are available to me clearly show.
Over 90 per cent of the external trade of this country is through our seaports. In 1995 cargo throughput through the major seaports increased by 12.66 per cent on 1994 and passenger throughput increased by 5.4 per cent, confirming the increased activity in the Irish economy.
The tangible results of economic growth are also in the unprecedented increase in job creation, low interest rates and low inflation. Only this week many mortgage holders received notification of a reduction in their mortgage interest and monthly payments.
Despite the booming economy, however, the problem of long-term unemployment has persisted. Much of it is concentrated in disadvantaged urban areas, where dependency on State assistance is high, where social problems such as drug abuse are prevalent and where the associated problems of unemployment, poverty and disadvantage tend to repeat themselves from one generation to the next.
Clearly, the rising economic tide has not lifted all boats. As a society, we have a choice — to confine the benefits of the economic boom to those participating in it and to leave the damaged boats behind to sink, or to go back and repair those boats and ensure that society develops in a cohesive way and that the quality of life for all is improved.
The argument from Opposition spokespersons and from some commentators that this year's budget should have effectively confined itself to reducing taxes, is the worst kind of "shorttermism", because it ignores the biggest economic problem in our society, namely, unemployment. Nobody likes paying tax. Everybody wants to pay less, but what use is it to reduce tax to such a level that essential public services can no longer be adequately provided or that social problems are ignored to the extent that they manifest themselves in drugs and crime? Extra disposable income does little to improve the quality of our lives if it has to be spent on private insurance schemes and private security to shore up collapsing social services and a ruptured fabric of society. For most workers even the most exttreme tax cuts proposed by the Progressive Democrats would hardly be sufficient to buy a decent burglar alarm.
The Government has continued the process of tax reform by targeting the tax measures at the lower paid. To listen to Deputy Brennan, one would think that there were no tax measures in this budget. He appears to have ignored the increase in tax allowances, the widening of the 27 per cent band, the raising of the tax threshold, the taking of 18,000 people out of the tax net.
In deciding to focus the budget on long-term unemployment the Government has acted responsibly. Unemployment is bad for the individual out of work because it limits income and demoralises and diminishes personal esteem. It is bad for the families of the unemployed because it impoverishes them, leaves them dependent on State assistance and establishes role models for the young which suggest that it is possible to make a living without working for it. Unemployment is bad for communities, as any examination of areas of concentrated high unemployment will show. High unemployment is bad for the taxpayer because it costs not just in direct social welfare payments to the unemployed but on a range of other associated forms of State assistance — supplementary welfare, rent allowances, reduced differential rent, schemes to combat educational disadvantage etc. Long-term unemployment is the root cause of dependency on State assistance, and anyone who is serious about ultimately reducing this area of State expenditure has to root out the cause.
Ultimately, high levels of unemployment fertilises the ground on which drug abuse and crime generate and grow. Unemployment does not excuse crime and, of itself, does not cause crime. The vast majority of unemployed people never have and never will do anything criminal. The children of the vast majority of unemployed people are well reared and will not get into trouble but there is a minority whose idle hands, having failed to find something constructive to do, will end up dabbling in criminal activity. For example, the young man who drops out of school, has never got a job, goes straight onto the dole, does not know the discipline of work, stays in bed late, idles around part of the day, watches violent videos for another part, is a candidate for crime. It is far better for him personally, and a far better use of public money, to find a way to put him to work or back into education or training than to leave him and then possibly end up having to find a prison place for him after the damage is done to him, his family and his victim.
By putting unemployment at the top of the economic agenda, the Government is exercising its responsibility to help build and sustain a stable society. The Government's management of the economy, resulting in increased economic activity, will generate a further 31,000 net new jobs this year. Although such employment creation is at an alltime high, it is not sufficient to tackle the scale and deep-rooted nature of long-term unemployment. Special measures are required and are being provided for in the budget. The employment subsidies and PRSI changes make it easier and more attractive for employers to take on extra staff. The targeting of tax and PRSI measures at the lower paid together with the elimination of poverty and unemployment traps will make it more attractive to take a job. The extension of existing schemes and the introduction of new ones will help to re-introduce to the world of work those who have been unemployed for a long time.
The exercise of responsibility, however, is not confined to the Government. With the favourable economic climate, and now the special subsidies and PRSI reductions, there is an added responsibility on employers to provide additional jobs. There is also a responsibility on trade unions to take a more generous view of the opportunities for the community employment scheme and other schemes than has been the case in some areas in the past. Finally there is a responsibility on the unemployed person to take up a job or training opportunities when presented.
We have heard a lot about `the incentive to work. Clearly, there have been some disincentives to taking up employment. These include low levels of pay compared to the levels of social welfare payments, especially if the unemployed person has a number of dependants, and the loss of secondary benefits such as the medical card.
This budget seeks to redress these disincentives. Persons who have been unemployed for at least one year will retain their medical cards for three years after entering employment. Family income supplement is being increased and extended. The method of calculating entitlement to unemployment assistance is being changed to encourage people to take part-time work. The back to work allowance scheme is being extended. Child benefit, between this budget and the last, has been increased by £9 per child. The tax and PRSI changes have been targeted at the lower paid to open up the gap between reward for work and social welfare payments. These improvements, together with the special employment measures, are the first major attempt at eliminating the financial disincentive to taking a job.
Under the social welfare code, it is a condition for payment of unemployment benefit or assistance that the recipient be available for and seeking work. Apart from this obligation and apart from the so-called "incentive to work" issues, there is a responsibility to take a job if it is available.
Very many people who are at work in our economy are financially only marginally better off — if at all — than if they were totally dependent on State beenfits. Many people willingly take up jobs or opportunities on training and employment schemes, even though on purely financial criteria they end up no better off. All of these workers are entitled to fair wages or salary. Their incentive or motivation to work, however, is based not only on the monetary reward but on the sense of personal fulfilment which work gives them and a sense of social responsibility they exercise by contributing to the economy and to society.
No society can afford the luxury of idleness. If society is to work, all able citizens must play their part — by contributing through taxation, by working in the house or in a job or by involvement in neighbourhood or community work. The concept of social solidarity, which is one of the pillars on which this budget is built, is not a new term for State payments — it is an idea for a cohesive society where the needs of the weak are provided for and where all members of society play an active part.
The approach taken by the Government in this budget and the debate which is following it is really concerning the choices which face us about how our society is to be organised in the new information age. Are we serious about the need for an inclusive society or do we want increasing atomisation which ultimately leads to the very well off opting out, the very badly off dropping out, and everyone else working in the middle having to cope with the consequences?
Essentially the question being asked about this budget is where should the gains of good economic performance be applied. Some Opposition spokespersons want to gratify short-term demands. By deciding to tackle the most pressing and central issues of unemployment, the Government has made the best choice.
Deputy Séamus Brennan may be right. The budget will be remembered, not for the reasons he has stated but because it has tackled the most central social, economic and human problem facing the country, which is unemployment.
I welcome the opportunity to speak on the budget because I want to be unashamedly parochial and address the problems which confront a beleaguered industry in my native town.
First I wish to shed a silent tear for Deputy Hogan. Last year he was made to walk the plank because of a minor indiscretion for which he was not fully responsible. When we consider the leaks over the past two months, we can understand the lack of interest which has been evident in this House. When I first became a Member there was a tremendous buzz of excitement on budget today. Today it is a non event. People used to queue to implore Deputies for admission to the Visitors Gallery to hear the budget secrets. There were secrets in those days but not any more. The lack of interest in the budget by the nation was evident by the small attendance in the gallery last week, which was only quarter full. The usual political activists were not evident in the House, which was taken over by spin doctors. Deputy Hogan is entitled to feel a little hard done by, given the length and extent of the leaks over the past two months. There were more leaks than there are from the sunken fleet in Scapa Flow. Deputy Hogan has been in the sin bin for some time but I hope this bright young man will take his place again in ministerial office.
If I were in Government I would be very concerned about the unprecedented leaks of official documents over the past year. Rumours abound of documents being handed to newspapers in brown paper parcels. Indeed it is significant that one journalist seems to be the beneficiary of most of these leaks. That is a matter of some disquiet not only for the Government but for every Deputy in this House. What is the motivation behind these leaks? Is it financial gain or disaffected feelings of ideology?
I wish to refer to leaks to another Sunday newspaper columnist who purports to be a consultant in the field of crime. The Minister for Justice should address that problem. It is of some concern that details affecting the Garda Síochána are leaked to a person and used for the purpose of sensationalism. I refer in particular to a murder in my native town some nine months ago. A man was strangled and the following week a banner headline appeared under this lady's name to the effect that a serial killer was at large in Dundalk. There was not a vestige of evidence for that story and it aroused my anger, the anger of the gardaí in Dundalk and that of my constituents, particularly elderly people living alone. That journalists was apparently given an award for journalism but I would give her an award for bum reporting of the year. She should apologise to the people of Dundalk for that article.
Last November I tabled a question asking for a press council to be established. It is about time some rein was put on journalistic licence.
This budget was predictable. It was as good as could be expected and had my two colleagues on the opposite side of the House been in power they would be saying what I am saying now. The system formulates budgets and it does not matter what party is in power.
Never.
Deputy Cullen will allow me say that, as a cynic. I welcome one or two aspects of the budget, in particular the tax relief on businesses which will benefit family owned businesses. It is extraordinary that many family owned businesses fail to survive the first generation because of our excessive taxes. Three weeks ago I visited a Utopian paradise, Kuwait, there is no tax of any kind — perhaps we could all retire there. It was a huge contrast to come back to this benighted country where we are all bogged down with tax regardless of what party is in Government. I welcome tax relief on businesses because family businesses are the bulwark of business activity. They were in operation long before the supermarkets and many of them will remain when the supermarkets are long gone.
The hypothetical tax bill on the transfer of a business to a son or nephew on the death of a father or uncle, has been more than halved by the increased tax relief. That is a practical step which is to be welcomed because many old people do not know when to pass on their businesses and leave major problems for the families that succeed them.
I ask the Leader of my party to ensure that in the coming year Fine Gael is seen to care for the interests of middle income earners and the selfemployed who have supported us down the years and who perhaps have seen our clothes stolen by the party of my colleague opposite, Deputy Quill. Fine Gael supporters need reassurance that they will not be submerged in Government by the ideology of the two left wing parties. I need reassurance that will not happen.
As the Minister of State, Deputy McManus, has just entered the House, the Deputy's timing is excellent.
I am killing two birds with the one stone — no pun intended.
Only old men make remarks like that.
I am a little disappointed that only meagre mortgage relief was given to middle income workers. VHI subscribers will get mortgage relief of £80 but when one considers the £100 increase imposed by the VHI during the year, there is no net benefit. Will the Minister consider opening the door to competition in that area from British companies such as BUPA? The VHI have a monopoly at the moment. We denied the Independent the right to come to the aid of the 600 workers in the Irish Press because of monopoly questions, yet we are allowing the VHI a monopoly in this area. It can do what it likes. We should invite competition from the UK and avail of its companies' low subscription rates.
On the social welfare increases, the social welfare budget is approximately £4.4 billion per year and neither I, nor anyone, would begrudge increases to genuine recipients, but some years ago I said that our national emblem should be the fiddle instead of the harp. I also said we could have a national orchestra of fiddlers in every county and that is undoubtedly true. Every PAYE and PRSI worker is carrying a few monkeys on his or her back.
Twenty two.
That is a heavy burden. People are not given any incentive to work. As Deputies, we are all aware of constituents who say they are better off on social welfare and who want to go for the gold bar — the medical card. That is alarming. Some time ago the well known financial columnist, Senator Shane Ross, referred to the creation of a social welfare monster. We have created that monster and the alarm bells are ringing. My friend and racing colleague, Deputy McCreevy, was pilloried by Deputies on this side of the House some years ago when he warned that the water in the well might run dry. Deputy McCreevy's honesty is refreshing and rare in politics, yet the politicians who knew he was right homed in on him and took political advantage of his comments.
Certain elements of our social welfare system must be thoroughly investigated. If a person is genuinely made redundant and cannot find work he deserves our continued help, but that does not apply to the gangsters who exploit the system by signing on the dole while doing odd jobs. The going rate for a man on the dole is £40 a day even to do menial tasks in the garden. That is not bad if you can retain a medical card.
Some middle aged people on the verge of redundancy are gripped by a new malady and symptoms of illness before they terminate their employment. Their doctor will sign them off as unfit to work. These people are not content to receive a lump sum but want the State to provide as much as possible for them. This major scam should be stopped. People who are genuinely unable to work should be helped but after a thorough medical investigation. The people who are working are carrying a burden of £4.14 billion on their shoulders.
No other industry in the State has been as maligned as the cigarette industry. In former budgets the old reliables, drink and cigarettes, were hit but due to the power of the drinks industry lobby that industry is getting mighty respite and it is now down to the cigarette industry. I do not advocate cigarette smoking because of the question mark about its damage to health but I believe in the right to choose. The cigarette industry is being smothered by taxation. Tobacco products are unique in that the excise duty on them is increased in every budget whereas the duty on products such as beer, wine, spirits and petrol go through lengthy periods without an increase. This is highly discriminatory against an old, legitimate and valuable industry.
There are still 800 people employed in this industry in high unemployment black spots such as, inner Dublin, Tallaght and Dundalk. I acknowledge that the 10p increase this year is modest compared with the 15p increase in the United Kingdom and, obviously, the industry lobby is getting through to Ministers and civil servants. While we acknowledge the increase was lower than in the UK, tobacco excise rates have increased by 45 per cent since the 1991 budget, just short of four times the rate of inflation. No other industry has been subjected to such savage levels of increase and, ultimately, the high retail price is the reason that the illegal sale of cigaretes is so attractive. Smuggled cigarettes from Eastern Europe are being sold on the streets of every town under the nose of the Garda Síochána.
The 800 employees in the tobacco industry enjoy above average rates of pay and conditions. In addition, a further 3,500 full-time equivalent jobs are provided as a result of links in the wholesale and retail trade. These jobs continue to be threatened by excise increases above the rate of inflation.
Tax on tobacco products in Ireland is among the highest in the European Union. This has led to increasing penetration of the Irish market by tobacco products smuggled from lower tax countries. The retail value of this illegal trade is estimated at £20 million annually and represents an annual loss of £15 million to the Exchequer. If the smuggling issue is to be addressed and Ireland is to remain a viable location for tobacco manufacturing, the rate of increase in excise duties will have to be curtailed in future budgets.
The kindest thing one can say about the budget is that it resembles something else in life — the build-up was brilliant but the thing itself was a huge let down. It is puzzling that so little could have led to so much leakage. Come next April the average worker in the Republic will pay income tax of 48p in the pound whereas his or her counterpart in Northern Ireland will pay 24p in the pound. In the past 70 years we had to contend with political partition and my fear is that unless something dramatic is done quickly about taxation, we will suffer severely from economic partition in the next 70 years. I say this in Deputy McGahon's hearing.
Last week the Minister of State at the Department of Justice, Deputy Burton, in her speech, instead of taking the opportunity to comment on the budget, concentrated almost exclusively on the Progressive Democrats's tax reform proposals published earlier this month. It was flattering that she should have devoted so much time and attention to an analysis of our taxation document. Perhaps she was demonstrating her intelligence because in truth what could she have said in defence of the budget? May I remind her of the record of the Labour Party in Government? The Labour Party has been in Government for three years during which time there have been four budgets and the yield from income tax rose by more than £700 million, most of this from the PAYE sector. The national debt rose by almost £4 billion and public spending rose by almost £2.5 billion. In the past 12 months unemployment rose by 5,000 in spite of a strong and much praised economy.
Income tax will increase further this year. By the end of 1996, if the Government lasts that long, the Labour Party will have been party to increasing income tax by £1,000 million and the PAYE sector will foot most of the bill. Having said that, we should not wonder at the Minister of State, Deputy Burton, confining her remarks to a critique of the Progressive Democrats' tax proposals rather than an analysis of the budget.
The budget is a calculated insult to PAYE workers. The Minister for Finance gave a glowing account of our booming economy but it does not appear to be of much benefit to those who live and work here. We are told in each successive budget that the economy is doing well but there is no money to reduce taxation or introduce reform. The tax burden remains to cripple and bear down on the hard pressed PAYE sector. There is no real commitment to tax reform. In fact, there was no reference to it in the Minister's speech. Income tax will rise by £260 million in 1996 and the bulk of this money will be extracted from the PAYE sector.
When the proposed changes in the budget take effect a single person earning £150 per week will be better off by £1.71 per week. That would not buy a pint of stout. Such a person will not go on a binge after this budget. A married couple with two children and one earner with an income of £15,000 will gain £3 per week or 75p for each member of the family. A clerical assistant in the Civil Service on £192 per week will gain the princely sum of 87p per week, enough to buy a can of coke and a Mars bar. That is what the PAYE taxpayers received. How can we say we want to reward work and create an enterprising economy when that is the way we treat workers?
Workers in modest circumstances continue to be crucified under the tax system. The Government seems to have turned its back on this sector. We cannot continue to fleece the PAYE sector. It flies in the face of any concept of social justice to ask a person earning £248 a week to pay 56p out of every pound they earn to the Government in taxation, PRSI and levies. We cannot do that and pretend to have a social conscience.
Few taxpayers will be better off as a result of the budget. The Minister, very cleverly, failed to mention that tax relief on mortgage interest payments and VHI premiums will fall sharply from next April. This will increase the tax bill of a typical family by £25 per month. Many taxpayers will be worse off when the measures in the budget are fully implemented. The budgetary tables show that the total take from income tax is set to rise by £260 million in the current year. The Minister said 18,000 people will be removed from the tax net. Who will pay the extra £260 million? The average taxpayer will pay approximately £4 per week extra in taxation as a result of the budget. So much for tax reform. If we continue to penalise people for working we should not be too surprised if we have a huge unemployment problem and in estimating its extent and the success of our job creation efforts we are in danger of indulging in self-delusion.
Taking account of the live register and the tens of thousands of people on various Government schemes and programmes 350,000 people cannot find a proper job. This is equal to one in four of the workforce — a frightening statistic for a country supposed to be experiencing a major economic boom.
The official labour force survey statistics indicate that 54,000 additional jobs were created between 1992 and 1994. These are the numbers the Government spin-doctors like to throw around, hopeing they will not be questioned by an unsuspecting public. All the indications are that these figures overstate and distort the true position. A closer look at the labour force data is revealing. Some 54,000 jobs were created over the last two year period but the spin-doctors do not point out that 33,000 of those were part-time. In other words, when you analyse our much vaunted job creation performance you find almost two out of every three jobs generated are part-time ones. In some of the major supermarket chains up to 95 per cent of the workforce is comprised of part-time staff. They replace a full-time, 40 hour per week worker with three low paid part-time workers. Because of the crazy way we present our labour market statistics, that counts as the creation of two new jobs.
Incredibly we only have a detailed breakdown of the employment figures up to April 1994. We are working with data that is almost two years out of date. How can we hope to address the unemployment problem properly if we do not have up-to-date and accurate information? Preliminary figures published just before Christmas for 12 months to April 1995 show an increase in employment of 49,000 during the previous year. Democratic Left Ministers and spokespersons fell over themselves trying to claim credit for this great performance, oblivious to the fact that they had been in Government for scarcely 12 weeks of the 12 months in question.
A detailed breakdown of the figures for April 1995 will not be available for another year. That is how long we must wait to find out how many of the 45,000 new jobs are part-time positions in supermarkets. I do not have anything against people working on a part-time basis if that is what suits them but we must adopt an honest and accurate approach to compiling labour market statistics. Could we not, for example, speak in terms of full-time job equivalents? Would that not be more accurate and give a clearer and more real picture? Politically speaking, in the interests of the three joyful mysteries of openness, transparency and accountability, would it not be better to make the necessary changes to the official data so that a true and accurate picture of overall employment is available to planners, policy makers and the public?
There is little point in pretending we are creating thousands of jobs if that is not the case. We are fooling nobody. We certainly are not fooling people in my constituency of Cork North-Central. The issue of part-time working is only part of the problem. During recent years there has been a huge increase in the number of people on temporary Government schemes. There has been a sharp increase in the number of people employed in the Civil Service and public service. The number of programme managers and handlers employed by this Administration is almost large enough to have an impact on the labour force survey. The more closely you look at the figures the more obvious it becomes that we are creating very few real jobs in the traded sector. That is a poor return in an economy which is supposed to have grown by more than 20 per cent in the last 20 years.
The Government's failure to tackle the jobs problem is reflected in the most recent unemployment figures. The numbers out of work as measured by the live register have increased by 5,000 since this Administration came to power more than a year ago, yet employers complain they cannot find people to fill vacancies. A recent survey by the Chamber of Commerce of Ireland found that 22 per cent of firms questioned had difficulty recruiting unskilled workers. The association representing retail grocers stated that there are up to 500 vacancies in shops throughout the country. A spokesman for that association said that young people are now unwilling to take up jobs paying £150 per week.
It is no use complaining that the jobs on offer are lowly paid. They are lowly paid because of the crushing burden of personal taxation which the Government continues to levy on those on modest incomes. A person taking up a £150 per week job in the retail sector would have to pay more than £26.50 of their hard earned income in income tax and PRSI. What encouragement is that for people to move from the dole to paid employment? We are in danger in taxing work out of existence. There is a need to integrate the taxation and social welfare systems. I understand that a commission or task force is considering this subject — that seems to be the modern day equivalent of draining the Shannon. Completion of the work of a task force is always imminent but never achieved. The saying in Cork is that we are always one report away from action.
We have created a very deep divide in terms of personal taxation on this small island. A worker in Newry on £300 per week is £16 per week better off in terms of take home pay than a person on the same wages in Dundalk, 12 miles down the road. While it costs an employer in Newry £1.67 to give an employee an extra £1 per week in take home pay, the cost to an employer in Dundalk is £2.54, almost 50 per cent higher. The message this sends to employers is clear: if you want to create jobs do so in Northern Ireland, not in the Republic. Competition from Northern Ireland for jobcreating investment will intensify considerably in the wake of the peace process and the return to normality of the economy there. How can we hope to compete with Northern Ireland for jobcreating inward investment? That is a matter that was blindly ignored in the budget.
The weakness of sterling makes industry in the Republic increasingly uncompetitive vis-à-vis its counterpart in Britain and Northern Ireland. It is estimated that up to 60,000 jobs are dependent on exports to the UK. Those jobs could be at risk if the competitiveness of our industry is allowed to deteriorate further. The key to restoring and protecting competitiveness is not devaluation, otherwise we would find ourselves devaluing every time the British Prime Minister lost a vote in the House of Commons. The key to ensuring competitiveness is a reduction in costs for industry. In particular we must seek to reduce the cost of employing people. That means substantial cuts in personal taxation and PRSI both for employees and employers.
High levels of direct and indirect taxation have created an economic partition in this country. Let us take the case of a person on £300 per week who wants to buy a new car, say, a 1.3 litre hatchback. If that worker lives in Newry he or she will need about 38 weeks take home pay to buy that car but if the person lives in Dundalk it will take 56 weeks take home pay to buy the same car. In terms of real net personal income the same vehicle is 50 per cent dearer in the South than in the North.
To digress from this subject, I spoke with representatives of nurses' unions today about the impending nurses' strike, and their quarrel is not with gross pay but with take home pay. Nurses are not taking home the amount of money their profession demands and they deserve.
There is no real commitment to tax reform in the budget. My party has shown how the basic rate of tax can be cut from 27 to 20 per cent and how the higher rate can be cut from 48 to 40 per cent. That could be achieved over a five-year period provided public finances are managed prudently. A tax reform package need not involve a reduction in Government services. The key to success is not in cutting public expenditure but in controlling it. The Labour Party and Democratic Left have dismissed our proposals, but I suppose that is to be expected. That is politics, but it is disappointing and depressing for the people.
I have noted that no Fine Gael spokesperson has criticised our tax proposals. Am I to take it there is an implicit agreement from that side of the House to our proposals? We are constantly told we cannot afford tax reform, as if we could continue to tax work as a luxury. Real tax reform is possible provided we manage our public finances in a prudent and sensible way.
Debate adjourned.