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Dáil Éireann debate -
Wednesday, 17 Apr 1996

Vol. 464 No. 1

Finance Bill, 1996: Second Stage (Resumed).

Question again proposed: "That the Bill be now read a Second Time."

The Finance Bill, 1996, is a monument to the lack of vision and ideological confusion of this centre-left rainbow Coalition Government. In favourable economic circumstances for tax reform and in particular with every possible reason, politically, socially and morally, to reduce the crippling effect of high employment taxes, the people have been cursed to have in office a Government consisting of a set of parties, none of which has the appetite, vision or competence to bring about what this country needs, a dramatic, pro-employment, pro-enterprise root and branch reform of our taxation system. The cause of this malaise can be described in one word — Labour.

When the Labour Party got into office in 1992 it immediately halted the programme of tax reform which in the previous years had seen the reduction of the top rate of tax from 58 per cent to 48 per cent and the standard rate from 35 per cent to 27 per cent. Labour tore up that strategy of low marginal tax rates and immediately imposed a 1 per cent income levy on all taxable income, which was equivalent to a 2 per cent increase in the standard tax rate for 27 per cent taxpayers, bringing their tax rate back up to 29 per cent. Three years later the Labour Party's period in office has achieved nothing on the tax front except tinkering, sleight of hand, increasing complexity in our tax system and a stubbornly high dole queue.

Last Saturday the Minister for Finance, Deputy Quinn, and the Minister for Enterprise and Employment, Deputy Bruton, emerged as competitors in the whole area of tax reform. In a pre-emptive strike Deputy Quinn told the papers on Saturday that he would face up to the question of the middle income tax burden because, as he saw it, in plainly political terms that was what the Labour Party needed to be seen to be doing. On Sunday Deputy Bruton, determined not to be upstaged, did a trailer for a forthcoming document on tax, PRSI and jobs, to appear in Monday's papers, but this Finance Bill makes political liars of them both.

To those who have consistently emphasised the need for reform and the reduction of taxes on work, this deathbed conversion on the part of the rainbow Coalition partners on tax policy evokes nothing but the deepest cynicism. We should remember that Labour has been in office for 13 of the last 23 years. That is an enviable record and I congratulate the Minister for being part of those Governments but the Labour Party cannot now turn to the other parties in this House and say it was not there. It has been in office for the majority of the last generation.

Is that the independent or the Progressive Democrats line?

Our tax system has built up during that period.

Which party is the Deputy working for now?

The Deputy in possession, without interruption.

Between 1973 and 1977 the bones of our tax system as it is now were put in place. Every single word on the tax statutes has been either there since Labour was in office or has been kept in place by Labour. Our tax system is the Labour Party's tax system because it has been in office for a majority of the last quarter century during which that system evolved. The Labour Party's insatiable spending plans have put a consistent upward pressure on taxation.

It is good to know we had such influence.

Between 1973 and 1987 Labour and Fine Gael raised the number of taxpayers paying above the standard rate of income tax. A total of 98 per cent of taxpayers were on the standard rate when Labour and Fine Gael came into office in 1973 but by the time they left office in 1987, Labour and Fine Gael had brought surtax to the masses and increased the number of taxpayers paying above the standard rate of income tax from less than 2 per cent to 43 per cent.

Which parties were in power then? The Taoiseach came from the Deputy's constituency.

I spoke to a member of that Government in 1977 and suggested to him that its catastrophic defeat at the hands of the electors might have had something to do with the fact that it had not index linked the tax system. He replied that index linking the tax system would be the end of all social progress.

Is that why the Deputy left?

Those words ring in my ears because I read occasionally in The Irish Times, particularly on Saturday, about crocodile tears now being shed over the effect of tax on lower paid people but that the Government which brought this about included people who were deeply hostile to any form of tax reform.

Labour and Fine Gael who presided over the crazy anti-employment tax changes which at one point reached 77 per cent and which they only reduced to 60 per cent to avoid defeat in the 1987 election. It was a Labour and Fine Gael Government which criticised most strongly the Progressive Democrats in its first year for suggesting we could have a system with a 25 per cent standard rate and a 40 per cent top rate. It was Labour which, in its first budget in 1993, tried to revoke the PDs' tax reforms by throwing the whole process into reverse and imposing the 1 per cent levy.

Having declined all sensible proposals for tax reform, Labour and Fine Gael are now vying with each other to recover middle income support by laying the foundation for so-called tax concessions in the next budget. In the meantime we have a Finance Bill that does nothing on that agenda. The facts speak for themselves. In the next year, the average taxpayer will pay £117 more in income taxes to this Government to assist it in its tax and spend policies.

There is no need for a by-election post-mortem in the Labour Party to produce a deathbed conversion to tax reform, nor do we need another postgraduate research paper from the Minister for Enterprise and Employment, Deputy Bruton. We need a Finance Bill that tackles the issue now but what we have is a lamentable evasion of the fundamental problems in our tax system. Our tax system is killing jobs, stifling investment in jobs, lengthening the dole queues and encouraging the black and grey economies.

Those people to the left, as they like to deem themselves — they might more properly be deemed the left behind — should be expected to show a little radicalism now and then and some smidgen of concern for the 300,000 marginalised people and their families to whom this country offers nothing but dole and crocodile tears. One might expect a party of the working man to take on the greatest single impediment to social justice for those who do not have jobs — a tax and welfare system that excludes the most vulnerable in our society from any chance of participating in economic life. Instead we have a deeply cynical, self-serving social partnership which has chosen unemployment, high taxation and to keep State control over huge areas of the economy.

Ireland is the most conservative of economies. Our conservatism is social democratic conservatism. We constantly seek derogation from European competition directives and have left our tax and social insurance systems largely unreformed. We are now governed by a complacent, out-dated and inept governing class supported by self-serving, bureaucratic State machinery. We do not have any radicals or radicalism in our system and that is strange in a country where so much is so radically wrong.

This sick and, I suggest, sickening State takes 57p in taxes and PRSI in every extra pound earned by a single worker earning well below the average industrial wage. This Bill is leaving in place a system which needs more of their extra earnings than a single man or woman earning less than £12,500 per annum. We do that because nobody will face up to the truth that a tax system which confiscates more than half the extra earnings of a single person earning well below the average industrial wage is sick to its heart.

The people who justify that system and who talk in public about being of the left and concerned with the working classes and the plight of those on low wages are hypocrites because they offer those people nothing but confiscatory tax rates on below average earnings. We take more from below average earning workers in Ireland, which has the lowest average earnings in Europe, than any other country in similar circumstances and we justify that by reference to the need to spend more money. It is not simply confined to lower earning workers because many people find themselves in the position where it is better not to work. They have more disposable income doing nothing for 40 hours per week than if they worked for 40 hours per week. That is our problem. It is a sick country which does that to the weakest and most vulnerable sections in the community while, at the same time, claiming it is making progress and that the fundamentals are right. A country with a centre left coalition, in which a Labour Party postures as being the party of the working man, which fails to remedy that in budget after budget should be ashamed as should any party which accepts it.

There is nothing new about what I am saying; it has been well appreciated for a long time. There is nothing unprecedented about a speech of this kind in this House but what is unprecedented is the unwillingness of the parties most interested in high taxation and high spending to face up to the truth that they are part of the problem and not part of the solution. Why, since coming into office in 1992, has Labour done nothing to change the tax rates that workers earning below the average industrial wage face? Why, after four years of Labour in office and two years with a Labour Minister for Finance at the helm, do single working people earning well below the average industrial wage still give more than half of their marginal earnings to the State in taxation? Why is it that people on £14,000 per year living in a local authority house, even taking into account family income supplement, PRSI, tax and other fringe social welfare benefits, are no better off than if they were earning £9,000? How does the Labour Party explain, after four years in office and two years at the helm, that it cannot reform our tax system to do something for those people? If we are talking about social justice — this Government came into office with a mandate to put justice back into economics and trust back into politics — how can it after two years face an electorate and say it is fine by it that the State takes more than half the earnings of a person earning £1,500 less than the average industrial wage?

Such a country and the parties which preside over it are sick and hypocritical if they say they have any intention of doing anything sensible about unemployment, while at the same time pursuing and keeping in place such a tax regime. That is the cost of the Labour Party to the working class. Where is the social justice in that and where is the conscience of the Left? I suggest the conscience of the Left has been left behind at the social partners' negotiating table.

In 1994-95 the Packard Electric company in Tallaght paid the Minister for Finance, Deputy Quinn, and the Minister for Social Welfare, Deputy De Rossa, £3.5 million in PAYE and PRSI on a total wage bill of £15.5 million. That is equivalent to a 35 per cent levy on its wage bill in terms of employer and employee PRSI and employee PAYE. That company was trying to hold on to employment in Ireland in a highly competitive world market and the work it offered was highly labour intensive. It was offering genuine employment to people who were not the most skilled workers but who were willing to work to improve their circumstances and to keep their families' heads above water. Yet our Government had two Ministers careering around the world looking concerned when there was a redundancy package. This company was dragged down by the fact that the Exchequer is so organised that it requires 35 per cent of the payroll of such a company in taxes and levies. That is the truth. As long as we run a regime which takes so much from those who provide employment for people who need it most, we have no chance of confronting the employment problem.

I contrast what the Exchequer did to Packard Electric, that is, taking 35 per cent of its payroll spend each week, with what it does to other jobs which are apparently more important to the social partners, like jobs in the semi-State sector. What is wrong with a job at Packard Electric that it must be taxed as if it were a luxury? Why is it so different from other jobs which must be subsidised as if the country depended on them? What type of society is this that we tax out of existence the jobs of ordinary working people who are most vulnerable and deliberately load a burden of taxation on their work which makes it impossible for their employers to compete on an international field? What type of society is this that we say to those people to keep paying high taxes because we have a lot of things on which to spend their money?

There is a different way to look at our economy which does not come from those in this House who believe in radical tax reform and who have in the past done something to change our tax system. It comes from those across the world, formerly of the Right and the Left in politics, who realise that the type of sick state-dominated economy so many people in Ireland feel so addicted to and dependent on cannot survive in modern circumstances.

There is always a danger in conjuring up a vision of another economy, waving it before the people and saying this is the way we should work because every economy and society has its problems. Our economy is very sick because the fundamentals are not right in terms of economic or social justice. Any society which fails to address the fact that most of those at the bottom of the economic ladder are better off not participating than participating is one which is running away from the truth and which will face serious consequences in the future.

We have failed to address our fundamental economic problems. It is not for want of analysis. We do not need another paper from the Minister for Enterprise and Employment, Deputy Bruton, on why the Culliton report was right. The Culliton report said there was one thing the Government could do to improve the employment situation, which was to radically reform the tax system. It said it was the one central thing on which Government could deliver, but the Labour Party in Government does not believe in that. The Labour Party does not believe in that publicly or privately or in changing the burden of tax on work. That is why when the Labour Party got into office in 1992 with Fianna Fáil and in 1995 with Fine Gael the result was exactly the same on both occasions. A flimsy, intangible set of targets for tax changes was put in place. Three or four lines, which could mean anything or nothing, were shoved into a programme to allow for flexibility. The real issue was to get on with the social partnership, driving up public sector pay in gross terms and to forget about the importance of take home pay to the average person and the incentive to work and to give others employment.

One of the most unfortunate myths which the Labour Party tends to propagate, publicly and privately, is that marginal tax rates do not matter but that what is really at issue is the overall burden of taxation. With that wave of the intellectual wand, it is saying that it does not matter if the tax rate is 27 per cent, 20 per cent, 48 per cent or 77 per cent, as in the past, but that what really matters is how much one pays on the bottom line. That is demonstrably false.

Countries such as New Zealand which have opted for low tax rates of 18 per cent or 20 per cent and a top rate of 33 per cent understand that the marginal tax rate is crucially important when it comes to getting out of bed and going to work, deciding whether to work an extra three hours on a Saturday morning if one's employer asks, deciding whether to take promotion and responsibility, investing in a new machine in one's small business and taking on two extra workers and hazarding one's savings in a small business which might generate employment for others rather than putting it into a house let in flats. This may not be apparent in the deepest recesses of Merrion Street.

I know the difference between having two thirds or one third of a fee confiscated in tax and the incentive to me. I sometimes say I would prefer to go on holidays this week because all I am doing is giving the Minister for Finance a present of most of what I earn — that is not personal. I know how ordinary people tick.

Should I declare it?

They tick by reference to the effect on them of getting up, working extra hours, taking extra responsibility and putting money into some remunerative investment. It is crucially important to a businessman who invests in a particular concern to know whether the return, taking into account the risk that it could all go wrong, will be taxed in a way that he gets only half into his own pocket. That doubles the risk of failure as far as he is concerned. If the positive return on an investment, which can lose money, is taxed at half the return then the odds on success are effectively halved.

I reject the notion, propagated and peddled by the Left in Ireland in particular, that there is something intellectual and abstract about the difference between facing a 48 per cent tax rate and a 33 per cent tax rate. It is demonstrably wrong. Those societies which understand what drives people to fend for themselves, to work harder to improve society, and which are not caught up in ideological befuddlement, which suggests to them that there is something wrong with somebody wanting to work harder or to better themselves and which do not make a complete icon of the culture of dependency, cannot be told if they are earning less than the average industrial wage that the state needs more of any extra money they earn than they do.

Societies such as New Zealand have learned a hard lesson as to how one can throw away, across a whole generation, the opportunities for growth and self-sustaining economic development if one has a high tax, highly regulated economy. I ask the Minister to bring the Labour Party into the real world. Do not be part of the "left behind", become part of the radical left, bring the Labour Party to the point where the New Zealand Labour Party was, in a mood to challenge, on a radical basis, the ill effects of the state through its taxation and control in that economy.

Why can Felipe Gonzalez in Spain privatise but the Irish Labour Party cannot? Why can even the French Left take on the issue of state ownership of assets but the Irish Labour Party cannot bring itself to do it? Why is it that across the world parties of the left have woken up to the new agenda in politics but in Ireland they have not? The reason is that at the heart of the Labour Party's thinking up to this point — and I think it will change — there is a notion that going into the next election if they keep faith with the 250,000 Irish voters in identifiable industry such as the semi-State sector, the public service and the State sector generally in terms of teaching, nursing and council employees they will return with more or less the same number of seats into the next Dáil. That is the strategy but it is in tatters because the Labour Party could think only in conservative terms: let us service this political constituency, let us bash ahead with a little more of the social partnership economics, let us keep the show on the road and look after our own. That is a fundamental political mistake and it will not work. It will be blown out of the water because an economic window of opportunity will not be availed of.

Between 1997 and the year 2001 this country will have a huge opportunity to effect a dramatic transformation. We could have a divestment of State control in a large area of our economy to allow competition, to reduce public indebtedness and the calls on the Exchequer to capitalise various projects. In relation to Aer Rianta we could say, for instance, that the State has no particular interest in owning that company any more and does not need to capitalise its £100 million investment plan we read about today. It does not need to do that. It does not need to control airports. I do not want to control airports any more than I want to own shopping centres, both of which are equally vital for our economic life but I see no reason one should remain in State ownership rather than another.

We do not need a system of semi-State sea ports as opposed to State sea ports. We need a system whereby every Irish port of any size is competing with Larne to ensure that Irish traffic going through the Republic's ports faces charges which are on a line to make them competitive with those in Northern Ireland. We do not need a system in which the State does all the generating of electricity. We do not need to derogate from the European Union directives in relation to telecommunications competition. We do not need any of these things if we have the strength of character and the sense of purpose to effect in the next four years a dramatic transformation in the Irish economy. We have uniquely favourable circumstances to do it: transfer of funds from Europe, a good position internationally, good growth in some portions of the economy here. Now is the time more than ever for someone with a radical vision of how this country can transform itself to be in office. Unfortunately, now is the time when we stand cursed with a Government with no vision, no united sense of purpose and no programme. To compound all that, the Government thinks it should have the right to determine a successor programme to the Programme for Competitiveness and Work. What a tragedy that would be.

This Government lacks the basic understanding of what is needed over the next four years and should not, in its declining days, be allowed to set the agenda for the next four years. It is for an incoming Government to do that and it is for the people to set, by their votes in the next election, the mandate and the parameters as to how Ireland can be transformed in the next four years. It is not for a confused group of ideologically bewildered partners who are wed in a coalition only because of the need to be in office. It is not for them to set the agenda for tax reform in the next four years.

I have no deep seated objection to a further programme if it produces industrial peace, but not at any price. Any programme that does not have as its starting and its ending points radical tax reform and which does not factor into every agreement about wages the issue of tax reform, take home pay and restraint on growth in public sector pay and private sector pay and is not built on that cornerstone is a programme that we cannot merely do without but one which we would be cursed to have foisted on us by a Government in its dying days. We need something radically different from what is available. We were far better off not to have had a programme negotiated during the lifetime of this Government, to let the people have their say about what they want to happen in the next four years in terms of taxation reform. There is no way one can map out a strategy for three or four years of a successor programme without facing up to taxation. This Government has not the political will to do the basic political ground work to deliver on the issue of taxation and it does not have the ideological cohesion to put before the people a single vision to that end.

I do not claim to be a political clairvoyant. It would be a foolish person who would predict what will happen at the next general election. Parties which appear to have the backing of only approximately one-third of the voters should not set the agenda for their successors. Parties which do not have the confidence of a working majority of the electorate and, in particular, those which do not have any reasonable prospect of getting the support of a working majority of the electorate should not tell the electorate how the country will be run after they lose office. It would be a great tragedy if an incoming Government was stuck with an agreement it could not rupture or renegotiate without it being in bad faith.

How does the Deputy imagine the 1 per cent came about? Such arrogance. His party left us the unpaid bills. How dare he? This is mind boggling and arrogant.

Let us hear Deputy McDowell without interruption.

The Minister will have an opportunity to reply and, undoubtedly, he will do so in his usual trenchant way. He should not talk to me about arrogance. He should reflect on a single woman earning below the average industrial wage, from whom he is taking 57p of every extra pound she earns, and then tell me he is a party of the left. If he can tell me that he has her interests at heart, when in three years he has not changed her position significantly, he can address the issues I am raising with a greater degree of confidence.

The Finance Bill is not merely an adjunct of the budget, it is the law of the land. Our tax system is the law of the land. Our tax system is in its present state because each year for a quarter of a century Members have voted to leave it as it is. We have done less than any other country in Europe to address the issue of taxation on work but, curiously, we have the most reason to do something. We have had commissions, Culliton and OECD reports, we have set up the NESC, working parties and forums and the Minister for Enterprise and Employment, Deputy Bruton, proposes to introduce another paper on the importance of taxation, but we have not had action. I have studied the details of the Bill and I do not propose to deride them because much work has been done on its drafting. Effectively, it is a fine tuning and tweaking of an existing tax system. It does not propose significant reform. In real terms, the changes in allowances are all within a few percentage points of zero. People will discover in the next few weeks that the Bill will make little difference to anybody. This is a missed opportunity to deliver on taxation reform.

I hope I am not being too arrogant in saying that I regard it as somewhat bewildering that coming up to election time, a Government should flag that tax reform will be on the agenda for its final budget. It is disappointing that it is a question of party political interest rather than doing what is right. It is also disappointing that the Minister should be quoted in the newspapers as saying he will now do something for the middle income groups for which he has done little in the past. He should start from his socialist roots and do something for single workers who earn £1,500 per annum below the average industrial wage and must pay 57p of every extra pound earned to the Government. If the Minister does something for those workers and forgets about the middle income group he might have some authentic socialist credentials. If he does something radical for them he might be seen as a radical socialist but if he does nothing, the political, economic and electoral consequences are inevitable.

I wish to share time with Deputy Finucane. I welcome the opportunity to commend the Finance Bill, 1996 to the House. Deputy McDowell's colourful speech should not surprise me. He is continuing to reiterate views and policies, with which many people agree, but which are in sharp contrast to his party's performance in Government, particularly in terms of growth in public expenditure and increased taxation. His views do not gel with his party's performance and this is a serious criticism of what he constantly preaches. I listened to him preaching similar sentiments when his party was in Government but he was not a Member of the House. It is amazing that when his party was in Government it did not do something about these matters. Unless and until Deputy McDowell and his party confront that reality the electorate will view them with a degree of cynicism. Public life is being diminished by the continuous assertion about what the Progressive Democrats would do about taxation and public expenditure control when that party's performance in Government left a great deal to be desired. I do not know why Deputy McDowell does not confront that subject when he speaks on this topic.

I was also amused at his unfounded comments about the parties in Government being confused and bewildered. The Government's cohesion on the Estimates, the budget and the Finance Bill has been marked. Of course, the parties in Government have different points of view but we respect one another. We have conducted debates and dealt with our differing views in a sensible manner, reached conclusions and are working well together.

The Finance Bill is the most complex legislation laid before the House each year. Many of its key provisions have been widely discussed since the budget speech in January. However, for the first time this year there has been extensive consultation on some of the Bill's more technical aspects prior to its publication. This applies not only to the discussion paper released some time ago but also to specific areas, such as the amendments to the BES scheme, on which there was extensive consultation with interested parties, practitioners and so on between budget day and the publication of the Bill. That process of consultation is essential to the efficient preparation of complex technical legislation such as the Finance Bill. The initiatives taken this year will be expanded in future years and this can only enhance the quality of our legislation and allow for more efficient use of the House's time in debating such technical provisions. The Bill also provides for the initial legislative stages in the process of consolidating approximately 30 years of taxation law. This is a major project which will be welcomed in particular by professionals and practitioners.

The Bill is unusual in one other key respect, that is it does not contain the provisions which give legislative effect to many of the key priorities addressed in the budget. The economy is prospering as never before and is growing at a faster rate than that of any of our fellow members of the European Union. The level of job creation has improved significantly. However, not everyone who desperately needs to work has been afforded that opportunity. The central thrust of the Government's policy in the budget was to direct resources towards the long-term unemployed and low paid. These measures are not appropriate to the Finance Bill as they are administered by the Departments of Social Welfare and Enterprise and Employment. The Finance Bill does not, therefore, give the full picture.

I wish to refer to some of those measures lest they be forgotten. The Government introduced an £80 per week subsidy for employers who provide jobs for the long-term unemployed. Special provisions have also been introduced to help 18 and 19 year olds avoid the trap of long-term unemployment. The low rate of employers' PRSI has been extended and now covers more than 600,000 employees. A range of tapering arrangements, including the retention of medical cards, have also been introduced. The Bill reaffirms the Government's commitment to the creation, through enterprise, of real sustainable jobs. It provides for the exemption from tax of grants received from county enterprise boards and grants paid under the Leader and area partnership programmes and back to work allowance scheme. The subsidy of £80 per week paid to employers in respect of the recruitment of long-term unemployed persons is also to be exempt from tax. This provision will allow these employment creating incentives to be maximised to the full by small and micro-sized businesses.

The Finance Bill is the single most complex piece of financial legislation brought before the House each year and it therefore merits careful thought and attention. It is sometimes regarded as the sum total of the Government's deployment of the benefits of economic growth, which of course is not the case. The Finance Bill is but the final stage in a long process which involves the settling of the Estimates, the Budget Statement, the Social Welfare Bill and a host of other measures.

The fruits of economic growth are spent not just on tax concessions or measures to help the unemployed but also on the improvement of services in hospitals, schools and other areas of society. None of this would be possible without the underlying prudent management of the economy to which the Government is totally committed. Economic prosperity which to some extent is taken for granted is not an accident; rather it results from proper policies and prudent management of the economy. There can be no improvements to services or significant reductions in the tax burden without continuous strong economic performance and prudent financial management. These are the key challenges facing the Government which has managed, and will continue to manage, the economy with the prudence necessary to promote sustained economic growth and real sustainable jobs. No package of employment subsidies or other pro-employment measures can deliver the kind of real sustainable jobs created by a prospering economy. A total of 45,000 new jobs were created last year and more than 30,000 new jobs will be created this year. Special interventions are necessary for those who have not been able to avail of economic prosperity, but in the end it is the overall management of the economy which will create real long-term employment opportunities.

A broadening of tax bands or a reduction in tax rates is guaranteed to make the headlines. The improvements in take home pay which these desirable changes can deliver are modest when contrasted with the savings to households arising from sustained low mortgage interest rates and low inflation. These are the ways in which economic prosperity is primarily shared.

Modern history textbooks rightly deal at length with the "economic miracle" of the late 1950s and early 1960s. However, the final years of the 20th century are the most exciting for this economy since the foundation of the State. As a nation we stand at the brink of becoming a founder member of a true single European market. This is a dream the founders of this State could scarcely have contemplated. In order to realise that dream we must manage our growing economy in a prudent and sensible way. The economic planning and policies which underpin this year's budget and the Bill reflect this necessary prudence and sensible management.

I do not propose to deal at length with the individual sections of the Bill as my colleague, the Minister for Finance, has already done so and I have no doubt they will be discussed in detail on Committee Stage. A significant number of the provisions reflect decisions already announced but there are some new items to which I would like to refer. I am particularly pleased that the relief granted for the installation of alarms for the elderly has been extended in section 5 to the relations of elderly people living alone. The extension of the relief will make it more accessible to those who need it most and the Government recognises that it is needed.

The provisions to curb abuses of the patent income relief have received much publicity. I fully support these measures as the level of abuse could, in a relatively short period, undermine the entire system of relief in this area. The new proposals which, in certain circumstances, relate the level of distributions to actual research and development expenditure should assist the genuine innovator and promote research activity in the State. The Bill also includes a separate provision, section 48, which broadens the scope of the special tax relief for research and development expenditure introduced last year. Any measures which foster innovation are to be welcomed.

In the two budgets introduced by it since it took up office the Government has increased the level of relief from capital acquisitions tax on the transfer of family business from zero to 75 per cent. This relief is crucial in ensuring that long-established family enterprises, most of which have created employment, can pass to a new generation without a significant tax charge requiring the sale of assets.

The small and medium-sized business sector is a major creator of employment and will deliver many badly needed jobs in the future. The risks taken and the commitments given by these business people must be recognised. In this context I welcome section 52 which makes the 27 per cent lower rate of capital gains tax available to a wider range of genuinely entrepreneurial business people who dispose of their businesses. I look forward to the further extension of this lower rate in the future.

I have no doubt that the economy will continue to perform strongly this year. All of the indicators are that the low interest rate and low inflation environment will continue in tandem with strong growth and job creation. The pro-employment measures introduced this year will be effective and the Government priority will be to reduce the burden of personal income tax next year. This year we concentrated largely on targeting the long-term unemployed, and we make no apologies for that. In future it is my desire to reduce the burden of personal income tax. This cannot be done at once, but it is an area that this and future Governments must address in future.

I look forward to constructive discussion on this Bill, on which there was extensive early consultation prior to its publication. It is a continuation of the same prudent economic principles which underpin the Estimates and the budget announcements and reflects the Government's commitment to job creation through enterprise and through the maintenance of a low interest rate, low inflation, high growth economy. The creation and maintenance of such a climate is much more important than any individual measure in the Bill. The Government is determined to continue sensible policies and not to be thrown off course, even by electoral considerations, as mentioned by the previous speaker. The Government has a duty to manage the economy in a sensible way not just to proceed, under the Maastricht Treaty, towards a single currency but because the policies operated by it brought about high growth, low inflation and other positive economic factors which have not filtered down to everybody yet — that will take time. The Government recognises it is also necessary to tackle the question of taxation which everybody agrees is a disincentive and must be reduced. It will be reduced in the months and years ahead by this Government and its successor which I believe will be this Government.

I do not know whether I was fortunate or unfortunate to listen for 30 minutes to Deputy Michael McDowell's contribution. Although he appeared to focus mostly on taxation — and there have been successes in that area — at no stage did he recognise that we have a very buoyant economy. People who have mortgages are extremely happy with the relaxation of mortgage interest rates. Inflation is low and there are low interest rates in the banks. All these factors contribute to the present state of the economy. I would love to take Deputy McDowell to where I live in Newcastle West where he would see the housing boom——

Is the Deputy saying the Minister is responsible for that?

——and that obviously reflects an enhanced economy. I prefer, however, to deal with the technical aspects of the Bill, some of which are good. I am glad the Minister decided to change the budget provision regarding the installation of security systems by pensioners over 65 and make relatives of older people eligible to avail of the facility. There was further recognition of the particular vulnerability of older people when the Minister for Social Welfare, Deputy De Rossa, announced a further £6.5 million to cover extra provisions for the elderly. I am sure Telecom Éireann will row in with a reduced telephone installation cost. The Government does reflect on the situation outside the House and has responded positively.

It is recognised that this Government is pro-enterprise. In 1995 it created 45,000 jobs and another 30,000 jobs are projected for next year. The Finance Bill states that grants from county enterprise boards, area partnership boards, Leader groups or grants under the back-to-work schemes will be exempt from taxation. That is desirable because, as a member of a county enterprise board, I have seen at firsthand how, at a relatively small cost, a county enterprise board can help to create many jobs in its local area. The Government is to be complimented on setting up such organisations in every part of the country.

I want to sound a note of caution about county enterprise boards. The Government is at present conducting a study to evaluate where funding will go in future. I am afraid that one of its recommendations might be that a greater amount of funds should go to city areas. Although that might be desirable in itself, I would not like it to be at the expense of county enterprise boards around the country which, in many cases, are getting a reduced amount. Most county enterprise boards are allocated £90,000 every three months and must operate within that budget. My county enterprise board is already exceeding its budget. The number of people interested in the various grants is an indication of the success of the county enterprise boards. I would like to think the Government would consider increasing the finance for the operation of those boards because they are creating many jobs at local level, far more successfully than some of the more renowned bodies.

Another element of the budget is the concession to encourage the transfer of farms. There has never been a greater incentive to do this. The Government is encouraging the transfer of farms to younger people and this Finance Bill contains concessions on leasing and capital acquisitions tax. Parallel with that is a very successful EU farm retirement scheme. The young farmer, if he avails of a particular Teagasc programme, is entitled to an installation grant of £5,600. All these elements are conducive to encouraging the transfer of farms, which is desirable.

One thing that concerns me is whether the priorities of the various organisations are sometimes misplaced. This struck me very forcefully during the week when I accompanied a deputation from a small rural community called Fianna who have been trying for the past five years to get a sewerage scheme for their village. Unfortunately the news from the council was disappointing, it would not even submit this scheme to the Minister for the Environment because so many other applications for similar schemes were stockpiled and awaiting approval. This is disappointing for a community which is typical of most rural villages around the country. It has a vibrant community council and, over a period of time, achieved third in the county in the tidy towns competition. It is one of the areas selected under the urban and village renewal schemes introduced by the Minister of State at the Department of the Environment, Deputy McManus. It is located in an area subvented by Leader funds, yet those villagers are threatened by the loss of a teacher, the relevant local authority not allowing them planning permission because of septic tank considerations. This is a contradiction in terms — a rural community endeavouring to advance while being constrained by bureaucracy.

One can talk about the Leader programme, partnership boards and urban or village renewal but local infrastructure must be a first priority. If one cannot implement a sewerage scheme for such a community — even at a cost of £200,000 — that community will wither through its inability to construct houses there. Having recently led a deputation of ten on this subject I was very disappointed with the official response as were the other members who returned to their area without any great confidence. That is what happens in many villages. While acknowledging the spending parameters of Leader programmes and partnership boards, it appears the Minister for Finance cannot entertain such demands within his budgetary constraints. Somebody must seriously examine the position and ascertain where funding can be provided for such community plans and requirements.

A good aspect of this Bill — and here I agree with Deputy Michael McDowell — relates to the incentive to work. There are many industries located in west Limerick, the gross income of most of whose employees, including some overtime, would amount to approximately £10,000 annually which is subjected to income tax. Many people with four or five children come to our clinics for advice and tell us that it is more beneficial to be unemployed than to work. That is something to which I referred when speaking on a Finance Bill some three years ago. One important anomaly — the loss of a medical card — has been removed. Heretofore, whenever an unemployed person returned to work he lost the benefit of a medical card estimated to be worth approximately £500 annually to an average family. The abolition of that anomaly is some incentive to return to work. There is also the positive incentive to employers who, on recruiting people who have been unemployed for three years, will be eligible for the employment subsidy of £80.

I also welcome the environmental controls on forestry introduced in the past few days by the Minister for the Environment in conjunction with the Minister for Agriculture, Food and Forestry. I particularly welcome the proposed consultations with local planning authorities on projects to be grant-aided, including forestry projects. In the western part of my county small communities, comprised of older people, live in isolation and in fear in the homes in which they resided happily for many years. They perceive many local forests almost as havens for the thugs who prey on them. This phenomenon is leading to rural decline, as some people are forced to move into larger communities. I welcome any tightening up of regulations in this area.

So far, the tone of contributions, particularly from Members on the Government side of the House, has been very interesting. While listening to the Minister of State at the Department of Finance and Deputy Finucane I was fascinated that they almost ignored the failures inherent in this Bill and its objectives. I was struck forcibly by their obvious difficulty in identifying any provisions their party could clearly state it had carried forward from Opposition and implemented in Government. Indeed the Minister for Finance had very little to say yesterday about overall policy thrust, or any concrete achievement by him in his second budget. He failed to point to any notable legacy worth retaining in terms of taxation after his term of office. He unenthusiastically commented on the various sections of this Bill in a very lack lustre fashion without making any radical change in the development of fiscal policy. It appears the type of policies he might want to implement are not capable of being implemented under this tripartite Government and he realises his failure.

Since the recent by-elections I was struck by the Minister for Finance's promise that his next budget will deal with the most fundamental problem of taxation as it affects middle income families. He almost held out a bribe to the electorate in advance of next year's general election. It is reasonable to interpret such remarks as a bribe. He hopes the very serious failing fortunes of the Labour Party and this Government can be rectified in the interim. Over the next 12 months, no doubt we will be treated to a regular diet of such statements from the Minister for Finance and the many spin doctors associated with this Government, but the electorate will not be fooled. In the past two years the greatest opportunity in 25 years existed for tax reform when, for the first time, a Labour Party Minister had control of the Department of Finance. Yet there was the greatest failure on the part of any Minister who had espoused a particular radical ideology over recent years and the Labour Party, when afforded that opportunity in conjunction with Fine Gael and Democratic Left, to do anything that could be construed in any way as beneficial for PAYE workers. It is reasonable to suggest that it will be difficult to sustain the high levels of economic growth experienced in recent years, facilitated by Fianna Fáil-led Governments since 1987, into the next century.

The electorate will not be fooled into believing there will be an overnight change of direction in next year's budget. They will perceive any carrot held out to them as merely being offered in advance of the next general election. There should be a health warning on the package that the spin doctors will make public in the next few months. Let us remember that there is provision for a further budget in the autumn of 1997. The electorate should take on board that whatever bribes the Government may try to offer in early 1997 in conjunction with the general election, if it is returned to office, it will have the opportunity to bring in a second budget that year. I have no doubt that whatever concessions, packaged as real tax reform, may be given in the early part of 1997 will be reversed in the latter half of the year should this Government be returned to office. This country cannot afford the luxury of the policies pursued by this Government.

I have read the Official Report for the period when the Minister for Agriculture, Food and Forestry, Deputy Yates, was Opposition spokesperson on Finance. His statements from these benches are a world away from what the Fine Gael Party is doing in Government. It is failing to deliver on a shred of its radical proposals professed in Opposition. The Fine Gael Party simply abandoned any thought of radical tax reform when it entered Government. Apart from the fact that it is a tragedy for the Fine Gael Party——

That is misinformation. The Deputy is wrong.

In fairness to the Minister of State, she is one of the people who knows well what I am talking about.

Put the facts on the record.

We do not encourage exchanges across the floor. It cuts into speaking time.

I will give the Deputy an extra minute to put the record straight at any time.

Acting Chairman

The Deputy without interruption.

I am too long in this House to be put off my stride by the Minister of State's comments because she knows that what I am saying is true, as do the public.

The Deputy does not know.

What is more interesting——

The Deputy is incorrect. The Deputy is putting words in my mouth and he should get them correct if he proceeds in that vein.

One only has to walk the streets, the highways and byways and talk to Fine Gael supporters who will tell you exactly what I am asserting in this House. My point is that the electorate will not be hoodwinked or fooled by messages emanating from the Minister for Finance, Deputy Quinn, since the by-election and the "4 per cent" Labour Party. The Minister for Finance has suddenly found the Holy Grail and realises that middle income families have been decimated by his lack of action in the past two budgets. Given the substantial increase in productivity and the wage restraint shown by the PAYE sector, it would have been reasonable for the PAYE sector to have expected a pay back in terms of real tax reform that would put extra money in their pocket. They had expected to benefit from the substantial economic growth, but that did not happen. It did not happen because the rainbow coalition Government of Fine Gael, Labour and Democratic Left was unable to deliver on a package that would have led to continued economic growth, a reduction in unemployment and sustaining the jobs that are available. That is a real tragedy.

We can look to independent forces for some indication of where our economy is going. At a time of increasing economic expansion in the European Union and the strengthening of various world markets, it is extremely worrying that the competitive position of the Irish economy is slipping. In the recent OECD report we can see that we have fallen very far from our competitive position a short time ago. We compete for mobile international investment in order to create sustainable jobs which in turn creates further jobs. We know the benefits of international investment by some of the biggest companies in the world markets that have set up in this country. We know that the cost of employment in this country is turning potential investors away from investing in Ireland. We simply cannot afford this. Not alone will we lose potential jobs but the companies already here are beginning to think in terms of expanding in other countries. If that happens, the existing jobs will shrink, there will not be continued growth and the unemployment crisis will be further compounded. Tragically, this stems from this Government's decisions. There is no use in blaming outside forces such as the German, American or Japanese economies for the problems we have created for ourselves. My colleague, Deputy McCreevy, rightly stated last evening that many workers on low wages are better off when they are out of work and live off the State and have made a decision not to work because of the punitive taxation of low paid workers.

This problem has been on the agenda since I was elected ten years ago. We have had reports from independent consultants and departmental assessments have been carried out. We do not need any more reports, we simply need to take the sort of action that is necessary if we are to make a real impact on our levels of unemployment. It is reasonable to interpret the policy of the Government in this Finance Bill as not being committed to doing anything worthwhile in creating employment and reducing unemployment. In 1995, 45,000 new jobs were created but this year the Government expects somewhere in the region of 30,000 new jobs to be created. That is extraordinary considering the level of economic growth we are experiencing. It is an extraordinary admission by this Government that it has no answers and is literally depending on outside forces in the hope that something might happen.

When we talk about monetary union — I have spoken on it many times in this House — and its effects on this economy, the one question we all keep coming back to is whether Ireland should participate in it if the United Kingdom does not because of our close relationship with the British economy. It is a real and difficult question. However, we are doing nothing to create the conditions in our economy that would greatly lessen the negative impacts if we participated in economic and monetary union and the United Kingdom stayed outside.

Employers and employees alike do not have room to manoeuvre because punitive levels of taxation have removed any scope within a company when a problem arises. When various sectoral problems arise in our economy — there have been problems in the beef industry recently — its immediate impact is job losses. It would not have to be that way if these companies had room to manoeuvre with their employment costs. Since employers are bearing the major proportion of the cost burden, job losses seem to be the first and only alternative in a crisis. This is not the case in other economies. Many other measures can be taken long before jobs are lost. However, that is not the case in the Irish economy. This is coming more into focus and will worsen when sectoral problems arise because the employers' room to manoeuvre has been removed. That is very much in keeping with our slipping down the scale of the world competitiveness league.

We can argue about monetary union forever but our decision would be a million times easier if we made tax changes, which is within our own remit, to reduce employment costs and the burden on employers. If there was more scope and room to manoeuvre in those areas and if those costs were substantially reduced, the impact of the United Kingdom staying outside economic and monetary union would not be as great and our companies would be able to cope with it in a far better way than at present. There is currently no room to manoeuvre because of the punitive costs involved in employment. There is no point in talking in this or other fora about plans to reduce unemployment if substantial and radically different changes are not made to our taxation system.

There was movement that made a difference from 1987 onwards. There was growth in employment and real benefits began to filter through. However, all this came to an end when the Labour Party got its hands on the Department of Finance. It is impossible to have a high spending Government and a low taxation regime at the same time. This high spending Government's performance has been substantially masked by the economic growth it was fortunate to inherit. It did not create the current levels of economic growth in this economy. They were created and built upon during the last eight years by Fianna Fáil led Governments. It would be ludicrous of the Minister to suggest that he created that economic growth, but he had the opportunity to benefit from them. However, he slammed the door on continuing the move towards the downward trend in levels of personal taxation and employment costs. It is extraordinary that the party that failed the most in this matter was that which purported more than any other to represent the PAYE worker. Of course, those of us who have been in politics long enough know that most of what the Labour Party says is hot air and suited to a short-term agenda. It has never had a proper, committed long-term strategy that it was prepared to espouse in Opposition and deliver when it came to Government.

The Labour Party has spent 13 of the last 23 years in Government but what has it contributed? Every time it has been in Government there has been a crisis in its removal from office. It spent large amounts of money, did nothing about taxation and crippled the economy and this pattern is repeating itself. However, this time the economy is in such good shape that it is masking its lack of ability, commitment and real dedication to do something about taxation.

Another aspect absent from this Bill, from a party that had much to say about it in Opposition, is that of local government. There is no mention or reference to it in the Bill. The local government strategic management initiative was announced last week. While this is important, how can the Minister be serious about taking a radical approach in that area and say nothing about funding and finance and the framework of the dreadful property tax? We know about the anger of people with regard to the way service charges etc. are structured. The Labour Party introduced them and hounded members out of every council chamber.

While the Minister for Finance and the Minister for Health do nothing, their county council colleagues are still opposing everything. There would have been no development of local government if it had been left to the Labour Party. Fianna Fáil has saved local government in extraordinarily difficult times. We have suffered a lot of pain for doing so but many local communities have benefited from our stand.

I am a member of a county council that has seen much strife and difficulty in that area. However, it is extraordinary that this Government, which consists of the Labour Party Tánaiste, the Minister for Finance and the Minister for Health, has not even inserted a line or a reference to local government in the Bill, as if it exists in other countries but not here. It is quick to tell us at committee meetings about the success of the Nordic countries, including Denmark and Sweden, Spain or France but it does not refer to the level, contribution or status of local government in those countries and the commitment to it by socialist parties — which the Labour Party is supposed to be — to encourage people to pay for necessary services. Most county councils and corporations are involved in major sewerage schemes and dump sites which will cost substantial sums to operate on a current basis, irrespective of the capital costs involved, yet there is no reference to local government in this Bill. It is as if the Minister for Finance, Deputy Quinn, accepts that when this issue arises next year he will be in Opposition on his old hobby horse shouting about it and somebody else will have to take responsibility for the difficulties, unlike the Labour Party, Fine Gael and Democratic Left which have not done so.

I wish to refer to two aspects of the Finance Bill. I applauded the seaside resort renewal scheme introduced by the Minister last year to invest in and rejuvenate seaside resorts. However, within 12 months he excluded accommodation from capital allowances under the scheme as if addressing the needs of resorts like St. Moritz and Cannes. Does he realise the condition of our seaside resorts and the struggle encountered by those engaged in the tourism industry in those areas? The welcome radicalism initiated by my colleague, a former Minister for Tourism and Trade, Deputy McCreevy, in devising that scheme left a legacy for the Government to introduce it to protect seaside resorts and assist tourism development. We supported the Minister in introducing that scheme last year but this year he excluded accommodation from capital allowances and ring-fenced rental incomes. He might as well abolish the scheme. He must be aware of the number of projects seriously affected by that measure which is a nonsense. The scheme was hardly up and running when the Minister introduced that severe measure. It is typical of the Labour Party that, when its members thought some people might make a few bob out of the scheme, they imposed a restriction on it.

It might have been too successful.

"Profit" is a dirty word and the Minister was the person to put a stop to it. The Labour Party did not stop to think that such a measure might ruin a projected investment package required over the next five years to upgrade hotel accommodation in our seaside resorts to the required standard, but in less than 12 months the Minister came into this House and did a volte face regarding a provision under that scheme. The Minister was wrong to introduce that measure and we hope to amend it.

The restrictive changes introduced in the area of research and development are ironic. The lack of research and development is raised at all forums I attend. Such facilities are badly needed. When companies become involved in this area, the Minister adopts the attitude that they may be abusing the system to reduce taxation on profits. That would be all very well if this country had some of the largest development and research plants in the world. We badly need major European companies that locate here to invest in research and development. Bausch and Lomb, located in my constituency, requires research and development facilities, encouragement and supports to compete with its mother plant in the United States and plants elsewhere to make it worthwhile to locate here and to bring the necessary expertise and provide training for Irish people.

Despite the publication of a well researched report recommending the upgrading of the regional college in the south-east region and the deficiency in third level education there, I heard nothing from the Minister for Education about that. While the report recommended upgrading Waterford regional college to an institute of technology, it did not make any recommendations concerning other areas, yet the Minister chooses to deal with other areas. Putting this matter on the long finger is no longer acceptable to the people of Waterford and in other parts of the south-east region. The people of that area want and demand action now to upgrade the regional college to an institute of technology. As the Minister of State, Deputy Doyle, is from Wexford, I expect her support on this.

Most of us do not realise the extent to which the public service impacts upon our lives. We take the delivery of public services in their present format and standard very much for granted. For instance, the public service provides our public bus and train service, postal service, health care through hospitals and clinics, social welfare benefits, personal taxation, motor tax, the provision of telephone and electricity services, the range of services provided by local authorities, primary, secondary and third level education and radio and television service. The list is apparently endless. The public service impacts on us all every day of our lives. There are more than 200,000 people employed in the public service, both appointed and elected, including civil servants, doctors, nurses, Army personnel, gardaí, local authority workers, teachers, politicians and all those employed in the commercial and non-commercial State sectors. We are talking, therefore, of almost one in five of the labour force employed in the public service paid by the Exchequer on behalf of the tax paying public.

One of the commitments in A Government of Renewal concerns the introduction of reform in the delivery of the large range of public services I listed, with the aim of achieving and demonstrating value for money, high standards of service, efficiency, courtesy and accountability. A central objective will be to assert the authority of the customers of public services.

As the House will be aware, the whole area of quality of public services, including standards of service and redress, is a major component of my area as Minister of State with responsibility for the Strategic Management Initiative, an integral part of which is quality of service to users of public services. A primary function of my brief is to develop and implement a package of measures designed to make public organisations more accountable, more efficient and effective and, crucially, more responsive to the needs of the public.

I consider it critical that structures are put in place to implement change to ensure that these systems and structures are reviewed on an ongoing basis and, most importantly, that customers of public services are provided with clear and easy-to-use means of redress. This is especially important in my appointment to the Department of Transport, Energy and Communications whose wide variety of commercial State companies will constitute a key part in the improvement in the delivery of service to the public, to which I will refer later.

I was particularly impressed with some of the findings and recommendations of the recent National Economic and Social Forum report on quality delivery of social services published last February. While primarily relating to the provision of social services, the report is of direct concern to everybody as most of its findings and recommendations can be applied to the provision of all public services. The forum reports that the traditional emphasis on systems and procedures in the public service must be complemented by attention to "people, purpose, performance and value for money". This indicates that we now require a number of strategic initiatives central to which will be the requirement for profound attitudinal and cultural changes in the way we deliver services to the public.

Proper training and staff development will be imperative, particularly for frontline staff, as will effective leadership, support and commitment from management. The delivery of the service will have to become much more customer-focused and it must be recognised and accepted by all that quality is a constantly changing target. What was considered a quality service ten years ago is no longer sufficient or of high enough standard. Staff consultation, involvement and support are also of fundamental importance.

Integrated action on four fronts will, therefore, be necessary for the delivery of a quality service. The first is quality of communications. This would embrace such areas as formal consultation processes being established through, for instance, customer service advisory groups comprised of customers, representatives of customer organisations as well as representatives of staff and management with customer perceptions and expectations being regularly surveyed and customers being kept informed of rights and procedures plus mechanisms for complaint and appeal.

The second is quality of specification, performance indicators and value for money. A quality service must cover issues such as definition of objectives, priorities and policies, accessibility and availability of service, speed of response, staffing levels and qualifications of staff. Performance indicators for the delivery of services will need to be developed in consultation with staff representatives and customer service advisory groups. They will also be initiated so as to provide an examination of existing activities in delivering services. Value for money concepts in relation to service delivery will comprise economy, efficiency, effectiveness and equity.

The third is quality of delivery. A quality service will monitor the delivery method and take action when standards are not met. Correcting faults and failures are only the first steps in the process. It will be vital also to identify the causes of difficulties and take measures to prevent recurrence.

The fourth is quality of staff and systems. A quality service can only be delivered by suitably trained and motivated staff supported by good management systems. The forum recommends that action be taken in the areas of recruitment, motivation, internal communication, training, health and safety, industrial relations and organisational development. In addition, staff will need to be equipped to deal with two levels of interaction — one a service provider and the other a guardian against fraud.

I fully support the NESF report and I am committed to implementing its recommendations as part of the Strategic Management Initiative.

Another recent timely input into this important area came from the second report to Government of the Co-ordinating Group of Department Secretaries established under the Strategic Management Initiative. This important initiative was set in train by the previous Taoiseach, Deputy Albert Reynolds, and is being continued by the Government. The primary objective of the SMI is to put in place in each Department and public service agency a management process that is focused on ensuring continuous improvements in the performance of the civil and wider public service in relation to the contribution they can make to national development, the provision of services to the public and the efficient and effective use of resources.

The co-ordinating group's mandate was to review existing systems for making decisions, allocating responsibility and ensuring accountability in the Civil Service and to bring forward Government proposals for an integrated programme to modernise the systems and practices in operation and for the consequent modernisation of existing personnel and financial management in the Civil Service.

The co-ordinating group dealt in detail with the issue of the delivery of quality services. Its report identified that the essential task of the Civil Service is to ensure the delivery of high quality services to all those who are the customers and clients of the Civil Service across the whole range of its activities from the provision of policy advice to the delivery of particular services to the public.

The report considers that the approach to service delivery, whether in dealings with the Office of the Revenue Commissioners, Telecom Éireann or local authorities to give just a few examples, needs to be clearly focused on achieving specified results to agreed standards and targets and being more open and transparent in its approach. The importance of doing so in the most cost effective manner also needs to be reaffirmed.

As Minister responsible for the SMI, I am taking a keen personal interest in implementing the recommendations of the Co-ordinating Group of Department Secretaries. Deputies will recall the successful debate held in January by the Select Committee on Finance and General Affairs and the total support across the House for the Strategic Management Initiative. I very much welcome the contributions of Deputies from all sides. I recommend the report of the Select Committee on Finance and General Affairs to those who were not in a position to join us on that occasion as excellent reading in this most important area.

Progress in the area of quality service delivery in the public sector can best be achieved through the approach which has underpinned the Strategic Management Initiative from the beginning. This has focused on the way the Civil Service is managed and not just on plans and implies a strong emphasis on how work is done and value delivered. This approach will form the basis for the deepening of the Strategic Management Initiative within the Civil Service.

A particular focus on customer satisfaction, output quality, the time taken and cost involved in delivering the services in question will provide the basis for measurable assessment of performance. This is the approach I would like to see taken.

The co-ordinating group identified and sought support in the first instance for the adoption and implementation by the Civil Service of new approaches to quality service delivery. This new approach will be based on the following principles: a specification of the quality of service to be provided by Departments-Offices to their customers, whether internal or external; consultation with and participation by customers on a structured basis; the provision of quality information and advice to customers; reasonable choice for customers in relation to the methods of delivery of services; the integration of public services at local, regional and national level; a comprehensive system of measuring and assessing customer satisfaction involving such issues as customer feedback, questionnaires-surveys, periodic reviews and audits by independent organisations, customer advisory groups and others, and complaints and redress mechanisms which operate close to the point of delivery. The group recognised the substantial progress which has been made in improving the services delivered in some areas of the Civil Service in recent years and saw its recommendations as underpinning the provision of even better quality services.

I single out and compliment the Office of the Revenue Commissioners and the Department of Social Welfare for the steps they have taken towards improving the quality of the service they offer to their customers. I understand that the Department of Social Welfare intends to publish shortly fresh initiatives in this area, but already there is ample evidence of a more customer-focused approach in that Department's dealings with members of the public through the development of one-stop-shops in place of the traditional employment exchanges, the facilities to receive payment of benefits from post offices and the easier access to information regarding benefits, but these are only the start.

The Revenue Commissioners have also taken steps in the area of quality service delivery to their customers with the publication of a charter of rights of those dealing with the Office. This charter sets out in a clear and concise manner the level of service the customer has a right to expect and covers such issues as access to information, impartiality, privacy and confidentiality, consistency and the right to an independent review. The Revenue Commissioners might consider providing a copy of their excellent charter to their customers on an annual basis.

Publicly articulated, the principles outlined by the co-ordinating group will underpin the provision of a high quality public service in Ireland. They are geared to achieving a qualitative improvement in service delivery and one which will be perceived as such by the customers of the public service. This is vital because the reality that a fair and efficient service is being delivered by the Civil Service is lost if the public as customers do not perceive the service received as efficient and helpful. There is a gap between the perception and the reality which must be closed urgently. An open interaction between community-voluntary organisations and the public service will help create a culture of mutual trust and build a deeper relationship between them in the interest of delivering better public services. Tensions can arise where the Civil Service not only provides a service but also has a regulatory function. The tension generated by this dual role will be fully addressed in the development of appropriate policy guidelines and, critically, in the training of the civil servants who provide services directly to customers.

I fully endorse the co-ordinating group's recommendation seeking the immediate introduction of a quality service initiative. This must be based on the principles I outlined and it will be implemented as part of the current phase of the Strategic Management Initiative. This initiative will provide a new groundwork for enhanced customer focused administrative procedures and these will be appropriately underpinned by a legislative framework. In this regard, I restate the Government's commitment to bring forward legislation in the area of administrative procedures and freedom of information legislation. These will be an integral part of the overall renewal programme.

The co-ordinating group, involving Department secretaries, also recommended extending the Strategic Management Initiative to the Irish public service in general. This will involve setting all chief executives of public service bodies, for example, State-sponsored bodies, local authorities and health boards, the task of producing a strategic statement within the Government programme and in the parent departmental context. This must be completed within 12 months. An integral part of such a statement will be the focus on customer service and the quality and delivery of same. Given that such statements will be published and will, therefore, be in the public arena, it places the onus on the organisations in question to deliver on the promises and objectives set out.

As Minister of State at the Department of Transport, Energy and Communications, I recently requested an update on the customer service initiatives in existence in the ten commercial and one non-commercial State companies operating under the Department's ageis. The House will be interested in the details of how some of these companies deal with this important issue.

Aer Rianta's customer care initiative has been ongoing since 1986. A series of quality systems which comply with Irish and international industry standards have been put in place on a company wide basis. A quality, or "Q", mark model documented in 1993 is currently used and each business unit has developed and put in place a quality management system. Quality agreements were also made between Aer Rianta and the other services that operate from Aer Rianta managed airports.

The "Q" mark model includes a mechanism for dealing with customer complaints. The procedures include provisions for recording complaints and reporting them to senior management on a monthly basis. Customer comment cards are placed at convenient locations in airports and collected and acted upon weekly. Internal audits are carried out by Aer Rianta twice a year to ensure compliance with the quality system. Having obtained the "Q" mark in 1992, the company has expressed ambitions to achieve the ISO 9002 standard and ultimately to receive the European Quality Award. I commend Aer Rianta for its recent work in the area of customer care and quality service delivery.

The Irish Aviation Authority provides a service to a small, homogeneous group of customers. The Authority has recently initiated a programme of regular consultation with customers and other measures for customer service. A variety of customer consultation groups have been established and the possibility of setting up an advisory council to the Authority is currently being considered. In addition, a process of consultation between top management and all major customers began in January 1996. Performance indicators on service level to customers are currently being developed and will be finalised by the end of 1996.

Aer Lingus has a number of mechanisms to ensure excellent customer service. These include a mission statement which enshrines customer service in its corporate ethos; published service standards for frontline staff; intensive customer service training programmes and an established customer relations department which handles liaison with customers who have problems with any aspect of the company's service. Aer Lingus considers that, because it works in a competitive service environment, it must pay particular attention to its customers as its success is determined by the marketplace. The excellent progress made in this area in recent times by Aer Lingus is evident. It is interesting that the semi-State bodies which operate in a competitive market seem to be well ahead of the rest in relation to customer care. A strong message is contained in that point. I also commend Aer Lingus for its excellent attention to quality service delivery.

It will not come as news to Members or to the public that CIE has not been to the forefront in terms of customer service. Accordingly, my colleague, the Minister for Transport, Energy and Communications, Deputy Lowry, recently announced a series of new measures as part of an investment strategy for CIE. An integral part of this includes the negotiation of a series of public service contracts. These contracts are a new idea and they will spell out clearly, for the first time, what services the company is required to provide and what the State will pay to support non-commercial services that are socially necessary. Performances under the contracts will be monitored and the results of that monitoring will be made public. Customers of CIE will, therefore, be able to see, for the first time, what service standards have been set for the company and how it performs against those standards. I am sure this measure will be welcomed by all customers of CIE.

The principle of customer service is a central element of An Post's mission statement. To ensure the attainment of this aim, An Post has employed the Market Research Bureau of Ireland — MRBI — to independently monitor elements of its quality of service. These results are published regularly in the national press. The performance of its post offices is also monitored and reported to its major customer, the Department of Social Welfare. An Post has also established a customer care department which responds to customer complaints on an individual basis, both corporately and within the individual businesses of the company. From the complaints sources of problems are identified and, as far as possible, rectified.

In response to Minister Lowry's request in June 1995 for a review of An Post, the company appointed Price Waterhouse to make recommendations on its role, method of operation and effectiveness. The report contains over 400 recommendations on such matters as quality of service and strengthening of management. The board of An Post accepted the report as a framework for the future direction of the company and the recommendations are being implemented. A new business plan will be put in place and will include a number of initiatives, including the production of customer charters for its businesses together with customer service quality committees throughout the company.

My colleague, Minister Lowry, has reported our concerns in relation to the still unacceptable delays in the delivery of mail in certain areas and the service provided by An Post. While I accept that measures are in place, which have resulted in a situation where the quality of service has reached the level which existed prior to operational changes introduced in 1994 — a figure of 90 per cent next day delivery has been published — there are many difficulties regarding the delivery of mail in the Dublin area. The company is currently addressing these but Minister Lowry and I have expressed our ongoing concern. The Minister reported our mutual concerns to the Cabinet in recent days about the ongoing delivery problems. Apparently, only 10 per cent of the public do not receive next day delivery service, I meet many of these people.

So do I.

If we are to accept that 90 per cent of the public receive a next day delivery service, Members who raise their concerns about the quality of service from An Post must meet all the remaining 10 per cent. I must accept the figures which, apparently, were arrived at by an independent service. However, the 10 per cent is very vocal and those people are most unhappy with the quality of the postal service in terms of next day and time of day delivery.

This matter was raised at Cabinet level by my colleague, Minister Lowry. As a result, it has been agreed that I will undertake a special mission to determine the extent and cause of the problem and examine what proposals are in place and if they are sufficient to resolve it or whether we need to go further to determine the cause of the difficulties and the necessary resolution. The Minister will make a statement later today on this initiative sponsored by the Government in relation to the delivery of services by An Post.

Telecom Éireann has a number of customer service initiatives under way at present. A customer charter is in preparation and the company intends to finalise it in the near future. It will be sent to all its customers and will detail the levels of service which customers can expect from Telecom Éireann.

For the past number of years its call centres have been running a programme of customer satisfaction measurement, the results of which are used to improve operations. It has established five customer panels made up of representatives of its various customer groupings. These panels meet in various locations around the country. The company has also invested resources in training its frontline staff to meet its customers' needs. I recognise recent improvements in customer service care from Telecom Éireann. It still has a road to travel and I encourage it in its endeavours.

A recent consultants' report reviewed quality of service as an integral component in Bord Gáis Éireann's competitiveness in the energy market. The recommendations of the report have been accepted and a chain management initiative, including a comprehensive strategy for customer service, is in the first stages of implementation. For a range of customer groupings, a series of benchmarks and targets have been set within a phased timetable. Customer satisfaction with various aspects of the service features strongly as a benchmark and a mechanism for monitoring and reporting progress is to be set up in the first half of this year. Time is running out.

An existing system of complaints monitoring is to be given a higher profile to encourage staff ownership of registered complaints. In the longer term a comprehensive complaints management system will be established. The consultants' report recommended the production of a customer charter for Bord Gáis at a later stage in the implementation of the strategy.

The ESB has a number of structures in place to deal with the issue of customer service. Fundamental to its treatment of customers is its consumer charter which was issued in 1989 to all its customers. I do not believe I have ever seen it. The charter, which is under review at present, specifies the standards of service customers can expect in dealing with the ESB. The company employs independent consultants to track complaints to test its achievement of the targets set out in the customer charter and compare it with the other utilities. Its information technology system allows complaints to be devolved to the first point of contact in regional offices. The ESB, in common with other State-sponsored bodies, will face a new liberalised market in the years ahead. Among other things competition will force the company to pay greater attention to the issue of customer service.

Bord na Móna focuses on product quality rather than customer service. All its factories have the ISO 9000 and "Q" mark quality awards and there is a continuous process of new product development. It carries out regular customer surveys and is in the process of adopting a set of company values the first of which is responsibility to customers. This must lead to a greater degree of commitment to customers.

The Irish National Petroleum Corporation and the Radiological Protection Institute of Ireland are two bodies with which I do not have time to deal.

All the companies in question have in place, to a greater or lesser extent, some mechanism for dealing with the issue of customer service. It comes as no surprise that those companies which are operating in a competitive environment, where there is a choice of suppliers, appear to have put the customer first. If they fail to do so, they run the risk of losing customers and market share with consequent loss of revenue and profitability. In that sense competition and choice is good for all customers in the public sector.

But not all our commercial State companies are operating in competitive environments and some of them are comparative newcomers to the competitive environment, having operated as monopolies since their inception. These will, therefore, need to devote considerable attention to the issue of delivery of a quality customer service. The adage of "the customer is king" is very true and with further deregulation and increased competition, customers can and will choose alternatives when confronted with a standard of service which they consider to be less than satisfactory. In the era of choice, customers cannot be taken for granted.

In order to bring about a more focused and integrated approach to this area within the public service at large, I am pleased to inform the House that I am establishing a group chaired by a senior official in the Department of Transport, Energy and Communications and including representatives from a wide range of commercial State companies. The group's terms of reference will include an in-depth examination of the current state of play in commercial State companies with a view to drafting a code of practice for customer services in the commercial State companies. I am anxious that we put in place as soon as possible an agreed standard to which all relevant organisations will comply. At some stage in the future legislation may be necessary to ensure the provision of quality services but I am not contemplating that at present. My preference is to seek a consensus approach to this important issue and to allow for the development of a voluntary code of practice. I have requested that the group submit to me a draft code of practice for quality service in commercial State companies by the end of this year.

I am also anxious that, on an annual basis, an independent audit would take place of the current standard of customer service in the commercial State companies. I would like to make an annual statement to the House on the progress being made by the State companies in implementing a programme of quality service for customers. What I have outlined above for the commercial State companies is the current baseline and I hope to be able to record major progress when next I report on progress.

Before concluding, I would refer to the benefits that can accrue to organisations that pay the necessary attention to the quality of customer service. As my colleague, the Minister for Transport, Energy and Communications, Deputy Lowry, has emphasised on numerous occasions, a five strand strategy for the commercial State sector exists comprising competitive not monopoly pricing, effective management of change involving quantifiable performance measurement, emphasis on long-term strategy rather than short-term tactics and, most importantly, customers. It is a sine qua non that, in today's increasingly competitive environment, unless you are fully customer driven your future is one of decline. Customer focus and delivery of a quality service can be the main engine in companies achieving and sustaining real growth.

I take this opportunity to express my regret at any inconvenience caused to members of the public as a result of the closure of some Government and public offices on Tuesday 9 April, because of a privilege holiday. In light of the concerns expressed I wish to again assure public service customers that, in my capacity as Minister with responsibility for customers of public services, I am examining the issue of the availability of public services to ensure that the public receives the continuous quality service to which they are entitled.

Following adverse publicity at the same time last year over the same issue, I initiated new arrangements in relation to the privilege days. These arrangements involved a two-strand approach, involving a review by Departments of their opening arrangements at Christmas and Easter and the placing of a single advertisement in the national newspapers detailing those opening arrangements for the benefit of public service customers. I am pleased to note that as a result of the former initiative, as well as the largest Civil Service offices and Departments with which the general public would have considerable contact on an ongoing basis, there were a number of additional offices open on the day in question compared to Easter Tuesday last year. These included, for example, the Passport Offices in Dublin and Cork and the Government Publication Sales office. There should be cover in all Department and Offices on Easter Tuesday. That does not mean all public servants must be in place. They are entitled to their day's leave but not all on the same day.

I am, of course, anxious to ensure that, when there is to be an unavoidable reduction in the level of public services available, the customers of those services are made fully aware of the relevant arrangements. In order to meet this objective and as part of the second strand of the approach I have already outlined, I arranged for an advertisement, setting out the opening arrangements for Government Departments and offices over the Easter period, to be placed in the national newspapers in the run-up to the Easter holiday.

I again emphasise my determination to ensure that our public service becomes much more customer-orientated and customer-driven. For this to happen, the necessary structures and initiatives need to be put in place to deliver on the commitments covering public service reform contained in the programme A Government of Renewal. Similar ideas are also referred to in the recommendations of both the National Economic and Social Forum and the Co-ordinating Group of Secretaries established by the Government under the Strategic Management Initiative. We must be honest enough to admit and accept that the level of service offered in the past by all — in that I include those appointed and elected public servants — and currently by many, has not always been of the highest standard. Much more attention and emphasis need to be devoted to it so as to develop a more vibrant and responsive service to the public. We as public servants are not ends in ourselves, we are the means to an end — the delivery of quality service. The change will not happen overnight, it will take time to implement and get right, but we cannot wait forever. Significant attitudinal and cultural change will need to be adopted and public servants at all levels will be expected to buy into and support changes to the traditional way of delivering services to the public.

I am determined that this new process will involve all players from the outset and that staff at all levels of the public service will have an input into whatever changes are discussed and eventually agreed. Any new system that is imposed from the top down is doomed to failure. There is a challenge here for us all, but one which the public will thank us for if we take it up and deliver quality services to our customers. They deserve nothing less and I will endeavour to ensure that they get the very best.

I wish to make two brief comments on the Minister's long speech. On the independent survey carried out on behalf of An Post — as an independent survey I have to accept it — the 10 per cent of people who do not receive their mail on the day after it is posted must live in Wexford, and some in Limerick, I being one of them. I am delighted the Minister has cast a jaundiced eye on that survey. This matter needs to be considered more closely. Perhaps the people conducting the survey did not ask the right questions.

The Minister mentioned charters, and apparently there is a commitment to introduce further charters and update some of those already in existence. At present there are charters for taxpayers, hospital patients, occupants of rented accommodation and farmers and for the past 12 months we have been awaiting a charter for crime victims.

What about a charter for Deputies?

That will be next. We will arrive at a stage where there are as many charters as there are famous Blarney stones, and they are about half as useful. The effect of charters in practice is nil. In a professional capacity I represent a number of people, particularly taxpayers, and in a political capacity I represent a number of other groups for whom charters have been made available, but those charters have no basis in law. People cannot take legal action based on charters. They are mere pie-in-the-sky, pious, platitudinal, aspirational documents which read very well but have no effect whatever in practice. I do not object to them, they do no harm, but from my experince of charters, both in a professional and political capacity, they certainly do no good.

The purpose of the Finance Bill is to give statutory effect to the tax changes introduced in the budget. I am on record as stating, without intending a personal insult to the Minister for Finance or his civil servants, that I regard the budget as basically fraudulent and directionless. It follows therefore that the Finance Bill, which is based on the budget, can hardly be otherwise. One point — it may be a minor point to some people — which has not been made relates to the general structure and content of the Finance Bill. I have read the Finance Bill and as far as I can see it adds a further 144 pages of mainly mind-numbing complexity to the arcane jigsaw puzzle for the taxation code. All Ministers for Finance pay lip service to the notion of simplicity and clarity in the tax system.

What about the consolidation Bill?

What about it?

Some of the measures are included in this Bill and the remaining ones are on the way.

There is no consolidation in this Bill. If the Deputy can point to one section which deals with consolidation I will defer to his point of view, but there is no consolidation in this Bill. Successive Ministers for Finance, including some from Fianna Fáil, have promised consolidation for some time and, as the Deputy said, it is still coming.

I hope the Deputy is not criticising Deputy Ahern.

I am criticising all Ministers for Finance during the past 25 years who promised consolidation but did not deliver it.

Including Deputy Reynolds and Deputy Ahern. There has been a fair line-up of Fianna Fáil Ministers for Finance.

All Ministers for Finance pay lip service to the notion of simplicity and clarity in the tax system. For the past quarter of a century they have felt compelled at one time or other to mutter some mantra about simplifying the tax code and the present Government has been particularly voluble in this regard. There was supposed to be a policy of openness, transparency and accountability — it was a subplot of the general plot. The promise to simplify the tax code has proved as hollow as the promise to conduct the affairs of Government behind a pane of glass. This Finance Bill plays no small part in the further complication of the tax code. No effort is spared to add mystery to mystery, complications are heaped on complications and fine distinctions which already exist in the tax code are further refined and in many cases increased and multiplied.

For all but a small coterie of skilled accountants and tax advisers the taxation system has become an impenetrable maze. Many of the complications introduced by this Bill have no basis whatever in logic. In many cases they fly in the face of logic and common sense. They will not encourage enterprise and risk-taking; they will stultify and restrict it in many instances, which I will demonstrate if time permits.

Deputy Quinn, the Minister for Finance, is on record as saying that we must let the light in, we must simplify and clarify our tax code. I will give some examples of what he means by simplification of the tax code and letting in the light. Section 29 (4) which deals with mining relief states in terms of qualifying mines:

The amount of the allowance shall be an amount determined by the formula——

E × N/12 × 1/L

Those figures and letters are explained and some of them are subject to a number of other qualifications. Section 37 (2) of this Bill that is supposed to let in the light and simplify the tax system states in dealing with corporation tax relief, which is ludicrous——

It is simply accountancy.

I am an accountant and for any member of the public this is not simple. The subsection states:

For the purposes of subsection (1) and subject to subsections (3) and (4), the specified amount in relation to an accounting period of a company shall be an amount determined by the formula——

£50,000 × N/12 × 1/A

Section 125 (3) (a) which deals with stock relief states:

In any case where subsection (2) (a) applies, a person's increase in stock value in the accounting period shall be determined for the purposes of section 122 by the formula:

A (C-O)



That means something to me but it means nothing to the general public whom we are supposed to represent. It does not represent a simplification of the tax code. I would say to the Minister of State who talked about delivery of service to the public that what we should try to deliver to the taxpayers is a rational, clear tax system to which they can have access and which they can understand to some degree.

That would obviate the necessity to employ accountants.

We all welcome extra work, but we are supposed to represent taxpayers as a whole and the Finance Bill should be drafted in such a way that the public at least understands the rudiments of what is involved.

The core of the Finance Bill is sections 1 to 3, inclusive, which deal with increases in tax free allowances and tax exemption levels and widening of the tax bands. The changes introduced in these sections and the way they have been represented are nothing less than a fraudulent charade. This Bill has been represented as a tax reduction measure, but the net effect of those measures will be to extract an extra £730 million from taxpayers in 1996 over and above what they handed over in 1995.

It is a lower proportion of GDP. The Deputy should get the ratio right.

The Deputy will have an opportunity to respond. Percentages of GDP mean nothing. The reality is they extract another £730 million from taxpayers in 1996 over and above what they paid in 1995. If the Labour Party persists in ignoring that fundamental fact, it will have certain consequences next February or March or whenever it has the guts to face the people.

The Deputy should wait until he sees next year's budget.

As somebody who works actively in my constituency and meets many people at weekends and whenever I get the opportunity, I believe the process, unfortunately, has gone too far for the Labour Party. Giving £100,000 to everybody in next year's budget will not reverse the irreversible decline of the Labour Party, but that is its problem and it can deal with it.

What about the second budget in October?

The Deputy should continue to whistle past the graveyard. The increase in taxation yield of 8.2 per cent in the total volume of taxation is in addition to a 7.5 per cent increase in volume in 1995 over 1994. Using simple arithmetic, £730 million in a full year represents £2 million per day or an average of £14 per week for every taxpayer.

The figures in the principal features of the budget give examples of families who, in terms of gross income, will be better off, depending on their circumstances, by the following princely amounts: 0.7 per cent; 0.7 of 1 per cent; 0.6 of 1 per cent; 2 per cent; 1.9 per cent; 1.8 per cent; 1.7 per cent; 1.5 per cent; 0.8 of 1 per cent, etc. However, the principal features do not factor in the mortgage and VHI changes and when that is done the relevant figures fall to amounts such as a quarter of 1 per cent; 0.2 of 1 per cent and 0.1 of 1 per cent.

Deputy Bertie Ahern started that, it was Fianna Fáil policy.

It is not mathematically possible——

The Deputy should own up.

——to factor in the increases in indirect tax. The meagre improvements in living standards set out in the principal features apply only to that rare individual or couple who do not pay a mortgage or VHI, do not smoke, drive or engage in any activity that would attract increased indirect taxation.

A typical Fianna Fáil member.

That is a rare individual, almost as rare as the supporters of the Labour Party.

Section 37 implements the budgetary promise to reduce corporation tax from 38 per cent to 30 per cent on the first £50,000 of corporate profits. I welcome any tax reduction, particularly a reduction in corporate tax, because our rates of corporation tax are very much in excess of the rates in most of the countries with which we trade. It is necessary to reduce corporation tax and I welcome any move in that direction but the approach adopted by the Minister for Finance is weak-minded and will lead in many cases to a reckless squandering of taxpayers' money. The maximum tax saving from this measure will be £4,000 — 8 per cent of £50,000 is £4,000 — but the problem with it and the way it is drafted is that it applies to all companies, regardless of size or profitability. For example, among the companies which will benefit from this munificence will be Bank of Ireland, Allied Irish Banks, Cement Roadstone, Smurfit, Fyffes, Avonmore and Elan. Those companies will receive a gift of £4,000 from the taxpayers but the directors of some of those companies are paid approximately £4,000 per day.

This measure will cost taxpayers the not inconsiderable sum of £23 million and much of that will be dissipated needlessly through paying out £4,000 to people who do not need it and to companies such as those I have mentioned where it will obviously have no effect. The Government, the Department of Finance and the Revenue Commissioners could have displayed a scintilla of imagination by focusing this £23 million on areas where it could most benefit the economy in terms of creating and maintaining employment, which is the stated ojective of the measure. If the Department of Finance and the Revenue Commissioners could not devise a more imaginative way than this of spending £23 million in corporation tax reductions, they should have examined the S corporation system in the United States and adopted some variation of that appropriate to the needs of this country. Why squander a large part of this money on areas where it is not needed? It should be spent in areas where it will have an effect.

What about the British system?

I am not concerned about Britain. I am concerned about Ireland but the Labour Party seems to be concerned about everything other than the people they are supposed to be representing here.

Britain has helped smaller companies.

If Britain helps smaller companies, why can we not do the same in a focused way——

The Minister did that.

——rather than giving money to the Bank of Ireland?

Acting Chairman

The interruptions are enjoyable but Deputy O'Dea is entitled to have his say.

This is a debate.

Despite repeated promises by the Taoiseach we do not yet have the right of interruption.

We just want to formalise these interruptions.

Section 27 amends the law relating to tax relief on patents. As Deputy Cullen rightly said, over a long period of time we have been treated to continuous homilies about the need for industry to invest in innovation. We are told that unless we invest in research and development and innovation we will fall further behind because that is the only way we can be competitive in today's world. I recently received a glossy White Paper from the office of the Minister of State, Deputy Rabbitte, outlining the money the Government is spending on research and development, directly and indirectly. Successive Governments have been conscious of this but I do not believe they have spent enough in this area. Other measures were put in place, however, which assisted innovation, one of which is section 34 of the Finance Act, 1973, which allows patent royalties to be distributed tax free in certain circumstances. This measure has had a beneficial impact in relation to innovation. It was not perfect; it had to be amended in 1992 and 1994 but it is now exclusively confined to the manufacturing sector. Apart from those misuses — I will confine myself to using that term — of the section 34 relief that were identified and plugged in 1992 and 1994, no other abuse has been identified. The case has not been made that there is a need to restrict it further yet it is severely restricted in section 27 of the Finance Bill for reasons which remain a mystery to me and which the Minister has not explained. I hope he gives an explanation when replying to the debate or changes his mind in this matter.

Section 34 of the Finance Act, 1973, has rewarded innovation. There has not been any evidence adduced that it was used as a tax avoidance mechanism. It was more clearly focused in 1992 and 1994 and it is now confined to manufacturing. This tax concession, which has served the economy well and which is of major relevance today, has now been severely constrained in section 27 of this Bill. I want the Minister to give a reason for that in his reply.

Because of the abuses.

The Minister has not outlined any specific abuses.

Abuses did take place.

It appears to me these restrictions — and I will refer to one or two others if time permits — are being included in the Bill because the Labour Party cannot sleep at night if it believes the tax system is allowing somebody to make a profit. "Profit" is a dirty word to those in the Labour Party.

We represent the PAYE workers.

The Labour Party is not looking after them very well and the results of by-elections as well as opinion polls reflect that.

The Deputy should watch us.

As I understand it, there is a let-out clause in section 27 and while I welcome any let-out clause, I cannot understand how this one will work in practice. The restriction in section 27 will not apply if the Revenue Commissioners determine that the invention patented constitutes "radical innovation". The Revenue Commissioners are the last people I would consult about what constitutes radical innovation.

Perhaps the Minister is not aware that in order to get a patent, the applicant must consult a patent agent and make a presentation to the Patents Office. It is on the advice and preparation of one's application by a patent agent whose qualifictions are recognised by statute and on the sanction of the Patents Office that one gets a patent. If the Revenue Commissioners want advice on this surely they will not ask an official in the office to determine on his or her initiative whether something is a radical innovation. They would need to hand it to a patent agent, that is, get advice from the experts in this small area. The Revenue Commissioners will need to consult patent agents to second guess other agents or the Patents Office. It does not make sense.

How does one know what is an invention?

I do not know, but the Patents Office does because it determines this. Although the Patents Office may say something is an invention, the Revenue Commissioners now must ask a patent agent, other than the one who made the original application which was upheld, if it is a radical invention.

That is the problem.

If the Revenue Commissioners want advice, they must go to another patent agent who will second guess the first agent and the Patents Office. This is ludicrous.

The Revenue Commissioners have ample power to audit a company or concern to ensure that the payment of patent royalties is bona fide and not a type of transfer pricing arrangement. There is a general anti-avoidance section in the 1989 Finance Act where measures taken, with their main purpose being tax avoidance, can be deemed null and void and nugatory by the Revenue Commissioners. The effect of the blunderbuss approach taken by the Government in this section is that a small manufacturer who discovers a new way to make or refine his product will be penalised. Why should that be that case when these people are creating employment and engaging in innovation? Why should foreign companies, a number of which have come to Limerick — for example, Analog, Dell and AST, which have brought their R&D to Ireland, be penalised, particularly when they will often be in competition with their parent company where there is a more generous regime?

Section 25 deals with the restriction on relief for resort areas. In last year's Finance Act the Government introduced tax concessions for expenditure incurred in certain resort areas. This relief was supposed to continue until 30 June 1998. However, section 25 changed the goalposts after one year. People who were told to go ahead and to spend money because this relief was in place now find that it has been restricted after one year. I know there is a clause relating to those who got planning permission before a certain date, but the Minister should bear in mind that other people who might not have availed of this relief incurred expenditure as a result of the relief announced in the 1995 Finance Act. Where does this leave these people? I do not understand how the legislation has been framed. It proposes to ring-fence the capital allowances on two categories of expenditure — expenditure on holiday homes and self-catering apartments. By what monumental process of logic has this decision been reached? Why have holiday homes and self-catering apartments been singled out? Other tourist facilities mentioned in the 1995 Act, such as hotels and guest houses, which are also beneficiaries of the relief have not been so restricted.

The Revenue Commissioners are armed with a vast array of powers and if they are worried about abuse they can secure the services of Bord Fáilte to check this matter out. I have information that Bord Fáilte has already hired a Welsh company based in Cardiff to do this. It seems those on the left of this Government are afraid that the 1995 relief has proved too successful and that people are making or might make money. As I said, profit is a dirty word. The restriction in section 25 is needless tinkering which adds significantly and unnecessarily to the overall complexity of tax legislation. It restricts investment where it is more clearly needed.

The changes in the BES add another layer of bureaucracy. The investment proposed is over £250,000 and one must get a certificate from a State agency to certify that one is adding significantly to employment. This adds another unnecessary layer of bureaucracy to this complex area, as those who have worked in it or who have applied for relief will know. Film relief has been restricted in an incomprehensible way. Now only 80 per cent of one's investment qualifies for tax relief. The holding period of capital gains tax has been reduced from three years to one year. There are, however, improvements in that some amounts have been increased — for example, for corporate investment. One approach contradicts the other. If this was being abused — no evidence has been adduced — one would understand certain restrictions. However, there has been no explanation as to whether something has gone wrong. Apparently it has been a success. There are restrictions on one side and improvements on the other which seem to contradict each other. It has been heavily criticised by people working in the industry. Those investing and their advisers have intelligently, cogently and comprehensively criticised these restrictions which they say have no logical basis and which will have disastrous consequences in practice.

I will not lower myself to comment on section 5 which deals with tax relief for people over 65 years who install an alarm system. It is like an unfunny Irish joke. Some changes have been made to capital gains tax, but it is largely tinkering. This and successive Government have failed to recognise that we have gone beyond the law of diminishing returns as regards the rate of capital gains tax. There would be a greater yield to the Exchequer if capital gains tax was set at realistic levels. I know people who have engaged in once-off investments and lost their money. The Revenue Commissioners did not come to their doors to sympathise with them but had the risk been successful, they would have looked for 40 per cent of the profit. That is an inordinately high figure. Academic papers have been written on this which have mainly related to the United Kingdom and which stated that the rate of capital gains tax is way beyond the law of diminishing returns. That is why — I believe the Minister will readily admit this — there is wholesale evasion of capital gains tax. Who wants to take a risk and then fork out 40 per cent if they are lucky?

The Finance Bill, like the budget on which it is based, is lacklustre and directionless. It reflects the ideological conflict within the Government and is a typical example of Government by committee. The hand of Democratic Left is evident. Some 2 per cent of the electorate support Democratic Left, yet its view is paramount in formulating economic policy. Presumably the 98 per cent of the electorate who do not support Democratic Left do not agree with its economic policies which are, in large measure, being implemented. This is surely a negation of democracy — it is the very antithesis of democracy.

The left, in particular Democratic Left, will continue to insist on spending taxpayers' money with all the gay abandon of French aristocrats before the revolution. Fine Gael has been neutered or, to use the words of one of its distinguished parliamentary party members, castrated. Never since the Bolsheviks seized control of the Soviet economy has so much been inflicted on so many by so few. This Finance Bill represents merely a fine tuning — a tinkering — with a taxation system which is complex, confused and gets more aggressive and penal with each year that passes.

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