I had indicated that I wished to share my time with Deputy Bell.
Finance Bill, 1996: Second Stage (Resumed).
Question again proposed: "That the Bill be now read a Second Time."
With your permission, a Cheann Comhairle, I would like to avail of Deputy Bell's slot if that is acceptable.
I am sure that is satisfactory and agreed. Agreed.
I had been making the point that the time is ripe for job creation. All the indicators are favourable. Interest rates have never been lower in the history of the State and there is confidence among the people. Of course, this confidence stems from the Government's openness and honesty. In the words of a famous motor manufacturer, people now understand they are getting "a square deal" which instils confidence in the management of our economy. The nod and wink policy is something of the past. People are now aware that any project they propose will be given fair consideration, that the attitude of "you scratch my back and I will scratch yours" is gone, that there is now open competition.
Within that favourable climate we must do everything in our power to create jobs, particularly for our young people. I fully support FAS and other schemes being developed by various agencies and voluntary organisations. However, my one criticism is that there is too much paperwork involved. Applications could be streamlined, rather than placing a burden on the many voluntary organisations prepared to recruit six or seven young people to carry out good work within their local communities, such as the restoration of old buildings, walls adjacent to towns and villages and so on. Procedures should be simplified to facilitate their recruitment. Crafts I thought had long since disappeared are also being fostered, giving young people another outlet for their talents.
I might digress to the other end of the scale and compliment the Minister for Social Welfare on having increased the carer's allowance from £62.50 to £67.50. Care of the elderly will always be extremely important. At a time when the country is doing well we could easily forget the elderly. There is a place for nursing homes, whether health board or privately run. However, a message should not go out from this House that the elderly should be cared for in nursing homes. Given the opportunity, most old people would prefer to remain in their own home. We must not forget that they want to remain in their local environment. We must do what we can to help them achieve that. Old people have fears about going into institutions. I am not decrying the policy in regard to nursing homes but 90 per cent of elderly people in nursing homes could be cared for by the family grouping with the help and support of various schemes.
While I welcome the increase in the carer's allowance in the budget, we should look again at the means test for this allowance which is too stringent. People who would wish to avail of this allowance cannot do so because of the stringent means test. Home helps who call on people for two hours each day do marvellous work but they are paid only £27.50. This meagre amount should be increased.
Multinationals have a role to play in the Irish economy but the days of attracting major multinational industries to the region I represent are numbered. We have to encourage small businesses. There are opportunities and people have more confidence in themselves and in the country. Many small businesses are crushed by the tendering system of the State and semi-State agencies. For example, in the bakery industry, the major concerns tender for all State contracts to distribute their goods throughout the country on a block basis. Many of the State organisations have units adjacent to small bakeries who are precluded from tendering. The tendering system should be opened up so that each hospital, nursing home, army barracks and so on could seek tenders locally to supply them with provisions. I gave the example of bakeries but other provisions are required. I do not think there should be block tendering and distribution. We should be seen to be playing our part in developing local business and I ask the Minister to take note of that. There are other points I wish to make but I will not take from the time of the Deputy with whom I am sharing time.
I have every confidence in the Government which is doing a marvellous job. It will continue with its good work up to the next general election when I hope we will be returned to office for five years.
The country has never fare better. There has been a significant increase in employment. In the past year or so 45,000 more people are at work, an increase of 3 per cent. The growth rate is at the unprecedented level of 7 per cent. Investment has increased in real terms by 11 per cent and private consumption is up by 4 per cent. Mortgages and short-term interest rates are at an historic low. The increase in the volume of exports is 13 per cent. Economists are predicting that unemployment levels will be less than the European average by the end of the year which represents a huge advance. Great progress has been made in recent years. At the same time, however, we should not be complacent about the impact of those figures on the public. The public is unhappy with the present position and there was a great deal of evidence of that in the recent by-elections. We must address that.
The Bill is part of a package being put forward by the Minister for Finance. Last year in his first budget he outlined his objectives which were to reward work, to promote enterprise and to strengthen social solidarity. They are very worthy objectives and it is important to bear them in mind. The ability of society to work cohesively is very important in terms of generating economic progress and social cohesion and this should be our priority. Very clear lessons should have been learned from our experience during the periods of social discord and lack of harmony. In comparison the social contracts of recent years have had a beneficial effect and our unprecedented levels of economic growth, low interest rates and so on are to a large extent related to the capacity of the labour movement, the Government and the social partners to work together to a set of objectives. This Bill is a continuation of the path of progress.
Other issues have to be addressed. Some progress has been made in regard to tax equity but those in the PAYE sector feel they are paying more than their fair share. There is great discontent among large elements of PAYE workers who feel they are carrying an unfair share of the national burden and have felt that for a long time. Some progress has been made in this budget but we have a long way to go before that sector of society will be happy they are carrying their fair share.
The annoyance of this sector is the result of an accumulation of problems over many years. It is not as if this has happened suddenly, it has been building up for a long time. As a society we, unfortunately, have been unable to address that matter. Undoubtedly, some progress has been made but there is need for much more. The anti avoidance measures in the Bill are useful. The changes in corporation tax should be beneficial particularly for small firms which play a very important part in our economic development, as Deputy Boylan mentioned.
On the theme of social cohesion, this Bill is part of the Minister's objective of strengthening social solidarity. That is essential. The Bill makes some worthwhile provisions in that area. However, we must devote time to understanding what must be done to generate the type of social cohesion needed here and reassess the values that have dominated our political agenda for the past ten years. There has been an excessive concentration on individualism and individual rights to the exclusion of matters which relate to concepts such as the common good, the objective of social cohesion. Liberty must be balanced by considerations that relate to fraternity. Much emphasis has been placed on liberty and individual rights, but little has been placed on fraternity. If as a society we do not seek to work together and produce common goals, progress will be diminished. That is one of the great lessons to be learned from some estern countries. I am not suggesting that we should imitate those countries in every way, but lessons can be drawn from the manner in which they have behaved. One of their central features is social cohesion and social solidarity.
We must reappraise the emphasis placed on rights to the exclusion in many ways of a much needed one on fraternity. Much greater emphasis must be placed on the obligations of society and the duty of all citizens, irrespective of their position, to carry their fair share of the burden. The PAYE sector is particularly annoyed by the fact that it considers it carries an unfair share of the burden and that others, by legal and illegal methods, can avoid their responsibilities. It is important to stress that aspect.
Another worth while feature of the Minister's budget and the Finance Bill is that they seek to establish long-term objectives. When introducing the budget the Minister spoke of the need to think long-term, to plan over a period of years and to link budgets as part of a pattern. That is important and happens in successful companies. It is essential that the first steps taken towards that end should be developed and expanded. I look forward to next year's budget when I am sure the Minister will pursue this objective further. That type of planning and long-term strategic thinking will greatly help to diminish the tendency towards cycles of boom and burst, where the economy booms for a while, then overheats and falls into a depression. That cyclical aspect of economic behaviour is inevitable, but it is important that we damp it down and control it as best we can. Developing concepts which relate to the community, obligation and to everybody believing they have a share in society will help to achieve that. That is what the Minister was alluding to when he spoke of social solidarity and is a central feature of that concept. Everybody should have a stake in society and belong to it, but a significant number believe they do not. That must be tackled. The sense of exclusion, of being an outsider, of not having any responsibilities and of not belonging is an important factor in the genesis of much of the social chaos and decay we are experiencing to a frightening degree in parts of this city, including areas in my constituency. It is important that this Bill is viewed in terms of a move back towards social solidarity which implies duties and obligations.
People on the left, as I am, mention the role of the family as a pillar of society, but a lack of emphasis has been placed on that role. Mentioning that role is perhaps stating the obvious, but sometimes it is necessary to state it. The role of the family is important in terms of generating social solidarity to ensure we have a society that will benefit everybody. This Bill and the analogous Social Welfare Bill introduces considerable improvements in that area, but more changes must be made. It is important that as a society we move away from the quick buck and lotto mentality, the idea that one can work magic, political or otherwise, that there is a great leader whom we will follow and that we will never have a bad day again. Life is not like that. It is time we began to accept that if we are to make progress, it will be slow, tiresome and made step by step. That can be done, but we must accept that we must put in the effort and plan and work together. We must put aside the notion that somebody among us or from elsewhere will come along and solve our problems. To some degree we have suffered from such a subliminal thinking process arising from the large amounts of money we have received from Europe. While it has been welcome, at another level it has been an easy escape from hard-thinking and getting our act together to a far greater extent than we have.
That is true of the agricultural industry and particularly true of the beef industry, which is now experiencing a significant crisis, but it would not be as severe if the necessary planning had been undertaken. If Irish beef products had been promoted, European and other customers would be buying Irish beef confident in the knowledge that it is a safe product, free of BSE. We have not been able to promote our brands and put them on the shelves of world markets. That requires a major investment over a prolonged period of time. It is important that we must understand, give some thought to it and work out its logic.
To that end it is encouraging that the budget contains some initiatives to promote science and technology. The Minister has taken some steps to encourage investment in science and technology, patents and developing new products. The way forward is through the development of new products and new ideas. The world is changing and has changed over the past two or three centuries when power was derived from military capacity. In more recent times power has been derived primarily from financial capacity. The Japanese, who were not a major military power but have been very important players in the world, are a good example of that. There have been further changes and now power is related to knowledge and information which will be the driving force in the new society. It is important to understand that and to take steps to benefit from it.
It is essential that we continue to invest in science and technology and that we increase the amount of investment in that area, which has been miserably small in the past number of years. It is long overdue that we radically change our thinking process in that regard. I am glad the Minister has taken worthwhile steps to address this area. I also compliment the Minister of State, Deputy Rabbitte, with responsibility for science and technology for the extent to which he has set about promoting science and technology. He has done a good job considering the difficulties he is facing in that large elements of the Civil Service do not have the faintest idea about science and technology. They do not have any interest in it more is the pity. I hope the position is changing, but that would have been the lesson drawn from an analysis of what happened in that area during the past 15 to 20 years. The National Board for Science and Technology, established in the late 1970s, was duly rubbed out, rubbished and subsumed into Eolas which, in turn, was gobbled up by Forbairt. That carry on is not reconcilable with a society which values and sees science and technology as a central factor in generating progress. The position is beginning to improve, but we have a long way to go.
It is important that we continue to invest in education, one of the great sources of success, particularly among the younger generation. Education standards have been exceptionally high, much higher than would have been predicted based on the rate of economic development. They have been a central factor in developing the economy. To a fair extent, this is due to the dedication of those involved in the teaching sector at first, second and third-level. They have made an exceptional contribution to economic development. This has been characterised by a central preoccupation with high standards. Under no circumstances should we contemplate or tolerate reductions in standards in education if we are to make progress.
The Minister's objective is to strengthen social solidarity. To achieve it it is important to move from the culture of blame, conflict and accusation, an approach which damages progress. It is important that that is understood.
People who call for more honesty, openness and frankness, which are exceptionally desirable, should be prepared to respect those who are honest, frank and open. In the past honest people were exploited and their honesty was used as a tool with which to beat them. That type of behaviour does not help to develop the culture that is essential to underpin economic progress.
Some important steps have been taken in this Bill which is part of a process. I am glad the work has started.
I propose to share my time with Deputy Síle de Valera. To take up the point made by Deputy Upton that we should all work together, it is interesting to hear so many Labour Party Deputies in recent weeks speak in those terms. We have no intention of getting into their canoe which is sinking fast. When we were aboard ship we were ditched. We intend to maintain our independence on this occasion.
Before addressing the specific provisions of this Bill I will comment on the context in which the Minister has put together his proposals. In general, the overall condition of the State's finances is good largely due to three main factors — first, the excellent management of the economy under successive Fianna Fáil-led Governments which led the country from the brink of financial chaos in 1987 to balancing the books for the first time in many years by late 1994; second, the net transfer of funds from the European Union which continues to stimulate the economy and, third, the overall world economy which is going through a phase of growth combined with low inflation and, consequently, relatively low interest rates.
The general sense of economic growth and well-being makes it essential for the State to make hay while the sun shines. In other words, it is vital that we avail of the positive international and national financial climate to aggressively tackle fundamental problems in society. It does not make sense to wait until times of inflation and stagnation before addressing core and urgent problems.
When attempting to assess the 1996 Finance Bill we must keep in mind if there are particularly pressing problems facing society which require extraordinary effort and vision in planning. It does not require much delay or soul-searching to rapidly answer that question. Despite the apparent health of the State's finances, we face problems of both an intimidating and critical nature, rather than drawing together the extremes of wealth and poverty, the depressing reality is that the gap between the poor and rich continues to widen. As a result, there is a growing number of people who feel alienated or hard done by in modern society.
Unfortunately, the problems come easily to mind. There is major unemployment, a rapidly increasing rate of violent crime, an escalating drug abuse problem, increased levels of domestic violence and abuse, a grossly uneven take-up of third-level education across different socio-economic groups and a continuing erosion of the family as the cornerstome of society.
It would be unfair and factually incorrect to suggest that the Government can realistically eliminate the various social ills affecting modern society within its period of authority. However, it must be emphasised that a special and unique responsibility lies with the Administration to provide leadership to the people at times of particular need and stress.
The scale of the problems I have outlined is enormous. We in this House have a major responsibility to the people to give a clear indication that we can and will show the necessary degree of leadership, compassion and determination to successfully tackle these problems.
Much of the language used regarding the well-being of the State's finances is of little or no interest to the individual or family struggling against great odds to survive. They want to see evidence that their vital needs are being effectively addressed. They want to be reassured that all our efforts are directed towards tacking issues of fundamental importance to their lives. They have little time or respect for political play-acting or point-scoring. Similarly, they have little difficulty in finding out any Government which places selfish short-term political interests above the needs of the people.
It is against this growing and extremely worrying pattern of increased social inequality, with a corresponding loosening of the bonds of social cohesion and common purpose, that we examine the many provisions of the 1996 Finance Bill. Is there compelling evidence that the Minister, Deputy Quinn, has mastered the many difficulties facing him in his portfolio and, as a result, is advancing the economy towards greater social equality and justice? Has he decided to seriously tackle a small number of core issues rather than tilting at every windmill in sight?
It gives me no pleasure to indicate my great disappointment at the overall package of proposals brought before us by the Minister. Rather than reaching out and grasping a unique opportunity to make an impact on the major problems of unemployment and social inequality, for the second time the Minister's main aim seems to be to bring in a set of proposals which are unlikely to cause too much offence to his partners in the rainbow Government. It highlights the nonsense, in terms of major policy development, of having far left, centre and far right "hands on" Government control at the same time. It is not surprising that the resultant mix of policies is neither healthy nor attractive. As is so often the case in Government, by attempting to placate everyone at the same time the Minister has ended up with a set of extremely disappointing proposals the net effect of which, at best, will be to maintain the status quo. With two parties in Government particularly committed to the principle of social equality the Bill is a major let down.
In case my comments are interpreted as supporting a budget of handouts I wish to make my position clear. For a number of years it has been abundantly clear that, as a nation, we must deal rapidly and effectively with the problem of unemployment. It has been generally agreed that bringing the State's finances firmly under control is a key requirement in creating the necessary level of confidence in our economy and financial management among national and international investors. Successive Ministers for Finance, Ray MacSharry and Deputies Reynolds and Ahern, contributed in a major way to bringing about such a climate. The people tolerated excessive taxation levels and general financial restraint to put the country in a strong position. The totally unacceptable levels of unemployment were tackled aggressively. Having brought about a remarkable recovery in the national finances, it would be completely irresponsible to waste a major opportunity for change by using available resources in an unplanned and unfocused manner.
What I expected from the Finance Bill was evidence of the commitment of the Minister's Cabinet colleagues to radically reform those aspects of our system which retard the required level of growth in enterprise and employment. A radical overhaul of the taxation and social welfare systems is required. One looks in vain at the Bill for a signal that this simple but crucial message has the ear of the Minister. Almost every informed commentator on the unemployment problem stresses three key issues, the first of which is that the general financial climate must support those who have the drive, vision and business ability to create new enterprises. For example, the availability of venture capital is vitally important to such individuals and companies. They need support from the financial institutions by way of working capital and reasonable loan terms. Despite initiatives such as the BES and other schemes, the level of venture capital available in this country is inadequate to cater for the development needs of new businesses. Despite some welcome movement in recent years, the main financial institutions continue to operate in an extremely conservative manner in the domestic market and seem to focus their risk taking outside this country. That is regrettable. It is not in the long-term interests of the banks and is damaging to young business leaders.
The second issue is the need to provide further resources for the ongoing training and educational needs of the unemployed and those in employment. Reports indicate that every pound spent on such schemes is well repaid. Despite the overwhelming evidence of research, is there any indication in the Bill that this message has been received by the Government? Sadly the answer is no.
The third ingredient necessary to remove blocks towards further growth in employment levels is the incentive to participate in the workforce. It does not make any sense for a person to be better off receiving social welfare benefits than to be in gainful employment. The term "gainful employment" must be redefined given the current shortcomings in our taxation and social welfare laws. Despite some minor adjustments, the Finance Bill also falls down in tackling this aspect of the unemployment crisis.
It would be unfair not to acknowledge some of the positive aspects of the Bill. On income tax, the Minister has made a number of adjustments which go in the right direction towards reducing the crippling burden of taxation on many average income earners. I support the provisions in section 4 (d) which increases the deduction allowable for carer's costs from £5,000 to £7,500. Similarly, the adjustment which increases the incentive towards shareholding among employees is welcome. I welcome the adjustments made to the BES but I have two worries in this regard. The net effect of the changes may act as a disincentive to participation in the scheme because of the increased level of bureaucracy. That would be counterproductive. My second worry relates to the need for a detailed audit and assessment of the scheme. It is suggested by reliable business commentators that the scheme is not as effective as it should be in the area of job creation. A comprehensive independent assessment of overall performance would be of benefit to all concerned.
I welcome the aspects of the Bill which assist those involved in the promotion of arts and culture. With the outstanding success of many Irish artists on the world stage it is too easy to forget that the majority of those who are involved full time in the arts have a precarious financial existence. Very often we are only too happy to share in their moments of glory but it is vital to support them financially in their formative years. I welcome the proposals to stimulate island investment. With their rich and unique traditions it is vital that every effort be made to redress the population drift from the islands which has been a feature of recent social history.
Despite these features of the Bill I am disappointed with the Minister's proposals. I hope the Bill will be improved sufficiently as it passes through the House and that some of the ground which has been needlessly lost will be recovered.
I thank Deputy Wallace and the House for allowing me to share time. I will deal with section 35 which concerns the film industry as that comes under my brief of arts, culture and heritage. The section refers specifically to the film industry. The measure was initiated by a Fianna Fáil Administration. In 1993 the section was amended by Deputy Ahern, then Minister for Finance, it resulted in potential growth for the industry and stimulated production activity.
We acknowledge that further improvements and refinements were needed. Inconsistencies in the administration of the legislation led to uncertainty. Initially all-comers were welcome but, as a result of alleged abuses, a stricter regime came into being. Further uncertainty arose as a result of the position of some in the Department of Finance who, it is believed, feel this section should be abolished. I have learned from a number of people in the film industry that the perception is some people in the Department would like a smaller number of investors to participate in the scheme so that there would be a ready-made excuse to abolish it. Such a perception creates uncertainty which is detrimental to investment.
The net benefit from the implementation of section 35 is evident, not least in its focus on Ireland, which can only have a positive effect on tourism and benefit local economies and communities. We have seen this with the blockbuster movies made in Ireland. The one exception was the infamous case of "Divine Rapture". I referred to this matter in the House in July 1995 and again on budget day in January 1996, on both of which occasions I put suggestions to the Minister for Arts, Culture and the Gaeltacht in the hope that they would be implemented in law to protect local communities and those involved in service industries in the event of difficulties arising similar to those we witnessed with "Divine Rapture".
There is great potential for job creation in the film industry not only in the world of acting, directing and production but also in the associated trades, for example, carpenters and other skilled crafts and trades as well as the service industries. To help our script-writers in particular IBEC suggested the introduction of business expansion schemes. The companies which develop screen plays for production are considered to be in the high risk area of the film industry as many projects never proceed from development to production. Business expansion schemes could lead to sustained expenditure on the development of film projects which would provide vital experience for our writers, directors and producers.
As I pointed out in the budget debate on 24 January, the increase in the number of blockbuster films helped our indigenous film industry to get a kick-start by providing an infrastructure into which our industry could tap for expertise. The move to reduce the proportion of investments which are eligible for relief from 100 per cent to 80 per cent will have a detrimental effect on the film industry, which has already experienced a reduction in production activity for 1996. That was alluded to by Deputy Bertie Ahern in his contribution to this debate yesterday. IBEC recommends a 100 per cent tax relief on section 35 moneys raised for films with budgets of up to £4 million, which would bolster the indigenous film industry, and that projects over £4 million should be judged on a case by case basis by the Department of Arts, Culture and the Gaeltacht.
The Government proposals on section 35 chip away at investment attractiveness and, therefore, investment potential. In debates in this House on the film industry I have pointed out that other countries are prepared to consider proposals such as section 35. If such proposals were implemented by countries, within or outside the EU, that would chip away at our competitiveness in the film industry worldwide. Now that our film industry is beginning to grow it is not the time to introduce proposals such as those in this Bill which would affect our competitiveness.
The Minister does not deal with the issue of seasonality in the film world, yet when pressed by me on 24 January he acknowledged a difficulty in that regard. I hope even at this late stage the Minister for Finance will acknowledge by way of amendment the difficulties for those involved in the film industry in terms of seasonality.
An anomaly exists whereby the Minister for Arts, Culture and the Gaeltacht may not certify a film as a qualifying film unless such a certificate has been applied for by budget day. Film companies which raised finance under section 35 and were still developing their film projects found that their investors had their entitlement to tax relief unilaterally cancelled. IBEC strongly recommended that this matter should be addressed by permitting the Minister to certify a film after budget day according to the criteria that apply at present. That would enable pre-budget investors to obtain tax relief. IBEC also recommends that a pre-budget day investor be treated in the same fashion as a post-budget day investor or a BES investor as regards carrying forward excess investments. Under the present proposals a company which has raised section 35 finance before budget day for a film which was granted application for approval before budget day cannot decide, even for good commercial reasons, to substitute another film since approval would have to be sought for that film before budget day.
The proposed changes to the legislation have caused great uncertainty. Changes of a negative nature send their own signals. The proposed amendments and restrictions will undermine all the achievements in the film industry to date. I ask the Minister for Finance to consider carefully once again the proposals on section 35 and I hope he makes the amendments suggested by this side of the House and by interested bodies outside the House, particularly IBEC.
I wish to share my time with my colleague, Deputy McGahon. In debating a Bill of this kind we should probably react to the contributions of previous speakers. I noted the comments of Deputy Wallace on behalf of Fianna Fáil, particularly his opening remarks in which he solidly declared that the overall condition of the public finances is very good. I am delighted with that acceptance on the part of Fianna Fáil. There is, however, an attempt to explain away the reasons for the good financial position. If we had problems with the public finances Fianna Fáil would say it was our own fault but because the condition of the public finances is good there is an attempt on the part of Fianna Fáil to claim credit for it.
When I was first elected to this House I recall the fiscal madness that then permeated Fianna Fáil thinking. There was the notion that the more you borrowed, the more benefit you brought to the country. At that time under a Fianna Fáil Administration the national debt was quadrupled. That led to enormously high interest rates and historically high inflation rates. It also led to huge unemployment. It was economic and fiscal madness. I am delighted that in recent years a sense of fiscal responsibility has descended on Fianna Fáil. The day of going to the polls and promising a free for all, as Fianna Fáil did in the past, with lower taxes, greater expenditure and more services is, I hope, over. Or is it?
An election will be held in the not too distant future. I would say to Fianna Fáil not to succumb to the temptation it fell for in the past, not to destroy our national finances as it did in the past with silly, foolish promises about abolishing taxes and awarding enormous increases in pay. It behoves every party to be responsible in terms of election promises, particularly when dealing with the lives and fortunes of the people. The consequences of irresponsibility are unemployment, misery, hardship and suffering.
That brings me to the question of public pay and tax reliefs. There is some industrial unrest at the moment and while I do not intend to discuss the particular issues involved, it is important there is a balanced debate on public pay and tax reductions. I again detect from the Opposition a tendency to suggest that people should get more pay and tax relief. There is an obvious correlation between the two and that must be fully understood in any discussion or debate on public pay and tax relief for the future. One cannot have unrestrained increases in public pay and huge tax cuts.
It is important that people involved in industrial unrest fully appreciate the impact of their actions on others. I am thinking about two particular examples. The annual Hereford bull sale takes place in Bandon today. One may ask about the relevance of that. A widow who has bulls entered for that sale needs certification from the Department to state they are disease free. They are disease free; all the tests have already been carried out. However, her vet must get a call from the Department to formally confirm that fact but it refused to give it because of industrial action. Whatever about the merits of that industrial action, it is having a negative impact on that lady.
Another small farmer in Baltimore has been confined to his farm for six months because he has TB reactors. However, he passed the first TVB test and only needs to pass one more before he is back in business. He is a small farmer living in poor circumstances and has suffered enormous loss. He needs clearance from the Department to allow his vet to carry out the second test. The vet is standing by to carry it out — he would do it this morning if the Department told him to go ahead. However, it has not been given because of this campaign.
I highlight these two incidences to show that while the case of those low paid civil servants may be justified, they should bear in mind the consequences of their actions on others who may be in equally difficult financial circumstances. Sometimes that relationship is forgotten. This is especially relevant to national agreements which preclude industrial action. While people have a right to present their case fairly and reasonably, when a national agreement which precludes such action exists people should be slow to take steps which have an impact of this kind on other innocent people who have no part to play in that industrial relations battle. There must be a sense of proportion and justice.
Will we have another national Programme for Competitiveness and Work or wage agreement of any kind in the future? If we do, we must focus on our principal objectives. We are great for talking about the problems of unemployment and the need to generate jobs. There is also a direct relationship between what is done in other areas about unemployment and the jobless figures. There was an enormous growth in employment over the last two years — it is the highest rate in Europe — because of the competitiveness of this country. While this is not the sole reason — Ireland also has a good Government — the fact that we are competitive has an enormous influence on those figures. If we accept that and if there is a real intent to tackle unemployment and maintain job growth, there must be moderation and restraint on the part of those people with jobs in the public and private sectors and elsewhere in demanding extra pay.
There is a direct correlation between increases in pay and tax relief. If whatever money available is absorbed by additional pay increases, there will be no money for tax cuts. There is a ceiling. The Maastricht limit of a maximum of 3 per cent on borrowing and other limitations with regard to inflation and the reduction of the debt burden on our GDP apply here. If all the available slack is taken up by increases in public pay, there will be no money available for tax cuts. This factor must be debated and understood and if people are calling for tax cuts, more emphasis should be put on it and a greater proportion of money should be made available.
Tax cuts help everybody. Irrespective of whether somebody works in the public or private sector, it is the net amount of money in their pockets, not the nominal pay, which is relevant. Would it not be better for everybody if that net pay was increased as a result of tax cuts as opposed to nominal pay increases? There should be greater emphasis on tax cuts rather than pay increases, especially if they bring the same benefit to those claiming them.
A case can be made for pay increases by low paid members of the public sector provided it is argued and pursued reasonably — I am not saying this should not be done. Some members of the public sector, such as nurses, etc., also feel, with some justification, that their work is undervalued. I have no problem with their making that case, as long as it is made in a balanced and restrained way and takes all circumstances into account. There is no point in saying that increased employment is the national economic priority unless we are prepared to follow it through by focusing on the necessary economic and fiscal measures and to keep up the employment growth rate.
As somebody who comes from a rural constituency, I always thought we needed a fully developed approach to regional policy. I spent five years attending various European councils and was naturally supportive of its approach to regional policy. We are a peripheral island in the European context and had a good case — every Government has argued for it — for having a proper European regional policy.
However, the same enthusiasm for a regional policy has not existed in national terms, particularly among our urban orientated colleagues. The approach to regional policy is seen to be fully dealt with when we get our return from Europe under the Structural Funds, but that is only half the battle. There is a need for much clearer thinking on regional policy in national terms and in that respect I want to focus on one aspect in particular, namely, telecommunications.
The cost of telecommunications and the service generally will be very influential in determining the economic vitality of a region in the years ahead. We are in the early stages of a revolution in the way people use telecommunication channels. Looking ahead to the next five to ten years, there will be four main areas of usage, namely, the telephone, the fax machine, electronic mail and electronic access to information sources. The rate of increase in the use of the latter two will be enormous. Voice phone could become a relatively small part of telecommunications usage in the next 15 or 20 years.
One might ask what this has to do with regional policy. The answer is simple. The cost of a phone call in country areas is far greater than in the city. If there is to be greater use of telecommunications in the years ahead, the additional costs to peripheral areas will greatly increase. A third of the population lives within the greater Dublin area, which is a local call area, yet people living in remote areas, such as the village of Allihies, in my own constituency, where President Mary Robinson began her election campaign many years ago——
Under Hungry Hill.
——have to pay ten times that which a person living in Ballyfermot, Balbriggan or the hill of Howth pays. Why should that be the case? Why should somebody carrying on business in Allihies be subjected to that extra cost? Why should this cost factor increase in the future because of the greater use of telecommunication facilities? I see the growth in the use of telecommunication facilities as a major instrument in reducing the cost of peripherality, but everything will depend on cost.
I welcome the fact that Eircell users pay a flat rate. It costs me the same to make a call to Dublin from my home in Bandon as it would if I were ringing Dunmanway, a few miles away. That is only right. While some moves have been made by Telecom in recent years to broaden the local call charge areas, they have not been sufficient. We must aim to have the entire country as one local call area in the near future. An essential part of our policy should be to achieve that in as short a time as possible.
Other countries are following this line. Where possible the United States always adopted the standardisation of the costs of essential goods and services throughout that vast country. That has always been an essential part of the thinking there. I would like to see that approach adopted here.
In the context of the possible changes that might take place in the structure of our semi-State bodies on the years ahead, joint ventures, privatisation and part privatisation are all possibilities. We do not know what will happen in the years ahead but I would like to see the principle established now of a flat rate of charges throughout the entire country. If some element of privatisation were to take place, that could be included in any new regulatory format as part of a licence to operate.
The same principle applies to electricity from the point of view of current charges, not installation; the price of a unit in Allihies is the same as in Dublin. It also applies largely in the private sector. The price of a pint in Allihies is the same as it is in Dublin. In fact, taking labour costs into account, it might be more attractive to buy one's pint in Allihies than in Baggot Street. This issue should be part of Government thinking in the years ahead.
Part of this thinking is reflected in the Finance Bill, particularly in relation to the islands. There are 21 inhabited islands around our coast, seven of which are in my constituency. That is not a large number but I have always felt strongly that we must support the islands as much as possible. In that regard I welcome the innovative approach adopted in the Bill and the tax reliefs that are available to encourage residents of the islands. If that approach is successful it will make a major contribution towards the vitality of our islands in the years ahead.
The population on the islands has fallen considerably over the years. I was in Sherkin Island last Sunday taking to the local people who told me of their concerns about the decrease in population, particularly with regard to school numbers. More permanent residents are needed on the island. The example now being set by the Government should be followed by local authorities and others. Tax relief is available for owner-occupiers by way of 50 per cent of the cost of construction and 100 per cent for people who make buildings available for rent to permanent island residents.
The local authorities should also make housing available. I realise there is not a great demand at present but the future life of the islands may depend on greater use of the rural resettlement scheme. Part of the current problem on the islands is that many of the houses are available for holiday purposes only and not for use by the locals. There are no houses available for people who want to become permanent residents on the islands. That is one of the difficulties in implementing the rural resettlement scheme as far as our islands are concerned.
When the opportunity arises I hope to develop further the main issues to which I have referred, namely, pay, tax cuts and regional policy.
I thank Deputy O'Keeffe for sharing his time with me. While he did not mention it by name, the Deputy referred to the infamous 1977 manifesto and its incalculable cost to the Irish nation and he called for a responsible attitude on the part of all political parties——
He did.
——including my party, regarding the production of glossy brochures and manifestos which are a contributory factor in the growing cynicism with which the people view all political parties. While canvassing in Blanchardstown, Clonsilla and Castleknock last week, I was struck by the staggering level of political ignorance in those areas. Children should be educated in primary schools that politics are necessary for them and their country. Unfortunately, thousands of people believe the political system exists to penalise them.
This was manifest in the upmarket areas of Castleknock and Blanchardstown last week. One called at the doors of beautiful houses in new estates, with two cars outside, in some cases the houses had Sky Sports, which costs over £300, but these people did not want to pay £80 for the most essential service to their homes, water. This illustrates the urgent need to educate children that politics are necessary. Rather than teaching them Irish, we should teach them the basic of politics otherwise there will be a morass here in the future with Independent Deputies representing hospital, water, rates and unemployment causes. Collectively, they can do nothing because the policital party system — bad as it is — is the only viable option for any country.
Having got that off my chest, I wish to point out to my party that there is an overwhelming need to do something for middle class people on middle incomes. Traditionally, Fine Gael represented those on middle incomes, including the self-employed and those who provided for themselves. Now more than ever, these people need help because they are overburdened. They provide for themselves by buying houses with mortgages, usually at usury rates, and they wish to send their children to university but they must pay through the nose to do so. I did this and I am still in debt as a result. I am aware of the problems facing such people. Fine Gael must identify with their cause and do something for them, particularly next year.
I wish to express my disappointment at the Government's acceptance of the European Commission's proposal to allow ADM and the Combat Poverty Agency to organise the spending of the much vaunted peace money. I cannot understand how that proposal was reached and I indict the European Commission representatives in Ireland who seem blind to the needs of the Border areas given the past 25 years. This money should have been apportioned to local authorities. Although we criticise them on occasions, they are established professionals and over the past 60 years, have experience of administering the meagre amounts they receive from central Government.
However, the novel idea now is that the community at large will be given huge amounts to spend. I predict — I wish I could predict a winner on the racetrack as certainly — that when the final tally is done in the years to come, it will show a huge amount of fraud by these so called community groups which have very dubious origins, particularly in the North of Ireland. The amount of money lost will be incalculable and a grave mistake is being made in giving it to inexperienced people to administer.
I wish to mention the beautiful but forgotten area of County Louth, the Cooley Peninsula.
It is not forgotten.
It seems to have been forgotten by everybody, including Bord Fáilte. The town of Carlingford is a jewel but, unfortunately, it is a hidden jewel. I ask the Government to designate it and Omeath under the seaside resort scheme. This would help those villages to overcome the debilitating economic factors which have prevailed over the last 25 years. Given their location near the Border, they became virtual cul-de-sacs but, as a result of local initiatives in the two towns, there are definite signs of resurgence. Apart from Kinsale, Carlingford is the loveliest town in Ireland. However, the area needs help and it was little short of criminal to omit it from the seaside designation scheme last year. I appeal to the Government to include it this year.
While the Deputy is at it he should ask the Government to reinstate the reliefs it cut out.
I underline Deputy O'Keeffe's appeal for restraint in the public sector. The unrest among well paid people, particularly teachers and gardaí, and their continual demands for more pay is most disillusioning. When one contracts the level of unrest in the public sector with that in the private sector, it seems these people have received too much from recent Governments, including possibly, this Government. These people should be reminded of their privileged position. The Government should do less sabre rattling and show more steel.
I wish to share my time with Deputy Browne and Deputy Jacob.
Is that agreed? Agreed.
In one of last Sunday's newspapers I read, as did the nation, that the Minister for Finance will give massive tax reliefs to hard pressed middle income taxpayers, but not until next year. However, the Minister should live horse and get grass, which is what taxpayers have been doing for the past two years. In 1995 the Minister presented with great pride the first rainbow coalition budget. He was the first Labour Party Minister to steer a Finance Bill through the Dáil. The Bill was supposedly based on the Government of Renewal policy statement of December 1994. In regard to taxation it stated: "The Government will accelerate the process of tax reform and will be guided by the following principles and priorities" ...One of those priorities was targeting lower paid workers and young new job entrants through a combination of measures aimed at taking them out of the tax net and the development of a reformed system of PRSI contributions and other measures. What happened? The Government failed miserably to meet this promise and, indeed, the increase in the tax exemption limit is still desultory at £3,900 per annum, which equals £75 per week. That is roughly £10 above the level of unemployment assistance for a single person. The Government said it would get those people back to work by reforming the tax system but is this an encouragement?
I acknowledge the PRSI changes that have been effected are helpful but there is still a plethora of PRSI rates which are a real headache for many of the small employers who do not have access to computer systems. For example, under Class A there are six sub-classes and there are 18 other classes and sub-classes to complicate the issue. I hope this can be simplified further in the future.
Another priority in that document was widening the standard rate tax bands with the aim that only those on higher incomes would pay tax above the standard rate and to increase personal allowances significantly greater than the rate of inflation. The increases are not in line with those empty promises. The widening of the tax band increased by 7 per cent between 1993-94 and 1994-95; 8.5 per cent between 1994-95 and 1995-96 and 5.6 per cent between 1995-96 and 1996-97. That is and average increase of 7 per cent — from a nil increase in previous years — under the stewardship of the Minister for Finance, Deputy Quinn. What happened the increases promised in that famous document published in December 1994? Tax free allowances were increased by 8 per cent between 1993-94 and 1994-95; 6.38 per cent between 1994-95 and 1995-96 and 6 per cent between 1995-96 and 1996-97. Rather than increases these are decreases. Where have the promises been fulfilled from that policy statement regarding those tax increases? During the term of office of the Minister, Deputy Quinn, the PRSI allowance was reduced by 51 per cent between 1994-95 and 1995-96 and done away with altogether between 1995-96 and 1996-97.
Another priority was the raising of the exemption threshold for employment and health levies. There has been a slight increase at 2.7 per cent from 1994-95 to 1995-96 and a 5.4 per cent increase from 1995-96 to 1996-97. These are not major increases. That famous document also stated that the study on the integration of tax and social welfare codes would be completed and published in April 1995. We are still awaiting the publication of that document. This is another unfulfilled promise. It also stated that residential property tax would be revamped. That is a couched statement that it would be abolished. We still await developments in that area. I have no doubt if we hold our breath we would die from asphyxiation before there will be any changes under this Government.
All the actions of the Government in the taxation area have given the lie to its fine promises. The public has given its answer in all the recent by-elections to the Government's inaction and about-turns.
The net take home pay since 6 April 1996 has clearly shown to the doubters that what we said at budget time was true, no one is better off. The taxpayer has been short-changed by these deceitful statements.
When in Government from 1987-94, Fianna Fáil, despite having to correct the near bankruptcy in which the former Fine Gael-Labour Government left the country, was able to reduce the tax burden, at the same time keep the finances in order and bring the country back to a situation in which it had not been for 30 years when we had a budget surplus rather than a deficit. In all aspects the last two budgets have put a halt to the progress of those years and any type of tax reform has been put on hold. The Government has been acting in a most insulting manner to the PAYE taxpayers — and all taxpayers — in a time of financial well-being that has been unknown to any Government for the past 30 years. It is frightening to think what damage these parties would do in times of economic difficulties.
The Minister in his Budget Statement provided for tax relief in respect of expenditure occurred on the purchase or installation of intruder alarms in the homes of persons aged 65 or over living alone. The downright stupidity, ridiculousness and meaninglessness of this announcement was highlighted by Fianna Fáil during the budget debate and the penny finally dropped. The Minister recognised that what he had suggested was meaningless and so he has extended the allowance to any relative who bears the expense. This is most welcome but if the Government had the real intention of helping the aged it would have given a grant rather than interest relief. What it is doing is a daisy in the bull's mouth approach. We see the Government for what it really is, parties of perception rather than substance.
The business expansion scheme was introduced to foster and create sustainable jobs. Over the years the qualification for reliefs under these schemes have been necessarily tightened up. The changes in this Bill imply that many of the BES funds are still not invested in genuine business ventures. I would like to hear the Minister spell out in greater detail the reason he has again changed this scheme. I have no doubt he has information from monitoring the schemes which show the reasons for the changes and I look forward to hearing from him regarding same. We heard so much from the Government about job creation and simplifying the process of job creation that I was surprised when I saw the introduction of a certification system which means more paper work and bureaucracy and involves the State in extra public sector expenditure, which I thought we were trying to get away from. It could also mean that claims could arise in the future against the State because there is no doubt that some whiz-kid lawyer will attempt to involve the State if a State certified business expansion scheme goes belly-up. The insertion of this section in the Finance Bill is cobbled together to keep some dissenting voice happy within the Rainbow Coalition.
While the section 35 tax break scheme is welcome, as it has helped to create jobs as well as promote Ireland, this Bill provides a major advantage to the film industry against the business expansion scheme. It has led to fears that funds will flow from the business expansion scheme funds to the more attractive film tax breaks. The small print allows those who invest in films to get out after a year compared with the former rule which kept him or her in for three years.
The investor in the business expansion scheme must wait for five years before getting money back. Experts in the area have stated that under the previous regime there was only a two year differential between section 35 and the business expansion scheme repayment time and thus did not have a major impact. Now the difference at four years is quite important and means that the section 35 film industry tax break is greatly favoured. The view is that factories and industrial enterprises which are funded under the BES scheme last a long time and do not end within a year like films. This change may result in a fall-off in investment in business expansion scheme funds which were designed to create long-term sustainable employment. The Minister should not weigh the advantages so heavily against investment in long-term job creation enterprises.
I am disappointed the provisions of Chapter III do not change capital allowances, especially for farmers, the majority of whose net incomes, before capital allowances, are below the average industrial wage. Out of those net incomes they are required to invest in machinery, major capital repairs, reconstruction, land reclamation and other essential capital expenses necessary for their enterprises, but they are allowed a maximum of only 15 per cent tax free capital allowance. From my experience as an accountant I am aware of the severe pressures placed on farmers by the costs associated with pollution control, land reclamation and other necessary capital expenditure. The common view that all farmers are rolling in money does not hold. I ask the Minister to review this area urgently.
The announcement last year of a pilot relief scheme for certain resort areas was widely welcomed in the areas designated. It was the catalyst needed to rebuild areas such as Youghal. However, section 25 has put a severe damper on this development. The scheme was to be effective for three years from 1 July 1995, but only nine months later it has been changed. Many people have gone to considerable expense, both in time and money, preparing projects but they will not qualify for relief under the conditions laid down in section 25 (5) (a), (b) or (c). I look forward to discussing this matter in further detail with the Minister on Committee Stage because he should re-examine cases where substantial expenditure has been incurred. People who were willing to take the risk to rebuild those areas are now at a great disadvantage and loss. Why was the scheme changed in such a short time? The pilot scheme is not as advantageous as the urban renewal scheme as rates exemption do not apply and reliefs are applicable only to touristm related expenditure. Was pressure brought to bear from some source in Government who did not favour the development of the countryside?
In section 27 the Minister attempts to close off loopholes in the patent royalties area. This section gives powers to the Revenue Commissioners to decide if the scheme is solely for avoidance purposes. I have no doubt there will be a court case on this matter in the future which will be costly for the State.
I agree with Deputy McCreevy who expressed disappointment that the Committee Stage will be held in a committee room rather than in the Chamber. This is important legislation which will have a major impact on every individual and on employment. Allowing only two days to discuss it is an insult to every elected Member.
It is evident from the last two budgets that this cobbled together Government of convenience has failed to live up to their policy statement, A Government of Renewal, of December 1994. I would not be so cynical as to suspect that the 1997 budget will include all those flowery promises of December 1994, but what are the odds with an election not long afterwards?
(Wexford): We debate the Finance Bill every year but I am not sure if anyone listens. There has been much talk in the past two days about this country never having it so good with low inflation, low interest rates, high economic growth and a booming economy. Those factors should bridge the gap between the haves and the have nots, but that is not the case. The rich are getting richer and the poor are staying poor. It is amazing that in a Government of which Democratic Left and the Labour Party are members this position should continue.
PAYE workers, trade union members and small business people have been abandoned by the Government. Despite the healthy economic position we still have the problems that have existed for the past three years, high unemployment, crime and drug problems and a lack of equality in third level education. Approximately 70 per cent of families in most housing estates are affected by unemployment. They want the Government to provide leadership and jobs but, unfortunately, this Bill will not give them any hope. It contains a number of proposals for job creation and more quangos, some of which were established when we were in Government. There are county enterprise boards, FÁS, community development and partnership programmes and other job creation structures in place, most of which are doing very little to create jobs. We are merely creating layers of bureaucracy, red tape and jobs for chief executives and specialised people but they, in turn, are not creating jobs for those who need them.
Drugs and crime are major problems but the Bill will not assist in putting those involved behind bars. There have been delays in providing additional prison spaces and appointing extra gardaí and other people required to deal with these problems.
The lack of equality in third level education concerns many Members. The majority of young people who live in housing estates never see the inside of a college or a university. We will have to provide selective investment in such housing estates and other high unemployment areas to encourage young people to attend colleges so that we can break the cycle of unemployment and low educational standards that have existed in those areas for a long time. People in Donegal and Dublin raised the same issues with politicians canvassing during the recent by-election, namely, lack of education for poor families, taxation and crime. All politicians must listen to these people. While there was a reasonable turn-out on polling day in Donegal, the position in Dublin was alarming. That malaise will spread throughout the country unless we are prepared to listen and to tackle the problems confronting us.
The Finance Bill consists of 130 sections, most of which mean nothing to many sections of society. It is complex and confusing and, if we were prepared to admit it, many of us do not understand some of its sections either. It contains nothing that will help the unemployed get back into the workplace and, despite the changes proposed, in 1996 PAYE workers will pay more money to the Government than they did in 1995. We should endeavour to take those in the low income bracket out of the tax system and examine the position of those in the middle income bracket who are paying up to 56 per cent of their income in taxation. People should not have to pay more than 50 per cent of their weekly income to the Government through taxation, PRSI and other payments. The people in the middle income bracket who have to pay full water and service charges, educational fees for their children and full medical fees are disillusioned and feel crucified by the tax system.
Many people made sacrifices in the late 1980s and early 1990s and during a time of economic boom we should be looking at ways and means of increasing the take home pay of people in the PAYE sector. Last Sunday the Minister for Finance, Deputy Quinn, said he hoped to be in a position in 1997 to look after the middle income group. He should have looked after this sector last year and this year instead of saying he will look after them next year when there will be a general election. One of the reasons people are cynical about politicians and politics is that Governments have acted in the same way in the past. This cynicism not only exists among the large number of unemployed people in housing estates but also among middle income earners and taxpayers who have to pay such a high rate of tax. It is time the Government looked seriously at ways and means of increasing the take-home pay of PAYE workers, giving people an incentive to work and overhauling the taxation and social welfare systems. It is not good enough to tinker around with the system. That is of no benefit to taxpayers or social welfare recipients who are not happy with the Government and believe politicians are not representing them or endeavouring to deal with them in a fair manner.
When the resort renewal scheme was introduced last year it was welcomed by all sides of the House and many Deputies tried to have additional areas included in it. However, for reasons best known to him the Minister has decided to make changes to the scheme which will have a serious effect on the level of investment in seaside resorts. Courtown is included in the scheme and during the past few months negotiations and discussions have taken place and seminars have been held to encourage people to invest. Much of the groundwork has not yet been completed and many people are only in the process of applying for planning permission and seeking funding to invest in Courtown. As a result of the strict changes proposed by the Minister many investors have contacted me to tell me they no longer propose to invest in Courtown but propose instead to invest in Wexford or Enniscorthy which are included in the urban renewal scheme and which will yield a more profitable return on their investment.
The Minister should look seriously at these proposed changes and consider letting the scheme run for three years before making any changes or including other resorts. He should not introduce changes in the scheme in midstream as this will have a serious effect on investment in seaside resorts which need to be upgraded and require new facilities. These changes are another kick in the backside for rural Ireland. The urban renewal scheme is a major incentive to people to invest in towns and cities and I ask the Minister to reconsider his proposed changes to the resort renewal scheme as they will not be in the best interests of rural Ireland.
I am grateful to my colleagues for sharing their time with me. The constraints of the Chair make it difficult for me to contribute to debates.
I wish to refer to the proposed changes in section 25, particularly as they will affect my constituency. These changes will curtail the advantages and tax breaks available under the resort renewal scheme. I received a letter from a firm of solicitors in my constituency in which they outlined their aversion to these changes as they will affect Arklow, which has been devastated over the years, together with its south Wicklow hinterland. The letter states:
In relation to Arklow, I have been involved in advising on several proposals but we have had great difficulty in relation to planning and the financial difficulties being encountered...and due to this they have been much slower to get off the ground.
However up until now prospects were looking good and if some of these schemes had got off the ground they would have had a marked impact on Arklow as a tourist destination, especially in the accommodation front which would have involved the provision of self-sustaining holiday cottages which would have been a major benefit to the local economy, initially providing construction jobs to be followed by the spin-off effects of additional tourist numbers in the town.
I have, as a result of this amendment, been contacted by a number of investors who now tell me that they are no longer interested in investing in Arklow as a result of this amendment and will now switch their investments to the West where the incentives are better.
In my considered opinion it is an absolute scandal that Arklow has yet again been left out in the cold while better off tourist resorts reap all the benefits of the tax relief....
No words of mine could better describe the situation that this letter from a firm of solicitors who are living and working in the town and know the difficulties on the ground.
For many years I have been making the case for the inclusion of Arklow in the urban renewal scheme. My criticism is not confined to this Government only; rather it is of successive Governments who have refused to include Arklow in the urban renewal scheme. Over the past ten or 12 years this area of my constituency has been devastated, the traditional pottery and fertiliser industries have been run down and 2,000 jobs have been lost in Arklow and the surrounding hinterland of south Wicklow. The northern part of County Wexford benefited greatly when the economy of Arklow was doing well. This problem has not been addressed and corrected and these proposed changes are another kick in the teeth to this area of my constituency.
The IDA had identified Arklow as one of the top three towns warranting positive and urgent action. These negative changes are unacceptable to me and the people of Arklow and Wicklow who have had enough. My colleagues will table Committee Stage amendments to correct these totally undesirable and unacceptable changes in the scheme. We were very pleased when Arklow and other areas along the east coast were included in the scheme last year and it is unacceptable that the scheme should now be curtailed in this way. I appeal to the Minister to consider the Committee Stage amendments which will be tabled by my colleagues, to listen to what they have to say and to let this meritorious scheme proceed in the way initially proposed.
I propose to share my time with Deputies Seán Ryan and Éamon Walsh. I am pleased to have the opportunity to speak on the Finance Bill. We all know the economy is performing extremely well. The Minister for Finance, Deputy Quinn, is to be congratulated on the strong economic growth this year and in previous years. For the first time in a generation, we are translating economic growth into job creation. Having long been an unemployment blackspot in the European Union, some commentators estimate that our unemployment rate will be within 1 per cent of the EU average by the end of the year.
A perception has developed, ably assisted by the Opposition, that we pay higher tax rates than our European partners. It is an idea that has firmly taken root among the public but which is not entirely true. Figures for taxes and social contributions in 1994 place Ireland eleventh in the league table of European Union countries per percentage of GDP taken up by taxation and social spending. The perception that taxpayers are highly taxed is not without foundation as our unique demographic situation — we have by far the youngest population in Europe — has meant that our taxpayers support more dependants than is the norm in Europe. This problem has been compounded by our high unemployment rate which is now declining. I hope the measures announced in this year's budget will impact here. Taxpayers quite rightly expect high quality services in areas such as health, education and social services and they must be funded by taxation.
Another aspect which compounds this problem is the PAYE sector feels it carries an excessive tax burden vis-à-vis the rest of the community. It is a view for which I, as an urban Deputy, have considerable sympathy. The columnist, Colm Rapple, in an article in last Sunday's Sunday Business Post detailed the level of State support and intervention payable to the farming community. It is hard to refute the allegation that this section of society does not pay its fair share of tax.
The attitude of the Revenue Commissioners does not help in this area, although it is not difficult to understand their position. Their view is that rather than prosecute those involved in tax evasion, it is better to get some money into the Exchequer. The benefits of this to the Exchequer are obvious but it creates an impression that people can adopt avoidance strategies with the Revenue Commissioners without ever having to pay the final penalty.
The tax burden has declined in recent years as a result of Government policies. Since entering Government my party has tended to direct tax relief to the lower paid whereas other Governments concentrated on across the board reductions. I support my party's policy in this area because it is based on social justice and is targeted at removing poverty and employment traps which prevent people taking up jobs. Such a strategy is complemented by the social welfare package which allows people to retain certain secondary social welfare benefits after taking up work thus creating an incentive for them to get back into the workforce.
This year's budget further increases personal tax free and PRSI allowances. The extension of the standard rate bands is welcome. Workers through successive national pay agreements have made sacrifices to secure economic growth. It is right that they should now reap the rewards. I note with interest the Taoiseach's remarks yesterday about how take home pay has increased over the course of national pay agreements. However, the time has come to make a large gesture in this area and I hope the Minister will bear this in mind when preparing the 1997 budget.
Like Deputy Jim O'Keeffe, I am bemused by the approach taken by the Opposition, in particular Fianna Fáil. Each time we have a debate on public finances it says we are overtaxed and require tax reductions, which is fair enough because that is its policy. It is certainly the policy the Progressive Democrats pursues with vigour. However, when we debate health, education or social welfare, Fianna Fáil says we are not spending enough. It is trying to square the circle.
I refer to the Government's contribution to tourism in recent years and speak as a member of the Dublin City and County Regional Tourism Organisation. Last year was a boom year for the tourism industry and the peace process contributed to this. Dublin Tourism has indicated that bookings for this year are up on last year. I welcome the incentives to support the industry in coastal towns. The number of new hotels in Dublin city has mushroomed in the past year or two in areas previously derelict. Dublin Corporation is receiving planning applications almost monthly for large hotels needed to meet the projected tourism increase. Last year our city teemed with tourists. We must provide incentives for the provision of more hotels and accommodation and to attract more tourists. The tourism industry creates welcome employment in hotels, restaurants, theatres and studios and is helping our economy to improve. On the Government's initiatives to tackle long-term unemployment I welcome the recruitment subsidy of £80 which will be paid to employers in respect of employees who will be unemployed for at least three years. Up to 5,000 places will be provided this year under that scheme. To refocus community employment on the long-term unemployed, an additional 1,000 full-time places are being provided on community employment schemes on a pilot basis for people over 35 years who have been unemployed for at least five years and who can contribute to the economy. It is important to target this group, as people who have been out of work often give up hope of finding employment. It is important that they are redirected back into the economy. I welcome this Bill which is a continuation of the policy set out in the programme for Government to deal with unemployment, in particular.
I welcome the opportunity to speak on the Finance Bill which gives legislative effect to measures announced in the budget. The purpose of the budget was to reduce poverty and unemployment traps and to increase the incentive to work. On the basis of statistics and figures available, I have no doubt it will move us in the right direction. I hope the initiatives in the Bill will provide much needed jobs, particularly for the long-term unemployed.
On last year's Finance Bill I referred to granting a tax allowance for local authority service charges paid in full on time. The maximum amount which qualified for relief was £150. I welcomed this as an interim measure but only those who pay income tax benefit. Thousands of families on low incomes and on social welfare cannot benefit from such relief.
The Minister for Finance, the Minister for the Environment and the Government should address this issue of service charges. I do not say this because of the votes received by an anti-water charges candidate in the recent Dublin West by-election but because of the need to introduce proper funding for local authorities. It is imperative to put local authorities on a proper footing. The problems of local authorities date from the abolition of rates in the 1977 budget. This issue, and the finances of local authorities, has been a political hot potato for years and has been shelved by successive Governments. If we are serious about reforming local government, it is essential that the review of local authority funding initiated by my colleague, the Minister for the Environment. Deputy Howlin, is completed and its recommendations implemented as soon as they are known. In this regard, water and service charges should be taken off the agenda and a fairer system put in place. Residential property tax, introduced in the mid-1980s, should also be re-evaluated, because it is mainly a Dublin tax.
If we are serious about devolving more responsibilities to local communities, which will entail further tiers of local government, it is imperative that a fair and equitable system of funding is put in place. All of us in this House are aware of the need for such a system. Accordingly, as I have done on other occasions, I appeal to the Opposition parties not to play politics with this important issue. It should be addressed by the House as a whole, and it is up to us to ensure that we do not fail the people on this occasion.
When I spoke in this year's budget debate I welcomed many of the measures contained in this Bill. I was particularly satisfied that the issue of long-term unemployment was being addressed and the ongoing progress in dealing with the public finances. Although this year's budget provided in the region of £178 million in tax relief for the PAYE sector, there is a perception among PAYE workers that there was little increase in their weekly or monthly salaries. Given economic progress in recent years, it is imperative that further and more substantial progress is made in this area in next year's budget.
The consensus approach to economic management in recent years by the social partners, trade unions and the Government has been responsible for the sustained growth. Reduction in taxes for the PAYE sector and attempts to increase the tax take from other sectors will be essential in maintaining the momentum behind the social partnership approach. Although in recent months trade union leaders have expressed unease about a new national programme, a commitment from the Minister along the lines already outlined will, it is hoped, bring them back into the fold. At the end of the day it will be up to the union membership to make a democratic decision on that. As someone who was active in the trade union movement, I believe that the consensus approach in recent years has provided us with the opportunity to create additional jobs and to plan ahead.
I would like to refer to a couple of areas of concern in my own constituency. The urban renewal scheme was introduced in the 1994 Finance Act and I understand it is under review at present to assess its benefits. I want to make a case for designating the town of Balbriggan under the urban renewal scheme next year. Balbriggan is a town that has experienced peaks and declines over the last few centuries. It is located in north County Dublin, close to Drogheda and within easy reach of Dublin city.
Balbriggan, like many other towns in Ireland, was a major industrial town 200 years ago. By the 19th century it had a number of vibrant textile, fishing and agriculturally based industries. Infrastructural developments in the mid 19th century provided a boost to the established industries. However, like many other towns throughout the country, the traditional industries declined in the 20th century. The town has experienced difficulties in replacing its traditional industrial base. The problems in this area include the decay of the buildings there, lack of jobs and, as anyone travelling to the North will see, excessive traffic, which works against Balbriggan as a town. Thankfully, the Government has provided finance, after many years of promises, for a road to divert heavy traffic from Balbriggan. Apart from the by-pass and the inner by-pass, designating Balbriggan for urban renewal would give hope to the people in an area which has the highest rate of unemployment in my constituency. At long last communities are coming together and putting forward proposals to local authorities and Government. One of the main proposals already submitted consists of a 30 or 40 page detailed document on areas to be developed and designated under the urban renewal scheme. I make no apology for going on a bit about that because it is a town which needs the support of the Government.
There are areas in my constituency, and in many other parts of urban Ireland, which are unemployment black spots, and there is a need for taxation relief for businesses prepared to invest in these areas. There was reference to a scheme introduced last year to provide amenities in seaside resorts. Since Fingal caters for hundreds of thousands of people from the city centre visiting the seaside at weekends, I was most disappointed that none of the towns in my constituency was included. I understand that scheme has been successful and remain hopeful that at least some of the many resorts in my constituency — Rush, Skerries, Donabate, Loughshinny, Malahide, Portmarnock, Balbriggan, etc., many of which have blue flag beaches — will be included.
I must deplore the latest bombing in London last evening. It is my fervent hope that sanity will prevail. The last thing this island needs, North and South, is the perpetration of such bombings which will merely diminish further our overall economic prospects. We had witnessed the clear consequences of the peace which had prevailed over the earlier 18 month period. Let us hope that sanity will prevail and that the views and expectations of the vast majority of people on this island will penetrate the hearts and minds of those who engage in such atrocious acts, condemned by all decent people.
I have been very glad to contribute to this debate and have no doubt that, since this Bill forms part of a three year programme, the best is yet to come.
I, too, welcome the opportunity to contribute to this debate. The Finance Bill is the important annual fiscal instrument affecting the livelihood of all our citizens, taxation being its central feature. It is my belief that taxation must form an integral part of any civilised society. It is a means of distributing wealth from one sector to another and of directing various taxation funds towards the more needy.
There has been much debate in the House on taxation and tax relief. Whereas previous budgets veered taxation funds in another direction, this one concentrated on the creation of employment. While no one budget can meet all needs, if we are to work to a plan we must be selective. Therefore, I was glad to note that employment and unemployment were its main focus this year.
I must now deal with taxation, an important factor of the overall economic equation, particularly in the case of those workers who produce the wealth for distribution to those in greatest need. There appears to be the perception abroad that an unfair share of the burden of taxation falls on the shoulders of the PAYE worker. Although many workers in that sector are unsure whether statistics or analyses quoted are correct, they are fully aware that they are not getting a sufficient break. Notwithstanding that fact, they must be reminded that they have benefited from indirect tax concessions, not immediately recognisable, but without which they would be lacking certain benefits in education, social welfare and housing.
I might remind the House of what has been done with regard to increased child allowances. Within the social welfare aspect of the budget there has been a substantial increase granted each year leading this year, for the first time, to a decent payment to every family, irrespective of means, payable to the female spouse and welcomed by many families experiencing considerable financial difficulties, if not poverty.
The fact that the per capita grants to primary school students have been increased is not yet fully recognised by many PAYE taxpayers, since nobody has informed them of the fact; many schools tend not to inform parents of their State per capita grants. Indeed that fact is not sufficiently vaunted in this House. For example, in 1992 the State per capita grants for a primary school pupil was £28, increased to £40 in 1995, with further funds available for an additional increase in this year's budget.
We need to spell out to those demanding tax reliefs and tax breaks that funds are being expended in their interests in other areas. Always we are confronted by a choice: in which direction should we move? Should we put a cap on services in return for more money in pay packages? This is a perpetual dilemma. We must endeavour to strike a balance because many citizens cannot provide the services they require from their own resources.
The issue of local authority service charges is important, particularly in my constituency of Dublin South-West. Once again taxpayers perceive this latest imposition as unfair, but, in order to render the overall provision of such services fair and equitable, certain safeguards must be incorporated which of course cost money. We are beginning to ascertain the increasing administrative expenses incurred in the collection of such charges and their commensurate diminished benefits. That disparity must be examined because, the more safeguards there are built in, the lesser will be the funds collected and the fewer the benefits accruing. I advocate the abolition of water charges nationwide to be substituted by proper financing of local government and serious, well thought out analysis of what is required to provide proper local authority services.
Another group of low paid workers in my constituency whose difficulties need to be addressed are those employed by Packard who are in need of a tax break. While jobs were targeted in this budget, I hope taxation will be the focal point of next year's. Many constituencies have pockets of deprivation, Dublin South-West is no exception, particularly West Tallaght, where resources need to be directed. If tax breaks are to be afforded low paid workers in such areas I hope administrative expenses will not diminish their benefit. I am thinking particularly of areas like Glenshane, Fettercairn, Jobstown and Killinarden, where there have been media reports of people endeavouring to regain control of their areas from drug barons or their sub-agents. The women in those areas want to be sure that, when their menfolk leave, they can walk the streets safely. Indeed, their present action is a symptom of the urgent need for such safeguards. However, the requisite funds must be found and it is my hope that we will not diminish their effectiveness by cutting taxes too severely. People living in places like Fettercairn, Glenshane and Jobstown, experiencing enormous difficulties with drugs, need resources invested in their areas. Resources must be invested immediately to tackle the drugs problem. Next year may be too late for some young people living there.
While arguing for tax reductions is eminently valid, on the other hand, there are many other genuine, urgent demands competing for such funds. This leads to the dilemma of knowing best how to balance the scales. We should first endeavour to target the low paid PAYE worker, give them a substantial tax break since they have carried a huge burden for so long, thus according them the recognition they deserve. They have waited patiently, quietly and I hope their time will come.
That being said, I make no apologies for the provisions of this Bill targeting jobs, many people in the areas to which I have referred being in desperate need of them. If they can be provided with employment, the battle against crime, drugs and other deprivations will disappear.
I wish to share time with Deputy Ned O'Keeffe. One of the changes that has taken place in this House since I was elected is that there is a time limit on debates. Overall that has been a good thing for more ordered business but the disadvantage is that there is not an opportunity to reply to the outlandish misconceptions that are trotted out by the Labour Party, in particular. An example is the abolition of rates in 1977. Do the members of the Labour Party not realise that it was the committed policy of all parties to abolish rates? Before 1977 the Labour Party in Government had abolished 25 per cent of the rates that contributed to the health services. In 1982 when a Fine Gael-Labour coalition Government was formed after the general election, the Leader of Fine Gael said there would have to be prudent management of the economy and control of public spending, but within 12 hours the Labour Party Leader said there would be no such thing. In four years that Government doubled the national debt, creating the terrible problems we have had to deal with since. I am tempted to reply to the points that were made, but I will desist and concentrate on the 1996 Finance Bill.
The Finance Bill gives effect to the measures announced in the budget and introduces other measures as well. This is the fourth great opportunity the Government has had to bring about worthwhile changes, particularly in tax reform. The Government has introduced two budgets and this is its second Finance Bill but it has not introduced worthwhile changes. The issues that have to be addressed by any Minister for Finance are reform of the tax system for a variety of reasons and control of public spending. We have to be concerned about the level of public spending, particularly in the light of the present good economic environment. Last year the Government added £1,000 million to the national debt which in my view was totally unnecessary. The Government inherited a situation in 1994 where the budget came in with a £15 million surplus. They budgeted for a deficit last year and surpassed it by spending an extra £60 million. They have budgeted for an even higher deficit this year which is totally unacceptable at a time when our economy is doing well. We have to bear in mind that we have benefited from European Union Structural Funds which are making a substantial contribution to development. We cannot be absolutely sure that after 1999 we will be favoured by the European Union to the extent we have been in the past. The Government should prepare for the rainy day because at some stage there will be a down turn and it is important that we are able to maintain the level of services. Prudent management is essential.
Charter 1 includes marginal relief in income tax. The Government has missed the opportunity to bring about proper tax reform and spend the money that was available wisely, to target it in areas that would be of benefit to taxpayers and ensure that we were able to remain competitive in some of the labour-intensive industries, for example the food sector.
The changes in PRSI were minuscule. Employers who take on people in areas of high unemployment benefit from a 0.2 per cent reduction, that is £20 in £10,000, which is not much incentive to employers to create jobs in these areas. The £140 allowance was abolished. During the Donegal North-East by-election a number of people raised the question of why it was not possible to give tax relief on domestic charges in the current year rather than having to wait an extra year. The Minister might look at this.
The economy is performing well and we on this side of the House make no apology for taking the credit for that. I was a member of the Government in 1987 which decided on the key issues to be addressed and hard decisions to be taken. Those decisions were taken and I am sorry that my Labour Party colleagues are not here to let them know it was possible to reduce taxation and at the same time increase spending on social welfare. Public spending was properly controlled. The Government of the day looked for better value for money. We are reaping the payoff and that is the main reason the economy is doing as well.
Irrespective of the Maastricht Treaty and economic and monetary union, it is right that there should be prudent management of the economy and that public spending should be controlled. I have said before that we do not have the right to spend money we are not prepared to raise and leave the bill for our children. We do not have that right. On the question of inflation, it is important to recognise that nine of the 14 European Union countries turned in better inflation rates. Under the Maastricht criteria the average for the three countries with the lowest inflation rates is 1.1 per cent as against our 2 per cent. It is no harm to keep an eye on these figures, which highlight the need for control of public spending.
Section 5 deals with income tax relief for installing alarms. Obviously what was announced in the budget was totally unacceptable and has been recognised as such. If somebody installs an alarm for an elderly member of their family, they will be able to claim the tax relief. It showed a total remove from reality to bring in a scheme whereby pensioners would be able to claim tax relief when the overwhelming majority of them do not pay tax. That fact should have been known. These people should be given a grant and should have alarms if they wish to have them. We should contrast the way this was dealt with the enlightened initiatives taken by the then Minister, Charles Haughey, in introducing free telephone rental, free television licence, free electricity allowance and so on. These things were examined and then implemented immediatley and one did not need to set up a task force, unlike the way it was handled by the Minister for Social Welfare.
The Minister referred to the provision in section 35 of grant subsidies to employers in certain circumstances but did not refer to the new scheme — outlined in the explanatory memorandum — to be announced by the Department of Enterprise and Employment which FÁS will operate. It would be interesting to hear more about the scheme.
Part IV deals with changes in stamp duty. I wish to raise the question of removing stamp duty for those aged 65 and over who purchase a house. It has been suggested recently that people over 65 years who own very large houses could buy a smaller house for themselves when they retire but the level of stamp duty is an impediment to that. Perhaps the Minister for Finance might look at the cost benefit of stamp duty and how it works in the sale of houses, considering that elderly people living in very large houses might well prefer to be in a smaller house and the construction industry would benefit. It might be worth looking at the question of stamp duty.
Part VI of the Bill deals with consolidation provisions. While I welcome the decision to consolidate finance law dating back to 1967, the Minister should consider how it will be dealt with by the Select Committee on Finance and General Affairs. Given that the Minister said it would involve 1,100 sections, to deal with it properly some thought must be given to how it will be managed. The integration of the tax and social welfare systems, with which my colleague, Deputy McCreevy, dealt at some length, could also be considered at that time.
I welcome sections 54 to 59 which provide incentives for construction and refurbishment work on the islands. I am concerned about the Government's U-turn regarding incentives for seaside resorts. The case was eloquently made by my colleague, Deputy Jacob, regarding towns in his constituency, but it applies to all resorts. Having regard to our demography, a much wider issue needs to be addressed. It has been highlighted on many occasions in terms of the marginalisation of areas of cities and towns. I refer to the depletion of our rural population. We must consider what can be done to change what has happened over the years,
The decentralisation programme introduced by the Fianna Fáil Government was abandoned by the Fine Gael-Labour Government between 1982 and 1987 and reactivated by Fianna Fáil in 1987. It has worked extremely well in transferring people to centres in rural Ireland along the west coast, in my constituency in Cavan town and elsewhere. The problem is that at present all parties are committed to decentralisation on a cental basis. There seems to be a conscious effort to centralise all decentralised services in county towns. That issue must be addressed as a matter of urgency because if not we will end up with decentralised services concentrated in 26 county towns.
The ESB is closing a number of its offices. With the highly sophisticated telecommunications available today there is no reason its offices in towns other than the county town should be closed. The Army closed its barracks in Cootehill, a first class town, and built a new one in Cavan town. Over the years we have allowed sub-post offices and rural Garda stations to be closed and service providers to locate in main towns. There appears to be an advance on that now in that county towns are being developed at the expense of other towns. That matter should be addressed. It is an undesirable trend which, if allowed to continue, will have serious consequences.
Public service utilities such as water and sewerage should be provided in all towns. Every town should operate from a level playing pitch in terms of having the necessary services to attract industry, create jobs and retain its population.
There is not a Government commitment to Border areas. Border areas and others are unable to compete with the greater Dublin area. I understand industralists are prepared to pay £120,000 per acre within 20 miles of Dublin, but they will not pay £20,000 an acre for land 50 miles down the road. That issue must be addressed. The main reason for that disparity is the lack of a fully serviced infrastructure including roads, water and sewerage facilities and particularly the lack of highly sophisticated telecommunications, such as fibre optics. Those services should be available. I refer particularly to the Border areas and other areas where advance factories should be located. The IDA is committed to locating them in those areas, but they should be in place.
Despite the incentives for locating in Border areas, of the 10,000 jobs created as a result of overseas investment only 120 were created in my constituency, which has a population of 100,000. That is an indictment of the Government's lack of commitment to Border areas, particularly having regard to the investment conference in Washington. Many funds are available under INTERREG, the IFI and the peace initiative. I ask the Government to ensure that the funds are spent wisely and are additional and not substituted. For many years moneys allocated by taxpayers in France and Germany were substituted for Exchequer funds which the Border areas should have received. Following the ceasefire, and I hope it will be restored despite last night's incident, it is incumbent on the Government to ensure that such funds are additional and spent wisely to ensure that proper infrastructure is provided to attract investment opportunities and create jobs to enable people live in their local areas. Too many agencies are dispensing funds under the peace initiative. I do not see the need for the large number of newly established agencies.
There is no major road west or north of the Dublin-Galway road. Elsewhere there is a reasonable network of national primary roads, but there is not a national primary route from the north east to the north west to serve Border regions. All our maps, as well as the national development plan, highlight there is no national primary route north of the Dublin-Galway road. That has major consequences for people and businesses in Border regions.
The food sector is the largest sector in my constituency. It has encountered problems arising from price differentials in competing with Northern Ireland and Britain over the past 12 months. The increase in the value of the punt from 95p 18 months ago to £1.03 against the pound sterling has posed serious problems for that sector.
I referred to the miniscule changes in PRSI. Worthwhile improvements could have been made this year to make industry more competitive, particularly labour-intensive industry such as the food sector. It is a tribute to that sector, which accounts for 50,000 jobs, that it has been able to survive. The agriculture industry is going through a difficult period. The price of winter finished beef has fallen. There has also been the BSE fiasco caused unnecessarily by the announcement in the House of Commons. I have no hesitation in saying, as a politician and doctor, that I will continue to eat beef. I hope this problem will be dealt with in time. All these factors put pressure on the food sector.
This Bill contains many complex measures. I agree with my colleague, Deputy McCreevy, that given its importance Committee Stage should always be taken in this Chamber rather than dealt with by a select committee. We will have an opportunity at that stage to deal with the various sections in more detail.
I thank Deputy O'Hanlon for sharing his time with me which is rather short to debate such comprehensive legislation. I welcome in particular the proposal to consolidate the tax code, but what is required even more is tax reform. There is a need for greater integration of the social welfare and tax codes. It would be a step in the right direction if the provisions governing reference numbers and so on were tightened.
It must not be forgotten that the Bill and the budget are silent on VHI and mortgage interest relief. These reliefs are again being reduced, placing a further burden on the PAYE and PRSI worker. Residential property tax remains intact. It is both unfair and unjust in that it mainly affects Dublin and Cork home owners. It is not based on the size of property or income of the household. Location is not a reason for taxation. That was one of the lessons of the Dublin west by-election. In the short time I spent in the constituency I was made aware by some property owners that this was a relevant issue.
I wish to refer to the business expansion scheme and the film tax arrangements. These arrangements are merely an official admission that people cannot be expected to pay over 51 per cent of their income to the State. All indirect taxes and the iniquitous residential property tax are in urgent need of reform, but have not been addressed by the Minister. He has shown flair in introducing the old car replacement scheme, even if he continues to ignore my suggestion relating to second-hand cars which would enhance the scheme to the benefit of the Exchequer.
The film tax arrangements should be built into a reduction of the higher tax rates while the BES should be confined to its original purpose rather than amended. It was introduced to encourage risk taking and help new and small business in raising finance. This is not happening under the existing scheme. There is an impediment in that one has to meet certain criteria. In addition, the scheme is geared towards helping labour-intensive industries. We have many fine capital intensive industries, but they will not have an opportunity to secure funding because of the restrictions imposed in the budget.
In a recent article in the Sunday Independent Shane Ross pointed to some weaknesses and the high cost of securing finance and indicated that the financial institutions were abusing the scheme. Prospectus advertising should be properly monitored. The certification arrangements are of no help in job creation.
Many speakers have referred to the seaside resort scheme announced last year which is now being amended in mid-stream. This could hardly be described as fostering employment creation. For some time we have been very vocal on the issue of the development of the hospitality sector to the benefit of the tourism industry. Because of the restrictions being imposed many people will be caught mid-stream. The Minister should reconsider and relax the proposed restrictions on Committee Stage.
This Bill will produce £4.388 billion in income tax, an increase of £455 million on the figure for 1995 — so much for the Minister's claim that he is helping the PAYE and the PRSI worker. It is clear that he has lowered his own expectations of being a radical Minister for Finance to one who is treading water. There will never be a better time for not needing a Minister for Finance, with world trade in such a favourable cycle, funding from Brussels at an all-time high and the economy doing well without any help from the Minister, who inherited a favourable situation from Deputy Bertie Ahern one year ago. It is disappointing that the rainbow Administration could not build and improve on that sound platform.
The Minister knows like everybody else that he cannot make all the people happy all the time. The trouble is that he seems to think that he cannot make any person happy with the tax code. He is a bad harvester. The seeds that he garners he scatters to the winds with a few landing here and there, but nothing happens in terms of fruitful cultivation. Instead of adopting a miserly Fagin's policy of making nobody happy, the Minister should seek to sow his seed in choice, productive areas and reap a proper harvest of jobs. What are we doing? We are building ghetto after ghetto and improving the welfare system without creating any jobs. Many of the people living in those ghettos will never know what it is like to have a job. That is the reality of life.
We have a large national debt which continues to grow. Were it not for the co-operation of Deputy Dukes, whom I admire and who is now on the back benches, with Fianna Fáil from 1987 onwards the Government would not be able to gloat about economic achievements. He has, regrettably, paid the price. I sympathise with him.
The Deputy should listen to me more often.
Public expenditure is rampant. The one-third of employees in the public sector are being carried by the two-thirds in the private sector. An overburdened taxpayer and productive sector will not be able to continue to do this.
There is a crisis in the beef industry, which accounts for 10 per cent of GNP. Its exports are valued at £1.8 billion. For the first time people realise its importance to the economy. It is as important on O'Connell Street as in Glanworth, Kildorrery, Ballycotton and Midleton in my constituency.
I thank the Minister for putting the brakes on some of his colleagues in their anxiety to spend in unproductive areas. He has been able to use the Maastricht Treaty to curtail the efforts of Ireland's first Democratic Left-led Administration, a Government with L plates, although they are good learners. I doubt, however, if they will qualify for the big "P", a good pension, because they have been reckless. The tragedy is that Fine Gael, which was classed until recently as the business party, has been singing and dancing to the tune of Democratic Left. The real Taoiseach is the leader of Democratic Left, Proinsias De Rossa, and the people are beginning to realise that. Labour does not have any influence in Government. The loony left is running the country and the economy into the ground. When we were in Government Deputy Bruton lectured us on accountability and mentioned transparency and panes of glass. He badly needs to buy a bottle of Windowlene and a nice white cloth to clean the glass and show us what he has achieved.
The country is on a road that does not lead anywhere. After all the constructive work done in the economy from 1987 onwards when restrictions were imposed on the people and they suffered hardship, a serious crisis is looming. The people will pay the price for the Government's mismanagement.
There has been enourmous growth in Government Departments and the cost of the public service has risen from £1.6 billion in 1987 to £2.3 billion today. Such growth in a few years is frightening. I appeal to the Taoiseach not to allow Deputy De Rossa, who represents a small number of people, to run the country.
I am saddened that Deputy O'Keeffe's time was so limited because I enjoyed his literary flights of fancy. The new literary Fianna Fáil Party is a seductive one and is more interesting to listen to than it used to be.
The Deputy is welcome over here.
Deputy O'Keeffe was more interesting today with his oratorical flourishes than when he spoke of his concerns about "Babe". I hoped he would continue to speak for longer, especially on the public service. As far as I could see, he was going to propose that we reduce employment in Government Departments and civil servants' wages. I would love to hear the literary flourishes he would use in arguing and justifying that case.
Get rid of the mobile phones and programme managers first.
If Deputy O'Keeffe sat still for long enough to read the good news, God knows with what eloquence he would speak. When he finds out that there are 45,000 more people at work today than there were a year ago he will be orgasmic with joy, even if we are still in Government. There is even more good news. I felt like cheering on budget day.
Is that why Fine Gael did so well in Dublin West?
With tears of joy and gratitude I listened to Deputy O'Keeffe complimenting my advice to his predecessors on economic management but imagine my happiness on budget day when, in spite of the apocalyptic utterances of Fianna Fáil, I find a budget with a current budget deficit of £82 million, virtually nothing, 0.2 per cent of GNP and an Exchequer borrowing requirement of £729 million, 2 per cent of GNP, the kind of figure that I would have thought very difficult to achieve even in 1987 when Fianna Fáil last had an outbreak of commonsense and took my advice.
Look where the Deputy is now.
I am glad they did so. Such figures show good, solid, sensible budgeting. There is nothing of the looney Left there. It is a good budget outcome for Fine Gael and when it is accompanied by a series of social welfare initiatives which I and my colleagues have been arguing for over a number of years it is one with which we can be modestly content.
Another aspect with which Deputy O'Keeffe dealt briefly requires attention. He is coming along quite well and has what Joyce called the "agenbite of inwit". It is beginning to bite now. He mentioned the integration of the tax and social welfare codes. Unfortunately he did not dwell on this area but he may do so next year. When he examines the issue he might find cause to congratulate the Taoiseach and the Government because, for the first time, a Minister of State at the Department of Social Welfare, Deputy Durkan, has been specifically charged with integrating the taxation and social welfare codes. I am delighted with that. It is too many years since I, as Minister for Finance, tried to look at these two codes in an integrated way. The importance of doing so was brought home to me further by an interesting study I received recently from a friend of mine dealing in a thoughtful way with the interface between taxation and social welfare. I recommend that Deputy O'Keeffe and his colleagues think about it. I sent a copy to the Minister of State, Deputy Durkan and to the Ministers for Finance, Social Welfare and Enterprise and Employment. It will be a useful contribution to thinking in this area through it is not the first such study. Some years ago, my colleague, Deputy Jim Mitchell, produced some startling conclusions on this area. However, in the meantime the issue has become more worrying. It was with that in mind that I said while I was happy with the overall shape and outcome of the budget, the Government, with every goodwill — and I am not criticising it for doing so — made the same mistake as most other Governments. It tried to do too many worthwhile, laudable and desirable things in the budget and, therefore, did not do any one of them sufficiently well to make a substantial impact on the problems we face. Nowhere is that more obvious than in the area of personal taxation. It is not sufficient for Deputy O'Keeffe to drag up the same old chestnut and ask why if personal allowances are being reduced the tax take this year will be higher than last year. That old argument is so tired——
There is no harm repeating it.
There is no harm repeating it if you do not want to think. Repeating it makes no difference to the fundamental fact that there is more income to tax. Sections 1, 2, 3 and 4 of the Bill deal with the tax reliefs, increases in personal allowances and so on and section 35 provides for employment grants or subsidies to be made to employers on or after 6 April in regard to new employment provided by them. It relieves certain new employments from the necessity to pay corporation tax and income tax as appropriate. On the one hand we increase personal allowances and so on and on the other we recognise that the tax system is anti-employment and we introduce employment grants and subsidies in section 35. If we look at the explanatory memorandum and the number of bodies involved we will realise the extent of the problem. There are operating agreements between the Minister for Enterprise and Employment and county enterprise boards. There is the EU Leader II Community Initiative, the area partnerships scheme administered by Area Development Management Limited under the EU Operational Programme for Local, Urban and Rural Development.
Notice taken that 20 Members were not present; House counted and 20 Members being present,
Local employment initiatives counter the effect of the difficulties arising from the interaction of our tax and social welfare systems. The degree to which that is the case is very worrying. It was with that in mind that I said we would be far better in budget policy to recognise that the scope for tax reductions in any one year is limited and to concentrate the resources available for tax reductions in the areas where they will make the biggest difference to the capacity of our economy to employ people, and that is always at the lower end of the tax system.
There is a particularly difficult interaction between our tax and social welfare systems. Low income workers, depending on their level of income, are eligible for tax exemption. Families with children are exempt from income tax up to an amount significantly higher than the normal tax free allowance of £6,100. The tax exemption amount is linked to family size; it increases depending on the number of children in the family. Workers who benefit from the tax exemption system move on to a 40 per cent tax rate, which is more than twice the difference between the tax exemption figure and the tax free allowance figure. For example, a worker with an adult dependent and four children is exempt from tax up to £10,000 per annum instead of having a tax free allowance of £6,100, but that person pays at 40 per cent on all additional earnings up to £18,000. A worker with eight children escapes from the 40 per cent tax band under the marginal system only when income exceeds £23,500. That is the first difficulty.
For most family sizes there is not a very big difference between the medical card income limit and the tax exemption amount. For example, for a worker with an adult dependant and two children the medical card income limit is £8,086 whereas the exemption limit is £8,700. That does not allow for other income amounts added to the medical card income limit such as provision for travel to work or payments of rent or mortgage over a certain level.
The next item that affects low paid workers is the family income supplement, a very useful scheme. This supplement, which is paid to workers on low wages from employment, is linked to the level of gross income and to family size. For example, the FIS income limit for a married worker with two children is £11,180. For a worker with four children it is £13,260. The family income supplement payment is 60 per cent of the difference between the gross income and the FIS income limit. For example, for a family of two adults and four children with a gross employment income of £10,000 the FIS entitlement is 60 per cent of the different between £10,000 and the FIS limit of £13,260, that is £1,956 per annum. All increases thereafter lead to a reduction in the family income supplement payment at the rate of 60 per cent so that an increase of £1,000 in the gross income figure leads to a reduction of £600 in the FIS figure.
Let us now look at the operation of employee PRSI and the levy of 2.25 per cent of additional income — the limit was changed this year. If a worker's income is above the medical card limit or tax exemption limit, which are very close, the worker immediately loses the benefit of the medical card and loses exemption from the 2.25 per cent in levies. That can amount to a loss of between £500 and £900 depending on family size. All additional income up to the FIS limit is subject to levies, PRSI, income tax and FIS reductions. At certain levels of income, with additional income coming into the household, a 60 per cent reduction applies in family income supplement, a 40 per cent marginal tax rate applies, employment levies apply at 2.25 per cent and employee PRSI applies at 5.5 per cent. The combination of extra impositions or reductions on the additional income can amount to 107.75 per cent. In those cases, the worker who receives an increase in gross income experiences a reduction in disposable income.
The income band over which additional gross income leads to a reduction in net disposable income varies with family size as the medical card limit, FIS and tax exemption amount are also linked to family size. There can be quite a spread of income — for example, for a family with two children, earning between £8,700 and £11,180, increases in gross income over that band lead to a reduction in net disposable income. That happens because of the operation of the social welfare system with FIS, the tax system with marginal relief, PRSI and the levies. It creates the major problem at the lower end of the income scale and prevents people from taking on work rather than remaining unemployed. All increases in income between the medical card limit, the tax exemption amount and the FIS limit lead to a reduction in net disposable income.
The maximum loss a worker can experience by falling in that income range is suffered by the worker with a large family earning just above the average manufacturing wage. A worker with eight children who pushes his earnings from just below £12,600 to £17,000 would lose a gross total of £5,624. For an increase in income of £4,400, one loses £5,624, a net reduction in disposable income of £1,224. This comes about because of the interaction of the various parts of our tax and social welfare system, which is where the real disincentive to work comes into play.
Increasing income over that range also involves costs to the employer. The employer's PRSI rate over that range increases from 8 per cent to 12 per cent on all earnings above £80 a week. If the employer tries to cover that loss in net disposable income for the worker, it will have to be with income payments bearing an increase in the level of the employer's PRSI contribution. This is where the tax disincentive to work comes into play.
If one examines the comparison between net disposable income from employment at the average manufacturing wage, which was £13,806 in 1995, and total income from unemployment for different family sizes, as family size increases the relationship of net income from unemployment payments to that from work increases from 77 per cent for a family with two children to 92 per cent for a family with eight children. This only considers income from employment. If one takes account of the benefit, for example, of a local authority rent, the value of a medical card and the other elements built into increasing the income level below which one would qualify for a medical card, it is not difficult to imagine situations where a worker on the average manufacturing wage level is worse off than an unemployed person in receipt of those various social benefits, medical cards and increases in allowable income limits. However, there is a wise provision that a dependant of a worker in receipt of unemployment assistance can earn up to £2,000 per annum without the loss of any benefits or without incurring any income tax liability. There is a knot in family income which constitutes a major difficulty.
Curiously, the task force report on long-term unemployment made little reference to this matter. Instead it proposed establishing a local employment service, measures to increase skills, positive discrimination in favour of the long-term unemployed, etc. However, it did not deal in any real sense with the interaction between our tax and social welfare systems. Lest there be any misunderstanding, I am not for a moment suggesting we reduce the levels of social welfare provision, the provision under the family income supplement etc. However, when we have resources to reduce levels of personal taxation, if we want to have more employment in our economy we should use whatever resources we have at the lower end of the scale to relieve the tax burden on those earning lower incomes so that we get past the tax wedge problem which is creating the poverty and unemployment traps.
It would be perfectly valid for any Government to say, for example, that for the next three to four years it will devote any leeway it has to reduce personal income tax to address this problem and tell people like me that I will have to be content with the effects on my income. While there would be a positive effect by reducing taxation at lower income levels — because I am higher up on the scale I would get its full benefit — there should be nothing else. If we are serious about helping to turn our economic growth, which we have managed to achieve consistently and steadily for the last few years, into more employment at a higher rate than at present, that is the strategy we should adopt when we come to discuss our taxation system.
This Bill also provides for a number of other useful measures. However, it is puzzling why some of them take the form specified. Section 5 provides for relief from income tax for expenditure incurred on the purchase and installation of an intruder alarm system. Although that was greeted with some hilarity on budget day, on reflection people found it to be a good idea. Many older people, because of provisions made in their earlier years, have an income tax liability although they are over 65 years of age. However, I do not understand the reason for limiting the benefit of this measure to people over 65 years of age who live alone. Would anybody suggest that a married couple over 65 years of age are less at risk than a single person? They may be, but the difference is not that great. This good idea has been compressed by budgetary exigencies and I cannot imagine that making this relief available to couples over 65 years of age would severely worsen our £2 million current budget deficit this year. We might have an opportunity to look at other matters in the Bill in more detail on Committee Stage.
Part III of the Bill deals with value added tax and makes a number of worthy changes that nobody would argue against. What has happened to the idea of moving towards a single value added tax rate? I would hate to think that idea has disappeared from the fiscal map. We have several rates of value added tax which, in some circumstances, can cause substantial difficulties and costs for people in trade and retailing who have to account for them. A single rate of value added tax has a number of advantages not the least of which is convenience for traders as well as the dynamic effect of such a single rate on substantial sectors of our economy. I would like the Minister to give an indication of his thinking on this issue when replying to the debate because there is a great deal to be said for simplification in our tax system if that can be achieved.
Each year the Finance Bill provides an opportunity for the Government to use the tax system as its instrument to bring about social justice and greater equality in our society.
I want to take on board some of the points made by Deputy Dukes. It is a fact in our society that many people are doing extremely well. High levels of growth have transformed the economy for many people and, in particular, low interest rates are improving the lot of those who are hard pressed to pay their mortgages. The extension of free university education is of enormous benefit to a certain class in society and to their children but for many thousands of other people who are excluded or locked out from the benefits of high growth in the economy, there is nothing in the budget or in this Finance Bill to improve their position, remove their isolation and marginalisation, give them a greater opportunity to participate in our economy and contribute to their own community by being allowed to work, which every citizen is entitled to do. Their dignity is being denied them because they are being excluded from employment opportunities.
There is no greater instrument available to Government than taxation to encourage what is good in our society and discourage what is not. Year after year, Government after Government brings in tax breaks or designates certain areas of certain categories of industry for beneficial tax breaks to encourage various aspects in this economy.
This Bill, and the budget announced in the House earlier this year, does not increase equality of opportunity for the unemployed. It does not give to the hard-pressed taxpayers, particularly PAYE taxpayers, the fruits of the growth about which the Government is so keen to boast.
I want to refer briefly to the proposed successor to the Programme for Competitiveness and Work. Yesterday in this House I raised with the Taoiseach, as I have done before, the fact that certain key sectors of the economy are not involved in social partnership which, if it is to be a true partnership between all the components in our society, must be as inclusive as possible. I said yesterday to the Taoiseach, in the context of Northern Ireland, that if, as he rightly advocates, we are to transform that society, if we are to have a lasting peace settlement and if Northern Ireland is to become a partnership society to which Unionists and Nationalists can each give their allegiance, we must have inclusive talks and everybody should be at the talks table.
Equally, in the context of social partnership in this economy, if it is to be inclusive and if all the partners are to be represented, we cannot simply pick and choose. Many people believe that the social partnership is becoming more and more an insiders' club, where those who have are represented and those who have not are excluded. In particular, there is no justification for not having the INOU, the only organisation whose sole focus is unemployment, represented at that table. I know the trade union movement, IBEC and employer organisations are concerned with unemployment also, but theirs is a wider brief. They are concerned about their own industries, sector and employees. The Irish National Organisation for the Unemployed is the only organisation whose sole raison d'être is to improve the lot of the unemployed and to give them a greater opportunity to participate in real work. There is a strong case for including that organisation in the social partnership.
The organisation, ISME, represents the traded sector in which 400,000 people work. That sector, more than any other, knows the need for this economy to be competitive and what incentives can do for employers in relation to taking on more employees. It knows too the effect of high taxes on its workforce.
If we are to continue with the social partnership which, on balance, I support because there are strong reasons for having social partnership, provided we can afford it and that it is a genuine partnership, it must be as inclusive as possible. There is no justification for having five voices in the area of agriculture at the table — the three farming organisations, ICOS and Macra na Feirme — while excluding other key sectors in the economy. I could list others such as the chambers of commerce or the National Youth Council. There is a strong case to extend the social partnership to ensure it is genuinely inclusive.
I have reservations about whether the Government has the capacity to agree a new deal. One only has to look at the responses in the past few days from the trade unions and from IBEC to see they are getting a little sceptical about the Government's capacity to deliver a successor to the Programme for Competitiveness and Work. The Taoiseach made an extraordinary statement yesterday. He seems to be more concerned with a deal, any deal, rather than the nature of the deal. We cannot adopt a narrow minded approach to the nature of the deal that will succeed the Programme for Competitiveness and Work because this economy is entering a far more competitive European Union. Our economy has enormous problems because of the high levels of unemployment and our peripheral location. In the context of peace in Northern Ireland, the economy in the Republic is not now as competitive as the economy in Northern Ireland.
If we are to have a successor to the Programme for Competitiveness and Work, it must be tax based. Nominal increases in salaries are of no use to Irish workers if they have to face penal levels of tax on work. Is is right, for example, that a single worker in Packard Electric in Tallaght, Oral B in Newbridge or the many factories around the country, earning £12,000 per year or £246 per week, pays £46 per week in tax? Is it right that a married man with a dependent spouse who earns £300 per week pays £68 per week in tax, and on their marginal income they pay over 56 per cent of what they earn to the Government? Any society that takes more from a person by way of tax than the individual can keep for themselves is not encouraging self-reliance, rewarding effort or encouraging people to go out to work. Tax reform must be fundamental to any successor to the Programme for Competitiveness and Work if this economy is to reward effort and encourage enterprise.
In the recent Dublin West by-election, more than 50 per cent of the voters did not vote for any party represented in this House. We may say by-elections are different. That is true. When people focus on choosing a Government they examine different issues as well as the capacity of parties to deliver good government for the country. Nonetheless, 50 per cent is a startling figure and it would be foolish of any of us, particularly of any leader in this House, not to take on board the strong message delivered to us by the voters in Dublin West.
The protest in relation to water rates was not merely a fundamental issue about not paying for water. That is how it may have been represented but it was much deeper than that. The taxpayers were saying they have had enough. They are fed up paying high taxes. They live in a society where they are not rewarded for the effort they make. They do not live in a fair society and, in so far as they can, they will agitate and protest because they do not believe in paying double taxation.
The strong message that comes from that is that reform of the tax system is essential for social cohesion. The people who work in this economy, the eight out of every 24 people who work in the private sector and the two out of every 24 who work in the State sector, are the backbone of society. They are the people who maintain its fabric in so many ways because a society that does not respect workers and appreciate the contribution they make through ordinary efforts, earning a living for themselves and keeping their families, is in danger of destablisation. Reform of taxation is not just an economic issue; there is more to it than that. It is about social cohesion in families, the nature of the society in which we live and the kind of Ireland we want as we head into the next millennium.
The Minister for Finance, Deputy Quinn, spoke recently about the need for tax reform next year. If they can get away with it, the Government will try to have two budgets before the next election, one at the beginning and another at the end of the year. The Government had an opportunity this year to introduce tax reform, as it has had for two years, indeed the Labour Party has had this opportunity for four years.
We should consider the record of the Labour Party in Government. For example, as the newspaper stated today, each individual in the State now owes £8,434 in terms of the national debt. However, this sum has increased by £1,011 a head in the four years since the Labour Party went back into Government. The national debt has increased since the 1970s — every party in the House has been in Government during that time — but the rate of increase since the Labour Party went into Government is three times the rate when the Progressive Democrats were in Government. Since the Labour Party went back into Government, spending has increased by £2.2 billion, an increase of over 25 per cent, while £700 million extra has been taken in taxation from the PAYE sector. There is no point in the Labour Party boasting about free university education if the workers the party seeks to represent are being penalised through high levels of tax on their income. That is no incentive or reward.
If a different strategy had been followed, with spending this year kept in line with inflation and the provision of services to the people limited in real terms to the growth level of inflation, the Government would have had £375 million to apply to tax reform. It could have reduced the standard rate of tax by 5 per cent, from 27 to 22 per cent. Since the Progressive Democrats left Government in 1992, neither the top nor standard rates of tax have decreased by even a single percentage point. We live in a society where there are five taxes on work. In addition to the two tax rates, there is the employment levy, the health levy and PRSI. We live in a country where work seems to be taxed as if it were a luxury and something we are trying to stop. We must change our ways and start rewarding effort. We must start encouraging those who make a contribution to society to see the benefits of their effort.
Spending this year will rise by 6 per cent, which is over two times the rate of inflation. This is not justifiable and the proceeds of growth should not be spent on more Government agencies, quangos and task forces. If there is a lesson we in Ireland must learn it is that throwing money at problems does not solve them. If the establishment of new agencies and quangoes solved unemployment, there would be none. There is now a ludicrous situation where in excess of 100 different agencies deal with job creation in the economy. More people, approximately 4,000, are involved in job creation agencies than in some of our major industries, such as brewing and distilling. The job creation agencies have become job creators themselves. In the rush to create jobs in agencies, incentives have been decreased and employers have been penalised. Many of them now wonder if there is any point taking risks.
We should consider the contrast, from an employer's point of view, of locating in the Republic as opposed to Northern Ireland in the context of an employer in Dundalk vis-á-vis his counterpart in Newry. The distance between them may be a mere 12 miles but it is a long way in terms of taxation policy. The cost to an employer in Northern Ireland of giving his employee extra money in take home pay is 50 per cent less than his counterpart in Dundalk. A worker in Dundalk earning £300 a week is £17 a week less well off than the same worker in Newry. Irrespective of the successor to the Programme for Competitiveness and Work and the wage increases it delivers, it will be impossible to give that worker £17 extra unless the issue of taxation is addressed. This is a small country with a small internal market and we must export at least 70 per cent of what we make. The more that is made, the more that can be exported and the more people can be employed to make the products. If the economy is not competitive and Irish companies cannot compete, whether in Northern Ireland, Britain or internationally, they will not be able to sell their products. The consequences will be less employment, less wealth and less growth in the economy.
We must also realise, as the end of the decade approaches, that Ireland will operate in a very different Europe. It will extend eastwards and the first five countries expected to join the EU are much poorer than Ireland. They are all food producing countries and it would cost an extra £10 billion a year to extend CAP eastwards. Germany, which funds 80 per cent of the bills in the EU, will not fund that type of extension. Ireland must survive in a European Union from which it receives much less. At present, in terms of net receipts, Ireland receives £2 billion a year from Europe. We are the biggest development aid recipient in the world. This development aid is running out and we must learn to stand on our own two feet and to live within our means; Governments cannot spend money they do not have.
Given that the national debt will rise this year by £1 billion, it is unjustifiable not to address the fundamental flaws in the economy, such as the fact that it taxes work as if it were a luxury. The economy does not reward effort and believes the State knows best. The liberal philosophy of rewarding the individual, of considering the State as one's servant and not one's master, does not dominate the politics and economics of Ireland.
A different approach is required, particularly in the context of the next election which will be sometime in 1997. There can be no doubt about this because that is the legal limit. However, if a longer time was available, I am sure the Government would try to hold on as long as possible. The next election will be about choosing a Government for the next millennium, but the choice will not be between Fine Gael or Fianna Fáil because whatever Government comes into play after the next election will be led by Fianna Fáil or Fine Gael. The choice will concern the partnership to make up the next Government, a choice between the Progressive Democrats and the Labour Party. However, it is not just a choice between two parties, it is a choice between two different directions.
If we believe in more quangos, committees and task forces, high tax and that 56 per cent of the marginal earnings of a single worker earning less than the average industrial should be confiscated by the Government, then the choice should be the Labour Party. However, we should choose the Progressive Democrats if we believe the economy should become one which rewards effort, encourages enterprise and self-reliance to bring out the best in people, which recognises that every individual has talents and resources and is entitled in their community and country to contribute to the development of their society. If we believe that every individual is entitled to keep more of what they earn and make the decision on how to spend it, even if they make mistakes — the argument was made during the debate that they would spend it on imports, but, in a civilised, democratic and civilised society, people are entitled to spend their money as they see fit because it is hard-earned — the choice should be the Progressive Democrats.
The time has come to move away from the politics of promising people that there is a bottomless pit, that there is a crock of gold and the Government can solve every problem. We have seen with the publication of the Kelly Fitzgerald report, the hepatitis C débâcle and many other examples, such as the beef tribunal, that the State often has not served its citizens well. The State has a capacity to be incompetent and action is not taken when that happens. It is not all about spending more money to get the right answer. It is about decisiveness, leadership and a different direction. It is time the House started to address that different direction because at present 350,000 people in the economy have no real jobs; 285,000 are officially unemployed while the remainder are on Government schemes of one type or another.
This is not a society which encourages effort and rewards enterprise. It is not a society which is interested in its own cohesion and fabric. We must change our economic policies and control Government spending. We must begin to set aside the national debt by privatising certain key industries and above all else we must decrease the burden of tax on work. When this is done, there will be a very different type of society. Real political leadership is required to drive the economy. The people want risk takers and ground breakers, not just handshakers and promise makers. The people want the successor to the Programme for Competitiveness and Work to give dynamic leadership and management to the economy. If they get it, they will see the fruits of those efforts in more employment, success and a much more dynamic and satisfying economy.
Debate adjourned.