Bertie Ahern
Question:3 Mr. B. Ahern asked the Taoiseach if he will summarise the principal points made in his address at the IBEC dinner. [13667/96]
Ceisteanna—Questions. Oral Answers. - IBEC Biennial Dinner.
As the Deputy is no doubt aware, my address at the IBEC Biennial Dinner on last Wednesday covered a wide range of topics. I do not believe, however, that it would be the best or most efficient use of Question Time to simply repeat or summarise every utterance I make outside this House.
However, in my speech I congratulated and thanked the members of IBEC for the enormous contribution that employers, within the framework of social partnership, have made to the prosperity of this country. This prosperity is a function of many things, not least of which has been the success of our national programmes.
I pointed to the challenges that faced Ireland when social partnership in its current form was introduced in 1987 and to the fruits that the consensus approach has borne, both in an economic and social sense.
I highlighted the importance of Ireland's democratic tradition under the rule of law. It is a matter of legitimate pride that we are the fourth oldest continuing democracy in Europe, and this tradition should not be compromised for any reason. I referred to our commitment to a democratic and peaceful resolution to the problems in Northern Ireland and looked forward to the economic benefits that would flow from such a solution for all parts of this island.
Apart from what he stated in his address at the IBEC dinner last week on the ending of the term of the presidency of that organisation, does the Taoiseach subscribe to the principles it lays down, that is, that low taxes are more favourable to growth, if it is to be sustained in the long-term? The Taoiseach has not said anything about that in a number of speeches. Will he agree that the policies devised and the foundations laid over the next five to seven years will be important? IBEC has consistently called for a policy of lower taxes which will lead to long-term growth not now but over the next five to seven years. Will the Taoiseach give his view since he did not mention it at the dinner?
It is important that we get good value for taxation; people should see that the money they pay in taxation is being well used and that they, or those for whom they are responsible, are getting a return. Obviously, a policy of lower taxes in the absence of increased buoyancy in tax revenue means a policy of lower public spending. There are inherent difficulties in reducing public spending given the commitments involved in terms of pay, rates of social welfare and levels of service. It is important that those who seek lower taxes have a clear idea on how services are to be reduced to enable it to happen or, alternatively, how revenue is to be made more buoyant without any reduction in the rate of taxation. What I have said is platitudinous; it is so true, it barely needs to be said. However, it is an important point in answer to, any suggestions that it is possible to lower taxes without taking difficult decisions on spending.
That argument would be true except for the fact that with increased growth, there is stronger buoyancy and a stronger tax take but we are still maintaining the same Exchequer borrowing requirement we had when we had low growth. Do I take it from what the Taoiseach said that he believes the yield of increased growth, buoyancy and revenue should be spent? That is the only conclusion I can reach.
The record shows that there have been significant reductions in taxation in recent budgets, particularly at the lower end of the income scale. There have been increases in the exemption limit and allowances and the standard rate band has been widened. Those on low incomes are exempt from social insurance. There has been a reduction in the burden of taxation. I recognise there is a demand for further reductions in taxation and a suggestion that certain taxes should be set aside. That can be done in two ways, one of which is through increased revenue buoyancy. As a result of exceptional growth in the economy one is enabled to maintain the level of revenue without a reduction in spending. In the last two to three years there has been exceptional economic growth which means we have been able to have reductions in taxation without reductions in spending. That rate of growth, however, will not necessarily continue forever and in the event that growth rates decrease, reductions in taxation would have to be offset by reductions in public spending. While it is very easy to call for reductions in public spending in the abstract — such requests slip quite readily off the tongue of many commentators, political and otherwise — it is not so easy or acceptable to make those reductions in practice in regard to individual programmes.
I disagree fundamentally with the Taoiseach, but since it is Question Time I can only ask questions. What the Taoiseach states is a contradiction because the Government is putting in place spending programmes at a time of high growth when it should be reducing the Exchequer borrowing requirement. When the present growth diminishes there will have to be spending cuts. The Taoiseach is not following his own logic. There have been no rate reductions for a number of years — the widening of bands and exemption limits in this year's budget were marginal. Has the Taoiseach abandoned the concept that lower taxes are more favourable to growth than increases in public spending? Will he continue to put programmes in place that will create difficulties down the road for the economy, as he has been doing successfully for the last 18 months?
I do not agree with the Deputy. The Government has put in place programmes of expenditure in areas of genuine social need, which have been supported in every case by the Opposition. I am not aware of any programme of expenditure, for example, in regard to the long-term unemployed, the extension of the local employment service or any other area, that has been opposed by the Opposition. Without being specific, the Deputy is calling for reductions in spending in general and asking that spending programmes not be put in place. If he reflects on the last question that was dealt with, there were calls from a member of his party for an extension of the type and category of expenditure under the Border areas programme to include advance factories.
Within existing funding. We were not seeking extra spending.
Within the Deputy's party there are calls for increases in spending without any specifics as to the area where spending should be reduced.
We asked that the money be properly spent.
The Deputy in question called for increases in spending on advance factories without specifying what Border area service should be cut to enable that to happen.
That is not true. He was talking about spending within current financial arrangements.
I remind the Taoiseach that the Opposition opposes the annual spending of £10 million on programme managers and advisers, which is certainly excessive. Will the Taoiseach accept that at a time when the economy is growing what is required is controlled spending? The underlying increase in spending this year over last year is 6 per cent, four times the rate of inflation, but if spending had been controlled we would have had £280 million which could have been applied to tax reform. That would have allowed us either to reduce the higher rate of tax by 8 percentage points or the standard rate by 4 percentage points. Will the Taoiseach accept that either of those decisions would have done much more to encourage enterprise and job creation and reward employment than spending the money on additional Government quangos and schemes?
It is not correct for the Deputy to say that it would have been possible simply by "controlling spending", another one of those easy phrases that trips off the tongue, not to have had the increase in spending we had this year. If we had zero growth in spending this year, as the Deputy suggested——
I was talking about matching inflation.
——by means of "controlling spending" we would have had to defer pay increases owed to public servants, as well as increases in social welfare payments, and we would not have been able to fulfil commitments given to improve various services, including health services, services in regard to improvements in road building, maintenance of the educational system and so on. It is simplistic for Deputies opposite to suggest it is possible by eliminating waste or better control to reduce spending painlessly in such a way as to make available resources for taxation reductions.
It is possible to do so.
It was done in 1987 and the Government is reaping the benefits.
Any facile attempts by the Opposition to pretend there are easy solutions will not serve its cause or the cause of democracy and the Government will not allow it to do so.
The Government will not take the decisions necessary.
We will be relentless in pointing to the services that might be the victims of any facile suggestions made by the Opposition about controlling or reducing spending. Spending means people's jobs, incomes and way of life. Before people suggest in easy terms that it is possible to reduce or control spending——
Fine was once the party of low taxation.
——they need to be told that these phrases have human consequences.
The Taoiseach has given up on tax reform.
I assure both parties opposite that the human consequences of suggestions they may make will be brought to the attention of the public.
The Taoiseach has completely abandoned tax reform.
We are talking about matching spending with inflation. The Taoiseach said that we are being facile and that spending means jobs. Spending means the loss of jobs. This is another area where the Taoiseach has completely changed his tune since he went from Opposition to a three party rainbow Government of the left.
Labour and Democratic Left are rubbing off on him.
Free university fees were not justified on equity grounds.
Democratic Left did not want it.
The provision of £18.5 million to county enterprise boards has done nothing for jobs, nor has the spending of £10 million on programme managers. They are some examples of where money is wasted and the Government does not have appropriate priorities in terms of expenditure.
I am very glad the Progressive Democrats have indicated —I am waiting to hear whether Fianna Fáil agrees — that third level fees should be reinstituted. The saving to the average family by the Government's decision to abolish third level fees will be approximately £2,000 per annum of after tax income.
People are paying on their houses instead.
It would be very interesting to be able to tell the public that the Progressive Democrats want to restore third level fees.
The Taoiseach should not be so heavy-handed.
It would also be very interesting to draw attention to the fact that the Progressive Democrats want to abolish county enterprise boards——
Does the Taoiseach remember what he said about university fees two years ago?
——and to make it known that the many small enterprises that were enabled to start up because of the existence of county enterprise boards — they could not get money from the IDA and other agencies——
We set them up.
That was our policy.
——would not be in existence if the Progressive Democrats had the opportunity to put their proposals into practice.
The interruptions should cease.
I compliment Deputy Harney on mentioning two areas of public spending where she would be happy to make cuts, third level fees and county enterprise boards. I have not heard a single proposal of that nature from Deputy Ahern, even though he told Business and Finance some time ago that he had prepared a list of spending cuts. He said he did not think it was the appropriate time to tell the people about them. I hope he will tell the people in due course his proposals for cutting public spending——
Before the election.
——given that he confided to Business and Finance that he had a list. I wonder if there is a good combination lock on the safe in which that list is preserved——
The Taoiseach is very heavy handed.
——or whether he has allowed other members of his front bench to see a copy of the list. Every morning in this House the Opposition go through a ritual of calling for more legislation——
The Taoiseach should wind down.
——every item of which involves additional spending in terms of enforcement and the commitment of resources.
The Taoiseach would be very good doing the Stations of the Cross.
Every morning on the Order of Business one member after another of the Fianna Fáil Front Bench, in a spirit of competition, jumps up and urges some item of legislation which inevitably involves an increase in public spending.
The Taoiseach is a joke.
It is important that the party opposite understands that every time it calls for public spending increases, it means less money for reductions in taxation.
Is the Taoiseach all right today?
I want to dissuade Members of the notion——
The Taoiseach has lost the run of himself.
——that we can debate this matter now. It is quite inappropriate. I will hear a brief relevant question from Deputy Ahern and then move on to the next question.
Did the Taoiseach mean what he said about university fees?
The Taoiseach has put forward today a highly irresponsible policy——
(Interruptions.)
I am complimenting Deputy Harney on revealing the list the Deputy would not reveal.
Every week I read what the Taoiseach said in Opposition and it really amazes me.
He no longer has any morals.
We must have an orderly Question Time.
This year and last year the Exchequer has been fortunate enough to have a buoyant economy with quite an additional amount of money available for expenditure, but that money is not made up of savings. The Taoiseach is increasing the level of spending in the State to such a degree that when the growth rate declines and interest rates rise, we will be back to the old ways. The Taoiseach has tried to justify that policy today and it is highly irresponsible of him.
We cannot debate the matter now. I am proceeding to Question No. 4.