Financial Resolutions, 1997. - Financial Statement, Budget 1997.

I understand the Minister for Finance has asked the Party Whips to inform Members that the Principal Features of the Budget will be circulated now in the House, with his speech, strictly on condition that the budgetary measures remain confidential until the Minister has announced them in the House. I would ask Members to respect confidentiality in this matter. I now call on the Minister for Finance, Deputy Quinn, to make his Budget Statement.

This is a budget about the concerns of today, the priorities for tomorrow and our plans for the future. It is a budget about change, compassion and confidence.

It is for the election.

The full annual value of the additional amount which I am investing today in our society is, at over £650 million, the biggest in the history of this country. As a result, for those on PAYE and full PRSI, a married worker with four children earning £210 per week gains over £14 per week; a single worker earning £270 per week gains £8 per week; and a married couple with four children earning £28,000 per annum gains £888 per annum or £74 per month.

People receiving social welfare payments will get an increase of twice the rate of inflation. This year we will make real progress towards achieving the targets set by the Commission on Social Welfare. Small firms and family businesses will get reductions in tax to help them continue the increase in economic growth and in jobs.

I intend to do this, and more, while at the same time providing for a significant current budget surplus for the first time in our history. Moreover, the general Government debt ratio will be the lowest since we began calculating this measure back in 1989.

Over the past two years this Coalition Government, in which I am proud to serve as Finance Minister, has made spectacular progress in developing our economy and combating social inequality while at the same time successfully managing the nation's finances. In doing so, we have confounded those commentators who said that you cannot achieve social progress and fiscal responsibility at the same time. In fact, we have and the record is there for all to see.

Since the end of 1994 employment has grown by over 100,000 or 8.5 per cent to about 1,300,000 — the highest number of people at work in the history of our State; unemployment has fallen by 31,000 or over 14 per cent; GNP has expanded in real terms by over 14 per cent; the level of investment has risen by about 20 per cent; capitation grants for children in primary school have risen from £20 and £25 to £29 and £34, an increase of between 35 and 40 per cent; tuition at universities and other State-funded third level colleges is now free, with the abolition of fees; the number of households assisted under the social housing scheme has risen from 8,540 in 1994 to 10,020 in 1996; total spending on arts and culture has risen from £23 million to £46 million or by 100 per cent; over 3,000 extra people are employed in delivering improved services in health and education; real consumer spending has grown by almost 10 per cent; exports have risen by over 25 per cent; inflation has averaged about 2 per cent each year; the general Government deficit (GGD) has been reduced from 1.7 per cent to 1 per cent of GDP; and the general Government debt to GDP ratio has fallen from 88 per cent to 73 per cent. These economic and social statistics tell the facts. Taken together they represent the most dramatic economic and social development of our society since this State was established just 75 years ago. Ireland is now a national and international success story.

I want, therefore, at the outset of this budget to pay a special tribute to workers, employers, farmers and businesses for the record breaking performance which they have achieved. The policies of this Coalition Government have contributed to our collective success. The lessons of recent years, and indeed of previous Governments, have been confirmed by our collective success. Social partnership works.

It is clear that the consensus approach to developing and managing our economy is successful. It ensures continued economic growth, real improvements in take home pay, increased numbers at work and better social services for all of our people. It has produced real results at home and it has caught the admiration of commentators abroad.

However, we still have major problems of unemployment and poverty in our society. Long-term unemployment remains unacceptably high. The poverty that it brings limits the hopes and aspirations of too many of our people. We must improve and deepen our measures to deal with this problem and this budget begins to do that.

Partnership 2000

The social partners and the Government have recently completed negotiations for a new agreement to succeed theProgramme for Competitiveness and Work or PCW. The new programme, Partnership 2000, aims to build on the success which we have achieved together — in particular the creation of a dynamic low inflation economy. The primary objective of economic policy under the new programme will be to secure and strengthen the economy's capacity for sustainable employment and economic growth. This will make it possible to continue to reduce taxes, to raise living standards generally and to generate the resources for improved social inclusion measures while maintaining competitiveness.

The new partnership is based on acceptance by all its participants of a commitment to a reduction in the tax burden; a commitment to improved social measures to tackle long-term unemployment and social exclusion; moderate wage increases in the context of low inflation, with a strong focus on competitiveness; agreement on the management of the public finances, including a slowdown in the rate of increase in current public spending; and agreement on a firm exchange rate strategy.

Adherence to these principles will ensure that we can continue to develop our economy upon sound foundations. Underpinning moderate wage increases and social development through Partnership 2000 is the best way to maintain low inflation over the medium term. Low inflation and minimising both public sector deficits and the debt burden are essential components of a sound economy. Their achievement will also ensure that we continue to qualify to participate in the single currency under European economic and monetary union.

I look forward to the ratification of the new programme by all of the social partners. It will ensure this nation's continued economic and social progress up to the beginning of the next century. Based upon our experience to date and the real progress that our people, working together, have made during the course of the previous programmes, Partnership 2000 is the best way forward for all of us.

The budget which I am presenting today is clear evidence of this Government's intention to deliver on its commitments under the new programme.

Public Service Pay and Public Service Change

The pay agreement which forms part of Partnership 2000 provides for increases in the public service in line with those in the private sector, totalling 9.25 per cent over 39 months. The method of application of the first phase of the pay agreement in the public service will limit costs in 1997 by restricting the increase payable in July next to the first £200 per week. In addition, payment of the local level negotiations provision of 2 per cent is linked to the achievement of real verifiable progress in the public service programme, Delivering Better Government.

In 1997 pay increases will add an estimated 5.5 per cent or £265 million to the Exchequer pay and pensions bill. This is largely due to the public service pay increases under the PCW pay agreement and the need to fund outstanding commitments under the PCW local bargaining arrangements, which the Government intends to honour. These increases and the cost of service improvements, including those I am announcing today, will bring the total pay and pensions bill to approximately £5,150 million.

This country and all its people — particularly public service workers — need a modern, efficient and effective public administration. The impact of change must be reflected in the development of our public services at both national and local level. The programme Delivering Better Government sets out a complete range of changes which are designed to improve the performance of the public service, increase value for money and deliver a better service to the citizen as customer. The commitment in Partnership 2000 to specific action to improve the public service, and the link with the local level negotiations provision, are important steps toward acheiving these objectives.

Review of 1996

1996 was another very good year for the Irish economy. The main features were GNP growth was over 6 per cent; employment grew by 50,000; consumer spending increased by 6 per cent; inflation was 1.6 per cent; the GGD was 1 per cent; the current budget had a surplus of £292 million; and the fall of almost £300 million in the national debt in absolute terms, reflecting the relative strength of the Irish pound, was the first time it has been reduced in almost 40 years.

Budget Targets for 1997

Taking account of departmental balances of £26 million and increased capital receipts of £20 million, the opening EBR for 1997 is £334 million. Having made provision for the measures contained in today's budget, my targets for 1997 are a current budget surplus of £193 million (0.5 per cent of GNP); an Exchequer borrowing requirement of £637 million (1.6 per cent of GNP); and a general Government deficit of 1.5 per cent of GDP.

As I pointed out earlier, this is the first time ever that a Minister for Finance has planned for a significant current budget surplus. And I am projecting a surplus, not just for one year, 1997, but for 1998 and 1999 as well.

1997 Budget Measures

This budget reaffirms and builds on the main principles of my first two budgets. As in 1995 and 1996, the measures in this budget will reward work, promote enterprise and strengthen social solidarity.

Work continues to be the key to our success as a people and as a society. It is one of the ways that we fulfil ourselves as individuals and it is the way that we create wealth as a community. We need to foster and promote enterprise throughout our society in both the public and private sectors. We need to encourage the growth of new companies, consolidate existing firms and ensure that family-run businesses can pass safely from one generation to another.

In rewarding work and creating wealth through enterprise, we generate the resources to strengthen our country, to provide the services which we all require and so ensure that every individual in our society becomes and remains a valued participant in our community.

REWARDING WORK

The first of those principles is rewarding work.

Income Tax

I propose to reduce the standard rate of income tax from 27 per cent to 26 per cent with effect from 6 April next.

The employee PRSI rate for class A and class II contributors is being reduced by 1 per cent.

Is that all?

This reduction in social insurance contributions will assist over 70 per cent of PRSI contributors, including those outside the income tax net.

In addition, the standard rate income tax band is being widened by £500 for single persons to £9,900 and by £1,000 for married couples to £19,800. The personal allowance is being increased by £250 to £2,900 per annum for single persons and by £500 to £5,800 per annum for married couples. An increase of £250 per annum will also apply to widowed, single parent and widowed parent allowances. The general income tax exemption limits, below which no income tax is payable, are being increased by £100 to £4,000 per annum for single persons and by £200 to £8,000 per annum for those who are married. It is estimated that these changes will remove around 10,000 persons who would otherwise be in the tax net.

The withholding tax on professional services and the standard rate for deposit income retention tax will also be reduced from 27 per cent to 26 per cent.

The thresholds for the payment of the employment and training levy and the health contribution are being raised by £500 to £10,250 per annum, or from £188 to £197 per week.

Finally, the PRSI ceiling applicable to all employees and the self employed will be increased from £22,300 to £23,200 per annum.

The reduction in the employee PRSI contribution rate which I have announced today will add significantly to the improvement in takehome pay for most workers. However, I do not envisage a process of regular reductions in this regard as the Government remains committed to protecting the financial position of the social insurance fund in view of its central role in ensuring that agreed social insurance entitlements are provided into the future. In that context also, the Department of Social Welfare is commissioning an actuarial review of the projected long-term costs of social welfare pensions.

The effect of the substantial cuts in personal taxation and employee PRSI which I have announced will be to leave a family with two children and one spouse working who is earning £15,000 per annum and paying full PRSI and PAYE better off by £327 per annum or £6.30 per week. This is before the effect of the child benefit measures which I will announce later.

To assist the elderly, the special allowance for those aged 65 and over is being increased by £200 to £400 per annum for single or widowed taxpayers and by £400 to £800 per annum for married couples. This age allowance, which benefits some 65,000 taxpayers, was last increased in 1986. Some 30,000 other pensioners will also pay less tax as a result of the increase in the income tax exemption limits which I announced earlier.

In line with the commitment in Partnership 2000, the Government will be introducing a provision in the 1997 Finance Bill whereby the first six weeks of disability benefit in any tax year will be disregarded for tax purposes. However, for the 1997/98 tax year the exemption will be for three weeks while the administrative arrangements are being put in place, with the six week exemption applying from the 1998/99 tax year.

The special tax relief on unemployment benefit payments to systematic short-time workers introduced in the 1994 Finance Act is being extended for a further year. The exemption of the first £10 per week of unemployment benefit from tax, introduced in the 1995 Finance Act, will also continue at its current level.

The cost of these income tax and PRSI measures is £232 million in 1997 or £393 million in a full year.

PROMOTING ENTERPRISE

I turn now to my second principle, namely that of promoting enterprise.

Corporation Tax

In my last two budgets I have made significant changes to corporation tax, both by lowering the standard rate to 38 per cent and by introducing a new rate of 30 per cent on the first £50,000 of taxable income. There is a clear longer-term strategic need to reduce the standard rate of corporation tax over time to bring it closer to the 10 per cent rate which applies to manufacturing industry generally. Accordingly, I propose to reduce the 38 per cent rate of corporation tax to 36 per cent and to reduce the 30 per cent rate to 28 per cent. The taxable income band to which the 28 per cent rate applies will remain at £50,000.

It is estimated that there were nearly 20,000 companies with taxable profits of £50,000 or less, paying tax at the standard rate in 1994. As a result of this year's budget, and the reductions in my previous two budgets, such companies will now be paying tax at 28 per cent, as compared with 40 per cent in 1994. This is a real reduction of nearly one third in the tax rate for the small and medium sized Irish companies concerned. I recognise the important role that they have to play in our growing economy and I am also aware that this is where most of the new jobs have been created within our society.

The Government is studying the appropriate corporation tax structure for the longer-term, bearing in mind the central importance of the 10 per cent rate for inward investment, including the IFSC. I am conscious of the need to clarify this issue at an early date and I would hope to be in a position to make an announcement before too long.

Employer PRSI

In the case of employer PRSI, the threshold below which the 8.5 per cent rate applies is being increased from £13,000 to £13,500 per annum or from £250 to £260 per week. The overall ceiling on employer PRSI will rise from £26,800 to £27,900 per annum.

Mariners' PRSI

In order to foster seafaring employment and to develop a pool of maritime expertise in Ireland, the Government will bring forward in the Social Welfare Bill a special concessionary regime involving substantial reductions in the rate of employer PRSI applicable to certain seafarers. An ongoing review of the income tax regime for seafarers is taking place but this review is not yet completed.

New and Expanding Businesses

As a further measure to assist small business formation, I will be introducing a provision in the Finance Bill to enable firms to claim certain pretrading expenses in setting up business. Assistance to firms in such start up situations can be crucial to their survival. So too is access to capital when firms have reached a certain stage of development. The Government welcomes, therefore, the proposed establishment by the Irish Stock Exchange of the Developing Companies Market, or DCM. To help promote its establishment, a number of tax measures will be introduced in the Finance Bill including the extension of BES relief to qualifying firms who obtain a listing on the DCM. I also propose to increase the investment limit for 10 per cent special portfolio investment accounts by £10,000 which will be targeted specifically at investment in DCM shares for the first three years of its existence. Full details are set out in the Principal Features.

These concessions are made in the expectation that the Stock Exchange and its members will set out, and seek to achieve, specific targets for the number and type of firms to be brought to the DCM and will restrict listing fees in the generality of cases to reasonable levels.

Rented Residential Accommodation

I have been reviewing the tax rules applying to the providers of rented residential accommodation in order to improve the supply and quality of such accommodation. As part of this review process, which is not yet fully completed, I have decided to make improvements in the tax rules applying to this sector. In particular I will be making legislative provision to apply the standard capital allowances in respect of wear and tear on fixtures and fittings to this area. Full details are contained in the Principal Features.

Capital Gains Tax

In line with the reduction in the standared rate of income tax to 26 per cent, it has also been decided to reduce the 27 per cent rate of capital gains tax which applies to certain shareholdings in small and medium-sized companies to 26 per cent with effect from 6 April 1997. This reduction will also apply to the taxation of life assurance and unit linked investments.

Capital Acquisitions Tax

In the last two years I increased the business relief under capital acquisitions tax from a minimum rate of 25 per cent on certain transfers to a flat 75 per cent for property retained in the business for at least ten years after transfer. I have decided to increase this 75 per cent rate to 90 per cent in order to reduce the tax impact on the transfer of a family business. This new rate will also apply to the transfer of agricultural property. The effect of this measure will be to strengthen further small and medium sized companies and ensure their sucessful development from one generation to another. Early profit taking and other forms of redistribution will continue to be taxed in the normal way. The new rate therefore will be subject to the existing clawback arrangements to ensure that the ten year requirement applies to the full 90 per cent.

Car Value Threshold

I propose to increase from £14,000 to£15,000 the car-value threshold used for calculating capital allowances in respect of new cars and allowable expenses for all cars which are used for business purposes.

Farmer Taxation

The level of the farmers' flat rate addition, which compensates unregistered farmers for the VAT borne on their inputs, is being increased from 2.8 per cent to 3.3 per cent with effect from 1 March 1997. This is based on the latest information on the level of VAT paid by unregistered farmers. There will be a similar increase in the associated VAT rate for livestock which will also increase to 3.3 per cent from the same date. The cost of this measure in 1997 is £9.3 million and £14.1 million in a full year.

It is also proposed to introduce for a three year period an improved capital allowance for farm pollution control, and to continue for a further period the existing farming stock reliefs and the special stamp duty relief for transfers of assets to young trained farmers. The details of these reliefs are contained in the Principal Features. The cost of these measures is estimated at £6.2 million in 1997 and £8.5 million in a full year.

The cost of all the business measures I have announced today is £27 million in 1997 and £100 million in a full year.

The total impact of the tax changes I have introduced today will be very substantial. The value obviously will vary for different categories of individuals, depending on their circumstances. Taken together, this is the biggest tax reduction package in the history of the State. It will benefit the majority of the 1,300,000 people currently at work and it has an annual full year value of over £490 million.

An expensive election.

STRENGTHENING SOCIAL SOLIDARITY

I turn now to the third principle, namely that of strengthening social solidarity.

Social Welfare and Social Inclusion

One of the major challenges identified in the new programme, Partnership 2000, is the reduction of social inequalities and exclusion, especially by cutting long-term unemployment. To meet this challenge, the Government agreed to commit additional expenditure of up to £525 million over the next three years on an action programme for social inclusion and equality.

The measures I am announcing today will not only reflect this committment in regard to social inclusion but will also improve the position of all social welfare beneficiaries and other categories and enhance the work-friendly features of the social welfare system.

Weekly Welfare Payments

I am providing for increases of £3 a week in all personal social welfare payments and of £1.50 a week in adult dependant allowances from midJune next.

They are very low.

These increases are about 4 per cent or twice the rate of inflation and reflect substantial progress towards meeting the commitment in Partnership 2000 to implement, before the end of the Partnership, the minimum rates recommended by the Commission on Social Welfare. By next June, almost all rates will be at 98 per cent of the Commission on Social Welfare target rate or above it.

Child Benefit

I am continuing the policy pursued in recent years of increasing child benefit rates significantly. In this budget, I am providing for an increase of £1 per month for first and second children, and increase of £5 for third and subsequent children with effect from next September. The new rates will be £30 per month for each of the first two children and £39 for the third and other children.

A mother with three children will therefore get £99 a month or £23 per week while a mother with four children will get £138 a month or £32 per week tax free for her children compared with £90 per month or just under £21 per week three years ago. This amounts to a 50 per cent increase which is of direct and real value to mothers and children throughout this country, particularly large families.

They will not be holding their breath.

Family Income Supplement

Family income supplement, which is a support paid to families in low paid employment, has been identified in Partnership 2000 as a priority measure to enhance the reward from work by increasing the net return to families with children. Partnership 2000 contains a commitment to adjust the way it is calculated from a gross income to a net income basis during the lifetime of the Partnership. As a first step towards fulfilling this commitment, I am proposing that, from June this year, family income supplement will be calculated on a basis net a PRSI contributions and the health and unemployment levies. In addition, I propose to increase the current income thresholds by £10 per week. These changes will increase the payments to those currently in receipt of family income supplement by a minimum of £6 per week for most people and will increase the take up of this scheme.

Back to Work Allowance Scheme

As stated in Partnership 2000, the most effective strategy for achieving greater social inclusion is one which focuses on increasing employment. As part of the measures in this budget to fulfil the commitments to combat unemployment under this programme, the Government has decided to increase the numbers on the back to work allowance scheme. This scheme allows the long-term unemployed to taken up employment or self-employment while retaining a substantial portion of their social welfare payments and associated secondary benefits for up to three years. Because of the success of this scheme, the Government has decided to provide for an increase in the number of participants from 17,000 to 22,000 in 1997. Of this increase, 1,000 places will be allocated to people on disability allowance thereby facilitating their integration into mainstream employment.

Adult Dependant Allowance

I now turn to a measure designed to alleviate a particularly severe poverty and unemployment trap. At present, if the dependent spouse of someone in receipt of a social welfare payment earns more than £60 per week, no adult dependant allowance is payable. Many such spouses are deterred from seeking employment of a substantial nature or from working additional hours because this would result in a substantial fall in net family income.

To address the severity of this trap, the Government has decided to introduce a tapering arrangement in regard to the retention of the adult dependant allowance element under certain schemes with effect from next October. The adult dependant allowance will be retained on a phased basis as the spouse's weekly income increases from £60 to £90.

Miscellaneous Improvements

In addition to the measures I have just announced, I am providing for other improvements in the social welfare system which are targeted at particular groups. The main changes are as follows: in relation to the carer's allowance, an additional 50 per cent is being paid to persons caring for more than one incapacitated person, while the full-time care requirement is being relaxed to allow attendance at rehabilitation, training and day-care centers on a limited basis; £2 million is being provided for renewing the scheme of grants aimed at improving the security of elderly people; an additional £2 million is being given in grants for community and voluntary service, including increased resources for the National Social Service Board and the Combat Poverty Agency; those in residential care on a part-time basis will be entitled to half-rate disability allowance; in relation to maternity benefit and adoptive benefit, the minimum rate is being increased to £82.30 and both these benefits are being extended to the self-employed; in relation to treatment benefit, the income limit is being abolished and dependent spouses who take up employment are being allowed to retain entitlement until qualified in their own right; in completing the process of equal treatment for social welfare recipients, a widower's non-contributory pension is being introduced and equal treatment in occupational injuries benefit for widowers is being applied; more generous capital assessment provisions in regard to some non-contributory schemes, including old age pension, are being applied; the minimum yearly average social insurance contributions needed to qualify for apro-rata old age pension is being reduced from 20 to ten provided that the claimant has 260 paid contributions; the qualifying conditions for free electricity and free telephone rental allowance are being streamlined; the rules for payment of arrears on foot of late claims are being eased; and — I know this is making Deputies sick but please listen to it — in order to improve the arrangements applying to casual workers, social insurance contributions paid after six months of unemployment onwards will be reckonable for requalification for unemployment benefit.

Health

An additional £25 million for health services development is being provided in this budget.

For the nurses.

This includes £10 million, in addition to the extra £2 million already provided in the published Estimates, towards enhancing further our services to people with mental handicap. A sum of £6 million will be allocated towards the implementation of the Minister for Health's recently announced cancer treatment strategy.

An additional £5 million will be provided to develop further our child care services. The hospital waiting list initiative will be continued this year, for which a further £4 million will be allocated, bringing the total in 1997 to £8 million.

What about the nurses?

People with Disabilities

For too many years, Irish people with disabilities, and their families, were either ignored or forgotten. The report of the Commission on the Status of People with Disabilities, which was requested by the Minister for Equality and Law Reform, at last opens the door to the way forward.

To help the important work in this area, I am allocating an additional £500,000.

Total Cost of Social Welfare and Health Package

The total cost of the social welfare and health package which I have announced is £139 million this year and £245 million in a full year. Nearly £600 million has been provided in full year terms in the last three budgets for social welfare improvements.

Sport

The role of sport in the health and life of the nation has always been important. Many outstanding sportswomen and sportsmen have inspired us all with their achievements. It is important that we make the best use of the existing facilities throughout the country to enable all our people to have access to the sports arenas and resources which they need.

The report of the sports strategy group, established by this Government, is due to be completed shortly. I am allocating an additional sum in 1997 of £1.6 million to enable their recommendations to begin to be implemented over the next three years.

Modernising Access to our Laws

The Irish Statute Book, comprising all the laws enacted by the Oireachtas over the past 75 years, now runs to more than 35,000 pages and occupies about 4.5 metres of shelf space. The conversion of the whole Statute Book to an electronic format would allow all the laws of the State to be stored on a single standard size CD-ROM disk, portable and instantly searchable by modern electronic search techniques. Extensive work has been done on a project to achieve this and it is now ready to go for tender and implementation.

The project represents a recognition by the State of its obligations to make the laws, including the statutory instruments, as accessible as possible——

To all those with computers.

——not just to the legal profession, but to the public as well. The project also is a good investment by the State, where one of the primary requirements of incoming investors is ready access to all legislation in electronic format. I am allocating a sum of £750,000 this year to enable the first phase of this project to commence——

Well done.

That will be huge in west Cork.

The James Joyce Centre

This year is the 75th anniversary of the publication in Paris of Ulysses. This famous literary work celebrates the diversity of Dublin during the course of one day, Bloomsday, 16 June 1904. Being familiar with James Joyce's definitive work, Deputies may know that a central character Leopold Bloom was also involved in constructing a budget. His careful budget for Bloomsday included the following: lunch — 7 pence, a copy of theFreeman's Journal 1 penny — bad value even then, a postal order and stamp — 2 shillings and eight pence, banbury cakes 1 penny, bath and gratification 1 shilling and 6 pence.

What is gratification?

The Deputy will have to work that out. The total for the entire day's expenditure came to the enormous sum of 2 pounds, 19 shillings and 3 pence.

In recognition of Joyce's tremendous contribution to the world of literature and to mark this anniversary, I am allocating £100,000 to the James Joyce Centre in Dublin to secure the future of this literary heritage centre for generations to come.

What constituency is that in?

It is in Deputy Bertie Ahern's constituency.

Local Authority Expenditure

Last month, the Minister for the Environment announced a radical reform of our local government system. His proposals, which I strongly supported, include a new system for financing local government. The new funding system involves the abolition of local authority charges to domestic consumers for water and sewerage facilities. In fairness to those who paid their charges, the local authorities will continue to collect outstanding service charge arrears. I will make no change in the tax relief for service charges this year.

The proposals also involve the assignment of motor tax revenue to local authorities, partly offset by the abolition of the rate support grant. In 1997, there will be transitional arrangements, with part of the motor tax revenue being transferred and a reduction of £98 million in the allocation for the rate support grant in the abridged estimates volume, a provision which was calculated on the basis of the previous funding arrangements.

The Minister does not have to tell us.

This is a technical change.

That is what they all say.

It does not affect local authority spending. Local authorities will receive in 1997 at least the same amount through motor vehicle duties and the reduced rate support grant as they would have got with the original grant. The cost to the Exchequer in 1997 will be £60.5 million.

A reduction in real terms.

Details of the effects on the position of local authorities and the Exchequer are given in the Principal Features.

Total Cost of Current and Capital Expenditure Measures

The abridged Estimates volume provided for gross current supply spending of £12,874 million this year. The gross cost in 1997 of the current expenditure increases I have announced is a little under £200 million. Taking account of these and other changes, in particular the change in the arrangements for funding local authorities, the revised 1997 spending is £12,950 million. I announced a post-budget target for gross current supply services of £13,014 million when publishing the abridged Estimates volume last month. The principal changes to this figure are an additional £24 million pay costs and the reduction of £98 million in the rate support grant which I referred to earlier.

The capital measures have a gross cost of about £12.8 million, which is mainly offset by savings. The net impact of the capital adjustments, which are also summarised in the Principal Features, is that 1997 spending is now £2.4 million above the target of £1,574 million which I announced last month.

I turn now to revenue raising measures.

Tax Changes: Excises

With effect from midnight tonight, I propose to increase petrol and diesel excises by a VAT-inclusive 1.5p per litre for diesel and unleaded petrol, 2p per litre for super-unleaded and 2.5p per litre for leaded petrol.

The Border counties will be affected again.

I also propose to increase tobacco excises by 7 pence per 20 cigarettes, including VAT, andpro rata for other tobacco products, also from midnight tonight. This will raise £52 million in 1997 and £57 million in a full year and add an estimated 0.2 per cent to the CPI in 1997, bringing the post-budget CPI forecast to 2.2 per cent.

Environmental Tax Policy

Last year I announced that my Department, in conjunction with other relevant Departments and agencies, would establish a special group to examine the strategic impact of taxation on environmental policy for the 1997 budget. I have already announced one measure in the farming area for pollution control, while the proposed excise duty increases on petrol and diesel take account of environmental considerations. The extension of the £1,000 VRT refund scheme for scrapping ten year old cars to 31 December 1997, to which effect was given last month, also has clear environmental advantages.

They are back on the road.

No, they are not. The issue of environmental tax policy is one of growing relevance and importance world-wide. The EU Commission will bring forward proposals to apply a framework for an energy tax regime across the Union. For that reason I will ask the group to continue its work with a view to a complete examination of possible initiatives which might be taken up in subsequent budgets.

Residential Property Tax and Stamp Duty

Last month the Government announced the abolition of residential property tax from 5 April 1997. This will have a full year cost of £16 million.

So much for the socialists.

As with arrears of local authority service charges, the Revenue Commissioners will continue to collect outstanding residential property tax. At the same time it was announced that, in order to recoup this loss in revenue, the existing 6 per cent stamp duty on transfers of certain residential property valued in excess of £150,000 would be increased to 9 per cent with effect from midnight tonight, subject to certain transitional provisions.

It is still anti-Dublin.

The Financial Resolution, which will be moved later, sets out the full details of the application of the new 9 per cent rate of stamp duty and the definition of residential property for the purposes of this new rate. The Financial Resolution provides for a number of intermediate rates to increase the duty from 6 per cent to 9 per cent. These are 7 per cent for relevant property valued between £150,000 and £160,000 and 8 per cent for property valued between £160,000 and £170,000, with the 9 per cent rate applying thereafter. This stamp duty increase will raise £13.5 million in a full year.

Dublin Docklands

Last year I announced the establishment of a task force which would lead to a master plan for the regeneration of the Dublin Docklands. I am pleased to say that great progress has been made in achieving what I set out to do. The legislation to establish the new Docklands Authority has passed Second Stage and should be enacted by March. The preparation of the master plan by the multi-disciplinary team of consultants is on target and will be completed by 31 March. I intend to facilitate the implementation of the master plan with a range of selective tax reliefs based upon the recommendations which will be set out in the report of the consultants. This project will transform the heart of Dublin over the next 15 years, providing new jobs, homes and amenities for the next generation of Dubliners.

IFSC

The International Financial Services Centre will be ten years old this year. The centre has been a remarkable success by any standards, and I will be including certain measures in this year's Finance Bill to help ensure that it continues to expand and provide more jobs for our young school leavers and graduates well into the next century. The Custom House Docks Development Authority which has provided the infrastructure for the centre will be subsumed into the new Docklands Authority when it is established.

Valuation Office and Ordnance Survey

The Valuation Office is a great national resource, providing specialised expertise vital to public administration which has largely gone unrecognised. This office has endured, for far too long, a completely outdated archaic system dating back 150 years. Work has been completed on the heads of the Valuation Bill which will totally modernise this valuable agency's operations. I hope, with Government approval, to publish the Bill later this year.

I am giving serious consideration to the establishment of an interim board to oversee the transition of the Ordnance Survey to independent status. A new form of organisation could well strengthen the commercial focus of the survey.

Multi-Annual Budget Projections and Strategy

In last year's budget I announced my intention of moving to a multi-annual budget presentation this year. This new presentation of the budget allows the Government to examine policy changes on spending and taxation in a more systematic way in the light of their future impact. As part of this process, I am publishing today for the first——

——time projections for the main economic and budgetary aggregates for 1998 and 1999 as well as for 1997. These projections are given inEconomic Background to the Budget and further details of the budgetary projections are set out in the Principal Features. They take account of the full year cost of the 1997 budgetary measures announced today. They also include the cost in 1998 and 1999 of maintaining the existing level of services and take account of the pay, tax and social inclusion commitments envisaged in Partnership 2000, including in particular tax reductions of £1 billion on a full-year cost basis representing real reductions, on average, of over 0.5 per cent of GDP per year and an action programme for social inclusion and equality involving expenditure of £525 million.

A major start has been made in the budget in implementing these Partnership 2000 commitments. In preparing the multi-annual projections for 1998 and 1999, it has of course been necessary to make some working assumptions as to how the balance of these tax and social inclusion measures could be spread over the subsequent two years. The multi-annual projections are based on a forecast that GNP growth will be approximately 5.5 per cent in 1997 and average 4.5 per cent in 1998 and 1999. It is also projected that employment growth will average approximately 38,000 per year over the three years 1997-99. Inflation is expected to be moderate at just over 2 per cent per year over the period. Based on these assumptions, the underlying general Government deficit is projected at 1.2 per cent of GDP in 1998 and 0.9 per cent of GDP in 1999.

However, recent experience shows that we should budget for the unexpected. It is prudent, when making plans over several years, to provide a reserve against factors outside the control of the Government that may impact on the budget but which cannot be foreseen at this stage. Examples are variability in tax buoyancy and exceptional costs across all areas of public expenditure. While such variations are likely to be both positive and negative, it is appropriate to allow in the projections for a modest negative net impact on the EBR and GGD. I have, therefore, made a net provision against all budgetary contingencies of £175 million in 1998 and £325 million in 1999. This would increase the projected general Government deficit to 1.5 per cent of GDP in both 1998 and 1999.

In farming the medium-term target set out in Partnership 2000 of keeping the GGD in 1999 to no more than 1.5 per cent of GDP, the Government was mindful not only of the need to keep the debt-GDP ratio on a progressive downward path, thereby increasing overall budgetary flexibility, but also of two important factors bearing on the future budgetary position:

(1) Economic and monetary union, European Monetary Union, which will provide for the single currency, to be known as the euro, will commence on 1 January 1999. Ireland intends to continue to meet the conditions of entry into European Monetary Union. We are obliged under the Maastricht Treaty to avoid an "excessive deficit". This was further reinforced with the adoption of the Stability and Growth Pact at the Dublin European Council. This means that we must make provision in our future budgetary planning to maintain sufficient headroom to deal with the impact of economic shocks without exceeding the 3 per cent ceiling on the deficit.

(2) There is uncertainty regarding the level of EU Structural and Cohesion Funding after the current Financial Perspective expires in 1999. The Government will, in the forthcoming negotiations, argue that Ireland needs continuing substantial support. We will point to our recent economic progress as evidence of our effective use of EU funds. However, it is only prudent to recognise that there is no assurance that EU funding will continue indefinitely at present rates.

Because of factors such as these, the Government has adopted a strategy that will keep our general Government deficit at no more than half of the 3 per cent Maastricht ceiling by 1999.

Public Expenditure Reviews

Constraining the growth of public expenditure will be central to achieving the Government's medium-term budgetary goals. To date, we have not been as effective in this area as we would wish. It is essential that we improve our performance. One step in that connection will be the wide-ranging programme of financial management reforms set out in Delivering Better Government. The objective of these reforms is to underline the primary responsibility of spending Departments for managing their expenditure programmes within settled allocations and to take accountability for the results achieved. A key element of the new system will be agreements between the Department of Finance and spending Departments on a rolling programme of expenditure reviews under which the objectives and the rationale for the continuation of all major departmental spending programmes will be subjected to systematic evaluation over a period of three years or so. This process will begin this year.

It is also my intention to reflect on how the relationship between my Department and the spending Departments should develop in the context of a devolved, medium-term approach to expenditure management, the main aim being to improve the effectiveness of overall control over Government spending.

Pre-Budget Submissions

Last year I announced a change in the forum for presentation of pre-budget submissions from various organisations and representative bodies. The new forum for the presentation and hearing of these submissions was the Select Committee on Finance and General Affairs under the chairmanship of Deputy Jim Mitchell. This new arrangement worked well in its first year and 107 submissions were received. Twenty-one groups appeared before the committee and a comprehensive report was submitted by the committee which helped to shape and form this budget. In the process, the various organisations which presented themselves to the committee had an opportunity to advance their case. In turn, the members of the committee could probe and evaluate the various proposals and clarify why a particular group should benefit from a specific tax or budgetary consideration.

The entire process has improved the democratic accountability of the budget preparation system. I am indebted to the work of the various groups and the members of the committee. I propose, therefore, that the same process should operate this year in time for the next budget.

Timing of the 1998 Budget

This brings me to the date of the 1998 budget, which I also intend to introduce.

We will be with the Minister.

Wishful thinking.

Yes, they will. Last year I announced that, in future, the budget formulation would be brought forward by about two months. In effect, the budget for 1998 will be prepared and presented to the Dáil well before the end of November this year. This in turn will advance the timing of the annual Estimates campaign. This will improve the efficiency of our budgetary practices. It will also enable subsidiary organisations to be informed of their exact budgetary allocation before the commencement of the calendar year. As Deputies who are also councillors and members of local authorities know, at present it can be up to three months into the year before such organisations know the total amount of their allocations for the year. This is unsatisfactory as it does not enable proper budgetary planning. That is why it is now being changed.

Progress Made 1995-97

I have now completed my third budget.

The next programme will be the manifesto.

One manifesto is enough.

It is useful to stand back and look at what progress has been made taking these three budgets into consideration. Sometimes it can be difficult for individual citizens and Deputies to appreciate fully the changes that have taken place, so I will give some illustrative examples. The Deputies opposite may not like to hear these but I am afraid they will have to.

Listen to this, Ned.

First, I will take the case of a two parent family with three children where one spouse is earning approximately the average industrial wage. Taking account of the pay increases in the last two years and those for 1997 envisaged in Partnership 2000 together with the income tax, PRSI and child benefit changes in my three budgets, such a family will be better off in terms of take home pay by about £32.50 per week, an increase of approximately 15 per cent or 8 per cent in real terms.

What about mortgage interest relief?

(Interruptions.)

An industrial wages budget.

They are entitled to a car.

They will have to get bicycles.

Second, I will take the case of a two parent family with two children both over 18 and in full-time third level education, again with one spouse earning, say twice the average industrial wage.

What about mortgage interest relief?

Their annual disposable income will have risen by about £2,350 as a result of pay increases and the tax and PRSI changes in my three budgets, even after taking account of the standard rating of certain discretionary reliefs such as their mortgage. This represents an increase of 13.5 per cent or over 6.5 per cent in real terms. They will also gain, say, a further £3,000 per year as a result of the abolition of undergraduate third level education fees.

They do not think so.

Go out and ask them. Third, an elderly person will be £7 a week better off from the increases of almost 10 per cent in the old age contributory pension in my three budgets.

A Deputy

Well done.

Seven pounds over three years.

One would not want to be on social welfare with this Government in power.

In addition, approximately 25,000 car owners have benefited so far to the tune of £1,000 each from the scrappage scheme for cars at least ten years old which I introduced in my first budget and recently renewed for a further year to 31 December next. The take-up under this scheme has been more than 1,000 per month.

All the bangers have disappeared from the roads.

(Interruptions.)

Inevitably these examples, of which I could give many more, are a snapshot, as all such examples must be. However, there is no doubt that as a result of our three budgets the standard of living of many people has been dramatically improved.

There has been an abuse of Structural Funds.

However, not everyone has benefited in the same way. There are still too many unemployed people, while others are excluded from the gains which this society has made in the past few years. We cannot move forward as a nation unless and until all of our people move together. That is why the Government is committing so much of our resources to promoting social solidarity.

Conclusion

The world is changing rapidly and we, including Deputy O'Keeffe, must adapt to that change. We are very much a part of the change within Europe, as our successful Presidency of the European Union demonstrated. We must both move with it and shape it in the coming years.

The Partnership 2000 programme will accommodate change and growth and will take us to the start of the next century. However, we need to look further ahead in order to manage the present and secure our future. Our success in recent years gives us the experience and the courage to embrace the future with confidence.

In my first budget two years ago, I set out five goals to which this country could aspire and plan to achieve by the year 2010. They were the following: Ireland could have the averageper capita income of the European Union, provide full employment for those seeking work, have the best managed and best preserved environment in the European Union, possess the most effective public administration in the European Union and be perceived outside of Europe as the best place in which to invest and do business within Europe.

This could be achieved by a Fianna Fáil Government.

Since 1994 we have made good progress towards all those goals. First, the nation is becoming richer. Real wealth is being created by our continuous economic growth which has been four times higher than the European average. If we achieve the progress I have set out in the budget over the next three years, by the end of the new programme, Partnership 2000, we will be very close to the European Union averageper capita income. Second, employment has increased by 100,000 but there are still too many people unemployed. However — this includes the periods when Fianna Fáil was in Government — for the first time in our modern history we are seeing a sustained net increase in jobs, net emigration has stopped, and some people are coming home.

We have more to do, but we are doing it better now than ever before. Third, our environment continues to present a real challenge as we grow and prosper, but policies are being put in place which will protect and enhance it through to the next century. Fourth, the Strategic Management Initiative provides the basis for the transformation of our public administration system. It may take time to do it, but I am determined to push ahead on this front. Finally, this year the IDA found that Ireland was the number one location for US investment seeking to locate in Europe.

In Dublin.

Where are the jobs?

We have benefited from 30 per cent of all US investment.

Areas outside Dublin have been forgotten.

Deputy Ahern must restrain himself.

Or there will be no marriage with the Progressive Democrats.

The Westmeath bachelor.

I would not go into a marriage with them.

(Interruptions.)

The challenges we will face may be greater than those we have overcome, but today we are much better placed to meet them.

The budget lays the foundation for continuing, strong, non-inflationary growth until the beginning of the next century. It demonstrates clearly our commitment to social solidarity and the elimination of inequality and poverty. It makes a clear statement of our economic and fiscal goals for the next three years. As a result, it will enable us to qualify to participate in European Monetary Union from the beginning. The tax changes it contains will encourage personal and corporate initiative and strengthen our economy and society.

The celebration of success should not be confused with the contentment of complacency. We have much more to do and we will go on together to complete our task.

What about the nurses?

Seventy five years ago this nation established a new fledgling State, leaving the strength and wealth of a powerful country to pursue a destiny and a vision of its own. We are today the inheritors of that vision.

This is an election budget.

Is there any compensation for nurses?

The budget, when implemented in full, will bring us closer to achieving that vision and I commend it to the House.

It is a pity the Progressive Democrats did not have that vision five years ago.

TABLE EXPLANATORY OF CURRENT BUDGET, 1997

Revenue

£m

Expenditure

£m

£m

1. Tax Revenue

13,485.0

1. Central Fund Services

3,260.4

Adjust for:

£m

Local Authority financing (allocation of MVD)

2. Non-Capital Supply Services

10,075.0

— see Table H

-168.0

Adjust for:

13,317.0

Local Authority financing (see Table H)

-98.0

2. Non-Tax Revenue

320.8

Other net revisions to Estimates (including PRSI buoyancy, etc)

-21.3

9,955.7

3. Deduct:

Income Tax reliefs:

£m

Add:

—changes in exemption limits, personal allowances, standard tax rate and standard bands

-168.7

3. Social Welfare improvements, including Health element

113.2

—other Income Tax concessions

-13.2

4. Contribution Initiatives [impact on Supply spending]:

-181.9

VAT measures

-9.3

PRSI concessions:

Corporation Tax measures

-1.6

—Employee contributions

47.7

Capital Tax measures

-14.9

—Employer contributions

9.6

Threshold for Employment & Training Levy

-2.0

57.3

-209.7

Health Contribution

2.5

59.8

4. Add:

Stamp Duty Measures

6.5

5. Health Service development

25.0

Excise Duty measures

51.5

58.0

6. Miscellaneous

2.9

5. Net effect on tax revenue of tax and spending changes

98.0

7. Estimated Departmental Balances

(26.0)

8. Current Budget Surplus

193.1

13,584.1

13,584.1

TABLE 1

1996 BUDGET OUTTURN

1996

Budget Estimate

Provisional Outturn

£m.

£m.

Current Budget

1. Expenditure

(i) Central Fund Services

3,054

3,161

(ii) Supply Services

9,462

9,501

12,516

12,662

2. Revenue

(i) Tax

12,068

12,520

(ii) Non-Tax

366

434

12,434

12,954

3. Current Budget Deficit/(Surplus) (as % of GNP)

820.2%

(292)(0.8%)

Capital Budget

4. Expenditure

(i) Exchequer Capital Programme

1,392

1,458

(ii) Other (non-programme)

109

78

1,501

1,536

5. Exchequer Capital Resources

854

807

6. Exchequer Borrowing Requirement for Capital Purposes

647

729

7. Total Exchequer Borrowing Requirement (3+6)

729

437

8. Total Exchequer Borrowing Requirement as % of GNP

2.0%

1.2%

9. General Government Deficit as % of GDP

2.6%

1.0%

TABLE 2

CURRENT GOVERNMENT EXPENDITURE AND REVENUE IN 1996

Current Expenditure

Current Revenue

Item

£m

% of gross expenditure

Item

£m

% of total

Service of Public Debt

Current Budget Surplus

(292)

Central Fund Services (part):

Interest

2,099

13.7

Sinking Funds, etc.

261

1.7

Total

2,360

15.4

Tax Revenue

Economic Services

Customs

159

1.2

Industry and Labour

527

3.4

Excise Duties

2,320

17.9

Agriculture

623

4.1

Capital Taxes

178

1.4

Fisheries, Forestry

43

0.3

Stamp Duties

336

2.6

Tourism

35

0.2

Income Tax

4,562

35.2

Corporation Tax

1,426

11.0

Value-Added Tax

3,105

24.0

Total

1,228

8.0

Agricultural Levies

11

0.1

Motor Vehicle Duties

258

2.0

Employment and Training Levy

164

1.3

Infrastructure

84

0.5

Income Levy

1

Total

12,520

96.6

Social Services

Health

2,332

15.2

Education

2,085

13.6

Non-Tax Revenue

Social Welfare

4,385

28.6

Court etc. fees

38

0.3

Housing

8

0.1

Interest and Dividends to

Subsidies

166

1.1

Exchequer

61

0.5

Total

8,976

58.5

Central Bank — Surplus Income

176

1.4

Proceeds of National Lottery Surplus

89

0.7

Security

1,103

7.2

Miscellaneous

70

0.5

Other

1,587

10.3

Total

434

3.4

Gross Expenditure

15,338

100.0

Total Current Revenue

12,954

100.0

Supply Service Receipts

2,676

Net Expenditure

12,662

Total Revenue less Current Surplus

12,662

TABLE 3

CURRENT GOVERNMENT EXPENDITURE 1993-1997

1993(1)

1994(1)

1995(1)

1996 Provisional Outturn

1997(2) Estimate

% change 1997 over 1996

£m

£m

£m

£m

£m

%

Service of Public Debt

Central Fund (part):

Interest

2,159

2,004

2,156

2,099

2,275

8

Sinking Fund etc.

231

223

249

261

285

9

Sub-Total

2,390

2,227

2,405

2,360

2,560

8

Economic Services

Industry and Labour

320

389

493

527

568

8

Agriculture

576

523

522

623

644

3

Fisheries and Forestry

38

42

42

43

46

7

Tourism

28

35

36

35

35

Sub-Total

962

989

1,093

1,228

1,293

5

Infrastructure(3)

54

80

81

84

87

4

Social Services

Health

1,907

2,121

2,254

2,332

2,445

5

Education

1,727

1,876

1,962

2,085

2,201

6

Social Welfare

3,743

3,879

4,261

4,385

4,500

3

Housing

4

4

6

8

9

12

Subsidies

170

169

167

166

174

5

Sub-Total

7,551

8,049

8,650

8,976

9,329

4

Security

Defence

403

427

427

454

479

6

Garda

391

411

418

451

454

Prisons

91

99

102

107

108

1

Legal, etc.

65

76

82

91

103

13

Sub-Total

950

1,013

1,029

1,103

1,144

4

Other

Central Fund (part):

EEC Budget

453

507

547

589

582

-1

Miscellaneous(4)

26

87

31

212

118

-44

Supply Services

631

761

789

786

1,045

32

Sub-Total

1,110

1,355

1,367

1,587

1,745

Gross Total

13,017

13,713

14,625

15,338

16,158

5

Less: Supply Services Appropriations in aid, P.R.S.I. receipts(3)

2,494

2,540

2,516

2,676

2,823

6

Net Current Expenditure

10,523

11,157

12,109

12,662

13,335

5

Exchequer Pay and Pensions included in above(2)(3)

4,087

4,356

4,560

4,792

5,122

7

Notes:

(1) The figures for 1993, 1994 and 1995 reflect actual audited expenditure.

(2) The 1997 Estimate corresponds to figures published in the White Paper on Receipts and Expenditure 1997.

(3) To allow for comparison the 1993-94 figures have been adjusted to exclude expenditure and receipts in respect of the Air Navigation Services Office whose functions were transferred to the Irish Aviation Authority on its establishment in 1994.

(4) From 1996, payments in respect of the Exchequer's liabilities to the An Post and Telecom Éireann Pension Funds are provided for in Central Fund Services rather than in the Vote for the Department of Transport, Energy and Communications as was the case in respect of part of the 1995 liability.

TABLE 4

RECEIPTS AND EXPENDITURE OF THE EXCHEQUER AND CERTAIN PUBLIC AGENCIES

1973-1997

Exchequer

Local Agencies (a)

Current Revenue

Non-capital Expenditure

Expenditure

Revenue (b)

State grants received

Rates collected

£m

£m

£m

£m

£m

1973—74

793

803

298

183

71

1974 (April-Dec.)

651

744

292

190

61

1975

1,091

1,350

481

332

84

1976

1,470

1,672

567

404

109

1977

1,757

1,958

684

504

111

1978

2,023

2,420

831

670

82

1979

2,384

2,906

1,007

820

91

1980

3,155

3,702

1,313

1,062

103

1981

3,973

4,775

1,565

1,284

102

1982

4,908

5,896

1,878

1,560

95

1983

5,711

6,671

2,093

1,749

105

1984

5,952

6,991

2,302

1,888

122

1985

6,331

7,615

2,493

2,066

141

1986

6,710

8,105

2,633

2,160

153

1987

7,151

8,331

2,699

2,223

170

1988

7,690

8,007

2,387

1,862

194

1989

7,756

8,019

2,552

1,931

231

1990

8,269

8,421

2,761

2,116

239

1991

8,776

9,076

3,000

2,349

252

1992

9,360

9,806

3,285

2,589

265

1993

10,140

10,519

3,358

2,683

280

1994

11,203

11,188

3,647

3,007

302

1995

11,667

12,029

3,846

3,079

323

1996 (c)

12,954

12,662

4,024

3,226

336

1997 (d)

13,806

13,335

4,219

3,410

346

NOTES:—(a) Local Agencies comprise County Councils, County Borough Corporations, Urban District Councils, Town Commissioners, Regional Health Boards, Vocational Education Committees and County Committees of Agriculture (up to their dissolution in 1987).

(b) The revenue of Local Agencies comprises rates, State grants (including payments on behalf of Health Boards to voluntary hospitals and homes in respect of general medical services) and other receipts e.g. rents and fees. Only State grants and rates are shown herein.

(c) Provisional.

(d) These estimates are consistent with those in the 1997 White Paper on Receipts and Expenditure.

Not far from here the slogan "God loved the world so much that he did not send a committee to save it" adorned the office of the senior partner of a very successful professional practice in this city. It is a pity the Minister for Finance did not follow through on his resignation threat last month.

Is that the best the Deputy can do?

I now understand why he wanted to get out, he wanted to save himself the embarrassment of having to deliver the budget speech, which took him one hour and ten minutes. He knew that by the time the Tánaiste and Minister for Social Welfare, other fellow socialist Ministers, programme managers, advisers and assorted hangers-on were finished, his budget would resemble the political equivalent of a camel, which we all know is a horse designed by a committee.

Never in the history of the State has a Minister been in such a favourable budgetary position and never has a budget from a Minister of Finance failed so spectacularly to live up to its expectations. All the Minister's predecessors, from as far back as Michael Collins to Deputy Bertie Ahern, could only have dreamed of such a favourable Exchequer position.

It is a pity the Deputy did not follow Collins.

This was a glorious opportunity to leave a real footprint on Irish economic development, but instead we get barely a toe mark on the seashore to be washed away by the next small wave. Could the Minister not have set himself a small number of real objectives and done something in those areas? He has a political objective. The budget is the Labour Party equivalent of an SOS, save our skins in 1997.

There was a time when politicians and political parties cared about the medium and longer terms, and some still do. Has political comment become so vacuous that economic and budgetary decisions in an election year are measured solely on their perceived electoral pluses or minuses? There is no economic strategy underpinning this budget. It is an attempt to revive the electoral fortunes of the Government by trying to purchase the votes of the electorate. Trying to please many is often a sure political recipe to antagonise all.

People frequently refer to what politicians said many years ago. I have heard the Taoiseach say on many occasions that he is entitled to change his mind and there is no need for me to remind him of how often he has changed his mind in recent years. However, I take it he has hardly changed his mind since last Sunday——

I would not bet on it.

——when in an article in theSunday Independent he stated we are also reaping the rewards of wise decisions made in the past. In regard to our economic growth he went on to state that, “None of this would have happened but for the original decision to extend free second-level education back in the 1960s. This shows how important it is to think in a long-term sense”. I am not convinced there is political long-term thinking in the budget or in the Government's economic strategy.

The Deputy is doing well against the tide.

Some of the things I predicted about the economy came true. We have paid a big price for making short-term decisions many years ago.

In recent months a plethora of changes were introduced by the Government, in particular by Labour Ministers. Service charges and residential property tax were abolished, the Minister for Education altered the school capitation grants, the status of the regional technical college in Waterford — where a Minister of State resides — has been changed and the Minister for the Environment made announcements regarding roads. All of those changes were announced by Labour Ministers.

What has happened to Fine Gael Ministers in the present Government? Perhaps they are so busy dousing the bush fires of scams and so on they have no time to pay attention to the budget and its contents. There was a time when the Fine Gael Party stood for something, for the betterment of this State in the medium and long-term, for which we should all be grateful, unlike in the more recent past when a Fine Gael Leader said he would take a more long-term view, now recognised by all and sundry.

Perhaps the Minister for Health has taken such a grilling from my good colleagues, Deputies Geoghegan-Quinn and Liz O'Donnell, or perhaps as a result of the mess into which he got himself in the course of a recent debate in this House——

(Interruptions.)

Which is the reason Deputy McCreevy is in Opposition.

I saw the Minister for Health on "Prime Time" last evening and I have to say I prefer the real Deputy Michael Noonan to the sort of creamy custard, caramel type flavour on offer last evening which had to be endured by "Prime Time" viewers. I much prefer the more crunchy, lemon, wholenut flavour of Deputy Michael Noonan which has a real good bite which can also be pleasant and very stimulating. There is already sufficient blandness, consensus and dullness in this House. If the Minister for Health is to go the way of many others, not alone will Irish politics be the loser but the threshold of boredom in this House will have risen to an all time high.

The Deputy is drifting from the budget.

Perhaps in the future the House will be full of dull, boring Members.

Against what criteria should this budget be judged? I suppose that depends on which part of the political spectrum to which one professes allegiance but all budgets and economic strategies must be judged within the economic criteria. There are those who will say that one should have an economic philosophy which might achieve other objectives but, unless one gets the economic fundamentals right, nothing else will follow.

I contend that what has been put forward today as a budgetary strategy will do nothing at all in the medium or longer term for the betterment of this country. I would go so far as to say I would see nothing wrong with a budget — and there have been some in the past — which did not attempt to do anything momentous on the economic front. I would classify such budgets as reasonably harmless. I would also classify Governments that adopt a type of "do as little as possible" approach as not too dangerous, but I predict the budgetary strategy adopted by this Government over the past two years will do lasting damage. I have made that prediction for some time and reiterate it today.

The other criterion against which a budget can be judged is on its proposals on the social front: does it really tackle a few key areas or just spread the manure or fertiliser over a wide area, yielding no real benefit?

On the taxation front, one must ask what the changes add up to. Do they make much of a difference to the individual, the business person or company? Does it reward risk or achieve anything in terms of equity?

Finally, a budget can be judged for what it does for what is a unique Irish problem, referred to as the poverty trap. If the broad economic strategy is wrong, the rest becomes irrelevant. The broad strategy being adopted by this Administration is wrong, misguided and dangerous. There is no economic philosophy behind the strategy of this Government.

I have searched high and low, from Adam Smith to Jimmy Goldsmith, from Keynes to Milton Friedman and, unless perhaps the Minister for Social Welfare has been able to devise some wonderful economic theory covered in a correspondence course yet to be unearthed, conducted between himself and some Soviet bloc economy——

Shame on the Deputy.

——but I have not come across any theory or any text book, past or present, which says that this is the proper economic strategy to adopt.

Our economy is going through an historically high growth period. Over the past couple of years we have experienced growth in excess of 5 per cent while simultaneously increasing — which will be the case in the current year — current spending by at least 7 per cent. The Central Bank has signalled that growth in the credit institutions is now growing at an alarming rate and yet, at the same time, it is proposed to reduce taxation, all this in one fell swoop, and to continue this strategy. Were one to advance some justification for that economic doctrine one might be more readily excused but to do all of those things at the same time is inexcusable.

Ireland is probably at the top of the economic growth league. Our economic growth cycle is unique, at the opposite end of the leaguevis-à-vis all our European Union and major trading partners, an unusual phenomenon with which nobody has yet come to terms. The consequence of this phenomenon is that when we are experiencing something of a downturn they are doing very well, whereas the opposite is the case at present.

In the very near future we shall be joining a very strict economic and monetary union which will abolish the normal financial tools available to any future Irish Administration. While adopting that specific policy, we are also acutely aware of our nearest neighbour and major trading partner — who will remain so, because one will always trade with an economy 15 or 16 times one's size so near geographically. Having adopted the best economic strategy over a period of 25 years, thankfully we have redressed our total dependence on the United Kingdom market. Nonetheless the United Kingdom will remain our major trading partner, which will remain outside economic and monetary union and pursue an independent monetary policy, in itself, a major cause of concern——

Deputy McCreevy should not forget it was Fianna Fáil who broke with sterling.

——remembering that we shall be going down that road in two years' time.

Despite our massive economic growth in recent years, we continue to have massive unemployment and to have a higher than European average number of unemployed which I predict will not decrease considerably before we join economic and monetary union.

We know that in January 1999 and in the year 2000 the European Union funds negotiated for the years 1993-99 will expire; if I may put it like this, thereafter, hopefully Irish Administrations will be in a position to negotiate new European funds. However, with the enlargement of the European Union it is an absolute mathematical certainty that, proportionately, the amount of funds coming into the Irish economy, post this round, will be very much less than those we have enjoyed to date. When one bears in mind that over the past year 1 per cent, possibly more, of our growth can be attributed to those EU funds, one clearly sees the extent of the problem.

Furthermore, if we can pursue this type of economic policy at a time when all the indications point to and all the experts say that we may be fuelling inflation — I make this point in response to some backbenchers on the Government side — the one thing they should know is that we in Fianna Fáil have experience on which to make such judgments or predictions. Experience shows that this type of economic policy does not work in an Irish context. As a colleague has said on many occasions, what was worst about the Fianna Fáil 1977 manifesto was that we implemented it. Effectively, we spent our way out of a boom. That type of economic policy does not work. There was nothing wrong with trying to experiment at that time because the economies of Europe had come through an oil crisis in the 1970s which they had not experienced before and it was felt we should prime the pump. The experiment did not work and it left lasting difficulties which took until the late 1980s to reverse.

Davy Stockbrokers, in its Economic Monitor of 3 January, more or less signalled what the Minister would do and addressed some of these problems. Mr. Jim O'Leary, a columnist, said that the Minister could enter the textbooks as the man who introduced a new idea to the world of macro-economic management. He called it disinflationary fiscal expansion or how to join monetary union by cutting the price of drink. Most people who have looked at this problem would say that caution should be the key note of Government policy but that is not the case.

The Minister for Finance allowed himself to be bought off or browbeaten by his governmental colleagues into a situation where he felt he must put forward such a budget and publish a ridiculous Book of Estimates at the end of 1996. Over the past two years, with different Ministers pressurising him, he has had to increase gross current spending by upwards of 20 per cent at a time when inflation for the relevant period will not be greater than about 6.5 per cent. The Minister for Finance and those advising him know this is wrong. However, that will be little consolation in a few years' time when a future Administration made up of whatever parties — I do not care what ethos underpins the next Administration — will have to do something dramatic.

The problem is that when one has to take corrective measures, it is always the poor at the bottom of the scale who suffer most — the people whom those with bleeding hearts overtly say they are trying to protect. When changes and reversals of policy must come, whether a left or a right wing Government is in power, it is always the same unfortunate people who must suffer. That is what will happen again.

This is an attempt to buy off the voters for the next election. I have a certain amount of admiration for the subtlety with which parties of the left buy off the electorate. Unlike Fianna Fáil in 1977 which adopted the crude approach of trying to buy people's votes or Fine Gael in 1981 when Garret FitzGerald put forward a proposal of £9.60 for stay at home wives, the left has a far more subtle way of doing this and dress it up as if it is in the national interest. It is a bit like their appointments to semi-State boards and other quangos. The people they appointed are those who should have been appointed in the first place but who were overlooked by the thugs in Fianna Fáil. These nice people who put the national interest first should have been appointed. It is only the muck savages in Fianna Fáil who have no ethos in these matters and who look after their friends. However, the Labour Party and Democratic Left appoint the best people, although it is important that they are members of the local branch and have always been involved in the party. I am willing to live for the next decade with that type of economic philosophy which has been laid down by some commentators because it is quite harmless and people should not get too upset about it.

They will be in Opposition anyway.

Short-term popularity bought at the expense of future bankruptcy is not a worthey aim. The electorate has become so sophisticated that such an approach will not work electorally, but that is for another day and we will let the people be the judge. For some time the people have taken a longer-term view than politicians of any party or commentators but which they might not express as well. We all praise the farseeing decision of 1966 to introduce free second level education but policy makers, particularly politicians and commentators, forget that the effects of that decision over 30 years have given us an electorate and a society which are more sophisticated and which will not be bought off in ways we have all tried in the past.

If there were not to be an election in 1997, no Minister for Finance, let alone Deputy Quinn, would come to the House and produce this Book of Estimates and budget. It is wrong at this time. We should look at economic history and see that this type of economic policy has not worked. In the United Kingdom Nigel Lawson tried the same approach in the late 1980s. Before an election, he introduced a budget very similar to that of the Minister.

He did. The Minister has made the same mistake as that made in the United Kingdom which, in everyone's view, had a detrimental effect on all the good work done previously. Good work has been done here over a number of years by various Administrations made up of all the parties in the House but we are prepared to throw it away because an election is imminent.

We have found a successful formula which has worked. It is amazing that economies in various parts of the world have adopted an Irish approach — for example, the Shannon duty free zone. The World Bank gave grants and assistance to organisations to help them to set up such areas. Shannon has been copied by others and it is a pity we did not do it a little better. We have discovered the magic or whatever of how to run the economy.

We took a long time — since the foundation of the State — to change economic strategy but, when we did, the economy grew quickly. We made mistakes and repeated them. When we were at the edge of financial bankruptcy, we found a successful formula which came about in the late 1980s when the Haughey-MacSharry Government totally reversed economic polices of previous decades. It was not politically popular in the House and we had critical votes on many occasions. Strange as it may seem, it proved to be good economics, which turned the country around, and good politics, which surprised politicians because instead of being eaten alive by the electorate, those who took this decision were respected.

In fairness to the parties which make up the Government and which opposed that type of economic strategy, they came to recognise that this was a successful Irish way of doing things. The main reason this was done was that we were at the edge of financial bankruptcy, but there was a realisation by the trade union movement, employers, farmers and the Government which produced the first Programme for National Recovery. That consensus approach gave us low inflation, low interest rates and a successful and good economy of which we are now able to enjoy the fruits.

The Deputy's party will never again get a second Charlie Haughey; I guarantee that.

Fine Gael will never have a second Paddy Sheehan; that will be some loss.

I want to say a few words about our joining economic and monetary union. There is no point in any politician or Government saying there are rules about joining monetary union and at the same time not realising and being prepared to face up to what future Irish Administrations must do after we join European Monetary Union. On one occasion during Question Time the Minister, perhaps inadvertently, gave the impression that it was not in the national interest even to question or debate joining economic and monetary union.

Not at all.

My party is pro-Europe. We believe that we can join economic and monetary union. However, to attempt to stifle debate would be very bad. Furthermore, we must face up to the fact that, if and when we join, it will not be the same for Irish Governments after that. I would have no objection if the Government proposed, like the Swedes, a commission of experts to give their views; as a matter of interest, the Swedish commission decided that it was not in Sweden's interest to join at that time. It would allow for putting forward all the ramifications of joining European Monetary Union. The only study carried out here by the ESRI has been on the economic front. It surprised me and many others in the pro-EMU camp that, whether the UK joins on day one or stays out, the economic benefits would be marginal.

We must recognise our position when we join economic and monetary union. We will not be able to come before this House with budget deficits. It is obvious that European Monetary Union would frown upon any type of deficit and we will be able to have them only under very strict rules. This raises the question for me of how monetary union will be operated without some form of enlarged federal budget.

There are two differences between the proposed European economic and monetary union and that in the United States. First, there is a centralised budget in the United States so that, in the event of a major economic shock, other taxes can be raised; second, there is great mobility of labour in the United States but there is no similar tradition in Europe. That is a matter for debate and the Select Committee on Finance and General Affairs has spent a great deal of time on it.

The most interesting aspect is that if we are at one end of the economic cycle and our European partners are at the other, say in three years time we join economic and monetary union which once joined cannot be left, we could come to the other end of the economic cycle and there would be a depression here while the rest of Europe was doing swimmingly. We would then be in a very awkward position. Rules must be introduced which would allow a small nation such as Ireland to adjust.

Despite what the Minister said today, after all his adjustments and trying to justify the unjustifiable, the national debt at the end of 1996 was still £30 billion. Over the lifetime of this Government current spending will be 20 per cent — it was 6.5 per cent of late, and this year alone it will be at least 7 per cent. If the Minister for Finance had succeeded in getting the Government to adhere to its targets of inflation plus 2 per cent since it came into power in December 1994, he would have had another £500 million available to do something about the national debt, to deal with social exclusion, to give more money to old people or to reduce income tax. That proves that the link between debt, taxation and expenditure must be understood by all sides. That was one of the most important breakthroughs in thinking over the past decade.

The Minister said that £400 million was taken in taxation last year which was not planned for. In the last two years, £600 million has been taken which was not planned for in the Estimates. We are supposed to be delighted the Minister is giving us back some of this money. In 1996, the amount collected in tax revenue was £4,562 million. After all the adjustments today, the Minister will collect next year, by his own estimate, £4,926 million, an extra £364 million or an 8 per cent increase in tax this year.

More people at work.

For the Irish taxpayer, £1 million extra per day will be collected between now and the end of the year instead of PAYE being reduced. People are really having some of their own money thrown back at them.

The Minister has made great play today of the full year cost of taxation changes. In the last budget brought in by the then Minister for Finance, Deputy Bertie Ahern, in 1994, the total tax changes in the full year were £333 million. If the Minister had stuck to his own rules in the programme, A Government of Renewal, he would have had that extra £500 million with which he could have done something real.

Regarding the social changes brought forward today by the Minister for Finance, despite the great Deputy De Rossa being the Minister for Social Welfare and the statement which talks about the total cost of social welfare and health in this budget and gives the impression that this is the biggest change ever made, I want to point out something different. This is not the biggest social welfare package ever. In 1990, when things were really bad, the full year cost of changes made in the budget by a Fianna Fáil Minister was £235 million, and that was social welfare alone. The total cost for the year of changes today between health and social welfare is £245 million. It is not true to say that the changes made here are the biggest ever.

Managing the Department of Social Welfare requires care and prudence. However, the Minister for Finance or the Minister for Social Welfare would be far better off targeting a few key areas in social welfare rather than trying to spread the largesse over a large number of areas. The Minister said that the increase for an old age pensioner will be £7 over the three years of this Administration. It may interest him to know that a bag of coal costs £7.60, in other words, the total increase for an old age pensioner over the three years of this Administration would not buy them an extra bag of coal per week. That gives some idea of the nonsense carried on by the Minister for Social Welfare and Democratic Left. Over three years the total increase for old age pensioners will be £7, while the cost of a bag of coal in my part of the country is £7.60. It would be much better for the Minister for Social Welfare to target the elderly at the lower end of the scale or give an increase to widows than spread the money over many areas with no effect.

What about the dirty dozen?

I am sure the Minister would be interested to know how many of those measures were changed by subsequent Governments, including the one of which he is a member.

There is no co-ordination in the Government regarding changes in social welfare. The Minister for Social Welfare recently announced an increase in the single parent allowance. I received a phone call and a follow up letter from an unemployed person whose wife is working and he said that if he separated from his wife he would be 150 per cent better off, taking into account child dependant allowance, tax changes, rent allowance and the new single parent allowance. That is the type of social welfare policy that is being introduced.

I read recently about changes in Irish society — this matter was referred to by the Taoiseach in an article last Sunday. The wage earner in a household, be it the husband or wife, should be the role model. The Minister for Social Welfare's recent unilateral announcement of a single parent allowance will create anomalies. We must consider the issue of household income because people make economic decisions for their betterment, and who can blame them?

Today's budget is founded to a great extent on Partnership 2000. Fianna Fáil is the party that introduced the concept of that partnership. If one reads the Official Report of that period they will find that speech after speech by the present Taoiseach, the Minister for Social Welfare and other members of the Labour Party opposed the concept from day one. They said that it would not work and that it was undemocratic. Some Members, particularly the Taoiseach, maintained opposition to that concept until they went into Government, but others had the decency to say some years ago that they were wrong.

The figures in today's budget are based on agreement by the unions to Partnership 2000. Perhaps the unions will vote for that partnership, and everybody assumes they will, but my information is that if they do, the margins of victory will be very small. The result is not a foregone conclusion. From my contacts within the trade union movement, I am reasonably certain that the outcome will be very close and it will not surprise me if Partnership 2000 is not accepted.

Is the Deputy recommending support for it?

If that Partnership is not accepted, given that the Minister has already made taxation cuts and adjustments, will there be a mini-budget to address some of the changes?

I read recently that the Minister for Finance, Deputy Quinn, was contemplating resignation from the Government as a result of being upstaged by the Tánaiste and leader of his party. The Minister gave his views on RTE on public sector pay, but after the launch of Partnership 2000 a headline appeared in a major daily newspaper that the Minister was throwing down the gauntlet on public sector pay. Since becoming Minister for Finance, Deputy Quinn has picked Monday morning to throw down the gauntlet to some of his ministerial colleagues, but usually a few days later he gives in.

The Minister is like the fighter who talks about a great fight but when he gets into the ring he just lies down and throws up his hands. He reminds me of Mr. McNeely who fought Mike Tyson — he talked about a great fight until he jumped into the ring when he lay down with fright rather than from a blow from Tyson. In dealing with the Tánaiste the Minister, when he got into the ring — in this case the Cabinet room — lay down and threw up his hands. If he contemplated resignation, and he has not denied he did, he took the matter seriously. It is a serious matter to undermine the position of the Minister for Finance, the only Minister referred to in the Constitution apart from the Taoiseach. He has obligations and responsibilities which far outweigh those of any other Minister. He is responsible for the budget and does not have to get agreement on it from the Government. He is named in the Constitution.

That bodes well for the future.

I give the Minister credit for believing that the matter was serious enough to contemplate resignation. We deserve an explanation from both the Tánaiste and the Minister for Finance.

Some changes in the budget are inconsequential and will make little difference to business people and others. As regards corporation tax, if the change in that regard signals the long-term strategy of trying to reduce the top rate of corporation tax, it is welcome. The Minister said that he is awaiting a report in this area and will make an announcement shortly. It is imperative that that be done in the immediate future because decisions of major companies are dependent on the rate of corporation tax post-2005.

The changes in PRSI will make no difference to anybody. I recently read the results of a survey which states that 78 per cent of small firms have difficulty getting staff — any Deputy could give that information to Department of Finance officials. Some 20 per cent gave the reason that the people involved had no interest in the job, 37 per cent said it was due to the relationship between the social welfare and taxation systems and 43 per cent said that the problem relates to skills. There is no incentive at the lower scale for people to go back to work and there are no measures in the budget to address that position.

Despite great economic growth it is interesting that from 1990-96 there has been no dent in the number of the long-term unemployed. Because we are approaching an election, much was made of the fact that the end of year 1996 live register figure had fallen by 15,000 compared to the previous year. Nobody pointed out that the figure had increased by 15,000 in 1995. It is a fact that in early December 1994 when the Fianna Fáil Labour Government went out of power the live register figure was 272,000 and it was 271,000 at the end of December 1996; there has been no change. Another interesting analysis undertaken recently shows that the number of long-term unemployed has not changed. The great growth we are experiencing has not impacted on that group.

I have told the Minister that the live register is a count of the number of people unemployed week in, week out. Government agencies should make greater use of the information which is available as a result of people signing on the register. With the increasing use of computerisation, I suggest to the Minister that it should be possible to obtain more information on that group than we have at present. To say that the Labour Force Survey is more accurate than a count of people is the same as saying that an opinion poll is more accurate than a general election. That does not add up. If we said we will not bother holding a general election in 1997 but will just carry out a survey at the top of O'Connell Street, people would laugh at us. I emphasised that point before and I do so again.

Some changes proposed in the tax year 1997-98 were not dealt with in the Minister's speech. Mortgage interest relief for 1997-98 will be at the standard rate. It is being phased in over four years. As a principle, I like the idea of standard rating. If a person has an ordinary job and income, he or she is more entitled to the benefits of a taxation break than, say, the higher earner who, if a standard rate does not apply, gets the tax break at 48 per cent and when tax rates were higher got it at those rates. We should be prepared to do something in this area now because I received some interesting figures recently regarding changes that have taken place in this area.

I suggest that the threshold of the interest allowable should be increased. It may interest the Minister to note that, taking inflation into account, in 1996-97 the relief will be only one sixth of what it was worth in 1980-81 and 56 per cent of what it was worth in 1993-94. When married couples, etc. are counted, at least 560,000 people are affected by this measure. Taking the 1993-94 figures into account, at least 570,000 people were affected by it. As the cost of houses is so high and interest rates are low at present, rather than tampering with standard rates, which would be a regressive move, the interest threshold should be adjusted. At present one gets 80 per cent of £5,000, less £200 or whatever the figure is. The benefit of it has been considerably decreased and the Minister might address this matter before the Finance Bill is introduced.

Theraison d'être behind any good economic philosophy should try to address three issues — employment, public services and taxation, in that order. That is a reversal of what some parties in this House would do. The Labour Party would go about it, maybe, somewhat differently and the Progressive Democrats would approach it somewhat differently again. Those three measures represent Fianna Fáil's philosophy on this.

In future budgets we should identify and set out our core expenditures, those that a Government and a society should necessarily undertake. We should provide for them and decide that peripheral expenditures cannot be given priority under the budget or the financial plan. There would then be some rationale behind how we run the country. The Government should disengage from areas where individuals can best provide for themselves. That is the underlying rationale I would like to espouse here today. If we adopted that economic philosophy in approaching a budget or a three year plan of Government, it would be to our betterment. It could then be tied in with annual budgeting to determine where we are going.

It may interest people to note that this is the first time there has been any cut in the standard rate of tax for a number of years. We are proud that we were able to make changes in our period of office from 1987-94. The top tax rate was reduced from 58 per cent to 48 per cent, the standard rate was reduced from 35 per cent to 27 per cent and the debt ratio decreased from 125 per cent in 1987 to what it is today. That is an outstanding achievement of which my party can be proud.

It may also interest people to note that the Exchequer borrowing requirement in 1986 was over 10 per cent and we are delighted to note it is much lower today, but my party leader said quite recently that we should aim not to have any Exchequer borrowing requirement on joining economic and monetary union.

There is a current budget surplus.

The Government has engaged in short-termism to an extreme degree. It has thrown caution to the wind. It has not provided for the rainy day. It has looked only as far as the next election. The budget is pro-cyclical. The last thing the economy needs at this time is the stimulus which this budget will give it. That will be to our detriment. The Government has not taken any account of the fact that EU funds will run out at the end of 1999 and the constraints we will have to put in place when we join economic and monetary union. Regarding public spending, it has spent all the revenue from the growth achieved during the past number of years. In relation to social welfare, it has tried to spread benefits over too wide an area which will not have any real impact.

Every commentator I have read, including the Central Bank, suggests we should not adopt this type of financial approach at this time. The Minister, who has been tied up preparing the budget may not know, but his officials certainly know, that there was a degree of nervousness about the financial markets today in the expectation that the budget would be too expansionary. We may think that nobody pays any attention to us, that this is good theatre and is to impress the electorate, but men and women are sitting in front of VDUs around the world noting what is happening in the Irish economy and taking a position on what they think a Minister for Finance and Government should be doing. We have decided to spend our way out of a boom and we have not made any provision for what will happen in the future.

Much was expected of the Minister for Finance and to those to whom much is given much is expected. We never had an opportunity in the history of the State to show we were responsible and could handle things better than anybody else. The pushing through of this budget by the Minister for Finance, perhaps against his will — there are three parties in Government and it is probably very difficult to operate in such circumstances — will be to the long-term detriment of our people and the economy.

The Minister was impelled to quote James Joyce. At the turn of the century, when he knew he was dying, Oscar Wilde was reported to have said:

It would be more than the English could stand if another century began and I were still alive. I am dying as I have lived, beyond my means.

With a slightly changed wording, could there be any more fitting epitaph for this Administration? It would be more than the electorate could stand if another millennium began and the Government was still politically alive. Politically, it is dying and has certainly lived beyond its means. In sporting terms, in a penalty shoot-out without the goal-keeper, the Minister missed.

I send my regards to Deputy Jim Mitchell who is unwell. He would have participated vigorously in the debate that will take place over the next few days. His work at the Select Committee on Finance and General Affairs on the pre-budget process was highly valued.

This budget, far from being the great giveaway, has turned out to be the great damp squib. It has been portrayed in public as an occasion on which the Government would secure its electoral future.

What would the Deputy like as a wedding present?

The people will not be bought that cheaply. The budget is the longest redundancy application form ever composed and signed by a Minister for Finance and an Administration in the history of the State. It represents the high point of the abandonment of every commitment made by the Government of renewal on taking office two years ago. I do not have to remind Members that it set itself certain targets, one of which was to control public spending. It promised the electorate that public spending would rise by no more than 6 per cent in the first year and 2 per cent in real terms in the years thereafter. It has exceeded those sums by £500 million thus far and proposes to exceed it by even more next year.

The budgetary tables show that there will be a 7 per cent increase in public spending this year. If one allows for the inflation rate which the Minister, through the budgetary changes, is pushing up to 2.2 per cent this year, one is still left with a 5 per cent increase in public spending at a time when he solemnly covenanted with the people it would be 2 per cent. The difference between the amount he said he would run the country for for the past three years and the amount he is proposing to run it for, is of the order of £600 million to £700 million per annum. That would make a huge difference to the capacity of this country to have a pro-enterprise, pro-jobs tax régime. If the Government had kept its promises on the one target it set itself on the day it took office — it was not set by the Opposition — we would be in a radically different budgetary situation now.

The truth is that the figure of 7 per cent is a phoney underestimate of the real underlying rate of increase in public spending. I do not have to quote anybody more or less eminent than Dr. Garret FitzGerald who reprimanded the Minister for moving towards gross increases rather than net increases in his first budget as the real measure of increases in public spending. Using the formula that Dr. FitzGerald said the Minister had wrongly abandoned, the net increase in public spending this year will be 8.2 per cent, four times the rate of inflation.

I will not ask anybody to measure up to standards which are unrealistic, I only ask them to measure up to standards which they set for themselves and which they agreed were reasonable. If the Government had kept the spending commitments it solemnly gave to the people on taking office, we would be in a radically different position.

The Minister will say that there were many unexpected and unforeseen contingencies but the £100 million paid out in equality payments was fed into the system and formed part of the cumulative total for the following year. There is now a publicly stated contingency fund. Although I am aware that the committee on which I served recommended that such a fund be set up, this is a very dangerous development because it seems to be an open invitation to every pressure group to demand that the money be spent and to create the contingency against which the money was provided.

I sympathise with the Minister in attempting to control public spending, particularly in the manner in which he was betrayed by the Tánaiste. It is clear the Minister tried to take a stance to control the explosion in public spending and was prepared at one stage to lay his job on the line but dissuaded by others from doing so. I admire him for taking a stance but it was always inevitable that a Government put together in the way this one was would eventually fall victim to the temptation to increase public spending and even the noble gesture of laying one's own political body across the pathway of increased public spending would not have stopped it. That is the reason the Minister did not carry out his threat. The Government would have carried on without him because its insatiable appetite for increasing public spending at four times the rate of inflation in net terms would not have been embarrassed even for two minutes had it to dispense with him as the price for maintaining the volume of public spending. While I sympathise with him, his gesture in offering to resign was futile.

I remind the Minister that it was not unprecedented. In the 1980s the same force for increased public spending overrode the determination of a previous Government in which Deputy Alan Dukes, who has had much to say in recent days, played a key role as Minister for Finance before his inglorious trip to the Department of Justice——

(Carlow-Kilkenny): He had great material.

——with the result that it proceeded to double the national debt.

The same culprit was involved.

There are one or two provisions in the budget for which the Minister must be commended. He has finally agreed that PRSI is a tax on work and a reduction in PRSI is a pro-jobs, pro-employment step. My party has been saying this for years. The Minister's colleague, the Minister for Social Welfare, Deputy De Rossa, has been denying it emphatically. I salute the Minister's achievement in turning the tide and forcing the Department of Social Welfare to accept that PRSI is anti-jobs and anti-work and should be integrated into the tax system. I salute his first faltering step down that road.

I also salute the 1 per cent decrease in the standard rate of income tax. Why is this being done now and why the sudden and late conversion to a reduction in the rates of income tax? If it was a good idea to reduce the 27 per cent rate of income tax in 1997, why was it not done in 1993, 1994, 1995 or 1996? The reason is the Labour Party's insatiable requirements for public spending in 1995 not only demanded that the process of tax reform be stopped but that a 1 per cent income levy be imposed on all income that year. This amounted to a 2 per cent increase in the standard rate of income tax.

Does the Deputy know why?

The Minister should look at the Labour Party's history of tax reform.

To pay the bills the Deputy's party left behind.

At the beginning of the Labour Party's four years in office it raised taxation on work, but at the end of that term, following a deathbed conversion and faced with an electoral winter, the party is converted to the proposition that tax rates are important.

Only those who understand how people work and what incentive really means understand that tax rates are important. It is neither a right wing nor a Thatcherite notion. The Progressive Democrats seek tax rates in Ireland which Tony Blair is committed to maintaining and improving in Britain. We look for tax rates which the German Government proposes to exceed through tax reductions in the next few years. The top rate of tax in Germany will be 35 per cent in a couple of years. The lower rate will be 20 per cent or less. However, Ireland, under the unreconstructed, left-wing, socialist parties which hold the reins of government, has kept tax rates at their current levels.

There is no decrease in the 48 per cent tax rate. This is probably justified on ideological grounds, on the basis that those who have owe more to society than those who have not. Central to that proposition is a lie: wealthy barristers, doctors, business men and property developers do not pay 48 per cent tax. They use every BES scheme, special savings allowance scheme and other schemes to minimise their tax liability.

The Deputy does his best to help them.

They employ people who are skilled in minimising their tax burden and they feel foolish if a significant portion of their income is lost at a rate of 48 per cent, in addition to PRSI in the case of some of the lower paid.

Ordinary workers earning less than the average industrial wage are obliged to pay 48 per cent tax. These are the people who have never heard of or have never received through the post an application for a BES scheme. These are the people for whom accountants can do nothing. PAYE workers earning less than the average industrial wage are caught by the 48 per cent tax rate. They pay 48 per cent tax in addition to 6 per cent PRSI or 54 per cent of every extra £10 they earn. These are ordinary men and women who work in shops and factories and who earn less than the average industrial wage. They pay more than half of every extra £10 they receive from their employer to Ministers Quinn and Prionsias De Rossa in PAYE or PRSI. They are caught by the tax system.

In the USA, a lady known as the "Queen of Mean", Leona Helmsley, was sent to jail for tax evasion. The reason she gave for evading tax — the judge correctly disregarded it — was that she thought tax was only for the little people. Under the Labour Party, the 48 per cent tax rate is only for the little people, the people who cannot avoid it. They are the people who are hammered and nailed to the floor by the tax system and for whom it spells the end of hope and an incapacity to improve the lot of their families by working harder.

This was not always the case. In 1973, when the Fine Gael-Labour Party coalition came to power, fewer than 2 per cent of taxpayers were paying above the then standard rate of 35 per cent income tax. However, when the Labour Party and Fine Gael finished with the tax system 14 years later in 1987, 42 per cent of taxpayers were paying tax above the standard rate. Those parties brought surtax to the masses and there it has remained. Although the wealthy and powerful in Irish society can move their money offshore, invest it in special savings accounts and BES schemes and thus avoid the consequences of the Government's massive avarice for people's earnings, ordinary PAYE workers cannot and they pay through the nose, week in and week out.

I agree with a columnist in one of today's newspapers who said that the sooner we are rid of the notion of secrecy attached to the budget and the embargo on publication of copies of the Minister's speech before a certain time, the better. When today's budgetary charade is over, we will be left with one fact: single men and women earning less than the average industrial wage will continue to pay more than half of every extra £10 they earn in taxes to a State which is grinding them and their prospects of doing good for their families down and preventing them from rising through their hard work.

There were substantial improvements today.

I will talk about the substantial improvements and I am glad the Deputy suggested it.

Services are required which the Deputy would not provide for people if he were in Government.

The Deputy will have a chance to speak later.

Deputy McDowell without interruption.

The standard rate of income tax has been reduced by 1 per cent. The band has been increased in real terms, after inflation, by 3 per cent. Is that radical? The value of the personal allowance in this great giveaway budget is increased in real terms by 6 per cent. The budget tables offer examples of single people and families who will, according to the figures in the budget, have an extra £8 to £12 per week. However, these tables make no reference to mortgage clawbacks. None of the examples chosen reflects them. What is also not stated in the Budget Statement is the rate at which the Minister is increasing PRSI ceilings. The employee ceiling is being increased by 9 per cent, from £22,000 to £23,000 and the employer's ceiling is increased by 9 per cent. Across the board there are hidden taxes to take back the apparent benefits of the budget.

When people have paid the extra moneys on petrol, mortgages, cigarettes, increased television licence fees and extra PRSI, many families this year, as was the case last year, will notice no difference in their circumstances. Those who notice a difference will see it is so small that they will wonder what a tiger economy is about. In an effort to add literary and artistic flair to his Budget Statement, the Minister referred to Leopold Bloom's budget on Bloomsday. We were told he spent one penny on his newspaper, theFreeman's Journal, the predecessor of the Irish Independent about which the Minister was so scathing. Even at that time, Mr. Bloom had to spend £2.19s 3d, slightly less than £3, on his day's activities. In fact, Leopold Bloom's £3 per day budget on Bloomsday is less than the benefit to most families under the budgetary tables of this budget. We are talking about an increase of the same amount or less. A sum of £3 per day is a total of £21 per week. I defy people to search through the budgets for any ordinary family who will be better off to that extent.

This is a bloomsday gloomsday budget which is being put forward as something magnificent but turns out to be something very disappointing. That need not have been the case. If the Government simply had held to the targets I mentioned earlier, the dramatic scope for tax reductions and increases in essential services would have been enormous compared to what has been achieved today. At the end of 1997 it would have been of the order of £600 or £700 million had the Government simply kept in line with its own promises.

One of the features I have noted about the budgetary process for the past three or four months is that not one governmental programme was examined to see if it was giving good value for money. There is not one reference to the effect that the moneys to be expended under the Estimates have been revised because good value for money is not being obtained. There has not been one saving of significance right across public spending. All we have had is a proposal to increase dramatically the level of spending over and above an already inflated rate last year.

I ask Deputy Ryan or anybody else to say with their hand on their heart to the electorate that there is no economy to be made anywhere, all Government spending is necessary, we get good value for every penny spent, there is no overmanning in any area and there is no scope for savings anywhere. Nobody could say that to the electorate but as far as I can see not a single penny is saved in this budget from the current levels of public spending. There was no control of the growth in public spending, as the figures I mentioned earlier of a real increase of over 8 per cent in net terms over the past year adequately demonstrate.

A decrease which I noticed was on public housing through local authorities. In an election year how can the Labour Minister for Finance reduce the amount of money for spending on local authority housing in capital terms?

When the Deputy's party was in Government not one house was built.

The answer is simple. He found that when he gave the motor tax receipts to the local authorities there would be an overall increase which they could use for some of their purposes. What did central Government do? It clawed it all back and told them they must live on exactly what they had last year. That is interesting when one thinks about it in terms of local government. They must live on what they had last year but at central Government, where the election will be won or lost as far as this Government considers its prospects to be still alive, there will be an 8 per cent increase in net terms in public spending. That is extraordinary. The Government was willing to implement cutbacks everywhere else but where it really mattered there was no such determination.

Deputy McCreevy correctly said that we are now in a position to begin reducing the national debt. Last Monday week the Progressive Democrats published a budget which showed that by controlling public spending, getting better value for money, not filling every position in the public service as it became vacant but asking for a real return in terms of productivity for the moneys due under Partnership 2000 it was possible to begin the process not merely of wiping out the Exchequer borrowing requirement but going one stage further in 1997 and beginning to repay the national debt. The sad fact is that this year the Government is planning to borrow an extra £637 million — I accept there is a surplus on the current side — simply to spend on capital projects, thereby increasing the national debt to that extent and incurring a £30 million or £40 million extra charge per annum to service that additional indebtedness. That is not necessary.

I note there is no provision in these budgetary figures for the Trustee Savings Bank to be floated off into the private sector and a capital inflow to the Exchequer to arise from that. Nor is there any proposal in respect of any part of the semi-State sector to get in private sector capital, investment funds or pension funds to substitute their investment for the capital the State has now borrowed to capitalise those ventures. The reason for that is ideological. Nobody will take the risk, even in this electoral year, of facing up to the reality that the Trustee Savings Bank should no longer be in the public domain. If Greencore or Irish Life had remained in public ownership at the time we handed over the reins of power to the Labour Party, would they still be in public ownership and what terrible effect would such public ownership have caused?

There is huge scope for this country to make Government leaner and more effective. We do not have to capitalise every project from borrowings. We can introduce private funding initiatives, as other countries are doing, for major public projects. We can reorganise our portfolio of public sector assets with a view to reducing the role of the State, the necessity for the State to manage and to take risks and the necessity for the State to capitalise and to pay interest on borrowings for those enterprises. All of this could be done on a non-ideological, pragmatic basis with the interests of all at heart if we were not frightened of our ideological shadows. We are not proposing that a swingeing axe be taken to the semi-State sector. On the contrary, we are proposing a programme of survival for the semi-State sector which enables that sector to be fully competitive in the competitive world which we have not ordained for ourselves but which Europe has delivered to us.

Does it make sense for the Government to borrow money and to pour it by way of capital into an enterprise which is expected to compete with other enterprises on a level playing pitch and at the same time to have the Government be the regulator, referee and arbitrator on that level playing pitch? Does it make sense to have a system in which one is supposed to do justice as between two parties but own, capitalise and take the risk of failure of one of the two parties? It does not. The days are numbered for our capacity to maintain this hybrid world where the State is both capitalising risk-taking operations in competitive fields and at the same time purporting to be the judge and the regulator of those markets. It is not I, the Progressive Democrats or the next Government, whichever way it will be formed, that are numbering those days. It is the inevitable laws of economic competition handed down to us from the European Union.

As a society we have to take advantage of the next five years, 1997 to 2002, to transform this country from top to bottom. There is something radically wrong with our tax system and only radical steps will put it right. Incrementalism such as the 3 per cent in real terms we have seen today or the 1 per cent decrease in income tax rates over five years of the Labour Party in office will not do. If we are to compete with Tony Blair's Labour-led Britain, which in all probability will come to pass, our workers are entitled to as projobs a tax system as his workers. If we are to compete with Germany, which will have tax rates of 35 and 20 per cent respectively, our workers are entitled to a Government which has made the necessary preparations to allow them compete on a level playing pitch with German industry and capital which can locate much closer to the European centre.

A total of 40,000 new jobs are contained in today's programme.

I am glad the Deputy reminded me. Last year I queried the speech made by Deputy Quinn when he said 5,000 jobs would be created by the jobstart scheme.

That is right.

I recall that a newspaper the next day, the successor to theFreeman's Journal, contained the headline “Quinn introduces pro jobs budget”, with the line “5,000” studded across the three page feature inside. However, by the summer only 100 jobs had been created and less than 1,000 jobs were created by the autumn under that programme. I know what the Deputy means when he says the budget will create 40,000 new jobs; employers and workers will create a real economy with growth and 40,000 jobs.

Who is holding them back?

A total of 50,000 new jobs were created last year, the highest number ever.

The Government and the tax system are holding them back. The economy needs what Dublin traffic had over Christmas, an operation free flow.

Hear, hear.

We need a system where all the obstructions and anti-competitive activities are moved on carefully to create a free flow of resources into employment creation, workers into jobs, and through poverty traps which are as bad as cars on freeways.

On double yellow lines.

The economy needs less, but more effective, government, less taxation on work and a Government which is committed over a period of time to the programme of transformation I stated.

Deputy McCreevy mentioned the period between 1989 and 1992 when the top rate of tax was reduced from 58 per cent to 48 per cent and the lower rate from 35 per cent to 27 per cent. This was not achieved by considering what was left over each year for tax reduction but by the exact opposite arrangement with a statement that the tax rate in the following year's budget would be a certain figure before deciding what accommodation had to be made to achieve it. All the Finance Bills which achieved that significant transformation in the tax system were voted against solidly by the Labour Party. On occasions when I hear the vehemence with which it condemns the tax reform policies of the Progressive Democrats, which were echoed in a long since forgotten Labour Party document in 1988 — the Deputy may have heard of it — I wonder if anybody in that party wishes to return to pre Progressive Democrats tax rates. Do they wish to return to a 35 per cent standard rate of tax, which, in conjunction with PRSI, meant that over 40 per cent was the first effective tax rate for workers?

I do not want to go back to the borrowing rate which obtained when the Deputy was in Government.

Does the Deputy want a tax rate of 58 per cent applying to workers earning well below the average industrial wage?

Deputy McDowell without interruption.

That was the rate and we changed it. People in the Labour Party who want to turn back the clock and say we were wrong should stand up and state that we should revert to the tax system which operated before the Progressive Democrats began the revolution in tax reform in this country. Why are the people now being asked to accept, in the twilight hours of this Government, that reducing tax rates is a good idea when it was not a good idea for the last four years?

I said previously that 1997 marks the end of a 25 year period in which the Labour Party has been in office for more years than any other party. It has been in office for 15 of the last 25 years. It brought down a Government on the issue of who it wanted appointed to the courts. It does not lack bottle when it comes to something really important, such as that matter. However, when it comes to something which I consider important on behalf of workers, how much the State takes from their wage packets every week, the Labour Party has never taken a stance. It has never said it is fearlessly on the part of workers.

I am convinced the Deputy is not on their side.

During those 25 years, we have come from a position where less than 2 per cent——

The Deputy has two jobs.

——of people were earning sufficient money to pay tax above the standard tax rate to a position when the Labour Party last left office where almost 50 per cent of people were paying income tax rate at the higher rate.

How much does the Deputy earn?

Is Deputy McDowell getting to the Deputy? He is hitting home.

I thought Ceauceseu was dead. Did the Deputy buy into Stalin's set up?

Those decisions did not occur by stealth. Some people think it was the effect of annual inflation at a fierce rate, the diminution of the value of the tax allowance or an unconscious process which nobody chose. However, that is not the case because the tax rates are reviewed every year in the Finance Bill. The position where workers in the Deputy's constituency are paying more than half their marginal earnings in tax and PRSI was chosen by successive Governments in the last 25 years. The chief moving party in that process of increasing taxation so there was more money to spend at every stage was the Labour Party.

The phrase "tax and spend" has been used and it is easy to throw it out as a jibe. However, I do not use it as such. The record shows that the taxation of workers' earnings over the last 25 years is crippling and that welfare versus taxation as a deciding factor in whether people work has dramatically changed over that period. There must be political responsibility and accountability for that change. Those who were in office for the great portion of that period must take responsibility for the shape of the current tax system. I look forward to the next general election and even more so following the Budget Statement. I thought it would be an election winning budget, but an election losing budget was announced because people will say tomorrow: "Is that all? Is that what we were waiting for? Is this the bonanza we were promised? Is this the price of our vote in the cynical minds of the Government spin doctors and programme managers?" They will say it is not for sale at that price.

The Government, which has, according to opinion polls, one third of popular support, is facing an election campaign and hoping to swing around, in a Lazarus like resurrection, its political fortunes on the basis of its performance in office.

We will stand on our record across the board.

The Government will stand on its record but, like anybody who stands on a record, it cracks. That is what happened today.

We will stand on our record.

The Government stood on its record and it is broken. The people are not fooled by the rhetoric, the quotations from Joyce, the so-called largesse of the Minister for Finance or the gross figures. They are well tried people in terms of the bottom line.

They will not vote for the Deputy.

They know that in April, when they look at their pay slips, the truth of four years of the Labour Party in Government will add up, in the case of pensioners, to less than the price of a bag of coal. That is the increase in pensioners' spending power over four years of the life of the Celtic tiger. How do they feel about that?

However, that need not necessarily be the case because the Progressive Democrats' alternative budget, which was castigated by the Left, proposed economies in the way the State is run and also proposed an extra £5 for every pensioner. That is much more than is on offer in today's budget. It proposed an increase in the carer's allowance which is far more than what is on offer here. It also proposed an increase of £4 in child benefit, four times what is on offer here. In spite of all the cant from some Deputies on the Government side about the huge revolution in child benefit, this year we are talking about £1 per month, the price of a chocolate bar per week, as the bottom line for children in needy homes in Irish society.

Give all the facts.

Deputy Ryan is trying to defend the impossible.

If that is the extent of preelection largesse, I am sorely disappointed. I have come to the conclusion that the budget processed this year was fatally compromised by the three party process, the wrangling over whether PRSI could or could not be reduced, the wrangling over whether the top rate of income tax could be reduced and the absolute determination of every spending Minister to hang on to every penny. All these have combined in the rather dismal and pathetic spectacle we have today — a budget which achieves very little for many people, nothing for some people and a good deal for a very small group.

This is an election year and this is an election budget, but it is an election budget which will see this Government swept from office and replaced by a Government which will put tax reform as the cornerstone of the budgetary process every year.

I think Deputy McCreevy was trying to draw a distinction between the approach of the Progressive Democrats and that of Fianna Fáil when he said that we had to deal first with employment, second with public sector spending and programmes and third with taxation. If I were asked to rate their importance I would agree with Deputy McCreevy that that is a proper sense of priority. What is peculiar is that if one does nothing about taxation one will not achieve much in relation to employment.

What is it about other countries that stimulates Irish children who go there to work during the summer, to take two jobs and work hard for all the hours of the day and night to bring money home? What is it about this country that produces the opposite reaction, to leave the country because there is no room for enterprise? It is our tax and welfare systems. We have to face up to that because the post-EMU Europe will not be a forgiving society. In the brave new world of the post-EMU European economy, any country that has an anti-work, anti-employment tax system will suffer a haemorrhage of people to the other regions of the European Union throughout the period it struggles to remain within economic and monetary union. Ireland is being asked to pay a heavy price in terms of financial autonomy, control of our interest rates, and perhaps fiscal autonomy, in taking the next step in European economic integration. If we are to pay that price and be in a position to sustain that price year in, year out, we must make the changes now, because the window of opportunity when EU transfer funds will make it politically possible to effect the radical and fundamental changes in our society, in our tax system and in our expenditure patterns, that are needed to make Ireland a self-starter which hits the ground running in the post-EMU Europe is a narrow range of time — three or four years at best. If the present Government were by any mischance to be re-elected — and I cannot see that happening — that window of opportunity will be slammed shut and the opportunity for Ireland to prosper in post-EMU Europe will be thrown away.

We have seen what Labour has done with its pledges to control public spending. It has cynically ripped them up every year. There is no reason to believe that, if the Labour Party got back into office as part of the Rainbow or, by some disastrous set of circumstances, by wooing any other party into office with it, it would behave differently. It is ingrained in the nature of the beast that it will always exceed its expenditure targets and never make the economic decisions that are necessary to sustain real development.

The Progressive Democrats is a party which is creating choice. If these seats were occupied by others, if they were spread between Independents and the other parties in this House, the next election would be reduced to one single proposition — with whom would the Labour Party make the most beneficial electoral arrangement after the next election? There will not be a Fine Gael-Fianna Fáil Coalition. If we were not here, there would be one choice for the Irish people — to choose a mate for Labour. Because we are here the people have a choice; it will be a straightforward choice. It will not be a choice between extremes as some people like to characterise it. It will be a choice between sanity and insanity, between squandering and saving——

Not squandering, using money usefully.

——between building a pro-jobs economy or squandering our growth in additional spending. Over the next four years we will have the choice of matching Tony Blair's Labour Party taxation policies in England or failing to do so because we have a pre-Berlin Wall Labour Party in office in Ireland. We will have a choice of doing in Ireland what the Labour Party did in New Zealand to transform the economy seriously or to abandon that and allow Ministers Proinsias De Rossa and Dick Spring to continue with the squander-mania of an 8 per cent net increase in spending over the next few years. We will have the choice of matching the tax rates that Chancellor Helmut Kohl and the Free Democrats are going to produce in Germany or carrying on with a 1 per cent change in the income tax rate every five years, which is the legacy of Labour.

I have no doubt about the choice the people will make if that issue is put to them fairly and squarely. I accept that this is an electoral budget, but it is an electoral budget that blows the whistle on an electoral year that will be decisive.

It is a budget in an election year. There is a difference.

I believe 1997 will be the year when the lack of economic philosophy and ideological confusion and the lack of will to stand by commitments given to the people which this budget represents will be shown up for what it is, and that the people will choose a better, saner, more enterprising path. I welcome today's budget from my heart because it shows clearly, as no speech of mine could do, how hopeless it would be to re-elect this Government or any Government in which the Labour Party has its hands on the levers of the economy. It shows clearly how they will squander every opportunity to transform this country. It shows that next year they will have another 8 per cent real net increase in public spending even though they will probably promise the electorate this summer they will do something radically different. If Deputy Ryan is standing on his record I am glad this budget represents his best because the worst has been a lot worse. If this amounts to the best, I face the next election with confidence and satisfaction that for once in recent years the Irish people will have a simple and straightforward choice put before them which they will make.

On that issue we are agreed.

The Progressive Democrats will play its part in undoing the damage Labour has done for 15 of the last 25 years, making sure that Ireland, in post-EMU Europe, is a thriving, thrusting, worthwhile, enterprising economy,——

We will fight you in the constituencies.

——the kind of economy that provides jobs for its people and fights poverty with jobs not rhetoric, which is what today was about.

Sitting suspended at 6.40 p.m. and resumed at 7.10 p.m.