I wish to respond to some of the points made by Opposition Deputies. Deputy Cowen asserted that the budget took little regard of considerations relating to the proposal to join economic and monetary union a most important policy issue for the country in the years ahead. However, I do not understand why the Deputy made that assertion and I reject it.
The criteria for entry to economic and monetary union includes a serious reduction in the debt towards 60 per cent of GDP. Under the Government the debt percentage has fallen from 88 per cent to 73 per cent and it is targeted to fall to 69 per cent at the end of 1997. By any yardstick, we are comfortably complying with that requirement. The next criterion involves inflation. The inflation rate which we must be beneath is approximately 2.5 per cent and our inflation rate is approximately 2.2 per cent. It is not a matter for complacency but it is well under control. We must have a general Government deficit less than 3 per cent and the target this year is 1.5 per cent. Most other EU states which are hoping to be among the first group of countries in economic and monetary union are having great difficulty keeping below 3 per cent. However, Ireland's target is 1.5 per cent. The other criteria include stable, low interest rates. Historically, Ireland has never been in better shape on that issue. A stable currency remaining within the EMS bands is also required. Ireland is at the top of the band. The Deputy's assertion that the budget disregarded considerations relating to economic and monetary union is not true and I reject it.
Deputy Cowen also stated that the tax package was not significant in light of the current tax buoyancy. The package, at almost £300 million this year, is the largest in the history of the State. The Deputy's comment that it is not significant and his party spokesman, Deputy McCreevy's statement on budget day that it was dangerously generous highlights an inconsistency which is difficult to defend. Deputy Cowen said the public is especially disappointed with the continuing tapering of mortgage interest relief. He must have a short memory because that concept was introduced by Deputy Bertie Ahern when he was Minister for Finance and it is generally considered fair and reasonable by all parties in the House. I do not understand the Deputy's criticism.
Deputy Cowen said that the general increases in social welfare should be limited to the cost of living. However, Deputy Joe Walsh said he welcomed many aspects of the social welfare package but that much more was required. I fail to see a consistency between those two distinguished Fianna Fáil Front Bench spokesmen. If one took a position half way between the two, we must be about right. The social welfare package indicates compassion in addition to working within affordable limits.
Deputy Walsh criticised the Government for failing to implement in full the measures proposed by the commission on social welfare. However, the Government has made more significant progress on that than any of its predecessors. It is totally committed to its implementation within the timeframe of Partnership 2000. The Deputy also said the Government, obsessed with self-preservation, had tried to maximise tax giveaways in an election year. Deputy Cowen said the tax package was not significant but Deputy Walsh said the Government maximised it for election rather than economic reasons. The inconsistency is startling.
Deputy Cullen referred to the explosion in public expenditure and the miserable reduction in the standard tax rate. Effectively, the standard rate reduction is not 1p, as he stated, but 2p because of the reduction of 1 per cent in PRSI. While I admit and accept that public expenditure is higher than the Government's target and it is a reasonable criticism to make, it is not consistent, relative to the facts and the performance of previous Governments, to refer to it as an explosion.
The Deputy, who has a strong interest in the development of small and medium sized businesses, also commented on the failure to provide more corporation tax reductions. I do not understand the logic of the Deputy's argument. The Government has, over three budgets, reduced the corporation tax rate for small businesses from 40 per cent to 28 per cent. That is far and away the most significant focused tax reduction made by any Government in recent times. It is directly focused on small businesses with profits of up to £50,000.
Deputy Cullen also said the Government is pushing our economic and monetary union qualification criteria to the limit. I already dealt with that aspect and it does not bear serious examination. While I am not complacent about the matter, we will have some difficulty on the inflation front because the rate at which the economy is growing is bound to stoke up some inflationary factors. That is certainly occurring in the construction industry in Dublin. I am not in the least complacent about it. The Government is focused on the economic and monetary union criteria which we will meet reasonably comfortably. Deputy O'Dea referred to inflation as a serious problem and I take his point, but nonetheless he has exaggerated.
Deputy Dempsey commented on the failure of my party to impact seriously on the budget deliberations. The budget sub-committee of the Cabinet which discussed much of the framework for the budget — obviously the Cabinet made the final decisions — comprised the leader of my party, the Minister for Enterprise and Employment and myself representing Fine Gael, the Leader of the Labour Party, the Tánaiste, and the Minister for Finance representing the Labour Party and the Minister for Social Welfare, Deputy De Rossa representing Democratic Left. There was proportionate representation of the parties in Government and the overall package was roughly in line with that proportion of 3:2:1. One could argue that matter for ever, but I reject out of hand the notion that Fine Gael did not have a serious hand in framing the budget.
Deputy Quill said that we should do more for the needy and make more tax cuts. In fairness to Fianna Fáil, it did not make the case for massive tax cuts while at the same time doing more for the needy. The Progressive Democrats proposals avoid all the hard choices in terms of spending, yet favour a massively greater tax package. I do not see how that party will make a comfortable partner; the Fianna Fáil Party is much more responsible in its approach to those matters. The Progressive Democrats received much favourable comment by the public — anybody who favours massive tax cuts will find themselves in that position — but that party will be uncomfortable to deal with if it insists on doing more for the needy while making massive tax cuts. That would be impossible.
Deputy Quill referred to Progressive Democrats budgets in the past, but there is no such thing because the Progressive Democrats Party was the junior partner in Government with Fianna Fáil. The assertion that it delivered more tax cuts in less favourable economic circumstances does not stand up because the present tax package, which has been criticised as too generous, is the largest by far in the history of the State. The Deputy said that if Fianna Fáil and the Progressive Democrats had remained in power the higher rate of tax would be 40 per cent. I do not know if that would be at the expense of the lower rate or how it would be paid for. Nobody would deny the desirability of reducing tax rates from 48 to 40 per cent and 26 to 20 per cent, but everybody knows that is not possible in the short-term except at the expense of some other area.
Deputy Quill said that the tax regime is a barrier to the attraction of multinational companies, but that flies in the face of what is happening at present. There never were as many international companies setting up in and around this city and to some extent around other large cities. In the past six months there has been a boom in multinational companies, household names from around the world, setting up here. Deputy Quill also referred to the lack of Fine Gael influence on the budget, which I have dealt with.
Deputy O'Donoghue made a plea for more spending in the area which he strongly represents. He sought additional resources in the area of crime prevention, in other words, more spending, yet that is an area in which the Progressive Democrats proposes to make cutbacks.
Deputy O'Hanlon said that there are no specific measures in the budget to reduce the national debt. The Deputy did not listen to the Minister because for the first time in the recent history of the State the budget provides for such a reduction, and there is much more to be done in that regard in the years ahead. The Deputy referred to making adequate provision to tackle problems raised by the reduction in EU Structural Funds post 1999. If he looks at the three year projections he will see that the Minister for Finance has included prudent contingency provisions. It is not easy and it would be very unwise in terms of negotiation to give specific figures for that purpose because that would give away our strong negotiating position. In terms of the three year projections, even in the final year there is a contingency provision which will, I hope, cushion any such development in that regard.
Deputy Ned O'Keeffe suggested that the Government, in its tax proposals, should have sought to abolish levies. I find that surprising because the levies, which amount to 2.25 per cent, were introduced by previous Governments led by Fianna Fáil and the cost of abolishing them would be £400 million in a full year. While it would be desirable to abolish the levies, and it must be faced up to in some measure in the years ahead, it would have the effect of swallowing up more than the entire package of one year. The levies impact least on the less well off; the higher one's income the greater the impact of the levies. Any budget that would seek to abolish the levies would be very one-sided, but I accept the desirability of reducing and ultimately abolishing them.
Deputy O'Keeffe put forward the proposal to offset pre-trading expenses against tax liabilities for small start-up businesses. That is being done. He said that corporation tax should be further reduced for small businesses, but the previous reduction in the rate from 40 to 28 per cent over a couple of years is significant.
Deputy Andrews claims there are no incentives for tourism in the budget. Tourism prospers most in an economy where there are low interest rates, a stable currency, low inflation, a stabilising factor in terms of wages and costs which results from Partnership 2000, and an expanding economy, all of which are self-evident. Tourism is prospering and will continue to prosper as long as the Government and its successors continue that framework.
Deputy Michael Smith made a plea for the reinstatement and expansion of farmyard pollution schemes as a boost to tourism. There is a measure in the budget to provide generous capital allowances for farmers investing in such schemes.
Deputy Seamus Brennan raised the issue of the establishment of an EU compensatory fund to provide assistance to member states suffering in the event of currency turmoil. That is a double-edged sword because if it were introduced we would also have to contribute. As ours is a well-managed economy, it would be likely that we would pay into that fund rather than receive payments from it, so that is not a good idea.
Deputy Haughey referred to the stamp duty increase as an anti-Dublin and anti-young people measure. That is incredible, given that we are removing service charges and RPT, which were both seen to be adversely affecting Dublin. Those two reductions are the single biggest pro-Dublin measure that any Government has taken in recent times so I reject his suggestions. I do not know how he can suggest it is anti-young people because stamp duty does not apply to new houses and very few young people buy houses for more than £150,000.
Deputy Callely referred to several issues, one of which is prison accommodation. That is my area and this Government, in a very accelerated prisons programme, will provide 800 additional prison places in just over two years. That programme is well in hand.
The leader of Fianna Fáil recently proposed increasing overseas development aid spending significantly. I welcome that but it is an additional commitment to public expenditure by a party that is criticising us for excessive spending.