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Seanad Éireann debate -
Wednesday, 7 May 1975

Vol. 80 No. 11

Finance Bill, 1975 ( Certified Money Bill ): Second Stage.

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

The Finance Bill is designed primarily to give statutory effect to the taxation proposals which I announced in the budget last January. The basic aim of that budget was to assist in the maintenance of employment and the preservation of living standards, in line with the strategy set out in the White Paper A National Partnership which had been published in November.

Because of the openness of the Irish economy the impact of adverse external economic forces is particularly severe. The increase in the prices of oil and other commodities, despite the impressive performance of exports, led in 1974 to a balance of payments deficit of the order of £300 million while the year to year rise in the consumer price index to November, 1974, was 20 per cent.

Allied to the high rate of inflation we had the phenomenon of steadily increasing unemployment during the course of 1974 with the result that by early January, 1975, the total number on the live register was, at 96,000, over 33 per cent up on the previous year and represented about 8 per cent of the work force. Industry was experiencing serious difficulties not only because of the fall in demand but also because of severe liquidity problems in conditions of accelerating inflation and, as well, agriculture was suffering from a slump in beef and cattle prices.

While the large external deficit would in the normal course call for immediate corrective action it was decided instead, in the light of the exceptional factors which had given rise to it, to bring the deficit into line in a phased manner over a number of years. The alternative which would involve precipitate action could have a damaging effect on the economy. It is, of course, of paramount importance that we should not embark on any course which would run counter to this strategy and harm the prospects of correcting our present external imbalance. The opening gap on the 1975 budget was £64.2 million. In the budget I provided a total of £78.6 million for increased public service pay, social welfare benefits and other schemes designed to encourage the training of workers and the stimulation of output. The social welfare increases are an indication of the Government's continuing concern, as shown in the last two budgets, for the less well off groups in the Community. The result is that the 1975 estimate for Exchequer expenditure on social welfare is, at £210 million, almost two and a half times the 1972-73 level. In addition, the dates on which the improvements take effect have been advanced by several months from October to April and provision has been made for another increase in the weekly payments from October next.

The budget also announced substantial tax concessions costing £27.8 million in respect of both personal income tax relief and company tax relief. The increase in the personal income tax allowances for the second year in succession has brought the cost of these measures in a full year to no less than £60 million. I would like to point out that this provides an unprecedented level of relief for income taxpayers despite the many calls on the Government for other easements and reliefs. The tax concession to industry which will cost about £12 million this year should substantially assist that sector in overcoming its liquidity problems.

After allowing for departmental balances I was left with a balance to be financed of £164.6 million. After a full consideration of the possible financing options open to me the Government decided that it was appropriate to obtain some of this balance by increasing taxation on less essential items and accordingly some £39.2 million is being raised from increased taxes mainly on alcoholic drinks and tobacco. This left a deficit on current account of just over £125 million.

The increase provided for in the public capital programme was of the order of 20 per cent with capital grants and loans to industry showing the greatest increase. The 1975 provision for capital expenditure by the Industrial Credit Company is £24 million which is many times more than the 1972-73 provision of £4.6 million. In addition the provision of £4 million in 1975 for Fóir Teoranta will help potentially viable enterprises to overcome temporary difficulties which are exacerbated because capital cannot be raised from normal commercial sources. A total in all of £90 million is provided for capital grants and loans to industry as compared with an estimate of £64 million for 1974-75. Furthermore the Government subsequent to the budget have decided that the local authorities should be enabled to spend an additional £7 million on the local authority housing programme in addition to the budgetary allocation of £51 million in the current year. This means that the State's allocation of resources to housing is now 125 per cent higher than two years ago, quite a remarkable achievement. This substantial additional injection of funds into the economy makes a valuable contribution towards the maintenance of investment and the creation of new jobs.

In fact the 1975 budget was the most reflationary ever introduced. With a current deficit of £125 million it means that rather than imposing extra taxation the Government are borrowing for current use £125 million or £1 for every £10 of current expenditure. As the Government are also borrowing £288 million for capital investment, a total of £410 million or about one quarter of the total expenditure for current and capital purposes is being borrowed. The only alternative to that borrowing would be higher taxation at home. Of course borrowing cannot be effected without risk or limit. The supply of borrowed money is uncertain because lenders, particularly foreign lenders, cannot be compelled to lend and whatever money is borrowed has to be repaid with high interest rates in short periods. Borrowing is certainly the proper course today to avoid even greater slump and unbearable taxation, but we cannot overlook that we are mortgaging the nation's future to relieve present difficulties.

Nevertheless developments since the beginning of the year vindicate the carefully expansionary stance which I adopted in the January budget. Policy makers in other countries are attempting to strike a balance between curbing inflation on the one hand and combating recession on the other. The steps to boost activity which some countries have taken should bear fruit later in the year when we should be in a position to take advantage of them.

In common with the experience of many other countries, we are finding that tax buoyancy is not now as elastic as it was in days when economic growth was assured. Inflation is pushing up the costs of Government as remorselessly as the costs of other sectors of the economy. Incessant demands for the Government to produce still more cash to relieve the burdens of various groups or to pay the increased wages and salaries of public servants resulting from national pay agreements cannot be met without resort to further taxation. Those asserting that the limit of taxable capacity has been reached should logically withhold demands for increased Government expenditure. This logic is singularly lacking in most cases.

It is necessary to speak bluntly like this because to judge from the vehemence and selfishness of many protesters seeking to use powerful muscle to extract more than their due from the public purse, many people are still wilfully and culpably blinding themselves to the unpleasant realities of today in which unacceptable levels of inflation and unemployment, if not threatening our very survival, are certainly postponing the prospects of a recovery.

While the Government accept and will not shirk their responsibility to grapple with the problems facing the country, we attach importance to obtaining the understanding and cooperation of the social partners in implementing any corrective action. That is why the Government have invited representatives of employers, employees and farmers to join an emergency working group to recommend remedial action for present difficulties. The Government, of course, reserve the right, at all times, to take whatever action may be required in the national interest.

I now turn to Part I of the Bill which is subdivided into five chapters dealing with income tax and corporation profits tax. The principal measures relating to allowances, reliefs and rates of tax are set out in Chapter I.

Section 1 raises from £409 to £497 the income limit of a dependent relative to ensure that the full dependent relative tax allowance can be claimed where the relative has no income other than the non-contributory old age pension.

Section 2 provides for the restoration as from 6th April, 1974, of the same cash differential which existed prior to then between the tax relief given to higher-rate taxpayers in respect of life assurance premiums on policies with Irish and non-Irish companies.

Section 3 to 8 inclusive provide for certain amendments and extensions of existing capital allowances. In considering this matter, the Government have been strongly influenced by the need for investment by the industrial sector at this time so that it can reap full advantage from the fruitful, but competitive, years that lie ahead. Sections 3, 6 and 7, which relate to the tax allowances which may be obtained in respect of new plant and machinery, extend from 31st March, 1975, to 31st March, 1977, the period of operation of the 100 per cent initial allowance, the free depreciation provisions and, in the case of expenditure in the designated areas, the additional 20 per cent investment allowance. Section 8 provides for the continued suspension of the special 40 per cent investment allowance for ships, which, I might mention, was introduced in 1957 when the rate of initial allowance was only 20 per cent and free depreciation did not exist.

Sections 4 and 5 relate to expenditure on industrial buildings. In order to give an immediate stimulus to the industrial and building sectors the rates of industrial buildings allowances are being temporarily increased, from 20 per cent to 50 per cent in the case of the initial allowance and from 2 per cent to 4 per cent in the case of the annual allowance. In addition, the initial allowance for market garden buildings is being increased from 10 per cent to 20 per cent—the same level as applies to farm buildings—which ensures that market gardeners will not be at a disadvantage in this regard as compared with farmers.

Section 9 exempts from income tax the new monthly payments— ranging from £25 to £75—by the Minister for Health to thalidomide children, which supplement the already-exempted awards from the West German fund for thalidomide victims.

The reductions in the higher rates of personal income tax, effective from April, 1975, to coincide with the introduction of Wealth Tax, are provided for in section 10. Section 11 provides for the increases in the personal tax allowances for 1975/76 which were announced in the Budget.

I now come to Chapter II which deals with the taxation of farming profits. Section 12 will ensure that, as from 6th April, 1975, land taken for grazing will for tax purposes be regarded as land taken for farming. This will remove the anomaly whereby land taken for grazing was not taken into account in determining a farmer's land valuation for the purposes of the taxation of farming profits. In effect, grazing profits, which hitherto were separately assessed to tax, will in future be treated as farming profits.

Sections 13 and 14 are to remove a doubt about the application of sections 15 and 16 of the Finance Act, 1974, in the case of those persons with land of £100 valuation or more who are also carrying on another trade or profession. Thus if these persons were held not to be within the scope of section 16 of the 1974 Act they would be entitled to marginal relief and to the option of being assessed on the notional basis. Since this was not the intention, sections 13 and 14 of this Bill have been designed to remove any possible doubt on this score. The sections will have effect as from 6th April, 1974.

Section 15 is an amendment to section 17 of the Finance Act, 1974. That section sets out the criteria for determining the occupation of land. It provides for apportionment of the rateable valuation of the land where the land is beneficially owned or occupied in partnership with others. During the passage of the Finance Bill last year, it was pointed out that the section as it stood might not cover such cases as tenancies in common. I think that section 15, which will be operative as from 6th April, 1974, will meet this point.

Section 16, introduced on the Committee Stage of the Bill in the Dáil, amends section 20 of the Finance Act, 1974, by extending from six months to 15 months the period of time in which a farmer may opt for a current year basis of assessment in respect of tax liability 1974-75.

As I indicated in my budget statement, the option provided for farmers under section 21 of the Finance Act, 1974, whereby they could elect for a notional basis of assessment for 1974-75, is being extended for a further year to 1975-76 and section 17 provides for this. This section also extends from six months to 15 months the time given to farmers to opt for the notional basis of assessment for the tax year 1974-75.

Section 18 provides for two further valuable concessions for farmers as follows:

Section 22 of the Finance Act, 1974, provided for an annual farm buildings allowance of 10 per cent. However as many farm buildings have a relatively short life it has been decided to provide, in addition, an initial allowance of 20 per cent.

Section 18 provides for this concession with effect from 6th April, 1974.

Section 18 also provides a further concession for those farmers now liable to tax who undertook heavy expenditure in the years immediately prior to 1974 to prepare themselves for entry into the EEC. In many cases these farmers raised substantial sums of money in the expectation that they could be repaid out of tax-free profits. Since this is not the case as far as those farmers now liable to tax are concerned the Government have decided, as an exceptional measure, to ease this particular problem by providing that the existing annual farm buildings allowance will apply to expenditure incurred on or after 6th April, 1971, instead of 6th April, 1974.

One other section in the Bill relevant to farming taxation is section 23 which ensures that the farm buildings capital allowances apply for corporation profits tax as well as for income tax.

Chapter III, comprising sections 19 to 22 together with the Second Schedule, deals specifically with one particular type of tax avoidance scheme. The essence of the scheme in question is the creation of special leasing arrangements between associated companies so that a large premium becomes deductible immediately for tax purposes by one company while the same premium, because it is expressed to be payable in instalments over a period of perhaps 40 years, is chargeable to tax in the hands of another company over a long period of years by reference to the instalments received.

The Bill counters these schemes by tightening up the existing tax legislation regarding leases.

Chapter IV of the Bill which deals with corporation profits tax, contains two sections, one of which, section 23, I have mentioned already. The other section, section 24, provides for the continuation, for a further year, of the exemption from corporation profits tax accorded to certain public utility companies, building societies and the Agricultural Credit Corporation Ltd. This provision is necessary in view of the already announced deferment to 6th April, 1976, of the introduction of the proposed single tax system of company taxation.

I now turn to Chapter V of the Bill, which deals with a number of miscellaneous taxation matters. Section 25 is designed to overcome difficulties which arise under existing law in the service of taxation notices. As matters stand, notices may be served on a company only at its last-known registered office and on an individual only at his last-known residence or place of employment. This requirement has given rise to difficulties not only for the Revenue Commissioners but also for taxpayers who may find themselves liable to pay interest on overdue tax because of delays in the transmission of demands to them from old addresses. The section therefore proposes that documents may also be served at places of business.

Sections 26 to 28 contain provisions relating to interest payable on late payments of tax to the Revenue Commissioners.

Section 26 provides that in cases where it is necessary after the end of a tax year to serve formal estimates so as to recover PAYE tax not remitted by an employer, interest will be payable by him from the end of the tax year in question to the date of payment.

Section 27 provides that interest paid to the Revenue Commissioners by a principal contractor, because of delays by him in remitting tax deducted from payments to subcontractors, will not qualify for tax relief, and so places such interest on the same basis as interest on other overdue tax.

Because of the very steep increase in the cost of borrowing, the rates of interest charged on overdue tax in recent years have been failing to discourage delays in tax payments or to compensate the State for the cost of its consequential borrowings. Section 28 accordingly provides for an increase to 1.5 per cent per month in the rates of interest charged on overdue tax.

Section 29 provides that in cases where a refund is made of the value-added tax paid in connection with capital expenditure on mining or farm buildings, the capital allowances shall be computed only on the net expenditure. A similar provision in relation to the capital allowances then existing was contained in the Value-Added Tax Act, 1972, but, as it is more properly concerned with income tax and corporation profits tax, the relative provision in the Value-Added Tax Act, 1972, is being repealed and instead a new comprehensive section is being included within the income tax and corporation profits tax code.

Section 30 provides for the passing on of relief to shareholders where dividends are paid by a company out of income from patent royalties which are exempt from tax under the Finance Act, 1973.

The Government proposals for giving relief through the taxation system to companies suffering from liquidity problems are detailed in section 31 and the Third Schedule. Because of the recent severe increases in the cost of replacing trading stock many companies, merely to maintain the same scale of operations, have had to plough back into their businesses profits which would otherwise have been free for other purposes.

In order to defer the collection of tax on such profits, it is proposed, generally speaking, to allow in the computation of taxable profits of certain classes of company a deduction of the amount by which the increase in the value of trading stock and work-in-progress exceeds 20 per cent of the trading profits. The relief will in general apply to corporation profits tax for accounting periods ending in the tax years 1973-74 and 1974-75, and to income tax for 1974-75 and 1975-76. This relief is a temporary expedient, aimed at giving help where it is most needed. The problems of business liquidity vary as between different sectors of the economy and as between individual firms in those sectors, depending on various factors such as profit margins, length of credit, and frequency of stock turnover. Clearly, the deferment of tax would not be justified for certain types of business. Accordingly, the proposed relief is being confined to companies engaged wholly or mainly in manufacturing, construction or farming or in the sale of plant, machinery or material to those sectors. It would not be administratively feasible to bring unincorporated traders in the qualifing sectors within the scope of the relief in this Bill but I propose to extend the relief to them in next year's Finance Bill.

Section 34 extends to buildings used by persons other than farmers for the intensive production of cattle, sheep, pigs, poultry or eggs the same level of capital allowances as is available in respect of farm and market garden buildings.

The remaining sections of Part I of the Bill are of a mainly consequential nature.

Sections 32 and 35 effect some minor textual and drafting corrections in existing legislation while section 33 provides a comprehensive up-dated definition of "capital-allowance" which will apply throughout the Income Tax Acts.

Part II of the Bill which covers sections 36 to 46 is concerned with customs and excise duties. With the exception of sections 44, 45 and 46, the sections confirm the various budget increases. Sections 36 to 40 inclusive confirm the increases in customs and excise duties on beer, spirits, tobacco, wine and table waters. Section 41 increases off-course betting duty from 15 per cent to 20 per cent. Section 42 raises by £60 the annual excise duty chargeable on licences for gaming premises with pro rata increases for shorter periods. Section 43 provides that a new excise duty will be imposed with effect from 1st June, 1975, on gaming machines in use on premises licensed for gaming under the provisions of the Gaming and Lotteries Act, 1956. These fiscal measures will assist in the implementation of the two basic aims of Government economic strategy in 1975 which are the maintenance of employment and the preservation of living standards.

Section 44 increases the dog licence duty from 25p—last fixed in 1925—to £1 and the duty on a general licence, which permits the keeping of any number of dogs, from £10 to £25. The section also increases the excise penalty for keeping an unlicensed dog from £2 to £10.

Section 45 confirms four orders made by the Government under the Imposition of Duties Act, 1957. Numbers 213 and 215 effected certain reductions in customs duties on goods of United Kingdom and Northern Ireland origin in accordance with the Anglo-Irish Free Trade Area Agreement. Number 214 increased the customs and excise duty on petrol by 13.3p per gallon in December last. The final order—Number 216—permits school buses which are taxed at the private car rate, and not the public service vehicle rate, to be used to carry teachers as well as school children and to carry them to or from school-related physical education activities as well as to or from school.

The effect of section 46 is to give the Government power to replace by order made under the Imposition of Duties Act, 1957, a customs duty of a fiscal nature or the fiscal element in such duty by an excise duty chargeable on the imported goods. Senators will be aware that the provisions of Article 38 (3) of the Treaty of Accession to the European Communities oblige us to convert our present customs duties of a fiscal nature or the fiscal element of such duties into internal taxes by 1st January, 1976. The need for the amendment to the 1957 Act arises from the terms of section 1 (h) of that Act which at present preclude the application of the relevant provisions of customs law to an excise duty on imported goods.

Part III of the Bill provides for the abolition as from 1st April, 1975— the effective date of operation of the proposed wealth tax—of death duties. The removal of these death duties and their replacement by the proposed reformed system of capital taxation will mean that over 90 per cent of those people who up to now have been at risk to death duties will be totally free in the future of death duties and any capital taxes.

Part IV, together with the Fourth Schedule, is concerned with Stamp Duties. Section 48 converts into permanent legislation the stamp duty increases announced in the budget. They were an increase from 3 per cent to 4 per cent in the case of property transactions between £20,000 and £50,000 in value, and from 5 per cent to 6 per cent on property transactions over £50,000. The order which gave temporary effect to these increases as from 1st March, 1975, is being revoked by section 49.

I now come to Part V of the Bill which contains four sections dealing with value-added tax. Sections 50 and 51 are anti-avoidance measures to which I referred in my budget statement and, as such, are designed with the same objective as the other anti-avoidance measures in the Bill, namely, the collection of properly due tax for channelling by the Government into the most worthy avenues of public expenditure. I can assure Senators that, in implementing these VAT anti-avoidance measures, the Revenue Commissioners will have due regard to any difficulties faced in the industries concerned and will devise procedures and guidelines which, as far as possible, will be fair and clear for all concerned.

Section 52 is designed to recoup to the Exchequer the cost of its advances to finance the cattle feed voucher scheme for farmers the PLV of whose farms is under £50 and who last winter experienced serious problems in feeding their young and store cattle. The sum involved—about £2.2 million— will be recouped through a temporary suspension of the VAT 1 per cent credit to registered purchasers of live cattle.

Section 53 is to correct a drafting omission consequential on the changes in VAT made by the Finance Act, 1973, in relation to the Third Schedule to the Value-Added Tax, Act, 1972.

The remaining Part of the Bill, Part VI, deals with a number of miscellaneous matters, of which the most important is the proposal outlined in section 55 to amend the Provisional Collection of Taxes Act, 1927. This arises from the revision of the Standing Orders of Dáil Éireann and consequential amendments to the 1927 Act enacted last year.

Prior to 1974 the time available for the passage of the Second Stage of a Bill confirming financial resolutions was 20 sitting days from the time the resolutions were approved by the Dáil as a whole. As, however, such resolutions were first passed by the Committee on Finance, for instance on budget day, and were not approved by the Dáil as a whole until up to ten sitting days later, the period available from the first approval of the resolutions for the passing of the Second Stage of the confirming Bill was in practice up to 30 sitting days.

However, the revision of Dáil Standing Orders in 1974 involved the abolition of the concept of the Committee on Finance and the 1927 Act was amended, accordingly, by the deletion of references to that committee. As a consequence of these changes financial resolutions are now moved in the Dáil as a whole so that the time limit for the passing of the Second Stage of the confirming Bill has been abridged effectively to 20 sitting days.

As it was not the intention of the changes made in the Standing Orders to reduce the time available for the preparation of the confirming Bill— for instance the annual Finance Bill —and for its consideration by the Dáil at the Second Stage it has been decided to restore the period of time previously available for these purposes by extending the 20 sitting-day period specified in the 1927 Act to one of 30 sitting days, and this is the object of section 55.

The other sections in Part VI are of a routine nature. Section 54 is the annual provision relating to the capital services redemption account, section 56 is the usual care and management provision, and section 57 provides for the short Title, construction and commencement of the Act.

I commend the Bill to the House for a Second Reading.

We can discuss the details of the Bill on Committee Stage. On Second Stage it has always been appropriate to deal with the overall economic and financial situation. I would have expected more current information from the Minister in his Second Reading speech to bring the facts of our economy up to date.

The Minister's speech referred to the total number on the live register being 96,000 unemployed in January, 1975. This is May, 1975, and, to put it mildly, it shows a lack of appreciation of the seriousness of the problem to bring into this House a document which is clearly dated by the galloping nature of the economic problems with which we are faced. There are a number of other figures for January, 1975, given by the Minister which have been exacerbated substantially since then. Unfortunately the unemployment rate is now about 103,000. When the Minister spoke in the Dáil in introducing the Finance Bill—again, he refers to it here—he was talking of an inflation rate of 20 per cent. That was January, 1975, economics; we are talking about May, 1975, economics which now show cost of living and inflation rate increases of some 25 per cent.

I would have expected the Minister to treat this House in an adult manner by giving us the figures as they now are. I am sure it is the galloping rate of inflation and the seriousness of the unemployment figures as they now are that have induced the Government at least to consult with what he describes as the social partners in the community, the farming, trade union and employer organisations. I welcome any form of consultation of that kind, but it is coming rather late in the day, and the Government, after two years in office, only now appear to be aware of the enormity of the problem facing the economy.

I feel it was the real gallop in inflation between January and March of this year which finally brought home to the Government that we were facing, in 1975, the highest inflation rate in Europe. We have gone ahead of the "sick man of Europe", our neighbouring island, in inflation. When our inflation rate for the first time runs ahead of the notorious inflation rate experienced in Britain since the war we have lost our competitive edge in the British market for our exports, particularly for our industrial exports. Previously we retained that competitive edge because our inflation rate was lower than that of Britain. The madness which affected the British economy since the war did not affect our economy until two and half years ago. That madness has now run ahead of the British madness with the result that our inflation rate at the current level of 25 per cent is running ahead of the British rate.

The enormity of the problem vis-a-vis other EEC countries can be realised by relating our inflation rate of 25 per cent to the much lower inflation rate of all our EEC partners—a rate which at the moment in Germany stands at 6 per cent. So when people talk here— and I agree there should be open discussion on it—on the question of freeing the Irish £ from sterling there should be sophisticated, sensible, adult discussion about these matters, but let nobody be under any illusion that we will be able to run an Irish £ alone on the money market. If we switch from sterling we will have to tie ourselves to the mark or the franc or the dollar or some other currency that is imposing far stricter disciplines on their respective communities in order to deal with inflation than we are including here in regard to our attempt to deal with inflation.

This is the basic reality that will have to be understood by people when they come to discuss the emotive matter of breaking the link with sterling—that it automatically involves a link with some other currency, and every other currency in the world at the moment, particularly in the western world, is dealt with by their respective Governments imposing severe disciplines and severe restraints, particularly in regard to Government expenditure. In this way they are coming out of the inflationary wood while we are going into it. In Germany, Holland, Belgium and France this is the pattern. They tackled the problem of inflation a year ago when we were telling the Minister in this House to get down to tackling it. We proceeded to gallop into a situation which, last year, resulted in a deficit on our external account of £310 million, which the Minister told the House this time last year would be only £140 million— the balance of payments deficit has doubled since the Minister's prognostications.

Similarly, we have deficits in regard to the budget. I am not opposed to budget deficiting, as such. I think budget deficiting is necessary in our circumstances but not budget deficiting that is merely utilising loans borrowed at high interest rate on foreign exchanges to maintain current Government expenditure.

I am all for budget deficits that are geared to productive investment by way of both current and capital allocation. It is the duty of any Minister coming in with budget deficit proposals of the size envisaged to announce specific proposals relating to increasing productivity that will bring a positive result from such a budget deficit. I am suggesting the current account deficit of £125 million should be broken down by the Minister and show the way that is being devoted to productive investment that will enable us to reflate in the proper manner.

I do not regard the concessions in regard to income tax payers as being substantial, to use the Minister's phrase. They are not substantial in the context of the inflation with which we are faced. I do not regard the aids to industry as being substantial, again in the context of the enormous situation with which we are faced. I mention those two because they are matters which the Minister appeared to have been rather proud of in his opening statement. In my view there should be an overwhelming effort to get going, both at worker and at investment levels, incentives regarding taxation at the personal level and at the investment level. To quote the words of the Central Bank Report:

There should be a concerted programme of action to come to grips with the domestic pressures that contribute to Ireland's relatively high inflation.

This is notably lacking. There is no such plan or programme in evidence. Perhaps the meetings last week with the social partners are some attempt to get this going, but ultimately it is the Government's responsibility.

The Government have for two-and-a-half years contributed, largely by an attitude of euphoria, to the problem with which they are now at a very late stage grappling—the basic problem of domestic inflation running way ahead of even Britain and way ahead of our other partners in the EEC and indeed other nations with whom we trade in North America and throughout the world. Our gross national product last year fell. That was the first time our GNP has fallen since the initiation under Fianna Fáil in 1957 of the First Programme for Economic Expansion. This is a statistical reality for 1974. To bring GNP to reality means 103,000 people unemployed that is what happens when your gross national product does not rise. We have here in the budget no concerted plan for economic expansion, no plan to give incentives at taxation level to enable the expansion to take place.

Is the Minister aware that when he refers to substantial income tax concessions he is describing concessions in the order of 15 per cent which may have been substantial in the context of a speech which was obviously written in January of this year, but in May of this year the picture is of a 25 per cent increase in the cost of living and a 25 per cent increase in inflation? In that context a 15 per cent increase in regard to income tax allowances is already outdated. The same situation will arise in regard to the social welfare payments in the coming year. There is provision for a rise in October, but again the same situation will happen here—a paper money situation, to put it in blunt terms.

There is no point at all in having an attitude of unreality in an era of inflation. By that I mean describing in financial terms actual increases in social welfare payments. They are very welcome, but when related to the inflationary erosion one then sees the inadequacies of the welfare increases in their proper context.

It may be said that I am being negative, and the question may be asked: what did we do? One practical way that we advocated to do this, at an early stage last year, was to peg basic matters—basic food, if necessary by subsidisation, to peg the levels of basic food prices, to peg the levels of fares and electricity charges. Instead, CIE fares, electricity charges and postal charges have been, through Government agencies, contributing substantially to the increase in the cost of living. Travel charges and ESB charges are factors in the cost of living increase to which the Government themselves are directly contributing. The petrol increase before Christmas is another classical example of the Government themselves, by Government action, contributing to cost of living increases and business cost increases, just to deal with a budgetary problem.

It was asinine, to put it mildly, for the Minister to pretend, when introducing last December what was in effect the first budget for this year, that the measure was designed at the time to curb the utilisation of petrol within our community and not as a budgetary measure. The Minister knows well that where it may be a very minor spin-off, it may mean less consumption of petrol, the major purpose of the £30 million secured in the petrol increase last December was to bring in an Exchequer contribution which enabled him to have fewer troubles in bringing in the budget the following month. He was relieved of finding that £30 million in regard to petrol and was able to put a better cosmetic face on the budget itself. It was no more than that. I call that gimmickry of the highest order in face of the problem with which we are faced. The same criticism applies in regard to the postal charges that brought in about £20 million in a very savage increase towards the end of last year. That sort of gimmickry is not good enough. It is much better in my view in the annual budget statement to come to the people and lay the cards on the table and tell the people the seriousness of the situation.

We have had three budgets of this kind from the Minister—in 1973, 1974 and 1975. It was only at the Fine Gael Ard-Fheis, ironically, that his Leader, for the first time alarmed by the 8 per cent rise in the cost of living in the first two months of the year, December to February, said precisely what we had been saying here in this House in successive debates on financial measures since the Minister for Finance went into office. He said quite clearly at the Fine Gael Ard-Fheis that inflation was within the competence of the Government and the people to deal with on a domestic basis. He said there was no point in talking about the oil or energy problem because it was a problem that faced every country in the western world. We cannot hide behind that curtain any more.

In so many words, the Taoiseach told the Fine Gael Ard-Fheis what the Minister for Finance had been refusing to tell the House although we had said it to him and it had been spelled out in both present and previous Central Bank Reports since the Minister went into office. This is not a matter we can run away from merely by saying it is due to international commodity or energy situations. This is a matter within our own competence to deal with as a Government. It is a matter which every other European country with whom we are associated in the European Economic Community is facing up to.

I suggest that if we had pegged basic elements that contribute to the cost of living index we might have a 10 per cent escalator clause in the pay agreement. It might have been a 5 per cent escalator clause. The pay agreement escalator clause is limited to a cost of living that has been added to directly by Government policy and this enabled a 10 per cent instead of a 5 per cent increase in wages to take place. That is the sort of attitude which has characterised the governing of national finances and economic development.

However, at this stage there is not much point in recrimination. It is a question of what do we do. The Minister has not indicated in this document by a single word—nor has he indicated in the other House—what the Central Bank requests of him regarding a programme of conserted action, to deal with this problem. I mentioned one way, and that is a substantial policy of tax incentives both at personal and investor level. That is the obvious policy in our circumstances. It is a policy on which I would back a Government deficit if it was related to substantial incentives in the way of depreciation incentives, reinvestment incentives, personal incentives towards workers, geared to productivity, incentives of any and every kind through the tax code and incentives to the building industry by way of giving tax free allowances up to a level of £5,000 to people who wished to invest in building societies.

This is an identification of the problems right across the board in our economy. There is the problem of people on incomes who have no incentive to work at present and the examination of people who wish to invest and expand and have no incentive to do so and the examination of the problem in the construction industry where there is a lack of funds and liquidity.

We have the situation where the Government, in order to keep their machine going, are absorbing a growing share of the finance available—42 per cent of our gross national product is now directly related to Government expenditure. Instead, we should have a situation where the Government should be disengaging from expenditure themselves and giving incentives to people to get moving. This directly bears on what I am saying, without talking about the other financial measures that are in the current package of financial measures in the Dáil. I will refer very fleetingly to them because they relate to the points I am just making.

Each of these three measures, the Capital Gains Tax, the Capital Acquisitions Tax and the Wealth Tax Bills are three measures that are disincentive and in the current situation deal precisely in the wrong way with the type of problem facing us, when we should be reflating instead of dampening down incentives and enterprise. The whole package of tax Bills to which I have referred would be—I would go along on social grounds here with anybody who thinks socially—appropriate in terms of an unexpanding economy and in terms of a gross national product that was not diminishing but was expanding at the rate of 5 to 10 per cent. They would be very relevant to an economy where there were growing divergences between the haves and the have nots as a result of a period of economic expansion. I would go along fully with a taxation policy of that kind in that situation. But that is not the situation we are in. One of the weaknesses of Government over the years has been to bring in remedies at the wrong time—in other words they are behind in thinking in relation to problems.

Here the whole corpus of legislation that has been prepared by the Department of Finance to deal with a situation of economic expansion and with bringing this legislation in, taking all the Bills together, in an atmosphere of economic uncertainty and recession has been badly timed. I said last week, and it was unfortunately proved to be right, in regard to the Criminal Law (Jurisdiction) Bill—the Northern Convention elections have proved it—that the timing of that was all wrong.

The Government must realise that the fundamental art of government is timing. They must take appropriate action at the right time. The action I am suggesting to the Government at present is in regard to industry by way of tax remission incentives, action at personal level in regard to the ordinary worker, action in regard to the construction industry that would lead to more funds going into private housing, and the raising of the SDA loans given by local authorities from £4,500 to a realistic figure such as £6,000. They should raise the income limit which is now at £2,350 to a realistic figure of £4,000. There should be action all along the line that will encourage the people who want to build their own houses, the people who want to work hard at a personal level to improve their earnings, and the people who want to invest at the industrial and agricultural level. There must be a spur to enterprise in our whole financial and economic thinking.

This is notably absent. Indeed the Minister is moving the train in the reverse direction. The train is being shunted back into a siding instead of going forward into a future where there is progress. There is the very same attitude of delay and prevarication in regard to the mining tax legislation. Right across the board the wrong remedies are being applied. What we must realise is that we are in a state of serious recession and that the wrong remedies are being applied by the Government to get us out of that situation, to deal with inflation and its consequence, which is unemployment. The right remedies are not more budget deficits, financed by foreign borrowing; they are not a further £300 million deficit on our balance of payments. The right remedies are more credit and funds in the areas of economic activity where they can be utilised both at the personal and company investment level.

There is no evidence of this in the Minister's budget. The amounts given to industry are paltry in the situation in which we exist. There are some reliefs given to industry in the Minister's budget. I am not denying that. Is the Minister serious, in a situation where we are facing unemployment of 103,000 people, when he says in his budget speech:

The tax concession to industry which will cost about £12 million this year should substantially assist that sector in overcoming its liquidity problem.

I notice Senator Alexis FitzGerald smiling to himself. He is as well aware as I am that £12 million will not get Irish industry out of its present liquidity problem, no matter how it is given, because the problem is of such a magnitude that we should be talking in terms of £120 million and not £12 million, that applied in the right direction.

I see nothing wrong with a budget deficit as such if it is applied, and if it is seen to be applied, towards the productive area of the economy. But if it is applied merely to enable the Government, which the Minister categorically states, to get out of their current difficulties and borrow abroad at high interest rates, it is totally negative thinking. That is going away from the problem. I would not mind a budget deficit of twice that size if it was directed and seen to be directed in accordance with a concerted plan to stimulate higher investment and higher employment. The Minister has the agencies through which this can operate. He has the IDA, the Industrial Credit Company, and the Agricultural Credit Corporation. He can give more incentives to the income earner by far more substantial personal allowances, personal allowances that would, through some form of indexation or automatic increase, at least keep pace with the cost-of-living situation.

This is my most severe criticism of the budget. It is not dealing with the central problem of inflation. I have asked the Minister for Finance to look at it rationally and to deal with this central problem by reviving the spirit of enterprise through incentives used in the tax code. This policy appears, in its legislative form at any rate, to be a negative one of discouraging investment and, indeed, discouraging work, which is a far more serious problem. I do not want to go into the abuses that can exist in regard to somebody on a three-day week receiving unemployment benefit, pay-related benefits that can be indefinitely extended apparently. I do not have to go into any examination of the slippery slope on which the Minister was then engaged, because it is quite apparent that while it is essential that we have a whole panoply of social welfare aids to help the genuinely less well off in our community, we are in very great danger of following the same path as our neighbours across the water, again years after they have found out where that path led.

Where there is no incentive to work, the very serious moral question is then raised as well as the economic question. I do not see what future there is in any country—never mind economy—if, along with the incentive to invest, the incentive to work is removed by deliberate Government policies. Let us be straight about it. The pay-related scheme which was introduced and planned by us and introduced in legislative form by the present Government was designed to deal with a transition situation, designed to deal with the six-months situation where workers would naturally have to live and keep their wives and children during a period of transition from one job to another, a period of retraining, readapting. On that basis the pay-related benefits were fixed at a substantial figure, 90 per cent of the salary. That was never intended to be a continuing measure of social welfare, which the present Government has now extended by another three months and which it is given power to extend by a further period if necessary.

The whole financial policy is running into very dangerous waters, again at a time when it is the wrong remedy at the wrong time. At the present time the incentive should be towards work, towards bringing people who are at work better pay packets in the form of tax incentives for the work they do. There should be far greater incentives in regard to industrial expansion in relation to investment. At both levels —the earner level and the investment level—the Government are pursuing policies that are running totally counter to that which is required.

There is one way in which the Government can help themselves out of their budgetary problems to some extent—and I should like to get some reassurance from the Minister on this —and that is by raiding the various European funds that are now available and by utilising these European funds in the form of the FEOGA funds, the social funds and the regional funds for expenditure that in effect it is the duty of the national government to deal with. The Minister for Finance is very unwise and indeed the Taoiseach and the Minister for Foreign Affairs sought to rescue him from a situation where he implied that regional funds could be used for Exchequer purposes, in view of the——

I never said that.

The Minister certainly left himself open to that interpretation.

I can tell the Minister this. One can read the statement each way, but whatever the Minister intended, his remarks did cause very serious concern to the administrators of the Regional Fund in Brussels.

The remarks were uttered by others who have since apologised to me. I can show the Senator the letter if he wants to see it.

I know Commissioner Thomson, who is the chief administrator of the Regional Fund was concerned to know what precisely was the truth of the matter when I was speaking to him last week. I want to emphasise that these funds are not to be raided in order to get the Government out of their difficulties. I can assure the Minister they will be very severely monitored to ensure they will not be, if the Minister thinks he can get away with it. The Regional Fund should be used for regional projects that come up to the standards set out by the Commission in regard to the administration of regional funds.

A similar matter was raised officially last year with the Minister by CII in regard to the absorption by Government agencies to a large extent—I refer in particular to AnCO and the IDA—of the Social Fund. I do not mind AnCO adding to their expenditure because that represents a sound form of investment in our present situation. I would like to see the work being done by AnCO developed and encouraged to a far greater degree. Again that is part of the investment area I was talking about, that is productive. At the same time, one does not use the Social Fund totally in AnCO or the IDA to the detriment of private industry. The CII raised this matter last year with the Minister. We have a duty to push money out of our own national resources into AnCO and the IDA which are two positive productive sources. I would not object to any Government deficit, however large, if it could be shown that the money was going in those two directions. But we find that instead of money from our own national resources going in those two directions, money is routed from the Social Fund given by the EEC to those two areas. I do not mind that as long as there is no single worthwhile private project neglected or ignored by reason of the absorption by State agencies of money from the Social Fund.

By all means we should fight for everything we get from that fund. It has been one of the successful funds. We are now getting in the region of £8 million from it. It is a fund of very great value. While welcoming funds from the Social Fund being diverted towards AnCO and the IDA all I would like to get from the Minister is an assurance that they are not diverted to the extent that worthwhile private projects may be neglected, postponed or delayed. That would be a supplanting rather than a supplementing of national aids which is the whole purpose of the moneys being devoted in that area by the EEC.

Were it not for the fact that we are in the EEC, we would be in terrible trouble altogether at the moment. I do not want to see the funds we get from the EEC abused. I am sure the Minister knows that the funds will be properly monitored by the Commission in Brussels to ensure that no member State rescues itself from its exchequer troubles by misuse or abuse of these funds. It is important to preserve our diminishing credibility, it is important to put our economy basically right. There is no point in blaming anyone else.

The energy and commodity problems are world wide. There is no point in talking in a woolly manner about changing exchange rates or breaking links with sterling. There is a problem of Government and personal discipline to be solved here in regard to expenditure and inflation. It is a question of discipline and leadership at Government level and discipline at personal level, at the level of demands made by various groups in the community such as the trade union movement, the employers and the farming movement. I welcome at this late stage the fact that the Government are bringing our social partners within the community into some form of consultation, because they as the leaders in their respective areas must be brought to the reality that the Government and the Minister now appear to be at, the reality that they failed to face up to two-and-a-half years ago, the reality that is here now in May, 1975.

I only hope the message will come through, because what we are seeing now is a crisis of leadership. Basically that is what governments are there for, to give leadership in situations such as this. From the country's point of view, I hope they will succeed in getting the message through to the various social partners I have just mentioned and through them to our community so that they will appreciate the enormity of the difficulties into which we have been led. It is my view that this has been largely due to Government mismanagement over the last two-and-a-half years. We are in that trouble now with the highest rate of inflation in western Europe. We have an unemployment problem that is continuing to live on the Exchequer to a very substantial extent by reason of the extension of the pay-related benefits scheme.

Does the Senator object to that?

I am only talking about the facts of life.

Does the Senator object to that?

I am all for dealing in the proper way with problems of this kind, but I am trying to bring home what the Government should be trying to bring home—the realities of the situation at present. We cannot afford to have this community continue to live on budget deficits and on balance of payments deficits. We must get our people back to work. We cannot have a policy of unemployment. What we have at the moment is a continuing policy of unemployment instead of one that is geared to getting people back to work and to providing the incentives that will enable them to work and keep them working and provide the incentives that will get people investing and expanding in industry and thereby giving more employment. The criterion of any Government's capacity to govern in the last analysis is their capacity to keep a high level of employment, their capacity to keep people living in their own homes, rearing their families, having equal opportunity in education and having this through a community that by reason of an expanding economy has more people at work, fewer people unemployed, not a policy that is going to be achieved by encouraging unemployment and by refusing to give the incentives needed for a growing volume of employment, with total earnings going up. Total earnings will not go up on pay-related benefit, however welcome that may be in a certain situation. Total earnings will not go up if you have people continually on unemployment benefit. That is not the way to gear an economy. You do not gear an economy by gearing policy towards supplying welfare needs alone to the exclusion of the need for employment. What is needed in the economy is bigger and bigger pay packets, more and more productivity, more and more investment. This is where we should be going, and this is the direction in which we should be going. I am afraid we are going in the reverse direction.

The Senator wants to starve them back to work.

We must start getting people back to work. We must start investment and reinvestment. In this area lies the whole key to future progress, and the Minister knows this well. I am sure this formed the basis of the discussion with the social partners last weekend. There was no reason at all for bringing them in last week except to speak this sort of language. I am quite certain that the Minister knows what I am saying. It is the truth.

In a period when employment normally rises employment is not rising. Unemployment that should have been out of the trough, hopefully, in March is still at the March level. We are in a recession right up to our necks. We must get out of it and we can only get out of it by stimulating the economy. We cannot get out of it by a policy that runs away from the cure, and puts a cosmetic appearance on the situation. That is not the way to do it. The way to do it is to stimulate the economy and get people back to work in growing numbers, and I offer the way that it can be done. It can be done by drastic taxation incentives and drastic taxation reliefs. I do not mind how high the budget deficit is if it is in that direction, and that direction primarily, that Government policy directs itself.

Might I start by referring to a comment that was made by the other side of the House in regard to the speech by the Minister, that it could perhaps have been a little bit more updated. Some play was made of the month of January mentioned by the Minister in his speech. It must be remembered here that the Opposition contended not only in this House but also in the other House that they wanted adequate time to discuss any legislation pertaining to financial matters, and, for the record, this Finance Bill was introduced in the Dáil in mid-February. It was processed through the Second Stage in the same month. It went through the Committee Stage for six days in April, and it had the Report Stage only yesterday. All-in-all a total of nine debating days covering 50 hours, which was well nigh a record hearing for a Finance Bill at any time.

Some play was also made with the figure of 96,000 unemployed when the current position is 100,000. We are all aware of this. It is no harm mentioning that that figure of 100,000 includes short-time workers as well, who simultaneously appear as being both unemployed and employed. In discussing the Finance Bill I think it is no harm to mention points in it which perhaps are to the advantage of the social welfare classes, PAYE workers, the farming community and industry at large. Personal taxation allowances have been increased this year for the second time. Concessions have been made to the farming community in regard to farm buildings allowances and also in regard to building expenditure incurred by them pre-EEC entry. A concession has been made as well to industry in regard to industrial buildings and in regard to easing the liquidity problem from which industry is suffering. Death duties have been abolished, and it is worth repeating what the Minister states, that this will mean that 90 per cent of those hitherto liable for these duties are now free from death duties and any future capital taxes. That is a very creditable performance and a matter which was a most contentious issue only two years ago.

I think we should try and put the economic situation in its proper context. What Ireland is suffering is no different to what other countries are suffering at the present time, namely, an attack of inflation and also an attack of serious unemployment. In many of these countries there is also a balance of payments deficit due to the oil crisis of two years' standing. In the case of our balance of payments deficit, the Government are attempting to tackle this problem to get it back to a more reasonable base by means of phased operation. Bearing in mind that its origin lies in the oil crisis of two years ago, it is, we hope, a once and once only situation and something which is not likely to be repeated to the extent that we then experienced. I would regard the phased attack as the best possible way to meet our balance of payments deficit and bring it back more in line with what one would normally expect to see any country facing.

In regard to inflation and unemployment here we find Ireland like every other country suffering from two economic ills which are attacking us simultaneously. This is probably unique. The volume and extent of the attack from both inflation and unemployment are certainly unique. The text books have of course classical treatments for either inflation or unemployment on their own, but there are very few textbooks dealing with a situation such as we have where both inflation and unemployment are attacking a country's economy at the one time. How to deal with inflation has always been regarded as a relatively simple matter. You make money tight and you make it dear. The best method of dealing with serious unemployment has always been considered to be reflating the economy, in other words, stimulating the economy, creating certain credit incentives and so on.

But in a situation where both inflation and unemployment are rife, it is not so easy to implement two solutions which are really opposed to each other.

The Government 12 months ago set out to stabilise the then deteriorating employment situation and to stabilise it at a figure of 100,000. That has now been achieved, and in the light of a hope for betterment of the economic situation we can look forward to seeing that figure being reduced.

Business suspended at 1 p.m. and resumed at 2.30 p.m.

Before the break I was referring to the attempt by the Government to contain the unemployment figure at 100,000. It must be admitted that the unemployment situation could be far more grievous —it could have reached a figure of 150,000. That the unemployment figure has been contained at 100,000 is due to a great extent to the reflationary budget which the Minister introduced in January and, to a lesser extent, to the 1974 budget.

The consequences of this reflationary budget in keeping the unemployment figure at 100,000 can be compared with the situation obtaining in another country, Japan. I shall give some examples of what happened there when they tackled the problem of inflation prior to tackling the unemployment question.

The Japanese carried out what was called a classical deflationary procedure by making money very hard to get and very expensive, that is, if it could be obtained. They also delayed public spending considerably. The result of these measures was an improvement in the balance of payments situation, but also a chronic rise in unemployment. Japan found itself considerably embarrassed by the criticism of other countries that it was restricting imports, thereby damaging the economies of neighbouring countries.

We have a two-pronged problem, inflation and unemployment. Unfortunately, when both come together we find that the classical textbook methods of dealing with one can sometimes lead to an aggravation of the other. This month we were told that there was a slight upturn in world economy which, it is hoped, will be more evident and positive during 1975. In that context we must decide what is the best way to take advantage of that upturn and in the meantime not aggravate further the inflationary situation. I suggest that what the Government are attempting to do —namely, trying to balance the solutions of reflation and deflation—is to play for time. This might well be the best approach in the circumstances. We could also use borrowing procedures to help us overcome our current problems. When there is a more positive indication of the upturn in world economy, we must be in a position to have for our future guidance not a definite fixed plan but some choices which we can follow. A flexible approach would be best; flexible in the sense that it can be adjusted as the circumstance dictate.

To have such a plan is important but it must be backed up with the confidence of the business community and of the ordinary individual. Any business sector would be encouraged to know that there were some alternatives to fall back on which would be implemented when the upturn in world economy becomes more apparent. Every individual, particularly the worker, feels a certain amount of concern no matter what figures are produced to show that social recipients have gained in excess of any adverse movement in the cost of living. I quoted figures recently to show how social welfare recipients fared when compared with the effects of inflation over the past two years. We should try to give an air of confidence to the PAYE sector, particularly those in that section who as a result of the latest national agreement will be in a higher tax bracket. The Minister mentioned there would be regular reviews of tax allowances. If there was a formal linking of tax-free allowances with the cost-of-living index, the worker would acquire some of that confidence to which I referred. This would apply especially in the case of the lower paid worker.

Responsibility lies, not only on the Government, but on the unions, employers and individual workers. The unions must be disciplined. They should exhort their members that there are times when it is appropriate to apply pressures for wage and salary increases but there are also times when these actions are not appropriate. Harking back to the example I gave, an effort was made in Japan to exhort people that it was not positive action to agitate, strike and claim wage increases at particular times.

If this Government can be proud of any measures it is those they took in the 1974 and 1975 budgets. They set out to contain an unemployment situation which they knew existed. They had only to look to the experiences of other countries to realise that the unemployment situation could be considerably aggravated, not because of what was happening domestically, but through a fall in demand for our exports.

As there is an upturn in the world economy the Government should devote themselves more to tackling inflation. Indeed, it has been accepted by them as their first priority. Just as the objective in 1974 was to contain unemployment, the objective now must be to tackle inflation in a positive way. If we adopt a flexible plan, which can be adjusted upwards or downwards as circumstances dictate from May, 1975, onwards, I have no doubt that Ireland will find itself in a strong position to obtain the benefits accruing from the upturn in the other economies.

There were a number of points made this morning from the opposite side such as pegging food at certain levels and pay-related benefits. The point regarding pegging foods at certain price levels was not clarified but I assume what was hinted at was the provision of subsidies. I should have thought that this problem was aired sufficiently and, on this side of the House, there is considerable opposition to an overall subsidy. It is far more advisable and far more beneficial to give subsidies through the social welfare system, because social welfare recipients are most in need of assistance.

In regard to pay-related benefits now being made almost a permanent measure, I would have regarded the introduction of this legislation some two or three years ago as an indication that it would be there to alleviate circumstances from time to time. The fact that it has now been extended by a further three months is doing nothing other than fulfilling the original motivation behind its introduction, namely, to assist people who find themselves in exceptional circumstances. It is gratifying that the three months' extension has been announced at this stage because it will assist people who find themselves seriously affected by the unemployment situation up to the end of 1975.

I do not know whether the provisions of this Finance Bill will get the scrutiny to which the 1974 Finance Bill was subjected. It has relieved certain categories of people; it has removed certain anomalies; it has abolished contentious death duties. There is nothing in these matters with which anybody could disagree. There may still remain anomalies under the Income Tax Act but, as we saw on the introduction of the farming community to taxation in 1974, it is not always possible to foresee anomalies that may arise. The Minister may have to come back here next year and make certain other improvements regarding its structure.

The Finance Bill, 1975, has played an important part in keeping our heads above the economic high waters of a world-wide recession. With the first indication of an upturn in the economy of other countries, if we are in a position to avail of the possibilities of those circumstances, this Bill could represent a very important step in our recovery.

The main purpose of a Finance Bill should be to pinpoint the various things that beset the life of the nation in general and in particular the economy and financial matters, because finance is more or less the lifeblood of the whole economy.

One would expect in a measure such as this that the Minister, and indeed the Government, would have reviewed right up to the present date the state of the country in general. The stark fact is that we have 103,000 people unemployed. It is no consolation to any of us to have to accuse the Government of having 103,000 people out of work. We would much prefer to see a situation where people could get a decent living in their own country under modern conditions and taking their place in society. But we must face the salient fact that we have a serious unemployment problem. That is the yardstick by which the performance of the Coalition Government must be judged because, irrespective of what people think, those in the community who have families and commitments and have to buy the ordinary, everyday necessities but who find themselves on the dole, provide a clear indictment of the policies being pursued by the Government. Faced with these facts, one would expect that some reasonable effort would have been made in this Finance Bill to try to pinpoint where the trouble lies and to try to rectify it, if at all possible.

This has not been done. There is no denying that, in the context of the present financial and economic situation which shows every sign of becoming even worse, one would expect something better than this. It is a well-known fact that inflation is running rampant in this country and things are completely out of control. There would be some excuse if this situation had come upon us suddenly, but it seems to be a situation that forever haunts Coalition Governments here. It happened in 1949-51 when we had inflation and unemployment. It happened in 1957 when we had thousands of people unemployed and thousands more emigrating. I cannot be blamed for drawing attention to the similar pattern which is now in existence. This Government seem to be travelling on the well-beaten track already laid for them by the two previous Coalition Governments.

When we consider that this Government is composed of what the media once described as "the men of all the talents", one would expect a better performance. I am sure the people who voted them into office on the strength of their 14-point plan expected something better from them. There is no use in having pity for them and making lame excuses for the unemployment position. There is an old saying: "An ounce of help is worth a ton of pity." There does not appear to be much help forthcoming for the unfortunate people who are unemployed.

I notice that the pay-related benefit scheme has been extended. Nobody on this side quarrels with that. We must be fair and realise that this is just a stop-gap method and cannot continue indefinitely. We cannot drain out all the time and not put anything back. The day of reckoning is fast approaching. If this Finance Bill is to mean anything, it should have made some attempt to prevent the present terrible situation.

The Minister may say that exports are up, but so are imports. He may blame everything that has happened in this country over the last two years on the oil crisis. We all freely admit that oil caused a furore all over Europe, and we were no exception. To allege that oil seems to be the be-all and end-all of the economic gloom that hangs over the country is nonsense. Much of this has happened inside, and members of the Government in their own statements have adverted to that fact.

We welcome the benefits that have been sanctioned here and meted out to people on social assistance and various other social benefits. We welcome the increase but the increase is nothing compared to inflation. It is no consolation to the old age pensioner, a disabled person or anyone living on a fixed income, to find out that when they get an increase it is eroded the first day they go down town to the shop.

The Government in their own policy said they would reduce the rate of inflation. That was one of the points in their programme. It is selfevident now that that is one of the points that has not been fulfilled and there is no hope on the horizon that that day will ever come for the Coalition Government.

This sad state of affairs has percolated right down into local government and the county councils have found themselves in difficulties.

When one takes into consideration the tremendous inflation that has taken place over the last few years, road grants bear no comparison to the grants given then. All this is happening at a time when we should be improving our roads and adverting to the fact that a great change will take place inside the next five or ten years. The people in rural Ireland who are trying to provide industries to give employment will expect decent roads to transport the finished articles to ports. If grants are not available, local county councils will not be able to make the roads, and the county and country will suffer. This year, because of lack of finance, the amenity grants, which were tremendously useful at county council level, have been scrapped completely. These were schemes whereby a local community could get a grant to carry out a worthwhile project in the area. It was furthering the community spirit which we we told the Coalition Government would like to foster in rural Ireland. Again there has been plenty of talk but no action. The present position is that amenity grants are completely out for this year, and, until the next Fianna Fáil Government takes office, they will probably not be heard of again.

Housing grants have not changed over the last four or five years. Grants from local government to people striving to build their own houses do not compare with the grants of two or three years ago. That is another yardstick the ordinary people are using to measure the performance of this Coalition Government. Those engaged in agriculture—a very big proportion of our population are employed in this very difficult and arduous occupation—had great hopes because of our entry into the EEC. One would have expected these people to have been encouraged to expand and modernise their farms, so that they would be able to compete with the best in Europe. We have the best grassland here. We have a favourable climate, but we seem to lack the necessary injection of finance needed by practically every farmer who wants to bring his farm up to modern standards. Instead he finds he is being classified into two or three different sections, between commercial farmers, development farmers and some other type. No one seems to be able to get any money from the Government. That is disastrous because it seems to be leading to a slow down. People who are expecting to build new silage plants, sheds and so on find that the grants are no longer in existence. There is very little activity all over the country, with repercussions in employment in quarries, cement factories and timber yards. All these things help to create the vicious circle.

I do not believe our farmers have any confidence in the present Minister for Agriculture and Fisheries in view of the disastrous situation that obtained last year and the way in which he and those who were with him sat idly on the fence in Europe and allowed our farmers to be mulcted by the meat factories. These things will not be forgotten.

So far as money is concerned, many farmers are wondering if that pattern will repeat itself this year. It appears that cattle are coming in from outside the EEC. This will affect the finances of this country. It will affect the farmer's financial position also. It is time the Minister and others in Government advert to the fact that we are not getting the proper type of leadership in Europe so far as farming is concerned. Consequently, the Irish farmer is being pushed to the wall.

The Senator is going very wide of what is in the Bill.

I am sorry. I just wandered into that area because I was discussing the grants that are not available to farmers to construct buildings and modernise their farms so that they could compete in the world in which we live.

We have the extraordinary situation that money is available for extending Radio Telefís Éireann. The Minister proposes to bring in a second channel and rebroadcast British propaganda here. If there is such an abundance of money available——

The Senator is now discussing another question of expenditure. We are not concerned with matters of detail in regard to expenditure of administration on this Bill.

I appreciate that. I was about to say that, if the money is available for such an exercise, the Minister for Finance should have provided money in his budget that would alleviate the tremendous hardship that has already been caused all over the country in view of the fact that there does not seem to be any money available for educational purposes. If the money is there for such things as Radio Éireann it should be diverted. The position of second level education seems to be desperate. I think it is wrong that the Minister did not provide the money. He is now asking the colleges to impose a tax on parents that the Government could not face up to. We are supposed to have free post-primary education for children up to 15 years of age. In that situation the Minister for Finance should provide the money. There does not seem to be any provision in this Finance Bill for the money to ensure that that will happen. I have had letters complaining about parents having to pay when we are supposed to have a free scheme. It is totally wrong.

Again, the Senator is going into too much detail. On a Finance Bill general levels of expenditure may be discussed. The question of the allocations of moneys to different broad items of expenditure may be mentioned in passing but a detailed discussion would be more appropriate to an Estimate discussion or the Appropriation Bill.

I shall not travel that road any farther. Generally there is a type of hidden taxation which the Minister is trying to avoid and impose at local level. I think that is wrong.

Another thing that annoys many people is the method whereby the Government in recent years have introduced a budget whenever they thought fit. In particular, there was the disastrous budget introduced in December when the Minister collected up to £27 million by the steep increase in the price of petrol. There have been other instances since then of mini-budgets being introduced. Now the Government are pretending that this Finance Bill covers all expenditure for the year and, at the same time, every chance they get they seem to introduce a budget when money is needed.

This Government have contributed to inflation practically since they came into office. It is poor consolation to the Irish people to see that, while the Government set up the Prices Commission and other bodies to control prices, prices have been escalating all the time. The Department of Posts and Telegraphs, without consultation with anybody, overnight increased the price of the radio licence, and the price of stamps and so on. The same has happened in another Government controlled body, the ESB, where they seem to deem it their right to increase charges any time they feel like it. Whether they go to the Prices Commission or not, I do not know, but they seem to get away with it all the time.

If the Government are talking about controlling inflation they could make some attempt themselves to set the example in this matter. Some reliefs have been given in income tax but again, as I said earlier, by virtue of the fact that inflation is running at such a high level, there does not seem to be any real benefit whatever in so far as the ordinary taxpayer is concerned.

Some reference was made to the fact that the Regional Fund was being raided by the Government. Last year I think some funds were used for social welfare purposes instead of what they were intended for. If this is true it is a matter that should be remedied. Yesterday, they were discussing in the Dáil appointing an ombudsman who would enquire into these things; perhaps there is need for such a person because things may be going on of which the ordinary person is not aware.

Apart from that, everyone on this side of the House would like to see in a Finance Bill such as this an attempt to get us out of the quagmire in which we find ourselves. We seem to be in economic quicksands and every day we are deeper in debt. That situation cannot be allowed to continue. The Government seem to have brought in people to consult at a late hour: perhaps it is too late but at least they are trying to do something in that sphere.

There is another important means of stimulating industrialists to provide new factories, to look for more exports and expand generally and that is to ensure that we would not have these wild-cat strikes that very often bedevil the efforts of industrialists and other people. I am not against the right of the individuals to go out on strike because the strike weapon had to be fought for very hard and I am a member of a trade union myself. I respectfully suggest that members of trade unions and their bosses should be able to control the trade union movement. If they are not, they should have consultation among themselves. There is a multiplicity of unions in this country. With one or two of their own men as Ministers they should be able to come together themselves and in some way iron out this matter of these disastrous strikes, where nine or ten people hold up the whole country to ransom.

If the Government made a study of other European countries, in particular Germany and places like that where there is a high employment content, they would find that they have not the multiplicity of trade unions we have. These countries must have some built-in protection against this. Consultation between workers is very important. That is something that in 1975 must be faced, because we are now trying to export to other countries apart from Britain. We must be able to fulfil our orders on date. Our workers are good. They have in the past proved themselves to be able to make goods of as high a standard as can be made in any other country. Their skills are good. We have AnCO and various methods of training them, but we still have this very important problem that must be solved.

If we could have a method whereby we would have agreement on phased wage increases over a number of years we would make progress. It was attempted and was doing reasonably well until this other development arose. It is a very dangerous approach and one which could cost us a great deal financially in so far as exports are concerned. It could certainly be detrimental to any Government in office because we do not want to continue trying to pay pay-related and other benefits and not have people at work.

When lightning strikes like these take place thousands of our workers are unemployed. It costs the people and the unions money. Therefore, I think it is a problem that would be well worth settling.

As far as the Finance Bill in general is concerned. I cannot praise it in any way. Naturally, if there are any good points in it I would go along with it but I must revert to the fact that things are not good. It is no consolation to people who are waiting for grants and money to say, as has been said in the past by some responsible Minister, that the computer was wrong or something like that. What is needed at present is somebody in Government with ability to lead; somebody who will be able to look out across the mess in which we are, and have the foresight to ensure that the country would not be allowed to drift rudderless, as is happening at present. Things are going from bad to worse with 103,000 unemployed in the month of May, at a time when unemployment should be at its lowest ebb. That is a situation of great urgency. The Government must tackle this immediately if they wish to remain in office and if this country is to make any attempt at all to make any progress and reap the benefits that should be accruing from our membership of the EEC and from being able to export our manufactured goods to other areas.

It behoves the Minister and the Government to examine this situation immediately. It is not sufficient for them to say that they cannot take some motion on a particular day, as they did with the motion regarding the scarcity of money for education which came up in the Seanad last week: it is no solution to sweep these important matters under the carpet. They would be far better brought out in the open. There should be no shilly-shallying behind doors. The Government should tell people the true position, take them into their confidence and, perhaps then, the people would understand the situation much better. It is wrong to try to pretend all along that everything is rosy in the garden when in actual fact it is not.

I am certainly very disappointed in the budget, mainly because I am a member of a local authority. What the budget did and did not do affects nobody as much as the whole structure of local authorities in so far as no real provision has been made to increase contributions to local authorities or retain them or provide for inflation or increased prices. The seriousness of this can be easily understood if one looks at the structure of a local authority from the lowest paid clerk or caretaker up to the county manager, the assistants and the engineers. This administration system which every county has is faced with an annual increase in expenditure on wages and salaries. There is a system whereby they plan to build a certain number of houses, provide a mileage of roads and certain sanitary services, water and sewerage. It is more than serious when the local authority concerned finds itself with the administration and the infra-structure to do all these things but, due to inflation and increased prices and no extra money being provided, that local authority is in a dilemma of stagnation.

I am very bitterly disappointed that the Minister and all his back-up team have not seen the dilemma that these authorities are in, that he has not come to their rescue. In fact, it is bad economy; it is bad for the State generally, not to use the system that is there and costing money. As time goes on, this situation becomes worse and the result can only be bad. There is a complete lack of confidence in local authorities in the entire Administration in planning ahead any programme. The Minister did a very poor job in not coming along and keeping local authorities informed and encouraging them to visualise clearly their commitments and make a serious attempt at meeting them.

Under many headings, the results will not be evident for some time. To quote an example, in County Donegal we have commitments for housing, contracts signed and entered into and, according to the allocations we have we will be £1 million short. I would ask the Minister to take note of this and to investigate the possibility of making supplementary allocations to County Donegal without going into too much detail. Other counties and local authorities will be in exactly the same position. It is very sad: the repercussions of it are devastating. It adds to inflation and certainly hastens its progress.

I do not know what is happening to the money because our taxation is as high as it could be. Prices are high. We rank highest in Europe in taxation on drink, cigarettes, and tobacco. The Minister has definitely taken his pound of flesh right across the board, anywhere he could get it. I fail to understand what is happening, because the money is not going to local authorities or school building programmes, or the farming community. The Government seem to be stagnant. They are suffering from the fact that people have lost confidence and are not investing. Investment from outside is lacking and the situation has reached the point where one would actually feel sorry for those who are burdened with running the country at present.

I sympathise with the Minister for Finance because the lack of confidence is bound to bring about a result that makes his job practically impossible. I see us arriving at the point when there is little confidence in any part of the whole Administration, right across the country. This is serious.

The present Government had two budgets under which money is provided for social welfare. Out of the first budget, it was saved after our entry into the EEC and there was much talk of what we would gain in social welfare. The Government made great capital out of what they were going to do for the social welfare classes. In fact, this amount of money was largely saved from the farm subsidies on our entry into the EEC. Our second budget then provided money for social welfare recipients. But this was largely thrown on the shoulders of those who are actually finding it hard to keep the few people that would be employed in employment, the industrial sector, that are hard pressed to sell their products, because of higher costs for electricity, oil, and the numerous other charges involved. The small industrialists were never under so much pressure as they are at the present time. The Government found it far too easy to burden them even further by increasing the contribution from the employer, on the stamp. This is where the money was obtained to give out the increases in social welfare. This was a tragedy because it was unproductive in so far as the people who were giving employment to numbers of people reassessed their business and their prospects and laid off people. This is borne out by the number of people unemployed.

It is well know that the lack of action here has resulted in the large numbers of unemployed. The small industrialist, the farmer, the creamery manager, the bacon factory or any type of industry that employs ten, 20 or 30 people are under tremendous pressure. If they do not actually go out of business, as has happened in the building industry, they adjust the number of people they have employed down to the bare minimum. The increased contribution from the employer contributed in no small way to the number of unemployed being increased. The purpose of that legislation was to add security and to benefit the unemployed and those who received social welfare benefits, but it was counterproductive in so far as the security of the jobs they were in was at a greater risk than before the increased contributions were announced in the budget. I feel that the budget did nothing at all to encourage production.

Many of the people on this side are suffering seriously. We have a vested interest in the State and in the welfare and future of the State. We do not want to be knocking everything the Government do. We want to be constructive. The budget is something that stimulates industry and keeps it alive for a year or it does the reverse. The budget we just had did nothing at all to encourage anybody to invest in the State, to expand or to employ more people.

The Minister may well introduce this Bill here by saying the main purpose is to retain employment. I think it has just failed to do that. In every second statement we hear from the Government about the financial problems and prices we are back on the hardy annual—the oil crisis is blamed for everything. It is very hard to accept this.

I was a member of a delegation which visited an oil-producing country and I have been in on discussions with those countries. They are very concerned at the amount of propaganda other countries use, blaming the oil-producing countries for all their problems. The increased price of oil into the pockets of the oil-producing countries from before the Middle East war up to today is about 4 per cent. Most of what they are purchasing, including drinking water, went up from 50 per cent to 400 per cent.

We are an agricultural country and produce most of what we use ourselves, yet we blame oil for most of our problems. This is unacceptable. The Government have a responsibility to see that the multi-national oil companies do not cream off and use the oil-consuming countries to the extent that the whole economy of that country is wrecked. If we accept what the Government tell us, that is what would appear to be largely responsible—that the oil marketing organisations of the world are holding us up to ransom. If the producers are getting only a 4 per cent increase and the increase here has been a massive 70 per cent, there is a serious discrepancy.

It is the Government's duty and responsibility to see that this serious problem is removed or investigated. It is their duty to see that it no longer affects our economy and brings about inflation in the way it has. I hope we will not be tied completely to the major oil marketing concerns. The big oil marketing companies and sales organisations have enough oil afloat to do the world for two years. They put pressure today on the consumer, like ourselves, and go along to the producer next year or next week and put pressure on him. They can use this pressure as effectively on the producer as they can on the consumer. It is time the oil-producing and oil-consuming countries came together and reached a fairer marketing arrangement.

No Government should allow the major oil companies to affect their economy and to bring it to the point where it is nearly at a standstill and people are unemployed. If that happens, it should be investigated without delay.

I had hoped the budget would do something to encourage and expand industry. We are certainly taxed to the maximum. I only hope that the Minister will look at the whole structure of financing local authorities and Departments of State—the Department of Education and the Department of Agriculture and Fisheries. The future is not bright at present. In agriculture the payments due to farmers are not coming forward. Never before had we such a history of correspondence to get the ordinary payments of schemes and benefits to farmers.

Not long ago the Department of Agriculture and Fisheries announced a farm modernisation scheme. This announcement has been made over 12 months and the scheme is still with the Department. The only reason we can accept is that the Government have not the money to implement the farm modernisation scheme. It is the only answer those engaged in agriculture can accept. It is sad that hardworking honest people, anxious to expand should have the fear that the benefits and grants available from the State are not likely to be paid. I hope the present Minister will end this stalemate, this situation of lack of progress, and will do something to restore confidence to those who wish to expand, to retain employment and to provide a decent standard of living for themselves and those they employ. It is a pity if we cannot do that. We, on this side, would co-operate and welcome any improvement at all. It is unfortunate we do not see it.

We are probably restricted as to what we can say on this Bill, but I am not going to accept that the price of oil is totally responsible for our inflation and all the ills of the State. The Government have a responsibility to keep down prices. I know of many instances where the Government have failed completely because they have taken no practical steps to keep prices down. I will not go into details on these but I should like to give an example of where the Government have failed to keep down prices. The farming community have been under great pressure for the past 12 months. They find it difficult to pay rates, to sell their cattle, yet the price of fertilisers they had to purchase in the spring had increased by September from £50 and £55 to £100 a ton. Most of the fertilisers were in stock at cooperatives and merchants. Is the Minister aware that this is happening —that the price of fertilisers to farmers increased by 100 per cent at a time when the farmers' backs were against the wall and at a time when the farmer had no money to pay for anything? Is the Minister for Finance aware of this racketeering and high prices of fertilisers? I use that to point out the serious neglect of the Government to do anything about prices, because if those who stock and sell fertilisers can do this without notice by the Government, or control or attention, then there are other sections of the industrial world that are equally as free to do it.

The Government have failed to watch carefully the financing of local authorities. I hope that the Minister and the Government look at the situation and the plight local authorities are in. Most local authorities are surviving on a shoe string. They do not know how to finance their programmes next month. I would ask the Minister to take a keener interest in how local authorities are financing their programmes.

One of the great advantages of being in Opposition is that you show great wisdom and magnanimity but unfortunately in this day and age the Minister for Finance, whoever he happens to be, has to deal with the realities of the situation not with the situation that exists in the imagination of some of the Members of the Oireachtas. Every Minister has problems to tackle but it is fair to say that no Minister, certainly in the past 20 years, has had to deal with the number of critical problems the present Minister for Finance has had around his neck since he came to office two years ago.

It is all right to say that we would like to have bigger increases for this and more money for that, but as far as I know—and I hope somebody from the other side of the House will disabuse my mind of a simple thought that I have been carrying around for many years—there are only two sources of income, one, taxation and the other, borrowing. When Senators on the opposite side suggest defectiveness in the Minister's policies in regard to assistance to agriculture, industry, schools, social welfare, it is only fair that as a quid pro quo they should come up and say how this finance is to be found, because that is the nitty gritty of our problem of not only the Minister for Finance but every Minister and every Government that ever existed in this State.

We should all like to be magnanimous and open-handed and help every possible sector of society and every section of our community, and Ministers being politicians the same as everybody else here in this Chamber, would wish to present the rosiest possible picture to the public when they come to announce their annual budgets. That is human nature. The person that most people would like to feel was in control of the national finances is a man who will face up to the difficulties of the situation and tell the people the unpopular side of it. If he is to provide, as the Minister provided in his budget, the greatest reliefs and the greatest increases in social welfare benefits, he has equally got to tell other sections of the community that they have got to help to carry this burden. That in fact is what has happened in this budget which is now being implemented by the Finance Bill before us.

There is no doubt that every section of the community at the moment and all the main sectors of the economy have serious difficulties. Agriculture is now fortunately, particularly the livestock trade, moving out of the serious depression of 1974, and in this small country where agricultural employment and agricultural activity still accounts for about 25 per cent of our people, obviously the success, the prosperity, of agriculture has a far greater impact on our prosperity, or the reverse, than in any other country in Europe where the general level of activity and involvement in agriculture varies between something like 3 per cent or 4 per cent in Great Britain to something like 10 per cent or 11 per cent in the highest of the EEC countries, France for instance. We are terribly dependent on the prosperity and success of agriculture and it is right that the Minister and the other Ministers concerned should do everything they could to help our greatest single industry. Fortunately agriculture is now moving out of the disaster situation of 1974. At the moment nobody can look too far ahead in these difficult times, but agriculture seems to be set fair for prosperity for 1975-76.

With regard to industry, it is still passing through a very difficult phase. Any man who is engaged in industry, commerce or business will agree with me there are still many firms with severe liquidity problems. The Minister gave something in the nature of £12 million in his budget to help industry over these liquidity problems. However I would like to tell the Minister that industry, particularly individual industries, are still having severe liquidity problems. A number of business today are finding it extremely hard to carry on with rising costs and either static or declining output.

I do not think this can be laid fairly at the door of the Government. The enormous increase in the costs of raw materials in 1973-74 has compounded the situation as regards manufacturers. A manufacturer budgeting two or three years ago making a forecast over the next two, three or five years and basing his costs of raw materials on the then going prices would find himself a year or two later hopelessly out in his calculations and looking for possibly two or three times the capital to finance even his normal working capital, normal stock requirements, normal sales. These are things that a Government cannot cure overnight. They are part and parcel of the huge inflationary situation that has been raging through Europe in the past two or three years.

I think the Minister would agree that the two greatest problems we have in this country today are inflation and unemployment. It has been said that we only import something like half our inflation and that the Government are directly responsible for the other half and that the Government should do something, take some positive steps to tackle inflation within the country and within their control. But how do you do that? I read some of the speeches in the other House with great interest. There was a suggestion that corporation profits tax be wiped out for last year and the current year and that VAT should be taken off certain articles. That sounds grand in theory and most of us would support it if there was no quid pro quo. The said fact is that if you reduce VAT or if you do away with corporation profits tax in any one year or two years to relieve industry you have to replace them with something else.

Will taxation be increased further? Will social services be curtailed? Will there be a standstill on wages and salaries? No Minister has ever found a solution to the problem where income is reduced and is not replaced by something else. If that is done it will reduce the standard of living. Nobody wants that.

The Minister was faced with a very substantial projected deficit of £125 million in the balance of payments this year. He had two courses open to him: one, to take drastic steps to close the gap or, two, to phase it out over a number of years. The Minister took the latter course. The Manchester School of Economics would recommend balancing the budget and the introduction of a deflationary policy. Those days have gone. Our priority is to try to keep people in employment and assist the less-privileged sections of our society. For that reason, the Minister rightly decided to adopt a moderate inflation-expansion programme.

"Inflationary" is the word the Senator wants.

I think that was the right policy. The Minister has been criticised for not expanding more, but the result of that would be greater inflation. It has been a very difficult decision what to do and how to do it. I think the Minister has achieved this balance, although his critics in the Opposition seem to be divided on whether he was too inflationary or not expansionary enough. There does not seem to be any consensus.

The Minister is correct in being moderately expansionary and not to go too far in either direction. It is a very difficult situation where inflation is running at 20 per cent or more. Printing paper is an easy thing to do and in the short-term might provide employment, but in the long-term it would bring disaster. Both sides of the House would agree that in the long-term we must have stability in the economy. We will pull out of the present crisis but it would be disastrous if we were to take any action now which would put inflation at a higher rate.

Inflation is the greatest challenge for this country, even more than for other countries. We have an open economy. We export almost half of what we manufacture. While we have inflation running at 20 per cent or more, our partners in the EEC—Germany, France, Switzerland and Holland—appear to be getting down their inflation. We are in the situation of still maintaining a high inflationary rate and at the same time trying to export our products to countries who have begun to reduce their inflationary rates, perhaps to single figures.

It is obvious that in such a situation no Minister on his own and no Government on their own can successfully tackle the problem. It is a national problem which, as the Government have said, calls for a national partnership between all sections of our community. I was very glad to read of the Taoiseach's invitation to representatives of the major organisations dealing with industry, agriculture and trade unions to discuss the problem and to find common ground for its solution. That is the best way to approach this problem. The combined wisdom of industry, commerce, agriculture and the trade unions, harnessed together, could bring substantial improvements in the situation.

The Government are faced with several problems. One is to try to maintain employment, a very difficult task which no other country in Europe has managed to solve, not even the booming German economy or the Dutch, Danes or French. The situation in Great Britain, our nearest neighbour, is even more serious than it is here. They seem to be heading for disaster at the present time unless they can take a grip on the situation. Their social contract, which that Government tried to create between themselves and the trade unions, seems to be in serious trouble. We could very usefully take a lesson from what is happening in Great Britain and demonstrate to ourselves the necessity for our forming a partnership between the Government and the major economic and social sections of the economy.

The Minister has taken a practical step in the budget to provide for employment. The substantial increase in the capital investment programme is an indication of the Government's concern to provide employment. The increase in the allocation to the Industrial Credit Company, to Fóir Teoranta, to AnCO for training programmes, are all indications of the Government's concern to maintain employment and create new employment opportunities. Notwithstanding the difficulties we are experiencing at present, the position is not as stated by a previous speaker, that investment is not continuing. Even though capital is scarce both inside and outside, people are still interested in investing their money here. The Industrial Development Authority will confirm this. Undoubtedly, people are slower to invest, just as a businessman is slow to invest funds until he is satisfied that the future looks more settled. Everybody likes to look ahead and be certain that, if he makes an investment, he will get a fair return. Even in present conditions, there is a very high degree of interest as regards investing in the country. I believe this will continue and will increase as we start to pull out of the recession in the latter part of this year.

I mentioned the question of the national partnership which I regard as the best way of tackling the situation, bringing to the problem all the wisdom and experience of the different organisations and associations and, above all, their goodwill and anxiety to get the country back on its feet again. We ought to be perfectly clear that in the present situation, or even in normal times, we cannot take out of the national cake more than we contribute. Those who are paying themselves more than they are entitled to are doing a disservice to the nation.

In the main, our people are industrious but I suppose there will always be, as there is in every country, a certain section which think that the opportunity offers them a chance to get more out of the national cake than they are contributing. This situation cannot be allowed to continue. If any section of the community are taking advantage of their strength or pressurising powers to get more than they deserve they are doing a disservice not only to their immediate neighbours but also to the country.

This is a time for putting the interests of the country first rather than each man for himself. It should be "sinn féin" rather than "mé féin" in this day and age. The Minister has done the best job he could in a difficult situation. He is not pleased with the business community. They like to get more help, more reliefs, more grants, more loans, more depreciation for their plant and machinery and many other aids when they are faced with difficulty. All this cannot be done.

There has been a lot of talk recently about breaking the link with sterling. That has been offered in some quarters as a panacea for all our ills. It has been said that we are linked irretrievably to the sick man of Europe and that if we broke with sterling the Irish £ would immediately bound upwards and we would be living in a land flowing with milk and honey. Superficially this sounds an attractive proposition, but at the present time it is not possible. Our trade with Britain forms too large a proportion of our total trade to consider at the moment taking any drastic steps.

But it is something the Government must keep in mind. I do not dismiss the idea that at some future date it may be in the best interests of this country to break the link with sterling and if that time comes I do not think the Government should hesitate to do it, but at present, and having regard to our trading relations with Great Britain, this would not be the right time to do it. We have many more pressing domestic problems to tackle before we can break this link.

There are many things to be said, but perhaps it would be better to do so on Committee Stage. I should like, however, to refer again to the business community. There has been much written about the taxation of actual profits as distinct from taxation of paper profits and the time must surely be approaching when accountancy must be based, in these inflationary days, on real and not paper profit. Everybody knows the effect inflation has on any business or manufacturing concern. What appear to be profits based on cold, analytical figures, based on inflationary factors, are not profits at all; in some cases they can turn out to be losses. The Minister should give serious consideration to allowing industry and commerce to calculate their profits on a real basis in inflationary times.

We are discussing this Bill against a background of a rate of unemployment which has not existed for some 40 years or more. Almost 103,000 people are out of work and that is in the month of May at a time of year when normally one would expect the rate of unemployment to be beginning to fall rapidly. We are assessing this Bill also against the background of quite unprecedented inflation, a situation where the optimists expect that there will be an increase of at least 25 per cent in prices this year and assessing it also against a background of a balance of payments deficit which last year reached £310 million, against a background of falling national income, falling GNP and in a state of almost universal industrial and commercial depression. Rarely does one open the morning newspapers without finding that some very old-established and apparently extremely solid company had gone into bankruptcy or had to have a liquidator or receiver appointed.

In the light of this situation all one can say about this 1975 Finance Bill is that it is quite irrelevant to the needs of the present situation. Far from dealing in an adequate way with the problems that exist, the provisions of this Bill add 3 per cent to the already enormous rate of inflation. It is doing nothing to solve all our other problems.

Since he became Minister for Finance the Minister has consistently ignored the dangers facing us or, in so far as he has not ignored them, he has in most cases deliberately concealed them from the public. For example, the budget for 1974 was clearly a disaster. Almost every prognostication or prophesy or expectation that he dealth with in his speeches on that budget turned out to be totally wrong.

The Minister said that provisions in the budget were aimed to raise the increase in gross national product in 1974 from an expected 3 per cent to 4 per cent. It now appears that the gross national product fell slightly last year. Real disposable income— what people in fact have to spend— fell by more than 2 per cent. He also said that there would be a balance of payments deficit of £140 million. This seemed to me to be extremely optimistic. We suggested, even before last summer, judging from the way things were going, that a figure of £300 million was a far more realistic assessment. It may have seemed realistic also to the Minister, but he has the universal attitude that when the news is bad, do not tell it or, at any rate, try to make it sound as good as possible. He continued during the budget debate to stress his notional figure of £140 million which turned out in the end to be no less than £310 million.

The Minister said that the current budget deficit in the nine months up to the end of December last would be £76 million; in fact, it turned out to be £92 million. This is another example of what might be described as ministerial exuberance. He assumed that continuing inflation and continuing boom conditions which he had inherited from Fianna Fáil would reduce the deficit by the end of the year to something quite small. He also said that he expected farmers' incomes to rise quite substantially. In real terms they fell by about 30 per cent. To complete the list of mistakes and misinterpretations in his budget speech of last year, he said that prices would rise during 1974 by 14 per cent but they rose by 20 per cent up to the end of November. When up-to-date figures are available we will see that they have risen considerably more.

These were the types of misinterpretations, complete misunderstandings of the trend of events which led to last year's budget being, as I have said, something of a national disaster. The Minister for Finance is very much like a man in a house with a leaking roof. It is raining very heavily and the water is coming in, and he says: "Oh, well, there is no need to go to the trouble of fixing the roof. Sooner or later the rain will stop." Unfortunately the rain of international problems which is coming in on us, together with the problems that we are creating ourselves to add to inflation, will not go away just like that. The Minister is always hoping that such problems will go away and that nothing will have to be done to deal with them. In his budget speech as reported at column 200, Volume 277, of the Dáil Official Report of Wednesday, 15th January last, the Minister said:

King Solomon might never have achieved fame had he not had to make a difficult decision upon irreconcilable claims. The duty I have of holding a balance between conflicting pressures is no less daunting than Solomon's dilemma but unfortunately I have no pretensions to either his wisdom or wealth.

All I can say about that is that King Solomon would never have achieved fame had he, like the Minister, made no decisions about anything in the hope that the problems would go away. It would be fair to suggest that the Minister and the Government hope that they can avoid dealing with inflation and with our balance of payments problems, that other countries throughout the world and more particularly in Europe, will deal with their problems and so improve the international conditions to our benefit.

We are the only European country that has not taken measures to deal with inflation and the balance of payments. They have taken measures which in many cases have been very painful and have been politically dangerous for their governments, in certain cases the governments sustaining considerable political unpopularity. They have taken these steps because it is essential in order to maintain the economic and financial stability of their countries. For practical purposes we have done nothing at all. One can only say that this Coalition Government, if one is to take their policy, appears to be totally devoted to the task of winning the next general election, even if this may involve bankruptcy for the country. It seems to me that this desire to acquire and maintain political popularity and to do nothing that would create political unpopularity if it can possibly be avoided. is the basis of the entire Government policy on these financial matters. Every other European country is dealing with the problems originally created by the oil crisis, the enormous increase in the price of imported fuels. All the figures suggest that in this year, 1975, the other countries, with the solitary exception of our bankrupt neighbour, England, are going to see a very considerable improvement in both the rate of inflation and the problem created by their balance of payments. Britain and ourselves are the odd men out. Even as between Britain and ourselves we appear to be very rapidly getting ourselves into a much worse position than they are in.

On the details of this annual budget, the Minister in his opening speech today boasted about the improvements in income tax allowances. He said that the amount made available was £27.8 million in respect of personal income tax relief and company tax relief. He said that for the second year in succession these had been improved and the total cost over the two years was £60 million. He says this provides an unprecedented level for income tax payers. First of all, the income tax allowances may have cost £27.8 million in this year, but they are up by only 15 per cent, which is well below the rate of inflation. If one takes the two years, the income tax payers are much worse off. If the Minister had succeeded even in reducing the rate of inflation to what a couple of years ago would have seemed the appalling level of 10 per cent, then all the income tax payers in the country would have been far better off than allowing inflation to reach this dreadful rate of 20 per cent to 25 per cent and then giving them back a very small part in the form of income tax allowances.

However, in spite of the rather self-satisfied remark that the Minister made in his speech about how "developments since the beginning of the year vindicate the carefully expansionary stance which I adopted in January budget", it does already seem clear that this budget has been a much greater disaster even than the one last year. In particular, the Minister said in his January budget that revenue this year would rise by an overall 25.8 per cent. Expenditure was to rise by 31 per cent, the result being a doubling of the expected annual deficit from some £69 million to £129 million. In the first four months of this year up to the 29th April last, the increase in revenue was not 25.8 per cent but exactly 10 per cent, whereas in the same four-month period, expenditure was up by 31 per cent, which is just a fraction over what was expected, so for practical purposes it is on target.

I appreciate that input of revenue is not always level throughout the year, that there might be a couple of bad months followed by better months later on. There may be some sort of improvement in the position later on. It would have to be a very big improvement and, judging by the general depression in the economy as a whole, it does not seem very likely that there will be a very big increase, if there is an increase at all, in the rate of input of revenue between now and the end of this year. It seemed to me at the time that an estimate of 25.8 per cent increase in revenue this year was a wildly optimistic estimate by the Minister, but if we were to continue throughout the rest of the year in getting only 10 per cent extra in revenue as against the Minister's estimate of 25.8 per cent, it would mean that the deficit in the budget instead of being £125 million, which heavens knows is big enough, would be something well over £250 million. The only result of that would appear to be that, as the Minister threatened in his budget in January, we would have to have a supplementary budget. He said in his speech in the Dáil on the budget in January that if revenue did not come in, if economic conditions generally did not improve so that revenue came in, then the possibility of a supplementary budget definitely loomed large.

I would like to refer in this connection to a rather curious paragraph which appears to have been inserted in his speech here today after the rest of the speech was prepared, because it is on page 3A, which I presume means that it was added at some stage between pages 3 and 4.

On page 3A he says: "Incessant demands for the Government to produce still more cash to relieve the burdens of various groups or to pay the increased wages and salaries of public servants resulting from national pay agreements cannot be met without resort to further taxation." I would like to ask the Minister what precisely he means by this reference to paying the increased salaries and wages of public servants resulting from national pay agreements. In his budget last January the Minister provided an additional £40 million for increases in pay to public servants, but he said himself that a substantial part of this £40 million related to pay awards already made, arbitration awards and so on. Only part therefore of this £40 million could be related to any possible arrangement that might be made to follow on the pay award of last year. He said that in setting aside this sum he had made allowances only for what he described as a reasonable pay award in line with what he considered the needs of the country were.

I would like to ask the Minister whether this reference to the increased wages and salaries of public servants resulting from national pay agreements means public servants will not get the full award which they would get normally, on analogy with the other awards made under the national pay agreements, that he proposes to increase taxation to meet this. It seems to me that these are the only two meanings that one can draw from it.

I would be interested to know which of them it is, whether he is going to refuse to pay or to postpone paying the increased pay for public servants or else have a supplementary budget to meet it. It would appear that even after four months of this present budget we are facing in the fairly near future the strong possibility of a supplementary budget and still further taxation. This reference in this paragraph would also appear to mean that the Minister does not propose to meet incessant demands for the Government to produce still more cash to relieve the burdens of various groups that cannot be met by further taxation.

He includes in this the anguished demands for more money from the various schools, particularly secondary schools, which are steadily rolling into bankruptcy. The Minister knows perfectly well there is an appallingly dangerous situation arising in the educational field. It would appear from this paragraph that the Minister is saying either that he is not going to give them anything or, as he puts it, he is not going to produce more cash to relieve the burdens of various groups or else he is going to include this in his forthcoming supplementary budget if he introduces one.

It is not unfair to say that one of the big problems with the Minister is his general lack of candour. He appears to be anxious to avoid unpopular budgets, and in so far as he does increase taxation he spreads taxes throughout the year instead of, as used to be the custom, putting at least the greater part of taxation into the annual budget. In this budget he imposed £34 million in additional taxation. Of course there were many other mini-budgets which added very much more than this to the burden on the public. We had the addition of £13 million for Posts and Telegraphs— stamps, telephone charges, telegrams, and so on. Indeed it is an interesting aspect of this matter that the Minister for Posts and Telegraphs and the Government in general appear to have miscalculated this amount very badly. I notice in the figures for the first four months of this year that the income that the Minister got from Posts and Telegraphs is exactly the same as the income from Posts and Telegraphs from stamps and so on in the first four months of last year. It would appear that the only result of these enormous increases imposed on us by the Minister for Posts and Telegraphs is that the public have reduced their use of the services so much that the income has not been coming in.

Another £2.8 million was taken off butter subsidies. We had another £3½ million from increased health contributions, and comparatively recently we had the enormous rise in the insurance stamp; we have not been told how much that will bring in but estimates of £40 million for the year are about right. Anyway this figure has not been denied in any satisfactory way.

These matters taken together add up to an increased burden of £87 million on the public, as against £34 million in the annual budget, a total of £131 million. We have the situation under this Minister that the greater part of increased taxes and burdens on the public are not included in the budget at all. They are included in assorted mini-budgets throughout the year. It is an example of the general lack of candour and openness in Government financial and budgetary policy.

Regarding CIE, I do not need to remind Senators or the Minister that within the last few days we have been appalled to discover that there is to be a further 33? per cent rise in bus and 25 per cent rise in train fares, starting I think next week. This is the largest single increase that there has ever been. It is going to be extremely severe on the public. It will increase business charges but more particularly it will be a very severe burden on working-class people who use the bus and train service. It is not quite so bad for those who can drive their own cars. Of course, they are being hit by the huge rise in the price of petrol. Workers who have to travel quite long distances by bus are going to find this a very heavy impost on them week by week.

On the 18th December last, during the passage of the Transport (No. 2) Bill through this House, I cross-examined the Minister for Transport and Power on this matter. I pointed out to him that the Minister for Finance included in his Estimates a sum of £17 million as a subsidy to CIE. I pointed out that far more than this would be needed. If one took the trend of losses in CIE this provision was quite unrealistic unless the losses of CIE were to be cut by enormous increases in fares. Year by year the tradition followed by successive Governments has been that of increased costs in CIE, which are always very big in a time of inflation because it is a labour intensive concern and in order to avoid these huge increases being put on the public, the subsidy from the State as a social matter was increased. I said therefore that the estimate of £17 million was far below what CIE normally expected to lose. I suggested that £25 million would be a more realistic figure.

The appearance of this figure of only £17 million suggested to me— and I put it to the Minister—that there would be enormous increases in fares. The Minister replied that his estimates might be very intelligent guesses but they would be estimations rather than facts. My guesses, whether they were intelligent or not, have turned out to be facts within four months. We now find ourselves loaded with 33 per cent extra in bus fares and 25 per cent in train fares.

The whole affair is an example of a lack of candour in Government policy; that apparently a decision is taken that all the increased costs of CIE are going to be landed straight onto the public without any increase in the State subsidy, a subsidy which is entirely justified, because the existence of a national transport concern is not simply a matter that can be treated as an ordinary commercial proposition. It has very strong social aspects to it.

It cannot be expected in a state of inflation such as we have at the moment that a national transport concern of that kind should be expected to pay its own way completely with the aid of enormous increases in fares on the public. Apparently the decision was taken by the Minister way back last November that in future, at least for this year, the public are going to have to pay for the whole increase of wages in CIE. If he had taken this decision he should have told us. In fact, this thing was slipped into the Estimates and the decision taken without any public statement on the part of the Minister or the Government. It is an example of the constant efforts of this Minister and the Government to prevent the people from hearing the full truth of financial matters.

Prices rose in the past three months for which we have figures by the appalling figure of 8 per cent. Fortunately that does not mean that the rate of increase for the year as a whole will be 32 per cent, because there was the exceptional fact that the Minister in his budget added 3 per cent to the cost of living. Unless he is going to have a budget every quarter we will not expect to have quite that increase continuing. Nonetheless it does seem to be generally accepted that the rise this year will be at least 25 per cent. In the period that has elapsed since the general election the total rise in prices now is 46 per cent—this in the context of a Government which retained power to a considerable extent on the basis of one of its 14 points, the stabilisation of prices. Not alone have they not stabilised prices but so far as anyone can find out not one single step to deal with prices has been taken by the Government other than those which had already been taken in the form of the Prices Commission and so on by the previous Fianna Fáil Government. Not only have they not taken one single step to deal with prices, let alone stabilise them, but they have in many cases, such as the recent budget, actually increased prices. The tragic thing is that our rate of inflation is getting steadily and rapidly worse at a time when everywhere else, except in Britain, it is improving.

It is worthwhile looking into some of the figures for the countries of western Europe, particularly the members of the EEC. We find there has been an all-round improvement except here. Italy, for example, up to some time ago was looked upon generally as the almost bankrupt country in Europe, whereas now all the economic indications are that it is improving quite rapidly; prices certainly are falling; balance of payments deficits falling quite rapidly. Prices in Italy last year went up by 24.3 per cent. The estimate for this year is 19 per cent. In Denmark prices rose by 16.9 per cent last year; this year the estimate is 14 per cent. In Belgium last year the increase was 15.7 per cent; this year it is 11.5 per cent. In the Netherlands the prices last year rose by 10.9 per cent; the estimate is for a slight fall this year to 10 per cent. In West Germany last year prices went up by 5.9 per cent; this year a slight rise to 6 per cent is expected, but if we could reach the level of Germany we would all be very happy. In Luxembourg prices rose by 10.8 per cent last year; this year they are expected to rise by 8.5 per cent. In France they rose by 14.7 per cent last year; they are expected to rise by 11 per cent this year.

In the United Kingdom, on the other hand, prices rose last year by 17.1 per cent—which is somewhat less than our rate—and this year the estimate I have seen is 18 per cent. Perhaps that is a bit low but for some reason that is the estimate which has been produced. I do not think it will be 25 per cent anyway. We have the glorious picture that last year our prices went up by 20 per cent and this year it looks as though they are going to rise by 25 per cent. So if England is excluded, we have by far the worst situation of any of the member countries of the EEC. We are simply waiting for other people to do the work for us. We are waiting for an improvement in world and European conditions in the hope that this will ultimately lead to a reduction in prices here.

The trouble is that as import prices, if they do not fall, at any rate tend to become less, we shall find ourselves in the position that more and more of our inflation is created by ourselves at home, and there is no prospect certainly for the next 12 months or more of any substantial improvement in our inflationary position.

With regard to external borrowing, the Minister's attitude is curious. On 20th December last, at column 488 of the Seanad Official Report, I asked the Minister on the Appropriation Bill how much he expected to borrow abroad last year either directly by the State or indirectly by semi-State companies. This was the 20th December, very near the end of the year. He told me that he expected that by the end of the year, which was another ten days away, the State would have borrowed £138 million and semi-State organisations would have borrowed £40 million. In fact, according to the Central Bank Report, the State last year borrowed £160 million and semi-State bodies borrowed £81 million— double what the Minister told me on the 20th December. The total was £241 million instead of £178 million.

I was surprised at the time that the Minister's figures were so low, but I assumed that the Minister had access to the figures. I am totally unable to understand why on the 20th December last the Minister, in particular, should have been able to tell me that only £40 million was borrowed abroad in 1974 by semi-State organisations, whereas now the figure appears to be £81 million. It would suggest that the Minister's control over the activities of semi-State organisations is a great deal weaker than it ought to be.

However while the figure given by the Minister was certainly highly inaccurate for whatever reason, we know that the total borrowed last year abroad was £241 million, which is an enormous amount. It is not surprising therefore to find that the Minister in introducing this Bill today, should have said:

Of course, borrowing cannot be effected without risk or limit. The supply of borrowed money is uncertain because lenders, particularly foreign lenders, cannot be compelled to lend and whatever money is borrowed has to be repaid with high interest rates in short periods. Borrowing is certainly the proper course today to avoid even greater slump and unbearable taxation, but we cannot overlook that we are mortgaging the nation's future to relieve present difficulties.

The trouble with this Government is they are mortgaging the nation's future to relieve their present political difficulties.

One gets the impression at all stages of this Government's budgetary activities that they are not interested in taking genuine action to relieve the problems they face. One feels that they are dealing with this matter in a political way in order to avoid taking unpopular political decisions in the hope that some time, somewhere, something will happen to improve the state of the country.

Another example is the lack of candour which the Minister for Finance displayed on such occasions. Today in his opening speech he talked about our balance of payments problems. He spoke of the £310 million deficit we had last year as if it were entirely due to the oil situation. Only £130 million of the £310 million balance of payments deficit last year was due to oil. He goes on to say that apart from the oil there was a price increase in imports which we had to meet. That is less than candid. While it is quite true that imports other than oil rose in price last year by 30 per cent, the Minister ought not to forget to add that the average price of our industrial exports, which last year were nearly two-thirds of our total exports, also went up by 30 per cent. If he mentions one, in all candour and honesty, he should mention the other.

One of the problems which creates most of our difficulty in the present day, and which led to massive unemployment, is the state of the manufacturing industry. All the gains achieved in manufacturing employment in the last two years have been wiped out. There are fewer people employed than two years ago. It will be very difficult even to maintain present employment during 1975. It is unlikely that the level of employment will at any stage this year reach that of early 1974.

Ninety per cent of all industrial firms at the moment have slack capacity. As a result, new and replacement investment by existing firms is at a very low level. The continuous fall in manufacturing output over the last 12 months left industry with spare capacity, short of cash and short of orders. Much of this setback has been caused by the effects of the current international recession, but much is also due to a decline in the competitiveness of Irish products both at home and on the export markets.

I quote from an issue of the Newsletter issued by the Confederation of Irish Industry dated 22nd April, 1975:

The economy is firmly caught in an inflationary spiral, and recent trends are very disquieting for our future. The time has now come for determined steps to counteract inflation. Unless these steps are taken, a number of our industrial sectors are in danger of further decline.

They go on to point out that almost three of the eight percentage points rise in the consumer price index in November and February are caused by increases in indirect taxation.

This in turn, added to the level of wage claims which had to be paid by the manufacturing sector, thus reducing competitiveness. Fuel costs in industry were allowed to increase faster than in Britain. In the middle of a depression and a wage agreement negotiation, the Government decided to increase Social Welfare contributions from both industry and employees. The combination of these actions has directly added to industrial costs. A continuation of this trend will result in the steady decline of manufacturing industry.

Irish industry is now going through its most difficult time since the 1950s. There has been a steady decline, month by month, in output since March, 1974. Employment is now down to the level of 1969. We have almost 103,000 people out of work with an inflation rate running at the moment at 23.8 per cent. The cash flow in industry is getting steadily tighter. We have the combination of higher working capital requirements because of inflation with low market demand. In many cases production, and therefore employment, had to be cut back in line with the cash actually available. It was estimated that between 1971 and 1986, 20,000 extra jobs a year were needed in order to provide for our increasing population and to eliminate emigration. Since we now have fewer at work in industry than 1969 and no improvement likely this year, one can see the appalling problem which will face us, either in very heavy unemployment or in a combination of heavy unemployment and a large-scale renewal of emigration.

What can one say of the future in the present conditions and in the light of the complete irrelevance of the budget now before us? There is no sign of a fall in the rate of inflation. Even the invariably over-optimistic Minister has not suggested there is likely to be a fall in the rate of inflation this year. There is no sign of any real fall in unemployment or any increase in industrial production. People say vaguely and hopefully that perhaps there will be by the end of this year. One notes that even the more optimistic tend now to say next year rather than the end of this year. There is no certainty that even then there will be an improvement.

We are still waiting for other countries to do our work for us. In his opening speech the Minister said:

Nevertheless, developments since the beginning of the year have indicated the careful expansionary stance which I adopted in the January budget. Policy-makers in other countries are attempting to strike a balance between curbing inflation on the one hand and combating recession on the other. The steps to boost activity which some countries have taken should bear fruit later in the year when we should be in a position to take advantage of them.

Has any more ludicrous and more selfish pronouncement ever been made by a Minister for Finance in this country? We are waiting for other countries to strike a balance between curbing inflation and combating recession.

I hope that the steps taken by other countries will bear fruit and we will be in a position to take advantage of them later. That was an appalling statement made by the Minister but it is in line with the statement he made at a press conference abroad a couple of months ago when asked whether we propose to use our drawing rights or borrow money from the International Monetary Fund to help with our balance of payments problems, to which he replied firmly no. He said we have no intention of doing anything of the kind because we do not want those people interfering in our internal affairs. This seemed to be one of the most outrageous statements any Minister of any country ever made.

It is outrageous to describe the International Monetary Fund as if they were a group of people interfering in the people's internal affairs. The point being made of course was that, if the Minister and the Government borrowed from the International Monetary Fund to deal with our very pressing balance of payments problems, they would require some modicum of competent financial administration from this Government. The present Minister and the Government appear anxious not to be made to do that. So, we have this outrageous pronouncement that it is impossible to raise any money from the IMF because they would be interfering in our internal affairs.

I compliment the Minister for Finance, not for any budgetary changes he has brought about, but for the courage he has shown since taking office—the courage of the continuing commitment to changing the whole financial and taxation structure. This was a commitment to which many of us were always dedicated. Unfortunately, up to the change of Government, we never had the opportunity to bring about these most welcome changes in the taxation and financing institutions—changes which were long overdue and obviously missing in any previous Government's contribution to the fairer distribution of wealth.

The Minister has given himself this commitment. He has proved in his successive budgets that he is dedicated to the redistribution of the wealth of the nation. If we want to add to that commitment of the redistribution of the wealth, we must look forward to improvement in our economy which will occur from the hoped for income from our natural resources. If this comes to fruition, we hopefully look forward to it putting our economy, small though it may be, on a par with our EEC neighbours.

We are one of the smallest countries in Europe. We have the most open economy one could imagine—an economy which is subject to all the inflation created outside and beyond of the control of any legislators in this country. This inflation has taken place in all western economies. Because of our open economy, it has hit us harder and we were not geared for it. Our EEC membership ensured free trade arrangements, not alone with Europe but with Britain. A free trade agreement with Britain was signed by the previous Government which subjected many of our industries to competition. Although industries which had been protected for so long had been forewarned apparently they were not forearmed. This meant that, because of outside inflationary situations, many of these industries, such as the footwear and the motor car industries have found it almost impossible to compete with outside trading. This is one of the largest areas of unemployment.

If we are to consider what action this Government must take to meet the curtailing this employment, we must look to the responsibility we have through the IDA. This authority was set up to bring new and diverse industries to our country, particularly from America. Because we are now members of the Common Market, the Americans realise that by setting up an industry in a country such as ours they will have a better chance of getting their products on the EEC markets.

Basically, many of these industries are in the pharmaceutical sector. In my own county, Tipperary, we have been fortunate that the IDA managed, after long negotiations, to convince firms like Merck, Sharpe and Dohme and Sheering Plough Incorporated to set up plants here and provide thousands of new jobs. Because of the work of the IDA, we now have one of those industries almost completed and an application is before us for the second. The unfortunate thing about an application by an industry for planning permission is that people who do the most shouting and talking about unemployment are the first to lodge objections to new industry in an area which heretofore had been dependent totally on the agricultural sector or on service industry.

We have currently in Tipperary a planning application from a pharmaceutical company, which has assured us, the Institution of Industrial Research and Standards and the IDA of their desires, not alone to be good neighbours, but to produce vast employment opportunities for our people. We have the extraordinary spectacle of people who themselves talk about employment and what this Government are or are not doing about it, I find people who are secure in industry and in their own very good jobs listed as objectors, thereby holding up the progress in the provision of new industries. We admit and accept that the Planning Act ensures that such people have every right to object, but we hope sincerely that no stone will be left unturned to ensure that a speedy hearing is given to these objections so that the IDA and the Government can proceed with their plans for new industries.

For this reason I welcome sections 4 and 5 which gives a stimulant to industries. Sections 4 and 5 deal with expenditure on industrial buildings. They give an immediate stimulus to the industrial and building sectors. The rates of building allowances are being increased from 20 per cent to 50 per cent, and in the case of the initial allowance from 2 per cent to 4 per cent. In addition, the allowance for market garden buildings is increased from 10 per cent to 20 per cent. The same level is applied to farm buildings. This ensures that market gardeners will not be at a disadvantage when compared with farmers.

Those provisions are most welcome. Not alone do they give an added stimulus to the industrial sector, but they also give a stimulus to the agricultural sector. It is unfortunate that direct employment is decreasing in the agricultural sector in Ireland and every EEC country. It is true that in creating indirect employment in the service and allied industries, agriculture plays an important role. Because of that, any assistance that can be given by way of allowances is to be welcomed by farmers. Whether we like it or not, since our entry into the EEC, with the exception of milk, the farming sector have been disillusioned with what has come from Brussels.

Today, the General Council of Agricultural Committees met. Each county without exception reiterated this and put on record their dissatisfaction with the terms of entry negotiated for us in Brussels, with the directives that have come from it, particularly Directives Nos. 159 and 160, directives that have no bearing whatsoever on our agricultural community. If the farm modernisation scheme is to be operated to the benefit of farmers, changes will have to be made in the operation of that scheme to make it relevant to the farming community here. Otherwise we will have lost the impetus of joining the EEC. As I said, with the exception of milk, it is true that farmers have benefited very little from membership in the Community.

I welcome the provision in the Minister's speech which provides under section 21 of the Finance Act the option for farmers to elect for a notional basis of assessment for income tax. The Minister extended this notional basis of assessment for a further year. This will be welcomed by the farming community. They have never been caught in the taxation net and are not geared for the presentation of accounts. There is always a suspicion in their minds that whatever is documented will be used in evidence thereafter. For this reason, they are slow to present accounts in their own interests. I too welcome the provision to continue this basis of assessment for a further year.

I was one of those who advocated that taxation should be extended to farming. The Opposition had been adamant for a long time and had assured us that this would not come about. They warned us that such an action would be disastrous. The Minister had the courage to proceed and ensure that the agricultural sector, when it could be proved by accounts or on this notional basis that they were making profits would become taxable. Every other sector of the community, including agricultural workers, were liable for taxation. Most reasonable farmers appreciate that, if an employee is expected to contribute by taxation, it is only fair that the farmers should contribute their fair share. This is now readily accepted by all fair-minded people and we look forward to a fair assessment of their earnings, having regard to all the allowances and the problems they had.

The Minister mentioned the problems of 1974. For the farming community that year was a disaster because of calf prices, cattle prices, nonworking of intervention, except to the benefit of the factories, the inability of the farmers to dispose of brucellosis reactors—all the things that contribute to the economical working of the farm. Farmers should get a fair return for their labour and have a fair system of taxation at all times.

Throughout the budget speech and in this Bill we have seen little touches of humanity. There has been an awareness of the problems that can be created by implementing a Bill without thinking of the poorer sections that might suffer under it. Section 9 is a typical example of this type of human approach. It is proposed to exempt from income tax the monthly payments, which range from £25 to £75, by the Minister for Health to thalidomide children, which supplement the awards from the West German fund for these victims. This type of provision proves that the Minister and the Government are aware that some of the minor legislation put through both Houses had imposed sufferings on the weaker sectors of the community.

I cannot let this occasion pass without complimenting the Minister on the tremendous improvements he has initiated in the social welfare sector. On page 2 the Minister outlined the amounts of money he is making available in 1975 for Exchequer expenditure. On the social welfare side alone he will spend £210 million. This figure is two-and-a-half times greater than the 1972-73 level. In addition, the dates on which these improvements take place have been advanced from the traditional October of previous Governments to April. Provision has also been made for a further increase in weekly payments in October.

The October increase reminds me that this is the first time that social welfare payments are related to the income of this sector and to the cost of living. As the Minister says, this ensures that in October all recipients of social welfare allowances will get an increase because of the rising cost of living. This is the first time any such provision was included and it is a most welcome improvement.

There are not many people ready to defend the weakest section. Most people, because they themselves are doing well, rarely worry about the unemployed, the sick, the widow or the old age pensioner, or such social welfare recipients. This Government, without fear of contradiction, have put on record their commitments to the weaker sections of the community. They have ensured that in successive budgets, not alone have they improved the payments, but they have eased the means test thereby bringing a larger section of the people into the social welfare net.

As a result of commitments in their 14-point programme upon which they were elected, the Government have also reduced the qualifying ages at which people could benefit. Many people, for the first time ever, have found themselves being remembered by the Government for the services they had given to the nation to an extent beyond their wildest dreams. These services involved rearing their families, educating their children, working either in industry, private firms or shops. Now that these people have reached retirement age, this Government have through the budget recognised the contribution of these people to the economy. They have not been forgotten.

We speak about inflation, about price increases and about what has been or can be done to arrest it by price control, through the National Prices Commission, or by price freezes, whether it should be done, as in the past by wage freezes, to which we would—and did at that time—object vehemently. It has been the commitment of all the Ministers that in an inflationary situation such as we now had, the prime consideration of this Government would be for the maintenance of employment.

Price increases have come about because we are an open economy. Much as Fianna Fáil would like to say that it is not because of the rise in oil prices, there is no doubt that oil prices have contributed significantly to the inflationary situation of all western countries which depend so much on oil as, indeed, we do. These oil increases have to be met by the ESB, CIE, the farming community and industry. To tell us that price increases in oil have nothing to do with inflation is a little naive. To say that nothing has been done, or can be done about it is not really true. Not alone have we tried to ensure maintenance of employment but we have also tried to ensure that prices are related to the maintenance of employment in the industries which manufacture the goods in respect of which price increases are sought.

If people want something, they must be prepared to pay for it. Those who stand in bars and pubs every week and spend something in the region of £6 million or £7 million on alcohol are the people who govern the country: they complain about taxation, about the cost of drink but they expect to have a new hospital to go into any time they need it. They expect to have doctors, to have roads to drive on, to have good houses provided for them. They expect to have everything without being asked to pay for it.

The function of government is to rechannel, by either direct or indirect taxation, from those who can afford to spend it on drink and otherwise, money for the benefit of the underprivileged and poorer sections of our community, for those who are in ill-health. We have to ensure that, as Senator Russell said, either through taxation or borrowing sufficient funds are available to the institutions of government so that this country can continue on an even keel as we expect it to do.

I mentioned roads and sanitary services and facilities that people demand. Many of the improvements promised in the 14-point programme have been forthcoming to local government for the past three budgets. We have a continuance of the policy for the reduction of 25 per cent each year in the amount of money contributed from the local rate to the health charges. In addition, we have ensured that the rates contribution to housing subsidies has been reduced. Because rates are a local taxation, this has ensured that each ratepayer now pays up to £4 in the £ less and increasing amounts are being made available to local authorities under most of these headings for work carried out and initiated by local authorities.

My own county in the last year of the previous Government had £200,000 available to it for sanitary services, sewerage and water. This money was borrowed at that time from the Royal Liver Society in England, because no money was available to the institutions of Government here, to make this necessary capital available to us. The present Government have a commitment to sanitary services, housing, and such works, and I should like to point out the difference of approach to this problem. In their first year of office, we were notified that £900,000 was available from the Exchequer to spend under this heading and that it had already been budgeted for.

This is progress. As a legislator at local level, I realise how important it is to be able to produce schemes for Government approval and to be able to get speedy approval for their implementation. In spite of all the warnings and all the complaints that nothing is happening in the building sector, building at local authority level has never been at as high a level as it is currently. We have applicants, we have land and our greatest trouble is to find contractors to fulfil our building programme. There is absolutely no scarcity of money available to county councils from the Government under these headings.

I feel confident that the present Minister is sure of our support in his continuing effort to change the taxation structure, to ensure that the burden is spread evenly right across the board. We look forward to the day when the rating system can be done away with. The Minister for Local Government has committed himself under this heading. We are examining the possibility of doing away with this unfair system of taxation which ignores a person's ability to pay and its replacement at some stage with a local form of taxation, in order to ensure that all the local services continue to be implemented. In this way rates would be replaced by a system of taxation which would ensure that the person's ability to pay would be taken into consideration.

We ask the Minister then, to continue his good work and to ensure that there is a fairer distribution of the wealth of this country over all our people and the taxation should not be confined to the working class people or the salaried people who in the past carried the major burden of taxation.

It should be spread evenly over all the other sectors which are now included in this Bill. We look forward to an increasing buoyancy in our economy because of this. Everybody should realise that to have improving standards of service in hospitals, schools, roads, water and all the other schemes necessary and in the social welfare code which is the most important sector to be protected, money must be provided: it does not grow on trees. Instead of complaining about chipping into the kitty to redistribute to those who have not got it, we should regard it as a social obligation. It is an obligation that we have not found the Minister wanting in. We compliment him on his courage in initiating all these changes and we look forward to a continuance of this policy so that the poorer sections of this community will benefit in the long run from the type of legislation before the House today.

As the Minister said some time ago, the purpose of the Bill before us now is to give statutory effect to the taxation proposals in the budget. In this speech he gave at least four or five reasons why taxation should be imposed, amongst them being the high rate of inflation, the steadily increasing rate of unemployment—which has never been so bad in this country with 104,000 unemployed—the difficulties in the industrial section and the slump in the agricultural field. All these reasons are an indictment on the present Administration for the way they are handling the affairs of the country. They have proved themselves, from what we see in this budget, very bad national housekeepers and they have failed completely to make ends meet in spite of the many estimates that have been made. Cuts that have been made mostly affect the weaker sections. We see that over 200 untrained teachers are to be scrapped, people who have given long and faithful service and who have been proved good enough to teach for 20 or 30 years. They are now to be let go. There are cuts in several other areas such as amenity grants. Capitation grants for our secondary schools are insufficient and many of them are on the verge of closing. In spite of all this cheeseparing there is an unlimited amount of taxation in this document before us.

Many bodies, including the Central Bank, who have made a deep study of the present economic situation, have all agreed that at least 50 per cent of this inflation and 50 per cent of the crisis in which we now find ourselves is due to internal factors. We hear the Minister and members of the Government saying it is all due to the oil crisis, or the Suez crisis as it was once upon a time. If it is not one crisis it is another. The Minister is giving a paltry sum of a few millions to industries which are in difficulty to tide them over a rough period. With the other hand he increases the stamp contribution and he takes at least £17 million to £19 million out of the same industries, thus taking away four times as much as he gives. We have had a number of mini budgets. The Minister would not even wait until budget day to impose his taxes. One Minister imposes higher taxation in the postal sector, another Minister imposes taxation in the petrol sector. Every day we have a budget. What we have here is really only chicken-feed compared with the millions raised outside of budget day.

I believe that instead of going on the present lines we should be giving incentives in the tax field to induce people to save. We have no incentive for people to save. At the rate inflation is going, if you save one pound today it is not worth twopence tomorrow. We should have incentives to induce people to invest here and to induce people to stay here instead of the many different taxes that are now being imposed and which are running people out of our country—people that we can ill-afford to lose, people who have some money to invest in our country.

From the housewives' point of view the shopping basket of today is only half of what it was last year. That is all a housekeeper can afford to buy for the amount she has in her pay packet. We have, as Senator Yeats said, another increase expected in ESB charges; next week we face an increase in CIE fares and charges. These will be passed on to the consumer and passed on to the goods that we buy. Each article that we buy from next week on will be dearer. We are in for another round of inflation.

The Minister has boasted in this document that he has increased the amount of money for housing by 125 per cent. If his increase were to be realistic and keeping in line with two years ago he should have given an increase of at least 200 per cent because of the increases in materials and labour costs. There are no incentives for people to invest in this country. We have lost all credibility and we are living on borrowed money. The Government are living on borrowed time. What they are trying to do at the moment is buy popularity. The amount that the social welfare recipients have got is in no way in keeping with the increase in the cost of living. They would need 50 per cent or 100 per cent more of an increase in social welfare benefits.

The Minister himself admitted that all this borrowing is very bad and, as he said, we cannot overlook that we are mortgaging the nation's future to relieve our present difficulties. I believe it is about time that this should stop and that we stop living on borrowed money and borrowed time. It is most disappointing budget and I hope that when Fianna Fáil return to office they will improve the situation.

The Finance Bill gives us an opportunity to have a look at the economy to see how it is progressing. We are all conscious of the fact that, like all other countries, we are in grave difficulties. I do not think anyone knows the answer to the present problems; indeed I do not think anyone can forecast the future with any accuracy.

I think that the budget, within its limits, did as much as could be done. It had to gamble and gamble quite strongly to the extent of borrowing £125 million abroad, or 10 per cent of the budget. In the exceptional circumstances I do not think there was any alternative. We have set the goals of maintenance of employment and preservation of living standards. We all subscribe to those goals. We are not doing very well in the preservation of employment because there is almost a 50 per cent increase in the number unemployed. We must acknowledge the fact that this is the position in most other countries also. We are conscious of the great difficulties in industry, the many closures and so on. We see this as hard reality.

On the other hand, the present Government have increased social welfare benefits, unemployment benefits and other benefits to a very considerable extent so that between these and redundancy payments there is not a marked difference. Those of us who are in a fortunate position and have a weekly wage owe it to the community to help those who lose employment due to no fault of their own. There is now very little incentive left to work. A man might say if he does not work, depending on the number of his family, he will get so much, and if that man worked the week he may get only another £3 to £5. The person concerned feels he is working for nothing.

I wonder if anything could be done by means of an educational campaign to bring home to people the value of work and the fact that the difference between what they would get if they were unemployed and what they would get if they were employed is not in any way to be taken as a measure of the work they are doing. They should regard it as an honour and privilege to be able to work and thereby be able to make a contribution to all those who are less fortunate than themselves. I have a feeling that efficiency in work has gone down and there is not the same concern about whether the industry will survive or not because there is not the same amount at stake for the employee as there was 20 years ago, or even ten years ago, when there was a very substantial difference between the two. I wonder can that be tackled on the educational level? I am not suggesting that efficiency can be achieved by the economic whip, because unfortunately that whip falls on the guilty and the innocent alike. It also falls on the family of the man who is unemployed, which is something we all wish to prevent.

I want to move on from this to the fact that there is very little difference today in money terms between having a man unemployed and having him at work if he is working for the State, because the level of unemployment benefit is so good. I would suggest that if the State is capable—and we all hope that it is and demand that it should be—of maintaining the unemployment benefits at the present level, then it should be prepared to go further and actually put as many as possible of the unemployed to work. The work I mean is education: It is the work of preparing for the future that we hope will be brighter than the present. We hope that the day will come when we will have new factories or extensions to old ones, that closed factories will be opening and looking for people to operate them. Now is the time to train those people.

I know that a great deal is being done by the board engaged in that. The number at present is up to 6,500 —from 2,000 trainees to 6,500 trainees. I visited the headquarters of this board less than a year ago. We were all highly impressed by the work that is being done.

Yes. What I am suggesting is that at the present time we should have a crash expansion of that work. We should get a hold of people who can teach. They are available because we have many people unemployed who have the same level of skills that are being taught in AnCO. Therefore our whole effort should be that all who are capable of being trained further should not be given unemployment money with no duty. They should be put to work improving themselves and improving their value to the community in the future. I would ask the Parliamentary Secretary to see if the Government could do anything on that score.

This year is Women's Year. They are demanding equality and so on. This could not come at a worse possible time. It is driving us in the wrong direction at the present time because it is creating a standard that says that the housewife or the married woman who has not an outside job is somehow or other being less than a real person: she must go out and get that job. We have always recognised and should recognise that the highest vocation of all is in the home. The greatest contribution that the married woman can make is raising her family. Certainly it can be asserted without fear of contradiction that that is totally incompatible with full-time employment as long as there are children in the home of school age. Full employment in many other countries started this off, in so far as there was such a need for an increased labour force that the industries had to try to attract married women from the homes to work.

It might be said that psychologically it is good to be able to get out of the home for some time. Surely that is only for part-time work. Therefore I would suggest that, if it is at all possible, it should be made attractive for the mother of the young family to stay in the home apart from some very small part-time job. Full-time employment in connection with a family under a certain age should be penalised by reduction in the allowances for the children concerned.

No household should be entitled to get allowances for children while they are drawing two salaries. There is a contradiction there. The additional allowance given on the basis of family is surely to encourage the mother to remain in the home. In this time of high unemployment this is underlined for us. It may be difficult for the Government to do something about it because all the EEC nations are on the march at present on this bandwagon. It is all right in places where they have relatively high employment, like Germany and so on. Certainly, in our present state, if the Government were capable of doing it, it would be a real positive act of national development if 10,000 single people were to be taken off the registers and used to replace 10,000 mothers of families who are in full-time employment and to encourage and help them to get back to the home where their primary duty rests, where their primary contribution to the welfare of the State is demanded.

That brings me to another unemployment sector—the question of teachers. We had the very drastic and harsh decision by the Government in recent weeks on the question of untrained teachers. That is an action which none of us can support. We can sympathise quite well with the necessities that underlined it, but we now see fully trained young teachers lined up at the employment exchange. Obviously the Government had to make a very difficult decision there. Provided adequate compensation is given and so on, unfortunately, the trained must take precedence over the untrained in difficult situations like that.

That brings me again to the point that too many young married women are holding down full-time teaching positions in this country. It has become the fashionable thing to do. Indeed the atmosphere has been created where it is expected that a woman will seek to utilise fully whatever professional training she has got. The public do not seem to favour the slackening or abandoning of most of this while the family are being reared.

That is all wrong. At this time of high unemployment the scales could be well tilted so that it would be scarcely worth the while of such a young married woman to take a full-time post. Of course, it would depend on the level of income of the husband. In some cases it may be a harsh necessity to get some extra money. Surely the tax system takes care of that. It means that in the case of any woman whose husband has a relatively reasonable income to rear a family the tax system should be such that while the children are young it should not be made profitable for such a wife to go into full-time employment. I would make a great exception for part-time employment. That should be encouraged; in other words, teaching and so on up to a quarter of time, because it satisfies the wish of the person concerned for fulfilment in the professional sense. It also gives the person the opportunity of having some interest outside the home, which is all to the good. If it were restricted to a quarter time it would provide the opening for the married teachers who are coming on the market just now, who have completed their studies, who are anxious to teach and who have something to offer to our community and are not given the opportunity.

In that regard I must fault both the previous Government and our present one in that, with all the talk about education and so on, the number of teachers per 100 pupils has been decreased by deliberate action of both of our Governments. It went from a ratio of one in 15 to 20 to one today. I know that is dictated by financial considerations. It is not dictated by educational considerations. Neither is it dictated by a progressive and far-reaching view of the importance of training our young people to the limit of their ability and having confidence in the future, that our country in the future will be able to use their skills.

We would not have any unemployed teachers in the country today if the Government raised the current teacher ratio of one to 15 that was there in 1967. Nobody who knows anything about education could contend that the ratio in 1967 was excessive, yet what is the choice to the Government? The choice today is that they will have to face the fact of paying unemployment assistance to unemployed teachers because, unfortunately, England and other places have not got openings for such people today. My contention is that it would cost very little extra between paying the unemployment benefit and paying the initial salary of a teacher. If that needs a little bit extra in taxation it is something we would willingly face. In other words, I want to look with confidence to the future. We are entitled to do it. This budget does in the sense that, in line with general EEC fiscal policy, it does not seek to get over the oil crisis and the oil jump in the balance of payments in one year when it can be spread out over six, seven or eight years as we are borrowing on a heavy scale.

I submit that if we did that a little bit more we would cut unemployment drastically. We would cut it by what I have suggested and ensure that what we were really doing was training the work force, the young people to the limits of their ability for the day when we hope this oil crisis will be but a memory, indeed, a day when we might even be in that league ourselves, though that is rather far away.

We are all conscious of the many closures we have had, of industries having a difficult time surviving. But what has happened to the Buy Irish campaign? We had a flurry about six or eight months ago when it was got going again but so far I have not seen it. I have no use whatsoever for unofficial strikes, but if there were one for the support of Buying Irish and if it were against firms that are deliberately loading their shelves with foreign goods, then we could applaud such a venture. I know the Government's hands are tied by the EEC rules of the game, but the hands of the trade unions are not tied. Why are they not taking a foremost part in this and taking action against firms that are not playing their part in promoting Irish goods and who are not giving adequate displays to Irish products? Very often they deliberately try to mislead by mixing up products so that the housewife is unable to tell which is Irish and which is not. I ask the Minister what has happened to the campaign? Why are the trade unions so unconcerned about it? I feel they should be the pace-setters in this. We would all be glad and happy to support it.

Many of us make our personal efforts to buy Irish goods as far as we possibly can. Yet you can be saddened in stores when you see the shopper heedlessly rushing by with not the slightest concern as to whether the article came from Ireland or Hong Kong. These are the positive ways we can help the economy at this juncture. There are reasons why the Government cannot take a leading role in it, but I do not think the Government would prevent trade unions and others taking action up to the limits of the law in this regard.

When it comes to conserving our resources, we have to look at the agricultural picture. While it is considerably brighter than it was 12 months ago, it is more depressing because the raw material on which our agriculture industry thrives, that is the calf stock of the year, has been squandered this year in a way that made the ten bob calf of 1935 look a reasonable price. We all have pointed to those awful days in the economic war with England when the Government paid ten shillings per calf, but today in the market there is at least 20 to 25 per cent of the calf stock being sold at less than the present value of that ten shillings, at £1, £2, £3 per calf. The owners of such calves would have been far better off if the calves had died at birth. Unfortunately, in many cases, calves have been killed off. Certainly nothing has been invested by way of medicine or veterinary care to rear them. The result is that the present calf stock, which will be the beef stock of two years' time, is at least 10 per cent less than it should be. We will miss that raw material very sadly in two years' time when we hope the beef cycle will be in boom condition again.

I do not know what kept the Government from trying to tilt the balance and ensure that the calves were reared because there were subsidies paid to factories and so on on the beef side. Admittedly they were tied up with EEC regulations, but I would have thought a prudent concern for conserving our raw material would have diverted some of them to the maintenance of the calf stock.

I fully support the Government meeting various sectors concerned with our economy—industrialists, trade unions, farmers—to plan remedial action for the present difficulties. I applaud that, but I ask the Government to get similar groups together from the education and retraining fields to see how we can maximise the training of our unemployed people and our schoolchildren. Far from putting any ban on more teachers in our teaching system, this is the time to view their appointment as a case of taking them off the unemployment register and doing a better job for youth. If we have no option but to borrow to the extent we are at present, that money will have to be paid back, and it is the young people of today and the workers in the 20 to 30 age group who will have to carry the main brunt of putting the economy in such a way that it can pay back that money. That is why I appeal for a crash programme on the AnCO lines. What AnCO are doing is only a drop in the ocean of what could be done.

As regards short weeks and three-day or five-day weeks, it would be far better if we had attractive retraining programmes that would enable a company, rather than putting their employees on short-time, to assign a certain percentage of their work force to retraining programmes which could be aided and got under way very quickly. They do not have to be perfect. We have to do the best we can with our limited resources and the teacher is the main resource that is necessary.

Whether the teacher is the skilled mechanic who is unemployed and on short time at present or whether the teacher is a BA, woodwork instructor or metalwork instructor, they are the people. Give them chalk and blackboard or whatever slight facilities we can afford but let them get on with the retraining job. It is only by that we can proclaim our confidence in the future. If we did not have confidence in the future the present situation would be unbearable.

We hope and look to the future, and I think the Government aim, as announced here in the Minister's speech, of the preservation of living standards is an impossibility and we should face up to it, because with the sudden increase in the price of oil, were we to send out another £100 million plus for oil supplies surely you cannot take that out of any economy without affecting living standards. That should be spelled out clearly for all. At most, if it takes that much out of the economy we will have to accept the fact that it will take quite a few years, maybe four or five years, without any further major setback to the economy, before we can get back to 1973 standards. That is what is creating the inflation, in that all groups are seeking to preserve the 1973 standards and the Government are paying lip service to it here. But that is an impossibility because the goods are not there to go around. We have to pay to meet the external gap and consequently the only solution is more and better production from all working and a united effort to cushion, as the Government are doing, the impact of employment but, above all, to provide the necessary funds for retraining, because it is on retraining we should place our hope for the future.

There must be a future and a bright future. In that regard we can accept the budget as it is and hope that the next budget will be on a brighter basis and that it will show more imagination on the score of training and the score of making adequate numbers of teachers available for educating our young people because we have not made the slightest effort to get to the needy section of our children, that is those who have problems as slow learners or various other problems. Now is the time. The teachers are there. They can be retrained quite quickly to carry out the task necessary in all those remedial educational fields.

The universities have been criticised, and I think very unfairly, for the numbers of H. Dips. or trained teachers that are being produced—about 1,200 this year. As I pointed out earlier, if the Government only reverted to the 1967 teacher ratio of 15 to one rather than 20 to one that would more than take up all available unemployed teachers. We must face the fact that a teacher takes four years to train.

Four years ago, when the EEC was on the horizon, we were bedazzled with figures and hopes and dreams of what this was to bring and we all shared that equally and we were all perfectly honest in believing this was the real solution. At last our agriculture would be free to develop, would have the impetus to develop its full potential and we would have industries flowing in to get into the enlarged EEC market. All of it made common sense. What did we tell anyone at that stage? Go and train yourself. The Government had their priorities set on education and so the young people who went to university to become teachers, who went into the Arts faculty at that stage, did so in good faith. Their advisers gave them what they considered to be the proper advice, none of them having a crystal ball that could see what 1974 was to bring.

Now we have the situation of the spectre of grave unemployment of young teachers. While we deplore unemployment at any level the Government should be particularly sensitive to unemployment at a highly trained level, because a young person who has made an effort and has become highly trained, if he cannot get employment very often he is likely to stray into ways that are subversive to the State. You are creating a groundwork. You are creating a whole host of people who can be roped into such subversive and extreme organisations just because they feel frustrated with the way they are being treated, by lack of employment and lack of opportunities to practise their profession. We should be particularly careful about that even from the level of the security of the State alone. Most revolutions have arisen from educated groups who were in situations of great discontent and frustration and we have the seeds of that here today.

There is the parallel case for retraining in industry. It is taken for granted that the average industrial worker will be retrained at least three or four times during his career. He goes into an industry and after eight or ten years the process that was there has been superseded. That line is no longer viable so we have to retrain him in something else. He is retrained and he goes on again. I suggest that this concept of retraining is no longer viable so we have to retrain him in something else. He is retrained and he goes on again. I suggest that this concept of retraining, which we accept as fundamental in industrial development, is equally fundamental in the educational sphere, because while the training of a person in the educational sphere usually takes four or five years at third level, you must accept that such training will become obsolete following technology improvements and developments after a period of five or ten years. You must expect that we will have retraining problems and our third-level institutions will have to face up to that and be given the resources to face it. A considerable time will have to be spent on retraining. Retraining is also required for professional groups when there is a surplus of qualified people and no jobs available for them. If there is a surplus of engineers and a shortage of economists it should not take longer than a course of six months or one year to turn an engineer into a good economist. Indeed he could be an extremely good economist because of his engineering background.

The same applies to qualified BAs. They should be retrained for whatever opening is available for them. Unfortunately today we do not have sufficient openings for which to retrain them. Our whole planning for third-level education will have to make provision for and accept the existence of retraining. This can be applied at all levels of education. Training can be given immediately after graduation or retraining can be done ten years afterwards. That is the only way in which we can keep abreast of the demand of this crazy, mixed-up civilisation we have today. I appeal to the Minister to break with past thinking on education, just as this and previous Governments have broken with past thinking on the role of the industrial worker.

I hope next year will be better for us and I call for positive action on retraining unemployed people for the future. I call for immediate action by the trade unions to ensure that the Buy Irish policy is brought to the fore quite vigorously. This is one of the greatest aids that can be given to industry. I ask the Minister to ensure that whatever money is required for education is provided, whether this is done by way of extra taxation or in some other way. This would show that we really have the confidence we profess in the future of our country.

This Finance Bill, like many previous Finance Bills, is necessary to give effect to the budgetary proposals which were announced last January by the Minister for Finance. It is extraordinary that in this sea of inflation in which we find ourselves the budget itself is becoming less and less significant. The people tell us we have a budget not once a year, not once a month, but every week. That is the situation in which we find ourselves, and it is a tragedy that we live in such inflationary times.

We must ask ourselves have this Government, has our present Minister for Finance, seriously come to grips with the situation, or have they allowed the economy to drift in whatever way it pleases or in whatever way outside developments will decide? We have become accustomed to blaming all our economic ills on the oil crisis, and on the Arabs because they decided, in their wisdom, that it was high time that they looked for more money for the most precious commodity in the world today. We blame the oil sheiks for all our problems but we must bear in mind that the Minister for Finance decided to outbid the Arabs in their efforts to increase oil prices. Late last year he announced in the Dáil that he was increasing oil prices by 15p per gallon. We cannot blame the Arabs for that increase, which did nothing to curb the consumption of oil. It added further to our inflationary situation; it added further to the steep increase in commodities necessary for our survival as a people.

I am dissatisfied that we have no real long-term planning. There is no long-term programme being initiated which would induce confidence in our economy, confidence in the people who manage the economy, confidence in the people who manage our industries and confidence in the people who invest in those industries in order to create new jobs, in order to build a better economic climate for all. There is a great deal lacking at the present time. Who is governing the country today? Is it the unofficial strikers who, without rhyme or reason, call an unofficial strike which holds the entire country up to ransom as was the case a few weeks ago with the tanker drivers' strike? What has gone wrong? Will we ever grapple with the problem of the unofficial striker, especially those in strategic employments where they can inflict most damage on the community? We know now that people who can cause the most damage are inclined to wield the greatest weapon they have at their disposal and so inconvenience a large number of people.

The time has come for positive action for dealing with unofficial strikes and for dealing with the wage demands that are being made—some necessary and legitimate and some not so necessary. There should be more consultation to ensure that there will be no unofficial strikes which cause such havoc in the country. Whether we are in Government or in Opposition we do not want strikes. Everyone wants to see progress, no matter in what way it comes about. I am not convinced that enough is being done to advance the welfare of our people and of the nation. We still have a very high unemployment figure. The Minister mentioned this in his speech. When he introduced his budget in January he put the figure of unemployed at 96,000. In April we had 102,000 unemployed and we also have the threat of more redundancies hanging over us. In my own county we have a threat of more factories closing in the near future.

The most disturbing fact of unemployment is that male employment is being reduced. Nothing is more distressing in any community than when large numbers of male employees have to be declared redundant. Something drastic will have to be done by the Government. They are responsible for the affairs of the nation, for the national housekeeping. Therefore, responsibility must rest on their shoulders, irrespective of how we try to blame outside groups for our problems.

I should like to say to this Government that was hailed two-and-a-half years ago as the Government of all the talents that it is time they displayed this talent; it is time they displayed all the super expertise which they are alleged to possess and to get on with the job of governing this country in the way the Irish people expect. There is galloping inflation and more and more taxation. There is price rise after price rise. There is little use in talking about the generous increases that this budget makes provision for in regard to every aspect of social welfare when all those increases will be devoured by increased living costs.

We are led to believe that we will have a 25 per cent increase in the cost of living this year. I believe that it will rise to 30 per cent. Are the recipients of the various social welfare benefits any better off? They are not. We need greater purchasing power. We should like to see a return to the day when the £ would have some purchasing value, when the housewife would be in a position to buy something worthwhile for it. There is now a situation where the £ is no longer of any use, and one wonders if the £5 or bundles of £5 will be of any use, in order to tide us over this terrible inflationary situation.

The Minister, in his reply, will have to spell out clearly his plans for the future. He will have to try to restore confidence, confidence which has been badly shaken in recent times. I am afraid that, unless some drastic measures are taken, the general public will reach a state of despair and will have given up all hope of ever seeing an economic revival. It is disturbing that there is still such a high number of unemployed and to see the Minister for Social Welfare deciding to extend the pay-related benefit scheme for a further six months. I consider that to be a defeatist action on the part of the Minister and the Government. It means that they see no immediate possibility of getting those people back to work. They see no immediate possibility of the creation of thousands of new jobs which are needed at present.

It is all right to say "We are generous. We are extending the pay-related benefit scheme". That is only staving off the evil day, because sooner or later the situation must be faced up to. It will require all the confidence and all the co-operation of every section of the community if we are to get the country back on its feet, to get industry moving again, to get people off the employment exchange and get them back to work.

That is an important aspect of our budgetary programmes which must be pursued vigorously. The Government will have to face up to their responsibilities. It was disturbing to note at the weekend a prominent Minister making one type of statement and the Leader of the Government making another on our attitude towards Northern Ireland. That has nothing to do with this Bill, but it is a typical example of the divergent views there are concerning Government policy.

There has been a serious crisis in agriculture during the year 1974 and during part of 1975. That crisis occurred in a community which is not counted among the high numbers of unemployed. It occurred in a community who do not register as unemployed or redundant, and cannot do so. The year 1974 was a disastrous year for agriculture and that had its effect on the economy. When there is a drop in the value of agricultural goods, we reduce purchasing power abroad and our balance of payments deficit tends to grow and grow. I am not satisfied that everything is well in agriculture at present.

Some years ago farmers increased production in the hope of reaping the bonanza which we were led to believe was there for us when we became members of the European Economic Community. In 1975 the dairying counties are producing thousands and thousands of calves which are normally purchased in the midlands and reared on the farms there. Now the situation is as bad or worse than that which occurred in the thirties, when the calf-slaughtering took place. That was caused by the economic war that existed between ourselves and Britain. At that time there were no inflationary problems. Nothing could be much cheaper than it was then. It was known as "the hungry thirties". Now again, in 1975, there is a recurrence of calf slaughtering. There is evidence of calf-dumping in the south, with calves being sold for £1, £1.50, £2.00 and £2.50. If they are being bought for £2.50 apiece today, that £2.50 could be regarded as pennies compared with values in the 1930s.

This is a serious situation and is a clear indication of a lack of confidence within the farming community. It is an indication that they are worried about the future of agriculture. They are worried for fear of a slump in the cattle industry, and in dairying. As far as the pig industry is concerned, there appears to be little hope. Costs were allowed to soar to a degree where it was uneconomic for the smaller farmers to continue pig feeding. New incentives are needed and a reorganisation of our entire export system. At the moment it is haphazard. Suggestions have been made about the establishment of proper export markets, of new markets in third countries which are becoming very wealthy in recent times because of revenue from increased oil charges. These are all possibilities that must not be lost sight of if confidence is ever to be restored to the farming community again. Assurances should be given that our greatest single indutry will be maintained as it should be, at the forefront in employment.

Senator Quinlan referred to the "Buy Irish" campaign. I mentioned last year when we were speaking on a similar Finance Bill that a Buy Irish campaign was useless unless it was matched by a Sell Irish campaign. Nothing has happened in the past 12 months to increase the purchases of home-manufactured products whether it be the textile industry or any other type of manufacturing industry. I believe that nothing will happen until more drastic measures are taken to ensure that traders stock Irish goods. The only way they will be encouraged to stock Irish goods is to impose some form of increased taxation upon them if they fail to do so.

It is no good blaming the housewife. She goes into a store in an effort to purchase Irish-made goods and she becomes embarrassed. She probably looks from line to line or from store to store and sees goods made in Korea, Hong Kong, Taiwan, England, France, Germany, Portugal and Britain. She has great difficulty in finding an Irish manufactured article or garment or whatever she may propose to buy. In her embarrassment she has no alternative left but to go along and purchase foreign goods which are there on display in abundance in all our stores.

It is all right to say that we have quotas and tariff restrictions, we have free trade with Britain and this kind of thing. I do not think we have any free trade with Taiwan or Korea or Portugal or any of those other countries which seem to be dumping so much second quality material on this country at the present time, materials and goods which are produced in low cost countries where you have underdeveloped economies and low wages and lower overall standards of living. We have our main buyers in this country going abroad and buying all those goods and selling them at huge profits for themselves. That is a situation I feel our Minister for Finance could correct. It is the only way that I can see Irish goods being bought by Irish people. If you do not penalise them in some way they will continue to buy the article where they can get it at a low price and where they can ensure that they themselves will enjoy maximum profits.

There must be long-term planning for industry and agriculture. There is no good in introducing stop-gap measures similar to the pay-related benefit scheme. That will continue for a few months more only. What will happen at the end of that period again if we still have high unemployment and more redundancies and more threats of factory closures? Long-term planning is what is necessary and it can be done if our Government have the determination and the will to do it.

In industry today there are many factors which make it difficult for them to continue manufacturing. First of all, last year there was the increase in postal charges, which in itself was responsible for increased costs. All companies and firms have to resort to the postal service in order to run their business. When postage stamps and telephone charges were increased that contributed to industrial costs.

Then we have the continuing rise in ESB charges. In every two-monthly bill that the electricity consumer receives there is an increase. That increase is responsible for unemployment at present It is responsible for the greatly increased deficit in our balance of payments. It is detrimental to the establishment of new industries. Industry, by and large, is dependent on electricity in order to operate its machinery.

There are also difficulties within CIE. We have another proposed increase in CIE charges which falls back on the taxpayer because of the subsidy being made each year by the Government to CIE in order to keep that service running. That is going to have a serious impact on employment, on jobs and on the cost of living, because people use the service to travel to and from their places of employment.

We hear about the millions that are being poured into housing, but we must consider the cost of housing today and the cost two years ago. Housing costs are increasing at an unprecedented rate, and therefore the Minister must provide more millions in order to maintain the rate of house building which we have enjoyed in the past. It is a good thing we still have a demand for houses. It is an indication that the people want to work and live in their own country. They are determined to do so if the Government will give them the lead in that respect. We need some sort of action that will help to stabilise housing costs. SDA loans are being held at a particular level. Housing grants have remained static over the years, but housing costs continue to rise each day, each week and each month.

I pity the unfortunate househunter who wants to build or purchase his own home today and discovers he is limited to an SDA loan of £4,500. His house may cost him £7,000 or £8,000, or perhaps £10,000 before this year is out. He has to go elsewhere if he wants to provide himself with his own home. This morning the Minister for Local Government issued booklets telling people all the facilities which were available to them. It was extraordinary that he quoted a farmer with a £22 valuation being in a position to provide himself with a home for £4,500. I do not know of any type of home that you could provide today for £4,500 except a substandard building, and who wants a substandard building?

Will any substandard building receive grant aids or even the SDA loan we talk about. The Minister was misleading people in telling them that homes could be provided for £4,500. The maximum SDA loan is inadequate and is still £4,500.

The building industry has always been a great source of employment. It has always been an industry which made use of a high percentage of Irish-manufactured goods. There is an abundance of native timber because of the years of activities of the Department of Lands. We have an ample supply of good Irish timber which can be used in the building industry. We have an unlimited supply of gravel, plastering material and cement. The same applies to roofing and so on. We are dependent on imported timbers for the manufacture of doors and windows. The building and the housing industries have made a great contribution over the years towards the creation and maintenance of jobs. The SDA loan ceiling must be raised and more grants must be given if that industry is to survive.

With regard to the Road Fund allocation I am disappointed that local authorities are still confined to the 1973-74 road grants. Those grants are ineffective because road costs have increased by at least 55 per cent over the past 12 months. We import bitumen and many other road-making materials. Various increases in wages have also been granted. Local authorities should be receiving grants at least 60 per cent greater than those received in 1974 if they hope to maintain and carry out the roads programme envisaged some years ago. If we want to contribute to road safety, we must make roads that will cater for modern traffic. What is needed is a good surface, not a wide open space which we thought we needed before the Arabs increased the price of oil. We will not see the enormous increase in motor traffic anticipated when oil was cheap. It must be borne in mind that, even if we are successful in discovering oil and gas off our shorelines, by the time that oil or gas is landed and refined here, because of the inflationary situation it will be as expensive as the oil we import from the Middle East at present.

I now want to discuss estate duties. A great deal has been said about the abolition of death duties. I welcome the abolition of death duties. I come from a family that has suffered its share in recent years by the death of fathers of families. They left behind legacies of death duties which have still to be paid. The Minister and the Government should be honest and say we still have death duties, but under another name—estate duties. If a Government are to maintain progress or embark on new programmes, they must have capital. I agree capital must be raised by some form of taxation. The new methods which have replaced death duties have increased rather than decreased the burden on certain sections of our community. Therefore the abolition of death duties may sound well, but we still have their replacement, which in many aspects can be more penalising than death duties themselves.

I should like at this stage to refer to the education crisis here. It was Confucius who said education was meant to tend for good behaviour.

I did not hear what Confucius said.

Education was meant to tend for good behaviour.

It is a very good moral.

Education has to do with the training of our young people, the legislators of tomorrow, those who will run our nation. It is a tragedy that we have a real crisis in education at present which has been brought about by the reluctance of the Minister for Education to listen to sound reason. It has been brought about by the closure of rural schools, which seem to have escalated in recent times. It has been brought about, as Senator Quinlan said, by the increase of the pupil ratio per teacher from 15 to 20 pupils. The lower teacher/pupil ratio was advantageous to the pupils because it meant the teacher would have a clear understanding of the pupil, he would know personally each child and he would have an opportunity of dealing more adequately with the slow learner. We now have more children being packed into already overcrowded classrooms. The result of this is that the child is becoming more of a number and less of a person. We must place emphasis on this if the nation is to have the future which we all want for it. The Minister's decision to dismiss the untrained teachers was a——

An Leas-Chathaoirleach

I must remind the Senator that we are talking on the Finance Bill. His remarks would be more relevant to an Appropriation Bill debate.

Other Senators were allowed to say it.

An Leas-Chathaoirleach

I am telling the Senator the position.

All I want is equal treatment to that given to other Senators.

An Leas-Chathaoirleach

The Senator is straying from the Finance Bill. If he relates his remarks to taxation he will be in order.

We should have had a crash course for those teachers to allow them to continue teaching, or we should have given them some form of compensation. If we have redundancy in employment we pay our redundancy money. What is going to happen to the thousands of boys and girls who qualify for the leaving certificate this year and who have little hope of obtaining new jobs because we already have such a high number on the unemployed list? Can we hope for a vast improvement by the end of this year? Can we hope for the creation of new jobs, or must we resort to the old safety valve which we had for so long, namely, the emigrant ship? Nobody wants to encourage emigration. Even people who have secure employment will emigrate from time to time. I feel that more of our people will be forced to emigrate through necessity.

This budget did not encourage the creation of the thousands of new jobs which are required to tide us over our serious economic difficulties. We must come to grips with the situation as we see it. We are in a crisis situation and if we are to come through it we must restore confidence in every member of the community. The only way in which that confidence can be restored is by creating incentives. Nobody wants to see this nation remain static; nobody wants to see it taking a backward step. We all want progress, and the only way we can have progress is by long-term planning, sound planning, planning for the future, planning that will be realistic and will have the co-operation of all sections of the community.

I am disappointed with this budget and I will have more to say about it on Committee Stage. It did nothing to enable the Irish people to overcome the serious problems they are facing at present. Greater efforts should have been made to induce people to keep their capital at home. We have had an export of capital in recent years because of the various forms of wealth and new taxes. Many valuable jobs have been lost through lack of capital. What is needed is some form of inducement to encourage people to keep their capital here and put it to productive work, instead of it working in other countries and helping to improve their economies.

I repeat, I am dissatisfied with the budget. So much has happened since its introduction last January that very little of it is effective now.

I doubt, taking into account all the extremely well-informed and experienced advice the Minister has available to him, that I will say anything very original here today. But I will contribute at any rate such judgments as my own experience suggests are right to make about our situation. It struck me that it might be useful, in considering the terms of this Finance Bill, to have a look at the pattern of the tax provisions to be discovered in this Bill which reflect a policy whose adumbration can be found in the first Bill introduced by the Minister.

Looking through the Finance Acts of 1973 and 1974 with this in mind, I thought it might be useful to make the following points with regard to the whole fiscal policy of the Government. The first point, though it does not arise in this Bill except in so far as this Bill contains amendments of those earlier provisions is the political courage involved in introducing a system of taxation of farmers. It should put to rest completely the old nonsense that a Coalition Government could not take firm, courageous political decisions. Whether that decision was right or wrong is a personal view. I think it was right. There is no doubt about it, whether one thinks it was right or wrong, it must be agreed that that was politically difficult for any Irish Government to do. Many of us who favoured it often wondered if there would ever be a political party who would have the courage to do it. This is a first and, perhaps, not unimportant point.

The second point, though it does not arise save in so far as it is also a fiscal measure, is that there was also decisiveness in facing up to the political, industrial and economic problems caused by the provisions with regard to taxation of certain mines. I have made my contribution on that point on another Bill and I see no reason to vary what I said. The point is that it was done, from the point of view of political decision, decisively. There are not many people in the country now who think that what they did then was wrong.

I will deal now with personal allowances. I may, to a certain extent be comparing incommensurates, and I do not desire to mislead the House. Perhaps someone might want to show where I am incorrect through ignoring, for example, the abolition of the earned income provisions. I will take a few random figures. The personal allowance for a single person when this Minister came into office was £299. It is now £575, with a special provision for single persons who are over 65 years. For a married person the allowance was £494, it is now £920. If one applies to any of these increases the inflationary rate which can be seen to be operative between these two dates—perhaps a fair figure would be 40 per cent—one would not find that the inflationary rate has eroded that increase. In fact the increases are quite significant.

Similar remarks could be passed about the other allowances but I am only illustrating that point. There is a third item in this fiscal policy. The Minister has had to finance the most extraordinary increases in social welfare provisions this State has known. the rates, for example, for an old age pensioner, ignoring the reduction of the age at which these pensions are paid, have gone from £6.20 in the case of a single person to £10.50 last month. In the case of a single person with an adult dependant above pensionable age, it increased from £10.35 to £18.40. These are very significant and important causes of the fiscal changes which have to be provided for in this and earlier Bills introduced by the Minister.

There has been a significant improvement in the provisions for retirement pensions for self-employed persons or where these schemes are being provided by companies. Encouragements have been given to industry by way of increased capital allowances and the special arrangements to assist company liquidity, which are a remarkably rapid response to a case made by Mr. Donal Carroll with regard to this whole area. It was not a complete response, nor indeed could anyone expect a complete response until the accountants' profession make up their own minds as to the proper treatment of profits. When that happens, this provision with regard to liquidity points the way at least the Government want to go.

There has also been a revision in the higher rates of taxation. These revisions are very useful and important for people who will never come within a mile of the Wealth Tax provisions where the rates have been effectively reduced in the three brackets which precede the final one, by 5 per cent in the first case, 10 per cent in the second, 15 per cent in the third and then, again, by 10 per cent. The overall maximum rate of applicable tax is now 70 per cent and not 80 per cent. In addition, life insurance premiums are available where they were not available before in the determination of the actual tax being paid by these people.

The Minister has fulfilled a promise which is important by abolishing death duties. The suggestion that death duties have not been abolished is unreal and terminological. For the vast majority of Irish people, death duties have gone where previously they represented a serious social problem. I am not sure if the abolition of death duties has not gone too far, in so far as certain previous exemptions or reliefs from taxation went too far and were finally found not to be socially sustainable. I am not sure that the complete abolition of death duties in the form it has taken place will be finally maintainable when its full social significance is measured. It was an important step.

It is true there is a capital gains tax. That has come far too late; it should have been introduced a long time ago. If a capital gains tax with suitable inflationary provisions had been there, it would have been a considerable ease to social tension and prevented a lot of sores developing through people getting gains in situations where they could be completely free from tax, indeed saved themselves income tax and direct taxation by the methods with which they financed them.

Another point is the tax avoidance measures. I will have something particular to say about this matter later. They are worth looking at. The transfer of capital abroad provision has been tackled. That was very difficult, but it was the right thing to do. I hope some of my clients do not know I suggested that here about five or six years ago. There is also the control of the disallowance of interest. The particular method chosen will need improvement. It was over-convenient to fix a figure to suit administrative purposes without having regard to the overall effect of that decision. Another tax avoidance provision, that was in effect and truth remuneration cloaked in the form of dividends from export tax relieved companies, has been caught for taxation. These things are important in so far as they are being practised on a wide scale. Where some people are able to do them and others in like circumstances are not, that can create an imbalance which is socially undesirable.

There has also been some extension of the policy of making allowances for payments, for example, to universities for research of a particular kind. There has been an extension of relief for payments to bodies with consultative status, the United Nations or the Council of Europe. I like to think that this development is capable of much more progress in the future.

One of our troubles is the extraordinary failure of communicators— commentators, public people who speak on these subjects, journalists who record them, people who write in newspapers about them, people on television—in their duty to educate our people about their realities. One of the reasons is that the journalists, the TV commentators, the economic writers, the politicians do not appreciate them. They do not get up every morning with a short list they must remember every time they take out their pens or open their mouths. If they did that, maybe they would avoid making more of the gregarious errors they committed yesterday and they will mislead the people less in the future than they did in the past.

One of the reasons for the difficult, great expectations that people nutured here is that people with pens in their hands and tongues in their mouths, do not know enough about the subjects on which they are writing or speaking. They do not know solid, basic facts. People have as their measuring rod of what they are entitled to expect what they know their cousins, sisters and aunts can get in the United Kingdom. We know the United Kingdom is sick. We know their expenditure is in excess of their income. Nobody bothers to tell the people constantly, as they ought to, that even with the progress there has been here over the last 25, 30, 50 years—whatever one's political platform one can choose one's period— the average per capita income is about 70 per cent of the average income of the United Kingdom. The average United Kingdom expenditure is in excess of what it ought to be. It creates expectations which the British cannot satisfy and there is no possibility of our being able to satisfy. An attempt on our part to satisfy that only leads to great trouble.

An article which appeared in Administration or a similar publication recently stated that about 1/2 per cent of the people of Ireland own 26 per cent of the wealth. If you are as ignorant as the person who wrote that heading, and failed so miserably to give any account of what significance he attached to it, you would decide you are living in a thoroughly unjust society and nobody was making any effort to make it any more just. The implication was that the 99½ per cent would be doing splendidly if they got a hold of the 26 per cent of the wealth so tightly held by that 1/2 per cent.

Of course the reality is quite different. Reality is different for many reasons. It is axiomatic that if you took the whole damn thing from everybody by confiscatory measures in the morning and put them all to work on a compulsory basis, the net addition to everyone's true possessions and true income would not make a tráithnín of difference to the mass of the people, apart from the appalling disruptive effect. But even a simple little fact like that, that much of that wealth is mobile in a free society will not be tolerated by the free people. They are being taxed out of existence with regard to this type of thing. I think we should nearly have a bipartisan policy on just telling these kind of basic truths to the people. I suppose everybody in this House knows it, but how often are the people told it with regard to their expectations of this that or the other thing—that we depend for our development upon the availability of foreign capital and that we have made progress to a large extent because foreign capital has trusted us and regard us as a stable society in which it can go to work and be able to enjoy its returns? That is a third fact that I would have thought there should be some attempt to repeat. The people who comment on the Government's failure to provide for education, the Government's failure in the third level education, the Government's failure in this—and I would be saying this whether I was over there or over here and I did say it when I was over there—should be brought up and should be told: "All right. If you want that, what are you going to give up to pay for it? Because you are going to give up something. You are going to give up something because you are either going to be taxed more; to go further into debt, to borrow abroad at the cost of interest which will be levied on your earnings or, in some fashion, you are going to pay and you are going to pay increased prices for your goods. You are not going to get away with it." There is no escape from that type of reality.

The fourth thing that we should recognise and not pretend about is this. There is within our control, part of our price inflation. There is certainly out of our control a very large part of the inflation which we experience. People who talk about price rises should refrain from doing so unless they properly allow for the proportion or make some attempt to allow for the proportion of that price rise which is inescapably coming from inflationary forces not under our control. Not being under our control there are no technical means, such as shifting links, whereby we can protect ourselves from its effect.

My fifth point is that all these pressures for additional expenditure lead to additional taxes and these additional taxes affect people's disposable incomes. The after-tax income is what people nowadays are thinking about. It is the unwillingness of people to take less than the certain after-tax income which is the cause of a large part of our inflation, and everybody commenting on those things should be forced into a recognition of these facts. Anybody who is looking for tax reliefs, tax stimuli such as I think I may be suggesting, should realise that all these reliefs are subsidies. You could move them over to the other side of the balance sheet. For example, take the export tax relief. Has anybody quantified yet the cost to the Exchequer of paying out the equivalent to the export tax concession? I am sure somebody trembling in his boots at the possibility, in the context of our EEC commitment, must be doing so and I think it would be worthwhile if we were all made aware of the cost of any of these tax reliefs. Take, for example, the simple one of personal allowances. How do you pay for the rise in personal allowance? By raising the rate of taxation. Does that cheer everybody up?

You must trace into the fact what is the way of providing for an increased personal allowance. There are three ways, it seems to me. Suppose we borrow for it. Is it justifiable to borrow to maintain expenditure that is, perhaps, consumption expenditure that cannot be afforded? We do not do that. Say we deprive other claimants for expenditure of what they are looking for. They suffer. Money is not made available to them if the money is not collected from the taxpayer or we raise other taxation including income tax itself.

I want to say something with regard to tax evasion and tax avoidance. I am forced to do that in the Minister's absence although I welcome his colleague's presence because the Minister has made a number of remarks with regard to this and they represent, understandably, a sort of Revenue point of view. Most people do not seem to know what the difference is, and it is as simple as this. It is as simple as telling lies and looking exactly and precisely at the facts and recognising the facts for what they are, observing the truth about the facts and acting accordingly. Tax avoiders never evade taxation. Tax avoiders are not interested in tax evasion. No worthwhile project was ever financed by tax evasion. Nobody who is concerned for the future development of his project, who takes a long term view of his own life, will ever evade taxation or will rarely sensibly do so. To suggest that the morality which attaches to the one attaches to the other is very much to miss the point.

I am going to suggest to the House that a very high priority in any sophisticated planning for industrial or commercial development is the quality of the tax planning done. It is the after-tax return which people must look at before they consider what their investment will be. People, for example, considering a large project here do not want shysters who will tell them how to fiddle with their tax. People who are involved in these substantial projects do not want anything to do with that kind of person. The kind of person they want is somebody who has some awareness of the international tax position and a very real understanding of the Irish tax position, and then they want to know how can they sensibly arrange their affairs so as to minimise their tax liability. They know that they will be paying taxes anyhow in some form or another, indirect if not direct. They are aware of that. It would be part of their cost structure in some form or another.

The Minister has spoken about the iniquities of estate duty—a fair enough statement. Were those who were engaged in avoiding this iniquitous duty engaged in some unworthy operation? If it was an iniquitous duty, an unjust duty anything which would reduce this impact would seem to me to be a highly commendable activity. In so far as we have quite a number of features of our existing tax code reliefs and incentives and encouragements and in so far as it is public and national policy to maintain these, you are inevitably going to have the requirement of a skill for discovering how these can be made available to the taxpayers. How can he avail of these incentives? There is the export tax concession. I hope this will be maintained for a long time. It is one of the solid factors contributing to our success. There will be people who will want to avail of this export tax relief so that they can sell their skills. The fiscal legislation was so expressed that there was nothing wrong in trying to get remuneration free of tax.

If there are encouragements by way of fiscal reliefs and subsidies in the form of capital allowances, encouragement for capital to come into industry, you will get people to invest their capital. If there are special concessions for farmers under the wealth tax proposals this will lead to redistribution of assets in that direction to the extent that the incentive is thought or judged to be a materially significant attraction. If there is to be an exemption for bloodstock you cannot tell me that there will not be people who will buy stallions so that fees from the services of stallions will be free from tax at whatever is the applicable rate.

Is there something wrong in somebody knowing that this is so and designing schemes whereby they can avail of concessions? I am making the point that where you have taxation with reliefs, particularly if it is high taxation, which is a burden on modern Government caused by modern expectations from life, you will have the requirement of professional advice as to how this can be done. I cannot see that there can be anything morally wrong.

Take the case of a young, enterprising executive who in most cases will have no resources but who finds himself, because of his skill, up to the 70 per cent tax rated. He has a wife and children. If somebody can think up some scheme whereby he can get that 70 per cent tax rate down to 35 per cent, is there something wrong in making that service available to him, so that if he dies suddenly in a few years time he will be at least one-sixth as well off as the chap who inherited the money? I do not find that people who develop skills in this field have any reason to feel that they are doing something that is not of importance. Neither in economic terms, do I think they are doing anything other than a service to the country, because it is my judgment that British industry was built up because there was a very low rate of taxation at the time of its growth. It is because of the excessive rates of taxation on British industry that industry is in such difficult straits at present.

Can the export relief ever be a tax collector's idea? Does the mind of a tax collector ever work like that? Can a Revenue Commissioner be expected to think in terms of incentives? Can he be expected to perceive the economic consequences of reliefs? He cannot, because his interest is in collecting taxes. What he knows about are the rules laid down for their collection. This is the game he plays. This is the game he likes playing. To ban the game for three days of the week is not what he wants to do. He likes to play this game all day long. I do not believe that there is anything in the export tax relief other than an idea which came from political life and affected the industrial life of this country. I suggest that a large part of the industrial growth we have here has been due to the existence of an export tax relief, that is to say, that in relation to a particular form of activity there is a low rate of tax.

If somebody was clever enough to discover a method whereby activity not directed to the production of industrial exports but to another type of economically justifiable economic activity and if there was some method whereby he could get that treated like, for example, the inventor who is being attracted here to register his patents—he is another favoured creature and there could be others— would the availability of such a skill not be a good one? To introduce the moral condemnatory language is wrong and should be acknowledged as wrong.

It is very similar to somebody who is playing a game of chess according to the rules of the game and loses the game. He then changes the rules and says that the other fellow had won because he was cheating. In fact, he himself was beaten in the game. That is the same as the Revenue Commissioners complaining when tax avoidance schemes are discovered. There is nothing immoral about any tax avoidance scheme if it is not, as it very rarely is, mixed up with any type of untruth.

It is a necessary bit of maturity for us to say this. As I said, we depend very much on foreign capital and we depend very much on the good opinion of foreign capitalists, whether they be social institutions in Swedan, Norway, Italy, France or the horny-handed capitalists of the USA. They depend on the quality of the advice they get from people who very often are engaged in this type of tax avoidance operation. Any attempt to slur the professions involved in this is a great mistake.

One of the things we might do—it is not really the Opposition's job but the job of people on the Government side; it is understandable that the Opposition would not like saying it— is to point out that there are many things in Ireland going for us. There is very solid ground for optimism in our economy and about our society. Some of these points might be touched on. The climate in Ireland is favourable for capital investment. It has been favourable and it is becoming increasingly favourable. There are many signs that the long-term benefits from EEC membership are much greater than were estimated at our time of entry to the Community. I do not merely mean in the obviously underrated flow of money into the Exchequer to support public schemes but I mean in the opportunity for advancement for this economy, the extension of our market to 260 million people, when previously we were caught in a hopeless situation with the UK. This presents enormous opportunities.

The second thing worth saying is that only the surface of the potential development of agriculture in this country has been scratched. If we do more than scratch the surface there are great grounds for believing things will continue to go well.

The third thing is that the existence of the export tax concession and the guarantee of its maintenance is very important.

Fourthly, the great hope of the existence of really rich natural resources is another ground for controversy. The strength of our social infrastructure is very remarkable. It is particularly shown by the stability of the political system. All governments make mistakes; they delay. Some governments are better than others, but on the whole, governments in Ireland have governed. The important test of a government is their ability to do the right thing for the right reasons, irrespective of the consequences. That is a ground for continued confidence in Ireland.

I shall not go into the merits of our link with sterling, because I want to illustrate one single aspect of that. I think Senator Lenihan touched on this today when he spoke, and I can do no more than touch on it. We did not have the classical situation for a variation in the rate of the link, and that is the surplus in our balance of payments. I wonder if our true situation does not conceal a potential surplus, if the judgment of the people who have been pushing their capital into this country is not a judgment that this inpouring of money will be found ultimately justifiable; whether there is not already an anticipated, long-term financial judgment in the strength of the positions that foreign investors are taking up, when they take up an investment which will finally be productive according to the strength of our currency.

Oddly, the existence of our Constitution is a very important factor making for confidence. Some may think is preservation of property rights excessive, and I can understand that kind of criticism. Some may think it even old fashioned. The important point is that, if somebody is going to put his property at risk, you can tell him that it cannot be taken from him without proper payment, because he will have a right guaranteed by the Irish Constitution. This is very important to people who are thinking about the differences.

For example, critics of the wealth tax pay more attention to its minute defects than they ever paid to the position of the means test applied to the poor woman with a few hens. They were not as worried about her position as they are about somebody with an estate of over £250,000. The wealth tax is a moderated type of tax and appears to be justifiable and defensible in terms of constitutional rights. If, as has been quoted, Drummond said that property has its duties as well as it rights, the Irish Constitution says exactly the same thing, except in reverse order—it has its rights as well as its duties.

I wish to direct the Minister's attention to the desirability of an examination of the possibility of extending the existing relief in relation to covenanted payments, which exist to an extent, where these payments are made to worthwhile causes. There are numerous sections of Acts whereby there has been a very much moderated reintroduction of concessions for charitable payments by covenant. There is a very strong case indeed for a controlled extension of that in inflationary circumstances where people who were once well-off people are now miserably poor. There is a strong case to be made for any system which helps people in real need.

It has been said: "Sorrow's crown of sorrow is remembering happier things." A large number of Irish citizens remember happier days. They are faded gentility: people who perhaps had been left with the duty of caring for a sick brother, or an aged and dying father. They, perhaps, thought they had sufficient family money to keep them. This is no longer true. For example, there are organisations such as the Solicitors' Benevolent Association, the Benevolent Society of the Bar of Ireland, the Beneficent Association of the Royal United Kingdom, where I find extremely touching cases arise. There is no provision here, such as exists in the United Kingdom, for encouraging people to make payments to these bodies.

I should like to cite some examples here. There was the case of the lady who was looking for an annuity. Her father was a partner in a printing concern; she had worked as a hospital clerk all during her life, but had no pension. She suffers from angina pectoris. Another applicant's father was in insurance. She had studied at art and music colleges and at French and Italian cultural institutes. She had spent her life dress-designing and retailing for leading city fashion houses and was suffering from osteoarthritis, migraine, failing eyesight. Another example was a lady whose father was a teacher. She was unable to take up any training due to ill-health and remained at home to look after her family. She is now suffering from diabetes and high blood pressure. There is no provision under our code, as there ought to be, for the payment of money to charitable societies concerned to help people such as these. I know that I shall be told that this would cost money, but the general social welfare provisions do not take care of this kind of case.

There are also bodies that are concerned to explore where poverty exists in our society, and it exists in surprising places; behind high shutters and apparently comfortable-looking houses. There lurks a good deal of poverty in Irish life. There are societies that are concerned about looking after people such as these. They investigate where this poverty is to be found, how best it is to be relieved and are concerned about assisting people who really need assistance. They should get encouragement in the form of a relief given to covenanters who take on obligations to make payments over sustained periods.

I recognise the fact that it would be difficult to estimate the cost. I understand that when this provision did exist, it was abused; but the amount of tax involved in those days was not very much. There was a potential for abuse and I can understand why it would have to be controlled. The simplest thing would be to put such covenanted schemes under the care and management of the Revenue Commissioners themselves just as you must get a revenue clearance certificate when establishing a pension scheme where payments to it will qualify for tax allowance and one must conform to certain requirements. There must be nothing bogus about the charities, such as is the case in the USA. There should be adequate public protection against bogus charities being invented by people who are really the beneficiaries themselves. I realise that a stern type of control which does not exist even in the UK might be required here even if only a pilot of this idea.

The second point I want to make relates to the matter of business confidence. This is a very important matter indeed. It is very often a matter of mutual comprehension of the respective positions of the State on the one hand and the businessman on the other. People who are dealing with economic aggregates—the fellows who tell you in macro-economics that if you put in £10 million here this will come out of the model—very often have no understanding at all of the circumstances in which business people make their decisions. Business people do not have the time that we have to read all this stuff and reach our conclusions, so wisely expressed from time to time. They do not know what is going on half the time about lots of things lying outside their particular areas of experience. What they do know is important even if what they do know is wrong: even if it is an illusion it is important to try and dispel that illusion.

I have a quotation for the Minister which I thought rather interesting. I am saying this because it is most important that it should be emphasised in the context of the various capital taxes. I am entirely satisfied—if I did not think it was I would not be on this side of the House—that this Government realise the importance of encouraging productive investment in Ireland, realise the importance of keeping their word to the letter and will do so. They are entirely committed to the stability of our economic system. I in no way suspect them and if I thought otherwise I would not be here. It is because there are some people who are perhaps hurt personally by one or two developments, or who have got the wrong end of the stick, who might suggest that the Government did not know perfectly well that their policies of social amelioration depend on economic growth, that I dare to suggest to the Minister the importance of paying attention to the business world. It may interest him to know that John Maynard Keynes wrote to Mrs. Eleanor Roosevelt on the 1937 recession and dealt with the impasse between the business world and the New Deal:

I think the President is playing with fire if he does not now do something to encourage the business world, or at any rate refrain from frightening them further. If one is purporting to run a capitalist system, and not something quite different, there are concessions that have to be made. The worst of all conceivable systems is a capitalist one kept on purpose by authority in a state of panic and lack of confidence.

Mrs. Eleanor Roosevelt's lawyer, Hooker, wrote:

Whether we like it or not, Capitalism is timid.

It is important that in the conduct of the economic affairs of this country the timidity of capitalism be recognised, because whether we like it or not we are part of that capitalist system so far as the path to revolutionary socialism will not receive immediate rewards in the living generation of Irishmen. The revolutionary socialist is alas not present in the Chamber.

The third thing I want to say is in regard to the stimulus of taxation. I wonder whether the Minister will consider examining the possibility of procuring an improvement in our industrial relations by fiscal encouragements, whether by schemes for profit sharing, schemes to encourage companies that voluntarily go ahead of any law in encouraging their workers to participate in their businesses, schemes even giving bonuses to strike-free companies. These are just ideas. There are schemes which might have a fiscal cost to secure a social advance. Schemes of that kind might profitably be considered.

Earlier I was talking about the importance of telling the truth. It is always important to tell the truth, but also to break up illusions by a consistent and strong policy. I was very struck some months ago with an advertisement which appeared in the United Kingdom newspapers. The Irish equivalent has been made out for me. It was an ICI advertisement showing what happened to the profits of Imperial Chemical Industries. You have people in this House and the other House remarking on the staggering increase in profits and asking why should the worker not get a 10 per cent rise if profits have increased by 100 per cent, or whatever the percentages might be. The quantities of moneys involved in profits seem so enormous it seems to be an entirely unjustifiable position that the people who had the capital should get all of this whereas the workers have got to be held down. I am not arguing that, if there is to be an incomes policy, it should not apply to the lot. Of course it must.

I had data drawn for me from statistics on profits of quoted Irish companies and it was rather interesting. I mention this to illustrate that when people in public use words we ought to have a duty to bring home to our people the reality of these words. Out of £1 made by the average Irish industrial companies 13p went in interest payments, 39p went in taxation, 21p in dividends and 27p went back to develop the business. I might add that that is probably an overstatement of what it went back to do. It probably went back to maintainthe business, not to develop it, because of the high cost of simply maintaining a business at the moment. Of that £ profit then, we see only 21p or one-fifth, was going to those who provided the capital. Those who provided the capital are in the position that inflation is affecting them, too, and that 21p in 1974 is worth so much less than it was in 1972.

I think there is a tremendous amount of national advantage to be got by taking these kind of public utterances and breaking up their meaning for the people. There is a great advantage to be got for the nation from simply educating the people on the realities that they have to live with.

The Minister should not be discouraged from reconsidering the desirability of a plan by hearing the observations of certain Senators here as to the reasons why he should adopt a national plan. I personally think that you can overstate the advantages of planning. The benefits flowing directly from the programmes for economic development were rather more apparent than real. It was the decisions that lay behind them which contributed most—for example, the decisions to establish the Industrial Development Authority, to provide the extra tax relief and the inflow of foreign capital. There is no doubt that they provided some stimulus and a framework for leadership. People have to be led sometimes by a certain degree of illusions. If they are made to believe that they are doing it all themselves in accordance with the leadership that in itself may get more from them. The idea is not my own and not at all original in case anyone thought for a moment I was capable of such a thing.

An advantage to be got from planning is that it places some control on the extraordinary variety of uncertainty and events, largely inexplicable, that are taking place at the moment. You state all your assumptions and you then begin to see what you can possibly control. I think there should be no hesitancy about adopting a plan on the basis that the Government are adopting it and they will be judged on failure to reach targets. It is the reaching of targets rather than the choice of the policies to move towards these targets whether they are reached or not that can get highlighted.

I do not know how the Minister and his advisers can deal with all the countless details, political and administrative, and how they can do the job at all of making decisions which take account of the whole picture. As far as I know, there is no single document or no master plan to which they can refer. Practising lawyers go back to a book of preccedents and they make quite sure they are covering everything by having a precedent to work from. You need something like that.

One tragic example of a blunder some years ago was not to provide capital for telephones. Any of us who are trying to telephone our homes are paying the price of that decision made some years ago. It was a long term blunder and we have not yet recovered from it. I understood how that decision came to be made. That kind of decision would not be made if you had a plan, but there is no escape from the reality that planning is going to do anything more than be a contribution towards achieving a worthwhile future for our people.

So very much am I of that view that I really believe that if we thought more about the character of our people and the factors which affect their character, which would make them more resilient, more self-reliant, more progressive and more confident and less than we do about economic, social and financial things, we would find at the end of the day that we had built up better social institutions and a more durable society. This is all important and brings us back to those things that the Minister can do and is doing which help the young people of Ireland in the strength and quality of their family lives.

This Bill gives us an opportunity of discussing the budget that was introduced in January and the budgets before and since the last budget. Some years ago this country was used to having one budget day. Everybody looked forward to finding out from the radio and papers what increases took place and they were satisfied that they would be all the increases for the year. They were quite content to put up with whatever hardships they had to meet.

Two months before Christmas we had a budget regarding the Department of Posts and Telegraphs which increased all sorts of charges. As a result of that budget there was about £15 million in revenue brought into the coffers of the Government. As a result of these increased charges many people became unemployed. There were a lot of redundancies in the Post Office staff because the services of the Department were less used by the public. They could no longer write a letter and post it for 5p. The postage stamp was increased out of the ordinary. Considering that there was £9 million borrowed from the European Bank for the Department along with the millions that they brought in with these extra increases, the staff had no more overtime with the result that many of the telephone services were held up. The telephone service is in a bad state throughout the length and breadth of the country.

After that we had another small budget brought in. It was the removal of the butter subsidy. It meant 5p on the lb. of butter—in old money one shilling on the lb. That was brought in before the date it was due to be brought in by the EEC regulations. It meant that the finances of the country were in a very bad state when this £2 million or £3 million was brought in.

Then we had the famous 15p per gallon on the price of petrol. This was a terrible blow to the whole country. Anybody who would say a few years ago that with one stroke of a pen in a period of 24 hours that they would have to pay three shillings more for a gallon of petrol, would not be believed. Something was seriously wrong when that step was taken. We were told that that brought in about £27.5 million. Some of the economists and the statisticians estimated that it was nearer to £35 million. That had a terrible effect in every part of our industry and our life.

It was a terrible burden on young people in the west, who have no buses or trains to commute to and from their jobs. In some houses in my area where there are two or three fellows working on different shifts in Bord na Móna, ESB and various other places, it is necessary for them to have two cars in the house. They are not there as a luxury but as a necessity. These young fellows have to pay an extra 15p per gallon for petrol. It costs some of them up to £5 and £6 a week. It is a terrible imposition all the way down the line—the health services and the ambulances, the country council transport system. It not only hit the man who had the car for luxury and enjoyment; it hit everybody without exception.

Before we come to the budget which took place on 15th January, we had roughly about £80 million collected in new taxes. It would have been a far more respectable thing for the Government to say on the day of the budget that they were about to impose these taxes by each Minister bringing in his own mini-budget. The result was that when the Minister for Finance was about to bring in his budget all he could raise in the form of that sort of taxation was about £34½ million.

If we could get back to the system that existed under the Fianna Fáil regime, and I am not ashamed to say it, we would have one budget day in the year and not three or four budget days which is what we have had over the past few months. We still have not finished with it. CIE are now going to increase their fares by almost 25 per cent. This is another form of a budget. There is a rumour that foodstuffs will increase by 18 per cent over the next 12 months. The ESB stated in the newspapers yesterday that their prices will be increased by 18 per cent. I do not know where it is going to finish up.

They increase their prices and as a result of the increase in prices we are having an increase in the actual revenue brought in by VAT. VAT expected revenue this year will be £196 million. For the nine months last year, if I remember correctly, it brought us something in the region of £112 million. The increase in VAT is mostly due to the increase in prices because the higher the prices the better the VAT becomes. That is one reason why the prices are being allowed to increase.

This is far removed from the promises that were made in January and February, 1973, before the election, when we were told we were going to have the VAT removed from foodstuffs in order to reduce the price of food and if it was not removed it would, at least, be stabilised and there would be no increases in foodstuff prices. We are going to have a nice reasonable standard of living. It is the old story which is becoming a joke down the country now that it is the Arabs who were the cause of all the increases by putting up the price of oil.

Some of the greatest economists and financiers here and in other countries have stated that oil has probably been responsible for about 50 per cent of the increase but it was mismanagement of our own Government that has been responsible for the other 50 per cent of it. That assessment is fairly accurate. The inflation rate of the other small countries like ourselves in Europe who have to import oil, like Denmark, Luxembourg, Belgium, is only about 10 per cent. This is very small in comparison with our inflation rate. It comes to the time when there will be an outburst somewhere or another against the increases that are taking place, because the people are not able to stand it.

It is all right to say that the people have been given wonderful social welfare benefits but I can tell the Minister and his staff that if he comes down to my county, where there is plenty of social welfare being paid, he will soon find out that with the social welfare benefits they are still not able to meet costs. They are the people who are being badly hit and they are going to voice their opinion one way or the other.

We had still another budget, the increase in the price of the stamp for the workers, the amount of which was not announced in the January budget. That increase in the price of the stamp has brought in about £40 million. There were many small businesses throughout the country where the employer paid the stamp for his staff. That day is now gone. The staff are feeling the pinch. As a result of the shocking burden of the stamp increase these businesses may close down. The small businesses will probably close down at any rate. It was one way of causing more unemployment, more redundancies, at a time when our unemployment figure was in the region of about 103,000 people or probably more if we had them all on the list. Instead of doing anything that would cause more unemployment we should have given some incentive to the industrialist, the employer, to create employment rather than cause more redundancy and unemployment.

As a result of the wealth tax legislation—I am not too conversant with it—I understand people will be paying tax on the wealth and the savings they accumulated along with paying tax on their incomes. Any man who has saved should not be taxed, regardless of what his wealth is. As a result of this some of the wealthy men of this country have decided to emigrate. One man said that his income would not even pay the taxes he would have to pay. I am sure there are many people in this country who have transferred their wealth to other countries and cannot be caught. I believe there is some regulation in regard to a non-resident certificate but this can be overcome and the tax can be dodged easily enough.

There are some firms in Dublin who, in order to avoid this, have invested their capital in small industries in other countries where they have tax free concessions. The names of some of these firms are well known. They have not gone under the bush to hide it in any way. They openly said that there was a way out and they took it.

I fail to understand the attitude of the Minister in not doing something with regard to the housing situation. The terrible state of the industry has been brought to his notice very forcibly over the past year. It is one place where we can use plenty of labour. The Minister in all his wisdom should grant some tax concession to the building societies, or grant more money to local authorities in order that they may lend money at a proper rate of interest. Perhaps, even at this late stage, he may consider allowing the income level up to £3,000 and increasing the loan to £6,000. A young married couple who intend to settle down in their own home, even in the most backward part of the country must pay from £1,000, £1,500, £1,750 and in some cases up to £2,000 for a site depending on the location. The cheapest site as yet is in the region of £1,000. If they were to build even a three-bedroomed house it would cost them in the region of £7,000 plus the £1,000 for the site.

If they are below an income of £2,500 they receive a loan of £4,500 plus the grants. They have not an earthly hope of building that house because the grants and the loan will not come up to the £8,000. And that does not include furnishing or decorating the house. It is something that will have to be seriously considered if we want to give some incentive to the building industry.

There is a clause in the Bill for which I do not believe the Minister is responsible, though he may be. If a second-hand house comes on the market it can be sold for about £6,500. If a young married couple want to buy that house and if there is not a lease of at least 60 years on the house they will not receive a loan. There are many houses that young people would endeavour to buy if that detrimental clause in the Act could be changed. One gets a loan for a 30-35 year period. The lease on that house is longer than the length of time for which one needs the loan, and it is enough of a guarantee to the State or to the local authority. This thing of not receiving a loan unless there is at least a 60-year lease——

Is this a local authority loan?

A local authority loan, a building society loan, a bank loan or any loan. The building society have practically the same code in operation as the local authority.

They used to be happy with a 50-year lease and I was wondering if there had been a change.

Recently I was told that if there was not a 60-year lease on a house the young couple could not get a loan. There was a 46-year lease on it. They wanted a loan for 35 years but even with a 46-year lease they would not be entitled to any portion of the loan. If this concerns the Minister's Department—the financial end of it—this clause should be removed immediately. If the lease runs longer than the loan is required for, that should be sufficient guarantee for the repayment. With the amount of money the Minister got in taxation, I do not understand why he cannot see his way to alleviating this difficulty not alone for the building trade itself but for the poor unfortunate people who are trying to buy houses. They are in a very serious predicament. It is the cause of many happy marriages being broken up where people are forced to live with their in-laws; in some cases the wife is living with her father and mother and the husband is living with his parents, and the children go back and forth between the grandparents. This is a very sad state.

I do not see why the Minister could not grant larger sums of money for road works. Mayo is one of the largest counties in the country and has one of the largest networks of roads. The Minister should allocate some of the revenue he received from road users through the petrol tax, the road tax, and through the increased fee for registering a new car and for a driving licence. We were still offered the same grants for our roads as we were two years ago. It is wrong and the Minister must be reasonable. He must consider that the cost of materials used in roads has increased. Two years ago you could buy a gallon of tar for 9p; now you will pay 22p for a gallon of tar. Tar is one of the ingredients used in the making of roads. Machinery has gone up. Administration costs have gone up by about 30 per cent or so.

If the Minister ploughed even 75 per cent of the revenue received back into the roads, we in Mayo would not be in the cruel position of having at least 1,700 miles of our county roads untarred.

The Minister should have granted to the Minister for Local Government the money which he told us he sought for amenity schemes. This is a scheme that was responsible for a fair amount of work. The local authorities had to put up pound for pound with the Government. Certain voluntary organisations all over the county were doing work which should have been done by the county council or the Government themselves without any help. These people were willing to contribute in their rates towards the carrying out of these amenity schemes and they are still willing to do it. They look forward to the day when this amenity grant will be restored. Anyone going through the country can see some very beautiful spots as a result of works carried out by local groups who raised the finance in cooperation with the county council and the State.

The rise in the stamp duty will have an adverse effect on the amount of work that can be done by the local authorities. County Waterford is a good deal smaller than County Mayo, and, according to newspaper reports, in order to overcome the rise in the stamp and in order that Waterford County Council would be able to carry out the work they had estimated and planned for, they had to bring in a supplementary estimate of about £27,000. I do not know what the estimate will be for Mayo. If Waterford's estimate is £27,000, then Mayo, if you take its size and the amount of work that has to be carried out into account, we will have to bring in a supplementary estimate, if we can afford it. Remember, we are the highest rated county in Ireland and our ratepayers are reluctant to add any more on their rates. We will either have to cut down to the extent of about £40,000 worth of work or else bring in a supplementary estimate to increase the amount. It will have to be a decision of the county council. I am sure the decision will be that we will have to cut back on the amount of work because it is impossible for us to burden the ratepayers with any heavier rate than they have.

I would again appeal to the Minister that, if he cannot see his way this year to increasing road grants and amenity grants to the various local authorities, next year when it comes to budgeting he will make some effort to increase our road grants and give us the benefit of the increased amount of revenue he is collecting on petrol which, as an imposition of duty tax, was, I think, brought in under the wrong Act. That Act referred to putting a duty on a commodity which has been manufactured in this country but was being imported from abroad at a cheaper rate. I think that was the idea of that Act at that time, but evidently this 15p on the gallon of petrol came in under it and there it stays, but with the increased revenue to which I have referred, I am sure the Minister could give us some extra grants for roads and also restore the amenity grants to us. If in the near future the Minister does not give some relief to the building societies or give some incentive to the building industry, I am afraid we will be in a very, very sad state in north-western region of Mayo and south Sligo. There is a possibility of very large developments taking place there and the outcry for houses in that area in a very short time will be terrific.

One Senator during the course of his speech referred to the great times we are having here. We are surely having wonderful times. He said that if you go to any public house during the weekend there will be rock and roll, the discotheque, the sing-song, and people drinking pints. He was enjoying himself at these things. I would like to point out to that man that things are so bad that it is driving a lot of the people to the pubs to console themselves with a pint. But if he wants to live an austere life and have no social life at all, I wonder where is he going to finish up. It is an old saying that all work and no play makes Jack a dull boy.

But supposing some Minister decided tomorrow morning that these boys are enjoying themselves too much at these sing-songs in the pubs at the weekend and that this should be cut out all together, I wonder would the Minister for Finance thank him when you consider that for the nine months of last year he got in £115 million in revenue from excise, which I believe includes tobacco and drink and for the 12 months ending in December he is expecting to collect something in the region of £175 million, not counting what will be taken in VAT on the increased charges also. I do not know whether that Senator was serious or not in saying that this thing should not happen. I am sure if he were down in some of the boglands of Mayo where I come from he would know the only amusement some people have is to go to the pub on Friday or Saturday night and console themselves with a few pints about the increase that took place during the previous few days.

I will again appeal to the Minister that as soon as possible he should increase those grants to the local authorities, to the building societies and to industry in general. They want some incentive to put them back on the road to prosperity where they were sadly interrupted in February, 1973.

If there is one thing which is overtaxed in the country perhaps it is the Minister for Finance's patience and endurance and I do not wish to detain him on this beautiful evening any longer than is absolutely necessary. For that reason I intend just to concentrate on two or three central propositions in relation to the Finance Bill and particularly to the use of the budget as an instrument of economic management rather than giving consideration to its fiscal aspects. In his speech the Minister was slightly pessimistic, if that is the word that can be attributed now to economic objectivity in looking forward to the prospects of the next few months.

In looking back we are now familiar with the conventional recital of factors which led to the current general world economic depression of which we of course are a casualty the same as everybody else. As the Central Bank itself emphasises, in 1974 we were hit by a combination of factors which are unique in their integrated impact: the increased cost of oil and raw materials, which has now almost become a cliché in discussions of this sort but also in terms of our own economy; the depressed cattle trade and its impact on agricultural incomes; and, then, as a trading nation, of course, the very serious slow down in world trade. All these factors combined together to reduce the economic growth from a very high level at the end of 1973 down to a negative growth rate at the end of 1974.

In this debate a year ago I took a very pessimistic view of the 12 months that faced us economically and I believe on that occasion I forecast a very bad period ahead and suggested that the Minister's forecast in his own speech on the Bill on that occasion was perhaps a little sanguine. I think that unfortunately I was on that occasion proven to be the realist. I must confess that in looking at the world economic situation I am just as pessimistic now as I was then because I see those factors still operating. I see no evidence of an international co-ordinated response to deal with them and I also believe, as I said last year that the world economic system in any event was shocked by the huge transfer of resources consequent upon the oil increase. I still hold the viewpoint that it will take at least another four to five years for that shock to cease its vibrations within the world economic system and that it will be some considerable time before we get back to the conditions of the late sixties and early seventies.

In addition to that, many economists pointed out that, irrespective of the huge transfer of resources effected by the increase in the price of oil and the depression in world international trade, in any event the boom of the late sixties and early seventies would have been brought to a halt by problems in the international monetary system. This I believe to be correct, and I see no prospect there either of there being an internationally acceptable solution.

For these two reasons I am not one of those who sees in approximately six months' time any economic light at the end of this admittedly very long tunnel, and I am inclined to the view that it is going to be much longer than most of us believe before the world economy picks itself up off the floor. Probably we have reached the trough, but I think the length of time that the world economy can remain in depression will be much longer than is currently anticipated.

We of course suffer in a very unique way from the simple fact that our international trade accounts for 94 per cent of our GNP, and this is an enormously high proportion. It makes us one of the most open economies in the world. This has a twin effect of depressing demand in our own country because we are so dependent on exports for employment and, secondly, of making us very susceptible to international trends in inflation, particularly from the United Kingdom upon whom we are so dependent.

In this regard we have not come to any concerted analysis (a) as to the cause of inflation theoretically and (b) in terms of the impact of inflationary factors as to how our own domestic market is affected by international costs and trends. Some have argued with conviction and great clarity that all of our inflation is externally generated— some directly and the remainder indirectly consequent on the direct portion. There are others who argue that the international and the domestic factors can be separated and that we can be charged with responsibility for one while we can quite legitimately deny responsibility for the other. That generally would be the position of the Central Bank.

Those who read papers provided at the recent meeting of the Statistical Society would be hard put to come down on one side or the other in this particular argument. Whether or not one believes we have an element of control over inflation domestically, it behoves all of us to look at the question quite clinically and with a great deal of humility. There is no theoretical construction upon which we can rely to explain inflation and therefore to influence Government policy. We should be mindful of the words of Keynes in his great treatise of the 1930s dealing with the then horrendous problem of unemployment when he stated that most statesmen were, in the last analysis, influenced, although some of them in their madness might believe that they were acting as independent agents, by economists in respect of public policy.

At the moment there is no dominant theory or school to influence public policy in respect of inflation as there was in the late 1930s and 1940s in dealing with the question of unemployment. We must look very coldly and very clinically at all of the factors which we believe to have some influence on the situation. If we accept that a certain element of inflation is imported through import prices, we should look in a cautious fashion at the question of the link with sterling. I do not intend to go into the pros and cons of that here, but it ill behoves the Central Bank to enter this particular debate in the way in which it did on page 9 of its annual report, where it refers to "a revival in some quarters of the often emotive and rarely well-defined notion of breaking the link with sterling". The report then goes on to give what is not quite an elementary lesson but which is a middle-form lesson in the consequences of changing the exchange rate. It expresses itself as follows:

The foregoing remarks are made in the hope of clearing away some of the misconceptions which surround the subject.

Those of us who introduced this topic recently into public controversy were not really guilty of some of the elementary misconceptions which the Central Bank attributes to those who have been emotively affected by this particular question. They have a right and a duty to take up a position on this matter. But if they are going to do that in terms of analysis of what causes inflation and what is open to us as a remedy, then they themselves should be less guilty of the fault which they attribute to others, and the approach which has been taken in a motion tabled by a number of Senators in this House is, in fact, a more appropriate one, a much more responsible one, because it does not take up a position either way but recognises that the position should now be reexamined, given the fact that it was only in the 1930s that there was any significant and open discussion of the relationship between our own currency and sterling. The world has greatly changed since then, particularly the world of sterling. The matter is far more complex and complicated than to dismiss it in one page in the annual report of the Central Bank.

One of the factors which is influencing me to think very deeply about this subject—accepting arguments for and against—is the state of the British economy. I believe that economy to be in profound crisis, as I stated in previous debates, and I repeat that conviction here, with even greater strength. I fear a pretty savage British deflation following the EEC referendum. British politics are for the moment in a state of Limbo pending the decision on this referendum. I can understand why politicians on all sides are not focusing as a matter of priority on their economic problems; they are dealing with another issue. But when that issue has been resolved and the British public has made its decision, we will find then that the British Government will be turning rather spectacularly to dealing with problems which to date have proved quite intractable.

For example, last weekend we had very ominous sounds coming from Len Murray, the general secretary of the TUC in respect of the social contract. All of us read with trepidation the speech of the Chancellor in introducing his budget and we have read the forecasts of the CBI which are very pessimistic indeed, and they are usually quite accurate forecasts of what is happening in the UK economy. We have seen the latest trade figures and the fate of sterling, in particular over the last two weeks.

If the £ sterling is devalued—and I suspect it might—if Britain has some resort to a siege economy mentality, then the question is going to be posed: what then for us? What exactly are we going to do in this situation? Are we going to continue to hitch ourselves to an economy whose problems are quite different and distinct from ours? Or are we going to give ourselves a measure of independence, which I believe is absolutely necessary if we are to tackle the problems of what is a developing new economy rather than a very old economy in a state of some disintegration and attempting to accommodate itself to a new economic world?

This is a vast issue which I do not intend going into in any great detail here but which should be looked at quite clinically, and perhaps the best resort would be to pass the motion which is on the Order Paper so that the Seanad might address itself in a more leisurely and comprehensive fashion to this very important question.

The sterling link is a powerful mechanism for importing UK inflationary madness and is only one aspect of the problem. It is true, irrespective of costs and price factors, irrespective of institutional problems, that inflation is also a matter of psychology. For too long the division between sociology and economics has been permitted to operate. Economics is not a science in the same way as physics or chemistry is. It is a science which must deal with people and deals with human behaviour, and if you deal with human behaviour you must admit the concept of irrationality. Physical scientists do not admit the concept of irrationality. They deal with things which, to a great extent, are predictable.

If we accept the component of irrationality, as Keynes did in his concept of the marginal efficiency of capital, we have got to accept that in an inflationary situation there can be an inflationary psychology developed which is self-reinforcing. At the moment most of the country is in the grip of an inflation fever. People believe inflation to be higher than it actually is. They anticipate that it will grow even higher and at a more rapid rate. They then build that belief into their demands for resources, price increases, wage and salary increases, and the whole process becomes self-reinforcing and dynamic.

The intriguing situation at the moment—particularly with regard to income demands—is that the lower income groups are not the most culpable. Very often, those who are most ruthless in this process are those who are best educated, best off and best organised. That is a new and very disturbing factor. I am thinking of one specific segment of society who have led the way in terms of ruthless exploitation of their power in getting what they want. There is abroad too much a sense of "we will get what we want, irrespective of the social consequences". There is no great sense of communal sacrifice, neither is there in certain quarters any great sense of social responsibility. Much of this is born of failure to appreciate the gravity of the national crisis.

I agree with the Minister where he warned that the Government cannot go on providing ever-increasing services out of less and less resources. The times in which we live are characterised by people demanding more from the Government, while, at the same time, wanting to pay less for what they are getting. For example, the Minister has made in two successive budgets significant income tax concessions. I am making the point, not in a Party sense but in the sense of the amount of revenue involved.

In his speech, the Minister said that the combined budget concessions will amount to about £60 million. The same people who demanded these income tax concessions and who, in many cases, characterised and criticised them as being inadequate, also demanded increased social welfare, increased educational benefits, increased health services, and more housing. It is a truism that you cannot get more out of anything than you put into it. If, on the one hand, the Government had voluntarily foregone in terms of revenue £60 million in one area of taxation, they cannot then be castigated for failing to meet all the demands in terms of expenditure. Expenditure is simply a function of income. At the same time, we face a situation in which most people will do what they can to evade or avoid taxes.

This morning, it was interesting to note that Senator Lenihan paid some attention to those in receipt of social welfare benefits, and pointed to some of the abuses there. However, he did not have regard to those who do not pay the taxes they should be paying. We all know that one of the greatest industries is providing advice to those who already have resources, who are very well off, on how they can possibly avoid having to pay what is really their just share of the taxation burden. That is a psychology which is pervasive at the moment, and is quite sinister. It can only carry in it the seeds of social disintegration. If one were to give the prize to the Minister with the most difficult task in government, it would most assuredly and easily go to the Minister for Finance—not that any Minister for Finance might believe it was always his lot. At a time of standstill in economic growth, at a time where there is a huge army of unemployed, at a time of a very high level of inflation, of increasing demands on the Exchequer, the Minister must literally be at his wits' end to meet all the demands being made on him.

I should like to say very briefly to the Minister that I hope he may embark on two innovations and continue a third. In the first place, the time has come when there should be a well-thought-out and clearly defined economic plan. My reason is as follows: a plan has many inbuilt advantages, despite the fact that one writes on paper certain objectives, usually quantifies them and runs the risk later of being criticised for not meeting or fulfilling them. Apart from that, which is a legitimate political consideration, a plan has the discipline of forcing one to think out one's priorities. Having been involved professionally within industry in this area, I can think of no greater advantage to any group of men trying to achieve any objective than being forced to put on paper what they regard as being first in terms of importantce, and second in terms of importance. It is quite extraordinary how difficult it can be at times to put such views on paper, even when one thinks one knows one's set of priorities. Very often we run public affairs on what are unarticulated assumptions and priorities, about which we believe there is general consensus. When one puts them on paper, it is amazing how differences and divergences can occur.

It is, therefore, necessary at the moment to carry on the work begun in the White Paper in establishing priorities, and begin to refine them and make them more precise. I accept the general trust of the policies in respect of maintenance of employment and the protection of the weaker sections of the community. But in a plan, one can go into which type of employment, what parts of the country, which sections of the poor should be given priority.

Secondly, a planning process must involve people other than those in government and in public life. It will involve other elements of the community, and in that regard a start was made last Friday. The task force established by the Government is a step in the right direction. Even at this stage, we are involving people at the top, not only at the top of our Government but also at the top of the various organisations involved. The plan, therefore, carries a third advantage of broadening the sense of participation in decision-making.

Decision-making must be diffused downwards in the plan, if it is to have eventual acceptance. There must be large numbers of people involved in the planning process. Because they are involved in the planning process, they will be forced to think out the priorities. Those who are engaged in the overall exercise will have the advantage of contributions which they would not otherwise have. The fourth advantage of a plan is the identification of problems and the mutual recognition of the problems of different sectors.

I am sure the Minister is blue in the face listening to people telling him what to do with money which he knows he has not got; by telling him how to spend money which he is at his wits' ends to try to raise. If, on the one hand, one castigates the idea of the size of a budget deficit, and on the other hand, castigates the inadequacy of Government expenditure, one is, of course, putting forward a total contradiction. Yet, that has been done in this debate. It is that type of identification of problems which would be one of the beneficial side effects of a national plan.

The fifth advantage would be that the Government would be able to analyse the options open to them and the Irish society. In other words, confronted with any set of problems, there is no uniquely correct response. There is usually a variety of options open and these should be put down, presented and opened to public debate. At the end of the day Government must decide, carry the can, and that is how it should be. In presenting the options, it would meet with a far greater wealth of intelligence, commitment and understanding than we might now believe possible. On occasion, politicians tend to underestimate the electorate and those involved in social life.

The plan, apart from unleashing a wealth of talent, concern and commitment, would also secure at the end of the day consent because within a democracy there is no possibility of progress without overall consent. At the moment what we are getting is a lack of consent in certain areas. People are saying: "No, we will not agree to doing this in respect of our incomes. We will not consent; we will not acquiesce. We demand all, and if we do not get all then we will take certain courses of action." Within a democracy there must be consent, there must be a consensus. In any plan, options will have to be chosen which involve not doing certain things, or doing them in certain ways, which will arouse opposition in certain quarters. There is no plan which is so good, so comprehensive and so all-embracing, that it will satisfy every section of the community. If life were like that, it would be very easy indeed.

My second suggestion to the Minister is the necessity to reorganise what I believe to be the economic departments. I said in the debate here on the Department of the Public Service quite some time ago, that I thought the Minister for Finance was taking on far too much in having to handle these two Departments. The case can be made more strongly now. The Department of Finance, despite the fact that it has a Parliamentary Secretary, is even too much in its present demands for one Minister. I would like to see a recasting of the economic Ministries and a recasting of departmental responsibilities. This is the area of the moment—the handling of the economy. Quite frankly, I am amazed at the endurance and enthusiasm of the Minister for Finance in dealing with his Ministerial responsibilities, if one takes account of the enormous amount of time he has had to spend recently on legislation, and that he is responsible for taking the key decisions in respect of Government expenditure and overall Government economic strategy. While there are other Ministers who are also being over-taxed he, in particular, is in the firing line as he has been here in the last few days. This is an area which really requires fundamental reorganisation.

The third point is the reorganisation he has undertaken in respect of capital tax proposals. I hope he will continue with them because they have widespread support in the community. He saw that at the Ard-Fheis of his own party. Few Ministers have been subjected to such intense pressure to introduce changes as he has, since he introduced his capital taxation White Paper and the legislation. I admire the fortitude with which he has withstood this and continued to process those very important Bills through the other House.

This morning I welcomed the reiteration of the Fianna Fáil point of view by Senator Lenihan. It is an articulation of what is becoming more progressively a right wing attitude. I welcome that because perhaps it will be one of the anomalies of the Coalition experience that it may force political ideologies to be more accurately expressed than they have been in the past. I believe fundamentally that that is where Fianna Fáil belong in their social thinking. I am very glad the opportunity is being afforded to them to give this articulation.

I say, in summary, that I believe an economic plan is essential. I believe in respect of that plan that budget deficiting on current accounts must be central. I believe also that budget deficiting of the order which was achieved in this year's budget is fundamental and is a sine qua non of continued stability and growth—and I mean social stability as much as economic stability—in this society. I would enter just one criticism of the present budget. Perhaps there is a slight imbalance in that the capital budget side is not as great as it might be. That perhaps is a function of the size of the budget deficit and that, in turn, is perhaps the size of the borrowing capacity to which the Minister made reference in his speech.

Finally, I believe that the year 1975 will be a bad one economically in the international sense. I do not think that anybody can be sanguine about international prospects. Therefore, they cannot be too sanguine about our own economy and its performance. For that reason, we must continue with the expansionary policies as contained in this budget and as articulated by the Minister in three budgets. We cannot have recourse to policy which involves a control of Government expenditure which, in effect, means cut-backs in essential services. It is very dangerous to be tossing around policies about inflation when there is no agreed theory as to the cause and nature of inflation. I am always disturbed by the fact that at a time when economic theory is uncertain, people usually have recourse to those policies which involve unemployment. We are back at the moment at the era of Hoover walking around the White House turning off the lights in order to show the American people the correct way of dealing with the economic crisis.

Unemployment should be the target.

Of course it should. Those who, like Senator Lenihan, propose moderation in Government expenditure as a means of dealing with inflation, had better say quite clearly to the Irish people what that means in respect of the size of budget deficits——

It means more work.

——on current account. If you want to maintain the present levels of Government expenditure such as is contained in the Book of Estimates and at the same time lower the budget deficit, you can only do so by increasing taxation. If that is what the Fianna Fáil Party want they had better spell it out with simplicity. If they do not want an increase in the present level of taxation and they want the budget deficit decreased then they stand for a decrease in Government expenditure. That means less on social welfare, less on housing, less on health, less on education. If that is Fianna Fáil's economic policy it is better that it be spelled out with simplicity. We in the Labour Party, in particular, reject the concept of suffering for some as being the prescription for the happiness of others. That is always at the root of those people who believe that there must be a cut back in demand which inevitably and invariably means an increase in unemployment and in the level of Government expenditure——

Full employment is our policy.

——particularly on social services. The Senator nailed his colours to the mast this morning in a piece of economic contradiction where, on the one hand, he attacked the size of the budget deficit on current account and then proposed greater expenditure. He could not distinguish between a deficit on current and capital account, which is elementary economics, and then he went on to decry the level of Government expenditure. You cannot have it both ways.

Senator Halligan is not the only Senator who can read.

An Leas-Chathaoirleach

Please allow Senator Halligan to continue.

I may perhaps be one of the Senators who can hear and who can understand what people say; that is what Senator Lenihan said this morning. I do not deny him his right to say that, but what I wish to do is to spell out the consequences of what he says.

What did I say exactly?

The Senator has consistently, since the Minister has been coming in here on Finance Bills, attacked the size of the budget deficit. He has, at the same time, demanded extra services and I have said that both of these are economic contradictions.

On a point of order, just to be correct because I cannot be misquoted so blatantly, I said positively this morning that I welcomed the policy of budget deficits provided it was clearly shown that budget deficits were geared towards productive investment.

An Leas-Chathaoirleach

I am sure the record will have an accurate account of the Senator's statement.

That is not a budget deficit. That is precisely the point I was making: Senator Lenihan really does not know what he is talking about: the budget deficit refers to current account, not to capital account.

Does the Senator think there is no way of using the current budget to increase output?

The use of a capital budget as a means of economic management is of profound importance.

The Senator is very innocent if——

Excuse me, I want to explain——

An Leas-Chathaoirleach

Senator Halligan is in possession. Other Senators cannot be interrupting.

——that current expenditure cannot be used for productive purposes. If the Senator in his crazy notion thinks that you can have capital and current in separate compartments when a large proportion of property properly used in current expenditure can be devoted for productive purposes——

As it used to be under Fianna Fáil.

An Leas-Chathaoirleach

This is turning into a question and answer session between both sides of the House. Would Senator Halligan continue his contribution?

I am quite indifferent to these attempts by Senator Lenihan to set the record right. He has already condemned himself in print. He attempted to rewrite the Sunningdale Agreement on the last debate that we had here and he is doing it rather well. I admire his skill and he knows that.

The general thrust of what the Minister is doing in terms of the use of budget deficit on current account as distinct from borrowing on capital account—a very profound and important economic distinction—is the correct way at this moment of handling a very difficult and unique economic situation. I do not believe there is any way over the next two years of having recourse to any other course of action. Those who attack the Government for allowing such a policy are threatening and attacking in a very real way the standard of living, not only of those who are at work but also those who have to depend upon the State for what they enjoy in life. I hope the Minister will not be influenced by misconceptions of economic theory or economic management.

Like everybody in the Labour Party, I am prepared and proud to support this policy and will continue to support it, irrespective of the criticisms which may be voiced against it.

It is very hard for me to follow all the arguments in this very necessary and welcome debate. I was pleased to hear such enthusiasm from all sides of the House that the country is in a sound financial position. I know the Minister personally and sympathise with him because I must regard much of his speech as a piece of political playacting. This is very old and sometimes very attractive in the political arena. Let nobody have the neck to tell me that we are living in a semi-Utopia with 100,000 unemployed. Day after day, I read in the newspapers new increases in prices sanctioned by the Minister for Industry and Commerce. There will be an 18 per cent increase in ESB charges.

I am not a legal man. I have no desire to travel the ground these people travelled before me from either side of the House. I have been in business for the last 50 years. When you live on this planet and spend almost three-quarters of a century, 50 years of which are spent in business, unless one was a terrible fool altogether, one will realise the type of society and thinking behind the people who make the speeches to which I have referred.

I heard, no later than last week, the Minister for Local Government—who was very welcome in my county where he opened new houses—trying to create the impression that there was full employment in the building industry. All anybody has to do to weigh up such situations is to go into any builders' providers from Cork to Donegal and you will see hundreds and thousands of pounds worth of materials not being used, and it is anybody's guess when it will be used.

Let me now get away from this high stuff and turn to what I choose to say.

An Leas-Chathaoirleach

I trust the Senator will not stray from the Bill.

With all due respect to the Chair, I am not going to be too long.

An Leas-Chathaoirleach

As long as the Senator relates to what is before the House.

I know what is before the House quite well. I have lived with it for a long time now, and I intend to live a little longer. When I hear somebody speaking with the supposed ability of Einstein, and in the next breath the innocence of a day-old chick, it gives me food for thought. All you have to do is go into any family dwelling and ask the parents how they are faring. The Minister says he has no control over this. When the housewife in Dublin, Dundalk, Drogheda and down as far as Wexford and Tipperary does her shopping in Jonesboro, this gives us food for thought.

The political playacting must go on; there is no way around it. I sympathise with the Minister. He is like Captain Smith on the Titanic. This was the unsinkable ship built in Belfast. So sure was Captain Smith of his ground that when he was told he was sailing into an icefield he disregarded it. He said he could split this iceberg. Of course, he did not reckon on the two-thirds of the iceberg under the sea, and only one-third over it. That is how my sympathy goes to the Minister for Finance this evening. I do not believe he knows there is two-thirds of his iceberg under the sea. He may find himself in a much more awkward position than he anticipates. However, I wish him luck. I hope he takes my advice. Who would come to me for advice? I remember the Leader of the House——

He always listens very carefully.

I can remember there was a by-election in Cork and the Leader of the House was there —a good humoured man like myself and a good neighbour. I described the getting of these two parties together as cutting Mick the Miller down the centre and a mountain goat, and if you put the two together, you had a new breed of a greyhound. I think I was not far wrong. This is a very cross-bred outfit. The Minister makes a speech and his Leader comes the next day and contradicts it.

When we come to this issue it is quite obvious to me, with my limited degree of intelligence, that not one iota in that Bill before the House can be changed—I think I am right on that but the Minister will tell me if I am wrong. But the act must go on and I am part of the act now. I take full responsibility for that. At what stage will the people rise up in their wrath and say that they have had enough?

We then have the situation regarding unemployment. What do any of the Ministers, the Cabinet, propose to do about unemployment? I see that the Taoiseach called together all the different groups and interests. Have they made any worthwhile headway? Perhaps it is a bit early to say yet. I am giving the position as I see it. I have given my observations as I see them and I am waiting for and looking forward to hearing the Minister's reply.

I do not know if I shall appear like Einstein or a day-old chick to Senator Brennan but I hope he will hear some words of wisdom from me. I like his criticism of Senator Halligan's address: I considered Senator Halligan's address to be one of the best of the day because while the basis of the debate was not directed to the Finance Bill—if I may say that without disrespect to the jurisdiction of the Chair; it was a wide ranging debate on economic problems —he hit the nail on the head when he said that the world economy is in a bad state and that he considers it to be much worse than many commentators are now prepared to acknowledge. He admitted that he had been more pessimistic about the world scene when last he discussed it in the Seanad than others, including myself, had been and that he had the same sense of pessimism today.

On behalf of the Finance Ministers of the EEC I am going to the United States next week to discuss with the United States authorities the prospect of getting a better co-ordinated international plan for dealing with the current depression, which is deeper and more extensive now than any previous economic depression experienced in the world.

The present recession is worse than what occurred in the late 1920s and early 1930s. The only reason why it is not more obvious is that the welfare state has developed right across the western world. One of the difficulties which a small open economy like Ireland has in trying to overcome the effects of this world recession is that 94 per cent of our total trade, both import and export, is involved in world trade which is in the depths of this recession. No matter what we do by way of reflating our own economy it can do little more than keep our economy ticking over at the highest sustainable level pending the pickup on the world scene.

The three budgets which this Government promoted in 1973, 1974 and 1975, were reflationary. They were expansionary budgets. I would recall, not in any sense of boasting but in order to get their own minds tidy, to the Opposition that they criticised the budgets of 1973 and 1974 as being too expansionary. Indeed, the debate some months ago in the other House on the budget was of a similar nature, that the 1975 budget was too expansionary. Where do they think the economy of Ireland would be today if we had not deliberately chosen to proceed on paths of expansion? The domestic slump would be much worse. Instead of having an unemployment rate which we regard as intolerable at 100,000 it would be 140,000 or 150,000. If the Government were not spending the enormous amount which Government are at present spending both on the current and capital side, unemployment would be higher.

If there is today a certain amount of recession in the building industry, to which Senator Brennan and others referred, the fault does not lie in any lack of investment by the Government, which in two years has increased by 122 per cent. The State investment in housing and the construction industry has increased by 122 per cent. Any difficulties that arise there and in any other sectors today are due to a lack of confidence and a lack of investment in the private sector. I am not chastising the private sector for their concern: what is happening in Ireland is no more than a reflection of what is happening elsewhere.

When there is the economy of the industrialised world of which we are a part, albeit its poorest part, when the mainsprings of the economies of the OECD countries operate from Wall Street in New York—the headquarters of two-thirds of the multinational companies of the world—it must be realised that these companies are being operated from the area of the greatest depression, from the area where confidence is at its lowest point. All this is reflected now in the economy, not merely of the United States but of Europe and Japan.

OECD last December anticipated that there might be a growth of one half in the economies of the 24 OECD countries in 1975. The latest forecast of OECD is to have a decline of one or you may call it a growth rate of minus one in 1975. This is something which supports what Senator Halligan said. It is not a pretty picture. What is even more significant is that they attribute this poorer performance to the fact that the depression, recession and slump, the lack of investment, the rate of unemployment were much higher in the first quarter of 1975 than we had anticipated. They now expect that situation to improve and for the significant economies of the world to take an upward path again in the third and fourth quarters of 1975.

That is the world scene. It affects Ireland. We cannot escape from it. We are caught in it. There are a number of positive factors in Ireland which do not exist elsewhere. I want to emphasise these. I have emphasised them elsewhere and we should not overlook them because they should give us cause for confidence and a cause for feeling that, whereas in other countries the growth path this year may be minus one, we can reasonably assume that we will have growth in our economy this year.

Irish agriculture will enjoy an increase in income of between 35 per cent and 40 per cent. That is a massive increase. That will be reflected throughout our whole economy. The increase is already occurring but, as it has occurred, quite a number of people in the agricultural industry have understandably used their first profits to pay off existing debts which were incurred during the most difficult year of 1974. When the further profit that they make through the year is recycled throughout our economy domestic demand should significantly increase. On the home front also domestic demand will increase as a result of budgetary policy. It is only now beginning to take effect.

For the first time in our history the budget this year was in January, but the two significant factors which contribute to home demand are the tax concessions both for industry and for personal income and social welfare benefits. The tax concessions on personal incomes and the welfare payments came on stream in April which should mean that whereas we had, as Senator Yeats mentioned, a decline in consumption of about 3 per cent in 1974, on the basis of these figures, we would have an increase in consumption of 3 per cent in 1975.

I share with all Senators who spoke about the need for a Buy-Irish campaign their concern about the need for a Buy-Irish conviction, because it should not be necessary now to have a campaign to make people do something which is in their own interest to do. This is the importance of people in business selling Irish—which is the first thing they must do; they must have Irish goods available so that the people may buy and then by having people buying Irish, prevent any leakage of these increased incomes into imports from abroad.

Today we live in a world which is experiencing the greatest decline in world trade since the last war. In that situation there are many countries prepared to cut the profit margins entirely, both on their own home market and on the export market simply in order to get rid of stock. This has imposed upon us and many other countries a tremendous burden of trying to police these movements of goods. But we must remember that as far as Ireland is concerned, if the world embarks upon a programme of restrictions on trade, we will be hurt more than we could hope to gain by any restriction which we would impose on imports. We are still exporting more of these goods including textiles, clothing and so on than we are importing. We are a free people and we are under no obligation to import anything from the EEC or to buy it if someone else imports it for us.

I do not share the view mentioned by Senator Keegan that people are embarrassed on going into a shop, finding nothing Irish and do not want to ask for it. That is a slave mentality I thought we had got rid of long ago. If shopkeepers realised that people would not buy goods that came from abroad they would not stock them much longer.

We have this choice. It is a critical one and it is one that those of us in employment should exercise because it is too late, when people are unemployed, to realise their mistakes that they could have kept themselves and their colleagues in business if only they had the wit to buy Irish and spurn the foreign goods.

Inflation is a terrible menace. The rate at which it is running here is not sufferable in the short term, the medium or the long term. We simply cannot survive a rate of inflation of 24 per cent, particularly when our main trading partners, with the exception of Britain, are cutting their inflation rates to above half what they were last year.

We are a democracy and the Government can produce a number of different weapons to combat inflation. They can put on the statute books rules and regulations which should be observed but we know from past experience that an ounce of co-operation is worth a ton of compulsion. Police powers or enforcement procedures will not get our people on to the path of common sense if their own conviction does not get them there and keep them there in the first instance. That is why the Government last week invited the social partners— the trade unions, the employers and the farmers—to come for a frank across-the-table talk to identify the problems, to get a recognition of them and an honest and frank admission on both sides of the table of what the problems are. The people generally accept that we are all responsible for inflation, everybody in every walk of life. Perhaps we have become affected by what Senator Halligan called the inflation psychology. It is now regarded as just as certain as day following night and night following day that inflation will continue and that further increases therefore must be given in phased payments to protect against tomorrow's inflation.

That has us now in a state where we have awarded ourselves over the last two years income levels far in excess of what was justified by inflation caused by factors beyond our control and much further in excess of what we were ourselves producing. I nodded approval and I now speak approval of something which Senator Quinlan said. He queried whether or not we could hope in present circumstances to maintain living standards, which was certainly the Government's ambition last November when we published the White Paper on the national partnership. It is still our ambition. We want to maintain standards. We do not want to see them dropping. Unless there is a fairly quick pick-up in the world economy then we shall have to accept that income levels cannot be maintained, I mean maintaining real income, real standards. We could get a short way and a comparatively painless way out of our present predicament if we had the wit to forego an improvement for a short period. Even a six months' pause would be a very quick and easy road to salvation but it is something on which we will have to get a general consensus. We will have to get the national conviction that this is the right thing to do. That is why we are setting up this working group—to get an understanding of the problem. I accept what Senator Halligan says about the need to diffuse decision-making downwards. We have to get diffusion downwards of acceptance of the right policy. Government in a democracy must rule and must make decisions and the Government will not hesitate, as I said in my opening statement, to make decisions even if they are unpopular. But, making decisions is one thing. The important thing is to make decisions that will be seen as being reasonable and desirable.

I was talking about the positive aspects of Ireland's economy and I mentioned agriculture and the dramatic improvement in agricultural incomes this year and the spin-off that will have through our whole economy. We also have another element which is comparatively novel to this country and which is not enjoyed by others to the same extent, and that is the dramatic impact on our economy of membership of the EEC. That still continues but it is a factor which only two other countries enjoy—Denmark and Britain—and they have not done as well out of EEC membership as we have. That is a continuing factor. We would be doing a good deal better if it were not for the current depression but it means we have this positive element which other countries have not.

We have had this year, last year and the year before and we anticipate for next year, a higher rate of foreign investment than anything we previously experienced. One of my budgetary difficulties is to obtain the capital which we are pledged to produce to match the private capital that is coming into this country for foreign investment for new industries or for the modernisation of existing industries. That means we have to borrow considerable sums of money in order to match this demand. But, in Heaven's name, when the industrialists and wealthy people of the rest of the world who have the world from which to choose to locate their new industries are choosing Ireland, there is no reason for Irish people to have any lack of confidence.

I would like to refer briefly to the £2,000 libel that an anonymous group calling themselves SIE published last Friday in which they made the outrageous, irresponsible allegation that the Industrial Development Authority were experiencing difficulty in introducing industry into Ireland because of the Government's capital taxation proposals. I trust everybody has seen that the Industrial Development Authority have now stated categorically that that statement is untrue and that they have experienced no resistence on anybody's part in relation to placing industry in Ireland because of the Government's capital taxation proposals which—I want to emphasise—are brought to the notice of all persons contemplating coming here. This is printed in the brochures issued by the IDA. Furthermore, the Industrial Development Authority have stated that no person, no group, and particularly the group calling itself SIE, consulted them before they published that libel against the Irish people and against the interests of Ireland.

We have also now the certainty of having on stream and producing electricity and producing town gas for Cork within three years gas offshore from Kinsale and there are prospects that the quantity of gas which is proven and admitted to be there, may, in fact, be only a fraction of what is really there. But if within three years we are going to be producing 12½ per cent of the energy requirements of this country from a new indigenous source, 12½ per cent will be coming from offshore gas as well as the 40 per cent we already have from water and from turf. We could, with a little bit of luck, have further supplies of gas available to distribute not merely in the southern area but throughout the whole country and there are not unreasonable prospects of oil as well in commercially viable quantities.

These are positive factors which justify us in the policies which we have pursued; policies which have involved us this year in the highest budget deficit ever; policies dictated by our own circumstances and our own assessment of it and also recommended to us by all the international organisations of which we are a member, OECD, IMF, the World Bank and the EEC.

But, of course, any borrowing is a borrowing and it is, as I said earlier, mortgaging the future. This brings me again to the point made by Senator Quinlan about the prospects of maintaining our standards. Because we have to make these substantial borrowings both on current and capital account we will have to set aside some of tomorrow's growth to repay the money we are now borrowing because we have to buy the money we are now borrowing—the international market says so—over a five-year period. That means a very short period of repayment and we do not want to be in the position of having to borrow in five years' time in order to repay the borrowings that we made in 1974-75. So we must harness this money to investment purposes and we must accept that we shall have to allocate part of tomorrow's growth towards the repayment of our debts in order that we may have continuing recourse to the international money market and also to maintain this country's credit rating, which is still one of the highest in the world.

The Government have not turned their face against economic planning. In the Department of Finance we have an economic model always on view and always being worked upon and we apply to it all the winds, all the currents, all the new influences that are operating in the world and on the domestic scene. But the production of an economic plan today is not as easy as it was 18 years ago or ten or five years ago. At that time the world was fairly stable, it was seen to be moving in a certain direction.

One could make reasonable projections. We know then that, even with the best of good-will and even with an efficient Government in office, many of the targets were not achieved and problems arose which could not be foreseen. I do not think that anybody today is so silly as to believe that one could produce an economic plan today based upon a number of immutable and unchangeable assumptions. The best which could be done would be to produce a plan which would have a number of alternative assumptions and it might be anybody's guess which of those assumptions might be the right one.

But there are a number of critical factors that we would like to get out of the way before making a projection which might be helpful. There is no use in producing a document which in three months could be useless. We would want to know whether or not Britain will remain a member of the EEC. We may have our assumptions about that and our assumptions might not be wrong, but that is something that must be got out of the way because it has a critical effect upon this country. Even if Britain leaves the EEC it is our conviction that Ireland's interest will require Ireland to remain in. I think there can be no doubt about that at all. When all the sums are done, it is quite clearly in Ireland's interest to remain a member of the EEC even if Britain leaves, though again it will cause a number of short-or medium-term difficulties. But if Britain goes out the plan would want to deal with that particular problem. That is something that should be known in the next few months.

Again, as far as our future resources are concerned, it would be helpful for us to know just a little more than we do at present about the prospects of offshore oil and gas. The important thing in planning for the future is to know first of all what are your resources. You cannot do any more than your resources allow. The resources to some extent will depend upon foreign borrowing, of course, but the most important thing is what your own resources are, because that will determine whether you can repay foreign borrowing and other countries will look at your resources to see what is your capacity to pay the interest and to repay any money which is borrowed.

When those uncertain factors are out of the way we would certainly visualise the production of a proper plan which we think our people will accept as being reasonable. At this stage I think there would be very few people so unreasonable as to say that the plan would not need to be updated from time to time. It clearly would be. Every sensible businessman is doing that, probably if not monthly, weekly or quarterly at present, and that is obviously what any modern State will have to do in the fluid world in which we live at the present time.

At this hour of the night I am almost afraid to reply to some of the specific points raised in the debate because it might be thought that I was argumentative and I do greatly appreciate the general tone of the debate. Even though the Opposition succumbed, as when we were in Opposition so long we succumbed, to the temptation to find the weak points in the enemy and went in and took advantage of it. There was a sense of the seriousness of our situation at the moment and there was an understanding that it was not entirely due to domestic mismanagement or otherwise and, I think, that in itself, augurs well for the discussions which we hope to have with the social partners.

But Senator Lenihan did say that the Government had no plan for expansion. I think I have already pointed out that the mere fact of our deficit, or the size of the deficit, is an indication of the Government's expansionary attitude because if we had not got that expansionary attitude we would not have had those deficits or we would have imposed more taxes. But if we were to impose more taxes— and God knows I am as convinced as anybody else that we have imposed enough, as much as is tolerable in present circumstances—we would simply be reducing domestic demand. It is already reduced for many reasons, most of them beyond our immediate control, and there is no point in pretending that general subsidies on food, fuel, postal charges and so on are a cure for our problems. It would be no more than a bookeeping exercise and in the other respect the subsidies would have to be paid for by taxation or by further borrowing. We see the difficulty our neighbour is in at the moment. She borrowed very heavily to subsidise last year and now she is beginning to feel the pinch. It is not a remedy; it is a palliative and it certainly would be no cure and would only in the long run aggravate the disease.

Senator Lenihan mentioned a suggestion that is often thrown out as a cure, that of tax concessions on overtime earnings. That is not possible, because if there were to be a lower rate of income tax on overtime, it would be very difficult to get even the most honest man to work a 40-hour week and to produce to his full capacity in that time. There would be a strong incentive to shorten the standard working week and to get overtime. It would be economically dangerous to have that concession.

He also mentioned tax concessions for investors in building societies. When we were discussing this a couple of times last year I pointed out that further tax incentives for building societies would not be justified. In the event, I was proved right because there is now a flow of funds into building societies. Before long we may well face the same difficulty as Britain where the building societies could be flush with money and not have sufficient borrowers. There is more to the purchasing of a house than the mere availability of money. There is also the question of confidence and in a time of some uncertainty—and we were frank enough to admit that there is uncertainty—when overtime is not so easily available as it used to be, when some people are on part time working, there is anxiety about embarking on a new venture such as the purchasing of a house. We hope that in the second half of this year, in common with the rest of the world, confidence will be again exuded and that the situation will significantly improve.

On a number of occasions recently I dealt with the question of the EEC Regional Fund. I cannot put it any more fully than I have already done. I do not know how anybody has the temerity to suggest, at this stage, that the Government intend to use the EEC Regional Fund to assist the Irish Exchequer. No penny, no dollar, no franc, no Deutchmark can be received from the Regional Fund unless and until an Irish Government have first spent the money out of their own resources. When the Irish Government have spent money out of their own resources, we may then receive from the EEC part of the money which has been so spent, and only part of it. For every £1 that we would get from the EEC Regional Fund for industry or, say, the designated areas, the Government here would already have had to spend at least £1 of their own. Before we get £1 from the EEC fund for roadworks, infrastructure— for bog roads, sewerage schemes and the like—the Irish Government would already have had to spend £2.33.

There is no question of a fiddle here because all the money has to be spent by the Irish Government. Two pounds would have to be spent by us before one pound could be received, or £3.33 for infrastructure work would have to be spent by us before any money is received. The proof would have to be on the table in Brussels before the money would be received. The same would apply to any other money we would receive from the social fund or any other fund. The money must be spent here before any money is received from Brussels.

Senator Markey has a nice sense of the balance that had to be maintained. He mentioned that the correct treatment for one of our problems could lead to the aggravation of the other. If we went bull-headedly to tackle inflation we could bring inflation down. There is no doubt about it. We could bring inflation down to half what it is at present fairly quickly, but the consequences would be massive unemployment. That is not a tolerable price to pay in order to bring inflation down quickly.

Likewise we could, to some extent, but only to a very marginal extent, by the expenditure of Government funds relieve some of the unemployment, but the effect would be to add to the rate of inflation which, in itself, is a cause of much of the unemployment from which we are suffering at the moment. So we have to try to strike a very delicate balance in order to ensure that we do not aggravate either of the terrible problems now menacing us—inflation and unemployment.

Senator Dolan said we were not taking action to stimulate industry. He is being rather unfair. We gave £12 million in tax reliefs in this year's budget. There will be another £12 million in tax reliefs in next year's budget. We have promised this for a two-year period, for manufacturing, construction and farming or for any businesses supplying manufacturing, construction or farming, which means that a number of the concerns to which Senator Lenihan was referring —such as builders' suppliers—will get relief under such concessions.

We have also substantially increased the allocation of money for Fóir Teoranta this year. They are the organisation which provide an ambulance service, as it were, for companies in trouble. It is seen at this stage that we will have to increase the allocation for Fóir Teoranta and this will be done, without demur, without hesitation, because we are going to ensure that every company that has future prospects will be kept operational so as to be in a position to avail of the upturn when it comes around later in the year.

Senator McGowan can hardly have been serious when he spoke about insufficient assistance for local authorities. I mentioned earlier that there was a 122 per cent increase in the State's expenditure on housing, and the greater proportion of this increase has gone to local authority housing. We have also massively increased the State's allocation for sewerage and water supplies.

Senator McGowan repeated the falsehood that investments are not coming into the country. I have already told you what the IDA said about that. I have given you the figures to prove that it is untrue, and here is another statistic. In 1973, the amount of foreign private money coming into this country was £40 million. In 1974, the year in which we published the capitalisation White Paper dealing with wealth tax, capital gains tax and capital acquisitions tax, £140 million was the amount of private money which came in here. Since the beginning of this year, this inflow has continued.

So far as this particular Bill is concerned, we have increased from 20 per cent to 50 per cent the depreciation allowance, allowed in respect of industrial buildings. This is a temporary measure. We are not going to maintain this 50 per cent allowance indefinitely. We have allowed it until 1977, so that any companies wanting to avail of it would be wise to do so now. That is a significant boost to construction in the productive and manufacturing industry.

Senator Russell said that industry still had severe liquidity problems. That I acknowledge. Many of these problems cannot be solved by the tax process. Tax concessions are only of use to companies that are making profits. They are not of value to companies that are in a loss-making situation. We are, however, looking at all companies that have come to our notice and giving such aid as is possible. The State has gone in as guarantor in several cases where we considered that the public interest would be served by the State undertaking that risk.

I would issue an appeal to companies that are in difficulties or feel that difficulties could arise, to give the State agencies fair warning. I am appalled at the large number of cases that arrive on my desk a few days before the receiver or a liquidator goes in. Maybe it is an indication of the poor management which in some cases has got the firm into trouble, that they conceal their difficulties until the last moment.

Fóir Teoranta have very clear obligations to assess the long-term viability of companies. They cannot advance public money unless they are satisfied the company has a prospect of being made viable. To give State agencies such as Fóir Teoranta and the IDA only days before a total collapse occurs is obviously not the best way to ensure the survival of these firms. Managers in such industries have a duty not only to themselves but also to their employees to see to it that the State aids that are here are availed of in adequate time. Very often we discover that aid can be obtained from the private banking system. The problems of some companies are in presenting their own difficulties and in getting the expertise necessary to get them out of them. Many companies have been assisted where they gave adequate warning. I am sure Senators would share with me a desire to see to it that people would act sensibly in their own interests.

Senator Russell said he was sure the Minister was not pleasing everybody. He can be sure of that. On the day I wake up to discover that I am pleasing everybody, I should consider I am not a good Minister for Finance— there would be something wrong somewhere. In the OPEC countries, such as Norway, where the Ministers for Finance are flush with money, even they are not pleasing everybody in the way in which they are spending it. It can also generate its own rate of inflation, which can be quite as bad in some respects as our own.

The Senator mentioned the question of taxing unreal profits. I share his view that we should not tax unreal profits, but I repeat what I said in the Dáil. The Revenue Commissioners do not lay down the way in which profits should be assessed. They have no hard and fast rules regarding the valuation of property. They use the rules used in the market place; they use the rules of the accountancy profession. However the accountancy profession themselves are not satisfied as to the proper way of assessing profits in a highly inflationary situation. Any proposals which they have to make in this regard will be very earnestly and carefully considered by both the Revenue Commissioners and myself.

Senator Yeats said the budget was irrelevant to current needs. I do not think it is. What option had we? What else could we have done that we have not done? We could have had more taxation. More taxation would have meant there would have been less money available to stimulate demand, if necessary. Therefore we ruled that out. The amount of taxation has already been severely criticised from the Opposition benches. We could have gone for a bigger deficit, but a bigger deficit would have been more inflationary. It would also have meant the State would have had to borrow more, therefore taking more money away from the private sector that needed it. We tried to strike a balance. We know it does not clear all our problems but it would probably be worse than the several diseases we would have set off if we had been more extravagant.

I was asked if there was a possibility of a supplementary budget. I was asked a similar question earlier in the year and then said there was no certainty as to what the economic fiscal circumstances may be at any particular time in a world which is far from stable. We do not enjoy now the buoyancy in revenue that was once enjoyed. One cannot have that buoyancy in revenue when growth is negative or very small and when the rate of inflation carries Government expenditure far beyond any conceivable buoyancy in revenue.

There have been a number of additions to the budget expenditure since the date of the budget. Several of these have been demanded by the Opposition, so if there is guilt for engaging in these expenditures we share the guilt jointly. There have been demands for more expenditure on primary and secondary schools. Today the Minister for Education is making a statement about that. The figure there will be in or around £5 million. The national pay agreement, which I presume nobody is going to argue should be withheld from teachers, Garda, Army, civil service, nurses and so forth, if it is not withheld from others, will add £29 million to the expenditure of the Exchequer.

Is that in this year?

Yes. Extra teachers, for which again the Opposition share with us the credit or guilt for providing them, additional gardaí and Army to meet the security situation, which continues to be a terrible problem, a comparatively small number of essential civil servants—a smaller increase than anything which has occurred in recent years—will add about another £2.5 million. The cost of the settlement of the doctors' pay dispute, which so many people told us to settle and not to carry on any longer, cost £3.7 million. There is an addition of about £40 million. If one adds £40 million to the deficit and if there is no buoyancy in revenue that is a problem that we have yet to face. We are justified in watching the performance of the economy and seeing to what extent the inevitable pick-up in the second half of the year will change the situation.

I have been criticised for a lack of candour. I have never tried to conceal the facts. These are the facts, as any person who was watching the scene would know. However, just as these additions of expenditure have gone on, the fact also remains that the money has to be provided in order to meet these additions.

Senator Yeats picked me up on some figures in relation to foreign borrowing. The explanation is not so difficult. I used a phrase when I was speaking on 20th December, 1974, in the context of what we were calling the nine-month year. I was correct in stating that the State's foreign borrowings for that period—April-December, 1974—were £138 million and £40 million in respect of semi-private organisations. The figures in the Central Bank are in respect of the calendar year 1974.

That is what I was thinking of when I asked at the time.

I share Senator Ferris's appreciation of the fact that the Government are not pre-occupied with the book-keeping but also have a human approach. Senator Quinlan mentioned the desirability of retraining work programmes. We support him there. I forget the exact figures offhand, but the figure for AnCO this year is immeasurably greater than it was last year. We would consider possibly expanding that even further. At a time of unemployment such as exists at the moment, it is terrible to think that in some sectors of our economy there are some future industries on the way for which we have not got sufficiently trained personnel at the moment. In that situation the obvious thing to do is to train the people who are now available for training. Where there is such a large number of unemployed it is not difficult to pick the cream of people for employment.

Senator Keegan and others said that the increase in petrol duty did not curb the use of oil. I am afraid he is wrong there. It did and still does. It is very hard to compare like with like, because the early part of this year had to be compared with the early part of 1974 when there was a decline in consumption due at that time to the increase in the price of oil charged by the oil producers. As a consequence of these two increases—the producers' and the tax which we in Government certainly do not like—there was an addition to the rate of inflation. It is unpleasant in many respects.

However as a consequence of both the producers' increase and the tax increase we have avoided the growth of about 8 per cent to 10 per cent per annum which we were previously having in our consumption of oil. This has meant that our consumption of petrol and oil today is at a figure comparable to what it was in 1972-73 before the oil crisis arose. That in itself is a most significant factor and is making its own contribution towards an improvement in our balance of trade which will, I am glad to say, improve quite significantly this year because we will have on the plus side the improvement in our agricultural exports and on the other side we have learned to live less wastefully in the use of foreign energy.

Could the Minister give the saving on petrol in money terms over the 12-month period?

I could not offhand but if I could get the figure——

Would it be about £3 million?

It would be more than that. One of the factors we have to take into account here is that any increase in the consumption of petrol by us means that we have to buy petrol more dearly than we would have to buy it from Whitegate. Whitegate is already being used to full capacity and that oil coming through Whitegate costs us less in our balance of payments than oil which we get from oil refineries in England.

Senator Keegan suggested taxing shops which stock foreign goods. I am afraid that is not on certainly within the scope of our obligations under the EEC. In any event, administratively it would be very difficult to do it. I thank Senator Alexis FitzGerald for his kind remarks about courage but sometimes one needs more than courage to manage the economy. There are many problems today which have to be courageously faced, but we will need a great deal more than courage. We need new skills as we operate in waters that have never previously been chartered.

The Senator mentioned, as he has on previous occasions, that he thought tax concessions should be given for charitable projects. This is a worthy idea but it is very difficult indeed to devise a system of tax exemptions for appropriate charities without opening the door wide to tax abuses and avoidance activities. Until such time as I would be satisfied that such a scheme could be devised I would be loath to open the door. There is also the problem as to what you would identify as charities. If the Legislature in its wisdom decides that people should be making a contribution for what they regard as priorities, after all it is what Parliament decides as the priorities which really matter: they are reflecting the wishes of the people. Is it proper that some person of considerable substance should decide to say: "No, I will withhold my contribution towards these publicly identified priorities to give it to something that I would prefer to give it to"? That is in essence what happens when a person of considerable means, who has discretion in relation to the disposal of his money, does.

I accept what Senator FitzGerald has said about capitalism being timid. Sometimes it is not timid and can be quite aggressive and selfish. He may be assured that, as he publicly acknowledged today, nobody in the National Coalition Government is hostile to capitalism. Everybody in the National Coalition Government is anxious to ensure that capitalism receives its fair reward and there will be no action by this Government in any way to act as a disincentive to people to invest their capital in Ireland.

Senator FitzGerald took me to task for some words I uttered recently in the Dáil regarding the difference between tax avoidance and tax evasion. He told me he had not got the opportunity of reading the Dáil Report which contains my full remarks. I should like to repeat now what I said then. There is a difference between tax avoidance and tax evasion. Tax evasion is illegal because it is a breaking of the law—it is avoiding payment of tax which the law says you are obliged to pay. Tax avoidance is availing of weaknesses in the law to allow you to avoid paying tax which you would have to pay if you did not take the steps of avoidance which you take. A sample of avoidance which used to exist was people distributing their property more than five years before death so as to avoid liability for estate duties.

I said in the Dáil, and I repeat tonight, there are some schemes of avoidance which run so close to evasion, because they bend the law inside out, as not to merit the defence that is often offered in favour of tax avoidance schemes. Not so long ago I saw an ingenious tax avoidance scheme laid out by a firm, which shall be nameless, for the guidance of their customers. It was most ingenious but it did add the rider at the end of it that it was such an ingenious scheme that it was unlikely the Revenue Comcissioners would tolerate it for long and they would no doubt bring it to the notice of the Minister for Finance. That has happened and that avoidance scheme has been closed.

From time immemorial parliaments have taken action to close off tax avoidance schemes which operated against the intention of the Legislature, and where tax avoidance schemes operate against the intention of the Legislature, it seems to me that they run so close to evasion that it is not outrageous to suggest they could be put in the one law. I should like to quote from the remarks by the UK Solicitor General dealing with a tax avoidance provision introduced in Britain in 1941:

We have had in every Finance Bill put forward a whole series of clauses so complicated that speaking for myself, and I spend a great part of my time studying these things, I find them exceedingly difficult to understand. When we have propounded a new clause, some more ingenious person comes along with new devices. If it had not been for the ingenuity of tax dodgers, if I may give them that description, our Finance Acts would have been far simpler, and the whole structure of our income tax law would have been simpler than it is today.

That is the reality of the game of tax avoidance. It is a game, a sporting game, and those who engage in it have little cause for complaint if every now and then a Finance Minister happens to score a goal. Most of the time it is the well-to-do, well paid, well shod advisers, tax consultants and others, or people of considerable means, who score the goals. When they score goals, when the avoider or evader scores a goal, he scores it at the expense of the general body of taxpayers who have to pay more tax because of the failure of those with means to pay what the Legislature intended they should pay.

I hope I have covered most of the points that have been raised. We will not chase after the hare of the link with sterling because there is a motion on your Order Paper and we will no doubt have an opportunity of discussing it on some future occasion. It is a sign of the times, however, that we can now discuss the problem or the possibility of severing the link with sterling or on changing the rate of linkage between the Irish púnt and the pound sterling without setting off any sense of alarm or otherwise. The encouraging thing today is that as people discuss this problem they discuss it with the conviction—this is not peculiar to Ireland; it is discussed elsewhere, in the United Kingdom and on the international money markets— that the reason there might be a severance of the link with sterling is because the Irish economy is healthier than the economy of Britain.

That is a situation which we will continue to ensure, not out of any sense of chauvinism but simply because our economy is sound and we intend to keep it that way. Whatever our worries are at present, I would ask people not to join in any public chorus of depression which is not justified. As I mentioned earlier, we have more positive things going for this country than many other countries have at present. If we remain calm and work hard and pull together in the sense of the national partnership the Government are seeking, then we will be able to pull through and be ready for the revival which is inevitable.

Question put.
The Seanad divided: Tá, 24; Níl, 12.

  • Blennerhassett, John.
  • Burton, Philip.
  • Codd, Patrick.
  • Daly, Jack.
  • Deasy, Austin.
  • Ferris, Michael.
  • Fitzgerald, Jack.
  • Halligan, Brendan.
  • Harte, John.
  • Lyons, Michael Dalgan.
  • McAuliffe, Timothy.
  • McCartin, John Joseph.
  • Mannion, John M.
  • Markey, Bernard.
  • O'Brien, Andy.
  • O'Brien, William.
  • O'Higgins, Michael J.
  • O'Toole, Patrick.
  • Owens, Evelyn.
  • Prendergast, Micheál A.
  • Quinlan, Patrick Michael.
  • Sanfey, James W.
  • Walsh, Mary.
  • Whyte, Liam.


  • Brennan, John J.
  • Browne, Patrick (Fad).
  • Cowen, Bernard.
  • Dolan, Séamus.
  • Eachthéirn, Cáit Uí.
  • Garrett, Jack.
  • Keegan, Seán.
  • Lenihan, Brian.
  • McGlinchey, Bernard.
  • Ryan, Eoin.
  • Ryan, William.
  • Yeats, Michael B.
Tellers: Tá, Senators Sanfey and Halligan; Níl, Senators W. Ryan and Garrett.
Question declared carried.
Committee Stage ordered for Thursday, 8th May, 1975.
The Seanad adjourned at 10.5 p.m. until 11.30 a.m. on Thursday, 8th May, 1975.