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Seanad Éireann debate -
Wednesday, 30 May 1979

Vol. 92 No. 3

Finance Bill, 1979 (Certified Money Bill): Second Stage.

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

The Finance Bill, which is the subject of this debate, is concerned mainly with implementing the taxation measures which I proposed in my budget in February last. It would be useful therefore for me to outline the aims and objectives of the budget and the economic background against which it was framed.

In the White Paper on National Development laid before this House last January the Government spelled out their economic targets for 1979. These are for growth in national output of 6½ per cent, a reduction of 25,000 in the numbers out of work, a reduction in the rate of inflation so that by the end of the year it will be no more than 5 per cent, and a continued reduction of the borrowing requirement to bring it to 10½ per cent of GNP.

These of course are targets and not forecasts of what would happen if events this year were left to run their course. Their achievement obviously depends upon there being a real effort from everybody in the community, particularly in the matter of income demands, and it is this effort which the Government are trying to generate by pursuing a coherent economic strategy with precise aims and a well defined plan of action. The Government's policy stance, especially on the budgetary front, must be considered against this background.

Last year, we set about tackling the immediate problems of unemployment and inflation and, I am glad to report, achieved substantial progress on both fronts. The rise in employment was one of the highest ever, if not the highest, and the inflation rate was cut by almost a half. We also achieved, in large part as a result of the stimulatory impulse injected into the economy by the 1978 budget, the highest growth rate in the OECD area, even surpassing Japan. In 1978 our people experienced a sizeable increase in their standard of living, and many obtained jobs of which they had been deprived.

In order to consolidate and improve upon the gains of 1978 and as part of our planned approach to economic and social development, the Government set ambitious targets for 1979. These targets are attainable. It is my firm conviction that the Irish people possess the ability to achieve them.

The main thrust of the Government's budgetary policy in 1979 is, therefore, once again towards growth in employment and output. This year we are, however, calling upon the private sector to shoulder a greater share of the responsibility for achieving these targets. With the increased dynamism and capacity which it now possesses, thanks to the encouragement given to it last year and this year by the Government, I am confident that the private sector will play its part. Indeed, the growth which is expected this year in the countries which provide the bulk of our markets should go a long way towards enabling the private sector to make the kind of contribution we are expecting from it.

Against this background, it becomes possible to scale down the contribution made by the public sector. This is what I have done in my budget by reducing the borrowing requirement to 10½ per cent of GNP. In doing this, however, I have been careful not to slacken the growth momentum of the economy. In keeping with the Government's policy of reducing the disincentive effects of personal taxation, I have provided substantial income tax reliefs in my budget. Moreover, by reorienting public expenditure, I have acted to maximise the growth impact of public sector resources. I will return to these matters later.

When I was drawing up my budget, one of the factors I had to bear in mind was the changing situation in the oil market, and its impact on economic prospects, domestically and internationally. It was already apparent, at that stage, that in the wake of the OPEC decision of December last, the dollar price of oil would rise by 10 per cent on average this year, in contrast to the stability enjoyed in 1978 and, moreover, that the delicate balance on the global oil market was threatened by events in Iran.

In the interim, the position has been clarified somewhat with the resumption of Iranian oil exports and the revision of official OPEC prices from 1 April. However, a great deal of uncertainty persists—not just as regards the policies of the oil-exporters but also in relation to the outcome of the industrial countries' renewed efforts to curb their demand for imported oil. It is, however, clear that oil prices will rise more than seemed likely a few months ago.

This development could have adverse implications for economic trends internationally, especially in terms of its potentially dampening impact on growth. Much will depend on the policy response of Governments both in the energy and economic policy areas. We have impressed on our partners in the international community the need to monitor developments closely and to stand prepared to act should the situation require it.

There is a danger that, because the oil supply difficulties have had a rather dramatic and annoying impact on the daily life of the community, Senators, like others, may have an exaggerated idea of the scale of the problem and its economic impact. We are not witnessing a repetition of the quadrupling of oil prices a few years back. We, and all other net oil importers, face a serious, but not an insurmountable, problem.

Most important for the course of the Irish economy will be the domestic response to the situation. In the first place, the extent to which we conserve energy will determine the net addition to our import bill. Secondly, and most critically, will be the response to the unavoidable, but modest, increment to inflation from higher oil prices. Since we must use oil, an increase in its price makes Ireland slightly poorer. Yet this need not have adverse implications for the output and employment targets, providing that expectations for improved living standards are toned down correspondingly. In fact, if by improving our competitiveness, exports could be stepped up and import penetration curbed, the effect of the oil crisis could be minimised on all fronts.

Of late, we have all been subject to a virtual barrage of economic forecasts. Since views on the future always differ, there are inevitably differences between some of these forecasts and the Governments objectives, and media comment has tended to focus on these differences. As a result, it has gone largely unnoticed that other forecasting bodies see a number of the key economic aggregates, notably industrial exports and investment, developing in a way consistent with out aims.

I should like to draw the Seanad's attention to some of the recent indicators of economic performance which serve to refute those who continue to denigrate our continuing economic achievements and, by doing so, damage the international standing of our economy in this critical early phase of the EMS. These should also set in perspective the difficulties in relation to industrial disputes which have been so prominent recently.

Clear evidence of the continued buoyancy of investment, so important to the development of our economy, is provided by the indicators of expenditure on capital goods and of activity in the building industry. Imports of producers' capital goods, apart from ships and aircraft, in the first quarter rose by over 40 per cent on the 1978 level, suggesting a volume increase in excess of 30 per cent. Domestic sales of cement advanced by over 14 per cent year-on-year during the first four months, despite the inclement weather, and new house completions reached a remarkable 8,000 in the first quarter. A more general indicator of buoyancy in domestic activity on a broad front is the much increased level of imports in the early part of 1979, which has attracted unfavourable comment. The important question to ask about an import bill is: what is it for? Imports of investment goods, and essential inputs to industry grew much faster in the first quarter of 1979 than did imports of consumer goods, a fact which puts our import growth in its proper perspective. A particularly encouraging feature of economic performance in the first quarter of 1979 is the strong growth of industrial exports, whose volume rise over the 12 months continues well into double figures. Indeed, the rather modest increase in total exports reflects the low level of cattle disposals so far this year. This is clearly related to the farmers' desire to build up their breeding stocks.

A vital factor in our future progress will be the trend of incomes. In this connection, the rejection of the national understanding must be a keen disappointment to all of us concerned with our country's economic and social progress. The purpose of the national understanding was to achieve the goals desired by all of us, namely, industrial harmony and the fastest sustainable increase in living standards by reconciling conflicting pressures in society and directing them to achievement of these goals.

Serious modification of the terms of the national understanding is not feasible unless the ambitious targets for job creation and control of inflation are also to be reviewed. General pay increases at a higher level than those in the understanding would cripple the economy and dangerously undermine the achievement of the job creation and inflation targets. Individual groups might be able to exert pressure to do better for themselves than the terms of the understanding but if they succeed others will definitely lose either through job losses or higher prices.

In any event the only clear signal from the trade union movement is that the understanding is being rejected. Neither the trade union movement nor any other group has so far come forward with a viable and acceptable alternative. I say viable and acceptable because it would be relatively easy to make concessions in order to produce an acceptable alternative. However, this would be irresponsible because acceptance would have been purchased by undermining the viability of our economy.

The Government are prepared to discuss matters further with employer and union interests but they are not prepared to rewrite the understanding nor to tolerate a situation where the goals and objectives of the understanding which are universally acceptable to the community are seriously endangered by the irresponsible and divisive actions of individual groups in society.

The Government will listen with great interest to the views of the employers and unions on the situation which now exists but they do not contemplate allowing measures to be taken by any groups which would lead to economic chaos. The Government are strengthened in this viewpoint by the realisation that very many people accept the justice and reasonableness of the terms of the understanding and would support Government measures to ensure that these terms are not seriously violated.

The Government's main concern is not with growth itself but rather the accompanying improvement in employment prospects. It is on our achievements in this regard that we would hope to be judged. Last year the Government exceeded their job creation targets. Well over 25,000 jobs were created under Exchequer-supported schemes and programmes in the period to end 1978. The momentum of job creation activity has been maintained this year notwithstanding an overall restraint on the growth of public expenditure consistent with getting the Exchequer borrowing requirement down to 10½ per cent of GNP. This has been achieved by a re-orientation of public expenditure programmes in support of employment creation.

While only limited indications as to the recent trend in the live register are available, they confirm that we are making steady progress towards our primary objective. Provided that the necessary communal support for the Government's efforts is forthcoming, I am hopeful that the target reduction of 25,000 in the numbers out of work will be attained in 1979.

I announced in my budget statement that the capital and non-capital estimates approved for this year were expected to result in about 5,250 extra jobs in the public sector and some 4,400 jobs on various building and construction projects.

These measures were supplemented in the budget by a special £20 million job creation package, with a heavy emphasis on youth employment schemes. Four and a half million pounds will be spent this year in order to provide about 1,000 man-years employment on the environment improvement schemes programme. Three million pounds is available for the work experience programme which will, it is hoped, involve the participation of 6,000 young people by the end of this year. Additional funds have been allocated to the Department of Education temporary youth employment schemes. The total available—£2 million—is expected to support 750 man-years employment. Also, a sum of £1.75 million has been provided for proposals for increasing the output of skilled manpower in key sectors where occupational shortages have been identified. These involve new and expanded third level courses and a recruitment campaign abroad.

The Government are, therefore, both by means of direct job creation schemes and measures designed to stimulate economic activity generally, pointing the way towards the attainment of full employment which is the priority national task of our times. Yet there can be no room for complacency. If the aspiration of a job for every person seeking work is to be realised, the total resources of the community must be mobilised to this end. Nothing can be more damaging to our employment prospects than the self-centred exploitation of positions of strength by people already in employment at the expense of those seeking jobs.

Combined Government expenditure —on the public capital programme and on non-capital services—in 1979, is estimated at £3,750 million, an increase of £532 million, or over 16 per cent, on expenditure in 1978. Both current and capital expenditure was framed in accordance with the Government's targets for economic and social development. The stimulatory design of the budget is clearly evident from the re-orientation of expenditure, with the main emphasis being placed on investment.

The public capital programme was settled at £974 million, an increase of £176 million or 22 per cent on expenditure in 1978. Over 40 per cent of the programme is devoted to productive purposes either directly or indirectly through loans and grants for industrial and agricultural enterprises and about 30 per cent of the programme will be spent on infrastructural projects. Building and construction investment was also given a substantial boost, an increase of 27 per cent on expenditure in 1978.

The non-capital supply services were settled at a relatively modest increase of 12 per cent over 1978. The total for these services is £2,196 million, of which over £1,100 million, or more than half, is required to meet the pay and pension costs of the public service. The allocation for Health has been increased by some £45 million. An additional £35 million is being spent on Education. Defence and Justice between them have been allocated an extra £27 million.

The 1979 budget gave a further indication of the Government's desire to continue their policy of reducing the disincentive effect of personal taxation. Provision was made for increases in the personal allowances of £250 for a single person and £500 for a married person. Together with the modifications of the lower tax bands, these reliefs will cost an estimated £30 million in 1979 and £47 million in a full year and remove some 40,000 taxpayers from the tax net.

Combined with the large increases given in the 1978 budget, the effect of these measures is that, in two years, we have increased the value of the single person's allowance by 68 per cent and the married person's allowance by 103 per cent, more than doubling it. This is well ahead of the rate of inflation. It is useful to relate these personal allowances to the level of industrial earnings. The 1978 and 1979 increases have brought the single person's allowance from 16.5 per cent of the average male industrial wage in 1977-78 to about 24 per cent at present and have brought the married person's allowance from 27 per cent to about 48 per cent in the same period. These are very significant improvements.

Tax evasion is an area with which I am particularly concerned and I intend to make every effort to deal with it. I have made provision in the budget for a substantial strengthening of Revenue staff to intensify the campaign against tax evasion. The campaign will include such measures as examination in depth of particular accounts and where there are indications of evasion, reconciling them with the general state of the business and the taxpayer's life-style. More emphasis will be placed on legal proceedings, rather than compromise action, where the making of false returns is discovered. Chapter VI of Part I of the Bill now before you contains certain specific provisions related to tax evasion.

I now turn to the individual provisions of the Bill. Section I provides that the income limit for the purposes of the dependent relative income tax allowance will automatically be equal, for 1979-80 and subsequent years of assessment, to the personal rate of the social welfare contributory old age pension payable to a person living alone and aged 80 or over. The section thus removes the need to amend section 142 of the Income Tax Act, 1967 annually to take account of budget increases in this pension.

Section 2 amends the rate bands in line with the budget proposals. The revised bands are set out in the Table in the section. Section 3 adjusts the personal allowances and income tax child allowance. The married allowance is increased by £500 and the allowances for single and widowed persons by £250. The child allowance has been reduced by £22. This reduction is related to the increase in the social welfare children's allowance which, in the vast majority of cases, more than offsets the increase in tax suffered.

Section 4 gives an additional personal allowance of £250 for a parent who is widowed, deserted, separated or unmarried and who is entitled to the income tax child allowance in respect of a dependent child resident with the claimant. Where the parents are separated or divorced and the required conditions are fulfilled the allowance will be available in full to each parent.

The purpose of section 5 is to provide for the special income tax allowance of £175 for PAYE taxpayers which was outlined in the "National Understanding for Economic and Social Development". Where a married couple are both PAYE earners the special allowance would be available to each spouse. The provisions of this section will come into effect only if the appropriate order is made and I have already referred to the rejection of the draft understanding by a special conference of the Irish Congress of Trade Unions on 23 May 1979.

Section 6 is a direct consequence of the change to a fully pay-related social insurance contribution—it was not administratively feasible to continue relief in the manner previously allowed. Relief now comes to the employee, not as hitherto through the income tax code, but by way of a net social insurance contribution.

Section 7 provides relief, for 1979-80, in respect of the labour element of expenditure by householders on the improvement and maintenance of their private residences, including gardens. This relief is confined to the excess over £50 and is subject to a maximum allowable expenditure of £450. It is envisaged that the scheme will contribute towards job creation and energy conservation.

Section 8 is effective for 1980-81 and subsequent years. At present benefits payable under permanent health benefit schemes are taxable only if they have been received for a full year prior to the year of assessment. The section proposes that from 6 April 1980 premiums and other contributions payable in respect of approved schemes will be allowable for income tax purposes and the corresponding benefits assessable under PAYE from that date.

Sections 9 and 10 relate to income tax relief in respect of interest on money borrowed. Section 9 increases the present limit of £2,000 to £2,400. The Table sets out the sections of the Income Tax Acts where the revised limit will apply. Section 10 concerns loans at preferential rates of interest made by employers to employees and directors. It is aimed at restoring an element of balance, in the income tax sense, as between those who enjoy such loans and those who do not. The section will not restrict relief where a person enjoys only preferential loans and the borrowings do not exceed £20,000.

In the White Paper "Programme for National Development" it was announced that short-term social welfare benefits would be subject to income tax. Section 11 provides for this with effect from 6 April 1980.

Section 12 is a technical provision to facilitate proceedings in the High Court for the recovery of income tax which is due for payment. Chapter II provides for the changes in the taxation of farming profits which were contained in the budget and which will apply for 1979-80. The revised system of farmer taxation which the Government announced recently will apply as from 1980-81, subject to enactment of the necessary legislation.

Section 13 provides for the lowering of the valuation threshold for liability from £60 RV to £50 RV. Marginal relief will apply to farmers in this range, so that a farmer with a land valuation of £50 will pay only one-tenth of his full liability, at £51 RV two-tenths and so on until the full tax becomes payable at £59 R V.

Section 14 makes the usual provision for farmers becoming liable for the first time who may not have been keeping accounts. They may opt to be taxed on the basis of their current year's accounts rather than on the normal preceding year basis.

Section 15 enables a farmer to opt out of the notional basis of assessment before the end of the three-year mandatory period. It also provides that, in such cases, the Revenue Commissioners will have the right to require the production of accounts for the preceding one or two years of notional assessment and to reassess the taxpayer's liability for those years if the accounts warrant it. Section 16 increases the multiplier for assessment on the notional basis from 90 to 125.

Chapter III is concerned with losses. It has three objectives. The first is to eliminate the anomaly under which the same loss could be set off against tax more than once. The second is to terminate the situation, which exists at present, in which losses made in the carrying on of certain activities, which are themselves tax-exempt, can be set off against other income for tax purposes. The third objective is to provide for relief being given at an earlier stage than under present legislation in respect of losses incurred in the carrying on of a trade. The second and third of these objectives are achieved by section 17, and the first is achieved by section 18. Sections 19 and 20 are consequential technical provisions.

Chapter IV contains two corporation tax provisions. Section 21 amends the existing provisions in relation to the restriction to £2,000 a year on the deduction of certain interest which is treated as a charge on income for corporation tax purposes and is in line with the increase from £2,000 to £2,400 a year provided in section 9 in the amount of personal interest qualifying for income tax relief.

Section 22 is a technical amendment of Chapter IV of Part I of the Finance Act, 1977, which is concerned with the 25 per cent corporation tax rate scheme for manufacturing companies which achieve a specified increase in employment. The amendment takes account of the new system of fully pay-related social insurance contributions introduced as from 6 April 1979. In determining whether a company has achieved the required annual percentage increase in employment for the purposes of qualifying for the 25 per cent rate of corporation tax, the section enables a true comparison to be made between the number of the company's employees in a period falling wholly or partly after 5 April 1979 and in an earlier period.

Chapter V contains various income tax and corporation tax provisions. Section 23 provides that stock relief will be given for a further year, on the basis of three-quarters of the relief which would be given if the present provisions were simply extended for another year without modification. This change takes account of the fact that the inflationary pressures which gave rise to the introduction of stock relief have diminished considerably.

Section 24 provides for the continuation to the end of 1980 of the operation of the investment allowance applicable to plant and machinery in the designated areas. Section 25 corrects a drafting flaw in section 25 of the Finance Act, 1978, which introduced "free depreciation" for industrial buildings and hotels. Section 26 is the third and final section dealing with capital allowances. It extends to 31 March 1984 the operation of the increased initial allowance which applies to capital expenditure on new machinery and plant and secondhand ships, as well as the initial allowance in respect of capital expenditure incurred on industrial buildings.

Section 27 provides that all payments made by the Minister for Labour under the employment incentive scheme or the employment maintenance scheme will be disregarded for income tax and corporation tax purposes. This exemption is broadly in line with that given in the Finance Act, 1976 for similar type payments made under the Employment Premium Act, 1975. Payments under the 1975 Act ceased in January 1977.

Section 28 allows the Revenue Commissioners to approve, for the purposes of income tax relief, retirement annuity contracts which have an "open market option", that is, one where the policy holder may transfer his rights under the contract from one assurance company to another. This alteration of the conditions of approval should be of considerable benefit to the individuals concerned.

Chapter VI is concerned with antievasion. The measures proposed are part of the Government's continuing attack on tax evasion and, taken in conjunction with the substantial strengthening of the staff of the Revenue Commissioners announced in my budget, should have a significant impact in this area.

Section 29 provides for the extension, from three to ten years, of the time limit for the taking of summary proceedings under certain sections of the Taxes Acts, for example, for the lodgment of false or incorrect returns or the submission of fraudulent statements and accounts. This new limit will apply only to offences committed after the passing of the Finance Bill. Section 30 extends to partnerships the existing provisions relating to the production of accounts, books and records. Section 31 will authorise the Revenue in a case where they are dissatisfied with the accounts produced and the taxpayer gives no satisfactory explanation of the deficiencies in the accounts, to ask the taxpayer's business suppliers and business customers for particulars of, and documents relating to, the business transactions between them. Banking business is excluded from the scope of the section and a special provision is made for professions to preclude the disclosure of information of a confidential nature.

Chapter VII contains a number of anti-avoidance measures. Section 32 is designed to prevent wealthy taxpayers from reclaiming a portion of the tax they paid in the years 1974-5 to 1976-77 under a measure introduced in 1954 to help people with low incomes. Notice of my intention to legislate for this abuse was given in a press release which issued on 18 September last.

The intention in section 33 is to counteract a practice which has been growing in recent times. Taxpayers in the higher income brackets have been executing deeds of covenant in favour of their sons and daughters over 21, the effect of which has been to attribute income liable at higher rates to persons in whose hands the income may not be liable to tax at all, or if liable, is liable at a lower rate. These covenants have also been used in other ways to avoid tax. In order to cater for cases of hardship I am providing that the restrictions which the section imposes will not apply where the deed of covenant is executed in favour of a child or grandchild who is permanently incapacitated by reason of mental or physical disability. Section 34 is the final anti-avoidance measure and is concerned with the device of dividend-stripping.

The last chapter of Part I is concerned with capital gains tax. Section 35 introduces a new capital gains tax relief which will apply in the case of a disposal by an individual of a house occupied rent-free by a dependent relative. Section 36 amends section 27 of the Capital Gains Tax Act, 1975, under which relief from capital gains tax may be given on certain disposals of business or farming assets by a person aged 55 years or over to his child. The effect of this amendment is to extend the application of section 27 to any such disposal made by a mother to her illegitimate child. Section 37 aims to prevent an unintended exemption from capital gains tax being availed of by certain unit trusts and also corrects a minor drafting flaw in section 31 (5) of the Capital Gains Tax Act, 1975.

Part II of the Bill deals with customs and excise matters. Sections 38 to 43 confirm the budget increases in excise duties on beer, spirits, tobacco products, wine, cider and perry. Section 43 also has provision for relief from the new maximum rate of duty on cider and perry for stocks held by manufacturers on 7 February 1979 where these did not exceed 20,000 gallons. The rate of duty on these stocks will be the new intermediate rate. A flat-rate duty of 5p per gallon on cider and perry had remained unchanged since 1940 until this year, and this concession takes account of the hardship which the immediate imposition of the new maximum rate could impose on these manufacturers.

Section 44 provides for an increase in the penalty for unlicensed bookmaking, which has remained unchanged since 1963, from £100 to £500. Section 45 repeals an old customs provision contained in section 15 of the Finance Act, 1934, the effect of which was to exempt importations of antiques by unregistered persons from VAT. The repeal will end the discrimination which existed against VAT-registered traders in antiques within the State, who are required to charge VAT at the 10 per cent rate on sales.

Section 46 contains provisions in relation to some operational aspects of the temporary excise duty on agricultural produce, for which the basic statutory instruments are the Imposition of Duties Orders 1979 (Nos. 239 and 240). Section 47 confirms a 1978 order which provides for the metrication of excise duty on hydrocarbon oils and replacement of the bushel in the law relating to excise duty on beer. The order was made by the Government under the Imposition of Duties Act, 1957. Details are set out in the explanatory memorandum.

Part III of the Bill contains two VAT provisions. Section 48 amends subsection 18 (1) of the Value-Added Tax Act, 1972, regarding the inspection of business records of persons liable for VAT, so as to confirm that Revenue inquiries can be made regarding VAT repayment claims as well as liability to tax. Section 49 confirms the application of the standard 20 per cent VAT rate to radios and record players as announced in the budget.

Part IV is concerned with various stamp duty matters. Section 50 exempts from stamp duty transfers of land and houses for charitable purposes in Ireland to bodies of persons or trusts established for charitable purposes. This is the first time that a general exemption is provided in stamp duties for charities as such. By this section the position in stamp duties is brought into line with that in other forms of taxation which provide relief in one form or another for charities. Sections 51 to 53 deal with companies capital duty, which is a stamp duty chargeable on the formation of a company or on an increase in its capital. Certain amendments of a technical nature are provided for and an interest charge of 1.25 per cent per month is imposed where such duty has not been paid within one month after the date of the transaction.

Sections 54 to 56 are concerned with the arrangements for collecting stamp duty on transfers of stock and shares through the stock exchange. As a result of the introduction of a new computerised stock exchange transfer system, it has become necessary to change the stamp duty arrangements that have applied hitherto and the enabling legislation is contained in these sections.

Part V of the Bill contains a few miscellaneous provisions which are on the usual lines and do not call for comment.

I commend the Bill to the House.

In the course of the speech which the Minister just made he reports substantial progress which has been made on certain fronts and refers to the indisputable fact which our people experienced in the last year, the sizeable increase in their standard of living. It is an indisputable fact that this has been the experience of our people in general at varying rates and at different times since the foundation of the State. I have no need to quantify that. It has been of the order of 20 to 30 per cent in the last six or seven years. It is true to say that the standard of living generally of our people, to use the Minister's words, has multiplied since the foundation of the State. They are now two to three times better off. Why then are the people in such an ugly mood? Why so rancorous, complaining, poor-spirited and so unappreciative of the good that has been done for many of them by the efforts of others and by their own efforts?

If the miracle of the loaves and fishes was performed this morning in Ticknock, could we not be reasonably sure there would be a queue to prevent people from getting in or out of Dundrum to get to the fishes and loaves? Baskets of loaves would be sidled off to various households in the city by those very skilled in that art. Why the communal diverticulitis? Why the universal griping? It is not all the Government's fault. This Government and other Governments, for one reason or another, have to share and accept part of the blame. The Government are no more responsible for some of the elements leading to the tensions and the gripings than they are responsible for the weather. There are other elements. I wonder whether, looking at the Minister's language, we will not find some clues as to the elements which are within our control, some clues as to where we have been making mistakes. Maybe part of the trouble is the sizeable increase in the standard of living. Maybe part of it is the use of language like, "they obtained jobs of which they had been deprived", as if someone had deprived them of them and the Government had succeeded in getting them back. Maybe part of the trouble is affluence, an insufficient dosage of the truth or the nature of the political debate in which claims are made about matters as if they were governmental achievements or governmental failures, according to whichever side of the argument you are on. It has little to do with the Government at all.

The Minister claimed that the inflation rate was cut by almost a half in 1978. It may have been if one takes cutting out the rates and motor taxation as part of the cutting without any writing in of the inevitable cost of cutting out the rates or the motor taxation. The Government did not get rid of rates in the sense that they discovered some mysterious method by which rates could be lifted as a burden without setting up a situation in which the rates would have to be paid for. The particular point I am making is that the cutting of the inflation rate as if it were a governmental achievement is an untruth because if the inflation rate in one year compared to another differed, the predominant factor creating that difference was, having regard to the particular relationship we had with sterling in these two years, the change in the valuation of sterling. I come back to this. I hope I do not sound pharisaical but one must have regard to the importance of truth in relation to public debate. I hate sounding in any way holier than thou. I certainly am not.

There are other elements. It is no good talking about the Government's policy of reducing the disincentive effects of personal taxation. It is no good referring to the increase in the personal allowances if the problems created by the whole set of demands which are being made have been partly stimulated by political debate, if the taxation system is technically felt to be a burden, if there is a feeling among individuals or individual groups that it is their experience not to be enjoying increased real incomes at a time when they are being told that the community is enjoying such benefits.

I would like to set out a few propositions with which I do not think the Minister will disagree, the sort of things which should be part of the common case of all the parties in or outside this House and all the commentators about what is done in this and the other House of Parliament. The first proposition is that, compared with other countries, this country is not over-taxed. By way of support of that proposition I will give Senators percentages given by the OECD in relation to revenue statistics of member countries between 1965 and 1976 when the total taxes share of the gross domestic product in Ireland in 1976 was 36.8.

That was in a year when the civil service were introduced to Pay-As-You-Earn. There were accelerated payments made of Schedule D taxation and I think there was something done with regard to farmers as well. That percentage puts us in a like position with that of the United Kingdom, Germany, Austria, France and is only substantially exceeded by Sweden, Denmark, the Netherlands, Norway and Belgium. In 1979, according to figures calculated for me, that figure dropped to 34.1 per cent. If we are not over-taxed, if that proposition is right, it should all the time be noted that with the taxation rate we have there is still an unbalanced current budget. The second proposition is that of all the countries, from the same source, this State shows the greatest dependence on taxes on goods and services. These are not the taxes that are causing the tensions. They are being wrapped up in prices though the question of prices is a gripe.

The third proposition is that, taking the years from 1965 to 1976, of all the countries Ireland shows the highest increase in personal income tax share. I am not offering it as a proposition for agreement although I think the Minister's calculations will not find that I am wrong. Taking the 19 years between 1960 and 1979 and valuing the income tax threshold for PAYE taxpayers, even with the reliefs given by the Minister this year and last year, in the case of a married man with four children there has been a 45 per cent erosion in real value. The basis for a tax allowance, presumably, is a minimal allowance which it is regarded as not appropriate to tax, as being something which the individual, in the case of a single person, or the married couple with children to support, must have for survival on some basis of calculation or some standard of application. It may well be that in 1960, the base year, this was a very greatly inflated figure. I find it difficult to believe that it was so. Certainly the year has not been selected to make any case of this kind since the trend has been better in the last couple of years.

One of the causes of the griping already mentioned is increased affluence and through increased affluence the substitution by the individuals whose incomes are increasing of the material values for other values. They attach more importance to their increasing incomes than they do to other things that do not show themselves in this form. Attaching this importance to it, they tend to look at other people's increases and to think that other people's increases are greater than theirs, but without any examination of the reasons for this, which may well be good and just. One of the consequences of placing the emphasis on growth, on material prosperity, putting economic development crudely ahead of social development and the immeasurable values of life, is an increase in expectations—demands on life, not merely on Governments. We have, as all the West is having, an over-excited, over-expectant view of life. People expect to be at parties all the time and are enraged if someone else is at a party that they are not at, or if they think there are parties they are not at.

There is no use talking about the possibility of a total transformation of that scene, but it should be recognised as a real, drastic, continuing and increasing problem. After the simple business of ensuring that people are free to express their opinions and be peaceful in their places without being molested, I regard the next most important duty of the Government would be to "cool it", to reduce expectations—not merely not to promise before elections, which tendency it is desirable to curb, but not to keep on maintaining promises all the time.

The real situation now is that unless people's real incomes actually increase they will be dissatisfied. This is the only thing which has been valued for them by their public men. The objective of employment is not sufficient. In a sense, that too, as it is put forward, is a material business, particularly if the employment given is simply numbers taken off registers, people put into some kind of jobs and paid some class of incomes, without any examination of the value to them, for their lives, of the kind of jobs they are being given to do—whether these jobs are satisfying to them, enriching of them, in the fullest sense of enrichment. I have the strongest view that the people are only going to do good for themselves if they are procured and encouraged and stimulated to do good for others.

I do not know, and I do not know how many Members in this House know, the basis for the view which is put forward about the deprived 20 or 30 per cent of our population. It should be a primary duty of people in public life to find the full truth of the extent of deprivation—I do not like the word underprivileged—its nature and its extent and to what extent is it material. If we have a segment of our people living below the poverty line—or in whatever words you come to express it—that should be the subject of beamlight. The consciences of all the people should be confronted with these facts. What is required to be done should be done at whatever cost and the people should be faced with it as an obligation. I do not think, with our history, that our people are good at serving Mammon. I do not think they know the Liturgy very well. They study the past history of the British, the Germans and now, perhaps, the French too. If they want to continue serving that god they might learn more about the Liturgy. They might learn that some of the things they are doing at the moment will not help them serve Mammon well.

Usually the phrase "charity begins at home" is used to knock people on the head and stop them doing any worth-while works of charity. It is absolutely intolerable that people should go temple-tramping from church to church and complaining about their standard of living. I am talking about people whose standard of living is high, not about people whose standard of living is not high. At this moment there are people dying all over the world. There are obvious limitations on what we should or could do. We talk about giving messages to the rest of Europe. A very clouded message is going out from this country at the moment to the rest of Europe. These people will be judged in the course of their own lives, are being judged for the experience of their own souls at the moment, if they are cold-hearted about what they know is happening to people, which is being blasted into them by every headline and from every screen.

I am not referring to the Minister, but to myself and to our thinking generally about our people. We talk too much in economic terms and in macro-economic terms and too much about economic aggregates. Apparently, there is now very good news of a change in the savings ratio which has the beneficial effect of stimulating the economy, which I take to be gobbledegook for people spending money which they might be much wiser not to spend. Macro-economics might make room for micro-economics.

If I were Minister—Lord help the country—I would talk much less about increased exports and aggregates and I would talk much more to people—and when I say talking I mean through deeds, through legislation, through decisions which is much the best way of talking. This would make all do their jobs better and make them value doing their jobs well and not be thinking in terms of changes which will produce instant returns. Worth-while changes do not produce instant returns. As in planting oak trees, it is long years after we are dead that their value will be seen. Export tax relief was very slow to produce any return. You cannot isolate it from all the different measures—Fianna Fáil's initiation of the grants for industry, the earlier Industrial Development Authority, the famous 1958 plan, the position with regard to manufactured exports. In 1950 we had less than £10 million of Irish manufactured exports, this year there is an anticipated order of £2,500 million, 250 times as much.

The changes to be made should not be offered to the people. There should not be the message that marvellous things are going to happen tomorrow. Gradual improvements that will be maintained can be made and they will have a converging and accelerating effect. Part of it is this business of truth; part of it is indexation of allowances. I know that indexation of the bands cannot be done without costs; of course it cannot. What is the reason for doing it in the first case? I would suggest that, in principle, we should fix the minimum sum which should be allowed, untaxed, to an individual and maintained against erosion. There should be not merely justice in the sense of the treatment of the individual but in the sense of his attitude to everyone else in the society which treats him like this. Let us have a look for a moment at the situation with regard to these tax bands. In 1974 the gap between the top of the lowest rate of tax, that is the top income which experienced the lowest rate of tax, and the bottom income which suffered the highest rate of tax was to be measured, and has been measured, at 3.1 times the average male industrial earnings for that year. To go from paying the lowest rate of tax to having some of your income suffer the highest rate of tax your income must increase by 3.1 times the average male industrial earnings for that year. This year's figure required to produce that experience has gone down from 3.1 times the average industrial male earnings to 1.05 and you are running through a number of other brackets on the way up there. Now, what is the position of other countries? To have had the same experience in 1976 in Austria your income would have to increase by 11.44 times; in the Netherlands, 5.04; in Norway, 4.37; and even in the United Kingdom, 4.25; in France, 3.20.

We have a technical tax position in which increasing monetary income gives a very exceptionally high rise in average income tax. This is one of those very important technical matters. Having this wrong is very costly, indeed, all through the economy.

If inflationary increase shifts even from one band into another, without increasing the real income, then there may be an actual erosion of real income because there is a greater tax dip into the same real income. There are all sorts of different languages to describe what is going on with this inflation tax. They talk of buoyancy but I am not going to pursue buoyancy. The inflation tax means that Ministers are put in the position of talking about increased personal allowances but the fact of the matter may be—I am not saying it is in this year, in fact it may well not be in this year—that the personal tax allowance increase is not even sufficient to cover the inflation. I believe that in certain circumstances, where there are a certain number of children, the allowances are not sufficient and that the increased allowance does not cover the inflationary effect in reduction of real income, so there is a real reduction in income.

The Minister will know that the year in which he introduces the indexation will cost him nothing so we should take particular note of the year in which it is introduced. It will be the following year in which that cost will be borne. Now, on this question of telling people what is going on, the quality of the analysis is not good enough. The Minister might well consider the model of the demand note which used accompany domestic rates when we paid them. If you took time off you could discover how your rates were being spent. This ought to be a business for the political community, to explain what money is being spent on, and how it is going. In relation to this farmer/city thing there should be a sustained compaign by political parties to try to prevent this fissure between city and country. How serious an effort is being made by the political community to explain to city people the extent of the dependence of cities of this island on agriculture? Of course, if many people are now earning incomes which are putting them in the tax bracket, many farmers are having the experience of paying taxes for the first time and we should not be unsympathetic with that situation. It is obviously in itself a problem with any group of people.

I will conclude by saying that there are a number of good things in this Bill. It is unfortunate that the situation is that they are not going to be appreciated as being particularly good. I would like to refer to one thing which is a very good idea but which has been badly bunched, for which I blame the Revenue—I will get an audience up there if I say that. I am referring to the provision with regard to payments to people where there is a labour content for work done on houses and gardens. The Minister should not be discouraged but it will not do any good this year; it is a hopeless mess and is absolutely typical of Revenue because they do not like this carry-on at all. They are afraid of all the possibilities of avoidance of it and perhaps even evasion. The idea of encouraging people to employ others at anything that they are happy to be employed at is a very good one. I wonder has there been some sort of social nervousness on the Government's side, joining with the Revenue's fear of the tax consequences in extending it to the area that it ought to be extended to.

We have a ridiculous situation at the moment under which if I and my wife bring out some customer and his wife to some highly expensive restaurant which all four would like less than the civilised treatment in one's house, in addition, incidentally to getting my dinner, I will be allowed that against my tax. I cannot see why that is so. If it was good for business for me to bring that customer out, I would bring him out whether I was being allowed tax or not and I might not bring the wives.

It is wives in my case. I would say spouses but I cannot be all the time producing a revised edition of my text to meet the sexist revolution. I would very strongly argue that allowances ought to be given. I will come back to the wife who is pressed as a mother with her children and cannot get assistance in her house; somebody would be very happy to take that job. I know that people with substantial incomes will, no doubt, be able to take great advantage of it. Let me tell the Minister that people with great incomes have all sorts of other ways of taking advantage of other things and this would be a worth-while type of business. People should be encouraged to give employment in this way and I do not see why people should have to dig a garden in order to have the sum allowed if they could render more useful assistance with the children. The excessive contribution I have made on this Stage will be borne in mind by me on Committee Stage.

This is the third stage towards the taxation decisions for 1979-80. The first was the White Paper which we partially discussed; the second was the budget; now we have the Finance Bill. When speaking on the White Paper I spoke on three points: one was the achievements of the Government in 1978; the second was the aims of the Government and third was attitudes. Like Senator FitzGerald, I am concerned about attitudes and have been wondering why those attitudes have been adopted when the facts are examined.

We have had a strike and marches in relation to the PAYE sector. Originally there was a request for revised taxation but the case appeared to be based on the total amount of money payable under PAYE in one year compared with another. It was never clearly illustrated that, first of all, if a Government have to carry out their objectives, they cannot always reduce taxation when they have to pay the bill. A Government can change from the section of the community which pays its part to another section. Also to be taken into account is the number of people who are paying the tax and the number in that budgeted figure. None of these appear to have been made clear. We appear to have a situation where there were marches over PAYE and it has now evolved that people in certain income groups feel that they are paying too much and that nothing has been done about it.

The point is, what are the facts? I have tried to be careful in illustrating these facts because I want to come back to what can cause these attitudes in a somewhat different fashion from Senator FitzGerald. As the Minister has pointed out, in two years the single tax allowance is up by 68 per cent; in two years the married allowance is up nearly 103 per cent. Nobody earning up to £7,000 a year pays more tax except the single or widowed person and the figure in that case is £6,875. As well as this the lower paid gain on social welfare even though the contribution is taxed.

On children's allowances the gain is not affected by the reduction in tax allowances except in the higher income bracket. To illustrate this, obviously a person who is not paying tax gets the full allowance. For a married couple with three children and earning £12,000 a year, it works out at about 1p per week and, with the social welfare adjustment, the net saving in that case is £135 a year.

The tax bands were adjusted but adjustment of the allowances prevented entry into a higher band than before. A married couple were taxable at £1,730 and that went up to £2,230. This means, where entry into the 35 per cent band was at £3,220, it now became £3,330. Another point is, even to get into the 60 per cent band the single man would have to earn £7,715. A married man with two children would have to earn £9,266. The married allowance in 1977-78 was £1,100; two years later it was £2,230—as I said, up nearly 103 per cent. In that time—mid-November 1978—the consumer price index was up 20 per cent. If that 20 per cent was applied as indexation the allowance would now be £1,320.

I have taken out these facts and they are the truth but how has this got over to those people who, as Senator FitzGerald says, have a gripe? Some of the statements that have been made publicly caused misrepresentation due to misinterpretation. Some of these statements have come up in the Dáil during the Second Reading of this Bill and some have come up elsewhere.

The removal of the tax allowances on social welfare contributions was referred to without reference to the contribution reduction; everybody gets relief where a non-tax payer did not. In that case when that is stated without the full case being put, in other words out of context, and is publicised people can get the wrong ideas. It has been stated that the children's allowance increase was of little benefit to large families. I pointed out what the benefit to large families was. Such a statement can give a wrong impression. Reference has been made to the fact that a man working overtime would pay two-thirds of his earnings in tax. In fact one does not get into the 60 per cent band at all until one is earning £7,715 and possibly the man who would have that would have other allowances as well. A statement made out of context like this can be accepted by people who believe if they work overtime they are going to pay 60 per cent tax. This will create grievances because of this misconstruction.

I pointed out the position indexation would have resulted in this year. I have not gone back as far as Senator FitzGerald but definitely indexation of either bands or allowances would have left a worse position than the improved position which the Government have created. Senator FitzGerald says we should not start talking about macro-economics. Even suggesting at this moment that indexation is the thing to have is putting something out of context unless it is clearly discussed in the context of the improvements this year and it will give the impression that if the Government had only brought in indexation this year everything would have been better when in actual fact it would have been the exact opposite. Therefore we have to be careful how we put things; we must put them fully and put them carefully.

The other evening on television a senior trade union official used the word "vicious" in relation to taxation this year. The facts are the complete opposite. Surely language like that, coming through the media, is what is causing some of the difficulty today. I feel we have to look at what we say because, as the Minister said, the result depends on there being a real effort from everybody, but if everybody is making up his mind on statements made out of context I do not see how we can get that effort behind us.

Many other things have been done in the Bill. The interest allowance has been brought from £2,000 to £2,400 and also in the case of buying shares in one's own company stock relief has been extended one year; the 20 per cent investment allowance for new machinery has been extended until 1980; free depreciation has been extended for five years; payments to employers under the incentive and maintenance schemes are free of tax. All these incentives are to keep the drive going, create more jobs and keep the incentives in industry, to achieve the aim of the Government which is full employment. Everybody should agree with that aim and the sooner we can get across to people that if we are to do what we have to do to create jobs it will cost money the better it will be. It is most unfortunate that the national understanding did not take its course, was not accepted. The one section of the community that would gain the most from it, and to whom Senator FitzGerald referred, had no vote. I welcome this Bill.

The Minister in introducing this Finance Bill referred to the economic background against which it was framed. In his second paragraph he referred to the figures in the White Paper on National Development. He quoted the targets which the Government had set out for 1979—growth in national output of 6½ per cent; a reduction of 25,000 in numbers out of work; a reduction in the rate of inflation so that by the end of the year it would be no more than 5 per cent, and the continuation of the reduction of the borrowing requirement to bring it to 10½ per cent of GNP. Anticipating, perhaps, some of the comments from this side of the House, he quickly explained that there are, of course, economic targets and not forecasts. Then he went on to use the phrase which deserves to be put on to the records of this House because it is surely a masterpiece of over-statement. He said that the Government are trying to generate this kind of approach by pursuing a coherent economic strategy with precise aims and a well-defined plan of action. Like many other candidates in the local elections I have been going around the doorsteps in Area 9 here in Dublin, and one phrase that I do not hear people using when talking about the Government's performance is that it is a coherent economic strategy with precise aims and a well-defined plan of action. That seems to have escaped the vast majority of the citizens in Area 9 in Dublin. On the contrary, they have a number of very harsh things to say, very sad and distressing things to say, and the poorer the area the harder people appear to be hit. It is appropriate that we do take a lead—and I take the lead both from Senator FitzGerald and from Senator Jago—in looking at this Finance Bill in a broader context. We have to do it by looking at the background to this Bill, the present economic circumstances in which we find ourselves.

The Minister was very selective in giving an account of this economic background. He forgot to mention the 14-week old Posts and Telegraphs dispute which has crippled so much of industry, of existing and potential employment and even of social relations here. There are so many people who are cut off from their own families, cut off from relatives and people abroad. There are students for whom I am writing references at the moment who know that those references cannot be sent to the colleges where they are hoping to pursue post-graduate degrees. The economic and social misery caused by this dispute places, I believe, a really grave responsibility on the Government. People are struck by the absence of an impression that the Government really take it as seriously as people so deeply affected by it have to take it, and as one travels out of Dublin to areas which are not even on the direct dial system and sees the impossibility of doing business, the impossibility of maintaining existing employment, the real danger to our economic structure, there is a real feeling of deep malaise about the lack of decision at Government level, the lack of confidence. There is a feeling that the Minister who is in charge of the Department which is the biggest employer in the public sector has no capacity to manage the problem which he is facing, that he does not have the ability really to come to grips with it and ensure that that strike is settled on acceptable terms.

Since we are dealing with human beings and since we are dealing with a human and industrial relations problem it is something that can be and some day will be settled but we will live with the effects of it for a very long time to come and we will live with it in out reputation as a country for a very long time to come. We are at the moment a source of astonishment to our partners in the EEC and to other countries who are trying to communicate with Ireland. We are a country that is now very difficult to communicate with and it is very difficult for us to communicate with each other.

The Minister forgot to mention in his opening speech the disastrous fiasco of farmer taxation even though there is a provision in this Bill that it is the Government's decision to fall back on and impose the 2 per cent levy. This levy will hurt the small farmer, is hurting the small farmer; it discourages production in agriculture because it is a non-selective tax and it has pushed up meat prices. There is no doubt that meat prices have gone up very sharply recently and that meat itself is becoming a very rare, delicate dish for a lot of families in Ireland. Indeed, I gather that butchers are now complaining that people are no longer buying meat. They cannot sell meat at the prices it is being sold at. This is an indication of lack of a knowledge of the agricultural industry which is distressing because Fianna Fáil have always tried to promote the image that they understood the farming community. The farming community are waking up to certain realities there because there is no doubt that anybody who travels around Ireland and talks not to large farmers who may have very substantial clout in their own area and who have an effective PR machine but to small working farmers who themselves have families who employ people in their area and who are trying to increase their agricultural production, sees that they are being hit very hard by this levy. It is a deterent and it is a source of great bitterness for the small farmer because it is non-selective and is hitting them proportionately far worse than the larger farmer.

This again is an area where the Government's performance is seriously lacking and, in the phrase that the Minister chose to use, does not give evidence of a coherent economic strategy with precise aims and a well-defined plan of action.

The Minister forgot to mention the PAYE marches throughout Ireland. Senator Jago referred to them briefly and implied that there was no real substance behind these marches and no real cause for them. A quarter of a million people do not go out marching unless they have some good reason to march. I would like the Minister, in his reply on the Second Stage, to clarify precisely what the position is now in relation to section 5 of the Bill in relation to the PAYE allowances. When he referred to this in his opening statement he appeared to be determined not to introduce this relief for the PAYE worker unless and until there is some agreed overall national understanding, or some other similar typed phrase. I would put it to the Minister that that is a very grave mistake. That section 5 would provide a special income tax allowance of £175 for PAYE taxpayers which would be available to a married couple if they were both PAYE taxpayers which would go some way to responding to a very widely felt and very deeply felt grievance of PAYE workers. I believe that the Minister might learn a little about human relations and might learn that the Government should act in response to a quarter of a million people marching—and they would come out again if called upon to do so.

There comes a time when the Government must take a lead in responding more actively to a sense of very deep injustice, an injustice which stems in very substantial part from the tax burden being borne by the PAYE worker, which contrasts with the burden being borne by the larger farmers, the professional bodies, those who can employ tax avoidance and tax evasion techniques and who are self-employed at the higher levels of income. The real source of the grievance, apart from this bearing of the majority share of the burden by those who are not best equipped to pay it, is the knowledge that the Government have, since they took office in July 1977, taken measure after measure which has favoured the better off, the richer in our society. Examples are the removal of the wealth tax, the modification of the capital gains tax and even things like the removal of rates from private dwellings which favoured those with larger private dwellings who were paying more rates and making their position demonstrably much better off than the poor PAYE worker who remains trapped in a tax burden situation where he cannot seek the kinds of reliefs that are available to other sectors or the kind of tax avoidance or tax evasion which is available to other sectors. That very deep grievance and a feeling of basic unfairness in our society is still there and it is still very strong. I believe that the Minister should remove that contingent clause in section 5 of the Bill that he will not introduce this PAYE tax relief unless there is some approach in the nature of a national understanding, Mark II, or some similar type of overall agreement.

The Minister forgot to mention the petrol crisis. Here again we have an example of a very serious problem. The Government are not responsible for the situation in Iran; they are not responsible for the international increase in oil prices. They are, however, responsible for managing the situation here and what we have seen in the last six weeks is gross mismanagement of the situation here. Everybody who is queueing or trying to queue for several hours on end, sometimes starting at 5.30 a.m., can see that mismanagement. When one is sitting in one's car queueing for hours at a petrol station and one has the radio on and one hears the Minister saying there is no crisis, there is no need for rationing——

Could I ask Senator Robinson if she is telling the Minister how to run the country or is she speaking on the Finance Bill?

The Minister is in the House today to hear the advice of Senators on the Finance Bill and it is customary in this House, on the Finance Bill, to address ourselves to the financial problems and to give what advice and make what criticisms we feel are necessary. It is in the normal course of the debate that I offer these criticisms. The Minister may answer them. He may say that the petrol crisis has been well managed by the Government; he may have very strong opinions in that matter. It seems to me, to those I have talked with and to the beleaguered public that there has been a lack of foresight and a lack of anticipation of the physical problem. They still do not understand why Ireland is so much worse off than other countries in the European Community.

I had an experience of that yesterday. I was interviewed by a French radio team who had come over to Ireland as part of their coverage of the EEC. They land in Dublin and find that they cannot get petrol. They find that there is a total crisis here in Dublin which is completely out of proportion to what is happening in other European countries where they have increased the price of petrol and taken steps to curtail the use of petrol. They were astonished and confounded. They asked how it could have become so bad and had the Government not anticipated it. Did they not know about the overall supply and how to regulate it so that there would be a sense of priorities regarding access to petrol and so that those who need a car as part of their work would have priority of access to the limited supply of petrol? That is an area where there is a significant lack of the coherent approach and planning which the Minister mentioned in his opening speech.

We then come to a subject which is of grave importance when we are discussing the Finance Bill and that is the very botched negotiation of our entry into the European Monetary System and the consequent problems for the currency of this country. The Labour Party were extremely critical and remain very critical of the way in which the Government negotiated our entry into the EMS. Indeed, at one time it was embarrassing to see the apparent lack of understanding at what happened at a vital meeting on the question of the original terms for entry. There is no doubt that our present participation in the EMS is putting very severe strains on our currency. I do not want to undermine the present position or make it any worse by posing questions about it but we must ask at least that the Minister would explain in his reply, preferably in some detail, how the situation has deteriorated so quickly as far as the punt is concerned, that there is now an increasing fear of devaluation of the Irish £. This matter has been raised frequently.

Could the Senator elaborate on the alleged disimprovement of the position of the Irish £?

As I read in my papers this morning, it is down to an all-time low against sterling.

I understand. That is what the Senator means.

It is 95.9 against sterling. It is low against the dollar. It is down nearly at the bottom of the band of the European Monetary System. I do not want to undermine our currency. I want to see the situation as strong as it can be. I do not want to use any scare phrases about it, but it does seem that there are very considerable strains. Those who are looking at our economy from the outside are increasingly apprehensive about the way in which the various matters I mentioned are being managed, about the size of our borrowing and about the way in which very serious strikes have crippled us in our industrial output. I would be grateful if the Minister would comment on this subject.

The Minister also made no reference in his speech to the spiralling inflation rate, in particular to the steep rise in food prices which has hit low income families. The Labour Party campaigned very strongly for the retention of, and an increase in the food subsidies. The Government have substantially worsened the day to day situation for low income families, for the unemployed and for those on fixed social welfare benefits. The level of inflation at the moment appears to be returning to the very bad old days following the oil crisis in 1973-74. This is a relevant consideration in talking about the Bill to implement the proposals in a budget in which the Minister was talking about a year end inflation rate of 5 per cent. Is the Minister still confident of that? It does not appear to be what any of the economic indicators are indicating or what the business community believe, if one reads reports such as those in Business and Finance and elsewhere. The House is entitled to hear, not the economic targets in the White Paper, but the Minister's own prediction as he sees it, of the inflation rate. What is this inflation rate at present? What it will be throughout the year?

It is appropriate, in looking at the proposals which the Minister mentioned for job creation, improvement of jobs for young people and so on, to note the very crippling effect of the various body blows that I have mentioned on our tourist industry. This is very sad for the whole country as we come into the summer season. Tourism is an essential part of the economy. It is a boost to jobs, particularly for young people during the summer season. It is absolutely essential for those whose major occupation is in the tourist industry and it is very bad for the regions which depend on tourism and in which people budget for the prospect of tourist revenue during the summer to carry them through the winter months. We must look very seriously at the consequences for the tourist industry of what appears to be a lack of coherent management and the well-defined plan of action that the Minister referred to in his opening speech.

I would like to mention the question of the commitment to achieving equality and the removal of discrimination against women in society. I remember that the Minister, in his days of Opposition, was a very articulate, if I can use that word, spokesperson for the achievement of equality. He spoke about it on a number of occasions. This was in the good old days when he made the fundamental mistake of confusing the achievement of equality in our society or mis-describing it as being just a lobby of well-heeled articulate women. That was a major gaffe from which he has still not recovered in this area.

Would the Senator quote what I actually said? If the Senator does not have the quotation there I understand, but the Senator ought to know by now——

The Minister knows what he said and knows what the answer to it was.

I know precisely and I know that the people to whom I was referring have been at great pains to object to being described as well-heeled, which is not a crime, or as articulate, which is certainly not a crime. That was not what I was talking about but what they were pushing, as was Senator Robinson, and she knows it too. What the Senator was doing was depriving other people of fair play.

If the Minister is a little touchy about a phrase that I think——

He likes to be represented rather than misrepresented.

The Minister will have his opportunity. I look forward to his reply on Second Stage. Am I drawing blood? We seem to be a little touchy.

Does the Senator think I should not make any remark at all when I am misrepresented?

No, I am not objecting. I am very interested in the way that the Minister is responding.

I do not mind people who do not understand the position but the Senator knows very well what the position is.

The debate should not continue in this fashion.

I was using this as an introduction to the fact that this Bill does very little for women. That is the substance and reality of the situation. We have had in Ireland and we now continue to have in a way which has been totally unredressed, blatant discrimination against the working wife. There is no progress at all in this measure. There is no increase in the working wife's tax-free allowance. This, in 1979, in a situation where we have the lowest ratio of working wives in the European Community, is a very sad reflection of a genuine commitment to remove one of the worst and most unacceptable discriminations in our taxation system, both the absence of a proper working wife's allowance and the fact that a wife's tax is still computed as part of her husband's tax and, therefore, pushes the married family into the higher tax bracket. This is leading to a very predictable and understandable conclusion for young people. Their social behaviour is now giving rise to some worries in certain quarters. Who can blame them when we discriminate against marriage in our taxation code? Who can blame women for being angry at this continued discrimination which is reflected in our overall employment statistics and in the very low rate of married women in our workforce? Who can blame the housewife who feels totally under-valued in the work that she does and who finds it so difficult in the present circumstances, with such high food prices and general surging inflation, to live, feed and clothe her family on one income, and yet is discouraged or even prevented from trying to supplement that by working herself? In this Bill there is no real joy for the mother of children because——

Could the Senator tell us what she thinks should be done about married women's tax?

They should be considered as separate for the purpose of taxation and should get a single person's allowance.

Is that the end of the story?

No. It is a very long story. I would prefer not to comment in any great detail because I am involved in a constitutional action on that front, which the Minister I am sure knows about, which will be at hearing shortly. I would rather not prejudice that position.

I do not think there is the slightest danger of the Senator prejudicing that position by her comments in this House, but that is a matter for the Senator.

It would be preferable not to comment on it because it will be the subject of a Constitutional case starting on 3 July. There is an increase in the children's allowances which, if one looks at the proportionate size of the increase may seem to be generous, but the fact is that the children's allowances would have to be doubled to keep pace with the rate of children's allowances in 1974 because the cost of living has doubled since then. The increase is not enough to keep pace with the overall costs. This has been set-off for a considerable number of families by the fact that, instead of getting the normal expected increase in the child allowance, an increase of 30 per cent which is comparable to the increases in the other areas, there has been a drop of 9 per cent by a decrease of £22 per year in the children's tax allowance.

These two measures together go no way towards giving the very important benefit to the mother who is at home trying to bring up her family and feed and provide for her children on the income. For very many women the children's allowance is her only guaranteed income. In many circumstances an increase in the husband's wages or a benefit in his tax allowance may not in reality be passed on at all. The wife may still be getting only the same allowance that she was getting the year before, with no increase. Very many mothers are dependent on the children's allowance. It is necessary for us to move very substantially in the area of providing child benefit allowances. We should have a weekly child benefit allowance which is sufficiently substantial to ensure that a mother can get basic provisions such as food, clothing, shoes, which are so costly now, and so on, and that she is free from the terrible worry of wondering whether she will be able to get financial support from her husband if he is not inclined to give her a regular allowance or if he goes on a batter on a Saturday night. These are very real problems.

In working-class Dublin, the children's allowance is the income for the wife at home, the income for the mother of children. The proposal in the budget is not a genuine response to the ever-rising food costs and the general rise in costs of other items that the mother has to buy. The children's allowance is the most frugally and carefully spent money in the country. Women spend it extremely carefully and thoughtfully for the benefit of their children. This is an area where we should understand our priorities. We should listen to some of the values that Senator FitzGerald was talking about earlier, where we get away from some of the macro-economic language and talk about people in their own homes with their own families and what they have to cope with.

The Minister should take the time in his reply to spell out the way ahead for the Government at present. The national understanding has been rejected. The whole question of the farmers' levy is causing great controversy and it appears it will not be easily collected if it is collected at all. It will have a damaging effect on meat prices. The general industrial situation is something that we must reflect on. This industrial strife is much more in the public sector and, therefore, much more in the lap of the various Ministers in their Departments than in the private sector. We should ask ourselves why this is the case and how we can approach the situation so that we can turn a tide which has gone sadly away. It has got to the stage where on some doors, in Area 9 of the constituency, there is actually a notice up "Fianna Fáil canvass this door at their own risk". People are giving warning at this stage that they had enough. The situation has got so bad that they now want decisions. They want the country pulled out of the present drift. I await with interest what the Minister will say in his reply.

I do not want to speak on any specific proposals in the Bill but rather on the general subject of taxation. So much clamour has arisen or been stirred up recently about PAYE and the equity of the tax system that it seems to me not only worth while but necessary to try to establish the position more clearly and achieve a better understanding of it. I shall be using for this purpose a broader canvas than either Senator FitzGerald or Senator Jago.

Even when non-tax revenue is added to it, taxation of all kinds is far from sufficient to cover the current outlay of the Exchequer. There was a deficit of almost £400 million last year on current account. The aim in this year's budget is that the current deficit should not exceed £290 million. Certain developments since the budget have made that aim more problematic. The rate of economic growth may be slowed down a little by scarcer and dearer energy and, of course, by the prolonged strikes we have endured so far this year. The postal revenue will suffer. It appears also that a "catching up" pay increase is spreading throughout the public service. The revenue will benefit from inflation being higher than we originally expected. On the other hand, when everything is considered—especially the weight of pay in public expenditure—my guess would be that we shall have a bigger than planned deficit. I regret this.

Taxation, whether it is completely fair or not, is not at present doing its basic job of providing enough revenue to meet current expenditure. In fact, taxation is now supplying less revenue in proportion to current expenditure than it did in the first years of this decade. Then it was contributing about 85 per cent of current expenditure. Last year it yielded less than 72 per cent.

Income tax as a proportion of total taxation has certainly gone up. It was less than 20 per cent 20 years ago, it was less than 25 per cent ten years ago, but it is of the order of one-third today. That means that one-third of 75 per cent of current expenditure is being met from income tax. In other words, only one-quarter of the current outgoings of the State is being financed from income taxation of all kinds. How much of this income tax is levied on wages and salaries? I have seen a figure of 85 per cent mentioned, but this is probably too high as it includes directors' fees and some other extraneous elements. If we put it that 80 per cent of the income tax comes from wages and salaries, that means that wage and salary earners are paying, through Pay-As-You-Earn, only just about one-fifth of current Exchequer outgoings.

I hope that this will help to put the Pay-As-You-Earn campaign into perspective. To listen to some complaints, one would think that Pay-As-You-Earn was carrying the whole State on its back. If there is anything wrong with it, it can hardly be said that the total is excessive. It may not be distributed with absolute fairness. It is important, given present attitudes and their implications, that whatever inequity exists in the system should be removed as soon as possible because it is, most unfortunately, generating envy and discontent and destroying all sense of community and interdependence at a time when we urgently need co-operation and moderation if we are to overcome our national economic problems.

The Government have promised to look into the equity of the income tax system. I hope this will receive urgent attention in its own right and that particular regard will be had to the position of tax evaders—this Bill contains provisions about that—and to the fairness of the contribution which is being made by the self-employed, including farmers and professional people. The position of married taxpayers with children also seems to need adjustment.

Anyone who is critical of the weight and distribution of income tax, even though it provides only one-quarter of the State's current needs, must take a view about the alternative of indirect taxation, that is, taxation on expenditure rather than income. For many years, the Irish tax system was criticised severely for leaning much too heavily on indirect taxation, which was taken to be regressive because it took no account of family circumstances and bore more heavily on the larger families and the less well-off. Twenty years ago indirect taxes, that is, taxes on expenditure rather than on income, profits or capital, accounted for 75 per cent of our total tax revenue. Ten years ago the proportion was 70 per cent. Now it is down to 54 per cent.

It is of interest that, despite all the time and effort given to reforming the taxation of capital over the last six years or so, including the switch over from death duties and the introduction and subsequent withdrawal of wealth tax and modification of taxes on capital gains and acquisitions, the contribution of taxes on capital to total revenue is even smaller today than it was 20 years ago. It is less than 1 per cent now as against 2½ per cent then. I have very little use for taxes that do not produce worth-while revenue. Social or political cosmetics are a poor substitute for real money to run the public services.

Most of that real money is still being supplied by taxes on expenditure, particularly VAT and the "old reliables", drink, tobacco and oil. It is fair to ask whether those who crib about Pay As You Earn want to have higher taxes on expenditure despite the complete lack of concern in these taxes for individual and family circumstances. Or is their search for equity mainly inspired by resentment against those who, in their view—and I am not saying they are entirely wrong—are not paying their proper share of income tax itself?

There is no doubt that the incidence of income and other taxes on the representative worker has increased during this decade. There is an obvious and inescapable reason for this which I can best bring out by contrasting the rate of increase in current public expenditure with the rate of increase in personal incomes. Government current expenditure is now almost seven times what it was in 1970. Average weekly earnings in manufacturing industry are now about four-and-a-half times what they were in 1970. Wages and salaries make up the largest element in total personal incomes. How could wage and salary earners escape having to pay a higher proportion of their income in taxation when the State's needs are rising so much faster than the incomes of its citizens? Even as it is, as I mentioned earlier, they are not paying enough to cover the State's current needs.

At the same time, it is true that incomes generally have gone up in real terms. As against a multiple of seven for Government current expenditure and a multiple of four-and-a-half to five for personal incomes, the price multiple is three. So people are considerably better off. What is most out of line, however, is the rate of increase in current public expenditure.

Looking more closely at the incidence of income tax on the average worker in industry we find, not surprisingly, that the effective rate of tax has risen several percentage points in the case of single persons and married persons with children. The anomaly is that married persons with no children have got off rather lightly. I have taken the actual average earnings in manufacturing industry and worked out the percentage of earnings paid in income tax during the last seven or eight years.

In 1972, on an annual basis, average earnings in industry came to £1,250. A single person paid just under 18 per cent of this in income tax. A married person with no child paid 12.4 per cent and a married person with two children 4 per cent. In 1979 the average annual income of a worker in industry, whether male or female—they are all lumped together for this purpose—will be of the order of £4,500. A single person will now be paying 22.5 per cent of this in income tax as against just under 18 per cent in 1972. A married person with no child will be paying just under 14 per cent as against over 12 per cent in 1972. That is only a slight increase. But a married person with two children will be paying 10.5 per cent as against 4 per cent. The reason for this is that the child allowance for income tax has grown very little over the years—from £170 in 1972 to a net £218 this year Here is an area where equity and consideration for the family seem to suggest a need for adjustment.

On the whole, however, it must be kept in mind that the incidence of taxation must increase if expenditure on the public services is rising faster than total personal incomes, as it has been. With wages and salaries accounting for well over half of personal incomes in the State, how can a heavier incidence of taxation on working people be avoided? There is no great scope for revenueraising in the top ranges of income. I have estimated that if the present top rate of 60 per cent were raised to 70 per cent it would scarcely yield more than £25 million in a full year. This would do very little to pay for increased services or relieve the burden of taxation on others. It still remains true of course, as I acknowledged here before, that the better-off have done rather well in recent years through the reduction in the maximum rate of income tax, the reduced incidence of taxation on capital, the abolition of domestic rates and so on. I for one, and I say it again, will not cry if ever at budget time I were the little boy that Santa Claus forgot.

I come now to those, and they include Senator FitzGerald, who advocate indexing of income tax allowances in the hope of protecting income earners against a heavier tax burden in real terms. When one states the position that way it becomes clear that, in effect, they are setting themselves against any further improvements in social or other public services or at least they do not want income tax to contribute anything towards such improvements. This would mean either that the improvements would have to be foregone, which is unlikely in view of the continuing pressure for them on all fronts, or that they would have to be paid for by what used to be considered, and still is I think, a less equitable form of taxation, namely, taxes on expenditure.

As one who was involved in the setting up of a commission on income tax in 1956, I see some irony in the fact that Pay-As-You-Earn was first introduced in response to trade union pressure. The commission on income taxation said in its first report in 1958 that "representations have been received by the commission from the various groups of organised workers in the country recommending the introduction as soon as possible of a statutory scheme of tax deduction applicable to employees". The memorandum submitted to them by the Provisional United Trade Union Organisation, which was the predecessor of the ICTU, said that that organisation was completely in favour of the Pay-As-You-Earn system of income tax payment for all employees. The Union memorandum called in urgent terms for the introduction of such a system. They wanted "a system of tax payment which would be convenient and easily understood and which would involve the least difficulty and hardship for the taxpayer". They said that in their view PAYE was such a system. Attitudes have changed but not, I think, with full understanding of all the facts of the situation.

Finally, I would like to repeat a point I have often made in earlier roles in the Department of Finance and in the Central Bank, namely, that pressure for expanded public services is never in my experience accompanied by a willingness to accept the burden of financing them. Those who advocate better health, education and social welfare provisions, and most of us are in favour of these things, jib paying for them, whether through income tax or expenditure taxes. If the PAYE categories were not up in arms, the unions and everyone else would be claiming compensation for the rise in prices caused by expenditure tax increases to meet these improvements.

In strict logic there should be no such compensation, since the whole purpose of the tax increase is to switch income from those who are taxed to those intended to benefit from the new or expanded services. Nevertheless, as we all know, this inflationary process goes on and no one has yet heeded the force of the argument against compensation. Neither does anyone pay any attention, as far as I am aware, to the version of the cost of living index which leaves out taxation effects. The same claim for compensation is made, with the same lack of validity, in relation to price increases caused by external factors like dearer and scarcer oil. This is a burden the community must bear. It cannot escape it. Indeed, it can only make inflation worse and spread inequity by looking for so-called compensation in the form of increased money incomes. However, I am not optimistic enough to feel that there is any assurance that attitudes will be miraculously changed by my words, so I shall leave it at that.

I do not think that the PAYE workers for one moment feel that they are carrying the nation as such. What they feel is that there are quite a number of groups of people and individuals who are using all sorts of devices to get out of their obligations and, at the same time, pressing their right for the services that the money yielded through income tax has provided. That is the big argument.

I would not be able to quarrel a lot with what Senator Whitaker said. I know well that if you get after so many people the amount of money brought in will not yield that much, but that does not defeat the argument that people who are not paying their fair share should be obliged to do so. I will come back to that question later on when I am dealing with the capital gains, corporation tax, the self-employed and so on.

Having said that, it would be very irresponsible to say that nothing good has come out of the budgetary strategy. I will indicate one or two places where I feel the strategy has been good. For example, it must be admitted that there was a substantial increase in non-agricultural employment. There were 31,000 jobs created, but allowing for the redundancy of 10,000 last year we had a net increase of 21,000 jobs, and that must be admitted. This is a big achievement, probably the biggest step in that direction in decades and that is something to be commended. However, being a little bit critical, the main direct contribution by the budget to employment is the public capital programme and there are features in it which give rise to concern. For example, there is a very sizeable proportion for the private sector allocated at the expense of the State industrial enterprises, and this is a criticism. Out of the £974 million provided, £194 million in loans and grants went to private industry, £154 million in loans and grants for farm development and State industrial enterprises got only £37 million. From my information this constitutes a drop of 12 per cent as compared with last year.

In the area of housing, of the money allocated there, £165 million, there was an under-expenditure of £7 million. Part of the problem there is, of course, that there was just enough money to provide the same amount of building activity in local authority houses as there was last year, which is certainly not sufficient.

Anybody who attends clinics, taking complaints and dealing with the public on the problem of housing will realise that the question of more building in the private sector is not the solution. There is still a lot to be done in the local authority area and I thought, perhaps, in this respect that more money would have been allocated for the local authority building rather than the other way round.

With regard to social welfare, 20 per cent was sought for this area by congress. The budget provided increases of 12 per cent for the short-term benefits, provided 16 per cent for the long-term pensions, but since about 56 per cent of the allocation goes to the long-term pensions it means that the increase is about 14 per cent. While it looks significant, it still leaves pensioners and other beneficiaries worse off relative to other sections of the community, even though we are all supposed to be equal. This must be rectified. The proportion of Government spending expended in social welfare has, in fact, been falling for many years. The previous Government were probably at fault as well. For example in 1972-73 social welfare accounted for 13.9 per cent of Government expenditure. This has risen to 15.8 per cent in 1975 but by 1978 the proportion had fallen to 13 per cent and in 1979 it will be 12.6 per cent. In arguments put forward in this House on anything affecting economic and social development, it is often said that when times improve the poor will get a little more, but, in fact, their situation is getting worse and this is a criticism.

Senator Whitaker dealt with the question of PAYE workers feeling they are crippled with regard to tax, and I do not think he made any argument against the fact that there should be a more equitable system of tax. He did, however, say that if we want services we must pay for them. I would say the same to a trade unionist if he argued with me when I was increasing the contributions. I would say that if you want services you have got to pay for them. If £9 out of every £10 of income tax is collected from employees whose total income constitutes only two-thirds of the national income there is a burden on the workers. This burden is no longer acceptable. You cannot expect the trade unions to accept gross inequities. They are going to stand up and kick up a row to protect the income of the workers. For example, last year wage and salary earners paid income tax 16 times greater than that borne by farm profits. If that was the case it has to be redressed and must be seen to be redressed. It is not a question of farmer bashing. Later on in my contribution I will speak about auctioneers, doctors, dentists and people like that. I will talk about their position and whether they are paying their fair share of tax.

Let us get to the question of tax evasion. Congress called for a determined campaign to combat tax evasion by the self-employed, businessmen, traders and professional people. The Minister gave an undertaking to strengthen the staff of the Revenue Commissioners to enable them to mount an effective campaign to combat tax evasion. This was welcomed. If this happens, we should be in a position to know exactly how much revenue can be produced as a result of this activity. Some good things came out of the budget but there were some areas which could have been dealt with more effectively.

It seems to many people whom I have been talking to that the present tax system is still more geared, with no pretence to equity, to an agricultural country with a large number of self-employed, despite the fact that we are becoming an industrialised country, and have been for some time, with a large, potentially powerful, working class. This not only reveals itself in the continual annual drop in agricultural employment and the regular pattern of 7,000 agricultural workers being absorbed into industrial employment, but more so in the demonstration by thousands of PAYE workers which probably included people who were formerly engaged in agriculture. I make that point deliberately because attempts are being made by many people to try to create divisions between urban and rural people. In these demonstrations I know there were many people with substantial incomes and many were not trade unionists. I know that if there had been a ballot box at the end of the street many of them would have voted in favour of Fianna Fáil. I am not suggesting that the demonstration was one-sided. It was an indication that the nation as a whole knows that the present taxation system is inequitable. The self-employed, publicans, doctors, professional men, builders, lumpers, auctioneers, chartered accountants and so on, know that the system is inequitable but they know how to deal with it and how to get around it. They get themselves a good chartered accountant to make out their accounts but this is something the ordinary PAYE workers is not in a position to do because the collection of tax from him is done by the employer. When a person, even an employee of a farmer, gets an increase the tax is stopped directly, while the farmer gets some sort of relief for paying wages. On the other hand, if the farm larourer's son or daughter starts to work outside, immediately the employer deducts tax. Employees whose employers deduct tax from them see part of that money returning to the employers by way of relief.

Chartered accountants are well aware of the directive that was issued by the Revenue Commissioners in 1977. The Revenue Commissioners got into such a state that the easiest way out for them was to accept every account. In other words, if there was a good consistent story, in line with that told the previous year, it was accepted. Whether that was because of the lack of staff or because the people responsible in the Revenue Commission are tied strictly to administration I do not know. If you contrast that with the situation of the PAYE employee, there is every reason why he should be very angry. If he gets a bonus or a few hours extra overtime, or Sunday work, immediately the employer is there to act as a watchdog for the State and the tax is deducted. On the other hand, the self-employed person, the lumper, the trader, the builder, the auctioneer, is in a position to manipulate the situation in that he can hire someone to protect him, as distinct from having a watchdog over him. He has someone to protect him whereas the State has someone policing PAYE workers. This is not a correct situation in any democracy.

Taxation is raised to pay for essential services. These services must be provided for. The people who are avoiding the tax get equity in the sense of getting the services but they do not give equity in the sense of paying their just amount of tax. Many people want all rights but do not want to live up to their obligations. No Government have really tackled the problem to the extent of redressing the balance.

We are talking about a situation where people pay into a system, whereby some sort of redistribution takes place and other people who become beneficiaries of the redistribution in the form of services and so on are not being caught in the tax net to any effective extent and this is a bellyache for a lot of the PAYE workers. If people were as enlightened as Senator Whitaker is on this whole question of finance and the effects, or lack of effects, of taxation on the economy, and so forth, they would accept that he is probably right. That still does not take away from the fact that they are, in fact, bearing a burden to a great extent in making a contribution towards this redistribution of income and that there are people who are not making that contribution. There is no way of denying those people are not making a contribution to a share in the redistribution of the benefits.

I know that the Government are committed to adjusting taxation of the self-employed groups, including farmers, to see that every income recipient pays a fair share of tax. I must also say that there was an improvement in the 1979 budget estimate. There was an increase, I think, of 40 per cent from the self-employed on the 1978 figure. I understand that this is because of the evasion measures. If that is correct, I must welcome that, notwithstanding my criticism that sufficient has not yet been done.

As a contribution to promoting the present national understanding, the Government will provide a special allowance for PAYE taxpayers at a cost of £39 million in 1979 provided (1) that the budgetary position is reasonably in line with expectations and (2) that any funds needed for employment creation, which is the first priority, have been made available. This is one clause that did not go down well with people who were asked to accept the national understanding. I belong to a union that voted in favour of the national understanding and I am sorry it was not accepted. It did seem laughable to PAYE taxpayers that they had to live up to Government conditions while all of evaders and avoiders can make their own conditions, which does happen. This is a big bugbear of a lot of people present at the discussions on the national understanding.

The anti-evasion methods reveal that there is extra money to be collected, which the Government are keen to collect. Will it, in fact, in the long run vindicate the point of view of Senator Whitaker? Will it help the people to understand how, exactly, the tax figures are broken down? How will they understand the intricacies of the tax bill if they are not educated to do so? I learned something today. Sometimes the obvious is very easy to miss, and one or two points made were quite obvious. However they might not be so obvious to the people with whom I come into contact.

The PAYE workers fear that the anti-evasion measures will not, in fact, do away with evasion, but will make the position less acute. People still will not understand how the tax figures break down and we will still have this big communication gap, with everyone believing that he or she is wearing the crown of thorns and not somebody else. If we are really serious about coming to terms with this question of reconciling our differences with the PAYE workers, a random sample of the returns should take place in all areas. It is against the law to evade tax and is not a tax-evader a suspect, the same as a criminal? Does he not demand the services, that are provided through taxation, to protect his property? Does he not demand a greater penalty on criminals? Why can there not be immediate random sampling? In this way a lot of the PAYE workers would see that there was a really determined effort on the part of the Government to try to get at this whole question and to ensure an equitable contribution to the tax bill.

I do not know how random sampling could be tackled, but I dare say that it might be something similar to carrying out a survey. If you get a good result from taking a survey of 10 per cent of people you have a fair indication of how things are going. It might be possible also to get an accurate assessment of where the evasion lies, if there were random sampling of about 10 per cent of people in certain categories.

I am not suggesting, for example, that people should be jailed, but how less a criminal is an evader than a fellow who breaks a pane of glass and breaks in and robs a few shillings out of a shop, when the person who is evading tax is probably robbing thousands for years? The only difference I see between the two and possibly somebody might take me to task over my logic is that they use different implements. One fellow uses a chisel or a tool to break and enter. The other guy uses the strong pen and the sharp brain of some chartered accountant.

I will give you another source of irritation for PAYE workers. Take a redundant worker who gets a lump sum. If you happened to negotiate anything higher than the lump sum from the State—when it was being paid in the lump sum—every cheque and every receipt had to be photostated. You were brought down, and you were brought into a small office, as the small businessman is, as the builder is, as the auctioneer and the solicitor or as anyone else is, you stood in a queue at a counter and a clerk came out. He made you produce a photostat of every cheque you received. Contrast that with the situation where the businessman is brought inside and his solicitor with him, and so long as he is consistent with last year, everything is all right.

May I say that where the businessman is brought inside, with his solicitor with him, he is in trouble.

Maybe I should have said his chartered accountant. Anyway, the truth is that this is what you are subjected to. In other words I do not want to put it too hard, but it seems that there is a comfortable way in which you can tell lies to the Revenue Commissioners. You may chance your arm outside the counter, but unless you can produce all the photostats of the transactions, it is not so comfortable. If you have a chartered accountant or a solicitor beside you, it is a much more comfortable way to tell a few lies. The Revenue Commissioners have no real investigatory powers although they have militant powers and there is no evidence to show that this dishonesty does not happen.

This kind of thing bugs the working class people. Whether they are mistaken or not, this is a feeling in the minds of people, and there is some truth in what they are saying. as long as people do not understand how the tax situation is dealt with, and as long as they believe that the Revenue Commissioners are powerless to go after evaders or avoiders— perhaps Senator FitzGerald might explain the distinction later on— you will always have this bellyaching on the part of the PAYE workers, and quite rightly so. If a fellow does shift work, working Saturday and Sunday in order to get extra money, he is hammered immediately, taxwise. Another fellow can go out and do all sorts of things and because he knows the trick-of-the-loop he is in a very happy position to be able to score, and do well for himself.

The attitude of the people towards the Revenue Commissioners must be changed. The Revenue Commissioners must have more powers of investigation, rather than being a fairly good or tough interviewer, and extracting something out of people. At the same time, a lot of the goodies are still very much concealed.

There is a point to which I would like to refer but if I do I might be in trouble. I do not know if you are privileged in the House or not, but I will skip over it very quickly.

Not entirely?

You are dying for a gossip.

We need field people who have investigatory powers and can show the PAYE workers that the opportunity to cheat is gradually diminishing, and that by further action on behalf of the Government the chances of cheating will be drastically reduced.

The question of a State auditing company might not be a bad idea. I do not know whether it is a feasible proposition, or whether we might get into trouble by introducing it. It may do more harm than good, but it might be a consideration.

I make no apologies to the lumpers, the landlords, the doctors, the vets, the solicitors, the architects and the other self-employed. I am a PAYE contributor all my life, as are all my workmates and all the people I represent. We were interested in an estimate given by the President of the Association of Inspectors of Taxes, Mr. Tom Wyams, in an interview in the Irish Independent of 4 August 1978 that tax payment of around £50 million was evaded by the self-employed, farmers, professional people and shopkeepers. He calculated that 10 per cent of revenue was lost by evasion because of lack of staff. Quite frankly, neither my colleagues nor I believe that the £50 million was a realistic estimate because the total revenue from income tax in 1977 was £522 million, and 87½ per cent—£457 million—came from PAYE workers. Those are our figures; Senator Whitaker has different figures. Twelve-and-a-half per cent, £65 million, came from the self-employed. This, of course, raises the question of how much should have been collected, had there been no tax evasion; it certainly would have been a lot more than the £522 million. It can be assumed that there is the scope to under-state an income. That raises the question amongst PAYE workers of how much less they would have to pay if more powers were given to extract the correct amounts from all these other categories of taxpayers.

I have great faith in the instincts of the working classes. When they talk about the special reliefs and the stock write-off devices which allow companies to avoid paying their share of tax—there is usually quite a lot in what they say. I shall give, later on, an example of these devices. It will demonstrate how the PAYE worker is being milked. Am I in order in mentioning the name of a firm?

Acting Chairman

It is not normal.

Company A made a profit of £1.1 million in 1977. The stock relief given was £434,000 and they ended up paying £74,000 tax out of £1 million. I am sure the £74,000 tax was not the correct amount due. I cannot criticise their product; I can very much criticise them for not paying their taxes. I will say that when I am shaving, the lather from the soap is not the worst. Jefferson-Smurfit in 1976 made £11.6 million profit—I am sorry that I have mentioned their name. I did not mean to. It slipped out. They paid £15,000 tax and how they got that figure I do not know. I know that that is the return, as I checked it out.

Then you come to the question of the four taxes on wealth. Estate duty and the wealth tax have been abolished. The capital acquisition tax was brought in and, in fact, realised less than the previous taxes. The PAYE worker wants to know why it is not possible to tackle those things and make sure that everyone pays a just share. The capital gains tax on property or assets seems to be full of loopholes. The transfer of property to a son is totally exempt, if the property is under £150,000 in value. This, apparently, often happens as a tax evasion device—or that is the general view. Somebody will have to show that it does not happen, if it is not correct. In the light of all those points, how are the PAYE workers expected to sit still? The PAYE workers are policed, the Revenue Commissioners are poised to administer justly, but the loopholes are there. There is no great endeavour to create a lot of field officers, demonstrating an increase in the investigative and punitive roles. If I were speaking on another Bill, one could say I was arguing on civil liberties, but this is one person cheating the other. I can be excused for asking for these investigatory roles and for more punitive measures.

Dr. Patrick Lyons of TCD calculated that 150,000 people own three-quarters of all the wealth in Ireland, yet in 1977 capital taxes yielded only £10 million in revenue. Wealth tax was below £10 million also. This is most extraordinary, particularly when the statistical inquiry shows that the personal allowances were lower in 1977 than they were in 1971, taking inflation into account. The 1978 budget personal allowances did not even redress that, nor will the concession in the national understanding, redress it either. I shall not deal with the national understanding as there seems to be some rescue operation going on at the moment.

There is an old story that a small number of people control all the wealth. That is not the point I am making. I was dealing with the actual contribution that those people made. This is what I was really concerned about and I was quoting Dr. Patrick Lyons on this. I was not knocking it in the sense that the ideologically motivated people so often express it. I know that if you took every deuce off them you might not be able to give thirty shilling a head to everyone else. They are, however, making a very small contribution to society in general.

Out of 300,000 self-employed persons, 3,000 admitted making over £10,000 in 1976. What the complaining PAYE worker is asked to believe is that all doctors, publicans, solicitors, builders, lumpers, and so on earned less than £200 a week; that takes a little bit of digesting. I do not think the PAYE workers can digest this. Doctors, solicitors, accountants, auctioneers and farmers, like trade unionists, parade the weakest section when they are making an argument, giving the impression that this is the overall situation, when in fact it bears no reality to it. I condemn that; it is dishonest. These other self-employed people do that. The reason why they have many small farmers in the farmers' organisation is because they can be paraded. The farmers with the money can show that these people are not doing very well, and it is true they are not doing that well. They are a very useful commodity to the IFA, to demonstrate that fact. As with the trade unions, the weakest is always displayed for propaganda purposes.

The Fitzwilliam Square man would have a hard job convincing you that he was not earning around £20,000. Someone else is put to the front, like the ordinary GP who can reasonably claim that he is getting between £4,000 and £5,000 a year. His membership is very valuable in the organisation because he can tell the tale of woe—the untypical, rather than the typical.

The PAYE workers are carrying the burden, even of the fifth of the expenditure. They are carrying the burden of the redistribution of wealth within that fifth. They are carrying the burden of the sick and the poor and the needy, but there are a lot of professional people who could well afford to pay more and are in fact dodging their responsibilities. They are not becoming involved in the distribution process. The PAYE workers see the money they contribute going to doctors, small gombeens, small builders and so on. It is a fact of life that this is how they feel. They fell that it happens through State grants and subsidies. They see the farmer getting his whack through reliefs on wages and so on that he pays his farm-hands, and rates credit, improvement of stock and other perks. The PAYE worker sees this, not as Senator Whitaker does, but as a peculiar way to redistribute wealth, when the people who could contribute a lot are not being brought into the net in sufficient numbers. It is only natural that ordinary workers on a weekly wage would look at it like this.

There are a lot of people jumping on the bandwagon. A very funny situation happened in the PAYE march. A photograph was taken of a man who has a very nice head of grey hair, wears a dust coat and who was one of the leaders of the protest. He was described by the papers as being a well-heeled, middle management person; he was actually a trade union official, but the photographer got the wrong man, though middle management people were there, too. On behalf of the PAYE workers I say to the auctioneers, doctors, dentists, solicitors, vets and landlords, there is nobody trying to get you locked up, though we want to see people going after you. You have obligations as well as rights, and you are not living up to your obligations, therefore we would ask you, particularly on behalf of the underprivileged, to play some role in the vital creation of employment for the building of schools, hospitals and the provision of local authority housing. We are saying that the PAYE workers can no longer bear the burden in that particular area. There are points in the budget and the Finance Bill which I criticise. These are also commendable points. I would like the Minister to note my criticism, to see if adjustments can be made in any way. Finally I would like to say that I hope, as a responsible person, that the national understanding will be given a try.

Before I call on the next speaker I think we should adjourn for tea.

Business suspended at 6 p.m. and resumed at 7 p.m.

As a chartered accountant I was delighted with Senator Harte's selling promotion because the institute cannot advertise our profession. If I was a tax evader I certainly would not employ a chartered accountant because the integrity of the profession is at stake and no one in the profession could afford their reputation to be questioned by the Revenue Commissioners.

With regard to the Finance Bill, it is a pity that the debate on the budget which was introduced in February was so delayed that it can be clouded by political party issues which are not so relevant to the points in the Bill.

We should concentrate on what is in the Bill and not the current problems which distort the actual introduction of the budget. As the Minister explained, additional reliefs, amounting to £30 million, were dispensed in the budget. At the same time 40,000 low-income earners were released from the tax net. This, in administration costs and benefit to the community, is an enormous step forward. The proposed national understanding provided a further earnest of the Government's commitment to reform. In return, for an employment-preserving policy of pay restraint the Government offered a further £39 million in tax reliefs through the proposed tax rebate next December.

I see the linking of tax concessions to an incomes policy as representing an important break-through in thinking. It contains an implicit recognition on the Government's part that an excessively onerous tax burden plays its own part in creating inflationary pay demands. Tax retraint itself is a necessary condition for achieving incomes restraint. While commending the Government on the progress that has been made I am under no illusion that the reforms so enacted are yet not sufficient. The public reaction testifies to the need for maintaining the impetus of reform. I agree with Senator Harte that we must not encourage the division of society, urban versus rural, and that we must try to explain why everyone must pay their taxes to safeguard the position of the country in the European community.

The basic rate of income tax remains too high. When the new employee payrelated social insurance contributions are taken into account the lowest effective rate of tax is 29.4 per cent compared to 20 per cent in the last financial year. The progression of the system also remains too concentrated. The top 60 per cent rate of tax is reached on the taxpayer securing a taxable income of only £6,600. This progression is far too steep as it means that people on relatively moderate real incomes are actually subjected to the highest marginal rate of tax. That stifles initiative and the willingness to take on more responsibility which promotion may offer. The inclusion of short-term social welfare benefits in assessing liability to income tax is a move in the right direction. It will help to eliminate the poverty trap whereby many of those in receipt of unemployment benefit were discouraged from seeking immediate re-employment by the working of the tax system. They faced too high a marginal rate of tax on the additional income yielded to them by re-employment.

Many have covered the subject of tax evasion, and it is an integral part of any serious programme of tax reform. The Government must try to foster a moral climate where the tax-evader is the subject of public disgrace and not public approbation and envy. The man who illegally evades his tax bill should be represented as imposing an additional burden on the honest taxpayer.

I supported the proposal of a residence-related employment scheme in the Green Paper last July and in this regard the home improvement allowance is to be welcomed. It seeks to attack one of the most obvious and notorious areas in which tax evasion occurs while offering a worth-while benefit to the many thousands who wish to improve their homes. One drawback of the scheme must be remedied if the allowance is to be widely claimed. It must be administratively easier to claim the allowance. At the moment I believe it is the case that one must apply for a form on which to apply for a form to claim the allowance. I also hope that in future the allowance can be extended to permanent employment in the home or in the garden. While the rooting out of evasion is of the utmost importance the zeal of our tax inspectors must be tempered with humanity.

I should like to make a plea for the ending of the intimidatory practice of inflicting estimated demands on widows and pensioners in receipt of small incomes. The unnecessary fear and unjustified feelings of guilt adduced by such demands cause much needless suffering and anxiety. People have come to me with such demands. They have actually paid them although liability did not exist, but they were terrified by the final red demands which were not justified.

Those who administer the tax system must adopt, and be seen to adopt, a more helpful attitude to taxpayers. It is those who owe least who are most ignorant of the workings of the system, and this applies particularly to small businesses. In the enlargement of the numbers involved in tax collection I hope this philosophy will be put over to them in their analysis of the situation. Our tax collectors and assessors must make taxpayers aware of the allowances to which they are entitled. At present the onus lies with the taxpaper and a tax officer is not legally bound to provide guidance on allowances which can be claimed. I am thinking on the less well off and those who are involved with a lot of medical expenses. Mention has already been made of the mortgage interest being increased to £2,400. The real value of this relief has suffered a major decline in recent years, and steps should be taken to restore it. That is important in view of the sharp escalation in house prices which are evident in the newspapers and the consequent increase in the average size of mortgages.

Similarly the tax-free interest on bank deposits has remained at £70, £140 in the case of a married couple, for too long. Doubling this allowance would cost little and help many. Perhaps in some way it would ease the demand for money which is causing such exorbitant lending rates for all classes of society. In talking of tax reform one must not lose sight of the cold and hard fact that if the level of State spending on employment creation and the provision of social services are to be maintained, never mind increased, the scope for immediate and major tax concessions is extremely limited. At this stage of the country's development the wherewithal does not exist to provide all the living standards to which we would all like to become accustomed. The adverse disparity between manufacturing wage costs here in comparison with our major competitors in the UK threatens the viability of many Irish manufacturing industries, particularly in the unsheltered sector. No one can blame the Government, or private enterprise, if the level of our pending income increases further damages our competitiveness and puts more jobs at risk, and, possibly, forces a devaluation of the Irish pound or, indeed, provokes—we all have responsibility to avoid this—the shameful possibility of a departure from the EMS.

The Minister took over a run-down and battered economy two years ago. A serious situation existed at that time with more than 100,000 people unemployed and the building trade was at a standstill. Senator FitzGerald spoke about the distribution of the loaves and fishes but there were a lot of people on the dole queues at that stage who had neither loaves nor fishes. They probably have them today, and this is a result of the common-sense approach of the Minister, who took over in difficult times to rectify a number of years of mismanagement. We have arrived at a situation where we can look back with pride on the progress that has been made in the last three years. That progress is well known in the field of employment, in the field of the construction industry and in the other areas where we have been successful. Those who talk loudly now are talking from a new base, a base brought about by the Government and the Minister which has enhanced their position to a point where they can look for further demands.

It is correct that we move forward and look to the future. Senator FitzGerald indicated that we should not promise the people or tell them certain things but, of course, we should tell them what we are going to do and what we will do in the future. The positive action of the Minister is the proper action. We are conning the people, we are giving them an indication of what we will do in the circumstances that will develop. There may be industrial and external problems some of which we have no control over. Those over which we have control we will have to handle in a way that is acceptable to the general body of people, not to any particular section of the community who believe they can take over and govern. The day that a Government allow any group to take over is the day of the downfall of a State. While there are people here who would be only too happy to topple the lawfully elected Government on one issue or another, one way or another, nevertheless the Government have got the confidence of the people. On listening to Senator Mary Robinson one would think, when she told us that signs were up in a garden that Fianna Fáil canvassers would enter there at their own risk, that everyone seemed to hate Fianna Fáil. We have heard this approach that often but it has transpired that everyone hates Fianna Fáil except the voters. I am sure that in the future we will have the same situation.

I was sorry that the national understanding was not accepted, but I believe that there is still time to talk and reach an agreement. There is a vast section of the trade union movement who believe and understand the problems that confront us. On a reassessment of the situation this understanding can be achieved. The Government have been most reasonable in their approach to the common problems of the workers. I was appalled by statements of some members of the Labour Party in relation to the national understanding. They want to maintain the existing differentials but they are not concerned about the weaker sections of the community getting a greater advantage than some of the people in the well-paid positions. If that is socialism at its best it is a new type of socialism. It is very sad when one thinks of the weaker sections of the community to whom the national understanding gives major assistance, that that agreement was not accepted.

Some people are prepared to disregard the question of the bettering of conditions for the weaker sections of the community. We have heard much about the PAYE sector, the blue and white collar workers but we are concerned about the people who do not have collars, those on the dole queues. This Bill provides easement for such people within the limits of the Government. We promise to do better things in the future. It may hurt the Opposition to think that after promising we can deliver the goods. Senator FitzGerald indicated that we should not tell the people that we are going to steer a certain course for the betterment of the people. The whole question of loyalty, national pride and understanding is the big factor and an injectment of this is wanted, not the type of tactics that have developed here by a small section. They are trying to disrupt the Government, the economy and even family life.

I hope that some speakers, particularly the hit-and-run Senator who comes here, makes a statement, tells us she hopes the Minister will reply and then runs away. I do not like hit-and-run drivers any more than I like hit-and-run Senators because they are a menance to the community as she is a menace to the Seanad if she does not stand her ground and listen to the answer. It is not good enough to come here, make statements and then run away. If she wants the answer she should wait until the Minister gives her the answer. It is possible that she does not want to hear the answer because she knows that truth would prevail. For the last four years she has been hawking around her own Bill, a family planning Bill, and having listened to her one would wonder——

The Senator is very entertaining but hardly relevant.

The Senator is not relevant.

That Senator was not concerned about the male section of the community she was concerned about females and children. We are concerned about every person. When that Senator was hawking that Bill around I wondered whether she wanted a man for a hubby or a hobby because, judging by her prouncements, men do not matter. Everybody matters to me and the Government, irrespective of who they are. We have a duty to every member of the community and we fulfil that duty whether the Opposition like it or not. We will tell the people that we are prepared to do and we do exactly as we say. We can look back with pride and forward with confidence, thus ensuring that when our time is up the notice will be on the gate to tell Senator Robinson and company to keep out.

During the local election campaign the Senator mentioned that she was against the relief of rates to many people. Is that Senator saying that the corporation tenants who had their rates relieved and their rents reduced should now have them increased and the rates restored? Is she saying that the people who are struggling to purchase their own homes should face this further burden? If one reads through the pages that are now history since Fianna Fáil came into office one will see that people are being encouraged to own their own homes, more houses are being built, and more people are being put into jobs. For that we have no apologies to make.

I wish to refer briefly to four areas mentioned in the Minister's opening address, namely, employment, the trend of money incomes, income tax and oil prices. Nobody can doubt the seriousness of purpose and determined approach which the Government have brought to bear on the problem of unemployment, the great social and economic problem of our time. It is, therefore, encouraging to note the very substantial achievements on the employment front in 1978 which now act as a spur to continued efforts towards job creation. One of the key objectives of the Government is a reduction of 25,000 in the number out of work in 1979. That is clearly an ambitious target, but realisable if all sections of the community co-operate in achieving that goal. In line with the planned approach to development, the private sector, which has received specific incentives in the budgets of the past two years, is this year asked to play a bigger role in job creation than in 1978.

On the question of pay policy it is worth recalling that in the 1950s changes in pay took place in the context of price changes. In the seventies, however, the country experienced a period of very fast economic growth, and this growth was accompanied by rising living standards and a shift from what was essentially an agricultural economy to one with a rapidly growing industrial base. Rising expectations and increased affluence characterised the period. There was more income to share and claims reflected the desire not only to keep pace with prices but to secure bigger real and relative shares of the new economic growth.

Since the early sixties up to the present day, pressures for comparability and differentials in pay among various groups have become a national obsession. These same pressures are at the centre of much of our present industrial unrest. Expectations have continued to strengthen during the seventies. There has been a greater consciousness of the weight of taxation borne by the PAYE category, especially during the past five years which has probably been reflected in grossed-up claims of a certain order to try to meet expectations in regard to post-tax incomes. It is worth noting here that under Government strategy, real incomes increased substantially in 1978.

We live in a competitive, conflictprone pressure-group democracy, and the national understanding which has been referred to on a number of occasions attempted to reconcile the conflicting pressures in Irish society at the present time. I share the regret already expressed here at the rejection of the national understanding. Among its many merits it formalised an approach to pay policy by making specific provision not only for increases in pay related to price increases but, in addition, provision for employees to share in the real growth in national production. As for the future of pay policy, it goes without saying that any responsible Government must be concerned with trying to ensure that we pay ourselves only what we can afford.

On the vexed question of income tax it is worth saying again that conscious of the need to alleviate the burden on the hard-pressed PAYE category the Government, in their first two budgets, in 1978 and this year, increased personal allowances for single persons by 68 per cent and more than doubled the allowances for married couples. This was not a cosmetic exercise, and far surpassed any improvements made in income tax allowances by the Coalition during their term of office. Furthermore, the Government have undertaken to continue their review of the income tax system.

On the question of oil prices the Minister, in his opening address, stated that they will rise even more than seemed likely at the beginning of the year. He, rightly underlines the seriousness of the problem but, rightly too, warns of the danger of exaggerating the impact of the present oil problem. In the context of compensation for increases in oil prices which might feature in any future pay claims it would be futile, in my view, to compensate ourselves through pay increases for externally determined increases in the price of oil. That would be a recipe for rapidly increasing inflation, as events in 1974 and 1975 so clearly demonstrated. Let us hope we learned our lesson from that period.

Most people, after the budget, accepted it as progressive and containing a lot of measures that would help to stimulate industry and development generally. It may turn out to be one of the greatest budgets the country has had for many years or any Government have produced. The Bill encourages people to do something for themselves, and that is where the Government have been successful down through the years. They have encouraged the private sector to do something for itself. The budget restored a lot of confidence. Those of us who are travelling up and down the country can see that despite all the difficulties there is massive development under every heading. I am a member of a local authority and our biggest difficulty is to keep pace with development, to provide the structures, the sanitary services, water and sewerage and sites. The whole country is developing at a pace such that one would wonder where one will get a site to build a house in ten years. Actually the same can be said of advance factories.

Before Fianna Fáil went out of office six years ago we actually studded the country with advance factories and they lay with the cobwebs on them until Fianna Fáil came back into office and started to fill those factories. There are very very few advance factories lying idle today. The Finance Bill was a very sound financial plan for the country. The mass of the people accept that the country is financially sound and that the Government have a lot to offer in this Finance Bill.

We have many difficulties, but I think that the difficulties can best be summed up by saying that most people, regardless of how they oppose and present the performance of the Government, will accept that there is an improved economy. This is borne out by the fact that so many people are looking for an improved standard of living and improved wages; they want to pay less tax. Everybody is looking for their share of the cake. That being so, one must admit that there is a cake there in the first place. The Government have contributed largely to making that cake available.

On the question of new houses most of us realise that housing and the provision of new houses is a major problem. Local authority houses are provided and the people who live in them are subsidised to the tune of £25 to £30 per household per week. With the ever increasing number of local authority houses this is becoming a very substantial amount of money. At the end of the day somebody has got to pick up the tab and pay for it. It is an ever increasing burden on the whole economy and on the people who are working. This provision of local authority houses to meet the housing need is a major financial burden. The whole question of providing houses, local authority houses and privately built houses, will have to be looked at again because it is costing a mountain of money to subsidise houses. I agree that it is necessary to subsidise houses for new families for some time until they get established financially. But after a while we have the situation where there are families living in subsidised houses and drawing unemployment benefit and other benefits as well. That adds up to a serious burden on those who are complaining about paying tax. It is an area that will have to be tackled very soon. The Government would be wise to encourage more people to build their own houses, because we will be reaching the stage when in fact it will be impossible to continue to subsidise houses to the tune of £25 to £30 a week per house. People should be encouraged to build their own homes. More developed sites and every assistance should be made available. I would like to see the grants for new houses substantially increased. If we encourage people to build their own homes we could remove the very serious financial drag on the taxpayer.

I certainly welcome the new training of youth programmes, and I hope that this training of youth is accelerated, because it has been a tremendous success throughout the country. Many a young boy and girl would have found it difficult to get into jobs were it not for that youth training programme. It started them off on the right foot. It started them off accepting that they had to work and that they had to make a contribution. Many of those young boys and girls who were started off in training programmes did find jobs and continuation in employment. I would like to see more and more effort put into the training programme. I would like to see the money substantially increased. If one looks at the massive amount of money that is being paid out on unemployment benefits we should see that here is an area where we should put the massive amounts of money to train youth, and the return will be there. It is an area where we can make a major contribution. I would rather see a substantial increase in the training programme than be forced to go abroad to recruit skilled people. I come from a county that in the past has lost some of its best trained people because we did not have skilled jobs for them, and I am delighted to see so many of them coming back. It presents a problem with housing and settling them back where they had actually pulled up their roots. Nevertheless, I would like to see the two possibilities examined. Have we the capacity and the ability to train our young people and to encourage them and provide jobs for them? I would be very serious about that aspect of it before I would encourage people to come back.

Section 12 to section 16 provide for a change in farming taxation. Here there has been a lot of controversy. It is the old story that if the Government are reasonable and prepared to compromise they are inviting pressure groups in the hope that they will move a bit further. The present Minister for Finance was more than fair because in fact he invited the farmers to come along and to propose alternatives to the 2 per cent levy. I know for a fact that the IFA made no serious attempt at all to do this. In fact all they did was stand and oppose the 2 per cent levy with a blanket refusal even to consider it. When the Minister met them, more than fairly, and said that he was prepared to withdraw the 2 per cent if they came along with an alternative by 1 May, I know that there was no serious attempt whatsoever, because I have it from a man who has been a senior executive of the IFA in County Donegal for a very long time, Major Chance——

The Senator should not mention names.

I know I should not, but I have. I have been told reliably that the meeting of the IFA which met to form a negotiating group were told that the people who were going to negotiate an alternative tax system had already been chosen and that no representative from the west was allowed to take part in that negotiating group. I use the opportunity here of saying that. I have been asked by the IFA representative to say that. That can be checked out and confirmed. It is a serious situation when no voice of the small farmer in the west was allowed to be heard and those who were anxious to contribute in making an alternative offer to the 2 per cent levy were not allowed to be heard at the conference that was held prior to the meeting to discuss an alternative tax system. It is the very same people who do not want to pay the 2 per cent levy who do not want to offer any alternative system, and they are still shouting from the roof-tops that farmers want to pay their fair share of taxation. I do not know what is fair, and I think that the Minister should be guided by the mass of the people and not by the self-interested sections.

I see that the butchers now are revolting and saying that they will not collect the 2 per cent. I would like to remind those who are interested that the butchers are the very first section that took the cream off the slaughter premium when they got as high as £37 a head over the four years when the Coalition were in office. Through bad administration they forked out thousands of pounds to those that were in the cattle slaughter business—so much so that Tunney was able to buy the Gresham and the rest of it was invested outside the country in hot money. That was bad, stupid administration. That money was meant for the farming section and it never got to the farmers. The butchers are the very first section of the public now to revolt and say they will not collect the 2 per cent. The Minister has a responsibility and the Government have a responsibility. It is clear that they cannot bend and bow to every pressure group that meets and says we will not do this or that. Contained in that budget and Finance Bill is a fair appraisal of what is best for all of the people, taking into consideration that we have a country that has to develop.

I want to finish off by saying that we have plenty of difficulties in the country at present; we have people who are unreasonable; we have people who want to use the present labour difficulties for their own political ends. I was very glad to see the bank strike being called off because, in fact, most of us thought that we were going to have a bank strike. I was making some enquiries as to what some of the bank officials were getting and I found it very interesting to learn that some of the bank officials who were ready to go on strike——

That does not arise on this.

It might not arise in this Bill but it arises in the general financial structure which was contained in this budget. I will be guided largely by the Cathaoirleach, but we have got to support the Government in the stand to provide an equal share of the prosperity of the country for all of us. We have got to support the Government 100 per cent in their determined effort not to let self-interested sections of the community run away with any unduly high wages. We have far too many people yet below the poverty line and the Government must be firm in its handling of financial affairs. I am confident that we have had a good budget, that we have a good Minister in charge. He has shown a reasonable attitude to every section but I hope that he will not yield and bend to every pressure group. I hope that he will at this stage, after everybody has got a fair hearing, show his determination and the country will respond by supporting him.

I had five pages of material about which I wanted to talk but as the Minister has been so patient I will cut it down to two paragraphs. I welcome the Bill very much. It is notable for the dimensions of its breadth and depth where under a previous Government it has been hard to suppose that the approach was other than incidental and maybe shallow.

I suppose that nationally speaking the most vital topics are simply in single words, jobs, output, redundancy, borrowing, inflation and of course the EMS. These are all large topics and it is impossible to be dogmatic about them. But on all of them I feel that this Bill has made a most full and, as the Americans would say, a zesty presentation of the really relevant principles.

I want to thank first of all the Senators who contributed for their contributions and ideas. In some cases they were stimulating and in others perhaps not so stimulating. Certainly from my personal point of view I found the debate very interesting.

If I might, first of all, deal with the point raised by Senator FitzGerald when he quoted OECD figures for our overall tax burden and showed that total taxation in 1976 was 36.8 per cent of GDP. He quite rightly calculated our 1979 total taxation as about 34 per cent of GDP. This is a clear indication of the Government's action in this area since coming into office which was designed to lower the overall burden of taxation. These reliefs were spread widely through the community covering income tax, rates, motor vehicle duties, corporate taxes and capital taxes.

We certainly recognise the dissatisfaction with the growing burden of taxation, particularly on PAYE taxpayers, and we set out to give very substantial reliefs. A number of Senators have commented on the reliefs given and the degree to which they are substantial and have been substantial. As Senator FitzGerald pointed out, we compare quite favourably with our European partners in the size of our tax burden. While our overall burden as a proportion of GDP in 1976 was slightly above that of the UK, Germany and Italy, the reduction that we have achieved since then has brought us below these countries as well as being below the other EEC member countries. However, this favourable position must be viewed in the light of the fact that our per capita GDP is smaller than it is for the other EEC countries and our high level of unemployment and high dependency ratio also limit our taxable capacity. In general these figures show that our tax burden is somewhat smaller than that of our EEC partners. The Government are also, of course, concerned about the distribution of the tax burden between taxpayers, and will continue to make progress as quickly as possible towards a system which will prove—and I would not claim that anybody can produce the ultimate in equity—certainly to be more equitable to all tax-payers. I want to say in this connection that I, as Minister for Finance, am not satisfied with the tax system. I have said I do not regard it as being satisfactory from an equitable point of view, apart from other points of view, and that I am trying to work to attain a greater degree of equity in the tax system. I will have a word or two to say on that before I finish.

Senator FitzGerald made another point with which I would agree broadly, but I want to say something about it that may or may not have occurred to him. I am paraphrasing what he said of course and am not purporting to quote him. He said that we ought to be concentrating our efforts on that section of the community which is below the poverty line, or whatever phrase one wishes to use, to designate people who are in need. He seemed to be implying that we were doing various other things that perhaps we ought not to be doing and that if we wanted to take action that this is the area on which we should concentrate. I do not disagree with the sentiment but I want to point out that, if poverty is to be tackled, there are basically two ways to do so. In regard to those who, by reason of age or infirmity of body or mind, are unable to work and earn their own living, they must be assisted through the social welfare system. In regard to those who are capable of supporting themselves, provided they get the opportunity to do so, the only way anything worth while can be done for them is by providing employment.

With regard to the first category and the social welfare system, I do not want to go into undue detail, but it is important to point out that while our system has many defects and certainly is capable of very considerable improvement, nevertheless, in real terms the value of our social welfare payments have been increased under this Government to about three times what was achieved under the previous Government. Significantly that same figure is true if one goes back to the previous Fianna Fáil Government prior to the last Coalition. I am not saying, and I do not want to be misrepresented as saying, that we could not do a great deal more or that there is not a great deal more to be done but I am saying that, as far as that aspect of tackling poverty is concerned, we have at least demonstrated in real terms a commitment with which our political opponents tend not to credit us. On the contrary, they seem to suggest on many occasions that their commitment in this area is very much greater than ours. In regard to the provision of employment for those who are capable of working, the provision of an opportunity of employment for such people is the most fundamental way that poverty can be attacked. For those people themselves and for their relations the provision of a job with a reasonable wage is of fundamental importance and it is far more important and valuable than the alternative of handouts and social welfare payments. If one can provide reasonable employment this is the way to do it. In this connection I am very proud of the fact that no Government in the history of this State have been responsible for the creation of as much employment as this Government in a comparable period with that with which we have been in office.

I was rather saddened to hear Senator Robinson engaging in what I think would not be unfair to call a litany of Labour Party propaganda which one hears time after time. I was rather saddened because, as I think Senator Robinson knows, she is somebody for whom I have quite a high regard and really she is capable of a good deal better than what we heard from her this evening. I know that all of us who are members of parties on occasions have, perhaps, to deliver certain kinds of speeches that we might not necessarily choose to deliver. On some occasions that happens but not very often. I am sad to see Senator Robinson do this. I did think in a way from something she said, when asking questions and so on, that she was going to be hanging on my answers but it is obvious that she is not so I am not going to go into too much detail about the points she raised, tempting as it is.

However, there are two matters that I want to refer to which she raised. One is in regard to the question of the performance of the Irish punt. I am not purporting to quote her now because I do not have any record of what she said but I think it is a fair paraphrase to say that she indicated that she thought the Irish punt was very weak and that its position in relation to the EMS was in doubt. I am afraid that there is a considerable amount of misunderstanding here. The fact is that the Irish punt has performed very well since we went into the EMS. It has remained fairly close to the top of the band.

The object of the EMS was to create stability between the currencies of the countries concerned and, therefore, if there was a great deal of change in the exchange rates of the currencies concerned and considerable divergence between them, the EMS would be failing. In fact there has been relatively little movement in the relative values of the exchange rates concerned. The misunderstanding appears to be in relation to the difference in value between the Irish punt and sterling. The present value of sterling, as is well known, is due to the availability of North Sea oil, to what happened oil prices recently and to certain other factors. Nobody expects those factors to operate permanently but it is not my business to comment on the likely movement of any other country's currency. I do, however, want to say that the fact that there is a difference outside the bonds of the EMS between sterling and the Irish punt is not an indication of weakness on the part of the Irish punt. It reflects the movement of sterling as against all of the EMS currencies, including the Deutsche Mark which is generally recognised as being one of the strongest currencies in the world. Sterling has appreciated considerably as against the Deutsche Mark and the other EMS currencies.

It might be interesting to note that within days of our entry into the EMS we almost had to break the link with sterling because sterling was going through the bottom of the margins but just at the last moment it did not and so we did not break the link with sterling at that time. Subsequently when we did break the link with sterling because sterling went through the top people said, "Why did you not take the 6 per cent band and this would not have happened"? Within less than a fortnight it had gone through the 6 per cent band, so if we had taken the 6 per cent band we would have gained less than a fortnight extra in maintaining parity with sterling. However it is important to remember that the movement of sterling should be measured against the EMS currencies in general, not against our currency. The whole object of our entry into the EMS was to keep our currency in line with the other EMS currencies, and that is what we are doing, so that in so far as that is concerned, our £ is performing very well within the EMS.

Senator Robinson said something about there being nothing in the Bill in favour of women.

I did not say "nothing". I said "very little".

I am sorry, I do not have an exact record of the Senator's words. I would like to draw attention to one provision of the Bill which is of some importance and is unprecedented. The benefit is not confined to women but clearly the great majority of the beneficiaries will be women. The provision in section 4 brings in a new allowance of £250 for single parent families, a provision which is particularly helpful to widows, deserted wives and unmarried mothers who have children to look after. It is a worth while provision and, as I say, an unprecedented one.

I was interested to note that Senator Robinson did not feel it appropriate, for the reasons that she mentioned, to elaborate on her views on married women's tax. I did notice, however, that in the few words she said she indicated the kind of approach that she thought should be taken. I want to make it absolutely clear to her that I disagree with her on that. She is advocating discrimination and, as far as I am concerned, I will not go along with it. What I want and what I have taken some steps to achieve, although we have a considerable distance to go, is a system of income splitting. Senators may be aware that this is referred to in the terms of the national understanding as the direction in which the Government are moving. In this connection, it is the only way in which we can achieve reasonable equality without discrimination in the tax system. I would be interested to hear from anybody who thinks otherwise, the system they would propose and to demonstrate that their system would not involve discrimination.

In connection with the income tax question, I said in Senator Robinson's absence, and I should say it again now that she is here, that I was rather sad to hear her engage in what seemed to me to be a litany of Labour Party propaganda and that I had a high opinion of her and I knew she was capable of more than that. One of the matters she referred to in the course of that was PAYE. Whatever view one takes of this situation in regard to PAYE, really no member of the Labour Party or the Fine Gael Party should dare to open their mouths on the topic of PAYE.

We did not remove wealth tax, capital gains tax or the other taxes.

May I remind the Senator that wealth tax was worth approximately £8 million?

At the level it was at.

How far would that go for relief from PAYE but how far did it go towards creating jobs? That is another question. As regards the question of capital gains tax, the Senator will find that the adjustments made by us were adjustments which were making it an equitable tax directed at speculators not, as was done by the Coalition by directing it at anybody who for any reason, including having worked all their lives to build up a business or a farm, became liable. I am not going to digress into that area, but I want to point out that these are red herrings. As far as the PAYE system is concerned, the vitally important thing for anybody who is concerned with this area is what has been done to relieve the burden on the PAYE taxpayer by this Government and what has been done by the previous Government. The record in this regard is one that really most people do not realise. I rather suspect in fact that maybe even Senator Robinson does not realise just how bad it is. Under the Coalition in 1976-77 on a weekly income of £30 for a married person with two children an annual income tax of £18 was paid, under this Government this year, nothing; on £40, £153 was paid under the Coalition, nothing under Fianna Fáil; £50 a week, £289 under the Coalition, nothing under Fianna Fáil; on £70 a week, £634 under the Coalition, £244 under this Government; on £90 a week, £1,034 under the Coalition, £595 under this Government. We are talking in terms of earnings and payments of tax some years ago, which means that the sums involved in real terms were even greater and the difference is greater. I mention this to show that whatever dissatisfaction people may feel with the PAYE system, no member of Fine Gael or Labour has any moral right to speak on this subject having regard to their record, to their unwillingness or inability——

With respect to the Minister, is it conceivable that we are deprived of a moral right to speak of something that is due to some decision made in the past by a Government comprised of parties, of which our party was one, in circumstances which may be completely different from the circumstances which now exist? We are deprived of a moral right to discuss the matter?

The Minister, without interruption, please.

I understand Senator FitzGerald's intervention. I did not refer to anything he said because he did not refer to this topic at all. I will recall the context in which I have made this observation. Senator Robinson spoke with, as I said, a litany of Labour Party propaganda which included——

Now we are hearing Fianna Fáil propaganda.

——a ritual reference to PAYE.

A quarter of a million people marched.

In the context of the propaganda and official line of the Labour Party which was put forward by Senator Robinson I am entitled to say to Senator Robinson, speaking on behalf of the Labour Party, that her party and anybody who speaks similarly for the other Coalition party, has no moral right to lecture this Government on PAYE having regard to their record. However, it is not a matter on which I want to continue unduly; I merely wanted to make the point that, putting it in colloquial terms, people in glass houses should not throw stones.

Senator Whitaker gave a very interesting set of figures in regard to the share of tax and revenue of different sectors of the community. I was interested in his exposition of the question of indexation which indicated his objection in principle to the idea of indexation.

Senator Jago dealt with the same problem in practice and pointed out the consequences that would arise if this Government had applied indexation in regard to the income tax bands and thresholds. I do not think Senator Jago went on to point out the other dire consequences that would apply if one applied indexation in regard to indirect taxation, including increasing the duty on petrol by 19p a gallon and various other consequences of that kind. These are the practical consequences of applying indexation now being advocated, I understand, by the Leader of the Fine Gael Party and indeed by the spokesman on Finance for the Labour Party in the other House.

Senator Whitaker also spoke, as did Senator Hillery, about the question of claiming compensation for the increase in the oil prices. Senator Whitaker also spoke of claiming compensation for indirect tax increases designed to produce revenue to assist the poorer sections of the community. I agree entirely with the views expressed by both of the Senators. The economic reality is that we cannot compensate ourselves for the increase in oil prices except by earning more. There is no way we can simply adjust our wage packets and compensate ourselves. The consequences would be, as both of the Senators pointed out, simply to fuel inflation further. We must recognise the reality that our economy is that much poorer depending on the increase in the price of oil. We can compensate for it by earning more, by being more competitive, by producing more and selling more, but not by simply paying ourselves more with the same basic production and sale of Irish goods.

Senator Harte spoke at some length about the question of tackling tax evasion. He raised a point, I am not quite sure which year he referred to, but to make it clear I want to say that we anticipate this year, 1979, an increase in income tax receipts from the selfemployed sector of over 40 per cent. A considerable amount of that increase will be attributable to measures being taken to combat tax evasion. He advocated that there should be greater powers of investigation. He felt that there were not powers of investigation. I want to make it clear to him that there are powers of investigation but this Bill is providing for more powers of investigation, some of which we expect to be quite effective.

I gave public notice in my budget speech that it is my intention that in cases of tax evasion in the future the normal result will be prosecution. Heretofore the normal result has been settlement of the claim, acceptance of the settlement by the Revenue Commissioners consisting of payment of the outstanding tax, payment of interest on it and payment of a penalty. It was unusual to have prosecution. I want to give public notice again that, in general and in the normal case in the future, prosecution will be the result.

There are two major reasons for that. One is that it is important that the public should know that the Revenue Commissioners follow up tax evaders and make them pay interest and penalties. The other reason is—and a number of Senators referred to this—that there ought to be a socially unacceptable aura attached to tax evasion. Prosecution and the publicity attached to it will help to generate that aura. This can and has been misrepresented as snooping, spying and so on. I agree with the basic philosophy which was expounded in this regard by Senator Harte when he said that the whole question of tax evasion amounts to this: that people are not paying their fair share and as a result are increasing the burden on other taxpayers. That being so it should not be socially acceptable. The efforts that are being made to tackle tax evasion are far more vigorous than anything that has been done before. Very substantial increases in staffs have been provided and we are providing in this Bill for quite important new powers of investigation and enforcement. If necessary, I will come back to the Oireachtas again if more powers are needed in that regard.

I do not want to give the impression that it is intended to have a kind of a witch-hunt. That is not the intention. It is intended, however, to use the powers we have to take the necessary extra powers and to provide the necessary staff to try to ensure, in so far as we can, that all tax evaders will be caught up with and will pay their fair share. There is no equivocation about this nor would I want anybody to be under any illusions about it. We mean business in this regard.

I have been asked in this connection whether I propose an amnesty. I do not. I have no plans at the moment for any such thing. In this Bill we are talking about offences committed after the passing of the Bill, so anybody who feels that they want to make a clean breast of it can do so quickly. It is traditional with the Revenue Commissioners to treat more leniently people who voluntarily disclose their evasion than those in respect of whom the Revenue Commissioners have to engage in investigation and detective work to bring to book.

In regard to the point raised by Senator Harte regarding profits made by certain companies, the amount of profit that a company make in the abstract does not mean anything. It has to be related to the capital employed. When that is done sometimes the figures which may appear very big in the abstract reveal a fairly poor return on the capital employed. Furthermore, as regards the tax paid by a company this depends, of course, on very many things. For instance, if the company are engaged in the export market and are entitled to profits on manufactured exports to be free of tax or to benefit under various allowances available for the encouragement of investment, that is no criticism of the company concerned. If it is intended as a criticism of the system we operate that is a separate argument. We would have to go into in more detail to see whether the encouragement we are giving is effective and is helping to create employment, or is it doing so at too high a cost.

Is it argued that it is not doing that at all? To the best of my knowledge at the moment the kind of encouragement we are giving is worth while. A firm which, for instance, get tax free profits on exports of manufactured goods should not be criticised just on that ground. If there is any criticism to be made it is of this system that we are operating. There is another way to tackle that problem if somebody wants to do so.

Senator Lambert raised a matter in regard to the home improvement allowance. He made a point about the operation of this, that one has to apply for a form to get a form. I do not blame him for making these observations. The wording of the Schedule relative to this is a little unfortunate. If I tell him how it will operate it may make a little more sense and not be nearly as formidable as it may seem. Supplies of the printed form will be given to registered persons, whether they be contractors, people working on their own and so on. They will also be given to the National Manpower Service.

When a householder engages such a person he will be given the form by the registered person. It will be filled in and the registered person will complete the last part of it. This form, with details of the work to be done, will be sent to the inspector of taxes who will then forward a claim form to the householder on which he can claim his tax relief. This is where the idea of sending in a form to get a form arises. That completed form, signed by the registered person and given out by the registered person to the householder, is what is sent in to the inspector. Once the inspector sends the claim form to the householder that is a protection for the householder. Whatever happens afterwards between the Revenue and the contractor, there will be no difficulty for the householder. In other words, that will establish the householder's rights to claim this relief provided the work is carried out and so on. There can be, and will be, no argument after that form is sent to the householder by the tax inspector. If it turns out that the registered person should not have been registered that will not be raised against a householder. That is an argument between the commissioners and the registered persons. To some extent this is a protection for the householder.

When one analyses the various provisions they are not as formidable as they might appear. The main degree of formidable requirements relates to the combating of evasion and will present no problems for the genuine householder and the genuine contractor for whom the operation of the scheme should be relatively simple and straightforward.

I was glad that Senator McGowan welcomes the youth training and work experience programmes. I agree with him. They have been quite successful and they are useful. He expressed a view from which I would dissent somewhat. He said that he would rather spend more money on such schemes and not spend it on recruiting skilled people from abroad. He would rather train people at home. I understand that, but the position is we have a number of bottleknecks because of the absence of certain skilled workers. The existence of those bottlenecks is creating a situation in which numerous semi-skilled and unskilled people who could otherwise get jobs cannot get them. It is well worth while to try to recruit these skilled workers and get them to come back from abroad, apart from any other considerations, because for each one of them there would be very many more jobs created.

There were some observations about the levy, the butchers and so on. I will not go into that on this Stage. If anyone wants to raise it he can do so on the relevant section on Committee Stage. I will go into it in more detail then.

I thank the Senators for their observations.

Question put and agreed to.
Agreed to take remaining Stages today.