It is nice to see the little flicker of life return, even if temporarily. The text shows political distortion of the facts. Let us give the Minister responsibility for that. It shows most seriously an unawareness of real issues and a complacency. The budget, of course, had a purpose, which was to keep reality away until the autumn, and to open the options for a general election. The economic facts are coming home to roost sooner than the autumn, perhaps a little sooner than the Minister and his colleagues thought.
The purposes of a budget are more than simply to obtain enough money to pay for the services the State requires. There is also the major purpose—or there ought to have been over the past 40 odd years—of having an influence on the economy, either to stimulate it or to do the opposite, to cool it. I do not propose to spend too much time on detail in what I have to say, because I want to devote my time to the major charge of the mismanagement of the economy since the present Government came to power and, indeed, the damage they did before coming to power by their performance in the run-up to the 1977 election.
I can put the burden of my charge quite simply. At times when the economy is doing better than the normal growth line which it is possible to determine over fairly long periods, then it ought to be the purpose of budgetary policy to bring growth back to that sustainable path. When the economy falls below its sustainable path, it ought to be the purpose of a budget to raise it so that the cycles, larger or smaller, that we know to be inherent in market economies, and that vary in their intensity from time to time, and vary in their intensity on us as a small open economy which is part of a rapidly integrating and already very integrated world system can be levelled out. The task of a budget is also to level out those fluctuations and to see that an optimum rate of growth is maintained in the calmest possible conditions.
The central mismanagement the Government have been guilty of for the basest party political reasons is that, instead of behaving in a counter-cyclical way with the budget, they used public moneys, and used them incompetently, to exaggerate the swings in each case. Instead of behaving counter-cyclically they got themselves, for trivial and stupid political reasons, synchronised with the swing, to that they exaggerated the swing in each case. Now in recessionary times they are making things worse, instead of being able to mitigate and to minimise the effects of some internal and external factors on us.
I have talked about complacency in this rather surprisingly political document. On page 2 of the circulated text it is stated:
The remaining important budgetary parameter was the need to maintain momentum in the Government's pursuit of equity in the taxation system.
The aim is an important and decent and laudable one. We see all over the world a tax revolt which presents real difficulties for Governments. We see that people want more public consumption but less taxation, and anyone who wants to be fair about it knows that those two desires are not reconcilable. But if taxes are to be paid on the levels that are necessary and if some sort of calm in society in the possibility of a reasonable evolution without confrontation is being preserved then taxes should be seen to be as equitable as possible, and since we all inherit a complex system to which we add little increments in budgets, of course we all inherit a complicated system and nobody suggests that in a continuing situation one can suddenly have a drastic and enormous reform. I accept that the Minister has practical difficulties. But the visible trend of taxation policy ought to be towards equity, for a variety of reasons that we need not pursue. The visible trend of the taxation policy indicated in this Bill and, indeed, indicated by the Government in its period of office is the opposite to equity. It is the production of inequity, of inequality in a number of ways that I will indicate.
In the past there has been an effort to introduce reasonable forms of capital taxation here and the Government have backed off that in the case of the wealth tax. In the past when there was no taxation on farmers equity demanded that there should be. We have had in the past a very odd system of taxation on industry, and equity would demand a movement to a more reasonable payment of tax in a very refined way that would have been a stimulant to growth. What we have here about company taxation is a backing away from that.
For the vast majority of people who have small incomes equity demands a direct taxation system which is based on their incomes, on their ability to pay, involving, therefore, income tax or something like it. We see in this budget a movement which is not very harmful, perhaps, for the Minister or for myself. But for old age pensioners and for all of the weakest and poorest sections of our society it is very harmful. That is an increase in indirect taxation. Those are practically all the heads that one has got. One has the taxation of industry, the taxation of wealth, of capital wealth, and the taxation of wage earners. It seems to me that the direction of taxation policy under all those heads is towards inequality and inequity. That does not surprise me a bit. I would have expected it knowing the complexion of this Government. What does cause me both a little outrage and a sneaking sort of admiration at the sheer brass of it is the statement that the Government needs to maintain momentum in its pursuit of equity. To say it in that brazen way while doing the opposite is a nice trick. But it is a trick that needs to be pointed out.
I referred to what I consider the drift away from reality and the distortion of facts that I have found in this document. I know that one can play tunes on the figures. I know one can play tunes dishonestly and one can also play the tunes honestly. When there are a whole series of assumptions to be made and there are a range of figures within that assumption, one can pick the most adverse or the middle or the most benevolent assumption. The way that one's numbers come out depends on a whole series of assumptions of that kind whether one goes in the middle on each case or whether one goes to the extreme optimistic or pessimistic side, so that not all variations or figures are dishonest. But my feeling is that on pages 2 and 3 of the Minister's statement we are getting a long way in the direction of dishonesty. Perhaps it is only benevolent incompetence; perhaps it is worse. Time will tell and, indeed, judge this by some of the Minister's own statements as time goes on. But I see in the circulated statement the Minister says:
As I indicated in the budget statement, the Exchequer borrowing requirement for 1980 has been calculated at 10.4 per cent of GNP compared with borrowing last year equivalent to 13.7 per cent of GNP.
Then the next sentence is:
Such progress, however, will have to be continued ...
That looks as if "such progress" refers to a reduction from 13.7 per cent of GNP last year to 10.4 per cent of GNP this year as Exchequer borrowing requirement. Perhaps that is just the use of the most benevolent assumptions possible. I know serious people who, perhaps, are using the most pessimistic assumptions possible. But they get a very different figure for percentage of GNP as Exchequer borrowing requirement for this year and they get a figure quite close to 13.7 per cent, not as high, but quite close to it. We cannot, in the nature of things, know definitively who is right until the year is over and until some arithmetic is done. But I am just putting it on the record because time will tell—and it may not be very important to the Minister or to myself at that stage.
It is a pity in fact that we scrutinise things retrospectively so little and so carelessly in Ireland, because it makes all sorts of politicians feel that it does not matter too much what they say because nobody is going to look back carefully anyway and, provided it is 18 months down the road, nobody really cares. So even if one is not telling lies, one can take the most optimistic assumptions and one can fudge it when the time comes if one is ever challenged but it is a hundred to one against one being challenged.
All of those assumptions that the Government have made are wrong. I get in the mail, though I am not a Deputy obviously or I would not be speaking here, letters from school managements of various kinds saying the money is running out; it is running out acutely and will I please approach the Minister for Finance asking to do something about this.
I am putting these representations to me on the record now.
Those of us who have some sort of relation with local authorities around the country know that there is an intense apprehension about the actual availability of funds towards the end of this year. All through the local authorities, it may be in fact that the lack of provision in our initial budget was such that we may not get through the year without a supplementary budget. My own view, from talking again to serious people who may or may not be on the pessimistic side, is that we are not going to get through the year on the moneys voted in a number of important areas.
This suggestion, because it is very slightly hedged, that we can get through this year with 10.4 per cent of GNP as an Exchequer borrowing requirement, is seriously wrong. Time will show it to be seriously wrong. The Government have not tackled the question which is exceedingly serious for our credit worthiness and for our ability to maintain the parity of our currency within the European Monetary System of the level of Exchequer borrowing. Phrases like "such progress" are misleading. It is not possible with certainty to decide whether that sort of misleading of people is honest or dishonest. Time will tell. It is possible, though, to form an opinion. Those numerate people in the Government, or who have recently been in the Government and who presided over the 1977 manifesto, knew that the targets were not honest. The seriously numerate people with a little bit of economic understanding in the present Government—I think they are fairly few—know that the budget was, in fact, not honest.
I want to refer to the matter of incomes policy. I want to add my voice to those who say it is crucially important and to indicate why I believe what the Government has done in this context is counterproductive. Whatever our political outlook we all want to see the country get richer; we all want to see the benefits of that growth spread as widely as possible. Of course we want to see the better funding of all of the social services and we want to see the raising of the weaker sections of the community and better education and so on. Those are the ordinary aspirations of everyone in political life shared by all the parties and by people of no party. Again, one could say that the only way that this is done is by securing growth. One cannot consume, except for a little while—and the results are, unless brilliantly managed, adverse if one tries—more than one produces. Also we know that in the context of the European Community and in the context of the contemporary world economically, in the context of the huge transfers of wealth which are now taking place away from the traditionally developed parts of the world, the possibility of de-industrialisation—not simply of holding the situation, but de-industrialisation—of job losses in the industrial sector, the shrinkage of the industrial sector, is not alone possible but very easy to permit to come about. We see a country with the great wealth and the great traditions and great organisations of Britain close to us, much stronger than us, and we see a process of de-industrialisation taking place there. The level of wage demands and the rate of inflation and the competitiveness of products, especially within a community context, are an important determinant of whether this de-industrialisation takes place or not.
I am talking about de-industrialisation now because we see how fatuous the promises of three years ago were in regard to employment levels. I suppose that some of the people who made those promises at the top believed them. I know in relation to the rank and file through Fianna Fáil who cannot be expected to be knowledgeable in this, if their leaders tell them something, I do not question their good faith for a moment; they believed them and they said them in good faith. But we see how fatuous those things are now. Of course labour discipline, labour peace and an evolution of wages which is related to productivity and the level of production are crucial in a successful economy. These things are capable of being influenced profoundly, they are capable of being influenced in fact to a level that determines what happens, by what Governments do. That is why the dishonesties, the deceptions and the lies, and the things that were not lies but were said in good faith but were untrue, of three years ago were so disastrous, why their repercussions are coming back on us now.
After the oil shock of 1973, the Coalition Government did borrow and did do stimulant things and did increase the Exchequer borrowing to a level of GNP that had not existed previously. We did those things; we did them with our eyes open; we did them in the face of the sharpest recession since the early thirties. It is possible that we were optimistic about the rate at which one could stop doing that and get back into balance. But we were making strenuous efforts in 1976 and 1977 to redress the balance at a time when we knew that the world economy had turned around, that the slump was ending and that, economically, relatively better times were coming. But the 1977 election was an auction organised by the Opposition of that time as to how much could be borrowed and how much could be spent and what Scrooges we were and how wrong we were to try to manage the economy in the way we were doing it and to try to get back on the rails. What, in fact, for party political advantage, was done three years ago was to release forces in our society that are still echoing through it, possibly harder to control now than they would have been then but certainly having wrought terrible damage in the intervening period. It was done in the most cynical and opportunist way for party political advantage. We are still paying and will go on paying.
On the evidence of the complacency and incompetence in this speech there is not even a recognition of what needs to be done, much less a willingness to do it or where there is a certain genuflection towards doing it, it is done in the way of fudging the figures, for example, as I have already referred to, in our borrowing requirement. People are told that there is endless money to be borrowed. There was a debate in 1977 as to how much more we, the Coalition, could borrow to put into the economy if only we would do it, if only we were not such Scrooges. We were being told by the same people now responsible for the running of the economy that we could borrow much more, that we were not stimulant enough, we were not borrowing enough. Everybody remembers that debate. It is interesting to see how farcically and cynically and trivially people have totally reversed direction in the intervening years. I do not think they believed what they said then; I do not think they believe what they say now; I do not think they believe anything very much except the cosmetic action of PR, to try to get votes. There is no passion or conviction or honesty or real depth in regard to the economy, good or ill, up or down, in or out of office. There is just cynical manipulation. But we are paying for it most desperately because if one releases those forces inside society, switches them on, the genie gets out of the bottle and then we have the exhortations of this disgusting kind, switch them on and switch them off again. I quote from page 6 of the Minister's speech:
All sections of the community must appreciate that we have been paying ourselves too much, and that, if we continue in this direction, we are behaving irresponsibly.
The Minister says that all sections of the community must appreciate that. Must they? Let me offer the Minister a quotation from a different source. I quote from The Kerryman of 13 June 1980. I quote from someone who is described in the opening sentence of the piece as “North Kerry Fianna Fáil Activist, Con Riordan”. He says:
The organised sections of society are listened to and succeed in having their demands met whilst the old, the poor, and the vulnerable are left at the mercy of inflationary market forces that make them poorer still.
That seems to me a reasonable description of what is happening. But the Minister complacently says all sections of the community must appreciate that we have been paying ourselves too much. I listened, fascinated, yesterday to the analysis of Senator Alexis FitzGerald. I hope, for the sake of any sort of decency and equity in this country and for the sake of the reputation of the Government, that the Minister will be able to prove his calculations wrong when he comes to reply. I hope so. I doubt it, though. What Senator FitzGerald showed very brilliantly is that if one is rich with these taxation changes one does better than if one is poor, a lot better.
I mention, in passing, something that is in a way trivial but it is symbolic because what Ministers do is symbolic and is noticed and is watched all over the country. In our time in Government, partly for economic reasons and partly as an example of energy conservation, we moved from larger Mercedes cars to smaller two litre Peugeot cars in the great majority of instances—different Ministers have different cars for reasonable reasons. But we gave an example of that. What our successors did immediately was to move back to the larger cars. I saw one of them claiming credit for a subsequent return to a smaller car about a year ago. But the movement on assuming power in 1977 was the bad example movement from smaller to larger.
The movement in taxation as analysed by Senator FitzGerald, who brings great competence to these things as well as, in my view, great integrity and great passion, and is a man to be listened to, indicates a growing inequality in the taxation system. But the Minister says complacently that all sections of the community must appreciate that we have been paying ourselves too much. In my view that is not true. If one talks to a small farmer now, with his costs escalating at 20 to 25 per cent a year and who may be getting the same price for stock and getting a few pence more for a gallon of milk, with the price of what he sells either not increasing at all or increasing by a few per cent, with a very dramatic and rapid squeeze on his margins, it is complacent and offensive to tell him that he is paying himself too much.
With small businesses, when interest rates go to their present level and when interest rates are such a significant part of their total accounting and have such leverage on their final profits, when we know that in many of these instances small businesses are being squeezed very hard at this moment, it is complacent and offensive to say they are paying themselves too much. In the case of the lowest paid workers it is offensive and complacent to say that they are paying themselves too much. In the case of those incomes that are determined by the Minister and his colleagues of recipients of various sorts of social welfare where the rate of inflation has eliminated the benefits, it is offensive and complacent to tell them, not that they are paying themselves too much, because they do not pay themselves, but that the State is paying them too much. That is the sort of stuff that does not make for social peace, for harmony, for cohesion, for labour discipline, for reasonable wage demands. That is the sort of complacent and offensive behaviour that makes for the exact opposite. That is what the Government have been doing in pursuit of the policies and the attitudes which arose from, I was going to say, the most dishonest and contemptible and deceitful thing that had happened in Irish public life but that would be, perhaps, putting in on a special pedestal. It is on a par with a lot of other things in their history. But those are the actions and the behaviours that necessarily arose from the economic policies and the promises and, indeed, other than economic policies, of the manifesto of 1977. Perhaps I will quote the source I mentioned a minute ago, Mr. Con Riordan. He says he feels encouraged the Institute of Taxation, who
My sense of betrayal of the promises we were authorised by the Manifesto to make, and, above all, my deep personal sympathy with the people who believed us and took our advice...
He says he feels entitled to express his disappointment at the Government's performance. That is why it is complacent and offensive, at an exceedingly difficult time in our economic history, to say that all sections of the community must appreciate that we are paying ourselves too much. It is incompetent as well.
I turn to the matter of inflation because anyone who has any experience of wage negotiations knows that to say to the poorer sections of the community that they must take a cut in their real living standards is a difficult thing. It is not unthinkable because the people being addressed are generally responsible, generally patriotic. Generally in what they ultimately do they are high-minded and decent people who want the success of our country and our economy. One may ask them, if one tells them why, to please take a cut in their income this year. They may even do it. But when one is reducing the taxation on the richest and when one is reducing the taxation on the industrial sector and then asking them to please take a cut to unscramble our eggs, to save our bacon, to rescue us from the mess we have made, then one has to have pretty good arguments because the rate of inflation is a crucial determinant of the rate of wage claims. People making the claims are not fools. They may say they accept that they cannot go on getting richer every year, they notice certain sorts of figures rising and they notice the profits of oil companies rising, they notice the profits of banks rising, they notice the volume of exports rising, they notice the volume of production rising, they notice the volume of outputs from the land rising. They say the Government make the argument that they should not get any richer this year. They say they will think about it, in the circumstances. But the level of inflation is crucial. And what does our competent and dedicated truthful Government do? I quote from the Minister as to what the Government do by budgetary policy at a very difficult time when the level of wage settlements is crucial this year in our econmy:
However, the increases in this year's budget added less than 4 per cent to the cost-of-living index.
The Minister is actually boasting. In fact, less than 4 per cent means 4 per cent; with a little bit of using the figures in the range of guesses, it might be a little bit more than 4 per cent. There are people who are neutral and who are outside who make it a little more than 4 per cent. There are people who take the pessimistic range of the variable figures and who make it a good deal more than 4 per cent. But let us say that this delicate euphemism of less than 4 per cent means 4 per cent. We will know in due course, because that figure will come out for those who want to look back and those who want to judge who is telling the truth. We will know that in due course. We will know it when the year has ended, but 4 per cent is not the sort of figure that the Government should be adding to inflation. It is the sort of figure that in an appropriately-run economy would comprise the totality of inflation, and you could make the argument that 4 per cent is too high.
There are countries in the market economy world at this moment running inflations of less than 4 per cent while we have this appalling complacency of saying that all we did to an already acutely inflationary situation was to add 4 per cent to it, then the gall to turn around and say to workers, "You must not expect compensation in your wage packet for the inflation that is taking place. Please take a cut". Workers will take a cut or will accept no increase in the context of honest Government and of a serious effort to solve problems but to ask them to please take a cut in their living standards, in the context of the sort of complacency and mismanagement that we currently see is to ask the impossible. It is an offensive request.
You can do those things if your own house is in order and if you have a record of truthful dealings, but you cannot do those things with the possibility of success with the sort of record that this Government have—complacent and offensive.
I want to turn to that part of the Minister's speech where he says that Chapter 4 of the Bill provides for the resource tax. He goes on to say what the rate of tax will be and then he says that, as he said before, it is not the Governments intention that this tax should be a permanent feature of the farm tax system, that it will be reviewed at the end of the year and so on in the light of its operation. I am not opposed to the taxation of the countryside or of farmers. I am proud to have been a member of the Government who grasped that nettle. Precisely the sort of inequity in the taxation system that I have complained of was that farmers in the past should not have been paying tax. A situation of where a farm worker was taxed while his employer, who was a substantial farmer, was not taxed was socially divisive and could not be permitted to continue.
Again, we have an example of the classic ignorant mistiming which arises partly just from sheer incompetence and stupidity and partly because the Government trapped themselves as a result of what they did in 1977. I said that taxation policy and indeed Government money and financial and economic policy as a whole should be counter-cyclical—when things are in trouble raise it a bit, when things are getting over-heated, cool it a bit. That is putting it very crudely. Is it possible that these people with all the sophistication of their grassroots and their delicate organisations spread through the country do not know what is happening in the countryside, do not know what is happening to farming? Is it possible that they do not know what farming needs? Is it that they are that stupid and that ignorant? Do they not know that at a time when margins contract, as they have been contracting dramatically, the way you solve the situation both in terms of the national economy and of the farm sector is to put up production? Do they not know that Ireland needs now to raise its production and intensify its production in every sector? Do they not know that farmers need to be encouraged and not discouraged to invest? Do they not know that you cannot get increased production except by increased retention of profits for productive investment? Do they not know that you cannot readily lay your hands on that investment money if it is being drained away with higher costs for your own personal and family consumption and with this sort of tax as well? Do they not know that a taxation system ought to be delicate in the sense that it coaxes people to increase production? It ought to be subtly tuned so that people are allowed for what they put back into higher production and that money is not taken away on a flat-rate basis to drain them at a time when they need extra investment to get over contracting margins by putting up products, by putting up volume. Do they not know that the cycle in farming is not a matter of a month or a year but of five or ten years? This means that you need steadiness and continuity.
Why put your foot down to take it up again? Why say to an industry that they are to be discouraged in this year when farm incomes are dropping dramatically but that since they have protested loudly the tax will be reviewed at the end of the year? What sort of complacency and incompetence is that? The industry should be given reason for confidence and continuity. They should not be thumped at the moment of their greatest disadvantage. Whether that is just is not the point I am making. Whether it will yield much money is not the point I am making. The point I am making is that it is stupid and incompetent because it is inappropriate in time, because it is not being followed through and because it is inappropriate in its nature in relation to what the countryside needs now.
Farmers' spokesmen say that farmers are willing to pay a fair amount of tax. When you analyse it that means very little, but I am not making that argument. Nobody likes paying tax. Everybody will argue like hell especially when there is no tradition of paying it. As it comes in incrementally people are bitter about and try to oppose it. I am not defending those points of view. I am happy that farmers should pay tax but it is the silliness of this tax that I am appalled by.
Let us turn to the industrial taxation situation which is referred to in Chapter 6. We have had a system for a long time in both types of government in this country—Coalition and Fianna Fáil administrations—of export tax relief. My own information which I am not certain of but which I believe to be true is that the original input of thought came from someone who has political opinions but who is not primarily a politician, certainly not a practising politician. It is a system that has served us well. It is a system that in my own time, as Minister for Industry and Commerce, I tried in difficult times as well as in easier ones, because I had some experience of both, to operate. I always thought it was right to have such a policy. I argue that it is still right to have it, but in my view it is only half a policy because we have to look in our particular circumstances at intense stimulation of indigenous things. That happened. The IDA changed emphasis a bit both in my time and in my successor's time, and that is good.
I would argue also that we need a strong public sector in our particular circumstances as well. In other words, we need to balance the inflow of investment from foreign companies in response to export tax relief and to virtual freedom from all taxation on profits made from exports, with a much more positive and stronger industrial policy that is indigenous. It is not that the present policy is wrong but it is incomplete. In the discharge of a promise by my successor some considerable time ago I see the enactment of the legislating of that promise, if I can express it that way. The new rate of corporation profits tax is about 10 per cent in respect of the income of companies from sales of goods manufactured by them in this State. The scheme consists of a new rate of corporation profits tax with that objective in view. The change there is that it has not been possible in the Community circumstances to sustain the differential between taxes on profits from exports and profits from sales indigenously. The passing of that differentiation may be a good thing because one could see the unbalancing of our economy as between companies who defended their places in the domestic market and companies that were set up exclusively for exports. The long-term existence of a differential like that can have serious distorting effects, and these effects were beginning to emerge. Therefore, so the basic idea of taxing profits in an across-the-board way regardless of where they accrue is not an idea to which I would object.
I have two things to say about this section. Firstly, we are told it is intended to operate from 1 January 1981 until 1 December 2000, that is a 20-years run. It interests me—and if I knew more law and more governmental and constitutional history than I do, but I do not know those things and I do not know the precedents—that this Bill purports to tell budget makers in the year 1999 what rate of tax they will levy on the industrial sector. It is interesting to tie down a tax rate for 20 years in advance on the largest and most dynamic sector of the economy. I wonder if it is legal. Presumably it is or it would not be there. I wonder if it is practicable. Future governments may decline to have their hands tied in that way. I wonder if it is prudent, because with the rate of change in the world now who can say exactly what the situation will be in 20 years time? Who can say truthfully that in 20 years time it will be appropriate to tax industrial profits at the rate of 10 per cent? It does not seem to me to be either prudent or appropriate. Since the objective is to be able to say to incoming industrial firms, "That is a promise, and it is a promise that will hold for 20 years", I see the point of it but I am inclined to wonder about that point.
The other point I would make is that we see what is happening to the taxation on farmers. We see what is happening to the taxation on sales and we see what is happening to the taxation on people who are wage and salary earners. We see a trend, and of course, we see efforts over and over to adjust the bands on income taxation to take account of inflation, and we see approximately 60,000 or 100,000 people being taken out of tax altogether by a particular adjustment at band level but in the course of inflation over the next year or so they will come back into the band again. We do not see any dramatic tendency downwards in the level of taxation on incomes. We see a fairly dramatic tendency upwards in the level of taxation on the countryside but we do not see any tendency downwards in the levels of the various cascade taxes, value-added taxes and so on in our economy or in other economies; the European Community may be asking us to add a little on for their budgetary purposes one of these months or years also.
We see a dramatic downward tendency in the taxation on company profits. That is socially disruptive and imprudent and bad taxation policy. If you ask me if I believe in the heavy taxation of the profits of companies, I will not answer that with a "yes" or with a "no". I will say that it depends, because my belief is that companies do very different things with their profits depending on a whole variety of reasons that we need not now analyse, and that some portion of company profits should be very heavily taxed and some portions should not be taxed at all. I want to see a delicate and graduated method of company taxation. In other words, I am for all the allowances which genuinely go back into keeping our plant competitive, and that is always a problem in a little country with small units and a small domestic market, everything that contributes to the introduction of high technology which will remain competitive with our rivals in other countries. I am for everything that improves the quality of life in the work place, the beauty of the workplace and of the factory and its surroundings. I am also for everything that diminishes pollution, and that is dear, as you cannot have clean industry at low cost.
But the things that are spent in phoney ways for giving executives higher level real income than they have to tell the taxman about and the things that are spent on distribution, I am not for. So one wants a very different system of allowances and one wants a higher rate of tax on the residual. The yield may not be very different but the social justice and the equity and the way that a taxation policy coerces our industry to go in the level of beauty, environmental concern, high quality of working environment and the retention and, indeed, the increase of competitiveness and the increase in the intensity of capital investment are well worth while. One can coerce industry that way with taxation policy or one can coerce it the other way. It seems to me that this 10 per cent rate is coercing it the other way. It seems to me gravely iniquitous.
I am not a farmer's leader but I am a farmer and I very often disagree both publicly and privately with what the leadership of the farming industry in Ireland say, but how does one justify the resource tax to farmers and the levels of farming taxation going dramatically in one way when farming is shrinking in its profitability and when farming desperately needs retained profits to intensify production? How do you justify that when you compare it with little Irish industrial plants that never exerted themselves catering to a home market, not trying very much, not re-equiping, not capitalising, just mining the resources of the capital that the company represents?
There are plenty of those little companies. They have a limited life. We know how lack-lustre their management attitudes are, that there is no investment in them, that they distribute more than they ought and that they have a dramatic reduction in taxation while at the same time a farmer down the road has a dramatic increase in taxation. Why is an industry employing ten people different from a farmer employing ten people? Are the ten people working on a farm not useful socially? Is managing the resource of a farm and a herd of cows different from the managing of a factory? Why the inequity of this and why the dramatic movement in opposites? I think it is bad and it is foolish.
I have said this before and I will say it for the record of the Seanad—I see very little difference between the policies of the two major parties in this country but I see an immense difference in their morality. However, I could contemplate in the appropriate circumstances a coalition with Fine Gael but how could one coalesce with people who put out the 1977 manifesto that nobody is ashamed about, except a poor man like Mr. Con Riordan in North Kerry? I wonder how long he will remain in the ranks of the party for which he now purports to speak. He says in another place, referring to the present Government that their record in the economic field is diabolical. That is right, but nobody is ashamed, nobody resigned and nobody criticises the leadership except people like Mr. Riordan who are birds of passage in terms of their position in the party—an odd flicker of a conscience. Nobody is appalled that it was dishonest or that it is incompetent or that it is complacent. We see the frenetic efforts being made. One is reminded of a mother bird's reaction when one goes near her nest. She will go off in front of you, making efforts to draw attention to herself and to lead you away from the nest. What we see from the present Government are dramatic efforts to stop us looking at the economy and superb public relations about everything else in sight.
I have dealt with the major themes in the Minister's speech. I want, in closing, to reiterate a number of major conclusions that I have drawn. All prudent budgetary policy tries to counteract the cycles that occur in the economy and that are particularly damaging to an economy like ours which is small and open. The Government trapped themselves in the lies of 1977 so that all of their activities since then, far from being counter-cyclical, have been stimulant to the cycles which were emerging from the working of the economy.
I am making a very serious charge: in terms of the management of the economy, it is the most serious charge that can be made—that for trivial, partisan, party political reasons the Government are going the road of making the economy very hard indeed to control. I have made the point that in a small open economy, at a time of recession in the world and when world trade is slowing, especially for an economy that is not simply small but which exports a very high percentage of its gross national product, the rate of evolution of wages is exceedingly important.
Price changes are the biggest determinant in wage changes. Wages follow prices as a rule. There are moments when wage demands can be inflationary, but generally they compensate. With the great rise in the price of oil which occurred after the oil shock in 1973 and which has recurred more slowly in a number of steps during the period in office of this Government, we have seen inflation brought in from outside. Nobody denies that. Nobody who wants to make any shot at telling it like it is can try to minimise the seriousness of the inflation that was brought to us due to the increase in the price of energy, or indeed the seriousness of the transfer of resources away trom us because of increases in the price of energy. I have to say that after 1973, with the continued existence of OPEC and the great success of the original OPEC manoeuvre, anyone who thought in 1977 that it would never happen again was either stupid or dishonest, or both. It is obvious that we are living in a world in which in the foreseeable future, probably until fusion becomes technically feasible, and that will be a long time away, we will have manipulation of energy shortages and the transfer of wealth away from our economy because of the high cost of energy.
I recall, with some contempt, the efforts of people now in Government to minimise the seriousness of those things during my period in Government. I am not minimising them now—of course they are serious—but the prudent response, firstly in recognising those dangers and secondly trying to minimise them, realises that when you get an imported inflation the whole trick is not to roll it on at home and let the further subsequent stimulus come from internal developments, because the engine of inflation is not continuously the same.
It varies from time to time and it is never a single thing: there is a contribution from wages and there is a contribution from Government economic policy, Government financial policy, Government taxation policy. There is a contribution from the rate of evolution of raw materials worldwide. There is a contribution from a specific rate of energy prices, and so on. It is always complicated. There is a shifting dominant force, and it is a very important thing in our economy not to follow up the thump that we get from some external price explosion by adding to it with imprudent Government policies. If you get that you cannot hold the wage front. If you cannot hold the wage front you get a subsequent rolling on of this wheel of inflation because of internal causes which were not alone not controlled but were fermented by imprudent Government activity. It is precisely that that seems to me so appalling in the policy outlined in the Minister's speech. It is diametrically inappropriate, directly opposite to what our economy needs, and it makes the economy very difficult to control.
Certain persons will respond usually in ways that prudent people can predict. It is not foolish to think that if inflation is 20 per cent workers will want a 20 per cent wage rise. You do not have to be clairvoyant to know that that is likely to happen. It is not imprudent to predict that if the oil supplying countries can obtain the sort of disciplined control of the market and of the prices they have got they will go on increasing prices. They will try not to do it in a way that will wreck the market economy of the world, but their own councils are divided and there are very different voices at OPEC meetings.
These are given things: they are things that we know about and that prudent governments have to try to counteract. What I find so appalling is the exacerbation of the difficulties by doing diametrically wrong things. Nobody denies the reality of the difficulties, but it is the inadequacy, the stupidity, the fatuity of the response that I find so appalling, and also the lack of frankness.
This Finance Bill and this budget are not in fact budgets for the whole year at all.
I am sorry the Minister is not back because the record will not show that it is the Minister of State who is occupying his chair. I want to put it on the record, because the record has ears but no eyes. I am sad the Minister is not back because I shook him out of his torpor with a reference to the relationship between himself and his civil servants. I want to go back on that because in my own time in office I had——
