Finance Bill, 1982 [ Certified Money Bill ] : Second Stage.

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

This Bill confirms the taxation changes proposed in the budget of 25 March. It also provides for the introduction of further improvements in the tax code which are aimed at achieving a fairer and a more efficient system. Some of the new tax measures proposed in the budget, though perhaps of relatively minor importance in the overall context, involve substantial changes in existing tax provisions.

Before I describe the contents of the Bill, I want to refer briefly to recent developments affecting our budget and taxation policies. In the course of my budget statement I said that the Government's principal concern was to achieve a proper balance between reducing our dependence on borrowing and improving employment. We are making progress this year in reducing borrowing for day-to-day purposes. The budget targets are within the limit for the year recommended by the EEC. The special PRSI tax concession of £312 which was introduced in April will reduce tax revenue by £45 million this year and I have said on a number of occasions that this has to be made good. I am now examining the results of a review of departmental expenditures with a view to making proposals to the Government for savings this year. If the £45 million shortfall cannot be made good through expenditure savings, then I must consider taxation options, though I regard this as very much a second best approach.

There has been considerable publicity in recent weeks about the current budget deficit for 1982. When introducing the Finance Bill in Dáil Éireann, I gave notice that the trend this year would be highly unusual because of an accumulation of revenue in the final quarter of the year. The quarterly figures showed a deficit at end-June of £692 million which equals 102 per cent of the expected deficit for the year as a whole. This level of deficit was generally in line with our expectations and the deficit will continue to rise during the period to end-September. There will, however, be a substantial surplus of revenue in the final quarter due to a number of factors including the imposition of VAT on imports. I have indicated that it is the Government's intention that, for the year as a whole, the deficit will be kept close to target, despite the increasing cost of central fund services, and some shortfalls in revenue.

The first report of the Commission on Taxation was submitted to me last week and I am arranging to bring it before the Government immediately. I would like to take this opportunity to express my thanks to the members of the commission for the work which they have put into the preparation of this report. Until I have had the opportunity to consider its recommendations carefully, it would be premature to comment upon it, but I can say that it is a very comprehensive statement on direct taxation which, I expect, will invite widespread public attention and debate about the whole structure of our taxation system. Other aspects of taxation will be dealt with in later reports. The commission's terms of reference require them to make recommendations which will achieve an equitable incidence of taxation. In assessing these recommendations the Government will give a high priority to the need to work as rapidly as possible towards a fairer system of taxation.

There is at present considerable dissatisfaction with our tax arrangements. This has been manifested again and again in recent years. The protest on PRSI increases is the most obvious instance, but there is clear evidence of continuing unease about the level and distribution of the tax burden. Much of this comes from pressure groups who simply want to ease tax on their own members and transfer the burden elsewhere. They argue consistently for further concessions on the grounds that they are being treated harshlyvis-á-vis other groups, or that business will be severely damaged if no change is made. But, apart from the pressure groups, I think there is a general recognition of the need for significant changes.

I emphasised, however, in Dáil Éireann, and I want to emphasise here again, that it would be unrealistic to expect that we can achieve, in the short term at any rate, a reduction in the overall level of taxation. While the overall burden of taxation here is admittedly high, it is not out of line with taxation levels in other European countries generally. In any event, we simply do not have the scope for reductions because of our expenditure commitments and our unacceptably high levels of borrowing. I might add that all too frequently those who are clamouring for tax reductions are at the same time looking for more handouts from the State. They justify this inconsistent attitude by the spurious argument that there are large sources of taxation yet untapped. We must adopt a more realistic view if we are to bring our serious budget difficulties under control.

I would now like to deal with the individual items in the Bill. Sections 1 to 3 legislate for the changes announced in the budget in the income tax exemption limits, allowances and rate bands. These are designed to have substantially the same effect, for individual taxpayers, as the tax credit proposals of 27 January. A comparison of the two approaches shows this very clearly. Both the tax credit proposals and the budget changes involve a redistribution of the income tax burden to the benefit of lower and middle-income groups. In the proposals of 27 January this was to be achieved by tax credits. In the budget it is achieved by improvements in the personal allowances and adjustments to the 35 per cent rate bands. There has been considerable argument about the merits of a tax credit structurevis-á-vis the present system of allowances. The only criterion that ultimately matters is the burden imposed on individual taxpayers and it is not the structure but the level of taxation for different levels of income which determines this.

Section 4 deals with the benefit-in-kind from the use of a company car. For the future the benefit to an employee from the private use of a company car will be calculated as a percentage of the original market value of the car. The percentage will vary from 12½ per cent, where the car only is supplied, to 20 per cent, where all costs are met by the employer. Tapering relief will be available where the business mileage exceeds 10,000 miles. Where the business mileage exceeds 25,000 miles there will be no chargeable benefit.

The proposal to grant income tax relief to elderly persons in respect of private tenancy rents is contained in section 5. The maximum amount of rent on which relief will be granted is £500 in the case of single or widowed persons, and £1,000 in the case of married couples jointly assessed. Relief will commence in 1983-84 and it will be based on rent paid in 1982. There was a very lengthy debate on this section in Dáil Éireann and there was considerable pressure to extend the relief to include those on lower incomes. While this might be desirable in principle, it had to be ruled out for financial reasons. The special PRSI allowance of £312 for those who pay PRSI contributions at the higher rates is confirmed in section 6.

There is a concession in section 7 for those who are obliged to pay excess life assurance premiums because of ill-health. Section 8 legislates for loans to employees at preferential interest rates. These changes are necessary because preferential loans could be used to circumvent the new benefit-in-kind arrangements and the revised loan interest provisions. In future, the benefit from a preferential loan, that is the difference between paying interest at the preferential rate and at the specified rate of 12 per cent, will be charged to tax. The amount of interest so charged will be treated as if it were interest paid by the employee and will qualify for income tax relief subject to the normal restrictions. In practice, ordinary employees should be largely unaffected by these changes.

Section 9 exempts military service pensions paid to veterans of the War of Independence, their widows or dependants. Sections 10 and 11 bring the limits which deal with recovery of tax from defaulters into line with the new jurisdiction limits of the District and Circuit Courts, and section 12 extends for a further year the residence-related employment scheme which was first introduced in 1979.

Sections 13 to 16 implement the measures announced in the budget relating to the taxation of farming profits, that is improved stock relief, payment of tax in instalments, the rates credit and treatment of certain capital expenditure. Section 17 provides for the abolition, from the date of its inception, of the agricultural resource tax, which was discontinued last year. The resource tax which has been collected in respect of the year 1980-81 will be refunded.

Payments under the employment contribution scheme and grants towards employment in the service industries are exempted from tax under section 18, and section 19 gives effect to the budget proposal to provide tax relief for the cost of repairs to buildings and upkeep of gardens which are of significant scientific, historical, architectural or aesthetic interest. This relief is conditional on reasonable access being allowed to the public. Section 20 disallows business entertainment expenses incurred on or after 26 March as a deduction for tax purposes.

The revised arrangements for loan interest relief are set out in sections 21 to 23. Because of serious technical problems, it was not possible to implement in full the earlier budget proposals on mortgage interest. In general, relief will be confined to interest on loans to purchase, improve or repair the borrower's sole or main residence. In the case of other loans no relief will be allowed for interest on the amount by which the borrowings exceed the specified limits. These limits are £5,000 for married couples, £3,600 for widowed persons and £2,500 for single persons. Transitional arrangements will apply for loans in existence before 26 March or 6 April, as appropriate. In the case of overdrafts and credit card facilities, only the amount outstanding on 25 March will qualify for relief and for 1982-83 only. Special provisions will apply where overdrafts or credit card facilities in existence on 25 March are subsequently replaced by loans. The existing overall limits on the total amount of interest qualifying for income tax relief will remain in effect. As an anti-avoidance measure the new arrangements are also being extended to companies in respect of their non-training interest.

Section 24 continues stock relief for a further year. Under the following section, the special arrangements between the Revenue Commissioners and the building societies for determination of tax due on interest and dividends are, broadly, to remain unchanged for 1982-83. Following an agreement on mortgage interest rates between the Minister for the Environment and the building societies, provision is also being made for a decrease in the overall tax payable in 1982-83 by societies which maintain certain interest rate levels on housing loans.

The basic rate of corporation tax is increased from 45 per cent to 50 per cent in section 26. There are consequential adjustments in the small companies' rate from 35 per cent to 40 per cent and in the low rate applicable to certain bodies from 30 per cent to 35 per cent. In section 27 the due dates of payment for corporation tax are brought forward by three months.

As part of the reduced interest scheme for farmers in severe financial difficulty announced by the Minister for Agriculture on 31 March, section 28 provides for a tax credit to be made available against the corporation tax payable by the Bank of Ireland and Allied Irish Banks. The other participating institutions — the Ulster Bank, Northern Bank and Agricultural Credit Corporation — will receive a direct grant for which provision has already been made in the budget.

Section 30 provides for the abolition of tapering relief and for the increases in the general rates of capital gains tax announced in the budget including the special higher rates for short-term gains. These rates are applied to companies, for corporation tax purposes, in section 31. The yield from capital taxation has been much too low and substantial increases are fully justified. However, to cater for the small investor the present annual exemption limits for capital gains tax are being increased fourfold in section 32 and the new thresholds will be £2,000 for an individual and £4,000 for a married couple.

Section 33 brings forward the assessment and payment dates of capital gains tax for non-residents. In regard to section 34, the 30 per cent deduction which came into force on budget day in respect of disposals of development land was an interim measure and will not be continued after the enactment of this Bill. The pre-budget criteria for clearance certificates will be restored and these certificates will be issued automatically to Irish residents. The section also provides for refunds in regard to the special deductions made since budget day where no liability to capital gains tax arises or to the extent that any deduction made exceeds the capital gains tax liability.

Sections 36 to 40 deal with the taxation of disposals of development land. The provisions will apply to disposals made after 27 January, the date on which the new measures were first announced. The rate of tax applicable to transactions which took place between that date and 26 March will be 45 per cent. The new 60 per cent and 50 per cent rates will apply as and from 26 March. Where an individual disposes of small sites and the total consideration in any one year does not exceed £15,000, he will be taxed under the general capital gains tax rules rather than under the special development land arrangements.

Indexation relief will apply only to the current use value of development land on the date from which the gain is computed. Roll-over relief will not be allowed in the case of disposals of development land, but an exception is being made where the land is being disposed of by sports clubs. While these clubs may continue to avail of roll-over relief, they will otherwise be subject to the arrangements for development land transactions. Only development land losses may be set off against development land gains. Where a disposal constitutes trading in development land by a builder or land-developer, the tax charge will, as at present, be to corporation tax or income tax and the new provisions relating to the special capital gains tax on development land will not apply.

Sections 43 to 49 make provision for a tax relief in respect of increases in employment. A deduction of £10 per week will be allowable in computing profits chargeable to corporation tax for each week in which a new employee, taken on by a company between 1 July 1982 and 30 June 1983, is retained in employment.

Sections 50 to 58 introduce the scheme of income tax relief, announced in the budget, for shares given to employees under profit sharing arrangements. Ordinary shares up to a maximum value of £1,000 in any one tax year will qualify for tax exemption if they are held for seven years. If the shares are disposed of within seven years the full tax charge may be reduced depending on the number of years they are held. This is an entirely new development and I am sure that it will help to improve the industrial relations environment.

I am very concerned that we should make further progress in countering tax evasion and tax avoidance and this Bill contains a number of sections which will strengthen the law in this regard. The rate of interest charged in back duty settlements is being increased from 1.25 per cent to 2 per cent from 1 November and section 59 provides for this. The monetary penalties for a range of offences are being increased in section 60, and section 61 is designed to strengthen existing measures which counter tax avoidance through dividend-stripping. Sections 62 and 63 are designed to combat schemes for avoidance of capital gains tax which, if not negatived, could result in the loss of millions of pounds of tax revenue.

I announced in the budget the introduction of a travel tax. The charge is £2 per passenger on cross-channel sea routes and £3 per passenger on all other sea and air routes. Section 65 of the Bill implements the proposal and it will apply to tickets purchased in the State on or after 1 September. The charge will not apply to travellers going to Northern Ireland. As regards disabled persons, the charge will not apply to those who because of physical handicap are transported in wheelchairs or on stretchers, and invalids in general will be exempted when travelling to a recognised place of religious pilgrimage.

Section 66 confirms the budget increases on petrol, road diesel and auto-LPG. The increase will not be passed on to scheduled road passenger services and excise duty will be repaid on oil contained in goods which are exported. The present duty repayments scheme for excise duty on oil used by the horticultural sector is being extended by providing on a temporary basis for repayment of the total amount of excise duty.

The rate of duty on motor vehicle parts and tyres is reduced by one-third in section 67. The reduction should help improve the standard of maintenance of the existing motor vehicle stock, adding to its useful life and raising safety levels. I am happy to be able to propose the implementation of this constructive measure which is expected to cost about £5 million in a full year. At the request of the trade, the reduction for motor vehicle parts is being phased in, with a reduction from 37½ per cent to 33 per cent from 1 October 1982, to 29 per cent from 1 February 1983 and to 25 per cent from 1 June 1983. In section 68 the rate of duty on dance hall licences is reduced. This should be of benefit to community halls in particular.

Section 69 increases penalties for betting duty offences. The penalty is increased from £500 to £800 for non-payment of duty or for breach of regulations and for unlicensed bookmaking. The penalty of £50 for obstructing an officer of Customs and Excise in the course of enforcing betting duty provisions is being increased to £500. Penalties for excise duty offences may be mitigated by the courts to one-quarter of the full penalty at present and, in section 70, this threshold is now being raised to one-half.

Sections 71 and 72 provided for the changes in road tax announced in the budget and for increases in the fines for certain road tax and vehicle registration offences. In section 73 a number of orders made under the Imposition of Duties Act, 1957, are being confirmed in accordance with the required procedure, including the orders made by the Government which came into effect on 13 March increasing various excise duties.

In the value-added tax provisions in the Bill there are only minor changes from the budget proposals. Section 75 provides for the introduction of the 18 per cent VAT rate for auctioneers' and estate agents' services in respect of the purchase and sale of land and buildings. Section 76 is a technical provision relating to the application of VAT to barristers' fees. Sections 77, 80 and 81 provide for the maintenance of the existing unregistered status of racehorse trainers except to the extent that their purely horse training services exceed £15,000 a year in value. The latter portion of racehorse training services will be liable at the 18 per cent VAT rate from 1 September 1982. Section 77 also provides for some technical changes in the definition of farmer and fisherman. The remaining part of section 81 confirms the increase, from 1 May 1982, of the flat-rate VAT compensation for unregistered farmers from 1.5 to 1.8 per cent.

Section 79 confirms the budget increases in the VAT rates, as from 1 May, from 15 and 25 per cent to 18 and 30 per cent, respectively, and maintains the special 3 per cent effective rate on building and certain agricultural contracting services. It also extends, from 1 September 1982 this special low rate to auctioneers', estate agents' and solicitors' fees relating to the purchase and sale of agricultural land and farm accountancy and farm management services.

Sections 78, 80, 82, 84 and 85 provide for the technical changes necessary to allow the imposition of VAT at point of importation. The Revenue Commissioners have already issued an initial public notice giving details of the new system which will take effect from 1 September. The key feature is that it will apply to all goods whether for immediate use or for warehousing. While the new system will increase the working capital requirements of industry, its dampening effects on economic activity generally will be substantially less than that of the alternative of increased rates of taxation. It will also help to reduce losses from tax evasion, arrears and insolvencies and to equalise the VAT treatment of imported and domestically-produced goods. It is not proposed to allow any exceptions to the new arrangements. Corresponding with this change, the usual domestic system of charging VAT will, under section 88, apply to sales by registered persons in Shannon to persons elsewhere in the State. The monetary penalties for VAT offences are increased in section 86 as in the case of other taxes.

Sections 87, 88 and 89 amend the various schedules to the VAT Act, 1972, to give effect to the decisions to apply VAT to the services of the legal and accountancy and related professions from 1 September, and the reductions in the rates of VAT on furniture and joinery, furnishings, floorcoverings and books from 1 May. Section 83 contains a technical provision to clarify the application of the cash receipts system of VAT accounting, particularly in the case of hitherto exempted services.

Provision is made in section 90 for the postponement until next January of the increase in the 15 per cent VAT rate in respect of hotel, car and boat-hire services to non-residents in accordance with fixed price contracts entered into prior to 1 January 1982. This measure is expected to cost nearly £1 million and should be of considerable benefit to those sections of the tourist industry who have long-term arrangements with overseas tour operators.

Section 91 provides for the imposition of the levy of £20 million on the banking sector. A levy of 1 per cent on certain insurance transactions is introduced in section 92. Stamp duty on gifts of land to young trained farmers is being removed for a two-year period under section 93. In order to avail of this concession, which will apply from the date of enactment of this Bill, a farmer must be under 35 when the deed of transfer is executed and be in possession of an appropriate training qualification.

In section 94 provision is made for various increases in stamp duties as well as for the introduction of a fixed duty of £1 for all new insurance policies other than policies of life insurance. Transactions between close relatives, which are at present liable to a maximum stamp duty of 1 per cent, will in future be liable at half the normal rates which range from ½ per cent to 6 per cent. The following two sections provide for the continuation of two stamp duty measures which were implemented by Government orders in 1981.

Sections 97 to 102 are concerned with capital acquisitions tax. The upper limit on the special agricultural relief for farmer benefits will be increased by £50,000 to £200,000 in regard to gifts or inheritances taken on or after 1 April 1982. Gifts and inheritances received by a beneficiary from different sources on or after 2 June, the date of publication of the Finance Bill, will be aggregated to determine a beneficiary's capital acquisitions tax liability on a particular benefit. This changes the previous arrangements whereby only gifts and inheritances acquired from the same disponer were added together. From now on all gifts and inheritances taken by a beneficiary from all disponers of the same class will be added together for tax purposes but there will be no aggregation of benefits received before 2 June as it is considered that the new aggregation system, which will greatly increase the tax liability in some instances, is in itself a sufficient additional tax imposition without taking into account gifts and inheritances taken before that date.

In a few areas the Bill contains significant modifications of proposals made in the budget. These modifications are being introduced either because of technical problems, as in the case of mortgage interest, or because on further examination it became clear that the original proposals were imposing too severe an extra burden on some taxpayers. The overall effect of these changes on revenue this year will amount to a reduction of approximately £2½ million.

I have outlined for the House in, I hope, reasonable detail the main features of this Bill. Because of the various import changes being made in our tax arrangements, the Bill is quite complex.

Before I conclude, I would like to deal briefly with an item within my area of responsibility which is not of direct relevance to the Finance Bill but which will be of general interest. In the 11 years since the introduction of our present decimal series of coins, inflation has taken its toll of their real value. The result has seen quite a change in the pattern of demand for coins. In particular, the use of the 10p piece has increased considerably. The average person must carry more coins to meet normal day-to-day transactions. The inconvenience is added to by the fact that our coins, in contrast to the coins of many other countries, are relatively large and heavy.

In consultation with the Central Bank I am considering the desirability of introducing a new coin between the 10p and 50p. There seems to be a definite need for a 20p or 25p piece. The advice available to me suggests that 20p would be the more suitable as it would reduce substantially the need for 10p coins. It also fits naturally into the decimal system. The highest value coin at present is the 50p. Traditionally, in this country the standard unit of value, the £1, has been provided only in the form of a legal tender note. There may now be a case for introducing a coin of this denomination.

I have requested the Central Bank to undertake detailed studies, in consultation with my Department, into the introduction of a 20p or 25p coin; the possible introduction at a later date of a £1 coin, and in the longer term, changing the existing cupro-nickel coins—that is the 5p 10p and 50p pieces—to provide a relatively less heavy coinage. It would not be appropriate to decide these matters without taking account of the views of the public. Over the next few months my Department will be consulting representative bodies closely concerned with these matters. That will help me to formulate firm proposals on the denominations and specifications of any new coins for Government approval and presentation to the Dáil and Seanad. I recommend the Finance Bill to the House.

Permit me to welcome the Minister to the House, and to wish him well in the discharge of his duties. Normally the Finance Bill is the high point in the political year of any Administration. It was accompanied in the other House by a histrionic exhibition which I do not think is the normal tenor of this House. Despite the fact that we cannot put down amendments to the Finance Bill, Members will be particularly anxious to comment on the finances of the economy and on the Bill which has been put before us. I look forward to hearing the debate as it ensues.

Before looking in detail at particular sections of the Bill, I would like briefly to restate the characteristics of a good approach to public finance and taxation. Any system of public finance must be looked on as a whole before any final judgment can be passed on its merits or demerits. So, too, any tax system must be looked on as a whole, for different taxes may in certain of their effects correct and balance one another. A distinction may be drawn between the subjective and the objective burden of taxation. Corresponding to the same objective burden there may be a different subjective burden on two different taxpayers, even if their economic situation as regards incomes and other factors is the same. By responding to two equal objective burdens due to two different taxes there may be different subjective burdens on particular taxpayers. Corresponding to a given objective burden, taxes which are much felt impose a heavier, and taxes which are little felt a lighter, subjective burden, but, in general, this distinction is only of secondary importance. The primary consideration is the objective burden as measured by a given loss of resources to a taxpayer in a given economic situation. To this there corresponds what may be called a normal subjective burden. Deviations on either side from this norm are mainly due either to personal peculiarities of taxpayers, which cancel out in the average, or to transient conditions, such as the novelty of a particular tax, which, of course, will pass in time.

This leads to the whole concept of the incidence of taxation. The problem of the incidence of tax is commonly perceived as the problem of who pays the tax. This is a painful business. More precisely, we may see that the incidence of a tax is upon those who bear the direct money burdens of the tax. Every tax produces a number of economic effects, and it has been questioned whether it is either practical or desirable to try to separate the special problem of incidence from the more general problem of effects. But clearly, the attempt must be made, if anything is to be said on the distribution of the direct money burden of taxation.

It can be seen, therefore, that any legislative proposals which seek to enact financial or tax measures will have far-reaching economic and social implications for each and every member of the community. Whereas many of the provisions contained in this Bill are to be welcomed, I would say to the Minister for Finance that certain sections, which I will deal with in detail later, show an incredible apathy to the economic and social needs of certain sections of the community. The social measures being proposed show an indifference to the deep-rooted social problems which afflict our community. Rather than offering help to the socially deprived in our community, the Minister has shown the certain grim, selfish face of what might be called political expediency. The economic measures proposed in the Bill show a total lack of understanding of the real problems confronting the construction, manufacturing and service industries in our economy and those people who earn their living in the business and industrial sectors.

In dealing in detail with certain sections of this Bill, I would like the House and the Minister to bear in mind the stark realities of the economic problems which we are all facing. We have over 150,000 people out of work, and all the national and international forecasts predict that this figure will rise even higher during 1982, and who knows what it will be by the end of 1983? Very often as I go through our cities and towns at around 4 o'clock in the afternoon when the schools are discharging their young people, it strikes a certain terror and anxiety in my heart when I look at these bright, enthusiastic young faces and wonder if they will be able to find employment which is their right and due. We, in public life, are charged with the responsibility of ensuring that these young people will be able to make a living, find a livelihood which will give them dignity.

The current budget deficit at the end of June 1982 was approaching £700 million and indications are that it will approach £1,000 million by the end of the year. The national debt now stands at £11,000 million which represents £1,118 per head of population or £3,198 per head of the work force. These figures are stark and disturbing. They must not be shied away from, but must be faced up to in all their grim reality. The interest required to service the national debt from current taxation is a staggering £1,300 million. The House should also be aware that living standards, or real income, declined by 1 per cent in 1981 and are forecast to decline another ½ per cent in 1982. To my mind it is unworthy and unrealistic of the Taoiseach and the Minister for Finance to suggest that revenue buoyancy in the latter half of the year can retrieve the serious deficit situation and put our finances on a sound footing which can have the confidence and support of all members of our community.

Section 4 provides for a change in the method of calculating for tax purposes the value of the benefit in kind arising from the private use of a company car. The charge to tax will now be based on a cash equivalent of the benefit which will range from 12½ per cent of the original market value of the car, where the car only is supplied, to 20 per cent of the original market value where, in addition to supplying the car the employer meets all running expenses. This section must be welcomed on the grounds of equity, but one must seriously question the Minister's motivation on the grounds of equity in the light of the concessions offered in the Bill compared with the budget proposals in March of this year when he indicated that the assessible benefits in 1983-84 would be calculated on 25 per cent and 40 per cent, respectively, of the original market value of the car. One can only conclude, lamentably, that this is a naked concession to political pressures and a bungled attempt to buy political power. Nevertheless, it is only right that any employee who enjoys a tax-free benefit arising from his or her employment should be taxed on that benefit in the interests of equity. However, it is grossly unfair to any employee to be subjected to having to learn the mechanics of a 15-step formula for the calculation of tapering relief. I am also aware that many employees who have the use of company cars for the purpose of their employment have chosen the option of providing their own cars in claiming mileage on a civil service type formula which is neat and simple and contains only six steps compared with the 15 steps of tapering relief proposed by the Minister in the Bill.

The movement towards employees' ownership of cars used for business purposes, and which will be financed out of already heavily taxed income, will have a further depressing effect on an already disintegrating motor industry. The motor industry today is disintegrating and cries of anguish are emanating from it. I look to the Minister for some input to alleviate this position. It cannot be contradicted that an individual already heavily taxed and living in a society where real living standards are declining, will have less and less finance for investment in a car, even though it may be largely used for business purposes. Nevertheless, the concept is to be welcomed even if its implementation and administration give rise to what I can only call a bureaucratic monstrosity.

Section 5 grants relief from income tax in respect of rents paid by persons over 65 years for private rented accommodation which is his or her only or main residence for the period in respect of which the payment is made. This measure is to be welcomed because it grants relief to elderly people living in rented accommodation. This should serve to bring to the notice of the Revenue Commissioners many landlords who are not at present returning rents for income tax purposes in whole or in part. This section has certain counter-evasive proposals which are welcome. However, I would like to remind the Minister that when his party were in Opposition the main thrust of their criticism of the Coalition and their budget earlier this year was that it was not concerned with people but that it merely demonstrated a certain financial rectitude and was concerned with bookkeeping accuracy.

I ask the Minister to look again at the specific provisions in the Bill which provide that only payments relating to the bare right to use, occupy or enjoy the premises will qualify for relief; that payments relating to the cost of maintenance or repairs to the premises, and payments relating to the provision of goods and services such as furniture, household linen or electrical items, will not qualify for relief. I ask the Minister to reconcile his concept of concern for people and their right of occupancy provisions in this section. I would further ask him to give particular consideration to this provision as it specifically relates to elderly people to whom the relief in respect of some goods and services may be as basic as the provision of bare accommodation.

Section 7 grants full relief for income tax purposes in respect of excess premiums payable due to special health considerations which a person has to pay on life assurance policies. The normal premium, as distinct from the excess premium, will be subject to the normal tax relief and restrictions. The only note of caution I will express in relation to this measure is that this section, like many others in this Finance Bill to which I will refer later, makes it considerably more difficult and complicated for an individual to complete and submit his or her tax return and secure full and proper relief for the premiums paid. We should be in the business of simplifying the bureaucratic procedures for individuals, particularly in the area of income tax return, an area which has a full bearing on people's fiscal policies and the way in which they order their finances for the year.

Section 8 provides that in the case of a loan made by an employer to an employee at a rate of interest less than the specified rate, namely 12 per cent, the employee will be liable to tax on the amount representing the difference between the amount of interest he pays and the amount of interest calculated at the specified rate. This measure is overdue particularly in the case of employees of banks, finance houses, insurance companies, building societies and other institutions of this ilk. The principles of distributive justice indicate that these people should be liable to tax in a fair and just manner on benefits which they enjoy because of the employment or career they pursue. I also welcome this provision on the grounds that it will ameliorate a contributory inflationary factor in relation to house prices outside Dublin and, to a lesser extent, in our major cities. Nevertheless, I would remind the Minister that many of the people working for the institutions already mentioned are, of necessity, obliged to accept a regular job mobility as a precondition for their continued employment and career progression. I would like to see this provision handled with sensitivity and a deep understanding of the circumstances involved in order to minimise unrest and dissatisfaction which could lead to industrial action against the financial institutions and further damage our economic credibility both at home and abroad, and therefore project an unattractive image for investment in our economy.

I would like the Minister to consider those points very carefully, particularly in the light of the "disturbance money" which is granted to people who merely move from point A to point B in a certain section of a city. Credibility is being strained if the points I mentioned do not come in for close attention and amelioration.

Sections 21 and 22 set out, it must be said, extremely complicated proposals concerning restrictions on the allowability of certain interest payments for income tax purposes. As with sections 4 and 8, this measure hits at the more well off sections of the community and in consequence must be welcomed on the basis of justice and fair play for all. The proposals are extremely complicated.

Like section 7, this section ensures that an individual who pays interest will not have the technical information or capacity to complete satisfactorily his or her income tax return. I request the Minister to look at this very closely and ensure that it is possible for people in a relatively simple fashion to submit their income tax return so that they will feel confident that all the allowances due to them are clearly down on paper and that they in turn will receive those allowances without a welter of complication and difficulty.

Thus, far from making the taxation system simpler, this measure only serves to complicate it. It should also be mentioned that the transition provisions are and have been the subject of gross abuses. These abuses would have had a much greater impact if the proposals in the March budget had been capable of being implemented in full. It is interesting to note that despite the technical back-up facilities of the civil service and the Revenue Commissioners, the Minister for Finance should make proposals in his budget speech which on subsequent examination, were found to be technically unworkable. It could lead one to the conclusion that the Minister is not Minister for Financeper se, but merely some sort of titular holder of the office at the behest of the Taoiseach.

Sections 29 and 40 deal with new proposals in relation to capital gains tax. In equity, the general thrust and shape of these proposals must be welcomed. However, their implementation demands skill and expertise on the part of the Minister for Finance because any capital taxation proposal will tend to inhibit capital formation and will have consequent effects on employment. Also, it would be unrealistic not to record the fact that the measures as proposed are likely to delay significantly any pick-up in the building industry with its consequent implications for unemployment in that already very hard hit sector. I do not deny the equity or justice of taxing such transactions because a lot of money has been made, much of it with inside information from public representatives or their agents, and the Government record in the proper spending of revenues collected in the form of taxation must be seriously questioned. Therefore, if the price of development land is controlled in line with the recommendations of the Kenny Report, or some variation of it, whereby the benefit could be passed directly to the house buyer, the results would be more equitable and effective.

There is one further comment I would like to make on this proposal, that is, that the proposed new individual exemption threshold of £2,000 is totally unrealistic. Many needy and elderly or retired people supplement their sometimes inadequate State pensions, if they have such, by investing their savings in stocks and shares. The increase in the exemption threshold from £500 to £2,000 represents only a tame gesture in this regard.

Section 12 proposes the extension for another year of limited relief for residence-related expenditure. I include comments on this subject under this heading because it may help to preserve jobs. I say "may help" after some thought because much of the work which would normally fall to be included here is done on a "nixer" basis — the much talked about black economy. One of the hopes for this measure when it was first introduced was that it would substantially reduce the number of "nixers". From my own experience, this hoped for result has failed and in consequence the only benefit from the measure has been to provide the more affluent with further income tax relief. To my mind, this measure has failed.

I will now refer to sections 47 and 59, Part 1, Chapters VIII and IX. Chapter IX proposes to exempt from income tax shares given by companies to their employees under profit sharing arrangements and share option schemes. This is to be welcomed, but virtually all the good contained in it is set aside by section 57 in which the amount allowable is a deduction in computing the company's profits which cannot exceed 5 per cent of its trading income after deducting losses, forward capital allowances and balancing charges for tax purposes.

Section 20 proposes disallowing what the Bill describes as business entertainment expenses. The measure is appropriate by reference to the abuses which have been a feature of this form of relief in the past and for that reason is to be welcomed. However, the framing of legislation on the basis that it eliminates abuse only and does not take into account the beneficial effects of legitimate expenditure can only damage productive business relationships. Also, I question the timing of the proposal. It could hardly be said to be appropriate when the hotel and catering industries are suffering very deeply from the recession and because of the damage done to the tourist industry by the Government's handling of the Falklands crisis. This measure will almost certainly add to the 3,000 jobs already lost in the hotel and catering industry and as such will have a dampening effect on the economy.

Section 26 proposes to increase from 45 per cent to 50 per cent the standard rate of corporation tax. In times of recession and high inflation, such as we are experiencing at present, companies need to retain profits for capital formation and investment in the future expansion of their businesses or industry with consequent job creation. This measure reduces the funds available for such reinvestment and will in consequence service no one, will put some companies out of business with a consequent loss of jobs and also prevent others from properly gearing themselves for the end of the recession which we hope is in sight. If companies are not able to finance investment out of profits, the next step they must take is to borrow. If you couple this borrowing with high Government borrowing, the net effect is to push up interest rates, and this in turn has a most damaging effect on the economy and keeps the spiral of inflation riding high.

Section 27 caused some controversy. It proposes to bring forward by three months the due dates upon which corporation tax has to be paid. It reduces the period of grace from two months to one month during which, if corporation tax is paid, interest will not be charged by the Revenue Commissioners. This will have an immediate impact on the passing of this Bill and will bring many companies already experiencing serious cash flow difficulties closer to liquidity crises with consequent job losses and a further damaging effect on the economy. This imposes a further burden on the Exchequer both in terms of unemployment benefit on the one hand, which will need to be paid to those workers who find themselves on the dole, and then there is the loss of PAYE revenue from the employees involved. The corporate sector must feel neglected and perhaps this neglect was inevitable if one considers that the framing of this Finance Bill was done on a philosophical basis of ensuring the maintenance in power of the Government. It is a matter of grave concern that the Minister has not seen fit to tackle the problem of cash flow in the business and industrial sectors. No mention has been made of any form of a current cost accounting or any other technique for discounting current profits for taxation purposes.

Now I will deal with section 66 which provides for yet another increase in the excise duty on petrol, diesel and LPG. Continuing increases in the tax element in the price of petrol only serves further to fuel the inflationary spiral. It is also worth noting that increases in fuel charges have a disproportionate effect as between urban and rural dwellers. The latter have to travel further distances without adequate public transport just to do their jobs and to look after the necessities of life. This feature is particularly acute at the moment for the farming community which is experiencing its most serious difficulty at least since joining the EEC. It is an utterly outmoded concept to consider the possession of a motor car as a luxury. In today's world, particularly for those in rural areas, it is a necessity and, as such, penal taxation which inhibits people from going about their daily business and their jobs is damaging in the extreme.

Sections 76 and 77 contain measures which will have a greater impact than any other on the unemployment statistics. The damage which these measures will cause is all the more serious when a very substantial element of the proposals consist of what might be called cosmetic accounting. The appearance of measures such as this on our Statute Book could be said to be part of an overall decline in accountability by public representatives which, sadly, has been a feature of political life in Ireland over the past few years. It has done nothing to enhance the image of a democratic political system, either at home among our people where confidence in public representatives is at an all-time low, or indeed abroad.

Again, I would like to draw the Minister's attention to the wide gulf which exists between the principles of financial management being operated by the Department of Finance and the Revenue Commissioners and those being operated by the business and industrial sectors of our community. I have already referred to the financial problems which uncontrolled inflation is creating for the business and industrial sectors and I would ask the Minister very seriously to look at the old question of discounting current profits for the purpose of assessing a liability to income tax in order to preserve the patterns of capital formation and to guarantee future industrial employment.

Sections 89 and 94 of the Bill introduce substantial changes to the Capital Acquisitions Act, 1976. I am not altogether sure that equity dictates these changes. These measures represent a substantial erosion of the existing position and will undoubtedly involve the break-up of estates and thereby put at risk businesses included in these estates by perhaps forcing sales at possibly inappropriate times from the market point of view. Indeed, there could not be a more inappropriate time to mount a sale of any sort than at the present. None of these potential risks is in the best interests of either the country or employment.

Section 6 introduces the special PRSI tax-free allowance of £312 for 1982-83. This can be seen as nothing more than a failed attempt to influence voters in the Dublin West by-election and can best be described as petty cash politics. This measure is further evidence of the lack of moral fibre on the part of the Government in the face of demands by powerful sectional interests without due regard as to the incidence of these provisions on the taxpayer. The very structure of the PAYE tax band creates the situation where a flat allowance is granted and will benefit people in the higher tax band to a much greater extent than the lower paid people. I look forward to the publication of the findings of the Commission on Taxation. If we are positive in our approach to the findings which they bring before us I hope they will be implemented. I hope that this report, like many other reports, will not be dumped on the shelf of a library to gather dust and be talked about in the same way as so many other reports which have come before this country with great dash and verve, just to sink into nothingness.

Section 65 proposes an excise duty on foreign travel. The proposals contained in the Bill are complete and I cannot see any administrative difficulty which prevented the implementation of these proposals until 1 September. Therefore, I am afraid I see vote-catching as being the issue in the postponement of the measure until 1 September and if I am wrong in this suspicion I stand corrected. However, I suggest to the Minister that another reason for the delay in implementation is that the provisions were ill-conceived and ill-advised in the first instance. One can well understand an excise duty on foreign travel for holiday or leisure purposes but I am sure that any Minister for Finance who is concerned with the ongoing prosperity of Irish business and industry would not even consider a suggestion of the imposition of a levy on people who go abroad to secure orders for our businesses and industries to ensure that employment and jobs are safeguarded. I might also add that these provisions are in total conflict with the export sales tax relief which is available to manufacturing industries under existing legislation.

However, on the credit side I am pleased to think that the disabled and those in wheelchairs and on stretchers and going to places of pilgrimage will not be charged this levy. I am pleased to think that the disabled will figure in our legislation and I hope to see more of these provisions in future legislation coming before the House. I would also ask the Minister if he would consider extending freedom from this levy to old age pensioners, many of whom have relatives in the United States, and in Britain and elsewhere and who like to go to see them and would appreciate the concession of alleviation from this tax. I feel it is a small concession and one which should not be beyond the kind hearted Minister to grant.

Section 2 refers to increases to dependent relatives, to the blind and to old age allowances. Increases of this nature have not figured in a Finance Bill since 1949 and, as such, they are very welcome. I am slightly concerned, however, in the case of the dependent relative's allowance that some provision should be made to ensure that only bone fide claims are countenanced. I see a certain danger here in that while the measure is welcome and necessary, perhaps it might be open to abuse. I would like certain assurances from the Minister that it will be implemented in such a way that abuses will not become a feature in this particular provision.

Section 3 alters the instance of the 35 per cent rate band for PAYE taxpayers for 1982-83. The impact of this measure has not yet been felt. When it is, the reaction against it will be strong, vocal and determined and to my mind will give rise to serious social unrest throughout the community. In some parts of the country at least there has been a very significant increase in the number of PAYE taxpayers who are now being taxed in the 60 per cent tax band. It is a matter of bald fact that many people in the community are concerned and fearful that this issue of instruction by the Revenue Commissioners, putting many people into the 60 per cent tax band, is politically inspired to cover up the impact of the changes which this section proposes. Perhaps the Minister could assure me that this is not so and advance a contradictory reason.

In sections 13 and 16 mention is made of certain farming relief measures. I am very pleased to see the 110 per cent stock relief and that stamp duty relief will be made to young farmers. There is also mention of rates relief. These are only some of the points in the six-point programme for agricultural policy advanced by the Coalition Government. I am very pleased indeed to see that they take their place in this Finance Bill.

In conclusion, I would say to the Minister that despite some provisions which are welcome and timely, in its overall effect the Bill has failed dismally to tackle in any sort of constructive way the very fundamental problems now besetting the Irish economy. The Bill contains many provisions which are a positive disincentive to industrial and business growth and employment. The farming community, to some extent, has been left to drift in the choppy mainstream of European economic difficulties despite the provisions which I welcomed a moment ago.

The Bill also demonstrates that the Government's top priority is holding on to political power. It also demonstrates a lack of regard towards the underprivileged and needy in our society. On a broader scale there is no constructive attempt to eliminate the current budget deficit, control the level of public expenditure, encourage growth in the business or industrial sectors by the introduction of realistic incentives and no attempt to reduce public borrowing as a percentage of gross national product. There is a blind and unyielding belief that increased borrowing and unlimited credit is a solution to our serious economic problems. I would also ask the Minister why no specific target date has been given for the elimination of our current budget deficit. When he talks about a plan that will be put before the nation, I would like to feel that there would be targets, that the plan would be shaped in such a way that we would know where we were going, how we were going and what we propose to achieve.

I might finish by saying — if the House would like a little insight into some Hindu mythology — that Vishnu, who is the creditor spirit, rules the Irish economy and is seen as such by our European economic partners. We sit in Ireland in terrible isolation, living with financial policies, full of paper aspirations, paper hopes, paper promises, paper money and wealth. Indeed, the Irish Vishnu sits in this vision like a paperweight upon its own little world, smiling paper promises at the figure of hope.

I should like to welcome the Minister of State at the Department of Education to the House. I should also have liked to welcome the Minister for Finance but he has just left the House for a while. I am sure the Minister of State will wish him for me and for all of us many years of being what he is, a very successful Minister for Finance.

Let me straight away reject many of the things that have been said by Senator Bulbulia. I think the Minister is his own man. He is his own Minister for Finance and he proved that point quite clearly in the recent debate in the Dáil on this Finance Bill. We all know that this Bill gives legal effect to the budget proposals. The budget for this year was unique in many ways, unique from the point of view that many of its provisions were brought forward by the present Government because of lack of time. We know that the Coalition Government brought in a budget on 27 January which was rejected because in setting out to solve some of the economic problems of our time it imposed a real hardship on the ordinary working people, by putting VAT on clothing and shoes, by the tax on social welfare benefits and on the removal of food subsidies.

My opinion is that any Government, and indeed a Government which included as it did four Labour Ministers — and I am not trying to be political — which imposed VAT of 18 per cent on clothing and shoes for children, which set out to request the payment of tax on social welfare benefits and asked for an increased cost for food because of the removal of subsidies on food, deserved to fall. And that is exactly what happened.

I honestly feel that the previous speaker, when she referred to the underprivileged, was the last person to speak of this particular problem. While there have been some faults with our Government — I am not ashamed to say that some of the things done may not have been the best — I want to assure the Senator and all other Senators that the very last thing this Government would do would be to impose 18 per cent on clothes and shoes for children. When the previous speaker refers to nothing being done about the underprivileged, I have to remind her of what was done to them by the previous Government in their proposals.

I believe that overall budget strategy should do a number of things. The principal things would be to help people not able to help themselves, to reduce the current budget deficit and to reduce overall Exchequer borrowing requirements. We know it is impossible to reduce foreign borrowing instantly. We know it is impossible to reduce the current budget deficit within a short spell of time. Both of these tasks will require a considerable time and will bring with them severe difficulties for business and for the ordinary man in the street. It is common knowledge that many of our problems have been caused by factors outside this country. We are in a world recession and we must be prepared to accept that. We must accept that living standards will not improve for a while; in fact the opposite may be the case for some time to come. Unemployment will be with us for some time. It has always been there but I hope it will not always be of the magnitude which we have now. I know that the reduction of unemployment is a priority factor for the Government, and rightly so.

We are all looking forward to the proposals for a new economic plan which has been mentioned by the Minister for Finance. I believe that an economic plan on its own will solve nothing. What is needed is the will to tackle inflation and I believe that the Government have a major role to play in this area. We cannot expect workers, farmers, trade unionists and shareholders to co-operate in a sustained and painful assault on inflation if the Government show no seriousness in their efforts to control public spending. My opinion is that the Government will tackle public spending in a real and positive way in the years ahead. We must get inflation under control if we are to compete on home and international markets and if we are to expand our work force in the long term. No one has any doubt that it is better to have our people working than to pay them dole money. This latter policy is one of the sure signs of decadence. Most people prefer working to idleness. The prospect of thousands of people under 25 not getting a chance to prove themselves in employment is a thing which no society should contemplate.

Our obligation to the young is both a moral and a social one. I feel that every possible effort must be made to reduce this terrible problem of inflation. If there is to be some reduction in our standard of living the people will rally to the cause in the national interest. Certainly I was heartened having read some of the reports of the latest economic prospects issued by the Organisation for Economic Co-operation and Development in Paris. They appear to be far more optimistic about our chances of recovery than most of the people who live here. We can draw encouragement from this report and from the fact that we are not all that bad when looked at from the outside.

Referring to the Bill, I found there were a number of provisions which were of particular interest to me and which have not been sufficiently highlighted. For example, the interest on loans for the purchase of private houses, for the repair and improvement of sole or main residences, will be eligible for relief irrespective of the dates on which the loans are taken out. In the case of other loans, those which are taken out after 25 March will attract further relief. There is relief on interest payable on an overdraft. There is a rent relief for people over 65 years and it is no harm to highlight these facts. One of the main provisions relate to tax deductibility on life insurance premiums. The maximum amount deductible is £1,000 for a single person and this has been increased to £2,000 in the case of a married couple electing for joint assessment.

The Minister referred to the increase in the penalties from £500 to £800 for unlicensed bookmaking. This is desirable and worthwhile. I will refer also to the SP betting in this country. It is a problem I have mentioned to successive Ministers. I honestly feel that we are losing a lot of revenue as a result of this 20 per cent duty. As we all know, in the North of Ireland and in England this betting duty is 9 per cent. It is common knowledge that there are very many people placing big bets in the North and in England with subsequent loss of revenue to this country. I would like to think that in the future the Minister would consider reducing this duty. It would have important provisions and improvements for the greyhound industry and the horse industry and both would benefit.

The Minister referred to a 20p or a 25p coin. In my opinion this development would be welcome. It is something that most people would certainly welcome. Like other speakers, I am looking forward to the report of the Commission on Taxation. Any comment on it at this stage would be premature. I think it is a document which will be read by most people and I hope it will solve the inequities that exist in the present taxation system. We all want an equitable tax system.

Reference was made by the previous speaker to buying political power. I do not think that is fair comment and this Bill indicated clearly to me that this is not the case. This Bill indicated that the present Government stood firm and showed strong government, unlike the Coalition Government who seemed to be putting in amendments which were going to cost this country millions of extra pounds. The problem of the finances of this country requires the help of every politician in this House and in Dáil Éireann. I welcome the Bill. I would like to thank the Minister again for coming to us today and I hope he will return at a later stage of the debate.

As we know, the Finance Bill is one of the principal means of short-term economic management. It is appropriate, therefore, that we should note briefly the economic context in which it applies before dealing with some of the measures proposed in the Bill. The dog in the street is aware that the economy is in a deep and prevailing crisis. The general picture of recession has become clear to the public, although the full scale of the crisis may not yet be fully understood. Unemployment is now in excess of 150,000 and it could rise to a figure in excess of 170,000 by the spring. Inflation, although moderating somewhat in recent months, is forecast to be of the order of 17½ per cent for the year, a fact which is leading to falling living standards at home and to a serious loss of competitiveness on both the domestic and the export markets. Growth in GNP this year is forecast at a minus quantity of ¼ per cent, thanks in part to the scale of our foreign interest payments. The public finances continue in disarray though in a moderated form. The current budget deficit, it is reasonable to assume, will be of the order of £800 million this year compared with £802 million in 1980, and a forecast deficit of £685 million in the March 1982 budget.

In this regard I would say that the suggestion made by the Minister for Finance both here and in the Dáil during the debate there on the Finance Bill to the effect that the deficit position would turn out on target because of expected revenue returns before the end of the year seems to be highly optimistic and I very much doubt that this will be the case. More likely we will end up with a deficit of the order of £800 million, which, while being an improvement on last year's figures, undoubtedly will be way off target again.

The Exchequer borrowing requirement will rise to £1,850 million this year according to the ESRI as compared with £1,722 million last year. The level of Government external debt at the end of 1981 was £3,725 million or more than five times its level in the mid-seventies and it is accumulating in what could almost be called a geometric progression. This year, for example, potential growth rate of 1¾ per cent has been turned into a growth rate of minus ¼ per cent because of foreign interest payments. The balance of payments deficit remains unacceptably high, at a forecast £1.2 billion, or 10 per cent of GNP. The external reserves once again this year amount to cover for three months imports only.

Combined with this generalised picture of acute economic recession, it is obvious that individual sectors of the community are also in trouble. Although agriculture seems poised for a relatively good year compared with recent experience, and although it seems likely that some of the more recently created high technology industries will also come through the year relatively intact, these appear to be the only sectors of the economy which are not on the ropes once again in 1982.

More traditional domestic industries, many of which are just surviving, are going to be hit in the autumn with the sleight-of-hand exercise dreamed up by the Government to impose VAT on imports at the point of entry and to bring forward the date of payment of company taxation to the autumn of this year. That goes without saying and really it does not bear repeating. That exercise was no more than sleight-of-hand which does not solve any fundamental problem in terms of the public finances and which does no more than carry the problem over until next year. Investment in building and construction is expected to fall by 5 per cent in volume this year. Investment generally is expected to fall by 2 per cent and inquiries to the IDA from abroad have virtually dried up. Local authorities and health boards are starved of finance to the point where many services are grinding to a halt. Local authority expenditure is expected to increase by around 11 per cent a year, a level which cannot maintain current levels of activity, so services will be cut. Indeed, they have been cut already. Tourism will show no growth in export earnings this year thanks largely to domestic inflation and in my view also to inadequate and over-priced services in the tourist trade. Semi-State bodies, as we know only too well from our newspapers, are in serious crisis across the board.

This, then, is a very brief overview of the economic context in which the measures proposed in this Finance Bill will have effect. In the most recent ESRIQuarterly Economic Commentary the author summarised the introductory remarks by saying that the economy in 1982 while receiving a sharp external stimulus will also be experiencing internal inflationary forces. There is no doubt that this Bill and the March budget on which it rests will have an acute deflationary effect on our economy this year and that at a time when the optimum cyclical economic policy should be to seek to give the economy a moderate reflationary stimulus in view of the signs of upturn in the world market generally.

There is no doubt that any Government can easily get their cyclical policies wrong in the short-term, for either technical reasons or because of political necessity. There is also no doubt that our present policy is wrong, not for any minor or short-term technical or political reason but because we have suffered in recent years from an acute failure of political leadership and responsibility which has manifested itself in the form of a breakdown in our political and economic management and in the undermining of public credibility in the democratic system itself.

It is now widely agreed that this process began in 1977 at a time when the economy required prudent management in the interest of medium and long-term stability, growth and development. For narrow political reasons quite the opposite was done. We know the detail of that but the effect of it was to unleash in the economy funds which we did not have, which we were prepared to borrow abroad and which were squandered in the main on frivolous consumption and unnecessary and unneeded imports. I felt when the present Taoiseach became Taoiseach for the first time in January 1980 that he recognised the folly of the policies pursued by that post-1977 Government. He indicated early on in his period as Taoiseach that he did understand the folly of that exercise. However, he continued on that line and I regret to say that the same process of auctioning the economy for votes was continued, in my view, in the Fine Gael manifesto in 1981 and let it be said that the same process continues today to some degree.

It has been noticeable that the Minister for Finance has begun to move away from this policy in recent weeks. I hope he means it and I hope that from here on in we will begin to get some connection between economic policy and economic reality. During recent years the objectives of good public policy in the economic area were in my view subverted to the objectives of narrow partisan political gain. Money was squandered left, right and centre during that time on unnecessary imports, frivolous consumption and often wasteful day to day expenditure. If I may enter a partisan, but I believe true comment, uniquely of the political parties, during that period since 1977, the Labour Party did not succumb to the auction type of politics that I mentioned because we were aware of the seriousness of the crisis. We were aware that the outcome of this kind of auction politics would be a reduction in living standards, increased unemployment for the people we try to represent and would also mean inevitably, sooner or later, cuts in public expenditure, again at the expense of the people we try to represent.

We recognised that throughout that period from 1977. We did not engage in auction politics and we paid a political price for not doing so. Who can say now that we were wrong? The reality is that what we foretold and what we suggested would happen has happened. We now have a crisis right across the economy in the public finances, in employment, in enterprise and in the social services. The reality is that the money has been spent but the problems of industry, of employment, of inadequate social services remain. Nothing has been gained from those last four years of economic squandermania. All that has happened is that the difficulties which face us now and coming out of it have been intensified. The costs in terms of finances and in terms of human sacrifice which will be required to come out of this crisis have been made greater.

The reality also is that politicians of all persuasions have to turn their minds to coming to grips with the folly of the last four years and with the problem of how do we begin to plan our way out of it. In this context, I would suggest a number of essential elements to a recovery strategy. We need — and the Government have admitted this — an economic plan. What we do not need is the kind of so-called economic plan that has plagued us over the last three or four years — useless projections based on no reality and no realistic policy proposals behind them. We do need an economic plan which is serious, which is based on the reality of where we are now and which deals with a number of matters. Obviously, any serious economic plan will have to deal with getting the public finances in order, dealing with the borrowing requirement, dealing with the balance of payments crisis. Those things go without saying.

It seems to me that there are a number of other serious elements to an economic plan which we cannot avoid. One is this: there is no longer any future for our economy on the basis of an industrialisation policy based on attracting multinational or foreign enterprises. I do not say we do not need some or we do not need any we can get at the right price but it is folly and madness to believe that we can cater for the employment or leisure or social service needs of a rapidly expanding population by this means. What we must do is come to grips with identifying what kind of things we can do here based on resources which we have at home and basic skills which we have at home or can provide at home. In the context of any economic plan which is brought forward, what we need to do is to have within it serious sectoral economic programmes and targets, based in particular on developing areas and aspects of economic life where we have some natural advantages or some skills.

I would hope — because this may well be the last chance to avoid a serious political and economic crisis — that the economic plan which we expect some time in the near future is not going to be like the kind of documents we have had in the past, which purported to be plans. I hope that it will be serious and worked out as a serious measure and will be a set of proposals to lead this country through the crisis which we face.

It has often been said that people in the Labour Party in some way refuse to deal with the question of incomes. I, like everybody else in the party to which I belong, am aware of the critical significance of incomes growth in an economy and the effects which incomes have on employment and production and output generally. To get the right kind of income growth is essentially a political question. It has very little to do with economic managementper se. Trade unions are in a fundamental sense political institutions. If we recognise that, it is possible to reach agreement over time on appropriate incomes settlement provided that these things are traded off against other objectives which working people and trade unions have. It will be possible in the future — trade unionists are the ones who are losing their jobs and their families are the ones whose incomes are being cut in the main — to reach a point when trade unions and people representing the broad groupings of working people will trade incomes for employment, for a fair taxation system and for a system of effective social services, which we do not have at the moment. It is the business of Government to begin negotiating and discussing with trade unions the relationship between incomes and other things in the economy which they hold dear.

It was said recently that public expenditure in Ireland is too high. In absolute terms it is neither too high nor too low. The problem is that at the moment we cannot generate sufficient revenue to pay for it because we have reached a tax collection crisis. In general, in relation to public expenditure the real problem is its effective use. I advocate public expenditure as an alternative to unemployment, inadequate housing availability and as an alternative to inadequate education. But nobody in his senses would argue a case for public expenditure which is not properly cost effective and which does not serve some clear, defined purpose. It has been the case over recent years that there has been a great deal of wastage in public expenditure both of a current and capital nature.

Those of us who are socialists and who believe in the value of promoting public expenditure must — if we can make that strategy sensible and acceptable to people — begin to identify areas of waste in this sphere, because, irrespective of what one believes about the appropriate level of public expenditure in the economy, no one can stand over wastage, particularly when the percentage of the population who pay tax is so small.

I welcome the setting up of the Joint Committee on State-Sponsored Bodies. I have read the work which that committee did during the period it last operated and it was a very successful committee. I hope in the period ahead it will exercise and even sharpen further its analysis of what is happening in terms of public expenditure in that sector for which it has responsibility.

On the question of taxation and the Bill I would like to say two things. The first is that the problem which has led to so much political unrest in regard to taxation has nothing to do with the global burden of taxation as it affects people. The problem in political terms and as felt by the man and woman in the street is that taxation is inequitable in its incidence and is so seen. Therefore, I welcome the fact that the Commission on Taxation has produced a report. I do not know what is in it so I cannot comment on it. There is no possibility that the present inequitable taxation system will be tolerated very much longer in this country. People recognise that because we have a relatively small portion of the population in the working age group that taxation is going to be a burden for all of us in the foreseeable future and will not come down in actual terms if we are to have the kind of services we wish to have. What is annoying people — and rightly so — is that the burden of taxation is inequitably spread. In this regard, the Finance Bill is a disappointment.

Capital taxation in this country still amounts, I understand, to no more than £16 million a year. This is an outrage. There is no justification, either technically or in terms of morality, for not immediately increasing that share of taxation which comes from capital to £140 million or £150 million a year. I do not agree that capital taxation is a disincentive to invest or to create employment. Capital taxation can very often have the opposite effect if properly applied and, one way or the other, it is essential that we are seen to have effective capital taxation in the future or otherwise those on the PAYE system will increasingly be prepared to argue whether or not they should pay at all.

Farmer taxation is another matter which successive Governments have evaded. I believe absolutely in the necessity for agriculture to be developed to a far more intensive degree than it is developed at the moment. The agricultural sector should have the reasonable aid and assistance it requires for development. However, I think equally that the farming community must pay taxation on an equal basis with the rest of us and if that is not done then those who are on the PAYE system and who cannot avoid taxation will become increasingly reluctant to pay their share. I regret that the present Bill does not follow up the measure contained in the February budget to tax discretionary trusts. I refer to very substantial tax evasion by the wealthiest section of society. The fact that discretionary trusts were dropped from this Bill, having been in the earlier Bill, indicates to me that the Government, despite the other things they have done in terms of inner city housing — which I welcome — are still prepared to protect that small section, the wealthiest people in the community who are successfully still managing to salt their surplus funds in discretionary trusts.

On the question of tax relief for mortgage interest on houses, the Finance Bill should have kept that at the standard rate of income tax. I do not believe it is justifiable for somebody who happens to be on a 60 per cent tax rate to write off his interest against tax at the rate of 60p in the £ while a person on the 25 per cent tax rate can write off only 25p in the £. That is inequitable and should be dealt with. There is no justification for having differentials in this regard particularly when they discriminate clearly, directly and obviously in favour of the better-off.

I believe also that the Bill should have entirely eliminated relief against taxation on mortgages for second or additional houses. It seems to me to be something that could and should have been done. I think, too, that the infamous section 84 loophole should have been eliminated in this Bill once and for all. It serves a nominal purpose but I doubt very much whether it serves any serious economic purpose and it certainly does create a scandal inside the taxation system as a whole.

These and other things which relate to the widening of the base of taxation, the ending of evasion in taxation and the searching out of ways in which we can get a more equitable taxation system, seem to me to be things to which we must turn our minds rapidly. I do not believe that enough has been done in this Finance Bill in this regard. For that reason I must express my disappointment with it.

I would like in conclusion to raise one particular matter which I hope the Tánaiste might consider. It is a non-controversial matter which I hope the Tánaiste might consider on grounds of equity. It is section 3 of the 1980 Finance Act. What can happen and does happen under that Act is that if a self-employed person hires staff and if one of these staff is a relation of his the £600 a year employment allowance in the PAYE system is not allowed to that employee. I can understand well that the purpose behind this section in the 1980 Act was to deal with questions of tax evasion and avoidance in family concerns. I understand that very well, and it is appropriate that that matter should be dealt with. However, it is now the case that a number of genuine self-employed people — and in the case to which I am referring the person concerned is a builder — who employ other people to work for them are caught in a position where they cannot hire their own relations because their own relations will suffer as a consequence of the tax system. I understand there is a court case coming in this matter, but I wonder whether the Tánaiste in his reply might indicate whether anything can be done or is likely to be done in this matter.

Like other Senators, I would like to welcome the Minister. I am sorry that the Minister of State has gone. I would like to have welcomed her too, if for nothing else but adding a bit of colour to the House.

Have you not lovely ladies here already?

If the Minister had listened to me he would have heard the word "adding".

Senator Fallon said this in reverse because the Minister of State had come in and the Minister had gone out. While I would agree with the welcome he gave them I would disagree with what he said when he wished the Minister and the Minister of State a long term of office, because I am at present engaged in the Minister of State'salma mater trying to ensure that that will not be the case.

I will get down now to the sad story I have to tell the Minister of the motor industry in this country, which is on its knees. It is weighed down with taxation. The motorists have their backs blistered with taxation, not only by the present Minister but by previous Ministers and previous Governments. The motor industry employed 30,000 people and was the biggest single contributor of tax to the Government, in the region of £700 million. The Minister thought he could continue, that this was a bottomless pit to take money out of. The result is that we now have at least on average one garage per week closing down in this country. Recently in the city of Dublin one firm which started in 1904 and was the first importer of motor cars in this country, and employing 300 people, had to close down. We had another company which celebrated its 50 years in business by having to go out of business. In the last couple of weeks a company that started business in 1911 in this city and was importing vehicles as well as assembling has now gone out of business. In addition, at least one, if not two throughout the country per week, are closing down.

Up to last year we had 30,000 people employed in garages. That was reduced to 25,000 but that is the latest figure I have. I cannot give an up-to-date guide to car sales because the Central Statistics Office, since they changed over to computers like many other firms, are taking a couple of months longer to issue the information, but in September of 1980 the car sales in this country were 6,464 new cars. In 1981 for the same period the figure was 5,825, a drop of 9.9 per cent. In October of 1980 it was 6,164. For the same period in 1981 it was 3,329, a drop of 46 per cent. For November 1980 it was 4,464 and in November 1981 it was 2,843, a drop of 39 per cent. In December 1980 it was 2,901 and in December 1981 it was 1,257, a drop of 56.8 per cent. We have the figures up to March which showed a slight improvement with 9,607 for 1982 as against 9,351 for 1981, plus 2 per cent. Since March the car sales have become very bad, I can speak with full authority, apart from the fact that I am myself a motor trader, and in the past three weeks the car sales position has become so bad that not only are we not selling new or second-hand cars but we are not even getting inquiries. That is a bad situation, and if something is not done to correct this — and the Minister has an opportunity to do it — we will be in dire trouble. I particularly will be in dire trouble, because as a member of my society I have been getting a lot of stick at various meetings because I have not done something about this. The motor traders have said that the only people who get anything done in this country are those who become militant. The farmers did it, the workers did it and the PAYE people marched. I asked them to leave it for six months when I would try to use whatever influence I could on the powers that be to do something about it. Now I am faced with an emergency meeting of my society on Thursday to discuss this.

Reputable companies at the moment are having their cheques returned by the banks because they have not the funds to meet them and the banks are not prepared to give them any further credit. Of course, one of the biggest difficulties of all in the industry is the rate of bank interest. As I was coming up from Galway in my car this morning I heard on the news that the bank rate in England had been reduced by one-half of 1 per cent. To my surprise I discovered the bank rate in England for ordinary borrowing is 12 per cent. In this country the bank rate is 19½ per cent if you are lucky enough to get the AA rate, but you can pay as high as 25 per cent or 26 per cent. The net result is that the companies are not able to carry on, they are not able to meet their commitments and are closing down.

The construction industry always had 3 per cent VAT on their repairs. That was recently given to the machinery repair people. I am now asking the Minister to consider doing the same thing for the motor industry. If he does that he will continue employment in the garages, and he will help in making the vehicles roadworthy and serviced properly. At the moment, instead of people taking their vehicles to reputable garages, who pay taxes, they take them to the back-lane garages who will do the nixer or the foxer, as referred to by Senator Bulbulia. The job is not properly done, with the result that there is a danger to people on the road. In other words, we will have a situation of castles falling and dunghills rising. That is the situation that is facing the motor industry at the moment, I am sorry to say.

Another area where VAT is doing irreparable damage is car hire. It is subject to so many taxes already, as well as 18 per cent VAT on the person hiring a car. People coming to this country, who have to pay £120 or £130 a week for hiring a car believe this is crazy. The people who hire the cars have no option, because the car that is bought in the UK for £3,000 is £5,000 here, the Government picking up £2,000 taxation on each vehicle. The insurance premium on that vehicle in the UK for the hire people is £100. In this country it is £625 a year. The result is that the car hire firms have no option but to charge the figures I have stated. Then the Government, not satisfied with having raked off a lump of tax in the purchase of the vehicle and not satisfied with getting over £1 per gallon on the petrol that will be used by the tourist, put another 18 per cent VAT on top of that. This again will lead to the back-lane man who will not be registered for VAT, who will hire out cars that will not be properly covered by insurance and which will not be roadworthy. This will do irreparable damage to the tourist trade in the long term, while it might appear to solve some problems in the short-term.

Another thing I would like to refer to is the LPG. Every time there is an increase in the tax on a gallon of petrol, which normally runs at around 10p we find that 10p is put on LPG. Anybody who knows anything about this — there should be experts in the Department who know the difference — knows that a gallon of petrol and a gallon of gas are not equal. The gallon of gas is about 15 per cent less efficient than a gallon of petrol and it should not be taxed at that rate. If we were sincere in our approach to the environment and pollution, we should be encouraging the use of LPG. If you buy a new car in Canada you get 1,100 dollars off if the car is fitted with a gas conversion outfit. You get your 100 dollars a year registration fee exempted because you have LPG in the car. In Holland it is the same thing. There is no Government tax on LPG, the result being that you can buy about three gallons there for the price of one gallon here. I know that from the Dutch tourists who come to my premises for gas. They think we are holding them up. When you ask them for the money they are surprised that you have not got a revolver as well. If we were honest about the environment and what we are going to do for the country, we would encourage the use of LPG.

Insurance premiums for the private person and the young person have gone out of all proportion. The result is that we have a big percentage of the people driving cars with no insurance because they cannot afford to pay the premium. I know the Minister will say that what I am looking for will cost a lot of money and that he, as Minister for Finance, will have to find the money. With respect to the Minister and to previous Ministers, they lack vision. They are in the position that all they can think of is petrol, tobacco, beer and motor cars for taxation.

It is very easy to pose problems to the Minister but it is not always easy to offer solutions. I will offer some solutions to the Minister which, if they were properly put into operation, would bring the taxation so low that the people would be back to the stage of getting 20 cigarettes for 10p.

I would like that.

The first thing I would do is to have a national lottery, which is in many countries and which is a huge success. This country is no different from the European countries today. The country is gone mad on gambling. The returns can be seen in the racing pages of any newspaper. If the Minister visited Monaco and went into a huge casino he would see the millions of pounds that are changing hands. If he looked out the window of that casino all he would see is one big lump of rock. Here we have one of the most beautiful countries in the world and, of course, the centre is Killarney. If the Minister had a casino in Killarney — there is a site for it in the Muckross estate — he could bring the friends of Senator Killilea, Sheik Yamani whom he is always talking about, the oil barons and the petrol barons to gamble their money in that national casino. That would solve all his financial problems. On Committee Stage, I may have more to say.

I, too, would like to welcome the Minister to the House this afternoon. There are a few brief points I would like to make. With regard to farmer taxation, it is important that farmers are seen by everybody else to be assessed for tax in a very fair and equitable manner. At the present time, farmers, unfortunately, have not an income tax situation to contend with. I agree that a taxation formula for everybody ought to be such that it is truly and utterly flexible.

There are a few items I would like to refer to, in particular, the sale of sites for development land. In sections 36 to 40 this matter has been dealt with fairly thoroughly. Clearly there is a limit of £15,000 per person per year for the sale of sites for development land. When they exceed that limit in any one year they are liable for tax under the development land tax formula rather than the other formula which applies. I am sure the Minister is well aware that farmers do not sell sites unless they are very pushed to do so. I submit that that figure is far too low at a time when farmers have an extremely difficult financial situation.

The Minister is well aware of the seriousness of this problem. The figure of £15,000 does not go anywhere towards alleviating and correcting the financial difficulties of many of our farmers. That is one aspect that certainly is not in accord with what it should be. The figure of £15,000 should be £50,000 or £60,000 and should apply perhaps for a limited period until we get out of the very serious recession we are now in. The selling of sites is only carried out by farmers for the purpose of clearing bank indebtedness or getting them back into a position where they can invest in productive things. There is nothing for this area, unfortunately, in this Finance Bill.

With regard to stamp duty, like others, I welcome the measure of relief for those persons under 35 years if their transfer takes place within the two year period. However, I am not so sure that this requirement of 100 hours of formal education is a qualification that ought to apply. There are many excellent farmers who never had the benefit of formal agricultural training. I know them to be excellent farmers and they are very good at their job. I submit that that clause should not apply.

I do not believe that 35 years is a correct breaking off point because, with the social fabric of our society, much of our inheritance takes place at a later age. I fully agree with the sentiments behind this age limit, which is to encourage earlier inheritance. We must, in my view, deal with ade facto position which exists at the present time whereby many of our people inheriting properties are over 35 years old and they are thereby liable for stamp duty while people less than that age will have the obligation removed from them.

I believe the 110 per cent stock relief measure is a progressive step. I do not agree with the removal of the tapering relief on the capital taxation front with regard to the disposal of farms. I am certain that this tapering relief clause meant that persons owning a place for 21 years had no capital gains liability. This was on a reducing scale right down to a three year stage of ownership. For 16 years a person paid less and for 12 years less again and so on. I believe there was no speculative aspect in this. That tapering relief ought to continue. It could be undesirable to have it removed from a number of points of view. It could slow down the mobility of land. We do not want in any way to do that. Unmarried farmers living on their own farms may not be making the best use of their farms and would be slower to dispose of their asset even though they owned it for 21 years or maybe 40 years for that matter with this tapering relief clause removed. For that reason, I feel that the removal has not been a progressive step.

I question quite critically the roll-over relief for development land applicable only for sports complexes and the like. Frankly, I think this roll-over relief whereby a small farmer in the vicinity of Limerick, Ennis, Dublin or wherever, if he disposes of his assets and moves a bit out of town and buys some extra acres, there is not a major speculative aspect in that.

Those are just a few points I would like to highlight. As far as taxation is concerned, the sooner we have an equitable system of taxation for everybody the better, and that it is not alone equitable but seen to be equitable. As far as farmers are concerned at the present time, regrettably, they do not have a tax liability position. In any formula being devised, which would relate to the farmers, it is absolutely essential that there is a simplified form of accounts-keeping accepted. There is no point in assessing farmers for tax knowing that they have no tax to pay but putting on a cost on them of a couple of hundred pounds to pay somebody to prove that they had no tax liability. If we have a taxation system across the board, which I think would do a lot of good to bring home to all concerned that there is nobody making a fortune that everybody is assessed for tax, but that tax system as far as farmers are concerned should be simple and straightforward and would not necessitate the expenditure of several hundreds of pounds just to establish that people do not have a tax liability at all.

I had intended to go on at some length but in deference to the House, the Minister and the obvious lack of enthusiasm of most of my colleagues for a long debate on the Finance Bill and also the fact that the debate is confined fairly specifically to taxation matters, I do not want to launch into my philosophy of how we should get the country out of the mess it is in. I do not think it is really relevant to this Bill.

There are a few things I am interested in. May I for one put something on the record which will probably cause a little bit of amusement, but I believe it is true? I do not believe there is anybody in the income bracket that most politicians are in who could not afford to pay more tax. We have not paid tax on our property since 1977. We did not pay any tax on our cars until 1981. I suspect that, in fact, the level of taxation in this country is not by any means the highest in Europe. It is probably lower than any Scandinavian country. The commentators who have created a kind of an atmosphere of hysteria about taxation and who have quite shamefully misinterpreted the trade unions' concern about the distribution and equity of taxation and seen that as some parallel with the sort of reactionary nonsense that has been going on in the United States are doing the country a disservice.

The problem in this country about taxation is not so much that people are unwilling to pay the volume of taxation but people are unconvinced that the tax burden is being carried equitably and that people are liable to pay tax on their disposable income. My place of origin despite my often claimed Cork connections in south Kildare. Agriculture there was never anything other than extremely prosperous. When the boom of the seventies came we did not really notice a massive increase in agricultural production. At least those I know who were in a position to judge did not see a massive increase in agricultural production. They were extremely efficient as things were. We noticed that instead of the landed gentry — that is what they were close to — all around south Kildare going to the South of France for their holidays, they went to the Carribbean instead. I have not noticed any signs of impoverishment or penury in south Kildare subsequent to the alleged recession in farming.

I believe that there is a section within the agricultural community who should be paying income tax, and would be quite frightened if they were asked to pay the sort of tax on even their own disposable income that the rest of the community have to pay. The two major political parties have been intimidated by the political lobby of the farming organisations. I am not persuaded that the most efficient section in farming are as impoverished as they would have us believe, except for a few. There was one major evidence in south Kildare of the new prosperity of farming. That was the cut-throat competition to buy up every available acre of agricultural land when it came on the market, producing prices that, even in terms of ridiculous prices that prevailed at the time, were astronomical.

I believe there is a strong case for property taxation. I believe that somebody in my income bracket — that would be the same as most politicians, I suspect — could afford to pay rates and the sort of houses we choose to buy could be rated. I think that some form of property taxation should be introduced. I am not that naive a politician to suggest that rates can be reintroduced but I believe that if all those on pensions and on social welfare were exempted, a form of property taxation could be introduced. Part of the problem about the Irish taxation system is not that we are paying so much tax but that there are so few sources of revenue now that we feel because they are only biting us in a couple of places, we are being crucified.

I do not feel that I am being crucified and I suspect most people in the income bracket most of us are in do not feel that we are being crucified but we have latched on to the justifiable anger of people on £70, £80, £90 and £100 a week, who were being unfairly treated and who particularly objected to the comparatively unfair treatment that they were receivingvis-á-vis other sectors of the community. I am disappointed to see the Government — it is not just this Government who in some aspects have been considerably more compassionate and sensible than their predecessors — accepting that we have reached saturation. We may well have reached saturation level on income taxation and on indirect taxation but I do not believe we have reached saturation level on the extent of those who should come within the income tax net. I do not believe we have reached the level of saturation on other forms of taxation and, in particular, on property taxation. I have heard, for instance, extraordinary figures suggested if bank interest were to be taxed at source. I defer to the expertise of the Minister's Department what the precise estimate would be, but I have heard figures that would be quite significant in terms of the level of the budget deficit.

The second thing is that on this whole area of taxation, deferment of tax and exemption from tax as an incentive, maybe we should look at that area again. It would probably be regarded as something close to being unpatriotic of me to suggest that when everybody else is being told that the good days are over — they quite patently are and for a large section of our community the good days never arrived — for those who are relatively well off.

The whole level of taxation on manufacturing industry at 10 per cent ought to be looked at in slightly more realistic terms. That is just a suggestion. I do not know what the income from manufacturing industry is. In this context in terms of manufacturing industry and its contribution to the economy it is time we stopped bleating about the productivity of the Irish workforce because the Irish workforce in manufacturing industry can be, without over-simplifying it too much, categorised in two areas. If those in the new IDA-funded high technology industries were not producing per head as efficiently as anywhere else in the world those high technology industries would not be here. They are not here because we are particularly kind to them. In fact the IDA have consistently advertised that Ireland produces almost the highest rate of return on American investment anywhere outside the United States.

It is a little bit simplistic for people to blame Irish workers for the problems of competitiveness in Irish industry. I do not want to diverge too far. I want to come back to the taxation incentive. The Minister can correct me. The Telesis Report, as far as I know, was never published. There have been so many leaks at this stage that I am not sure if it has been published. The copy that I have, as distinct from the copy that may have been published subsequently six months later, makes a telling point. I would remind the House that what they said was the view of a major international consultancy body. This was not the allegedly red Brendan Ryan talking. They said that there was too much of the carrot and too little of the stick in the way Irish industry was being developed. For instance, in Taiwan and South Korea, which would hardly be regarded as bastions of Marxism or even social democracy, the banks are fairly well constrained about the sectors of industry to which they can make funding available. Those sectors of industry are identified by the State as possible areas of growth and possible areas of development.

That is an interesting idea. It is not nationalisation of the banks. It is not particularly necessary in this country to nationalise the banks. If we changed the board of directors of the Central Bank in the way I would like we would have effective State control of the banks anyway. Maybe that will put a scare into the banks, but I am sure all these things were done to them already. You could effectively take control of the banks by the composition of the board of directors of the Central Bank. I think that this whole idea of more and more incentives to private industry, which are usually the product of a very effective public relations campaign by the Confederation of Irish Industry — this is not any disrespect to them: I read them all but I have not any place to store them; my waste bin is full of circulars and submissions from the Confederation of Irish Industry——

May I interrupt the Senator at this stage because the House agreed that the Trade Disputes (Amendment) Bill, 1982, should be taken at 5 p.m.?

Debate adjourned.