Seanad Éireann debate -
Wednesday, 23 Mar 1983

Vol. 100 No. 3

Public Finances Reform: Motion.

Mr. O'Leary

I move:

That Seanad Éireann welcomes the movement towards equity in the recent budget as a first step in the reform of the public finances.

The purpose of putting down this motion at this time is to provide Seanad Éireann with an opportunity at this early date of expressing their views on the contents of the budget and enabling the Members on all sides of the House to express their views to the Minister so as to have some input from this House before the Finance Bill is drafted. In previous years, for technical reasons, that was often not possible. Naturally, being on this side of the House, I will be emphasising the positive aspects of this budget. No doubt, others will be emphasising the negative aspects of the budget. As far as my seconder and I are concerned, those views are as welcome as our own views, as we primarily have in mind presenting Seanad Éireann with an opportunity of expressing their views on this important topic prior to the drafting of legislation.

In general, trying to sell to people the concept that a budget which imposed considerable extra taxation is a step in the reform of public finances and a movement towards equity is a difficult task. But because it is a difficult task it does not mean, on the one hand, that it is a task which should be ignored or, on the other hand, that the statement is incorrect. It is very difficult to explain to people that the standard of living which they enjoyed right through the sixties and in particular in the seventies — being, as it was, artificially high — has contributed in no small way to the excessive burden of taxation which this and previous Governments have now found necessary to impose on the people. Similarly, the extent to which we fail to control our public finances represents the legacy which we are passing on to the next generation of taxpayers. The extent to which we overspend represents the amount of equitable distribution of the nation's resources which we are not passing on to the next generation. That is not a very popular or easy message to put across to people, but it is one in which I firmly believe.

However, even within the context of that difficult message, there are a large number of individual measures capable of identification, which were proposed or referred to in the Minister's budget statement. I propose to refer at some short length to a number of these proposals. In the welter of criticism of the increases in taxation — a criticism to which everybody instinctively subscribed — very many positive aspects of this budget have been lost sight of. It is right and proper that Seanad Éireann should take this opportunity of expressing their viewpoints on these items.

I have identified nine such items in the budget to which I want to refer. There are many more, and in addition to the positive ones of course there are items within that budget that are painful to the community at large. I have identified nine positive items which show the commitment of the Government and should be welcomed by Seanad Éireann. Briefly, the list is: the manner in which social welfare recipients have been looked after in the budget; the proposal to introduce a family income supplement; the proposals for the taxation of the self-employed; the proposals for the changing of the system of farmer taxation; the measures proposed in respect of deposit interest; the measures proposed in respect of tax evasion and tax avoidance; the residential property tax as outlined in the budget speech; the advance corporation tax company taxation proposal; and the amelioration of VAT on certain kinds of imports.

These are areas of particular importance which can be put forward as positive steps along the road towards reforming the public finances and moving towards equity. That is not to say, of course, that any one of these individual items is not itself subject to internal criticism. But, in broad general terms, as one examines each of them one will find that there are very positive and worthwhile aspects to each of them.

I am conscious, in talking firstly about the social welfare changes, not to get into the detail of the Social Welfare Bill, which has not yet been presented to the House, but which I understand will be the subject of discussion in a short time. The budget speech itself refers to the broad policies on social welfare payments during the coming year. In general, the Minister showed a welcome awareness of the need to ensure that social welfare beneficiaries would receive a substantial increase. The 12 per cent proposed in respect of short-term benefits and ten per cent in respect of other benefits is a welcome re-commitment of this Government and the nation to the necessity of protecting those in receipt of social welfare benefits.

Under both the Coalition budget which was defeated and the subsequent Fianna Fáil budget, the proposal was to increase social welfare payments and a 25 per cent increase was implemented. This cumulative increase of 40 per cent over two years contrasts very vividly with what has happened in the United Kingdom. In the United Kingdom for the last four years there has been no real increase in social welfare payments. It could be argued in respect of their last budgetary statement presented on 15 March by the Chancellor of the Exchequer in the British House of Commons that they, in fact, effectively reduced social welfare benefits.

In our difficult financial situation that the Government can bring about this welcome improvement is something which should not pass unnoticed. We can have discussions at a later date about the nitty gritty of other changes made, but as regards the vast majority of social welfare recipients, as announced in the budget they will receive very welcome increases which, when taken with the increases of last year will show, in a time when real wages for the rest of the community are falling, a preservation of the purchasing power of those in receipt of social welfare benefits. It will also show a slight increase in their purchasing power, and that is to be welcomed.

Also foreshadowed in the speech of the Minister was the family income supplement. This is an aspect of the budget of which, because it was short in detail in the budget speech, the significance has not struck home to the general public as yet. The Minister set aside a sum of £5 million in respect of this supplement. He indicated that he envisaged that about 20,000 families could benefit. The legislation and the enabling measures to bring this into effect will mean that its implementation will be later in the year. If it was in respect of the last three months of the year the amount set aside by the Minister and the anticipated number of families to benefit would indicate a payment in the order of £800 per annum, or proportionately; if the £5 million was in respect of a time greater than three months, then the £800 a year could be proportionately reduced.

This supplement, being a first step towards the bringing together of our social welfare and income tax codes is most important. It is vital that our social concern should extend not only to those people who are unfortunately unable to work at this time due to illness or lack of availability of work, but to those who are involved in marginal occupations and who might find themselves almost as well off if they did not work at all. The advantage of the family income supplement is that these people, from my understanding of the Minister's speech, will be helped in this regard and that the lowly paid people who are working will and can expect to benefit in some way from it. That is a very positive start and one which has not received sufficient publicity.

The Minister has mentioned his determination to tackle the problem of the taxing of self-employed people. I am self-employed myself, so anything I say here would obviously have to be viewed in that light. There is a considerable value at the present time to the self-employed in the delay which they can bring about quite legitimately in the payment of their taxation. I am not speaking in terms of the use of appeal procedures or anything like that, but about the self-employed paying their taxes exactly when they are due, but not before.

The amount of time by which the self-employed can delay the payment of tax varies depending, if they are traders, on the time of year which they are using for the basis of assessment. For example, if the self-employed person is using income up to 6 April of any year, he can delay his payment for practically two years beyond the PAYE worker's payment. Take the worker who pays PAYE every week. He is, effectively, paying his taxes in the mid-point of that year. The self-employed person who has a tax year ending on 6 April, 1982, for example, does not pay tax in respect of that until two years later. Of course it is not true that everyone benefits to that extent. If, like myself, their tax year ends on 30 March, their benefit is limited to approximately one year later than the PAYE person.

The Minister should, as a first step, recognise the difference in approach or in length of time and should tackle the problem on the basis of bringing those people who are to a greater extent in arrears up to date. The value of this delay to the self-employed should not be underestimated, in respect of someone who is two years in arrears being probably equal to a reduction of 30 per cent in that person's taxation payment. That is the extent of the benefit which the self-employed are getting. The Minister has expressed his determination to tackle this problem and to introduce it with respect to the coming year. This is another positive step towards the elimination of inequity within the tax system.

There is the question of the extension of taxation to small farmers who are not at present liable for tax. The Minister has also dealt with that matter in his budget speech. It is never pleasant to tell people that they must come within the taxation net when they were not previously within it. In equity, some of those who are involved have not objected, because if they do not have a taxable income, like everyone else in that situation they will not pay tax. The establishment of the general principle is, as the Minister said in his speech, moving towards tax equity. In that regard, it should be welcomed. It is important that the system of returns for such people should be of the simplest kind possible. They should not have to make a return of the variety of the AG3 form which farmers now have to make. A form like that is very difficult and quite unnecessarily complicated for the type of people who are now coming in to the taxation net.

Another point worth considering is deposit interest. This is a difficult area because those who have abused the system — and I suppose most of the people who have abused the system have only slightly abused it — feel that for the sake of the small amount of money involved they should not be subject to a major investigation. The Minister is correct in reducing the amount from £70 to £50, in effect retrospectively. He has to establish a code or practice in respect of the implementation of this which will not leave minor offences open to very severe penalties. The important thing is to ensure that there is no flouting of the law in future and of course that people pay their legitimate arrears. It will be recognised that the law was indeed widely flouted in this area. It is equitable that the Minister should seek to ensure that that does not happen in the future.

The budget speech also referred to the possibility of including a new provision in the Finance Bill on the question of tax avoidance. Anything in the area of tax avoidance should be welcomed. The determination of the community to stamp out tax avoidance has been lacking, and the time to turn over a new leaf is now. There is a lot to be said for some period of grace, to enable people to confess their sins and come to a sensible resolution of problems that may have been accumulating over years past. The Minister is to be commended on his determination to ensure that those who evade tax do ultimately go to jail. That is the only reasonable and sensible way of resolutely tackling the problem of tax evasion.

There is an area of capital taxation which has been foreshadowed in the budget — that is the residential property tax. It is only right and proper that those in receipt of income in excess of £20,000 a year in occupation of a house valued in excess of £65,000 should make this modest contribution towards the services provided by the community at large. The linking together of the valuable house and the substantial income is sensible, and the Minister should be commended on that. It is a sensible approach towards taxation, and one which I am confident will yield substantial revenue. The most important thing in capital taxation is not only that it be fair and equitable, but that it should yield revenue. There is no point in having taxation schemes that are grand on paper but, in fact, do not yield revenue.

The other point which is fair from the point of view of the community at large is the question of advance corporation tax. It is right and proper that the Minister should tackle this point. The House may not have been aware that until the present time it has been possible to receive a tax credit or a refund from the Revenue Commissioners in respect of the payment of a dividend from a limited liability company which assumes that the company from whom you receive the dividend has paid tax. Very often, that company have paid no tax and even though the company paying the dividend would have paid no tax, you would be as entitled to your credit as if that company had paid tax. The proposals of the Minister are sensible. They will not penalise any company who are paying tax in the normal way. If there is a slight effect on companies that are paying a reduced rate of tax it would have a slight effect on their shareholders. By and large, it is a good principle that you should not be entitled to get a tax credit or a tax refund in respect of tax that was never paid in the first place. The Minister's determination to introduce this new type of taxation is another example of the equity which exists in the budget but which has been overlooked because of the publicity which the more swingeing type of increases attract. These increases are equitable, is so far as we are accepting all responsibility and not passing the responsibility on to an even greater number of unemployed in years to come.

In addition, there is one other matter that I would like to refer to, and that is the very welcome change which the Minister proposes to VAT on imports. That very foolish change was brought about in 1982 as a result of an election promise. It had disastrous consequences for a large number of manufacturing industries, as well as having beneficial consequences in respect of some other spheres of activities. In respect of manufacuring industries, it has had disastrous consequences on their cash flow. The Minister's proposal to allow firms who export 75 per cent or more of their production to be excused from the full rigours of this rule is very welcome. I would commend the Minister for the courage which he has shown. This will cost the Exchequer £12.3 million in 1983. A subsequent provision of a similar amount of money and the rolling back of a greater amount of this ill-advised tax would have a beneficial effect on other sections of our economy, particularly on manufacturing industries which are not exporting 75 per cent of their production. I would recommend that the Minister would pay some consideration to that.

There are a number of things which I would have liked to have seen in the Bill, as having an even greater contribution towards equity. The special exemption for artists makes absolutely no sense in the present day and age. The people who benefit are those who do not need the exemption, while the artists who do not have an income get absolutely no benefit from the exemption. A new and more imaginative scheme using the same amount of money differently would be much more beneficial as regards our patronage of the arts.

Generally, with those few examples of the general thrust of the budget the changes that have been set in progress in the budget will lead to a greater degree of equity in the question of taxation and social justice generally. I commend this motion to the House.

Mr. FitzGerald

I second the motion before the House in the name of Senator O'Leary, welcoming the movement towards equity in the recent budget as the first step to reforming public finances. In seconding it, it would be proper to give a little background to the budget 1983 and the period that not alone this Government had to deal with but the period over the last number of years that led up to the need for this budget.

Apart from being a budget that should first step in the direction of equity in our taxation and in relation to social justice in this country for quite some time, the budget also has done a major piece of work in the protection of our standard of living. Not alone has the budget been brought about in a period of extreme difficulty for our economy — and it is worth mentioning the opening Exchequer borrowing requirement of the State of £2,232 million with which the Minister was faced prior to introducing this budget — but it is worth framing the whole picture relating to this budget in a reaction to the seventies when this country suffered, on the one hand, from two major increases in the price of oil commodities from the world outside and suffered also from a preoccupation — this is not something that is necessarily knitted into the official record to the extent that it might be but certainly was subject to public comment for a long time — with the extent to which our leaders through the seventies, and particularly in the latter half, were moved by the possibility of oil gains off our coasts realising finds that would have been considerable for the social and economic development of this country and which, in the final analysis, were never realised to any great extent. They were too deep to really engage in a serious attempt to bring the offshore oil to this country. That climate that certainly prevailed in the seventies led government after government — and I mention particularly the last Government that was in power in the latter part of the seventies — to engage in opening up new schemes, developing areas beyond the point to which it was reasonable for us to develop them, extending areas, developing schemes, not just those directly in the hands of the State, but those in which State-sponsored bodies and public statutory bodies were involved, to a point which led to very many millions of our country's finances being doled out without the same degree of responsibility as would obtain today by a Minister in dealing with capital expenditure or with schemes that prevailed in the country and whose scope there was no great necessity to increase.

I believe this particular budget has been not alone equitable but also compassionate to our people who are less well off and whose needs need to be looked after in a period of great economic strain. It behoves the Government in office at this time — who have a concern for this area of our economy, for this section of our population — to show that in the annual budget statement. The history of the last two budgets was that they embodied 25 per cent and 12 per cent increases in social welfare benefits. The family income supplement forms one part of that movement to keep very close to the need to support people who have grave reason for depending on the State because of sickness, unemployment or other pressing reasons.

In the period in office of the previous Coalition Government from July 1981 to February 1982, there were brought in measures which have been seen to be supported in the recent budget. For example the establishment of the Youth Employment Agency at that time was a major exercise in trying to do something about the well being of very many young people, the extent to which young people form part of our unemployment problem at present. The Youth Employment Agency, in supporting not alone the training of youth but equally the voluntary efforts of the community, are proving very successful. It is important for us to point out that the budget not alone supported the demands of the youth organisations in relation to what they required to finance their activities, and particularly those who are engaging in voluntary efforts dealing with youth, but equally it came up with a quarter of a million pounds over and above the amount demanded by the youth organisations.

When talking about equity and compassion it is important to record that this country has not had a record of great substance, over a long period, in relation to development aid abroad. In the 1983 budget there has been an additional £3 million given to this area over and above what was provided in the budget last year.

In relation to public housing I was dealing a moment ago with the achievements of the Coalition Government from July 1981 to February 1982 — one other achievement that can certainly be recorded in large profile of that Government was the establishment of the Housing Finance Agency. In the course of this year the funds have been provided — we are not just dealing here with public housing directly but we are dealing with the question of loans under the Housing Finance Agency — 2,500 loans are expected to be financed and provided to couples who might otherwise not get housing in the present climate, given present market trends, couples who must depend on getting support from a body like the Housing Finance Agency with its interest levels and attractions.

Like Senator O'Leary I am very encouraged by the statement of the Minister in relation to tax avoidance and evasion. The emphasis on prosecution and of course on letting it be known that jail sentences will develop out of this area should bring the kernel of this problem to the attention of very many of our citizens who are not facing up to their financial responsibilities to the State. The Minister did say that the £20 million expected revenue from this source is only a beginning of a serious campaign in which both his Department and the Revenue Commissioners will engage in the foreseeable future.

Listening to a recent "Today Tonight” programme in relation to this problem of tax avoidance and evasion it was somewhat ironic that when the Report of the Commission was referred to, amongst the five categories of people listed who would be making their fair contributions, if I remember correctly, were garage proprietors, doctors, solicitors, building contractors and publicans. The conversation continued for at least another 40 minutes. After the point at which that was mentioned at an early stage in the programme there was no mention again of anybody other than doctors and solicitors. There is a great need here to identify each of these particular areas of tax avoidance, to have built up in the Revenue Commissioners specialist teams to handle them stage by stage, year by year. I am sure the Minister will have a chance of replying to this later in the debate.

This is one other way of contributing in a major sense towards softening the burden on the less-well-off, towards giving them the support they need in a period of severe recession, unemployment and difficulty for them. One might point to the manner in which the budget has seen to the needs of the social welfare recipients, to giving a considerable boost to our youth, public housing and indeed private housing sectors, under the aegis of the Housing Finance Development Agency, to development aid, to taking the first real step, I would hope, after a period of uncertain government over the last two years — in a four year period — in which attempts can really be made to combat tax avoidance and evasion.

The area of equity, of social justice and the protection of the weaker sections of our community would be well served by this Government, by this Minister if the substance of this statement can be translated later into more generous statements in relation to this area in the course of time.

Mr. Smith

Senator O'Leary in the first half of his contribution concentrated on social welfare and the elements in the budget with regard to people who are eligible for payments of one kind or another. In a country in which half of the population is under 25 years of age, where there are thousands of others who have lost their jobs and have become redundant in so many areas, the first question to be posed with regard to how we apply equity must be how we provide the engine of growth, how the Government, in a budget, design that budget so that all of the people can be motivated. Indeed, the services necessary for the old, the infirm and the unemployed can be sustained only, and growth can only be more equitable if that engine of growth in agricultural, industrial and commercial terms can prosper.

In this motion to concentrate for half the time on social welfare, taking it as the first norm, as the major plank, of what this Government were doing in terms of equity seems to me to be quite extraordinary. Is the answer to the problems facing this country, facing our young and indeed many that are not so young — who are sometimes forgotten, who have lost their jobs — to be found in social welfare? I noticed also that in the second part of his contribution Senator O'Leary concentrated on taxation, some changes and some worthwhile changes. But the two main themes seem to be missing something. We appeared to have the wheels, the carriages, but we did not seem to have the driver.

I want to deal very quickly with the social welfare points Senator O'Leary made. He made the point that there was a substantial increase affected in social welfare payments. Over the years all Governments have tried, in so far as it was in their power to do so, to increase benefits to the older sections of our community, people who are well entitled to any such benefits. When the Senator compares increases given here with those given in the United Kingdom he might distinguish between the inflation rate here and that in the UK and remember other schemes not in existence here but which exist there.

Moving on to the question of taxation, obviously the Senator was glad to see farm taxation extended to cover all farmers. There are circumstances in which most people would welcome that kind of change because of the anomalies in the PLV system. Let us look at the facts as they appear on the ground. Up to now there has been marginal relief. A system applied to farmers which gave the category of farmer coming into the taxation net for the first time an opportunity to apply a graduated scale which would make them liable to taxation at lower rates depending on how their valuation increased from £40 to £50. I do not want to go into the detail of that because it is not relevant here. However, when they entered the farm taxation code they had a buffer provided until such time as they entered the system fully. Now the naked thrust of new taxation hits all farmers. In spite of whatever changes the Minister makes — and I welcome any changes that can be made in terms of simplifying a system of accounts particularly for small farmers — as farm surveys have proved, over 60 per cent of the farmers being added to the tax net do not have taxable incomes. The fact still remains that many of these people will employ accountants paying them £200, £300 or £400 to prove that they do not have a taxable income. I would dread going into any court to argue the case, in all equity, that a farmer who has half a taxable income would pay a proportion of that income to prove that he should not be taxable in the first instance. I mentioned that in passing in terms is this new scheme, as it applies to farmers, I might take advantage of the fact also that the Minister for Finance is here to welcome the efforts that will be made with the Revenue Commissioners, to devise such a scheme. The Minister knows that by no stretch of imagination under any scheme would it be possible for them with their commitments to pay tax. Therefore the new simplified system should take all these matters into account.

I want to come to the real fundamental. There is no concentration in the remarks so far on where this budget is going in terms of how it will fire the engine of growth in our economy. I want to address myself for a few moments to the question of measures in the budget which as I foresee will set back our agriculture to a very considerable degree. I want to deal with these questions on the basis of equity. How does one argue that a 100 or 200 acre farmer, milking 70 cows, should qualify for a farm modernisation grant in December 1982 and yet a small farmer, milking ten, 11 or 20 cows some months later, qualifies for no grant? That is the simple fact as it operates on the ground.

It is this kind of thrust in the budget — which seems to concentrate on areas of no developmental character — which is hurting the country and in respect of which I should like to see changes take place. Remember, it is not just the farming community who suffer by virtue of the fact that these grants are not available. Not far from here, indeed perhaps in every constituency in this country are small industries dependent perhaps for 65 per cent to 70 per cent of their output on farm development. Little industries — in sand, gravel, cement blocks, hardware and so on — will grind to a halt this year, not because farm development is not necessary, not because anybody who is really interested in the development of agriculture thinks that the amount of money spent on farm development is not wise but because practically no farmer will make a move this year pending whatever changes are to be made. In the meantime these jobs will be lost as will many of the small and medium size farmers who have been slow to develop. I accept that but they are now coming on-stream when development aid is very essential to them. To take away that encouragement with its consequent detrimental effect on employment seems to me to be quite an extraordinary decision.

I would put it to the Minister and his colleague, the Minister for Agriculture, that the very least that might have been done was that this scheme would have been retained until it was replaced by a revised scheme — if that has to be — because it is a fair point to make that developmental aid should be related to output. To change in mid-stream, leaving nothing in its place, letting all these small industries close down, with farm development grinding to a halt, is disastrous and is having its effects, as can be seen at present right across the country.

In that same area there are the farm home advisory services and the poultry services, an industry which is valued between £80 million and £100 million, with imported products costing us up to £25 million, an industry which has been developed very scientifically, in which the numbers of people involved are not as great as we would like. But it is a specialised industry requiring specialised aid and advice and in respect of which changes affecting that industry adversely have come into being. I would align with that the cost added to advice in respect of ACOT and farm development services.

All of these together constitute a body-blow to an industry which has enormous potential for not alone improving farmers' incomes — who in turn would be placed in a position to pay more tax — but also the off-stream employment which would be created by this additional output in terms of services and food processing. We import something in the region of £800 million in food imports. About one-third of those are food products not produced here. The remainder are food products which we have the climatic and disease-free environment to produce on a par with any of our counterparts in Europe or indeed in the rest of the world. Yet, at a midway stage in our agricultural development, about one-third of our farms produce little or nothing. All the changes that have taken place in Irish agriculture since our accession to the EEC have taken place on about two-thirds of our farms. It must be remembered also that this has taken place at a time when, in all equity, we want to encourage that group of farmers yet to be motivated to development in their interest, in the county's interest, in interests of employment. It is an ever-renewing resource which we need desperately at present in terms of the provision of jobs. But for some extraordinary reason these changes have not been effected in agriculture.

When one examines the budget one sees a reduction in borrowing for capital projects, an increase in borrowing for current expenditure and infrastructural development. With regard to roads, I cannot speak too well for Dublin apart from its traffic congestion. But I would invite anybody to come to Tipperary and see for themselves how our roads are being ground up under the impact of vehicular traffic not envisaged at the time their foundations were laid. There are many of our people who cannot avail of services for one reason or another. Usually the reason advanced is that the roads are too bad. Provision can be made for an additional £31 million in what is claimed to be in all equity for additional people we know will go on the unemployment register — forecast as being necessary this year. Yet at the same time we cannot provide funds which would employ the same number of people for practically the same amount of money. The argument might well be based on what would be paid to a person who is employed as against one who is unemployed — if one takes account of PRSI and income tax contributions and output. This is apart altogether from one's attitude to work, the country's attitude to work, the morality of work and getting people doing something. This is particularly desirable at a time when our roads are crumbling, when our building industry has had up to 38,000 people unemployed over the last few years. Yet while these valuable skills are latent we can afford to increase the provision for unemployment benefit by millions of pounds. It seems quite extraordinary to me that, in all equity, we cannot pay these people for working rather than having to make provision for them in social welfare, occasioning an ever-diminishing working, taxable population. Yet the Government have to provide more and more funds to sustain the weaker sections of our community, making no use of a group of people who I am quite certain can use their talents in many developmental ways. But we appear to choose to ignore that road and condemn many people to unemployment which if it persists——

An Leas-Chathaoirleach

I am sorry to interrupt the Senator but he has a minute to conclude.

Mr. Smith

I was not aware of the strict time limit. I misjudged the situation. However, I will abide by your decision.

I would ask the Minister for Finance to take a very serious look at our approach. I know there are limitations. I know that we must face up to the realities of putting our public finances in order. Many criticisms have been made of this budget in terms of its being a book-keeping exercise and so on. But I would exhort the Minister to place the funds at his disposal, as far as possible, into development. Otherwise I cannot see a future for this country or for our young people and others. Naturally, all politicians who have a real interest in the country want to see the talents of all our people used to the fullest possible extent. We do not want to see our cities crime-laden and so on because many of those young people's activities and energies are diverted into other areas because they do not have these resources available to them.

I would urge the Minister to address himself seriously to this question, whether this Government remain in office for a long or for a short period. This is our country and all of us want to see it providing the opportunities for the people we want to serve.

Mr. Ferris

I shall try to be as brief as possible. The question of equity has been raised in the motion before the House. It is equity in the distribution of the wealth of this nation and in the distribution of its tax code right across the wide spectrum of society that is involved here. We talk about equity now because of the introduction of a budget which everybody accepts as being a difficult one. All the harsher provisions of the budget hit at people's standards and are those spoken about by people whom we in the Labour Party would hold we represent— people in the trade union movement, people on social welfare, people whose present incomes could be regarded as being just above what we would accept as being the poverty line. It is because there are so many of those people, because they perceive the present system of taxation as being inequitable, that it is opportune that this House would point out those provisions of the budget that make an effort to bring some equity into our system of taxation.

The previous speaker, Senator Smith, expressed doubts about why we should worry about social welfare recipients and why we should not provide more work for them. It brings to mind a worry I have that in the budget, presented by the Minister who is with us in the House today, an additional figure was found to be necessary to have allocated for a number of people who will come into the social welfare scheme this year. Unfortunately, the previous budget estimate and the figures published by the previous Government did not take that into account. That is what has this country in the state it is in at the moment. Proper adequate budgeting never took place in advance and by the end of the year the budget estimate was so far off mark that increased taxation had to be brought in retrospectively to pay for situations which had happened 12 months previously.

Mr. Killilea

Absolute rubbish.

Mr. Ferris

Senator Killilea will have his opportunity to contribute to this debate. This Government have put in additional money to protect these people we know we must look after. It is so glib of anybody, particularly those who have been in Government for so long, to ask why do we not put people to work instead of paying them social welfare. The reality of it is that these people have lost their jobs through no fault of their own and have contributed through PAYE and PRSI to an insurance fund which gives them certain entitlements when they do not have work. To suggest for a moment that the Government can steal money out of an insurance fund and give it to some other organs of Government, like a local authority or a health board, to create employment is not in compliance with the facts. It cannot be done. The reality is that it is not the job of the Department of Social Welfare to prop up employment but it is to look after people who have contributed and through no fault of their own have no jobs.

The Social Welfare Bill which we will be discussing tomorrow has tried to eliminate some of the anomalies whereby people working a short week can, in fact, have more than people working a full week. That is an area of contention. It is an area of argument. It has been argued continuously inside and outside these Houses. It has been argued in the country and in the trade unions. It has been argued in my party. The reality is that there was an anomaly there. Unfortunately, when people for any reason, in trying to have equity, find themselves with a lesser amount of money at the end of the week they consider that unfair, and, because of that, 15,000 short-time workers consider the Social Welfare Bill unfair in that they will be getting less. That is why it was initiated. I do not think for a moment that the amount of increases being given through social welfare are sufficient. I would like to see them given in April——

An Leas-Chathaoirleach

We will deal with the Social Welfare Bill tomorrow.

Mr. Ferris

It has been brought into this debate by all the previous speakers, and I was reverting to some of the statements which have been made by some of your colleagues from your side of the House. That is why I want to deal with it. I have said I will deal with it more specifically tomorrow.

Why have we a problem of inequity? It is because the tax base is so narrow that the unfortunate people who are at work in the PAYE sector and in the PRSI sector appear to themselves to be the only people who are contributing. They perceive themselves to be the people who are contributing most, and they are, of course. They contribute over £1,000 million in taxes in a system out of which they cannot opt. We are now broadening this tax net to include self-employed, to have their returns more quickly, and all farmers who have a taxable income. We are not suggesting in the Labour Party that anybody who cannot afford to pay tax should pay tax.

I am appealing today from this side of the House as a Labour man to farmers, particularly their organisations who purport to represent them, to facilitate at least the Revenue Commissioners in deciding with a simplified accounting system which has been given to them as a privileged section—they are allowed literally to write their own tax bill—to co-operate. It is time for leadership to be shown from that side of the House and from the leaders of trade unions and the leaders of the farming organisations. This country is slowly going down the spout unless we all pull our weight. This is the equity the PAYE workers are talking about. They want everybody with a taxable income to pay a fair share of tax.

It is our contention that by bringing everybody into the net, without expending £400 or £500 on accountants' fees to disprove liability or otherwise, and I realise there are a number of farmers who will never pay a penny tax, they will be seen at least to be subject to some form of accounting system. Otherwise there will be a revolution in this country by the people who pay this enormous amount of PAYE and PRSI to protect themselves when they are out of work. The fact that 93p out of every £ income tax is going directly to international bankers is something that the PAYE section will not accept for much longer, and this is why the Minister has been making an effort to bring down our foreign borrowings to a reasonable limit without bankrupting this country in the process.

Fianna Fáil intended to have a figure of £750 million, which is so difficult that it should wipe out three-quarters of the social welfare code in this country or wipe out food subsidies. All these things published in Fianna Fáil documents are blatantly discriminatory against poorer people, the people Fianna Fáil purport to represent. Fianna Fáil should realise what they have been doing. In the sixties when everything was brilliant and Fianna Fáil were in power they never moved once on the actual allowances under the PAYE section. Never once did Fianna Fáil increase the allowances. When we asked for a continual move downwards of the date in which somebody could retire as an old age pensioner, Fianna Fáil continuously refused to do it. When Fianna Fáil got back into power they stopped the movement we were doing. That is equity.

We talk about farm modernisation grants. I agree totally that the farm modernisation grants were of benefit to the larger farmers only. We have all discussed them at various forums and seminars. They needed to be reviewed. Farmers who had been approved for grants through ACOT or otherwise, even though not approved by the Department for payment, when a new scheme is brought into operation in fairness should get whatever grants were approved for them at the time.

We will have to broaden the whole spectrum of capital tax, the tax on discretionary trusts that Fianna Fáil wrote off, the millions of £s of unused money which is legally set aside and cannot be got at because Fianna Fáil wrote it off, and I am glad the Minister has given a commitment to look at this. These are areas that people on social welfare and PAYE will not accept for very much longer. They have no option but to pay the youth employment levy and the health contribution levy. Farmers have refused to pay it. Why? Because nobody actually made an effort to collect except when the farmer was hospitalised, and then he was glad to pay it. It is unfair. There is a system for one and it does not operate for everybody. It operates for the unfortunates who are caught in the net, and they have no discretion whatsoever about the postponement of it or refusal to pay it.

The other problem is the collection of taxes from workers which has not been surrendered to the Revenue Commissioners. The Minister in our last sitting dealt adequately with that, and I want to compliment him on the approach he has to this problem. It is something that needed to be tackled, because people do not see equity when they can find people who are almost public heroes getting away with it, and they have been getting away with it. The fact that people who should have been paying a fair share of tax have been getting away with it under successive Governments is what has this country in the almost bankrupt situation it is in vis-a-vis our foreign borrowings and what we can generate ourselves productively within the country.

A commitment must be given and must be seen to be given, because I do not want a situation arising when you will have people stopping work deliberately because they feel that other people, who apparently do not have to work as hard as they, can get away without paying a fair share towards the running of this country in the manner in which we would like to see it run. I know that indirect taxes, VAT, customs and exise duties, all these forms of taxes, have now arrived at the point of diminishing returns. We are talking about a very select group of people to whom we will now have to extend the tax, they are farmers of all valuations depending on their incomes. They are the sectors that up to now, for some reason, have been treated differently from anyone else in this country.

I am defending the social welfare people who are incapable of assisting themselves without some assistance from the State. They have contributed to it. I would like to see this income supplement coming into being in a genuine way that will overcome some of the problems that will be created in other sections of the Social Welfare Bill, and I would like to see the continuation of what the Minister announced in his budget speech of a commitment to tax equity. Nobody wants to pay any tax, but for God's sake, let us face it, if we do not broaden the net this country cannot continue to create new jobs and employment for our young people, and do all the things that we want to do as a social democratic society abiding by the rules of democracy. All of us will present ourselves at various stages for election. That is democracy. But if you get people on the street continuously objecting to paying any excess amount, I think this country could be in trouble. It is heading for that unless some constructive steps are taken. I think the steps have been started. They are not quick enough for me, but at least they have been started. I hope the Minister, in his response, will deal with some of the points that have been made by the contributors to this motion.

Minister for Finance (Mr. Dukes)

Before I refer to some of the points made by speakers on the motion I would like to pick up one or two points from the Report of the Commission on Taxation.

Mr. Lanigan

The Minister is coming in before anyone on this side of the House has had an opportunity to contribute to the debate.

An Leas-Chathaoirleach

The Minister has a right to speak at any stage. He is not concluding.

Mr. Dukes

There have already been two speakers from that side of the House that I have heard and listened to with some attention. I would like to refer to one or two points raised in the Report in the Commission on Taxation which I think are of interest as a background to the matters we are discussing. In chapter two the commission referred to criticisms of our taxation system. Under the heading of "Equity" in paragraph 2.3 they made the following points:

The greatest volume of criticism alleges that the tax system is unfair. Those subject to PAYE consider that they are paying an excessive share of total tax revenue. They feel that the financial institutions, the farming community and the self-employed generally are contributing too little. The self-employed consider that the benefits enjoyed by those in secure employment should be taken into account and cite instances in which the self-employed are treated less favourably than employees. The non-manufacturing sectors of the business community, including farmers, believe that they should be given the same reliefs as the manufacturing sector.

I conclude from that that everybody believes that the system is wrong, everybody believes that somebody else gets more advantage out of the system. It is probably because the system as a whole is not seen in its proper context by most of the people who are making a contribution. That point was taken up again by the commission in chapter 3 of their report where they were dealing with criteria for tax systems. In paragraph 3.5 they discussed particularly the term "the burden of taxation" which I think has a lot to do with people's perception of the equity of the system. I would like to quote from that paragraph and the following one:

In discussing equity the term "burden of taxation" is frequently used. We believe that the implication in this phrase that all taxes constitute a diminution of welfare for which the citizen receives nothing in return is incorrect.

It goes on in the following paragraph to state:

The notion that taxes as a whole are a burden probably arises because taxes are compulsory and payment is divorced from the receipt of the benefits arising from public expenditure which most citizens take for granted.

There is the kernel of the problem of considering the equity of the tax system. There is severe inequity in any system which puts a heavy burden on today's taxpayers to pick up the tab for yesterday's expenditure. There is a particular inequity in a system which so loads today's taxpayers that it diminishes our ability to provide the kind of services, to provide for the kind of investment, that we want to provide for in order to make sure that our young people can have jobs, can have the education they want, can have the other facilities to which we believe they are entitled and which we want to give them.

The kind of dichotomy in view that is being illustrated by the Commission on Taxation is the main reason why we have a situation, this year for example, when virtually the equivalent of all of our revenue from income tax will be needed to pay the interest on Government borrowing. We have mortgaged that much of our ability this year to provide the services and to finance the investment that we believe is necessary because we have not systematically down through the years looked at taxation in the same context as expenditure. That failure in itself on our part as a community is one of the greatest inequities that we ourselves can perpetrate on our own community. It is part of this Government's effort, as set out in this year's budget, to bring home as directly as we can the direct link that inevitably exists between expenditure and taxation, between the benefits we derive from expenditure and the sacrifices that we must consent to make in order to provide the means to support the expenditures in question.

We had to face in December the task of devising a budget fairly quickly. It was clear from the outset that it could only be a very difficult package. This, indeed, had been predicted for many months previously. Our public finances were seriously out of line, so that on top of the Estimates of expenditure already published which incorporated some very considerable reductions, further expenditure reductions and increases in taxation were inevitable. This was the only responsible course of action, and this is what we have done. The budget has been subject to some severe criticisms. Much of this is understandable.

I think I hear a noise from another place which indicates that I should leave for a few minutes.

An Leas-Chathaoirleach

Senator Killilea.

Mr. B. Ryan

I understand that there have been two speakers from Fianna Fáil.

An Leas-Chathaoirleach

There has been only one. The Minister was incorrect. I will let you in after Senator Killilea.

Mr. Killilea

I am delighted to get in at this stage. I interrupted Senator Ferris with a remark regarding the statement he was making. The word I used was "rubbish". He made an allegation that our Estimates were not correct, that the Fianna Fáil Estimates were not correct when they were leaving Government last year. That is not true. The straight facts concerning this argument can be asked of the Minister when he returns. I do not want Senator Ferris or any other person in this House or in any other place to get up to make such remarks when they are unfounded and untrue. In the allocations in the budget last year, it was the first time in the history of the State that the expenditure of the Departments and the expenditure in the budget were kept exactly as budgeted. The revenue dropped. That is quite a different thing from what Senator Ferris was talking about.

He went on then in a vague way to talk about diminishing returns. That is true. There were diminishing returns then and there will be quite a substantial amount of diminishing returns this year. Of course there will. He talks about the set figure Fianna Fáil had in their programme at the last general election of bringing down the deficit to £750 million. I hope that Senator Ferris at the end of this year will not be shocked when he finds that the present Minister and the present Government will not have got that figure substantially lower than £750 million. We are only at the beginning of the year yet and their attitude to date shows that. Indeed, they will get a hell of a surprise, and the Labour Party will get an enormous surprise, no doubt, at the end of this year.

I want to say this now before the Minister comes back from his vote in the Dáil. I asked him here on a previous occasion about tax and the collection of tax, PRSI and PAYE. I asked here on the last occasion, and I am going to reiterate it today and I am going to continue to ask this question about the collection of taxes, because I made the allegation then that the biggest sin an employer can commit, in my opinion, is to take from workers who start in his employment PAYE and PRSI subscriptions, and not return them to the State. If he did not take it in the first instance then one would say that he was not complying with the law, but he takes it and puts it down in his own pocket. There seems to have been a promise in recent days to the Labour Party in particular in which certain members of the other part of the Houses of the Oireachtas are satisfied that we are going to have a marvellous improvement in the collection of those taxes. I cannot see how that is going to be done. I want Senator Ferris to ask his Minister about it because seemingly he does not pay heed to me. I gave instances down in Carrigaline in regard to a recent closure down there where an enormous amount of money which was collected from the workers was not returned to the State. But the very first one in this country that made an enormous collection of PAYE and PRSI was in County Leitrim in the firm of McCartin. McCartin's owe this State £1.3 million in PAYE and PRSI moneys collected from their employees and never given to the State. How do this Government now propose to collect taxes when every single employer in this country——

Mr. O'Leary

On a point of order——

An Leas-Chathaoirleach

You may not name a firm in the Chamber.

Mr. Killilea

Sad it is that one company can walk away with £1.3 million of taxpayers' money, PRSI payments, and the Minister glibly states — I read it in the newspaper yesterday — that he assured the Labour Party that he is going to put the thumb on the non-payers of taxes in this country. When is he going to start? I want him to declare to this House and to this nation is he going to collect that for a start? Is he going to collect from the Carrigaline district, the company which walked away with an amount similar recently, and the others to date which owe that money? I want Senator Ferris to understand that, not to come in here talking pious platitudes about firmness by the Government, the Fine Gael side of the Government, pious platitudes that they give to some of their members in order to persuade them to vote them through.

Mr. Ferris

The Joneses and others have not paid, and they got away with it.

Mr. Killilea

These are the matters that are relevant and these matters are very relevant to the employers and the workers of this country, and I am surprised that the Labour Party are not asking questions about when will that money be collected. That is the first thing. We talk about farm grants then, and Senator Ferris gets up again and says, "Sure, we are going to have the soft option for the farmers of this country. They are going to get a piece of paper and they are going to sign it and send it back to the Revenue Commissioners, and all is going to be happy. Everything is going to be rosy. They are not going to have to pay taxes, but they are going to satisfy the PAYE people that they have signed the document and that they do not have to pay taxes".

That old story does not wash with me. The present Government are sending out a document to the small farmers, many of whom are receiving social welfare benefits to whom this Government gave a 10 per cent increase recently in the budget. And they are now asking the small farmers to supply them with information so that they can be eligible for tax assessment. It is similar to the one the Senator signed recently when he was asked at the bottom of it, did he, as a person, collect the £1,000 from the Department of Local Government for building a new house in the last 12 months. That is a horrible thing to ask on any tax form, but it is being asked in the present one, and it is relevant. I think it is horrifying to think that the tax collectors, the Revenue Commissioners, the Department of Finance and the present Government, would ask any person in this country did he receive a £1,000 grant from the State in the last 12 months to build his new house. It is in it; go out and check it; you will see I am correct.

Mr. Ferris

It is a misrepresentation of the facts. The reason for that is to find out whether in fact a person has one or two homes or is he claiming tax allowance for both of them. Get the record straight.

Mr. Killilea

All they had to do was to ask the Department of the Environment and they would tell them. They are either eligible or not eligible for the grant. If they have two houses they cannot be eligible for it. I am surprised at Senator Ferris. I want to talk, then, about the present Government and their budget. It is really an anomaly of terms and time when you read that "Seanad Éireann welcomes the movement towards equity in the recent budget as the first step in the reform of the public finances". This to me is a joke and of course the Fianna Fáil Party, as I am sure the House is aware, will be voting against this motion in this House this evening.

I want to give an instance about that part of the country that I live in. I am not going to talk about these famous documents that will be brought out to the small farmers, because the small farmers will know all about it — the little men in the west of Ireland who have tried to strive to make a living and rear their families in difficult circumstances. All Governments to date acknowledged the fact and tried to help them in whatever way they could. But this Government have seen to it that they will not give them any more assistance, that they will frighten them out of their proverbial socks.

However, there are more serious things that this Government have done in these famous cutbacks. I am going to refer to them, particularly from the Labour part of this Coalition Government, because Senator Ferris really drew me to my feet on this one. We talk about the Department of Health in which Mr. Barry Desmond, a Labour member, is the Minister. We will not talk about Knock airport, because that is a hobby horse that he has worked upon for a long time and has shamed his party on the whole west coast——

Mr. Ferris

On a point of order, you reprimanded me for drifting from the terms of the equity motion when I dealt with social welfare. We are now having Knock airport; we are having everything else from Senator Killilea. Would you please extend the same rule to him as you extended to me?

An Leas-Chathaoirleach

Senator Killilea to continue. Also, Senator Ferris, when you make reference in this House to a Senator you do not say "to him".

Mr. Killilea

I want to talk first and foremost about the serious cutbacks in health in the west of Ireland. I am going to talk about the place that I come from. We have in the north-west side the hospital in Sligo. The allocation of funds to that has been finished. We have the most recent one in Castlebar finished and cut out. We had under the previous Fianna Fáil Government an extension built to the maternity unit in Galway, but the present Government have refused to give us the money to staff it. Despite the fact that we have closed the other maternity units around the country, such as the Bon Secours in Tuam and the Calvary Hospital in Galway — the conditions prevailing in that hospital and the demands for funds are so obvious that any Minister with any compassion or indeed any Government with any compassion could see through it, and the facts are there for them to have a look at. I will not talk now about the Tuam sugar factory because at another time tonight, with the help of God, I will get half an hour to deliver to this House and to the people, in particular in the sugar industry, the good side of that argument as against the present Government's attitude there.

We see as well the reneging of the Government on the schemes in the public works sector such as the Boyle and the Bonet in Roscommon and Sligo; the Dunkellin drainage scheme, renowned as it is, and every politician in this House and in this country knows about it. It has been postponed despite the fact that in existence in that constituency is a Minister of State for Agriculture, and in the adjoining constituency a Minister of State at the Department of Posts and Telegraphs. However, all that seems to be forgotten. The schools are abandoned and they renege on the whole programme for development in the west of Ireland.

The Government have attacked small-time savers and investors. I take particular notice of this because it has been referred to by our spokesman, Deputy O'Kennedy, and on a few occasions on television and in press reports. In the budget, as we know, the Revenue Commissioners must now be notified of any person receiving interest in excess of £50 either in the bank or in the ACC. I want to tie that up with the glib way in which Senator Ferris passed over the small farmers' tax. They are not asking the two questions just for sport. Time will tell. I want to warn Senator Ferris that when they are talking about the soft option——

Mr. Ferris

Senator Killilea should address the Chair.

Mr. Killilea

——they are talking about small farmers who, through their thriftiness over the years, might have saved a small amount of money. Many of them must have over £1,000 in the bank. I am sure the Minister for Finance knows that over the past two or three weeks the drain from the banks, particularly on the west coast, has been quite significant from those small investers with their £1,000 or £2,000 — a small sum nowadays, one must admit. However, the Revenue Commissioners are anxious to know who they are and, in the budget the Minister instructed the banks to notify the Revenue Commissioners of those small savers. The Minister has with him the Report of the Commission on Income Taxation and if he really wants to find out——

An Leas-Chathaoirleach

The Senator has two minutes to conclude.

Mr. Killilea

I hope that includes the time taken from me. That is most serious. That money is now leaving the banks. The heart has been frightened out of those small investors. They are insignificant. They are the thrifty ones who over the years saved for a rainy day, but now the Revenue Commissioners want to know about it. The Minister is quite wrong.

I am disappointed that he is not back in the House before I finish because I want to suggest to him, through the leader of the Labour Party in this House if necessary, that this question of the collection of taxes be reconsidered straight away. I want to know when is the starting point. Are those who have committed an alleged sin in the past now to be pardoned? Are we to make a fresh start today and be crucified from now onwards? If that is the case, this Government are acting unfairly and wrongly. The Minister must state in this House, or some place publicly, that this money must be collected and get the matter into perspective. He should ensure that everybody pays his tax and that those who collect tax for the State do not put it in their own pockets and walk away with it. That is very important. There is much more to be said, but my time is up and I will refrain from talking about the sugar industry until tonight at 8 p.m.

Mr. B. Ryan

I will hardly take a quarter of an hour because there may well be a number of people who wish to speak and time is beginning to press on, and also because much of what I would like to say on the budget will be as appropriate tomorrow morning. When people put the word "equity" into a motion, somebody has an obligation to record the facts fairly carefully. Equity is a word which has been used with great abandon recently about taxation, about welfare, and all sorts of things. It was used quite freely in the last election. There seemed to be a competition between different methods of dealing with the same section of society. As another Member of another House said, it would appear that the difference between the two major groupings in Irish politics before the last election was that one group wanted to tax social welfare and the other group wanted to reduce social welfare, which is effectively the same thing.

Equity means above all else that you treat people with justice and with dignity. I should like to quote from the Minister's speech in the Dáil on the budget. Unfortunately, I was not there to hear him, I was doing my duty to the electronic media and wasting my time, their time and probably the public's money in the process. The Minister made reference in his speech to a very considerable growth in short-term weekly welfare rates, and drew from that the conclusion that we needed a more modest approach. Apart from the fact that there is an inherent question of logic involved here, which is, that just because there has been considerable growth that does not automatically mean we need a more modest approach, we are growing from a very small base in terms of welfare rates, and the fact that there has been considerable growth is simply a statement that we have made progress. It does not justify going back on the progress. I hasten to add that what the Minister outlined, I am quite convinced, is what would have been outlined if a Fianna Fáil Minister had been making the budget speech. I am not particularly giving plaudits to one side as against the other. I do not understand why progress in an area of social deprivation over a number of years suddenly justifies a more modest approach now.

Let me illustrate the actual figures. It would appear from the Minister's statement that they are regarded as reasonably satisfactory because of the considerable growth. We will give a married couple on unemployment assistance £49.75 a week. With two children we will give them an additional £15.40. Without getting involved in too much histrionics, let me say that £50 would pay for about two nights out of The Irish Times“Table for Two” idea of what is reasonable value for a meal for two. The Minister and I and many Members of this House have developed those kinds of tastes when a meal for two which costs half of what we give an unemployed couple to live on for a week is regarded as reasonable value. We are saying to a couple: “What we would spend on one night out we expect you to live on for half a week and feed yourselves on, clothe yourselves on, and do everything else on.” I cannot understand, in that context, how the Minister can say that the considerable growth in short-term welfare rates now needs a more modest approach. In his budget speech the Minister said:

The recent improvements in short-term payments have narrowed, and in some instances completely closed, the income gap between those at work and those drawing unemployment or disability benefits. The work incentive is suffering and there is an unacceptable inducement to exploit the social welfare system.

I do not think anybody would argue too strongly that it would be ridiculous in principle to have people drawing more on welfare than if they were working, except for the fact that the problem really is that the levels at which people who are working have to pay tax are far too low, not that the rates of benefit for which they qualify are too high. If people's taxation levels were properly and justly drawn, there would be no tax rebate for somebody on £100 to £120 per week. Therefore the problem would not arise. The Minister omitted to tell the nation— and the Government have been rather coy about this—the categories of groups who actually, technically, are on short-term benefit. Thus unemployment assistance is regarded as a short-term benefit, even though unemployment assistance is what you end up on after your stamps or your PRSI contributions have expired. Hence the Minister gave people on unemployment assistance a 10 per cent increase.

If we cannot afford any more, and of course I would not agree that we cannot, that is fair enough. If we are actually saying unemployment assistance is too high, then the Minister is not being fair, and that is being very polite about it. He was playing games. There are problems, I admit, in some areas of short-term benefit, but there are not problems about unemployment assistance. It is categorised as a short-term benefit. I am sorry to see the Minister nodding his head. In the tables in his budget, under maximum weekly rates of social assistance, unemployment assistance at the urban rate is increased by £2.65, which is a 10 per cent increase. It is not a 12 per cent increase. It is a 10 per cent increase.

He stated in his budget speech that the 10 per cent rate was being applied to short-term benefits. Among those short-term benefits to which a 10 per cent increase has been given are unemployment assistance and supplementary welfare assistance. Do not let anybody try to fool me that supplementary welfare is a disincentive to work. People on supplementary welfare are invariably the victims of bureaucratic bungling in the Department of Social Welfare who are waiting for weeks, months and in some cases I suspect years, for bureaucracy to straighten themselves out and give them their normal entitlement. They are the victims of the campaign about short-term welfare to which we have been subjected for the past few years.

Unemployment assistance is not a short-term benefit, though technically it is categorised as such. It is a long-term benefit for those who cannot get work after 12 months, 15 months or two years. Yet it has been given the 10 per cent category which implies, whatever may be the technical definition, that it is treated as being in need of less growth because of the considerable benefits in the past. The Minister should explain that to all the hordes of unemployed young people. There are 60,000 of them. Surveys in Finglas have shown that somewhere close to 25 or 30 per cent of unemployed people under 25 years do not qualify for State assistance. It is just too much to talk about disincentives to work in the broad sweeping way the Minister did, and not to make reference to some of the categories and areas when this idea of a disincentive to work has been used to justify less than generous increases.

The difference, I would accept, is not enormous, but the principle underlying the distinction suggests that people on unemployment assistance are not prepared to work. There is not a disincentive to work. The rates are appallingly low. They have been categorised. Whatever the Minister may say to me afterwards, the facts are that they were given a 10 per cent not a 12 per cent increase.

I want to talk briefly about a couple of other areas. One is youth unemployment and the absolute non-recognition of the problem in the Government's budgetary strategy. The Fianna Fáil alternative on youth unemployment was to compel all unemployed young people to register with the National Manpower Service. To do what? For whom or on whose behalf I am not sure, unless there was some underlying suggestion of national service to follow afterwards. I do not know, but they did propose that they should be all compelled to register. I do not know why, or for what. So do not let me hear too much from Fianna Fáil on youth unemployment.

What we need is a totally new approach. I proposed it already. I am being lambasted about it, but I will say it again. Our young people are imaginative and creative, and I do not think they are involved in fiddling, or dishonesty, or anything like that. After about six months' unemployment every unemployed young person should be sent unemployment assistance through the post by cheque instead of facing the humiliation of the labour exchange and being told: "This is all the State can do for you. Go and do what you like for yourself after that". We give employers an employment incentive scheme by which they benefit from employing people. Let us give our young people an employment incentive scheme. Give them the money and say: "Right. There are no strings attached. We cannot look after you. This is the best we can do. Go and do it for yourself". I have heard similar suggestions proposed from the ESRI and other areas.

I know it would be expensive, but the cost to our society from not doing it would be vastly more expensive if we end up with 100,000 unemployed young people. Let them use their imagination and their creativity. They can do absolutely nothing as it stands without losing their basic miserable £29 a week. If they get involved in adult education, or voluntary work, or part-time work, or anything, they are immediately harassed by the labour exchange, and lose the miserable sum they are getting. That is what I call a disincentive to work. That is the real disincentive to work — the unwillingness to be flexible in the face of mass unemployment.

I am disappointed at the absolute lack of equity in the budget. In the thirties, in the middle of a world recession in an impoverished country, 3½ per cent of Government revenue was raised from capital taxation. In present day terms that would be the equivalent of about £150 million to £180 million. I have heard so many people say that the capital just is not there. Perhaps somebody who knows more about these things than I can explain how we could raise 3½ per cent of revenue in the thirties from capital taxation and we cannot raise it now.

If we have such a problem — and I asked this before of the Minister and he gave me a very vague answer — why do we have to spend £200 million on defence? I should like to know who categorised it, and who quantified, and who measured it, and who decided that was the limit, or is it just that we pick a figure that will keep the senior Army members happy, and do that? Who said that is what we need? Who said we could not do with £50 million or £100 million less? What do we want an Army for? What is our proposal? Are we playing three or four different strategies at the one time?

There are numerous opportunities for savings within public expenditure areas. For instance, there is the new and appalling charge for applicants to the public service. Did anybody ever wonder about the cost of all the examinations held for admission to the public service, and all the extra examinations people have to take which effectively duplicate the Department of Education examinations? How much do they cost? Why do we need them, and why are they being persisted with? Every private employer can live with the State examinations. Why cannot the public service? How much does that cost? There is a whole host of areas. We are getting at the vulnerable groups, the threatened groups and the ones towards whom and against whom fairly high level of public hostility has been whipped up. Those are being threatened.

I conclude on the question of unemployment assistance. These people are not receiving a decent rate. They are not in a position to get work. They have been unemployed for months, and it is close to being fundamentally dishonest to suggest that their rates are in any way a disincentive to work. Yet they are categorised and treated as people on short-term benefit who have been effectively and implicitly over-paid in the past. Therefore, I could not accept that this budget was in any way a contribution to equity in the areas of real need in our society.

Mr. Hourigan

I should like to compliment the Minister in his absence for the excellent work he is doing as Minister for Finance. I wish him well in the very difficult task he has ahead. There is one point which has been missed in this debate this evening. For that reason I will read the motion. It clearly states that "Seanad Éireann welcomes the movement towards equity in the recent budget as a first step in the reform of the public finances". That sets out clearly that the proposers of the motion, and those of us who will support it, in no way see the recent budget as in itself solving our very serious financial position or, indeed, moving towards full and total equity which is very much needed. It is, as I stated, the first step in that direction. I totally support that view. A point which has been missed by many speakers is that the budget certainly contains many unpopular measures.

Because of the situation inherited by the Government in the entire economic area, they had no choice but to have an unpopular budget, a budget with very stringent measures which are not acceptable to all the people. That has been skirted around and listening to the speakers on the Opposition benches, one would imagine they had not been in Government for generations. It is hard to realise that a few short months ago they were in Government. In the space of three months our Government have set about dealing with the problems in a very realistic fashion and have begun to set up the machinery to resolve the problems we inherited.

We all know that we cannot go beyond this present level of borrowing of £1,700 million. We have borrowed to that level and we cannot go beyond it. Furthermore we had a balance of payments deficit of £1,200 million which had to be reduced. The objective of the Government is to reduce it to £900 million in one year as against the objective of the Opposition party to reduce it by a further £150 million. This shows that Fianna Fáil in government would have been far more severe in these whole areas of taxation, social welfare, and so on. We should not under any circumstances look at this matter in anything less than its totality. By that I mean we must recognise the absolute inter-dependence of all sections of our community. There is no point in believing we can solve the problems of one section of our small society without reference to the others. Equity in taxation is an absolute must and, in fact, we have gone only a certain distance along that road. We have a long way to go to achieve absolute and total equity in this whole field of taxation. Not alone must taxation be equitable, but we must be seen clearly as a Government and as a people, to be applying equitable taxation measures. I am personally closely involved and allied with the farming community. I welcome the extension of the taxation net to embrace the farming community. Nothing has divided our community more than the fact that some persons could say that others were not assessable or liable for taxation.

To be assessable for taxation, to have a liability for assessment, is totally different from actually paying tax. I urge on the Minister that the most simple of systems must be evolved to take care of the very obvious situation where small farmers do not have a tax liability. We must not run them into a situation where they incur an indebtedness of £300, or £400, or £500, to prove that they have no taxation liability. That is very, very important.

With regard to the suspension of grants, grants under the farm modernisation scheme have been suspended for some months. In fact we all look forward to those grants being reintroduced. Some Senators on the opposite side said we must motivate farmers. I accept that point fully. Let us also bear in mind that many members of our farming community who are now in very serious trouble were motivated during a time when we had a very high inflation rate, and an interest rate that could not be sustained. Many of those people who were highly motivated are now in serious trouble. Those who did not move forward have not got the same problem to contend with. I make that point against the whole background of our present scene. Let us be very frank: our position commenced to decline seriously from 1977 onwards. We have been on a slippery slope since 1977. Our borrowing capacity has run out. We have to cry: "Halt. Thus far and no further".

It is now incumbent on us as a community, and on the Government, to rescue our economy from the abyss. No doubt greater efficiency in agriculture, in industry, in tourism, will help us to do that. While I agree totally with the measures in the budget to achieve equity in social welfare and taxation, and to restrict services where necessary, I urge the Minister to think again about the possibility of getting growth in the areas of tourism, industry and agriculture. Coupled with this budget we need something to move us forward as well. I urge the Minister to look very seriously and critically at what can be done in those sectors.

Reference was made to food imports. I share the view that food imports should be replaced by home grown foods. This would help to reduce our balance of payments deficit. We are exporting too many non-processed or semi-processed goods.

The social welfare abuses need to be eliminated. It is very encouraging to note that this budget sets about doing that. Reference has been made to the very serious anomaly whereby persons who worked a three-day week earned more than persons who worked a five-day week. Indeed, in some cases persons who did not work at all were better off than those who worked a five-day week. Any change in that regard can be seen only as equity in its fullest and broadest sense.

I agree also with the measures in regard to capital taxation which have been introduced. If people own a house valued at £65,000 or more and enjoy an annual income of £20,000, there is no reason why they should not be asked to pay the modest levy of 1½ per cent proposed in the budget. Anybody with a social conscience will agree. With regard to accountability I suggest that the Minister should seriously consider the whole area of tax credits to prevent tax avoidance. I believe also that the Government's action regarding the removal of VAT at the point of entry was a progressive one and will help our industry quite significantly. The other point that needs to be stressed is the position with regard to the self-employed which has been referred to already. I do not propose at this stage to go into it again except to reaffirm and to agree with the points of view that were expressed.

Finally, I want to say that we must not take this budget in isolation. It is part of a process that, hopefully, will move our economy from its present dire position to a position of health in the time ahead. If one took this budget in total isolation one would make a totally wrong judgment on it. I am in total agreement with the sentiments expressed in this motion which suggest that this budget is the first step along the road to equity. It is a matter for everybody. It is so serious that it must rise above party politics because, frankly, the alternative to our not rescuing our economy at the present time is too frightening to imagine.

Like many other Senators I believe that employment is an extremely important and urgent matter and anything that we can do to get those who are unemployed and those who, unfortunately, will become unemployed as time goes on back to work must be done. I urge all concerned here to view this motion with the objectivity it deserves. I believe that nothing short of a team effort on all our parts will be necessary to get this economy back into shape again. I do not like to have to refer to the lead-up to our present situation. Frankly, I believe it was essential that we identify our position. In 1977 the Opposition party then seeking office went to great lengths to get the Irish electorate behind them. Admittedly they succeeded in so doing but unfortunately we are now, and have been for some time past, paying a very dear price for that. I conclude by saying that this motion is the first step and it does require further steps to make certain that we put our economy right again.

Professor Hillery

I wish to commend Senator O'Leary for putting down this motion and in so doing to enable Members of the Seanad to discuss aspects of the budget. I hasten to add straightway, however, that I find myself in sharp disagreement with the sentiments expressed in the motion.

The 1983 budget was a heartless exercise in figures, with no movement of any consequence towards equity. Budgetary arithmetic seems to reign supreme. The merits claimed for the budget in the motion before us are virtually non-existent. It seems to me to be a singularly unimaginative piece of work. Contrary to the claim in the motion, there is no evidence of reform of the public finances. For example, on the question of tax credits, great political play was made about the introduction of tax credits in election campaigns, primarily on the basis that the introduction of such measures would lead to equity in taxation. Where are the tax credits now? The argument that it would not be administratively possible to introduce them at this time is not acceptable. Why were the voting public not told that tax credits were a longer-term measure?

The Minister in raising additional taxation has relied on the same taxes. He has relied on the same tax structure while nodding to the recommendations of the Commission on Taxation. Basically he has gone for more of the same. Clearly the Minister for Finance and his officials have not grasped the opportunity to reform the taxation structure, for example, through the introduction of tax credits. Surely the Government must realise at this time that the patience for the PAYE category in particular has been exhausted.

What do we find in the budget? Senator O'Leary, understandably in a very selective manner, picked out items which he saw as positive. In most of those cases I would have to go along with him. However, there are some very harsh and inequitable measures in this budget. An additional income levy of 1 per cent has been imposed on most of the population, raising £47 million. Where is the equity there, especially for the lower paid worker? Is it equitable to hit the lower paid in this way? What about VAT? The budget increases the VAT rate by 5 per cent and there is a new 5 per cent VAT rate on fuel, which is a basic commodity, raising £131 million. Again these major increases have to be borne by the lower paid as well as higher income categories. VAT is generally regarded as regressive and, therefore, not equitable. I notice the Minister in his opening speech does not share that widely held view and I would like to hear him make a case to support the point he has made.

Then there is the vexed area of PRSI where the increases hit both employers and employees. The limit for PRSI, as we know, has been raised by £3,500 to £13,000. This hits the middle income group. A person nowadays on £13,000 a year can scarcely be described as rich, especially given the cost of living and the burden of income tax paid by people in that category. A person on £13,000 a year will now pay £5 a week extra in PRSI. More seriously perhaps is that the tax on employment, which we can describe PRSI as constituting, may drive more firms to the wall because they cannot cope with the increases involved. This will inevitably lead to more job losses. The property tax of 1½ per cent is obviously a sop to the Labour Party and we have to wait to see if it will be introduced. If this tax is in fact applied it seems to me that there is endless room for inequity in its application.

The impact of the budget, as I see it, is that it will be seriously deflationary. I say this because people will have less money to purchase goods and services. There will be a downturn in public sector investment. Investment in the private sector will also drop. It is very difficult to see how it can increase because of the fall in domestic demand. The Department of Finance themselves expect a £75 million drop in tax revenue as the net impact of the budget provisions. This leads to the conclusion that domestic demand will be about 1½ per cent down on the pre-budget position. After this budget the outlook for the economy has deteriorated. Inflation in 1983 will be in double figures, and it will be increased that much further by the devaluation of the punt earlier this week. With this budget the Government are facing a year of high inflation and higher unemployment. Moreover, the prospects for a harsh budget in 1984 regrettably already look all too real. The motion before the House is framed in such a way that, in one unreal gulp, the Government side want to have their cake and eat it at the same time.

Mr. Robb

The motion before us says that we should welcome the move towards equity and it sees the recent budget as a first step in the reform of public finances. From what we have heard this afternoon there is little doubt that nearly all Senators welcome moves towards equity, and certainly most have spoken about the need to reform public finances. I should like to introduce one or two thoughts here which the Minister on reading the account of this debate may wish to consider as he develops his current fiscal policies.

As I see it in Ireland today, we have not one currency but four: We have the punt, the pound sterling, the square foot and the acre. I have heard nothing this afternoon which would suggest that the square foot and the acre, which are two very important facets of our whole economic climate, have been considered with the importance they deserve. When the value of the square foot and the acre goes up, surely it follows that the value of the pound and the punt drops.

When we look at Ireland and consider the millions of acres, when we look back and think that a hundred years ago people were fighting a land war, and when we ask ourselves how much of Ireland has the ordinary person of Ireland got, how much of a stake in the country that he lives in does he have and how valuable is that half acre or acre that he might have, then I think we would need to consider, particularly at a time of increasing unemployment and decreasing opportunity, about how we use our resources as well as our finances, for the two are inexplicably linked.

I would throw out one suggestion that derives from that: that where people own more than a hundred acres perhaps at the time of death instead of, or as part of, the death duty that is paid a percentage of that acreage should be handed back to the State to be used for distribution in trust for life among those who at present have nothing. Perhaps those who have more than 50 acres might be asked to donate two or three of those acres for the same purpose. This land should be used primarily for the benefit of the communities to which it belongs and also as an attraction to try and decentralise the State and to bring people out of the cities and back to the land to start and think in terms of the island as a whole and not in terms of their own little deprived portion of a very deprived community in an overcrowded urbanised section of it.

The second thing I would like to throw out briefly is that there has been much concern about the way in which we collect our taxes how we are going to collect the taxes, why some people have their tax collected in full while others apparently have very little, if any, collected from them. I speak with some feeling on this matter as a full time employee of our health service: I do not indulge in private practice and, therefore, my income is taxed at source. It is a matter of considerable resentment if you feel that through the employment of accountants and various other means at one's disposal there are all sorts of subtle ways by which you can dodge tax and deprive the State of what might be its due. It has been said that in the United Kingdom's system if you are in private practice you can even get tax relief for flowers for the waiting room.

My tax goes to Westminster and the tax of people who live in the west of Ireland comes to Dublin. It is nearly impossible to relate to that in a tangible manner. I suggest a proportion might be collected centrally, another proportion regionally and another proportion locally, although I accept this could not be done overnight for the reasons expressed earlier in relation to another commitment. If 10 per cent of the tax of a country with 4 million people was collected centrally, if 20 per cent was collected in each of the four regions and if 40 per cent of tax was collected in the local community, then you would have 30 per cent over and that 30 per cent could be used on a sliding scale so that central Government would be able to shift resources and money from privileged communities to deprived communities. The essence of what I am trying to get across is that we are thinking in terms of communities rather than individuals, we are asking people in the communities to which they live to take back responsibility for what goes on in their own community, to become more accountable as a result of a total change in the method of collecting taxation. We are asking people in the communities to establish their own priorities and, at the same time, to take into account that there are privileged communities and deprived communities and to establish some percentage of the total tax that accrues to be set aside to enable growth and opportunity where at present there is so little.

Senator Smith suggested at the start of his speech that what Ireland needs most of all in its communities is a new sense of self-respect, a new esteem, a new ability to feel that it is possible to grow, to be motivated to do something about one's condition as well as to relate to the wider scene of the State. It is not enough to do as the community movement did in the early seventies throughout western Europe, and no more so than in Northern Ireland, to set up the structures for community participation, unless you give to the people the power to become effective and with that power to give back responsibility where it belongs, to enable them to become accountable to each other in the community in which they live. That, I would suggest, is the way in which we can generate new enterprise, new health and new esteem among our people.

In relation to that it seems to me that we have three economies. I mentioned four currencies. We have the macro-economy and the GNP-related economy about which most of the debate has been concerned. We have heard mention, too, of the black economy — the economy of tax evasion and so on. But there is another economy, the hidden economy, the economy of the intangible assets, the economy that Schumacher talks about in his great treatise "Small is Beautiful". How do we mobilise the almost unassessable value of things such as morale, commitment, enthusiasm, application, a sense of belonging and so on? Whatever we do, we should not try to find in the black economy the scapegoat for our failure to recognise what the hidden economy has to offer to the people of Ireland if it could be mobilised and utilised in our society.

Apparently the Republic of Ireland is in the most terrible state economically, but so also is the North of Ireland. We have heard the argument in the North that things would be much worse if the people of Britain pulled out and we had to join with the people of the Republic. In my view that is nonsense, because the worst thing that can happen is that the people of Britain decide to pull out and leave us in the North to face up to the fact that our economy would be far worse. It is only when the two parts of Ireland come together and we get rid once and for all of this vicious cycle of recurring violence that we can divert the energies which are at present dealing with matters that are dividing us. It is only when we have got that resolved that we as Irishmen, North and South, will be able to divert all those energies into the social and economic matters which will give to the people a standard of living adequate to meet their basic requirements but, more important, that we will be able at community level to develop a quality of life which will make us proud of the name of Irishmen.

Mr. Browne

Sé mo thuairimse go bhfuil cothrom na féinne tugtha ag an Aire Airgeadais sa cáinaisnéis seo agus creidim freisin go n-aontóidh formhór daoine macánta na hÉireann liom sa tuairim sin. Tá sé an-deacar do aon Aire Airgeadais — is cuma cén Rialtas lena bhfuil baint aige — dul isteach sa Dáil agus a rá le daoine go mbeidh orthu íoc as rudaí a bhí saor nó cáin breise aíoc. Mar sin molaim an tAire seo mar sílim go rinne sé job chun a chur in iúl dúinn nach féidir linn bheith ag fáil gach rud saor as seo amach.

In my political life I do not like to dwell in the past too much. It is very easy to blame others for what has happened. I have sat through this debate this evening and if I closed my eyes I think I could have imagined I was back five years ago. If the budget has done nothing else for us, it has brought a sense of realism to this country but it does not seem to have struck some of the Opposition speakers up to this.

Senator Smith spoke about the state of the roads. I was elected to the county council in 1979 and at the time we were allowed 10 per cent of an increase. When the engineer had outlined that costs had gone up 25 per cent for bitumen and other items I wondered what would be the result. He said that in three years time the roads would fall apart if we continued to operate in the same way. We are now into the fourth year. Senator Smith may be worried about the roads at the moment, and he is right because the roads are definitely bad, but he should look at the cause. We cannot take away the money to do these things and, at the same time, expect the roads to be in good condition.

Our deficit has been a problem for a long time and the question of paying income tax is not popular. However, there would be some pleasure in paying income tax if we knew that even half of it was going to serve the problem in our own country. When I hear the Minister saying that all our income tax is going to service foreign debt then it is time for realism. There has been equity in this budget. The day when people pay tax to provide for those who can afford to pay for things themselves has to come to an end, and this is the first step towards that equity.

Mr. Lanigan

On a point of information, may I ask Senator Browne where he got his figure for a 10 per cent increase on the road grants for 1979?

An Cathaoirleach

There is no such thing as a point of information, but the Senator may give you the answer.

Mr. Browne

I said I was elected in 1979. Senator Lanigan is able to calculate when the estimates come in.

Mr. Lanigan

It was not 10 per cent of an increase.

An Cathaoirleach

The Senator must be allowed to continue.

Mr. Lanigan

The Senator knows that it was not a 10 per cent increase. There was an increase given and there was a buoyancy figure written in. The Senator should know that in Carlow the buoyancy figure was as high as it was, in the second best county in Ireland.

An Cathaoirleach

I ask the Senator to resume his seat.

Mr. Lanigan

Because of the fact that rates were abolished we had a buoyancy figure in Kilkenny-Carlow which was higher than the national average.

Professor Dooge

On a point of order, I would ask that Senator Browne be given three minutes extra for the time that was taken up by that interruption.

Mr. Browne

Senator Lanigan did not listen. I said I was elected in 1979. He will know the elections were in June and we did not have any estimates in 1979. I am sorry if he is trying to put me off on my maiden speech. The question of farmer taxation was raised. I have been a member of agricultural groups and I am delighted that the sending of forms to farmers in certain categories is taking place. Senator Hourigan has already said that there is nothing more divisive than the question of farmer taxation and on many occasions it is due to ignorance. There are many city people who have not got the remotest idea what farming is about. If they take a drive down the country and they see ten bullocks in a field they estimate the value but they never think they have to be replaced. They live in a different world. One of our leading radio commentators does not seem to know that there are two sexes in the animal world. He cannot understand the farming situation. I am in the PAYE sector but I have a strong background in farming and I understand the position. I compliment the Minister on what he has done: it will do away with a lot of unnecessary trouble.

The question of social welfare has been raised here indirectly. It would be most unrealistic for any Government not to increase money for future unemployment. I have heard politicians talking about how lucky we are to have such educated young people on the unemployment list. That is absolute balderdash. We are unlucky to have young people unemployed one way or the other. If they have to be unemployed and to suffer, maybe they would be as well off unaware of their plight. We must prepare because we cannot handle the situation. We are not in full control of employment at the moment and must be realistic. Money spent so foolishly in the past five years has certainly led to the Minister having to step in and bring this word "realism" into our position. There is no point in talking about the patriots of the past and going on marches to commemorate Wolfe Tone, or anybody else. They did their job as they saw it and they lived in the past. Our present job is to make sure that this country has a present and a future. It is only by taking harsh measures that these things will come.

Tá áthas orm go bhfuil dhá mhilliún sa bhreis ar a laghad tugtha d'Aire na Gaeltachta chun an Ghaeilge a chur chun cinn, agus tá súil agam go bhfuil an Rialtas seo i ndáiríre ó thaobh na Gaeilge de, mar muna bhfuilimíd i ndáiríre caithfimíd éirí as ar fad.

To finish I have one slight request of the Minister. I know that his financial position does not allow him to give away much at the moment, but the question of VAT is a serious one. We are reaching a stage when some people are certainly being affected by it. Today the motor traders marched in protest. They have a genuine case because many are losing work and unemployed people are doing jobs on the quite. At the moment we are not able to do much about this, but I hope that by the end of this year the Minister's work will have made an improvement. Also the tourist industry needs encouragement. If at any stage in the future the Minister finds some extra money perhaps he will think of these people. I congratulate him on bringing us into 1983 in a very realistic way.

Minister for Finance (Mr. Dukes)

The budget has been subjected to some severe criticism. Much of this is understandable. It is only to be expected that people will be critical of measures which curtail some services that they have been used to taking for granted and which have led the effect of lending to raise their living standards in the short term. Viewed as a short-term measure only the budget of course has few attractions but it is wrong to view it only as a short-term arrangement. It must be judged in the proper context of the necessity to reform our public finances, to reduce our dependence on borrowing and to strengthen our ability to provide a proper foundation for growth and more employment in the longer term.

There has been loud criticism to the effect that the budget was too harsh. We have set a current deficit target of £900 million and an overall borrowing figure of over £1,700. The commentators are in general agreement that we could not set higher targets for either of those measures. There is acceptance all round that we have to curtail borrowing and that an overall requirement in the order of £1,700 million should not be exceeded. The previous Government had recognised this and had set a current deficit target of £750 million—that is, £150 million less than this year's budget figure. How they hoped to achieve this without the expenditure reductions and tax increases which we have deemed necessary and, indeed, without further expenditure reductions and further tax increases, has yet to be explained.

I would not like there to be any feelings of comfort or complacency about a borrowing requirement in the region of £1,700 million. It is still too high and it will have to be reduced gradually over the next few years. Otherwise, the accumulated burden of borrowing will undermine our best efforts to strengthen the economy and provide more employment. We have seen already this year in an example that I quoted earlier on what the weight of borrowing is when I said that in fact almost the total product of our income tax or its equivalent is required just to service our existing borrowing.

It is said that we have taken too much out of the economy but many of the critics who make this point would have us follow policies that would require us to borrow more. This would have brought some short-term relief, assuming that the money would be available, which is not necessarily the case. In the longer term, it would be a recipe for continuing difficulties, for even greater difficulties than we have now. We have spent beyond our means for a long time and it is now time to redress it. Indeed, it is long past time to redress this.

Many critics of the budget would prefer to bypass the general strategy and concentrate their attention on individual aspects. Members may be surprised to hear that I find it easy to find fault with individual elements, of the budget — indeed, of any budget. As a matter of course, special interest groups will condemn any budget changes affecting them, anyway. Some of the tax measures in this year's budget are severe and I, like most other people, would wish it could have been otherwise. The budget has also taken a severe line on expenditure. Again in many cases I and everybody else could wish that it would have been otherwise and there are many good reasons for so wishing. As to any of the specific measures taken it, of course, is the case that there was a series of options in each case, but any set of options within the same framework would have had generally the same effect for all of us. Those who are entirely dissatisfied with certain aspects of the budget should tell us what alternative specific measures they would favour. If they will not do this, it is very hard to have any real or rational debate about the budget. We cannot have a discussion based only on consideration of the case for increasing expenditure in particular areas, of reducing taxation in particular areas, without there being at the same time an examination of how we would have balanced off to arrive at the overall result which we have put forward and which, as I have said, are the ones which are generally agreed to be appropriate.

A great deal has been written and said in recent weeks about uncollected taxes and tax evasion. Some people see action in this area as providing a ready-made solution of our budget difficulties. This is a fairly facile viewpoint, removed from the reality of the situation, and I must repeat, as I have in this House in the not too distant past, that this is not the way out of our problems. This does not in any sense mean that we should weaken our determination to curb tax evasion and to bring about dramatic improvements in collection. I want again to say that the improvement of collection procedures and the curbing of evasion are not, in themselves, a means of resolving our overall public finance problem.

I now turn to the question of equity which I started with by quoting some passages from the report of the Commission on Taxation. In the introduction to my budget statement on 9 February, I said that the specific measures in the budget would bear witness to the Government's commitment to achieving a demonstrably fairer system of taxation, and I stand over this. It is true that the taxation measures generally are difficult. There are no giveaways for any section of the community and there are substantial increases in both direct and indirect taxation. But the budget package has laid the groundwork for a wider distribution of the tax burden, and this will be borne out by results. Reliefs which are of greater benefit to the better-off sections of the community have been curtailed. Direct tax increases have been tailored as far as possible to minimise the burden on the less well-off and a new high rate of 65 per cent for income tax has been introduced to ensure that the better-off make a significant contribution. As has been mentioned here during the course of the afternoon all farmers are now being included in the tax net for the first time.

The Government's concern with a more equitable spread of taxation and contributions is apparent in the specific measures which have been taken. We had to consider what approach we would adopt to the PRSI allowance, introduced last year for the 1982-83 year only. We decided to retain this allowance, but to reduce it slightly in order to provide the funds required to finance a new family income supplement scheme aimed specifically at assisting low-income groups with child dependants. The Government took the view that this represents a more equitable way of using a given amount of funds. The details of the family income supplement scheme are being worked out and will be announced in due course.

We have provided this year for an increase in the general exemption limits for income tax purposes. The limit is increased from £2,200 to £2,400 for single persons and from £4,400 to £4,800 for married persons. This again represents a further improvement in the equity of our tax system.

As I pointed out in my Financial Statement, the retention of the PRSI allowance and the increases in the general exemption limits will remove about 21,000 people from liability to income tax. Many more will benefit from marginal relief. The changes in personal interest relief which I announced also constitute a move towards greater equity in our system. It is frequently the case that taxpayers of equal means may pay widely differing amounts of tax simply because some make maximum use of the reliefs available and others either do not, or are not in a position to do so. This is a factor which was highlighted in the report of the Commission on Taxation, which showed a particular concern with equity in our tax system, and I will be considering their recommendations in this regard.

Many people feel that indirect taxes are necessarily regressive and that increases in these taxes — and we have had increases in those taxes this year — must be inequitable. I do not share that view and the increases which I announced in the budget were designed to ensure that the burden — an increased burden admittedly — is distributed fairly. In particular, we maintained the bulk of our VAT zero-ratings. I would point out that we have a very high zero-rated category in Ireland compared with our European partners generally. The effect of that, in fact, is to give an average rate of VAT on all goods and services here at about 14 per cent, which compares fairly favourably with our neighbouring countries in Europe.

As well as maintaining the bulk of VAT zero-ratings, the excise duty on beer and cigarettes was increased significantly less than prices generally over the past 12 months, thus reducing these duties in real terms. Above all else, substantial progress is being made in tackling tax evasion and avoidance. I announced a series of new proposals in the budget and the fine print of these will be detailed in the Finance Bill, which is due for publication in a few weeks' time.

The budget measures are only a beginning and I can assure the House that over the next few years there will be big changes. For too long we have promised firm action on tax evasion and not followed up on it. In Budget Statements over the years, successive Ministers for Finance have made a ritual condemnation of evasion and promised immediate action. Some improvements have been introduced but no determined effort has been made to come to grips with this problem. It is no wonder that many taxpayers who pay their due amount of tax are sceptical about the will of politicians to achieve greater equity. There is no point in talking about equity as an abstract concept, or making promises in general terms. What people want and expect are specific proposals for change and measurable progress towards equity, which we have included in the budget of this year and which we will follow up in succeeding years.

One of the budget proposals which aim to ascertain more information about moneys held by financial institutions has been criticised by a prominent Opposition spokesman as an intrusion on the privacy of the relationship between the financial institutions and their clients. If this attitude reflects our approach, then we are not really serious about evasion and it is unfair to be making promises to the taxpaying public. We must make a choice. I sought this information because there is reason to believe that the details required by law are not being furnished by all investors to the Revenue Commissioners. I do not think that it would be right, nor do I think the public in general would expect that we should turn a blind eye to this situation in the interests of expediency. Some people will claim that it is damaging to the economy to allow the Revenue Commissioners access to the world of the investor. I do not subscribe to this viewpoint. Neither the investor who makes correct tax returns nor the non-resident has any reason to be concerned about this. The investor who is evading taxation should not be allowed to succeed any more than another taxpayer paying tax on a different basis, on his or her income, for example, should be allowed to succeed in evading tax. The principal concern of the financial institutions is to ensure that they are all treated equally on a similar basis so far as taxation is concerned. That concern is a legitimate one, but it is not one that should lead us to ignore or to pass by cases of evasion.

I mentioned earlier the question of tax collection. We dealt with it at some length in this House recently and I do not propose to go over the same ground again. However, I would remark that while some commentators have wildly exaggerated the extent of this problem the fact remains that it is very serious. The situation has been deteriorating and we must bring about a radical improvement. The factors which have created this situation are complex and there are no miracle solutions which can change the picture dramatically overnight. I can promise substantial changes, however, and I can assure the House that this matter is receiving priority.

A more selective approach to enforcement has been introduced and this is yielding good results. Changes in the appeal system, which I will bring forward in the Finance Bill, will help to speed up the process of finalising liability. A great deal more remains to be done and I will be looking at further measures to improve collection. The existing measures are not good enough and it is clear that we will need changes.

While saying that, I must draw attention to the difficulties of clarifying this situation. We published in the last few days a supplement to the tables published in the 58th Annual Report of the Revenue Commissioners. One of the tables in that publication gave the result of a sample survey of 620 finalised farming income tax cases for the year 1979-80. It is an interesting table which I would commend to those Members of the House who have made remarks about farming taxation.

The first line of the table points out that in that year, 1979-80, there were 273 cases, that is 44 per cent of the sample, where the tax assessed as being due and payable was nil. I would like to ask Members to reflect on that because newspaper reports this morning indicated that the survey showed that 44 per cent of the farmers who were liable for tax had not paid any tax. I am not sure just exactly what is required in order to get the message across clearly, but that report misses the point — 44 per cent of those assessed for tax had a nil liability. That was in 1979-80. I leave it to Members of the House to imagine how the situation has changed in the meantime and look at that 44 per cent as part of the overall picture against the background of the general measures that we have taken on farm taxation.

There is a great deal that is seriously wrong with our taxation system at this time. It is demonstrably unfair to some taxpayers and there will have to be major changes before we can reasonably claim that our system is equitable. We have paid lip service for a long time to the question of equity and we have promised reforms without their having been implemented.

Mr. Lanigan

Could I get clarification? Did the Minister say in the beginning that 44 per cent of those who were assessed for tax did not pay tax, or did he say that 44 per cent of those who were assessed for tax had a nil liability?

Mr. Dukes

All of those in the survey were assessed for tax and 44 per cent of them had a liability of nil. In other words, their income was not at a level that would have attracted taxation.

The process of bringing about greater equity in our tax system is a complex one. There are some alternatives to existing procedures which sound entirely reasonable in principle, but simply cannot be implemented, for practical administrative reasons, in a short time. For example, in this year's budget I pointed out that we would not place the self-employed on a current basis of assessment this year because of administrative difficulties. We have not yet found an adequate solution, but I hope that we can provide for this change in the 1984 Finance Bill.

I was glad to hear Senator O'Leary supporting this case earlier on from his position of a self-employed person. The arguments that he advanced as to his case in relation to that of the PAYE taxpayer should be more widely borne in mind.

The issue of equity is by no means confined to the taxation side of the budget. It must also extend to expenditure. In large part, the expenditure changes for 1983 reflect the decisions of the previous Government, although there are some substantial differences. The social welfare changes, for example, are before the Oireachtas this week and have been the subject of controversy, as have education expenditure changes. But I would make the point in relation to expenditure that not only is the distribution of expenditure between different uses something which affects the overall equity of our system, but the very volume of expenditure itself has very serious implications for equity. The higher the burden of our tax system, the greater the difficulties of inequity in the system. It is inevitable that the higher the level of our total expenditure, the higher the burden of tax in our system. That sums up what I wanted to say about the considerations of equity in relation to the taxation and the expenditure side of this year's budget. There is a great deal that yet remains to be done, and this year's budget was a first step along that road.

A final point that I would like to refer to very briefly concerns some remarks made by Senator Smith. He made some remarks about the extra provision for unemployment in this budget which, as has been pointed out, indeed, by other speakers, is one which we were obliged to make in common prudence, given the trend in the levels of unemployment. But he made a plea to put funds into development as far as possible. I agree entirely with the direction of this plea. It is some thing which has a great deal, also, to do with equity. The fact that we have not the capacity to provide as much investment as we would want in order to create jobs for our young people is, as I said, a major inequity in our system. We must create more room to use greater amounts of funds for these development purposes. But it is only by ensuring that we relieve some of the burden of excessive borrowing on our resources and some of the burdens of excessive expenditure on lower priority items that we can actually make progress in remedying that particular inequity, which is the most serious one with which we have to deal.

Mr. Lanigan

Could I ask the Minister one question in relation to his statement that, from the 1979-80 figures for farmers who were assessed for income tax, 44 per cent did not come into the tax net? How much did it cost the 44 per cent to prove to the Revenue Commissioners that they were not eligible to pay tax, and how much did it cost the Revenue Commissioners to check up on this 44 per cent to prove to themselves that they were not eligible to pay tax?

Mr. Dukes

I am not in a position to give Senator Lanigan a specific answer to those questions. This was 44 per cent of the cases which were in the survey. I take the point underlying his question, which is that it seems rather inequitable in fact—to use the word—to require people to spend several hundred pounds to prove that they do not have a tax liability, but we are, as has been said in this House earlier on this afternoon, developing a simplified system of accounts for farmers. We are also discussing the same difficulty with small business groups, with a view precisely to relieving the burden of compliance on people who have smaller tax liabilities on the whole.

We are also, of course, trying to reduce the cost by increasing the efficiency of the collection system. But regarding specific questions that the Senator asked, these were cases that were taken out of assessments that were carried out in that year, and I would not have the specific information that he is seeking in relation to those cases.

An Cathaoirleach

Senator O'Leary to reply, and he has seven minutes.

Mr. O'Leary

I will not take seven minutes. The purpose, as I said at the beginning, of putting down this motion was to give to the Members of the Seanad the opportunity of expressing direct to the Minister for Finance at an early stage before the Finance Bill was drafted, their views on the budget situation and what should be in the Finance Bill. By and large, it has been a very worthwhile exercise. I do not intend going through the speakers' points of view. Obviously, some speakers expressed viewpoints with which I do not agree, but that does not mean that they are not entitled to express their viewpoints or that there is not a certain merit in what they say. I conclude by thanking those who took part.

Question put.

The Seanad divided: Tá, 26; Níl, 18.

Tá

• Belton, Luke.
• Browne, John.
• Burke, Ulick.
• Connor, John.
• Cregan, Denis (Dino).
• Daly, Jack.
• Deenihan, Jimmy.
• Dooge, James C.I.
• Durcan, Patrick.
• Ferris, Michael.
• FitzGerald, Alexis J.G.
• Fleming, Brian.
• Harte, John.
• Higgins, Jim.
• Hourigan, Richard V.
• Howlin, Brendan.
• Kelleher, Peter.
• Loughrey, Joachim.
• McAuliffe-Ennis, Helena.
• McDonald, Charlie.
• Magner, Pat.
• O'Brien, Andy.
• O'Leary, Seán.
• O'Mahony, Flor.
• Quealy, Michael A.
• Robb, John D.A.

Níl

• Cassidy, Donie.
• de Brún, Séamus.
• Fallon, Seán.
• Hussey, Thomas.
• Kiely, Rory.
• Killilea, Mark.
• Lanigan, Mick.
• Lynch, Michael.
• Mullooly, Brian.
• Fitzsimons, Jack.
• Hillery, Brian.
• Honan, Tras.
• O'Toole, Martin J.
• Ross, Shane P.N.
• Ryan, Brendan.
• Ryan, Eoin.
• Ryan, William.
• Smith, Michael.

Tellers: Tá: Senators Belton and Harte; Níl: Senators W. Ryan and de Brún.

Question declared carried.

An Cathaoirleach

Before I call the matter on the Adjournment, when is it proposed that we sit again?

Professor Dooge

It is proposed to adjourn until 10.30 tomorrow morning.

An Cathaoirleach

Is that agreed?

Agreed.