Like the other speakers on this side of the House I should like to unanimously endorse the sentiments of the Minister as set out in his opening speech. I should like to endorse also the general thrust of the Finance Bill. This is the fourth Finance Bill since this administration came into office. I recall that during earlier budget speeches and presentations of Finance Bill, the prophets of doom all forecasted each would be the last of this administration. Yet this administration has gone on and managed to baffle, bewilder and confound the critics. They have come through a very turbulent, a distinctly difficult time and have managed during that period to get the nuts and bolts of the economy right.
One of the aspects of the Minister's speech which was the central feature of the Finance Bill was the area of taxation. There is no question about it that there is unanimous agreement that the burden of taxation falls too heavily on a lot of people. To expect that there can be an instant overnight dramatic switch about and that you can automatically switch from one form of taxation to another without doing so on a phased, reasonable and gradual basis, is an unrealistic proposition.
I should like to compliment the Minister on bringing about some relief in the area of income tax. Last year we had the broadening of the tax bands and this year the top level has been reduced from 60p in the pound to 58p. Again although it might seem minimal to many the elimination of the 1 per cent levy on income is a welcome development. It shows that there is overall wholehearted commitment on the part of this administration and this Minister, to address, when finances permit, the whole issue of tax and income tax.
It is facile, simplistic and imbecilic to regard the business of tax redress, tax equalisation and tax equality without taking cognisance in addressing oneself to the fundamental problem of where the money comes from and how we achieve the redistributive desire and goal which everybody who would like to see. You cannot, on the one hand, advance policies which are seen to be the answer to everybody's ails and ailments without, on the other hand, meeting a consequent obligation of quantifying and spelling out the pounds, shillings and pence and the minutia of where that money must come from. This Government have shown a commitment to reform in that area. One hopes that many of the tenets of the Commission on Taxation will be adopted and that, before this administration goes to seek a renewal of its mandate, it will have furthermore and to a greater degree addressed the problem of equality of taxation.
The Minister stated that there is need for responsible harnessing of the upturn of our economic fortunes. There would seem to be a lull or an upswing, a lull in the recession and an upswing generally in the economy in economic trends here and elsewhere. When one looks at the Government's performance, one has to look back at the whole genesis of the problem we face today. One has to look at the record and the daunting task this Government were confronted with. One must realise that, on assuming office, the situation was that our credit rating abroad was so bad that the lending institutions were about to slam the door in our faces. We had little, if any, credibility. We were almost on the point of liquidation, if that is possible in a national sense. Agencies and arbitrators from outside could and would, and, indeed, were about to move in unless a determined, forward and responsible thrust was taken in relation to the economy.
One has to remember that, when taking office, this Administration was faced with an inflation rate of something in the region of 21 per cent. Our balance of payments was accepted in a defeatist sense as being an inevitable part of our overall economic make-up. We had unemployment racing madly in the direction of 200,000. We had agricultural incomes falling 40 per cent between 1978 and 1982. Basically, we had a whole disjointed economy. Yet in the teeth of such a daunting prospect and in the teeth of the worst recession that this country has ever faced, the Government have managed to hold the line. They have managed to repel the critics. They have managed to achieve an economic performance where our inflation rate has been cut to 4.5 per cent — this without the added bonus of the recent fortuitous fall in oil prices, which is a bonus on top of the hard slog used to achieve the inflation decline in the first place.
In a relatively short period of time the Government have managed to achieve a level of performance where our balance of payments, our trade figures for the first time since the war, are coming right. One notes with considerable optimism and a degree of satisfaction that the monthly returns and trends are very much on the positive side in that regard. Hopefully, the year end figures will be even better than last year.
Again, despite the many debilitating factors, the Government have managed to redress the problem of unemployment to an extent in that at last there has been achieved a gradual U-turn in relation to the statistics and figures. Again, agricultural incomes have grown during the Government's term of office and have managed to stabilise and to be maintained despite factors such as weather and other outside agents acting, which would seem to have a contrary effect. No matter how one sees the achievements of Government, and they have been considerable in that regard, the big millstone around this Administration's neck and around the neck of every John Citizen in the street out there is the foreign debt and the foreign borrowing. Irrespective of how we may try to delude ourselves into believing that we now have turned the corner in that regard, until such time as we meet our responsibilities in that regard, we are not out of the wood. There is no question whatever but that future generations will be left paying for the folly of the 1977-81 period, which was an unfortunate period. If one set out to discommode, disjoint or dismantle the economy deliberately, one could not have done so more effectively. It was a gamble that failed and failed miserably.
There are no easy solutions and no facile answers. When talking about the distribution of money or pumping or priming or generating money or stimulating the economy, one always has to address oneself to the central feature, where does one get it? Does one borrow, does one cut services or does one tax? In that regard the Government have faced up to their responsibilities and have pointed always clearly to where precisely the money has come from in order to originate schemes or to bring about reform in certain areas.
I should like to compliment the Minister on the manner in which he has managed, in this Finance Bill, to generate confidence, to stimulate growth and to bring about the necessary initiatives in the economy which, hopefully, will have a wholehearted and developmental and positive objective. One notes that in the area of employment the PRSI relief has had the desired and targeted effect. One notes that the Enterprise Allowance Scheme is being continued. Many people have derided that scheme but when one looks at the statistics and at the number of small enterprises which have been started and have managed to keep going under the scheme to date, it has been very satisfactory. Virtually all of the businesses involved are not alone managing to hold their own but in some cases have taken on additional employees. One notes with considerable satisfaction the imaginative thrust of the scheme.
The Social Employment Scheme when introduced, was derided in this House and in the other House and castigated as being nothing other than a stop gap measure, in order, as people said, to make some type of cosmetic redress of the unemployment figures. If you talk to people who have benefited from the scheme, you will find that many of them welcome the opportunity presented to them of again experiencing the dignity of work.
I want to compliment the Government and the Minister for Labour for recently bringing about an amplification of the scheme in the introduction of two levels, the married level of £85 and the single level of £70 and of bringing about the much needed innovation, that if somebody terminates a scheme having had one year's work he may, having registered as unemployed again, re-enter the scheme and avail of another year's work. It is a very healthy development. It is the type of thing we have been crying out for, the mobilisation of resources, the harnessing of resources and getting a return for money spent. It is the type of development that could be amplified and experimented with in the future.
Unquestionably, unemployment will be the big challenge of this and of every Administration. Without being defeatist or being accused of undue pessimism, it is as well to confront the fact that the days of full employment are gone. We have to target all our aims and objectives and plans towards achieving a reasonable level of employment and minimising unemployment. Full employment is an unrealistic expectation. That is a view that is shared by economies inherently stronger than ours.
The budget deficit in this Finance Bill is being phased down, as the Minister has said from 8.2 per cent GNP to 7.4 per cent. Of course, foreign borrowing is one of the major causes of our economic misfortunes. In the National Plan the aim was to achieve the softer target of 5 per cent. With the various other factors which came to bear on the economy, this was not possible. We commend the Government on their determination to phase out the budget deficit over a reasonable period of time, without wreaking undue hardship on the citizens, on the unemployed and on the various services which people have come to enjoy and benefit from.
In November of 1982 both of the major parties went to the country with two election platforms. On the one hand, we had the main opposition party with the plan The Way Forward. On the other hand, we had the Government's Joint Programme for Government. One must assume, from the overwhelming mandate given to both parties and the fact that the voters plumped largely for both parties, that there is an overwhelming political consensus among people to terminate borrowing for day to day purposes. It is, however, a difficult political reality to grasp. Based on the voting patterns and based on the joint objectives set down in both programmes, there would seem to be a mandate given to the Government to end the budget deficit. Over a 15 year period, over the term of jurisdiction of four Taoisigh and seven Ministers for Finance, it can be seen that it has escalated to its present proportion and one sees the whole scale and magnitude of the task.
There was an idea, for what it was worth, floated some time ago of a constitutional amendment making it mandatory to balance the budget. It is something that might be worth dwelling on again. The Constitution enshrines certain principles and values which have been endorsed by the people which might otherwise be let slip in a rash of political pressures. It puts a brake on rash actions, and would-be follies or the capacity sometimes to self destruct. The Constitution is there as a safeguard in this regard.
This Government have pledged themselves to phasing out the deficit over a period of time. Despite all the good intentions, on the other hand, when one is confronted with a whole spate of junk economics, as has been described recently, one has to look at the political realities. It would be better for everybody concerned if we had consensus on the need for a constitutional obligation on every administration to have a binding duty and have as its main plank enshrined in the Constitution the need to end deficit budgeting once and for all.
The Planning Board felt that Governments should smooth economic cycles by budgeting for deficits in bad times and matching surplus in good times. On the other hand, there is no difficulty in a time of need or in a time of political exigency in persuading politicians of the need to incur a deficit. It is an entirely different matter when it comes to reversing that deficit in due course.
This Government, by and large, have performed an economic miracle beyond the capacity of the imagination of most people. They have confounded the critics of doom. Unfortunately the perspective of the man in the street would seem to indicate that their efforts and achievements have not been largely understood or appreciated. When one looks at the statistics based on the achievements of this administration it can be seen that there is now a greater disposal income available to people. Living standards have increased. There is a national wage agreement of 7 per cent. There is a projected rate of inflation for the year at 2 per cent or it may even be possibly down to zero. Interest rates and mortgage rates are now at a level of 11 per cent as against 16 per cent and 17 per cent two years ago. A person with a mortgage of £24,000 has a net saving of £24 per week in his pocket without any constraints by way of tax deductions. That is a net gain. This is evidence of the achievement and track record of this Government.
Like many other people I very often fail to see that when the inflation rate is running at 2 per cent — and possibly there is no direct linkage as I am not an economist or a financial expert — why banking institutions cannot be more accommodating in relation to more favourable borrowing terms. Despite the fact that by and large, banks give a reasonable service, they operate a service that can be sometimes equivocated with that of providing somebody with an umbrella on a fine day and taking it from him on a wet day. Anybody who had the experience of having the banks offer money in flush quantities at certain times and then putting the jack-boot in unremittingly at difficult times will share basically the sentiments that I am espousing and expressing.
I compliment the Government that despite the various financial restrictions on them over the years, one category which have always managed to do well from this administration has been the social welfare class. As was recorded on the occasion of the Social Welfare Bill, the social welfare class were more than looked after in this budget in that the average increase of 4.5 per cent to 5 per cent for the long term unemployed will give these people a substantial tangible increase in their living standards.
The other innovations introduced by the Minister in the Bill are also to be welcomed — the tax treatment of stock options, the share option scheme and the emphasis on share ownership. I had the benefit of attending a dinner and listening to the Minister developing this point on the obvious consequent benefits of such schemes by way of improving the whole industrial relations scene and the encouragement of wider employee participation. The Minister has managed to develop the business expansion scheme with a record of £5 million in year one alone.
I welcome Chapter III of the Bill which emphasises the tax incentives for research and development. Unfortunately, it is an area in which we can record grave disappointment in relation to our performance. It is unfortunate that because of our tax regime it is very difficult to keep in Ireland people with technical knowledge. It is something that we will have to concentrate our attentions and resources on. It is one of the basic weaknesses of our whole industrial scene.
We are very grateful to foreign industries for establishing industries here and for the large component element they fill in relation to our employment figures. The manner in which they have invested shows confidence in this economy. It is a problem, nevertheless, that these industries, in many cases, are "torso" industries where the head and feet are one place and the decision-making voice is somewhere else. While they perform a very valuable role in our overall economic fabric and make-up, when it comes to a long term commitment they may not have the same commitment as native indigenous industries. It is an unfortunate pattern that sometimes they have been prone to uproot and go without any valid explanations as to their reasons for doing so. That is why I basically share the sentiments expressed in the Minister's address that research and development is an area in which we will have to concentrate on to a greater extent. It is an area that should be developed possibly at university level, as a satellite or an appendage to universities. An idea floated by the Opposition — and it might not necessarily be dismissed for that reason — was that of possibly having a Minister for Science and Technology. It is vital that we keep abreast of the most modern technological developments at home and more importantly, abroad.
The relief in areas of capital gains are to be welcomed. All of these developments announced by the Minister are stimuli to generate growth, confidence and private sector investment. One notes with considerable pride a number of the hidden success stories of Ireland. For example, Ballygowan Spring Water, Seery Biscuits, and the Flowers for Ireland Enterprise in Waterford, all of which in their own way have been successful. They have not received the degree of recognition that one might expect. They should be used and put forward as an inspiration for other would be investors and entrepreneurs.
One of the arguments that always seems to come most strongly from the Opposition benches is the idea that the construction industry must be primed at all cost. While everybody appreciates the employment content of the construction industry, it is, nevertheless, a fallacy and a myth to put it up front as being an economic generator in its own right. I always tend towards the view that the construction industry should be a response to economic growth, investment and economic performance. Therefore, it should be a gauge and a barometer of the economic climate and performance of the day.
This party nevertheless has not been found wanting in relation to its commitment. We have introduced more innovative schemes than any other administration in that regard. One recalls that one on the main planks of the infamous 1977 manifesto was the £1,000 new house grant. We have doubled that house grant. We have introduced a mortgage subsidy of £3,000. We have also introduced another imaginative scheme which has been working with spectacular success and that is the scheme for the encouragement of local authority tenants to build their own houses. It is now part of a package that if a local authority tenant of two years standing wishes to build his own house he can now get a £2,000 new house grant, a £5,000 dislodgment-moving grant plus £3,000 mortgage subsidy. In round figures there is a £10,000 non-repayable grant. There is also a £16,000 loan available at 11 per cent over 30 years or the option of a Housing Finance Agency loan of £22,500 or £25,000 in the case of a local authority tenant, at varying rates of interest depending on the ability of the person to repay. In that regard our record on this side of the House is a proud one and one that bears comparison with that of any other administration in the past. Without apology to anyone I make my observations in relation to the fallacy of providing money for money's sake or the construction industry's sake.
Section 101 of the Bill deals with the extension of the exemption on stamp duty for young farmers. This has been a very useful scheme. It is because of difficulties in relation to mobility and transfer of land that people have (a) run away from the prospect of transferring their land and (b) have run away from the prospect of paying out stamp duty in order to do so. The introduction of this general exemption for people who transfer land to a son under 35 years of age is a very welcome development. Statistics prove that overall there has been an acceleration of the transfer of land. Nevertheless we will never meet with the degree of success that we would like to see in this regard until such time as we introduce a proper and attractive retirement scheme. If somebody over 65 years of age transfers land, they qualify for the contributory pension or non-contributory pension at 66 years. If somebody of 55 years of age transfers land, which would be our desire, our target and our objective, there is very little there by way of inducement for them at present other than the ordinary UA scheme. It is long overdue and we should introduce in tandem with our European partners a proper farm retirement scheme.
