Seanad Éireann debate -
Thursday, 15 May 1986

Vol. 112 No. 11

Finance Bill, 1986 [ Certified Money Bill ]: Second Stage (Resumed).

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

Mr. Fitzsimons

As I said yesterday evening, I feel this is a very comprehensive Bill and one of the most important Bills we deal with during the year. It also requires great expertise and knowledge in the area of accountancy and fiscal matters which I do not have. Therefore, I will not make an extended contribution. I will deal with some of the areas in which I have a particular concern and leave the other matters to those who have a better knowledge of them.

I was dealing with the family and the stresses on the family yesterday evening and I gave figures to illustrate the point I was making with regard to these stresses and problems in relation to budgetary strategy over the past number of years. I will refer briefly to those first figures again. The table I gave showed that for a single person the tax free allowance in 1970-71 was £249. In 1975-76 it was £575; in 1980-81 it was £1,115; 1985-86 it was £1,900; and this year it is £2,000. The child's tax free allowance in 1970-71 was £135; in 1975 it was £230; in 1980-81 it was £195; in 1985-86 it was £100; and this year it is nil. I gave the percentage over that time of the child's tax free allowance in relation to single persons and in 1970-71 it was 54.21 per cent; in 1975-76 it was 40 per cent; in 1980-81 it was 17.49 per cent; in 1985-86 it was 5.26 per cent; and this year it is nil. We have a decreasing percentage there all the time which underlines and emphasises the point I am trying to make. The logic of this regression of the child's tax free allowance is that families with children are being pushed more and more into the poverty trap. They are being asked to pay an undue and higher proportion of the tax burden.

I then moved on to another set of figures which I had not completed yesterday evening. I would like to go through them again very briefly. In 1975 the Consumer Price Index base was 100 and in 1985 this had increased to 343.6 per cent. The single person's tax-free allowance in 1975 was £575 and in 1985, if it were to be in correct proportion to the consumer price index it should have been £1,975.70; in fact, it was £1,900, not that much less; and this year it is £2,000. When we begin to deal with married couples there is a problem in having a straight relationship between the figures because married couple's tax free allowance was £920 in 1975; again, in 1985, this should have been £3,161. There was a working wife's allowance of £230 which in 1985 should have been £750. The total in 1985 should have been £3,951. The actual figure was £3,800 — again not a considerable difference. This year the figure is £4,000.

In 1975, there was a year of marriage allowance of £100 which was introduced in the late sixties. In 1985 this should have been £343 to keep in touch with the consumer price index. It was continued in the early eighties. The child tax free allowance in 1975 was £230 and it should have been £790. In 1985, it was £100. This year it is gone. From the point of view of the family with children this table paints a bleak picture. While allowances for single persons and married couples marginally failed to keep pace with inflation, the allowance for children fell away and finally died this year.

In terms of money in the pocket let us look at what happens. For a family with four children the relative loss in tax free allowances compared with 1975 is four multiplied by £790, which is a figure of £3,160. To a family where the wage-earner is paying tax at the standard rate of 35 per cent the out-of-pocket loss is £1,106. This is a loss which the average family or, indeed, any family, could not sustain. Of course, the larger the family the greater the financial loss. The Minister and the Department and the Government should not feel proud of this development.

I quote figures from the supplement to the Administration Year Book and Diary for March 1986, giving changes in income tax resulting from the budget and the reduction due to the changes in the budget. Just taking the one income of £9,000 — incomes from £9,000 to £30,000 per year are covered in this but I will take the lowest — for the PAYE individual, a single person, the tax liability on an income of £9,000 will be £2,275.72. The reduction amounted to £212. For a married couple without children, one spouse earning, tax liability is £1,404.90, a reduction of £195. For a married couple with three children, one spouse earning, tax liability is £1,404.90 — reduction £90. For a married couple without children, both spouses earning, tax liability is £1,059.80 — reduction £230. There are more figures given in Schedule E which there is no point in quoting. It is clear there that the least reduction is for the married couple with three children and the discrepancy increases as the number of the family increases. This is patently wrong.

I could say in passing — and this is in the area of demography and demographic trends, which is a very specialised area, there is that undercurrent which is worldwide to discourage large families. It is an approach with which I do not disagree indeed — people must be responsible in that regard — but if that is the underlying notion it should be clearly stated because that, at any rate, is the effect.

Could I also say in passing — and I suppose it has nothing to do with the Finance Bill but just as a sidelight from my point of view — we had in the late 1900s a population explosion which apparently the historians are unable to account for. It was a worldwide trend and in some way the figures could be related to tax also because prior to that there was no proper census and the figures were based on tax returns, which again gave a wrong picture. In years to come when people look back at the situation and the change in the birth rate — it is not all that significant — they will certainly be able to trace it to policy in this country and abroad. France is an example in this regard where there is deliberate government policy to reduce the birth rate. Also, could I say in passing that the birth rate has decreased from 21.8 per 1,000 in 1980 to 18.2 in 1984 the last year for which figures are available. There was a downward trend over all of that period.

It is worth noting that the year of marriage allowance has also disappeared in recent years. It seems then that we are to understand that marriage and children are being discouraged. Perhaps my reference to this would encourage the Minister to rethink this policy particularly in view of the falling number of births in the country for the last five years. The Government are already reducing the population by forcing people to emigrate and I am sure that we do not want further to reduce the population by discouraging marriage and children in the family.

The general policy is to discourage marriage because, if we take persons who qualify for medical cards the qualifying limit for a married couple is not twice that of the single person and indeed for most social benefits the qualifying limit is not twice the amount of the single person. It has been often brought to the attention of the Minister in this House that two unmarried persons cohabiting would be in a better position financially than a married couple. Therefore, there is that stress on marriage that I have referred to and this is a continuation of it.

As I said at the start I am not an expert in this area — I know it is easy to be critical — but I am making my views known in a constructive sense. It is unfortunate, having regard to all the stresses that the family is undergoing particularly in relation to the divorce problem which we will be dealing with next week, this extra stress is placed on the family.

The argument will be made that children's allowances and child benefit allowances make up for the loss of the tax allowance. This is not true. Taxpayers always received children's allowances and they formed an important part of their income. This year the child benefit will increase by £3 per child per month giving a total of £36 per year but the worker loses his child tax free allowance of £100. Therefore on the standard rate of tax he or she will pay out in extra £35 in tax; the net theoretical benefit will be £1 per year. I am sure our children are not expected to be appreciative of this small concession. If the worker pays a higher rate of tax he will be a net loser just because he has children. The only people who can benefit from this new arrangement are the unemployed. Cynics might justifiably say that the Government have tried to increase the number of people who will benefit from the child benefit scheme in this way. I do not think it is right that we should have 250,000 people unemployed to achieve this aim. The Minister must pay attention to this matter. The families of this country are crying out for fair play in this area. The tax code must be readjusted before further damage is done. To continue the tax free allowance for children would not be all that expensive. On the basis of figures which I have worked out, 30.3 per cent of the population in 1983 were under 14; the population was 3.483 million and therefore 1.05 million are still under 16 and in those two further years there is a further birth rate of 0.13 million making a total of roughly 1.185 million under 16 years. An allowance of £100 for those children would cost between £40 and £50 million which is not a very big figure.

The Minister tells us at different times that there is a new optimism in the economy. He and the Government must be in a world of their own because I do not see that optimism. I can see nothing but pessimism. I cannot see anything in my own area or the commercial area which would give evidence to claiming a new optimism in the economy. We are told that the Government's role is to provide the best possible environment for growth. We would all agree with that but what follows on from that does not make sense. It seems to me like the situation where somebody wants to get to a particular destination; they see the sign to go right and then they go left in the opposite direction. The whole impetus of this Finance Bill is to discourage that growth and optimism that we should have.

Inflation has been dealt with at some length. I welcome the fact that it will be lower than projected at budget time and should average not more than 3 per cent. It is an achievement. I am not too clear as to what beneficial effect it will have. I recall the previous Minister for Finance saying that it would help in some vague way with employment; it would encourage more investment. If it does that I would welcome it. This is a special area where inflation and the consequences of the reduction must be considered. The Confederation of Irish Industry have gone into this in some detail. It is stated in their publication of February, 1986 that:

Ireland's inflation rate along with many others of our trading partners has been falling and seems set to fall considerably further. This is due to the overall increased strength of the value of the Irish pound mainly against sterling and the dollar and the dramatic fall in the price of oil to $12 a barrel. It is also a response to falling inflation around the world but like any other sudden fluctuation in economic variables it needs to be managed carefully to maximise potential and minimise the problems.

It goes on to state:

The problems are more obtuse. Manufacturers are selling into an increasingly buoyant European market partly because of the transfer of spending power to the European economy as a result of oil price reductions. At the same time because inflation in other countries is falling even more sharply than it is in Ireland (inflation rates in Germany and Belgium are running at an annual rate of 1 per cent, in France and Britain at over 2 per cent) producers are facing markets with falling prices so that margins are being severely squeezed in order to maintain competitiveness. There is a lag in the rate that wage rates and other domestic costs respond to the new price environment. It is therefore essential that full cost reductions in areas of fuel and other industrial costs are passed on immediately to industrial users so that exporters do not have to bear the full impact of competition by reduced margins.

That is very important.

The Irish Press of 14 May had an article headed “Inflation Drop Hits Tax Returns”, which said:

The Government's failure to anticipate a lower inflation rate will result in a drop in tax returns. The original tax estimates were based on prices staying at a certain level, the Taoiseach admitted yesterday.

Further on it stated that the Taoiseach said he doubted whether industry would be ready to respond quickly enough to the anticipated upward swing in the economy and a bigger growth in consumption. There we have the situation where, on one hand, we are told that the reduction in inflation is going to help and on the other hand apparently the Taoiseach is saying that it is not going to help, that we are not in a position to take advantage of it due to various reasons, the principal one being that the figures with regard to the budget were based on a certain level and we are not going to reach that. So, although, inflation is getting much lower and the Government must get credit for this, nevertheless it seems that on the basis of those figures there is an international trend and that Ireland is on this falling tide. While a certain amount of credit must go to the Government, these external forces played a very big part in that.

The Minister in his introduction to the Bill yesterday dealt with reconstruction grants and urban renewal. It is an area in which I have a very special interest. I quote from page 12 as follows:

I am pleased to report to the House that the anticipated activity in the designated areas along with the activity generated by the home improvement grants and the general pick-up in housing demand have an employment potential of more than 3,000 jobs per year.

I would like to state quite categorically with regard to the building industry that I have never seen the situation as bad. I doubt if anybody in this area has seen it worse. I do not think there is any reason to be optimistic in this regard.

With regard to the home improvement grant, which has been gone into in some detail by Senator Jim Higgins, I am not too sure it is achieving everything the Government claim. There are big problems in this regard. I welcome increased grants and the grants to local authorities for tenant purchasers. Basically, I do not see any activity generated by those grants.

In the Evening Press, 14 May 1986, the CIF criticised those grants. In relation to the regulations about home improvement grants, I made the case before that what this Government have done is to eliminate the do-it-yourself builder, the person who could not afford to employ a contractor, the person with very small means who, through hard work, provided an extension to his home. That person can no longer do so and this is unfortunate. It is wrong. It is not encouraging people to improve their housing stock. Many of the people who apply for grants feel that they are going to get a sufficient grant to do all the work whereas it is related only to a percentage of the work. The CIF have criticised the estimates for these works in that they are far too low. The Minister for Finance told us some time ago that he intended to bring in the same rules for new houses. This is unfortunate. It is a total change from the position we knew in this country. Even in the United Kingdom, there is a 50 per cent grant for the materials used in do-it-yourself home improvement. I fail to see how that cannot be done here.

I have pointed out at some length previously on a motion on the Adjournment that with regard to the black economy, I am totally against activity in this area as every normal person is, but there should have been some other way to overcome this problem.

Mrs. Doyle

The position in relation to the do-it-yourself man has not changed at all. It may not have improved but it has not changed.

Mr. Fitzsimons

I welcome that assurance from the Minister. I am talking about the new house improvement grant scheme where it is necessary to employ a registered builder. The individual who wants to improve his house is precluded from doing the work himself.

Mrs. Doyle

He is precluded from getting the grant, not from doing the work.

Mr. Fitzsimons

Of course. People who improve their homes have great difficulty in getting finance and make great sacrifices to extend their homes. It is very callous of anybody in Government to say they are not precluded from doing the work. Of course, they are not. Where does the money come from? The Government are not providing an incentive to do the work. These people need to get the grant and the Government will not give it to them. It is a penal clause in the regulations. It is a retrograde step. On previous occasions I appealed to have it reversed and apparently the Government are adamant that it will not be. In the UK people who want to do the work themselves, can do it and get a grant on the materials. Some other course should have been taken here.

In relation to employment, there is no improvement in this regard. I know of some contractors who have given their names to 20 or 30 people with regard to these grants and there is no way they could do the work if they were asked to do it. In the society in which they move, if they are asked whether their name can be used, it is impossible to refuse. I do not know of anybody yet who has been paid on those grants. I simply make the point with regard to what the Minister has said in his introductory speech that he is not representing the true facts. I accept that the intent is to improve the housing stock but in relation to having to engage registered contractors, there should be some flexibility in the rule.

There are in other areas an allowance for people, say, whose turnover per annum does not exceed something under £20,000 not to register for VAT. Of course, this applies also in the building area but anyone who would do two or three jobs would exceed that amount. Middle aged or elderly contractors, working in a small way, do not want to get involved in the clerical work of filling VAT returns. If that amount were increased it would possibly bring about an improvement.

The Minister criticised those people who looked for lower taxes and felt that the activity generated would justify taking this course. He stated on a different occasion: "We must get off this treadmill of illogicality and decide where our priorities lie". I thought this a metaphorical and quaint phrase to use. It is one with which I would agree. At the same time, there is something worth looking at in that area.

With regard to some of the other areas of the Bill, I am pleased regarding the incentives for research and development. We went into those in some detail when we were dealing with the Industrial Development Authority. It is an area in which we have lagged far behind. I am very pleased that the incentive is here in this area.

The Minister stated, with regard to the abolition of the 1 per cent income levy and the reduction of the top rate to 58 per cent, that these will together have a significant effect on those highly paid employees with particular skills who may feel there is little incentive for them to earn additional income. Their income tax on each additional pound earned is being reduced from 61 pence to 58 pence. In my view this is no big deal. Granted it is a reduction and granted it is going in the proper direction, but at the same time it is minimal. I know there are very many people who claim that people who are unemployed are better off than the people who are working. This is a wrong situation. In my own county I know of two small factories side by side in one town where the employees in one of them were on a three day week. They were getting a higher wage than those who were working full time, with the result that the employees in the second factory wanted to go on a three day week as well. This is a bad situation where employment is being discouraged. I know of situations where people do not want to work overtime because it is not worth their while. It is unfortunate that there is this nagging doubt in very many people's minds that people who are unemployed in many cases are better off.

One section of the Bill deals with the Urban Renewal Bill and the intention in this area with regard to the city. This is very welcome and it is an aspect we will be dealing with in greater detail when the Bill comes before the House. For decades there has been a significant tendency for new development to locate in the suburb areas and in the outer urban areas which are perceived by the property market to be more favourable. It is more subtle than that. The big problem with regard to the inner city area was that land was so costly there. It was less costly in the suburbs and therefore a decision was made at a particular time — we see it was wrong with hindsight but at the time I am sure it had many advocates — that for a certain amount of money it was possible to provide more housing accommodation in the suburbs than by building in the inner city. For that reason the development took place in the suburbs and in the peripheral areas and left the centre in the state in which we see it. I am glad this aspect is now concerning the Government. The Minister has referred to it in his introduction. I welcome it.

I note that even still it is difficult to get private investors into the central city area. I wonder why? I am sure the grant incentives could be better. I am sure in some way it is related to this cost factor.

A private investor would be thinking of the immediate return whereas the Government must be thinking of the long term return, not just in financial terms but in terms of the benefit to society and in terms of all these other benefits that will accrue.

I welcome also the incentives regarding film making. I see that these are somewhat restricted. The Minister seems to think that what some people want is an incentive for film making with no risk situations for the investor, where he puts in his money and gets his tax break and cannot lose. The Minister has stated that this is not a desirable way of encouraging any form of commercial activity. At the same time, films that are rented out abroad do benefit this country. That aspect should be taken into account, whether films are for the home market or whether they are for export. In that regard perhaps more concessions could be made for those who would have an international appeal and bring financial benefit to the country.

Section 47 provides for a surcharge of 10 per cent where there is a delay beyond a certain time in sending in tax returns. The Minister has stated it is a significant imposition and that it is aimed at improving compliance by self employed and corporate taxpayers in submitting income tax returns at an early date. I know it is important to file tax returns in time. At the same time, being one of the self-employed, I know there are very big problems in this area, particularly with the small businesses. If the person in charge gets sick or in very many other ways he does not have the same support that somebody in employment would have, he is relying on himself or herself as the case may be. When there is this general criticism of the self-employed, special consideration should be given to the fact that someone is there on his own and trying to play an important part in most cases. They do not have sickness benefits. They do not have facilities with regard to holidays. In all those areas there are drawbacks. That should be taken into consideration, and I believe it is not, by those who are most critical and that would be those who are in permanent and well paid employment. I welcome the reduction of the VAT rate on services. I am sure it will help in the tourist area. This is a very important area for this country. It will also strike a blow against the black economy. This is, of course, to be welcomed by us all because the black economy affects everybody. Even in my own area, I am affected by the black economy. Some time recently I advertised for a trainee draftsman. Many of the replies I got told me that they had experience and that they had prepared plans for many of their friends. It is very desirable that people should have this opportunity, but, at the same time, there is no way that somebody in a professional practice could compete with that kind of a situation.

With regard to the section that provides for the continuation of the stamp duty exemption for transfers of agricultural land to young trained farmers, I am glad this is extended. I know there is an urgency in this area. I see that the scheme will expire at the end of September next. I am not clear why it is necessary to terminate this scheme. It is a good scheme and it should be an on going thing. I am not sure why there should be a closing date and I hope it will be extended. Other changes in that area could be looked at again. This is an area with which I am not very familiar. The Bill does very little for employment and the reducing figures are affected more by emigration than by anything else. All of us know of many friends whose sons and daughters have emigrated. I certainly know them in my native town of Kells. This is something which is reducing the figures to a considerable extent.

There are many other areas I could go into and I could speak for a long time on the Bill but I think it would be pointless because I am not an expert in this area. I will make a few comments on some of the matters the Minister mentioned. He said that while exact comparisons with other countries are difficult to make it is clear that some European countries have more severe tax regimes than we have.

While I would accept that this is probably true it is no help to the people of this country. We are concerned with the situation here. The Minister stated that in recent weeks we have seen a number of pronouncements on new taxation policies and he is worried that in some instances new taxation policies have been advocated without any serious attempt to quantify costs and benefits. He stated that he feels this line of approach is dishonest and it is unfair to the general mass of taxpayers who have to foot the bill in the longer term. In this area there may be some sense and its dismissal in that peremptory fashion is something I do not welcome. He referred to the self financing cuts and he said that these were being put forward as the quick and painless solution to our difficulties. He said this is a dangerous folly. People who put these forward did not put them forward as the only way out of this morass, it was one way to be considered. The Minister stated that if self financing cuts were a practical option several other countries would have already gone down this road and we would have missed many golden opportunities. My reply to that would be why must we always follow, why can we not be inventive and why can we not lead for a change? It seems to me that there is some sense in this area. To reduce the taxes to generate that type of environment would encourage people to invest and to create employment. There is some sense in it because if people have the capacity to spend a certain amount of money to bring in X amount of tax, if they are given the capacity to spend twice that amount of money to bring in the same amount of tax I feel that in so doing it will generate employment and it will create that environment and I feel that there must be some sense in that.

The Minister also said that after a long period of recession there is a welcome economic upturn. I cannot see it that way and I sincerely hope the Minister is right. He stated also that we are fortunate that we are well equipped competitively to take full advantage of this upturn. That is a complete contradiction of what the Taoiseach allegedly said as reported in yesterday's Evening Press. In my view the Minister clearly stated the very opposite. The Minister referred to the employment figures for April and stated that they were very encouraging. I do not see them as encouraging. I believe that a total new approach to employment would have to be taken having regard to all the other factors. Possibly employment as we have known it in the past and what people refer to as the Protestant ethic of employment is gone and we are never going to have that again. Some consideration must be given to taking in leisure pursuits and all this area. It would be a very bold step and a very radical step but some Government must be brave enough to take it.

The Minister said that a large part of the improvement was due to the great success of the PRSI exemption scheme, that 2,800 people were taken on under this scheme and of course this was helpful. I would have to make a complaint that not enough time was given with regard to this scheme. I would have been in a position to take on one employee through this scheme but I did not have enough time because there is the time factor of advertising, there is the time factor of making a selection and making arrangements. I welcome the scheme and I know it was of considerable benefit. Nevertheless it would have been much more beneficial if the time had been longer.

I am concerned about the retention tax. I think this is unfortunate. It has been dealt with by other speakers and will be dealt with later so I am not going to go into it in any detail. It is unfortunate that voluntary organisations are included, organisations who have no profit motive. I think it is wrong. Senator Rory Kiely made a special appeal for the GAA and I would endorse what he said. The GAA have made a great contribution and it should be exempted. I am not going to restate what Senator Kiely has said but I agree totally with him and all those other organisations who have been so helpful with regard to the work and the responsibility of the State. With regard to the retention tax I know of one individual who is a widow and who got some compensation on the death of her husband. She invested that to have an annual income and now it appears that that investment is subject to the retention tax. That is wrong. I feel that a case should be made for people in a similar situation. If this unfortunate lady had invested in some other way she would not have to pay this tax but because it was the simplest way and the most straightforward way she was advised to do so and the result is that she is responsible for paying that tax with her young family and the responsibilities she has.

In conclusion I want to say that I agree totally with the Minister that this is a very complex and complicated Bill. I have great reservations with regard to many of the prognostications and many of the forecasts and indeed many of the figures given by the Minister. Nevertheless, I sincerely hope that what he has stated is true and I hope that the Bill will result in bringing all the benefits he claims.

Mr. Howard

I have a rather general and brief contribution to make on the Finance Bill this morning. Before I go on to the remarks I have prepared, I want to make one or two brief comments on the contribution by Senator Fitzsimons. There are a number of points he made which I propose to pick up in the course of what I have to say. I want to say by way of a general observation that I am impressed always by the sincerity that Senator Fitzsimons brings to the majority of his contributions here. However, I felt this morning that to some extent that sincerity and objectivity were devalued by an obligation to make certain ritual observations that he was decreed by his party to make and as is the practice of practically all their contributors to this discussion and, indeed, to discussions on the economy generally.

One gets the idea from them that the Finance Bill does little to deal with the employment situation. There was dismissal of the Minister's statement here yesterday morning that the unemployment figure had decreased by 4,900 for April 1986 as compared with the month of March. One must go back to 1971, 15 years ago, to get as high a drop. That appears to be ignored. To me that drop is to be welcomed.

Mr. Fitzsimons

How about emigration?

Mr. Howard

This is another part of it. If Senator Fitzsimons or anybody else wants me to go down the road of emigration and the history of emigration, no one has more experience in that field than I have.

Mr. Fitzsimons

Senator Howard you are talking about——

Mr. Howard

Let the Senator not be selective.

Mr. Fitzsimons

In picking 1971 the Senator is being selective.

Mr. Howard

I am saying that this is the recent trend and that in the observations Senators made of the Minister's contribution yesterday, there was a dismissal of this achievement. Senator Fitzsimons has spoken already with great sincerity of his own experiences. I went through my early school days in a class of 15 boys of whom only one apart from myself remained in the parish at home. Those of the remaining 13 who are alive today, are anywhere from San Francisco to Brisbane. They had little choice in what they were to do or where they were to go. These are the facts of the situation then. As Senator Fitzsimons can well estimate, in the period I am talking about, his party was the party that had the responsibility for guiding the economic destinies of this nation. Therefore, if we want to take emigration over that period fair enough and if we want to take it up to the present, all right. Emigration can be categorised. There is the emigration that is forced through economic circumstances. That is something I deplore and would not hesitate to speak about. There is also emigration by choice. I do not think that any of us should ever condemn, as it were, emigration by choice.

There are far too many examples of people who have left our shores and who have become a credit and an outstanding success in the countries and societies they emigrated to. There are many of our race with that inclination to travel, to explore better pastures and to succeed at that. Therefore, there will always be emigration and emigration by choice. To me that is nothing to be deplored or condemned. If people feel that they can utilise their talents more effectively in some other country or economy, then freedom, if it means anything, means the liberty to do precisely that. Therefore, there is no condemnation. I intend to say a few words on the question of inflation as we move along.

Senator Fitzsimons said he was no expert in that field and, indeed, neither am I. My understanding of inflation is very simple. I remember, indeed, everybody should remember, the late seventies and the early eighties. High inflation meant day in and day out, week in and week out, increased prices generally, the continuous pressure and strain on the income packet. That has been eased and to me and my understanding of inflation that is one of the benefits that have come from it. There are a number of points I wish to make on that issue. I will leave further comment on that until I reach it in the point on my notes. I want to make a final point about what Senator Fitzsimons says in relation to there being no evidence of an economic upturn. I believe there is. We are talking from two different environments. That is an expression of a genuinely held view rather than the obligatory comment that would seem to be part and parcel of his party's attitude.

Mr. Fitzsimons

I am not aware of any obligatory comment.

Mr. Howard

I think the last thing that Senator Fitzsimons's party would wish to have at the moment is an economic upturn. I mean, for political reasons, that is the last thing they want.

Mr. Fitzsimons

I think that is most unfair.

An Leas-Chathaoirleach

Senator Fitzsimons and Senator Howard cannot have a chat with each other in the Chamber. Senator Howard to continue with his contribution.

Mr. Howard

It is a privilege speaking this morning in such charming company.

An Leas-Chathaoirleach

There are rules here that I have to abide by, too, Senator Howard. I hate breaking up the nice chat but, at the same time, there are rules that I have to adhere to as Leas-Chathaoirleach.

Mr. Howard

I want to end on my note of criticism of Senator Fitzsimons by saying that in putting forward these comments I do not want him to think there is any personal animosity. There is not. They are just part of the normal cut and thrust of our debate. To that extent I will now leave it. I support the Finance Bill and welcome, in fact, many of the proposals within it. I want to congratulate the Minister for what I regard as many ideas and proposals that I believe will be of benefit and have merit where the economy is concerned. I was here during the Minister's speech yesterday morning and I welcomed particularly the positive tone of that contribution.

The Minister indicated that there were three major aspects he wanted to focus on: first, the reductions in personal taxation. It contained incentives for productive investment. He also highlighted what he regarded as the third important element in the Finance Bill, the extension of tax concessions to encourage greater employee participation in industry.

He produced figures to show that there was an economic upturn. He referred to falling energy prices. He spoke of lower inflation and lower interest rates. He stated that resulting from all that there was a new optimism, that we are beginning to see higher investment, new job opportunities and that inflation had reached its lowest point since the sixties.

He expressed the conviction that by the second half of this year we will be talking of an annual inflation rate of approximately 2 per cent. I share much of that confidence and optimism. To a certain degree, the benefit of falling oil prices is reflected across the entire community. This is a welcome improvement for householders, for private and public transport and for industry.

I welcome the initiative of the Minister for Industry and Commerce in taking action to ensure that the benefits of falling oil prices are passed down the line to the consumer. There is widespread public belief that the full value of reduced oil prices has not been passed on to the consumer.

Mr. O'Toole

That is true: they are not passed on.

Mr. Howard

There is widespread public belief as well that the ESB are not passing on to the consumer the full benefits they are obtaining from the reduced oil prices as part of their energy production costs. The benefits from reduced oil prices should be passed down the line whether by the ESB, the oil companies or the retailers. I am pleased that the Minister for Industry and Commerce has taken this step in regard to oil. I hope this effort continues. I want to point out to the Minister that the ESB have not responded as rapidly as they should have in passing on the benefits of falling oil prices. Economic recovery is far too important for us to tolerate a situation where elements that can contribute towards its expansion and development are gummed up by private organisations or semi-State bodies. The benefits of falling oil prices should be passed on to the consumer.

Falling inflation is a desirable development. The advantages are felt by the public. The advantages are valuable to the economy. While a number of external factors have contributed to the reduction in inflation, they have done no more than complement the determination of the Government and their policies in the past three years in reducing inflation to manageable and satisfactory proportions. A reduction in inflation represents a success for Government policies of major proportions. I admire the courage with which the Government have stuck to the commitment in this regard in the past three years. In many instances it stuck with unpopular decisions and endured criticism, often unfair, for staying with it. Because of that commitment, we have satisfactory results.

Interest rates were referred to by the Minister as an element that will help towards the economic upturn but interest rates have not fallen sufficiently. Business will not develop and industry will not expand and jobs will not come on stream while money costs business, industry and agriculture, 15, 16 or 17 per cent when inflation is in single figures. If inflation is to be 2 per cent in the second half of this year, there is no justification whatsoever for interest rates to be in double figures. There are many incentives in the Finance Bill for industry, for business, for economic development. There is excellent potential but we will never achieve full and satisfactory results as long as business, agriculture and industry are burdened with interest rates in excess of those prevailing in other countries. In the past few weeks we have witnessed certain gentle prodding by the Government to encourage certain institutions to reduce interest rates. This is not good enough. The Government cannot allow policies and incentives in this Bill, in the Industrial Development Bill we debated here some time ago and in the National Development Corporation legislation previous to that. A situation cannot be tolerated in which all these initiatives and incentives are being strangled by the attitude of certain institutions in relation to the level of interest they charge.

I have spoken in relation to business in industry and agriculture. To avoid repetition, I will only say very little on the matter. Points were made here yesterday and elsewhere. The agricultural industry is emerging from a particularly difficult year and an especially difficult spring. To maintain stock in the past number of weeks has for many farmers been an extremely expensive operation. Crops that should be in the ground for the past number of weeks are still not there. Farming costs, because of the weather and other factors, are at a level that is stretching the capacity of the people involved to make ends meet. If money is available in Europe at attractive interest rates, which I believe is the case, for agriculture and also for business and industry, then that money should be made available.

The Minister referred yesterday to the fact that we have had a decrease on the figures registered as unemployed of 4,900 in the month of April, 1986 as against the previous month. We would have to go back to the March/April period, 1971 before finding a drop as large or as significant as we just had in the month of April, 1986. That is an indication again that the policies of the Government are working reasonably successfully.

However, there is still the need for some years yet to make a lasting and major impact on the economy, especially in job creation. To achieve that we have to talk in terms of teamwork. I have always held the view that on an issue of such proportions facing the country that there is need for teamwork among all sections and all parties who have an interest in this country both in its present and future. The Government is but one part of that team, admittedly a leading member of the team. We are a small island economy. The problems we face and are likely to face in the future are far too great and serious for us to afford the luxury of other elements that should be in that team, either not being in it or by being in it but not pulling their weight.

I welcome the reduction in personal taxation which is included in the Finance Bill arising from the Budget. I welcome the incentives for productive investment and the tax concessions that encourage greater employee participation. Senator Fitzsimons gave certain examples of personal taxation and tried to illustrate that he knew of cases where people were no better off under the new regime than they were under the regime which had applied previous to the Budget. The Minister gave a number of examples. One example was of the couple with two children on £16,000 per year being £332 per annum better off. That is a reasonable reflection of what the true position is as a result of the Budget and the reorganisation by the Government of personal taxation. It represents a discharging by the Government of the commitment they have given in relation to holding of personal taxation limits at the level they were at at the time of the National Plan. Secondly, they have shown a certain measure of success in going beyond that commitment and succeeding in bringing about a reduction. The net effect is that where there is more money there is more spending power in the taxpayer's pocket. I accept that the illustration the Minister gave us yesterday is a pretty accurate indication of the true position.

I welcome also the provision in the Bill which extends the business expansion scheme to 1991. The value of that scheme is proven and is best illustrated by the number of investors who are qualified for it and who are involved in it.

I welcome the encouragement given in the Bill for investment in research and development. It is generally recognised that we have been late starters in that field, that we lagged behind many of our competing countries, that much progress is needed there and that we have an increasingly short span of time within which to do it. Therefore, the incentives for greater investment in research and development are welcome. I am confident that they will have the desired effect and that we will get this very necessary and important spurt in that field as a result of the measures proposed in the Finance Bill.

In relation to Capital Gains Tax, I welcome the reduction to 30 per cent of assets held for a period of six years or more.

Section 56 of the Bill relates to a situation that has arisen in County Clare in a certain industry in the industrial zone in Shannon Airport. The Minister explained the necessity for having to include this section there. Of the entire day's discussion in the Seanad yesterday, it was this section and this particular paragraph that made the media headlines. I am concerned that there might be any misunderstanding among industry in the Shannon region at the manner in which this paragraph was highlighted. I am glad the Minister took considerable pains to point out that there was no need for alarm.

He said:

So as not to alarm the many responsible companies in Shannon, who might otherwise feel that their tax data is in jeopardy, the section provides for withdrawal of a certificate only in the event of a company refusing to desist, from activities which they have been informed by the Minister for Finance are not acceptable.

When replying to this section of the debate perhaps the Minister will clarify that situation. Any of the companies in Shannon who are aware of the reason for this section having to be included will accept that there is nothing to be concerned about and that this is a reasonable and necessary precaution. I would not call it a section: I would only call it a paragraph.

An Leas-Chathaoirleach

It is a section.

Mr. Howard

In the 12 hour debate we had here yesterday, this particular paragraph of two inches was referred to on the radio last night.

An Leas-Chathaoirleach

The Seanad is getting fair coverage of late.

Mr. Howard

Well, I think we can both claim some credit in that field. I will be asking the Minister to refer further to that in his concluding address or when replying to the Second Stage. By referring to it again I expect that any unease that may be caused will be eliminated.

Section 101 deals with the stamp duty exemption for the transfer of agricultural land to young farmers. This is being extended. I welcome the extension to September, 1987. The age is being reduced also from 35 years to 30 years. The number of hours of agricultural education courses is being increased from 100 to 150 hours. That is somewhat more restrictive. The original cause and concept in this regard was to facilitate and encourage the early transfer of land from older occupiers to younger farmers who would have new ideas, who would have the energy and capacity that youth alone can give to develop and expand the farms in question. Therefore, it is and has been an extremely valuable scheme.

I should like to conclude by calling on the Minister and the Government to reconsider that cut-off point of September 1987. It is a scheme that has been a prudent success. It needs to be continued. The benefits that will arise from it will outweigh any supposed benefits that may come by cutting it off. Therefore while I welcome the Bill in very general terms and welcome many of the concessions, incentives and benefits included in it, I am focusing on one or two points. I want to see the level of interest rates being charged by financial institutions to business, industry, and agriculture reflect and relate to the prevailing level of inflation. The availability of loans from Europe should be investigated and made available if possible so as to regain business in industry and agriculture.

In relation to the exemption from stamp duty and the transfer of land to young farmers, it is imperative for the sake of progress in agriculture and for the sake of orderly and progressive development of farmland throughout the country that this exemption would continue beyond September 1987.

Mr. M. O'Toole

First, I would like to welcome the return of Deputy Bruton to this House as Minister for Finance. I am sorry he is not here but in saying that I am casting no reflection on my colleague from the west, the Minister of State, who is deputising for the Minister. I can say sincerely that I am confident that he is a Minister who has his feet on the ground unlike the previous Minister who was merely a mathematician with no practical approach to the real issues. The present Minister will have that advantage and I glad to see him back as Minister for Finance.

To talk about a Finance Bill without a job creation or a development programme is of no benefit whatever to the country or to the people. There is a disadvantage in a budget being introduced by one Minister and the Finance Bill to enact that budget being introduced by another Minister. This, in my view is a practice that should not be followed or adhered to. Anybody who has any measure of intelligence knows that a Bill the size of this Finance Bill would not be put before a Cabinet meeting. While Deputy Bruton is a Member of the Cabinet and knows exactly what is happening, the teasing out of every section of this Finance Bill is the duty of the Minister for Finance. Therefore, the new Minister would have played no part in the teasing out and the production of this document. It is bad practice for a Government to change horses mid-stream and at a time when the most crucial piece of legislation of any parliamentary year is being implemented. For that reason he cannot accept responsibility for the ingredients of this document. He has to fill in, take up his responsibility as Minister for Finance, accept a budget and put into effect a Finance Bill in respect of which he had no input. I am not holding the present Minister responsible for the ingredients of this Bill because he is not responsible for it.

The referendum on divorce will take the Government into the summer recess and then we will not see them again officially in this House until October. For that reason I cannot see them bringing in any positive measures to rush an election. The present Minister for Finance will be the Minister who will be preparing for us a budget for next February, a budget that will have all the goodies and all the attractions in what has to be the year of an election that is, if there is not an election before then. For that reason I will have something to say to the Minister when he comes back to us next year with his own budget and his own Finance Bill. This is a Finance Bill with no job creation or no development programme in a country which is crying out for employment on a permanent basis. The Government have introduced many artificial schemes to try to reduce the number on the unemployment register but these are only little fiscal, artificial and very temporary programmes that are terminating as fast as they are being initiated. There is no permanent employment whatever in the policies being pursued. Our major problem is employment. I would prefer to see ten permanent jobs created than a thousand temporary jobs from week to week where people have no programmes, no targets or no security in their employment. Senator Howard referred to oil prices and blamed the ESB for not passing on the reduced prices. That is not the duty of the ESB. It is the duty of the Government to rule.

It is disgraceful to see so many people in the petrol trade trying to compete with their counterparts across the Border and going to the wall daily. Oil prices have dropped from £28 a barrel to £12 or £10 a barrel. I would challenge any Senator who might say that that reduction is being passed on to the consumer and to the motor trade who are in dire straits at the moment for a variety of reasons. It has not been passed on. Let nobody tell me that it has. It has been passed on in every other country in the EC. It should be passed on in an effort to take the motor trade out of the dire straits they are in. There would be much job creation if this was done.

We have been told during the past number of years that the oil crisis was the reason for all our disasters here. The price of oil is relative to our industrial production and various other forms of production throughout the State.

I will refer now to the construction industry. I do not wish to be parrot-like. Many people both here and in the Dáil have spoken on the various aspects of this Finance Bill. I will just emphasise a few points and I will move through them as fast as I can. There are a number of speakers who wish to contribute. I am aware that we have a full programme before us and I am aware of that. At the end of March we had 237,204 on the unemployment register. Of that figure, 48,000 were from the building industry. Those are people with skills who have no other outlet. Some of them emigrated to the UK, Europe and elsewhere to try to get alternative employment. We will hear from the Minister and from the Opposition speakers, both in the Dáil and in the Seanad, about the progress made in our housing programme and in our building industry. These are the facts issued from the trade. The unemployment rate in the building industry of 48,000 is an up to date figure. There has been a 10.9 per cent drop in the building industry during the past 12 months. If you wish to gauge how the building trade is faring, the best graphs to consult are the returns for cement sales. Our cement sales were 115,200 tonnes in 1983 but the figure dropped to 102,800 tonnes in 1985. That is the only accurate graph I can quote to indicate that building industry activity has dropped roughly by 10.9 per cent.

I know many people welcomed the new house grants but to avail of these grants is no easy task. There was some relaxation in the inspection regulation in respect of those who had applied before a certain date but these people are not sure yet as to what amount of grant they will receive. They are in dread of starting any major construction because of the colossal expense involved in renovating or extending their houses today. They want some assurance first. Rural people will not borrow. They are people who like to know what they are getting in grants before commencing any project of that nature. It will only be once in a lifetime that they will renovate their houses. They are asked to engage registered contractors but while in some cases the applicants themselves may be contractors they cannot carry out the work to their own houses under the new system.

While it is a welcome breakthrough to have any advancement in reconstruction and new house grants it is not quite so easy to avail of the grants.

I should like to refer briefly to what is well known now as the DIRT tax, and a very appropriate word that is because it is a dirty tax so far as many people are concerned. I come from an area similar to that of the Minister of State who is present. These are areas in which there were many break-ins, I refer to the Counties of Roscommon, Galway, Sligo, Mayo, Clare and the whole of the west coast. People were advised that if they had money in their houses, as most of them had — by way of money for day to day needs such as ordinary shopping or even to buy a suck calf, they should invest it in a bank, in the Post Office or some other secure place. After the Government had got the old pensioners, the disabled, the widowed, and everybody else to lodge their money in deposit accounts or wherever they decided to charge them 35 per cent interest on it.

Mr. Belton

Only on the profits.

Mr. M. O'Toole

That is not so bad but suppose one wants to get one's money back from the Revenue Commissioners — and remember those people have no access to clerical staff as most of them are living alone — they will have to go to an accountant, auditor, schoolmaster, Senator or county councillor, to have a letter written to the Revenue Commissioners to say, for example, I want to buy a few cattle or a few ewes at the next mart in Castlerea. It will take up to 12 months to get that money back.

Mr. Belton

Think of the great time the Senator will have looking after these people.

Mrs. Bulbulia

This is too folksy for words.

Mr. M. O'Toole

An amount of £17.50 per £50 is too much for these people to pay. They were lured into that situation by the Government Ministers. I recall the present Minister for Industry and Commerce sitting here telling me when Senator Durcan and I were making a case for these people and saying we were scared of what was happening in the west that arrests were inevitable but no arrests took place. I know the record.

Mr. Connaughton

Such attacks are no longer taking place.

Mr. M. O'Toole

The Government did lure people into lodging money in various agencies and institutions. I will wager a bet that the DIRT tax will not be in the next budget. The Minister is trying to introduce a Finance Bill that is not his. Mayo County Council pay approximately £12 million interest on loans of various kinds to run the county throughout the year. If at any given date we have £100,000 of a float on deposit we also have to pay 35 per cent tax on that deposit. The finance man in Mayo is given a free hand because it changes so often. He has a free hand to use the finances to the best advantage so as to accrue some interest. What happens? We are going to lose 35 per cent on everything we borrow, notwithstanding the fact that we are net payers of interest and are paying £12 million interest each year to finance and run the county.

Take the recent reduction of the local SDA loans from 12½ per cent to 9 per cent. What effect has that on Mayo County Council? This year £800,000 to £1 million will come off the redemption list. We have that on loan at 12½ per cent and are now re-lending it but we are losing 3 per cent as a result of the reduction. That is another adjustment we will have to contend with. This will cost the county approximately £50,000 this year and £100,000 next year.

I would like to refer to community councils and various other voluntary organisations. If these organisations have any money during the year for any length of time they are subject to the 35 per cent retention tax. I guarantee there will be no DIRT tax next year, so I am really wasting my time talking about it. The voluntary organisations will be back to normal because at present they are barely existing. These organisations are necessary because they make a valuable contribution to our sporting life. They have been running on a shoestring up to now and have been finding it hard to survive.

I will refer now to agriculture and I am delighted Mr. Connaughton is here because this is in his field of activity.

Mr. Belton

Have you The Way Forward there?

Mr. M. O'Toole

No. We will have it after the next election.

An Leas-Chathaoirleach

That will be good when it comes.

Mr. M. O'Toole

I will refer to the TB eradication scheme. Building on Reality states:

The Government have also decided to make a fresh onslaught on bovine disease, particularly tuberculosis. Substantially increased funds will be made available for disease eradication, including an additional provision for stock replacement, subject to a number of radical changes in the existing practices. These changes include:

—farmer nomination to be replaced by direct Department of Agricultural nominations of veterinary surgeons to carry out all testing and blood sampling (other than thirty days testing) under the bovine TB and brucellosis eradication programmes. It lists a number of changes in practices. The Book of Revised Estimates for the Public Service shows that bovine TB eradication is down by 15 per cent from last year. It also shows that brucellosis is down 15 per cent from last year.

Mr. Connaughton

It was well up the year before.

Mr. M. O'Toole

Payments of bovine tuberculosis and brucellosis eradication scheme depopulation fund grant-in-aid was down 29 per cent. I mentioned this in another debate and I have the figures. I am quoting from an investigation survey I did with the IVA and the Department of Agriculture in connection with bovine TB eradication this year. There are going to be two pilot schemes in Ireland. The amount of money that will be spent on bovine TB eradication and brucellosis in this field will be £5 million. One scheme will be in West Cork and one in the midlands in Longford and Westmeath. What about County Mayo and the Minister's county and the other counties? There will be no testing whatever. There will be staff in Mayo but there will be no testing. I challenge that they have reneged on what they said in Building on Reality in that they were going to eradicate as fast and as quickly as possible but they are not doing it. That is what the Government should be doing. The figures are there in Building on Reality and Revised Estimates for the Public Service. It is a shame. We are trying to have, as far as possible, a disease-free animal herd in Ireland so that we have the best beef and lamb for exportation from a non-polluted environment. Non-polluted is the operative word because of the fall out from Sellafield and the Russian fallout. We have the best beef and lamb for export but we still do not have a disease free herd in Ireland. The Government have fallen down in providing the necessary money to accelerate that scheme to clear it as quickly as possible.

In relation to horticulture, we are importing thousands of tonnes of vegetables each year. That did not change since last year. It is the same as it was and this was in a year in which we should have been giving capital injections for the development of horticulture in Ireland rather than importing such goods. I was at a seminar in Westport recently at which the Minister was present. A Dublin woman said she loved to have fish when she came to the west, that she was afraid to eat the fish she got in Dublin because it could be polluted from the Irish Sea. I told her she could be eating the same fish in Westport. She thought the fish in Westport was caught in Achill, Rossaveal, Killybegs or wherever. That is not the case because it is sent to the Dublin market.

The same applies to our vegetables.

Mr. Belton

It shows how people can be fooled.

Mr. M. O'Toole

It does, I will not go into agriculture any further. I will refer to the environment. I am disappointed that the local improvement scheme grants have not been increased. They have been pegged at the same level as last year. We have processed almost £6 million worth of those schemes in Mayo. There are 1,950 schemes on our books. Some of them have been on the books for ten to 12 years. I am sure the Minister has the same plight in County Galway. I am annoyed that the grant has not been increased this year. There was a need for the increase. I am sure that next year, which is an election year, the Minister of State will ensure that there will be an increase in this regard.

Our county roads are in a deplorable condition. Our county roads are irreparable in some cases and will have to be reconstructed with new reconstruction grants.

Mr. Belton

The Senator has the airport now.

Mr. M. O'Toole

Next week we will be opening that and the Senator will be welcome to attend. I will ensure he will get an invitation if that is necessary. Our county roads are in a deplorable condition. While the former Minister for Finance was a mathematician, bringing two figures together like that, meshing them together, the roads were breaking up all over the country. We will have to put a lot of capital into this work when we get back to power. Our fleet of school buses will have to be replaced. Most of our railway carriages will have to be replaced. The old buses in Dublin will have to be replaced as soon as we get back into Government. All these things were let go. Our hospitals are being closed and our bed numbers have been reduced. We will have to get all that back on stream.

This Finance Bill does nothing to take corrective measures in that regard. I believe that is what should be done in a Finance Bill.

I want to refer briefly to our fisheries. There is some measure of patriotism in this national resource. I am almost certain that foreign entrepreneurs are arriving on our door step, people who have raped the fisheries of the continent and elsewhere. I do not want to refer to any particular country. The Government and the Minister should ensure that no licences are issued without screening those people who apply for licences along the whole coast.

I believe they are with us now. We have non-polluted waters. We have some of the best fishing grounds for the development of mariculture and aquaculture. I know there are development companies. I am sure the Minister might have heard something about this. I ask him to ensure that no licences are issued until we are certain that we recoup more than 10 per cent from the profits that will be accrued by these major fishery combines in our midst and will be over the next few months.

I have been a member of the RDO aquaculture committee and we have been screening this. The exploration and the salmon research at Carna has been reduced considerably. The people there have done wonderful work in advance technology as regards aquaculture and mariculture. We should ensure that the work carried out over the years by the Government will not be lost to our fishermen and our farmers who live along the coast and the inlets, who are fishing for mussels, oysters and shellfish throughout the whole of the country. They will not be able to compete against the foreign entrepreneurs that I hear are arriving on our coasts. I want to warn the Minister here to be alert to this development. If something is not done they may take hold. They have bought up some property for the development of this mariculture around the west coast.

I am disappointed with this Finance Bill. We have been criticised for borrowing. The Government in the past three years have borrowed more than any Government during my time or indeed before that and did the least with the money they borrowed. They have also the record of a Government with the highest number of unemployed of any Government ever in this country.

At a conference yesterday in Westport as reported under the heading "Irish Local Government on Point of Collapse" in today's Irish Independent it was stated:

The system of local government in Ireland is on the point of collapse because of the Government's financing policy, a union conference heard last night. Mr. Peter Sands, president of the 15,000 strong Local Government and Public Services Union said that the erosion of fiscal autonomy of local authorities in recent years had left them with virtually no discretion in relation to matters of any significance. It had reached the stage where "the whole system is at the point of collapse". Mr. Sands said in his address to the union's annual conference.

That is a release from yesterday's conference about the behaviour of the Government in local government and public services. The whole tax system is outdated. It might be well to say there is a drop in inflation. What good is this to my sons and daughters if they have no jobs? What does it mean if I cannot sell my stock or feed my stock, as has been the case in the west of Ireland due to the inclement weather?

Mr. Belton

The Senator is blaming the Government for the weather.

Mr. M. O'Toole

I am not blaming the Government for the weather but for the way they are tackling the problem when there is an emergency. The people will be looking at the next election at how the Government have performed to date. I have no doubt that we have a very intellectual electorate and that they will, at the next election, tease out and look at the performance of the Government and then they will through the ballot box tell the Government whether they are in agreement with their performance. It is fine to talk about inflation and so on. They do not mean anything to the man in the street. If you ask the man in the street if he is worried about inflation being down he will not care about it. He wants to know what does it take to run his household, to pay his ESB and telephone bills, the day-to-day running costs of his family unit. He is worried about whether his son or daughter is in secure employment and whether he can run his family unit better now than when the Coalition Government took over three years ago. I believe the man in the street will give the Government the answer they are entitled to.

Many Coalition Governments before this Government have failed. On this occasion, they will have run for four and a half years. Let them not go to the country and say they were thrown out of office because of this and that. They will serve their full term this time. It behoves them to ensure that the country is on a right footing when they seek election. The polls will tell whether or not they did a good job while in office. The referendum and the Contraceptives Bill can be used to get over any small crisis. Any decoy can be used to get over this crisis. Nevertheless, the day of reckoning will come. I have no doubt the result will be an overwhelming majority for Fianna Fáil at the next election because of the lack of performance of the Coalition Government in office.

Mr. Harte

I am provoked to make a comical remark about the fish in Dublin not being as clean as the fish in Mayo. It reminds me of somebody who once asked a question: what do you call a Dublin Bay herring caught off the coast of Mayo? The answer was "a good swimmer".

With regard to the Bill, from the standpoint of the majority of the people in Government favouring private enterprise, it is to be welcomed. This is not necessarily my view. There are, inevitably, in this Bill measures which will be welcome to industry. There are changes in the tax bands, there are gains on the roundabouts as distinct from losses on the swings and so on. There is a balance of change compared with previous Finance Bills. Those changes are tilted firmly towards creating a climate for investment in industry. The Government should be irritated that there seems to be a lack of recognition of this by larger businesses, I am not sure whether bodies such as the CII are irritated about the contents of the Bill.

It is very difficult, when one tries to make provision in the Finance Bill to encourage investment, fall in line with what the entrepreneurs want, what sort of incentives are needed, it is very difficult to rectify all the anomalies at once. It is not easy to close off any of the loopholes to create greater tax equity between companies. On balance, one must say that in all the circumstances the Finance Bill has tilted the balance towards encouragement of investment for the private sector. Looking at it from the Government's philosophy, they are playing their part.

I do not know a lot about the Stock Exchange. Through the Bill and the speeches prior to the Bill by the Minister for Finance, the Government are trying to demystify the Stock Exchange. It is mystifying to the ordinary punter. Many people do not understand what goes on in the Stock Exchange. They would not know that someone could walk in with £10,000, buy stock on the market and not put a halfpenny across the table and if that stock gains within 14 days before they have to meet the cheque, they are on to a killing because it is not easy to get at for tax. The Bill, goes some part of the way to demystify that situation. Eventually with more communication the whole purpose of the Stock Exchange will be better understood.

I would like to refer to the capital gains tax. There have been significant reductions in the rates of this tax. The 40 per cent rate is reduced to 35 per cent where the period of ownership of an asset is more than three years and to 30 per cent where it is more than six years. This is a step forward. This 30 per cent also applies for three years to shares dealt with on the smaller company market of the Stock Exchange to avoid any competitive distortions. The Minister is doing a favour there for private companies and also in applying this rate to trading in the shares of all venture capital, to research and development companies and so on. There are many things in the Bill on which the Government are to be complimented.

The whole question of the innovation of the relief from the full rates of income tax on dividends paid out of the income of companies qualifying for the 10 per cent rate of corporation tax, would not be radical from my point of view but from the point of view of the Government who run the system on the basis of the feeling of the majority of the people it is radical. It is available to small industrialists who are not ready at this point in time to export. I am worried whether it will bring us to the stage where the total dependence on grants and bank loans will gradually disappear. Frankly I do not think that we are at that point. It would be very nice if this particular aspect of the Bill discouraged this unhealthy dependence on grants and bank loans.

There are also improvements in the half of the dividends paid out of the 10 per cent companies up to a maximum of £14,000. This means that £7,000 can now be received by each individual shareholder tax free. This must also be considered as being encouraging for industrialists and entrepreneurs in general. It must also be encouraging for people who want to take a chance in investment in manufacturing companies. This is a good aspect of the Bill.

I do not know what the mechanics of share purchase by employees would turn out to be but at least there are provisions in the Bill for it. There will be opportunities for all sorts of schemes, the share of production plans, possibly direct profit sharing or some other such system. The Bill provides encouragement through share purchase by employees. This on its own will not be good enough. There must be good industrial relations alongside that. If industrial relations are left unattended, if people cannot get on to councils, talk about the overall problems and get fuller information through proper consultation and procedures then just giving a person the right to buy something into a company is only going some of the way. Nevertheless it is a development. There is a clause in it that the shares have to be held for more than five years or if not they are into the awkward problem of losing the income tax relief.

The Bill as distinct from the other Finance Bills since the Government came into power reflects the upward trend in the economy in the sense that it is much more stable now and the rate of inflation is so low. It is certainly not encouraging in the sense of job creation but we hope that some of the things that have been done here will lead in that direction. That must be welcomed.

I would like to talk about the provision for venture capital for research and development. This is very important. The extension of the life of the special business expansion tax incentive to 1991 is very encouraging but again, running alongside that measures must be introduced for investment in research and development at which we are not the best in the world.

I am particularly critical of the whole field of health. I am not so sure that we would come near a lot of other countries in that area. If there are any more cutbacks in the area we will suffer even more. Perhaps I may be unduly worried about the health area because I have not had an opportunity to examine the most recent proposals. It is good to see that there is a commitment here by the Government who really sponsor companies to some extent who are into research and development. The idea of increasing the ceiling to 49 per cent is a good idea as well. These are fairly good tax packages and, looking at it from the Government's point of view, it is quite in order for them to embark on a course of action that will get an appropriate return for the initiatives that people take.

I have one particular observation here which is a little contradictory to my contribution here the other day. The object here seems to be that the Minister would not like to see competition with one another. I do not know if that is possible in the type of society we live in. I believe he was trying to say that we should try to build initiatives into the Bill that will help people to compete. By now I believe everybody knows my views that when you go too far with competition you have to change the name of the war. I would like to reiterate that point. It is no longer competition but open warfare.

I compliment the Government for embarking on the incentives. They offer on opportunity for a new partnership between the employee and the firm. It cannot be on the basis of share investment but genuinely heading towards social partnership in the sense that they have got to know exactly what the company is all about, where it is going, what information is available that will actually advance the interests of the company and so on. Maybe that is the responsibility of another Minister. The Government cannot provide incentives with regard to profit sharing and tax reliefs to encourage employers to invest more in the hope that eventually job creation will be part of the scene and at the same time not give people the information they need. The fact that a person has a few bob in a company does not mean that he will always read the papers and watch events to see how things are going. There are many people over the years who invested money in companies and who did not know that it produced anything besides profits. Employees who became shareholders in companies can get into the same sort of situation in which they will be working in a company but they will not know how the profits are arrived at. That is not good for business. While share investment and the other incentives that have been given to employers with regard to investment must be welcome, care must be taken. We must understand that some other Minister has to take up the cudgels in regard to developing the industrial relations that are necessary to give this its maximum effect.

The income tax changes must also be welcomed. They make an extensive package. One could probably say that it is the best attempt in recent years to give this sort of package. It is the best we have seen in a good few years. Naturally, where rates are lowered, bands are widended, exemptions and allowances are increased and levies are abolished. This has to be encouraged. The Minister would be the first to agree that much remains to be done and that there is a tremendous scale to this exercise. It may not get the publicity it deserves but it is something that I certainly appreciate. There may be arguments later on with regard to the amount by which one will benefit. I have not worked out the figures but possibly there may be a few surprises in the coming months. For example, when one gets a wage packet one will learn if he has gained about £3 per week or 70p. The way things are framed sometimes makes them look more attractive than they actually are. Nevertheless, the principle and idea of extending the bands, etcetera, must be welcomed. Therefore, I give them that welcome.

We mentioned profit sharing and share investment. Broadening of the investor base is a good thing, particularly encouraging the small investor. This will widen the concept of share ownership. It will be an incentive to ordinary people. This is what we want.

Employment is an area of concern for me. I do not think the sale of investments on the Stock Exchange will have the type of momentum necessary to create jobs. It does not matter if the Stock Exchange is given a more aggressive role in making it easy for people to buy and sell shares. The ordinary citizen because of his lack of knowledge and the mystery of the Stock Exchange, will remain inhibited at the prospect of approaching a stockbroker, particularly when they hear of prominent people in society who have lost money through bad investments or through dishonesty.

The Bill does a great deal for business. That cannot be gainsaid: the Bill is business oriented. I will not say it is the most positively oriented measure in the history of the State because I could not prove that. What I can say and stand over is that in recent years, having regard to the way the economy has developed, a great deal has been done.

We have, however, a problem. Despite all that is in the Finance Bill and despite the welcome that we can give it, our generation of politicians and community leaders, not only here but in other countries, have to accept the judgement that we have not been successful in the creation of a just and progressive society, fit for all of our people to live in. It is fit for some. We have not brought about the transformation — and I do not mean by revolution, I mean by reform — that society needs to make sure there is a just and equitable system in operation. We have not got the social and economic system which must be achieved if we are talking about a proper human life for all men and women. This applies to all political groups. You cannot pick one political group and say that applies to them. The negative approaches to the social attitudes that have prevailed and have been encouraged, nakedly and selfishly, in our society and unprincipled behaviour by politicians who make all sorts of promises, must be deplored but in the final analysis, we politicians end up with massive popular support.

People really believe that we have redefined taxation which, in fact, we have not. We have dealt with it piecemeal, we have tried to do a little here and there. Generally speaking, what we are doing is making a passing reference to the question of redistribution. We have made it a kind of principle. The evidence of this does not come from Fianna Fáil; previous Fine Gael Governments would have been equally as guilty of some of the behaviour. For example, after the abolition of the wealth tax, the workers wanted to see the wealth tax reintroduced; they wanted everyone to pay their equitable share but as soon as one Government get in they abolish the wealth tax. It would be all right to abolish the wealth tax if the concept of redistribution was re-examined and if, as a result of that re-examination it was found not to be necessary to have a wealth tax as we knew it, that there were other ways of having a proper redistribution of wealth. The evidence, down through the years is of the way we have allowed the unemployment crisis to develop — and it is a crisis. It has become a structural problem in the Irish context. It is the kind of structural problem that has never been tackled by Irish Governments.

The tremendous number of jobless should not hide the fact that this country has never got the unemployment figure below 5 per cent. We have, over a substantial number of years, been witnessing a very large upward trend in unemployment. Apart from the social isolation that is there due to unemployment, the effect on the families, etcetera, it is also an indication that the technological age is not the kind of age in which we should be all working in harmony. The technological age is not creating jobs; it is actually doing away with jobs. There is some irony in the matter of the technological age doing away with jobs. If you are in the export business, as an employer who is going to bring in a rationalisation scheme, if you can put a good case to the Department of Industry and Commerce, you will get a grant. The inevitable result of that grant would be to do away with jobs. The people let go would have to get redundancy payments.

While the technological age is unavoidable we should not go overboard and think it is going to create jobs. My experience down through the years is that it has done away with jobs. This will continue unless we embark on some radical programme of hammering money into the building industry and the maintenance of roads, and try to advance by saying we have now brought a certain semblance of a development of that into the Finance Bill and as a follow-up we now know that there is much more to be done and so let us see how the private people have reacted to the incentives set out in the Bill. If that factor works then they should look at some work-intensive place rather than looking at a technological place and see what they can do to support such situations.

These voluntary schemes are very good but we are talking about creating fulltime jobs. I would be the last to argue about giving a person a job for 40 years; that day is gone when a person would start work in a company, come up through the ranks and stay in it for 40 years. Yet, there are many work-intensive areas. We have looked at the technological side of it and will continue to do so but we should look at the labour-intensive areas. Even the maintenance of major roads is not labour-intensive nowadays but many side roads, if capital was made available, for their maintenance would employ a lot of people. The building industry is labour-intensive and should be examined in that regard.

I welcome the Bill, from the standpoint of the philosophy of those responsible for it. They are to be complimented on that philosophy. There is much more to be done. It is up to the Minister for Finance and other Ministers to see where the incentives lie and opportunities exist. We should not, above all, lose sight of the fact that we now have the National Development Corporation. The corporation should get into the manufacturing area at the centre of the economy. The NDC should embark on a course of action that can not only encourage the semi-State bodies to become more efficient but also encourage private sector to take on new ventures. The technological age is here. The work-intensive areas are there. You cannot knock down buildings and rebuild them by technology except by system building — and we see the results of that in Ballymun and other cases. We must look to where labour intensive opportunities are without jeopardising the technological age or the advancements made through technology. We owe something to that side of industry also because if those people go back to work, former taxpayers who are unemployed, they become taxpayers again. The Government must look to labour-intensive areas, particularly the building industry.

Mr. T. Hussey

The debate on the Finance Bill is one of the most important in the Dáil and Seanad. It puts into effect the provisions of the budget and should be an exciting time both for the Members of the House and for the public whose expectations at budget time are often raised. Alas, the optimism that abounded in the pre-budget days has been shattered as the provisions of the present budget unfold. Nothing has been done to restore confidence or to get rid of the gloom and despair in every sector of the community.

The Finance Bill is an inadequate response from the Government to the very serious social problems of unemployment and emigration. At a time when thousands of our young people are emigrating because of lack of opportunity at home one would expect the Government to respond by introducing policies to tackle unemployment. The young people emigrating are well-educated and in many cases highly-skilled. They are a great loss to the country. Their education and training has cost the taxpayer dearly. Their skills are now being lost to us. One would have thought the Government would have learned its lesson over the past three years. They should realise that their negative and repressive policies have not worked. They must provide a new climate of enterprise and opportunity. The only change which we have is a change of Ministers. I hope that Minister Bruton will be more humane than his predecessor and more sensitive to the needs of the people.

The opportunities are there for the Government to do something. They have had an unexpected boost in the past nine months as a result of the drop in oil prices at their lowest level now since 1973. This must have resulted in saving the Exchequer millions of pounds. The Government should have some worthwhile schemes prepared to take advantage of this situation and absorb some young people into meaningful employment.

The promises made in 1983 to eliminate the budget deficit in four years have long since been abandoned. The budget deficit is now higher than when the Government came into office. The national debt has increased by 66 per cent in three years — so much for the Government's policies of fiscal rectitude.

This Bill, instead of reforming our tax system and reducing tax levels has complicated matters still further by introducing an inequitable new tax known as the DIRT tax and this is something that almost every speaker has referred to in this debate. The name is certainly right because this must be the dirtiest and meanest tax ever introduced by any Minister for Finance and, indeed, a Government that would tax the savings of old age pensioners and children's piggy banks is certainly a very uncaring Government. It is pointless for the Minister to say that old age pensioners can reclaim any tax deducted because many of those old age pensioners would not be capable of filling out tax forms. Even if they were, they would prefer to have nothing to do with the Revenue Commissioners. The Minister is going to take thousands or perhaps millions from the savings of those old age pensioners.

If we cast our minds back a year ago when old people were being brutally attacked in their own homes and their money being stolen the Minister for Social Welfare went on radio and television and encouraged those people to put their savings into the banks and now that they have done that the Government slap on a tax of 35 per cent on the interest earned on their savings. In effect, what the Minister is doing is imposing a tax on people who are not liable for tax in order to reduce the burden on those who pay tax. That is an inequitable system of tax. This is not the way to encourage people to save. Young people should be encouraged to save as they are in most other countries and given tax allowances for doing so. Our Government are doing the opposite and are adding to the black economy because millions of pounds are being taken out of banks and invested abroad. Any bank manager can verify this because they have witnessed the high rate of withdrawals in the wake of this retention tax. This is a terrible loss to the country at a time when investment is needed to prime the economy and help to create jobs.

Even sporting, recreational and community organisations are to be hit by this tax and will find their limited funds diminished by 35 per cent. The concession to legal charities is limited unfairly to those bodies or organisations whose activities are confined to legal, charitable purposes. We all know that legal, charitable pur-purposes are very limited and are strictly confined and relate only to trusts set up for the specific and exclusive advancement of education, for the relief of poverty or for the advancement or promotion of religion. Many of those organisations who do so much good work in their areas for the poor and so on will find themselves caught by this retention tax.

The other tax changes made in this Bill will increase rather than lessen the burden of the taxpayer. The abolition of the child tax allowance is going to hit the person on PAYE. The 1985 yield from income tax was £2,103 million. The estimated yield for this year is £2,356 million showing an increased income tax burden of £253 million or 12.03 per cent higher than it was last year. This is taking place at a time when the projected rate of inflation for this year is between 2½ and 3 per cent. In other words, we have an increase in the income tax take this year four times greater than the rate of inflation. To suggest that the provisions of the budget do anything other than increase the burdens of income tax on taxpayers in this year is nonsense.

The increase in the rate of VAT from 23 per cent to 25 per cent has increased the cost of living right across the board. Young and old, unemployed and sick are affected by this increase and they are certainly feeling the pinch at present. If we look at the area where the Government could have done something positive we see here that the situation is the same as last year. I am referring here briefly to the building industry. Last year the Government increased the rate of VAT in this respect from 5 per cent to 10 per cent. The effects of this savage increase on an industry that was finding itself in serious difficulty even before this imposition, is now easy to see. Private house starts have fallen by 25 per cent. Employment in the industry has fallen by 11 per cent compared with last year. Cement sales have fallen by an average of 15 per cent for the three months and in March alone by 32 per cent. Yet the Minister tells us that the indications in the building industry are encouraging.

Surely the Minister is ignoring the reality of the situation when he says the signs are encouraging. We all know that building firms, many of them long established, are going into liquidation every week of the year. Our best tradesmen are emigrating and their services are lost to this country. It is a pity the Minister could not have seen fit to reduce the rate of VAT to what it was originally. That would have given some encouragement to the hardpressed industry. It would have given some chance of survival to those people who are finding it almost impossible to keep their doors open and to hold on to the tradesmen that they have now. The Minister missed a golden opportunity here to boost the employment situation because the building industry is one area which could absorb many hundreds of those people who are unemployed at present because the building industry embraces not just the builders on the site but also the other services such as those provided by plumbers, electricians, builders suppliers and many others. They were waiting for the Minister to do something about this serious situation. Unfortunately that is not going to happen and the building industry is left in tatters.

Section 92 of the Bill provides for the continuation of the stamp duty exemption for transfer of agricultural land to young farmers who have completed an ACOT course. This is a very good idea and I must compliment the Minister for continuing this scheme. It encourages elderly farmers to transfer title of their farms to their sons. I understand that the extension is to be to next September but I hope the Minister will have another look at this scheme and that he will not confine it to September, that if he sees that it is necessary he will continue to extend it. The age limit is also reduced from 35 to 30. The course is extended from 100 to 150 hours. This again is a good idea because we all know there is a need for education in the farming sector and it is important that young farmers who are taking up this industry and who are intending to stay on the land would be educated the same as every other sector of the community. It is a good idea to extend the 100 hours to 150.

There is one anomaly I see in this scheme and perhaps the Minister will have a look at it. It is in the case of a married couple. I understand that if the wife's name is included on the title she has to pay stamp duty and that her husband who has completed the 100 hour course is exempt. I think this is wrong because in most cases farmers like to have the farm in the joint names of the husband and the wife and it is really cutting things very fine to impose stamp duty if the wife's name is included on the title. That is something the Minister could have a look at before this Bill goes through.

I am very disappointed with the whole area of agriculture because I can see here that the Estimate for the Department of Agriculture has been reduced every year for the past three years, this at a time when agriculture needs a boost. After all it is our main industry and we all realise that if the farmer is doing well there is a spin off and everybody else is doing well too. Unfortunately, that is not the situation at present. Because of the bad weather during 1985 the farmer has had a very difficult time and that difficulty has been extended right up to the present time because of the late spring and the serious conditions we are experiencing at present. This is the wrong time to be cutting back on the Estimate for the Department of Agriculture.

The main area in which I am interested is disease eradication. I am very disappointed to note that the money provided for the eradication of bovine TB is reduced by 15 per cent. The allocation for brucellosis is down by 15 per cent. For general control of disease nothing is being provided. I would not be too worried about the brucellosis situation because we know that brucellosis is now under control and the incidence of brucellosis in cattle has been reduced to an acceptable level. I am worried about the TB situation. It is very disappointing to note that in spite of all the commitments the Government have given, this Estimate is reduced by 15 per cent. The Government's document Building on Reality said in relation to agriculture

that the Government have also decided to make a fresh onslaught on bovine disease particularly tuberculosis and substantially increased funds will be made available for disease eradication including an additional provision for stock replacement subject to a number of radical changes in existing practices.

It is very unfortunate, after having given that commitment, that the Government should reduce the Estimate for bovine TB by 15 per cent. I hope the Minister will have another look at that very serious situation. The only reference that I see in the Minister's budget statement as regards agriculture is to the land tax. I think that is most regrettable, particularly, as I said, since agriculture is our main industry and we all know that the land tax which has been introduced by the Government is indeed not acceptable to a great many of the farming community. I think that the take from that tax will be very small for a long time.

Another area that I am worried about is the abolition of the Land Commission. We have seen the abolition of the Land Commission during the term of office of this Government and unfortunately no statutory land authority has replaced the Land Commission. We have the situation now where land can be bought up by all kinds of people who have money. The unfortunate small farmers who need land are not in a position to buy it and there is no land authority there to help them. The only help they can get from the Government is advice to go to their banks or to their lending institutions and try to borrow the money and buy the land if possible. In many cases this is not possible and I think it is a tragedy that before the Land Commission was abolished a statutory land authority was not set up to look after the needs of small farmers and where land became available helped them to purchase it.

We all know that with the exception of dairying all other agricultural enterprises are losing money and it has been borne out by the farming organisations and by everybody involved in agriculture. Even in dairying, with the restrictions and quotas imposed, there is very little scope for expansion. I believe that agriculture is in a crisis situation and I would like to see the Government with some plans to try to restore confidence in the agricultural sector. The bad weather in recent times, the late spring and the recent price package have not been very encouraging. We have seen cutbacks imposed on the dairying sector and the cereals and the threat of intervention for our beef being abolished after this autumn. Those are very serious threats hanging over the agricultural sector at present. I would like to see the Minister coming forward with some plan that would restore confidence in the agricultural sector.

There have also been savage cut backs in health expenditure. There have been hospital closures, ward closures, cutbacks in staff. I attended a meeting of the health boards in Blarney yesterday and the day before. The discussion there was frightening. If those threats of cuts are to be implemented then I can see a total dismantling of the health services, a total disruption of the services, and it is the unfortunate people out there who need those services who are going to be affected. I hope the Minister will see reason and that he will examine each situation on its merits and not make a bland announcement, as he did one day in the Dáil, and close eight or nine hospitals with one stroke of a pen. That is not the way to tackle this very serious problem.

Local authorities are starved of finance. There are not sufficient funds being allocated to put our roads into shape. As we travel around the country we can see the bad conditions of those roads. They are worse now that they were 20 years ago. I hope that money will be provided to local authorities at least to help them to repair minor roads which are in a serious situation. The main national primary roads are being looked after but the county roads are being neglected. I hope the Government will see fit to allocate some funds to local authorities for this purpose.

I am disappointed that more is not being done in the area of unemployment which is the biggest social evil we have at present. Unless jobs can be provided for our young people our greatest asset will be lost. Young people are emigrating in thousands. We have only to look at our own parishes to see the number of young boys and girls who have left in the past two or three years. Unless the Government come up with some imaginative scheme that will encourage those people to stay here and get meaningful employment at home, then it will be a sad day for our country. We are putting the clock back to the 1940s and 1950s when thousands of our young people emigrated.

Mrs. Bulbulia

I am very pleased to have an opportunity to welcome the 1986 Finance Bill. This Bill has generally been well received. It is clearly seen to improve the climate for enterprise which is so badly needed in our economy. Much has been said about the need for redistribution. What this Finance Bill attempts to do is to increase the national cake rather than to merely concentrate on a redistribution of what is a very small cake and end up leaving our people even more dissatisfied. I welcome the thrust of this Bill which is about enterprise and increasing resources.

The main features of this Bill and indeed the budget's taxation proposals to which this Bill gives practical effect are that it shifts the tax burden to allow substantial reductions in personal taxation. It is the first time that it has been found possible to do this in recent years. It reduces the burden of taxation on tourism and services, it increases the total support for children while making its distribution more equitable. It protects the living standards of those who have to rely on social welfare, sadly more and more. It rationalises and reduces the burden of current spending and it achieves a further state of progress in relation to our financial imbalance.

The Bill underlines the Government's commitment to easing the burden on the PAYE taxpayer. Income tax concessions amount to over £120 million allowing savings of 5 per cent on the average PAYE taxpayer. The income tax changes involve abolition of the 1 per cent income levy, an additional £100 under the PAYE allowance which is the first increase in five years, personal allowances and the 35 per cent band increased in line with inflation, the top rate of tax cut to 58 per cent and doubling the age allowance. All of these measures are to be welcomed.

The Bill confirms the budgetary announcement of significant measures designed to promote job creating investment. I listened with interest to some Opposition speakers who bemoaned the fact that this Finance Bill was short on measures to increase employment. I think the very fact that it provides incentives for enterprise must of necessity result in job creation. Sadly there is a mode of thinking which only accepts job creation in a tangible fashion as being a massive creation of jobs in the public sector. Anybody who thinks carefully about it will realise that it is just not possible to do that any longer. These jobs have to be paid for and they have to be paid for from taxation and the general public will not accept any further increase in the burden of taxation.

There is a special tax relief for research and development which I welcome wholeheartedly. There is a concession for shareholders in Irish manufacturing companies paying the 10 per cent corporation tax, a reduction in the rate of capital gains tax for longer term gains from 40 per cent to 35 per cent.

I specially welcome the reforms in the VAT system, which have the effect of boosting the labour-intensive service industry. The 23 per cent VAT is to be reduced shortly to 10 per cent on meals in canteens and restaurants. It also applies to hairdressing and similar personal services, to laundry, dry cleaning and cleaning services generally, to repairs to electrical and most other goods, to cinema admission and certain travelling fun fairs. All of this is to be welcomed and all of it will provide relief for the hard pressed taxpayer and for those who must spend mostly without any choice in these areas. They will feel the effect of that in their pockets as also will the people involved in these concerns where it is hoped and anticipated that there will be an increased volume of activity.

There are further indirect tax concessions given in this Finance Bill on car spares and tyres, on dental technician services and on touring coaches. The general thrust of the Bill is most supportive of tourism which is seen as an essential element in our economy. Unfortunately there have to be increases in tax on other goods, on petrol, tobacco, road tax and take-away food. This is necessary to meet the budget targets. The 23 per cent rate of VAT must be rounded up to 25 per cent, though this will not affect car prices. It is inevitable that the old reliables should be attacked and they are in every budget, in every Finance Bill, which is brought forward by successive administrations.

An interesting feature of this Finance Bill is the tax and social welfare amnesty which was announced in order to encourage a return from the black economy and in advance of a major crackdown with up to five year prison sentences. There will be a six month amnesty to allow tax evaders and abusers of social welfare to come clean. I hope this will result in an increased revenue yield. I welcome the first phase of the child benefit scheme which gives an extra 25 per cent nontaxable payment bringing the monthly children's allowance to £15.05 per child. I and many of my acquaintances who get children's allowances were pleased to see this increase, the interesting feature of which is that it will be of direct benefit to women.

The value of social welfare benefits has been increased by more than inflation in each of the past five years. I am pleased to note that the Government intend to maintain this momentum with a 5 per cent increase for the long term unemployed from next July. The increase for other beneficiaries will be 4 per cent in line with projected inflation for the following 12 months. There will also be an increase of one-third in family income supplement for those who are working on low incomes. All of this serves to underline that the interests of those who must depend on social welfare have been protected in the Finance Bill.

I suppose the most controversal element in the Bill is the deposit interest retention tax or DIRT as it has come to be known. The tax treatment of deposit interest for banks and building societies, post office saving banks and the ACC and the ICC is being brought into line. This will allow fair competition between the different institutions. It is important to recognise why it was found necessary to introduce this measure even though for some it has less pleasing side effects. It is also important to recognise that at the same time the tax yield from this source, £75 million in 1986 and about £100 million in 1987, is being increased in order to permit the income tax concessions which I have already described. It is underlining again that this Finance Bill is about balance. You cannot give income tax concessions and attempt to meet your commitments without raising revenue elsewhere. That is a simple and basic fact. It is sometimes convenient for people to overlook it. I have noted contributions from the Opposition on this and while they are long on analysis, and a correct analysis, and their descriptive powers are certainly worthy, nevertheless they are very short on solutions, strategies and plans. I feel they are short changing the Irish people when they adopt this attitude in debate on the Finance Bill. As tax will be paid directly by the financial institutions on behalf of their depositors there will be no requirement on the institutions to disclose to the Revenue Commissions details of interest paid. That is a factor that has been largely overlooked and that is why I mention it here this afternoon.

The objections to this DIRT tax have arisen on the grounds that it imposes a tax on charitable institutions and on persons whose total income is below the taxable threshold. I was pleased that following the budget it was decided to exclude from the scope of the tax deposit interest paid to charities which are exempt from tax. I welcome the decision which has led to a provision for refunds to individuals who are aged 65 years and over those who are permanently incapacitated to the extent that such individuals would not otherwise be liable to income tax. The mechanism is fairly straightforward. I really think critics of it do a disservice to those who are 65 years and over. They have been portrayed in much of the debate which I have heard here today as people who really cannot group the elements and rudiments of filling in a simple, straightforward form. I do not think that is particularly complimentary to people who are educated, literate and perfectly capable, in my view, of coping. If assistance is needed it will be forthcoming. All that is necessary is to present a completed application form to the Revenue Commissioners at the end of the tax year and the necessary refund will be forthcoming. There is nothing mystifying about that procedure. It is unfair and unjust and unworthy when I hear criticisms about the complexity of this simple manoeuvre being advanced by those who are politically opposed to the Government.'

Of course, it is important to remember that persons not wishing to involve themselves in this process will still have open to them other tax free savings media, such as saving certificates. It is undeniable that the DIRT is a difficult measure but it had to be contemplated and bravely dealt with if the Government's stated and over-riding fiscal priority of reducing income tax was to be achieved. While I have heard great gnashing of teeth and moaning and the wringing of hands about the necessity to reduce the burden of income tax, again I must call on the Opposition to advance measures and proposals by which they expect this to be done. It would be preferable if this vexatious problem could simply be achieved by expenditure cuts rather than new taxes, which are never popular. Despite the fact that there are expenditure cuts totalling a net £55 million in current Exchequer spending and £25 million in capital spending, it was still found necessary to introduce this deposit interest retention tax.

I want to give a warm welcome to the tax incentives for inner city developments which are incorporated in the Bill. Living in Waterford, I was particularly pleased when Waterford city was finally included in this special package. Initially it included all the borough councils apart from Waterford. Obviously there was an outcry when Waterford was excluded. Subsequently Galway was created a borough council and it too did not form part of this special tax incentive package. Following pressure which was applied with a certain intensity, it was found possible to include Waterford and Galway. I must express my appreciation that this is so. I look forward to seeing its impact on the development of Waterford.

The principal assumption behind the scheme is that tax incentive will act as a catalyst to urban renewal or development in the area designated by the Department of the Environment. It is apparent to anybody who takes a casual stroll in the centre of Waterford — and I am sure the same is true of Dublin, Limerick, Cork and Galway — that the city centre has been decaying for some considerable time, with only minimal development of housing, commercial or industrial projects. There are a number of prime sites made derelict through demolition and some of them have been like that for ten years or more. They are eyesores and crying out for development.

It is true to say of the country generally that urban development is at an all-time low, particularly so in the south east and in Waterford. The private sector development, especially in the industrial and commercial sectors is almost non-existent. There is an urgent need to assess the reasons for this lack of development and to provide the necessary stimulus for development which will encourage the private sector to become involved.

I also am somebody who believes very strongly in regional development. It is good to see this scheme extended beyond the greater Dublin metropolitan area. What is happening is that Dublin is expanding and developing and this is happening at the expense of the regions. In the long run it is happening at the expense of Dublin and Dubliners. It is an unhealthy trend. Any measure which surfaces in legislation and promotes regional development, is to be welcomed. Dublin with a dynamic urban economy attracts major private and institutional sector funds. Waterford — and the same is true of all the other regions — cannot hope to compete for these funds. Therefore, there is an urgent need to create an attractive investment, which is recognised in this Finance Bill. I welcome it and it is heartening to see the designated area in Waterford and indeed the other cities being part and parcel of the Finance Bill.

All these major tracts of derelict and decaying sites in our city centres are in primary locations. It is imperative that these should be developed. It is necessary for the people who live in these cities because it will enable them to have a feeling of pride in the preservation and enhancement of their cities. It is also something that is not lost on tourists to our towns and cities. Many of these tourists have expressed amazement that we should allow our cities look so much like the cities of post-war Europe with gaps, decay and dereliction everywhere, not that I am ever in favour of doing anything merely for its tourist potential. The first principle should always be that we should do this because we owe it to ourselves.

It goes without saying that the success of the scheme will largely depend on the responses of developers and investors in taking up the incentives now on offer. Indeed, there is a very limited time within which this can be done. Anybody interested should at this stage be going to the local authorities with proposals and plans. I certainly know that in the case of Waterford every effort will be made to expedite plans and proposals which will allow a speedy implementation of this quite splendid scheme.

One of the features of the Finance Bill which I particularly want to comment on is the special grant of £150,000 which was made to the women in business enterprise programme. This is a recognition of the potential entrepreneurs and the contribution they can make to the community in economic and, indeed, in social terms.

I had an opportunity in Waterford to experience the very positive effect of one of these day long seminars which emanated from the Office of the Minister of State for Women's Affairs. I should like to compliment the Minister of State on this initiative and, indeed, the Minister for Finance on recognising the success of the women in small business enterprise by giving this much needed injection of capital in the Finance Bill.

It is true to say that the idea of encouraging women entrepreneurs springs from a recognition of the fact that we need new employment initiatives. Details of increase in women owned businesses in other countries, particularly in the United States where they account for 22 per cent of all small businesses, is another reason why we are turning our attention to this facet of our economic life here.

There is a very low take-up by women of existing State schemes to encourage entrepreneurs. There is also a realisation that the creative energies of women are badly needed in the economic mainstream of this country. It is true to say that self employment offers women a way out of dependency or unemployment. It is an attractive alternative to the limited and limiting job opportunities which are available elsewhere. All of these conferences have been attended by large numbers of women. The follow through and the interest shown by women has been most heartening. Indeed, the whole campaign is one of the highlights and successes of the Ministry of State for Women's Affairs. It is given the kind of recognition it deserves by this cash injection in the Finance Bill.

At this point on Second Stage, these were really the main references that I wish to make on the Bill. I look forward to participating in greater detail on Committee Stage where we will have an opportunity to tease out some of the various measures that have been put forward in the legislation. I will reserve further comment until Committee Stage.

Mr. Fallon

We would all agree that the two most serious problems in our country today are crippling taxation and unemployment. In essence, in this Bill there is nothing for the PAYE worker. It makes no attempt to reduce the ludicrous level of taxation. There is a token gesture to increase the tax bands and provide some form of amelioration. However, this will not be enough to counteract the level of inflation even though it has been reduced in line with the other economies with which we trade. For industry, the reality for them is that interest rates on borrowing is at an extremely high rate. This, in itself, will not help in the creation of any jobs.

It is extremely difficult, if not impossible, to see an improvement in the employment environment with the sort of tax rates we have. The tax system, in my opinion, is stultifying enterprise and initiative. There is no incentive to invest or to take a risk because any profits generated are taxed at a confiscatory rate. Indeed, it is quite difficult nowadays to generate profits in the kind of environment in which we live. We will never solve our economic and social problems — we will certainly not solve our unemployment problems — until we can reduce drastically the massive tax burden.

In the past three years the number of unemployed has escalated from 170,000 in 1982 to the present level of 240,000. If one includes the 30,000 people who are young, educated and talented and who have emigrated and if one includes the number of people who are on short term training programmes or those who are in third level education and who should and would prefer to be in employment, that figure is much higher indeed. If one considers the barometer for all of the economy, which I think we all would accept the construction industry as being, it is at an all-time low in terms of morale, investment and unemployment. It is now being suggested and agreed by people in authority that even the recent home improvement grant, has not helped in this area at all.

The previous speaker, Senator Bulbulia, and other Senators said that probably the biggest bone of contention within the Bill is the tax known as DIRT. Obviously, all of us would welcome the Minister's concessions with regard to charitable organisations, incapacitated people and individuals who are aged 65 and over. I should like to think as charitable bodies that they should include sporting and indeed other cultural organisations. Most of all, those not liable to tax should be able to claim a refund. In the Minister's address to this House, he made the point — and specifically dealt with it in his speech — that refunds for all non-liable persons cannot be considered because this would be far too costly.

I, certainly, regard this statement as amazing in many ways. As we know, the hope for next year is that £100 million will be taken from this tax. It is agreed that 60 per cent of the people would be in that category referred to —"refunds for all non-liable persons cannot be considered". Therefore, here it is a question of massive injustice. He admits that to correct it would be far too costly but he is ignoring the massive injustice to these unfortunate people who find themselves in this situation.

The tax, as originally announced, was to apply to deposit interest of all depositors. The Minister reckons that by excluding incapacitated persons and charitable bodies and people over 65 the best possible balance has been achieved. I cannot but stress — and I would like to underline — what an incredible new imposition this tax is. As I have said, the estimated yield for the tax for 1987 is £100 million. If all the people who were not liable for tax were excluded from it, the yield would be £60 million. As I have said 60 per cent of this tax is being collected from people who would not otherwise be liable for income tax because their incomes are too low. I want to repeat, if this is not injustice with a capital "I", then I cannot imagine what is.

It is a cruel and vicious tax and the Government have indicated a total lack of concern for unfortunate people affected. It has been described in the Bill as a tax on deposit takers and, therefore, financial institutions. The truth is that it is nothing of the kind. The banks are not losing. They do not mind. They are not paying the tax. The tax is being paid by depositors and not by financial institutions. Nobody worries too much about large financial institutions. The popular impression is that we are endeavouring to get money from these large institutions and that is not the case. I want to repeat. It is the individual, the person who has a few pounds on deposit who is paying this tax and this should be highlighted.

In the context of financial institutions, it is worth drawing attention to another financial institution in which taxes are imposed for I presume the same kind of reasons, that it would be the ideology of one of the partners in Government that this should be the case, that is the tax on life assurance companies. It is described in the Bill in those terms. I would suggest that there is a great deal of untruth in that description because a tax will not operate as a tax on life assurance companies. It will operate as a tax on ordinary people who take out ordinary life assurance policies, who pay their premiums every year whether it is a bankers' order or whether it is a staff scheme or whatever.

Originally, the intention here was that a 15 per cent levy should be charged on the gross premium and the gross income and the funds of the various life assurance companies during 1986. As a result of that proposal, we all know that very strong representations were made to the Department of Finance by the insurance industry and my information is that there was an admission of a very serious error of judgment because the tax, as we now know, was reduced from 15 per cent to 9 per cent. It would appear as if a promise was extracted that this taxation would operate for one year only and that a new form of taxation would be introduced at a later stage. This now forms section 93 of the Act.

It is interesting to refer to the Minister's statement. He since says that the rate of duty is being reduced from 15 to 9 per cent. Industrial branch business and business relating to credit unions are being exempted in addition to pension and farm branch business and the final 10 per cent of the duty will not fall to be paid until mid-1987. As already mentioned, this charge will not apply for future years; instead changes in the corporation tax rules applying to life assurance companies are incorporated in this Bill. They will provide no additional tax yield of consequence in the short term but they hold out the prospects of a reasonable yield in the longer term. So I think the Minister is clearly saying that we intend to get as much as we can in the future. It is not clear how much but it seems to me that it would be his intention to get in as much money as he can from the life assurance companies because he obviously feels that the life assurance companies have been in some way not paying their fair share of taxation. It is not fair to indicate that particular statement and not give further clarification on it.

When we recall on this situation we find that the Minister for Finance of 1983 said that in regard to this particular area he would make changes but, when the 1984 Bill came, the changes did not happen although discussions took place and it was made clear by the Department at the time that changes would be made, would not be retrospective and would not apply to new business written after the change. As we know, nothing has happened in 1985 and then suddenly in 1986 the changes were made principally to take account of the guaranteed income bonds and the guaranteed growth bonds that are provided by some of the life assurance companies.

What is now happening is that the changes apply to all of the bonds of life assurance companies, excluding the areas I have mentioned, the industrial branch and, of course, that would be very small, and the foreign business and the credit union business. It is reasonable now to say that these proposals are drafted as a tax not just on small savers and lump sum savers but on all people who invest with life assurance companies.

In some cases it has been stated that the solvency of companies would be in question as a result of this retrospection. Obviously, this is a concern for the insurance industry here following so soon on the collapse of the PMPA insurance and the ICI. Companies which are not immediately threatened by insolvency will have only one way to meet a retrospective liability without reneging on a promised benefit, and that is to draw on their working capital. As we all know, as in any other business, the use of working capital to pay taxes can place severe and total restrictions on the ability to trade for the future. It has been purported as being a form of tax on large institutions which will have no effect on ordinary people but it will have a very great effect on ordinary policy holders of the various life assurance companies. In so far as the insurance aspect is concerned it can, I believe for the future have very serious effects on the financial standing of the country worldwide. The proposal to raise a substantial amount of tax revenue on a retrospective basis in the life assurance industry must take account of the industry's ability to pay without creating insolvency or causing broken promises to policy holders. For the future that situation must also apply.

The Finance Bill, as we know, gives statutory approval to the budget statement and in particular to make further provision in connection with finance. Under the budget statement there are a number of special expenditure provisions which I welcome. One is a grant of £250,000 to the Olympic Council of Ireland towards the preparation of our athletes for the 1988 Olympic Games. That is something we would all agree with. We have to keep equal to the other nations of the world if we are to achieve success. Similarly in a sporting vein I agree with the allocation of £100,000 to enable scholarships to be awarded to outstanding athletes to enable them to undertake training and competition at the highest level. It would seem to me that the provision of £100,000 to assist voluntary organisations involved in cross-Border co-operation is also to be welcomed and should help to further promote the important, unique role of promoting dialogue between the dividend people of the North and between North and South.

Under the heading of special expenditure provisions, the Racing Board have been granted £250,000 to improve the general standard of racing here and to encourage owners and breeders to keep more horses in training and thereby maximise employment in the industry. In particular it can said that valuable horses running in National Hunt racing, run for a very small prize money, and having regard to the cost of training, it is right and proper that there should be adequate prize money and, therefore, this will obviously be a help. It is something I would welcome.

Another aspect under the heading in the budget of special expenditure provisions is one for £50,000 to Bord na gCon to increase the prize money available to them for greyhound racing. The paragraph says it is expected that the increased prize fund will enable the board to mount a better racing programme so as to attract greater attendances and, in turn, to undertake the upgrading of those tracks that need improvement. I would suggest that £50,000 will not create records for Bord na gCon. Nonetheless, it must be seen as a gesture of goodwill towards the industry on the part of the Government, and I welcome it.

There are many people who enjoy ownership of greyhounds and enjoy a night at the track. People in the greyhound industry fall into a number of categories.

First there is the ordinary person who likes to keep a greyhound. For him it is an interest or a hobby and some of the time it can be quite a lucrative one and can pay off. I am talking of somebody who is lucky enough to have a very good brood bitch. It could prove to be a little goldmine. Then there are trainers with large kennels, with full time staff, and more often there are part time trainers who are in employment of their own and who keep a kennel of eight, ten or 12 dogs. Then there are the punters, large and small, punting on the tote or with the bookies. Then there are the bookies themselves. The Irish Coursing Club have responsibility for coursing and finally Bord na gCon have responsibility for the tracks and for the industry as a whole. All of them have a vested interest in the industry. Every group should be working for a more viable and a more efficient industry.

The ambition of every dog owner is to own a Derby winner. More often than not winning a sweepstake or winning a graded race is the best most of us achieve. Many people might get more enjoyment out of that. Bringing a dog from pup stage to running in races is quite an expensive proposition. Stud dog fees today are very high, some in excess of £600. Pups out of proven brood bitches are very costly indeed. The important thing if one has well bred pups or pups generally, is to feed and exercise them well so that in their preparation for racing in the growing up stage they are well cared for and the money spent on them at the initial stage will not be lost money. The majority of owners, whether they be owners of graders or open class dogs, will sell and are anxious to sell and that is understandable in any industry.

Here I believe the industry has fallen down somewhat. Of late, the Minister for Agriculture, Deputy Deasy, has been advocating the obvious merits of the American market. My great friend, the late Ber Cowen, who had responsibility for Bord na gCon previously, was also advocating the obvious merits of the American market. The Minister has suggested that we should breed our greyhounds for the American market, that is, rather than breeding sprinters or dogs of middle distance running, as we call it in this country, we should be breeding marathon or long distance dogs. This year we note that the Derby is being run over 550 yards rather than 525 yards as in other years. It is true that we have over the years been thinking mostly of the 525 yard dog and breeding for that particular race.

Many good greyhounds have won Derbys who are just about getting the 525 yard distance. Last year's winner, Tubbercurry Lad, was a classic example. He was running very well but was fading coming home, which indicated that he was not a stayer or that he was very much a 525 yard dog. I would agree with the Minister that, if we are serious about our industry, we must look at the American market. The question I would ask is, what chance would an owner have of selling his dog at any of the tracks in this country, say which I frequent, Longford, Galway and Mullingar? Who would see his dog running who might buy him for the American market? An owner cannot send his dog to America to be raced and shown to a potential buyer as often happens with the English market. It would cost £1,000 or more to send a dog to America. Bord na gCon have failed in the area of marketing during the past decade or so. What is the role of the Bord na gCon sales force or officially appointed buying agents of the board? How many of those people have American, Spanish or British markets of their own? How many attend the tracks of the country looking at dogs for either American, Spanish or British markets?

It is time for the board to review this vital area of their activities which would benefit dog owners and the nation. All new avenues in the area of selling Irish dogs must be explored. Bord na gCon's official buying agent programme must be scrapped or be totally rejuvenated. Why can the board not organise their own kennel in Boston or in some other States in America? Why not invest in a kennel of 180 to 200-strong Irish greyhounds suitable for selling on the American market? If Irish greyhounds are as saleable as we believe, then this must be a success. It is important that the Americans see our greyhounds running. If they see them running on their tracks they will purchase them. I cannot ignore the fact that the prize money is quite generous. If private individuals here can do it with success, surely our own national greyhound industry agency, Bord na gCon, can do it with success. At the same time we must watch developments in England.

Recent Acts of Parliament have helped the greyhound industry in England. Tracks can now have more than eight races on its card. Most of the tracks can have unlimited days or nights racing. Other restrictions have been lifted. The net result is that there is now a greater public interest in greyhounds. There are larger attendances and increased betting turnover. New tracks will almost certainly open up again in the future. Stamford Bridge, the home of Chelsea, which closed approximately 15 years ago, is open again. Football grounds in England are very suitable for conversion to tracks on the outside or indeed in some cases on the inside of the football pitches. These football clubs see this as giving them extra revenue just as the Americans see greyhound racing as making extra revenue for a particular State. In regard to the greyhound industry I should like to make some further points.

Mention was made recently by the Minister for Agriculture that stud fees might be exempt from tax as in the case of horse breeding. This would have a marginal effect and would be welcome. More important however would be the exclusion of greyhound food from VAT. Horse foods are exempt from VAT. The Minister would do the greyhound industry a great service if VAT was deleted from greyhound food. The greyhound industry is, after all, the poor relation and owners would welcome this.

When will we see regular Sunday race meetings? I have attended a number of horse race meetings on Sundays. A large crowd attend these meetings. Over the years the ICC have switched their dates from mid-week to weekends, including Sundays. During the summer months greyhound racing on Sundays would be very popular indeed.

We must face the fact that fewer and fewer people are keeping greyhounds. This is a regrettable situation and one which we must endeavour to improve. Greyhounds are not being kept because they are far too expensive to keep. Prize money is far too low. Praise is due to the various supporters clubs throughout the country who run raffles and other events to increase the prize money for the races.

Bord na gCon cannot continue to treat the smaller tracks in the same way as they have in the past few years. I realise that Shelbourne park is very important to the industry, but I have to suggest the small country tracks are the backbone of the industry and cannot be ignored.

Greyhounds and the greyhound industry are a way of life for many people. We have a duty to keep this industry vibrant and alive. My comments on the greyhound industry, arising from the Budget Statement and the Finance Bill, are not intended to offend in any way any person or any group. My comments are intended to be constructive and helpful to an industry which has given many hours of enjoyment to myself and to thousands of other people.

We could go on with the budget and the Finance Bill for a long time but I realise there are other Senators who wish to contribute. We could talk about many aspects of our way of life, for instance, the health seminar we attended in Blarney, the cutbacks and perilous state of the health boards and services generally — all these matters could be debated at length. Social welfare is a very important area where billions of pounds are spent and is an area we could also debate for a long time. Regrettably 37 per cent of our people are in receipt of some form of social welfare benefit or assistance. This review of the economy could go on for a long time and we could give many observations on it. However, having read the Budget Statement and the Finance Bill, I do not think they are an adequate response to the problems of the people of today as I and most people would wish. But I hope the Bill will in some way help to revive the sagging fortunes of many of our people.

Mr. McGonagle

On behalf of the Labour Party I welcome the Bill because we believe that the guts of it, if properly read, are sufficiently progressive even if it does not go as far as we would like it to go. It is sufficiently progressive for us to say that there are genuine efforts in the Bill and especially in the Minister's speech yesterday. I commend and welcome the Bill and make no apology for doing that.

The Minister touched on many matters that probably would be better left to the detail of Committee Stage. In any case I will do my best to give a broad rough appreciation from our side of what we think is in the Bill, what we consider might have been in the Bill, what we think the Bill is aimed at in the sense that we are operating collectively. Any country is a collective and that is not a word to be suspicious of. The money is collected from the people and dispensed to the best of one's ability in the places where it is believed it will do the most good.

I agree with Senator Fallon who said that the two biggest problems are taxation and unemployment. I have been an active trade unionist all my life, President of Congress and as such I am one of the people responsible for maintaining standards of benefits and services to the Irish people, North and South. We do not apologise for that. We insist on it. If we read the European Social Charter we find that when its authors talked about human rights 25 years ago they talked about maintaining and increasing social benefits, not only maintaining them. We will always insist that the underprivileged, the sick, the mentally disabled, the physically disabled, the children and large families will be looked after. We know that the taxpayer has to pay for all this. The taxpayer is paying a lot of money but the well-heeled taxpayer has continuity of employment and long holidays with pay. I would be prepared to arrange a swop, to have an unemployed man take the job of any taxpayer because the unemployed tell me that they are prepared to pay the high tax if they had the kind of jobs that those paying high tax have. All these things are relative.

When the Minister spoke concerning growth and about increasing our standard of living, I hope he meant the people who are at the bottom line. They must get more out of the common pool than the guys at the top. We believe that is only fair and just.

The right to maintain and increase social benefits is actually written into the European Social Charter. There is something else written into the European Social Charter — and this bears heavily on the second point made by Senator Fallon — it is the question of the problem of unemployment. I want to say clearly and unambigously that this Bill and its various measures are aimed directly at producing situations where there would be investment opportunities for small Irish businesses. That must be recognised as a good move. It is an excellent idea.

Taking VAT off the hotels and meals is good also. Urban renewal is good. That is why the Bill is progressive. It reads like a Bill that might have been brought in by a socialist government. That is the limit of the praise I can give to the architects of the Bill. I know it is a Coalition Government. I am giving that amount of praise to the Bill. It is progressive, it is not perfect, but what legislation is perfect? It is an ongoing continuous process that we look at all the time and in respect of which we must be flexible in our attitudes, making the necessary changes from time to time.

We have to pay and we trust that some day the growth objectives aimed at in the Bill will result in more people paying tax. That would reduce the unemployment benefit and increase the fund. Gradually it would bring the tax level down but it depends on growth and on job creation. We all know now the errors of depending too much on multinationals. When a branch of a huge multinational comes to Ireland or any country and when the branch has to be lopped off they do not ask the workers' permission or the Government's permission and having enjoyed all the attractiveness of the financial aids, the grants, the money that they take when they are here they bail out without giving notice sometimes. We are back to the position of sinn féin, if you like, do it ourselves. Why do we not do it? That is the idea behind the small business and the small companies ideas.

I am a very simple-minded man. I look around this country, at its roads, its hospitals, its schools, its houses — all this has a fancy name called "infrastructure". One is supposed to be an economist if one can use that word. When I look at all these things that require improvement, even the land requires improvement, and then I look at the labour force who are not working I wonder what is wrong, what is happening here? These are all the areas which need to be tackled. What is wrong? Are we wrong in terms of money, price, know how, technical knowledge, education, retraining or what? I do not think this can be tackled piecemeal. It requires some further thought and planning to get to grips with this problem.

I will tell you a story about starvation which has a bearing on a similar problem that exists in the world today. When I was in San Francisco during part of a two month tour as a guest of the American Government, I met the head of the Training establishment in California. It was in 1962 when nobody either here or across the water was talking very much about training in Ireland. We were trying to bring into this country the concept of training and retraining. We discussed various matters. We talked about world famine and the possibility of technical knowledge, aid and so on. He confessed that if all the arable land which was not being cultivated in America were to be cultivated it could result in feeding the starving world. I asked him to explain what he thought was the reason we were not able to do something about this. He said that it was the price and the profit motive factor. He also agreed that it was unjust of people to put profit before human needs. Then the starvation problem arose but we were talking about the human problems of poverty and starvation in 1962. I made the point in New York while addressing the trade union movement there that in fact — I know I am getting off the Finance Bill a bit but it is worth telling the story — that price and money is in the middle of this and that is what we are dealing with. We agreed that technical aid and education was the answer, not money.

This must have some bearing inside the Finance Bill as well. Tax remission, almost exemption, for money invested in research and development is the third or fourth progressive step I see in this Bill. Without research and development training and retraining and higher education we will lag behind and our people will pay the price. That is why the Labour Party and I are backing this Bill. Otherwise we would be seeking amendments just as we are doing in the case of the re-organisation of CIE Bill. We will be insisting on those amendments. We are backing this Bill. There is nothing wrong with it.

The problem seems to be in the middle somewhere about money. In a parliamentary democracy there is little a government can do by way of direction. No democratic government can direct people to invest money. No democratic government can direct a trade union to accept a cut in wages. Therefore the power and influence of the democratic government, elected by mandate of the people, can only use what is at their disposal, they are the financial and fiscal levers. They are the only weapons democratic governments can use and that is what a Finance Bill is about. It is the very centre of gravity. It is the nub of the whole working of the economy and it has to be seen in that light. Mistakes may be made here and there. Taxation may be too heavy but always remember what I said. I can get an unemployed man to swap jobs with a well-paid fellow who has continuity of employment and long holidays. The unemployed tell me they will pay the tax. That makes sense.

The Minister talked about increasing the standard of living, about growth and so on. I trust that the underprivileged will get their fair share and the largest possible share, especially if they are on the dole, or sick, or if they are physically incapacitated.

The Bill also contains some other remarkable formulae. If refers to workers owning shares in their companies. I was a director of the management development services in Northern Ireland and we used to hold weekend seminars in Newcastle with all the business people of the North. They asked me if I would speak about workers owning shares in industry. I did and I shot it down because I thought then that the best way to reward a worker in industry was to pay him the highest possible wages; always watching the cost of the article which left the plant at the end of the day. We tried to train management but we did not proceed to push the idea of worker shares. That was many years ago. Would the workers sell the shares? Would they be allowed sell them? Would they have to buy them or would they be a present? Would they be regarded as a bribe to bring industrial peace? All these arguments can be made against but a person can change his mind over a period of years and I am prepared to say that I will accept a trial run, an experiment with workers owning shares in their industry. If it brings industrial harmony that in itself is a good thing and it satisfies the people in the country as a whole. If that is how it is to happen, so be it.

The Minister referred also to worker participation which sits alongside workers shares. He is now in the field of industrial democracy and I trust it is understood by the Government that the worker director legislation we have, must be regarded and must be seen as a mini step, no more than that. If worker participation is to have a meaningful role in our industrial society it has got to be done at the factory floor level. That means that the board of the company have to be able to delegate authority intelligently down to the manager at the factory floor because he is closer to the workforce. We do not want situations where workers cannot propose ideas. Nobody knows better than a worker the quickest way to do a job. No one can tell him what is quickest. If he is not given room to advance his ideas through his counterpart's partner, who happens to be a manager, he feels frustrated so when the moment of conflict comes, say, from the board right down there is an unofficial strike or maybe an official strike. Worker participation will reduce industrial disharmony. That is the sixth good idea that I find in the Minister's speech and in the Bill.

A socialist government could not have brought in better than this Finance Bill. On the basis that there will be proper implementation of these various measures, I have no doubt but that this is a sound Bill.

At the time of the discussion in this House about the national plan there were criticisms levelled from the outside about external influences and the criticism was that the national plan depended too much on what was happening outside the country. The critics had better waken up because the world today is a village. What happens in Moscow or Leningrad affects us in no small way. Even a country like the USSR which claims to be self sufficient have to come to western bankers for capital. Romania is up to its neck in borrowings from the western banks. External influences are a very important factor. Oil prices fell recently. Did that not affect the economy in Ireland? Of course we are affected by external influences. There is very little we can do about controlling them. I repeat the world is a much smaller place — very small and a breath of icy wind from Siberia is felt here occasionally. That is the world in which we live. We may not like it but that is it and our children who come after us will have to bear the pain too.

I should like to get back to the unemployment problem which is a far bigger problem than inequity in taxation. The simple story is that if you are paying tax, especially in the higher bands, you have a fair lot left but if you are on the dole you do not pay tax and you have damn little to collect anyhow. I will repeat this: I can get an unemployed man to swop jobs with any bank manager provided of course I can find an unemployed man capable of doing the job. Do you think for one moment that the well-heeled worker today would change jobs with a man on the dole? If the Bill produced a situation whereby a small business in Ireland could provide us with more jobs it would not matter whether five, ten or 20, it would be worthwhile. We would be much better off to be dependent on small businesses rather than on multinationals.

The Bill is progressive in all the senses I understand, provided it gets proper implementation right down the line. It depends on the politicians, the trade unionists and all the people in public life to assist in getting this Bill implemented.

Mr. Robb

I would like to commence by saying that it is a great challenge to anyone who is not a financier or an economist to read a Bill of this nature with any degree of intelligent appreciation. I am sure I must not be the only person who finds it difficult to absorb and to try to analyse it. I therefore, to some extent, was dependent on the Minister's speech and on listening to and reading comments of Senators. There are some aspects of the Bill which are highly commendable and progressive. I remember being in this House when a very progressive Litter Bill was debated and duly passed. Yet, litter throughout the country seems to be in the same state, if not worse, as it was before that progressive Bill was enacted.

No matter how progressive things look on paper, I wonder whether it is not only a new style but a new philosophy that is required to cope with the challenges which we have heard of today, the challenges of unemployment, social deprivation and of the use of the resources we have in a sensible equitable manner. I favour the idea of profit sharing by those who work in large or small business. For far too long the fact that the employee had not shares in the business accentuated the distinction that has increasingly been made between manager and employee, between owner and the rest, the "we and they" mentality. For the first time this Bill by statute tries to bring people together as though they belong to the same enterprise working for each other for the benefit of all. It is important to consider in this context not only the consumer, for whom the produce is presumably being made, but the local community which relates to the position of the enterprise and to the effects of the enterprise.

As we move into the post-industrial era and search for new philosophy I would like to see a much greater awareness of tripartite approach, the institutions of the State, the operatives in the enterprise and either the consumer, for whom the products are being made, or the community for which that particular enterprise is creating a service, for example, hospitals and schools. We have these three legs that need to be considered if we want to bring society together and move forward. Nevertheless this is a start in that direction in that it involves those who, after all, are the people we have to rely on to produce the goods that make the money.

Even from a socialist perspective it is no good talking about making money as though it was a crime or a sin because if you cannot make it you will have nothing to distribute. We are concerned about creating a climate — this Bill seems to go some way in this respect — in which there is incentive to make money but at the same time a realisation that it is important that it should be distributed in an equitable fashion to those who are most needy in our society.

There is an element in the Bill which refers to tax relief for small businesses. This is highly commendable and deals with a point which Senator McGonagle was at pains to develop, the terrible dependency in Ireland both North and South throughout two or three decades on the multinational entrepreneur who came in from outside, who always set up wherever he could make the best profit, very often at very attractive terms. People who had previously had a wide range of skills ceased to use them, got on to a production line requiring a relatively narrow scale of skill and in return for that got a good wage for the period of operation but when the operation was over the entrepreneur left, the machinery was taken away and the people were left with nothing except they became centralised. There was a greater tendency to urbanisation with all the problems that has created. Expectations were kindled which can no longer be realised; frustration became rampant and, of course, with frustration go the violent feelings the consequences of which we are now very much aware of in our surroundings.

Tax relief for small businesses means that Irish people will be stimulated to use Irish resources, Irish brains to make money which can be distributed for the needs of the society and money which, hopefully, will not go out of the country except, unfortunately, to pay back interest on that vast national debt about which we hear so much and which it is gratifying to see is slowly diminishing.

The small business has another aspect which is important. It is much more flexible. We have heard recently of the small farmer being a survivor when the large farmer was going to the wall because he had borrowed so much money to sustain his enterprise and then he was insufficiently flexible when times changed to meet the demands of the bank and he has become bankrupt. The small farmer, the small business is a more flexible enterprise than the large fellow. When a small business goes under it does not have the same devastating effect either on the local community or on the whole of society. If we can sustain and encourage small business this is all to the good. Small is healthy as well as beautiful although if it is not democratic it can be very ugly. One always has to keep an eye on small enterprise, whatever it may be, to ensure that there is not a little bit of smallminded demagoguery at the back of it. I have had the experience of seeing small is beautiful but I have also seen small exercise itself in a very ugly way. The encouragement for tax relief in that respect is very good and the encouragement for small Irish businesses will be of enormous benefit to people, particularly to young people of enterprise.

We have been concerned about the uptake of the burden of unemployment. If we look at employment and unemployment in the old sense of full industrial production line employment we are bound to fail. If we were to pursue such a policy, modern technology in creating a need to keep the wheels of industry going would be highly destructive of the natural environment. We are dependent on the natural environment for resources of energy and sources of food. We cannot continue to play havoc with the natural environment. If we do, we do it at our peril.

It is already known that many species of bird, animal and plant life have become extinct in the last 50 to 100 years. The warning signs are already there. The alternative of course, we are told, if we have not got enough energy available from natural resources without this form of destruction, is to turn to nuclear energy. We can see what terrible effect that might have. We are reaching into a new era which will require more philosophy rather than a political policy to cope with it. Nevertheless, having said that, when we come back to the economy of the country we have on the one hand the resources of that country and we have to ask, do we squander them or do we use them in order, not only to meet basic needs in the time in which we live, but also to conserve them for the generations yet to come?

The other point I would make is that we also have resourcefulness. The resourcefulness is tied up in the unique talent that belongs to each one of us. Are we doing enough to unearth that talent, to develop that talent in both an individual and collective community sense and to relate it to the resources that are available in a meaningful fashion, which respects the natural world, so that the self-regulating mechanisms of mother nature can be perpetuated and so that we can ensure energy supply not only for our needs here and now but also for those of our children in the future?

One has to look, when one is talking about economy, at what one means by mobilisation of talent and how one brings it about. In the new society we are bound to have a situation where people will have to work less and less with industrial machines, if we are to preserve the natural world and if they are to work less and less they will have more time available to them. This is a matter which economists as well as politicians and philosophers will have to address themselves to. How will people have productive, effective lives in the time which is becoming available to them? That requires a restructuring of society and a restructuring of our economics in society, so that participation becomes effective. Expression of the individual and participation of the individual is also related to the collective community in which he exists, so that he feels he has a say to determine the health of that community, the enterprise that takes place in that community, the services that are needed for that community, and so on. Our most precious resource is in the talent of the people. Much of that talent has been stultified because of the very over-centralised and very uniform systems we have evolved. I will come back then to the need to decentralise as we look forward to a new economy for a new era.

Someone mentioned — perhaps it was Senator McGonagle — that we have to come back to a self-help type of society. We must be careful here because the ourselves alone philosophy implies a certain degree of isolation in the mind as well as isolation geographically. We are, as he also mentioned, living in a global village, spaceship earth, in the new cosmic dimension of things. Therefore, when one, to use that cliché, is thinking globally but acting locally, it is a question of how do we evolve a philosophy ourselves with others, rather than ourselves alone, but in the process of working at a self-help and help-out society rather than a hand out but stay out one. The trouble about the welfare state has been that while it was fired with an enthusiasm to try to create equitable arrangements in the social fabric nevertheless in its emphasis on hand-out and in the loss of dignity which one had in going to receive those hand-outs, there was a feeling also that we will give you what you need to keep you going but at the same time we are not really doing our best to incorporate you into what is really worthwhile in the social machine; you are being provided for by that machine, but you are not part of it. Then again, we have to try to think out how in the new community-orientated economy can we involve people so that they feel they belong, not only to the community, but to the nation as a whole, and will give of their talent and unearth the resources in a sensible way to move forward.

I would like, at this juncture, to mention two economies which many of the Senators here may not be aware of, that is the economy of the Faroes and the economy of Iceland. The economy of the Faroes deals with only 37,000 people but for that 37,000 people there are 50 local authorities, one local authority for every 700 to 800 people. Each of them can give grants in aid. In other words, each, at such a very small level, has considerable fiscal responsibility for the people in that very small community. I have only got the 1970 figures. Things may have changed drastically since. If we compare the GNP per head of those living on the Faroes with the GNP per head of those living in Ireland, we find that it is about twice as much, $2,200 in the Faroes, $1,320 in Ireland at that time. The Faroes only receive 15 per cent Danish subsidies. Let me emphasise, the land in the Faroes is very inferior compared even with the west of Ireland. Most of their economy is dependent on fish, but they have a very progressive society.

Iceland with 210,000 people, has 252 local authorities and 37 of these are major authorities. These local authorities levy income tax, property tax and turnover tax. Again, taking the year 1970, the only year I could get records for, GNP was again about twice per head of that of the people living in Ireland. We have in Switzerland, as is well known, one local authority for about every 1,800 people, with a considerable degree of authonomy. This is saying to economists: "we trust our people, we will provide the climate in which they are seen as the chief resource, which we will help them to develop and by having an open society at local community level, they will determine need in relation to the environmental stresses, in relation to the stresses of deprivation, privilege and so on". It will all be brought down much more to local level for discussion.

Once you get into that situation in a country like Ireland today, which has become so over-centralised in Dublin, then one community realises it is very deprived compared with another community. One has to consider an economy which can shift, if you want collective community responsibility, its financial economic resources from the privileged communities to the deprived communities, so that collective decisions can be made and people can grow as a result, develop their talents, become more aware of the total fabric of their society and have a much greater say in it. There should be much greater built-in checks and balances about what goes on without having to resort to so much central decision making.

Let me now deal with one or two small examples. As I said once before, we have four economies in this country. We have the punt and the pound, but we have also got the square foot and the acre. You can rest assured that there are plenty of people in Dublin whose whole life is spent in ensuring that the value of the square foot goes up and the rest can look after themselves, but if the square foot goes up and you have plenty of square feet then you can rest assured that you do not have to worry about the punt or the pound and likewise, to some extent, the acre.

Let us now take the problem of the two house man. I am a two house man and what is worse, they are in two jurisdictions. If I sell my house in Donegal with its unused seven acres, after having it for ten years, it is conceivable that I might walk off with more money in my hip pocket than the man who is putting his cattle on it would have made in these last ten years. The question I ask is why should all that money go into the hip pocket of the owner of the second house and he to leave the community not one whit better off? We, as Irishmen, in the community dimension are just as guilty of doing to communities what we are accusing multinationals of doing at national level.

It is time we asked ourselves what we leave behind in a community into which we went from another community, do we use it, exploit and then decide to pack up and leave it? Let us not go on blaming multinationals for the very crime that is being committed daily throughout Ireland. It is even worse in my case because I go from jurisdiction one to jurisdiction two. That money not only leaves that community but leaves this jurisdiction. It may be a small matter but, nevertheless, it highlights a principle that we would need to look at very seriously indeed.

We have the situation of hospital closures. In the past few weeks I have tried to set up in my own hospital a study to look into wastage. A surgeon could put a disposable gown on five times in the morning and if he is a good surgeon he should leave the operating table with them unsoiled. They go straight into the bin. There could be a shop at the front door and they could be sold to the motor mechanic. Syringes are used once because of this great disposable era. Thousands of syringes, which in Africa would be used over and over again, are thrown into the bin daily in Ireland.

There is now the high pressure salesman who comes along and tells us that he has got a disposable automatic suturing device which fires staples to bring bits of gut together, a process formerly done with the hands. One can also buy a gun which might last 20 years but because every year the newest and latest gimmick comes from the high pressure salesman which adds a parameter which has never been there before the new gun is sold as an advance and one is pressured to use it. One uses instruments only once and they are then disposed of. Even if it made short term economic sense, it spells long term disaster not only for the economics of the country but for the ecology of mankind. How do we deal with that? We will never deal with it by enacting our great Bills in central government like the Litter Bill to which I referred. Litter in Ireland is worse, I suggest, than it was when that excellent progressive Bill was passed.

We will only do that when we get back to decision making locally, when we become more accountable to each other locally for how we spend money and for how our local society is organised. When we become more responsible locally for the use of our resources, for the use of available finance towards one another, we will only begin to deal with the unemployment problem and look at it honestly when we realise that we have to know who are in the unemployment queue locally and why they are there, and when we ask if nothing is being done to get them out of the unemployment queue? Is it reasonable that some of us should have jobs separated by only a hair's breadth from those who do not have jobs? We are not prepared to share our jobs and yet we are prepared to accept these devastatingly high levels of unemployment.

We might ask about education and whether it can meet the very flexible needs of society. If, again, the norm is created centrally and there is not a big enough input locally, what should we be educating people for? With that in mind, I encourage others to develop the whole concept of community education where we will see education as an ongoing thing and the right of people to use the resources we have, the schools, buildings and so on to determine what direction their education will take them in, not to have that determined for them and then to find the way in which they have been educated and the talents they have developed are irrelevant because there is no outlet for those talents.

I welcome aspects of this Bill as being progressive. The whole of society needs to be decentralised if we are to have a healthy economy. Decentralisation cannot take place if it is looked upon clearly and simply as a matter of the centralists legislating in Parliament for the means of bringing it about unless we give to the people locally the power to make the participation effective. In that context, I ask the Minister to consider if it is not time to begin to think in Ireland of a new means of collecting tax and of distributing it. I only offer this as a suggestion. I make no claim to being an economist but this movement needs to be promoted so that people will take more responsibility where they live for what is going on round them.

I suggest, therefore, that if it were known a certain percentage of one's tax was being collected for use locally, another percentage of one's tax was being collected for use regionally and a final percentage was being collected for use nationally, it would certainly concentrate the mind, if there was a big enough percentage taken up for use locally. There would also have to be a further percentage which would be available for shifting on a sliding scale between the privileged communities to the deprived communities. The essence of this argument is that the percentage collected for local use plus the percentage that would be shifted for local use on the sliding scale would be cash that would be available for people locally to determine their priorities in relation to needs defined by them and not those directed from the centre.

The point about having three different collections is that one would be doing it with the guidelines of regional and national strategy. For example, if 40 per cent of my tax was collected for the community of North Antrim, 20 per cent was collected for the region of Northern Ireland and 10 per cent was sent for the time being to London but ultimately, I hoped, to Dublin, then we could evolve a new strategy. Furthermore, if one totals 40 per cent plus 20 per cent plus 10 per cent it comes to 70 per cent which leaves 30 per cent over. That 30 per cent would be available to central government to shift from the privileged communities to communities of need.

I am suggesting, therefore, that no matter how excellent may be the provisions of a Bill such as this, unless we move power back to community level for local collective decision making and try to heighten community awareness of the big issues that are involved in creating a good economy for the country, we will not go anywhere. There must be that change in philosophy. I am not advocating that everything be handed over to the local communities because that might well lead to anarchy. It must be done so as to have a balance between the citizen in the community and the enterprise that can be generated there, the other communities and the wider need, the region in relation to the services that are provided with an overall guideline and philosophy, and then the nation as the centre. We must ensure that society is decentralised so that talent can be liberated in a new context, so that resources are used — shared today, conserved for tomorrow — to create a good economy in which people feel in tune with themselves, with their community and with society at large. That does not necessarily mean an econnomy of great material wealth but it does mean an economy in which the citizen feels that his participation is effective, that he has the social space in which he can have effective participation and that he has a fair share of the resources in order to do this.

Mr. Ross

Like Senator Robb and I imagine all Members of this House I have mixed feelings about this Finance Bill. I welcome some aspects of it and, of course, I regret the absence of certain initiatives which I believe the Government could have taken. The principal criticism which I would have of the Finance Bill is the reluctance of any Government over the last few years to take a radical approach to the whole financial and fiscal situation in the country. I think it is fair to say that the real problem is that we have been educated to live beyond our means and this Government to a large extent have done their best to try to bring us back to reality in this sphere. The blame for our expectations being too high lies fairly and squarely on the 1977 Fianna Fáil manifesto because once that was issued, once we were taught to believe that we could almost have anything we could get and the cost did not matter all of us began to believe that the Government could deliver a Utopia — which was totally impracticable. Although there are many criticisms to be made of this Government they must be commended on that fact that they have brought back a sense of reality to the commonsense business of balancing the books. It is certainly true that the Government have not been able to balance the books but they certainly made some efforts to do so and recognise their own faults in not being able, whereas the previous Government who are now in Opposition were quite incapable of even recognising that problem. Anything I say in criticism should be said in the light of the fact that I recognise the difficulties the Government have and the sense of reality which they have instilled in us.

A far more radical approach is needed in the Budget and in the Finance Bill to taxation and expenditure matters. Over the last few years, and especially in this Finance Bill, the changes made have been merely tinkering with the system. All that is happening is a small adjustment of the tax bands, maybe a little bit more social welfare here and there, changes in corporate taxation and income tax from time to time. But they are minimal changes within the system. The first question which should be asked here is, why have the Commission on Taxation been almost totally ignored? I see very little point in setting up these extremely expensive and time-absorbing commissions which Governments continuously set up and then completely ignoring the enormous volume of work put into them. In most cases, and I fear in the case of the Commission on Taxation, the reason for setting up was to satisfy particular pressure groups at a certain time and in that sense to hope that the problem would go away and that by the time the commission reported that pressure group would have disappeared. It is a scandal that so many talented people who put so much into the work of the Commission on Taxation should have their work almost completely ignored by Government. There is no point in setting up this sort of body.

We should consider what is the basic cause of the malaise in the economy. Undoubtedly, it is a very sick economy. The real problem is quite simply, as has been explained many times, that we spend more than we earn. We seem to be incapable of balancing the books. As the Minister for Finance said in his speech to the Dáil, put very simply, to balance the books we can do only two things: cut public expenditure or increase taxation. It appears from what the Minister said that he acknowledges that taxation increases are no longer feasible. He acknowledges that there is no point in increasing taxation, whether income tax or indirect taxation, as it would be counter-productive. If he acknowledges that he must acknowledge that the only way of balancing the books is to cut public expenditure. It has been proven by Governments here and by Governments in Britain of a monetarist sort that to cut public expenditure is much more difficult in practice than in theory, that it is very easy in Opposition to talk about public expenditure cuts but very difficult in Government because of political and other pressures on Government to reduce public expenditure. When it comes to wielding the axe Governments are not very good at it.

The Government recognised the problem by promising initially to phase out the budget deficit and by promising later on that it would reduce it and now I fear the reduction of the budget deficit has become what the Minister for Finance calls a priority. The objective of eliminating the budget deficit has been lost sight of and has been completely abandoned. This probably ought to be acknowledged. All right, it has been brought down as a percentage of GNP but the main objective has been abandoned and it appears that the Government accept that we will inevitably live beyond our means and there is not a lot that can be done about it.

I do not believe this. I do not believe that one should accept this. It is only commonsense for the Government to look at areas where public expenditure could be cut. I see in this House, over the years, Bills coming through which are a waste of public money. We had the National Development Corporation with an authorised capital of £300 million. That does not mean that £300 million is being spent but it means that the potential and the irresponsible potential is there to spend £300 million from the Government at a time when we simply cannot afford it.

There are undoubtedly abuses of social welfare which are costing the State a great deal of money — an unknown amount — which also should be investigated. There is a very strong case for investigating semi-State bodies and in certain cases where they are not delivering the goods, where they are not earning their way, for their abolition. In the realms of education and health, which are the biggest spending Departments in Government, there must be a case for means-testing those who can afford to pay for their health and for their education. I see no reason why free education and free health should be given to those on very high incomes. I see every reason why their high taxation should be brought down but I do not see any reason why those with high incomes should be getting the sort of privileges which should go to those who merit them but cannot afford them in the lower income brackets. This principle seems to be anathema to a certain section of the Government ideologically but it seems to me to be absolute commonsense.

I want to refer to high taxation. The Minister stated in his Dáil speech that there was a new confidence in the business community. I see no such confidence in the business community. The business community still feel paralysed both psychologically and materially by the taxation system. The budget has done virtually nothing to relieve that. We can tinker with taxation in a very small way but the phychological condition of the business community except in certain specialised areas is still very, very low. The business community still feels that what the Government are doing is imposing taxation on activity within the country, on business activity, on enterprise activity. Any way the business community turn they will find that they are hit by the tax man on one side or the other. This obviously applies mostly to VAT or to income tax. The results of less activity in the business community obviously means fewer jobs.

If taxation was relieved in certain areas the unemployment situation would be relieved. I will point to one particular example which is the decision of Gulf Oil to withdraw from this country about two months ago, which was a direct result of the penal conditions imposed on it by the Government here for oil exploration. If every multinational or every company took this view there would be no possibility of exploiting what might be—and I say might be because we do not know if there is oil there or not—one of our most valuable natural resources. If Gulf Oil feel that way, other multinational companies and other indigenous Irish companies will feel the same way. Nowhere that I look, except in very specialised areas, does the business community feel any new sense of confidence. It may feel so next year; I do not know. It certainly will not be thanks to this Finance Bill if it comes in. It may be due to a worldwide upturn which the business community here can exploit. The Government are certainly doing nothing radical in this Bill or in the budget to ameliorate the situation.

We have heard from the Opposition in this House and in the Dáil about the negligible effects that this Finance Bill will have on unemployment. I tend to think that this is correct, that the unemployment situation will not benefit enormously. In certain specialised, small, limited areas where concessions have been made employment will increase undoubtedly. Where people can exploit the business expansion scheme, certainly it will increase. There will be no large-scale upward movement in the employment trend despite the constant optimism —and no more than that—and completely unjustified optimism of the Government for the last three-and-a-half years on the unemployment situation. As it deteriorated all Government spokesmen expressed optimism on the unemployment situation.

It is time that there was a certain amount of realism injected into the myth about unemployment. The myth is that unemployment is soluble and will be solved by this Government or by the next. It is the constant cry of Opposition that the unemployment situation is unacceptable. Every Opposition that get into Government find themselves incapable of doing anything about it because of the constraints of the economy or certain other constraints. It would be better and more honest if both the Government and the Opposition looked at the unemployed and said: "We acknowledge that we are going to have unemployed people for a very long time to come and that we are going to have a large percentage unemployed for a long time to come". I know that politically that may be unacceptable. It may be politically very difficult to say but it would be an honest thing to say because unemployment has got worse over the years despite the assurances we have had that it will get better. There is very little likelihood of a great increase in employment in this country in the next ten or 15 years partly because of technological developments and partly because of the population growth. It is time we did not pretend that unemployment is a soluble problem and that we genuinely thought about what we ought to do about this large pool of unemployed instead of pretending they will all, or half of them, be employed tomorrow, because they will not be. The Opposition are as much to blame for that as the Government.

The second great disadvantage of the high taxation situation that we have is the size of the black economy here. It is very difficult to estimate by definition the size of an underworld economy of which there are no records. It is undoubtedly enormous and it is undoubtedly an area where the Revenue Commissioners and where the Government could tap a lot more money. It is obvious to anybody in this country that the number of cash transactions, the number of "nixers" being done, the amount of moonlighting going on, the amount of tax being evaded, is immense. This is not because of some blatant dishonesty in the people. It is because several people find it more beneficial to draw unemployment assistance and to do "nixers" than they do to have a moderate or low-paying job because of the taxation situation.

If you tax enterprise, small or large, out of existence, people are by nature going to evade it. Evasion is rife not just among those who are drawing unemployment assistance or on low incomes; evasion is rife among the middle classes and those on high incomes as well. If they did not have to pay so much tax I think they would be quite happy to pay tax at a lower level. There are areas in which the tax net could be widened and revenue increased by including the black economy if tax rates were lowered. I especially refer to income tax. High taxation creates awful problems in the dislocation of trade. On the Border we have huge price differentials and smuggling which is a problem that has not been solved. It imposes a special burden of tax collection on those who have to collect it which as a result makes it immensely more difficult for them and leads to more evasion because there is less efficiency.

I would like to welcome some of the concessions or tax changes which were made by the Minister in the Finance Bill. I welcome the increase in the wage allowance. The fuss that was made about the reduction in income tax from the top rate of 60 per cent down to 58 per cent is a lot of nonsense. The Minister explained with some self-congratulation in the Dáil that as a result of his measures not only was income tax down from 60 per cent to 58 per cent but also the 1 per cent levy was abolished. As a result people on the top rate of tax were paying 3 per cent less on their incomes. This he portrayed and heralded as a great incentive for them to do more work and to produce more. It is not good enough to say that 3 per cent is going to encourage people to do more work or to produce more. There is no incentive, I fear, in reducing the top rate of tax by 2 per cent and the 1 per cent income levy. It is absolute peanuts to those who are earning anything which is tax-worthy at that level. The problem is that that income bands come far too early. It embraces far too many on far too-low incomes. It creates a general malaise about the need or the incentive to work. It will not stimulate any more activity.

I welcome the tax relief on dividends as a genuine effort to recycle money to Irish-owned manufacturing companies. This is the direction in which we should be moving. It should be taking money out of unproductive savings into Irish manufacturing companies who sorely need it. The concessions to research and development projects are essential. Research and development are backward here compared with European countries. We must look at this area as otherwise we will fall further backward in future years. The concession to smaller companies to be quoted on the market only subject to 30 per cent of capital gains tax is welcome as a small incentive to commercial activity. That is all it is.

It would be right to look at the capital gains tax situation. I regret that the Minister did not do so when he made this concession to smaller companies. Since 1981 the capital gains tax has been absolutely punitive. Many feel that the 60 per cent imposed on those who have taken gains within one year of the original investment is somehow a fair price to pay. I think it is the greatest deterrent to people to invest venture capital or to take risks or to make investments in any venture. Everybody who puts money into a project or an investment of some sort, is naturally looking for profit. The imposition of a 60 per cent tax on that profit makes them very unwilling to make any investment because if leaves them with only 40 per cent profit when they have taken a substantial risk. The 50 per cent rate after one year is also punitive. As a stockbroker I find those two taxes the biggest obstacles to investment in Irish industry through the stock exchange that I came across. Time and again the people who are willing to put money into Irish industry say: "What use is it? Even if it is a good investment and I have a capacity and a profit, there is no point in realising it because I will have to give 50 per cent of my profits in taxes" Money being put into non-productive savings could be diverted into Irish industry in this way if taxation was not so high. It is far too high.

One sector, apart from Gulf Oil, which is not confident about the future, is the building industry. All Members of this House receive representations from the building industry. All Members of this state and decline in that industry which continues. It is difficult to understand the lack of sympathy this Government have for the building industry. The Minister should have removed the 5 per cent extra VAT imposed on the building industry last year. It was inexplicable at that time to impose such a tax on an ailing industry which has continued to ail, aided and abetted by the taxation put on it last year. The building industry needs serious investment. It is a large industry and gives a lot of employment. Even this year there has been a 15 per cent fall in cement sales. Employment is down by 11 per cent in the industry. The building of new houses is down by 25 per cent this year. This vital industry is not only not getting any help from the Government, but it is also being penalised for some reason difficult to understand. Traditionally, Coalition Governments, some say are not very sympathetic to the building industry.

The constant tug-of-war between public expenditure and taxation is still being overbalanced on the side of public expenditure. The taxation side which has been minimally adjusted this year to help those taxed too highly is still the loser in this battle. The philosophy which was practised so appallingly and irresponsibly by Fianna Fáil Governments has been continued to a lesser extent by this Government — that what we need we shall have. What ought to be done — and I could not expect it from those now in Opposition but then in Government — is that the Government should take the net balance of what they are going to get from tax and say: How much have we got to spend on public expenditure? They should do this instead of saying: What do we need? How much do we need to subsidise? They should not consider finding as much as they can from taxation and at that point borrowing the rest. This would be a good case in point to take because public spending is up by 6½ per cent while inflation is only 2½ per cent. We could make a 4 per cent saving as a result of this because we are actually paying out 4 per cent more than we expected nominally at the beginning of this year. Across-the-board-reductions could have been made in public expenditure in this way. Social welfare payments are very high. It is difficult to expect a Government to reduce them at this stage. They are being paid at a higher than expected rate vis-á-vis inflation.

We are a very vulnerable economy. We are subject to the whims of America, Britain and overseas. As a result of the pick-up in the world economy we are likely to benefit through no great efforts by the Government. It would be a great pity if this was not exploited. I hope the Government assist in exploiting this by not stifling commercial activity in the way it has done over the last four years.

Mr. Cregan

Like previous speakers, I welcome the Bill. I see areas where improvement is created but I also see areas where too much is still being spent. First and foremost, I see a problem in the social welfare system. Senator Ross had a few comments on it and I was expecting that he might enlarge on it. We are now spending in the region of £7 million per day on our social welfare system. An increase in four years from £1.8 million to £2.4 million and now to £7 million per day is very serious. It is now one of our biggest spenders. Are we doing enough to question whether it is going the right way? In my view, we are not. We have a responsibility to answer to the taxpayer and in particular to the person who is always moaning, and rightly so, that the pays too much taxes. Tax is the biggest cause of complaint throughout society generally — the number of people who are paying so much taxes and getting so little benefit in return.

Secondly, there is our unemployment problem. Which is the priority? The taxpayer never complains about paying tax but he just wants to have to pay a fair amount. The incentive is not there any more to earn money legally.

There is a massive incentive to work without paying taxes. I am very conscious of this and I have done some investigation into it. I am appalled to think that it is recognised by many of our State bodies that the amount of money that is now being spent in the black economy area is enormous. I could not get a direct figure but the construction industry, for instance, were able to say to me that they reckoned that about £250 million per year is being spent in the black economy in that industry. I spoke to people in other areas and this seems to be accepted. One person was prepared to say to me that they reckoned that the black economy in our country in 1985/86 was worth about £1 billion. That is not an easy thing to say. If it is £1 billion per year, can we just imagine what is being spent for the wages on that? It is massive. Are we going to say that it is going on and do nothing about it or are we, with the help of the local social welfare officer, to try to catch the one or two guys who are doing it? That would not be the answer. We have a situation in our social welfare system under which an employer has no right legally to employ a person who is on social welfare legally but has the right to employ a person who is already working on a casual basis. If a person is on social welfare he has no right to go to work for anybody on a casual basis, whether it be for four hours or for eight hours. If he does work for two days a week on a part-time basis one is entitled to get the benefit for the other three days. We have created a situation where the employer wants to employ people on a casual basis but can only give the job to the person on the black economy structure. He is not legally allowed to take this person on on a casual basis for even four hours. We should recognise that we have a responsibility as legislators to say to the person who is earning £15,000, £10,000 or £6,000 as a single person and being taxed enormously that we recognise there are many people working who are not paying any tax. Do we legalise the system, do we recognise the system or do we hunt the wrong doing and eliminate it? In my view there is no way one will ever eliminate a £1 billion black economy. One may eliminate in the region of £100 million. The construction industry are prepared to say that £250 million per year is being spent on the black economy in their industry and even Senator Ross has admitted that there is a depression in the construction industry at this time. They admit that £250 million a year is being spent in an area over which they have no control. People who are drawing money from the State are getting paid as well in the region of £250 million. Of the £250 million about 40 per cent would be wages. Something in the region of about £115 million a year is being spent in the construction industry alone to pay wages to people in the black economy. That is a lot of money. We should be totally irresponsible if we were not prepared to question that. There is an enormous amount of work available on a casual basis within our society. Unfortunately we have a situation where the employer is not allowed to take on anybody on a casual basis. For instance he is not allowed to take them for four hours because it is illegal. The person who is on social welfare at the local exchange is breaking the law if he works for a certain number of hours because the social welfare system says that he is not available for work. They are prepared to say that a person can work for two days and draw dole for the other three days. This is on a casual basis rather than part-time. Part-time and casual are different. I recognise that there is a lot of casual work available within our society. Unfortunately we are not prepared to recognise the employer who wants to take on casual people.

Supposing a local publican spends in the region of £400 a week on wages but in fact he spends £200 of this on casual work on a Thursday night or Saturday night or all day Sunday, he would not have work for the person for the week. He is not entitled to take on this person because he is breaking the law. He can only give the work to people who are already employed elsewhere. These people are getting extra money. Suppose he has three or four of them employed every week and is spending £200, one of them gets £40, the other gets £50 and the other gets £45 or £50 as well. I see no reason why we as legislators should not change our system to say that this money should be given to people who are unemployed rather than to people who are already employed. How do you do that? How do you bring about a system where you recognise that the person doing the work on the casual basis is not drawing both moneys? A man with two children on social welfare gets in the region of £78 per week on the dole. If he is entitled to £78 a week and he gets, say £40 for a night's work and Sunday work from a local person, on a casual basis, why do we not recognise that he should be entitled to do this.

Why should the £40 be given to the person who is already making £120 or £140 or maybe £200 elsewhere? We should recognise that the employer does not have a full-time business and allow him to employ the person on a casual basis. This is going on at the moment and it is illegal. There are many people working on a casual basis, which is illegal, and in addition, they are drawing the full dole. This is part of the black economy. I want to give one example and we can imagine the amount of money that is involved throughout this city and throughout every city and town where casual work is available. I see no reason why a person who is signing at the local exchange should not be entitled to say: "I am working on Friday night and on Sunday but I must be able to return here on Monday and get so much dole as well".

If he gets £40 from the employer for two days work and he is a father of two children and he draws £78 from the exchange, I see no reason so much should be deducted from his social welfare. In other words: why not deduct £10 for a day and £5 for a night — £15 — from the £78? We are only saving £15 but at least the man is getting £63 and the £40 so he now has £103. We could deduct a tenner. At the same time, we must recognise also that the person must not go freely.

How do we achieve this? I am fully convinced that because of the massive black economy there should be some type of system as regards jobs. There is no reason why we should not introduce a job card system. A person who has a full time job should have a job card which should be with his employer at all times. The job card could be something similar to a credit card, maybe a little bigger or a little stronger.

The details would have to be worked out. When the person is leaving the local exchange on a Friday he should be allowed to take his job card with him. He is not unemployed for the next two days. If he works Saturday night and all day Sunday the card should be given to the employer who would write in the amount paid and attach his signature. The job card should be brought back to the local exchange when the man is not working. In other words, if he is not working on the Monday he would come back to the exchange with the card. The card goes through the system. The man is then back on the unemployed list and is entitled to a certain amount of benefit. A proportion of the £40 or £50 that he earned should be deducted.

In order to create the incentive for the employer to take on the legal man with the job card rather than the illegal man in the black economy we should say to the employer: "We do not want you to take any taxes from him, we do not want you to take any PRSI from him". We should give every incentive to the employer to say to the casual employee: "Fine, you are coming in here for two days. You are getting £40 or £50". The local exchange should then make the appropriate deduction for PRSI and tax. It would be a massive incentive to the employer if he had no responsibility for deductions. The questions may be asked whether this proposition is viable and realistic. Such a system is working in other areas. I do not want to give the impression that this card would be something of a fascist idea.

Every speaker has been very conscious of the black economy. This is one system that would certainly infiltrate it in no small way. We must make no apologies to the employer or to the employee involved that a fine of no small amount would be imposed on an employer whose employee is without a job card and on the employee who worked without a job card. If the job card is at the local exchange and the social welfare officer finds that he is working, the employee should suffer the consequences because his fellow worker or his neighbour or, for that matter, his son or daughter, is paying taxes while he pays nothing. That should not be. I feel very strongly about that. I mentioned it elsewhere. It is time that the Government implemented some such system. It is time we recognised that people in the PAYE sector, who are paying so much in taxes, are very annoyed that people who are drawing benefits are earning money.

I want to give an example of that. Last Tuesday afternoon I was asked if there was a person available who would drive a truck on a full-time basis up and down to Dublin on a 12 hour shift four nights a week. It was worth a fair amount of money. Four nights a week is a 48 hour shift and the driver would get four hours overtime each night, plus his expenses and meal allowance, which would amount to approximately £300 for a week. There was a person who was annoying me looking for work and for whom I had a high regard. He had been looking for work over a two year period. I asked him if he would go for interview and he has thrilled. He went for interview on Friday morning. I happened to meet him on Saturday evening in my local business. He said: "Denis, I had the interview yesterday morning. Thanks very much. I very much appreciate your concern. The basic rate for the job is £145."

That would not include expenses, meal allowances, overtime. The gross pay would be £320. He said, "I am drawing £78 a week at the moment from the local exchange. I have a medical card and free fuel. I have two kids and I am driving a local butcher's car or van three mornings a week and he gives me £20 a morning. That is £60 plus the £78. With the medical card and free fuel it is not worth my while going to work." What way did I feel? That is the philosophy throughout society today. How do I answer the fellow next door to him who is paying so much in taxes every week? It is not fair to him. That is the problem that should be solved. The only solution is to legalise the little butcher, who is prepared to say: "I can only give £60 a week. I want to give it to the guy with whom I know I will not have any bother."

The little butcher is half nervous because he is only giving out £60 a week and can only give it to the guy who is already not working. Nobody else would take it from him. The man is nervous that he will be caught by the social welfare officer. His wife is nervous also——

An Cathaoirleach

And so is the little butcher.

Mr. Cregan

The butcher is totally frightened. We should legalise the little butcher. We should say to him: "Fine, you can give out your £60 a week but give it to the guy with the job card." The man would then go back to the exchange and say: "I made £60 for three mornings work. You can deduct accordingly and I am legalised. He is paying his PRSI, he is getting benefit and he is legal.

An Cathaoirleach

You are living in a fools paradise. He will not go back with his card to the exchange.

Mr. Cregan

If he does not go back with his card he does not get any benefit. You did not get the point I was making.

I am talking about working something similar to a credit card system. If it is not registered in the local exchange as being in the exchange and if it is in his pocket he does not get any benefit. All the employees in the country should have a job card. It is probably only a once off system. You only give him one. A person may lose it, but it is like a passport. Until such time as something like that is implemented the expenditure of such money in areas will not be eliminated. The little butcher should not be taxed or should not have to stop the PRSI or taxes. When he goes back to the exchange to draw the rest of the money the local exchange should stop the tax. Instead of a man being idle 40 hours a week he is only idle 20 hours. I see no reason why this should not be implemented.

I welcome the announcement by the Minister for Social Welfare that newly married women, because of the EC system, are entitled to 390 days benefit rather than 320 days. There are 14,000 to 15,000 signing on at local exchanges, available for work and signing for benefits. They are entitled to sign after losing their 390 days for benefits in kind that other married women do not get. We brought this matter up in one of our manifestos in 1981/82. There are about 14,000 signing. I would say there are approximately 3,000 to 4,000 officially looking for work. These ladies are entitled to benefit——

An Cathaoirleach

The Bill has a very wide scope but you are developing social welfare since I came in and before I came in. We have a Social Welfare Bill every year, so I would like you to get back to the Bill under discussion.

Mr. Cregan

I appreciate that. I could speak on other issues but we are talking about the spending in the Finance Bill of £7 million per day. It is one of our biggest spenders.

An Cathaoirleach

I gave you fairly wide scope but I think you should leave it at that.

Minister of State at the Department of Tourism, Fisheries and Forestry (Mr. Donnellan)

I think you are adding a million to it. According to my information it is £6 million a day.

Mr. Cregan

I am glad to hear the Minister say that because no more than three weeks ago I read in The Irish Times that it was £7 million per day.

An Cathaoirleach

You are cute enough now not to believe what you read in the papers.

Mr. Donnellan

I am more authentic than The Irish Times.

Mr. Cregan

I would take your word before I would take the word of The Irish Times.

The designated areas in urban renewal is very welcome. It is an excellent idea. It got a great welcome in my city. I will be speaking on this on Committee Stage.

This has created a lot of good. The Minister must be aware that there are some points we did not take up. I wonder if the Minister is aware that a lot of upstairs renewal, inner renewal in properties, is not recognised within the designated areas and within the Bill itself.

Generally the Bill is very broad and welcome. It recognises areas that we were not recognising before. It must do some good. We do not really give the impression of explaining things in full to the taxpayer. I hope we will improve on it in the next Finance Bill.

Mr. Lynch

I hope the Minister of State will excuse me if I say I was hoping to get in on this, with my short contribution, while we had the Minister of State at the Department of Finance, Deputy Doyle, here. I was given permission to raise on the Adjournment the matter of a Garda barracks in Oldcastle some time ago and we got a commitment then from the Minister that work would commence in February. He was true to his word but for some strange reason they built a wall and the contractor has not done anything since. The barracks is there but it is uninhabitable. We do not want to be served by a squad car from outside the area, we like to have our own gardaí. We know them well and we know when they are coming about the place. I would ask the Minister to look into this matter and give us about £40,000 for the barracks in Oldcastle. It would be money well spent.

I promised that I would give due recognition to any Minister or Government who would implement some of the measures we recommended in our Oireachtas Joint Committee report. As vice-chairman of the Oireachtas Joint Committee on Small Businesses there are measures in this Finance Bill that I welcome. I would like to make a few general comments on the Bill.

I heard speakers from the Government side speak of the daunting and impossible task that confronted this Government when they came into office. I would like to remind Members on the opposite side that you have been in office for nine out of the last 13 years, you were there in 1973, 1975, 1976, 1977, 1981 a good part of 1982 and since then. That old line is worn out. I live in an area where I see devastating effects of the differential in the price of motor fuel. I see filling stations in my area closing down, garages closing down. I believe that the Minister should take seriously the comments that were made with regard to the price of petrol and fuel in Ireland. Most of these were family owned businesses. The motor trade has been decimated over the last number of years going back to 1981/82. I am saddened to see so many family businesses closing down over the past few years. They are being forced out of business.

The licensed trade was referred to. I work in the licensed trade when I can. The pressures on the licensed trade at present are very heavy. In the modern licensed trade you have to comply with hygiene regulations and health boards, higher safety regulations from county councils.

I am talking about the family publicans; I am not talking about the get rich whiz kids who have the late night clubs and who can pack in 3,000 people at £5 a head and give no supper and charge 30 per cent extra for drink. It is the family businessman who we are concerned about who is the unpaid tax collector for the State. He gets no grant assistance whatsoever. The friendly bank manager is no longer the friendly bank manager.

The licensed trade is trying to operate under legislation which, I believe, should be a relic of times long since gone. It takes no account of the needs of modern society in dealing with licensing laws. I believe that the present licensing laws which are really fragmented legislation at this stage should be updated. As they stand, the licensing laws are impossible to comply with, impossible to implement or, indeed, impossible to enforce. The sooner a Bill is brought into this House to cater for the licensing laws and licensed trade and to stamp out the abuses the better. I am talking about a sector who contribute a minimum of £300 million to the Exchequer every year.

I should like to make a remark concerning something that has been discussed here before. It is very dear to me. It is about buying Irish and selling Irish. Many of the unemployment figures could be rapidly reduced if we, as a nation collectively, would buy and sell Irish, wear, eat and drink Irish. I was listening to the Marion Finnucane programme on Tuesday coming up here. This lady rang up and only I was in the car, I would have loved to have phoned in myself but we have no telephone kiosks along the roads in north Meath, only every ten or 20 miles. The woman told how she had travelled the city, visiting eight or nine shoeshops looking for a pair of Irish made shoes for her daughter but could not get them. That is a scandalous state of affairs. She could get shoes from nearly any country in the world and I know from our investigations in the Oireachtas Joint Committee that shoes are being brought into this country at £2 a pair and sold at £22 a pair. Not alone will the attitudes of Government have to change, but the attitudes of people will have to change as well. I listened to advertisements on the radio from the big companies. They always end up by telling us to go to our nearest supermarket. I cannot understand why they do not tell us to go to your nearest family grocer.

In our report we stated that the multinationals control 81 per cent of the food distributed in Dublin city and 58 per cent nationally. If the trend had continued when we were producing our reports, the multinationals would have controlled the entire food business in this country. We would have factories working around the clock in places like England producing goods, mainly food, to sell to the Irish. That is a national scandal.

I should like to ask the Minister if he would do something about the delay in processing appeals for unemployment assistance in the Department of Social Welfare. From the system that operates at present where somebody appeals his unemployment assistance, there can be a two, three, four and I have seen a five and six months' delay before a decision is given. What happens then is they have to adopt the present system of the need to apply to the community care section of the health board for assistance. This is seen by many as degrading, as having to stand in the dole queues.

I said that I would give due recognition to measures that would be implemented which I support.

I want to outline what I see in this Bill as being measures that I certainly would welcome. The first and probably the most significant measure is contained in section 13 which sets out a scheme of relief from full rates of income tax on the dividends received by Irish shareholders in companies qualifying for the 10 per cent rate of corporation tax. The effect of this measure will provide for up to £7,000 per annum of dividend income totally free of income tax. This provision, together with the business development scheme and the small companies section of the Stock Exchange have gone a long way towards providing an effective and rewarding channel for investment in our smaller manufacturing companies.

Indeed, we have now reached the stage where the personal taxation incentives are greater for investment in manufacture than in the more traditional and safer forms of investment. These developments reflect an important and very correct shift in our priorities. They are very much in line with the findings of the Oireachtas Joint Committee on Small Businesses.

There is provision in the Bill for a scheme of relief for investment in research and development. Our committee recommended that IDA research and development grants should be increased from 50 per cent to 75 per cent in the case of small firms or that 25 per cent of the increase in the R and D expenditure over a based amount should be allowed against a company's corporation tax bill. These recommendations may be found on page 31 of our report on the manufacturing industry. The proposal in the Finance Bill is that an individual may invest up to £25,000 in the shares of a qualifying research and development company and claim full tax relief at his or her marginal rate.

The research and development must be sponsored by a manufacturing company which may hold up to 49 per cent of the share capital of the research and development company. This is a novel measure which deserves to succeed and it addresses one of the fundamental weaknesses of our manufacturing sector which is that our level of industrial research is only one third of the OECD average. Irish small manufacturing companies now have a means of developing new products at a comparatively low risk and in a specific purpose of research development.

I do not doubt that some bugs will arise in this scheme as we see it in operation. There are a number of complexities in the scheme which are designed to prevent abuse. I hope that there will be no serious practical obstacles to implementation and that the Minister will respond quickly if real difficulties arise. In fairness, too, I want to say that amendments to the Business Development Scheme were introduced in the 1985 Finance Act and in this year's Finance Bill to make that scheme more attractive and more workable in the light of experience in operation.

The provision of section 88 of the Bill will result in the reduction of VAT to 10 per cent for restaurants. This is vital for our tourism and is recommended in our report on tourism. We will also see VAT reductions in cinema admissions, some entertainment services, hairdressing and other personal services. This move is welcome and is in line with the recommendation of the committee's second and third reports.

I am very disappointed that no move has been made to reduce VAT on hurleys on which there was a motion down for discussion in this House. I would ask the Minister once again to reconsider the fact that VAT on hurleys should be abolished.

(Interruptions.)

Mr. Lynch

We have three great movements in this country. The GAA happens to be one of them and you know the other two.

Mr. Donnellan

No.

Mr. Lynch

The Catholic Church and Fianna Fáil.

Mr. Belton

What about the pioneer association?

Mr. Lynch

We will fix them up when we come to the licensing hours.

Acting Chairman (Mr. Fitzsimons)

Senator Lynch without interruption.

Mr. Lynch

However, as a committee we came to the conclusion and asked, when working on our report on construction, that VAT on all labour-intensive services should be as low as 5 per cent both as a stimulus to employment and as a measure against the black economy. The increase from 5 per cent to 10 per cent in VAT in the construction sector dealt a death blow to housebuilders. This has been mentioned by speakers from all sides of the House. Before the Bill leaves this House the Minister should amend it and reduce the VAT to try to do something for the construction industry.

I read in The Evening Herald, 13 May 1986 that the CIF stated that there is no improvement whatsoever in the construction industry. We were led to believe that when the new home improvement grant scheme was introduced it would create 10,000 jobs. Somebody, I believe in Government, asked the Taoiseach what were 10,000 jobs? Somebody said that it was a job for a man for 10,000 days. From the information we have, the jobs have not come about. I am not criticising the scheme; it is a good scheme and I give credit where it is due, but it has its snags. The people who thought they could use the scheme are not in a position financially to repay the necessary money that would be needed to fill the gap between the amount of grant and the amount of money required to carry out the work. I speak mainly of pensioners and retired people. They have not the ability to repay loans. That is one of the reasons why the scheme is not getting off the ground.

Mr. Donnellan

Surely the Senator would not expect the Government to give a full cost grant?

Mr. Lynch

Not at all. No.

Mr. Donnellan

You can get up to £8,000 and that is a great grant.

Mr. Lynch

I said that here prior to this. I am saying that it has not lived up to expectations judged by the number of applications received.

In the new house grants section, I have had numerous complaints, even today, with regard to delay on inspections. We were given an assurance by the Minister of State about four weeks ago that extra inspectors had been recruited to the Department of the Environment to expedite the scheme and have inspections carried out fairly quickly.

Mr. Belton

Does the Senator want one to be sent down to Meath?

Mr. Lynch

You may send a few of them down to North Meath and South Meath as well and to Meath in general.

Mr. Belton

It is so popular we cannot keep pace with it.

Mr. Lynch

I outlined here a few weeks ago the decline in the building trade. I gave facts and figures for the number of houses that had been built and the numbers that are not being built. There is an eight week delay in carrying out inspections and another six weeks delay in the payment of the grant. At this stage, a young married man who has his loan approved is under pressure from the bank for bridging finance and the grant comes in very handy at that stage and if there is anything that can be done to expedite the grant it will be well worthwhile.

Mr. Belton

It shows how many houses are being built.

Mr. Fitzsimons

Senator Lynch to continue without interruption.

Mr. Lynch

We have a system whereby we are sending inspectors from Dublin to Donegal, Dublin to Kerry, Dublin to Galway to carry out inspections. It is time that we did a cost saving exercise once again and got the local authorities to implement both the new house grant system and the home improvement grant scheme. We have too much duplication. We talk of unemployment benefits and social welfare being paid out but there is much waste too. I am not saying that it is deliberate. A whole new look should be taken at the structures we operate.

We have a system whereby an engineer from a local authority inspects a site. Engineers inspect the building for the purpose of the loan from the local authority and then there is a duplication of inspectors being sent from Dublin arriving eight or ten weeks after they should have arrived to carry out a further inspection to point out the few defects that are still left in the place before the grant can be finally paid and having to come back again to approve the job.

Mr. Belton

The officials in the Meath Council are a bit slow in regard to the inspection of new houses.

Mr. Lynch

I will conclude because I know that Senator Daly has a few words to say about the motor trade. I will listen to him with interest.

Mr. Daly

I thank the Senator who is always accommodating and I appreciate that. The Financial Statement by the Minister for Finance on 29 January 1986 contained the welcome decision to reduce the rate of VAT on selected services to 10 per cent. As a result, the reduced rate of 10 per cent will apply to the repair and maintenance of movable goods.

In June 1983 the then Minister for Finance, Deputy Alan Dukes, following extended representations from the society, agreed to reduce to 5 per cent the rate of VAT for the servicing and repair of motor vehicles to enable registered garage owners to attract business from the black economy and thereby provide a stimulus to additional employment or, at least, arrest the decline in employment in the motor trade.

The low rate applied not only to the labour content but also to the replacement parts fitted, whereas the standard rate of VAT continued to apply to replacement parts sold across the counter, with the result that the registered garage trade had a distinct advantage over the "nixer" operator. The principle of applying a much lower rate of VAT to replacement parts fitted to a vehicle in the course of repair or maintenance compared with the rate of VAT on sales of such parts across the counter has been recognised throughout the world motor trade as a most innovative and successful manner of enabling registered garages to compete with the black economy. The House may ask why we say "throughout the world"? There is an international motor trade conference every two years and this came up in Tokyo recently.

Mr. Lynch

Was the Senator there?

Mr. Daly

I was not but I was represented. That was not on Luke's list of priorities. Because the then Minister for Finance insisted that a reduction in the VAT rate on motor vehicle repairs and maintenance could be granted only on a self-financing basis, the society reluctantly agreed at the time to an increase in the excise duty on private cars by 4.5 percentage points. The extension of the low rate of VAT to the repair and maintenance of movable goods generally without any requirement on other trades to make the arrangement self-financing leaves the motor trade in the most unsatisfactory position that it is paying a very heavy price for a concession which is now being granted to service trades generally.

We think that it is fair to assume that, had the society not agreed to the self-financing arrangement at the time, the low rate of VAT would, under the current proposal, be applied to vehicle repairs and maintenance without any increase in the excise duty on private cars. In the interests of equitable treatment of the motor trade and the avoidance of unfair discrimination, we now ask that the opportunity of the Finance Bill should be taken to make a reduction in the excise duty on private cars to offset the 4.5 percentage points increase which the Minister for Finance insisted upon in June 1983.

I must say, at this stage, that in the budget the Minister gave us a reduction of 1.5 percentage points so that for people who are buying cars there would be no increase when the rate was increased to 25 per cent. I would say that the figure of 3 per cent would be fair enough.

Apart from the question of discrimination against the motor industry, it is clear that the industry is badly in need of relief from the heavy burden of taxation on the purchase of a new car as is evident from the continuing sluggish demand. The fact that for the past few years more new cars have been sold in Northern Ireland with less than half the population of the Republic is adequate testimony to the consequences of the excessive burden of new car taxes in the Republic.

The essence of our argument is that from 1 July next the repair and maintenance of all types of movable goods will attract the lower rate rather than the standard rate of VAT without any requirement on the trades or industries concerned to make the arrangement self-financing, as was asked of the motor industry back in 1983. I have no doubt that the Minister will argue that in last year's budget the motor industry was given a concession with the reduction in the excise duty on spare parts from 25 per cent to 10 per cent. However, that concession cost the Minister only £3 million in a full year, whereas he gained about £10 million from the increase of 4.5 percentage points in the excise duty in 1983. Furthermore, we are convinced that the excise duty on spare parts — unique to Ireland in the EC — was scheduled for removal because (i) the EC do not like it and (ii) it added to Border difficulties.

I should like to give a few figures to show the comparison with Northern Ireland. New car registrations in the Republic were: in 1981, 106,070; 1982, 72,811; 1983, 60,769; 1984, 56,451; 1985, 60,000. In Northern Ireland in 1981 they were 44,000; in 1982, 54,000; 1983, 64,000; 1984, 68,000 and 1985, 66,000. In the North of Ireland with a smaller population, with six counties, they have had a larger sale of cars than we have had throughout that period. Excise duty receipts in the Republic were: 1981, £131.5 million; 1982, £114 million; 1983, £103 million and 1984, £109.6 million. That was because of the reduced number of sales of cars.

Total Exchequer receipts from motor taxes were as follows: in 1980, the customs duty was £8.3 million; excise £323.2 million, VAT £85.2 million, road tax £25.5 million — total taxes £442.2 million. In 1981, it was £603.1 million; in 1982 £681.3 million; in 1983, £784.8 million and in 1985, £925.9 million. Taxation almost doubled and car sales almost halved. The loss to the Exchequer invovled in the higher price of cars is apparent.

In the North taxation on all cars is 25 per cent. In the Republic the tax on cars up to two litres is 72 per cent, large cars, over two litres, 81 per cent. It is evident why sales are so high in the North and so low here.

Petrol sales through retail outlets in 1980, 1,325 million; in 1981, 1,331 million; in 1982, 1,280; and 1,094,714 in 1985. That is in thousands of litres. The figures show a drop of 17.4 per cent in sales and yet there was a 66 per cent increase in price. Since 1980 duty receipts have increased by 66 per cent with a fall of 17.4 per cent in sales.

We lost petrol sales across the Border between 1982 and 1984. Deliveries of petrol to outlets in Border areas dropped by 58 million litres causing the closure of 57 filling stations and the loss of at least 100 jobs. Since 1980 some 9,000 jobs have been lost in the retail motor trade, down from 24,000 to 15,000. Between 200 and 300 retail motor trade outlets have closed down and most motor traders have had to trim employment levels to, on average two-thirds of their 1980 labour force, in some serious cases to one-half their labour force six years ago. Total registered apprentices in 1980, 4,339; in 1981, 3,546; 1982, 3,236; 1983, 2,842; 1984, 2,552 and 1985, 2,450. You can see that from 1980 to 1985 there has been a 50 per cent drop in apprenticeships. If things pick up again, as is likely from present indicators, we will not have mechanics to service the cars.

In 1973, capital allowance was introduced at £2,500 for the average representatives' car. In 1976 that was increased to £3,500. In 1986 it was increased to £4,000. Average representives' cars cost about £10,000. A business was allowed to depreciate only £4,000 in its accounts over five years. A company could trade at a loss but wind up paying corporation tax of up to 50 per cent on disallowed motoring expenses. This arrangement is unique to Ireland. There are an awful lot of things unique to Ireland. The position in Ireland in regard to benefit in kind is that the company supplies the car costing £10,000 and pays all motoring expenses including petrol. The employee is taxed on 20 per cent of £10,000 at his top rate, i.e. at £2,000, and the assessment remains at that level irrespective of whether the car was purchased new or used. The position in the UK is that employees are assessed on the following flat amounts: cars under four year, 1,300 cc or less, £450; 1,300cc to 1,800cc, £575; over 1,800cc, £900; four years and over, £300 for a 1,300 cc or less; 1,300 cc to 1,800cc, £380 and over 1,800 cc, £600. The petrol charge is £450 for cars of 1,300 cc or less; £575 for 1,300 cc to 1,800 cc. Petrol charge: £450 for cars of 1,300 cc or less, £575 for 1,300 to 1,800 cc and over 1,800 cc £900.

The employee driving an average representative's car would face an assessment of £1,150 compared with £2,000 in the Republic. Irish employees' tax assessment for benefit in kind is twice that of their UK counterparts who also have the benefit of wider income tax bands, leaving them with a good deal less tax to pay.

Consequently, executives and representatives who previously had their cars replaced with new cars every two to three years are holding on to their cars for much longer periods. The Exchequer loses out because a £10,000 car would generate £4,170 in excise duty and VAT, giving the Exchequer more than it would receive in respect of the employee's benefit in kind.

Regarding balance of trade, it is sometimes argued that imports of new cars should be discouraged because of their impact on the balance of payments. The EC would scarcely accept this approach. Why should we discourage imports of cars which cannot economically be produced here and not discourage imports of food products which we should be able to produce here in abundance?

Senators Lynch, Lennon, McMahon and I among others are members of the Joint Committee on Small Businesses.

This committee have done a lot of work for small businesses. Mention has been made of taxation in the context of the construction industry. We have heard how the builders would be so much better off if so and so had been done. The Minister will know what I mean by that.

As reported at columns, 124 to 127 of the Official Report for 17 April, 1986, I said:

The construction industry has been through a traumatic time in recent years. Jobs have been lost, firms have closed down and there are many empty factories, office blocks and other vacant premises on the market. While construction will always have peaks and valleys in demand, more so than in many sectors of the economy, the fundamental reason for the present crisis is that it grew too big too quickly in the seventies. If the construction sector reaches a stage where it accounts for nearly one-fifth of the national output of any developed country, as happened here in 1979, there is only one direction for construction to take — a very sharp turn downwards. In future we will have to plan a more stable environment for the construction industry based on real needs rather than on illusions such as that (1) the State will take up the 60 per cent of new office space, as happened in the 1970s; (2) that if the State builds advance factories all over the place manufacturing tenants will automatically follow; (3) that if we build an international airport in lightly populated areas there will be major increases in commercial air traffic. That may be seen in the near future. Apart from the dubious commercial basis for these investment decisions there were also deemed to be good for construction, that a healthy construction industry would, like a rising tide, lift all boats. It does not work like that.

The present state of construction is in part a consequence of these illusions. These remarks are not designed to denigrate construction but merely to put construction in its proper perspective so that it and the economy as a whole may benefit. Our report recognises that the State, which now ultimately finances 70 per cent of construction output, has a role to play in ensuring some relative stability in the sector. In the report we chart the future priorities for the public capital programme as national and regional roads, sanitary services, renovation of existing housing stock and urban renewal, tourism, leisure and community facilities.

A good trunk road infrastructure is an essential and integral part of any developed economy. We neglected the development of our roads for years. We are starting to put that right with the allocations announced in the national plan. We allocated for road improvement in 1985 £125 million, in 1986 £140 million and in 1987 £155 million. We have years of road construction ahead of us. Before we achieve EC standards in recommendation 261 of the report we advise that investment in national and regional routes be maintained at a high level. We also have two recommendations, 61 and 67, designed to encourage private investment in infrastructural projects. Roads should be our primary infrastructural priority. Because we have built over 250,000 new dwellings since 1970 we tend to overlook the fact that we have also 250,000 or so houses that are over 60 years old. We need to conserve our older buildings where this is possible and to renew our decaying town centres. We have published a series of recommendations in this regard, Nos. 31 to 38 of the report. The Government package of 23 October has lessened the impact of our recommendation which we published on 28 November but... nonetheless I commend our recommendations as an important contribution to urban renewal.

In our third report, which dealt with tourism, catering, and leisure, we identified the problems which have caused very poor tourism performance and all the things we need to do to get it right. We need tourism related investment in construction. On page 37 of our report we stated:

There is an urgent need to invest in leisure facilities to meet the needs of both the resident population and tourists. This investment should aim at updating existing facilities to the highest international standards, and providing new facilities in strategic locations to meet the requirements of the market.

Areas of investment would include indoor leisure facilities; restoration of historical buildings and industrial architecture; development of marinas and facilities for pleasure craft users and swimming pools.

The south-west is the main tourism region and there is a major regional need for both public and private investment in these areas.

I should like to repeat what I said to the Minister for the Environment who was in this House when I made this speech on the report.

I went on to talk about the Custom House dock area. I said:

The work in progress there is excellent and going in the right direction. However, there is a suggestion I would like to make to him. There is a crying need in this country for an exhibition centre. I was in Glasgow recently where they have built a custom-built exhibition centre in the docklands. They are also providing for a hotel on those lands. The RDS is not suitable for industrial exhibitions because it was not designed for this purpose. I am a member of another body and we run a motor show there every two years. Each year the attendance at the show is increasing. This year it was 106,000. Unfortunately many people have only the weekends to attend these shows. We had 27,000 on the Sunday and I am sure 4,000 or 5,000 were turned away. People queued for a long time to gain admission. It was not safe to allow too many people in at the same time. The result was that many were disappointed. I have no doubt that we could double that attendance if we had accommodation for it. The same would apply to other people. I would like if the Minister would go to Glasgow and have a look at the project over there. It is the nicest building I have seen. I go to motor shows all over Europe. There is a new building in Birmingham which has only been there for two years. The building in Glasgow is custom built, and is a beautiful job. I do not think it would be too expensive and it would serve many purposes. It would earn its keep in that the revenue received would cover the costs and it would provide something for this capital city of which we are all so proud. It would give a facility that is badly needed. If the Minister cannot go himself perhaps he could send somebody to have a look at it.

I would like to pay tribute to the chairman and vice-chairman of our committee and all its members, that is Mr. Ivan Yates and Mr. Michael Lynch, also our very efficient clerk, Mr. Shane McCauley. It is an all-party committee and has worked long hours. Each and every member of that committee is a dedicated member and there was never any hassle in there. Everybody works, takes their turn and contributes, and there is a great attendance. As the Minister is not here I will continue, and I am sure he will be able to reply.

The Minister said that he is not upset at the fact that the sales of new imported cars — to whose manufacture Irish people have contributed little or nothing — are down, and which have created a few or no jobs in the manufacturing process in Ireland. When Irish assembly ceased here a couple of years ago — to which we had a derogation — and before that Irish assembly ceased the motor importers and distributors provided alternative employment for assembly workers. The number of people employed in the manufacture of motor components for export in Ireland today is in the region of 7,000 people. A greater number by far than was ever employed in the assembly motor industry. I would quote from the Minister's speech:

My preference would always be to buy a secondhand car because I do not believe in buying a new car and giving employment overseas.

That is my view for what it is worth. There is a tendency to want a new car when a secondhand car would be just as good and when keeping and repairing the old car would be even better, because then one would be giving employment to mechanics rather than employing machines in Japan—

Unless the Minister has something like a magic wand that he can wave, how can you have secondhand cars if you do not sell new cars? That is the question I would like to ask him. Then he said:

Of course we must try to ensure that our cars are in good and safe working order, but in many cases our existing stock of cars is not properly maintained by the owners. Vehicles are allowed to fall into a poor state of repair frequently with neglect of the servicing of the cars and hence the neglect of an opportunity to create employment here. My fiscal policy regarding motor cars is to do everything possible to encourage people to maintain existing cars in good working order and prolong their life rather than take the superficially easy but ultimately more damaging option of buying new cars. There is a tendency to see a new car as some sort of status symbol. It should not be seen in that light. The aim should be rather to encourage the prolongation of the life of our existing car stock.

I would go part of the way with the Minister, that our secondhand cars are not serviced as much as they should be and there is neglect there. I would respectfully point out to the Minister that this Government and all previous Governments down through the years have failed in their duty to provide an MOT system for Ireland, that is the Ministry of Transport system that they have in the UK. In Ireland, without fear of contradiction, there are anything up to 40,000 cars on the road that are not roadworthy and not fit to be on the road. Some people cannot afford to get the repairs done. Others have to have cars for their workplace and their wages, with their taxes and expenses do not allow them to do the servicing required.

Minister of State at the Department of the Taoiseach (Mr. Nealon)

What percentage was that?

Mr. Daly

I do not know what the total percentage is but I can get it for the Minister. In the five years alone from 1981 to 1985, in 1981 there was 106,000; in 1982, 72,000; in 1983, 60,000; in 1984, 56,000 and in 1985, 60,000. That would be a one-third of a million cars in the country and that is only since 1981. There are at least a million cars, that is a car for every three of the population. Compare the drop in cars from 120,000 five years ago to 60,000 with the situation for the same period in Northern Ireland: in 1981 there was 44,427; in 1982, 54,793; in 1983, 64,493; in 1984, 68,627 and 1985, 66,629. In the Six Counties they have sold 6,000 more cars than were sold in the Twenty-six Counties. The taxation on our side of the Border is 82 per cent — the combined taxes of VAT and excise duties; the tax in the North of Ireland is 25 per cent flat. A car that would retail in the North of Ireland for £6,000 or less would be £9,000. That might seem bad from the UK because people do not see it from the distance. Take a person living in Donegal, Raphoe or Strabane. Across the road from him they can pay £3,000 less for their car. The result is that they buy bigger and better cars. I believe there are more BMWs in the North of Ireland than there are in England. That is another day's work. I would like the Minister when he is replying to explain that to me because his remarks, to put it mildly, were highly offensive to say that there was nobody employed in the motor industry, after it being the only industry that provided greater employment when all their assembly was shut down. There are now 7,000 people engaged and it is all for export. I, as a small garage owner, employ 25 people and if there were no new cars I have no doubt that the five members of our family could run it. So there would be 20 people unemployed if there were no new cars. I do not know how the Minister arrived at that. In the interest of accuracy I would like it corrected.

Mr. Cassidy

I do not wish to detain the House too long as many speakers have highlighted most of the points which I would like to have covered. With all the amendments introduced by the Minister in the Dáil, this Finance Bill cannot inspire confidence. If the Government do not have the confidence in it how can they expect the public to have confidence in them as a Government? The January budget needed many amendments but the most glaringly bad legislation, namely the DIRT tax was not amended and is still there. This tax will hit the weakest section of our community hardest, for example the tax on their savings. That is a deplorable act when one thinks of all the violent acts that took place in Ireland over the last number of years and now we are back to square one when people had confidence in placing their money for their burials and on most occasions they have to go back and rethink the whole situation again because of this very unfair tax, known as DIRT tax. It will also hit the unemployed through the DIRT tax bill imposed on the sporting organisations to which they turn to spend their time constructively. Finally, the poor in Ireland or the Third World who benefit from the charities who would be liable to DIRT under this Bill will also be hit. Yesterday in this House we had the former Presidents of the Gaelic Athletic Association, the General Secretary and the former General Secretary coming in to point out the serious situation that they find themselves in. We all know that the Gaelic Athletic Association is one of our top three voluntary organisations and they do much for young people. The efforts they have made down through the years for Irish life are unquestioned by any Member, whether from the Upper House or Lower House, or no matter what walk of life one comes from. I hope something can be done in relation to this and, in particular, the Gaelic Athletic Association's plea here to us yesterday. The VAT on hurleys is totally against the Irishness of Ireland, the Irishness of her people and the Irishness of where we came from and where we are now going to go.

Some Government speakers have tried to make out that the DIRT tax is a noble attempt to tax the banks. We all know, it is no such thing. Even a child could see that the banks would pass the cost on to consumers. We all know from bitter experience that this is indeed the case. Most of these customers will cease to invest their money, and the Irish economy which, in recent years, has been starved of investment will suffer. This is basic economics. We should be promoting investment not making laws which will prevent it. If the Government want to take on the financial institutions why do they not do something about interest rates, particularly the rates for commercial borrowing which at 14½ and 15 per cent are ludicrous.

It is no secret in business or the banking world that most of the deposits are heading north of the Border or heading way out of the country. This is one area the Government and the Minister should have a look at in this Finance Bill if they want to make a real contribution towards getting the economy back on a sound footing. Many Irish companies cannot afford to borrow money to fulfil orders because of this incredibly high rate of interest at 15 or 16 per cent. Business is lost, the company stagnates, redundancies follow and the State foots the Bill. This is not a winning way and is the one great example of where this Government are falling down at present. No government, irrespective of what political parties forms the government, are going to be able to come to grips with unemployment until they give encouragement to the companies, incentives to the workers and allow a more favourable way of investing money in this country and keeping it in circulation.

In my opinion this Finance Bill is not a very inspiring piece of legislation. It will, in part, reduce employment but how will it encourage increased economic activity and how will it help the poor? How can we pass it in this House? Yet again we have a Finance Bill, the priority of which is the collection of revenue. It invents new taxes and abolishes food subsidies. There are no lengths to which this Government will not go to collect taxes in order to balance their books. We have the worst of both worlds. When international interest rates are high we are told that reductions of taxation could not be afforded because of the great burden of interest payments to our national debt. Now when interest rates are low and when the burden of this rate is not as great, we are still told that the reduction of taxation cannot be afforded. This blinkered, one-dimensional view of taxation by this Coalition Government has stifled economic activity and will continue to do so if this Bill is passed.

Taxation has another dimension. A more innovative taxation policy can send out signals to investors which will encourage investment and get the economy moving again. Is it fair that the single person who earns over £51 a week is liable for tax? I do not think it is. Similarly a family with an income of over £102 a week is also liable for tax. These thresholds are much too low and attempts by the Fianna Fáil Party spokesman on Finance, Deputy Michael O'Kennedy, to get limits for tax exemptions raised for the elderly and for the low paid were met by the same old line of this Government — we cannot afford it. If we cannot afford it, a married person with two children cannot afford to be taxed on £102 a week. It is a good indication of this Government's so-called commitment to social justice that they did not increase the tax exemption limits. The result is that more and more low income people will be brought into the tax net this year. Because of the Government's policy on taxing everything and everyone and extending it to the low paid, it will be to many workers' advantage to go on the dole and enjoy the other welfare benefits they can get. This is not an attack on the level of these entitlements. They are barely adequate. It is an attack on a policy which makes low paid workers pay for the luxury of having a job. The Finance Bill should not be about figures. It should be about people and the way it will affect the lives of all of these people. Not raising exemption thresholds may be a tidy piece of work by politicians and economists which eliminates bureaucracy but for others, the people whom this change affects, it can have disastrous, destroying financial consequences.

This Government's tunnel vision and lack of social concern for many people who find it difficult to make ends meet is driving people into emigration and into the black economy. The Government lose in both of these situations. If young people emigrate, the country loses part of its greatest resources, its people. If people work within the black economy, the Government lose out on what it gives to the tax revenue. We all know of the appalling emigration situation which exists at present. We are back to the times of the fifties. As one of the youngest Members in the Upper House I barely remember the late fifties but I remember in my home town, Castlepollard, north Westmeath, two families going to England to find work. In 1984 Castletown Geoghegan and Brownstown were in the County Westmeath county hurling final. Today 11 players from the Castletown Geoghegan team have emigrated to America. Not alone have they emigrated but their families have gone as well.

We are looking to the Minister to do something for the people of Ireland and, in particular, to do something for the young people of Ireland. I know that he has the same problems with the Cabinet and with his Taoiseach and Tánaiste as every other Minister for Finance has had but I know that the Minister, Deputy Bruton, if he puts his mind down to it, can have his way in more cases than most men in his position because he is a very determined man and a man who is highly respected. I, coming from the same constituency as the Minister, know that this is true. The way to solve the unemployment position is to create jobs. As long as people get money for doing nothing, no matter what Minister for Finance we have, we will not solve the unemployment situation.

When Fianna Fáil returned to power after a Coalition Government's term of office they turned to the building industry to get the economy moving again. In Australia two years ago the economy was on its heels. Now they have got it going again through the building industry. Three years ago in Canada the economy was decimated and now they have got it going through the building industry. When the unions in Toronto ring people here — I had a call only two weeks ago — looking for 50 bricklayers, that shows what can be done by the building industry. We all know that nearly 50 per cent of the building industry are unemployed and that over 90 per cent of the money invested in the building industry here stays in circulation here. Surely the Minister can do for the building industry what Fianna Fáil will do when they get back? There are 250,000 people unemployed. If the emigration of the last four years is added the figure is in the region of 400,000. No matter who is in power no one likes to see intelligent, well educated people leaving the country. When one visits America, England, Canada or Australia one realises the incidence of emigration. Of the number of return tickets to America issued in January, 10,200 have not come back. That is a clear indication that people went in search of work and are either employed now or are still seeking work in the United States.

My home town of Castlepollard enters the tidy towns competition every year and does extremely well because it is a very beautiful part of the Minister's and my constituency. If we had 50 yards of any part of the quays from the Aisling Hotel to O'Connell Street in Castlepollard we could not enter for this competition. There are the most derelict buildings in Europe there, with the exception of about 10 per cent. It is now a known fact in the film industry that if you want to get a city suitable for a war film, whether it is the first world war or the second world war, Dublin is now the number one location. It is an appalling situation to be in 12 years after our entry into the EC.

People with money who cannot invest it here because they will be heavily taxed are forming companies in England and other places. They are making investments outside the country. We know that if the climate was right here they would take back those investments and invest them to create Irish jobs. We accept the philosophy, we accept the word of the Government that the money is not there. We need people to come in and invest money in our economy. Irish people are the easiest to get back to spend money in the economy. They cannot bring their investments back because they see this DIRT tax, they see all sorts of disincentives to bring money in. What do you do?

You have to come up with an idea. You have to say: "if you build an office block, if you build flats or whatever on the quays I will give you ten years tax free on your investment". You then have the money coming in, you have it going into circulation, 90 per cent of it staying here and everything starts to lift. The one thing that is lacking at the moment is confidence. I am a self-employed business man. I know, from talking to people in the same walk of life they have not got confidence. With a year and a half to go in the life of the Coalition Government this may be the time to make a name for themselves. The Minister could go to higher places than the Ministry for Finance. Our constituency would be proud of that. The Minister should have the courage to do something for the building industry. That seems to be the big difference in creating jobs between the Coalition Government and Fianna Fáil.

I would like to make an appeal on behalf of the hotel and tourist industry in general. Having experience in this trade I know that for the last five years with the exception of the cities, and perhaps only Dublin, the hotel trade is on the decline. Last year was a good year for most of the large hotels in Dublin who had well organised tours coming from America, Germany and England. Most hotels around the country are badly in need of repair. Hoteliers would like to be able to refurbish their hotels, paint them and put in new furniture. The basic needs of any person going into a hotel for bed and breakfast or for holidays is a bathroom with each room or at the very minimum, a shower.

It should be a basic standard recognised by the Government, the Minister and Bord Fáilte that every hotel bedroom must have a bathroom. The Minister should consider the possibility of giving a generous grant to hoteliers for the installation of bathrooms and the improvement of standards. The hospitality is there, the food is there. All that is required in most family-run hotels and most hotels that will stay in the industry and are not just big empires that are losing touch with the people are bathrooms and showers. Ireland is known as Ireland of the welcomes. The Ireland of the welcomes is the Ireland where the family meet the guests who come back year after year for fishing or other pursuits. Meath is a good strong fishing area. Many Germans and other tourists visit the midlands in connection with fishing. During May, the month of the mayfly there are 50 boats on Lake Derravaragh every day. My friends have said if any incentive can be given for the provision of bathrooms in hotels and guesthouses. These are regarded as a very basic modern requirement.

Minister for Finance (Mr. J. Bruton)

There is a scheme there.

Mr. Cassidy

They tell me that under the scheme they will have to guarantee they will spend a certain amount of money. To qualify you have to bring in so many experts to draw up the plan for the scheme that it will cost a minimum of £2,000 before the work starts. Most of these hotels have six and seven bedrooms. We have a hotel in my town just trying to survive from week to week. One night a week they have a function and they do not make money on it. By the look of the liquor laws that will go as well. Most of these hotels are family run hotels and they just want to get in the basic requirements. They have the means and they have the hospitality, but when the people go to the bedrooms they feel very let down. I would like the Minister to have a look into it and do something for the hotel trade.

During the remainder of the lifetime of the Coalition Government, they should do something to create jobs for our young people. The young people of today are the men and women of tomorrow. They will judge the Government on their performance to deliver, not on their performance to do anything else. If the Government do not deliver, the people will say: we will pass judgment in our way against that Government because they did not deliver to us. They are all looking for a job at the end of the day.

Minister for Finance (Mr. J. Bruton)

I would like to thank the Seanad for the welcome they have given to the Finance Bill and for the kind of remarks that have been expressed by Senators on all sides. In my own personal regard I appreciate these very much. I appreciate indeed the kind of remarks expressed by those who share the same constituency as myself, Senators Fitzsimons and Cassidy who are both in the House at the present time.

An Cathaoirleach

Their constituency is well looked after.

Mr. J. Bruton

It is.

Mr. Cassidy

It is a large constituency.

Mr. J. Bruton

We will start with Castlepollard. I would like to say in response to the remarks of Senator Cassidy, that I share his concern for the development of the tourist industry particularly in the midlands. The scheme, which we introduced to provide grants for the improvement of hotel accommodation, is a very good scheme. There was no scheme until that one was announced in October. Indeed, to have initiated it at a time of considerably straitened public finances was a reasonable and good effort on the part of the Government. It was very highly welcomed by the tourist industry at the time. It is fair to say that the Government are the first one ever to have published a White Paper on Tourism setting out in a comprehensive form, involving not just the Department of Tourism, but all the other Departments, of our policy and our recognition that tourism is just as important an industry in terms of the ability to generate jobs.

In delivering that commitment the Government reduced the level of VAT on hotel accommodation, boat hire, car hire and on meals. We then further introduced a system of grants, to which I have just referred, to refurbish accommodation, which has been a great success and the number of people taking it up has been very considerable. In addition to that, the various schemes initiated by the Government to combat unemployment, such as the Teamwork scheme and social employment scheme, are all being used extensively to improve the tourist amenities in the country. I believe, as do many Senators, that the tourist industry has great potential as an employment generator in the country. I agree with the emphasis placed on it by Senators during the debate.

I would like to return to another theme mentioned by Senator Cassidy — I know it was referred to by a number of other speakers in the course of the debate — the Government's attitude to the construction industry. First of all, may I say that the Government do not believe in a stop-go approach to construction. There is no favour being done to employees in the building industry or to builders by a splurge lasting about a year, of capital programmes of various kinds to create employment in the construction industry which cannot be sustained in subsequent years. Indeed, the construction industry has suffered from the stop-go approach in the past. When the Government of the day — this is not a partisan remark, it has been attempted by various Governments — decided to go for a short term injection of funds into the construction industry the net result of that was not necessarily to assist existing building firms to any great degree, but to draw in, because of the over-heating of the sector, a whole lot of new competitors into the industry, people setting up new firms and so forth and then when the money was no longer available, they were still there competing and under-cutting the existing well-established firms.

It is much more desirable to have a steady path of controlled business for the construction industry which ensures that the industry, as far as possible, can stay on a steady path, with existing firms, have a reasonable level of business, rather than the stop-go approach, which has tended to be our approach to construction as an industry in the past. The Government are laying the foundation for a sustained recovery in construction. I already have referred to the fact that there is evidence — and we see it today — of increased demand for houses. The level of demand for housing at the present time from the private sector, because of the increases in consumer spending and because of the prospective improvements in living standards generally as a result of the fall in inflation, the increases in wages and so forth, exceeds supply. It exceeds the number of new house starts occurring at the present time. In addition to that, the Government have put considerable resources into refurbishment of our existing housing stock. There is no use, particularly from a national investment point of view, in building a whole lot of new houses and neglecting, at the same time, existing houses which are being allowed to fall down. Our aim should be of course, to conserve our existing housing stock, and the housing improvement scheme does that.

Senator Cassidy also referred to the problems of urban renewal in this country. The Finance Bill specifically addresses that problem by providing a series of tax incentives, exactly as Senator Cassidy was saying, to give private developers an opportunity to refurbish derelict sites in the centre of Dublin. Dublin is not the only city in Ireland benefiting from this. Ireland is not the only country in Europe, or indeed in the world, that has suffered from inner decay. We are one of the few countries who have put in place specific tax measures to counteract that problem. It is being done in this Finance Bill. It will provide overtime to encourage people to refurbish existing buildings. There is not a lot of point building suburbs that we do not have serviced when there are centre city areas which have churches and schools which are derelict and are being deserted by the population. That is something that can be usefully debated in the Seanad on Committee Stage. It was not reached in the Dáil. That whole section was not debated in the Dáil at all because of the time allocation there. Perhaps it would benefit from discussions here.

Mr. Cassidy

We can tease it out here.

Mr. J. Bruton

Exactly. I would like to refer to a few remarks which were made by Senator Daly about my attitude to the motor trade. I would like to say that it is my view that the motor trade constitutes an important part of our economy. I was saying, however, that tax policy should deliberately favour that segment of the motor trade which is home generated rather than import generated. That is why our policy is to reduce the level of taxation on spare parts, to reduce the level of taxation on repair services, so that, as far as possible, Irish mechanics will be employed prolonging the life of our existing stock of motor cars. The repair segment is the most employment-intensive part of the motor trade. That is what we want, particularly to encourage.

I know there is much criticism of the fact that the level of excise duty on new cars imported from overseas is rather high and comparisons are made with the United Kingdom. The United Kingdom, as the Seanad is aware, is a country which has a substantial motor industry, producing the finished product. Obviously they want to boost their own industry, just as a country that is a substantial food producer will tend to have lower taxation on food. We have food exempt from tax. So, also, will a country which is a large motor car producer or exporter like Britain, tend to have a low VAT rate or excise tax on the product it produces. To suggest that we should model our policy on that of a neighbouring country which has an economy of a quite different structure, to my mind does not make sense. While it is reasonable to make a case for improvement in the tax treatment of the motor trade, any improvement should be made to suit Irish interests, in particular, and not as a means of encouraging the importation of new cars to replace existing cars that could with the employment of Irish mechanics have a prolonged life rather than being replaced and scrapped. This is the policy I am advocating as far as the motor trade is concerned. It is a policy Senator Daly should appreciate a little better perhaps than his remarks would suggest he does.

I am glad to acknowledge the welcome the Seanad gave to the various incentives in the Finance Bill, such as the incentive for profit sharing which will be recognised on all sides as very important to our economic development. Our problem as a country has been that we are not pulling together in the economic field. Workers and managers tend to pull in opposite directions. Farmers and those engaged in the food processing industry also tend to pull in opposite directions. As far as the first of those problems is concerned, the Government, by introducing tax incentive, are providing a means of solving it. Hopefully, we will see a situation, as a result of this policy, where the firm whose employees do not have shares will be at a competitive disadvantage.

A number of Senators expressed concern about the high level of interest rates at present. Of course, that is something which is very important and difficult from the point of view of investors. I am glad to say that there are prospects of a further reduction in interest rates in the next few days. It is very important that there should be continued downward pressure on interest rates. I can assure the Seanad that the Government and the Department of Finance, in particular, more so perhaps than any other, will be doing everything they can to influence interest rates in a downward direction.

As I had occasion to say outside this House lately, the Department of Finance are the biggest borrower in the country bar none. If there is any entity in Ireland that wants to see rates come down it would be the Department of Finance because we have to pay. I can assure all business people concerned that we are on the same side as they are as far as this incentive is concerned. We will do everything we can, within the prudent necessity of maintaining the value of our currency, to achieve lower interest rates.

Senator Kiely raised a number of points about the feed voucher scheme. I will be replying in detail to him as soon as possible.

I would like to refer to Senator O'Leary's points about income tax. He proposed that we should initiate a scheme whereby no taxpayer would pay more than 50 per cent of tax on his marginal income. I have to inform the Seanad that this would cost an additional £88 million. While it is highly desirable, I would like to have £88 million before I would introduce such a rate.

I would like to assure the Seanad that I am strongly of the view that we should do everything in our power to bring income tax rates down. There is no doubt that our income tax rates are far too high. I have explained, to the boredom of the Dáil and to some degree to the boredom of my own Department, that, while this is the case, the reality is, as I am sure the Seanad, is aware, that almost everything raised in income tax has to be used to service debt whereas in other countries a large proportion of income tax revenue is available for other purposes. In Ireland, virtually all of the tax revenue goes to the banks in the form of debt service. We are virtually unique in Europe in that regard. Obviously reductions in income tax are affected by outside considerations in a way that would not be the case in other jurisdictions. That is another reason why we should want to see interest rates coming down.

Senator O'Leary also said that the standard rate of tax should be 30 per cent. I have to agree that this would be desirable but whereas his earlier proposal would cost £88 million, this one would cost £210 million in a full year. The same argument applies about finding the money first.

There were a number of criticisms made about the deposit interest retention tax. There are a number of important modifications made to the original proposal which are designed to meet some of the representations that were made. Obviously, no matter what modifications one makes, there is a limit to what one can do without depriving the Revenue of the money needed from this tax.

The situation is that the Government decided on reductions in income tax. One of the ingredients necessary to pay for the £120 million in income tax cuts which are included in this Bill was the revenue from the deposit interest retention tax. If that revenue were removed, the income tax cuts made in the Finance Bill would not be possible. This is the regrettable necessity which underlies this tax.

Senator Michael Howard raised a number of queries about section 56 of the Bill relating to the possible withdrawal of relief from companies based in Shannon in respect of corporation tax. The only case in which this would be used would be where there was clear abuse of the system to engage in tax avoidance schemes that were not such as were envisaged in the original scheme when introduced. All I am doing is removing a technical defect in the draft of the original proposal which did not allow me to withdraw relief where it was clearly being abused.

Obviously, if I have the power to grant relief, I should also have the power to withdraw it if it is being abused. This will not be done lightly. Any firm being considered for withdrawal of the relief will be advised in advance that this is being considered, why it is being considered and what the firm would need to do to ensure that it would not be considered any further. It will not be done in any sense in an arbitrary way but in a very responsible way to preserve the good name of Shannon as an entity which contributes positively to our economy rather than allow it become a forum for tax holidays which was never the intention of the Irish people when the Shannon Free Airport Development Company was first established.

Senator Conway made some suggestions also about the construction industry. I have already replied to these in my reply to Senator Cassidy's contribution. Senator Conway suggested that the VAT on building might be reduced to 5 per cent. This would cost £50 million. It is money we do not have available at present.

Mr. Cassidy

How would the Minister get it if it was closed down?

Mr. J. Bruton

It is not closed down. As I have already illustrated to the Seanad, the prospects are for a considerable resurgence in activity in the construction sector over the next few months as a result of the increased demand for housing and also the full effect of the Government's house improvement grants scheme, which I am sure Senators from rural Ireland, in particular, will realise has evoked very great interest on the part of people who are now undertaking schemes to improve their houses.

Senator Hussey raised the question, what happens when the farm is transferred to the joint ownership of a couple only one of whom will qualify for exemption under section 93 — the stamp duty relief. The position is that only that proportion of the farm which is transferred to the qualified person will be exempted from stamp duty. Obviously, that is only the logical extension of the scheme as it stands.

I should like to conclude my remarks by saying that the purpose of this Finance Bill is to provide a strong tax incentive for the economic recovery that is already under way here and to ensure that Irish business are put in a position to invest, using the incentives contained in the Bill, and ensure that the increase in demand in the shops from Irish people which is resulting from the fall in oil prices, the fall in inflation and the increase in wages will be met by Irish products produced by Irish firms giving jobs in Ireland rather than by imports. We have designed the Bill in a very effective way to ensure that that happens. I appeal to Senators to use their considerable influence with the vocational organisations who nominate them and with their constituents and neighbours throughout Ireland to get them to understand the incentives contained in the Finance Bill and to use them.

I was informed recently of a survey that was conducted by a very prestigious business organisation amongst its own members in this city, probably the most prestigious business organisation in this city. They were asked how many of them understood how the business development scheme worked. That scheme has been in place since 1984 giving a very generous tax incentive for people to invest in manufacturing business. The answer came back that less than half of them understood how the scheme worked. That scheme has been in place for two years almost. We need to explain much more effectively to people what opportunities exist for them in this Finance Bill. The Government can only create the incentives and it is up to the people in business to understand them and use them. As far as I am concerned, as Minister for Finance, it is my intention to travel this country and meet business people on an organised basis to explain the incentives contained in this Finance Bill directly to them so that nobody can claim that for lack of knowledge they have passed up an opportunity that this House, and the Dáil, has given to them in the form of very generous incentives. We need the investment now, not in two years time. We need people who will understand the tax incentives, understand the marketing opportunities and use them. I ask Members of the House to assist in whatever way they can in the national interest in getting our business people who have the ability to take risks to study the Bill, understand the tax incentives and get to work creating jobs and not be hanging back waiting for somebody else to do the job.

Question put and agreed to.

An Cathaoirleach

When is it proposed to take the next Stage?

Professor Dooge

It is proposed to take Committee Stage on Tuesday next, 20 May and to devote Tuesday and Wednesday to Committee and remaining Stages of the Bill.

Committee Stage ordered for Tuesday, 20 May, 1986.

The Seanad adjourned at 6.05 p.m. until 2.30 p.m. on Tuesday, 20 May 1986.