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Seanad Éireann debate -
Thursday, 25 Jun 1987

Vol. 116 No. 12

Finance Bill, 1987 [Certified Money Bill]: Second Stage (Resumed).

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

The Minister mentioned that we have many calls for tax reform but these are not spelled out in any great detail. Very many critics ignore the budget realities. It is much easier to call for tax easement and incentives than to propose tax increases or to make proposals that could be incorporated in that area.

The Minister also said that there is continuing pressure for tax incentives to encourage business and we now have a wide range of these incentives in our tax code. He stated that they are expensive in terms of tax foregone and they are a factor in our high rate tax structure. I would be one of those who would encourage tax incentives in the area of business. They are necessary. I find it difficult to understand why we have a situation where tax is foregone. The situation must be considered on balance and if in a particular situation it is considered necessary to introduce tax incentives the necessity can only stem from the balance with regard to the country, not necessarily in terms of revenue alone but in terms of unemployment and the consequential advantage to the Government with regard to that area.

We have already spoken about unemployment. The Minister said there was no overnight solution. Of course there cannot be when we have a quarter of a million people unemployed. When people see light at the end of the tunnel it will encourage them along that path. We should see a little light along the sides of the tunnel as well. I hope we will see some steady improvement with regard to the unemployment problem. The problem will never be solved in one sudden swoop.

The exemption for income tax available to lessors of agricultural land, aged 55 or over, or who are permanently incapacitated, has been raised from £2,000 to £2,800 in section 2. I agree with this. I believe this has been a success. While increasing the amount from £2,000 to £2,800 will certainly improve the situation, perhaps reducing the age limit below 55 would also help. Was this considered? Will it be considered in the next budget? While 55 is, to many people, a reasonable age nevertheless if this scheme is a success, as has happened in other areas of the budget, progressively the age could be reduced one year at a time. This would help.

Section 4 deals with Irish people working abroad and the place of abode test for residents. I am in agreement with this. Indeed, all of us have friends who had to go abroad to seek employment legally and otherwise. Many of them are sending home their savings. It is only proper that there should be tax relief with regard to the money sent home. The ceiling for relief on individual income from an Irish manufacturing company is being increased from £7,000 to £9,000 where the company have an approved profit sharing scheme. The Minister told us this is intended as an incentive to companies to introduce profit sharing scheme. Obviously, the scheme has been successful to some degree. I am not sure how successful. It is unfortunate if it is not as successful as it should be. Perhaps this will stimulate companies in this regard.

I spoke about tourism and the Minister dealt with this in some detail. He spoke about a special package of measures prepared by the Government. I welcome this and I am glad that already it has begun to show dividends.

With regard to Chapter III of the Bill and the scheme of tax deduction at source on professional fees paid by certain public sector agencies, Senator Daly has dealt with this. I welcome his suggestion. I am not sure that I understand it fully, but knowing Senator Daly and regarding his contributions so highly, I am sure that it is worth consideration. I hope that this will be given consideration. Senator Daly highlighted the problems and there is no need for me to repeat them.

The Minister assured us that there has been a considerable amount of misunderstanding about the new system. I believe this. He stated quite categorically that no additional tax liability arises and that there are adequate safeguards to ensure that there will be no hardship and for the large majority of those liable the withholding tax is not a very heavy burden and will not disrupt their business. The Minister stated that it is not inequitable, it is not disruptive and it will not affect employment. I must accept that.

Senator Daly suggested that the greatest problem will be the cashflow and I accept that. I welcome the Minister's undertaking that its operation will be monitored closely. I ask him to ensure that in areas where it is an acute problem it will be dealt with expeditiously. I am sure this will be done.

I welcome the improvement in the provisions for the food processing sector. This is a matter that I spoke about before, where there is great potential, where we have lost out in the past with vegetables, which are perishable. I instanced the case of one farmer who lost ten acres of peas that could not be harvested. Another farmer who had produced cabbage and taken it to the market could not sell it and he had to dump it. That is unfortunate. It will take us a long time to overcome the prejudice of people who have been hurt in situations like that. I welcome that particular benefit.

I welcome the provision to extend the designated areas for urban renewal. In all areas of the city I am sure we could see this extended to the benefit of the city and all urban areas. The Minister said, that the response to the provisions incorporated in last year's Finance Act is most encouraging. I am glad that this is so and I hope through the use of this scheme that we will get rid of the problem of urban blight.

The Minister dealt with section 33 which proposes a new rate of taxation at 45 per cent in the income of banks from home loan business granted after the publication of this Bill. I made the case during the debate on last year's Finance Bill that the Revenue Commissioners are like somebody going around with a metal detector to find out where there is any revenue, where people make money and then dig it up. I feel in this situation that is more or less the position. This scheme has been a great help where the banks through their own building societies provide loans for home improvement. Perhaps it is only fair that with the growth of the scheme it should be taxed at a higher rate.

I know that there are problems in this area. We dealt with them recently in the Building Societies Bill. Some of them, for example, would be in my own particular area where I was offered — as I am sure many other people were offered — work as a valuer with the building society but the professional indemnification is so crippling that it is impossible to take this up. There are areas where there is a particular difficulty. I hope the Minister will look at those and be sympathetic to them.

With regard to Part III of the Bill and the value added tax previous speakers have spoken about the reduction from 25 per cent to 10 per cent in the rate on photographic services, waste disposal services and driving instruction as announced in the budget. I am particularly glad that this benefit is extended to a reduction in admissions to cultural, historical, artistic and scientific exhibitions. It will be welcomed generally throughout the country and will be a great help.

I mentioned, when I was dealing with farm tax that it would have eliminated accounts. I accept what the Minister says that the farm profile form will be a help in this regard for the smaller farmer, and for those who will not be assessed as being liable to tax, the farm profile form will be sufficient. I welcome that.

On the Finance Bill in this House we generally amble over a wide area as we do not have a budget debate. We will get to grips with the actual Bill when we deal with the various sections on Committee Stage.

I welcome the opportunity to speak on the Second Stage of the Finance Bill and I also welcome some important positive economic indicators that appear to be emerging over the past few weeks. I hope the Government will find the resources to capitalise upon these. In welcoming the Bill, I should say it is not an entirely uncritical welcome but my criticism is intended to be both positive and helpful. There are certain specific sections, in particular in the Minister's speech, to which I wish to address myself.

Before I do so, however, I should like to say that I listened with great interest to Senator Fitzsimons' careful, considered and wide-ranging speech. There are a number of things on which I should like to support him, one of which might appear mildly frivolous, but Senator Fitzsimons dealt with it very well, that is, the employment of the horse as part of our national symbolism, which is very appropriate considering the place of the horse in our national economy. I certainly take very well his point that, in terms of tourism, some form of spectacle comparable to the Changing of the Guard, to which the Senator referred, would be a very considerable advantage. There was during the thirties a period when the Blue Dragoons were contemplated. They managed a little canter around the city. This kind of colour introduced into our life might well have some concealed economic benefit, so I would support the Senator on that.

I would also support him very strongly on something that has no question of frivolity about it, that is, the question of the disabled person's grant. I feel that cutbacks in this area really must be resisted if we are to consider ourselves a Christian and compassionate society. It would seem to me, without re-opening the whole health cut debate, which I think would be tedious, to be utterly wrong to move against the most vulnerable sections of our society.

In welcoming the Bill, I would like simply in my opening remarks to say that it is inevitable, of course, because it is a political matter, that we would be treated to some comments that are unnecessary because they are taken as read. I hope that we will get away from this notion of every successive Government blaming the previous Government, in a kind of Chinese box syndrome. We inherited huge economic and financial problems. I was not in this House during the debate on the last Finance Bill but I certainly heard that being spelt out and it seems to go on ad infinitum. Various Governments have inherited huge financial problems apparently from each other and I do not think the Irish people wish to hear a recital of this. They wish simply to see the Government getting down and tackling those problems.

References were made to the huge outflow of capital. This is, of course, a matter of great concern. I am very glad to say, because there has been some criticism, not all of it unjustified, of the university system, that it was a distinguished colleague of mine, Dr. Antoin Murphy who first of all detected the black hole. I am very glad that the Government are taking an interest in this.

I am a little bit concerned to recall that the Taoiseach, in very properly addressing this significant economic problem, appeared to suggest that one of the functions of his Government was attracting back this money. I worry a little bit about that because it seems to me that what passed out of the economy at this stage, through the black hole, could possibly be described as hot money. I should like to know if it is to be invited back into the country, will its temperature be taken so that we may know whether it is hot or not and, if it is hot, I would like to think that some of this heat might be drawn off to warm the colder sections of our economy, those sections which other moneys apparently are incapable of reaching.

The Minister refers to positive responses to decisions taken. There are some, and I welcome them. He mentioned the fact that the focus of attention has been largely on the downside effects such as the cutbacks in the public service. I should like to support the Minister in this observation. Although I am, by no means a Thatcherite, it seems to me that you cannot effectively absorb unemployment simply by expanding public sector employment. This is an ill-effective and dangerous method of tackling unemployment because it simply serves to distort the economy.

We have, in fact, putting it simple enough for even somebody so innumerate as myself to understand, a situation in which a smaller and smaller productive segment of the economy is carrying a larger and larger non-productive segment of the economy. It seems to me that is a very dangerous situation. The Government should be, and I hope they are, addressing the expansion of that productive sector by all the means at their disposal. Of course the Government include in their programme certain specific areas such as tourism and the development of financial services. I should like to return to these a little bit later. I believe tourism is a most important element of our economy. I am a little bit concerned on the question of financial services and, as I say, I will come back to that perhaps a little bit later.

The Minister says that the budget strategy is the basis for optimism in the recovery of the economy which has been in a depressed state for several years. I have to agree with him on this and, despite the fact that it is possible to get conflicting advice, conflicting information and a conflicting assessment of our eonomy and its future from economic experts, I certainly agree with what I see to be the Minister's feeling in this matter, that there is also an intangible political element, that is, the psychological atmosphere of the country and we must have a psychological atmosphere which is attuned to the possibility of growth.

This is an element in which the political leaders of our country can play a most important and significant role. I am rather glad in fact, although I may disagree with the two major, and as I would see them, conservative political parties in this country, to see them co-operating in economic matters. It seems to me that if, for example, there had been an unscheduled slip on a political banana skin yesterday, it should not have been beyond the imagination of our political leaders to form some type of Government of national unity or national reconstruction, the degree of consensus between them being clearly now so great.

This is, as I know, a possibility because I am a frequent visitor to the Middle East and I have witnessed a very remarkable coalition between Mr. Shamir and Mr. Perez who are at least as deadly rivals as any two political figures in this country could possibly be. I saw how, with a very determined programme, financially speaking, they managed to reduce the inflation rate from over 1,000 per cent down to single figures, if not to zero. It seems to me that the people of this country are entitled to this kind of leadership if what we are facing is the kind of crisis we, the general public, are continually being told it is.

I say this partly because there is a danger of political leaders crying wolf, of the warnings being delivered to the general public becoming clichéd. There are a number of clichés, and with the greatest respect, I am sure the Minister will not resent my saying this, in the text. There is also, I regret to say, at least one split infinitive, but I will confine myself to the clichés and respond to them with a few of my own, because this appears to be a valuable political language.

I will tell the Minister that I am prepared to tighten my belt, but only if there is, as Senator Fitzsimons mentioned, light at the end of the tunnel. Continuous tightening of the belt leads to a kind of domestic financial anorexia nervosa, from which I am sure the Minister would not wish the Irish public to suffer. If the Minister really wishes to encourage the Irish people into a positive economic frame of mind, greater climate for investment and so on, I believe he is quite correct in addressing the question of tax reform. However, I should like to see it addressed a little more directly.

The Minister remarked that there is a general recognition that reform must involve widening the tax base. I quite agree. Let us see this being done. Let us see it being widened. I was most impressed by the contribution of Senator Brendan Ryan and his very precise analysis of figures. I do not wish, because I am an urban dweller myself, to lay myself open to being characterised as a farmer basher. We have great reason to be grateful to farmers. They are a highly important section of our society. Many of them battle against the elements heroically. They do so on very thin, very volatile margins. But let us be under no illusions that there are large farmers, people who are extremely wealthy and who have unquestionably, and to the great irritation of both professional people and lower paid urban workers, managed to avoid their responsibilities in tax terms.

I would say, tax the big farmers. I believe the reason this is not being done is that there is political cynicism in the two major political parties. Even if you cannot get a Government of national unity, surely it should be possible to arrive at some consensus between the two principal political parties. I know it is political caution on the parts of successive Governments who are delicate, to say the least, timid and diffident in tackling this very important matter because they believe that the next incoming Government will overturn what they do or at least that the political party then in Opposition will say to the farmers: "We would not have done that"— a great rural backlash against the party in Government. I appeal to the Minister, since discussions are apparently possible across the party lines as was evidenced by the meeting between Deputy Dukes and the Taoiseach yesterday; why not follow this up with another meeting on this important point? I believe the Irish people would be grateful for responsible leadership in this matter.

I am glad the Minister acknowledges the need for tax reform and rational discussion. However, there has been quite a lot of that already. Discussion is a very good thing but, at the end of the day, action is even better. I look forward to some degree of assurance that there will be, on a phased basis, an implementation of the recommendations of the Commission on Taxation. That would be far more convincing than a general welcome for rational discussion. We have very good, very valuable and very rational discussion.

However, no reform of the tax structures, no alteration in the underlying factors of our economy, is ever going to bring us to full employment. This, unfortunately, is a complete chimera. I do not believe it is possible. I hope it will not be seen as heartless on my part to say this, but it is something we must face. Modern Western economies have become so sophisticated, particularly in terms of the market economy, that there are a number of structural causes of unemployment which are quite ineradicable. The idea of full employment in these situations, certainly as defined in our society, is an illusion. The Government have the opportunity to completely change their colours and become socialist and going for full employment. But if you espouse a free market economy you simply are not going to get it. There is no way. Politicians must look at what we mean by employment in order to find some means of introducing value into the lives of young people, introducing a sense of worth into the lives of young people on a basis that does not automatically include what we now understand as full time employment, i.e. a job.

In the continuation of his speech the Minister, speaking of tax, refers to the situation with the farmers. He says that there are farmers who still owe tax from last year and that there are outstanding arrears of health contributions and levies to be paid by the farmers. He says, quite rightly:

It is an understandable source of frustration to the general body of taxpayers that they are not being paid.

I agree with the Minister on this. It is even more frustrating for us to realise that, as a result of these measures, some of these taxes are only going to be paid once — and then they get off the hook. As I understand it, they just pay the taxes for last year and then this system is abolished. That is not very encouraging to people on PAYE. I do not know whether they are the hardy annuals or the perennials of taxation. Recently I lost contact with my garden, but I am sure the Minister will understand what I mean. Some people have to pay every year. For others to get away with a once-off payment like this is a great deal more frustrating than the Minister realises.

I welcome section 4 which abolishes, in relation to Irish people working abroad, the place of abode test for residents and so on, but I welcome it with reservations. I certainly know people, colleagues of mine in the university, people who went through the university with me, who went abroad, made a lot of money and come back from time to time, to touch base so to speak. In some ways we must be grateful that they patronise us with their wealth, and so on, but one must be aware of the fact that this is yet another provision for the wealthy. This is geared to attract the rich back. This may be necessary, but it should be balanced with a kind of sensitivity to the needs of the poor, about which both Senator Brendan Ryan yesterday and Senator Fitzsimons today spoke so eloquently and so movingly. It would be totally unacceptable to me that even friends and colleagues of mine should be allowed to come back and be given this kind of concession, simultaneously with the paring back of allowances for the disabled. I would find that conflict quite unsustainable.

I should also like to address myself to section 6 which implements the restriction on mortgage relief. This may be socially undesirable. I say this despite the fact that I have got up to the limit in mortgage relief. I accept that, in a crisis, it is necessary and moral that the burden should be shared as evenly as possible and that those who have the capacity to invest in an asset which will, we hope, increase in value are at a higher stage and need protection less than those who are the most disadvantged members of our society. However, I would sound one warning bell. A number of people who live on the margins, economically speaking, entered into contracts for the repayment of mortgages in the belief that this allowance would not be tampered with.

This provision smacks very much of retrospective legislation, which is against natural justice. People made commitments to repay. They arranged their domestic finances in such a way that they had made provision for this and now suddenly 10 per cent of it is taken away. I appeal to the Minister not to allow this to become his first bite at people who are already pretty severely bitten. It is something about which the Minister needs to be very careful. Some people on comparatively modest incomes wish to be good citizens and to use mortgage relief as an investment in their society, in their community and to provide home and shelter for their families and their children but they may find themselves in difficulties particularly in a situation where there is very tight income restraint.

I notice, of course, that the Minister does refer to the fact that interest rates are going down. I congratulate both himself and the previous Government because there has been a consistency of policy financially, at least for the past few months. I would say that, even as expressed by the Minister, it has something of the flavour of a conjuring trick — interest rates goes down but mortgage relief also goes down, so you actually do not ever pass "go" or collect your £200; you remain miserably in a financial jail. I look forward to the day when the Minister and his civil servants will be able to get us out of this unfortunate bottleneck.

I should like to welcome the Minister's provisions about the shipping industry and ask whether the Minister has considered any special provisions for the discarded employees of Irish Shipping, whose treatment, I believe, is a national scandal. These are people who served this country well during very difficult years. I think it is abominable that people, sometimes after 40 years' service, are fired out on the street with almost no consideration for them. I believe there is a moral debt owing from the people of this country to the employees of Irish Shipping. I look to the Minister to make at least some concession. These are people, some of them now advancing in age, who will have no protection against a destitute and decrepit old age unless some degree of consideration is given to them.

I notice that the Minister refers to the export side of tourism and the importance of the promotion of tourism through offices abroad. I hope the Minister will enter speedily into discussions with senior executives of Bord Fáilte from whom, I understand, there has been a very serious constriction in their budget particularly in this area. Having made economies of a very sizeable nature and expecting to be rewarded, in fact, the response was to close down several of our Bord Fáilte offices in North America. This is something that needs further negotiation with the senior executives of Bord Fáilte. I speak with some feeling on this because I did some unpaid work for Bord Fáilte in North America. I was greatly struck by the efficiency, vigour and determination of executives in the offices in New York, Washington, Chicago and all over the North America. If the Minister is correct in identifying this as a valuable energy on the part of Bord Fáilte, it should be supported to a greater extent. I recommend him to discuss this matter with the senior executives of Bord Fáilte.

The question of the new system of deducting tax revenue at source from professional services is a matter which has been addressed at some length by the Minister. He assures us or attempts to assure us that this is perfectly straightforward. I am not quite convinced, with great respect, that this is the case. He may have detected that I do not have an unqualified sympathy for the capitalist system but at the same time this is the system that we have in this country. One must be careful in tinkering with it unless we are going to attempt radical surgery. There is still the danger that what is being taxed is not profits but income, and that some small firms will experience difficulty in terms of fluidity and liquidity because of the nature of this kind of tax. This is particularly true of small businesses. Representations have been made to me by, for example, a small firm of consulting engineers and a firm of solicitors who have just established themselves. They feel that the removal of this proportion of their income will create serious cashflow problems for them. Perhaps the Minister will be kind enough to be sympathetic to representations from bodies such as this in the implementation of those clauses of his Bill.

I should like to turn with particular interest to the provisions in section 27 empowering the Minister for Finance to extend, by order, the definition of designated areas for urban renewal. The Minister says quite rightly that it is essential to provide attractive tax incentives to promote the proper redevelopment for inner urban areas. Hear, hear. Thank God we have people saying this. I may also say that this was said by the previous Administration. This is an area on which I should like to take some small amount of time to inform the Minister from what I would see as the cutting edge of this programme as to what some of the difficulties are.

Of course, I welcome these provisions wholeheartedly. They do not, however, address the full problem. They are directed principally at business. If, in terms of tourism, for example, one is thinking of a revitalisation of the inner city and the creation of specific areas of amenities of cultural, architectural and historic interest by using tax incentives so that the tourists who come to our once beautiful city will have something with which they can refresh themselves culturally, this is simply not addressed at all. It could be, quite simply. I respectfully and with whatever degree of humility my nature is capable of make some proposals to the Minister at this point.

I ask him to consider very carefully the use of tax incentives to encourage people on modest PAYE incomes back into the city of Dublin and to other cities around the country. It is not just Dublin. I would also speak of Limerick, Cork and Galway. Kilkenny seems to be doing pretty well, and I congratulate them on it. Waterford, of course I apologise to this noble city of Waterford. I believe what I am about to suggest might well be of assistance in all those areas. It is quite simple, so simple that I can just about explain it.

I would like to see for persons who take over a house in one of the designated areas and use it for occupation, either by themselves or by themselves with rental income accruing to them, provisions whereby the cost of refurbishment of houses in designated areas could be set off against not just rental income but also against the total income including the PAYE component. The reason I suggest this is that it is unquestionably the most efficient instrument for the revitalisation of urban areas. Why? Because, No. 1 you are not giving a tax incentive to a class of persons like farmers, dentists, doctors or lawyers. You are giving it to a group of people who are united by only one thing — that they have taken responsibilty for a house in what the authorities already acknowledge and recognise as an area of specific value. They are, in a sense on behalf of the State, refurbishing, restoring and returning to useful life, buildings which otherwise might be demolished or destroyed.

The people who do this do it on really very close margins. I speak from some bitter experience. I was prepared to do that. A number of my friends were prepared to do that. People in other cities in this country are prepared to do that, but it does mean sometimes doing without a motor car for three or four years, doing without holidays, and so on. Some people are prepared to do that for the joy, the advantages and the delight of living in the cities. They are the exceptions. If you want to revitalise the housing stock and if you want to attract people of a slightly lower level of motivation there must be an incentive.

May I give an example? Just around the corner from my own house there was a fine house with elaborate plaster work, four storeys over basement, available recently for £35,000. It is a very modest sum of money. It had vacant possession. If a PAYE worker, or even somebody on a more modest income of any kind, had the opportunity to take over that house and do as I and other people have done, live in a section of it, and let off the rest of it as flats and then discount that against their PAYE responsibility, it would be a very significant carrot. There would be no wastage. There is no tax administration involved in that. Money is transfused directly into the effort to save the city of Dublin, without administration cost, so you are getting a very good deal in that. I believe you would have those kind of houses taken up. I believe you would have life returning in the city.

I say this fully conscious of the fact that I am still in a way talking really about the PAYE sector and about people who have to stake in the society. You are moving lower down. You are giving people on a smaller income again the opportunity to join the ranks, though they are occasionally unfortunately characterised as effete and self-serving Georgian restorationists. You are also releasing a very considerable housing stock back to people who will come back into the city and revivify it. I strongly appeal to the Minister for consider these kind of proposals which could have a very remarkable effect on the redevelopment of the inner city.

If one turns to what the Minister says about the Custom House Docks site development again, of course, one welcomes this kind of redevelopment. I would, in welcoming this, say that it must be balanced. The building of new housing stock, of new office blocks, the creation of a new environment must be balanced by the cherishing of the old. The Minister, I am sure, is aware of some of the exciting proposals produced by the architectural students of University College, Dublin, or of Bolton Street, in which they represented proposals which had exactly this merit in that they opened up from the new developments vistas of the old and revealed to us once again some of the concealed beauties of this city of Dublin.

Reference is made to the establishment of an international financial services centre. While again I would welcome this, it is not something on which I am really particularly well versed. In attracting public support for ventures of this kind, the Government would be well advised to spell out exactly what they mean by this. It is not fully clear to me. I understand that part of it may deal with computerised financial services, with the drawing in of computer disc records, for example, of bills of various kinds for international conglomerates and so on, and processing them here. That is fine. We would all be a little bit careful about suggesting that there was a possibility of establishing on the Custom House Docks site anything that could be seen as rivaling, for example, the real financial markets of Tokyo or London. I do not believe this is credible. If it is, I will certainly be the first to eat my words. I would welcome greater public clarification on this issue.

I should like to turn now to the question of the amendment introduced by the Minister in the Dáil to provide a special incentive for investment in film making. I congratulate the Minister most sincerely on his foresight in so doing. This is an excellent proposal. We have many really talented people — frequently, unfortunately, unrecognised. One has only got to look at somebody younger even than myself, Neil Jordan, who has had such an extraordinary career in terms of film making. I should like to think that this kind of young talent can be nurtured as a result of the Minister's proposals not, inevitably, in Hollywood, but also here at home, giving employment to the excellent technicians we have.

I say this with some degree of authority. I have been involved in film making with technicians from RTE. I was very struck, having made one of two films made on the centenary of John McCormack, by the technical superiority of the RTE film crew in matters of benchwork and in matters of quite delicate professional judgment, over the BBC. I say this not I hope in any jingoistic way. There are many other film makers, such as Kieran Hickey, who appears to get funding and credit principally from abroad. I hope people like Kieran Hickey and Donald Taylor Black, who are among our great resources of talent, will be given the kind of encouragement I believe is necessary to establish a proper film industry, which is an important factor in our economy.

One has only got to look at the success of the Canadian and Australian Governments in fostering film industries in those countries to realise what potential we have here for following this lead. I should like to end on that note. It is a positive note. I will conclude by once again welcoming in general the Minister's speech and the provisions of the Bill that he has introduced and say that I hope in particular that he and his officials will take note of what I said about the inner city and that he will be assured that it is not from purely selfish motives. I now have very little to gain from this except that I would greatly welcome some new neighbours, particularly as one of my most distinguished neighbours informed me last night that, because of economic and other circumstances he, alas, will be pulling out of his great house in the inner city. I should like some moves from the Minister and the Department of Finance to encourage a resurgence of interest in the inner city which I believe is something that is in the interests of all the people, not just of this city but of many cities around the country.

I understand the Leader of the House has proposed a break for an hour.

It is very welcome.

Sitting suspended at 1.30 p.m. and resumed at 2.30 p.m.

I would like to say a few words on this very important Finance Bill. The areas I hope to deal with will be in relation to taxation — reform of the tax code. I will have a few very harsh words to say to the Minister in relation to the present state of the construction industry arising out of measures taken in the last budget. It is Fine Gael's objective to use its parliamentary strength in the national interest and to achieve a position in the public finances which will create conditions for increased employment and for a lasting cut in the tax burden without adding to that service cost in future years. In so far as this Fianna Fáil Government introduce a budget and this Finance Bill which corresponds with the above objective, Fine Gael will not oppose it or the legislative measures required to implement it. It must be emphasised that Fianna Fáil successfully duped the people into believing that there would be an easier and a better way while, in fact, the people found just the opposite.

Unfortunately, this Government's economic strategy is far too narrow in focus. It has zoned in on a section that we emphasised in the last election. We produced literature about the vicious circle. Fianna Fáil have not only grasped hold of this principle of high spending, which leads to high borrowing, leading in turn to high interest rates and job losses, but they have also adopted it as a sole economic policy. Our support for this Bill is based on the Government achieving the position in the public finances which would create conditions for increased employment and for a lasting cut in the tax burden without adding to debt service costs in future years.

A political party, just like an individual, must stand for something. They must have a philosophy, a set of basic principles which act as a guiding light. The recent spectacular U-turns by Fianna Fáil on Northern Ireland, on the Single European Act, but, above all, on the economy is further proof, if any further proof were needed, of the shameful lack of depth and substance in the party who now form our Government. They stand for nothing. As soon as the ballot papers were counted, they turned their backs on everything they had been saying in the course of the general election campaign and everything they had been saying over the past four years. After four years of totally irresponsible Opposition, and having fought an election campaign on astounding dishonesty, they arrived in Government without any policies of their own. They have now, it appears, adopted the policy on which we in Fine Gael fought the election.

Part I of the Bill deals with income tax and corporation tax. This covers from section 1 up to section 35. I am opposed to section 6, which states that the amount of mortgage interest which will qualify for income tax relief will be restricted to 90 per cent. This is a retrograde step. A person on a maximum home loan would, as a result of this reduction, have to pay up to £25 a month more in income tax. Sections 12 to 20 deal specifically with the withholding tax. This tax will go down in history as one of the most confused attempts on the part of a Government to bring about a change in the taxation status of any group of people. This withholding tax is unfair, penal, inequitable and perhaps even unconstitutional. It proposes to confiscate 35 per cent of the turnover of many small businesses. It is the simple confiscation of turnover, irrespective of tax liability or tax owing to the Revenue Commissioners and, therefore, it is totally unfair.

This system, as proposed by the Government, includes a provision for interim refunds. It has been explained that, where the withholding tax deducted is disproportionate to the final tax liability for the firm in their previous accounting year, interim funds, free funds, will be made. This is unworkable. Anyone in business who has experience of VAT returns will know that you are plagued with inspectors; you are involved in filling forms, in red tape bureaucracy, and every kind of delay before getting your VAT refund.

The withholding tax will force many architects, engineers, quantity surveyors into a cashflow crisis in their business and will force them out of business. Two-thirds of the work of many architects and quantity surveyors is comprised of State business. What will be the effect on their cashflow if 35 per cent of their income is taken away?

The construction industry, which I hope to deal with in depth, later on in my speech, has suffered enough under the hands of this Fianna Fáil Government without being struck another major blow by the introduction of this withholding tax. This taxation system, for the very first time, constitutes a deliberate effort to take tax from people without any reference to the likely tax liability.

Speakers on this Bill today referred to unemployment, the creation of employment and the reversal of the trend of emigration as our economic and social priority. The deduction of the withholding tax is certainly not in line with those sentiments. It will add to the problems of unemployment because small businesses, such as the firms of architects, engineers and quantity surveyors which employ a number of people in an already depressed construction environment, will be obliged to reduce their staffs and to put more people on the dole — I have already said that most of their business would be State business — because confidence in the private sector has diminished. It is a hastily convened tax. It is a very punitive tax. It reminds me of a similar and equally punitive tax, namely, VAT at the point of entry, which was introduced by this Government and which has caused severe hardship to many small businesses since its introduction.

I wish now to turn to tax reform. I am disappointed that the Minister has not taken the opportunity at least to put together the legislative structure which would lead to a reforming package to reduce taxation. The most disappointing aspect of the Finance Bill is that it again increases taxation. A minimum of an extra £300 million will be taken in income tax this year from the PAYE sector. The reason the PAYE net has been tightened around the necks of those people is that they are a soft target — they are already in the net.

Tax reform is vital. When people talk about tax reform they mean a reduction in tax. We must have a system which will lead to a reduction in tax. If we are to maintain incentives to work and if we are to keep highly educated and skilled workers at home, the only leeway to reduce taxation is by cutting public expenditure. The more a Government spend, the more tax people will have to pay. The present high levels of tax were a direct result of the gross over-expenditure in the late seventies. We must reform the income tax system and widen the tax bands so that the vast majority of people pay tax at the standard rate. An immediate move to self-assessment together with reform of company taxation and a spread of the tax base will give leeway over the next few years for reductions in income tax. On the broadening of the existing tax base, the decision by Fianna Fáil to abolish the land tax is to be deplored. This land tax was perceived to be fair by the majority of farmers and the PAYE sector.

There are many recommendations set out in the different reports of the Commission on Taxation that are worthy of consideration. The commission introduced five different reports. The commission's terms of reference charged them with recommending changes in the tax system which would be consistent with maintaining an adequate revenue yield and the recommendations are not predicated on a reduction in the overall level of taxation. The detailed analysis contained in their reports strongly argued the case that it does matter how a given amount of revenue is divided between different sources, for example, the taxation of spending versus saving, or the taxation of labour versus capital. It also matters how the system operates in respect of any one source of tax revenue, the extent of exemptions and reliefs, the consequential reduction of the corresponding tax base, the level at which average rates of tax are pitched and the structure of the margin in tax rates.

In this way the Irish tax system was judged by the commission as one which raises a given amount of revenue in a way which seriously damages the efficiency of the economic system while, at the same time, offending against the principle of equity. The commission clearly showed that considerable scope for beneficial tax reform exists without requiring a reduction in overall tax revenues. In respect of all the major categories of taxation — for example, income tax, corporation tax, capital taxation and VAT — the basic underlying recommendation was the same: widen the base upon which the tax is levied by reducing or eliminating the lists of reliefs, exemptions and allowances that currently exist and simultaneously reduce the average rate at which the tax is charged.

The application of this principle to income tax is worth illustrating. Between 1981 and 1986 the number paying tax at rates above the standard rate increased from 132,000 to 365,000. At the same time, the base upon which income tax was levied was being progressively eroded, partly by the rise in unemployment but also, and more important from the point of view of taxation policy, by the growth and amount of income exempt from tax because of the operation of tax breaks, allowances and reliefs. The amount of income exempt in this way increased from the equivalent of about 60 per cent of the income tax base in 1981 to almost 80 per cent of the base in 1986. Therefore, the increases are very large. For example, the total amount exempted from tax on foot of the reliefs in respect of medical insurance, life insurance and mortgage interest totalled approximately £190 million in 1981-82, but had grown to almost £420 million by 1985-86. There is a clear relationship between the existence of such reliefs and the average rate of tax levied on the remaining taxpayers.

At present the structure of Ireland's tax system and, more generally, the state of the public finances is very different from that which obtains on average throughout the European Community. If the measures which it is proposed to implement in order to complete the EC's internal market are rigorously pursued, profound consequences will result for the way in which we manage our public finances. These consequences will make more urgent the need to correct budgetary imbalances and will also impel Governments here towards a radical overhaul of the taxation system.

Earlier in my speech, I said I would refer to the construction industry. I certainly do not know what the building industry did to draw the wrath of the present Government on them, but it is certainly a long way from an extra £200 million being invested, the VAT rate being reduced from 10 per cent to 5 per cent, or the capital programme being implemented in full. I will now outline the comments of the Construction Industry Federation on Fianna Fáil's proposals for the construction industry prior to taking office and then I will move on to the CIF's reaction to the budget after Fianna Fáil had taken office, and I quote:

The Construction Industry Federation welcomes Fianna Fáil's decision to introduce measures which the CIF has advocated as necessary to stimulate the industry and restore confidence. The proposals to reduce VAT from 10 per cent to 5 per cent will stimulate house construction and will allow the public sector to increase construction work by saving £30 million which would otherwise be spent on VAT. The VAT proposal will also assist tenants leasing commercial and retail premises as well as other persons and bodies not registered for VAT, such as religious and charitable institutions. The reduction in VAT will also mean that the State will benefit in terms of fewer workers unemployed and increased tax revenues both from employees and companies.

The establishment of the National Road Authority, which will have all major roadworks carried out by tender, has been advocated by the CIF in order to improve the cost-effectiveness of spending on the strategic road network. This measure could allow a 25 per cent increase in the volume of major roadworks, based on existing levels of expenditure, due to the advantage of using the competitive tender system.

Re-introduction of section 23 incentives for provision of rental accommodation has been proposed by the CIF because it would improve the stock of rental accommodation in larger towns and cities where standards are often very basic. This structure, when originally introduced in 1981, had a major impact in the provision of reasonably priced quality rental accommodation in the Dublin area. The CIF has requested improvements in planning procedures to stimulate new development projects and to encourage them to get off the ground. A change which is particularly welcome is the proposal to put a limit of four months on decisions of An Bord Pleanála.

Fianna Fáil's proposal to establish the Construction Industry Development Board follows on from the support which the all-party Committee on Small Businesses has already given to this proposal and the promise by the Minister for the Environment, Mr. Boland, to establish a similar board. A number of other proposals are also welcomed, but will require further study before the CIF can provide more detailed comment.

That is a summary of what was promised by Fianna Fáil prior to the last election.

I will now quote the CIF's reaction to the budget:

The budget measures announced represent a major shock to the construction industry. The cuts are widespread and severe. None of the measures outlined in the Fianna Fáil's policy document directly impacting on the industry published prior to the election has been introduced except the £1 million for decentralisation. These include the reduction of VAT to 5 per cent, the re-introduction of section 23 incentives and the bringing forward of public projects such as schools, harbour development, etc. In fact, rather than implementing their stated policy of bringing forward public projects, the Government had reduced the public capital programme by £66 million compared to that envisaged by the previous Government. The range of negative measures introduced represent a total reversal of stated Government policy on the industry.

Fianna Fáil had, prior to the election, stated that the industry would make a significant contribution to economic growth and employment. The industry currently depends on the PCP for 70 per cent of its finance. The cut of 3 per cent will therefore represent a drop in funding of approximately £50 million. This reduction, in addition to the abolition of the £2,250 house purchase grant, the home improvement grant scheme, the £5,000 grant for local authority tenants and the reduction in the level of mortgage interest relief to 90 per cent, must lead to a further sharp decline in activity and employment throughout the industry.

In relation to housing grants, Fianna Fáil stated that prior to the election the Government's policy document on the industry had suggested that all grants would be revised with the aim of improving their impact and benefit to the industry. The abolition of the £2,250 and the £5,000 grants without a fully compensating reduction in VAT is wholly unjustified and will have a further negative impact on this sector in 1987. It is also contrary to the clear implication of the manifesto.

In relation to the mortage interest relief, it states:

...this reduction in this relief to 90 per cent of the qualifying amount, with a further review next year, is particularly serious to the housing sector as it will act to negate the possible benefit to this sector from a possible fall in interest rates. The savings to the Exchequer which were envisaged at £6 million are negligible compared to the negative impact on the overall demand for housing.

In relation to the £5,000 grant for local authority tenants, this incentive had been very useful in stimulating local authorities to buy houses in the private sector and also in relieving demand for local authority housing.

It had become an important source of demand for new housing and for the home improvement grant scheme. This scheme provided a considerable amount of work for contractors and sub-contractors and was supplemented by the additional contribution from the householder. It was also valuable as it was confined to registered firms within the industry. That, of course, was to deprive the black economy. In addition, it provided badly-needed employment with a consequent saving in unemployment benefit and tax revenue. While it was obvious that in view of the State's finances there would have to be cuts in various sectors, the CIF consider that the measures referred to are ill-advised, negative in effect and will increase unemployment in the industry, currently standing at 47,000 people. The CIF are also most concerned that the Fianna Fáil manifesto on construction, apart from one shall measure, has not been implemented.

As somebody who is involved in the construction industry and as a member of the CIF, I know that building in Ireland is dead at present and that there is no future here for the construction industry. It had always been said in the past that under Coalition Governments the construction industry suffered. I think that myth has now been well and truly exploded. It is clear to be seen that the construction industry advanced significantly under the last Government, but has now been stymied by the present Fianna Fáil Administration. I used to attend CIF meetings of the Cork branch in the last four years. I saw the "aggro" that was delivered to the last Administration. I can go back to those meetings and keep my head high because of what is happening now.

A number of Cork builders and people involved in the construction industry in the Cork area have now moved their operation to London and the south of England as they feel there is no future for construction in Ireland. Fianna Fáil have always been associated with the construction industry. There are a lot of disappointed Fianna Fáil builders in Ireland at present. Perhaps the Government do not realise the damage they are doing to the construction industry. They are probably trying to neutralise some of the unfavourable reports. I quote from a comment by Mr. Tom Reynolds, Managing Director of the CIF, when he said:

Recent reports that the CIF had agreed to put aside its disappointment with the Budget were completely incorrect. We are particularly concerned that these reports appear to have emanated from Government sources following our meeting with the Taoiseach and Government Ministers on Thursday, 30 April 1987.

He went on:

While the reports were correct in saying that we agreed to participate in a working party assigned to put together a programme for the national recovery of the industry, nevertheless we remain disappointed with the budget. We do not expect favoured treatment and we understand the broad thrust of the Government's economic programme. But, however, in a labour intensive industry with considerable employment potential, one would have expected that various types of action would be taken, some of which would not have cost the State a penny, rather than the reverse treatment, which can only worsen the plight of the industry, its employees and its related professions and services.

My final comment on the construction industry is that in three months Fianna Fáil have demolished the new house building industry, devastated the small builder relying on house improvement work, removed the grants to encourage home purchase and house improvement, reduced by 10 per cent the tax relief on home loans and placed a threat over the remaining relief, while at the same time sowing the certain seeds of what will within a year result in council housing lists reaching crisis proportions. Thus ended the long-standing romance between Fianna Fáil and the construction industry.

It has been stated in this House today that interest rates are coming down, that inflation is at its lowest and that confidence is being restored. I would like to remind the Government that this did not just happen in three months; it is as a result of the tough policies and hard work of the last Government.

I would like to say a few words on the Finance Bill. Having listened to the Minister talking about the measures that have been taken in the budget, I agree that he is fully determined to press ahead with the policies which, I believe, can bring about economic stability. The evidence was there last night that there is no softening, no giving in, but showing a firm determination to press ahead with the measures which the Government feel will take this country out of the doldrums and set it on the road to economic recovery. It was well shown yesterday. It should restore confidence in this country, even from those abroad who would be hesitant about investing here. There is no question of deviation, no question of giving in to vested interests. This is one of the best decisions that has been made in this House of the Oireachtas in many years.

When Fianna Fáil came into power we had had a lag period prior to that when there was no Government. Then, when they did come in and introduced the budget in April, we have to remember that almost one-third of the year was gone and they were left with very little room for manoeuvre. It surprises me very pleasantly to see what they are able to introduce in such a short time. Their measures for stimulation of tourism, the food processing industry, the financial services and their measures in regard to marketing companies to help promote the export of Irish goods are imaginative. As I see it, it is only the beginning of many more imaginative proposals which will be made as we make further progress along the road to economic recovery.

The measure in regard to repatriation of profits and the encouragement for foreign multinational companies to leave their money in the country in their own currency, bearing interest which would be tax free, is a good, positive measure. I think it will be very well received by multinationals as it encourages further investment in Ireland. That is an imaginative measure, responding positively to a situation where multinationals had the option to take their money out of the country.

I have some reservations about the withholding tax, because there are certain groups in the country who are affected by it. I have no vested interest in this. I do not charge patients, so I do not have to defend it on that score. The fee paid to doctors on the medical card scheme is an inequitable one. It is unfair to them because over 50 per cent of that fee is by way of practice expenses. Therefore, the Government in this measure are collecting tax on something to which they are not entitled. In that way I feel it would create considerable hardship for doctors. When a doctor sees a patient for £3.85 in his surgery under the medical card scheme, 35 per cent of that will go back. But half of that fee is for practice expenses, leaving the doctor with £1.90 to cater for the patients, his practice, his receptionist, his phone bills, the running of his car, secretariat, anything. It is an very unjust system for doctors. Doctors are alone in that most of their fee is an regard to expenses. When one reflects that a doctor on the medical scheme gets £6.50 for a call to a patient on Christmas Day and that he does not get paid until nearly three months later, one can see he is not getting much out of it. I would like the Minister to look at that. It is an unjust scheme for general practitioners in the medical card scheme.

There has been a great deal of waste. There has been excessive spending. Just over a year ago we very kindly handed over £250 million to Allied Irish Banks to rescue the Insurance Corporation of Ireland. The former Taoiseach, Deputy Garret FitzGerald, came in a state of panic, having been warned by Allied Irish Banks that there was a great danger of a collapse of the economy. He was railroaded into giving this money. He sought urgent consultations with the Leader of the Opposition to inform him that this measure would have to be introduced and it was passed within a couple of hours in Dáil Éireann. Spending such as this has put us in our present predicament. That same bank, four or five weeks ago, recorded profits of £150 million for the year. The fool in this situation was the taxpayer. There is no question of Allied Irish Banks offering any money back. I would have preferred to see the Government of the day giving it by way of a loan to rescue it. It was not this country's fault that the Insurance Corporation of Ireland failed. It is a terrible indictment of us that we should ask the taxpayer to shoulder this burden of £250 million.

It is grossly unfair to find ourselves in the situation that beds are closing in hospitals, outpatients' departments are closing, casualty departments are closing because the money has gone out of the Exchequer. This is a very serious matter and nobody has mentioned this since the day when we were here in Leinster House and it was stated that it was an emergency. But that money is gone and the Exchequer is short of that amount. How much would £250 million have helped to relieve the pressure on the health services at the moment? We would have no problem if this money had been available.

We have given away money almost as if money was going out of fashion. We have given it to all these bodies. There is not enough monitoring or surveillance over what happens. We give the money out very freely. We have being paying rent for years for Government office blocks that have not been occupied. This is wasteful expenditure. The taxpayers are bearing the brunt of it. One can understand the cynicism of the public when they see things like this happening and then they are asked to bear a further burden by way of cutbacks.

The previous speaker said that there must be cuts in public expenditure. I do not agree, because in a situation of growth, Government expenditure and an increase in expenditure is not very harmful or wrong. Once we have a situation of growth in the economy we can have increased Government expenditure. I would like to clarify that point.

We have a very unusual situation at present in that we have interest rates up as high as 17 per cent with an inflation rate of 2.6 per cent. That is very destructive to the economy and a disincentive to growth. We read regularly — and this has been going on for the past four or five weeks — that reductions in interest rates are imminent, but they are not taking place and it is time for the Minister to call their bluff and ask the Central Bank why there is not a directive immediately to lower the rates. If the inter-city bank rates have dropped why are they not lowering their rates? They have been saying it for a quite few weeks. Today is 25 June and it was promised by the middle of June; now it is promised by the end of June but it has not taken place yet. I have seen five reports in the newspapers in the last few weeks that interest rates are coming down but they have not come down. It is an iniquitous situation that we have this position with interest rates as high as 17 per cent and an inflation rate of 2.6 per cent. That is the greatest disincentive to investment because why should people invest in industry when they can leave their money in the banks at that rate? There is no incentive. We must bring those interest rates down if we are to get growth in the economy. I would like the Minister to mention this fact.

The Minister said that there is no room for tax reform at present. I hasten to disagree with him because we could relieve the burden on the PAYE sector immediately if we made a conscious political decision that two-thirds of the population shall pay no more than 35 per cent by way of tax. We could implement that tomorrow by issuing tax credit certificates to these people. You do not pay them: you issue tax credit certificates redeemable in five to seven years' time. The immediate psychological boost to the economy would be obvious there; if they do not get the money it means compulsory saving and they can use it as collateral for loans and for the education of their children. What you are doing is priming the economic pump. You are giving an incentive to workers to work harder, to work overtime and you will immediately get the return to the Exchequer in improved productivity and in increased growth. It would not cost the State anything for five to seven years and you could provide money over those years by way of £40 million a year. You would get that effect immediately; you get that rate down. The effect this would have on the economy should be obvious to all of us because then you would hear workers saying, "At least I am saving; I can produce more, I can work overtime." This is what we could do.

We could also do something about the PRSI which we should seriously look at because it is the greatest disincentive to jobs that we have. Britain applied it in the way years and they called it selective employment tax because of the fact that they directed workers into jobs of priority and they put a tax on jobs which were not ones of priority. We are applying a tax on jobs. It is discouraging employers from taking on employees. Employers pay out more in PRSI than is paid in PAYE. We have to do something serious about PRSI to ease the burden on employers and encourage them to take on workers. There are opportunities for employers to take on workers but with this disincentive it would be a foolhardy employer who would in the present climate take on extra workers with that iniquitous tax. These are areas we will have to look at.

We are paying interest on foreign borrowing of about £770 million a year. The Manhattan Chase Bank and two other banks have made provisions for non-payment of debts by countries. Mexico and Brazil successfully sought a moratorium on their interest payments. It would not be undignified or wrong or harm us in any way were we to say to our foreign creditors, "We are seeking a moratorium on interest payments". We are not welshing on our debts, we are saying that we are seeking a moratorium and we would want to use the money instead by ploughing it into the economy, produce economic growth and then start paying. There would be nothing wrong with that and it would be a good courageous Minister who would go to them and say this. Why not? Five to seven years is nothing once we put the money into the economy to produce goods. I do not think it would be opposed. Brazil is one of the most wealthy countries in natural resources and one of the most wealthy countries in the world and they have done this. Mexico has done it. They have enormous oil reserves. So, why should we not do it? We have an inherently sound economy. We have proof of it there. When one talks of national debt, we must remember that we have in terms of houses per head of population more houses than any country in Europe. We have a very high standard of living but we are inclined to compare our standard with Britain which has enormous money reserves. We compare with Britain all the time. It is a good thing that we have Britain as our neighbour because we have aspired to bring up our social services to a par with those in Britain and indeed in the process we have succeeded in improving our social services to the stage that they are better than those in Britain in many cases. For instance, in the case of free travel, Britain cannot offer anything like what we offer. There are other areas in which we provide a better social service than they do. We have been looking for higher and higher standards of living which is not wrong in itself but in the process we have incurred a heavy national debt. But the resources are there: we have something to show for our expenditure. It has not been frittered away, as they say. I would not be too unhappy about that aspect of our position.

When I sought information from the previous Minister for Finance on what loans were outstanding with foreign creditors I could not get those details. I was told they were not to be supplied. We owe about £770 million a year. If we had a moratorium for five to seven years and used that money we could improve growth enormously and then we could quite readily pay this money back. We would not be reneging in any way.

We should look seriously at the question of semi-State bodies. I first put the proposal in 1981 to the Minister for Finance, Deputy John Bruton, about the Irish Life Assurance Company and said to him that the Minister for Finance owned 97 per cent of the shares but the State got nothing out of it. I suggested to him that it should be privatised and he said he would look into it and put the idea in motion and it is very far advanced. I would like to see semi-State bodies such as Bord Telecom, An Post, Bord na Móna and the ESB and perhaps other semi-State bodies privatised, once we include the provision that workers are given shares at nominal rates in proportion to their years of service with the companies. You immediately create industrial harmony because they are all shareholders. They are participating in their work. You would not have people going out on strike against their own interest. You would have a much more prosperous industry. I cannot understand the Luddite mentality of unions who are irrationally opposed to this. Mention it and they go berserk.

What is the difference between workers owning their own place and the State owning it? There is no difference. The shares could be sold to Irish pension houses. What is wrong with the workers owning shares in the business? You have a good, prosperous industry there in each case and it would be to the benefit of the country. That money could be set off against some of our foreign debts. This is the way we must look at things. I do not think tinkering with the system will solve problems. We must look more imaginatively at proposals that will help to create more growth in our economy and to create a much happier and much more satisfactory environment for growth. We must look more clearly at things. This tinkering with a few pennies off this and a few pennies on that will not solve our problems. We have to look further afield and look at more reform of tax. We may have to look at some tax concessions in areas such as the west of Ireland. We could ease in decentralisation of Government Departments such as Agriculture. We could initiate decentralisation very quickly by encouraging people to go back to the west of Ireland and giving them a lower tax rate. Berlin did it. When they could not get people to go into Berlin, they immediately introduced a low tax rate for Berlin, 25 per cent. Anybody who went to live in Berlin had to pay a tax of 25 per cent only. This encouraged thousands into it. It is a prosperous city now. You must take measures to meet the needs. This is what they did. They responded to problems and we should do that.

We should look at the prospect of people establishing a residence in areas in the west of Ireland that are depopulated. We could encourage many a Department to go back to areas like that and give them tax concessions. Why not? We would immediately ease problems in Dublin. Many civil servants would respond very positively if they were offered a tax concession. The Exchequer would benefit. We are inclined to say: "Ah, yes, but" to every single proposition I ever put I hear that reply. When I suggested tax credit certificates to people they said; "Yes, but what about the interest. Why should we not get interest paid on it?" Everyone wants to oppose any new proposal. It is a pity we have this mentality.

There are many areas where we could introduce new measures in the interest of the country. Unless we are prepared to look more positively at what we can do to help the economy, we will encourage more young people to emigrate. At present they are leaving in thousands. There is no doubt about that. It is very sad that the young people can be offered nothing. I am inundated with people coming to me asking if they can get a job here or there. There is literally nothing you could offer them. I had a case which would have been laughable and ludicrous if it were not so serious. One young person had applied for apprenticeship in Dublin Corporation and got a letter back from the National Manpower Services to say he was short-listed: "We are happy to inform you that you are short-listed for interview. However as Dublin Corporation propose to hold no interviews, we are sorry to say you cannot be considered. We suggest that you register with Manpower." This was a letter from Manpower.

This is why it is so depressing to hear about these young people who can be offered nothing in our country. We will have to offer more concessions to employers. We will have to create a new patriotism, not about the North, but a patriotism that realises that the Irish mean something. Instead of saying "Buy Irish" we want to say "Irish is better". We want to really stimulate this idea and encourge more people to buy Irish. There is a resistance still there because to buy something that is foreign is very fashionable and very trendy. We must encourage patriotism in that sense more and more and we must encourage it in schools and start off at an early stage. When people buy Irish they are creating jobs. It is areas like this we must look at. We are inclined to look at a thing for a short while and then it is forgotten. We must be consistent. We must keep at it to encourage people to stabilise jobs and ensure that jobs are not just here for a short while but that they are permanent.

At present when you see people doing examinations for the Leaving Certificate etc, you wonder what incentive they have to do the examinations. It is little wonder when parents tell them they must study hard that they say: "For what?" It is a natural reaction of any student or pupil to say that because we can offer them nothing. What we are seeing by way of crime and vandalism by many young people is a rebellion against society. We must offer them something and we must do it quickly. We can only do it quickly if we can encourage more growth and investment. We will encourage more investment if we can get a moratorium on our interest and say that we will put the money into the economy to create jobs. That is the answer.

First, I welcome some of the sugestions made by Senator O'Connell. They are good suggestions in the area of the economy and taxation. One little thing that puzzles me is the question of the "Buy Irish" campaign. Obviously everybody would be in favour of a "Buy Irish" campaign in so far as that goes. That leads us into two arguments; one is the question of import controls and whether in fact you can give effect to them; the second side to that argument is the question of competition. This seems to contradict the private enterprise system which is based on competition. In fact, it is based on war. If one man can get all the business for himself and take it off all the others, he will take it for himself. It is not just competition; it is war. Consequently, when people go into shops, they will go for the cheaper thing or the man who is giving the best deal, whether the product is Irish or foreign. I made that point in passing. I agree with him totally. Despite what I have said, something can be done in the area of supporting Irish goods. We are up against this contradiction of competition. It is the private enterprise system in conflict with itself. That is not an easy problem to tackle.

On the Bill itself, I would like to preempt my own remarks on taxation by saying that I would be the first to agree that much of our comforts and conveniences have in fact been augmented to a degree hard to credit down through the years and not by any one particular Government but by various Governments. However, there are miseries which could be made less acute and possibly wiped out if the various levels of administration were in fact working efficiently and if we were to look outward in the way that Senator O'Connell suggested. What has happened in our society is that all parliamentarians have allowed this system of collection to become difficult and assessments very hard to reach. This is due to a great mess that has been created in the system itself by way of allowances and refunds and chopping and changing in a piecemeal fashion on various recommendations. Inevitably, when you get into a messy situation like that the system becomes that much more difficult to administer and this is aggravated by the fact that there is a shortage of staff to go after the abuses which have grown up in the system through no fault of the civil servants but through the fault of all of us who have been legislating down through the years, the type of legislation we pass and, finally, through the fault of the system itself.

I do not want to suggest that any one Minister should take the blame for the mess — certainly not. It does not begin and end with a Minister; Cabinet decisions have to be taken and they have been taken by various Governments down through the years. So, we can all share the blame. Added to that I suggest — and I must suggest it — the yielding to special interest groups down through the years has aggravated the situation with the result that some sections of society gain an ascendency over others and where there is no will to go after real defaulters, abuses grow. Therefore you lose an opportunity in this whole system because of our inability to go after the real abusers in the big money situations. It denies us the opportunity to see that a genuine redistribution of wealth is given effect to.

The PAYE workers have been referred to on numerous occasions but you have to see it from their point of view. When workers see how the building societies behave, with their large salaries and high expenses paid, other cases where they consider — even if they have not got all the details — that there are abuses by the farmers and the self-employed, they naturally become justifiably indignant about the whole thing. I do not include all farmers: I am talking about some farmers and some of the self-employed. The ordinary man in industry has no hope of hiding his income from the tax collectors. He sees other people paying fees to those who can actually manipulate the system for them. That is not pointing the finger at one particular section or sections of society. In fact, one can see why the black economy becomes so intense or hyped-up. Looking at the other abuses, through a system that we created by our own deeds, our own legislation and our own neglect of the administration, we see how resentment grows up and quite rightly the people who have to look after the finances have to look at the black economy as well as the abuses in the other areas. Nevertheless, when you consider the worker who has no choice and the money is just taken out of his wages, he is the one with the real bellyache.

He is the one that in the final analysis we are going to have to win over. He is the one that you turn to and ask for greater productivity. He is the one that will hear about the cases where the IDA have gone wrong or have lost a lot of taxpayers' money, the AIB, the Gas Company, Mosteks, Hysters. He is the one who has to listen to all of this; yet he has no real redress in the sense that the money is just taken out of his pocket. If we are going to continue to talk about the worker in the context of urging higher productivity then we have to look seriously at the abuses. If we get workers' co-operation we are entitled to give them co-operation in return. If we are going to ask them for co-operation in higher productivity — which we get — then they are entitled to ask us for the co-operation in coming to terms with abuses.

The only sad thing about the situation it that 90 per cent of the people who actually make the protests, to a great extent, and accuse everybody of being guilty of abuses, vote for two parties: they vote for Fianna Fáil and Fine Gael. There has been no indication from either side that in fact there is real, detailed motivation among them to tackle the whole question of the overall tax system. I am not suggesting that it is an easy job but neglect of it leaves it open to the worker to think that the self-employed and other people who can get away with it are their natural enemies. That is not a healthy way to have society.

I have not got sufficient knowledge to tell the Government how to go about it. Senator O'Connell did make one or two points that might be worthy of consideration. They also have very good reports from the Commission on Taxation, etc. Much more can be done there. Perhaps our funding habits through a certain organisation may need a closer look at and perhaps in a big way could put a lot of money back into the economy to relieve the burden on the PAYE worker. We are talking about encouraging the PAYE worker. It was mentioned in the debate that decentralisation might be a means of taking the heavy burden off the State because decentralising gives incentives to people. There is a case there. The encouragement of more local self-sufficiency wherever that would be possible, including the maximum decentralisation would not only be good politically but it would create very good economic activity.

On the question of decentralisation, without going too far into the question of devolution you might think that it is not beyond the bounds of possibility to have a link with the two because there are also problems for local authorities. If you do decentralise you have to think about the gulf between the needs of the community and its purchasing power. That has to be bridged. You have to watch that also. This should be our philosophy on the question of taxation. We should not be thinking in terms of — as we do — what people can pay. We should be actually trying to bear upon what is superfluous rather than what is necessary. We go after the superfluous in some areas rather than what is necessary. This is a problem also with the system. We do not scale the burden to fit the shoulders which have to bear it when we are thinking about redistribution. I know tax is an incentive for people to make money but it should not be there for people to accumulate. In fact, in some cases it should be there to prevent the accumulation of wealth in a few hands. That is where the question of redistribution comes into it.

There are a lot of things, for example, in a decentralisation situation that could be tackled, particularly in the environment area. Conservation, including the real waging of war on waste and national re-cycling are better dealt with in a decentralised way. Local authorities and decentralised Departments could deal with the promotion of long-life goods and harmful products. All of these things can be looked at in a broad way in any decentralised situation.

I want to say a few words about unemployment. It is relevant to the area of tax and re-distribution. The unemployment crisis is particularly acute in Dublin because of a combination of job losses and an expanding labour force. Dublin accounted for 45 per cent of job losses in Irish manufacturing industry between 1981 and 1985. The number of unemployed doubled in the ten years to 1981 and it doubled again in the four years from 1981 to 1985.

We can see how Dublin has been affected by the whole question of unemployment and the lack of job creation. The region gets only 25 per cent of the combined spending of the industrial development agencies but it has 31 per cent of the country's labour force unemployed and 39 per cent of all long term unemployed. Earlier, I heard Senator Norris saying that the area should be a designated area under the regional control programme. Something very big is taking place in the Dublin docks area. It needs to be followed up, particularly in the light of the figures for the rest of the country in job creation.

Hand in hand with a poor re-distribution of wealth, we have the decimation of people's health. While we are witnessing a boom in the practise of private medicine, we should be asking ourselves seriously, could this crisis in the health services be avoided? Does it result from lack of planning, lack of cohesion? If it is lack of planning or lack of cohesion, the question we should be asking ourselves is: will cuts solve the problem? I do not think the Minister in the House or the Government think they will.

They are doing it because it is necessary. That is why I ask the question: is it lack of cohesion or what is the problem? There is no evidence before us at the moment that there will not be further cuts. Consequently, if there are to be further cuts there will be further privileges. The experience in England at the moment is that in a crisis the poor get poorer and the rich get richer.

The position of the privileged is maintained by the present taxation system and the bad re-distribution of taxes. That position of privilege will be maintained for some sections of the community and, at the same time, the weakest will be further penalised. That is sad, but inevitably the Government will have to consider more cuts before the end of the year. We are certainly not out of trouble yet. I do not believe workers would object to a high level of taxation if they knew it was equitable and that the weakest would not be continually penalised.

It is the same in education. I picked this piece of paper from the ground, but it is useful at this time. It says at the top of page 9 that it costs the taxpayer——

Does the Senator know the year because we are on the Finance Bill, 1987?

By the tone of it, it will never be out of date. It is headed "Educating Whose Children" and says:

It costs the taxpayer six times as much to provide education for a college student as it does to send a child to primary school. This emerges from figures recently released by the Department of Education in reply to a Dáil Question. This disturbing difference must be of particular concern to workers in this country whose children are unlikely ever to benefit from any third level education. A failure to increase the emphasis on improving primary education and making access to third level institutions easier for ordinary workers means that once again the PAYE sector pays the piper but does not yet call the tune.

I do not think I have to develop on that. I do not want to drag it out any longer. The PAYE workers have been carrying the load for a long time now and it looks as though they will be left carrying it. I hope, if the Government manage to get all the cuts right they will immediately lift the burden from the PAYE worker who, in the final analysis, is the person who suffers most. It is the person with no money who goes into hospital at more frequent intervals.

I should like to extend a welcome to the Minister. I am sure that at this stage there will not be much repetition. I will certainly endeavour to be quite brief because much of what I proposed to say has been said by Senator O'Connell.

The preamble to this document speaks for itself. The Minister is seeking to address himself to an extremely serious and difficult situation and within the time constraints, if nothing else, he has done extremely well. Nobody in this House can disagree in any serious way with the thrust of this Bill. I welcome everything contained therein. Now that the Minister can say with certainty that his initial steps sought to grapple with the serious problems of interest rates and so on so that already, after three months, there is evidence that this has been successful, he should be looking at the whole area of the re-deployment of existing resources.

This is fundamental to any possible chance of getting out of this vicious cycle we have been in for the past four or five years. The Minister refers to the necessity to continue the cutbacks in the public service. Every member of the public would subscribe to that. In this area there is huge scope for savings if we endeavour to redeploy the existing funds.

I had an opportunity recently in a document I was preparing to look at, a typical small town in rural Ireland, with a population of 3,500 or 4,000. I was quite astounded to find that £800,000 in social welfare was paid out in the previous year in that town. I understood from the Department that it was fairly typical. Obviously that was not all dole or handouts. In excess of 48 per cent of that money was effectively handed out in a totally and absolutely non-productive way. Not one cent of it, apart from that expended on foodstuffs and so on, would come back to the economy. There was no productive element in it at all. For us, as a House of the Oireachtas, to say that we would continue to subscribe to a system whereby in any given community we would continue to give out 50 per cent of our social welfare revenue, in such a way that it would continue to be non-productive, is inexplicable. With great respect to the Minister I suggest that it is an area which needs to be very seriously examined.

I am aware of a document which was submitted to one of the Minister's predecessors regarding the possibility of redeployment of resources. I was astounded to find that the Minister's reaction was to the effect that it counted on such fundamental change in Department of Finance and Department of Social Welfare activity that it could not even be entertained. It is this kind of rigidity which has continued to hamstring the Department of Finance and the Department of Social Welfare over the past decade. As a consequence, we had this huge wastefulness of public resources.

I have instanced examples of networks of organisations which we have on the ground in every city, town and village in this country. We have local authorities with engineers, foremen, supervisors and equipment all in place, but they are starved for funds. They get just about enough to keep going. We are talking about priming local job creating systems but here we have in one town £500,000 being given out in non-productive activity and yet there is a system in place where in another town, a seaside town, with no money, at the end of a given year facilities such as new piers, new slipways and new harbour developments could be created. The same applies to inland towns where there are many schemes.

Let us get away from the concept of cutting the grass in graveyards. I am sick of people telling me we can put people to work, that you give some young fellow with a leaving cert or a group cert a scythe and tell him to cut the grass in the graveyard. If there was ever a recipe for disaster and public discontent that is the kind of thing we must break away from. I am sick of politicians of all parties saying that they created an AnCO scheme or some other scheme. At the end of the day all we have is further discontent. We need, with this redeployment of public funds, at the end of a year, a three-year of five-year period, to be able at least to point to something and say that was constructed by funds which were diverted from the Department of Social Welfare to the county council, that people were put to work and we had a resource for the community at the end of the day which was of some use and which subsequently would stand the test of time. Then we could reasonably say that those funds were not wasted.

There would be a number of additional improvements to the local scenario by virtue of that diversion. Firstly, all these people would immediately become eligible for tax. Secondly, they would be taken out of the black economy where we have a percentage of unemployed people at all times available for other types of work for which they are not registered. They would have to go to a place of employment every day on a regular basis and be paid in a proper way for it. I would like to put it to the Minister that we should consider, in this time of crisis, redeploying some of the social welfare fund.

We had a debate here some weeks ago about the Jobsearch programme. We were told by one Senator that it was dehumanising, that people should not be asked to do jobs they were not deemed to be suitable for. Conversely, we had the argument here last night that Irish people would go to the United States and would be happy to do any kind of work. They are replacing all sorts of people in the United States, doing — the term was used objectively — menial work. I do not describe any manual work as menial. There is a whole area here which would not cost the Exchequer any money but would, at the end of the day, constitute a sizeable return for investment. Perhaps the Minister would examine that area.

In the knowledge that we have continuing cutbacks in the public service there is still reluctance in some quarters. The axe falls more in some areas than in others. In many county councils, for example, the number of roadworkers has dramatically declined and yet we have twice as many planners and twice as many engineers. If the axe is expected to fall, let it fall everywhere rather than just in the area of manual workers. That unfortunately, is where it tends to fall in the main. If we create a climate of acceptance let it be fair and seen to be fair.

I welcome the efforts which have been made to improve the climate for companies which are operating a profit-sharing system for their employees. Senator O'Connell can discuss that far more eloquently than I can. If we are to create a climate of contentment among the workforce we have to exhort more and more companies to indulge in this whole area of profit-sharing. We cannot go on indefinitely expecting, especially multinational companies — I know the Minister is making efforts in this regard — to keep their profits in this country. Certainly, profit-sharing among the workforce is an admirable way of doing it. Apart from the obvious benefits to the workers there is the level of industrial contentment which is absolutely essential. Senator O'Connell spoke about the knock-on effect of that concept, whereby we would look at the possibility of privatising some of the State companies, if for no other reason than to create some degree of industrial harmony. We will not then be confronted with situations like blackouts or thousands of people walking to work a couple of times a year when allegedly we have national bus systems. The climate of profit-sharing by employees has to be encouraged. The Minister's efforts in this regard are laudable.

In relation to farm tax, we could go on all day debating the pros and cons of one system as opposed to another. The Minister, in the last line of his address says:

It is now time the farming organisations showed some responsibility.

I am not necessarily addressing myself to the organisations, I am addressing myself to the farmers. Successive Governments have endeavoured, in various shapes and forms, to come up with an equitable farm tax. This Government have introduced probably the most equitable system, as I see it. That is a matter for political debate. At the end of the day there is a moral aspect to this debate. They have to pay something. I know they will say that they are paying VAT but everybody else in business has to pay VAT and various other types of taxation.

At the end of the day there is the principle of paying taxation. If we are ever to have a measure of contentment we must try, once and for all, to crush this urban-rural conflict which seems to become greater as each year goes by. I find that it is disconcerting to attend a health board meeting in my own area and learn that there is still £1.5 million of uncollected farmers' contributions. In this day and age when we have hospital wards closing we have this sizeable sector of society still saying, "Well, we subscribe to the concept that we should be paying but we are not entirely happy with the vehicle being used". That is not good enough four years after the initial effort was made to collect the money.

I subscribe to much of what the farmers say. I come from that type of background. But having said that, there is a moral aspect to this. One must subscribe in some way. At this stage they should concede. Even though we have High Court and Supreme Court judgments saying that it is not a collectable tax we are only talking in some cases of about 50 pence per week. How can you tell working class people that they must continue to pay but others, because of a quirk in the law, say they will not pay until some High Court judge solves their problem? That is not fair. It is not equitable. In the crisis in which this country finds itself at present somebody should grasp the nettle in that industry and say, "We will make this cursory concession, we will pay the damn bill even in the knowledge that the method of collection is not entirely right". Let them prefix the payment by saying, "We are not even accepting that the method of collection is fair or equitable, but let us concede the concept". It would show an amount of goodwill for the general perception that people have of that industry. It is important that we make an effort at least to bridge the huge gap that is there at present.

The Minister's efforts to do something for the shipping industry are laudable. Senator Norris made a plea on behalf of the employees of Irish Shipping this morning and I certainly subscribe to everything he said. The treatment of those workers was abominable. Even at this late stage, and given the constraints on the Minister, there should be some further examination of their plea. It is not a thousand years since we we were bailing people out of a bank situation across the street. Some of the workers, as the Senator said, gave 40 years service to a State company. To turf them out leaves a lot to be desired. The Minister might consider throwing some lifeline to these unfortunate people.

The necessity for a maritime nation such as ourselves to encourage companies to get back into the shipping business so that we could have some native shipping companies is apparent and the Minister is to be complimented on taking the initiative he has taken. I have no doubts it will have results.

There has been much comment on the tourism contents of this Bill and I certainly subscribe to it as I make my living from tourism. Deputy Bruton and the previous Government recognised the importance of the tourism industry. It is particularly important that this Minister should do more. Having congratulated the Minister on taking the initiative, it is now time that we looked at the whole mechanism whereby we expend our funds abroad on promotion. Are we getting the kind of return from the sizeable investment we make in our foreign offices and, indeed, the network we have here in towns and so on?

We are striving in Germany, France and the United Kingdom to attract tourists to Ireland but it is debatable whether we are getting the kind of return we should be getting. It is all very well to ask hoteliers to hold down their prices at 1986 levels. In my locality some hotels have not put up their prices for three years despite the fact that other costs have gone up substantially in the interim. We must see a return for the taxpayer's input into Bord Fáilte's efforts.

I have been chairman of a regional tourism company for quite a while and I am aware that the industry are quite prepared to play their part in the effort to promote this country abroad. Sometimes I wonder if we are getting the kind of return for the investment we put into Bord Fáilte in relation to their expenditure and their efforts to induce industrialists to come here. We have resolved in a substantial way our difficulties in relation to access transport, which was the greatest single impediment to our efforts to bring tourists to this country.

There are a few other very fundamental points which concern the Minister for Finance. One is the price of drink. Almost every tourist who comes here complains about the inordinately high cost of drink. Of course, when people go on holidays they drink because of the cost factor, here they do not. If people succeed in escaping out of Dublin, having paid the extraordinary drink prices people are expected to pay here and go to places like the Cathaoirleach's home town where they do not charge anything for drink——

(Interruptions.)

Without being facetious it is genuinely a fact. I used to chair a sub-committee of the regional tourism company which used to process complaints at the end of every season. We sat for a couple of hours in the week examining complaints. The biggest single common denominator in those complaints, apart from the problem we had about litter and dirt, was the price of drink. Food was not a factor at all, strangely enough. People were quite contented with the quality of the food and the reasonable value of restaurants. It was more expensive but it was compensated for by the fact that they were getting fresh vegetables. At least that was the tourist's perception.

Drink prices are a significant deterrent in our efforts to induce people to come here from England, I have no doubt about that. We have broken down a major barrier in our efforts to bring down access transport costs. The next barrier is drink prices. It was a little disconcerning to see major breweries looking for an increase of 6p and 7p on various commodities over the past few months. I do not know where they expect to get it. It is something the Minister should continue to bear in mind.

I said I would not be long and I will try not to be. Everything laudable in this Bill has been covered. Now that the Minister has taken the initial step of dampening down the economy there is already evidence that he is having some success with interest rates coming down. This has been referred to by many people here today.

I want to refer to the myth of the £600 million uncollected in tax, and the unfortunate individual in the private sector who is supposed to owe all these millions. I would like the Minister, in his efforts to satisfy everybody, to ensure that the real figure emerges some time, not an estimated figure, because, if we were all expected to pay that we would not be here. We should probably be in Mountjoy or Limerick. These are the cumulative figures. I hope they are the real figures because, if we owe £635 million, somebody in the private sector is in very serious trouble.

It is disconcerting to find sizeable companies and, indeed, semi-State companies folding up and owing huge figures in PRSI and PAYE. This is mind boggling to me as a relatively small business person who is expected at the end of every month to send off his cheque to Teach Earlsfort and if it is not there within one week you will hear that "we note that you have not forwarded your cheque."

With regard to State companies, a couple of years ago CIE hotels folded up owing the State £750,000 in PAYE and PRSI. How this can happen I do not know. Others have succeeded in departing the scene owing very sizeable sums of money. I would like to know how they can accumulate these sizeable bills when others in the private sector are expected to meet their bills on a monthly basis and pay their taxes.

I would like the Minister to look at some form of early warning system for small businesses in that sector who are expected to pay their bills and pay their way while others, not that much further up the line operate in a nonchalant way, fold up overnight and go off owing the State large sums of money. This, of course, appears in the famous £635 million bill. When somebody refers to it on television the unfortunate harassed PAYE worker points to it with a lot of validity and says: "Collect that and then I will pay". I would like the Minister to tell us what is actually due, and then we can go after the real defaulters.

I should like to welcome the Minister to the House and also, somewhat surprisingly, to welcome his Bill to the House as well. As one who criticised publicly Fianna Fáil's position on the public finances before they came into Government, both in their promises about what they would do and in their refusal to say what they would do in their manifesto I should say that, although standing by that, I thoroughly welcome their conversion since they came into power and the positive measures which they have taken to tackle the problem of the public finances. It is a refreshing surprise to me and to many other people to note the determination with which the Minister and the Government have tackled the appalling problems which the finances of the country present to us.

I am sorry that the Minister said that he had inherited these problems. I do not think he meant it in a political or party political way. He certainly came into an awful situation. I do not think it is right any longer to apportion blame to one Government or to another Government for the financial situation in which we find ourselves. It would only be fair to say that over the last ten years the balance of blame should probably be equally apportioned between the various Governments we have had. This Government's strategy in attacking the problem is the most hopeful one which I, certainly, have encountered for at least ten years. It may not be palatable or pleasant but it is determined and hopeful. It points down a very long road to some sort of prosperity and optimism for the country.

Just before I deal in detail with one or two sections of the Bill I should say a word about unemployment. The Minister has, as have so many other speakers during this debate, paid lip service to unemployment and talked about the need to reduce it. We all, I think, in this House share that particular desire and wish. There is a great deal of political dishonesty attached to the possibilities and the potential of reducing unemployment. We should recognise that unemployment on the scale on which it exists in this country is here to stay. It is unfortunate, but it is true. One has only to look at the performance by the Labour Party in Government. The Labour Party, who are the great champions of full employment and the reduction of unemployment, found it an impossible task. I would ask politicians on all sides of the House to recognise that unemployment is here to stay. They are not going to be able to reduce it significantly in the near future.

We had an attempt by the last Government in setting up the NDC to produce what was supposed to be not a panacea for the problem but a significant move towards a reduction of unemployment. That has not come about. The NDC only created a handful of jobs. I am very glad it has created only a handful of jobs because I think the setting up of the NDC was wrong. The jobs would not be permanent if they had been created. The enormous difficulties which we encountered when trying to tackle unemployment are, to a large extent, outside our own control. It is a world economic phenomenon which is really outside the control of a country like this which has an open economy. I would just point out that calls for a reduction in unemployment are many, while promises for a reduction in unemployment are pretty hollow promises. That has proved to be the case. I hope that we do not hear too much knocking of this Government from this side of the House in saying that the Finance Bill does not produce employment. This side of the House has a poor record on that. There is no fault on either side. Unemployment is here to stay. This is something that we should recognise. This is something we should look at and something we should approach in a completely different way.

There is no doubt that prior to this Government coming into office and prior to this Finance Bill, confidence in the economy and confidence among the financial community was lacking. Confidence was ebbing, as the Minister said. Investment was diminishing. There was a large outflow of money from the country, both legal and I suspect illegal. It is absolutely correct that the priority in establishing some shape to the public finances is not concerned with the figures. The actual target is not the budget deficit. The real target is the production of confidence in the economy among those who invest in the economy.

I am most impressed by and believe in the Minister's and the Government's determination to keep within their targets. Through thick and thin so far they have actually proved their determination to do this. The important thing is that there should be some confidence amongst those who invest that the Government are going to keep within the target. The target itself is not important, but the determination of the Government to keep within it is what is important. It should be noted that that is the primary reason why interest rates are beginning to come down. That is the primary reason why outflows from the country have been stemmed to a large extent. This follows on the Government's determination to indulge in less borrowing and to spend less money in the coming years.

I welcome also the emphasis which has been put in this Bill on the development of the economy and on certain sections of the economy. It is very difficult, when you are pinned against the wall for money, to actually develop your economy at all. Every reduction in taxation and every tax incentive produced actually cost the Exchequer money. We see in this budget a small beginning in the development of tourism, in the development of the food processing sector and in the development of the financial services sector. This is very welcome. It is very difficult because it certainly costs the Exchequer money to move at all on this level. What money is spent or lost here by the Exchequer has to be found somewhere else.

Special pleadings are inappropriate in a Finance Bill of this kind. Special pleadings can come from every single direction. If one listens to every special pleading there would not be any general strategy at all.

The black economy is an area which could be looked at far more stringently and far more carefully. I have been listening in the Dáil to Minister Woods explaining about a particular case of a man on the Jobsearch programme. His case is, I believe, typical. He had been disrupted by being on the Jobsearch programme. Having been on the unemployment register for eight years, he had been disrupted by the Jobsearch programme because he could not work. This is ironic. It is unfortunate, but there is a huge amount of moonlighting which has not been detected. It is just as unfair to the PAYE worker as the regularly complained about situation of the self-employed not paying proper tax. It is most unfair that the black economy is still allowed to flourish, and it is flourishing in certain areas. The long-term unemployment situation should be looked at. I welcome the Jobsearch programme.

I would ask the Minister to look at the prohibitive rate of capital gains tax which, I suggest, is driving people into the ground rather than producing very much in taxation. I do not know how much money the capital gains tax is producing, but I suspect it is a very small amount. To ask people to pay a 60 per cent rate on short-term capital gains tax is having two effects. It is acting as a disincentive to investment because very few people will make investments in capital propositions if they believe that any type of short-term gain will result in 60 per cent taxation on them. The second effect it is having is that people are evading it by various devices which any high taxation system will unfortunately force on them. Those who invest in the Stock Exchange, in properties or in Irish businesses in various ways are certainly prepared to pay taxation on profits which they make in the short term. I suspect that 60 per cent is far too high and the revenue being produced is very small.

Income tax should be looked at. It is like capital gains tax. It is very high compared with other western countries. I understand that it is very difficult to reduce it from the top rate at the moment, but I think its reduction should be constantly in the mind of the Minister.

The Minister talked about mortgage interest relief being restricted to 90 per cent, which is in the Bill. This is a very difficult proposition. There is an obvious need for revenue from the Minister's point of view. He said it should be seen in the context of the interest rate cuts recently. This, I think, is reasonable but I ask the Minister — and maybe he could deal with this in his reply — if it is to be seen in the context of the recent interest rate cuts, can we assume that, if interest rates rise, mortgage interest rate relief will go back to 100 per cent. We cannot suspect that. We should know whether it is here to stay or whether it is, in fact, related to interest rate cuts in any way. Those who are only getting 90 per cent relief now will have benefited from the fallen interest rates so there probably will not be any net loss to them. If there is a rise in interest rates there will be a net loss to them. I do not know whether it is only related in so far as it is beneficial to them now, or if it is related in a permanent way.

The business expansion scheme has been much heralded since it was introduced in the budget of 1985. The last Government made a great deal of it. We may be making too much of it. We have only raised about £12.5 million through the business expansion scheme, which is really peanuts in itself. It is a good idea, but it should be extended enormously. It has also really only been used by those who pay extremely high rates of tax. It is beneficial to them, but its actual benefit to the economy and to unemployment will not be great, unless it is expanded beyond those areas on which the Minister expanded in his Finance Bill. He spoke of tourism, trading houses and shipping. I do not really think we will create much employment or generate an enormous amount of business. A figure of £12.5 million is a very small beer, indeed, as an incentive to industry.

The tax deduction for professional fees has raised an enormous amount of public disquiet among those who are paying fees. From what the Minister said in his speech, I do not know whether he is talking to the same people as I am talking to. The reaction I have come across from various professional people is absolutely horrific, especially doctors who claim they have to borrow enormous sums — £20,000 plus — just to keep above water because of this. This is a matter of a cash flow. It is a bad system if people are having money taken away from them, and then have to have it refunded later. They have to go to the bank, borrow money, give it to the Government and then get it refunded later. The Minister and the Government should monitor this system very carefully and improve it possibly in the next budget.

The International Financial Services Centre which the Minister mentioned is a superb and very welcome innovation. I do not know whether or not this will work. I know those who are involved in it are very determined that it ought to work. It shows great imagination on the part of the Government in taking up this scheme and in trying to attract people from abroad to a financial services centre here.

Finally, I should like to welcome the Bill. I think it is well balanced, enterprising and courageous. I congratulate the Government on it.

I welcome the Minister to the House. I have not had an opportunity to do so before now. I welcome the broad thrust of the Bill. I have no doubt that the Minister, Deputy MacSharry, with his customary resolute manner, will effect it properly. It will certainly help the economy. I want to refer briefly to one or two sections and make one or two suggestions.

The first section I want to refer is to section 4. As the Minister stated in his speech yesterday, this section abolishes, in relation to Irish people working abroad, the place of abode test for residents of the State for tax purposes. I welcome this move. It is a very positive step which will enable people working abroad to visit home and transfer savings without being subjected to Irish tax simply because they maintain a place of abode abroad and make short visits home. This does away with what I regard as the unfair system which operated heretofore.

While I welcome the move in relation to Irish people working abroad I believe, however, that a similar relaxation should be given to foreigners who maintain a holiday home here. I realise there may be implications for double taxation agreements, but I feel that the proposal merits some consideration. There is a line in section 4 which says "a person who is resident in the State". By leaving that line in we are attempting to prevent the maintenance in Ireland of a residence by a non-national who has been employed here and who may wish to maintain a residence here for the purposes of returning on visits subsequent to terminating the period of employment in Ireland.

Some multinationals send staff here to establish branches or get factories or industries off the ground through their expertise. These people return to their own countries after their jobs have been completed here and when their positions have been taken over by Irish nationals. Some incentive should be given to encourage these foreign managers, of whatever rank they are, to maintain links here on a permanent basis. A number of subsequent benefits would accrue. For example, if non-nationals bought holiday homes in Ireland there would be a capital inflow and a subsequent increase in Ireland's foreign currency reserves. These people would spend money when on visits and would also pay for maintanance of their holiday homes.

The construction industry would benefit from building these homes. There would be a trade spin-off, for example, by attracting people in industry who might meet their Irish counterparts. By attracting a foreign business person as a tourist we might develop trading contacts. Finally, the non-nationals might consider in their latter days retiring here and bringing with them their pensions and, possibly, even their capital savings or investments.

The Minister has given assurances with regard to Chapter III of the Bill that this is no more than an accelerated payment of tax. There may be difficulties with regard to some professions. The advance payment of a tax on turnover could place professional firms in an extremely disadvantageous position. This would, undoubtedly, cause major cash flow problems. I am not opposed to the idea of introducing the withholding tax on net personal taxable incomes arising from the provision of services to the State as a means of improving the efficiency of the tax collection system. In principle this approach would have a similar impact to that of the PAYE system. However, professional firms which provide services to the State should not suffer discrimination in relation to other professional firms which provide services to the private sector, nor should professional firms suffer discrimination by taxing turnover rather than net income, particularly in those service industries where overheads and input costs are high.

One will appreciate that there is a very great difference between input cost structures in an architectural consultancy firm and input cost structures for a barrister who operates out of the Law Library. A significant proportion of the turnover of the architectural consultancy firm is used to pay salaries which are themselves subject to PAYE. This can extend to the salaries of the partners where the firm is constituted as an unlimited company. This means that the withholding tax of 35 per cent in such circumstances represents a very significant element, in terms of the whole taxation. I would like to see a system of tax clearance certificates which could be introduced in the case of persons, firms and companies who had paid their taxes in full up to date.

Reference was made to section 31 in one of this morning's papers by Niall Crowley and I had intended to refer to it anyway. I am a little concerned at the rate of increase in corporation tax which is chargeable on house loans given by banks. The banks are usually seen as being the big bad boys of industry. I feel that it is wrong that just because an organisation is large it should not be treated on a fair and equitable basis with all other organisations in the same business. In this respect the banks should be put on an even footing with other mortgage credit institutions, such as building societies and insurance companies. Placing the banks on an even footing with other institutions of this kind would entail changes, first, in respect of the basic rate of tax paid by mortgage credit institutions; secondly, the payment by mortgage credit institutions of a share of the bank levy, if such a levy is to continue; thirdly, a level application of the statutory liquidity requirements and, fourthly, a level application of the capital adequacy ratios.

Finally, I would like to refer to a matter which is not referred to in the Bill at all.

The Senator is not supposed to do that.

I will not refer to it then but could I refer to something which was in the Finance Act, 1983? The advance corporation tax required that a company making a distribution was required to make a payment of coperation tax to the Revenue Commissioners equivalent to the tax credits in the distributions made by it. Following the introduction of this advance corporation tax a company, which would otherwise not have a corporation tax liability because of the availability of capital allowances arising out of an investment programme, will have such a liability in the event that it pays a dividend. While capital allowances legislation encourages investment, the imposition of this advance corporation tax reduces the return on the shareholders' equity which should be the primary source of investment. A reduction of the advance corporation tax meant that any attempt to compensate shareholders by way of dividend for the funds invested in the company would result in the company having a corporation tax liability which it otherwise might not have because of the availability of capital allowances. Those two provisions are in direct conflict with one and other. 1983, Deputy O'Kennedy, who was then Finance spokesman, put down an amendment to this but it was defeated by people who saw better. Perhaps the Minister could look at those projects which were started prior to 1983 and for which provision had not been made in the original Act and which were allowed run their due course.

I wish to welcome the Minister to this House. Unfortunately, in the area of legislation this House is the poor relation to another place, particularly in relation to the Finance Bill. This is the only matter on which I will concede that the other House has more authority. It is like being invited to a wedding when the honeymoon is nearly over. For that reason it is much more difficult for us to be as constructive as we would like. The Minister's views will be formed now, having come through the other House with the Bill. The Bill gives legislative effect to his budget proposals in the area of taxation, VAT, excise duties and so on. However, as a party we will be putting down some recommendations that the Minister might consider, at least in the context of the worries that we have with the Finance Bill as published and as amended in the other House.

There was some difficulty about being able to discuss the problems that we have with various sections of the Bill. The Minister will note from most of the contributions which referred to pushing money around in stocks and shares and the employing sectors, which are important in economic development, that none of these functionaries can continue or make profits without the labour of a person working at the coal face. It is that section of the Bill and the legislation which has come before us arising from the Minister's Budget Statement that I am concerned with.

Nobody is denying that something drastic needed to be done about the country's finances. I am being kind to the Minister in saying that it is true that he has approached the problem in a drastic way. He felt that to put the country on the road again he had to bite hard now when he had, at least, support in the other House for that kind of philosophy. He felt that by getting interest rates and other monetary factors right everything else would fall into place. Unfortunately, if we accept that economic argument we are ignoring the fact that there are many people who are unable to come to grips with the problems that are created in a financial rectitude situation or, indeed, are unable to come to grips with the lack of services to which not alone are they entitled but towards which they have contributed for many years in employment, when they had employment. The vast majority of people who are unemployment are not unemployed of their own choice but because of financial circumstances within the country or within the companies which they worked for. They were suddenly forced on to the unemployment register. That is not a choice that people make lightly or make of their own volition.

Whereas Senator Ross might prefer that we did not talk about the problem, the reality away from the stock markets in Dublin is that there are large numbers of people unemployed and genuinely seeking employment. They need assistance from the State. They need schemes to stimulate the private sector to employ them. They also need assistance in their pursuit of employment. Many people seem to ignore the fact that people have a constitutional right to employment. It is impossible to deliver this. It has been impossible for the past number of years because of the changing face of economics and the technological changes that have taken place worldwide. We must never stop striving to ensure that our people, as far as possible, are gainfully employed.

The Minister of State, Deputy Calleary, said something to this effect last night. He said that the attitude of the Government is to try to ensure that people do not have to emigrate, people should be able to stay at home, if they wished, and be employed.

Our whole education system will have to be looked at because we are educating people for the workforce. If the need for a workforce is dwindling then obviously we will have to change our educational programme. Perhaps we should be conditioning people for something other than the workplace. If that is so we should address the problem. While we have a young, growing population needing and demanding education to the highest standard which we are giving academically and vocationally, we should address the problem that is being created. Otherwise we are just adding further numbers to the unemployment market. There seems to be no take-up from the private sector particularly, whereas at the end of the day, profit is what determines whether people are employed or not.

If an employer makes a profit by employing somebody then there is plenty of employment. Nobody takes on people for the sake of giving them work, particularly not today, when family businesses, and family shops and small supermarkets have to compete and sometimes close down because of the larger outlets that have now taken over in the wholesale and distribution areas and also in the retail trade. We now have a changing situation which will demand all the Minister's initiative to address the problem, I have no doubt that the Minister has plenty of initiative. He has shown some of it in this Bill. I want to commend him for some of the things he brought into being.

I admire the step he has taken in regard to the cross-Border trading situation. It is easy to say that the European Community are going to take him to the European Court on this subject. Many people would like to see him beaten in that kind of forum. But the majority of us, who have an interest in what he is trying to do to stop the drain of resources across the Border to the benefit of another jurisdiction, felt it was an imaginative stroke to ensure that people would not abuse the Border for personal gain. It was a source of concern to all of us that many people availed of cross-Border trading to the detriment of traders in our jurisdiction. I commend the Minister for that initiative. I am glad it has shown fruit and I hope it will continue to do so. Senator Daly mentioned that situation also and other areas, such as fuel, where the same kind of norm could be applied.

I would like to commend Senator Daly for the case he made for the motor industry. Most of us have been involved in briefing from that industry. They are basing their case totally on the concept of self-financing. As Minister for Finance, you have to raise your eyebrows at all the cases that are made on the basis of self-financing. But, apparently, in this case it has been documented and substantiated independently. Your Leader and Taoiseach had given a commitment before the election that if it was documented and independently costed showing it was self-financing, then he would look at it if it did not cost the State money. Therefore, on those grounds I commend the case Senator Daly made to the Minister.

I must express my disappointment that in this Finance Bill there seems to be no let up for the unfortunate, over-taxed PAYE, PRSI payee. That sector is the easiest to get at, the sector whose burden we are least likely to alleviate. What they pay in tax amounts to almost a total repayment of our foreign borrowing. That put tremendous strain and stress on the goodwill of people who are at work, and who, apparently have no right to have money without having the tax on it deducted at source. I have very little sympathy for sections who scream the moment you want to take tax from them by deduction before payment. The ordinary PAYE sector has been in that trap since PAYE was initiated here.

I admire the initiative shown by the Minister in respect of payment for professional services. Senator Ross, and other speakers on this subject, expressed concern about the cash flow situation that that will create for certain people. But the reason for its introduction was that it will probably increase the flow situation for the State. Many of these people would eventually be returning the tax to you in any event. These are mostly people whose earnings are above and beyond the tax exemption rates. It is pointless giving them money which they will have to return later, particularly when you are trying to come to grips with the country's financial problems, and in some cases it is difficult enough to get it back from that sector.

I agree with the concept of what the Minister is trying to do in Chapter III of the Finance Bill. It shows a certain initiative. The people screaming most are those who perhaps may suffer from a cash flow situation, but the reality is that that amount of tax would be paid by them anyway. On Committee Stage I will be putting down a recommendation suggesting that certain people should be excluded from this. There are people in the building industry and working for companies who are in a taxpaying situation and have received a current tax clearance certificate. In other words, these companies are already in a current tax situation and their employees and workers in the building sector, such as architects, surveyors and so on, would already be in a PAYE and PRSI situation. I will be suggesting that people in those categories should be exempted from this provision. Otherwise I think it was a good idea to bring these other people into that net. It is important for the ordinary PAYE worker to realise that other privileged people who get money from the State for services rendered should pay tax before they receive payment the same as any PAYE worker.

VHI payments should have been treated the same way. Consultants benefit greatly from the VHI system and payments to them from the VHI Board should be treated likewise. This is being done with the GMS and other State agencies and the VHI beneficiaries should not be exempt from it. Information should be available to the Government of the type of payments that are made by the VHI Board. Of course, these payments will be greater in the future since more people will have to be in the VHI because their normal entitlements under the hospital services card have been removed.

That was an unfortunate part of the Minister's Budget Statement, in which he increased the health contribution by 25 per cent, thus increasing the amount of money taken from people for health requirements by £13 million. Again the PAYE sector are paying more for a lesser service.

The service is no longer provided in an acute or sub-acute way close to where they live, something which they enjoyed in the past. One would imagine that, if an additional contribution was being sought, the service should at least be retained in the area in which formerly it was.

Another difficulty for that sector was that the pay-related benefits would be reduced from 25 per cent to 20 per cent — the Minister suggested a new uniform rate of 12 per cent from 6 April. That was an immediate saving to the State of £13 million but it interfered with the concept and principle of insurance which PRSI provides for people who are unemployed or are sick and unable to work. Many of us understood and accepted that concept of a pay-related benefit as a cushion for people who, for example, suddenly lost their jobs through no fault of their own. The concept was good and I was hoping that it would be retained as an insurance fund. But, with the reduction to these new levels, it has now become just a tax — tax on both the employer and the employee — and could be regarded as a disincentive to further employment.

Periods of exemption were given to employers for the payment of PRSI. Although the amounts involved were very small, employers seem to need this kind of stimulant before they take people on to their pay role. It is amazing that the private sector, who want to make profits, need all sorts of State stimulant to encourage them to employ people. In a mixed economy we have been trying to use this formula and with some success. We paid employers for taking employees off the live register. We paid employess on the live register social employment money for social employment with local authorities, health boards, other agencies, voluntary organisations, sporting organisations.

There was a tremendous response to the social employment scheme from people who wanted to do something for the money they are getting from the State rather than just receiving hand-outs. I do not think there is any doubt that the scheme was successful. I am sorry a restriction was put on it this year by some local authorities and other employing agencies using this scheme. A lid was put on it, so to speak, in particular regions where these authorities told people that they could no longer employ additional numbers, no matter what the project was — and there were some very worthwhile projects being introduced and approved by the trade union movement. I am sorry that scheme is not being used to its fullest. It could certainly make a major contribution to reducing the total number on the unemployed register.

I commended the Minister for Social Welfare on launching the Jobsearch programme. I see nothing wrong with a Government trying to assist people to get employment or to channel them towards employment. However, I am aware — and I did not think this would happen — that since the Jobsearch programme started people have been put through further tests in regard to their genuine efforts to seek employment. Apparently it has been so interpreted by some offices, and in particular by one office in Carrick-on-Suir, County Tipperary. The Minister can check it out. People who have been interviewed there recently have been told that, in spite of four, five or ten letters from employers in the area, the Department were of the opinion that they were not genuinely seeking employment.

I do not know if the Act requires a person to go out every day and ask every employer in the area for a letter to say: I asked you on Monday for a job and you did not have it; I asked you again on Tuesday and you did not have it. Does it require a person to ask on a weekly or a monthly basis? How often do you have to keep on producing evidence to say that you are available and looking for work? These people were already registered with Manpower before the Jobsearch programme started. I know of cases where hardship is being created. Two people who have families and were on unemployment assistance have been taken off the register although they are available for work. They are not "moonlighting" or anything like that, which I do not condone.

I have no brief whatsoever for people who cannot take a job or attend a training course because it would interfere with illegitimate employment. I will defend anything the Minister wants to do in that line if there is fraud in that area. The Minister has put into his budget a figure of £4 million for this. I doubt if that is there but, if it is, there are genuine grounds for it. But I am concerned about people who are genuinely seeking work and are now being taken off the register as not being genuinely seeking work; which means that they have no income. They have gone to the health boards for supplementary welfare and have been told that, because they were taken off social welfare on those grounds, they did not qualify for supplementary welfare.

It has also come to my attention that some health boards are now charging people for applying for renewal of medical cards or a review of their appeal for supplementary welfare and other such areas. This is illegal. Some health boards are now acting illegally in their desperation to try to budget. The Minister should take the necessary action here because, unlike local authorities and county managers, who have powers to make charges, some health boards do not have legislative power to make charges in these areas, charges on people at the lowest level who are in difficulty. That is a disgrace and I do not think anyone would condone it.

In the budget and in the Finance Bill the Minister has not addressed the problem of bringing any type of equity whatsoever into the tax system. He has done absolutely nothing for the PAYE worker who, this year alone, on his own estimate will pay some £300 million extra in PAYE. That is unfair in the context of a Finance Bill in which the Minister removed the farm tax. This was a tax on property which enjoyed local authority services and for which money was released to the local authority. He has abolished that tax this year at the same time as he has increased the burden on the PAYE sector. That is unfortunate, particularly as the vast majority of smaller farmers wanted to avail of the land tax system to eliminate the dreadful trauma they have about filling up tax forms when they have very low incomes which would not be taxable. Now they have to expend money on accountants and other people to prove that they do not owe tax. I have a lot of respect for people who want to keep accounts, and possibly they should have had options. Certainly, anybody who had the option to claim their land tax off their income tax were on a winner — they could not lose.

In abolishing land tax and increasing income tax, nobody can suggest for a moment that we are dealing seriously with the problem of bringing equity into the tax system. Therefore, we will be proposing that the PRSI allowance will be doubled as a measure of relief for these PAYE workers and, in addition, we will be proposing that the PAYE allowance would be increased for single and married people. We will be suggesting the removal of some categories from the withholding tax and we will be asking the Minister to reconsider the abolition of the land tax, particularly as it was in place and was beginning to show a return. As Senator Daly said, people were employed genuinely in the belief that there was a future for them and contracts had been entered into regarding houses, accommodation or transport. But, suddenly, the following day they were left without a job. That was bad enough, but add to it the fact that the Exchequer was beginning to benefit to the tune of £6 million this year when we had only started. The abolition of the tax is to be regretted and it was a mistake. The Minister's party had given a commitment before the election that they would do it. But, if they had considered the implications of the abolition of the land tax and the backlash in the farming sector, they would have been wiser to have allowed it to stay in place.

The Government also gave a commitment that they would abolish the DIRT, but at least they had the sense to sit down and consider the implications of the abolition of this tax, which now, in spite of the outcry at that time, is not the draconian measure it was alleged to be. It meant that people who had separate bank accounts throughout the country and in other places paid the minimal rate of tax on their unearned incomes, and there is nothing wrong with that concept. DIRT, unpopular and all as it sounded at the time, has been welcomed by many small investors who were worried about the disclosure of various incomes to show if they were being dishonest or otherwise. In particular pensioners, who may have a social welfare pension and a small pension from forestry or the county council — these little sums of money they had invested to bury themselves — often felt qualms of conscience about not disclosing them. But, now that they are paying the DIRT on them, they have no such qualms of conscience, and the State receives an income from it.

That brings me to the obligation that was originally on the banks to disclose these sums. That obligation is now removed, and people can have money invested in that way, privately and confidentially, in the knowledge that the banks will deduct the tax at source and pay it to the Government. That is the business like way of doing it. I am glad the Government did not rush in and abolish that tax, because, if they abolished that tax source of a couple of hundred million, no doubt the only sector that would have to pay it would be the PAYE sector again.

The banks are a source of funding. They are a privileged group of people. They are an important sector for the economic development of the country. The State has not been slow in the past, as Senator O'Callaghan has said, to be supportive of them when they ran into difficulty. Most of the people in this House and the Minister know whom I am talking about. Although it did not cost the State money at that time, the State were there for the rescue. That sector should pay more than the existing levy on banks and I will be proposing to the Minister on Committee Stage that he should double the money take from the bank levy.

I am trying to be constructive in what I am saying, if I am to defend the social welfare sector and PAYE sector. Naturally, there is a loss of income to the State, but I am suggesting to the Government ways in which they can make up this loss. I have suggested that the farm tax should be brought back. I am suggesting that the bank levy should be doubled. I am also suggesting that the Minister should seriously consider the reintroduction of the old wealth tax we had in the seventies, a complex system of legislation we had at that time in the area of capital taxes. This is one of the taxes that had, again, just begun to function and money was beginning to come through from it. The old system at 1 per cent was only a beginning. If the Minister looked at it now — he needs money — and increased that to 2 per cent, because the old system touched only a very chosen group of people, wealth tax could yield in any given year about £10 million or £15 million. That is the kind of money the Minister is looking for, and it would be coming from the wealthier sector.

There are relatively few people in the country who admit to being wealthy. They have assets and other properties which contribute relatively little to the upkeep of the country and to the services that they themselves require and enjoy. If we are to be realistic we must expect those chosen people to pay their fair share. If they were all seen to be making the effort — the farmers paying their health contributions, the wealthy people paying some element of wealth tax, and opting for the farm tax — it could bring in something like £57 million in any given financial year. Even if you gave £50 million of that to the PAYE sector, there would still be a net £7 million more than what there is now, and there would be some equity in the Finance Bill. There would be something that could be shown to the ordinary working man as proof of a genuine effort by the Government, whether the Government has a majority or a minority, on these issues. When you start tackling that area, you can often find yourself in a majority situation.

There are of course, arrears all over the place. I, too, would welcome the real figure of the unpaid taxes. VAT arrears are estimated at all sorts of figures; I do not know the real figures. If we requested the VAT inspectors and the Revenue Commissioners to increase their vigilance in that area and increased the income from VAT arrears by about £14 million, if we could collect the arrears of about £8 million of health levies that are owed by the private sector, and then looked at the national lottery, which Senator Daly referred to this morning, as a source, we could really talk about the amount of money that could be available. With the other reliefs to the PAYE sector, you could have £30 million or £40 million more for the health services. Because of the lack of this money, which we say we have not got, we find ourselves, without planning or otherwise, closing hospitals and taking away services that people are entitled to and need and to which they have contributed.

That is the kind of concept that I want to put into the Finance Bill. We cannot deal with the Bill in sections at this Stage. On Committee Stage, we hope, with our recommendations, to have an opportunity of discussing various ideas the Minister might at least consider in the run-up to his next budget. As I say, we are now invited to this wedding when the "honeymoon" is on, so it is pointless talking about this Bill. Your said yourself, Minister, that it was there when you arrived and that you did the best you could with it. You made it rougher in some areas and, thankfully, you changed some of the other areas.

The amount of money being taken from the PAYE sector amounts to £300 million extra this year. It is an unfair imposition on a group who have always been paying their way. You have a commitment, Minister to the concept of tax equity. If you consider what we are suggesting you might be able to convince people that you are being serious in trying to put the country back on its feet and that you are not doing it at the expense of the poor, the underprivileged, the sick or the people without homes. The whole construction industry needs to be looked at again. I am disappointed at what the Minister has done in the construction area and at the withdrawal of all the grants and everything else that was stimulating employment in that sector, as well as adding to the value of people's property. There were many disappointments in the budget. If the Minister did it because he had to balance books, he could have well balanced the books otherwise.

Today I suggested areas of capital tax that would have helped him. It is a matter for you, as the Minister for Finance, to look at these suggestions. We want to be of constructive assistance to the Minister. But we have to defend a sector that very few people now defend. Nobody in that sector objects to paying, or paying a bit more, for services that are delivered or rendered. The only people that abuse those services are people that rarely contribute to them.

In that regard I would like the Minister to consider the possibility in the future of a national pay-related insurance scheme for everybody — farmers, business people, self-employed and property owners. Why do they not all pay a share of their earnings every year to the State to justify the payment to them at the appropriate age of retirement of old age pensions? If that happened there would be a tremendous income into the coffers. Everybody in the country would be covered automatically. All they would have to do at the moment, apart from the people who worked all their lives, is that the people who did not pay anything to the State all their lives would, at age 66, legally divest themselves and hand over their property to everybody and anybody, and benefit automatically from non-contributory pension. That is difficult to justify to people who have been paying pay-related or PAYE towards that fund. I ask the Minister to consider the concept of a pay-related insurance scheme for the whole country. A lot of the ground work has been done by his predecessor and he should look at this. There would be widespread support by people who would like to feel that they have contributed to their own older days, and all of us want to support them in that. They would feel more entitled to it than at the moment, because they are subjected to means testing and all the other things, which is why they have to legally divest themselves of their property.

My final comment concerns assisting people in the transfer of land, to young farmers in particular. I will be putting down a recommendation for the next Stage that the Minister consider a further extension of the scheme which gives stamp duty exemption to young people who acquire land from their parents, particularly young people who have gone through a process of eduction and training to make them competent young farmers. Any incentive that we can give them, such as the transfer of land, should be given. I agree with the Minister that it cannot be kept going indefinitely. If it were, its value as a stimulant would be lost. However, there are people caught in the trap this year. Because they had not made an application by the end of March they no longer qualified, although they were in the process of completing their educational courses. There is a good case, and ACOT would have made it to the Minister separately. All the other people involved in this area would have made a case for, in this particular year, extending the exemption of stamp duty for those transactions. It ends now in September, and I hope that the Minister will continue it for just one further year and announce that this is the last time it will be extended. If you do not announce that in advance, people will presume that it will always be available and the incentive to transfer will not be there.

The other improvement I welcome is the fact that income from leased land, which is not counted for tax, has been slightly increased to £2,850. That is a useful instrument to stimulate people into leasing land without giving up ownership. Anything that can help to move land or make it available to people who can work it would have to be welcomed by us.

First, I would like to say that I am not quite sure how the Cathaoirleach arranges her rota of speakers. I offered to speak about two hours ago and now after six other speakers since the last Fine Gael speaker I have been called. I found it simply frustrating. I want to make a few comments on what Senators have been saying who spoke earlier. I also want to refer to what Senator Ross said about budget strategy and the fact that he supported it.

It might seem strange to some people that I, too, broadly support the strategy outlined in the budget as do my party. What we quibble about is the details and the way it affects certain sectors in the community very unfairly. Senator Ross said — and he was quite right to say this — that the time has now come to get rid of this myth by which people believe there is a direct connection between politics and job creation, that politicians can actually somehow give jobs to people. That is a total myth. The people who are mostly responsible for perpetuating the myth have been the politicians themselves. I have believed for a long time that we have got away from the idea that political action in any Parliament has any major effect on economic activity outside, because the whole economic corpus in the world is changing so rapidly and so bewilderingly that political activity influencing it one way or the other is a diminishing factor.

Fair enough — the Keynes solution proposed after the great depression in the thirties or late twenties and early thirties, worked because basically it was dealing with a simple problem, what we now see as a simple problem. Keynes proposed that the Government should spend to stimulate activity within the economy and that, as a result of that stimulation, the economy would start to gather a momentum of its own and hence the economies would pull themselves out of recession, or depression, or whatever it was. That worked. The great depression of the twenties, by and large, contributed to a greater understanding. It worked in the sense that the pump priming he talked about and preached about actually worked and the post war boom that we had after the Second World War gradually grew out of the application of his principles.

Today, of course, things are different because technology alone coming at us at a bewildering rate has a major influence on the economy. Technology every day — and I have said this so often — destroys hundreds of hours of working time for every man. So we need less pairs of hands, we need less pairs of feet and we need less heads to do the work. We are gradually transferring it over to technological gadgets and accoutrements. What we have not come to terms with is that that has given us a completely new revolution, a new kind of industrial revolution, that we somehow do not fully understand and we try to apply old, outmoded means to cure, to tilt or to influence. It is refreshing that some people in this House would say it is high time we got away from these things and recognised these new realities.

I would like also to comment on something Senator O'Connell said in his contribution because it amused me if nothing else. It was a strange mixture of the radical right and the radical left in the sense that Senator O'Connell proposed that we might solve some of our economic problems — our debt problem in particular he was referring to — in the way that Peru and Brazil have done, that they have welshed, or as they would say, they have sought rescheduling of their debts to the World Banks, the Americans or whoever else are their creditors. Senator O'Connell made that suggestion seriously here today. It is certainly novel to hear it in this House since the party he belongs to are very much a party of the capitalist system and certainly the capitalist system would not like to hear of debtors welshing on their debt. That is not to say I think it is right or wrong that we should do that but it is an interesting point.

Another interesting point which I would say is a teaching of a belief in the new Right is worker participation in and worker ownership of State industries. That is a plan by which the State industries would be sold in shares to the workers or maybe to the general public. That is a novel idea and is one I certainly subscribe to. I would like to hear that more people in his party would subscribe to that view because I certainly think it has great potential for us in the area of our industrial relations. We have so much industrial alienation in this economy and in this country that giving people a say and a real ownership in where they work would, in my opinion, get rid of that sense of not belonging many people have. That whole approach is expressed in the way they work and the way they react to situations at work which very often give us very difficult industrial relations in this country and this whole part of the world.

I am my party's spokesperson on Agriculture in this House and I am going to devote most of what I have to say to the agricultural side of the budget, or that part of the budget that deals with agriculture. I might first say that the Government said on coming into office they would identify areas of the indigenous economy where there was a potential for growth and these areas would be singled out for development attention. Those that spring to mind, of course, are agriculture and food, the development of the marine, that is, the development of fishing. One could extend that and say it is the development of gas and oil resources because they are in the marine or sea also.

The building industry was supposed to get from Fianna Fáil promises in Opposition £500 million at one time, £250 million another time, £200 million at yet another time. In Government Fianna Fáil very quickly moved to take about £250 million in State aid out of this industry. This left this flabbergasted and very bitter and indeed floundering industry in a situation that it simply does not know where it is going or what it is going to do. Not alone that, but the builders who once loved Fianna Fáil so well but not wisely are now being lectured by their once friendly patrons now in Government that their industry has declined in terms of its value to the national income in recent years, and that it would continue to do so and that public spending to stimulate it was just a waste of money. The industry which expected most from the comeback of the Taoiseach, Charlie Haughey, got the greatest of all Harvey Smiths and were literally told to drop dead.

Agriculture, if I may come to it now, is the industry most identified with our comparative advantage in trading. It still holds about 18 per cent of the workforce directly employed on the land. There is about another 12 per cent of the workforce directly employed in agri-related industries, making up in all about 30 per cent of the total workforce. The question I have to ask on behalf of my party as an agricultural spokesperson is: what has this budget done for this pivotal sector of the national economy? The answer is, nothing. Nothing, only all it has taken away. I have lots to say about good Government spending and bad Government spending. Most of what I am about to say now is about Government spending and the need for greater Government spending. I am only saying it, I stress to the House, because I believe it is spending in a productive area, in an industry which is still on the frontier with great potential. That is where we should be directing our resources and away from the many wasteful areas where we spend so much of the scarce resources we have.

In the budget there was a reduction across the board of 10 per cent throughout the whole farm improvement programme. A recent EC survey showed that aside from Greece and Portugal, Irish farmers had the worst buildings and the worst-built facilities in the whole Community. There is, as the Minister knows, a direct relationship between good facilities and good profit to the farmer and by extension, a good national income. But against that background of fact that we have the worst facilities and are, bar two, the poorest member of the Community and forgetting, it would appear, the direct relationship between development and good facilities and wealth creation, we reduce an area of very vital Government spending in a productive area of the agricultural economy. I say to this House and to the Minister that that is wrong and should not have been done.

Senator Ferris dealt at great length with the farm tax and I cannot let it pass without saying something about it. I was a little surprised that he omitted to talk about one particular aspect of the farm tax and that was the way it affects small farmers. In the whole area of farm taxation we find the major thing in this budget is the abolition of the land tax, which was a fixed property tax which the Coalition Government introduced some years ago. Now I suggest that this was a cowardly cave-in by this Government to a small group of large farmers who are particularly influential in one farming organisation in this country. It was a cave-in, I suggest, to this small, minority, rich sector of farmers. They are very large farmers and they can use the income tax system to their own best advantage. They are the people who can employ the best accounting services and they are the people who can get the best advantages from write-offs, from credits, etc., all legal within the tax system. We can call it tax avoidance if you like, but nevertheless, it is legal. That sector of farmers, because they can do these things, because they have the resources to employ the people to ensure that they get every possible concession out of the tax system, end up paying very little tax at all and some of them, none at all. I suggest — and I am a farmer myself, but from a different category of farming background — they are paying a lot less than they should be.

But what has that abolition meant for the small farmers of the country? It may surprise the House to know that £9 million was to come in from the land tax this year had it continued. That was a loss of revenue to the Government when it was abolished. The Government then looked around to find out where they could get an alternative to replace the £9 million lost and that loss is to be levied on the small farmers of this country because the Government are proposing to reduce the flat VAT refund which is payable to all farmers who are non-registered — and that is the vast majority of farmers. They were given a flat VAT refund of 2.4 per cent and that is to be reduced this year to 1.7 per cent and the Minister tells us that this measure of reducing the VAT refund will give him the £9 million which he has lost by the abolition of the land tax.

I hope the Cathaoirleach will not accuse me of using unparliamentary language: I think that this measure to abolish tax from the wealthiest of farmers and to compensate the Exchequer for that loss by a levy on the smallest farmers and the most disadvantaged farmers is desgraceful, if it is not rotten. This VAT repayment was specifically aimed at giving some compensation to the small or medium holders for the VAT they pay on their vital inputs like fuels, machines, sprays, contractor prices — the whole myriad of inputs that any farmer large or small has to put in. Registered farmers — and only the largest farmers, it would appear, are registered for VAT because there are only 1,300 registered farmers in the country and by implication they are the largest and the farmers that are doing best of all — can claim back from the Revenue Commissioners all the VAT they pay on their various incomes. So, an advantage is given to them by putting the smaller farmers at a further disadvantage by taking away from them the VAT refund system which was a small compensation for what they could not reclaim because they were not registered for VAT. The net result of it is that the small holders pay the £9 million; the very large owners will not pay in land tax this time around. That is the simple effect of it, if I may repeat it to the House.

I understand, from figures from the Agricultural Institute that there are about 265,000 holdings throughout the whole country and that 70 per cent of those are of less than 50 acres and 60 per cent of all farmers now in the country — and I take it that is also holdings — are in disadvantaged areas. As a result of the new tax arrangement all of these have to prepare accounts for the direct income tax system. If 70 per cent of all farmers have fewer than 50 acres, I am sure that more than 90 per cent of those have no taxable income, and many of them have no incomes at all. It is surely madness, and a total waste of resources to ask the hard-pressed — so they tell us — Revenue Commissioners to seek tax assessments from people with no tax to pay. We cannot but mention the unfortunate and misfortunate uneconomic holder who has to enlist professional advice to prove that he or she has no tax arising from farming enterprise.

The Irish Creamery Milk Suppliers Association recently showed that accounting costs to the minority of farmers on accounts was £40 million per year. That is an enormous amount of money; but what is to happen or what will that cost explode to if the thousands more — and the now majority of farmers; all farmers, that it the implication — will have to get into the accounting system and get professional advice to prove to the Revenue Commissioners that they do not have a taxable income?

I will be moving, on Committee Stage, a recommendation asking the Minister to amend the Bill in such a way that no farmer with an old valuation of £20 or less should be in the tax net at all because 99.9 per cent or maybe more simply do not have a taxable income. They are not financially prepared and they do not have the discipline of book-keeping to be prepared in that way to have anything to do with the income tax system which most of them fear, because of lack of knowledge. The one system that farmers would have understood was the direct land tax system rather like the rates and what we were proposing was that it would be levied only on farmers with 20 adjusted acres and over. Lots of holders with 50, 60, and 70 actual acres might not have 20 adjusted productive acres.

I might also mention some of the measures that are taken against younger farmers and against encouraging young farmers to enter agriculture. The establishment premium — I do not think it has been mentioned here today yet — has been abolished. That was a very imaginative scheme which was 50 per cent funded by the EC. Members of the House will know what it was; it gave a special grant to a young farmer who completed the necessary education and training. It gave him a grant of £5,000 to establish himself in a new land holding, one he would probably have taken from a parent or perhaps bought or whatever. But is was a very imaginative scheme; it aroused tremendous interest throughout the country. Practically every new young farmer coming into agriculture was either applying for it or thinking of applying for it or at least investigating it to see if he or she was eligible for it. Yet, this budget for some strange reason, a budget that is supposed to be careful about public resources to direct them into an area that is good and right and proper, into the productive sector, abolishes that.

Like Senator Ferris, I criticise the failure to continue the stamp duty relief for young farmers taking over land from their parents. That, too, was a tremendous success. All these measures are taken against younger farmers in the context that 4.7 million acres of land in this country is held by farmers who are over 55 years of age. There are about 12 million acres of land, I think, in the country and 4.7 million must at least represent 35 per cent of the total. Surely it is a very shortsighted policy that we should remove these two very cheap schemes which were having a tremendous impact in changing the land holding structure and giving us land mobility which, because of our history and our geography, we have never really had and encouraging the older farmer to hand on to his son. The son if he lived with him had the incentive to stay on long enough believing there were opportunities by which he could get into farming. All are removed. At this late stage, I request the Minister to look again at these measures and perhaps have them reinstated.

There has been a lot of talk about the amount of money the bovine tuberculosis eradication scheme has cost the taxpayer and about the little impact it would appear to have had in eliminating bovine tuberculosis in the national herd. In this year of 1987 the State will spend £30 million on disease eradication. Remember, £19.5 million of that will be raised by means of levies directly from the farmers. There has been a major increase in that levy recently. This is not often talked about in proper context. People talk about the terrible waste of money it has been and the cost to the taxpayers, as if everybody was paying for it except the farmers. In fact, the farmers are paying two-thirds of the cost of disease eradication. I urge the Minister — we have had no commitment from him yet — to have a full round of testing in every county this year. I live in County Roscommon, where there is a very high incidence of tuberculosis compared with the national average.

Is that the responsibility of the Minister for Finance?

These things have all been raised in the budget debate. These are budgetary matters. For that reason, I speak about them in this House.

The Minister should ensure that there is a full round of testing in every county this year. There is an unusually high incidence of bovine tuberculosis in our country herd in Roscommon. If one is to make any progress in eradicating this dread disease one must continue the disease eradication programme. Now we are charging the farmers two-thirds of the cost of doing this. We are providing ample money if it is used efficiently, £30 million for one year. I ask the Minister most insistently to ensure — I know he will have to do it through his colleague, the Minister for Agriculture but the Minister for Finance can have a major influence since he holds the purse strings — that the full round is done and that places like County Longford, with the highest incidence of bovine tuberculosis in the country, and places like my own county, with a higher than average incidence, are given special treatment.

We might remember that when the bovine tuberculosis eradication scheme was introduced there were—and for many years of its operation during the fifties and sixties — as many as one in 20 of all animals infected with tuberculosis. Nowadays the figure is one in 300. It is the highest in the EC: we cannot boast about that. Nevertheless progress has been made in that area.

I must also deplore the £140,000 which has been withdrawn from the funding of the farm apprenticeship scheme. There has been a drastic cut in the budget to ACOT. Farmers this year for the first time will have to pay for ACOT services. That is another budgetary measure which we talked about in this House a couple of weeks ago. My fear is that the whole structure of ACOT might change in the way they have to relate to their clients and to their farmers. I understand that ACOT, to get this £1 million this year, will be targeting about 25,000 farmers in the country. Those are the farmers they most frequently call upon and they would be in the development class. Naturally, if these farmers pay out £50 or £100 per year they will insist on a better service from ACOT. I expressed this fear in the debate on the ACOT Bill two weeks ago and it is that the resources of ACOT might have to be concentrated only on the people who are paying them.

I am glad that a number of farmers will be exempt from this payment. I am still not happy about it because the farmers who are paying will demand service and, because these farmers are very active in the sense that they are either development farmers or developing farmers, ACOT will no longer be able to get involved in what we used to call the "campaigns", the campaigns for more silage, for better buildings, for silage slabs and so on. All of these campaigns, especially in recent years, have been highly successful. We need more and more of these campaigns, especially in the areas of little or low development like the west of Ireland.

I found nothing in the budget to suggest that funds will be made available to develop alternative products to those that are in surplus in agriculture. We all agree that milk is in surplus. We are suffering quotas, levies and super-levies. The supply of beef throughout the Community is, at best, at equilibrium and the price for a number of years has been stagnant. I would have hoped that there would have been incentives in the budget for reverting land to forestry — land which is not really good for agricultural purposes or for the purposes of producing traditional commodities such as beef and milk. We have a good deal of marginal land. We have the best climate for forestry, the best in the world for the growing of commercial timbers as we know them. Yet, we have never taken advantage of the climate. I was hoping we would see something in this budget which would give a stimulus to private forestry, but alas I do not. In fact, if I read it correctly, I see the £250,000 has been taken out of the grants to private forestry. That is a deplorable situation.

The demand is not there.

I would not agree with the Minister. I read that 3 per cent of our lands are under forestry and the European average is about 11 per cent. The European demand for timber products is far outstripping our capacity to grow trees. The Government should not be just responding to the demand which is there now, but stimulating the demand. The way to stimulate the demand is to put in the money and to tell farmers there is a real incentive and a real income to be got from the marginal land which is not giving them £2 per acre today. It is something that might give them over its long rotation, perhaps £100 per acre per annum or a good deal more. The theme of my speech — I hope it is being heard — is that there is a need, when spending resources, to put them into the productive area.

I would agree with Senator Connor.

Thank you. I regret the abolition of the land classification office. The land classification office was not only carrying out a new close examination of all the land in Ireland for taxation purposes, but it had enormous other potential in terms of the information it could give to many other sources. We would know for the first time the adjusted value of every acre of land if this was allowed to go through. We have no reference for valuing land other than Griffiths Valuation, which was published between 1854 and 1857. It is now totally out of date. The things he had to make reference to are no longer relevant. Most of them no longer exist.

Here was a scientific modern survey of all the lands of Ireland, of every field in the country, which could tell us whether it was good or bad and what its potential was. What a priceless source of information that would be for planners for the future, priceless in the sense of planning for the future of agriculture, targeting for future production levels and so on. It has cost a good deal of the taxpayer's money to abolish it now. It is folly in the extreme. The Minister should think about that. Obviously the Government have given in to the pressure group on the land tax, I am not asking him to bring it back for the purposes of land tax, I am asking him to bring back the land classification tax office so that we would have the very vital information it could give us.

All of the thrust of the budget has been about saving money. I will be somewhat parochial. I want to move into the health area and I want to discuss a particular health institution in my constituency that is a victim of this budget. I am sorry the Minister for Finance is not here to hear the arguments I want to make about it. I hope good note is taken of it and that he will examine what I want to say.

I am talking about Roscommon County Hospital. Because of the recent round of health cuts — we all agree that there has to be some cutting back in the health services — Roscommon Hospital is literally compelled to close. The effect of what is proposed for it will close it. I do not want to bore the House because I have said it here before but the proposal is to reduce it from a 140 bed hospital to a 49 bed hospital, lopping off two thirds of its bed complement to start with.

Before the Senator starts on this we cannot have a debate on the details of a cut in a hospital even in his constituency, with the greatest respect to him. I ruled earlier this morning on an Adjournment matter that, because of the ministerial contribution in this House last night, we cannot have a debate on the cutting of an individual hospital because the Senator is not talking to the relevant Minister.

I agree with the Cathaoirleach. I want to point out with the greatest respect, that the example I am about to give — no doubt there many examples like it throughout the country — is proposed to make a saving. I want to prove that instead of making a saving, we are wasting more public money. As I go along the Chair will see the point I am making.

The average weekly expenditure on an occupied bed in this hospital in Roscommon is £671.28. That is the 1984 figure, the last figure the Department of Health issued. There has not been a lot of inflation in the meantime. No doubt it is up somewhat, but the relationship between it and the other figures I will give has remained the same. In Merlin Park Hospital in the Western Health Board area the average weekly expenditure on an occupired bed is £769.29. In Castlebar, another general hospital rather like Roscommon, the expenditure is £734.28 and in the Sligo Regional Hospital — I am sorry the Minister is not here to listen to this one — the average weekly expenditure per bed in that hospital is £779.83.

On the closure of Roscommon County Hospital, which has a throughput in patients of about 5,000 people per annum, just because we close it down or reduce its size, the number of people looking for admission to hospital will not diminish. Just because you make a cutback, you will not diminish the number of people who will need hospital care. The point I am making is that we have a proposal here to close a hospital that is highly economical in that its weekly expenditure on an occupied bed is £671 and transfer most of these patients — there are 5,000 going through it now — to any hospital in Galway — I have given figures to show that both hospitals in Galway are much more expensive — or the other regional hospital in the area outside the health board, in Sligo, where the cost is £779.83.

I cannot see the economic logic or the saving in something like that. About 5,000 people will need hospitalization or some association with a hospital in the catchment area in this hospital in 1987. By reducing it to 49 beds you will have a throughput of about 2,000 people and because you reduce the staff by about 60 per cent the average cost per week of an occupied bed in that hospital would jump from £671 to £1,000 per bed. These figures are relevant to public spending and I have to say to the Cathaoirleach the budget is all about public spending I am making the point that here is a daft proposal to transfer paitients from an economic hospital to places that are less economic.

I will listen to further details of what the Senator is speaking about if he tells me what section of the Finance Bill he is speaking to.

I was speaking to that section of the Finance Bill which deals with the health services.

What section?

I do not have a copy of the Bill with me but as the Cathaoirleach knows——

The Senator has given enough detail of the hospital. In fairness to the House and to the Chair I do not want to be hassling the Senator.

I appreciate that, but it is a good example of public money being unwisely spent. I am talking about a proposal which will cost £3.5 million. That is not small. It is quite large.

The Senator is only making the contribution on the Finance Bill which he would have been making tonight on a motion I ruled out of order. That is what I am saying and I am saying it definitely.

Fair enough, but I would have to insist——

Will the Senator get away from Roscommon Hospital?

I agree you are the Chairperson and I must obey your rulings but I do not think you can rule me out of order arbitrarily. I am raising an issue in the House which deals with public expenditure. The very essence of the budget debate, I submit to you and the House, is public expenditure. Thank you very much for your leniency and for your time.

Before I call Senator O'Shea I want to make a comment. I believe Senator Connor, who is now taking his seat, commented on the order in which I called Senators while I was in the Chair. He said there were six Senators called and he was in that group, that he was the only Fine Gael Senator. I do not recall this happening to me before and, therefore, I must put it on record. I called Senator Kelleher. Then it went across to Senator O'Connell. In the Seanad we go to the other side whether it be the Government or the Opposition, I went back then to Labour's turn, Senator Harte. It went back then to Senator O'Callaghan. It went back then to the Independents' turn, Senator Ross. It went back then to Senator Lydon. It went back then again to Labour's turn, Senator Ferris and then Senator Connor.

One thing I would not like to be accused of is that I called one Senator before another or that any party makes any difference to me while I Chair this House. As regards how long a Senator will be in the Chamber waiting to speak, unfortunately Senator Connor, more Senators came in at a later stage in the day but if they came in on the other side they had to be called even though the Senator may have been sitting longer in this Chamber. I am in the Chamber longer than anybody on all legislation and it happens all the time. I would not want the Senator to feel, regardless of the hassle we had over Roscommon Hospital, that I called anyone before him. The Senator commented when I had left the Chair that obviously there was a mistake. There was no mistake in my calling the Senators in their proper order.

I sincerely regret it, a Chathaoirligh, if I gave any offence or if I said anything that was not correct. I certainly had a feeling, being a member of the second largest party in this House, that we would have got a greater share or that I would have been called sooner.

I only wanted to explain to the Senator and to the House that the breakdown I did was on a group situation. I would hate it to happen — because we have not had it before — that any Leas-Chathaoirleach or Cathaoirleach would favour one Senator over another. That does not happen. Because of the Senator's criticism in my absence I felt I had to correct it for the proper order of the House.

As far as I am concerned the matter is over.

When the Minister for Finance was Minister for Finance in the short-lived 1982 Government he spoke of a new era of boom and bloom. This budget, I suggest, is a monumental bloomer. As we saw in the Dáil yesterday, Fianna Fáil have not got the market cornered in the matter of bloomers relating to this budget. Fine Gael more than demonstrated their ability in that area yesterday.

The word "boom" has more than one meaning. It means, for instance, a wooden barrier across a river or a harbour mouth. Probably the most famous boom in our history was the boom across the River Foyle in Derry during the siege. This boom was put there to prevent the relief ships carrying food reaching the city. As I recall, the starving population were reduced to eating rats.

This budget I submit is providing a barrier across the river of concern for our sick senior citizens and for our handicapped people. This was a river that Fianna Fáil were very pleased to tap over the four years running up to the last general election. Need I say again that being in Government damages their memory?

It is not just the health cuts that distinguish this budget as totally inappropriate to our present needs. Take for instance, the reduction of 10 per cent on the mortgage interest relief. The Minister claims that this is being designed very carefully to ensure the greatest clawback from those who enjoy the biggest benefit, yet it is during the early years of a mortgage that the highest level of interest is paid and it is at this time too that the highest level of tax relief on payments occurs.

It is during the early years of a mortgage, when families are generally young and a house needs to be furnished and furbished, that tax relief is most needed. I believe that this will have a depressing effect on those young people who intend to provide themselves with their own homes and reduce activity and employment in the building industry. This is the year when the provision for local authority housing has been cut by 46 per cent and the provision for travelling and homeless people has been cut by 36 per cent. We have the situation this year where the rate support grants for local authorities has been decreased by 9 per cent which has had profound and disastrous effects on county councils, yet the Government have also abolished the land tax.

The Supreme Court in 1983 did not find it was unconstitutional for farmers to pay rates but rather found that the PLV system was unconstitutional as a means of assessing their liability. The State in 1984 had to provide £115 million in 1985 £118 million and in 1986 £120.5 million to compensate local authorities for the shortfall in agricultural rates.

The Minister had a lot to say yesterday about outstanding health contributions from farmers and indeed he threatened to reduce the VAT refund. When we hear estimates of the order of £32 million being paid to the State in tax by farmers and £45 million to accountants it is difficult to accept that the State's take cannot be improved. It is little wonder that those who are under-utilising their land feel little incentive to improve productivity.

The Government seem tuned in to the big farmers of the IFA and deaf to the smaller farmers who are willing to pay this tax. It is absolutely crazy that the cost of tax assessment is greater than the tax yield. The ICMSA President, Mr. Con Scully, stated last November that a detailed proposal had been forwarded by his organisation to the Department of Finance which would allow the implementation of the land tax system immediately. The ICMSA envisaged a system of provisional classification of land. Mr. Scully's press release at that time stated:

The Government must bring forward the land tax as an option to accounts immediately because the accounts system is sounding the death knell of the Irish family farm. The only reason why we support the quick introduction of the farm tax is because the accounts system is progressively penal, anti-work, anti-productive and anti-family involvement in farming. We must eliminate this counter-productive system immediately if family units are to survive.

The Deputy President of ICMSA, Mr. Donal Hynes, in March of this year said:

It has become abundantly clear to the ICMSA, in the course of the general election campaign and subsequently, that the majority of Fianna Fáil rural Deputies support the farm tax principle as being a superior system to tax on accounts. Therefore, it would be a foolish political mistake were the Government to abolish the farm tax because of commitments and comments made by Mr. Haughey before becoming Taoiseach and to replace it with a tax on accounts which had been proven to be unworkable and to be costly to operate for all concerned.

On Committee Stage the Labour group will be putting down recommendations to this Bill. We are concerned that the State can provide, through the Finance Bill, an extra £50 million which if made over to the health services could virtually eliminate all of the problems that have come our way. There are many areas in our health services which even prior to the cutbacks in this budget were grossly understaffed and under-provided for.

Specifically as a teacher and as somebody involved in the area what has concerned me a great deal is the under-provision for speech therapists for mentally handicapped children, certainly in the south-eastern region where I come from where there is gross understaffing. There is a huge problem there particularly for Down's Syndrome children, who understand speech but cannot reproduce it, and who become frustrated, bold, less adjusted. In Waterford city between five and nine minutes is available weekly to these children. I know that that point is not specified to the Finance Bill as such but there are certain areas in the health services that were under-provided for previously. I believe these will suffer a lot.

The thrust of the Labour Party recommendations will be along the lines of providing extra money, seeking extra taxation, such as the reintroduction of the land tax, the acceleration of the collection of VAT and health contribution arrears and, indeed, the extension of the retention tax to professional fees, to hospital consultants by the VHI. An extraordinary situation obtains here where the VHI previously refused the Minister for Health and the Minister for Finance when he requested that they make available detailed information on what fees were paid to consultants by the VHI.

On 6 March 1987 the outgoing Fine Gael administration issued the following statement:

The Fine Gael Parliamentary Party considered the political and budgetary situation at their meeting today and noted the failure of Fianna Fáil to obtain a majority in the Dáil but recognised the likelihood that it would be forming the Government in the incoming Dáil. It is Fine Gael's objective to use its parliamentary strength in the national interest to achieve a position in the public finances which will create conditions for increased employment, and for a lasting cut in the tax burden without adding to the debt service cost in future years.

In the overall context of this desirable objective this Finance Bill, which provides the statutory basis for the taxation provisions announced in the 1987 budget, is most disappointing because it is a Bill of little content and with no underlying economic policy.

Declining interest rates are of course, of immediate benefit to the Exchequer, of direct benefit to the consumer and of particular benefit in encouraging people to invest in the risk areas of the economy which will create wealth and employment. However, it is not possible to base an economic policy on the prospect of declining interest rates if that is the only plank of economic policy and if it totally ignores the need for tax reform, tax incentives and economic participation. The very high level of taxation is perhaps a bigger disincentive than high interest rates and an intolerably high level of personal taxation is, unfortunately, being maintained in this Finance Bill. Therefore, it is all the more disappointing that the Minister for Finance has failed to put together a legislative programme to reform and reduce taxation commencing perhaps with a movement towards self assessment.

I am strongly opposed to the reduction of mortgage relief, the abolition of farm tax, to the proposals on the withholding tax in respect of professional fees and to the proposal to increase the tax on bank profits in respect of home loan business from 35 per cent to 45 per cent with consequent increases in mortgage interest rates. When an extra £300 million is being taken from the PAYE sector in 1987 it is most unjust and intolerable that this Government should be making home loans dearer.

Nothing, of course, has happened in this Bill to implement the pre-election promise of Fianna Fáil to reduce income taxation to the standard rate of two-thirds for all tax payers. Instead one-third of taxpayers paying above the standard rate, the effect of this Finance Bill is to bring us closer to the stage where one-half of taxpayers will be paying super or surtax.

The real problem in this country is that he or she who works hardest and he or she who produces results derives little or no personal benefit because of our penal and inequitable tax system. I am very strongly opposed to the proposal for the withholding tax on professional fees to be paid by the various State and semi-State bodies to people providing professional services.

The Minister is endeavouring to introduce for the first time what can only be described as a confiscatory and discretionary tax, a tax which may also be unconstitutional. This is a proposal which bears no relation to the circumstances of individuals, companies and businesses which it affects. It is a proposal which purports to take tax from people without any reference to their likely tax liability. It is a proposal which depends for its effect on the individual view of the particular inspector of taxation. It is a proposal which appears to conflict with the Constitution in that a Government cannot delegate the imposition of taxation, cannot delegate extensively the manner in which it affects individuals and cannot permit a body such as the Revenue Commissioners to determine how a tax will take effect. This proposal will create much extra paper work, substantial inconvenience to the firms involved and a much smaller than expected cash flow benefit to the Exchequer.

This budget and the Finance Bill are a major disappointment to the building and construction industry. This can be seen from the various issues of the Journal of the Construction Industry Federation in recent times. I will just quote from the first paragraph of the editorial in the April edition of the Construction Industry Federation Journal. The heading to the article is CIF Reaction to the Budget. It states:

The budget measures announced represent a major shock to the construction industry. The cuts are widespread and severe. None of the measures outlined in the Fianna Fáil policy document, directly impacting on the industry published prior to the election have been introduced...

The non-continuance of the £5,000 grant has already adversely and seriously affected important residential developments which were due to commence in five major cities, such as Limerick, under the special tax and grant incentives announced by the previous Government in respect of major urban renewal and rehabilitation of the inner parts of our cities.

It is important that the Minister for Finance, in conjunction with the Minister for the Environment, should ensure that there is a proper balance between commercial and residential development to bring real life back into our inner cities. Therefore I urge the Minister to have this matter of the continuance of the £5,000 grant in respect of the designated areas in these five major cities urgently reviewed. The expiry date of 31 May 1989 should be further extended by two to three years to facilitate the more orderly assembly of properties and consequential planning and design. I should like to thank the Leas-Chathaoirleach for giving me the opportunity to contribute to this debate.

I should like to thank all the Senators who made many important and constructive contributions here. As usual a very wide range of issues relating to budget policy and taxation has been raised in the debate over the past two days. I will reply to these as best I can in the time available.

Once again, I must emphasise the critical importance of reducing our dependance on borrowing. We have been living beyond our means for too long and we have no choice. This, unfortunately, requires some difficult decisions and the curtailment of some public services. If we shift our responsibilities in this regard and allow matters to drift, hopes of economic recovery and light at the end of the tunnel are ill-founded. We may disagree about the precise changes that have been made for different people. There are different priorities and some would perhaps argue that all the burden of adjustments should be borne by still higher taxation.

Whatever course is preferred, there is now a general recognition that a reduction in borrowing is an essential precondition for economic growth and new employment opportunities. Is it any wonder? I had the honour in 1982 to speak as Minister for Finance in this House. When I left office in December 1982 as Minister for Finance the national debt was £12 billion. When I returned as Minister for Finance in March of this year that national debt had more than doubled. It took us 60 years to get to a debt of £12 billion and in four more years it was doubled. There are now 100,000 people fewer in work than there were then. An atmosphere existed then of no hope, no confidence, little investment, huge numbers unemployed, many people returning to that cancer in our society of emigration and millions of pounds leaving the economy. Nobody was in control, in other words. This situation could not be tolerated any more. We took the necessary action on our return to Government and in three months, as I said in my opening address, the budget strategy is producing good results. Interest rates are coming down. A number of developments that will boost economic activity and employment have already been announced and more are in the pipeline.

If we are to sustain this momentum it is not enough any more that acceptable targets for the budget are set. It is equally important that these targets are achieved. Figures for the first half of the year will be published next week. The indications are that they will be very close to the budget targets. In a difficult budget situation, where there are pressures for reliefs, it is hard to hold the line at times. There are obvious risks of overruns. Despite the pressures, however, we must avoid this situation. People now recognise that there is a Government in control and a new mood of confidence is beginning to emerge.

In the course of this debate there have been repeated references to the demoralising and disincentive effects of high taxation and a variety of possibilities for change have been suggested. I agree that some taxes are too high and have a strong disincentive effect. I hope that we can do something positive about this sooner rather than later. What I find disconcerting is that some speakers who complain loudly about the high rates of taxation find no difficulty whatsoever in proposing more reliefs, more exemptions and more incentives. The last speaker, Senator Kennedy who was not the only one, made the very same points. He was against this, that and the other. He wants no taxation at all. Reliefs, incentives, exemptions and so on seems to be the order of the day. We cannot have it both ways. If we want lower rates of tax then we must accept a widening and not a narrowing of the tax base.

Senator Bulbulia, in a very worthy address, stated categorically that this Bill increases taxation. My categorical response to this is that her statement is incorrect. There are provisions in the Bill for tax increases. There are also provisions for tax reductions. In addition, there are new incentives to encourage development in various areas of the economy. Any arithmetic on the Finance Bill must take account of those.

In the context of the farm tax, the Senator asked that I indicate why the credit for the farm tax is not allowed over a three-year period. In the Finance Bill the deadline for payment of the farm tax to qualify for credit against income tax is being extended to the end of June. I regard this concession as sufficient and I do not see a case for allowing credit over a three-year period.

Some Senators have been critical of this Bill, arguing that it does not contain specific incentives for one industry or another. Mention was made in this context of the motor industry and the construction industry. Many Senators spoke of those two industries particularly. It is inappropriate to look at the Finance Bill in terms of benefits for one specific industry. It must be judged in terms of the overall direction which it gives to taxation policy. Like other sections of the economy, the motor industry is going through a particularly difficult period. The industry over the years has launched a campaign to highlight the adverse impact of taxation on the business. I acknowledge that high taxes are a real problem in this area. I have to balance this against the budget cost of concessions or the impact of other proposals made by the industry. I am glad that at least it was possible to introduce some modest changes which will assist the secondhand car trade and servicing. I can tell Senator Daly and others who referred to this matter that I will be keeping this whole area under review in the context of next year's budget.

The construction industry is also experiencing severe difficulties as a consequence of the slow-down in economic activity generally in recent years. While there are no specific incentives for the industry in the budget or Finance Bill, it will benefit significantly from the expected up-turn in investment. It will also benefit from specific developments mentioned in this Bill, for instance, the new financial services centre in the Custom House Docks area. There are many others but I will not delay the House with them. It is important, though, in discussing the construction industry and the changes in the grants as from 27 March to refer to the fact that there is in the budget for this year £100 million for expenditure under the house improvement grants scheme. There will be another £100 million in 1988 for the same purpose. That is three times more than what was spent in this area in 1986. The new house grant still remains. It must be said, not only in relation to the construction industry but to the economy as a whole, no matter what walk of life one is working in, that unless and until we begin to get the climate for investment right by reducing interest rates there is not going to be investment for construction work, purchase of cars, property or any other kind of business activity. That is the reality. Those are the facts that face us. I believe firmly in dealing only in realities and with the facts.

A number of Senators commented adversely on the withholding tax. Let me emphasise once again that what is in question here is accelerated payment of tax and not additional taxation. Senator Bulbulia was particularly worried about the impact of the tax on professionals in the construction sector who engage in contracts with the State or State agencies. She appears to have overlooked the impact of the amendment which I introduced in Dáil Éireann. For the benefit of Senators perhaps I should explain again what this amendment is designed to achieve.

The amendment relates to the conditions which must be met before an interim refund of tax deducted from professional fees will become due. Section 18 of the Finance Bill, as published, sets out the conditions to be fulfilled for payment of an interim refund. One of these was that the major portion of the specified person's business receipts must be derived from relevant payments and the major portion of the receipts must be expended for the purposes of the trade or profession concerned. In addition, the inspector had to be satisfied that the absence of an interim refund would give rise to hardship. This condition has now been removed. The change means, in effect, that a construction company or any other company or individual will obtain an interim refund once tax equivalent to the previous year's liability has been paid. Companies with a small tax liability and subject to significant deduction of a tax at source will be in a refund situation at a very early stage of the year.

A great benefit of the withholding tax is that it will encourage earlier settlement of tax liability. This is surely to be welcomed. One of the persistent problems in the collection of tax from companies and the self-employed is the lengthy delay in final settlement. Any development which reduces delay deserves support. Senator Kelleher related this new withholding tax to the VAT at point of entry and complained about VAT at point of entry having adverse effects on small businesses. It had the opposite effect. In 1982 I introduced VAT at the point of entry. It had a major impact in cases where people could import goods to compete with Irish manufactured goods and put many small industries here out of business because they did not have to pay their VAT until such time as they sold their product, or months afterwards, whereas an Irish producer had to pay VAT as soon as he let his product outside the door. Therefore, VAT at the point of entry had a tremendous impact on protecting Irish jobs and also had a major influence on the correction in the balance of trade.

Senators Bulbulia, Brendan Ryan, O'Callaghan and others referred to deficiency in the tax collection system. As I indicated in my opening speech, I accept that any reform package must incorporate measures to improve collection. I reiterate, however, that it is folly to suggest that our problems of high taxation can be solved by simply collecting outstanding taxes. Senator Bulbulia requested that I clarify the precise position as regards the level of outstanding taxes. She quoted a figure of £654 million from the recent report from certain staff representatives in the Office of the Revenue Commissioners. This appears to refer to figures in the report of the Comptroller and Auditor General on the 1985 Appropriation Accounts, which indicated that at the end of May 1986 the amount of collectable tax then outstanding was estimated by the Revenue Commissioners at £664 million. As my predecessor, Deputy Bruton, indicated in a statement he made on the general issue of tax collection and enforcement on 10 December 1986, the figure of £664 million does not represent an amount actually due for collection on 31 May 1986. In many instances tax liabilities were not even finalised on that date.

For example, in the case of corporation tax money is included in this figure which was not actually due to be paid until a later date and thus was not outstanding at all in the sense of being due for immediate payment. I would also like to stress that the estimate of tax ultimately likely to be collected is already built into estimates of tax yield according to the expected timing of payments. This amount does not, therefore, represent a new increment which can be added to available tax revenue.

In summary, amounts of uncollected taxes do not, in the words of one of my esteemed predecessors, Deputy Dukes, represent "a crock of gold" out there which can be harnessed to solve our budgetary problems. I am aware that the report from staff representatives of the Office of the Revenue Commissioners about outstanding taxes has received considerable publicity in recent days. As Senators will appreciate from what I have said, I regret to say the report is misleading because it implies simplistically, at least according to the newspaper account, that there are several hundred millions of pounds of tax due ready for collection if only procedures were improved and more staff provided. This is not the reality. Exaggerated statements about tax collection and tax arrears merely confuse the situation. I hope I have adequately explained it for the benefit of this House.

Senator Brendan Ryan and others were critical of the level of tax payments by farmers and suggested, on the basis of some unofficial figures on farmer incomes with which I am not familiar, that farmers should be paying as much as £200 million a year in income tax. To put this matter in perspective, the official CSO figure for farm income in 1986 is £1,125 million. However it is not possible to calculate the appropriate tax bill for farmers from this figure. The CSO reckoning takes no account of the wide range of perfectly legitimate business and personal allowances which farmers, like other taxpayers, are entitled to take into account in computing their income tax liability. These include business expenses, capital allowances, stock relief, interest repayments on borrowings, contributions towards life insurance VHI and retirement annuities and basic personal allowances or exemption, whichever are appropriate.

Furthermore, half or more of the farmer population have not yet been made effectively chargeable to income tax. The Senator will appreciate that these factors reduce the effective taxable income of the farming population greatly, although there are no data to indicate by precisely how much. The Government are not satisfied that sufficient progress has been made towards achieving tax equity in this area in particular in relation to the number of farmers not yet effectively liable to income tax.

Senators will recall that prior to 1983 farmers with rateable valuations of less than £40 were exempt from income tax. This exemption covered the majority of full time farmers — as many as 90,000. In that year the exemption was abolished. The progressive extension of the income tax system to all farmers by means of the highly simplified farm profile system was initiated. Owing to various difficulties, notably a staff dispute in the Office of the Revenue Commissioners, progress in achieving this extension was slow. However, the Government are committed to accelerating the effect of the extension of the income tax system to all farmers through the issue of improved farm profile forms as announced in the budget. These improved profile forms will allow farmers with marginal tax liability to be assessed immediately, eliminating the need for the return of further accounts by many of the profile farmers.

The Government are convinced that their policy on farmer taxation should finally set the taxation of the farming community at one with the tax position on non-farming taxpayers. In view of this, I would again urge farmers to put past disagreements behind them and to help make the farmer taxation system work fairly and effectively in their own and the national interest.

Senator Fallon claimed that there have been delays in issuing repayment of retention tax to those entitled to them. That includes the over 65s and incapacitated persons who are not otherwise liable to tax on the relevant deposit interest. Simplified procedures have been introduced by the Revenue Commissioners for dealing with claims for repayment of retention tax so as to ensure that refunds can be made as quickly as possible to eligible persons. However, if Senator Fallon or any other Senator is aware of any individual case where there has been undue delay, I will take up the matter with the Revenue Commissioners if I am provided with the relevant details.

Senator Bulbulia referred to the proposed changes in the reduced rate of tax applicable to the income of banks under their home loan schemes. Many other Senators made the same point. This change is designed to take account of the commercial realities in the market and not as a particular measure against one participant in favour of another. Section 28 of the Finance Act, 1976, provided for a tax concession to encourage the banks to provide home loans at competitive rates. At that time the banks considered it would not be prudent or profitable for them to engage in this lending.

In recent years, however, there have been significant changes in the banks' attitude to home loans. The banks' perception of their profitability and security has improved, relative to other personal lending. One can judge this to be the case from the fact that some banks have been able to offer home loans at interest rates below that which might be determined by reference to the criteria upon which the original concession was based. A tax concession devised at a time when home loans were not looked on favourably by banks must fall to be reviewed in circumstances where banks are actively promoting such lending as part of their mainstream activity.

I do not accept the contention that the proposed change will have an undue effect on bank mortgage rates. In the first place, the revised taxation arrangements will apply only to new mortgages issued after the publication of the Bill. There is, therefore, no reason why those who already have home loans from banks should pay any more. Secondly, I believe the banks' attitude to this sector suggests that they can continue to offer home loans at competitive rates. When this was announced we had wild headlines all over the place indicating that this was going to put up mortgage rates from bank lending by 3, 4 or 5 per cent. What happened? So far Allied Irish Banks have not increased their rates at all and the Bank of Ireland's increase has been extremely marginal, 0.75 per cent. Those are the facts. I like to deal in facts and in reality.

I welcome the banks' participation in mortgage credit but as in many activities, the best sort of competition is fair competition. I recognise that this aspect is one which is very difficult to quantify but it is a problem which we will have to address in relation to the provision of financial services.

Senator Brendan Ryan drew attention to the fact that the corporate sector pays only 3 per cent of total tax revenue and that this is much lower than elsewhere in the EC. I accept that this is not an entirely satisfactory position. Corporation tax yield has been virtually static in money terms since 1981 and so has been falling in real terms and making a decreasing contribution to overall tax revenue. By contrast, trading profits of companies before tax have shown steady growth from £974 million in 1980 to over £2,600 million in 1985, the last year for which data are available. The reason for the low corporation tax yield is the fact that there are within the corporation tax a code a wide variety of reliefs and a wide range of concessionary rates which are designed to encourage and have been successful in fostering economic development.

The most notable of the concessionary rates is the effective rate of 10 per cent which applies to manufacturing profits and profits on certain service activities at Shannon Airport. In the Finance Bill it is proposed to extend this rate to a number of important sectors. I make no apologies for this, since any short-term tax losses will be more than made up by the benefits to be derived from the expansion of economic activity in the areas which this tax concession is intended to stimulate. The reliefs which are available include export sales relief and Shannon relief which are, in practice, exemptions from corporation tax, group relief, exemption for agricultural cooperative societies in respect of certain trading activities and a generous regime of accelerated capital allowances which permits the writing off in the first year of up to 100 per cent of the capital cost of all plant and machinery and owner-occupied industrial buildings, including hotels, and 50 per cent of the capital cost in the first year in the case of leased industrial buildings. Some of these reliefs are perhaps now over-generous by international standards.

I announced in the budget this year a review of the structure of the corporation tax code which will examine in particular the feasibility of reducing initial allowances and free depreciation with a parallel reduction in the standard rate of corporation tax. This review will also examine the scope for increasing the corporation tax yield. It is vital that in any changes which might be contemplated with this objective in mind that we preserve an overall fiscal environment which encourages the kind of economic development required for employment creation. The 10 per cent rate of corporation tax is critical in this regard and I know that there is a strong support from all parties in this House and the other House for maintaining this highly successful instrument of economic development.

In regard to Senator Mooney's query about VAT liability on the hire of stage equipment imported by Irish based production companies, I want to assure the Senator that such importations are properly liable to Irish VAT at the 25 per cent rate on the hiring charges, whereas special provision exist whereby foreign companies can import, without payment of Irish VAT, stage and professional equipment for temporary use here and reciprocal provisions apply to Irish companies touring abroad. There is no such relief for Irish based companies. If the Senator is aware of any abuses of the general VAT regulations in this regard I would be glad to hear from him.

I have listened to the many points made by Senator Ross when he spoke about unemployment. We know the seriousness of that. We must do a lot more than has been done and hope that we will make much more progress than has been made. Unfortunately, we have seen in recent months — let us be honest and realistic — complaints and marches and protests. Such actions were taken by people who were in permanent jobs with little or no mention whatsoever of the 246,000 people who are unemployed and the many thousands who have already emigrated. We have got to get our priorities right. Those of us who are honoured to have employment, temporary or otherwise, should at least respect the fact that we have an income on a weekly or monthly basis. We should in some way make some little contribution to the overall economic activity that will allow some progress to be made on this terrible cancer that exists in our society — the dual cancer of high unemployment and huge emigration.

Further points were made about the mortgage interest relief. The suggestion was made by Senator Ross that the benefits of the reduced interest rates that have come along since the budget — the 10 per cent relief in this Finance Bill — will be correspondingly put back when interest rates go up. I will make no such commitment because we must again be realistic. This concession would have cost £160 million this year. All we are clawing back is £10 million, as I said when introducing the Second Stage of this Bill.

Mention was made also by a number of Senators of the growth in the black economy. This is something that all of us make some contribution to and to its growth. We are all involved in some way, whether it is by employing somebody to do the garden or paint the house. Perhaps such people are on the dole as well. We are just as much to blame as they are because they could not operate unless people allowed them to do so.

Mention was also made of the high capital gains tax of 60 per cent. I would like to say that while that is high there are substantial reliefs available of £2,000 for a single person and £4,000 for a married couple. In relation to investment generally, the existing schemes and the business expansion scheme which allows investments of up to £25,000 tax free are still operative. I do not think anybody could realistically complain about what the reality is in relation to investment. We know we need to attract investment. We know that there is no vast wealth in this country. We must attract whatever is here and keep it here rather than continue the situation I described earlier where billions of pounds were leaving the system. We must begin to attract all that back here, thereby reducing interest rates. We must have money here rather than borrow it so that it can be invested in the creation of jobs and in economic activity generally.

I was glad to hear some Senators — even though this matter is not in the Finance Bill as it was done by order prior to budget day — refer to the 48-hour travel allowance restrictions that were imposed on the Border. Those are important things that needed to be done. We can defend them legitimately in any place. Reference was made to the EC. I am quite confident that when we have had all the discussions and debates that will go on with the EC that those who referred to such matters will see the justification regarding the introduction of this very important measure. I have to say, being from that part of the world myself, that it does not affect that part. Talking to many people in business even here in Dublin and further south I have been told that all of them accept that abuses had gone too far. The original travel allowances, as they were introduced, were never intended to be abused in the way they have been, not only here on the island but in the trips across to other parts of the neighbouring island. We have taken the right decision in that regard. Let us again be nationalistic in our approach to buying Irish. All of us will spend billions upon billions of pounds in this economy. If all of us made a conscious decision that we would not spend £1 or one halfpenny other than on Irish products, look at the impact that would have. These are the kind of things we are going to have to do. There is no magic wand and no Minister for Finance has a wand in his pocket to take out and wave around and resolve many of these problems. Each and every one of us must make whatever little contribution we can. If we all start to make it together it will roll on to be of enormous impact to the overall economic activity in the economy and, thereby, will help us all in relation to the huge national debt, to the huge unemployment, hopefully increase investment, create more jobs and get the economy back on even keel and begin to make progress again.

Many other points were made that I will not go into in detail in replying now. As Senator Bulbulia said, whenever the Houses arranges it, we will have the Committee Stage of the Finance Bill when we will have greater opportunities to go into the point in much greater detail. There are many points which I am sure many Senators will wish to have clarified. I look forward to that debate next week on Committee Stage. I will do my utmost, as I hope I have done here, to respond to all the queries raised by Senators.

May I just thank the Minister for his extensive reply to the Second Stage speeches from Senators? Thank you.

Question put and agreed to.
Committee Stage ordered for Thursday, 2 July 1987.

An Leas-Chathaoirleach

When is it proposed to sit again?

Next Wednesday at 2.30 p.m.

The Seanad adjourned at 6.30 p.m. until 2.30 p.m. on Wednesday, 1 July 1987.

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