Seanad Éireann debate -
Friday, 18 Dec 1987

Vol. 118 No. 3

Appropriation Bill, 1987 [Certified Money Bill]: Second and Subsequent Stages.

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

Minister for Finance (Mr. MacSharry)

The annual Appropriation Bill gives statutory effect to the Departmental Estimates for the supply services, both noncapital and capital, including all supplementary and additional Estimates that were voted and approved by the Dáil since the enactment of the previous Appropriation Act. In line with custom, this year's Bill appropriates to the various services set out in the Schedule, the sum of £6,716 million comprising the Estimates totalling just over £6,691 million as set out in the revised post-Budget Book of Estimates, Supplementary and Additional Estimates of almost £25 million and £200,000 in respect of a Supplementary Estimate for the Office of the Minister for Finance for 1986, which was approved by the Dáil after the enactment of the 1986 Appropriation Act. As usual the Bill also authorises the use of certain Departmental receipts amounting to £661 million as appropriations-in-aid.

The Appropriation Bill also provides the statutory basis for calculation of the "four-fifths" issues which the Minister for Finance is authorised, under the Central Fund (Permanent Provisions) Act, 1965, to make from the Exchequer towards meeting the cost of next year's services during the period before the Dáil has an opportunity to consider and pass the various individual Estimates.

This year the Appropriation Bill is also being used to make a number of technical amendments to existing legislation. The Explanatory Memorandum to the Bill fully explains the basis for these changes. Section 2 of the Bill provides for the amendment of section 14 (3) of the Finance Act, 1948, to allow for the daily calculation of the annual interest rate on Post Office Savings Bank deposits. This is a welcome change which will bring the Post Office Savings Bank into line with financial institutions generally. Given that the Post Office Savings Bank's interest year begins on 1 January, it makes sense to provide for the change at this time.

The second technical provision provided for in section 3 of the Bill, amends sections 2 and 4 of the Central Fund (Permanent Provisions) Act, 1965, and ensures that there will be proper statutory authority for certain accounting procedures in relation to the issue of moneys from the Central Fund for supply services.

The 1965 Act empowers the Minister for Finance to issue moneys out of the Central Fund to meet payments by Departments from their Votes. The amount of these issues are necessarily based on estimates of the outturns for individual Votes. Inevitably, in some cases, issues from the Exchequer in respect of an individual Vote will be less than the actual payments made from that Vote, even though the total payments are less than the amount granted by the Dáil. This situation is usually referred to as an "underissue". Since total expenditure on every Vote must be matched in full by an issue from the Central Fund, the requisite balance is issued in the following year. This has been the practice followed since the foundation of the State and is clearly recorded in the annual Finance accounts. The wording of the 1965 Act, however, authorises the Minister for Finance to issue moneys "in the year" and the Comptroller and Auditor General has brought this particular anomaly to the attention of my Department. In order, therefore, to remove any questions as to the legality of the traditional accounting procedure the references to "in the year" in sections 2 and 4 of the 1965 Act are being deleted. The changes have been backdated to December 1965 when the Central Fund (Permanent Provisions) Act was enacted. This ensures that there is proper statutory authority for the procedures used over the years. These amendments are purely technical in nature and will in no way change the way in which the Supply Services are controlled and accounted for.

Let me turn now to domestic economic developments in 1987. It has clearly been a good year for the economy in many respects. Growth has been much higher than in recent years, and has been led by a very strong recovery in exports, especially exports of high technology goods. The strength of output and exports this year has been widespread. While the high technology sector has again led the way, other areas have also been doing very well. Take the food sector, for example. Output was 10 per cent higher in the first eight months of this year than in the same period of 1986; or the so-called "traditional" manufacturing sector — here there has been steady growth in output for the second successive year.

Agriculture is also likely to show a real improvement in 1987. After two difficult years, we expect to see a strong recovery in farm incomes due to a number of factors. Output prices are likely to be much better than in 1986. The volume of farm inputs has fallen because of better weather. Input prices have also fallen. The recovery in farm incomes this year should be substantial.

Solid progress has been made in other areas too. Inflation is at its lowest level for nearly two decades. With world inflation and commodity prices staying low and the effective exchange rate of the Irish pound stable, inflationary pressures are being held at bay.

There has been further solid progress in the balance of payments this year. Last year the balance of payments deficit was down below 2 per cent of GNP and I expect further significant progress this year. There is a big improvement in the trade surplus over the first 11 months of the year. It has virtually doubled compared with last year to £1.4 billion, at an all-time record. There are also signs that investment in plant and machinery has been strong, which augurs well for the future.

While average registered unemployment in 1987 will be close to 11,000 higher than in 1986, this figure masks the considerable improvement that has been taking place in the trend in unemployment for most of the year. In the 12 months to end-April last the live register rose by 18,400 but in the 12 months to end-November the increase was only 3,800. A further improvement in this trend is expected for the end of the year. There can be no doubt that much of the improvement shown in the live register trend in recent months has been due to the success of the Jobsearch programme which has been of particular benefit to the long term unemployed in their search for work and training.

The action the Government have taken on the public finances this year has had a beneficial impact especially on interest rates, which have already fallen very substantially. Indeed, we are now seeing a further downward movement. Lower interest rates encourage investment, the basis for growth in employment. The drop in interest rates is an important consequence of the action being taken by the Government to correct imbalances in the economy. It is part and parcel of the process of putting the economy right and will help to achieve faster growth over the coming years.

Economic performance has been disappointing under some headings. Personal consumption has been rather weak and now looks unlikely to show growth this year. Building investment has also been poor. Notwithstanding the improving trend to which I have already referred, unemployment is far too high. Despite the progress of 1987, we cannot afford to be complacent.

The world economy is still in an unsettled state. Events like the worldwide stock market crash in October illustrates the growing interdependence of the major economies. I might add that, whenever possible at international meetings, Ireland has always urged that the major world economies should take the necessary action to reduce the trading and other imbalances which are at the heart of the present instability in the global economy. The response of Governments to the stock market crash has been sensible and has averted some of its potential adverse after-effects. This points to the need for us to get our own house in order; we cannot rely on international economic developments to resolve our problems.

One of the most significant developments in 1987 has been the Programme for National Recovery and its associated pay agreement. The programme represents the culmination of the Government's effort to secure a consensus-based approach to the resolution of the formidable difficulties facing this country. Having received the endorsement of the principal economic and social interests, and, if opinion polls can be believed, of the public generally, the programme can be said to enjoy the broad support of the Irish people. This augurs well for our capacity to successfully overcome the obstacles to sustained economic and social progress, because the programme clearly indicates the Government's intention to face up squarely to the financial realities of our situation.

The programme has its roots in the common analysis of the most influential groups in Irish society expressed in the NESC report A Strategy for Development, 1986-90, published just over a year ago. This report set down the requirements to be met to avert an economic crisis, and to establish solid foundations for increasing output and employment over the longer term. One of the conditions defined was the adoption of a consistent and coherent macroeconomic strategy, embodying in particular fiscal policies which would stabilise the national debt in relation to GNP. Another was the pursuit of an effective development strategy, focused on the internationally trading sectors of the economy. Both of these elements are in the programme.

The aims of the programme are, however, broader than this. In it the Government, in co-operation with the social partners, have also set themselves the task of addressing other issues of major concern to Irish people over the past decade or so. For example, the Government are committed to reform of the taxation system so that each group within Irish society pays, and is seen to pay, its fair share of the burden. Similarly, we are committed to securing greater social equity in terms of social benefits and of access to health care and education. As foreshadowed in the programme, the Minister for Labour has already published a discussion document on possible measures in the areas of employment equality, payment of wages and unfair dismissals.

The public service pay agreement, which was negotiated in the context of the programme provides for yearly increases in pay averaging approximately 2.5 per cent over the three year period to 1990. The terms of the agreement represent a satisfactory compromise between what the Government can afford to pay and the expectations of the trade unions and their members. An important feature of the agreement is that the basic pay increases are weighted in favour of the lower paid which should enable them to secure a genuine improvement in their relative wage income over the period of the programme.

A major achievement of the pay agreement is the undertaking by the trade unions not to engage in industrial action in pursuit of claims in excess of the pay terms. This will contribute greatly to industrial peace in the public sector and so enable the Government to concentrate on the difficulties they are facing in relation to the public finances and the economy.

I must emphasise that the Programme of National Recovery is an integrated strategy and the attainment of its ultimate goals depends crucially on the coherent application of the policies which it contains. As an illustration, the beneficial downstream effects on the climate for investment stemming from the resolution of our public finance difficulties will be reinforced by the boost to competitiveness implicit in the pay provisions of the programme and the active sectoral development approach envisaged. This strategic combination of measures is designed to maximise the employment opportunities which are so badly needed. The mutual consistency of the planned policy initiatives and the support of the social partners in their implementation greatly enhances the chances of the programme's ultimate success.

Turning now to the 1987 budget, I am pleased to say that the budget for this year is still on course and there is now a good prospect that the overall Exchequer borrowing target will be achieved. The latest expenditure data suggest that there will be savings on non-capital supply services and Central Fund services. These, however, are likely to be offset by a shortfall on tax revenue, particularly in the area of indirect taxes. These taxes, in particular, are showing signs of weakness reflecting, among other things, the sluggishness in consumer spending to which I have already referred. The overall effect is that the gap between spending and revenue is likely to be very close to that predicted in my March budget.

Savings are also likely on the capital side of the budget. Exchequer-financed expenditure on non-programme outlays, which mainly relate to capital restructuring of semi-State bodies, and on the public capital programme are likely to be below budget. Even allowing for a small shortfall in Exchequer capital resources the Exchequer borrowing requirement for capital purposes is likely to outturn somewhat below its planned level.

The Government, then, have reason to be pleased with the prospective 1987 budgetary outturn, Not only did we introduce a budget designed to secure a significant reduction in Exchequer borrowing but, more important, we are about to deliver on this undertaking. This augurs well for the future control and management of the public finances and also provides a sound financial basis for the preparation of the 1988 budget.

In the future, when we look back at the economic history of this period, 1987 may well be seen as a key year — a watershed when we began to break away from the sluggish growth and sluggish policies which have plagued us for most of this decade. This year the Government took strong and decisive action to put the economy back on the road to recovery.

Sensible policies which squarely face the real issues and which do not shy away from the difficult choices which have to be made, have been, and will remain, the hallmark of this Government. We have taken the lead in putting in place an economic strategy which gets to the root of our problems. We have already seen some beneficial effects of these policies this year and I am convinced that, by continuing along this path, we will see considerably greater benefits in the years ahead. I commend the Appropriation Bill to the Seanad.

Mr. J. Daly

I welcome the Minister to the House and I welcome also the optimistic approach contained in his speech. It is like a breath of fresh air at a time when other people are predicting doom and gloom.

I hope the Minister will be able to do something for the motor trade which has been downtrodden throughout the years. With the expected growth in the economy during 1988, 1989 and 1990 — and please God we will be here for that period, and I think we will be — I hope the Minister can see his way to doing something for the motor trade. In common with all Ministers for Finance, when the Minister is asked to give relief in a certain area he says: "Of course I will if you can tell me where I can get the money." One area in which he could give relief, without any cost to the Exchequer, is in the car hire section of the motor trade. The car hire service is the cornerstone of the tourist industry and nobody knows the value of tourism better than the Minister because he comes from a tourist area. If the excise on cars which are purchased in January and February by the self-drive business was deferred until those cars are sold there would not be any loss to the Exchequer and it would also cut the very high cost of the purchase of cars.

As the Minister is aware there are very high insurance premiums in this country and we are competing with companies in Northern Ireland and the UK who operate a policy which is known as back tracking where people hire cars through American tourist agencies and collect the cars in either the UK or Northern Ireland. This is very damaging to the self-drive industry because the price of cars in the UK and Northern Ireland is lower than it is here and insurance costs are also lower.

Aer Rianta are an offspring of Aer Lingus and I have no respect for either of them. They are the greatest scourge this country has seen since Oliver Cromwell. Bord Fáilte have done a very good job in the tourist industry but they have been handicapped by Aer Lingus because they have not helped to bring people into this country at economic rates. Aer Lingus have carried thousands more passengers out of this country than into it. When the previous Minister gave a licence to Ryanair to operate a service, Aer Lingus started playing tricks. They offered flights to the UK for £66 but there was a restriction on the return trip. I know a man who had six tickets for six different periods. He could not get back to Ireland because he was given a day's notice in each case and that continued for a fortnight until the tickets expired.

On hearing that I went to London at my own expense to investigate the matter. One morning when I was there, there were 35 people outside the Aer Lingus office. I was in that queue from 6.30 a.m. and they did not open until 9 a.m. They did not want to let us into the office. I was at the head of the queue and I told them that we were not prepared to discuss our business on the street. When I eventually got in to the office I told them who I was and what I was doing. I told them I was going to pay the full fare to get back to Ireland and that I was going to hold a press conference when I got back. However, somebody waved a magic wand and 15 people were given seats on flights back the same day. Aer Lingus also brought in different packages.

Acting Chairman (Mr. M. O'Toole)

This Bill deals with Departmental expenditure. I do not mind you making passing references to different matters in your speech but you should confine yourself to the expenditure under different Departments. That is what the Bill deals with.

Mr. J. Daly

With respect, I know that what we are talking about does not matter because the money has been spent already and we are just going through the motions. I do not want to spend too much time on this because there is a time constraint on the debate and I am the only speaker from my party. The usual procedure when we discuss appropriation Bills is that we nod them through and discuss them afterwards. I do not want to make a lengthy speech but I want to cover a few points. It is relevant that Aer Lingus who are a semi-State body and who are getting taxpayers' money are now demanding a very heavy sum from the taxpayers to replace their fleet. I would like Aer Lingus to be privatised because I think that is the only hope for them.

The Acting Chairman comes from County Mayo and I have something to say about Knock Airport. The Minister for Tourism and Transport, Deputy Wilson, gave permission to Ryanair to operate a service to Knock Airport and they carried 55,000 passengers on that route. When Aer Lingus realised their success they then applied for a licence and I am glad the Minister refused it to them.

In regard to duty free shopping Aer Lingus are not charging VAT but they are charging the full price for every article. The Minister said in the other House recently that they are making profits of 50 per cent. Their argument is that they are using those profits to subsidise other parts of the airport but what they do not say — and this is what concerns me — is that they are ripping off the care hire people with the high prices they are charging. A small car hire firm at Shannon Airport is being charged £100,000 for a five foot space in the airport and that firm have to have two caravans in the forecourt in order to deal with the people when they come to sign their agreements. The sooner Aer Rianta and Aer Lingus are privatised the better.

What surprises me is that we were told by the previous Government as well as by the present Government that the biggest problem in this economy is created by the price of oil. A couple of years ago the price of oil fell but it was not reflected in the economy. I will reserve the rest of my comments for a future discussion on this matter and I will conclude in order to facilitate the Minister in getting this Bill through the House.

Mr. Lanigan

The discussion on the Appropriation Bill gives us an opportunity to review events of the past 12 months as well as giving the Minister the appropriations necessary to deal with matters in the coming year. The past 12 months has been a very difficult time for everybody who has had anything to do with the day to day running of the country and with planning for the future of the Irish economy. Within that period, for the first time in many years the real problems of overspending without earning and of borrowing without thinking about the future have been confronted. Irrespective of the fact that many people are suffering in the short term as a result of measures taken to tackle the problems, most people believe that the Government are at last on the right track. This Government are governing and are making decisions which will help to ensure that not alone the people of today but also future generations will have a reasonable standard of living.

A number of problems confront the people at present. Taxation is one that is paramount in everybody's mind. There is no doubt but that all levels of taxation are extremely high. The reason is that we have borrowed too much in the past and it is costing a lot not alone to repay the capital but also the interest on those borrowings.

Mention has been made here by various speakers throughout the year about the plight of PAYE workers. This morning we should address ourselves to the plight of the employers. A large number of small employers confront problems on a day to day basis that never had to be confronted by business people in the past. The Revenue Commissioners have too much power in the sense that the rate of interest they charge on overdue accounts is much too high. It has not been adjusted in line with interest rates. Because the Revenue Commissioners insist at all times that the interest as well as the taxes must be paid many firms are going out of business. They are not able to pay interest of 1.25 per cent per month to the Revenue Commissioners on overdue accounts. I appeal to the Minister to bring a sense of reality to the interest rates which are charged.

Suggestions have been made in the past that an amnesty should be given on overdue taxes but I do not agree with that. If taxes are due they should be paid but I do not think it would be impossible for the Revenue Commisioners to eliminate the interest on tax if the tax itself is paid. If that was done for a short period much of the taxes which are now overdue would be paid immediately and many of the problems confronting the Revenue Commisioners could be overcome. This would also help the Government in the enforcement of tax legislation. Many small businesses are in a critical position because of taxes due and I appeal to the Minister, on behalf of them, to see if something can be done in relation to the penal interest rates charged by the Revenue Commissioners at present.

There has been major rethinking in many areas and it is good that we can hold our heads high regarding our industrial output, our inflation rate, and the fact that in Europe we are among the prime exporters. Our workforce has proven that, given the right circumstances, it can equal any in the world. The success of our industry in export and in profit making is helped by the fact that there is a measure in the tax regime whereby manufacturing and exporting companies get a tax concession on their earnings. It has been proven that if you allow people to earn money they will earn even more and will reinvest and this is what is happening.

This has been a good year for agriculture. It is atrocious that in a country which has the best food in the world we should have to appeal to Irish people to buy Irish food. I am glad the Government have taken initiatives to create jobs within the agricultural industry generally. At last with proper planning in agriculture we will see a resurgence of interest and investment in the agri-business sector. This is good for the economy.

A lot of people knock the incentives being given to business people to come in here. The SEATO group of countries had the greatest growth rate in the world for the past number of years and because of incentives, investment is coming in from places like Taiwan, South Korea and so on. This proves that Ireland gives a return on investment. It is also an expression of confidence in the Irish worker. In addition, it creates employment which helps our economy.

Senator Daly mentioned tourism but I am not going to get into an argument with him as to whether Aer Lingus or Ryanair should operate in a more commercial way. The lowering of air fares has helped the tourist industry and has brought back many Irish people who had stopped coming home at holiday time. Because fares were too high, a lot of Irish people living abroad, either stayed where they were or went to places like Spain and Portugal because it was much cheaper to holiday there than to come home. Because air fares have come down there has been a huge growth in traffic into the country. This is good not alone for the tourist industry but also from a family point of view as it keeps the Irish from becoming separated for too long from their home base.

On the question of Aer Lingus, it is about time they got their act together and provided single fare structures such as have been introduced by Ryanair. If somebody wants to go to Brussels they have to pay a fare of from between £336 to £400. To come to Ireland from Brussels there is a fare of £189 and a £139 APEX fare with a Saturday thrown in. People are sitting on the same plane, having paid different fares because of four or five different fare structures. Fare structures are important if we want to get people to travel in or out of the country.

I agree, to a certain extent, that duty free does not mean cheaper shopping. The chairman of Aer Rianta makes no apologies for making large profits in the duty free shops, and he uses this large profit for purposes other than giving good value to the customers. The prices in duty free shops here are, in a lot of cases, higher than on the main street. Visitors to Ireland would be much better off to shop in the main street shops and claim their VAT back when they go out of the country because it is of no benefit to them to shop in the duty free shops.

Over the past 12 months there has been a gratifying drop in interest rates. Small percentage reductions in interest rates might not seem very significant, but to those who have borrowed, who are trying to keep their heads above water, every little drop is of enormous importance. When the banks lower their interest rates, there is a consequent drop in mortgage rates which helps a very large sector of our population who have invested in their own homes. We should be proud that we have the second highest home ownership rate in the western world. Governments have put a lot of money into providing houses through the local authorities and through the various Government schemes. This means that the quality of life is good for those who have been able to take up these loans. Where people buy local authority houses, the subsidies they are given by the Government to occupy exceptionally good houses, is a very high one.

In Kilkenny, the average subsidy for a local authority house is about £75 a week which is a heavy burden on the Exchequer but a burden which the Government have been willing to take on. In that area, the Government have been able to get the commercial banks to row in to help the people who are on lower incomes. They have agreed to put about £70 million into providing loans for those at the lower levels of income. These loans will be provided without the borrower having to have money on deposit with the lending institution for long periods prior to making the loan application. It is good to see that the Government have been able to persuade the banks and the other lending institutions to get involved in this necessary provision of funds for the lower paid people in our society. The Exchequer can use the money saved, in other ways.

Even though there are hiccups in certain areas the indications for the economy are good. It does not mean that we can get back into the helter skelter spending that was going on in the seventies without any regard for the future. It is regrettable but necessary that people will suffer in the short term because of financial stringencies. The Government have to be complimented for standing up to the many pressure groups in our society who are looking for more and more in their own interests. The public in general want the Minister and the rest of the Government to stick by the financial constraints that have been placed on them by historical facts and thereby ensure that there will be a better future for all the people in our society.

On a personal basis I would like to join in the appeal to the Minister to give some help to the Irish motor industry. In doing so he would not just help the motor industry but the economy in general. The motor industry was one of the biggest employers here for many years. There was a huge growth in employment and in reinvestment in the industry. Not alone that but the Irish motor industry was in the forefront in the training of young people. They passed on skills and made certain that their apprentices were trained to the highest possible standard. In Kilkenny city at present there is no apprentice mechanic. That is an indication as to where the industry is going.

I did an exercise in my own small business recently. I am a small wholesaler and I have lost 70 customers due to closures in the past four years. There is no sign of that changing. Unless something is done for that industry, not alone will it suffer but the country will suffer. I guarantee that anybody driving out from Dublin or around the city will meet cars with only one headlight working. People are not replacing their headlight bulbs or their taillight bulbs. If they are not replacing bulbs, can you imagine what the condition of the rest of the car is like? People say that the motor industry should be doing better in the service area because of the fact that people are not purchasing new cars. This is not true. People are not servicing their cars. There is a major case to be made for bringing in a Department of the Environment test for motor care in the same way as there is a test on commercial vehicles.

Another serious situation is developing in that a huge number of cars are being brought if from Northern Ireland and from Great Britain which are being reregistered here. I would suggest that 90 per cent of these cars have failed the MOT test in Great Britain and that one of the main reasons they are coming in here is that it would cost too much to get these cars through the MOT and it is cheaper to bring here. They look cheap and many of them were first registered in 1979, 1980, 1981 and 1982. This is not good for the Irish economy. It is placing the people who use the roads in a very hazardous position because I have no doubt that these cars are not up to the standard required in Great Britain. There is a major case for realistic levels of benefit in kind.

There is some little help for the motorist in that the drop in the value of the dollar means that oil prices should come down drastically within the next few months. There is no situation where oil prices will again be as low as $16.50 a barrel, which two or three years ago would have been the equivalent of about £20. At present $16.50 is the equivalent of about £9 or £9.50. There has to be some help for the motorist in that there should be a drop in the cost of petrol. However, the motorist here is faced with the highest insurance costs in Europe and the cost added to cars because of duties or levies of one kind or another is enormous.

It is a year in which there has been a resurgence of confidence that the Government are doing their job, irrespective of the fact that harsh measures have had to be taken. It is only in the imposition of harsh measures that we can see a future for ourselves and our children. The sectional lobbyists are growing in numbers. Some people are critical in their attitude towards politicians and politics. They keep saying on the one hand that politicians in Leinster House should be legislating and not acting as messenger boys for various groups. The very people who are strongest in the expression of that point of view are those who in their own organisations are trying to get the lobby system built up so that they can put pressure on the politicians, not in the national interest but for their own sectional interests.

The Government have for the first time laid down categorically, well in advance, the amount of money to be spent in 1988. Everybody knows where they stand. There can be a re-juggling within the amount of money that is available, but everybody should be told again that the amount provided is the amount that will be spent. If that is adhered to the Government will be doing an excellent job for the Irish people, even though it might be unpalatable in certain areas.

The Programme for National Recovery which was signed by the Government and the social partners is an indication of this policy. It should be acknowledged that the social partners have also looked at the problems confronting us and have rowed in with the Government to a large degree by accepting the message of the Government. Although they might not agree with everything that is done in every area, they do agree that the Government are going in the right direction and that unless the Government keep to that direction there will not be a place for anybody, whether they be trade unionists, farming interests, industrial interests or the unemployed, homeless or deprived in our society.

It has to be said that even though we are living in times of stringent control of finance where there have been major cutbacks in quite a number of areas the Government have not forgotten the plight of the unemployed, the plight of the homeless or the plight of the deprived. The Government have indicated that the underprivileged will not suffer to the same degree as those who are privileged. I am glad that the amount of money being given to the underprivileged is staying extremely high and has not been cut back in any way. Although not quite the double week of benefit was given for Christmas, nevertheless a week's benefit plus 65 per cent was allocated. Not alone that but it has been extended for the first time to the long term unemployed. This means that many thousands more can benefit under that scheme. This demonstrates that the Government give priority to the underprivileged in our society, that they have their priorities properly in place in that respect. The ensuring year will be another in which there will be a degree of cutback with stringent control being maintained over the nation's finances. Though it might not suit the tourism industry, hopefully the dollar might drop another few points which would be a tremendous help to the economy on many fronts. Hopefully, the tourism industry will benefit from the fact that ingress fares are coming down.

Agricultural and agri-business are being managed on a planned basis for the first time, an area that was making its fair contribution to the economy. Now that it is being planned and managed in a proper structural manner hopefully that too will reap enormous benefits for our economy.

We must pay tribute to employees and employers in Irish industry for the major efforts they have made to bring their productivity levels up to the highest international standard. Too often we hear people run down the Irish worker. I contend that if he has the proper tools he is the best in the world. Although there is at present a drain of enormous magnitude of young people leaving the country what the Government are doing will ensure that our economy will expand in the next few years thereby allowing those young people to return and, if they wish, find employment at home at reasonable rates of pay and under reasonable conditions.

I compliment the Minister for Finance on what he has done over the past 12 months even though there have been times I too have suffered on that account. The trend is in the right direction. Hopefully, the headline that appeared in one of yesterday morning's papers to the effect that the ESRI have predicted that 1992 will be the year of full recovery will be proved to be incorrect. Given Government decisions taken in the right areas, given a reasonable international scenario within which to work perhaps that forecast might be brought forward at least one year, if not two.

Mr. J. O'Toole

I want to pick up a number of points raised earlier. This Bill is merely an enabling motion to allow the Government to spend money and to govern. There can be no question but that it is their priority to have it passed.

I was intrigued by some points raised earlier, particularly the references to Aer Lingus. It highlights once again the double-think about public companies, privatisation and so on when, on the one hand, people say public and semi-State companies should be profitable and be run on a commercial basis while, on the other hand, people tell us that, when they do run their affairs profitably and on a commercial basis, they are doing so at too high a cost to the people dependent on them, that we should put pressure on them to do otherwise.

Aer Lingus represent probably the best investment that the State has made in the semi-State sector, in terms of what the company cost us and what they are worth. They have been worth every penny we have put into them. One of the reasons for that was that the Government of the day, in their wisdom, at the time of the company's inception, allowed the company to develop in different ways. They did not restrict their operations merely to air traffic. The Government allowed then to develop and expand into the hotels area and so on. That strategy allowed them to become a more complete company and to work efficiently and properly.

In relation to deregulation I might reiterate that it is my opinion that we are going through a honeymoon period at present. Because of the introduction of more privatised, smaller companies into the general area, air fares have dropped and are now much cheaper than heretofore. I might warn the House — and I am sure that the Minister is aware — that ten years ago, when deregulation was at its height in the US air fares dropped substantially. Ten years later, when all of the smaller companies have been wiped out, air fares are more expensive in pro rata terms than they were then, so that there has been no ultimate gain to the consumer. The same will happen here. We see it happening daily. No later than yesterday there were the negotiations mooted between British Caledonian, SAS and various other groups to amalgamate. Aer Lingus stated in recent months that they foresee a time within the next decade when there will be five or six multinational airline companies that will control everything, the smaller ones being bought out. We are moving in that direction.

I consider prices at duty-free shops very high. However, the "holier than thou" attitude of singling out Aer Lingus in this respect is unacceptable. Probably, it could be said that in any part of the world it is cheaper to buy goods on the high street than in the supposedly duty-free shops. I would include in that comment any carrier to continental Europe. For example it is cheaper to buy a bottle of brandy in a supermarket in France than at any of the duty-free airports in France. That is a fact and can be substantiated.

In terms of spending and allowing semi-State companies to develop, on which we will be having to debate later, I should like to compliment the Government on allowing the ESB to expand their operations into the area of wholesale coal distribution. Of course, any time they have ever tried to develop — including the period in which they were established — there was objection raised to their being allowed to expand nationwide. That is a semi-State company which will be proved to be a jewel in the crown eventually.

It is of interest to everybody to establish for themselves how the nation decides its financial policies. In the debate on the Estimates the Minister made a very brave point, one which was not picked up at all in the course of that debate. He said he was trying to find a solution to problems created by successive Governments from 1973 onwards, and that included Governments of his own party. That was a brave statement to make, an indication of honesty and deliberation. Whereas I would disagree with many of the aspects of the programme for Government, at least it constituted an honest starting point.

I am interested in the growth of our economy because I believe very strongly that we have a two-tier society in which there are the haves and the have-nots. There appear to me to be two ways only of finding a solution to that problem. We could say: there are a lot of people with wealth in this country at present; let us take from them and give it to those who do not have it. But there is not a chance in hell of that happening. I recognise that and am being pragmatic about it. The only alternative way to ensure a proper distribution of wealth among the lesswell-off in our society is to create a situation of growth in the economy, so that that growth can be spread amongst those people who most need it. In other words, there would be positive discrimination in the share-out of the effects and the wealth created by growth in the economy. The Leader of the House said he was glad to see that there was not a reduction in the moneys available to the disadvantaged or under-privileged in our society. That is not quite true. In one disadvantaged area, that of primary education, there has been a major cut of one-third. However that figure perhaps does not represent the extent of the problem as it was a small budget in the first place.

It is my view and certain belief that sound financial decisions are based very definitely and dependent upon sound economic strategies. At the moment we have a Government who are led by an accountant who wishes to act like an economist. Therein lies the problem. We are falling between two stools. We need to recognise that the economist gives a direction and the accountant takes the decisions. That has not happened. If they both got together maybe we could get a direction that might be more programmed and more understanding. For that reason, the Government should be aware and take discriminating heed of the economists who advise them in their decisions.

I want to talk on one area of that at the moment, and that is the area of redundancies. It is my firm belief — and it is only a belief because I cannot get to the facts of the matter and perhaps the Minister might be able to clear it up for me — that the whole area of redundancy in the public service is one that has been handled with a great lack of sophistication. It seems to me that the Government were advised, perhaps correctly, that the cost of a public servant is £X, the average amount. Let us say that the figure was a correct figure because it is simply a matter of division. The Government then decided that to reduce that number by 10,000 was going to save the State a certain factor of 10,000.

I think that is where the operation fell down because the Government then went about looking at each of the spending areas and saying they would take so many from here, so many from there on a pro rata basis. That was like giving William Tell a blunderbuss to shoot the apple off his son's head. He would have spattered the apple all right, but he would have spattered everything around it as well. There was a certain lack of accuracy in the way we developed the redundancy scheme in the public service and the way the Government approached it, because there are certain areas in the public service which are far less cost effective than others. This was not taken into consideration.

I am speaking very clearly at this stage about primary education, because in primary education the cost of a teacher to the State is more or less the cost of that teacher's net salary, whereas it has been estimated that in many other areas of the public service to maintain an employee that one has the costs of telephone, copiers, secretarial help, management structure, heat, light, rent and all the other costs that are there as part of maintaining a public service. This is not the case in primary education because those particular costs are covered locally and the only cost to the State is a cost per pupil which works out at something like 15p per pupil per day, and that cost will remain even if one takes every teacher out of a school because it is based on the pupil population only. Therefore, in this area and in other similar areas as well we have a situation where there is not the same cost to the Government of different public services but I have seen no sign of that kind of study taking place anywhere in the costings the Government have put in front of us. It also seems to me that the economic gurus who advise the Government in this area did not consider where we were going.

On the area of the cost and cost effectiveness, the need for planning, the need to follow up investment and the need to get the most out of investment, it is highly questionable why some of the decisions were taken. It was my understanding that when the Government, and all due credit to them, published the Estimates at the earliest I can remember them being published, the idea at that stage was to allow a debate to take place with people responding to them and pointing out various points to the Government. In other words, it was a recognition — at least I hope it was a recognition — that all the nation's wisdom was not simply invested in the members of Government and their advisers, that there are other people as well who can add to the collective wisdom of the nation in order to give a direction to economic planning.

In saying that, let us look at what it costs this country to take 1,500 national teachers out of the public service. The cost to the State to put a teacher on stream, at a very conservative estimate, would be approximately £25,000. That is what it costs to train and prepare a primary teacher and to have that teacher ready to take up work. Similarly, taking the primary teachers out of the system means we are turning our backs on that investment. If we are now saying that it costs £25,000 to train, educate and prepare a primary teacher and we then say let us take 1,500 of them out of the system, we are talking about 1,500 times £25,000 which is roughly £37.5 million that we are turning our back on, money that the taxpayers pay, that the nation has invested, that the nation is entitled to a return on and we are saying we do not need any return on that investment.

Similarly, if we take 1,500 teachers out of the system we are leaving up to 1,500 classrooms lying empty to deteriorate. Apart from the deterioration, which is something that is very difficult to quantify and assess, it would certainly be a very conservative estimate indeed to say that the average cost to the State to build each of those classrooms was approximately £40,000. Again, if we multiply £40,000 by 1,500 we get a figure of £60 million. We are talking about a figure of £60 million which we have invested in actual concrete and £35 million invested in the preparation, training and education of teachers. There is £100 million there that we are turning our backs on which is not being discussed at all. It is a waste of money in that we have invested money in creating an infrastructure, in creating a fabric, and we are now prepared to turn our backs on it. Is that a wise way of spending money? Is that a sound financial decision? Is there a sound economic strategy behind it? My understanding of economics leads me to believe — and I have yet to find the economist who will disagree with the point — that the most important resource for any developing economy is a sound, well-educated young population. There are two requisites for the development of an economy, health and education. There can be no development without them.

What we are doing at the moment is like buying a new car and then not being able to afford the insurance or tax on it. Thus, the car which cost £10,000 or £20,000 is lying outside the front door for lack of insurance and taxation. While it is outside the door it is deteriorating by the day and it is losing value by the year. We are looking at a huge investment which is devaluing all the time. What we are doing does not make economic sense. The future saving to the State through taking out of the system the primary teachers is probably a saving that would have come about naturally by way of demographic trends and changes over the next decade or so. I do not believe that the economists who advised the Government on this area took that into account. I put these points very sincerely. All of us make mistakes.

I have listened to Ministers talking about the need to work within the Estimates. I want to make a statement to the Minister for Finance in this particular area which I hope he will take on and respond to, because no member of the Government has responded to me so far on this point. I have listened to Ministers saying that whatever changes are necessary must take place within the budget and within the Estimates. To many people the Estimates are something very mysterious and very difficult to understand. The Estimates for primary education are dealt with in approximately 18 lines. Any normal fourth class or fifth class student could work them out. They are not difficult. I want to say, here and now, that in the Estimates for primary education no account is taken of a redundancy scheme. It is not costed in the Estimates for primary education except in one area and that is the area of pensions.

I challenge the Minister for Finance to tell me I am wrong in what I am going to say next. If the Minister would not apply this redundancy scheme to primary education, the net effect on the State's education Estimates for next year would be a saving of £5 million. The only place, that I can find, in the budget or in the Estimates where there is any allowance made for this redundancy scheme has been in the pensions area where, as I recall, superannuation at primary level goes from something like £48.6 million to £54.6 million in the coming year. On my figures, only £1 million of that will be needed for normal increases, therefore I estimate that £5 million extra has been put in to pay the pensions of teachers whom the State wishes to make redundant. Not making them redundant would save the State £5 million and that is the only effect it would have on the Estimates of this year.

Secondly, if we are talking about saving money and spending money, about Estimates etc., I would like the House to consider for a moment where the money for future redundancy schemes is going to come from. How are they going to be funded? I have heard references made to the Central Bank. Perhaps the Minister will correct me if I am wrong in my simplistic approach to it but, as I understand the Central Bank, it is a State-owned body. Its profits come to the State and its reserves are the State's reserves. There is a number of ways by which we can get money from the Central Bank. The only ways I know of are: they can give us a loan, which we have to pay back; they can give us an advance one year which means that we will not get money in a future year; or else they can give us the money out of the reserves.

If it is a loan, we have to repay it with interest at a cost to the State and I do not recognise any costing built into any of the schemes I have seen. I would like to know that cost. If it is an advance to the State from money that it would get in a future year, all this means is that in the future years for which we should prepare we would have less money to spend. If we have less money to spend in future years, the deficit must be made up with extra taxation. An advance means extra taxation; a loan means extra payment and loan repayments for the State. The other way is to take from the reserves.

Every year, as people will be aware, the Central Bank sinks a certain amount into the reserves. Some idiot, for want of a better word — who has a degree in economics — said to me recently, that we can take from the reserves because we have more money there than we need. I would certainly like to examine that point because it raises two questions. Either we have been needlessly sinking money into a hole for the last number of years and if that is the case I want to know about it, or we are taking from the reserves now. If that is the case it will create a crisis of confidence in the Central Bank and in the banking system which will have far more cumulative knock-on effects on the system than the Stock Exchange collapse, which was really only the rich hitting the rich. A crisis of confidence in the banking system would create a major problem for us.

There is one other way in which we could get money from the Central Bank and I hope the Minister will say that there is no intention of doing this — that is, to ask them to print more money. It seems that whichever of the four approaches is to be adopted, there is no sound, or financial, or economic argument for using it. That is my response with regard to the scheme of redundancy. It is non cost effective, it will not save money and-it is a mistake at a time when we should be building up an infrastructure. Surely, a precondition for growth is an effective infrastructure at all the different levels. I would appeal to the Minister to consider that, perhaps this is an area where, in the long term, savings could be achieved to the same effect, without a devastating onslaught in a very short period. I would ask him to take that point into consideration.

I would like to comment very briefly on the Ministers remark that he would like to see access to health and education made easier for people. I would certainly welcome that. I say with regret that I cannot see the decisions being taken at the moment making that happen, but I am not going to get into that argument. The direction is not right for achieving greater access to health or education, but it is simple enough for me to stand up and say that, particularly without putting forward my argument.

I want to talk briefly about resources. What is a national natural resource? What is valuable and what is not? Really it very much depends on the perspective of the person making the assessment. It is true that if an oil field or gas field started running free or wild tomorrow through a breakdown in piping, or through an upheaval or whatever and the gas was flowing into the air or the oil into the sea, there would be a public outcry at the waste, apart from the pollution. Something would need to be done. There would be immediate intervention to get the leak plugged.

I know that the Minister probably has been listening ad nauseam to statements on emigration, on the outflow of people from this country. I put it to him that the outflow of our young people is a leak, or a waste, of a natural national resource of greater proportions than if the Kinsale oil field were to be lost to the elements tomorrow morning. That must be taken on board. To put that in its context, as I recall, the latest figure that came through last week indicates that 28,000 was now a conservative estimate of the number of people emigrating from this country per year.

Figures mean very little to people — 28,000 is the same as 280,000. What does this figure mean, in fact? Can we relate it to something? I just want to relate it in very simple terms to the age cohort, in other words the number of people of any one age group in Ireland at the moment. The number of people born per year is roughly between 50,000 and 60,000. In each age group in primary schools over the last ten years the average number would be about 60,000. Such a figure will drop down over the next eight, nine, or ten years to roughly 54,000. An emigration figure of 28,000 per year is, in fact, one out of every two in relation to the number of births taking place in the year. Eventually, it finds its own level. It would be incorrect for me to say that one out of every two, or half of the 18 year olds in this country, are going to emigrate, but over a period of years — and it is a figure that is increasing — the estimates are that emigration will go up to 30,000 or 33,000 per year.

We are looking at an outflow from this country of more than one out of every two young people. We cannot afford that. We need these people. There will be no growth without them and that is for us a matter of priority. It is misleading to think that we can have development or growth without them. At the end of the day, we will have to take economic decisions, financial decisions. We must spend our money in a way which will repay every penny.

In making decisions during the year the Minister's number one priority should be to aim for growth and in trying to achieve that growth, he should use all the resources, advice and help that are available. The Government, because they are in a minority at the moment in the other House are in the ideal position to assess the information that is available and to make judgments. The expertise is not confined to the Government or the Government party, there are other people who can help. Their views should also be taken on board and given consideration. We should try to build a future of hope, not of emigration; a future of work, not of unemployment and a future in which there will be equality in society.

Mr. Ferris

I welcome this opportunity to discuss the figures which have been presented by the Minister in the Appropriation Bill, 1987. An extra £25 million is required over and above the figure contained in the Estimates and that extra £25 million has been approved by the House. The Bill presents us with an opportunity to look at where the country is going, how we as public representatives are performing in the eyes of the public, at the responsibility which has been placed on us by the electorate and indeed at the commitments given by us either when in Opposition or in Government. The position of the Labour Party has always been crystal clear and the Minister can, if he so wishes, check any documentation which was presented by the Labour Party before an election or any programme that we have been involved with in Government to see that this is so. We have always recognised the cardinal importance of attacking the crisis in the national debt, bearing in mind the major question as to who should pay for the crisis.

Ninety per cent of elected representatives feel that this crisis has to be, first of all, attacked at the levels which affect the poor, the underprivileged and the needy. The Government have approached the problem in that way.

When in Government we were accused of slowing up progress in dealing with the national debt. We plead guilty to that accusation on the basis that if everything that was required to be done was done within a prescribed period then suffering and hardship would ensue. We approached the problem realistically and there were widespread accusations that we were too tough. As Senator Lanigan has said, the lobby groups were active. Senator Lanigan's party were the biggest lobbyists of all. They ran with the electorate and said that more money should be spent in every area. If they were as realistic then as they are today they would have realised that it was difficult to say that without being dishonest with the people. There is a widespread feeling among the electorate that people are not the same in Government as they are when in Opposition.

The word U-turn has been used widely in respect of the Governments performance. Apparently, the Minister sees the need for being cautious in what he does and irrespective of what he might have promised when in Opposition he now realises that things are not so easy in Government. We still ask the question, who will pay for this crisis? On looking at the Book of Estimates for the coming year, which have been based on the Estimates for this year, I discover that there are major reductions in all of the areas which the Labour Party are concerned about. In the allocation for the Department of Labour who deal specifically with the sections which Senator O'Toole has spoken about, the young, the unemployed, and those who need to be retrained after leaving school, there is a reduction of £10 million. All that is left for them is the emigration boat.

The allocation for the Department of Health, and health is an area which touches the underprivileged, has been reduced by £72 million. There were widespread cutbacks within the health services this year and hospitals were closed around the country. These closures were dictated at departmental level and as a result many difficulties have arisen. The need which is there has not been met by the health boards. They now publicly admit that because of the Estimate for next year there is no way that they can continue to give any semblance of a health service to those who need it, to those who are entitled to it and to those who have paid for it. One of the tragedies of this type of bookkeeping is that the decisions which are made at a higher level can lead to widespread hardship on the ground. That is what happened in the health services this year and it will continue to happen in the coming year.

The executive officers of the health boards have publicly stated that they cannot continue with the money being made available to them. Members of health boards who are also in the Government party are publicly stating that they want to meet the Minister for Health to say that they cannot carry on. Senator Lanigan is one of those Senators who is privileged to serve on a health board. He has publicly stated that they must meet the Minister for Health, Deputy O'Hanlon, to explain their dilemma; yet, today he commended a Minister who has sent a warning shot across the bows of the Department of Health that they must cut back and that this is all they are going to get. When we go to the coal face, where the services are delivered, we realise that the services cannot be delivered. The Minister says that he does not want any more hospitals closed, but he only gives an allocation that will almost require the closing of a hospital. It is a very neat transfer of responsibility. The Minister says he does not want to close hospitals but he gives insufficient funds to the health boards who will have no option but to propose the closure of more hospitals which the Minister will accept. That is what he did this year.

We went to the Minister about the hospital in Tipperary. He said that he had no plans to close the hospital in Tipperary but in a vote the Fianna Fáil members of the health board decided to close the hospital so that the budget would be complied with, and the Minister agreed. We now have to go to court and go through all sorts of procedures. That is just one example of what is happening in the South Eastern Health Board area. Their budget for this year is smaller than any which has been given in the history of the State and is £4.2 million less than they require. That represents a real cut. In the past the Minister looked for more in the hope that he could improve services. He received a little extra last year but a lot less than he needed. For the first time it is being recognised that real cuts have taken place because less money has been given to the health services and other services. CEO's of health boards have said they cannot provide services unless they close hospitals. This year those closures have not affected any economies because the genuine sick must be hospitalised or otherwise they die. That is a tragedy particularly when we are mainly concerned about the old who have contributed their share in taxes over the years.

There is a cutback of £43 million in the area of primary education while post primary has been cut by £26 million. The cut in third level education is £3.6 million. Senator Joe O'Toole dealt with the dilemma that exists following the issuing of the 20/87 circular by the Minister. When that circular arrived at schools, and parents and teachers realised they were obliged to fall in line with its terms, they announced that they could not provide adequate primary education for the children. All hell has broken loose since and now the Government realise that irrespective of what is decided in the Department of Finance it is not always possible to deliver. Four different U-turns have been made on the Education Estimate. The Minister may have adopted certain policies, which were accepted by his colleagues on the basis of being a decision by the Cabinet, but on the ground some members of his party are expressing great concern. Members of his party on health boards, local authorities and county committees of agriculture, are concerned about the policies being pursued by the Government. They are unable to meet the challenge put to them by the Department of Finance. It is fine to say that they represent strong Government, even though the Government do not have a majority, but in my view the policies are being pursued by the Government because they realise they have support on local authorities to carry them through.

I wonder why it is that the Department of Finance is one of the privileged Departments in that they have been granted an increase in their Estimate of £27 million.

Mr. MacSharry

The national lottery.

Mr. Ferris

Yes, that is marvellous. There has been a 45 per cent increase for economic advisers, consultancy fees and so on. Who advises whom? I accept that the Minister for Finance needs consultants but I hope the consultants realise that it is left to others at local level to provide services for the people. That is not easy. There has been a reduction of £90 million in the Estimate for the Department of the Environment. I have gone through the difficult experience, as a member of local authorities, of trying to strike a rate and I have come to the conclusion that unless the financial structures of local authorities are reorganised there will not be a future for them. Local authorities are not being allowed to dominate the economic development of their counties or towns. They are not able to make democratic decisions which they can follow through. In my view they are nothing more than rubber stamps for central Government where there is very little planning. Central Government do not have any understanding of how local authorities functions. They are not aware that those power houses generate schemes to improve the infrastructural development of their counties. I hope the Minister will give real power to local authorities. The Government will have to address the financial problems faced by them.

The Minister, in dealing with agriculture, told us that farm incomes improved in 1987. My response to that is, thank God for a fine year. I do not think the Government had anything to do with the improvement in farm incomes. That improvement was handed down by the Lord. I accept that the Minister is in a powerful position but I do not think he has the power to intercept the decision of the Lord in regard to the weather.

Mr. MacSharry

I pray to him.

Mr. Ferris

The Minister may claim credit. I was blamed for the wet days. Occasionally we all have to pray to survive in politics. The years 1985 and 1986 were disastrous ones for farmers because of the bad weather. The Minister should not rest on his laurels because another bad year would prove disastrous for them, too. We must remember that the farming community have very few options left open to them to increase incomes. Many of the traditional sources have been closed off by the Council of Ministers. We depend on a vibrant agricultural industry and because of that I was amazed to hear the Minister for Agriculture and Food introducing a Bill to reorganise the system of advice, research and development and in doing so proposing to reduce the amount of money for that by 50 per cent.

That was a wrong decision and it will prove detrimental to the agricultural and food industries. We may prepare elaborate programmes but we will not be able to deliver on them if we do not have experts available to help farmers implement them. The experts in ACOT and An Foras Talúntais have been offered voluntary redundancy and I do not think there will be officials of any consequence left in those organisations to make it possible for the Government to implement their programme.

An expert in the field of agriculture, in the course of a letter to me, said that the proposed cut of 43 per cent in the estimated budget for An Forus Talúntais and ACOT, coming after a cumulative reduction of 25 per cent in real terms over the past six years, will virtually mean the end of agricultural research here. He went on:

The Institute have a team of experienced and dedicated research scientists, all of whom have real contact with agriculture and whose research work over the past 28 years has laid the basis for the growth in agricultural production and efficiency. To expect a recovery of our national economy in a land bereft of the research and development team for its major industry is impossible.

That is a valid response to the Minister's intention to amalgamate ACOT and An Foras Talúntais. ACOT, who have been giving advice and training to our young farmers, will be offering their staff voluntary redundancy. The Minister's proposal is that the staff should earn their wages by charging farmers for advice but in the past we could not coax our farmers to take advice at no cost. Profit margins in the agriculture sector are recovering after a number of disastrous years.

Unemployment concerns us all and the Minister was honest in telling us that in spite of all the efforts of the Government through the Jobsearch programme and other schemes, the number has increased over the 1986 figure. If the predictions of all the experts are right, whether or not they are competent experts and most of them are self professed, unemployment figures will continue to increase next year in spite of the best efforts of this Government. If so I am not sure that proper planning has taken place in the Department of Labour or the Department of Social Welfare to take account of this additional charge on the Exchequer to cover for additional figures in unemployment, unless we accept the soft option of facilitating people to emigrate to other lands. If we invest money in teaching and training our young people in agriculture or any other sector, we have an obligation and a constitutional right to make every effort to provide work for them in future in our own country. That itself would generate economic development which would benefit not alone the country but those of us resident in it.

The long term figures for unemployment are extremely worrying and it will be a tragedy if we have to wait until 1992 or further down the road before any real improvement takes place in this area. The Programme for National Recovery which the Minister referred to, on page 16, section V under the heading “Employment” states: “Lower interest and mortgage rates, a stable exchange rate, low inflation, stabilisation of the National Debt/GNP ratio and its subsequent reduction to a sustainable level, halting and reversing the flow of capital out of the economy, lower and more equitable personal taxation constitute the fiscal and monetary policy of the Government under the Programme.”

In spite of the collapse of the Stock Market this year which, as Senator O'Toole said, is the rich beating the rich, despite that jolt for the money men of the world, I see nothing in this programme except aspirations. It is good that at least there is an aspiration to do something about unemployment and that the social partners also have an aspiration in this area and will get together and submit proposals to the Department. If that was to be followed through, why were the NDC singled out for a reduction in their allocation when we could have capital available on an equity basis to stimulate development between the public and private sectors in areas where either one or the other would not have the funds, expertise or courage? Perhaps we should admit that the Programme for National Recovery is just a wage agreement. Some right wingers would say it is too generous. The trade union movement would say it was a give away but they want to be involved with the Government in a consultative process, which is to be welcomed.

As I see it, it just manages to deal with the question of wages over a two or three year period in the hope and belief that there will not be industrial disputes on wages. After that you can read every page and find relatively little hope for creation of jobs or any improvement as far as we can see that might stimulate the economy. Therefore, I do not know where national recovery comes into that programme. I hope I am wrong. I will monitor the progress and will be nothing but constructive in anything I might say or do in the next two or three years in this area. Let us hope some proposals come up because every other day I hear the private sector offering redundancies. The State sector are in the same dilemma and saying that one way they can balance their books is to ask everybody to leave the service.

We cannot abdicate our responsibility as a Government or as a nation. There are some services nobody can provide for himself or herself which the Government must provide. The whole concept of socialism is that people who are unable to provide for themselves must be looked after by somebody and the Government accept that responsibility. Let us not just say economically that we can take everybody out of the sector and forget about the services because that will manage to balance the budget and the national debt will be looked after. What will happen at the end of the day? Who will pay for all the redundancies? What are the amounts that will be given as lump sums going to cost initially? Where will the funds come from for the future pensions of all these people who now are taken out of the sector for which they were educated and trained and are competent to give the service? Suddenly we pay them all to leave it and continue to pay them when they are not in it on the basis that it is better economics to pay them for doing nothing.

This brings me back to the example Senator O'Toole gave about the car. I have used it on numerous occasions, but my analogy is even worse than the Senator's. Not alone did we buy a car; we taxed and insured it. We could not afford the petrol which he talks about so we locked the car and hired a taxi. We must have a driver for the car. We told the driver we do not want him. We sent him home to sit down and we paid him or he could drive somebody else's car. We would prefer if he drove somebody else's car.

That is the sort of economic development I see happening. We have invested a great deal of money in the State in the past in BTE, forestry, agriculture. Mention any sector and this Government and past Governments have put public money into the development when it was about to pay off to the State there was a mad rush to shift it into the private sector where real profits could be made when the infrastructural costs were already put in place by the taxpayer. This is Mrs. Thatcher's philosophy. You can bring down interest rates, inflation rates, everything, but if unemployment levels rise and continue to rise and all other movement of money and capital is unable to create jobs, this Government will have lost the mandate they got from the public. They made an issue of the fact that there was widespread unemployment, pictured the passports on their billboards and said: "There is a better way."

Bigger queues appeared in Molesworth Street since this Government were elected. Some of them may have been going on holiday, and I hope so, but a good many passports were prepared in Molesworth Street and we may never see some of those young people again. That is a drain on a real natural resource which this nation can ill afford. We have invested money in the past. We should use every method at our disposal to stimulate the economy and use the powerhouse of Government to ensure that people get work in their own country and thereby fill the coffers of the Exchequer and, in turn, look after the poor, the underprivileged and those in need who are unable to look after themselves. This Government have a responsibility not to disregard them, close their hospitals, do away with their pupil-teacher ratio or anything which touches their lives.

Minister for Finance (Mr. MacSharry)

First, I must thank the House for its cooperation in facilitating us in getting this legislation through and I thank the Senators who have spoken for their contributions. I could spend hours replying because many points were raised in relation to Government activity, local authority activity, transport activity and so on.

Senator Daly spoke about the difficulties in the motor trade, the car hire services the high cost of cars and the cost of insurance. There is absolutely no doubt that there are many difficulties facing this trade and facts and statistics will show there has been a great downturn in that trade. Senator Lanigan rightly pointed to this as well. It costs money to do anything about these problems. One has often to examine carefully whether it is a taxation proposal, a downturn in disposable income or employment or emigration, or a combination of factors, that is leading to the difficulties that any particular industry might experience. The motor trade is one that I accept are experiencing difficulties. I met motor traders this past week and I do not know whether it is possible for us to do anything to help them, but this is one area I will carefully examine to see if there is anything we can do.

There was a lot of talk about Aer Lingus, and I think it would be better for me to leave that to the Minister for Transport to reply. I would not completely accept some of the condemnations that were laid at the door of Aer Lingus or Aer Rianta when we see the amount of work that will be done by Aer Lingus, Ryanair and all their carriers, which will carry a larger number of visitors to Ireland over Christmas. I will come back to that before I conclude.

Senator Lanigan mentioned tax collection, the difficulties and the abuses, and suggested that we should be less strict in our enforcement. I do not think we can realistically accept that we should have huge amounts of taxes due to be paid, but when efforts are being made to collect that money as has been done in the last 12 months with sheriffs and the task force and a tightening up of enforcement and collection, and when those measures begin to bite, we cannot have too much sympathy for these people because many of them may have got two or three years grace to pay their tax, unlike the PAYE sector, about whom we are all concerned, who pay their tax out of their weekly, fortnightly or monthly cheques. I do not think we can have too much sympathy for those who could well afford to pay their taxes and who have not done so for quite some time, but now when they have to meet there obligations, they are inclined to complain. Obviously one would make every effort to ensure, and I am sure the Revenue Commissioners and all their staff will ensure, that the taxpayers they come into contact with are treated with courtesy and respect and that they are given the proper information and all that is required to ensure that the State, through its legislation and law, is not using the big stick against any individual, company or corporation.

Senator Lanigan also pointed to the difficulties for employers and small businesses, the cost of employment and the fact that employees are used, and have been used, as tax collectors. I know that is true and many of them have difficulties, but what has been inclined to happen in some businesses is that they took their turnover as being all their own, and did not take fully into account the amount that should be sent to the State in VAT, PAYE, PRSI or their own income tax. A number of them have caused some of the difficulties they are experiencing at the moment.

In relation to a number of these difficulties that have been raised, one has to accept that there is a downturn and that we are going through difficult times, and have been for some time. One good fact mentioned by Senator Lanigan was the boost increased tourism gave us this year. That was welcome and it arose because the Government saw the potential, even late in the season, and took action. The Minister for Tourism and Transport made sure that whatever we could do was done in the short time at our disposal, and we are all grateful for that. It led to some improvement in the industry. We hope we will be able to do even more for 1988. When we talk about tourism we relate it to the summer months or the good weather periods — spring, summer and autumn. It has been confidentially predicted that the number of visitors to Ireland over the Christmas period will break all records. The efforts of the Minister for Tourism and Transport in relation to excess fares have led to increased competition and a huge increase in the number of people using air transport particularly. However, I am glad to say that other forms of transport have rowed in and are making their contribution as well. We expect that huge numbers of additional people will be coming into the country, as we experienced in recent weeks. Most of the improvements will begin to accrue during 1988 on the basis of the agreements that have been worked out by the tourism and transport Ministers of the EC and by our own Minister.

Some Senators have mentioned interest rates. We all welcome that fact that they are continuing their downward spiral and let us hope that will continue. There is absolutely no doubt in my mind, or in the Government's mind, that unless and until we can have money available for investment at rates that will give a return on that investment — unlike the rates we have had for quite some time in this economy — we will not get the kind of investment we need to create the jobs that are required for the huge numbers who are unemployed at present.

One of the things Senator Lanigan rightly said was that we had made every effort to ensure that the poor, the people on social welfare, the unemployed, old age pensioners, would not have to pay or bear the brunt of the impact of these savings. All other Senators condemned the Government and suggested that it was the poor who were having to make this contribution. It is no harm to remind the House that we have shown concern for those people. I have said it on numerous occasions, but I want to repeat it. Our concern for the less well off is clearly demonstrated in both our actions since coming into office and in our published commitments for the next few years. For instance, unlike the Senators who spoke and the parties they supported up until March this year, we paid this year's welfare increases from July instead of November, as had been promised by our predecessors. It was promised only; it may not have been delivered on because of what has been done or what was happening in the economy at that time. This increase helped to ensure that welfare recipients would not fall behind. Secondly, we maintained the Christmas bonus for welfare recipients despite widespread concern that it would be reduced or abolished. Up to 920,000 recipients and dependants will benefit from this bonus. We also extended the equal treattempt alleviating measures to the end of this year and, as the Minister for Social Welfare said recently, until the end of April next.

I know they will keep pumping it out because if they say it often enough many people will believe it, but the facts are that the Government have been very careful in every single decision they made to ensure that those who are dependent on social welfare are not bearing the impact of the kind of measures and savings that had to be made in relation to the overall state of the public finances. The same goes for the delivery of the services on the ground, no matter who is delivering them.

Senator O'Toole, spoke about social welfare and complained about the poor having to bear the brunt of what we were doing, and he talked quite extensively on the education expenditure — I am not going to go into any great detail on that. On eductional expenditure we are talking about hundreds of millions of pounds in the payment of teachers' salaries. The Education Vote has been trimmed like every other Vote to contribute to the savings required by the Government. They have outlined their expenditure proposals for 1988 and will stick by them. When I come here to do the Appropriations Bill this time 12 months I will be able to say what I have said today, that at the end of the year we will have achieved the targets laid out in the budget.

I could not understand all the points made by Senator O'Toole on redundancy. There has been a great demand and necessity for a redundancy package because of the fact that in numerous areas throughout the public service — the Land Commission for example — people could not be laid off because of their terms of employment.

Mr. Ferris

What about the Valuation Office and the land tax?

Mr. MacSharry

There is tremendous interest in the early retirement and the voluntary redundancy package throughout the public sector. I have no doubt that we will achieve the target set by the Government in relation to the operation of this scheme.

Mr. Ferris

Who will pay for it?

Mr. MacSharry

I am coming to that. In the private sector redundancy schemes have been in operation for ten or 15 years. To survive, they must modernise and rationalise and, therefore, redundancy proposals were put forward in many industries. The State has found itself in the same position in many areas because of the decisions we took and implemented during 1987 and what is proposed in 1988. We did not want to make it compulsory for people to go so we came forward with the voluntary scheme.

How will it be paid? The main reason it was not countenanced before was because of the lump sum cost. Nobody was prepared to pay what was necessary in that area because it was not worth considering the lump sum up front costs. We understood that and accepted it and we said quite clearly that we would be concerned about the up front costs which are running at £80-£100 million now. We discussed ways and means with the Central Bank of providing that money. I indicated in reply to a recent parliamentary question that the board of the Central Bank have approved of arrangements under which the bank will make advance payments of surplus income to assist the Exchequer in meeting the exceptional costs of the redundancy programme. I would like to emphasise that point and to contradict the rest of what Senator O'Toole said in relation to taxing the reserves and undermining the confidence in the Central Bank, which is absolute rubbish. Advance payments of surplus income are being made to assist the Exchequer in meeting the exceptional costs of the redundancy programme.

Mr. Ferris

I thought no one had surplus income.

Mr. MacSharry

Every year the Central Bank has over £100 million which it pays into the Exchequer. It has been doing so for years, even during the period of the Senator's Government.

Mr. Ferris

The Minister is giving it away.

Mr. MacSharry

These arrangements are in accordance with section 63 (7) of the Currency Act, 1927, which provides that the Central Bank may at any time pay into the Exchequer such sums on account of surplus income as may be agreed upon by the Minister for Finance and the Central Bank. Each year the Central Bank pays over to the Exchequer the surplus income it has earned in the previous year after having made certain appropriations to reserves. The surplus income is taken into the Exchequer as non-tax revenue and is shown separately in the White Paper of Receipts and Expenditure published at the start of each year.

Under the arrangement I have outlined, the Central Bank will advance to the Exchequer not later than 31 December 1987 amount equal to the issue from this Vote, £10 million. This represents an advance payment to the Exchequer of surplus income by the bank in addition to the amount which would otherwise have been paid. That is how the lump sum costs are being paid for. The result is that the exceptional costs of the redundancy programme will be financed by the additional surplus income from the Central Bank and will not add either to the current budget deficit or the Exchequer borrowing requirement.

The advance by the Central Bank will be repaid over a period of four years after a moratorium of one year. The repayment will take the form of four equal annual deductions by the Central Bank from the normal payments of surplus income. The Exchequer will, at the same time, be getting the benefits of savings from reduced numbers. That is how the scheme will be paid for. It is good business. It is a very popular scheme and there is great demand for it.

Mr. Ferris

In the past that money was used for revenue.

Mr. MacSharry

Senator O'Toole and Senator Ferris raised the question of emigration and unemployment. We have been concerned about these matters in recent years. It is ironic that after we left office in 1982 the scourge of emigration returned to this country and that many tens of thousands left here over the past four years. In fairness, it has to be said from my experience and the knowledge I have of many who have gone from my own area and the area I represent, many thousands of those young people, living in England or America, are now earning and saving money so that when the upturn comes here they will come back. It is heartening to note, too, from what we are told by their families that many thousands of them are in a position to come home and will be coming home. Some of them have already arrived to be here for Christmas with their families and perhaps many of them will not go back. We hope that will be the case but it is good to note that many of those who, unfortunately, had to go in the past number of years are now saving money abroad and that when the opportunity presents itself they will come back and make their contribution to this economy.

Mr. Ferris

Are they on the register of voters?

Mr. MacSharry

Senator Ferris talked about tackling the crisis of the national debt and said the Labour Party will always recognise the necessity for doing this. It is a pity the Senator did not recognise that four and a quarter years ago when in that period the Labour Party allowed the national debt to double from £12 billion to £25 billion. They took no action, they did not make any proposals this year and have voted in this House and the Dáil against every single measure of savings introduced by this Government for the last nine months.

Mr. Ferris

That is true.

Mr. MacSharry

The Labour Party piously say that we need to tackle the national debt and yet when the minority Government have the courage to take the decisions that are necessary they oppose them every inch of the way. They cannot have it both ways and the people know that.

Mr. Ferris

As long as the poor are paying for it we will oppose it.

Mr. MacSharry

The poor are not paying for it.

Mr. Ferris

They are paying for it.

Mr. MacSharry

The Labour Party would have made them pay much more because they were not going to pay them until November. I am sick and tired of people who get up in this House, in the Dáil on public platforms or even on the streets, as the health workers and teachers did over the past number of months, saying they are all for cutting the national debt and for reducing borrowing but then marching because of the decisions that had to be taken to reduce spending. This is what the Government have to face. We will continue to face it and have done so successfully in the past nine months. Huge cutbacks and savings had to be made in 1987 and we were able to achieve these savings in nine months, notwithstanding the fact that during January, February and March spending agencies, because of the attitude adopted by the Labour and Fine Gael Parties, has spent their allocations for 1986. They had expected to get an increase in their allocations as had been the case in previous years. For the first three months of the year they were spending more than a quarter of what was spent during 1986. When we introduced our budget at the end of March we had to say quite clearly that we could not match 1986 expenditure——

Mr. Ferris

You have done a U-turn.

Mr. MacSharry

——and that we were going to have to cut more. The essential services were not affected in any area of service agency activities.

Mr. Ferris

That is not true.

Mr. MacSharry

We now have in place a much more cost effective and efficient public service, whether in the local authority or the health board or vocational education committee areas, and we have achieved the savings in nine months.

Mr. Ferris

You are not giving a service.

Mr. MacSharry

That brings me to the question of expenditure for 1988. The Estimates have been published and discussed and approved by this House. They will be in operation in a few weeks time. Everyone has planned in advance how they are going to spend the resources they have at their disposal and deliver the services they are obliged to deliver.

Mr. Ferris

Or close down.

Mr. MacSharry

That is what is going to happen during the next 12 months. The impact of those savings — and we know they are severe — will not be as great as what has been experienced in 1987 because we had nine months only to implement the savings in 1987 but we will have 12 months to implement them during 1988.

Mr. Ferris

Tell Senator Lanigan that. He says he cannot survive.

Mr. MacSharry

Many Senators expressed concern about the unemployed. As I said in my introductory remarks on this legislation we have seen a marked slowing down in the increase in unemployment in recent months. Naturally we are very concerned about the huge numbers who are unemployed but unless and until we can control public expenditure, reduce borrowing and get ourselves out of the market of having to borrow so much from abroad, with little or no flexibility about how we spend resources, we will not combat this problem.

Hundreds of thousands of millions of pounds are earmarked before the year begins and if we had even £100 million of that money we could do much in relation to providing the additional incentives which would help unemployment but we do not have the money to do it. When we make decisions we carry them through, notwithstanding the confusion that may have arisen——

Mr. Ferris

Is there confusion about circular 20/87?

Mr. MacSharry

——and which may have misled people in certain sectors of this economy. I would prefer to leave the questions in relation to Aer Lingus to the Minister for Tourism and Transport and it is for the Minister for Education to respond to the issues on education.

Mr. Ferris

She will not be allowed to.

Mr. MacSharry

What was done in this area by responsible elected representatives was absolutely farcical. Because of the confusion generated by politicians and other representatives, almost every parent was led to believe that by 1 January next there would be 50 to 60 children in every classroom. It is not going to happen in even one classroom never mind every classroom. We will never climb down from any decision that is made because the alternative is too serious to contemplate. During the next five years we want a democratic Government who are capable of delivering services providing the essential needs of the elderly and unemployed. If we had another four years of what Senator Ferris's party tolerated we would not see another Christmas where we would be able to control our own destiny; somebody else would be doing it.

Mr. Ferris

Circular 20/87 is still there.

Mr. MacSharry

That is why we cannot afford to run away from any decision that has been made. We have discussed and are prepared——

Mr. Ferris

To change it.

Mr. MacSharry

——to discuss and debate with every concerned party the decisions that have to be made. That is what we are doing and will continue to do in relation to the classroom sizes, teachers' conditions or parents' concerns in the education area.

Mr. Ferris

Withdraw Circular 20/87?

Mr. MacSharry

Senator Ferris referred to the local authorities and I think it is no harm to put the facts on the record. In 1988 the level of rates support grants to local authorities has been substantially reduced because it had to be. The Government have set out to make a significant reduction in expenditure under their control and local authorities must contribute to this process. Local authorities spend £900 million on a day to day basis, of which about £500 million comes from their own resources with the balance being expended by the Exchequer. Local authorities have been asked to make significant economies in their expenditure, including their pay costs in 1988, and to increase revenues where possible. All local authorities have done just that and have provided what they believe are the necessary resources to run the services they are responsible for during 1988.

Mr. Ferris

Would the Minister say that is true of Dublin?

Acting Chairman (Mr. Mullooly)

The Minister, without interruption.

Mr. MacSharry

The level of reductions they are being asked to make are in line with the economies made by the Government. They are being asked to find economies of up to £50 million on total day to day expenditure and revenue for a combined £1,300 milliion. This represents a reduction of only 4 per cent. I know the local authorities are implementing these economies in a way which will ensure that emergency and essential services will not be adversely affected any more than they were with the savings that had to be imposed in the 1987 expenditure which was done on 31 March. We had nine months only to implement those savings and we have come to the end of the year on target without any great impact, notwithstanding the difficulties that every individual had to face. As we face into 1988 we know we are going to have to do something similar and that by the end of the year we will have made sufficient progress to enable us to be able to stand again on our feet, stick out our chests and say that we are in control of our own destinies, we can provide the resources we need, we are not going to be a prisoner of those on the international scene who are lending money to us and we are beginning to overcome those problems. On the basis of what I have said I recommend the Appropriation Bill to the House.

Question put and agreed to.

Agreed to take remaining Stages today.

Bill put through Committee, reported without recommendation, received for final consideration and ordered to be returned to the Dáil.