I had not intended opening my contribution on the basis on which I am now going to do it. This arises because of some observations made by Senator Haughey here yesterday. As we are talking about large sums of money under different headings, it is appropriate that, in the first instance, I deal with the question of sums of money paid to private enterprises, to publicly owned enterprises and the value that is gained from both of them.
In this context, Senator Haughey seems to suggest that the call for privatisation was trying to strike the right balance. Senator Haughey said that he believed in the mixed economy and that the balance needed to be weighted towards private enterprise. He may be sincere about that, but the people who have been "hollering" for private enterprise certainly were not sincere and were not as well intentioned as Senator Haughey in striking a balance between private enterprise and publicly owned enterprises. If we are not very careful about privatisation, we will have what they had in England which was a programme of denationalisation which has nothing to do with a mixed economy. This would be unfortunate.
It is important to put a few things on the record about privatisation and publicly owned companies and the role they play in the economy having regard to the fact that more money is being appropriated both for private enterprise and for publicly owned companies. In relation to publicly owned companies last year the public enterprise sector did not cost the taxpayer any money because overall they showed trading profits of £447 million The most profitable areas are open to privatisation. We cannot have that, because ultimately somebody will sell off shares, the profitable operations, and the company lays off workers, all in the name of private profit. Then there is no public benefit. The economic development enjoyed as a result of the public enterprise, the job creation and the wealth produced are hindered and the State control over whether we encourage modernisation or expand new project policies and investment etc. is lost. We must remember that private companies will not be looking for unprofitable State enterprises but will be looking for the profitable ones.
Despite the incentives, inducements, grants, subsidised services and so on given to the private sector, it has not expanded over the past 15 years. Grabbing what is already there is not a substitute for industrial expansion. This is what the private sector have been doing. The fact that public enterprise employs only 2 per cent of the total number of employed in manufaturing industry is very revealing. It certainly knocks the argument about privatisation on the head with regard to selling off the profitable aspects of the public sector. The public sector is one of our few economic successes. At present there are 78,000 people employed throughout the country providing very essential services to the public. To put these services into the hands of private enterprise threatens the security of jobs.
Since the trade unions and the Government have entered into a national agreement into which is written a guarantee on job creation, there has been too much crowing about private enterprise taking on the profitable parts of the public sector. This must be tackled seriously to make sure that we do not end up with a denationalisation programme rather than a programme for a genuine mixed economy. There is nothing ideological in what I am saying. I believe in the mixed economy but I am very much afraid of the people who can put their hands on very substantial sums of private money and invest it and, when the time is right, can sell off the investment to anybody, and control is lost. The quick buck mentality is at work. We have seen a great deal of evidence of that in recent times. For example, in Britain when they decided to start privatisation in the public sector some of the companies were sold at give away prices and ultimately when an assessment was made of what was lost on these transactions, it showed an immediate loss to the tax payer of £4.5 billion in the selling off process, not to speak of the damage that was done when companies were taken over.
There are many deficiencies which have to be tackled in the public sector. However, when you look at the number of private company closures every week, the number of redundancies and so on, the deficiencies in the public sector are nothing compared to the failures in the private sector which have led to massive job losses. Privatisation would not make enterprise much more commercially successful. In fact, it would have the opposite effect.
The demand for privatisation is not based on the needs of the national economy. It is a response to the cries of international capital. For example, Mr. McPearson, an American banker and legal adviser, said last year that the US would link its aid giving programme to privatisation efforts and the head of livestock developments at the World Bank called for steps to be taken immediately to privatise CIE, Aer Lingus, ESB, NET, Bord na Móna and the airports. These are very substantial public enterprises that have served this country very well. The track record of the Irish private sector shows that their objective is short term gains. Short term gains certainly take precedence over long term benefits. The evidence is there. They failed on numerous occasions to heed the warnings on industrial organisation, both in the sixties and in the seventies. The result of that was catastrophic job losses; so why are we all so terribly excited about what the private entrprise people will do for us? When we have regard to all the inducements, incentives, grants, subsidised services and so on which they receive, it makes us sceptical about whether private enterprise can deliver on the question of job creation.
I have regard to this in particular because of the national agreement that is being entered into. I am afraid that the promises may not be delivered on, if we look at a mixed economy on the basis of denationalisation rather than just dealing with the question of efficiency within the private sector. I showed earlier the amount of profit the private sector have made overall. When the private sector can develop they will be supported, and more capital will be provided for them to develop more jobs. The employees of one State company in one year paid more PAYE than the whole of the farming communities that year. That is also something which we should regard seriously.
Let us not get carried away with the powers of privatisation; they do not exist. I am sceptical of the powers of private enterprise as I was born and reared in the inner city of Dublin. I know the population growth has been very substantial since I was a child in the twenties. From the time when I could realise what full employment and unemployment meant, I have never seen full employment. I will not see it before I die either. There are many young people in this House who are probably 30 years younger than I who certainly will not see it either. I am always astonished at the belief in the private sector. The evidence is that there are no grounds for it, but we never face up to it.
I am not opposed to private enterprise. I would be behind it if I thought it was doing the job it is supposed to do and that it was not a selfish scrambling system. I am antagonised by private enterprise because it is a selfish scrambling system which does not measure up against what the public sector have done over the years. I pay tribute to Seán Lemass here on the development of the public sector and the development of the whole concept of a mixed economy. We must recognise that private enterprise cannot match the performance of public enterprise overall, taking into account the benefits that go to both sides.
Senators will recall that earlier I referred to a State company in which the employees paid more in tax in 1984 than the entire farming community. The company was An Bord Telecom. I am not suggesting that farmers are not prepared to pay their fair share of tax. Most of the farmers I have spoken to are prepared to pay their fair share of tax and are very forthcoming on it when you get into discussion with them. But the people who lead them are not that keen on the idea and farmers are led away from the concept of measuring up to what they should pay in tax etc. I do not blame the individual farmers. It is a collective problem which can be remedied. The PRSI proposal is a small beginning, but it is a beginning.
People in public sector employment have good steady jobs and there is not the same temptation in a steady and permanent job to dodge tax as there is in private enterprise. The use of the black economy is not open to public servants in the same way as it is to some private enterprise workers and they are not exposed to the possibility to abuse Government training schemes. I do not want this to be taken out of context, but many of the employment schemes and enterprise allowance schemes are an abuse. They are a means of suggesting that there are fewer people unemployed than there actually are. In the public sector, people are not entitled to take up these schemes so they do not cost the Exchequer any money.
Another interesting thing about the public sector is that it creates a lot of profits for the private sector. For example, in 1983-84 Aer Lingus paid £49.5 million to the oil companies for fuel, and over half the State's subvention to CIE is paid out to the private sector for goods and services. Many private enterprises depend almost totally on public enterprise for an outlet for their product or service. Dozens of provincial garages would have to lay of hundreds of workers if An Post and An Bord Telecom cancelled their contracts for the maintenance of a large part of their fleet, over 4,000 vehicles. In 1985, An Post alone purchased 340 new vehicles. If the sugar company closed tomorrow, about 50,000 farmers would be without a market for their produce. That is one side of the argument about the moneys provided for both private and public enterprise. There is clear evidence that the money put into public enterprise, having regard to the overall public sector, is a much better investment with one reservation, that is, that inefficiencies should be tackled. We should all support that. It is not a question of ideological hang-ups. I am a little bit worried about somebody saying that we have to give a lift to private enterprise so as to get the balance right. The balance is the other way around. The public sector are doing their duty. The private enterprise system has not come to terms with the country's long term needs.
The cuts in public expenditure outlined in the 1988 Estimates for the Public Services and the public capital programme were not negotiated as part of the Programme for National Recovery. It is important that I say that in this House as an ex-trade union official nominated for the Irish Congress of Trade Unions. There is a belief that the cuts were actually negotiated by the trade unions with the Government. It may sound funny, but if you go into a lot of pubs you find that is the belief. The trade union movement certainly did not negotiate the cuts. They went into discussions on a pragmatic basis to serve the interests of their members. Based on the fact that there is only one fixed principle operating in the trade unions, they went in to get the best conditions and wages they could for their members in all of the circumstances. It is necessary that the trade union movement be seen to be reserving their right to oppose the implementation of cuts. Where these cuts would result in a reduction in essential services to the public, or where they would bear heaviest on the lower paid social welfare recipients and the working class areas, certainly the trade union's voice will be heard again.
The main problem with the tax system, as shown by the recent Exchequer returns, is that some sections of the community are not paying their fair share of tax. The tax base is too narrow and some features of the system are highly repressive. As a result, the PAYE workers bear the brunt of the bad application of the tax system. They are certainly paying much more than some sections of the community. Therefore a key element of the budget must be to reduce the disproportionate burden on the PAYE sector and provide real tax relief for workers. I mention real tax relief because again we are talking about appropriating money to do certain things. I will mention one or two examples later on of how we have not got real tax relief at this time. There is some tax relief and credit for that must go to the parties to the national agreement.
The tax system badly needs to be reformed so that the other sectors of the community, including the self-employed, companies, the owners of capital and wealth pay more. I do not want to be regarded a farmer basher — I am certainly not that. I have a great regard for the farming community, but they will have to be included in the overall situation.
There is a commitment by the Government to reduce income tax. This is to the accumulative value of £225 million. Out of that, as I understand it, the PAYE allowance under the national agreement will cost only £70 million. This is obviously the minimum. I am not making the argument that more could have been provided at this time. It should be understood, also, that what is happening to working class people is that they are not getting a great lift at all. For the whole of 1988, between more job losses and so on, the morale of workers will be further reduced. When they open their wage packets and discover the reality of the tax relief, their morale will be even further reduced.
I may have made a mistake in my figures in one or two of the examples I have given. I will give two examples and I think that I have them right. I left school a long, long time ago and I certainly could be inaccurate. For example, if you take somebody who has £7,800 annually, or £150 a week in wages, he is getting a tax benefit of £17.50 for 1988. Another increase in the allowance would yield him £26.50 in 1989 and another £35 in 1990, which would add up to a total of £79 over a three year period. I hope I have that right, but this is how I see it. The matter needs to be clarified or I must be contradicted. That comes down to people receiving an allowance spread over the three years of, on an average, 56p tax relief over and above what they have at the moment. I hope I have that wrong because when people start opening their wage packets and realise they are only about 50p better off as a result of the £70 million tax spread, the situation will not be very satisfactory. On the other hand, for somebody earning £13,000 and getting the same relief over the same period, the likelihood is that he or she will get £725 over the three year period. The result of that will be a little over £5 a week extra in tax relief. We are talking about two very different amounts of money. I know it is not possible to go through all the cases and I do not intend to do so. I thought I would give those two examples and perhaps somebody can correct me if I am wrong.
The reason I am making the point is that nothing has come out of this national agreement except that, for pragmatic reasons, the trade unions needed to get in there, not only to play their role in the national recovery but to protect their own members' interests. It is not a bad situation overall, having regard to the circumstances, but putting the wages and tax relief together over the three year period will create disappointment among the working classes. There will be some resentment because they misunderstood what the tax benefits would yield. Also, coupled with the other job losses, etc., it will add to aggravation amongst the working classes in 1988. All that can be said at this time is that it is a beginning to letting the PAYE workers see there is some hope that the disproportionate amount they are paying in tax will be tackled over a period of time. It is a long, long haul. I do not think we should fool anybody about that.
The favourable outcome of the Exchequer finances in 1987, lower inflation and the fall of the dollar mean that some increased resources are now available for job creation. Increases in social welfare payments and readjusting of the Estimates for 1988 could take place, also. The opportunity is there. These selective increases in expenditure could be financed by reorganisation of grants and subsidies to industry and farmers. Unless action is now taken, the country will continue to face a growing crisis over the serious lack of jobs. Recent forecasts from the ESRI and OECD indicate that unemployment and emigration will increase in 1988. This will add to the misery of the working class sector.
Not enough emphasis in the debate has been put on the whole question of what the key objective in the 1988 budget should be. The key objective must be to create jobs and to halt the growth of unemployment and emigration. I know that each person will crow in his own bailiwick. Many people will be concerned about charges and so on. If the jobs and tax situation were put right, many of the complaints over charges and so on may not have the same degree of severity or produce the same antagonism that is now manifested.
The worrying thing is that the Estimates for the public services show that Government action today has been concentrated mainly on stabilising the national debt and the GNP ratio. There are other areas in the Programme for National Recovery— and we must not be too critical in that respect — where action must be taken. There must not be just an agreement. For example, the 1988 budget must include specific measures to stimulate economic growth in 1988 and to implement the commitments to the programme of job creation, tax reform and increases in social welfare payments. It is easy enough to put it down on paper; the job of putting it into action must now be done.
On the question of education and health, again, in the Estimates published last October the burden of adjustments was not shared equitably across all sections of society. The poor and lower paid were hit hardest by the cuts in public spending. Also, in framing the Estimates, the Government did not take sufficient account of the need for increased growth in the economy as a means of stabilising the national debt and the GNP ratio. Again, that brings us into the public sector area where there is an opportunity for the Government to act.
We know that essential services to the public always cater for the lowest paid, social welfare recipients and the working class and these categories suffer most in the cuts in education, health and the local authority services, which were very severe and, I think it can be said, unjust. Whether they will damage the basic structures of these services I do not know; I think they will. The structures have taken decades to establish. When the Government were imposing cuts across the board, I do not think there was very much account taken of social equity and if they did take account of social equity, they missed out somewhere.
The proposed increase in the teacher-pupil ratio certainly would reduce the educational opportunities of working class children. Again, we have to guard against a two-nation development — the rich and the poor. The changes in the health service — some of them actually by stealth — can lead to a two-tier health service. While I do not suggest for one moment that the Minister for Health deliberately set out to achieve that purpose, the signs are that developments will head in that direction unless we can see more opportunities given to the credit unions who have announced some initiatives in recent times to assist people to get health insurance.
It has been said to me, and I am inclined to agree, that some of the public expenditure schemes and tax breaks are transferred to the rich who always seem to remain untouched when we are dealing with the Estimates or when we are doling out money. If that is the case, the budget must readjust the 1988 Estimates to make sure that the public services get their proper whack. Much damage has been done there to schools, education, health and so forth.
I spoke earlier about the farmers and said a little about the self-employed. The fact of the matter is that the farmers and the other self-employed are not paying their proper share of direct tax. This is not referring to the individual farmer. The large farmer leadership, in my view, can be a contributory factor to that. When you get big organisations like this, not only among the farmers but in the private sector also, there are opportunities for evasion and avoidance. For example, if people are not paying their direct share of tax, there is great opportunity for evasion and avoidance. For example, generous business allowances, expenses, etc. can be allowed for tax purposes. The recent OECD report shows that an average per capita income tax paid in 1986 by group was — employees £2,768, self-employed £2,005 and farmers £629. Although 70,000 farmers earn more than the average industrial worker, only 17,500 of them are paying income tax. In order to provide real tax relief for the PAYE worker, as set out in the National Programme for Recovery, the Government must raise more in taxation from farmers and other self-employed if they are going to be able to live up to the letter of the agreement they have made.
I do not want to look across the House when I say this next little bit, but persons such as doctors, accountants and solicitors should be paying more in taxation. Immediate action should be taken by the Revenue Commissioners to ensure that most of these people pay more tax than they are paying at the moment. There must be evidence of it. I will not go too far down that line. You never know when you might need a doctor.
