I was speaking about the hasty manner in which the budget of 1987 and the Finance Bill were put together. Everybody understood that that was the case and, therefore, our general approach towards them was charitable. We did not think it was fair to expect them to be creative, innovative or even radical in view of the circumstances of their genesis.
This year's budget and the Finance Bill which puts it into effect and which we are discussing here today are the products of ten months's consideration. Many people hoped that the Finance Bill would bear some stamp of coherent policy and constructive outlook or even, dare I suggest, a degree of imagination. My party and I find it dull, unspectacular, largely a figure-juggling exercise and something of a non-event. This is really because some of the most crucial decisions affecting the economy in 1988 were the spending cuts and, of course, they do not appear in the Finance Bill. In 1988, £400 million was written out of the economy and that does not feature in this Bill. It underpins and is the hallmark of Government economy policy. We cannot forget that when we are discussing the Finance Bill. I am sure many Senators will return to it time and time again in the context of the debate.
The Minister in recent speeches has confirmed that the Taoiseach has asked for a further 10 per cent cut in each Government Department, probably totalling in the region of another £400 million. These proposals will be before the Government shortly for consideration. While this is primarily a matter for the 1989 budget and Finance Bill I would like to enter a plea that decisions should be made against a background of coherent social as well as fiscal policy. There is a perception, and I share it, that the emphasis is very much on the fiscal side which, of course, it needs to be and that the social side is to some extent being overlooked, put on the back burner as of less importance. That cannot be so. The two matters should be dealt with equally. I would like to see an adherence on the part of Government to some clearly perceived principles of social justice. I would like to hear clear, unequivocal statements from Government about social justice and the importance, necessity and emphasis which they place on that.
I recognise that theProgramme for National Recovery states that the least well-off in our community will not have their position eroded by Government policy and decision making. Those of us on the ground have firm reason to believe that that kind of statement, while fine-sounding as a statement of intent, is very often in practical application purely aspirational and that the reality as we perceive it, and as those who come to us perceive it, is sadly very different. On the positive side I compliement the Minister on holding the line on Government borrowing, bringing it, at 8.2 of GNP, signiicantly lower than what was expected. He has been generous on the social welfare front but that is only as it should be. The increase of 11 per cent for the long term unemployed is particularly welcome and is a recognition of the reality of so many people's lives in this country today.
The income tax reliefs, such as they are, are welcome but they will not be of most benefit to the lower paid, which should be the case. The Minister has gone some way towards making the system a little bit fairer, but he could have exhibited greater courage and innovation and gone further. This he did not choose to do in the context of this Finance Bill. I notice from his speech that there is a promise of greater things to come. Reform of the income tax code is urgent and the Minister has recognised that fact. Other political parties, and my own political party in particular, feel very strongly about that. Everybody in the country recognises that the income tax code as it stands is disastrous. Many people are fleeing the country because they do not choose to submit themselves to it. Others groan and pay up but they will revolt if it is not a subject for meaningful reform soon. Others, of course, quite simply dodge and evade it. I welcome the provisions in the Bill which strengthen the hand of the Revenue Commissioners, the sheriffs and the county registrars and seek to eliminate what is a scourge — tax evasion.
All in all the Government could have shown more resolution towards reform in the Finance Bill. For my party this is the major disappointment in the 1988 Bill. Fine Gael perceive the reform of taxation, and in particular personal taxation, as being just as important as controlling the national debt. Obviously it will take time and very substantial political and administrative-commitment to bring such a reformed system into being. The first step along the way to this objective must be to reduce the standard rate of tax to 25 per cent and the higher rate to 40 per cent. I want the Minister to state in his reply to Second Stage debate on this Bill that he finds this is a reasonable objective and not only that, but that it is imperative that we move as rapidly as possible in this direction.
There are huge difficulties in the political and economic choices which this kind of progression involves. Fine Gael have proposed in their policy document,The New Politics, that an all-party committee should be set up to work towards the aim. Without cross-party agreement, no substantial tax reform can be achieved, just as there could not have been progress on the national debt without consensus and cross-party co-operation. This is a constructive approach. The Minister referred to it as being a rather fudgy and insubstantial way of going about things. In actual fact, consensus politics has come of age in this country, or it is beginning to come of age. Would that it could finally reach maturity if we could set up the kind of all-party committee and all-party approach which Fine Gael are attempting to initiate. Fine Gael have put out the hand of consensus on tax reform to the Government and to other parties it will be a very sad day for the country if that gesture is spurned.
There will come a day when that offer will be taken up, just as there came a day when the offer of consensus on the national debt was taken up. I ask the Minister to think and ponder on what I say very carefully indeed. In Fine Gael we will continue to press for this and we hope that other parties will desist from being negative in their reactions and using a purely party political response in attempting to cope with what is a very genuine, very necessary and, indeed, very patriotic gesture in seeking to have forward movement in the area of tax reform. The issue of high taxation and its effect on the personal economies of so many people and on the wider economy in general is so great that it deserves more than a sort of carping, begrudging and negative response from the Government and, indeed, from other parties who choose to spurn the idea.
While some of the measures which the Minister has introduced in this Bill continue the significant reform of the tax collection and enforcement system which has been undertaken over the past five years, I welcome the provisions in Chapter II of the Bill. Self-assessment to tax liability is Fine Gael policy and we are pleased to see the Government take it on board. In 1986, Deputy John Bruton, then Minister for Finance, invited the International Monetary Fund, as international consultants, to advise on this. My understanding is that this Chapter of the Bill reflects that advice and we support it in principle.
I wish the Minister had said more in his speech about unemployment and emigration. They are lurking in the background and, while he did not dwell specifically on them, I am confident that he is conscious of the 256,000 unemployed — the average figure in 1988. Another matter of great concern is the 30,000 per annum emigration level which it is estimated will take place over the next three years. These are stark statistics and they remind us very forcibly indeed of why we need growth in our economy. The Finance Bill, as presented to us, is based on a zero growth rate. Without growth our problems will continue and they will increase. The Finance Bill must be measured against a yardstick of what it will do to alter radically the unemployment situation and the haemorrhaging of young people away from this country. In my view it passes the cost containment test, but it fails in that it does not present any future vision or hope to the hard-pressed taxpayer, the unemployed or the young. We must improve our economic situation. High taxation and high pay-related social insurance are an impediment to job creation. The only way to find the resources to give substantial tax relief is to extend the tax base or to rearrange the system in some way.
Why are we not looking at options in capital tax? Why are the Government unwilling to talk about property tax? We all recognise that, if there is to be tax reform and if people are to sit down and talk about it, either in dialogue as the Minister says he would prefer, or in an all-party committee which Fine Gael have initiated, we will have to trot out the various options for a meaningful reduction in tax. No party will make the kind of unpopular decisions necessary. Fine Gael do not oppose the general thrust of Government policies. They are policies which we devised. We roundly criticise this Government for a lack of clear objectives and an absence of a well chartered political agenda. What we see daily coming from this Government is simply and solely cost containment. While that is necessary, we want to see so much more. The economic consensus may be a temporary expedient, and an essential one, to keep the ship afloat. I would like to see it taken up in the area of taxation reform and in so many other areas as well.
I would like to speak now briefly on some of the things that did not appear in the budget. There was no tax on alcohol in this budget. That is, of course, welcomed by the trade and, indeed, by the consumers of so many beverages. I would like to know, and perhaps the Minister would care to confirm, if this was because he recognises that in the area of drink taxation we are into the law of diminishing returns. There is already a very high tax rate on alcohol and a general lowering of consumer spending. Tourist interests are also strongly opposed to increases in alcohol prices. I assume this is the thinking behind the absence of what has become a usual feature of budgets and Finance Bills.
When the Bill was first published it included a measure which affected disabled drivers. It was the proposed transfer of the remission of excise duty and VAT from the Department of Finance, the Revenue Commissioners, to the Department of Health andipso facto to the eight regional health boards. There was an outcry against this and rightly so. To my knowledge nobody had sought any change in this scheme which was working nicely. It was a harsh and insensitive measure and was quite properly and quite rightly resisted by the Irish Wheelchair Association, the Multiple Sclerosis Society, which is my nominating body to the Seanad, many organisations which concern themselves with the welfare of the disabled and, of course, the disabled themselves who were most vocal on the matter. The Minister was compelled to withdraw what I regard as an ill-thought out proposal to change the scheme for disabled drivers. I welcome the fact that the Minister backed down on that measure. I am sure I speak for all those who would have been directly affected by it when I express appreciation and relief that that proposal was scrapped.
I do not know who dreamed up the tax on bank cash dispenser cards. Obviously it was introduced with a view to bringing in revenue but it should never really have gone beyond the first memo stage. It was a bad idea. Not only did it amount to a tax on efficiency but it amounted to a charge on customers for withdrawing their own money. In addition, it resulted in several thousand teenagers, who had been given a bank card and a £3 deposit by their friendly bank, finding themselves in the red before they ever activated their new accounts. I am glad that wiser counsels have prevailed and that an expedient was found to drop that measure from the Finance Bill. We could have had great fun debating it in the Seanad and putting down recommendations against it. As somebody who enjoys debate perhaps it is rather sad that we cannot do so. Nevertheless I am very pleased indeed that that tax has been politely forgotten and that it will not be a feature of this Finance Bill. One hopes it will never surface as an idea again because it was nothing short of disastrous.
I had hoped that there would have been more for tourism in the Finance Bill. I would like to know where is the long term strategy. I know £4 million was made available as a special package and that is of course welcomed, but it is somewhat disappointing that, in the context of the Finance Bill, our second major industry, and one in which we see tremendous growth and potential, did not feature for additional support. There is no great evidence, in the Finance Bill at least, of a long term strategy for developing tourism. Announcements to this effect were made during the general election last year. I think the tourist industry could reasonably have looked to the Finance Bill for more encouragement, greater support and a greater evidence of Government commitment. I will be interested to hear what the Minister has to say about that in his reply on Second Stage.
We consider the tax on investment income of pension funds to be a retrograde step. People should be encouraged rather than penalised for providing for their retirement. I recognise that there is some improvement in the Finance Bill on this measure as presented in the budget. The effect of the proposal on different pension funds will vary. Can the Minister give assurances that no pension fund will be put at risk of insolvency by the implementation of this levy? What guarantee can he give that this will operate for one year only? He reiterated, in his speech today, his assurance that this will be so. I would like more than reiteration. I would like more evidence to the effect that this will merely operate for one year. Anybody who has studied taxation knows that things have a way of lodging and becoming permanent. They may initially have been introduced as short term measures to derive revenue but they tend to hang around a long time. I would like assurances that this will not be the case in relation to this measure.
In general I am not happy about the principle, or indeed the lack of it, underlying this measure because it is discriminatory. It punishes those who have been provident and who have saved. Even allowing for the excluded assets, it still seems to be a measure which breaches a fundamental principle. It amounts to a clear case of double taxation. As the income from pension funds is already subject to tax, it will result in higher pension contributions. It will scoop £16.5 million out of private pension funds and it will be exceptionally difficult to collect. Of course, it will not apply to public servants whose pensions are funded out of Government revenue. I think it should follow the bank card tax into oblivion.
I would like to speak about the motor industry. I do so with a certain sadness because our able exponent of the motor industry in the Seanad, Jackie Daly, died some ten days ago. He always looked forward to the Finance Bill. He girded his loins, took up the cudgels, armed himself with his SIMI briefing documents, took the Minister on and enjoyed it. Those of us on this side of the House will have to do justice to that section of the Bill for the industry itself and, of course, for Jackie Daly who would have wanted us to give as good as we got in relation to it. There is not much joy in the Finance Bill for the motorist or for the society of the Irish motor industry. I welcome the increase in the benefit in kind relief on company cars proposed in section 22. The motor car industry is very depresssed at present and any measure which will stimulate demand for new cars is of value. My colleague in the Dáil, Deputy Michael Noonan, introduced an amendment, the purpose of which was to assess benefit in kind on the engine capacity of company cars rather than on the market cost. He felt that this would be an even stronger stimulus to car sales.
The 8p increase on a gallon of petrol is obviously something that one would not welcome. It is extraordinary that the Minister should treat the spirit which the motorist puts into the fuel tank as less essential than the spirit of drinkers who got away scot free on this occasion. The budget had the effect of clawing back recent reductions in petrol prices caused by the weakness of the dollar. It now increases the Exchequer take to a massive 71 per cent of £1.85, on a gallon of premium petrol costing £2.61. I am interested in unleaded petrol. It will now have price parity with leaded fuel, whereas heretofore it had been over 4p a gallon more. In most other European countries, however, unleaded petrol is actually cheaper to buy at the pumps and I would like to see that situation obtaining here. We have to give incentives towards the purchase of unleaded petrol which is, as we know, environmentally necessary and important and which we want to see being used more and more.
The fact that there has been no decrease in the excise duty on new cars is, of course, a major disappointment. The new £6,000 capital allowance represents roughly half the cost of the average company representative's car but it will hardly set the motor industry alight. The Finance Bill, to some limited extent, recognises the difficulties faced by the motor industry. I welcome some of the measures but I would like to have seen a much greater improvement.
Turning to Chapter III, sections 24 to 26, the Government's decision to reintroduce the section 23 tax incentive for apartments is welcomed in that it is an attempt to stimulate the building industry which is sorely pressed. They badly needed a gesture of appeasement, having been led to believe that they could confidently expect a 5 per cent VAT rate and a cash injection of £200 million if Fianna Fáil were returned to office. Last year's Finance Bill gave them no joy whatsoever. I suppose they have to be grateful for small mercies and take what is given to them on this occasion.
I see certain dangers in the reactivation of section 23 while I welcome it in principle. More and more we have seen suburban locations targeted by developers while dereliction in our cities and towns continues to grow.