The point I was about to make when we adjourned at 6.30 p.m. was that in the midst of this crisis that has developed in the country a number of other things have happened which have gone almost unrecorded. One of those has been the extraordinary improvement in productivity in this country. Productivity is the real measure of whether a country is developing economically, or at least it ought to be if there is any proper system of distribution.
Let me give some figures. It depends on how you compare things, whether you base them on official exchange rates or purchasing power parities. We will take official exchange rates, because they are the official measures. In 1971 agricultural productivity in this country was 46 per cent of that in Britain; in 1986 it was 94 per cent. In 1971 industrial productivity here was 93 per cent of that in Britain; it is now 114 per cent. The production per head of the average worker in Irish industry is now higher than that in Britain. In terms of services, there is a similar increase. Even more impressive is the growth in productivity of the Irish workforce by comparison with the smaller countries of the EC, like Belgium, the Netherlands and Luxembourg, where industrial productivity has increased from 61 per cent to 77 per cent of industrial productivity in those countries.
There are other interesting statistics about productivity that I do not propose to dwell too heavily on. What is quite clear is that there has been a dramatic increase in the productivity of our agricultural workforce, of our industrial workforce and indeed of our workforce in services over that period from 1971 to 1986 while at the same time — and I am quoting from the same report that I referred to earlier —"Living standards have remained entirely static". In other words, those who are at work in this country in agriculture, industry and services are producing in the various areas more and more, more efficiently, but the country as a whole is not seeing any benefit from that.
It is a long and interesting discussion as to why it should be that our workforce in its various areas is vastly more productive than it used to be but our living standards have remained static. It is easy to say that it is because of the state of the public finances. In my view it is because of an inability related to our taxation system to capture the benefits of that increased productivity. We have persisted with a low wage economy policy. We have persisted with a low corporate taxation policy. Therefore, if you have a poorly paid workforce dramatically increasing its productivity and you have corporate profits increasing at an astronomical rate and you do not have any method of retaining any significant proportion of those, then the benefits of that vast and substantial increase in productivity will not be available within the country. It is something close to a scandal that such dramatic increases in productivity have produced no significant improvement in living standards. It is an appalling record of the inadequacy of our ability to grasp the benefits of dramatically increased productivity.
Of course, one of the reasons why living standards have improved — not the only one — is that we have chosen in some cases to use taxation to distribute some of that benefit in terms of services. We are now liable to give away that in return for nothing, in return for no benefit in terms of employment, in terms of long-term damage to our employment creating possibilities because of the fact that our workforce will become increasingly poorly educated as the educational services fall apart; as our health service becomes a two-tiered service, with a good service available only to those who can afford to pay, and pay heavily, and an appalling service available to the vast majority. It will become a less and less pleasant environment in which to live and in which to bring up children. That will be the price in the long term that will be paid for a simplistic, in my view, strategy of economic development.
I have a few concluding remarks to make on the Finance Bill. There are a couple of very specific proposals that I regard as important but which are absent from Irish taxation legislation. The first is something that operates in some of the Scandinavian countries. It is a very simple way of ensuring a relatively honest payment of income tax, that is, that every citizen's income tax payment — not their allowances but the amount of tax that each citizen pays in any given year — be a matter of public record. It is not something that should bother the vast majority of people on PAYE, because, if you know the value of their mortgage, it is possible to work out within a few pounds how much tax they would be paying but for a large sector of our society the simple disclosure of the amount of income tax they pay would be sufficient to create the sort of public uproar that would guarantee the political will to enforce a fair taxation system.
It is the sort of thing, that is not fashionable in this country. Given that all our financial institutions can advertise absolute confidentiality when they are trying to attract savings, one wonders confidentiality from whom. They are hardly going to disclose it to competing institutions. They are hardly going to disclose it to other customers. One presumes, therefore, it is confidentiality from the State but one wonders why it should be confidential from the State. One can only imagine there is only one reason it should be confidential from the State and that is in order to enable people to avoid paying the tax they should be paying on that money. This effectively means that all our allegedly law abiding financial institutions are involved in a conspiracy to defraud the State and should be prosecuted accordingly, because that is what they are doing. They are involved in a conspiracy to defraud the State, they are providing facilities for people to avoid paying their lawful taxes and accordingly they are quite clearly, and have been for some time, a disgrace to the country.
The other question is the question of section 23 lettings, indeed section 23 of the 1981 Finance Act as amended by sections 27, 28 and 29 of the 1988 Finance Act. If one is prepared to be reasonable and not be too excessive, these are reasonable proposals to encourage people to purchase or develop new apartments or houses for letting. The idea as presented to the public was that the construction cost of such new developments can be offset against the rental income. The interesting thing is that the purchase cost may be offset not just against the rental income of the new development but against any income from any other rental properties.
What this means is that, while the new rental houses and apartments have to meet minimum standards — and they are generally of a high quality — there is no such condition attached to the other rental properties on which relief is claimed, for instance, a landlord of slum properties — and there is a considerable number of what can only be described as slum properties in the private rental sector in this city. I remember far too well from my own student days a considerable number of what could only be described as slum properties. Such a landlord can buy a new section 23, as they are called inappropriately, an apartment or house, and as a result he could enjoy the income from his slum properties effectively tax free.
It is extraordinary that we would have a tax provision which effectively subsidises slum landlords. I cannot believe that it is an accident. I have to believe it is part of this mythological enterprise culture based on a romanticised image of the entrepreneur. It is one thing to try to create conditions for the development of decent private rental accommodation. It is another thing to make provision in the Finance Acts for tax breaks for slum landlords simply because they take advantage of one small section of the Finance Act. I will repeat again. Somebody buys a section 23 apartment and the tax that would be due on all rental income from all other properties can be offset against the construction costs of the one section 23 property. It is quite outrageous. It achieves no purpose that I can imagine other than to create an incentive to maintain slum dwellings. I cannot see in any way how it can be justified other than a fear of the problems that might develop if these provisions were to be taken away — in other words, to a certain extent it is a rewarding of friends.
Neither is the tax relief linked to standards of good practice in the management of either the new or existing properties, such as the use of written tenancy agreements, rent books or a minimum period of notice to quit. It is quite extraordinary again that simple things like that, that would not cost a penny, are left out of an attempt to create a good market in private rented accommodation. It is in some ways a little puzzling that, at a time when a market ideology is extremely fashionable and at a time when there is quite a deliberate policy to try to encourage people to look to the private sector for housing rather than to the State sector, we are not prepared to create the conditions in terms of standards, tenants' rights and things like that which would encourage the other side of the equation, the demand for private rented accommodation to expand. We would concentrate it entirely on creating a supply of private rented accommodation via section 23.
Of course, most people with families or with any long term future where they are living will not move into private rented accommodation without some sort of security of tenure, some sort of guarantee of standards, etc. They do not have them and it is extraordinary that the section 23 provisions make no provision for it. It is essential that tax concessions under sections 23, 27 or 28 should be linked to proper standards. Standards should obviously involve conformity to by-laws where applicable. It is an extraordinary thing that there is no obligation on somebody who is claiming a section 23 concession to satisfy the Revenue Commissioners that they have properly conformed to the by-laws of the local authority within whose jurisdiction the property has been constructed. We do it for all sorts of other areas, but we do not do it for people developing property.
Take, for instance, simple things like the provision of rent books. It has been possible for the Minister for the Environment since 1982 to make rent books compulsory. I am entitled by law to a receipt when I do my shopping in a supermarket. I am not entitled by law to a receipt from a landlord if I am in private rented accommodation. Can somebody please explain to me why that is a difficulty? The only reason I can imagine is because of some delusion about the need to protect these frail, fragile creatures called entrepreneurs who are liable to be frightened off by the least inhibition of their activities.
I believe in an enterprise culture, but if the image of the enterpreneur as vigorous, independent, resilent and self-sufficient is any way true when a few simple regulations, which would improve the quality of market demand for the property which he or she is attempting to let, far from destroying his or her market, would in fact improve the quality of the market within which he or she was operating. I am not deluded enough to imagine that it is going to happen this year, but I would suggest to the Minister that the whole question of section 23 properties ought to be re-examined, not necessarily to get rid of section 23 at all, but to ensure that section 23 allowances only apply to section 23 properties and not to every property from which rental income is being derived; secondly, that section 23 allowances only apply to houses that meet appropriate standards in terms of letting; and, thirdly, that proper conditions for letting apply to section 23 properties. It is an extremely important area. I know there was an attempt to raise this issue by way of an amendment on Committee Stage in the other House but it failed on a matter of procedure and was ruled out of order. I raise the matter here to invite the Minister to comment on it with a view to future action.
I would be inclined to vote against the Finance Bill. The whole taxation philosophy in this country is quite uneven and one-sided. I can see that this Government have made some improvements but until the burden of taxation is taken away from work and goods and services and put on capital, property, land and wealth, the basic fundamental requirement of fairness in our society cannot be met. Without fairness in our society it is impossible to persuade our citizens that it is worth while paying taxation in order to provide decent services.