Skip to main content
Normal View

Seanad Éireann debate -
Wednesday, 8 May 1996

Vol. 147 No. 4

Finance Bill, 1996 [ Certified Money Bill ]: Second Stage.

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

I wish to pay a brief tribute to Mr. Frank Cassells, one of the three Revenue Commissioners, who died suddenly last Sunday night. Mr. Cassells was one of the key figures responsible for the emergence of a self-assessment tax system in the late 1980s. Latterly, he was involved in overseeing the reorganisation of Customs and Excise following the completion of the Single Market and the drive against the illegal importation of drugs. As Members will know, Revenue officials play a significant role in preparing the Finance Bill every year. With your agreement, a Chathaoirligh, I wish to take this opportunity to formally express my condolences to Frank Cassell's family and to his colleagues in the Revenue Commissioners. We will all miss him greatly.

I am glad to have the opportunity to put this, my second Finance Bill, before the Seanad and to explain to Senators the motivation behind its contents. Senators will appreciate that some provisions will require more detailed explanation than others and will, therefore, forgive me if my address appears somewhat long.

The Bill itself is somewhat shorter than its predecessor in 1995 but, nonetheless, contains some important new provisions and changes to the tax code. Naturally, a significant proportion of the Bill gives effect to the budget tax proposals but there are other elements, some announced in the budget, which are worthy of particular comment.

One important feature of the Bill is that it seeks to close off a number of tax loopholes and avoidance schemes and to refocus several major reliefs, such as BES, films and patent income onto their original purpose of job creation, investment and innovation. Given the amount of tax resources involved in these reliefs, the regular review and evaluation of reliefs is an indispensable and ongoing requirement of tax policy.

In the course of time, even the most effective tax reliefs can lose their sharpness and their whole rationale can be called into question. I hope that what I am doing in the Bill gets back to the original purpose and intent of these reliefs. Innovation and development are essential to efficiency and effectiveness. In the case of the Finance Bill, I have sought to bring about a new openness in the Finance Bill process.

This year has seen an important innovation in that a considerable number of measures were announced in February, well in advance of the publication of the Bill itself on 28 March. The Bill also sets out a series of provisions which are necessary to prepare the way for the full consolidation of the Income Tax, Capital Gains Tax and Corporation Tax Acts to be enacted next year. These proposals were published on 5 March.

An additional new development is that the Bill was made available in disk format this year for the first time to assist practitioners and other users. These are modest but important steps in developing greater consultation on Finance Bill proposals.

This Bill is being introduced against the background of a robust economic performance. The latest OECD Economic Outlook shows that Ireland had the best growth rate of almost any OECD country last year. More importantly the OECD forecasts that Ireland will have the fastest economic growth rate in the OECD in both 1996 and 1997. According to their forecasts, Ireland's growth rate will be more than twice the OECD and EU average this year. Moreover, our export growth is projected to be well in excess of that of our export markets over the next two years, indicating a further increase in our relative share of world markets.

The OECD also predicts that employment growth in Ireland over the next two years will be faster than in nearly every other European country and will be well over twice the OECD and EU average. While unemployment here is still much too high, the promising aspect is that the unemployment rate is falling faster than in any other EU country, with the possible exception of Finland. Low inflation, historically low interest rates and impressive employment growth are the result of solid management of the nation's finances.

I would now like to turn to the measures in the Bill. Sections 1 to 3 provide for further significant increases in basic personal allowances, income tax exemption limits and the widening of the standard rate tax band as provided for in the budget. The Bill also increases a number of allowances that have not been increased since the middle of the last decade, namely, the blind person's tax allowance, the allowance for an incapacitated child and the maximum income tax allowance for the provision of a carer for an incapacitated taxpayer.

Section 4 renews for a further year up to 6 April 1997 the special exemption from unemployment benefit taxation for all systematic short-time workers, which was introduced in the Finance Act, 1994, and broadened in the 1995 Act.

Section 5 implements the budget announcement of a tax allowance of up to £800 at the standard rate for persons aged 65 or over living alone for the purchase and/or installation of alarm systems. The new relief will apply in respect of expenditure incurred in the period from 23 January 1996 to 5 April 1998. The relief is now being extended to relatives of those elderly living alone who pay for the installation of the alarm so that they can claim the relief. The definition of relative is wide in scope and includes relationship by marriage or by legal guardianship. I am confident this new measure will help the elderly in providing for their personal security.

Section 6 introduces a special 20 per cent relief from benefit in kind tax on cars for those company representatives who spend 70 per cent or more of their time on business away from their place of work. This relief will operate as an alternative to the existing high mileage tapering relief and is available only where the business mileage exceeds 5,000 miles per annum and where the employee works on average at least 20 hours per week. I have been seeking for some time to bring in such a ring-fenced relief for those categories of employees for whom a car is a necessity as part of their employment and I am glad, there-fore, to be the author of this relief.

Section 7 of the Bill brings the definition of an "authorised insurer" into line with the Health Insurance Act, 1994, which regulates the health insurance market in the State. Tax relief will be available at the standard rate on premiums paid to all health insurers who are authorised insurers in the State. This includes prospective new entrants to the market.

Section 8 updates the list of accountable bodies who must deduct 27 per cent withholding tax from payments made by them for professional services. Details of the bodies affected are set out in the section. Under section 9 it is proposed to ensure that awards by the hepatitis C tribunal or by a court in these cases will not be subject to income tax.

Sections 10 and 11 deal with farming reliefs. The £3,000 exemption for income derived from certain leases of farmland is being increased to £4,000 for leases of five or six years taken out from 23 January 1996. Where such leases are for seven or more years, an exemption of £6,000 will apply instead of the previous limit of £4,000. This will encourage older farmers to lease land to young farmers on a long-term basis. A special measure is being introduced in section 11 in regard to the valuation of farm stocks on the discontinuance of a farming trade where the stock is transferred free of charge from one farmer to another. This measure is designed to remove a disincentive to farmers transferring farm stocks on retirement.

Section 12 proposes to increase the lifetime cap on existing tax relief for the purchase by full-time employees and directors of new shares in their employing company, whether quoted or unquoted, from £3,000 to £5,000. The relief is also being extended to part-time employees and directors.

Section 13, which was inserted on Committee Stage in the Dáil, increases the maximum tax relief available to those aged 55 or over in respect of pension contributions by the self-employed from 15 per cent to 20 per cent of relevant net earnings. This is a limited but significant change to the tax code to recognise the future demands which will be placed on society's resources in providing for retirement income.

Section 14 is a technical amendment to the artists exemption relief to remove an anomaly created by the changes in the residence rules introduced in 1994. The relief is now extended to include individuals who are ordinarily resident and domiciled in the State and not resident elsewhere.

Last year I introduced tax relief at the standard rate for students pursuing full-time approved undergraduate courses in private colleges. Following a detailed and constructive debate on Committee Stage in the Dáil, I introduced section 15 of the Bill in order to extend relief at the standard rate of tax to those pursuing approved part-time undergraduate courses of at least two years duration in approved colleges and paying the fees themselves. The intent is to focus relief on those who have left school and gone directly into work but who later wish to improve their skills and prospects through further education. I believe this type of skills enhancement must be encouraged if we are to retain our competitive edge.

Sections 16 to 24 relate to BES relief. This relief is being renewed for a further three years from 6 April 1996 subject to certain changes announced in the budget. These changes include a statutory certification system for any investment of over £250,000, whether single or cumulative, in a company or an associated company and additional measures to combat companies splitting to get around the £1 million BES limit. The guidelines for certification of industrial projects were issued on 15 February 1996 after discussion with the relevant fund managers. Guidelines for tourism projects have been put in place and those for the remaining qualifying areas are being finalised.

The Bill also sets out transitional provisions for pipeline cases which were well advanced before budget day. As a result of further changes announced by me on 29 February, a small number of projects, which were well advanced and in respect of which BES funds were raised by a designated fund prior to 6 April 1995, will qualify under pre-budget BES rules provided at least two-thirds of the money raised by the fund had already been invested by budget day in other qualifying projects. I believe these transitional provisions are fair and reasonable.

The BES is being extended, from the passing of the Bill, to the music industry for investments in the production, publication, marketing and promotion of a new artist's recordings and associated videos subject to a detailed certification system to be operated by the Minister for Arts, Culture and the Gaeltacht. A copy of these guidelines which are being finalised will be provided to the Houses.

The BES is also being extended to FINEX — the financial futures exchange in the IFSC — for a period of two years subject to certification of individual projects and a limit of £100,000 in BES funds per project and £2 million in total BES funds over the two year period.

The various changes to the BES scheme are intended to ensure that funds are invested in genuine business ventures that create additional economic activity and jobs. The certification system being put in place should achieve that effect without the imposition of an unwelcome set of rigid or bureaucratic procedures.

I turn now to corporate and other reliefs. Section 25 provides for the exemption from tax of income from greyhound stud fees on the same basis as the existing exemption from tax of stallion stud fees. This relief is aimed at assisting the development of the greyhound industry in the State. Section 26 ensures that the capital allowances and other reliefs for the construction of multi-storey car parks in certain urban areas will also be available in the three new Dublin administrative counties, with effect from 1 July 1995.

Section 27 renews the 50 per cent initial capital allowance for buildings in the Custom House Docks area and Shannon Airport zone up to 25 January 1999 and for buildings in the Temple Bar area up to 5 April 1998 to coincide with the termination dates for those urban renewal schemes which were given a two year extension in the 1995 Finance Act.

The standard rate of capital allowances for industrial buildings was due to revert from 4 per cent to its former 25 per cent level on 1 April 1996. Section 28, however, provides for a permanent 4 per cent allowance for such buildings. This is a useful industrial incentive in the tax code. To counter certain tax avoidance schemes brought to my attention by Deputy McCreevy in the Dáil, it is proposed in section 29 to restrict these allowances to buildings in the State. This restriction will also apply to expenditure on hotels, where there is evidence of a growing abuse of Irish tax capacity either to acquire or construct hotels abroad. This was never the intention of the favourable capital allowances made available in the case of hotels. To allow for a number of Irish hotel groups in the course of constructing hotels in Northern Ireland, certain transitional arrangements have been put in place in the section.

Section 30 closes off an undesirable loophole in the relief for seaside resorts in so far as holiday cottages and apartments are concerned. The proposed amendments are intended to prevent the use of certain tax aggressive schemes based on holiday cottages which are excessively costly to the Exchequer and to redress the balance in favour of other more worthwhile tourist projects in the resort areas covered by the scheme.

The proposed amendment will modify the tax incentive by providing that both the double rent allowance and the capital allowances cannot apply in relation to holiday cottages, apartments and other self-catering accommodation at the same time, and by ring-fencing the capital allowances for registered apartments and other self-catering accommodation to rental income or the income from the trade of operating holiday cottages or apartments, as is the case already for registered holiday cottages.

The changes apply from 5 April 1996, except in cases where, before that date, an application for planning permission had been received by a planning authority, or a binding contract for acquisition or construction had been entered into or where the Revenue Commissioners had given a favourable opinion in a particular case. In addition, as a result of concerns brought to my notice since the Bill was published, I have extended the scope of the transitional measures for cases where genuine commitments in relation to the acquisition of land for a holiday cottages development has been made by investors on the basis of the existing law and where the promoters can demonstrate this to the satisfaction of the Revenue Commissioners.

As announced in the budget, section 31 overhauls the existing section 35 film relief along the following lines. Section 35 relief will be continued for a further three years with effect on and from budget day, subject to a reduction in the amount of expenditure on larger films which qualifies for relief; an increase in the limit for corporate investment; the restriction of the tax deduction to 80 per cent of the investment and the substitution of a one year investment holding requirement for capital gains tax purposes instead of the current three year holding period.

Tax relief will only be available in future from the date of commencement of principal photography in order to encourage films to be commenced within a reasonable period of the investment in the film. In addition to details announced in the budget, the Bill provides for certain transitional measures announced by me on 29 February in relation to investments in film companies made before budget day.

Two further changes are proposed to the section 35 relief. First, an additional special 10 per cent increase in the maximum level of qualifying expenditure eligible for the relief will apply for off-seasonal activity — that is where principal photography commences between 1 October and 31 January. Second, corporate investors will be allowed to invest on an annual basis up to £4 million in addition to their new £2 million annual limit, provided the additional investment is in small scale projects which tend, by their nature, to be Irish films.

I turn now to patent income relief. Section 32 deals with tax relief on royalties from patents. There is clear evidence which indicates that the relief is being used by manufacturing companies as a means of rewarding directors and certain employees in a tax efficient manner without any obvious benefit to the economy from greater research and development activity. The Exchequer cost associated with this practice is significant and the indications are that the cost will continue to increase substantially in the future if no action is taken. The estimated cost over a four year period of the reliefs in a sample of cases surveyed by Revenue was between £10 million and £20 million. As Senators will be aware, a patent can last for 20 years. The relief being claimed in many cases is in respect of minor changes to production and other processes.

The 1994 Finance Act dealt with abuses in the non-manufacturing sector by restricting the relief to royalty payments between unconnected persons. This year's Bill tackles abuses in the manufacturing sector. In order to target the relief at those companies pursuing ongoing research and development programmes or exploiting significant innovations protected by patent, the Bill proposes, first, to retain tax relief for patent royalties received by a company from a manufacturing company whether connected or not. However, the Bill restricts the amount of tax free royalty income to the amount which would have been received if the parties were dealing with at arms length. Second, it is proposed to retain tax relief in full for distributions to shareholders made by companies out of patent royalty income received from unconnected companies.

Third, in the case of a company receiving patent royalty income from a connected company, the maximum amount of tax exempt distributions which the company or group can make in an accounting period to shareholders will be determined by the actual level of research and development expenditure incurred by the company or group in that accounting period and in the two preceding accounting periods. However, where it is shown to the satisfaction of the Revenue Commissioners that the patent is in respect of a radical innovation and not taken out for tax avoidance purposes, the tax exempt distribution of the royalty income will not be limited in this way. The phrase "radical innovation" in the legislation was carefully chosen to denote substantial technological advances and to exclude minor technical changes.

The Government considers that the measures proposed are balanced and reasonable. They will help to curb more questionable claims for relief and refocus the relief on productive R&D expenditure. In this way the section will reduce the unnecessary cost of relief to the Exchequer while at the same time conforming to the original intention of the relief when introduced in 1973, that is, to stimulate research and development and significant innovation.

A number of different sections are designed to facilitate the carrying on of business in the IFSC and Shannon. These provisions extend the range of financial transactions which can be carried out in the IFSC. In the case of Shannon, retailing operations are currently excluded from the 10 per cent corporation tax regime. This rules out mail order or distance selling activities to the extent that such operations are targeted at the final consumer. The Bill will allow such mail order operations to be carried out in the Shannon zone where these contribute to the use and development of the airport. It is hoped through this measure to attract a number of important mail order businesses to the region.

Section 34 is aimed at assisting a mining company to return a mine site to a greenfield site after the closure of the mining operation. The section provides a tax allowance for expenditure incurred in this way and also for advance payments made by a mining company into a fund to finance the eventual closure costs where such advance payments are required under a State mining facility or other agreement with the Minister for Transport, Energy and Communications.

The Bill introduces a number of measures dealing with the tax treatment of certain investment media. These measures, some of which were amended in the other House, are intended to ensure that the losses on gilt disposals by life assurers and others, where the disposal is ex-dividend, are not allowable for offset against income or gains until the related interest accrues. It is also proposed to ensure that no unintentional relief arises from the procedure whereby life assurance companies and undertakings for collective investment can spread their unrealised non-gilt capital gains over a seven year period. These new provisions are contained in sections 36 to 38 and a number of other sections.

The Bill also proposes changes in section 42 to the tax treatment of certain, longer term deposits subject to DIRT. The Bill provides that DIRT will be levied on the relevant deposits each year on the annual accrued interest of the relevant deposits instead of being rolled up until the final year. The financial institutions will now have to pay the DIRT to the Exchequer annually, to the extent that this is not already done in certain cases.

There is active competition between banks and the life assurance sector in the savings market. It is important that, as far as possible, the tax system should be neutral as regards different types of savings products. I will be examining on an ongoing basis what other tax changes might be undertaken over time in the savings market to maintain a level playing field and to encourage the provision of a greater range of savings and lending instruments best suited to customer needs and to the requirements of developing financial markets.

The Government has extended the range of various employment grants and subsidies to encourage the creation of employment opportunities, particularly for the long-term unemployed. To make these incentives attractive to firms, section 40 provides that, as with IDA employment grants, a variety of other employment grants will be exempt from tax in the hands of employers with effect from 6 April 1996, such as back to work, Leader and county enterprise board grants and the new £80 a week subsidy for the long-term unemployed effective from 1 June next. The section also extends relief in respect of any employment grants which may be provided under the EU peace initiative and the International Fund for Ireland.

Section 41 amends section 17 of the Finance Act, 1970, which relates to deduction of withholding tax from subcontractors under the C45 system. The amendment deals with the tax transparency of the gang system and provides that, in determining the tax to be deducted from a payment to a gang, a principal contractor must take into account the tax status of each individual member of the gang.

Sections 44 to 58 contain the main corporation tax provisions. Section 44 introduces the 30 per cent rate of corporation tax on the first £50,000 of annual income as announced in the budget. Section 45 amends the tax treatment of certain exchange rate gains and losses on hedging instruments which are used to remove exchange risks on the corporation tax liabilities of trading companies. Sections 48 and 49 are technical amendments designed to preserve the existing life assurance tax arrangements in relation to capital gains tax. The provisions in section 51 are designed to close off certain corporation tax avoidance schemes.

Section 54 broadens the scope of the definition of a qualifying ship for the purposes of the 10 per cent rate of corporation tax. It also removes one of two ring fences in relation to the leasing of ships. The effect of this will be to allow capital allowances and losses in relation to a leased ship to be offset against leasing income generally as opposed to the leasing income from the particular ship. This easing of the ring fence rules will only be available where the Minister for the Marine, with the consent of the Minister for Finance, certifies that the grant of relief will enhance the economic, employment, safety and environmental aspects of the Irish shipping trade. I intend to monitor this new relief carefully as tax reliefs for shipping have been abused in the past.

Section 57 broadens the scope of tax relief on research and development expenditure, introduced in the Finance Act, 1995. This relief already provides for an exceptional quadruple allowance for incremental research and development expenditure by manufacturing companies over a three year period. The relief is being extended, first, to allow companies or groups which receive grants for research and development not exceeding £50,000 in a relevant accounting year to obtain the relief in respect of their non-grant aided expenditure. Second, relief will now be calculated by reference to increases in expenditure over a fixed base year level in contrast to the previous regime which imposed increasing yearly thresholds. Finally, a definite termination date is being set to ensure that the scheme is not open ended. The 1995 scheme so far has been slow to get off the ground. The changes now proposed should allow for a better take-up without adding significantly to the cost of the relief.

Sections 59 to 64 make further changes in the area of capital gains tax. The aim of the changes is to target relief on productive investment and to close off certain loopholes. Section 59 allows insurance companies to pay claims under material damages policies without operating the capital gains tax withholding provisions. This is to rectify an unintentional side effect of an antiavoidance provision introduced by section 76 of last year's Finance Act. Section 60 extends the scope of the provisions relating to capital gains tax retirement relief to ensure the effectiveness of the relief.

Section 61 is intended to remove any doubt as to the correct treatment applying where, on the reorganisation of a company, a taxpayer receives a loan note in exchange for shares. Any subsequent disposal of the loan note will give rise to a charge to capital gains tax in the same way as disposal of shares themselves.

Section 62 amends roll-over relief on the disposal of certain quoted or unquoted shares and the acquisition of shares in an unquoted trading company. It does so by relaxing the requirements in relation to holding periods and employment with the company which a person must satisfy in order to qualify for relief.

The lower rate of capital gains tax — 27 per cent — applies to gains realised by individuals on the disposal of ordinary shares in certain small and medium sized companies. The shares in question must be held for at least five years prior to disposal. This ownership period is now being reduced to three years by virtue of section 63.

Finally, the Bill provides in section 64 for an exemption from any capital gains tax liabilities that might arise from the winding-up and dissolution of the Dublin and Cork District Milk Boards. Since the proceeds of these disposals are to be paid into the Exchequer, the net effect of the exemption is to avoid an unnecessary and circular transfer of funds.

On the question of offshore islands, Senators will be aware of the recent report on island development and the proposals in that report to address the economic and population decline of offshore islands. To assist in achieving this worthwhile objective, the Bill proposes in sections 65 to 70 to extend to certain offshore islands two specific reliefs to encourage the construction or refurbishment of residential accommodation. The reliefs are, first, an allowance against income tax of 50 per cent of expenditure on construction or refurbishment of permanent accommodation for owner occupiers at a rate of 5 per cent per annum for a period of ten years and second, the offsetting of construction, conversion and refurbishment expenditure on the provision of rented accommodation against all rental income of the owner provided that the accommodation lease is for a period of at least 12 months and that the house is used as the lessee's sole or main residence throughout. The reliefs will apply to qualifying expenditure in the three year period from 1 August 1996 and the reliefs are structured so as to encourage permanent residence on the islands concerned.

Turning now to indirect taxes, sections 71 to 74 make a limited number of changes to VRT as it applies to certain special vehicles, namely, motor caravans and crew cabs. This involves a reduction in the VRT rate to 13.3 per cent. A small change is being made to the VRT scrappage scheme to remove a complication where one spouse owns the scrapped car but the new car is being registered in the other spouse's name. The Revenue Commissioners have exercised their discretion in allowing the relief in the few such cases which have arisen so far.

Section 75 to 86 deal in the main with the principal budget excise duty changes which are already in effect. There are other new reliefs, however, contained in these sections. Section 75 will abolish betting duty on bets placed "on course" at greyhound tracks in respect of events taking place at other locations. Section 77 removes the value of food sales from the turnover basis on which pub licence duty is calculated. This will apply both to pubs and to restaurants with full pub licences and brings the basis of charging excise duty into line with hotels.

Section 78 relates to the disabled drivers' scheme. This scheme provides exemptions from VRT, VAT and road tax on motor vehicles, and excise duties on fuel used in such vehicles, driven by disabled drivers or used to carry disabled passengers. To qualify for relief in respect of a disabled passenger, adaptations to take account of the passenger's disablement must be carried out to the vehicle at a cost of not less than 20 per cent of the pre-tax price of the vehicle, i.e. excluding VRT and VAT. In response to representations, section 78 provides that this requirement will be reduced to 10 per cent of the cost.

Section 82 makes a minor adjustment in the spirits duty rate on a revenue neutral basis to ensure that the average amount of duty payable on a bottle of spirits will not increase as a result of the implementation of EU rules on the definition of spirituous products. Section 82 will also reduce the duty on low alcohol drinks based on spirits to bring it into line with that of other similar drinks based on beer or made wine.

With regard to tobacco and tobacco stamps, the Finance Act, 1994, prohibits the sale of cigarettes at a price higher than the manufacturers' listed price. Section 84 of the Bill amends that provision to permit the price of cigarettes sold through coin operated vending machines to be rounded to the nearest 5p. This amendment takes account of the shortage of copper coins and the practical difficulties with regard to using such coins in the machines.

Section 85 makes three changes to the offences provisions relating to tobacco tax stamps. In the first instance it will be an offence to have unstamped cigarettes on display in shops, etc., second, counterfeit or altered stamps will be seizable and, finally, it will be an offence to misuse a valid stamp from one packet by putting it on another. These amendments are necessary to ensure the effectiveness of the tobacco stamp regime which came into full effect on 4 March 1996.

The provisions in the Bill relating to VAT are to be found in sections 87 to 100. These transpose the EU Second Simplification Directive into primary legislation with effect from 1 January 1996; they provide for an increase in the farmers' flat rate addition and the rate of VAT on livestock, from 2.5 per cent to 2.8 per cent as announce in the budget, with effect from 1 March; and they make a number of technical changes to the VAT treatment of second hand goods and the invoice rules in the case of hire purchase transactions.

The EU Second Simplification Directive simplifies, among other things, the VAT rules in relation to cross frontier supplies of contract work. The strict requirements of the directive were already in force by virtue of EU regulations signed by me in December. The Bill confirms these and, in addition, makes certain necessary technical tidying up amendments to the VAT Act, which are consequential on the simplification provisions.

Sections 101 to 111 of the Bill introduce a new stamp duty charging provisions in respect of the transfer of uncertificated securities. Most Irish quoted companies will opt later this year to allow the title to their shares to be transferred by a new electronic settlement system called CREST. This will replace the existing paper based system and will do away with the needs for share certificates for those shareholders and companies who opt into the new electronic system. It is necessary, there-fore, to revise the stamp duty charging arrangements which are based, at present, on the taxing or stamping of documents.

There have been extensive discussions between Revenue, my Department and the Stock Exchange on the new form of stamp duty taxation which is set out in the Bill. My concern has been to protect the substantial annual revenue yield of almost £25 million from share transfers while, at the same time, seeking arrangements which allow the trading of shares to proceed in an efficient manner. I believe the new provisions achieve this goal.

A number of other changes are also being made to the stamp duty regime. Section 112 repeals the £10 stamp duty charge that applies on incorporation of a company on both the memorandum and the articles of association of the company. The need to remove the charge arises from a recent ruling of the EU Court of Justice. The revenue loss is estimated at £300,000 per annum.

Under existing law, new houses with a floor area not exceeding 125 square metres are exempt from stamp duty. However, the deed of transfer of conveyance must be submitted to Revenue together with a floor area certificate issued by the Department of the Environment. Section 113 provides that these deeds need no longer be presented for stamp duty purposes if the deed itself contains a statement to the effect that a valid Department of the Environment certificate was in force for the new house at the date of conveyance or transfer. This will reduce the formalities and simplify the procedures for obtaining the stamp duty exemption.

Other sections provide stamp duty relief on transfers of American depositary receipts issued in the US in respect of Irish unquoted shares and on certain international business mergers involving Irish companies. Both these changes are to assist Irish firms in the international arena, either by way of raising capital or forming international corporate alliances.

Section 114 confirms the increase in stamp duty on ATM cards from £2 to £5 announced in the budget with effect from 1 February 1996. Section 117, with section 34 earlier, re-enacts the tax and stamp duty exemptions contained in the Securitisation (Proceeds of Certain Mortgages) Act, 1995, and section 118 exempts the transfer of certain EU trademarks and international trade-marks from stamp duty.

The budget and this Bill make a number of changes to the capital acquisitions tax code. I have received a sustained level of representations to the effect that the CAT code is hindering business development and the transfer of business assets intact from one generation to the next. My philosophy in these cases is to distinguish between productive and non-productive wealth. We should act where it can be shown that there are genuine employment concerns or where a business might not be able to survive intact on transfer from one generation to another because of CAT. My aim, however, is not to remove CAT as there are obvious equity and other reasons inherited wealth generally should be subject to tax.

In line with this, section 121 is an antiavoidance section. In certain circumstances it may be possible for share-holders in a private company to reduce capital acquisitions tax liabilities by increasing the number of shareholders above 50 and thereby escape the current private company control test. Section 121 amends the definition of private company for CAT purposes to ensure that companies cannot escape the private company control test in this way.

Sections 122, 125 and 127 give effect to the budget day proposal to increase CAT relief on the transfer of relevant business and agricultural assets from a maximum of 50 per cent to a rate of at least 75 per cent and to extend the minimum holding period for such assets from six to ten years after transfer in order to qualify for the full relief of 75 per cent. Section 126 provides that where the beneficiary and his or her relatives control the company concerned, the 10 per cent minimum share-holding requirement will no longer apply for the purposes of business relief. This removes an anomaly in the rules for qualifying for business relief.

Section 123 provides an exemption for gifts and inheritances used exclusively to discharge the medical expenses, including residential care, of a permanently incapacitated individual. Section 124 allows a life tenant who is not a spouse of a disponer to effect a tax exempt section 60 insurance policy used to pay CAT liabilities.

At present, all applications to the Land Registry for registration of property based on squatter's title must be cleared by Revenue for capital acquisitions tax purposes before any registration can take place. However, a considerable number of such cases involve small holdings where a charge to CAT would not have arisen in any event or where any CAT which might possibly have arisen would be insignificant. Section 128 proposes to dispense with Revenue clearance for holdings generally of less than five hectares and £15,000 in value, provided solicitors are willing to certify that the holding being registered is within these limits of value and size. The section also introduces a similar but broader relaxation for statutory authority acquiring property on which a CAT liability may arise.

Section 129 ensures that the instalment facility for business and agricultural property introduced in last year's Finance Act will continue to be available where the business or agricultural property concerned is sold or compulsorily acquired and the proceeds are reinvested within one year of the sale in other qualifying business or agricultural property.

Part VI of the Bill sets out miscellaneous preconsolidation provisions. As the House will know, the law in relation to income tax, corporation tax and capital gains tax will be consolidated in a tax consolidation Act in 1997. Work on the consolidation Bill is progressing on schedule for the introduction of the Bill next spring. In order to speed up the process and to allow early consultation on proposals, I already published on 5 March a series of proposed amendments which are designed to clear the way for consolidation next year. These sections were issued in a fully drafted form, together with an explanatory memorandum. These measures are now included in sections 130 to 137 and in the Fifth Schedule of the Bill. The provisions are explained in detail in the explanatory memorandum.

The final sections of the Bill cover a small number of miscellaneous matters. Section 138 is the standard provision in relation to the annuity to be paid into the capital services redemption account. Last year's Finance Act provided for the setting off against income tax, corporation tax, capital gains tax or capital acquisitions tax of the value of donations of heritage items made by a person to approved Irish cultural institutions. There is a cap of £500,000 on the maximum value of donations which can be accepted in any one calendar year under this scheme. Section 139 increases this cap to £750,000 as announced in the budget.

Section 140 provides for a new system for the recoupment to vehicle licensing authorities of the costs incurred by them in the operation of motor tax offices. Licensing authorities are now allowed to deduct their expenses at source instead of the system which operated up to 31 December 1995 whereby licensing authorities handed over the gross amount collected in motor tax and were reimbursed from the Vote of the Department of the Environment. Section 141 amends the Casual Trading Act, 1995, to ensure that applications for casual trading licences must contain the tax reference number of the applicant. This will promote tax compliance in this sector.

I recommend the Bill to the House and I will be happy to respond to Senators' comments and concerns.

I compliment the Minister and his officials on the preparation of a highly technical Finance Bill. I join the Minister in offering the condolences of the Fianna Fáil Party to the family of Frank Cassells and his colleagues in the Revenue Commissioners. Frank Cassells was a highly respected official who did great work during his time in the Revenue Commissioners.

The difficulty for legislators is that the Finance Bill is a more legalistic form of the Budget Statement which was delivered last January. There is nothing new or significant in the Bill. It is highly technical and I am not interested in trying to disseminate the technical aspects of its provisions and amendments. It is sad that the Finance Bill is reduced to being legalistic legislation which tells us nothing more than we were told last January. I prefer to comment on some aspects of the Bill and I put it to the Minister that it would be more important and more efficient, from the taxpayers' point of view, if there were new provisions which would reduce the tax burden in the first instance and, in the second, encourage the growth of employment.

When the Minister for Finance introduced the budgets of 1995 and 1996 there was much talk about the large amount of money available to the Government to reduce the tax burden and to encourage growth in the economy. Sixteen months later, one must ask where is all the money we were told was available as a result of the great growth in the economy? It is clear from the Minister's speech that little is being done about the useful expenditure of this money for the benefit of the ordinary taxpayer. At least the Minister appreciates the correlation between lower public expenditure and lower taxes because it is clear that the Minister's and the Government's policy is to tax and spend. Unfortunately, we cannot see the fruits of this tax and spend policy.

The growing queue of public sector unions lining up for increases in pay shows that they are seriously dissatisfied with the level of tax reduction, particularly PAYE tax reduction. Nurses, teachers, gardaí and other public service workers see they will not get the tax reductions they had expected from the growth in the economy. They must now resort to strike threats in order to get pay increases. At a time when the economy has grown like never before, it is a sad reality that unions must threaten to go on strike because of the failure of the Minister to introduce tax reductions, particularly in PAYE, which would spread the burden more fairly among taxpayers and give the people who drive the engine of our economy a more equitable share of the fruits of their work.

Any Labour Party Minister with Democratic Left on his back is in no position to give the kind of tax cuts expected by the people. Labour could not stand the heat of Democratic Left if they cut taxation and brought about proper expenditure control. We had the spectacle before the budget of the Minister appealing to his Government colleagues through the media that they must cut expenditure in their various Departments. This Government is out of control as regards the public finances and we are spiralling towards major industrial relations problems. Although the economy is growing, we will not see its benefits.

Possibly the single biggest factor that has proved the heresy of both this and the last budget is the late decision to spend £100 million on a crazy scheme for the long term unemployed. I have not seen any impact from this money, which the Minister for Social Welfare commandeered from the Government in the last days of the preparation of the budget, among the long-term unemployed in my constituency, in areas like Westside and Ballybane in Galway, Darndale and Neilstown in Dublin or similar regions in Limerick and Cork cities. Was there any significant employment growth among the long-term unemployed as a result of this money? When we come to next year's budget, we will see this money has not made a significant impact except in so far as it can be seen as a sop to Democratic Left.

A significant impact could have been made reducing unemployment if this and other money had been used to bring about effective tax reductions for people on PAYE. There could have been significant employment growth if this Minister and his Government colleagues had tried to bring about a coordinated approach to tax reform through the implementation of a similar reform in the social welfare system. Is it not time for such co-ordination? Would this Bill not have been an opportunity to introduce correlated and genuine tax reform involving reform of the social welfare and tax codes?

It seems ridiculous that under present social welfare regulations, a person must prove that he is not able to get, and be available for, work but if he can get any work, his social welfare payments are cut. It is ridiculous that a person on the dole trying to make ends meet is penalised if he gets work. Instead of people proving that they cannot get work, or that they will work if it is available, the time has come to allow the long-term unemployed get their social welfare payments and find work to supplement these payments. We are living in dreamland if we think there is no black economy operating and that these people will not work if they are given a chance. Anybody with initiative who is on the dole will get himself a few hours work, and I would not blame him for doing that. We have a rampant black economy, but politicians and departmental officials want to close their eyes to what is happening. This is why we have so many long-term unemployed people.

A married man with three children may be getting around £120 a week on the dole. Would it not be sensible to give him another £50 and let him do a week's work and cut out all the bureaucracy of making him prove he will not work while he is getting his £120 and that he is looking for work which is not available? It is a pity that an opportunity was not taken in this Bill to introduce common sense proposals involving the tax and social welfare codes.

The best example of people being out of touch with reality I have seen in my time in politics — I have served in the Oireachtas for 14 years — was the proposal in this year's budget introducing tax relief for old people installing alarms in their homes. It is beyond me what the Minister and his officials were thinking about when they introduced that provision.

I met an active age group of 27 people in Letterfrack in Connemara two weeks ago and they were very concerned about the spate of crime, vandalism and robbery in the west and were anxious to know how they could better protect themselves — I brought a number of security experts to the meeting. I asked how many of these 27 people could avail of the tax relief introduced in the budget — and this included the amendment which allowed their families to claim this relief. Only three of them said they could benefit from it. I brought a security expert along a week later who referred to a system where one can phone a central office and have a security alarm installed. It cost £250 with a £40 monitoring cost per year. I asked how many of them could afford the installation fee. Four people told me they could afford it and would get it. However, the rest could not.

As one practical politician to another, I ask the Minister of State to amend this ridiculous provision and give a once off grant of £100 to every person claiming an old age pension and a living alone allowance. Many of those people will then at least be able to afford to install an alarm for themselves. There should be a strict definition under social welfare conditions where only those in receipt of old age pension and the living alone allowance could qualify. We will have done one good job this week if we can use our common sense to amend that part of the Bill.

I often wonder what the general public thinks of politicians when we talk about the significant tax reductions we are introducing. I conducted a strict examination of how this budget benefits the lower paid and I examined the budget tables. It is a nonsense to say that anybody in the lower paid bracket is any better off as a result of the budgetary changes made. In fact, to add insult to injury, the Minister abolished the £140 PRSI tax allowance, which was probably a significant benefit to the lower paid. There is not much point in our telling low-paid workers they will benefit from this Finance Bill because the reality is they will not. We may as well be honest with them and admit that.

I want to address a number of specific sections in the Bill, some of which are welcome. However, some of these provisions are difficult to understand. For instance, one wonders what is the significance of the proposed Consolidation Act because resources are obviously being devoted to rationalising and simplifying the tax code and beginning the task of integrating the tax and social welfare systems but, as I have said already, there is certainly no evidence of that to be found in today's Bill.

Two crucial elements need to be addressed: first, that matter which I have just mentioned and, second, the development of initiatives for the long-term unemployed. It is interesting to hear the Minister for Finance say that he must wait for the moment before introducing the measures for the long-term unemployed which are described in section 35 and for which a promotional scheme is to be established by the Minister for Enterprise and Employment. Seeing as this was part of the Government's much publicised plan to tackle long-term unemployment which was launched before the last budget, why has that legislation not been put together properly for introduction now? If bringing about these changes is a Government priority, we should be able to find the specific proposals in this Finance Bill.

Turning to another area which is causing much concern and which is not addressed in this Bill, that is, the ill-gotten gains of a growing number of people in society who earn their living from crime, drugs or other associated areas, one wonders why there are no proposals in this Bill to co-ordinate the various agencies, such as the Revenue Commissioners, the Garda, the Department of Social Welfare, etc. Is it not crazy that drug barons live in wealthy surroundings and own much property, yet we are told there cannot be co-ordination between the Revenue Commissioners and the law enforcement agencies, such as the Garda and Customs and Excise? Surely this Bill offered the opportunity to introduce some provisions to clamp down on those people who are operating in this way? Surely it would have been possible to bring about some co-ordination between the agencies, particularly the Department of Social Welfare, the Revenue Commissioners and the Garda, with regard to the large number of people who are now dealing in drugs and making significant sums of money?

For example, there are people earning £400 and £500 per week dealing drugs in Galway at present who are drawing unemployment benefit, a rental income subsidy and have medical cards. In fact, one fellow is drawing money on behalf of his 19 year old girlfriend, whom he commandeered from her family and whom he has completely brain-washed. Is it not time we had a little sensible co-ordination between the State agencies enforcing the law as far as these drug dealers are concerned? A primary part of the conditions for unemployment assistance is that one does not have another income and one is available and willing to work. I have evidence that people in Galway with significant income from drug dealing are receiving the various benefits to which I have referred.

Has the Senator reported them to the authorities?

I am in the process of reporting them to the authorities at present because I received this information only recently, but that is exactly the problem. If the Minister of State is expecting that proper conditions should apply just because people report matters, then it will not happen. It is especially significant that she should ask that question. However, is it necessary that the hundreds of drug dealers around this city who are drawing benefits which they should not be drawing should be reported to the authorities in order to stop those benefits being paid to them? Is it not our job, as legislators, to ensure we have, first, the legislative conditions and, second, the facility to implement those regulations to ensure those people are not drawing off the State while they are involved in drugs? That is the problem.

There are four gardaí in the drugs squad in Galway. They have no equipment and if they want to get on with their job, they must borrow a patrol car unless they use their own one. There are social welfare officers who are simply run off their feet and cannot keep in touch with the amount of drug dealing which is going on. Let me say that Galway does not have a problem in comparison to Dublin, Cork or other places, but Galway is certainly going down the slippery slope.

It is time we, as politicians, introduced legislation to address those matters and it saddens me to think we have been through a budget, and now a Finance Bill, and these are the practical matters which count on the ground. I can tell the Minister of State that it will cost the taxpayer millions of pounds to cure the problems which are now being created by the drug dealers in Galway who are selling only soft drugs, whereas we could prevent the problem with a relatively small amount of expenditure right now. We have the happy knack of trying to prevent a problem after it has happened, but the Minister of State and the Minister for Finance could certainly put good money into use by preventing many of the drug and crime related problems in towns and cities throughout the country today. We will stand here in a year or two and the State will be spending greater sums of money trying to keep these people in jail, trying to cure their health problems as a result of drug addiction and trying generally to cure the problems of society which are getting worse by the day as a result of what is happening.

In conclusion, I want to refer to one or two of the good provisions in the Bill. The section dealing with the offshore islands is certainly a welcome measure and it will do much to enhance the life-style of people on the offshore islands.

The section dealing with the IFSC and Shannon, that is, the provisions to extend the range of financial transactions which can be carried out there, is welcome. However, seeing that this type of initiative has been taken in the Bill, similar initiatives for the international services sector could be taken in other parts of the country. For instance, Ireland deals with something like 0.2 per cent of the international reinsurance business, which is now a huge business in the financial capitals of the world — Paris, London, New York and so on. If we were to create a tax incentive zone for international reinsurance, for example, in other locations throughout the country, there is no doubt in my mind the success we have had in the IFSC, and, in Shannon to a degree, could be repeated in other service industries. For instance, in Galway we have an international services business park with just one company operating there at the moment. If we were to extend the tax incentive base to that particular park for specialist types of international service industries I have no doubt we could create significant employment opportunities in that area in Galway.

The significant tax reductions which we all demand can only be brought about when all taxpayers in the net share the burden equitably. There is little or nothing known about the cost in lost revenue of the various tax reduction schemes, such as the BES and urban renewal scheme. There are many people who pay no tax because they know how to play the system of tax relief under these schemes.

My party wants the Government to change the tax laws to ensure that all the taxpayers in the higher earning brackets pay their fair share of tax before they can avail of those tax reliefs and reductions. The average PAYE employee never qualifies for these tax breaks because he needs all his income just to break even. The tax code in this respect is not fair to the ordinary PAYE payer.

We will be tabling a number of amendments to this Bill which will include measures designed to help the long-term unemployed escape from the poverty trap, measures to control confidence and to boost demands in areas such as the beef cattle markets which are in disarray at the moment, measures to deal with tax burdens facing cross-Border workers and measures to deal with workers on low pay.

The Finance Bill is the most complex Bill laid by the Minister for Finance before the House each year. Many of its key provisions have been widely discussed since the budget in January. However, the 1996 Finance Bill does not contain provisions which give legislative effect to many of the key priorities addressed in this years' budget.

Our economy is prospering as never before. The economy is growing faster than any of our fellow members of the European Union and job creation has reached record levels, but not everybody desperately seeking the dignity of work has been given that opportunity.

The central thrust of Government policy in the 1996 budget was to direct resources towards the long-term unemployed and the lower paid. None of these measures is appropriate to the Finance Bill as they are measures administered by the Departments of Social Welfare and Enterprise and Employment.

I welcome the decision by the Government to introduce an £80 per week subsidy for employers who provided jobs for those who are long-term unemployed. Special provisions have been introduced to help 18 and 19 year olds avoid the long-term unemployment trap. The lower rate of employers' PRSI has been extended; this is very welcome. Now there are over 600,000 covered by this special lower rate.

I welcome the commitment in this Bill to the reaffirming of the Governments' commitment to the creation, through enterprise, of real sustainable jobs. The Bill provides for the exemption from tax of grants received by the enterprise boards, grants paid under Leader and area partnership programmes and grants paid under the back to work allowance scheme. The subsidy of £80 per week to employers in respect of recruiting long-term unemployed persons is also to be exempted from tax; this is very welcome. This provision will allow these employment creation incentives to be maximised to the full by small and micro-sized businesses. The Finance Bill is the final stage in a long process which involved the settling of the Estimates, the Budget Statement, the Social Welfare Bill and a host of other measures. The fruits of economic growth are spent not just on tax concessions or on measures to help the unemployed. They are also spent on the improvement of services in hospitals, schools and in all levels of society.

None of these would be possible were it not for the prudent economic management to which this Government is committed. Economic prosperity is not an accident. It results from proper policies and management. There can be no improvements to the services or reductions in the burden of tax without continued strong economic performance. This Government will continue to manage the economy with the prudence which is necessary to promote sustained economic growth and real sustainable jobs. No package of employment subsidies or other proemployment measures can deliver the kind of real sustainable jobs the economy creates. The Government is to be congratulated on the creation of 45,000 new jobs in 1995 and the target of 30,000 jobs for 1996 which I have no doubt will be achieved.

Never in the history of the State have we seen interest rates so low. There is a major boost to the house market and the property market. Buying a house is the biggest decision any young person has to make and it is great to see the interest rates so low. It gives young people confidence to buy a new home. We have seen in every country, in every town, the increase in the levels of property and in sales of property over the last number of years. This is very welcome and it is all down to good management of the economy by the Government.

In the formation of this Government, it was decided that a Minister for the west was needed and it is to be congratulated for that. It is the first Government that has recognised the need for putting in place a voice for the west. In view of this, I would ask the Minister for Finance to consider designating special status to an area around Knock international airport. This is the tenth anniversary of the establishment of this airport. The people who run Knock international airport and the board members are to be congratulated in turning this project around and putting it into profit. This airport should be made a tax incentive area. This would be a major boost to the western region and to this airport. Knock airport is a gateway to the west and the Minister would be breaking new ground in establishing the airport as a tax incentive base. It would be a catalyst and a major boost to the west.

Imaginative changes are needed in our income tax and VAT laws. The Minister has the right idea and is a Minister who will bring about real change in our VAT and tax codes. The lower rate of income tax needs to be reduced. There are a large number on low income and real benefit can be brought about to help those people by reducing the lower rate of income tax. This can greatly help the lower paid and yet will not affect the unit cost to industry or increase the cost of employing people.

There should be one VAT rate across the spectrum. It would simplify things for everybody and reduce the number of staff in our tax offices. It would also reduce greatly the headache involved for the many thousands of self-employed people as well as making their accounting systems much easier. The Minister for Finance should take a serious look at changing the threshold for registration for VAT purposes for small family businesses. If something is not done soon every small shop, pub or business in the rural parts of this country will close down. Small family businesses, whether a shop or a pub, provide a much needed service in the rural parts of this country. They need assistance, otherwise they will go out of business.

If we are serious about tackling the high unemployment in this country the best way is through small indigenous industries. Down through the years small family businesses have been the backbone of this country and they can play a major role in reducing our high unemployment levels. The small business is running into serious difficulties now with major competition from multinationals and big stores which are cropping up on a nationwide basis in every large urban area. The rural dwellers are gravitating towards the larger urban centres. People commute on buses to shop in the large urban areas. All of this is to the detriment of the smaller businesses in the rural areas which are providing a great service from a social point of view as well as everything else.

The Minister should look seriously at increasing the thresholds for registration of VAT for small family businesses. By this I mean businesses which are run by a husband and wife and their family and employing a small number of people. With the right climate I have no doubt they will respond and take people off the dole queues. It would curtail the massive growth of the multinationals which we have witnessed over the last number of years and which is to the detriment of rural Ireland and the small family business.

I am delighted that the Minister for Finance has given tax concessions to people who are furthering their third level education. This is a great initiative because there are many people who would like to further their education after they have reared a family. They would also like to better themselves or their job. I congratulate the Minister for giving this tax concession to people who are trying to better themselves and, in the long run, trying to better their families.

In 1995 I welcomed the decision and the initiative taken by the Minister for Tourism and Trade, in association with the Minister for Finance, in launching the pilot renewal scheme for traditional seaside resorts. This major, significant initiative is revitalising our traditional resort towns. Major developments are underway in areas such as Achill, Westport, Bundoran and Wexford. This great initiative was very welcome. I have no doubt that more initiatives like this will benefit different parts of the country.

I welcome many aspects of this Finance Bill and I intend to go into greater detail on Committee Stage. I am particularly pleased that the relief granted for the installation of alarms for the elderly has been extended in section 5 to the relations of the elderly people living alone. The extension of the relief will make it much more accessible to those who most need it. The measure as initially proposed did not perhaps go far enough and I welcome the fact that the Government was big enough and brave enough to admit that it could have and should have done more.

The tax relief on alarms will make it much more attractive for the elderly to have alarms installed in their homes. It is not the answer to the fear and threats faced by the elderly but it is a welcome step in the right direction. Senator Fahey's proposal of giving £100 to an old aged pensioner who qualifies for a living alone allowance would cost the taxpayer £10 million annually. There are 100,000 people in this category and Senator Fahey's proposal is a matter for the Social Welfare Department, not the Finance Bill.

It would be the best £10 million the Government spent this year.

It is £10 million that the taxpayer would have to find. The Government has made the right decision in giving the tax initiative——

It is a matter for the Social Welfare Bill.

——and extending it to the relatives of those people. It is working very well in many areas, including Mayo.

I also welcome some of the improvements in stock relief for farmers and the regime of leasing of land. Section 10 increased the exemption for income derived from leases of land in certain circumstances. We must try to keep the maximum number of people employed on the land. It is extremely important to ensure the early transfer of farms from the more elderly farmers to younger, trained farmers. A difficulty always arose due to the fact that income from leasing was taxed at such a high rate. Such income, taken in conjunction with the farm retirement pension, often left the farmer who transferred the land paying a prohibitive amount of tax. By increasing the exemption, section 10 will make it more attractive for a number of elderly and retiring farmers to transfer their land to the younger, better trained farmers. This is good for rural Ireland and the agricultural economy. It will also help to keep extra people on the land.

Section 67 improves the situation of disabled drivers. The definition of a disabled driver or passenger is not addressed in the Bill and I would like to see the matter tackled. The definition is decided by the health boards in conjunction with the Department of Finance, but it is extremely narrow. As public representatives we often have to deal with cases of people who are trying to qualify under the disabled drivers scheme. They include people who are clearly disabled but who do not come within the limited scope of the scheme.

In conjunction with the Minister for Health, the Minister for Finance should review the regulations governing this scheme. The amount of money the State would have to forsake would be minimal if the definition was revised. A more generous definition would greatly alleviate the disadvantage faced by the people who are genuinely disabled and would enable them to play a better role in society. I hope that the Minister for Finance and the Minister for Health will liaise to see if improvements can be made in the classification of disabled drivers. The present definition is extremely restrictive.

The proposals in the Bill to curb abuses of the patent income relief have received much publicity and I fully support the measures. The abuse of the relief could in a relatively short period undermine the whole system of relief. The new proposals, which in certain circumstances relate the level of distribution with actual research and development expenditure, will assist the genuine innovator and promote research activity in this area. The Bill also includes a separate provision in section 48 which broadens the scope of the special tax relief for research and development expenditure introduced in 1995. Any measures which foster innovative decisions are very welcome.

This Government is committed to the relief of capital acquisition tax on the transfer of family businesses and farms and over the last two budgets this has gone from zero to 70 per cent. This relief is crucial to ensure that long established family enterprises, most of which have created employment, can pass on to a new generation without a significant tax charge requiring the sale of assets. The small and medium sized business sector is a major creator of employment in this country. The risks taken and the commitments given by these business people must be recognised. I welcome section 52 of the Bill, which makes the 27 per cent lower rate of capital gains tax available to a wider range of genuinely entrepreneurial business people who dispose of their businesses.

I welcome the tax relief for offshore islands. It is proposed in sections 54 to 59 to extend to certain offshore islands two specific reliefs to encourage the construction of residential accommodation. First, an allowance against income tax of 50 per cent of expenditure on construction or refurbishment of permanent accommodation for owner occupiers at a rate of 5 per cent per annum for a period of ten years. Second, the offsetting of construction, conversion and refurbishment expenditure and the provision of rented accommodation against all rental income of the owner, provided the accommodation is leased to the same tenant for a period of at least 12 months.

I also welcome section 126. This provides that where the beneficiary or his relatives control the company concerned, the 10 per cent minimum share-holding requirement will no longer apply for the purposes of business relief. This removes any anomaly in the rules for qualifying for business relief. I also welcome section 123, which provides exemption for gifts and inheritance used exclusively to discharge the medical expenses, including residential care, of a permanently incapacitated individual. Section 124 allows a life tenant who is not a spouse or a disponer to effect a tax exemption from a section 60 insurance policy used to pay the capital acquisition tax liability.

I also welcome section 141, which amends the Casual Trading Act, 1995, to ensure applications for casual trading licences must contain the tax reference number of the applicant. This will promote tax compliance in this sector. I acknowledge what Senator Fahey said in relation to co-operation between Government agencies in the fight against drugs and crime. I am sure the Minister will address those issues in his reply. Finally, I wish the Minister for Finance the best of luck in taking over the presidency of the European Council.

Senator Burke has comprehensively welcomed every section of the Bill, so I can just extend a general welcome and not be quite so specific. However, I wish to raise a number of specific matters.

The first is more political than financial, although there is a certain financial element to it. However, it may not be practical. Would the Minister for Finance consider attaching a health warning to the shares in British Aerospace in case they are purchased by unwitting members of the Irish public who are unaware they are subscribing to genocide, mass murder and the provision of instruments of torture by an otherwise apparently respectable British company? I would greatly welcome the Minister for Finance attaching a health warning saying that purchasing shares in this company will be dangerous to the health of people in West Papua, Indonesia and East Timor. I greatly applaud the action of a member of the East Timor-Ireland solidarity campaign who purchased one share in British Aerospace and made a plea for some standards of decency and humane behaviour on the part of this ignoble company at its recent annual general meeting in London. However, as I said, I expect this is a political point and perhaps does not lie within the remit of the Minister for Finance.

The Senator knows perfectly well it does not lie within the remit of the Minister, but he did well to slip it in between the sheets.

I thank the Minister of State. I thought she might——

Its relevance to what we are talking about defeats me, although it is important.

It is relevant to the people who are being murdered by agents of British Aerospace all over the world.

It is, but I was wondering under which section of the Finance Bill we can help them.

Let us say the Title of the Bill.

I will move on to an area where the Minister has clear and specific responsibility, and on which I have had some correspondence from him, which is the matter of residential property tax. On 8 March 1996 I wrote to the Minister saying I had already spoken to him and I hoped he would consider some of the points I made about the property tax for inclusion in the Finance Bill. I made the point that it was interesting to note that Fianna Fáil in its document on Georgian Dublin seem to be moving precisely in this direction.

It would be a piece of neat political footwork to introduce something simple and inexpensive yet at the same time imaginative. I am referring to the suggestion I have repeatedly made that a tiny number of architecturally and historically important houses should be exempted from the operation of the property tax. The ante has now been substantially upped, not only by Fianna Fáil but by the Progressive Democrats, who have launched a national campaign to abolish the entire tax. I understand from this morning's newspapers there are also grumblings and rumblings in the ranks of Fine Gael.

Tell us more.

We are heading into an election next year. It could be in November 1997, for example, and the property tax will hit in October. Three Dublin constituencies pay 70 per cent of the property tax yield. This seems a very politically useful time for the Government to consider removing entirely what is clearly an inequitable tax. This sort of poll tax is not really in the political tradition of this country. It reminds me of the campaigns in the last century for the "three Fs", which included fair rent and fixity of tenure, and the campaigns against rackrenting where a tenant who improved his or her holding was immediately rewarded by an increase in rent by a greedy landlord. That is precisely what happens in the operation of the property tax.

There is a further inequity in that not only is the operation of the tax concentrated almost exclusively in the Dublin area, but it hits people on middle incomes whose property value rises willy-nilly due to the operation of the market. If people buy a house in an area which suddenly becomes fashionable and where property prices become grotesquely inflated — as they are at the moment — the unfortunate houseowner, who has received no direct immediate benefit from this fluctuation in the property market, is penalised on an annual basis.

I originally spoke to the Minister about the removal from the ambit of this property tax of a very small number of houses. I believe now he will have to be far more radical but I will make the argument for those houses anyway. I am speaking of List 1 houses in areas such as those served by Dublin Corporation. It is really a Dublin tax, although it hits some other areas. The houses I am referring to should be List 1, owner occupied and within the designated areas, which is probably fewer than 100 properties. I know in its role as watchdog of the public purse the Department of Finance has a history of being extraordinarily penurious and begrudging in these matters. However, we have a system where there is no incentive for people to restore these buildings which are regarded as part of our architectural heritage. There are no grants or operable tax reliefs.

I know I will be told there are various measures and I managed to get some provisions included in a budget introduced by Deputy Albert Reynolds a few years ago. However, these were so confined and bound by red tape — and the appropriate forms were never issued to members of the public, as far as I know — that I do not believe a single person has ever operated these clauses. I have asked time and again for facts and figures about the number of people who have used these small tax reliefs but I have never got them. I do not believe anybody has ever successfully operated these very slight reliefs. Other European cities make a point of promoting the development of heritage by giving grants, That is not done in this country, although we now accept the restoration of our architectural heritage is a desirable objective.

It is also sometimes said to me that section 19 is hopeless, it is a complete and utter waste of time for owner-occupiers of terraced Georgian town houses. It may be satisfactory for stately homes but I am talking about an urban property holding such as my own. I am not making a personal case because I do not come under the property tax for a number of reasons, the principal one being that as I let apartments in my house I only occupy two-thirds of it. That will change because one of my tenants has died. In addition, I am requesting another to leave because under the Government's new registration policies, which I welcome, all apartment dwellings must be registered. There is one exemption where only one apartment is let out within what is called the curtilage of the property.

If I were to continue with the existing two apartments in my house I would have to register and would have to bring the accommodation up to satisfactory fire standards. In an 18th century house that means I would have to put in a lobby and a two wall fire separation. That would mean dislodging the tenant for six months, spending huge amounts of money and destroying the architectural integrity of the house. I am not prepared to do that so I will continue with one apartment. Although I recognise that what the Government is doing is in the interests of flat dwellers, and I welcome it, once again my attempts to generate sufficient money through letting apartments in order to restore the house is being curtailed by the Government.

Why is section 19 of no use? First, houses like mine — and virtually all the 18th century houses that are owner occupied and are being restored — have multiple occupation. For that reason it is simply not practical to allow tours in. Second, it is expensive and one would have to employ somebody to be there. One would get tax relief on the one hand but spend it on the other. Third, over the years I have permitted architectural tours to visit my house but I have now ceased to do so for one good reason. A refined group went round my house about two years ago. They arrived half an hour early and I had left my suit and cuff links out in my dressing room. When the tour had gone so had the valuable cufflinks which I inherited from my uncle. The insurance company told me I could not claim anything for the loss if I had tours going around the house because I had invited them in. So, section 19 is a complete fraud and an utter sham as far as people living in 18th century terraced town houses are concerned.

It would be a reasonable first step for the Government to remove from the operation of the property tax List 1 buildings within the designated areas which are owner occupied. That is a modest request to which I have received no satisfactory answer. The only answer which I can understand was contained in a written reply and was to the effect that if this process were started the entire property tax regime would begin to disintegrate. The Minister is probably correct in saying that, but it will disintegrate anyway. Why not let the Government get the political advantage of removing the property tax now before it starts to disintegrate as a result of political pressure, not only from Members of the Opposition parties but also from within the ranks of the Government? It would be wise, prudent and would not even be that costly. Last year residential property tax earned between £10 million and £13 million. Does the Government not consider that winning the next election, which will probably hinge on the Dublin constituencies once more, is worth a bill of £10 million or £13 million? I believe it is.

I welcome tax relief for elderly people who wish to install burglar alarms and other security protection. However, it is a half measure because the most vulnerable people in this area are those who live below the tax margin. Tax relief is of no benefit to them since they do not earn sufficient money to pay any tax. While I welcome this typically humane measure by the Minister, it should be taken further. The provision of tax relief for people who are not in a position to pay tax because they are too poor should be substituted by a direct onceoff cash grant to install burglar alarms.

I also welcome the necessary alterations with regard to cigarette stamps. The sale of cigarettes on the streets of Dublin is a huge area in the black economy. If anything can be done about that so much the better.

No doubt the Minister has received an enormous number of submissions, and I have also received a few to which I would like to refer. The Minister may already have had an opportunity to consider them and may well have taken the submissions into account in framing the Finance Bill and the budget. I refer to the valuable document produced by the Conference of Religious in Ireland which is sent to Members of the Oireachtas each year. In a way it is surprisingly radical, but it balances various considerations and gives the Minister praise where it is due. It does, however, inevitably highlight the growing gap between well off people, such as Members of this House, and the disadvantaged. We have heard, particularly from the Government benches, about the boom in the economy and the fact that it is well managed. I have no doubt that this is true, but it is principally still managed in the interests of those who have a greater stake in society. The budget response of the Conference of Religious in Ireland welcomes:

... aspects of the budget, especially the child benefit increases, the positive discrimination in favour of the long-term unemployed and the reduction in the Exchequer borrowing requirement to 2 per cent of GNP. However, when the whole budget is evaluated it is clear that most of the resources will continue to go to the better off in Irish society. Since coming to power this Government has presided over a widening in the poverty gap of £1,500 in the take-home income of a long-term unemployed couple compared to a couple earning a £40,000 salary.

I recognise that the Minister has to balance things and must provide incentives so that income is generated and there is motivation for people to create and sustain employment. At the same time, however, it is appropriate to sound a warning about the social divisions that, regrettably, continue to exist in this country.

The document continues:

In 1996 the gap in take home pay between a single long-term unemployed person and a person earning £40,000 will widen by £608. For a couple in these categories the gap will widen by £733 in 1996. This a continuation of the trend of the last ten years. It is clear that budget '96 has widened the poverty gap and has failed to raise the take-home income of most poor people to the minimal poverty line.

I am sure the Minister has read this submission and has done as much as he can to alleviate many of these underlying structural difficulties regarding poverty in our society. However, there is one practical suggestion that I would like to make which is not of an economic but of a political nature. It is contained on page 8 of this document from the Conference of Religious in Ireland under the heading "Participation and Exclusion", and states:

We note the Minister comments that the number of pre-budget submissions has increased enormously and that the Minister and Department of Finance could not comply with all the requests for meetings [and that is, of course, understandable]. He proposed that the Finance and General Affairs Committee of the Oireachtas would deal with these submissions. However, the Minister would be "available to have full pre-budget discussions with the official representative groups of the social partners". We also note the social partners do not include those whose primary role is to represent the poor, the unemployed and women. Does the Government intend to rectify this omission?

The Minister and his officials have so many submissions laid before them and so many groups lobbying them during the preparation of the budget and the Finance Bill that one understands it is not practical for them to entertain each group. However, his availability for full pre-budget discussions with the social partners raises the question of the inclusion of the Conference of Religious Superiors and other bodies which represent the poor, the marginalised, women and the unemployed. It would be useful if the Government included representatives of these bodies within the social partnership as it would help create a more balanced approach to the management of our economy.

I have been lobbied about smaller areas, as I am sure the Minister has also, but it may be useful to put them on the record of the House. A group called Crann — the Irish for "tree"— is committed to the establishment of tree planting. It was founded ten years ago by "a small group with a shared interest in broadleaved trees". From a tourism viewpoint, as well as the aesthetic appearance of the island, it would be a pity if our reforestation programme was exclusively committed to sitka spruce, pine, etc. Crann is a voluntary group whose purpose is to encourage increased planting of broadleaved trees. It is not opposed to coniferous forestry but it wants to create a balance. It has done much work in providing woodland skills training courses, planting trees in the city through its "Crann sa Chathair" programme, a nationwide schools project, work with Coillte, projects in disadvantaged areas like Leitrim and replanting appropriate oak trees in County Offaly where these have been removed. Crann plans to establish a series of 32-county projects this year and in the context of the peace process we should vigorously support all politically neutral projects, as the planting of trees surely is — it is not suggested that orange trees be planted in Catholic areas. I ask the Minister to consider assisting this group with even a modest grant.

I also ask him to extend the subsidy to the Rape Crisis Centres, which do an extraordinarily good job. I do not know the level of grant available to them under the Bill but I do not imagine it meets their full requirement. Their overall budget for 1995 was £545,000, funding from the Exchequer amounted to £225,000 and the balance of £320,000 was made up from unremitting fundraising, some donations and education fees. The centres' budget forecast for 1996 is £574,000; they want an Exchequer contribution of £350,000 and will provide the balance themselves. Undoubtedly some provision has been made for them in the Bill but because of the increase in demand for the Rape Crisis Centres' services, which have a high reputation, I ask that their financial provision be increased. Perhaps the Minister could indicate what level of grant is being made available.

We have successfully used community employment scheme workers in the James Joyce Cultural Centre, North Great George's Street. They are extremely valuable and are administered by the body previously known as FÁS — it is like the artist formerly known as Prince, now called Symbol. Of the 14 young people employed in the Joyce centre last year, six have gone to full time, permanent employment. The intention behind the scheme is not that the workers will be maintained in subsidised unemployment, working on hobbies, but that they acquire skills which will be sufficient to enable them to take up full time jobs.

However, there are anomalies for workers on these scheme projects. I have been lobbied by a group called the Scheme Workers Alliance, which calls on the Minister to:

focus on the anomalies created by the imposition of taxation on the wages of CE workers; provide an adequate and equitable wage increase for scheme workers; extend relevant employment and social insurance legislation to provide coverage for scheme workers; provide for a system whereby the short term unemployed would be included within the J9 system; and make training on schemes more accreditable, increase funding for training and extend schemes for a longer period than one year to spread out the time for training.


In Ireland today, over 40,000 citizens are carrying out various jobs [under these programmes] in the community sector... The legal conditions under which CE workers are employed are inadequate as although they work 19.5 hours a week they are not termed part-time workers. Part-time workers are defined as `an employee who has worked for at least 13 weeks with the same employer and is normally expected to work at least eight hours a week for that employer'. As a result of the unclear status of these workers, they are not entitled to the basic minimum protection, i.e. employment and social insurance legislation.

It is appropriate and also good for the dignity of these workers that they should pay minimal income tax. However, once they are brought into the tax net this should trigger the appropriate benefits and entitlements. I ask the Minister to examine the position and see if it is possible to bring them into the net so that they are covered appropriately by employment and social insurance legislation and protected from unfair dismissal. It may sound odd for me to say this as I am an employer in these circumstances, but I believe in protecting workers' rights.

The Minister will also have received a submission from Women's Aid, which is a most valuable organisation. In its submission, it states:

To date, the Department of Justice is the only Government Department which has a written policy on violence against women in the home. The Department of Health has initiated a consultative process with the aim of developing a strategy on women's health and aims to include domestic violence. There is a clear need for other Departments to develop written policies. There is also need for the health boards to develop policies and guidelines, and to recognise that violence against women is a health issue.

Its principal proposal is as follows:

In this year's pre-budget submission, Women's Aid is seeking funding for the establishment of a domestic violence resource unit. Women's Aid believes that the unit, recommended in the same research, is vital to look at a long term response to tackling violence against women and children in our society. We are also seeking resources to fund the ongoing services for women, the advice and information service and the national freephone helpline...

The helpline service was set up in 1992 in response to an overwhelming demand on a similar service in the Rathmines crisis refuge. The helpline is open six days a week, 10 a.m. to 10 p.m. The service received 6,000 calls in 1994 and approximately 10,000 in 1995. It is run by a salaried co-ordinator, six community employment workers and a team of trained committed volunteers.

Every day the media report a completely unacceptable level of violence against women in our society. This research should be funded so that we have a clearer idea of how to approach this difficult and complex problem.

Although Women's Aid was specifically set up for women, I would like it to take into its remit, as part of its research, violence against gay people which is endemic in our society and which is constantly reaching higher levels. Gay people are subjected to unprovoked attacks on the streets and often in the home. This is a related issue which is not being examined by any Government body and I appeal to Women's Aid in this regard.

I have left the most commercial submission, from the Society of the Irish Motor Industry, until last. Last year its scrappage proposal was accepted whereby people got a £1,000 grant towards a new car if they scrapped an old one. It was an extremely good idea. However, the volume of second-hand imported cars, which continues to rise, undermines business and employment in the motor industry. This problem is caused principally by the high tax on cars here compared to the United Kingdom and because we have failed to introduce car testing, thereby allowing unroadworthy cars from the United Kingdom to be dumped on our roads. I ask the Minister to consider a reduction in the tax on cars to bring us more in line with the United Kingdom and other countries and to introduce a proper system of testing in the interests of safety on the roads and the car industry, which is a significant employer.

According to the Society of the Irish Motor Industry, it has succeeded in creating 1,200 jobs in the past year thanks to help from the Minister and lobbying in this House and elsewhere. The society maintains that it can create another 1,200 jobs this year if the Minister goes along with the two suggestions mentioned. I have no doubt that any Minister for Finance would welcome a situation in which 1,200 new jobs could be created and in which an important industry could be stabilised with a minimal adjustment to the tax code.

I congratulate the Minister on this Bill and on the performance of the economy during his tenure in office. Many commentators felt that a Labour Minister would be incapable of presiding over such a booming economy, but he has proved them wrong. Our performance in recent years has been based on a consensual approach to economic management. The social partnership has more than proved its worth to the economy and I am confident that a new agreement will be signed this year.

Before addressing the provisions of the Bill, it is worth noting our overall economic performance. Until 1995 GDP growth averaged approximately 5 per cent per annum, a figure well over the European Union average. In the same period inflation has averaged 2.1 per cent, three-fifths of a percent below the European average. Moreover, the Government deficit has been below the 3 per cent required for qualification for the final stage of European Monetary Union since 1989. In the same period employment growth has been three times the European average, but the most pronounced period of growth has taken place during the Minister's period in office. There is no sign of this impressive record abating. Employment, having grown by 40,000 in 1994 and 45,000 in 1995, is expected to grow by a further 31,000 this year. GDP growth is expected to be around 5.5 per cent, well above the EU average, and interest rates and inflation are expected to remain low.

Despite such an impressive record and, to be fair, participation in it by all political parties, there has been a noticeable warming in the tenor of the argument about the economy in recent months. This appears to be based on a frustration on the part of the Opposition that such an unprecedented level of growth in the economy has coincided with a restoration and improvement in many of our basic social services such as hospitals, schools, housing and child benefit. A record number of houses have been purchased by local authorities and have been built by the private sector. Without such increases in spending, tax relief could have been greater. However, the standard of people's lives depends on more than the money in their back pocket, despite what some would like us to believe.

That is not to say there have not been tax reductions. The increase in this year's PRSI exemption from £50 to £80 puts more money in the pockets of the low paid. The Minister points out that the widening of the standard rate band over the past two years has been in the region of 15 per cent, a figure 10 per cent above the rate of inflation. Personal allowances have risen by 13 per cent. Over the period of the Programme for Competitiveness and Work, the standard rate band has increased by 17 per cent in respect of a single income earner and almost 20 per cent in respect of a married couple. There is a need for continued improvement. It is wrong that a single worker on less than the average industrial wage should pay part of their income tax at the marginal rate. Progress on this front should be forthcoming.

I have no time for the position of those who seek to slash tax by up to £2 billion per year. In Britain, when a similar slash and burn approach was adopted in the late 1980s, the Government was forced to increase taxes substantially thereafter. The British Labour Party estimates, for example, that indirect tax increases in Britain since 1992 have been equivalent to a 7 per cent increase in the basic rate.

The success of my party in Government, which has been confirmed by Davy's stockbrokers and IBEC, has been to concentrate available tax relief on the low paid. The economic logic of this is unassailable. It is among the low paid that the employment and poverty traps, which prevent fuller participation in the labour force, exist and that contributes to unemployment. I would have no difficulty with the introduction of a 20 per cent rate for the first few thousand pounds of taxable income as it is more consistent with this approach.

It is ironic that some Members of the Opposition want both tax reduction — we no longer speak of tax reform — and improved services. When the Finance Bill was being debated in the Dáil the two Opposition parties attacked the Minister on the tax issue; yet on the Order Paper that day there were over 30 parliamentary questions requesting more spending. We cannot have it both ways — the cost of services must be met by money from taxes.

Unfortunately, our high dependency ratio leads to an overburdening of tax on those who pay it, particularly the PAYE sector. The case for tax reform as well as tax reductions remains strong. I was glad to see improvements for carers. Many people depend on others to give them some consolation because they are impeded from doing normal tasks by ill health or old age. We must look at the issue of carers who often look after people for 24 hours per day with little compensation.

This year's Finance Bill consolidates the steady progress made by the Minister in recent years. Some measures are particularly welcome — for instance, the introduction of a new corporation tax rate for small businesses. According to my calculations, it is worth almost £4,000 per year for small businesses. The decision to introduce tax relief on fees for part-time students complements the Government's decision in relation to free fees. The introduction of further relief for research and development in companies is also welcome, as is the expansion in the terms available for relief to employees receiving shares in their companies. Similar schemes have been very successful in the United States despite its reputation as being the bastion of free market capitalism.

It is impossible to discuss the Finance Bill without referring to the complementary changes in the Social Welfare Act. Taken together they represent the most comprehensive package of measures aimed at tackling long-term unemployment. Rather than seeing this as an additional spending burden, the long term benefits to the Exchequer of people returning to work are enormous.

A special word must go the county enterprise boards, the Leader groups throughout the country and local authorities for the work they have done in providing small scale employment in rural, remote and peripheral areas. Enterprise boards have given grants to companies who provide two, three and four jobs. These jobs amount to a considerable number in an area like mine. The west Cork enterprise board does a terrific job. We must give every help we can to enterprise and Leader boards and to local authorities to continue their good work.

I am glad that the Minister gave some relief to the film industry. This sector is untapped in this country. We have the scenery, services and people to make films. The films made recently in the south were a credit to those who produced and took part in them. There are terrific opportunities in this sector and I am glad the west Cork enterprise board appointed a part time film co-ordinator to see what can be done to further promote the industry.

I also welcome the initiatives taken to develop resort towns. These will benefit tourism and people starting businesses in Clonakilty and its environs. Tax relief for islands is an issue which is close to me. There are seven inhabited small islands off west Cork. The remoteness and isolation, particularly during winter, that the inhabitants of these islands encounter deserve special consideration. I am glad that a Minister of State was appointed with special responsibility for islands. He visited west Cork and has done some good work for these islands.

The budget provides for an allowance against income tax of 50 per cent of expenditure on construction or refurbishing of permanent accommodation for owner/occupiers at a rate of 5 per cent per annum for a period of ten years. This is more than welcome. The budget also provides for the offsetting of construction, conversion and refurbishment expenditure on the provision of rented accommodation against all rented income of the owner provided that the accommodation lease is for a period of at least 12 months and that the house is used as the lessee's sole or main residence throughout. These initiatives will result in terrific benefit for islands. Often small measures benefit remote areas and islands.

This Bill is good. It continues the steady handed approach to economic management adopted by the Minister since he took office. This approach has won the plaudits of not only people in this country but elsewhere, the latest of which came in a recent issue of the The Economist. I commend the Bill.

Few Ministers for Finance since the foundation of the State have had the benefit of the healthy economic situation and State finances which the present Minister had when preparing this year's budget and Finance Bill. The outlook for the Irish economy and international economic prospects were never so good. Against this background the Bill, which gives effect to the changes announced in the budget, is uninspiring and disappointing. One would have expected a more dynamic and innovative contribution from the Minister.

The Bill is predictable and indicates that little effort has been put into developing new policies or strategies to deal with the major underlying problem of the economy, which is the huge and increasing levels of unemployment. It is disappointing, a few weeks since the budget was introduced and before the Finance Bill is passed, to see spiralling levels of unemployment and increasing numbers of people going on the dole queues. This is surely an indictment of this hapless budget and clearly shows that the Government's strategy on this fundamental issue has failed. A Government which cannot resolve the problem of unemployment is a failure.

The performance of the economy reflects the success of the fiscal and monetary policies which have been followed by this Government since it took office and by successive Governments over a number of years. These policies were set down by a Fianna Fáil Administration much to the criticism of the Labour Party at the time. Deputy Dukes, who was then leader of Fine Gael, took a courageous and right decision to support the Government. The result of that strategy is in no small measure due to the co-operation of the then Opposition under the leadership of Deputy Dukes and this is well established and recognised.

The Government must be criticised for playing dangerously with the incomes policy, which is a fundamental part of the overall strategy. Fiscal and monetary policies alone will not create the confidence in the economy which is essential. If a basic element of the strategy — a sound incomes policy — is undermined or abandoned, the strategy will disintegrate and we will see a return to the free for all in the negotiation of wage claims which was so damaging to the economy for many years. Senator Calnan rightly mentioned the necessity to copperfasten the concept of social partnership and I support him fully on this.

The first signs of the undermining of the incomes policy are beginning to surface. We have seen in recent times uncertainty in the public service with the escalation of disputes. There is the threat of industrial action by nurses and there are problems with regard to teachers' pay and in other sectors. The Government must act now to protect the successful tripartite wage policy which brought about the success we have experienced in the last few years. Unrest and uncertainty in the public sector at present, lack of confidence and the fear that we may move away from the policy which has been so beneficial to the economy necessitates remedial Government action to avoid a collapse of the tripartite arrangement which has been so successful over the years.

This arrangement has been the reason we have been able in difficult times to maintain our strong competitive position in international markets. The strategy resulted in the avoidance of unrest and disputes which had dogged the economy for years. I spent days and nights with Mr. Gene Fitzgerald, Mr. Tom Nolan and other Ministers for Labour endeavouring to find ways to resolve disputes which crippled the economy and created enormous problems with regard to competitiveness and in other ways. This policy alleviated the damaging results of free for all situations and it is essential that we get back to it.

There has been a strange silence on the part of the Government in the past number of weeks when the storm clouds have gathered on the pay issue. The Minister has wasted an opportunity to tackle the high levels of taxation which could be reduced and which would take pressure off the growing demands for pay increases. Those who are now actively campaigning for substantial wage increases would have responded positively to a meaningful tax reduction regime in this year's budget. The Minister has lost an opportunity here, but he has not fully lost it. He can still come to grips with this situation by making some efforts in this regard in the fall.

Sitting suspended at 1 p.m. and resumed at 2 p.m.

The economic indicators were for a successful year in 1995 and a continuation of this trend in 1996. This is why it is most important the Government takes some bold initiatives to capitalise on the thriving economy and maximise its benefits to create more employment opportunities. The key areas, which have progressed well in terms of new investment in recent years, are computers, new technology and electrical engineering. However, unfortunately, there is little in the Bill to encourage more development, investment and action in these areas, which are also vital in terms of job creation.

An indication of the success of these areas is that recently one company reportedly wanted to recruit the entire graduating year from a higher education institution. This demonstrates that the industry is thriving and, given that many talented people are unemployed at present, it is reasonable to expect the Government to take some initiatives to encourage more investment in research and other areas. This would create valuable openings for young people and particularly those who wish to establish their own new technology and computer science based businesses.

The House recently discussed the lack of availability of seed capital for small businesses, particularly when people do not have a track record because they are just out of college and wish to start new ventures. I am aware of the recent experience of two young business people in Ennis who, although they had good ideas, were not able to raise the funds necessary to start small businesses due to the restrictions on the availability of finance. These people could have provided secure employment for themselves and also offered the prospect of employment for many others.

Investment in construction and housing, which was mentioned earlier, and industrial and agricultural developments have thrived in recent years. Tourism related projects have also thrived, with some substantial additional developments. A number of attractive incentives were available and I welcome the measures introduced last year to create further tourism related businesses.

However, two aspects of the Bill are damaging. It is unfortunate that, within a year of its introduction, the Bill places restrictions on the new resorts scheme. I ask the Minister of State to draw the Minister's attention to this matter. Perhaps he could reconsider it before Committee Stage because I intend to put down amendments to extend the time to at least April 1997. It has not been possible to put well documented and planned projects in place in the short time since the scheme was announced. The Bill proposes to impose restrictive time limits when the current terms expire and this will put the scheme into reverse before it gets properly underway.

It was modified on Committee and Report Stages in the other House.

There is a need for a number of major tourism projects.

The second aspect is the new restrictions on business expansion schemes. The mechanism under which there was a multiplicity of schemes up to a certain limit will be closed off under restrictions proposed in the Bill.

The Minister of State is aware from his experience in tourism that, while there has been a substantial increase in the number of tourists visiting Ireland in recent years, the south and south-west have fallen behind in terms of the number of visitors. Part of the fall-off can be attributed to the absence of large developments which would attract people. The recent studies, which reported a sizeable increase in the number of people visiting the east rather than the south or south-east, is of concern to me and those involved in the tourism business. The proposed restrictions on the resorts and business expansion schemes, which will militate against bigger projects, is not the correct approach to adopt and the Minister should reconsider this matter.

I am concerned about the absence in the Bill of incentives for investment in industrial estates and parks and industrial construction in general. There is an absence in some regions of suitable buildings for small industry, such as small business parks like Smithstown in Shannon. In Shannon itself, the buildings in which the Lana Knit and Bombardier companies were based have been closed and derelict for many years. The Bill does not contain incentives for commercial companies to provide, where the State cannot afford to do so, bases which would be attractive to locating industries, particularly in areas such as the Shannon free zone.

In a previous debate I referred to the run down state of some of the bays in this zone, which had been the jewel in the crown of our industrial areas. Unfortunately, the jewel has become tarnished recently. The huge Lana Knit plant and the old bus company Bombardier buildings are derelict and falling down. The development companies do not appear to have the finances to reconstruct them. There is, however, an availability of capital, contractors and personnel that would quickly put this right if there were special incentives in designated areas. This would encourage something like the development we saw in urban renewal areas.

I suggest the Minister looks carefully at the range of incentives for the creation of industry infrastructure, within industrial and craft zones and parks. This could be done through tax incentives. The thriving economy which could create opportunities in the future will be hampered if there is an absence of a prosperous environment in which it can develop and grow.

I mentioned tourism earlier, and I again underline the recent worries about the fall-off in the number of visitors to the west. This is more acute in view of the more settled climate in Northern Ireland and the likelihood that an influx of Northern tourists will tend to go to the east rather than the west coast. This could be very detrimental to the economies of the western regions. I would like the Minister of Finance to consult with his colleague, the Minister for Tourism and Trade, who knows and understands the tourism problems we have in the west. Together they may come up with new incentives and ideas which would help to counter the imbalance which is accumulating. This needs to be remedied soon or the western areas will lose out substantially.

The Minister might clarify some points which would prevent us from putting down Committee Stage amendments. Section 5 provides relief for payments made by certain persons for putting in alarm systems for elderly people living alone. I suggest the Minister considers extending this provision to elderly couples living together because these people are very vulnerable and there have been a number of incidents this winter where elderly couples have been attacked and beaten up in their own homes. I suggest the small sum of £800 should be doubled and that the provision be extended to include couples.

In section 13 there is a provision in relation to pension security; this is a very small measure of support. The Minister may be aware that there are a number of people, especially those over 55 years, who are very worried that their pension entitlements will be sufficient to meet their demands as they grow older. This is an area which I am sure the pensions board and others have examined. Any extension of security or further support, provided through incentives to ensure people protect their pension entitlements and supplement them, should be looked at carefully.

I welcome the grant aid to students in section 59. We raised this matter last year and we appreciate the Minister's response. We would encourage him to extend this provision further. In this section, which we will discuss on Committee Stage, there is reference to persons with certification not qualifying for support under this proposal. The Minister will be aware that people do two year post-leaving certificate courses which give them a certificate enabling them to do diploma and degree courses. If they were to be debarred because they had a certificate, it would militate against young students continuing their studies. This could be examined and may be amended on Committee Stage.

On section 21, the explanatory memorandum does not seem to correspond with what is in the Bill. I query whether matters like the shellfish industry and aquaculture projects are covered under this section and I would like the Minister to clarify this. If they are not covered, I will put down amendments. The section mentions products such as mushrooms but it does not single out shellfish products, such as oysters, mussels or farmed fish.

I would like to see section 30, which covers the restrictions on the resort scheme, adjusted. For instance, being parochial, Lahinch has improved dramatically since the resorts scheme was announced, and there have been major developments there. Lahinch almost runs into Liscannor, where there is a small harbour which is rundown and neglected and needs financial incentives and support. In areas like that where a major extension of the scheme would not be needed to cover huge areas, small adjustments would be beneficial and would help in the overall integration of areas such as Lahinch, Liscannor, Salthill and areas adjacent to Galway. Each area has its own particular peculiarities and attractions.

In Part III, there are sections dealing with VAT. Reading the Bill, I do not know if the changes being proposed will result in increases in food costs. I would like to know if these proposals will increase the price of foodstuffs. That is something we would not like to see happen but if they do have this effect, we would like to change them.

Section 17 deals with the musical recording tax allowance. From the legislation, I am not sure whether those concessions are applicable only to those operating in the Custom House Docks area. If this is so, there is a good case for the area to be extended to something similar to the old Shannon free airport zone, where the introduction of special incentives and allowances was very successful. The zone, like Shannon Development, has not been expanding since the development of the Dublin Custom House Docks site. There is a very good case to have the freeport area of Cork covered under these proposals. I want to avoid a situation where the recording tax allowances would be applicable only in the Custom House Docks area and not in the docks areas of Limerick or Cork. It could also be applied to western areas — such as the Galway docks area which has seen a huge revival of traditional music and culture and is having a dramatic impact on tourism in that city. These proposals should be extended beyond the Custom House Docks area.

Section 54 deals with relief in relation to income from qualifying shipping trade. Some time ago I raised the necessity to continue to expand the Irish shipping fleet. The present Minister of State was here on that occasion when we discussed other legislation that was going through the House. The shipping grants scheme had the effect of putting a sizeable number of new Irish ships on the Irish register. Most of these were developed through the success of Arklow Shipping. The success of the scheme indicated that had funding and incentives been available to supplement the legislation covering shipping, it could have made a substantial contribution towards enlarging the Irish fleet and in view of the impact of the fleet on most of our exports, it is desirable that this be achieved. It is necessary, therefore, to extend section 54 and to reintroduce the scheme which made a huge impact on the development of the Irish shipping fleet at a time when it was neglected and almost totally run down.

The Bill is as conservative as can be expected from a Fine Gael led Government. I am disappointed because I always believed that, with the involvement of the Labour Party in Government, there would be dramatic improvement in policies, especially those designed towards helping the unemployed. It is disappointing to note the absence of any dynamism or input from the Labour Party. Perhaps it will exert more influence in the next budget. Up to the election of Deputy Bhamjee I always got a sizeable number of Labour Party preferences in my constituency because the policies I pursued were close to that party's.

An opportunity to introduce real tax cuts which would take the pressure off the demand for pay increases has been lost in this Bill. The tripartite arrangement on collective bargaining is under pressure and is likely to disintegrate unless the Government takes some remedial action.

There are very few measures to help the long-term unemployed and, overall, the Bill represents a lost opportunity to make a dramatic impact on the Irish economy. The economy is buoyant at present, but it may not always be in such a healthy position; some of the trends are scary. However, the Bill will go some way towards helping to continue and maintain the optimistic level of progress the economy has experienced over the past five or six years.

With the Social Welfare Act, the Finance Bill, 1996, will implement the changes announced in the budget. Until recently, people saw the budget as the end of the issue, but now the significance of this Bill, which gives effect to decisions in the budget, is better understood. The electorate is more conscious and aware.

The budget was the second in a package of three. The benefits of the reforms introduced by the Government are already being felt by those most in need — the unpaid and the low paid. Next year's budget will consolidate and expand those improvements.

The measures in the Social Welfare Act and this Bill are unashamedly interventionist. I make no apologies for that. Unlike those in Fianna Fáil and their blushing brides in the Progressive Democrats, Democratic Left does not believe that persistent long-term unemployment and the resulting social and economic exclusion can be solved through market forces alone.

Intervention is necessary to ensure that all share equally in the fruits of economic growth and that the long-term unemployed, especially, are brought in from the economic and social margins. The elimination of tax anomalies, and especially of poverty traps, is vital if people are to be encouraged not only to make work but to take work.

The Social Welfare Act dealt comprehensively with many of the poverty traps inherent in the social welfare system. The Minister for Social Welfare, Deputy Proinsias De Rossa, is to be congratulated on such innovative measures as the retention of the child dependant allowance for a period after taking up work and the phased retention of other secondary benefits. I also welcome the provision regarding the retention of the medical card. The increases in personal tax allowances and the adjustment in allowances for single parents complement the measures in the Social Welfare Act.

Four months after the budget, Fianna Fáil is still trying to square an invidious circle of its own making. Eighteen months after moving to the Opposition benches, that party is still seeking something to oppose. What is there left to say of a party which, among other achievements, introduced the "dirty dozen" social welfare cuts? The incoherent — and often conflicting — statements issued by that party comes as no surprise to anybody who has watched it struggle in Opposition.

The Progressive Democrats are at least consistent. The party believes that market forces can solve unemployment and its associated social problems. However, its ideas would result in a dog-eat-dog political culture in which those on the margins would be left to fend for themselves.

The party entitled its recent tax document An End to Tax and Spend. The title, like so many of that party's ideas, comes directly from the Reaganomic wing of the US Republican Party. The Progressive Democrats' sales pitch is simple. If its policies are implemented, taxpayers will pay less. However, it forgets that taxpayers are also consumers of essential social services, ranging from education, social welfare to health. The consumer — the taxpayer — will pay the inevitable bill for that party's bag of fiscal goodies.

The total cost of the party's proposals amounts to over £2 billion. Somebody, somewhere, will have to pay for that party's generosity and that somebody is the citizen — the ordinary taxpayer at whom the party is aiming its proposals. We should be told how it will raise £2 billion. Will it close down the Department of Education, shut down a few hospitals or abandon the programme of upgrading county roads? It has already given us some of the answers in its document, which refers to cuts in the cost of job creation agencies, primary education and child support services. Like so-called conservative parties everywhere, it also coyly hints at selling off State assets such as the TSB, Aer Lingus, Telecom Éireann and the airports.

The State's cupboards would be stripped bare if the Progressive Democrats ever get their hands on the reins of Government, even as co-drivers. The debate on the Finance Bill provides the party with an ideal opportunity to come clean to the electorate. It should specify exactly where it proposes to make the necessary cuts. How many, and which services does it intend to slash? What State assets does it intend to sell off and how many jobs will be lost in the process?

The Progressive Democrats proposals are a recipe for an economic scorched earth policy. They are also fundamentally dishonest. That party knows that its greed centred package cannot be funded simply through growth and a privatisation package. It also knows that persistent long-term unemployment cannot be resolved without selective State intervention. The party has built its political programme on a false equation. It has attempted to bamboozle voters into believing that tax reform equals tax reduction. Voters are not that naive.

Democratic Left has long argued the case for tax reform. The Progressive Democrats, however, favour crude tax reductions based on a formula which would militate against the economically vulnerable. Low pay is undoubtedly a major issue which Democratic Left is determined to address in a targeted and focused manner. Last week my party launched a discussion document which explores ways in which low pay could be tackled through a combination of minimum wage and income approaches. Neither approach would find favour with the Progressive Democrats whose tax reduction proposals would disproportionately benefit the most affluent sections of our society.

Despite the ritual Fianna Fáil and Progressive Democrats noises about the tax burden, this Government has made substantial progress towards reducing the tax and PRSI burden on employment income. This year's budget was designed to make it worthwhile to make and to take work. However, tax reform cannot be implemented in a social vacuum. Democratic Left is not prepared to countenance any measures which would diminish social solidarity. Rather than crude tax reductions, Democratic Left favours a redistribution of the tax burden. Both the Progressive Democrats and Fianna Fáil have been vocal in their concern for the hard pressed PAYE worker. I share that concern which is addressed by the tax and PRSI changes in this Bill and by some of the changes in the Social Welfare Bill.

The 1996 Finance Bill, like its 1995 predecessor, represents a substantial improvement for those at the lower end of the income scale. I accept, however, that it does not go far enough; it addresses some of the symptoms, which I welcome, without tackling the central planks of our taxation system. A fair tax system should treat all income in the same way. It should strike a careful balance between four objectives which may often appear to be in conflict. It must be fair in the way it collects revenue; it must take similar amounts from people and corporate bodies with similar resources; it must redistribute income, wealth and work; it must collect sufficient revenue for the Government to pay for things which are socially necessary and it must serve the economic objective of encouraging enterprise and job creation. At present, our taxation system falls far short of these objectives and Democratic Left will continue to press for further reforms in this direction.

I shudder to think what would happen to those objectives if the Progressive Democrats got their hands on the financial rudders of Government. Let us look at the Progressive Democrats' last outing in Government when they shared the matrimonial bed with Fianna Fáil. It may give us a taste of what to expect if they ever repeat the experiment. In 1989 when the Progressive Democrats-Fianna Fáil Coalition came to power, PAYE workers paid an average of £3,127. By 1991 this had jumped to £3,565 — an increase of 14 per cent in just two years. This is an indication of what to expect should the Progressive Democrats return to the Cabinet table. It is a scenario which Democratic Left is determined to prevent.

I am pleased to have an opportunity to speak on the Finance Bill.

We all accept that tax reform is moving to the centre of the political stage and it seems to be an issue which is taxing the minds of all political parties. I was interested to hear that Democratic Left launched a discussion document on tax reform. As it is in Government, it should endeavour to include its proposals in the Finance Bill, or is Senator Sherlock saying that the Finance Bill does not represent Democratic Left's tax policy?

There is great concern about the level of unemployment and there is a growing acceptance that the problems of unemployment and taxation are inextricably linked. My party believes that tax reform is the key to solving the problem. Our job creation agencies do the best they can, but we must recognise that Governments do not create jobs. If agencies, boards, committees and commissions were the answer to the unemployment problem, we would have reached full employment many years ago. However, we have not and it is time to recognise that our present approach to the problem is not working.

It is up to the Government to create the conditions in which employment can flourish. Our present economic policies are well meaning but they will never bring about any significant reduction in the unemployment levels. We cannot expect to reduce unemployment while we simultaneously pursue policies which are hostile to employment. I will use a company in my home town of Portarlington to illustrate this difficulty.

Avon Arlington Limited is an industry which manufactures a range of cosmetics, toiletries and jewellery products mainly for the export market. It is the major employer in the area, employing 355 people, following the recent receivership of Butler Engineering. A person who starts work in Avon Arlington earns a gross wage of £193 per week. Workers do not usually work overtime.

A Government strongly committed to creating, protecting and maintaining employment would ensure that people in companies such as Avon Arlington were given every incentive to work. However, the reality is different. Instead of rewarding these people for their efforts, our system seems to be designed to penalise them for working. Workers at the Avon Arlington plant pay four separate taxes on their weekly wage — income tax, employers' PRSI, the health levy and the training and employment levy. This means the same slice of income is taxed not once but four times. After paying these four taxes, a single worker takes home £148. About £45 a week is stopped for tax and deductions, which is almost a quarter of their weekly earnings. This is not an incentive for people who are unemployed to move into paid employment.

The workers in Avon Arlington and other PAYE workers who are not in a position to avail of the complex tax avoidance schemes which the better off elements in Irish society can use to minimise their tax bills, bear the full brunt of our present tax system. If we think the situation is bad for employees, it is just as bad for the employer. A company must pay employer's PRSI, a fifth tax on work, on their total wage bill. This means the weekly wage cost for the average worker is £209 per week. It is crazy if it costs the company £209 a week to give its workers £148 take home pay. This Government collects no less than £61 per week for every worker in the plant. This is tantamount to imposing a 30 per cent tax on job creation.

In the wake of last week's announcement about the closure of Packard Electric, some well paid media commentators said there was no point trying to sustain jobs at such wage levels — approximately £200 per week — and that we should leave these to the low cost Third World countries. That is arrogant and dangerous talk. There may be up to half a million workers in Ireland earning £200 per week. Are we telling these people they have no future in our economy and that their only choice is to pay high taxes or to give up work? Are we telling them to retrain for highly paid, up market jobs which do not exist? The workers in Packard Electric wanted to work and to contribute to their community. Although we might like to see higher wages in these companies, the people concerned are quite happy to work there; they want those jobs. We must do everything we can to foster employment at all wage levels and the only way to do that is by reducing taxation.

The Progressive Democrats have put forward a programme for the transformation of our anti-work tax system. This would involve reducing the basic rate of tax from 27 per cent to 20 per cent and abolishing employees' PRSI and levies. These measures would yield an extra £22 per week in take home pay for the typical worker in the Avon Arlington plant to which I referred earlier. We must also reduce the rate of PRSI paid by employers to make it economic for them to take on extra staff. Unless we are willing to reward work and reduce employment costs, we will never make inroads into the huge problem of joblessness.

Official figures tell us that the economy is doing well and that we are creating jobs but why is unemployment so high and why do so few working people feel they are participating in the great economic miracle about which we hear so much? Official statistics overstate the performance of the Irish economy. Much of our growth is produced by transnational corporations which concentrate taxable profits in this jurisdiction and repatriate the money, last year to the tune of £5 billion.

The economy is obviously growing but not as fast as we think and not fast enough to promote significant job growth. The most recent detailed assessment of employment is the Labour Force Survey for April 1994. This survey showed that 67,000 jobs had been created in the previous three years. It also showed that 45,000 of the 67,000 jobs were part-time, in other words, two in every three jobs created were part-time. I am in favour of part-time working and those who wish to take up part-time positions should be encouraged to do so. However, we must be able to distinguish between full-time and part-time jobs. Splitting a full-time job into four part-time positions does not constitute job creation.

Government schemes must also be taken into account. State-sponsored employment schemes have become an integral part of the Irish economy in recent years and the number of people participating in those schemes is now 41,000, an increase of 25,000 over the last three years. Many people are delighted to be part of those schemes and it is good that they are given the opportunity to participate in them. However, we should classify the schemes as what they are and not believe that we are creating an extra 41,000 jobs. If one excludes part-time jobs and positions on Government schemes, it is clear that we are creating few real full-time jobs and certainly not enough to make a dent in the unemployment figures.

It is time we recognised that high taxation is a recipe for high unemployment. Our present policies condemn a large and growing section of our population to a life of long-term unemployment. Unless we reduce taxes on work, nothing else will reduce the high unemployment figures.

There might be some acceptance of the need for high rates of income tax and PRSI if people thought it was the price that had to be paid for low taxes in other areas. However, the opposite is the case and the private car is an example of that. High levels of vehicle registration tax, coupled with penal rates of personal taxation make it prohibitively expensive for the ordinary individual to buy a new car. There is a huge affordability gap between car ownership in the Republic and in Northern Ireland.

Let us compare the cost of buying a typical small hatchback car, the Toyota Starlet, in Dundalk and Newry. A single worker in Newry earning £300 per week gross would need 38 weeks take home pay to buy that car new. Twelve miles down the road in Dundalk, the economics of car ownership change dramatically. A person in Dundalk earning the same gross wage as the person in Newry would need 56 weeks take home pay to buy the same car. In other words, in terms of net personal income, the same vehicle is 50 per cent more expensive in the South than in the North.

This policy of high taxation has a damaging impact on the motor industry in Ireland — Senator Norris discussed the problems of the motor industry earlier. We have a low level of car owner-ship. There are only 26 cars per 100 of the population in Ireland, a statistic which puts us in the same league as the former East Germany and Czechoslovakia. At least those two countries have the excuse that they were under communist domination for the last 50 years. We are supposed to have a free market economy. Car ownership in Northern Ireland is 40 per cent higher than in the Republic. High taxes mean that Irish people are effectively forced to hold onto their cars for longer than they should. One quarter of all cars in this country are more than ten years old and 60 per cent are more than five years old. With no compulsory vehicle testing, this means many people are driving old bangers which are a hazard on the road — a factor which helps to explain our relatively high accident rate.

High taxes have also converted us into second class citizens in the motoring world. Last year 45,000 imported secondhand cars were sold in this country. One secondhand import is sold for every two new cars. We are using other people's cast-offs, vehicles for which there is no market in their country of origin. The Government collects £1.6 billion per year in various taxes from the motor industry. It is a major source of revenue for the Exchequer and obviously it should be protected. Motorists might have less objection to paying this money if they thought they were getting value in return. Instead they are asked to drive on some of the worst roads in Europe, often without proper road markings or sign posting. Present indications are that the pace of the national roads programme is slowing down markedly since the present Administration took office.

Last year's changes in the Finance Bill had a huge effect on the number of new cars sold in this country. The Minister should keep on this road. There were some slight reductions this year but this is an area where there is potential for job growth. The benefit in taxes which the Government recovers as a result of people buying more new cars outweighs the loss of revenue the Government suffers as a result of reducing the VRT rates.

I also accept that some changes were made in the levels of employers' and employees' PRSI for people on lower incomes. However, we need a drastic change. There is no point in tinkering with the system. It bothers me that no targets are set by the Government. It is not claiming that in a certain number of years personal taxation will be reduced to a certain level. If the Government does not set targets, it will not achieve anything. If one sets targets, one aims to achieve them. However, if we have no targets we have nothing against which to measure our achievements and we will not be pushed to achieve anything.

I wish to dispel the myth that if the Progressive Democrats came into power and introduced their taxation programme, there would be huge cuts in public expenditure. The philosophy of the Progressive Democrats is not to reduce public expenditure but to control it. Our policy document, which proposes a reduction in taxation rates to 20 per cent and 40 per cent, did not propose cutting public expenditure. It proposed controlling public expenditure.

I spoke to a nurse in my constituency last Friday about the nurses' dispute. She told me that Mary Harney was right: the nurses would get an increase of £3,000 per annum or £120 per fortnight but over half of that money would be gone before the nurses received it. I accept that the Minister for Finance and the Minister for Health have difficulty finding funds to satisfy all the demands. However, we should look at how our taxation system affects these demands. People are concerned about what they get in their take home pay; their gross income does not bother them. We should examine our taxation system. The nurses who were in dispute were looking at what they would get into their hands. They never get their gross income; they were more interested in their net pay at the end of the fortnight.

The rate of VRT should be reduced. This would be accomplished without any loss of revenue to the Exchequer. The level of pent up demand in the market which was hitherto suppressed by the high taxation level on new cars and Government income from VRT would continue to increase substantially, even after a cut in rates. We should aim to make new cars affordable to ordinary people and the benefits in terms of increased tax revenue, extra jobs and fewer accidents would be immense.

An aspect of tax administration is causing difficulties for nursery growers. The nursery stock industry is an important subsector of Irish agriculture. The total value of ex-farm outlets is currently estimated at £16 million and is set to grow by about 50 per cent over the next five years. The industry employs about 500 people on a full time basis and another 500 people on a part time basis.

Traditionally, there was a long standing convention where the Revenue Commissioners accepted that growing crops may not be valued for income tax purposes in annual tax returns. However, they have now changed their practice and are insisting that nursery stock be valued in full. This change of practice will involve substantial back tax assessments for many of these nursery growers, for which they have not made any provision. The result of this is that the industry will undergo substantial financial difficulties in complying with the new requirements and many nurseries will be forced out of business.

It takes up to four years before many of these plants are ready for sale, during which time growers are vulnerable to weather damage, crop failure and market volatility. Nursery growers believe they should be treated in the same way as other growers — farmers, for instance — who are allowed to place a nil valuation on crops standing in the fields. It is worth noting that banks tend to regard growing stock as a liability rather than an asset, the complete opposite of the approach now being adopted in practice by the Revenue Commissioners. Could this matter be examined to see if there could be an alleviation of the problems being caused to the nursery industry by the Revenue Commissioners' departure from the nil valuation system? While I appreciate that this may not have been expected to come up in this debate, it has been brought to my attention. Ultimately, when these stocks are sold, the full value of the sales will come into the account; tax will not be lost.

I welcome the opportunity to speak on this Bill. However, tax reform is the most important issue. Our main concern should be our high unemployment levels. There is a challenge for us to provide the climate for employers to create jobs and the incentive for people to take up work.

This Bill has many good and positive features. Senator Daly described it as unimaginative. If a great deal of imagination had been used in this budget, some people would have been hurt and Senator Daly would then be saying it was not a good thing. However, that is one of the joys of being in Opposition.

The Government's record is good. All sections of the House have talked about the economy being in great shape. The prophets of doom who hovered around like vultures a few years ago when the Government was formed have been proved entirely wrong. It has good control of the economy, all the indicators are good, spending is under control — it has not been in that condition since 1989 — and inflation has been copper-fastened at around 2 per cent. We have excellent growth and it looks as if it will continue for a while longer. Lower interest rates and the other good effects of our economy are acting as a payoff to everybody. Mortgage rates in particular are incredibly low and everyone is benefiting from it. My mortgage payment level is a fraction of the figure it was two years ago. That benefit has taken a great weight off the shoulders of many people.

The tax reliefs in the budget are putting a few extra pennies into peoples' pockets. I refer especially to the further PRSI reliefs. My constituency has many labour intensive industries — for example, poultry, mushroom and furniture production. These are vulnerable industries and will continue to be so. Labour intensive industries tend to have difficulty in competing internationally. Some of our industries are not able to export. The reason for this is because their scale is not right. If they are not able to export, they are obviously vulnerable to imports. That is one reason why I was happy to see a further reduction in PRSI. It is an unfair tax.

The chemical industry makes huge profits every year and employs a handful of people. It is mechanised, computer controlled and robotic. However, labour intensive companies employing many people on their payrolls and producing small profits pay great amounts of tax in PRSI when compared to companies like these. Although I know the reason that tax is there, I am glad the Government has reduced it. I had many discussions about it with the current Taoiseach when he was Leader of the Opposition. I was able to show him its effects when he visited my constituency. I balanced that out by pointing to industries which were making huge profits but were not paying a commensurate amount because they had few people on their payrolls.

The general good management of the economy is continuing to show gains, but we still have problems. The BSE situation is rocking the country. There is a meat factory in nearly every constituency. In the last six weeks we have seen how that market has virtually disappeared. I understand it is beginning to recover and level out, but some say it will take years rather than months before it is back to normal. We have a huge job to do in convincing people that meat and meat products are safe. Most Members would agree that Irish beef and beef products are safe, but there are sceptics. The media tend to latch on and give huge publicity to whatever is the flavour of the month and frighten the lives out of people. That attitude has destablised the market.

Senator Quinn, who will contribute later, is an expert in that field in so far as his business procures and sells on meat and meat products to the general public. Indeed, his company is highly regarded for the way in which it has done this in the past. The practices which his company has been following will probably become the norm in the not too distant future as people will want to know the origin of meat, from which farm it comes, under what circumstances the animal was raised, how it was fed, etc. The customer will need to be reassured in that way in order for the market to make a full and complete recovery.

I imagine that matter had much to do with the bad unemployment figures which were announced last week. There is no doubt that many people are on three-day weeks and a substantial number of people are not working at all because of the BSE scare. Let us hope it settles down because it obviously has the capacity to make a huge negative impact on the economy and upset all revenue calculations.

The one continuing difficulty is that long-term unemployment continues to rage. We are not making any impact on it and I suppose it is understandable. When employers go looking for somebody, they are faced with middleaged candidates who have been unemployed for a substantial length of time and candidates straight out of college who have modern qualifications. For whom will they opt? Generally, younger people cost less. If they also have a more flexible education behind them and are basically a better product for the employer, is it not only natural that they be given first preference? It is a terrible situation. We must continue to try to create a huge number of jobs to return to a position near full employment. Then everybody's day will come with regard to opportunities in the economy.

I want to address a few specific personal concerns. I have had discussions with Ministers about public procurement in the last couple of months. It came to my attention that two Irish companies which produce vinyl floor covering were winning between 30 and 35 per cent of the contracts offered from Government sources in the public procurement area. The other 65 to 70 per cent of the contracts were being won by foreign companies. One might say that is the result of competition, but when I examined the situation in detail with the two companies involved, I discovered it is not the case. The product to which I refer is a vinyl one whereas the product being used is a different style product, that is, the ordinary linoleum which people use domestically. It is made differently and is more costly to make. It is not made in Ireland, but in Holland and other European countries. Foreign companies were winning most of the contracts for floor covering, yet the Irish product is equal to or better than that product in every respect, including price, and I have not yet been given a satisfactory answer as to why that is the case.

We have a rather stupid approach in Ireland. We keep talking about the fact that procurement must be on an EU wide basis. It must, but the EU also agrees that Governments are entitled to help indigenous companies to win contracts. In fact, EU money is available to assist companies to be prepared to win public procurement contracts. I find this incredible and I ask the Minister for Finance and the various Ministers to examine their Departments to see what is happening. What we are actually doing is either putting people out of work or preventing people from being employed by proceeding with that policy. It is incredibly stupid. If some people in various Departments prefer linoleum to vinyl, would they examine their conscience and see the effect what they are doing is having on the economy?

Some changes to the BES scheme were announced in the budget also and, on reflection, I believe they are good ones. There were loopholes where people were actually using BES for a purpose for which it was not intended, that is, drawing down BES funding twice or, in some cases, three times, and that has been closed off now.

A company of which I am aware was preparing a BES application long before the budget. One of the principles died in January 1995, which slowed down the application, which was for a second tranche of funds but it was legal at the time. I know for a fact that Revenue officials did not issue the letter of permission required to put the BES in place in the weeks before the budget because they knew the provision would change in the budget. I was incredibly disappointed that it happened and I let it be known in all the areas where it should have been known. The Revenue officials were actually anticipating what was to happen in the budget, and this particular BES fell. I am still negotiating with the Minister and departmental officials about the matter and I hope they will allow the application through in the circumstances. The matter relates to an important tourism development in a constituency which has a small tourism base. It is one of our jewels — a family run business which has developed into an institution which offers incredible potential to the tourism market at this stage and is making good money from international tourism.

We must try to achieve near full employment before certain people who want to work will be given an opportunity to do so. In order to do that we must take a fundamental look at our economy. We should be looking at the matter, not from an ideological but from a basic psychological point of view. People who get a proper reward from their work tend to be happier, more fulfilled and work better — that is a basic assessment with which people would agree. People who get a reward which they think is fair and good tend to respond in a more positive way than those who regard the reward they get as not being adequate. We must examine our economy to see whether the people who are working in the economy get the reward they deserve, which would imply that our economy will flourish. If our workers are well adjusted, rewarded and in a good frame of mind, the economy will be of that format. If there is poor reward, then there will be poor performance. Across the board, that implies that the economy would not be as good as it should be.

Even though the economy is booming, the PAYE sector, who are told time every year that they are actually paying 86 or 87 per cent of all income tax, feel a little aggrieved. I must say they are getting rewards from the economy — low interest rates, low mortgage rates, inflation of 2 per cent, etc. All those things are rewarding workers in one way or another, but we would be foolish if we did not examine the worries and concerns of the PAYE sector. They feel they are paying too much tax. There are examples of single people on relatively small wages paying the high rate of tax as well as 7.75 per cent PRSI. They are paying more than half their taxable wages to the Government every week. When income tax was introduced it was never intended that this should happen. It has happened progressively since the mid 1960s and it is time we examined it. It is not in the least ideological. It is a matter of being sensible and looking at how things have come to this impasse and seeing if it is possible to row back to a sensible situation. People should have control over as much of their weekly wage or monthly income as possible. It is not acceptable that someone on a relatively small wage is taxed at over 50 per cent.

How would one actually set about reducing tax and the PAYE burden? The first thing one does is recognise that the burden is unfair, with 87 per cent of it coming from one sector. Then, taking various measures, one could achieve a reduction in PAYE tax. The burden could be redistributed in so far as that is possible. While that has been done progressively over the last seven to ten years, there are still further possibilities for redistribution of the tax burden. There are most certainly possibilities for reducing the Government's demand on money.

I welcome last week's announcement about the refocusing of roles and functions within the Civil Service. It is important that it should be done. We live in a very changed world, with different practices from those of ten years ago. The changes announced last week will certainly modernise the Civil Service to some degree, but I do not believe it will do much to create new efficiencies in the Civil Service. The only way that will happen will be if the delivery of certain Government services is open to competition from the private sector. Some of my colleagues on this side of the House would disagree vehemently with that view.

I do not believe that public authorities can deliver services unless they are forced to obey some basic rules by which the private sector must live. I would love to see a Government Department taking a fairly bold step and setting up a procurement company, the job of which would be to buy at the cheapest possible price the delivery of the specific services in which the Department is involved. If the Department wanted to deliver the service, it would have to tender against the private sector. I know some people would disagree violently with that proposal.

Competition is a fact of life. At EU level there is wide acceptance that competition is the only way to make us tick. Those who do not work in a competitive environment do not tick. Instead of waiting to be forced to change, we should manage change. I would dearly love to see some Government Minister or Ministers looking at that idea in the context of a pilot project and trying to ensure that not alone has management practice in the Civil Service changed as was proposed last week, but that they are forced to look differently at the way in which they deliver their services and the cost involved.

If you ask a Department to examine its costs, it can do some research but it is not based on reality or competition from other sources. The latter is the only real way to measure whether what one is doing is efficient and cost competitive. I hope some Minister will take up that suggestion about setting up a procurement company to purchase the delivery of services as cheaply as possible through tendering and the private sector and the Department itself competing for the work. If that was done in a few Departments, we would certainly see a change.

Civil servants would probably be happier knowing that their performance can be measured in so far as they will either win or lose contracts. Winning contracts would be a measure of their ability to live in the real world and they would be happier with their work. The public would also be happier in the knowledge that they were not living in the type of cocoon in which many people believe they are living now. I do not mean to criticise any individuals; I am criticising a practice that I believe can be improved. By improving that practice we can reduce the amount of tax people have to pay for the ordinary service which the State and the Government are providing.

Recently, there was a furore about certain decisions made by a semi-State board. That board is working in a monopoly situation. Boards which are operating in that kind of environment can make pretty loose decisions at times, which are not necessarily related to the market place or the price of their product. They can be free and easy with money because they know that Daddy is hanging around with a cheque book if they get into a tight corner.

Irish Steel was a perfect example. The Irish Government was involved in making steel for years and the taxpayer paid dearly for the experience. Now Irish Steel has been sold off and, hopefully, it will survive in a different climate of work. I do not think the Government should be involved in making turf. The day is coming when we will be forced to move out of it, or at least forced to change entirely what we are doing. Again, I would rather see us managing change before it is forced on us.

We need a better spread of tax. We need a more efficient Government. The Government has done a massive job this year in cutting expenditure back to somewhere between 2 per cent and 2.5 per cent, which is way below the figures we have been used to since 1989. However, we should not be complacent. We should seek to cut Government costs further and in a way which is cost effective and would satisfy many people.

One could say that the economy generally is very dependent in one way or another. I am not talking about the jobless and the poor in our economy. We have general agreement in this House that people who cannot raise enough income to look after themselves and their families should be supported by the Government, and I support that view. There is much economic dependency in setting up businesses because everybody is looking for grants. Even worse, when grant schemes are announced, people try to come up with an idea to qualify for the grant. That is a total waste of time.

We will be forced to change that approach at some stage because the honey pot will be empty. We should start to change now. People's attitudes are changing and many Members of this House say the grant mentality is bad. Even if the money continues to be available, we should do things in a new way. People should not automatically receive grants for proposed projects. They should be told to try to put together a financial portfolio for the project in the private sector. There has never been a better time to do that as interest rates are so low that the banks will soon be charging people for minding their money. People are investing in property but they are not putting much money into productive projects. They should be told that grants are not automatically available and that they must prove first they have tried and failed to obtain funds in the private sector.

We should also make substantial amounts of venture capital available at lower interest rates. Some of that money is in the economy at this stage. It would be better to siphon off much of the money which is currently paid in grant aid through that vehicle. That would force companies to live in the real world, because receiving huge grants is not acting in accordance with the market place. These companies may compete with existing companies set up without any grant aid, which is not in accordance with competition.

We need new legislation on banking. Many people see the banks as vultures waiting for the corpse and picking the best meat off it. In my view, that is correct to some degree. In the past few years I have looked at how banks operate in other countries, which is very different to how they operate here. Banks here do not invest in the economy but lend to it — and they only lend to sure bets. They make very good judgments in regard to whom they lend. They make huge profits every year, none of which is invested in the productive economy. We should produce legislation to force the banks to invest 30 per cent of their profits in manufacturing or services every year. Banks take such risks in other countries, but they do not do it here. I will talk about this again whenever I get the opportunity. The banks should be forced to invest in the economy rather than just lending to those who are very likely to pay back their loans. If they became equity holders in companies it would release money into the sectors which need it and into job creative areas.

I am glad to have had the opportunity to speak on those matters. We need to have such discussions and to put forward views which may not be acceptable to all our colleagues. We need to get discussions going because we have to get 280,000 people off the dole. That requires a great deal of thinking, discussion, innovation and new ways of doing things. I look forward to that.

I am happy to engage my distinguished senatorial colleague in that conversation. Some of the views I will express will be at least as much in harmony with his as are the views of some of those with whom he shares the Government benches. However, I too had that problem when I sat in a partnership Government in this House so I am not trying to suggest the problem is unique to Fine Gael.

The Finance Bill is the third and final leg of a very important relay race. The first part of that relay, the public expenditure Estimates, is the key part of the whole programme without which the third cycle could not be concluded. It is essential in the Estimates to create a proper climate for the role of Government vis-à-vis the whole economy and investors. If public expenditure is not cut back and controlled, particularly on the current side, everything afterwards in the budget or Finance Bill is only tinkering at the edges. In my respectful submission, that is what is happening in this Finance Bill. Public expenditure, particularly on the current side, has been allowed — once again, I regret to say — to grow out of control after the experience we all had in Government, including myself as Minister for Finance, which demonstrated that controlling public expenditure and reducing inflation and interest rates is the only way to lay the basis for firm and guaranteed economic activity.

This Government finds itself in an extraordinarily and uniquely fortunate position because of the actions taken by its predecessors — Governments in which I served — since 1987. I want to acknowledge that it was with the support of Fine Gael, which was in Opposition then, we were able to achieve a dramatic turnaround in the fortunes of the economy. We did it by taking the steps which were necessary at that time to lay the basis for the healthy economy which is being talked about by this Government as if it all happened overnight at the touch of a wand, despite the fact — and I hope this does not sound too personal, particularly to my distinguished lady colleague in the House — that the leftist members of this current Government, when we were taking that necessary action and administering that necessary medicine, criticised us daily in the Dáil and Seanad for being heartless, cruel and uncaring.

That is the nature of Opposition and not necessarily just lefties.

I appreciate that, but let me illustrate it by reference to the figures. I would not expect them to commend the Government of the day, although I have in my time commended the Government and the Opposition — as I have just done in respect of the Fine Gael Party of that time. It was very evident the biggest problem we had was the insatiable growth of public expenditure programmes which suffocated the role of private enterprise. The climate of activity, which we are now reasonably happy to see restored, was being suffocated. Having learned over the years, it gives me great cause for concern and anxiety to see all that being dissipated again.

It is not being dissipated.

I do not know where the Senator got those figures.

I will get the figures right now.

An Leas-Chathaoirleach

Senator O'Kennedy, without interruption.

The simplest way is to start with the 1991 Revised Estimates for Public Expenditure programme to illustrate exactly the changes that have occurred. The Estimates for 1987 — the year before we came into Government — for net non capital supply services was £5.920 billion. In 1988 that total figure was reduced to £5.558 billion. We are looking at an actual reduction in the net non-capital supply services expenditure between 1987 and 1988. Nobody likes reducing public expenditure, but a reduction of that order in one year was the reason this economy was laid on a firm foundation. I remember the criticism we got from Democratic Left and the Labour Party for taking those necessary actions, which we continued with. Table 5 of the net non-supply services expenditure 1987-1991 shows that in 1989 that figure was maintained at £5.592 billion. In other words, having been reduced by almost £0.4 billion between 1987 and 1988, there was no increase at all afterwards. That is the only basis on which you can approach effective management of the public expenditure programme.

It is not surprising that in the same year we were able to reduce the top level of income tax from a high of 65 per cent to precisely where it is today. We did that in one year because we took the difficult, firm, disciplined and — if I may say so, perhaps belatedly — honest decision to tell the public that taxation cannot be reduced while public expenditure is increasing. After all the lessons we learned and the effectiveness of the actions we took in the 1987-89 period, it is a matter of great regret to see a voracious growth in public expenditure again which I hoped had been long banished from the Irish psyche and from efficient Government management.

Here is a Government that inherited the soundest economy in Europe — it is not only the Irish that say that but all the international fund managers and economic analysts as well — and instead of maintaining that programme, what did they do? Within less than two years they had embarked on a spending trail because they wanted to be popular. They did not want to be criticised for cutting back because that has not been the nature of their approach to public life. They set out to vindicate their popularity in the opposite way to which Fianna Fáil did it from 1987 to 1990. They increased net non-supply services expenditure from £8.352 billion to £9.068 billion in 1995. Since they are on the spending trail they decided to keep it going to £9.5 billion in the 1996 Estimates.

How else do you get the income?

Does anyone really think that when you go on that kind of a spendthrift trail in current public expenditure you can pretend to the public, much less to foreign investors who have come here in recent years, that we are managing our affairs efficiently? The Government says it is being responsible and is not dishing out sweets and goodies like children just because it is more pleasant to do so. That is why this Finance Bill, even with the best intentions in some areas, is a totally inadequate instrument for the management of the country's fiscal aggregates and, regrettably, it is seen to be so.

It takes a while for confidence in the country to be undermined, but it takes much longer to build it up after mistaken policies. If the Government is listening it will hear worrying sounds from pension fund managers and life assurance companies that are trading across the external barriers in Europe as well as a range of people who were seeking to make strong investments in this country. Is it any wonder?

It is time all this was exposed. Fianna Fáil was not supposed to be in close contact with the workers or to understand their priorities. It is extraordinary, however, that our Government, that was not supposed to have qualifications which are meant to be a feature of the Left, could enter into a partnership commitment with them in the Programme for National Recovery. I pay tribute to the trade unions I negotiated with in reducing numbers in the agricultural advisory services and in the Agricultural Institute, because they were concerned about those reductions. I pay tribute to them for the discipline and partnership they demonstrated so effectively in those great years in Government from 1987 to 1991. Without the trade unions we could not have achieved what we did. They were entitled to the benefits of a secure economy, including enhanced wage packets, reduced interest rates and lower inflation. They were probably entitled to more because their job expectations had, understandably, not been fully realised. I share their concern and apprehension. It is worrying now. I exempt Fine Gael because they were not seen to be the traditional allies of the trade union movement. However, we now have two leftist elements in Government and is it not extraordinary——

Is it not extraordinary how well they are doing?

——that they entered into partnership with Fianna Fáil, the party that was supposed to be hard line, hard nosed and that had neither care nor concern for the poor, the workers or the unemployed? But when "their own" as they would like to think of themselves — but they are not, of course — are in Government we find it is falling apart.

Nothing is falling apart.

Am I hearing or reading something different from the Minister of State? We find that public service workers like teachers, nurses and gardaí, all of whom were in partnership with us, are now breaking and dissipating that partnership because of frustration.

Good management?

An Leas-Chathaoirleach

Senator O'Kennedy must be allowed to make his contribution without interruption, please.

The Government has lost control of the fundamental responsibility of reducing the public expenditure take and maintaining low inflation and low interest rates. Our workers and trade unions are entitled to much better.

Such a change from last week.

The most important thing in terms of the Finance Bill is the broad direction which will come through for someone who reads the various sections, particularly on income tax, corporation tax and capital gains tax. I want to recap further, back to when I was Minister for Finance in 1980.

That is where all the problems started — there was 25 per cent inflation.

Not then, in 1981. I acknowledge we did not make the progress we should have in reform of the tax system between then and 1987. The broad thrust in the report of the Commission on Taxation, which I set up in 1980, was that we needed to simplify our tax system, reduce all allowances and incentives, and amalgamate the PRSI and tax systems. Any reduction from gross pay is referred to on a Government pay cheque by the beautiful Irish euphemism "as bhainntí"— things taken out of — before one gets the "méid glan", the net pay. By the time one gets that one has been fairly well cleaned out. The commission said that all deductions from income should be put into one category and that tax allowances and breaks should not be a continued pattern of our taxation system. This Bill increases our total tax take by £750 million but——

That is because of economic growth.

There are 25,000 fewer people out of work.

It is at a time of economic growth that one must take the responsible and controlled approach, because it is less painful then than in a period of economic decline. Unfortunately, all the signals are that we are heading in that direction and someone else will have to take the painful decisions. No doubt our brothers and sisters of the left will scream even louder when it is being done.

The brothers and sisters have cut public expenditure to a level 7 per cent below what it was in 1990.

An Leas-Chathaoirleach

Please, Senator Cotter.

How can someone say that when even the Government's own estimates for public expenditure show an increase of 5 per cent?

Senator O'Kennedy is not talking in historical terms, he is talking waffle.

An Leas-Chathaoirleach

Senator O'Kennedy should not encourage interruptions from Senator Cotter.

The figures are there.

They are not.

If Senator Cotter wants to describe Government figures as waffle——

Look at the historical figures. Every year since 1989——

An Leas-Chathaoirleach

Senator O'Kennedy, speak through the Chair, please. Senator Cotter, please desist from interrupting.

I cannot listen to waffle.

Table 5 in the Revised Estimates for the Public Service——

If one compares the figures for the previous five or six years one can make sense of it.

I will. When I prove Senator Cotter wrong, I will ask him to desist from making nonsensical points, unless he wants to keep interrupting for the sake of doing so. I will go back at least three to four years; I will insist on this even if it is irrelevant.

An Leas-Chathaoirleach

Please address your contribution through the Chair, Senator O'Kennedy.

This year, the net non-capital supply services public expenditure increased by over 5 per cent. The previous year, it increased from £9 billion to £9.5 billion, which is also more than 5 per cent. The year before that, it increased from £8.352 billion to £9.068 billion. If that does not answer Senator Cotter nothing will but he still will not want to accept——

The EPR is at its lowest level since 1989. Senator O'Kennedy knows that and so does everyone else.

No doubt these Government figures are nonsense also. It is regrettable that, having seen successful control of the fiscal aggregate, reductions in public expenditure, interest rates and inflation which were a consequence of effective public management and a reduction in taxation, the trend is being reversed in 1996 at a period of high economic growth internationally. We will wastefully forfeit this opportunity with a tax increase of £750 million.

I referred to the recommendations of the Commission on Taxation. In a Bill which ignores all the disciplines required for public expenditure control, a series of allowances are introduced which will make the tax code even more complex. If any section will benefit from this legislation it will be the tax consultants and advisers, which is not the basis for creating an environment for investment and enterprise. There are about 70 income tax provisions in the Bill relating to tax adjustments, allowances and diminutions for a range of areas such as investments. This is guaranteed to complicate the system to such an extent that the climate we want to establish will be reversed and frustrated at a time when we thought it was on a straight and direct path.

On Committee Stage we will go through the various sections of the Bill but I wanted to make these broad points now. Our marginal tax rates are so high that anyone earning £14,000 pays 56 per cent tax under this legislation. I do not suppose Senator Cotter or any Member agrees with that. We worry about the incentive for enterprise and employment but is it any wonder that there is disruption in our public services with that level of taxation? Until such time as we again take control of the fiscal aggregates and public expenditure, we will not have a firm basis for the economy or for equity and justice in taxation. Despite our high growth rates, which should enable the Government to have huge leeway and would allow for some increased public expenditure, we find that over 50 per cent of the salary of a single person earning less than the average industrial wage is taken in tax and PRSI, because the Government is using it for its uncontrolled and undisciplined public expenditure growth. It is time this was corrected or the success of the last few years will be turned into a serious disaster.

I welcome the opportunity to participate in the debate and particularly to follow Senator O'Kennedy. I accept some of what he said —— undoubtedly a number of Governments of different hues have participated in strengthening the economy in the last few years and his party was in Government for some of that time, as was ours. No one on the other side of the House can deny our strong economic performance, which is due to good management of the economy by the present Government and previous Governments contributed to it. Senator O'Kennedy cannot deny we have had a Labour Party Minister for Finance presiding over the last two budgets and little of the Senator's criticism applies to him. The current OECD figures are good and its forecast is that our growth will continue in 1996 and 1997. We have very good export growth predictions as well. I fail to understand Senator O'Kennedy's criticisms, which Senator Cotter summed up quite nicely in his interventions.

The Maastricht criteria and the requirements in relation to convergence in the Maastricht guidelines are inflation, interest rates, budget deficit and debt ratio. We are doing well in all those categories. I make no apology to Senator O'Kennedy and others, including the Progressive Democrats, when I say that we need a balanced approach to economic management. We must be concerned about social solidarity and about spending on health, education, housing and fighting crime, which Senator Kennedy's party called for on today's Order of Business. We must spend public money in these areas. We cannot attack public spending while at the same time look for it in areas where we need to look after those who are less fortunate than those in the higher tax bracket to whom Senator O'Kennedy referred.

I do not apologise for supporting tax changes at the lower end of the tax scale primarily as opposed to the higher end. Measures taken in the last budget, in particular in relation to the tax and PRSI contributions of those caught in a poverty trap and who were earning low amounts, were good and necessary. Targeting lower income earners rather than higher earners in terms of tax breaks is the correct approach.

Last week, at the Association of Health Boards meeting in Ennis, the president of Dutch health care providers spoke about concerns in his country in relation to the Maastricht guidelines and the pressures which Holland's health service faced in terms of public spending. He was worried about the possibility of a two tiered health service developing, although he felt the Dutch people would not accept a breakdown in social solidarity. I do not believe the people here would accept such a breakdown either. I make no apology for having what might be described as a leftwing approach and for ensuring that we look after the less well off. Social cohesion is important in a number of successful economies, particularly eastern ones. I am happy to support financial measures which prioritise lower income earners and which target job creation.

In its response to the budget, SIPTU said that over the period of the Programme for Competitiveness and Work, 1994-96, inclusive, there has been an increase of 116,000, or 10 ten per cent, in the number at work. It welcomed measures in the budget which addressed long-term unemployment, an aspect of the budget which I will address. It is important that the measures we take benefit everybody and that we target those who are excluded from the economy, that is, the long-term unemployed. The report of the National Economic and Social Forum indicates that the long-term unemployed find it extremely difficult to get jobs even when new jobs come on stream — 45,000 more jobs were created last year. There is a need to adopt an interventionist approach in this regard and when major job losses occur, such as Packard Electric, which has caused concern in recent weeks. It is right that a task force be set up in such situations and that the Government intervenes if necessary.

The British economy has relied on privatisation and the market economy, which has not been successful. There is little evidence that relying on the market has produced genuine innovative thinking; it has cut jobs and has not improved services. I disagree with some of the views of my colleague, Senator Cotter, on privatisation. A matter under discussion at present is the supply of energy. It is important to protect those who are isolated and ensure they get electricity at a price which they can afford. We should have checks and balances between the needs of large industries and private consumers, who are sometimes not an economic prospect for the supplier of energy. We must have a balanced approach to the economy so that we can show concern for the less well off while providing incentives in relation to job creation. Changes in the BES and provisions in relation to research and development are targeted at creating new jobs rather than giving money to people who would have created jobs anyway. Improvements in the BES are designed to deal with that issue.

I welcome measures taken in relation to long-term unemployment and to improving the community employment scheme by targeting some aspects of it at the long-term unemployed. Measures allowing people to retain their medical card for a certain period after they gained employment and measures compensating employers who take on the long-term unemployed are welcome.

We must further develop the youth progression scheme for 18 to 19 year olds who sometimes leave school with few or no qualifications. It will help them to get jobs so they do not face a lifetime of unemployment, which is a danger. This year an allocation of £6 million has been made to the local employment service. Although the same amount was allocated last year, less than £2 million was spent, an issue which I raised last week on an Adjournment debate. The scheme was slow to get started. Some 14 areas should have been set up last year — 12 in partnership areas — but only 11 got started. That scheme, which was recommended by the National Economic and Social Forum, should continue to expand. It is essential that we continue to target the long-term unemployed, a policy which has proved successful in other countries. This scheme targets their needs in relation to education and training and teaches them interview skills to help them gain employment. It has a lot of scope and we should increase the amount of money provided so that it is available throughout the country. It will only be available in 14 areas this year, including Limerick city, through the PAUL partnership, where there has been a positive response to it, although it is in its initial stages.

I welcome the improvements in family income supplement. These are not directly provided for in the Finance Bill but they help people on low incomes provide for their families.

There are other measures relating to corporation tax paid by small businesses which should encourage the creation of employment. Employers who are supported by Leader and county enterprise board job creation schemes will be exempted from paying tax on the moneys they put into these schemes. I welcome the measure on Shannon Airport. This should provide opportunities for mail order services in the Shannon free zone. People in the area have been looking for this for some time. It is important that job creation is the focal point of the BES scheme.

The Bill deals with loopholes with regard to research and development and it expands support for people engaged in this. If we are to create jobs in future, it is essential that there is a high level of research and development and that multinationals which operate here do not just provide immediate short term jobs but, by investing in R&D, ensure a continuity of employment and development of the jobs which are available.

Senator Daly referred to incentives for dockland areas. This comes within the Minister of State's responsibility to some extent. Urban renewal incentives have been successful. Recently, two planning applications were submitted for hotels and other developments in the docklands area of Limerick. There is another incentive with regard to people living over shops, an incentive with which the Minister is familiar. This has not been as successful in Limerick city as we would have liked and it may need to be looked at again.

We should consider incentives for companies who set up in areas where there are high levels of unemployment. Financial incentives are provided for seaside towns and urban renewal. We should also consider incentives for areas where there are high levels of unemployment so that companies would benefit more by setting up in them rather than areas where there would not be such a need for the creation of employment.

Senator Norris raised some of the representations we received on the budget. We were all invited by the Society of the Irish Motor Industry to attend meetings on the motor car industry. A statement issued yesterday shows that new car sales were up by 36 per cent in April. The scrappage scheme has played an important role in that regard. We should continue to support this industry because it is job intensive. Measures in last year's and this year's budgets relating to this industry are proving successful.

Senator Calnan referred to improvements for carers. The carer's allowance needs to be looked at with regard to who may qualify for it. The person being cared for must be in receipt of certain types of benefit, such as the disabled person's maintenance allowance or social welfare benefits. However, these are means tested. I received a letter from the Department of Social Welfare yesterday with regard to a case where a person who has been an invalid for many years does not qualify for these benefits because her husband has a modest income. Her adult child, who has cared for her for a number of years, does not qualify for a carer's allowance because of her father's income and does not have any income except supplementary welfare allowance. I would like this situation to be examined. It is not directly related to the Finance Bill but is related to the budget.

Sections 87 to 100 deal with VAT. The issue I want to raise may be small in economic terms. Theatre companies are VAT exempt. I am a director of a small such company. Because it is VAT exempt, it cannot claim back VAT on its expenditure. It would like to be considered for a low VAT rating. If it buys materials, it pays the full amount of VAT on them, whereas most other small companies can claim back VAT. I ask that this issue be examined.

It is most important that financial measures we take are targeted on the creation of employment. This has been done in the budget and the Finance Bill. We must continue to do this in future budgets. There has been a growth in employment, but the unemployment figures are unacceptable to all of us and we must continue to target this area in the immediate and long term future. Despite the fact that there has been an increase in the numbers at work, we have high levels of unemployment. All the financial measures we take should give the greatest attention to unemployment, whether they be measures with regard to income tax, VAT, PRSI and taxes paid by employers or measures taken to directly intervene on behalf of people who are unemployed, particularly for a number of years.

I welcome the Bill. I agree with those who say we must keep looking at the levels of taxation. Those levels are high. There have been some improvements but we must continue to improve the situation of PAYE workers who bear the brunt of taxation. We must work primarily to reduce the burden on people on lower rather than higher incomes.

I congratulate the Minister on a number of innovations in the handling of the Bill. The decision to publish the heads of the Bill in advance of the Bill itself was a good idea, even if many people found the heads were not detailed enough to be useful to them at that stage. This is a great step in the right direction and I encourage the Minister to go even further. The decision to make the text of the Bill available on computer disc is also welcome. I hope it will not be long before all legislation coming before both Houses and the reports of parliamentary debates are available in computerised form. This would have substantial advantages from an environmental point of view, apart from the question of efficiency. We should be interested in reducing the amount of paper the Oireachtas creates. Every Member would welcome anything which would help the environment.

My problem with this Bill is about as fundamental as we can get. Once again we have before us a weighty tome. The Bill itself consists of 157 pages and the explanation of it takes up 42 pages. Its net effect is to put further patches on the existing tax system and to make it even more complicated than ever. I want to see, and the country desperately needs, a radical reform of the tax system which will simplify it, make it fairer and turn it into a vehicle to stimulate job creation rather than the destroyer of jobs it is now.

Almost every Member mentioned the need for job creation measures and steps are being taken in the Bill in that regard. Successive Ministers for Finance and Governments have refused to grasp the nettle of fundamental tax reform and there is a link between this and job creation. Why has this been avoided year after year? Over this time a succession of weak arguments have been put forward against the notion of reform. For example, it has been said that it would be too complicated to introduce radical reform and that the system would collapse under the strain. Yet, year after year, there are sufficient resources to introduce Finance Bills which grow more massive each year and which often involve sweeping changes in procedures. If half the effort put into drafting the Bill was put into preparing the groundwork for tax reform, a new system could be designed and put into effect within a year. It would be interesting to know how many civil servants, if any, are currently assigned to the task of preparing tax reform. I would not be surprised if the answer was zero.

It has also been said that tax reform would be too costly and we must wait until the country can afford it. However, this argument entirely ignores the nature of the reform required, which is to redistribute the tax burden, not reduce it. It would be wonderful if it could be reduced, but I suggest reform involving redistribution. Effective tax reform could be revenue neutral. The basic problem with the current system is that there are high tax rates and a large number of exemptions and tax shelters. Reform would produce lower tax rates and abolish most of the exemptions and shelters. The result would be a vastly simplified system, which is much easier to understand and fairer in terms of who pays what, but which ultimately raises exactly the same amount of revenue as at present.

The size and complexity of the Bill is an argument against not reforming the system. The current tax system is a happy hunting ground for professional advisers who make a good living from minimising the tax paid by their clients. Every company spends a significant amount of its time on tax planning. Too many business decisions are based on tax rather than driven by the fundamental needs of the business. I am aware of companies which should be devoting their time, energy and effort to making their businesses successful but are spending much of their time examining ways around the tax system.

The complexity of the system creates unfairness because the better off can use it to the best advantage. Tax advice is expensive and most people cannot afford it. One needs resources to invest in tax shelters and most people do not have them. The result is a system which legally favours the better off. The real problem is the way the system spreads the tax burden, and this relates to the point made by other Members, particularly Senator O'Sullivan, regarding job creation. Despite some welcome changes in recent years, including this year, the systems of tax and social welfare continue to penalise the lower paid. This undermines the incentive to work and prices people out of jobs.

I am not another employer arguing for lower wages; we should move beyond the knee jerk reaction which occures when anybody mentions lower paid jobs. The unemployment problem is massive and, although there are signs and directions on occasion, it is not going away. Even when the trends are good, the current level of job creation does no more than just nibble at the edges of the problem. It is little wonder that people are pessimistic about the prospects of full employment ever again in the country. People are depressed about this, and one hears about it regularly. The economy needs high value and highly paid jobs and it is right to invest heavily in creating them. However, it is a tragic mistake to think these are the only jobs the country needs.

There is also a need to offer jobs to people who will never get the high value and highly paid jobs. The only realistic prospect of future employment for many people who are long-term unemployed is a job which is not highly paid. However, the system is tilted so heavily against low paid jobs that people are effectively condemned to life long unemployment rather than encouraged to take such jobs. In the long run, it is right to invest heavily in education to ensure people are as highly skilled as possible but, in the shorter run, training schemes can better the prospects of those who are unemployed. However, education and training, regardless of their intensity, will not create a position in the foreseeable future where everybody in the labour force can secure a highly paid job. It is not realistic to believe otherwise.

If we are realistic we will admit that we created much of the current unemployment problem ourselves, although I do not suggest there is a single cause. Many of the jobs lost in the 1970s and 1980s were in industrial sectors which were dying on their feet or in companies which needed to massively increase their productivity if they were to survive in a world which continues to be technology driven. Those trends are undeniable but they also destroyed jobs. We helped this process along, perhaps unwillingly but definitely unwittingly; we did not realise we were doing so. The people of Ireland also helped to destroy jobs by refusing to accept there was a place and a need for low paid jobs in addition to better jobs.

Jobs were destroyed by a combination of factors and high taxes was just one element. It remains an element, but a relatively generous social welfare system was another; it also remains a factor. These two then came together in employment legislation in a way which actively discouraged employers from taking on people because they found it so difficult and expensive to let them go if the business turned down. However, it also acted the other way by discouraging employees to take up work. It was interesting to read in a newspaper today that the Government's efforts to encourage 18 and 19 year olds to participate in FÁS courses should be reassessed in terms of those who would not even consider taking such courses.

If we set out to devise a system which would squeeze jobs out of the economy, we probably could not have done it better. I do not suggest we should try to create a low wage economy and seek to attract inward investment on that basis. It is a relatively high wage, high value added economy and we must work hard to ensure it remains as such. The inward investment sought should be at the high value end of the spectrum otherwise we will be exposed to a situation which will create more Packard Electrics in the future. However, there is also a need to create low paid jobs and to recreate jobs which, through our efforts, were squeezed out of the economy. If this is not done, we risk turning long-term unemployment into lifetime unemployment for many thousands of people.

The tax system is just one part of the overall jigsaw, but it is vital. If we are serious about creating full employment, we cannot allow the tax system to continue without reform. For this reason, I regret this year's Finance Bill, in common with all its predecessors, seeks to perpetuate the status quo rather than change it. The steps being taken will be in the right direction if we are willing to grasp the nettle of tax reform at the same time. We must recognise the problems and grasp the opportunity to avoid turning the problem of long-term unemployment into lifetime unemployment. I urge the Minister to consider this in preparing the next budget.

I wish to share my time with Senator Belton.

Is that agreed? Agreed.

I am pleased to speak after Senator Quinn and to note that he has taken the same approach as myself to the restructuring of the taxation system. I have always said that there should be a simplified system and would go further than the Senator on this issue.

This year 87 per cent of all our tax will be paid by the PAYE sector. No tax is fair; nobody wants to pay tax and everybody would like to pay less tax. At the same time, the PAYE sector should not be paying 87 per cent of all our tax. This sector pays too much while there are other sectors which pay very little.

While speaking on the Social Welfare Bill, I was told that the idea of simplifying the tax system by merging the PAYE and the PRSI sector could not be considered because PRSI is a form of pension benefit. This is true, but there is no reason why a proportions of one's taxes should not go towards one's pension. People do not pay PRSI on earnings over £26,000 per year. The more one makes above this amount the less is asked. There is no logic in this.

I fail to understand why we are not making changes in this area. As recently as last week, following discussions in my party, we have established a committee to look at this issue. I hope we will be committed to change in the future, especially in the next budget.

Of the 45,000 new jobs created in the past year, only one in 16 went to the long term unemployed. This is a sad reflection on us. Is the system not working, or is working against the long term unemployed? In a speech in the Dáil, the Minister of State at the Department of Finance, Deputy Coveney, announced that the subsidy of £80 per week paid to employers in respect of the recruiting of the long term unemployed is also to be exempt from tax. This subsidy is an exceptionally good idea and long overdue, but the employer is getting the tax benefit. Why not give the tax relief to the employed, in the same manner as the relief provided — an extra £6,000 per year — to the unmarried mother or the deserted wife?

Our tax system works against some for the benefit of others, even in the PAYE sector. Under various Social Welfare Bills we reduced payments to children from 32 different benefits to eight over five to seven years. The former Minister for Social Welfare, Deputy Woods was, and the Minister of State at the Department of Social Welfare, Deputy Durkan, is involved in simplifying this process further.

However, nobody is prepared to treat tax in this way and to grasp the nettle of the restructuring of the tax system. It requires urgent attention. Those earning £12,000 to £16,0000 per year are trying to make a living while being subject to a maze of tax liabilities, allowances and reliefs. I wonder if it has been deliberately created in this complex manner so that people will not understand their tax liabilities.

The self employed are entitled to benefits which, while relevant, are never properly explained to the PAYE sector. For example, I would be surprised if more than only 5 per cent of those in the PAYE sector are aware that they are entitled to 48 per cent tax relief on gross earnings used to purchase pension benefits. Everybody in this sector earning over £17,000 per year is on the 48 per cent tax rate. If they were to purchase pension benefits it would cost them only 52 per cent of every £1 spent. We should sell them to better off people in this category, especially in view of the amount of PRSI paid by the less well off. In this way the less well off would be entitled to greater PRSI benefits.

This can be done in the self employed sector already. Every year people can use 15 per cent of their gross earnings on pension benefits and obtain tax relief at a rate of 48 per cent. I would be surprised if as much as 5 per cent of people in the PAYE sector engage in this, yet the potential benefits which could be gained from such arrangements are enormous. Furthermore, at the age of 60 or 65 they would benefit from a tax point of view because they then get the gross amount of entitlement, despite having only bought such benefits at the rate of 52 per cent in every £1.

There are areas where we can help, especially those earning below £15,000 per year. We want to create more people in this category because we will never have a jobless free society. At the same time we must avoid the situation where only one in 16 of our long term unemployed will get an opportunity to avail of the extra jobs being created.

The economy is growing and doing exceptionally well. Car sales have increased by 36 per cent this April over April 1995. Despite the fact that there are 7,400 ten year old cars, there was an increase of 15,000 new cars sold this April over April 1995. This illustrates that people are buying and are motivated. However, when motivating people it is important to provide the initiative to those getting no push of any kind. These are the people I am concerned about. Why is it that the only way we want to help them is by providing supplements, social welfare benefits, long term unemployment benefits etc.? If we still have over 250,000 unemployed why do we not provide the small amount of benefit to those who would then not have to seek work? Why do we not provide the same extra benefit — the £6,000 tax relief — the deserted wife or the unmarried mother has obtained under the Social Welfare Act in respect of those who are prepared to stay at home?

I have been pushing this issue for many years and make no apologies for doing so. The person in the home, the homemaker, should be getting tax relief and a direct benefit. I am not prepared to be irresponsible on this and must, therefore, explain how these benefits will be funded? The tax system should be restructured so that women who want to stay at home to look after their families can do so and receive a payment. Benefits should be paid to homemakers, whether they are men or women, because this creates jobs for other people. We should not be afraid to look at this area.

Supplementary benefits should be given to low paid workers and to those less well off in our society. People involved in job creation know there is work for those with high technology skills, particularly in computers. This is a fast moving world. More money must be spent on education so that our young people can get a proper education. I know many people who could have done much better had they received an education.

This Bill is relevant to the PAYE sector. We must restructure the tax system so that people can pay tax in ways other than directly from their pay packets. This has been done in other areas. Last week, during a debate on the closure of Packard Electric in Tallaght, an argument was made about the amount of money the workers in Coventry and those in Dublin receive. It was said that the Coventry worker was better off. Although he may have got more money in his pay packet, he had to pay more to the local authority, the water company and the electricity or gas company. If the PAYE sector does not pay tax directly, everyone else must pay indirectly. However, there are not enough people paying tax indirectly. Some people in our society who make more money than everyone else pay less taxes than a person in the PAYE sector. That is why we must reform our taxation system and give the PAYE sector more benefits.

I welcome the provision where people over 55 years of age can get an extra benefit of 20 per cent per year. How many people in the PAYE sector are aware of that? Why are we not selling that provision? I welcome the £80 subsidy per week, but is it being sold to the people? We say the benefits exist, but how do we sell them? The Department of Finance does not sell its benefits.

I compliment the Revenue Commissioners, who have simplified the tax system. They advise people to contact them if they have any problems. They are now more open and this is working to the benefit of all taxpayers. The Department of Finance and all relevant Departments must sell their benefits. There is more need for co-operation between the Department of Social Welfare and the Department of Finance, which must provide money for social welfare payments. The tax system for social welfare payments must be restructured and simplified for those trying to make a living.

I thank Senator Cregan for sharing his time. I welcome the opportunity to speak on this Bill and I congratulate the Minister and the Government on their efforts in planning the year's finances. It is not an easy job to keep the economy within certain guidelines.

Ireland's preparation for the European Monetary Union has not been mentioned during this debate. We have always been enthusiastic about the EU and politicians often speak about its benefits and advantages. Our economy must be in order if we want to join the European Monetary Union. The Minister and the Government had to keep that in mind.

People become restless close to elections and they concentrate on issues such as the taxation system. No Opposition politician will ever talk about increasing tax, so they must talk about reducing it because that sounds good. However, instead of cutting back on public spending as a result, they will manage it better. How will the State invest more money in job creation if they reduce taxes? They will do so through better management. Opposition politicians have the answers for all situations — less tax and less spending. The song, "Happy Days Are Here Again", will be the theme music from now on.

I am glad the Progressive Democrats and Fianna Fáil are moving closer together; they are now cousins. It is nice to see them teeing up the ball and offering sweets to the electorate. The Progressive Democrats continuously mention the residential property tax. They were in Government with Fianna Fáil for a couple of years, but it was never mentioned. However, everything is possible in Opposition.

Sections 10 and 11 increase the £3,000 exemption for income derived from certain leases on farmland to £4,000 for leases of five or six years. Where leases are for seven or more years the exemption will be increased to £6,000 instead of the previous limit of £4,000. This is a welcome provision. The Minister has faced up to the reality that developing farmers who lease land must know in advance the length of time for which they will have the land. It will also be of benefit in the context of certain EU schemes. I also welcome section 11 under which a special measure is being introduced in regard to the valuation of farm stocks on the discontinuance of a farming trade where the stock is transferred free of charge from one farmer to another. This is an incentive for farmers to help young farmers and will help them secure a reasonable income when they retire.

Section 25 provides for the exemption from tax of income from greyhound stud fees. This exemption applies in the horse industry and it is only right that it should also apply in the greyhound industry. That industry — although it might not be recognised — has created much employment and income for small farmers and for people in urban areas who are involved in training and other jobs in the industry. The Irish greyhound is exported throughout the world. The greyhound industry is an important sector in our economy and section 25 of the Bill is welcome.

Section 40 provides that a variety of employment grants will be exempt from tax. They include the back to work, Leader and county enterprise board grants in addition to the £80 per week subsidy for the long-term unemployed. I am a member of a county enterprise board and I am aware of how important it is that small employers and people with a flair for enterprise are given an incentive to strike out on their own. We have seen much of this in recent years and we must give credit where it is due. There is a better atmosphere and people are more determined and confident to set up a business or enterprise. That could not have happened without the incentives that are available to help them on their way. The Minister to a certain extent has seized the opportunity and acted on what is happening. It is important for all Governments to have their ears to the ground and to be of help when necessary.

We talk about full employment but we must look at the employers. The State, industry, agri-business and the services sector are employers. The State can pay X number of pounds because it has a means of making money. It has taxes or can increase taxes, which are the State's income. However, employers in other business sectors can only pay a certain amount because if the product they put on the market is over-priced the business or industry will be in trouble. That is why it is so important that prices and interest rates remain steady. They have remained steady in recent years and that has been an incentive to industry. The increased spending power that is generated in the general population leads to more employment, especially in the services sector. That sector has become most important in recent years for the creation of employment.

I welcome the Bill. One can criticise many aspects of it, but that is true of legislation produced by any Government or Minister for Finance in any country. One cannot satisfy everybody at the same time. Let us forget about full employment and think about more employment. This Government's record on employment is good. People emigrating to seek jobs elsewhere is almost a thing of the past. People still emigrate, but not to the same extent as some years ago. More people are returning to Ireland.

The building industry has never been as good. Members of local authorities have seen the increase in the number of planning permissions — it has doubled in recent years. It was always said by one of our political parties that if the building industry was doing well the country was doing well. At present the building industry is thriving, so the country must be doing well. However, we must keep our eye on the ball in terms of restraint. If the State pays more, the State must tax more. If the State taxes more, interest rates go up and the economy becomes unnerved. We cannot let that happen. I congratulate the Minister. "Steady as you go" is the message and the Minister and the Government are doing a fine job in that regard.

I was disappointed that the Minister did not reduce income tax in the budget. He had a golden opportunity in this budget and he acknowledged that today. The latest OECD Economic Outlook shows that Ireland has the best growth rate of almost any OECD country last year. I agree with Senator Belton that things are quite good. However, if they are so good why did only 40 per cent of the voters of Dublin West come out to vote in the by-election and why did 40 per cent of those who voted vote for a candidate who was promising them an incentive? That candidate canvassed on the water rates issue. Can we not give an incentive to taxpayers?

A previous speaker spoke about the effect of the £1,000 grant for trading in ten year old cars to purchase new ones. It had a marvellous effect on the motor industry. However, we are forgetting about the majority of people. My cheque was unchanged after the budget, so what did the Minister give me? We must talk sense about the Finance Bill and it comes down to what the taxpayer has in his or her pocket. I would be grateful to the Minister if I received a couple of hundred pounds extra each year. However, apparently the money is not there. All I can see is what I receive at the end of the month and whether there has been an increase. There was no increase this year.

The people we must look after are the workers. I doubt that there is a shortage of jobs; I believe there are many jobs to be filled. However, because there is not a great difference between the amount of money one can get when unemployed and the amount one can get for working, there is no incentive. A woman on the "Marian Finucane Show" said it was not worthwhile for her husband to work when he can get as much money staying at home. He can also do a few day's work during the week, which would bring him above the pay levels of the working person.

Senator Belton is right in asking from where the money will come. An incentive should be created for people to work. If the tax rate is lowered a little every year, one would be widening the gap between what the unemployed person is getting and the take home pay of a worker without putting any further burden on the employer. By doing that, people will then have an incentive to work. The Minister who does this will drastically reduce our unemployment levels. We have a crippling tax system and this burden cannot be carried any longer.

A Senator in our party told us he could prove that he would be better off if he stayed at home and drew unemployment benefit. He needs a car to travel here. He would not need it if he stayed at home. For a Member of this House to say that he could prove this indicates the seriousness of the situation.

There are references to personal tax relief in nearly every page of the Minister's speech, but where is this leading? I am not blaming this Minister. I hated budget day because it never put any extra money into my pocket. If it did put money into my pocket with one hand, it took it out with the other. Like everybody else, I want to improve my lot and have a little more money. If we received a little more money in our pay packets through tax relief, the incentive to work would be there. This was proved in last year's budget when the Minister gave a £1,000 subsidy for people to replace their old cars with new ones. The Minister should try to give a similar amount to workers.

Is there any control over prices? The Minister should look at the petrol and diesel prices displayed by the stations on the road to Cork. Diesel costs 49.9p a litre in many towns. However, most of the large oil companies charge 57.9p a litre. This is a difference of 8p a litre or nearly 40p a gallon. When a person goes to a self-service station, he must put the petrol or diesel into his car, wash his windscreen etc. However, an independent garage in Tipperary, Limerick and Kerry may sell it for 49p a litre. When a person goes to these stations, all he has to do is sit in his car while the attendant washes his windscreen, fills his fuel tank, checks the oil etc. These price variations must be examined.

If the Minister told me he would give me an £8 increase in my pay packet I would welcome it. However, my car consumes two tank loads of diesel per week. This is a difference of £7 between one station and another, which is a massive amount of money and nobody is doing anything about it. These prices can vary widely even in the same town. The Minister should look at these price differences the next time he passes through County Tipperary. The profits these oil companies are making are obscene and indecent. If a person can sell diesel at 49.9p a litre and make a profit, what kind of profits are being made by those selling it at 8p a litre more?

There was a motion in this House not too long ago about Sky Television's monopoly of televised sporting fixtures. Anybody with satellite television can now avail of the Sky shopping channel. The amount of goods coming to this country from that channel is unbelievable. Products like jewellery, calculators etc. are being ordered by people. Is there a means of preventing this and do we collect VAT on them? I have not ordered any products from it myself but that business is currently worth millions of pounds. A person can tune into the channel 24 hours a day.

The Minister who reduces our tax rates and keeps reducing them will get rid of unemployment. We had a price commissioner at one time. While I outlined price variations in diesel, I know of other items that may cost 45p in one shop and as much as 55p in another. I am disappointed with the Minister. Despite our booming economy, he did not reduce the tax rates and put a few extra pounds into workers' pockets.

Am I allowed to haggle?

I will show the Minister that I have ended up with less in my cheque after the budget.

Do not kid me altogether.

I welcome the Minister for Finance, Deputy Ruairí Quinn, to the House. Unlike Senator Fitzgerald, I am extremely proud of the fact that, first, the office is held by a Labour Party Minister and, second, he has done a superb job since he assumed that portfolio.

Senator Fitzgerald mentioned in the context of the Dublin West by-election that if you give people what they want, they vote for you. Of course they do. He will remember that when Fianna Fáil decided to abolish road tax on cars and rates on houses, irrespective of the state of the Exchequer, that probably did more damage to this country than a war because there was no economic justification for it whatsoever; it was done to win an election. I considered it then, and consider it now, anti-national. All governments are capable of succumbing to that temptation. Great nations have been brought to their knees by a disregard for the basic rules of economics or by attempting to finance something which was not warranted. The acid test for this country is its reputation among the financial community, not just in Europe but throughout the world.

Of course there are things which need to be done; that will always be the case. Even if the unemployment figures were minuscule, we would want to reduce them further because if you are the person out of work, your perspective of the economy is not favourable. That is human nature. Rather than concentrate on the minutiae of the Budget Statement which has been gone through here for most of the afternoon, I would rather talk about the fact that, if the responsibility for unreal expectations or phony demands lies anywhere, it is in the Houses of the Oireachtas because even when we make demands to lower taxes and increase services, we know we cannot square that circle. Whichever side of the House we sit, it is just not possible to do it. The best you can argue is that priorities are not as you would wish, but, in my opinion, you cannot argue to remove a substantial portion of the tax revenue and, at the same time, fund additional services. To pretend it is possible is fraudulent and all parties have practised it. One would have thought that in the 1990s as we move towards the millennium, more sensible arrangement would be in place than the sort of rubbish which is spoken in these Houses at every budget.

Every demand and submission made to a Minister for Finance prior to the budget has a price tag. The only money available to meet those demands is money lifted from the public; it is the only source of revenue. The Department of Finance, as clever as it is, does not actually produce anything which is saleable. The best it can do is help redistribute the cash on an equitable basis.

I was in Bantry last week in the company of the Minister for Finance and we met a group of farmers. One would want to be a mathematician to follow the grant structure in farming. Not alone is it diverse but it seems to be never-ending; sometimes it depends on whether one has flat land or mountains. There are a myriad of schemes right across the board which everybody believes are crucially necessary to the economic well being of a sector or an individual and, at the same time, there is an overwhelming demand to reduce taxation. The best anybody can do is to restructure priorities, and I believe that in this budget the priorities were as they ought to be, that is, the concentration on long-term unemployment which was demanded by the Opposition in the run up to this budget. When that action was taken, it was passed as a given; then the demand to reduce taxes came on stream.

We now have another phony war on the residential property tax, which raises minuscule amounts. We are talking about a section of the community who are quite well off, whose children are benefiting from free education and who benefit enormously from greatly reduced mortgage rates. There has been a net inflow of funds into that sector and they are asked to pay an average of £500 per household but suddenly this burden, according to the Progressive Democrats, is almost too obscene for them to bear. People must make up their minds.

The PAYE sector pay the bulk of taxation and the majority of them barely have a living wage, but the screams from those who have it rend the air whenever one introduces a modest measure — I think the residential property tax is a very modest tax. These people are aided and abetted by many friends and associates in the media. If budgets are about anything, they are about balance.

Over the last couple of months we have had many debates on crime, the fabric of society, the way things are falling down around us and demands for more gardaí, etc. For instance, the need for gardaí on the Border to secure the State against BSE was raised on the Order of Business this morning and there are demands to put more gardaí on the street of Dublin. I do not know whether people realise this but I recall seeing figures some time ago which showed Ireland is the most policed country per capita in the world. How we use them is another matter of course.

All those Opposition demands without any reference to the money which must be made available to pay for them have devalued the political system and politicians. Nobody believes what we say because the same people who argue for reducing taxes made the opposite argument when they sat over here. Why should anybody believe them? They have advanced no good reason for saying the opposite to what they said less than three or four years ago.

It is my belief that the priorities in this budget were correct. It is my hope that the next budget will concentrate on those who need tax relief most, not those who scream loudest and have friends in high places. We have concentrated on the most defenceless section of society in this budget and I make no apologies for that; I am proud of it. We have put the cause of the long-term unemployed at the top of our scale of priorities. Despite the screams from the Progressive Democrats and their colleagues, I hope the next time the Minister examines the taxation system it will benefit those who need it most, not those who have it, intend to hold on to it, demand all the services a country can give and wish to pay, at worst, nothing, and, at best, a minuscule amount of their income.

Most of what is relevant has been said by colleagues today but there is one area I want to address, that is, some of the sections in Part II, Chapter II, on Customs and Excise.

I welcome section 78, which reduces from 20 per cent to 10 per cent the amount of VAT which must be paid by people who modify a motor vehicle to take account of the disability of a disabled passenger. If I had a chance to talk with my colleague, Senator Rory Kiely, who always advises me on any matters relating to greyhound racing, I am sure I would welcome section 75 as well. It provides that bets which are placed on course at a greyhound race meeting relating to an event or events taking place elsewhere shall not be liable to duty. I am quite sure he could have advised me on the profundities of this and I would welcome it as well.

I am a little more anxious about section 77, which provides that the turnover for the sale of meals shall not be taken into account as turnover for the purposes of calculating the amount of duty payable in respect of a spirits retailer's on-licence. There are tremendous disparities between pubs which serve meals and restaurants. This was all very well when pubs were serving sandwiches and basic meals but nowadays one can find pubs serving high quality meals. There are regulations which apply to restaurants, which do not apply to pubs, regardless of the standard of meal served, and which put restaurants in an invidious position. I ask the Minister to look at this area, which I also mentioned on a previous occasion.

The only other section of which I must take note is section 76, which reduces the duty on restricted gaming machine licences for weekends and public holidays from £240 per annum, or £60 per three months, to £100 per annum, or £25 per three months. I am sure the Minister has a very good reason for reducing the figure of £35 per three months for those who operate the gaming machines only at weekends. However, I hope this is not the beginning of softening up the population for granting a casino licence, of which I certainly could not be in favour.

I have a great deal of respect for those people in Dublin West who sought assurances in this regard, despite the fact that An Bord Pleanála has given permission for a casino to be built in the Phoenix Park complex. I realise the great value of a conference centre within the Dublin area. Having tried to bring conferences to this country, I realise how limited our facilities are. However, we need to look carefully at the situation before we make a decision about a casino which will inevitably lead to others being established. We must decide what we desire from the point of view of employment and tourism. The Minister is aware that there are different sorts of tourism for different sorts of areas. Having been to both Las Vegas and Reno, I have doubts about the suitability of a casino for the Phoenix Park area.

I gather that we already have a reputation for the ease with which money can be laundered in this jurisdiction. I am sure the Minister has done everything he can to make sure that does not take place. However, enormous amounts of money are being made from the drugs industry. There is no point in having money unless one does something with it. This money is obviously being laundered within this State. In most areas where there is a tremendous turnover of cash, such as casinos, one finds the drugs industry entering the scenario as well.

Before the Minister and the Government consider giving a casino licence, I urge them to look at the knock-on effects of any such development in this country. It will start with one, but competition will require that we have more. It is important to remember that the Government is not only running an economy, it is also running a State. Naturally, with the Finance Bill we concentrate on the aspects which affect the economy, but it is also important to remember the knock-on effects any economic developments have within a State.

Regardless of the pleas made regarding the amount of employment that could be generated by a casino, we would be better to resist it. There are casinos near at hand in other parts of Europe and we are in a position to develop a different sort of tourist industry. That tourist industry has already been well catered for and I cannot see how our desire to improve our unemployment figures by having even more diverse employment available will help. It will certainly have an effect on other areas of our tourist industry. No one goes to Las Vegas or Reno to see the scenery. They literally go there for the gaming machines and the shows which provide additional employment, especially to women. However, I am not sure it is the most desirable employment one would want to see in this country.

I wondered why the Minister has reduced the amount of £35 per three months. It is not an awful lot of money, especially if one is running gaming machines, which I gather bring in quite a lot of money. I do not have the benefit of knowing anyone who is involved in this business whom I could have asked over the last few days what difference £140 a year will make to the profitability of gaming machines. However, I hope this is not some sort of softening up process for us whereby at the end of the year we will feel that casino licences are acceptable and available in this country. It is important to remember that it is not just an economy that is being run by the Government but the State.

I propose to share my time with Senator Ross.

Is that agreed? Agreed. I remind Members that the Minister will be called at 5.45 p.m.

I would like to draw the Minister's attention to a couple of areas which are relevant to the Finance Bill. The Finance Bill and the budget usually involve either priorities or choices, particularly when considering areas where one can either raise taxes or spend. It boils down to taking decisions which favour some people more than others.

I want to mention people who are unemployed and getting various benefits from the State. Some of them find themselves unable to take up employment when it is offered because, while in theory they may be slightly better off financially, the benefits may be taken from them. This is particularly relevant if their children or other family members are sick. I ask the Minister to look at this question. A number of people have called to my advice centre about this problem. They may be offered a job, but the difference could be negligible or they may lose a rent allowance, medical card or other benefits.

The other area I wish to address is that of the ownership of houses. We pride ourselves on quite a high owner-ship rate in this country. We encourage it and introduced schemes to enable people to surrender local authority houses. However, there are two aspects which I want to mention. The first is the buying of second-hand houses and the payment of stamp duties. I raised this some months ago on the Adjournment. Apart from one minor amendment, the thresholds have remained unchanged for about 20 years.

As the Minister is aware, one bedroomed apartments, townhouses and council houses are now being sold for around £60,000, yet their owners are asked to pay the top rate. I ask the Minister to be realistic and to raise the thresholds and bands. He should also have a tax-free threshold for those buying small cottages or small rundown houses to encourage the sale of houses under £25,000. Many of these are bought by people who refurbish them, which gives employment.

Property tax is in the news at the moment. The original concept behind the property tax was that it would be levied on owners of reasonably large houses with fairly high incomes. The reality is there has been a property boom in Dublin, in particular, and also in other cities. Someone from Galway told me this morning that a house bought there two and half years ago for £100,000 made over £250,000. In some areas houses which were bought for £80,000 or £90,000 are now selling for up to £150,000. The mark up on those houses is between 30 and 50 per cent, but house owners' incomes have not increased. A person with a house worth £60,000 could have two yachts in the harbour without paying a penny in property tax — although he may be paying other taxes. The Minister must look at this tax in light of the recent property boom and increased house prices. People buy houses which are 80 or 90 per cent owned by building societies, although they may have put some money into them. I ask the Minister to accent the inequitable nature of this tax. People who make the effort to buy more expensive houses do not necessarily have very high salaries.

I support the main thrust of the Finance Bill. I hope this Minister will bring in one or two more Finance Bills before the Government faces the people.

I thank Senator Cosgrave for sharing his time with me. He is sharing in disproportionate measure as I have 20 minutes whereas he had only ten.

I wish to comment first on what Senator Magner said. Whenever Senator Magner welcomes a Bill so profusely I become rather uneasy with it, and this is no exception. Senator Magner welcomed what this Bill and the philosophy of the Government does for the unemployed. He said he made no apology for the fact this Finance Bill, and the Government in particular, had tackled the problem of long-term unemployment as a priority.

Two comments should be made about that. This Government does not know who is long-term unemployed and, second, it does not seem to have solved the problem, according to recent figures which indicate one sixteenth or less of the long-term unemployed are getting new jobs. The Government does not know who the long-term unemployed are because it has two means of counting them, the labour force survey and the live register, which produce figures which are about 80,000 apart. Those like Senator Magner whose hearts bleed for the long-term unemployed——

Did the ring cost £1.75 million?

——will have to be more precise about those for whom their hearts are bleeding because nobody knows how many long-term unemployed there are. The first priority in tackling a problem is to identify those who are suffering from the problem. Senator Magner's party——

And the Senator's party.

——my colleagues in coalition and my friends, have failed to do this. I accept Senator Magner has a heart of gold and a great deal of sympathy running through his veins. However, before he portrays this heart in public he should decide who the long-term unemployed are, because we do not know and the Government cannot tell us.

I can tell the Senator they were not at Sotheby's sale.

I will now tackle the subject of residential property tax. I was interested to hear Senator Magner, as a spokesman for the Labour Party, say that tax raised very little revenue. He is correct — it raised £12 million last year and is expected to raise £12 million this year, although I suspect that estimate will have to be revised because of what Senator Cosgrave described as the property boom. The problem with that is as much a political problem as anything else and one which will have to be faced by the Minister for Finance more than anybody else in his constituency. I applaud his courage in continuing with the residential property tax in a situation which must be politically difficult for him.

The tax is penal because it concentrates very large sums of money on a very small number of people. It is not really a property tax but an income tax. Those who come just below the income thresholds are penalised to an utterly unfair extent. The only way around it is to abolish it before the general election due in November 1997. I do not think the electors will welcome bills from the Revenue Commissioners on 30 September 1997, just before the polls. I do not believe the Labour Party, whose little creature this is, would be very happy to face the people of Dublin South, Dublin South East or Dún Laoghaire when their election pamphlets are dropping through letter boxes accompanied——

I thought Senator Ross voted for this.

——by demands from the Revenue Commissioners.

Acting Chairman

Senator Ross, without interruption. Senator Magner had is chance.

Thank you, and a very good job he made of it.

Senator Ross voted in is House for that provision.

Acting Chairman

Senator Ross, without interruption.

I am going to write to the Sunday Independent about this.

It will not be printed.

Acting Chairman

Senator Ross, without interruption.

I will move on to two specific matters because time is short — it is a matter of what Senator Magner called priorities. Having talked briefly about residential property tax, I wish to ask the Minister some questions about the BES. A large amount of this Bill is devoted to the BES. It was introduced as a pilot scheme in 1983 which was not taken up by many people for a long time. It has now been greatly expanded and is supposedly being introduced to create jobs in certain areas. The cost to the Exchequer of this scheme is apparently already about £200 million. The estimated number of jobs created is about 9,000. The cost per job of this scheme, if those figures are correct, is indefensible, partly because job creation cannot be put down to the BES specifically because we do not know whether those companies would have created jobs anyway. I doubt very much whether overall it has been worthwhile. In the circumstances of the 1980s it was probably worth a try, but it shows the desperation into which this Government has sunk in its attempts to create jobs that it continues with a scheme of this sort which is not working for the unemployed, although it is working for those who promote it.

The cost of this scheme is horrific. The Minister's own company, the ICC Bank, raised £8 million this year under the scheme. It is doubtful how many jobs this will create, or whether it will save any companies in distress, and those who are getting the money may have been able to borrow it elsewhere.

The one certainty in this scheme is that the ICC Bank will make a fortune out of it. Investors will be charged 3 per cent of £8 million, which is £240,000. That is quite a lot of money. The Minister ought to examine the fact that companies to which ICC gives this money pay 8 or 9 per cent, which is approximately £720,000, before or when they receive it. ICC does not lend the money, because it is the investors' money, and ICC is only making a transfer. The BES is a nice money earner for banks that are taking no risk. That is not a sin, but it is something which should be examined in the light of this scheme. Who is benefiting from this scheme and are those people and companies that it was meant to benefit getting anything out of it? I do not believe the BES has created any jobs worth speaking about, or that companies getting money from it — many of which I have spoken to — would not have been able to borrow it from banks at commercial rates.

The promoters, who are making a fortune at no risk, say that companies are getting cheap money over a five year period. They say they are borrowing at 5 or 6 per cent, but the reality is that they are not borrowing because that requires a lender and there is no lender in this case. It is simply a transfer of one person's money to another's money and that was not meant to happen.

For example, when the scheme was set up it was not meant to be exploited by banks at no risk, although there are legal and other fees in that area. Companies whom the Minister is undoubtedly trying to help are being given far less money than was originally intended because of what is being taken off by the promoters. This is not restricted to ICC, which is just the most obvious example because it takes all the money up front in the first year. ICC can, there-fore, put all that money on deposit and earn interest on it over five or six years.

Not a very smart option these days.

It is not a very smart option, but if you are taking no risk whatsoever with other peoples' money it is not a bad one either. It amounts to £40,000 a year for doing nothing, which is not too bad. Maybe they could find a better use for the money, but I doubt it.

You could buy a ring with it.

There are misleading areas in this scheme. Investors are discontented year after year because the money is not initially put in within the period they expect it to be. It sometimes takes a year to put it in and when, or if, they get their money back it is six years, not five years, but they are not told this in any of the prospectuses. That means that many of their calculations on repayments go completely wrong. They know it is risk money; but they expect that if the investment itself does not go wrong the investment should be made in time, yet it is not. The banks do not have to accept any liability in this case. It is a scheme which is basically redundant in that it does not create the employment it was meant to.

New restrictions in the Finance Bill, announced in the budget, were imposed upon these companies and the promoters to get certification from Forbairt or Bord Fáilte. How many applications were made to Forbairt by companies for certification and approval? Making an educated guess, I would say that not a single application to Forbairt was turned down. If any were turned down by Bord Fáilte it would be a minimum. The certification procedure is more a formality than a real examination of the prospects.

The criteria for the scheme — that there should be a reasonable prospect of sustainable employment — is so subjective that it cannot be defined in any meaningful way. It means that any scheme can get through because of the criteria laid down in the budget. The Minister may correct me, but I think the criteria is that there is a reasonable prospect of sustainable employment, which there is for any project. In achieving its objectives the BES scheme is to a large extent illusory.

Employment and public spending are closely related. Like other Members of the Oireachtas, I received a document from the Department of Enterprise and Employment. I submit that this document, like most documents we get in this House, is a complete waste of money. This one is called Promoting Employment. Now that is an original idea for a Department to issue a pamphlet on. I could not believe it. The subtitle is Strategic Management Initiative. These are three new words which have come into the language of Government and bureaucracy in the past five years. Everybody is using them, but they do not mean anything. The document is in full colour and intended to lead Members of the Oireachtas to believe that the Government is doing something about employment.

Which word does the Senator not understand?

I do not understand any of them. It goes on to state its "mission, objectives and organisation". I do not know which Minister or Minister of State introduced this. It is one of the most absurd productions I have come across in my long time in this House. I rang the Department to find out what it was about; I was told it was its mission. I said the Department had this mission since the Minister, Deputy Quinn, was there.

Who did Senator Ross ring? Was it the Taoiseach?

Civil servants are entitled to anonymity. The spokesperson said this was its mission. I said this had been its mission since unemployment started but the spokesperson said they had relaunched their mission, which was to promote employment. I asked how many documents had been produced and I was told it was written in the document that 2,500 had been printed. The spokesperson could not tell me the cost but he will get back to me.

There is nothing new in this document that I could find; it is a relaunch of what we had before by the Department of Enterprise and Employment. I am sure the Minister, Deputy Quinn, if he was still there, would not have gone to the trouble of issuing it. I asked the spokesperson what was new in it. He asked me if I knew that the Taoiseach had issued the Strategic Management Initiative last week; I said I did and asked if this was the Taoiseach's document. The spokesman said no, this was his little brother's response to it — that is not exactly what he said but it is what he meant. This is the Department of Enterprise and Employment's response — 2,500 pamphlets, printed in full colour, for Members of the Oireachtas to read.

I thought the Senator's party believed in family businesses.

It obviously does. I asked if every Department was going to issue a response to the Taoiseach's Strategic Management Initiative mission objectives statement, but the spokesperson said that was up to each Department. If we are lucky, in the next few days we will receive something similar from every Department, entitled "Promoting Employment", and by the end of the week we will believe that is what each Department is doing. Taxpayers' money and the time and apparatus of the State are being wasted producing this propaganda.

People buy the Sunday Independent——

They have to pay £1 for it, but I got this for free. Buying a newspaper is voluntary but I had to pick this up. Some 345,000 people every week buy the Sunday Independent. The Department only bothered to issue 2,500 of these documents. Why? No one is going to read it.

How many trees have been killed for Senator Ross?

Acting Chairman

We are discussing the Finance Bill, Senator Ross.

I am glad you pointed that out, Sir. This is a time for special pleading and everyone has done some today. People in this House are good at that and the further left they are, the better they are. Even when they are in Government, they do it; they do not believe it is going to happen but they have to say it. I have never heard how we will pay for these projects. I believe taxes should be cut and I am glad Senator Magner shares that view. However, where they are cut, they should be paid for somewhere else. Whereas Senator Magner articulately speaks about the need to cut taxes as the next priority, he never suggests where he will get the money.

No, he wants to give away much more money than he brings in.

I have Senator Ross in my sights.

The Minister should look at some of the State agencies. The FÁS budget is £400 million per annum, not bad for an agency which cannot create any jobs. The Forfás budget is nothing like as large as that. We have a plethora of State agencies doing the same thing and not producing jobs. The budget of these agencies should be not merely examined by a committee. In next year's Estimates, we should cut the FÁS budget to £150 million and tell it to start again. FÁS may not know how it will save £250 million but it will have to because it has failed, as have Forbairt and Forfás — why do these agencies all begin with F and end with S? The Minister should consider serious cuts in public expenditure before he concedes to those who make unrealistic claims on taxpayers' money.

In the limited time available I will not be able to deal comprehensively with the various contributions but on Committee and Final Stages tomorrow we will be able to have detailed discussions. To take the last speakers first, we will address some of the issues raised on the BES.

In this Second Stage reply I will put this debate in context, as the first Labour Minister for Finance in the history of the State. I listened to part of this debate and read some of the comments; I had the honour of coming in at the end of Senator Fitzgerald's contribution. We cannot look at the Finance Bill in isolation. One must regard it in the context of the Book of Estimates and the budget — one aspect of the Bill is that it gives full effect to the budget with other measures.

To judge by Fianna Fáil and Progressive Democrat contributions, one would think this country was in a crisis, that Labour was responsible for everything which had gone wrong and was not in any way connected to anything which might have gone right. I would remind Senator Fitzgerald and Senator Honan of the early days of 1993, when we came into Government, Deputy O'Malley left the then Department of Industry and Commerce and Deputy Reynolds left the Department of Finance. The currency crisis had been grossly mismanaged; interest rates for businesses were over 20 per cent before the interest rate crisis and for overnight and working capital, small businesses were paying 15 to 25 per cent, depending on what bank they were dealing with or their own position; mortgage rates were 14 per cent on 1 January 1993 and confidence in our indigenous industrial sector was at an all time low. Against that background Labour came back into Government and I had the honour of and responsibility for creating the Department of Enterprise and Employment from the Department of Industry and Commerce and the Department of Labour.

In response to Senator Ross, we had and we retain a clear economic strategy in respect of what we need to do in this economy. Numerous reports, from Telesis to the present day, have consistently focused on the need to concentrate on regenerating and creating conditions that would enable the indigenous industrial sector to prosper and grow. Every measure I have taken, in either the Department of Enterprise and Employment or in my two Finance Bills and budgets, has been in that direction. The tax regime for small business has never been as favourable as it now is — the small business task force report identified this. The capital acquisitions tax regime, which threatened the survival of family businesses when moving from one generation to another, was most onerous. All analyses demonstrated that what was lacking in the Irish economy was an indigenous base and multinational companies were not seen as the solution — Senators can read the analysis in the Telesis report. We focused on the indigenous sector from a variety of starting points so that the situation would improve. I confess that we have not improved it, but transformed it. CAT is not the threat which drove every family firm of any consequence into a trust which would cause problems in the future. That problem has been solved but there has been no recognition of that.

As regards mortgages, there is a very competitive environment which has partly led to the property boom to which Senator Cosgrave referred. Was there any reference to that? The reduction in mortgage rates amounts to an extra £20 per week for those repaying a £50,000 mortgage at 14 per cent. These gains were made because interest rates came down. Interest rates came down because we managed the economy responsibly, carefully and prudently, something which no Labour Minister is supposed to be able to do — some would say without imagination.

At the same time we increased social welfare rates above the rate of inflation. We abolished university fees, which were a significant factor for many people in terms of household expenditure — a much bigger mountain to climb than RPT. We doubled in virtual terms — 45 per cent to be exact — the children's allowance, while at the same time we managed to be the best performing economy not only in the European Union but in the OECD. Senator Ross referred rather humorously to the question of promoting employment. No other Government in the OECD can claim the same rate of employment creation as this Government. I will not claim the credit for that because it would be preposterous. I know precisely what the arguments would be from all sides of the House and commentators outside if we were at the bottom of the league table in the OECD. We would be blamed for that.

I would like to talk about the campaign launched by the Progressive Democrats to which Senator Honan referred. The Progressive Democrats made a rather seductive proposal that we could have had a tax bonanza of enormous proportions if public expenditure had been curtailed to the rate of inflation growth since 1992. It quietly passed over the period when it was in Government. The Progressive Democrats, because of their unique influence on Mr. Haughey, were able to get what they wanted.

In terms of expenditure, during the time the Progressive Democrats party was in Government, numbers in the public service increased on average by 3,500 per annum. The cost of that per annum is £70 million. That was the momentum which we inherited. On top of that, because it had reneged on its pay commitments in the Programme for Economic and Social Progress, we were left with no option but to bring in the 1 per cent income levy to get over the residual bill left on the desk during our first year in Government. That was an unpaid bill left behind by the Fianna Fáil-Progressive Democrats Administration.

When we came into Government we found waiting lists in our hospitals. Consultants in Cork would not do the job, so we had to fly people by helicopter to Belfast. When the consultants realised that competition could work in medical services as well as in other services, the prices came down and the jobs were done. There were also local authority housing lists. I do not expect that every Senator will be familiar with local authority housing lists but some of us are acutely familiar with them. There was a deterioration in the pupil-teacher ratio. If the Progressive Democrats got their way and we did what they suggested we should have done, then waiting lists in hospital would be three times the length they were in 1993 when we came into Government. Some 50,000 people would be waiting to get a basic roof over their heads — they would not be worried about RPT. The pupil-teacher ratio would have dramatically declined if we had not scooped the dividend as result of the demographic cohort by putting primary school teachers into disadvantaged schools, in particular.

The suggestion that we have somehow blown a fortune in public expenditure is a lie, but, like all lies, it is very seductive. I have met well off people who are totally against public expenditure — until the middle of the night when their child gets sick and they believe it might be meningitis. They rush to Harcourt Street hospital and they demand to know why it is not full of doctors and nurses. They do not think of public expenditure but of saving their child. The same person will say it is desperate that they cannot get their not so elderly parent who is suffering from Alzheimer's disease into a home and that the local authority or the health board will not take this responsibility off them. They want a place to put somebody who regrettably has Alzheimer's disease and who cannot care for themselves.

A great seductive lie is being put about by the advocates of tax reduction, who claim there is none in the two budgets we introduced. The biggest lie is that a fortune could have been saved and put into people's pockets and that they would have spent that money thus creating jobs. That is the depth of the philosophical economic thinking behind the Progressive Democrats, and others, argument. We have been over that ground before. We put a lot of taxpayers' money back into peoples pockets in 1977. Many jobs were created in Taiwan, Hong Kong and Japan because people bought consumer imports.

The thrust of this Finance Bill is to give effect to the budget. The tax changes in the budget — there will be more next year — concentrated on consolidating the indigenous base of Irish owned family business and Irish industry, something which has been consistently neglected. We have not given families a present of money because of inherited wealth. We have said that they will get the full 75 per cent benefit if they leave the shares in the company for ten years and that if they want to cash their winnings earlier, they will pay full tax. That addressed a problem which had been consistently presented to different Ministers for Finance but which had fallen on deaf ears.

The tax reductions in this Bill are unashamedly focused on the low paid. The tax wedge for the long-term unemployed, in particular, means that the salary which they will get will be in the lower paid end of the scale. In contrast to what Senator Ross said about us not knowing anything about the long-term unemployed, we know their location, age, educational profile and a range of statistics which are published. We set up the National and Economic Social Forum in which a lot of this research was done. The critical relationship is education. That will not do anything for somebody of 25 or 30 years of age who wants to get back into the workforce. As Senator Cosgrave said, if they go back to work they will get a little more than what they already get and will lose their medical card. Senator Fitzgerald will agree with that. This Bill allows that person to take the job and to keep their medical card for three years.

We have heard repeated reports about people who are 35 years of age and only have a primary certificate and that no employer will consider them because they want somebody straight out of school with a leaving certificate. From 1 July this year that person carries with them an £80 per week attraction for an employer to take them on. Many employers will do so because the steadiness of somebody that age is a benefit, notwithstanding the fact that they do not have the work habits and the education of an 18 or 19 year old. We should go through the details of the Finance Bill rather than listen to the screaming headlines on the lies in relation to tax.

Long-term unemployment is an enormous problem. It is as bad, if not worse, in parts of Britain as it is here. Yet Britain has done everything the Progressive Democrats wants us to do. It has sold the family silver. Britain is the only country in Europe besides Norway which has had North Sea oil since the early 1970s. There is not a single mile of road or a single object in the economic landscape of Britain which was financed by North Sea oil. The Conservatives did what the Progressive Democrats would like to do. They sold British Gas, the TSB and a whole raft of what we would call semi-State companies at discount prices in the hope that they would have a shareowning democracy. Within a short period all the shares went back to institutions. As Senator Ross will agree, virtually 90 per cent of all shares in Britain are held by institutions, not by individuals, which was the objective of Mrs. Thatcher.

We know whether the model works or not. The Progressive Democrats' answer does not solve the problem of long term unemployment. In many cases it simply ghettoises it. We are managing the economy in a careful, prudent, cautious and, consequently, boring way. We are so boring we are top of the league and we do not make news. We are so boring that, along with Luxembourg, we are the only country which is deemed under the Maastricht criteria to meet the qualification standards for entry into Economic and Monetary Union on 1 January 1999.

We are not having an economic debate in this country at present but an economic harangue from people who refuse to look at the facts, who promote the big lie because such lies are always seductive, and who refuse to recognise there have been tangible benefits of a social gain kind. These benefits have been driven not by bleeding hearts but by the need to put stitches in people's pockets so they do not fall out of the system and have rights to places on hospital waiting lists, to local authority roofs over their heads and to have their kids taught in schools where teachers can cope with the number of children in classes. This is not driven by bleeding hearts but is common sense, because those healthy, housed and educated people will form the core of a workforce. We will not have a workforce which will be able to compete internationally unless it is educated. The alternative is to go down to sweatshop labour rates, which the Tories are trying to do in Britain. We refuse to go down this road, it is not open to Europe and it has not and will not work in Britain.

At the end of the day we must manage the overall macro-economic components of the economy and we are doing so better than any previous Administration. We would have to go back to the late or early 1950s to see anything comparable in terms of the level of growth we are achieving at the same time as the lowest level of inflation and job creation. However, we will not read about this in the Sunday Independent because it is not news. We will examine the details of the Bill on Committee and Report Stages, but on Second Stage we should look at the big picture. We are the best performing economy in the OECD, we have the highest rate of net new job creation, we have social protection, we are making social progress, there will be no more university fees and we increased children's allowances by 45 per cent. We achieved all this at the same time. The big lie from conservatives was that Labour parties in Government could never manage the economy and provide social improvement at the same time — it was either one or the other. We have done both and that is getting up their throats.

There are two technicalities which I must bring to the attention of the House. First, a minor correction involving the realignment to the margin of the text at page 92, lines 18 to 25, is required to clarify that it relates to the whole of the definition of "qualifying lease" and not to paragraph (b) alone. Second, the reference at page 20, lines 27 and 28, to "the Local Authority (Higher Education) Grants Acts, 1968 to 1992" should be corrected to read "the Local Authorities (Higher Education Grants) Acts, 1968 to 1992.

Acting Chairman

I understand from the Cathaoirleach that he has directed the Clerk to make the appropriate corrections.

Question put.
The Seanad divided: Tá 25; Níl, 15.

  • Burke, Paddy.
  • Calnan, Michael.
  • Cashin, Bill.
  • Cosgrave, Liam.
  • Cotter, Bill.
  • Cregan, Denis (Dino).
  • Enright, Thomas W.
  • Gallagher, Ann.
  • Hayes, Brian.
  • Henry, Mary.
  • Howard, Michael.
  • Kelly, Mary.
  • McAughtry, Sam.
  • McDonagh, Jarlath.
  • Magner, Pat.
  • Maloney, Seán.
  • Manning, Maurice.
  • O'Sullivan, Jan.
  • O'Toole, Joe.
  • Reynolds, Gerry.
  • Ross, Shane P.N.
  • Sherlock, Joe.
  • Taylor-Quinn, Madeleine.
  • Townsend, Jim.
  • Wall, Jack.


  • Bohan, Eddie.
  • Byrne, Seán.
  • Daly, Brendan.
  • Dardis, John.
  • Fahey, Frank.
  • Fitzgerald, Tom.
  • Honan, Cathy.
  • Kelleher, Billy.
  • Lanigan, Mick.
  • Lydon, Don.
  • McGennis, Marian.
  • Mooney, Paschal.
  • Mulcahy, Michael.
  • O'Kennedy, Michael.
  • Wright, G.V.
Tellers: Tá, Senators Cosgrave and Magner; Níl, Senators Fitzgerald and Kelleher.
Question declared carried.

When is it proposed to take Committee Stage?

Tomorrow at 10.30 a.m.

Committee Stage ordered for Thursday, 9 May 1996.