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Seanad Éireann debate -
Thursday, 9 May 1996

Vol. 147 No. 5

Finance Bill, 1996 [ Certified Money Bill ]: Committee Stage (Resumed).

Debate resumed on recommendation No. 5:
In page 14, line 11, after "alone", to add "or with another person who has attained the age of 65 years".
—(Senator Daly.)

This innovation is imaginative and responds to a deep concern which was expressed last year when the threats to people living on their own throughout the country worried a large number of people. There is no ideal answer to this. It is like people looking at their gardens and deciding that the task of doing all the weeding is so big that they will not even start. If we are to solve something, we should start in a small way and attempt to nibble at it. Otherwise, we will never start. In this case the Minister has started. The ideal answer involves Community Alert, Neighbourhood Watch and family involvement. The modern technology being developed, particularly by Telecom Éireann, of radio links and alarm systems will help put many minds to rest. This imaginative innovation deserves congratulations. The points which have been made are well worth taking into account. This scheme is worth pursuing and I am sure the Minister will pursue any additions needed to improve it.

The Finance Bill must be taken in its entirety. An erroneous criticism, which has been made with great frequency by Fianna Fáil and the Progressive Democrats, is that the Government and I are not capable of controlling public expenditure. Giving people grants to install alarm systems is a step in that direction. Ireland has suffered from a grants culture for years and if we want to move towards an enterprise culture, which will be this country's saviour in the future, we must try to wean people off the grant mentality.

As it involves weaning people off and not cold turkey, the easiest way to do this is to move towards some form of tax incentive. I understand the points made by Senator Fahey and Senator Daly, but I do not accept that the process, which is painful, slow and without success in many quarters of the country, must be reverted. We must move people in the direction of doing something for themselves and assisting them in that regard. There is a belt and braces approach in that money, albeit a small amount, is available for those who, through no fault of their own, are unable to help themselves.

We do not know how well the system will work. Senator Quinn is correct. A start must be made somewhere and the cost provision must be modest. The total cost provision in expenditure terms from the Department of Social Welfare for security related measures for the elderly, based on the task force report, is approximately £8.5 million. It is estimated this measure will cost approximately £2.5 million in the current year and £5 million over the two years it will run. If the response is much greater than anticipated or if anomalies are thrown up — reference was made to some of these and it may not be possible to foresee others — the scheme will be refined. However, a start must be made somewhere. The various Telecom Éireann alarm schemes are eligible, including the pendant scheme to which reference was made. The Revenue Commissioners deem these as qualifying for the tax measures.

In relation to the point made by Senator Daly, this country has in many respects been cursed by a grant mentality and we must move, however slowly, from that to more self-reliant communities. Tragically, isolated communities are becoming an increasing phenomena across Europe. It is not peculiar to the west — 65 to 70 per cent of the population of Europe now lives in urban areas. The drift from the land is accelerating and this is compounding the problems of isolation and economic infrastructure in rural Europe. Modern technology and community alert schemes, such as those proposed in the Bill, are ways of trying to offset some of the negative aspects of the drop in population. If Senators have the possibility of influencing local communities to run schemes which will connect people through a community alert system in their areas, I encourage them to do so.

Is the recommendation being pressed?

It will be pressed if we do not make progress on this matter. I do not disagree with the Minister about the grant mentality. However, I disagree with him about another aspect. The Minister said 100,000 elderly people are living alone, but the number paying tax is 10,000 or 12,000 and approximately 90,000 people——

The Senator has missed the point. I presume they have sons, daughters, nieces and nephews who might care sufficiently about their isolated relative to help pay for it.

That is debatable.

Otherwise they have a real problem.

They have a real problem. This is why they are being attacked and beaten up in their homes.

They have a real problem.

This matter has been debated at length. Is the recommendation being pressed?

I appreciate the Minister is from Dublin 4 or thereabouts, but I am amazed he is so naive about the reality of living in isolated parts of rural Ireland.

The Senator is being repetitive. The point has been made on a number of occasions.

The scheme is not worth a fiddler's to people in isolated areas.

Recommendation put and declared lost.

I move recommendation No. 6:

In page 14, subsection (2) (a), line 29, to delete "£800" and substitute "£1,600".

Recommendation put and declared lost.
Section 5 agreed to.

I move recommendation No. 7:

In page 14, before section 6, to insert the following new section:

"6.—If a claimant proves that for the year of assessment he/she is employing an individual to care for his/her dependent children, the income tax to be charged on the claimant for that year of assessment shall be reduced by an amount equal to the appropriate percentage of the payments proved to be so made.".

I am still in rural Ireland, counting the charges.

The Minister will always be welcome.

I am not in a position to accept the recommendation for a variety of reasons. The issue of giving tax relief for child support and help in the home is enormously complex and was extensively discussed during the passage of the Bill in the other House. It was also extensively debated by the tax strategy group, which comprises officials from the Revenue Commissioners, the Department of Finance and the three political parties in Government. This group was formed by the previous Administration and continues under this Government. Early in the year it starts considering and evaluating at length taxation proposals from political and other sources. It gets technical input from the Revenue Commissioners regarding the practicality and administrative implications of the proposals and from the Department of Finance in relation to their cost.

The issue of child support and taxation relief for childminders has been examined in considerable detail. However, we are not in a position yet to come forward with a scheme which will stand up or meet the needs of a variety of constituency interests. For example, two people are working. They get married and have a child and one decides to stay at home to mind their child. Another example is a couple in exactly the same circumstances who both continue to work and decide to hire somebody to look after their child. Many problems involving inequality in the household arise, specifically regarding the Constitution and the recognition of the contribution of women in the home, although this is a non binding part of the Constitution. For example, should the marriage allowance be increased for a couple where the wife — it is invariably the wife — chooses to stay at home to mind the children?

One is back to the Murphy judgment regarding equal tax allowances, and attempting to give tax relief in that sense causes all types of complications. What relief is given to a mother who has a career but who decides not to work outside the home for a number of years? This poses enormous difficulties and when one runs it through one's mind, one begins to realise the legal complications associated with it.

Another aspect involves trying to bring people in the black economy into the white economy in terms of childminding. This area is fraught with considerable difficulties. People either have somebody come to their house or alternatively they leave their child in a house to be minded on their own or with other children. The cost of a person in the black economy, who is in receipt of social welfare and receiving payment for minding children four days a week, coming into the white economy is enormous, given that a condition would be that they must be in the white economy. They would then lose all their associated social welfare benefits. The cost of tax relief required to fund a single person on unemployment assistance, who is receiving approximately £70 a week plus entitlements, taking a job as a childminder is enormous in real terms. In addition, there are complications. Many people are receiving money to mind children.

Why would the tax relief be enormous?

I am informed that, in black economy terms, the going rate for having one's child minded is approximately £80 per week. This is in on top of what the person gets under the social welfare system, which is approximately £70 per week, plus rent allowance, if they are claiming it, and other entitlements. For that person to come out of the black economy, to sign off from social welfare, to work as a child minder and to have the same amount of money in his or her pocket at the end of a week, close to £180 would be required. To provide tax relief to enable somebody to fund charges of £200 per week, as against a charge of £80 per week, becomes very expensive, and this is before addressing the legal difficulties of discrimination in the tax code regarding a mother who had been entitled to a working income, but who opted to stay at home and mind the children while the husband goes to work. It is constitutionally frail. Our legal advice is that it would not stand up in court. If we lost we would be into a massive income allowance again, which would distort the tax system in a horrendous manner. I was committed to this. There are many arguments why it should be encouraged.

Another aspect that was considered was the provision of tax relief for creches. The cost of a creche can range from £40 to £60 per week. I do not know what the cost of our creche will be when it is operating, but it will operate on a cost basis. In most workplace creches, the employer or employing organisation provides the capital infrastructure of the creche and does not charge rent, but the operating costs must be carried by the participants. The cost is usually around £40 to £60 per week, depending on numbers. To provide tax relief on that runs the difficulty of discrimination against those who stay at home.

However, many people have made their own private arrangements. They do not want their children to attend a creche. I am sure Senator Henry, with her medical expertise, will confirm that one of the quickest ways of exposing one's children to every disease in circulation is to send them to a creche because they will pick up everything very quickly. Many parents do not want this, nor do they want their children to be minded in a creche; they prefer to have a neighbour do so. People make many informal arrangements for minding their children. As soon as a tax concession is introduced to support that, all these kinds of anomalies will be produced.

I am sympathetic to the sentiment behind the recommendation. We have not closed the book in respect of it. If we want to improve the position of women in the workplace, which the Government is committed to doing, we are going to have to make it easier for parents — I mean both parents — to enable this to happen. We do not have adequate child support systems in place to help working parents, but our current state of knowledge and ideas on the issue have thrown up more problems than solutions.

In the other House, Deputy Cullen, whose wife is Danish, remarked that there is also a growing revision of opinion on this issue in Scandinavia, where people have had the experience of a generation of intensive creche and childcare facilities. Children in Scandinavian countries go to creches very early in life and, on reflection, there is a growing view that this may not be the best way to provide support for working parents.

My long response to the Senator is an indication that we have looked at this issue in considerable depth and with sympathy. However, we have unearthed more problems in terms of the tax instrument than solutions.

This is very disappointing because so many women's groups have looked for tax reliefs of the kind suggested by Senator Fahey. The Minister enumerated many problems regarding the introduction of such relief. I would have thought it would have provided more employment, especially in the services industry.

Would the same problems arise with regard to providing tax relief for elder care, an issue which was discussed at the Oireachtas Joint Committee on Women's Rights? At least with children one can define the length of time where care may need to be provided. However, many people who may be in their fifties, especially women, may have to give up well paid jobs to return home to mind an elderly relative whom they think may need care for three months, but require it for longer. One woman who left her job ended up minding her elderly relative for nine years and was nearly as much in need of care at the end of it as the person she looked after.

We are looking at the possibility of getting tax relief for such people so that they could employ somebody at home and stay within the workforce themselves. With an elderly person one has little knowledge as to how long they will require assistance. Will the same arguments against the provision of relief be made?

I appreciate the Minister's response and I accept the complexities of this proposed change. I put down this recommendation because if we are serious about equality for women who want to pursue their careers, there should be some acknowledgement in the tax code, such as the change proposed here, especially when one considers the very high levels of tax paid by couples where both partners are working.

I admire the Minister's frank admission that he cannot afford to interfere with the black economy which is booming. I dwelt at length on Second Stage on the need to make a fundamental change in the way we assess inability to work of the long-term unemployed. If we pay somebody unemployment assistance we do it on two principles: the first is that they are available for and seeking work and the second is that they do not dare to take on any work while they are in receipt of assistance. As the Minister has acknowledged, this leads to the black economy which we all know is rampant.

It is time for a fundamental and radical change. Some people in receipt of unemployment assistance who are long-term unemployed and are likely to remain so should be allowed to take up employment opportunities of the kind we have been discussing while they retain their unemployment assistance. They would then be paid an additional amount to work a certain number of hours each week. This would overcome the problem which the Minister acknowledges exists. It would also bring common sense into the way the taxation and social welfare codes run against each other.

It would be useful if there were more frank admissions in regard to the system, similar to that made by the Minister, and an acknowledgement from officials and politicians that there are ludicrous situations which should be changed, even if such change is contrary to the principles for which we all stand. I ask the Minister to take on board this suggestion to tackle the problem of long-term unemployment rather than trying to find jobs that are not available and which, in any event, are not worth people's while to take up.

With regard to Senator Henry's remarks, in its review of the issue of childcare, the Second Commission on the Status of Women did not recommend tax deductions. It said that what was needed were more child support systems, such as creches in the workplace. This seems to be the approach which should be taken. Some companies — such as Fruit of the Loom in Donegal, for example — have realised that in order for them to retain their skilled workforce, particularly on the fabrication side in Buncrana, they must provide a creche in the workplace because people are moving back and forth and it is expensive. Until it makes economic sense for the employer and the employee, it will not happen. We should encourage this development and we are trying to give a lead with the establishment of a creche here, which we hope will be up and running by the end of the year.

As regards care for the elderly — the other side of the equation — we have made some changes in the carer's allowance and in money for the incapacitated. One can never do too much, but whatever is done will always be open to the charge that it does not go far enough. However, it is moving in the right direction.

Senator Fahey mentioned the black economy. The issue he raised will not be addressed until we have raised the gap sufficiently between low paid people in employment and what someone can get on the social welfare system. That is why tax relief concentrates on the lower, not the higher paid and why the Progressive Democrats are screaming with such ferocity. They regard themselves as having a remit for people at the higher end of the pay spectrum and what we are trying to do does not address their priorities. Politics is about priorities and making choices.

The Senator suggested that we should allow people to keep their flat rate unemployment assistance while earning a further £50 a week — a net of £150 per week. Many people who go to work in dark winter days do not take home that amount of money because the economy cannot pay them any more since this is an open competitive world, which will become even more competitive. I am not suggesting that we reduce the level of social welfare entitlements but that we reduce the level of tax on low paid people so that there is a gap between what some people get while they are working and what somebody gets on social welfare. We must lower that gap without disrupting the lower end of the labour market, otherwise we will create chaos in the economy. It will take time to do what the Senator is suggesting, but it is not only the way forward for this country but also for Europe.

The Senator mentioned 80,000. That is the gap between the live register figure, which is 281,000, and the figure from the labour force survey where people described if they were working or not. Some 198,000 people questioned in the labour force survey, which is done according to European statistical standards, described themselves as looking for work or being out of work. That gap has widened. The labour force survey has been running for approximately 15 years. In 1985 there was a gap of less than 1,000 or 2,000 between the figures from the labour force survey and those from the live register.

We have compounded that gap by giving people rights of entitlements by equality, which I support. Where a husband and wife, who is the dependent, are unemployed and she wants to prove her identity as an independent citizen or to get a slice of the money, Governments introduced regulations, with the support of the Houses, to allow that woman to sign on for unemployment assistance. The couple could then split the money between them. That had a beneficial effect for people who were able to get money in their own right, but it increased the live register figure by 7,000 because 7,000 couples split and became 14,000. However, there were not 7,000 extra people looking for employment on the live register.

There are other administrative anomalies. People who never visited a social welfare office but who want to avail of a FÁS course in order to go back to full-time employment after ten or 15 years at home must meet the administrative requirements of FÁS. They must sign on, which means they are included on the live register but they do not receive money. They are not looking for work but for qualifications to enable them to do a FÁS course.

We have compounded the live register statistically from that point of view. Even if one strips away 20,000 from the 80,000, there are still 50,000 to 60,000 people in a potential black economy, who will not get back into the labour force on a regular basis. They are better equipped in rural Ireland where their chances of part-time irregular work are much greater than in the urban centres of Dublin, Waterford, Cork and Limerick.

Perhaps this time next year we might put together a proposal in that regard.

Recommendation, by leave, withdrawn.
Section 6 agreed to.
Question proposed: "That section 7 stand part of the Bill."

This section covers the VHI. In the past number of years we have seen an upsurge in the sales of insurance policies for critical illness, cash back plans and hospital plans. Does this section cover such insurance policies because less well off people can avail of them but they cannot afford to be in the VHI?

Subject to confirmation, this section addresses the fact that we are liberalising the health insurance market. Previously, tax relief was extended exclusively to the VHI because it was the only player in the market. However, if new entrants come into the market — we have already received notice of one such player — they will be covered for tax relief. I am not able to answer the Senator's specific question because I would need to know whether the policies are health or income related ones. We are talking about permanent health income, which is covered by another section. The purpose of this section is to show that we are liberalising the health insurance market in accordance with a number of European Union directives.

Question put and agreed to.
Question proposed: "That section 8 stand part of the Bill."

Is there any reason some companies are not listed in this section or are they listed in another section? Aer Rianta is not included here although it is an employer.

This is an additional list. In most cases these companies have requested that they be included.

Question put and agreed to.
Sections 9 to 12, inclusive, agreed to.

I move recommendation No. 8:

In page 20, paragraph (a), line 5, to delete "20 per cent." and substitute "30 per cent.".

People should take out annuities to ensure they have a sufficient pension when they retire. Many people are anxious that they will not be able to provide for themselves in retirement. Perhaps the Minister might clarify this because there is not only concern in the public service. The Minister for Social Welfare said in a recent speech that the country would not be able to afford pensions in the future. Could the Minister clarify what the general policy will be and how he sees it developing? Can he extend concessions to people who provide additional protection for themselves on retirement?

The thinking behind this is a reflection of the changing nature of employment in both our labour market and that of Europe. We have asked the insurance companies to respond to this change by designing new types of pension plans that reflect a changing pattern of employment. Traditionally one got a job when one was in one's early twenties, whether one went on to third level education or left school during or after second level, and if one was made permanent one had access to a pension scheme as, increasingly, companies had contributory pension schemes. These schemes were assisted by the tax system to encourage people to participate in them and make provision for their retirement.

However, the job for life syndrome which underpinned that pension system is now changing. Many people do not become permanent. In many cases school teachers, for example, do not secure permanent posts until they are in their late 20s or early 30s, which is quite different from the experience of five or ten years ago. Likewise, the job for life syndrome in the private sector is disappearing. People, therefore, find themselves making good salaries but the 15 per cent figure is static throughout the 20 or 40 year earning period.

In this section I am trying — it is only a start — to address the problem where somebody approaching the end of their working life realises that their pension has been underfunded or they wish to make extra provision or they want to devote more of their income to pension provision. If they are over the age of 55 they can now put in 20 per cent of their income instead of 15 per cent. The last time this provision was changed was in the early 1960s and no age differential was made. It was raised from a flat 10 per cent to 15 per cent. This provision is targeted at the category of people who are over 55 and who want to make more prudent provision for their retirement. The provision has been welcomed.

I am not sure what will be the full cost. There was an argument against doing this because the full 15 per cent was not being drawn down; the average take was 12 per cent. However, that was a reflection of people getting into the system late or not being able to make enough provision for themselves. We are concentrating it on the last five or ten years of a person's working life when many of their primary family expenses will have been discharged and they are in a position to take this action. We are behind the rest of Europe in terms of this demographic cohort and our pension problems are less severe than those of other European countries.

However, they will be substantial and will begin to impact from about the year 2020. Unless we take corrective action now we will have a serious problem at that time. This is a small step in a bigger process to address that issue.

An Leas-Chathaoirleach

Is recommendation No. 8 being pressed?

In view of what the Minister has said, I will not press it. I am happy as long as the trend is positive.

Recommendation, by leave, withdrawn.
Section 13 agreed to.
Section 14 agreed to.
Question proposed: "That section 15 stand part of the Bill."

This section is most disappointing for my constituents. During the past year this House debated the extension of free fees to students in part-time courses. It is far more difficult for students in part-time and night courses to undertake such courses. The fees of many of these students are paid by employers, especially if they work in the Civil Service, the Garda and so forth, so their difficulties are not so great. It was suggested that about 50 per cent of such students are in that situation. I must accept that statistic as I am not in a position to find out the correct figures, although postgraduate students have told me that they did not think the figure was that high.

While it is welcome that individual students can claim tax relief for the fees, it is still difficult that these fees are not being paid. I realise this is the responsibility of the Department of Education. I am also sorry that if other members of the family are paying the fees they cannot avail of the tax relief. Some of these students are in jobs in which they pay very little tax.

I am also disappointed that covenants for postgraduate students have been removed. When I brought this matter up previously the Minister acknowledged that there are losers in every situation. I am disappointed that the extension does not apply to those in postgraduate education. Some people in postgraduate education have to string out courses and PhDs for much longer than is warranted because they must earn a living at the same time. It is very difficult to get grants to study for post-graduate degrees in this country.

Only a small effort has been made in this section and I hope the Minister and his officials realise that the removal of covenants has made a huge difference, particularly to people pursuing post-graduate degrees. It has also made things difficult for people in part-time and night courses even though these are often the people who put the most effort into getting third level education. Many are in second chance situations. While this provision is of some relief to some of them, I am disappointed that far more has not been done.

We provided for an extension of support for such people on Committee Stage in the Dáil. I will explain why it was made and why it is constrained in this way. It will not be extended because resources do not permit it. If my parents had not been in a position to enable me to be trained as an architect I would have ended up, hopefully, as a carpenter. I was, there-fore, very conscious of the advantage I had received which other people, through no fault of their own, had not.

Where somebody leaves school after the leaving certificate, gets a job and decides, out of their income, to do a course of any description in third level — the section specifies a course of two years duration or more — it means they are paying their own way through college and foregoing their nights out on the town to use the money to pay fees and other expenses. I believe that person should be encouraged and that is what this section is designed to do. It is not designed to do more.

While I empathise with somebody who is doing a PhD and finding the going difficult, their employment prospects are wonderful at 96 per cent. One will not find a single PhD unemployed for an extended period of time. This city is full of finance houses that would throw money at them — interest rates are at their lowest since 1960 — to complete their course and get into the labour market. I understand the concerns for people who are finding it difficult but individual cases make bad taxation law.

Third level education gets a disproportionate amount of resources. There is also the argument that if one wished to deal with the problem of long-term unemployment, more resources should go into the primary school sector. We had the Dale Tussing report from the ESRI many years ago. We are all familiar with the statistics but yet we have not changed it. We could even argue that this city and economy hardly needs the output of three medical schools, but that may be too close for comfort to Senator Henry.

The cost of training a medical student is high and is borne by the taxpayer, some of whose children never get a decent second level education, never mind a third level one. There are big issues of equity involved here. The Senator took a bad example. My heart does not bleed for a group of people doing Ph.Ds because their employment prospects are wonderful. They are extremely bankable in the present climate. They may not necessarily get the job they want but that can also be said for many others.

This extension is explicitly here for that person who decides that they will put themselves through a course. It does not have to be a regular conventional university degree course. This covers any public or private institution recognised by the Minister for Education, in effect, an NCEA course. If it is to be of market value, we have confined it to a two year premium. However, the principle is sound and I have no hesitation in advocating it, but it should be confined to that specific group.

Perish the thought that we should think of closing any medical school in this State or that the Minister thought I was looking for some sort of tax concession so these people could have more highly paid jobs. That is not my concern. I am concerned about the amount of employment provided in this State because graduates have high technology qualifications — the Minister is always telling us about this — and the number of people who have to give up their research projects. Such projects have been important in the development of industry in this State. For example, when the Digital factory in Galway closed, Boston Instruments tried to move in within a short space of time. However, we are having greater trouble in trying to get industries to employ the recently laid off low skilled workers of Packard Electric.

We need people in this country with high tech qualifications for high technology industry. A large number of them are in research fields such as physics, for example, which are not appealing to the finance houses of this State. These students can quickly get employment and research grants in Boston, Cal Tech or the Silicon Valley very quickly. But when I ask them to stay in our universities, they say why should they do so when they can only get a £4,000 grant at best on which they cannot manage. I am not worried at them getting high paid jobs in this State — a certain number will — but that we should retain them. The only way we can get high tech industry to come to this country is if we have high tech people to employ. It is difficult to get people to return from Boston, Cal Tech or Silicon Valley to our industries. One ends up appealing to their sense of national interest in encouraging them to stay. However, if we did manage to get them to stay at postgraduate level, they will put down roots here. This would concern me more than the individuals involved.

Finance houses tend to look more at accountants than people with Ph.Ds in polymer physics, but it is the latter we want to maintain. People involved in the computer industry, which is vital to this country, are currently being taken by Japanese companies. At this time of the year recruiters from around the globe are taking the best of our young graduates and will sponsor their postgraduate degrees in high tech industries. My son went to a Japanese pharmaceutical company; fortunately he came back. There are many Irish chemical engineers, pharmacists and chemists in Japan at the moment. We would be fortunate if we could bring some of them back. However, the Japanese companies are extraordinarily keen to keep them there. I want to keep these people to lay down a base here so we would then have them for our high tech industries.

I would be glad to support an amendment to this section along the lines suggested by Senator Henry. I am not sure whether she wishes to pursue this course. We could oblige her if she was willing to follow us through the division lobby.

My heart does not bleed for Ph.Ds either, although my pocket has leaked badly from having two sons, one doing a postgraduate course, in the University of Limerick.

An education is the best thing the Senator could give his children. It does not devalue. The bank cannot take it back.

It has revalued my financial position. Many students are living away from home and the cost of their accommodation is enormous.

The definition of a qualifying individual in the Bill seems to debar some people who may be partly through their courses. For instance, if a person was in a post-leaving certificate course in one of the recognised colleges which are mainly used to pursue degree and diploma courses, would he be debarred under this qualifying provision? If this was the case, it would be counter-productive. The more qualifications a person has, the better his chance of improving his position. While post-graduate courses are important and many students do them to enhance their future salaries, nevertheless many students with certificates may wish to pursue diploma courses in recognised courses at these higher level colleges so they could eventually study a university degree. In debarring people with certificates, the Minister is defeating part of the purpose of his proposals. I am not sure if that is the intention and maybe the Minister can clarify that definition.

I have every sympathy for Senator Henry's general case. However, when priorities must be made, one must decide at what point do we move from a grant mentality, which is free fees, to a support system. A number of new companies coming to this country are beginning to develop research projects with the various institutions. The universities themselves have been transformed from being virtually 100 per cent dependent on either a State grant and fee income for their revenue to moving into a vigorous relationship with the market and private sector companies and achieving much cross-fertilisation in income, research and facilities for training graduates. However, that does not address some of the training needs of some graduates who need primary training before they can begin applied research for which there might be a market price.

In terms of prioritisation, I would be more sympathetic towards primary schools. I still think graduates are bankable; but if not, there should be some kind of extended loan support scheme for somebody at that stage in education. It is hard, when looking at the spread of education and demand coming from the Department of Education, not to be driven in favour of giving extra resources for deprived primary school areas. If we can give a person a leg up at the beginning of their potential working lives, that advantage will be carried through, rather than at the other end where that person has, by definition, already received a lot of support.

There should be some form of extended financial support to enable students to finish their research work and stay here. On a historical note, the reason we have five medical schools and many universities is that we have been sending people abroad for years as administrators of the British Empire — some quarters do not like to admit that. That is where many of our engineers and doctors received their training and experience. The fact that they are going to Japan and might come back with some skills — and perhaps a factory — is a decided improvement on coming back as a retiree from Kenya or Malaya, as Malaysia was then called.

On Senator Daly's point, this is a focused confined relief. It is not proposed to extend it at present; we must see what the take up will be. Where somebody contemplates making the commitment to a course, the minimum length for which will be two years and where the cost would be fairly substantial, the person is getting the incentive of a tax relief. A short-term course of six weeks, for example, should be taken on by either the person, if they are at work, or, alternatively, by their employer. I forgot to put on the record of the House that many working people who do evening courses have their fees paid by their company. The companies, in many cases if not all cases, qualify for tax relief on that cost. We are not interfering with that provision; it will continue anyway. This relates to where somebody cannot avail of that, does not want to ask the company for it or wants to do a course which the company does not feel is relevant to its particular needs.

The persons to whom I am referring are the young people who have just finished the leaving certificate, may have done a two year certificate course and wish to do a further year to get a diploma. The fact that they have a certificate debars them from availing of the relief to do the diploma course. That is the way I read it. If it is different, will the Minister tell me?

I take the Minister's point about primary education, because how can anyone hope to go on to second level education even without adequate primary education.

Sometimes I get a little dismayed about us constantly talking about encouraging high technology industry to come to Ireland. Again, Senator Daly's point is important here. One must have the people to become involved in these industries and they do not all need Ph.Ds. There must be people with certificates who go on to get diplomas, etc., because all these industries are based on parameters. However, they need people with high skilled training, be it at the level of diploma, certificate, Ph.D, etc. If you look at the employment pages in the national newspapers, you will constantly see numerous jobs advertised in the fields of computers, engineering and technical areas. Unless we make some attempt to encourage people in these areas and to encourage them to stay here, they will emigrate.

The Minister is quite right in saying that we supplied the engineers for the British Empire and the judges for Kenya. I would not like to see Ireland supply the engineers and computer operators for Japan and America as we need to supply them for our own needs first. There is a dire shortage of computer graduates in Ireland at present. I think I was told there was a shortage of about 200 per year and I do not see that being addressed.

My worry about trying to address this is that there were people, as Senator Daly and I have been saying, who have a certain level of education and see they can do more, not just for themselves but within that field, if they received further training and I do not think enough is being done to encourage them. I hope the Minister will see himself in a position to address it further, because while education is something which cannot be removed from people and is the best thing a person can do for a child, it is also extraordinarily important for the community. If we are not going to put money and effort into high technology training, there is not much point in us talking about high technology jobs.

I welcome this section and think we have been talking about it all along, because we are really talking about people who have pursued a second level education and want to get a qualification which might get them a better job than their present one. We have been talking about Ph.Ds, etc., but I do not think this section is geared towards that; it is geared towards the person who wants a little third level education and recognition of it.

Senator Calnan has put his finger exactly on the focus of this amendment, which is designed to address that particular group of people. I hope the uptake will be good. Obviously, within the limited resources, we will try to improve it in future years.

I will get the answer to Senator Daly's questions later.

Maybe the Minister would like to leave it until before we finish. I would be happy enough with that.

I compliment the Minister for introducing this measure. In fairness, we were critical of the Minister for his lack of innovation but this is an innovative proposal, one for which Ministers get credit. Limited as it is, we appreciate it. It can be expanded, but it is a worthwhile proposal in so far as it goes. It will help to remedy some of the difficulties which have been created for many middleclass middle-income families endeavouring to educate their children.

Question put and agreed to.
Sections 16 to 20, inclusive, agreed to.
Question proposed: "That section 21 stand part of the Bill."

I have been endeavouring to find an appropriate section on which to raise a matter which concerns me. Perhaps addressing the entire chapter would be the appropriate course but procedure does not allow me to approach the matter in that way.

Sections 16 to 24 deal with the question of the BES and related activities, and I must acknowledge that it has been an innovative programme for a number of years. I welcome the proposed refinements because the scheme has provided a much needed source of finance to business, services, tourism, etc., and there are many examples of its success.

A colleague doubles as a business and financial correspondent to a well known Sunday newspaper.

The Senator is inspired. He is now in our midst.

He has been raising in a series of articles an issue which should be addressed by the House and certainly by the Minister. In summary, whatever the benefits of the BES are, it has become a virtual gravy train for the financial institutions who administer it. The money which is administered does not belong to these institutions — it is provided by the investors who wish to avail of the financial and tax advantages which come with the scheme — and the borrowers are not borrowing money which belongs to the financial institutions, but the institutions which administer the scheme charge commission, first, to the investor and then to the company or individuals obtaining the capital. In some cases, according to one of these articles, one is looking at a combined charge of between 8 and 10 per cent.

I do not think it was ever the intention of the Minister, his predecessors, the Government, or its predecessors that it should become that type of gravy train for these administrators. What I want to raise with the Minister is this: in view of that, have we not now approached the stage where we should be examining controls on the costs which these institutions apply to the administration of the schemes? As I said, I endeavoured to find an appropriate section on which to raise it. I am not sure whether it is appropriate to section 21.

I want to raise an issue similar to that raised by Senator Howard about the business expansion scheme. What role could local authorities play in the administration of the business expansion scheme? I come from a rural part of the country which is serviced by both urban and county local authorities which play a huge role in the area. There are few large companies in a county like Mayo which can raise sufficient funds to attract large projects, which would qualify for backing from various Departments, whether tourism based.

The local authorities can and could be the chief players in the business expansion scheme. Could the local authority administer a business expansion scheme? It is my view that they could not under the existing system because a company must be established. Could the local authority set up a company to administer these schemes? They would avail of the cash bonanza to which Senator Howard referred and to which Senator Ross refers in the media. I ask the Minister to explain and expand on it.

The explanatory memorandum seems to identify certain things which do not appear to be spelled out in section 21. I cannot correlate the contents of section 21 with the explanatory memorandum. Are shellfish and aquaculture products covered? It appears that horticulture, mushrooms and so on have been singled out, as has the cultivation of plants. However, the cultivation of oysters or mussels and the development of aquaculture and fishery products do not seem to be covered. Why is that distinction being made?

The House has asked me some technical questions, some of which I am not sure I will be able to answer so Members will have to bear with me while I accumulate the answers.

Senator Howard's opening point was delivered with much greater passion and far greater flamboyance by Senator Ross last night. I am not sure if he was rehearsing one of his articles or just letting off steam, but either way the House was kept enthralled by his description. Senator Howard, in a much more subdued manner, gave the same message.

No individual is obliged to go to a designated fund. If a company wants to raise money under the BES, it can do so. It does not have to go to one of these funds. However, it is easier to go to the fund. Only 40 per cent of all the money raised with the BES go through designated funds. If a person feels they are getting bad value, there are about six or seven designated funds which, one could argue, are enough to provide competition. The financial institutions are never great at getting into real competition. Perhaps it is an extraordinary coincidence that they are charging similar costs in and around 8 per cent. I would defer to other Members who know more about the details of this than I.

If a company looking for BES money feels the cost from one of the designated funds is too high, they are entitled to go elsewhere. Some 60 per cent of all money going into the BES goes through individual placements. With the help of chartered accountants or financial advisers some companies raise BES funds directly and, therefore, those charges do not apply to them. Obviously, there are costs associated with any of these things but, depending on the amount of money raised, presumably those costs are cheaper.

Senator Burke asked whether a local authority could administer a BES fund. They would have to get designation status from the Minister for Enterprise and Employment. It would seem more appropriate to the county enterprise board which would be a better body to facilitate the scheme. Senator Daly asked whether aquaculture and mariculture qualify for BES funding. The answer is, yes it does.

I would like to raise, in slightly more detail and with a great deal less passion, one of the subjects I mentioned yesterday. The Minister has already touched on it. Is the Minister satisfied with the current administration of the scheme? Senator Howard was correct in saying there was probably a combined charge of 10 per cent; if anything, I suspect he is understating the amount.

My understanding — and it should not be an understanding, it should be a certainty but that is not my fault — is that some banks are charging up front charges of 12 per cent between the company and the investor. That is an outrageous amount for an institution which is not lending money. I refer specifically to the ICC, which is the Minister's responsibility. In most cases ICC is charging 3 per cent to the investor, as Senator Howard said, but is then charging 9 per cent to the investee company. That is a total of 12 per cent. It seems excessive and we have to ask why they can charge these excessive amounts. The reason is twofold.

The investee company is in a vulnerable position because it desperately needs the money. It cannot argue with the bank about the rate they pay. They just take it and run because it is cheaper than the bank, and sometimes they are in serious trouble. The Minister touched on the second reason which is that the banks, as always, are not competing on charges. They are running a cartel and they are all charging the same amount but they dress it up under different types of fees, including administration fees, management fees, investment fees and arrangement fees.

I specifically want the Minister to address the ICC because it is his responsibility. It is possibly the most profitable of all of them and it is putting investee companies in a difficult situation, taking money from them when they are at their most vulnerable. I have the ICC BES prospectus here and what worries me is that the ICC does not tell anyone — that is a sin of serious dimensions — what it is charging the investee company. It is very difficult for an investor to find out what the investee company is being charged and that is information to which the investor must be entitled.

If one is putting £5,000 or £25,000 into a company to be decided by the ICC one is entitled to know that if the ICC is making an investment of £1 million, they are taking £90,000 off that investment immediately. There is a direct conflict of interest for all these banks and designated funds because they are going in, investing the money and immediately devaluing the investment by up to 9 per cent. That is not in the interest of the investee company and it is certainly not in the interest of the investor. What is so seriously wrong is that nobody, and it is not just in the ICC, is told what charges are being made against their investment by the promoter.

This is an area in which we must call for transparency if we are to protect the investors and the scheme. I have a few more questions for the Minister but I ask him to address that initially.

I compliment Senator Ross for bringing this to my attention. I must confess I was not as aware of it as he clearly is. That is probably an admission I do not read his column every Sunday.

It is a good thing for the Minister that he does not read it.

Senator Ross has brought something to my notice which requires attention but let us put it in context. An investor in a BES is, presumably, someone with considerable spare resources and a certain degree of wisdom, and marketplace rules, such as caveat emptor, must apply. If we were to become overprotective, the first people to scream about the “nanny” state and the interference of the Department of Finance would be the good Senator's journalistic colleagues in the same newspaper.

That said, transparency and accurate information are prerequisites in any market. The Senator is clearly saying the associated hidden costs of these designated funds — about which we are exclusively speaking — are not immediately apparent, or not apparent at all. Since the designated funds were, in a way, designed for small investors without a great deal of business experience, who were attracted by the fixed assets and minimal risk nature of the underwriting of these funds, perhaps there is a good case for this to be made transparent. I am not sure under which legislation that should be done but I will look at it. However, the scale of the charges and costs seems very substantial.

We had a BES review group which looked at changes in the BES and I have just asked my officials if the question of charges was looked at in any great detail. I understand that was not the case. However, I can give the Senator and the House an undertaking that I will look at this closely. There are clearly costs associated with the administration of any service, including the provision of finance. However, if what the Senator says is true — and he gave that caveat himself because we have not been able to get the information — and there is evidence of a cartel or some kind of rigging, we will take whatever appropriate action is open to us. The consumer credit legislation may be part and parcel of that but I suspect it does not impact on this. I do not want to give an answer off the top of my head in relation to what we can do, but we should look at it.

I think the Minister will find it is accurate, within 0.5 per cent. I thank the Minister; that is very helpful. On a very general level, is the Minister happy with the number of "jobs" created by the BES over the years? Given the £200 million lost to the Exchequer as a result of this — which is the estimate of his Department — does he feel it is a successful scheme? I think the cost per job is £20,000, which is very high.

The direct question was if I am satisfied. I cannot say I am either satisfied or dissatisfied because the reasons for availing of BES capital vary from company to company. It may be for consolidation, expansion or survival and jobs may be a secondary component of those three motivations.

One would presume, in the normal course of events, that expansion, following consolidation, would lead to additional employment. However, the correlation between increased activity and increased employment is not as strong and secure as it used to be. Through productivity gains and so on a company, to survive, could have to automate or get better machinery. The consequence of that better machinery, which they would use the BES funds to finance, would be to reduce employment. However, if ten jobs out of the 15 which existed were secured and the viability of the company was consolidated, that would be positive in itself. Therefore, a strict jobs per BES pound invested, is a very narrow restriction.

We have introduced, with the certification process through Forbairt, the criterion for larger investments. It remains to be seen how well it will work but we will monitor it to see if it is effective. It is appropriate to introduce that form of certification for that scale of operation.

The BES was introduced by the present Taoiseach when he was Minister for Finance in the early 1980s. The idea travelled across the Atlantic and surfaced in its present form — if I recall the debate accurately — in the United Kingdom. It was designed to address a problem which has historically plagued this economy, that is, the absence of risk capital. That is a result of the nature of our society, in contrast with countries such as Belgium or Italy where there was a history of a bourgeois capitalist formation with accumulated sums of money which could be lent within families or came down through families. That has not been the Irish experience. The BES was designed to make risk capital available for equity. As the Senator said, it got off to a slow start. For many people, the function of the BES is to have access to what are either effectively long-term loans through preferential shares or real equity. Many companies do not want to release primary equity for other reasons, which also have their origins in our history.

The review of the BES, which is reflected in the changes in this Bill, reflects the thinking of an expert group in consultation with many people involved in this process, including the designated funds. It reflects the broad consensus on how best it can be focused. However, we will keep it under review and analyse whether it is achieving its objectives. From the recipients' point of view, whatever about the investors' point of view, its primary function is to provide an alternative source of capital as distinct from borrowings from the banks.

The certification process was presumably introduced to reassure investors the quality of the investment they were making had gone through some sort of procedure and was semi reputable. However, it also has certain criteria, one of which is that it can provide — my wording might be incorrect — a reasonable chance of sustainable employment. That is very subjective and loose. My understanding is that since Forbairt became involved they had 20 applications this year and all 20 were passed by Forbairt. Is that correct?

I am not sure if we have that information to hand but I will convey it to the Senator in due course. That information would come from Forbairt and my team here are from the Revenue Commissioners and the Department of Finance. The certification process is not a guarantee the entire project is a sound one for the purposes of investment. The caveat emptor rule operates in regard to any would-be investor. The fact that a particular project has certification from Forbairt simply means Forbairt has looked at the proposal and is satisfied it has a job creation element — no more, no less. We can get information in relation to that.

I have just been handed a note to answer the Senator's second question. There are 24 applications with Forbairt of which 20 are already passed. It could be that the other four are also due to be passed. The substance of the Senator's question, in relation to his comments last night, was there is no critical evaluation and they were all passed on the nod. He did not use that phrase but that was his inference. We will talk to them about it. It is a fair point because someone might say that if a State agency signed it off it must be sound. That does not follow and now that the Senator has brought it to my attention we had better make it clear that certification from Forbairt is not a guarantee of a sound investment. Many people do not realise that BES investments are risk investments, generously financed by taxation.

Can the Minister provide the same figures for Bord Fáilte?

Question put and agreed to.
Progress reported; Committee to sit again.