Seanad Éireann debate -
Thursday, 12 Oct 2000

Vol. 164 No. 2

Government Policies: Statements.

Minister of State at the Department of Enterprise, Trade and Employment (Mr. Treacy)

Is an-onóir dom bheith ar ais sa tSeanad ar an díospóireacht an-tábhachtach seo faoi na fostaíochta, an chánachais agus na chuimhsithe shóisialta.

I welcome this opportunity to address Senators on the themes of employment, taxation and social inclusion. Employment is the key to the strength of our growing economy and the Irish economy is going from strength to strength. We have enjoyed strong economic growth in recent years, averaging in excess of 8% per annum in GNP over the past three years.

This growth has been translated into unprecedented levels of additional jobs. Increased employment is manifest across a wide spectrum of our economy and people are sharing in this excellent performance. That is the key element. The policy of this Government is to ensure that every citizen on the island, irrespective of age, physical situation or otherwise, can be actively engaged in mainstream economic activities in so far as we can achieve that. Jobs growth underpins the substantial improvements we have achieved in our standard of living and provides us with the resources to tackle social exclusion.

It is worth remembering some of the more positive indicators which underline the improvements achieved during this Government's tenure of office. A total of 290,000 more people are in jobs. This means that the number of persons at work has grown by one fifth or 20% in this short timeframe. A total of 110,000 people have signed off the live register, a decline of 43% in the numbers signing on in June 1997 when the Government took office. Most of the fall in unemployment has been from among the long-term unemployed. The long-term unemployment rate is down to 1.6% and the release last Friday by the Central Statistics Office of the live register data for the end of September shows that the unemployment rate is now down to an historic low of 3.8%.

These are extremely positive achievements and help underpin our strategic goal of full employment. This substantial progress has been achieved based on a coherent strategy of sound macroeconomic policies, on a consensus approach developed through successive partnership agreements which has provided a framework for economic and social development and given our strategy both stability and credibility, and on structural reform policies.

This strategic approach provides the framework for the development of our employment policies. Of course, the rapid changes in our labour market have brought with them many new challenges. The transformation of our economy requires ongoing review and appropriate shifts in policy in order, for example, to ensure that labour force expansion requirements are met. Tapping into labour supply is the key new challenge for policy – how to mobilise people and ensure they have the skills and competencies relevant to a modern economy.

These policy challenges are recognised and a rational response is in place and is embodied in the national action plan for employment for the year 2000. I will quote the first two strategic goals set out in the national plan. These are to "mobilise labour supply by tapping into potential pools of labour to support low inflationary sustainable growth" and to "enhance the quality of labour supply through investment in education and training and, in particular, through developing a strategic vision and framework for lifelong learning".

I welcome the students and teachers in the Visitors' Gallery today. We are proud of our education system and we want to ensure that those who did not get the opportunity in the past to pursue higher education will get that opportunity in the future.

The national plan sets out a comprehensive response to these objectives. In the first instance, it recognises the need to improve the reward from, and attractiveness of, work. Taxation impacts in a fundamental way on labour market behaviour. Clearly, Government initiatives over recent budgets have resulted in significant alleviation of the tax burden on labour. This is a key goal of Government. Several of our European partners, including the larger member states such as Germany and Italy, have embraced our approach with recent announcements of substantial tax reductions on employee incomes. I will refer further to the substantial improvements which we have implemented when I address the taxation theme later.

Besides an employment friendly taxation policy, other fundamental structural adjustments aimed at enhancing labour market participation and increasing the employment potential of the economy include the removal of persons from the tax net with earnings below certain income thresholds; the restructuring downwards of payroll levies; improvements in the operation of the family income supplement – an in work benefit to encourage increased access to jobs; and positive adjustments to the welfare system in the areas of the qualified adult payment and in the tapering of secondary benefits aimed at assisting welfare dependants on their transition from unemployment to work.

We want to enhance our labour supply. The overall strategic orientation of Government policy is aimed at increasing labour force partici pation among key groups of our population. Policy initiatives have been particularly focused on increasing the number of women in employment – despite our dramatic improvements over the last decade, we have come from a low base – and continuing to pursue policies and actions aimed at reintegrating the long-term unemployed and other disadvantaged groups into the open labour market. We currently have in place a wide range and scale of active labour market programmes which are targeted at specific groups, including the long-term unemployed, to assist them in their transition to employment.

To complement this approach, we now have in place a comprehensive support programme under the employment action plan which results in intervention by FÁS early in the unemployment period with young and adult unemployed to prevent their drift into long-term unemployment. The results of this approach have been very impressive with substantial numbers of under 25 year olds and adult unemployed leaving the live register. The data reveal that consistently of the order of 65% of people who leave the live register, following the referral process under the employment action plan, depart for positive reasons. They take up a job, a FÁS training course or go into an education programme which is a very positive indicator of their commitment to embracing the opportunities which are being presented.

A strategy focused on tapping into available pools of labour supply is being combined with the pursuit of policies designed to enhance and upgrade the skills and competencies of the existing workforce. Here the emphasis is on increasing the incidence of in-company training and developing a framework for lifelong learning. The task force on lifelong learning has been established by the Government within the framework of the Programme for Prosperity and Fairness. It is considering measures required to improve access to learning and upskilling opportunities and aims to bring proposals to Government early next year. In addition, the Government proposes to introduce legislation to establish the national training fund before the end of the year.

The expert group on future skills needs represents a further element in our response to meeting skills needs. The expert group helps identify the needs of industry across a range of sectors and has issued two reports to date on its findings. The Government response has been swift to help overcome identified skills bottlenecks. For example, 5,400 additional college places have been provided in the third level system and extra FÁS training places established to meet the shortages in specific sectors such as in the IT software and technician sectors.

Investment in the apprenticeship system to meet the increasing demand for training and reduced waiting times responds to the needs of our economy and, in particular, will help meet the needs of industry and the construction sector in the delivery of our national development plan. In September 1997, there were 8,600 places for apprenticeship training. Currently core capacity stands at 17,220, a doubling of apprenticeship capacity in this short period.

Of course, there is always more we need to do. For example, we can better facilitate women's return to work. Child care provision is a constraint in that regard. This Government has over the last three budgets introduced measures to increase the supply of child care places through the provision of tax incentives to employers and direct support to disadvantaged communities in particular. However, more needs to be done and I am confident that the next budget will see a significant initiative in this area.

The importance of older people in the workforce will grow in coming years as the population of young people declines and that of older age groups grows. Given these trends, we must consider ways of encouraging older people who wish to do so to remain in or return to work. The Government policy of reducing the overall tax burden on labour is an incentive for older people to continue working, particularly those who wish to work part-time to supplement their income. As part of further initiatives in this area, employers' representatives will be consulted to see what practical steps can be taken in this regard.

During the term of this Government there has been a substantial increase in real living standards. Leaving aside taxation, real manufacturing wages have increased by more than 7% since 1997. When taxation changes are factored in, the increase in living standards is even more dramatic. The average single person has enjoyed an increase of over 15% in real income since the Government assumed office in June 1997. A married one-income couple with two children has fared even better with an increase of over 19% in real terms. In all three of our budgets to date, the Government has acted to fulfil its mandate to reduce personal taxes. Beginning with budget 1998, tax reductions amounted to £517 million; in 1999, tax reductions amounting to £581 million were provided for and in the most recent budget, a further £1,067 million was given back to taxpayers.

These reductions in taxes have gone a considerable way towards fulfilling the objectives in the programme for Government in relation to rates of taxation. Both the standard and the top rates have been cut by 4%. The Government will complete the move to a tax credit system from the beginning of the new tax year next April. The first phase of individualisation has also been put in place and has been broadly welcomed by many people throughout the country and the European Union. It has been endorsed by the European Commission as being one of the most innovative and equitable ways of dealing with taxation.

The combined effect of the measures taken by the Government from the last budget alone has been to remove 70,000 people from the tax net. It removed 125,000 people from the top rate of tax. These are real and substantial improvements in reducing the burden of taxation which underpins Government policy of reducing the tax burden on labour, increasing the incentive to work and contributing substantially to the improved numbers in employment.

Unemployment, in addition to being an economic waste, is interrelated with poverty and social exclusion, particularly when it is reinforced by being concentrated geographically and when it becomes inter-generational. Reducing unemployment, together with associated issues of reducing early school leaving, tackling the problem of urban black spots and rural poverty, are central to Ireland's anti-poverty strategy. The NAPS recognises that unemployment is the single most important reason, although not sole reason, for poverty. Our success in increasing employment levels and reducing unemployment is now providing clear evidence of reduction in poverty levels and social exclusion. This is evident from the 1999-2000 National Anti-Poverty Progress Report launched by the Taoiseach at the end of last month, which showed that consistent poverty has almost halved from 15% to just over 8% today. Again this is real progress.

We have made significant inroads into reducing structural unemployment with the long-term unemployment rate falling to a new low of 1.6%. This is the result of a combination of factors, including that which arises from increased economic activity together with a concerted programme of direct interventions from within a wide menu of supports to assist persons in their return to employment. Some of the larger support measures include providing work in temporary job programmes such as community employment, or inserting people directly into the open labour market through the support of the back-to-work scheme, as well as training provided by FÁS and educational attainment programmes such as VTOS.

While the scale of the problem with unemployment, and particularly structural unemployment, has diminished, clearly there are groups who remain marginalised and who require supports in their efforts to reintegrate into the labour market. The current favourable labour market provides us with an unrivalled opportunity to address outstanding challenges. This allows us better to design and target supports at key groups who remain at risk of social exclusion. In this context, I refer to the adjustments being made to some of our key labour market programmes, including community employment. The fall in unemployment levels and the need to better target available places at older, long-term unemployed people were taken into account in the restructuring of community employment. This is part of a strategic shift in policy which sees a greater investment in training places, particularly for those under 25 years of age and the long-term unemployed. It also reflects a concern to facilitate lone parents access to mainstream training to a much greater extent than has been the case to date.

More recently we have introduced a social economy programme which will focus on developing innovative, locally-based income generating projects in disadvantaged communities throughout the country. The objective is to create employment for 2,500 people by 2003. The national development plan allocation for this scheme is £213 million.

Creating a more inclusive society by alleviating social exclusion, poverty and deprivation is one of the major challenges facing Irish society over the course of the current national development plan. The plan provides a breakdown of the provisions which will promote social inclusion in each of the plan's operational programmes for which in excess of 19 billion euros is being allocated over the seven year period to 2006.

We currently have in place a very clear strategy combined with the necessary policies and actions which will help us remain competitive, foster further growth in employment and improve living standards. The policy mix will help us to underpin a strong economy by providing an adaptable workforce in the new global environment in which we do business where the key aspects of success remain the ability of our workforce to adapt to change and to encourage an environment of innovation, research and development. A sum of £1.95 billion has been allocated in the national development plan to fulfil our commitment to research, development and innovation over the next six and a half years.

I wish to situate Ireland's employment challenge in the context of the evolving European employment strategy and a new social policy agenda with particular reference to the outcomes of last year's Lisbon Summit. We can align with the social policy agenda in Europe which embraces not just the basic social supports that any civilised society seeks to provide for its citizens in terms of social security nets and health provision but also issues relating to employment goals and conditions and investment in people, our human resources and our intellectual human capital.

The mandate from Lisbon is clear. We are required to grow more and better jobs with the objective of increasing the employment rate to 70% by 2010 across Europe – the EU average is 62% – and the employment rate for women as near as possible to 60%. Employment, therefore, is the key performance indicator against which the success of member states' policies in their implementation of the EU employment strategy will be measured.

Following the substantial growth in employment in recent years Ireland's employment rate in 1999, at 62.5% for the first time, has moved ahead of the EU average. I believe that with the positive achievements to date we will continue to grow employment which will enable us to meet the demanding targets set at last year's Heads of Government summit. The statistics give an opportunity to the Seanad to consider our current employment, taxation and social inclusion policies as having a real effect on the welfare and well-being of all citizens. We will continue with these policies in the next budget on 6 December and in our final budget in 2001 we expect to copperfasten economic growth for the next 25 years.

Mr. Coghlan

I wish to share my time with Senator Costello.

An Cathaoirleach

Is that agreed? Agreed.

Mr. Coghlan

I welcome the Minister of State to the House but I had been led to believe that the Tánaiste would take this debate. I wanted to ask her a few questions and it might be unfair to address them to the good Minister of State, as he is a member of a different party. I wanted to ask her if the war she is waging with the Taoiseach in regard to tax rates and tax bands is real or phoney but I will leave that for another day.

I agree with the Minister of State that employment is the key to the strength of our economy. While the drop in the unemployment figure is to be welcomed, it is clear the Government is still failing to provide adequate interventions to prepare the unemployed to take up job vacancies. At a time when FÁS is holding recruitment fairs abroad to fill job vacancies in Ireland, 74,900 people are still unemployed according to the latest quarterly national household survey. While the Tánaiste has announced details of a new social economy programme to provide 2,500 jobs for the unemployed, it will not ensure the employability of such people unless the programmes include modules on literacy and numeracy, as highlighted by the National Competitiveness Council.

Further barriers to training include anomalies whereby the unemployed are financially worse off when they take part in training or returning to education. That must be addressed. The Government must identify these barriers and remove them if the jobs requirement is to be satisfied and social inequalities in disadvantaged communities addressed.

The creation last year by enterprise agencies of more than 34,000 jobs masks record job loses of almost 21,000 in agency-supported companies, according to a document produced by the Department of Enterprise, Trade and Employment. The document, prepared for consideration by senior officials, also states that skill shortages and the tightness of the labour market are fast becoming significant impediments to attracting multinational companies to establish or expand their operations in Ireland.

Success in attracting foreign investment in the past was due in no small part to the availability of a pool of skilled labour, an asset that no longer exits, according to the departmental document, yet continued foreign direct investment is needed to replace the high level of job losses in the low skills sectors where Ireland is no longer competitive. Such investment is also needed for more bal anced regional development according to the document, The Tightening Labour Market, which was released following a freedom of information request.

The paper points out that during 1999 IDA supported firms lost almost 9,400 jobs, Enterprise Ireland lost almost 10,000 and Shannon Development lost more than 1,600. A rising trend in redundancies is apparent. Notified redundancies in 1999 were 6% higher than in 1998. In the first two months of this year such redundancies were 26% higher than during the same period last year. In a reference to companies such as Fruit of the Loom the document points out that alongside the boom in the high-tech sector other sectors are experiencing great difficulties. As redundancy typically occurs in declining sectors, such as clothing, footwear and textiles, particular attention needs to be paid to assessing and improving the skills of people in those sectors.

The clothing and textile sector is considering options for outsourcing some of the lower value added and low skill components of its value chain to low wage locations in eastern Europe and north Africa. This is a consequence of labour skills shortages and market pressures for range enhancement, according to the document. Training for people laid off in these sectors is required. Many individuals, particularly poorly qualified young people, are taking up low skilled employment in the current boom. They may not have the skills to obtain employment if there is a downturn in the economy. Flexible training options with an emphasis on progression routes are required to assist these people in upskilling.

The Department's document notes that in response to skills shortages and gaps education and training policies retain a key role. The key aspect of the policy mix in terms of the general labour shortage is maintaining the thrust of actions aimed at increasing the reward for work through fiscal measures such as reducing the burden of taxation on labour and providing employability supports. The document points out that the tight labour market has created opportunities to draw inactive and marginalised groups into the workforce, groups such as lone parents, women returnees, the disabled and young people with weak formal education. Enhanced child care provision is absolutely vital if we are to increase female labour force participation.

There have been wonderful examples of self-help in the social inclusion area but the Government needs to do much more to develop initiatives to tackle the problems of low income families, to co-ordinate a child care strategy and to develop crèches and other facilities. The Government has spoken a great deal about combating social exclusion and marginalisation, yet it has potentially created further difficulties for provincial towns and rural villages which continue to be denuded of population. We have witnessed the loss of Garda stations, post offices, banks, other services and shops.

I remind the Minister of what happened in Britain where almost half the villages no longer have a food shop because of the damage inflicted by the large multiples. I spoke about this matter yesterday and it is relevant to the issues of social inclusion or exclusion. The Government must be conscious of it. While I have not yet fully studied the published report of the British Competition Commission, I understand it believes in the introduction of a ban on below cost selling. It is under consideration at present, but untold damage would be caused in Ireland if that aspect of the groceries order was revoked. This matter is relevant to the discussion on social inclusion.

The Government must do more to close the widening gap between the rich and poor as rising inflation rates threaten to force people into poverty. December's budget provides an opportunity to address growing income inequalities, poor public services and the special needs of minority groups. It is vital that fiscal and budgetary policies set out to redress income inequalities and ensure that everybody has an adequate income.

While everybody has gained something from economic growth, it is clear that the better off and those in work have gained most. Although increased employment opportunities create important paths out of poverty, paid work is not an option for everyone. Many people for a range of reasons, such as looking after children or older people, ill-health, disability, lack of skills and literacy problems, may not find it easy to get a job. These people also have a right to an adequate income and quality of life.

The high rate of inflation – currently 6.2% and rising – will increase the risk of poverty for some people. However, this could be avoided by adequately increasing social welfare rates in the budget. The Government must provide significant increases in child income support. Inadequacies in basic public services, which affect particularly those on the margins of society, must also be addressed.

A booming economy does not guarantee an end to poverty or an inclusive and just society. Inflation is robbing the poor. The challenge for Government at this time of economic buoyancy is to use our resources to strengthen the economic, social and cultural rights of all and to deepen democratic society by enabling the full participation of all people.

There is great merit in the call on the Government to introduce tax incentives for long-term savings as an anti-inflationary measure. The Government should examine means of encouraging individuals to make greater provision for long-term savings by reducing taxation to perhaps 12.5% from 22%. It is economic nonsense for the long-term savings rate to be higher than the rate of capital gains tax. Inflation will remain a problem following an expansionary budget. A preferential tax rate for long-term savings plans would act as a non-distorting anti-inflationary measure.

I hope the Government will take the advice of my party, and particularly Deputy Noonan, in removing totally from the tax net all those earning up to £200 a week. This was his recommendation last year and it remains his recommendation. There is a need for more than 80% of taxpayers to be on the standard rate only. The Government should also give consideration to the introduction of a 35% tax rate. As I said, not enough is being done regarding child care to encourage women to return to the workforce.

As living standards are reduced by inflation, it is not surprising that workers try to maintain living standards through extra wage demands. Inevitably, this will lead to a loss of competitiveness. The Government has been negligent and incompetent in dealing with inflation. In the early months of the year, as the CPI increased, the Government went into denial and said there was no problem. We heard this from the Taoiseach, the Tánaiste and the Minister for Finance. Indeed, the Minister for Finance urged people to celebrate our prosperity, to break out the champagne and binge on the consumer boom.

However, the following month the CPI dampened his party spirits. Together with the Taoiseach, he rounded on people and said they were either "left-wing pinkos" or "creeping Jesuses" for daring to draw the public's attention to the rising, and crippling, inflation rate. However, the CPI continued to rise. Before the summer, the Government again changed tack and conceded that there was a problem. We know that inflation makes people poor and this year inflation has cancelled the 5.5% wage increase under the PPF and the 5% increase in social welfare announced in the budget. The living standards of persons on fixed incomes have been seriously eroded.

A counter attack on inflation, its root causes, symptoms and effects must be considered by the Government. Political action to deal with the symptoms and effects of inflation must not be confused with an attack on the root causes. The social partners have been given the responsibility by Government to deal with the effects of inflation. The review that is now taking place is, in part, a response to the demand by workers and social welfare recipients to regain the ground lost through inflation. The argument between the social partners is not so much whether this should be done but about how it should be done.

The package of measures containing pay elements, tax concessions and better social services must be designed to compensate for falling living standards. It must be done in a way that, as far as possible, does not fuel inflation further. This is not an easy task but a solution in this context is preferable to widespread industrial unrest and a reduction in competitiveness which would result from an extended bout of wages chasing prices and a leap-frogging free for all.

Every service industry has job vacancies. They compete for workers by raising wages and this increase is passed on in higher prices for customers. This is true of the bar, hotel and catering trades, garage businesses, hairdressing, dry clean ing, gardening, landscaping and every service with any connection to the building industry. It is also true in respect of doctors' and solicitors' fees and it will soon be manifest in the banking and insurance industry.

Competition for the decreasing supply of skilled workers is now the main driving force behind inflation in the service industries. The Government's incompetence is most obvious in its failure to deal with this problem. Ireland does not have a fully competitive market. The supply of services is littered with licences, cartels, cosy arrangements and professional agreements which increase prices and work against the consumer.

The supply of skilled workers is running out and the Government still has done nothing to remove the obstacles which prevent fuller participation in the labour force. Given that there are 150,000 people on the live register, there must be scope for upskilling many of these individuals to work in service industries.

The Government is in its fourth year in office, but it has yet to develop a coherent child care policy. The lack of such a policy keeps many women from participating fully in the labour force. I look forward to Senator Cox's contribution on that point, as she is the champion of women's rights.

I have spoken about removing from the tax net everyone earning up to £200 per week. There is not much point in having a minimum wage if people earning up to that wage must pay tax. It is an historical fact that the Government took over an economy in excellent order but failed to manage it. Ministers with primary responsibility for economic management have failed across a range of issues and continue to fail to control inflation. I do not believe the electorate will forgive them. It is a great pity that the people must continue to endure their incompetence and damaging inactivity while we await an election.

Mr. Costello

I thank Senator Coghlan for his generosity in providing me with an opportunity of contributing at this point, as I will not be able to contribute in the afternoon. Prior to the budget and at the beginning of this new Oireachtas session, this is an opportune time for us to examine the state of the country in terms of employment, taxation and the broader area of social inclusion. While the Government has certainly delivered on reducing employment, which is now down to 3.8% – previous Governments contributed enormously to that – it has also delivered considerably on its proposals for a reduction in taxation.

The Government has failed dismally, however, to deliver on social inclusion. Never has so much money been available for so few. The stark reality is that those who have benefited most are those who have most, while those who have benefited least are those most in need. The latter group has not been among the beneficiaries of the Celtic tiger's largesse. With the current Minister for Finance, I am not so sure that we will make further inroads in that direction for the duration of this Government's term in office. The noises coming from the Progressive Democrats seem to underline that point.

Considerable achievements have been made in the areas I mentioned, including employment which is down to 3.8%. Depending on how one looks at it, taking either the OECD report or the European Union's method of calculation, we have a surplus of £3 billion or £3.2 billion. That is nearly £1 billion in excess of what was estimated by the Exchequer at the beginning of this year's financial reckoning when the budget was being prepared. In addition, we have this interesting windfall DIRT tax of £150 million. While that is clearly good news for the economy, the question is whether it is also good news for the majority of people on this island. I am afraid it is not because the benefits of the Celtic tiger have not been distributed. I know the Minister is not happy when I say this, but I want to describe what is happening in the real world.

Last night we discussed the question of traffic. As the Minister and every Member of this House knows, there is horrendous traffic congestion throughout every urban area in the country. Dublin is grinding to a halt and the Government has no coherent policies to deal with the problem. This has been going on for some time.

Ms Cox

Where are all the cars coming from if people do not have more money to spend?

An Leas-Chathaoirleach

Please, Senator Cox, you will be the next speaker.

Mr. Costello

Senator Cox has missed the point I am making. I have acknowledged that there is more money to spend but I cannot accept that the Government has a coherent plan concerning how the money will be spent beneficially for the people or to deal with the various crises that have been created. An enormous number of crises have been created, which I will list. One is the incredible traffic congestion and another, which we discussed this morning, concerns hospital waiting lists – that was the major item on the agenda for the Order of Business. The health services have virtually ground to a halt.

How can a country which has never had so much money have the worst health services in Europe? Staff are haemorrhaging from hospitals which cannot hire sufficient employees. We have the lowest number of hospital beds in Europe available to our citizens. According to the Mater Hospital's annual report, 2,000 patients have had scheduled treatment cancelled in the past year – not postponed but cancelled. That is because the hospital cannot cope. A consultant neurologist today refused to consider taking on more patients because he has a two year waiting list. We have the lowest number of consultant neurologists in the European Union. These are the facts and this situation is replicated in every hospital in Ireland. The one area that is closest to everybody's heart is health. It is an area that determines the quality of one's life. Without one's health what does one have? This area is in constant crisis, yet nothing is being done about it.

The level of crime is increasing despite a Minister who is in favour of zero tolerance. The anecdotal situation relating to crime is quite fearful at present. Gangs of youths in deprived areas of Dublin are terrorising people with impunity. Joyriding is at its highest level, with cars being stolen in enormous quantities. A colleague of mine obtained the figures for Tallaght over a recent six month period, during which time approximately 1,500 cars were stolen in the area. People are terrorised when their cars are stolen and then burned. We have no effective remedy to deal with that problem, which is out of hand, and no measures have been put in place to deal with it.

Drug addiction and drug pushing have increased enormously, with an estimated 5,000 drug addicts in Dublin. We are not making any headway in dealing with that problem either.

If ever there was a crisis, there is one in the housing sector. We have the ridiculous situation where the news media are saying that house prices are falling, yet house prices increased by 15% in the first nine months of this year. That increase is enormous considering the levels at which we are trying to pin wages under the Programme for Prosperity and Fairness. Young people simply cannot get a roof over their heads at present. We are talking about three-bedroom houses being sold for £1 million.

Let us look at the number of homeless people. The local authority in my area has never witnessed such a crisis of homelessness, yet the Government is unable to do anything about it. There is no rent control under the landlord and tenant legislation so people are being evicted at will.

There is no overall planning for the country. There is no such thing as a spatial plan to determine how Ireland will develop in the broadest sense of the word, both physically and architecturally. There is neither rhyme nor reason to it. There is ribbon development all over the place with individual applications being made to local authorities, but there is no overall focus as to how the country is to develop.

As Senator Coghlan said, crucial essential services are becoming depleted. Some 20% of Bank of Ireland branches will be closed down over the next couple of years, but there has not been a word about it from the Government. The banks are making huge corporate profits, yet it is proposed to reduce the number of local branches. Post offices and Garda stations in rural areas are also closing down. How can a quality of life be maintained if such services are being taken away? What is the Government doing about that? It does not have a word to say because it has no policy on these critical areas where crises are now developing. All of this has to do with social inclusion. You cannot talk about social inclusion unless you talk about the quality of life. The quality of life is being depleted for the vast majority of people on this island, even though we were never so awash with money.

In December 1999 we were all here when the Minister for Finance came into the House and told us what a wonderful situation we had with inflation at 1.6%. Where is it now? It is 6.2% and growing. Every economist expects it to reach 7% and higher, with the result that the Programme for Prosperity and Fairness is totally at risk. What is the response from the Government? The Tánaiste and the Attorney General say that there will be drastic tax reductions. Where do these drastic tax reductions go? They go in what the Progressive Democrats call pay back to those who already have enough, not to those who do not have enough. As a result this measure will fuel inflation further. It must – there is no two ways about it. Every economist who has the basics in arithmetic will tell you that. This week marked a new determination by the Tánaiste, Deputy Mary Harney, and her party to turn Irish society into the same type of society that grew up in America and Britain in the era of Reagan and Thatcher.

The effect of what is going to happen if we proceed with the Government's proposals for its forthcoming budget are that we will have an exclusive society, not an inclusive one. I exhort the Minister to point out to the Minister for Finance, the Tánaiste and the Taoiseach the need to look at social inclusion, the weakest part in the statement made to us today. He should also point out to them that we must ensure we do not embark on irresponsible policies that will undermine the ability of this country to compete and that will ensure there is a more equitable distribution of the benefits being conferred upon us by the success to which all our people have contributed. That is the message that should go out from here.

We should look very carefully at where we are going. Above all we should underline the position that social inclusion is what counts when it comes to the richness and quality of life of any nation.

Ms Cox

Am I to understand from Senator Costello that the Labour Party is against taxation cuts?

Mr. Costello

We are against the taxation cuts proposed by the Attorney General and the Tánaiste. I believe the Taoiseach is against them as well.

An Leas-Chathaoirleach

I ask Senator Costello not to interrupt Senator Cox.

Mr. Costello

The Senator was addressing me.

An Leas-Chathaoirleach

I think she was addressing the Chair.

Mr. J. Doyle

She was encouraging interruption.

An Leas-Chathaoirleach

I hope she will not be encouraged.

Ms Cox

This country is facing its seventh year of spectacular growth. It is currently in fifth place in the global competitiveness report, ahead of all other EU countries apart from Luxembourg and Holland. This country had a 25% increase in exports over last year. In June 1997 the unemployment rate was 10% and today it is 4%. Our long-term unemployment rate is just over 1% and 200,000 extra people have found employment up to May 2000.

I do not know how anybody could say that we are not moving towards a more socially inclusive society. To be socially inclusive means we need to have people in jobs, making money and able to look after themselves, not dependent on the State to be looked after. I suggest that all of the crises as outlined by Senator Costello are indicative of the way our economy is progressing. Yes, there are challenges for the future. The progress report presented by the Taoiseach, Deputy Bertie Ahern, and the Tánaiste, Deputy Mary Harney, for the end of year three states:

The next two years will be challenging. Hitherto intractable problems remain while new concerns emerge.

We are aware that there are problems out there. The report continues:

We are confident, however, that we have created the policy framework of economic growth and social partnership that will enable us to achieve our goals, the most important of which is to fight social exclusion and marginalisation. We want to create a society where there is room for everybody and where everyone has access to the support they need to participate fully.

That quote says it all about our policies.

Members of the Opposition, from the Fine Gael Party and the Labour Party, have come along today and talked fairytales about some of the issues. Crime is down. I do not know where Senator Costello gets the idea that our policies are not working on crime. I will give one concrete example. By the time we reached September 1999 three murders had been committed in Galway. There have been no murders in Galway this year. That is an achievement. It is the way it should be and I hope it is the way it will continue.

I accept that there are issues of public order. One of the difficulties is that if we sit around and listen to anecdotal evidence and stories told late at night in smokey crowded rooms, perhaps in pubs, sometimes we will not hear the true story. We should be careful about what we say is happening because if we do not deal with facts then none of the initiatives that we bring in to deal with the problems will work. You cannot deal with problems based on anecdotal evidence. I appeal to anyone who has suffered from crime or injustice who has not reported it to the Garda to do so now. If a crime takes place but it is not reported then we cannot deal with it. That is the challenge faced by everyone involved in this area who has suffered. They must come forward and report crimes to the Garda.

I have said on many occasions in this House that when I started working in 1982 it was against a background where the top rate of tax was 58%. The higher tax rate is now 44%. Over the past 12 years we have reduced taxation to a higher rate of 44% and a standard rate of 22%. A single person can now earn £17,000 per year before they move into the higher tax bracket. That is what tax reform is about. That is phase three of a five phase programme for this Government. I am looking forward to what the Minister for Finance will introduce in the next budget and the one after that in relation to the culmination of our taxation plans. I have no doubt, despite advice from Deputy Michael Noonan, that it is this Government's desire and wish, and that of the members of the Fianna Fáil Party, to see that people on the minimum wage are excluded from the tax net.

There are challenges for us as a Government. There are lots of innovative and creative things that we can do in the area of taxation. I take this opportunity to make a particular plea to the Minister for Finance which I will repeat a number of times between now and the budget. It is a fact that if you pay for private medical care when having a child in Ireland and submit those bills to the Revenue Commissioners to offset your medical expenses they are not allowable. I will say to the Minister, as I have said to him in the past, that when you can write off the cost of an ingrown toenail or a golfing accident against your tax at the end of the year, why can Irish women and families not write off the cost of maternity care against their taxes?

Senator Coghlan referred to child care. Since this Government came into power we have made enormous strides in this area. I acknowledge that, but I am also the first to acknowledge that we have not done enough. I am delighted to see in the Minister's address a recognition of the fact that there will be substantial moves again in this area in the forthcoming budget in December. That is so important. Child care is something that is with each and every one of us. Contrary to what Senator Coghlan said, I do not believe it is just a female issue to allow females to go back to work. It is a family issue. It allows either the man or woman in a family to go back to work. It is only when we take it on board as a business issue and an issue for society that we will see the changes we need.

I still favour something in our taxation code to reflect the cost of children and child care. As a Government, we need to recognise the cost and make some allowances. We have gone a long way towards providing child care places, providing crèches in many disadvantaged areas and giving substantial grant aid to child care. In the last two weeks, the Minister for Justice, Equality and Law Reform announced a significant grant package for infrastructural and capital works on crèches. Some crèches benefited quite significantly from that grant funding and it will go a long way towards making those businesses viable. I welcome such initiatives.

Taxation is a very important part of our tool-set in attracting people to work and keeping them there. That is the focus the Fianna Fáil-led Government, in association with its partners the Progressive Democrats, takes when it considers its policies.

In the area of employment, we have to say, "Well done". We are doing tremendously well, although there are still challenges – there is 4% unemployment, but we should not have unemployment. What are we going to do to help those people get out of that trap? It is only by giving people a job, a way to earn their own money that we can truly work on poverty and social inclusion and the Government has done this. By putting together training plans, we are addressing the issues among the long-term unemployed. We are looking at training and reskilling and changing the way people look at work.

We have made a commitment to deliver over 50% of all newly approved greenfield jobs to the Objective One BMW region. We have made a commitment to reduce business taxes to provide a stimulus to enterprise and employment. It is that very commitment, which will see corporation tax of 12.5%, that is giving a new impetus to many people to set up their own businesses of three, four, five or six people. People are gathering together the nucleus for a good operation and a focused business unit which is creating wealth for the people involved in the organisation and creating and contributing to the continued growth and wealth of our economy.

The business community has changed greatly. It was a pain for the business community to pay £40,000 taxation to the tax man in a year if it represented 40% of a £100,000 profit. Now we do not mind paying £40,000 a year if it represents only 12.5% of one's annual profit. That was recognised. It is not the amount of money people mind paying in taxes, it is the percentage in relation to what they kept themselves. If we become a country which expects those who work hardest and earn the most to give back more than anybody else, it will not work. If I work hard, I expect to get the benefit of that. I also expect to make a fair contribution to the State and I expect the Government of that State to do its best to look after the people who are less well off That is what this Government is doing.

Long-term unemployment has been successfully targeted and it has fallen to a little over 1%. That has been done by very small initiatives at local level and by the use of partnerships with ADM and employment projects in small towns and villages. Tremendous work has been done in this area. People are now getting training in computers, in literacy and in all of the things Senator Coghlan spoke about. That is happening – there is a training plan. The challenge is to keep it going and to keep people on the long-term unemployment register interested in and motivated to a return to work and to ensure that none of the policies we put in place mitigates against that. That is a challenge about which there is no doubt. Our employment action plan has been extended to the 35 to 54 year old age group. That addresses the concept of trying to bring new people into the workforce.

A point I would like to address, although I understand it is not the Minister of State's area of responsibility, is that one of the key factors creating difficulties for lots of businesses is the length of time it takes to process work permits for non-EU nationals. It was seven weeks but that has been reduced to a lead time of five weeks. I appeal to the Minister to take this on board and to bring it to his Department's attention. In this employment market it can take up to four to six months to hire the right person to do a job at a senior level, a job which could be crucial to the entire business focus of that organisation. One has to wait five to six weeks for a work permit to be processed to allow that person to work in this country. It means businesses are in danger of losing candidates by not being able to make a job offer and subsequently losing jobs. That is happening in a number of places and I speak from experience.

Some 40 jobs in a company in Galway were threatened because it took six months to recruit the person needed to head up this department. The person filling in was on secondment from another plant in the EU and returned to it. We had to wait seven weeks before a job permit could be given to the person who was hired. In that seven weeks, the head office in the United States fought very hard to move those jobs from Galway to somewhere else. That is a challenge we face and we need to be innovative in how we address it.

I understand there are difficulties with staffing in the Department and with processing applications but this is to the benefit of all of us. The business community is particularly interested in and willing to become involved in trying to manage this situation better and in trying to get the work permit process down to a manageable period of time, somewhere in the region of ten days.

On the area of social inclusion, as our country changes, it is important we remember that everyone is entitled to be treated with dignity and respect. That message should go out to all the organisations which deal with people who are disadvantaged and who are receiving the services of the State. At no time should those people feel they are not as entitled as anybody else to share in the wealth of this economy. That sometimes does not happen. I would say that to the Government and probably to the Minister for the Environment and Local Government, who deals with local government, and the Minister for Health and Children, who deals with health boards. Often the message that comes from the agencies dealing with people who are disadvantaged is not great. It is not helpful and it can often make them feel they are not involved and that they are not important. That is not fair. As I said earlier, this Government is committed to social inclusion.

In regard to some of the initiatives taken towards an inclusive society, there have been substantial improvements in the rates of child benefit with the priority focused on £100 per month for the third and subsequent child. What this means to many families is that each month a non-taxed direct payment is paid to them, usually into the hand of the mother. That is used directly for the benefit of the family. The continued increase in that benefit will show our commitment to social inclusion.

Many new measures have been introduced to prevent early school leavers from drifting onto the live register. If one can stop somebody leaving school without a job, it is one way to ensure they get into the work environment and do not spend the rest of their lives receiving unemployment assistance or benefit from the State.

The main national anti-poverty strategy goals, with an original target date of 2007, have now been achieved. Those are the goals against which we measure how we are going about building an inclusive society. That is not to say everything has been done, it has not been. We have many things to do. I appreciate some of the points Senator Costello and Senator Coghlan have made but it is important to recognise what has been done so far. It is against that background that we set ourselves the new challenges and targets against which we must measure ourselves.

This Government is committed to an inclusive society. Our taxation and employment policies support that. If we can empower people to look after themselves and contribute to society, they will not feel excluded and marginalised. We will then be able to focus on the people who, through no fault of their own, are outside the net and need to be brought in.

Mr. O'Toole

I am delighted we are having this debate, which is very appropriate in the first week of the session. I wish to share my time with Senator Quinn.

An Leas-Chathaoirleach

Is that agreed? Agreed.

Mr. O'Toole

We are discussing here the outcome of social partnership and we must recognise the astonishing achievement of this country over the past 12 or 14 years. Twelve years ago, the issue was employment, the need for people to have the opportunity to live and work in their own country and what politicians were doing to ensure people did not have to emigrate. During that time, which is not so long ago, there was a major row about politicians trying to justify people having to emigrate.

The greatest achievement over the past 12 years, in terms of the objectives we set ourselves then, has been the reduction in the unemployment rate from almost 20% to about 4%. That is quite astonishing and unprecedented in Europe. We have achieved far more in that time than anyone would have expected.

Speaking as an Independent, I want to put on the record, in order to give some balance to what the leaders said this morning, that all Governments over that period have had a policy on this. Various complexions of Government kept their eye on the ball in regard to that issue.

The other main problem for the economy at that time was whether we would be able to meet the conditions under the Maastricht Treaty in regard to debt reduction. In 1987 our debt to GNP ratio was about 130%. The requirement under the Maastricht Treaty was that it should be reduced to 60%. That looked so impossible for the Irish economy at that time that successive Governments had to work to get the terms changed from "under 60%" to "under 60% or approaching it". The words "approaching it" were inserted by an Irish amendment during the discussions on the Maastricht Treaty because we felt we could not meet that requirement. Times have changed and we now have the lowest debt to GNP ratio in Europe, which was the second great development over that period.

I am making these points because it is important to see we have moved in regard to the fundamentals. Over that period the economy has come right and we now actually have a shortage of workers. We have achieved the main objectives regarding employment and reduction of the debt/GNP ratio, although the actual debt has only been reduced marginally and is still around the £30 billion it was at that time. However, very few people would suggest that the economic growth should be used just to reduce that debt at this time.

It is now payback time for the people who showed great discipline over that period. Those people were all the social partners, in which I include employers and management. Everybody settled down to try to get the business done. Governments, employers, unions and the voluntary and community groups have all tried, over a period of four programmes, to get movement in this regard.

People are now grossly unhappy. Workers on the ground and people on social welfare do not believe they are getting a fair return for the discipline, moderation and pain of the period from the mid-1980s until now. While employment and living conditions and people's general wealth have improved, people feel they have not got enough of a share in that.

Early this year, the terms of the Programme for Prosperity and Fairness were agreed and accepted by the social partners. A wage agreement was built into that programme which was preconditioned on a number of matters, including inflation. Over weeks of negotiations in Govern ment Buildings, the Department of Finance laid out its stall in regard to inflation and the basis on which pay negotiations would take place. People signed up to a wage agreement on the basis that inflation would be between 2.5% and approximately 3%. However, inflation has gone completely out of control.

Let us put two matters to bed before we discuss this and in anticipation of what Senator Ross might say if he contributes to this debate. First, the Government is not responsible for inflation and, second, the Programme for Prosperity and Fairness is not responsible for the increase in inflation. It has been caused by external factors and some internal factors. The Government takes responsibility only for some of those factors.

However, what is hugely important is that under the programme the Government took responsibility for introducing fiscal policies which would keep inflation down, which it has failed to do. I am sure Members on the other side could give good reasons for that, as could I, because the Government does not have all the levers to control inflation. However, it has some levers and it also has a requirement to balance off that which it cannot control.

Therefore, the Government must now look at those workers who have seen inflation increase from approximately 3% in January and February 2000 to 6.2% this month. Next Tuesday or Wednesday the figure for September will be published, and I believe it will be closer to 7% than 6%. Effectively, the value of the deal people signed up to has been eroded by 3.5% or 4%, which is a net devaluation of the wage and salary increases of all workers under the PPF. The Government and employers must now deal with that. Employers have a clear responsibility and cannot just say this can be dealt with completely by a taxation adjustment; they must make themselves part of the solution.

That erosion of value, painful as it is for those of us earning wages and salaries, is even more painful for those on fixed incomes from social welfare and similar payments. This represents a hugely costly diminution of their position.

To maintain the balance, inflation must be compensated for by Government policies through taxation, pay increases, a combination of both or other ways. Imaginative and creative ways of doing this are being discussed by a number of groups.

If we believe in the importance of social partnership, it is important that the people who support that believe they are getting a fair deal. At this point, the trade union part of the social partnership does not believe it is receiving a fair deal for its members. People can argue whether that is right or wrong, but that is the reality of how people feel and we must deal with it.

That brings us to the question of growth in the economy. Many people forget that the Programme for Prosperity and Fairness had two preconditions. The first was inflation, of which everybody is aware and on which a major media debate is taking place. However, the other precondition concerned economic growth. The PPF stated specifically and pointedly that reaching the objectives of the agreement was dependent on our achieving economic growth at an annual rate of approximately 5.6%. It goes on to say, "In the event of growth exceeding that amount we can then look at the possibility of redirecting national resources towards accelerating progress towards the objectives of the agreement." In other words, if growth exceeds 5.6% we can look at bringing the objectives forward. The first objective deals with pay. Therefore, what the PPF says is that in the event of achieving growth of more than 5.6% we can demand pay increases either above the level signed up to or that pay increases should be paid earlier.

Looking at the probable outturn for 2000, economic growth will far exceed 5.6% and will probably be double that figure. It is likely that GDP growth for 2000 will be approximately 11% per annum. Effectively, that means that the difference between 5.6% and 11% represents additional wealth in the economy. As a representative of the people who signed up to the PPF I demand that that wealth be shared out. Let me be clear, I am not saying that the whole difference should be shared among the workers at the bottom of the line – some has to go to the State, some to employers, some to the voluntary community sector and to the workers who are producing the wealth.

In dealing with this matter, IBEC has shown extraordinary degrees of selfishness and greed in its lack of openness. It signed up to an agreement which contains the following words, that "we can accelerate progress towards the objectives of the agreement in the event of us achieving growth rates of higher than 5.6%." It has a moral responsibility to deal with that. What has happened is that while the representatives of industry are talking about how difficult it is to meet the wage demands, the reality is that in those industries where there is a skills shortage or a shortage of workers they are increasing salaries and wages to attract people.

It is also a fact that there are many industries in the high-tech area where people are achieving increases above and beyond the terms of the PPF. These are members who are represented by IBEC. Its members are voting with their feet in certain industries.

Those who are dependent on social welfare or fixed payments of any description are getting the minimum level set out in the Programme for Prosperity and Fairness. Similarly, those in industries who are being paid the minimum wage will not get anything above and beyond the minimum levels set out in the Programme for Prosperity and Fairness. Many of those in indigenous industries are not getting increases beyond the PPF. Workers in the public service at all levels, including Members of the Oireachtas, are not getting anything above and beyond the minimum terms of their particular agreement. This has to be adjusted.

If anybody thinks the whole public sector and all the others who are not getting one shilling beyond the minimum terms of the PPF will accept that lying down, they are making a serious mis-assessment of the current situation. We are facing an industrial relations scenario if IBEC does not wake up and if the Government, as an employer, and as a Government does not look at its responsibilities under the PPF and deal with this issue.

On the issue of taxation the Government is setting up a war between the PD Leader, the Tánaiste, Deputy Harney, who is making some demands on taxation, and ICTU. Let us look at that in simple terms. The Leader of Progressive Democrats, Deputy Harney, said she would like to see both the higher and lower rates of taxation reduced by 2% and also that the tax threshold level for the payment of tax, for those at the bottom of the scale, should be not less than £150. The Irish Congress of Trade Unions wants the taxation bands widened and the tax threshold increased from £100-£110 to £200 over two years. There are specific differences on the area of the tax threshold between what the Tánaiste is saying and what the ICTU is demanding. That is an issue we should focus on and it should become an issue for Government.

On the issue of the Government commitment to reducing the tax bands by 2% and the demand by the Irish Congress of Trade Unions to increase the width of the bands, we should sit down and work our way towards them. I ask the Government to take special note of the demands before it and deal with this issue in an orderly fashion though negotiation, discussion and recognition of the demands and expectations created by the PPF.

Mr. Quinn

I thank Senator O'Toole for sharing his time with me. I do not always agree with the Senator but I agree with part of what he said today, that this debate would give us the opportunity to congratulate the Government on the great success we have had. He points out that it is not only one Government, but successive Governments. I welcome the Minister of State, Deputy Ryan, to participate in the debate about the success not only of one Government but of successive Governments during the past 12 years.

I listened to the Minister of State, Deputy Treacy, this morning who gave figures of which we can be proud. We can be proud of the figures mentioned by Senators O'Toole and Cox and we should hold our heads up with pride because they have been successful.

I was on the shop floor of a supermarket this morning and met a group of Swedish visitors who came to look at Ireland. The first question they asked was: "How did you achieve success in your economy?" The answer is that we have achieved it through successive measures. Senator O'Toole has one view with which we do not all agree but it has been a success story we can accept. Let us use this debate today as an opportunity to go further and make suggestions for the future.

I congratulate the proposers of the motion on the fact that it has been worded positively. Instead of talking about social exclusion we are talking about social inclusion and instead of talking about unemployment we are talking about employment. The debate today has three prongs to it: employment, taxation and social inclusion. I want to use my time to make some practical suggestions under each of those headings.

First, we should recognise that instead of the unemployment problem we have two problems – an unemployment problem and an employment problem. The employment problem arises because we are short of people to fill the many thousands of jobs the new economy needs. I have argued before that this calls for a total re-examination of our policies on immigration. We should be welcoming and seeking people to come to live here but at all stages of the skills ladder, not trying to cherrypick highly skilled people in a select number of key industries which, to a certain extent, we have done up to now.

We should certainly work to make the immigration arrangements already in place more efficient. I was disappointed to learn that the Tánaiste confessed to the Dáil this week that the time taken to get an immigrant work permit has slipped to six weeks. This is due to the imbalance that exists between the demand for the permits and the staff in her Department to process the applications. She promised to increase the staff with the target of reducing the waiting time to one week. Senator Cox spoke earlier about the danger of losing 40 jobs in Galway because of a seven week delay in one instance.

We have heard promises such as the Tánaiste's before. Our immigration policy is too limited to cope with the country's new needs. At the very least, we should apply the system we have with maximum speed and efficiency. Getting work permits for non-EU nationals who satisfy the entry conditions should be a routine matter, not a long drawn-out bureaucratic hassle that puts employers off the idea.

We have an employment problem but that should not blind us to the fact that we still have an unemployment problem, and we will have it for as long as there are people who are long-term unemployed. There is a substantial number of people in that category. These people are not caught up in the rising tide of the new economy. They get passed over again and again because they lack the employable skills and attitudes that will get them onto the bottom rung of the ladder of employment. These people need our help more than ever. As the unemployment figure steadily decreases, many people forget that this hard core of long-term unemployment continues to exist. It is almost a case of out of sight, out of mind.

Another danger is the temptation to run away from this problem because it is so difficult to cope with and because, despite having struggled with it for a long time, we do not appear to have made headway with it. As a society, however, we cannot afford to sweep it under the table. We must work on it. If we try to sweep it under the table, it will come back to haunt us in the years ahead. Let us grasp the nettle now while we have the resources to do so.

I will move now to the issue of taxation. We are currently in the pre-budget silly season. I call it the silly season because it has become the tradition to make the most outlandish demands – we heard some of them today – and promises. They are skirmishes, as it were, in the pre-budget debate. The trouble with this carry-on is that a large number of people take this posturing seriously and adjust their expectations accordingly. That makes the task of the Government, particularly the Minister for Finance, more difficult than it should be. It is, therefore, surprising to see the Government playing the silly season for all its worth.

The fundamental taxation problem is that the Government is committed to making further tax concessions but prudence demands that this be done in such a way that the current overheating of the economy and the attendant dangers are not worsened. When the Seanad debated this subject before the summer recess I suggested compulsory savings as a way of squaring the circle. As far as I know, I was the first to make this suggestion, and I was glad to see that many others took up this theme over the summer. It is nice to know that something initiated in the Seanad has grabbed such interest.

Since the savings scheme appears to be a runner, I will put some flesh on the bones of the idea I put forward in early summer. The central notion is to give people more money in tax concessions but to discourage them from spending it by creating new incentives for them to save it instead. There are many ways this could be done. One is by abolishing DIRT on a temporary basis. Another is to introduce a savings bond of either a flat sum or in proportion to the amount of tax paid, which people could redeem at some time in the future on a tax free basis.

A further idea, which appeals to me because a variation of it worked before, is an inflation-proofed monthly savings scheme. This was popular during the last period of high inflation because it guaranteed citizens against a fall in the value of their savings. The sum saved increased by the same amount as the consumer price index, keeping step with increases in the cost of living. I suggest that we revive that idea but add a further major incentive. In addition to making the interest paid on the savings tax free, the amount paid in by way of investment could be fully deductible against the standard rate of tax. There would have to be a limit of, for example, £100 per month. This would mean that up to that limit a taxpayer would have a choice of either taking the earnings in cash and paying tax on them in the normal way or putting them into the inflation- proofed savings scheme where every pound saved would be disregarded for tax purposes. That would be a powerful incentive for people to switch a portion of their income from spending to saving. It would be most desirable from the point of view of the economy. We are doing nothing at present to encourage this type of thing. I commend the idea to the Minister for Finance to consider with the many other proposals, sensible and otherwise, that are piling high on his desk in the run-up to the budget.

It was interesting to hear Senator O'Toole making the case that because inflation is higher than expected, people should be given more money. If we are not careful and do not try to solve this problem in the traditional manner, we will be back to the policies of the 1970s and 1980s. There will be a huge problem if we try to throw more money at it. I hope my suggestion is considered.

I will comment on the problem of social exclusion or the challenge of social inclusion. With each week new evidence comes to light which shows that the Celtic tiger economy is widening the gap between the haves and the have nots. This week, however, shocking evidence emerged for the first time – it was certainly the first time I saw it and I am anxious to highlight it. Most people regard education as a bell-wether for the problem of social exclusion. If we cannot create equality of outcome in the educational process, we sow the seeds for future generations of disadvantaged people. At best, we should not make the problem worse for the future, whatever about our ability or inability to wipe out disadvantage in the shorter term. That is the reason I found so terribly depressing this week's news that access to higher education from the lower socio-economic groups is still no better than it was 20 years ago.

Third level education, theoretically free for all, is still very much the preserve of the well off. The scandal is not so much that this is so but that things have not changed over the past 20 years. Despite much rhetoric and a welter of pilot projects and well meaning efforts, nothing has changed. The situation is as bad as ever. The problem is not restricted to education at third level. Indeed, the third level problem is simply the result of a problem which begins with the pupil's first days at school. Today, just as in the past, a sizeable proportion of our young people entering the school system are disadvantaged, and they become even more disadvantaged the longer they stay within the system. After all the strides we think we have made, only 80% of the age cohort finish secondary education.

In an age where everything depends on the ability to show a proper qualification, the fact that one in five of our young people leaves education without a leaving certificate makes a mockery of our claim to be a highly educated nation. This week's news is different because it should prove that what we have been doing up to now to address the problem of educational disadvantage is simply not working. It time to go back to the drawing board and completely rethink our approach. Until we do so and get a proper grip on the problem of educational disadvantage, anything we do about the wider problem of social inclusion can only be short-term and temporary in its effects.

That is the challenge in relation to those who have been left behind over past decades. What has now jolted us is that these people are still being left behind because that core of people do not get on the bottom rung of the ladder. Education is the means at our disposal to face up to the challenge of social exclusion and achieve much higher levels than we have attempted to achieve in the past.

Mr. Gibbons

I welcome the Minister of State to the House. I also welcome the opportunity to contribute to this debate which is timely and opportune in the run up to the budget. As many other speakers have outlined, the changes that have taken place in the economy over the past ten or 12 years are astounding. Had we set goals of this nature ten years ago, people would have laughed at us.

Ten years ago we were struggling with a national debt problem and all the associated problems. Today we have large budget surpluses. Ten years ago we had mass emigration which caused grief to many families. Today there is immigration and many of those who left ten years ago have returned. A major change which has taken place in relation to employment is that there simply were no jobs ten years ago for young people or anyone else. Nowadays there are not enough people to fill the available job vacancies. These are major achievements which must be put in context.

The present coalition has now passed the half way mark of its term of office. The Progressive Democrats and Fianna Fáil have so far delivered three budgets, the same number as the rainbow Government delivered during its period in office. Therefore, it is now possible to make a fair and reasonable comparison between the budgetary performances of the two Governments. I am bearing in mind what our Leader said this morning, that it is an opportunity to praise the Government on its performance over the last three years.

The comparison between these two Governments is quite stark. The rainbow Government cut the basic rate of income tax by just 1% during its period in office, whereas the present Government has cut it by 4%. The rainbow Government did not cut the top rate of tax at all, whereas the present Government cut it by 4%. The rainbow Government increased the threshold at which a single person hit the top rate of tax by just £2,250. This Government has increased it by £3,400. Yet the rainbow Government raised the value of the basic tax allowances for a single person by just £550 over three years. This Government has raised it by £2,000.

The last comparison is particularly significant in that it measures the difference between words and actions. Leaving aside the rates, the rainbow parties always argued against rate cuts but they always made great play of their commitment to lower paid workers and their determination to help those who were least well off. Their record of achievement in this area is miserable. When the rainbow Government left office just over three years ago a single person became liable for income tax at an income of £76.92 per week. It is worth bearing in mind the next time we hear people speak who did not introduce a national minimum wage—

Mrs. A. Doyle

The Senator should go back to 1993 to see what the Fianna Fáil-led Government tax policy was. He should consider the taxation levels under Charlie Haughey and Ray MacSharry. I will give the Senator the facts.

Mr. Gibbons

I will give the Senator the facts as they are.

Mrs. A. Doyle

I will give the Senator the facts. We know where this started.

(Interruptions.)

Acting Chairman (Mr. R. Kiely)

The Senator is entitled to speak. Senator Doyle should have manners and not interrupt him, please.

Mr. Gibbons

The fact is that no Government in the history of the State has done more for lower paid workers than the present Administration. It has taken well over 100,000 people out of the tax net altogether. It is also true that no Government in the history of the State has done more for people on middle incomes. This Government has taken well over 100,000 out of the top tax net and it is well on target to ensuring that less than one-fifth of earners will pay the top rate of tax by the time we leave office in two years' time.

It is now becoming fashionable in some quarters to say that it is all a matter of resources, that the present Government has the money to cut taxes and the previous Government did not. That misses the point completely. The present coalition has raised revenue by reducing tax rates. We harnessed the incentive power of taxation to reward work and encourage enterprise, to stimulate new economic activity and broaden the tax base.

The changes in capital gains tax make the point very succinctly. The rate was halved and the revenue more than doubled. This gives rise to some rich ironies. The Minister for Finance has been more successful in extracting money from the high rollers than any left-winger. He did it by cutting rates, not raising them. If for ideological reasons any socialists want to double the capital gains tax in the future to 40%, they will have to explain to the public where they will make up the loss of revenue.

There is now a fairly widespread acceptance that cutting taxes creates jobs. Recent evidence supports that contention. The number of people at work has surged and the number out of work has plummeted. The Minister of State cited the figures this morning.

We have heard the view put forward from some quarters recently that instead of cutting taxes we should be sharing the wealth. Again, people are missing the point because it is tax reductions which enable us to share that wealth. The figures speak for themselves. The number of people in employment has risen by almost 300,000 since April 1997 and the level of unemployment has fallen by over 100,000 over the same period. Long-term unemployment has fallen dramatically and last Friday the CSO released the figures for the numbers on the live register at a rate of 3.8% at the end of September. These figures are particularly significant because long-term unemployment is one of the major causes of poverty and deprivation in any modern society. It is a difficult problem with which to deal and there were times when a fatalistic acceptance developed that we would never be able to deal with it.

All that has now changed. Improved incentives, targeted intervention and assistance are helping the long-term unemployed to find their way back into work and giving them the chance to participate fully in our national prosperity.

Long-term unemployment can be eliminated completely within the lifetime of this Government. That would be an achievement of which any Government would be proud. I believe we will attain this. The tax cutting agenda which the Progressive Democrats set out in the mid-1980s has now been largely delivered, or it is certainly on the way to being finalised by the end of the Government's period in office. It is unlikely that we in Ireland will change course on the taxation front. The Labour Party attacks every cut in the higher rate, for instance, but there is no indication it would ever reverse cuts if returned to office.

Looking ahead to 2002, we can be fairly confident that we will have a tax system based on rates of 20% and 40%, with most low earners paying no tax and possibly just 17% of earners on the higher rate of tax. That will be a formidable achievement in terms of tax reform. It would be an unbelievable achievement when one considers where Ireland was more than a decade ago.

Where do we go from here? What tax system, society and economy do we want in 2010? We will compete in a global marketplace for jobs and investment. Everything will be more mobile than at present. Ireland will have to be more competitive and current prosperity must be built on if it is to be secured. Economic growth over the next decade will be driven by computer engineering, software development, biotechnology and similar industries and not the textile, clothing or low skill assembly-type industries. That will only happen if a climate is created and fostered in which such activities will thrive.

Do we want a high wage, high skill, high value economy? If so, are we prepared to make the tax changes necessary to ensure that Ireland can attract and retain the brightest and the best in those businesses and give them the incentives required to keep them here? Are we prepared to reward achievement, effort and excellence and to develop a tax regime that would enable us to compete with Silicon Valley, for instance, in the market for top quality computer professionals?

Tax is only one component in this equation. Other factors such as quality of life and the quality of services and infrastructure come into play, but if the tax element of the equation is wrong the others will not matter. These are not academic issues. The special low rate of corporation tax on manufacturing and internationally traded services has been absolutely crucial to our economic performance for several years. Our success in attracting foreign investment is proof positive of the incentive power of taxation in the corporate sector. Are we willing to apply the same logic to personal taxation so that we can attract not just the best projects but the best people? This is one of the areas on which political and economic debate should centre in the years ahead.

All this presumes that Ireland retains the right to set its own taxes and the freedom to run its economy as it sees fit. Recent interventions from Europe suggest that some people may have other ideas. Ireland has benefited enormously from the freedoms which Europe has given it. We have gained the freedom to export to a Single Market which is the largest and most lucrative in the world, to develop a modern transport infrastructure with the aid of EU supports—

Mr. J. Doyle

Where is that?

Mrs. A. Doyle

Outside Dublin.

Mr. Gibbons

—and to challenge local monopolies because of our need to adhere to EU competition and liberalisation directives. For Ireland, the European experience has been about freedom, not restrictions on freedom.

Within the United States individual states and cities enjoy the freedom to compete with each other for jobs and investment. Americans recognise that competition is good for everybody. I hope Europe learns from the American experience. By all means there should be rules for the proper ordering of the Single Market, to prevent abuse of state aids and to ensure fair treatment for all players in the market, but we should also make sure that Brussels does not stifle initiative and independence at member state level.

The success of the Irish economic enterprise should be an example to all and a threat to none. If other states want to emulate the Irish model, well and good; if they do not it is not a problem. It would be a problem if member states were to gang up on one another to stop competition. The EU outlaws anti-competitive practices by companies, and the same principle should apply to Governments. A successful social and economic model has evolved in Ireland. We embrace both the enterprise economy of the United States and the inclusive society of continental Europe.

Our model is delivering the goods and Ireland is making enormous strides. We have serious problems to contend with in areas such as housing, transport and the health service, but these problems are being addressed. Fifteen years ago we dealt with what seemed to be much more intractable problems, unemployment, emigration and public debt. By and large we have solved those problems and we can also solve the others.

We still have a major job to do in integrating our tax and social welfare systems. Each of these has developed quite separately from the other over several decades. A process of piecemeal change has given us a regime of incredible complexity which is full of contradictions and confusion. The interaction of tax and welfare means that some people can be discouraged from taking a job and in certain circumstances from establishing stable family units. The entire regime is not simple, transparent and logical in many cases.

Full and total integration of our tax and welfare systems is a target that must be attained. That would give us the opportunity to get rid of the poverty traps and disincentives which are a feature of the current system and it would enable us to target resources more accurately to those who most need them. Integrating our tax and welfare systems would be a major undertaking. It would take time and money, but we have plenty of both. If we set ourselves a ten year timetable there is no reason we could not have, by the end of this decade, a system that would be the envy of the world.

Some of the most important building blocks have been laid down by the Government. Tax credits are being introduced. The concept of individualised tax bands has been introduced and it is a great pity Fine Gael is committed to reversing this increasingly popular measure. Progress towards individualisation of welfare payments has been made with the decision to increase the value of adult dependant allowances in the last budget. These are significant and far-reaching improvements which demonstrate that, provided the will is there, great progress can be made in reforming and restructuring our system. More can and should be done.

Little more than a decade ago Ireland faced the most enormous difficulties. We had to cut back on spending, services and investment. We fought our way out of trouble by making hard decisions. We face new challenges, and big decisions rather than hard decisions are needed. We need to think and invest big in roads, railways and every other aspect of physical infrastructure. If we do, we can guarantee continued success for Ireland for many years to come.

Mr. J. Doyle

I wish to share my time with Senators O'Dowd and Avril Doyle.

Acting Chairman

Is that agreed? Agreed.

Mr. J. Doyle

Previous contributions have been wide-ranging but I want to address taxation. The December budget is under preparation and it is timely that we should have a discussion on issues which will be affected by the budget. Budget 2000 has been debated at length in the House and I do not want to go over that ground. However, one of the difficulties with it was that it did not provide sufficient tax relief for the less well off, especially those on low pay. This mistake must be rectified in this year's budget and tax cuts should be directed at the lower paid.

In the forthcoming budget the economy must come first. The budget should encourage more saving in the economy to curb inflation.

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

Mr. J. Doyle

I wish to refer to taxation measures and as we make these statements I am conscious that the December budget is in preparation. It is very appropriate, therefore, to have such discussions. The last budget, which was debated at length in this House, did not provide sufficient tax relief to the less well off in our society. That mistake must be rectified in the December budget with tax cuts being aimed at the lower paid. The economy must come first and, therefore, the budget should encourage more saving in order to curb inflation and wage spirals. We do not want the situation that existed in the 1970s and 1980s when all the benefits from lower taxation and social welfare were wiped away by a high inflation rate. We must never allow that to happen again. It behoves all politicians to guard against making inflationary statements such as, "The Exchequer is awash with money". These statements send out the wrong signals but, unfortunately, such a statement was made recently by a senior Minister.

The Tánaiste and the Attorney General have indicated their support for significant income tax cuts in the December budget but the Government should tread carefully in this regard. We should have reductions in income tax but they should be made prudently, although I accept that the tax bands should be widened. The Government must meet its commitment in the Programme for Prosperity and Fairness. If inflation is allowed to continue at its present rate then the wage increases under the PPF will lose their gloss.

We must remember that the PPF was negotiated on the basis of a 3% inflation rate, whereas it is now at 6% and rising. The December budget must be based on the criterion that it will help to reduce inflation. Union leaders called recently for lower duties on petrol and diesel fuel. They argued that rising oil prices have accounted for almost one third of the cost of living increases in the past year, and that a cut in excise duties would offset that.

The Government must also examine the possibility of cuts in indirect taxation. According to the chief economist at Goodbody Stockbrokers, a 2% cut in the top rate of VAT would take 1.3% off the rate of inflation. If an alternative excise duty measure was chosen by the Government it would have to give up £200 million in indirect taxes to take 1% off the consumer price index. Apart from that, the Government must hope that the euro will recover in the near future. Some international bankers are predicting, however, that the currency will fall further and if this were to happen it would fuel inflation. A fall in the currency threatens to push up the prices of all imported goods from outside the euro zone and in itself this would lead to an increase in inflation.

A number of Senators referred to the progress we have made over the last 20 years, coping with the national debt and reducing unemployment to 3%. I acknowledge that great progress has been made in recent years but housing and health must be attended to. We went through difficult periods in the 1970s and 1980s but we had a programme for social housing. Under that programme, Dublin Corporation, which has the longest waiting list in the country, was able to eliminate its entire housing waiting list. That was done during a difficult economic period. Today, however, young people cannot get houses, irrespective of their incomes.

Earlier in the debate when Senator Costello mentioned the number of cars on our roads, Senator Cox asked where the money was coming from to pay for those cars. I attended a meeting recently at which a young girl said she had bought a car because she could not afford an apartment. Young people are investing in cars, although they would prefer to purchase apartments but they cannot afford the high property costs involved. It is difficult to explain why social housing was available at a time when we had economic difficulties – even though people could get a mortgage to buy a flat or house of their own – whereas that is not happening today.

More importantly, health service provision has deteriorated. In the 1970s and 1980s there were no hospital waiting lists in Dublin. A new programme was instigated to replace a number of old hospitals with new ones. Those new hospitals are now in place, yet the number of hospital beds has been reduced by one third. That has led to extensive waiting lists. It was heart-rending to read in today's Irish Examiner about a terminally ill patient who was left crying for help on the telephone. She was attempting to get a bed in St. Luke's Hospital in order to obtain cancer treatment. Unfortunately, she was left waiting for three weeks and has since died. Is it not sad to read of such problems at a time of economic boom?

Ministers are now making bids to the Minister for Finance for allocations for their Departments. I sincerely hope that when the Minister for Health and Children makes his bid the Minister for Finance will regard it sympathetically. Health is one area that must be attended to urgently. If we are to have full economic prosperity we must house those in need and find hospital beds for those requiring medical treatment. If we fail in that we have failed as a nation.

Mrs. A. Doyle

I am delighted to have the opportunity to congratulate the Government and the previous two or three Governments which have all worked to turn the economy around from the difficult times of the 1980s, which featured high interest rates and unemployment. While there is no need to rehearse the whole story in this debate, it goes back to the Tallaght strategy and the brave stance Fine Gael took in Opposition at that time, when Mr. Ray MacSharry was the Minister for Finance. It allowed the then Government to take politically unpopular decisions without us jumping up and down on its political grave. That Government did what was necessary for the economy. Successive Governments, some shorter lived than others, have continued to move in the direction we are in today.

The Irish economic success story is held in awe in Europe. Only yesterday a colleague asked me to address a visiting group from Sweden. He told me they are fascinated in Sweden at how we have succeeded in Ireland. They want to know what they need to do to copy the Irish story. I addressed the group as best I could for 20 minutes. I spoke with great pride about the success of the Irish economy and how we turned it around.

Head of my list in terms of explaining how we did it was the consensus approach through successive social partnerships. I thank – we forget to do so – the unions, public and private sector, the employers, farmers and successive Ministers for Finance and all those involved with the social partners for the responsible line they have taken. May they all benefit from what was a key factor in contributing to the position we are in today.

We can add to that list of factors free second level education. It produced very well educated young people who were able to take up the jobs. Our membership of the EEC, the Single Market and now the EU was also a factor. It was most important, as a net exporting country, to have that huge market on our doorstep.

Membership of the euro-zone is doing us no harm, even though we would normally focus on the negative in terms of the dollar and sterling. However, our dependence on the UK market is decreasing as we become more Eurocentric and less Anglocentric in terms of importing raw materials and exporting finished produce.

Our problem now is one of employment, not unemployment. Who would have thought ten or 15 years ago that we would stand in the Houses of Parliament making that statement? There are skills shortages and we are enticing back to the country people with skills. I hope we find room for central and eastern Europeans and others who can take up the jobs that we can no longer fill. The unemployment rate stands at 3.8%. It is a great success story, but not one to crow about.

While we must listen to those who warn about the inflation rate – it is double that of the other 15 member states of the EU – I am inclined to accept that with prudence and balance we can address that difficulty. We no longer have control over our interest rates so we must be careful to get it right with expenditure, which is the only weapon the Government now has. We can continue to reward work and create a climate that is work and tax friendly in terms of the labour market, but balance is required.

We must remember that the rising tide does not lift and has not lifted all boats. As politicians and leaders in our various communities, our special duty of care must be to those who, through no fault of their own, are not in a position to help themselves.

It is time the two-tier health system was seriously addressed. The way it has evolved is an embarrassment to all. Notwithstanding the excellent service provided by those working in it, there is a lack of speedy access to it by the needy.

What needs to be said about traffic congestion? Yet another plan has been announced involving expenditure of £16 billion. It is time to stop announcing, re-announcing and regurgitating plans. We need urgent action.

The rapid rise in house prices has been a cause of concern, but we are still not in a situation of negative equity, as was the case a few years ago with our neighbours across the Irish Sea. The mortgage to value ratio on house prices is approximately 70% to 73%. That augers well so long as we can take the heat out of it. The problem has been caused not because house prices have risen but because they rose so quickly. They may continue to rise in the future, but we do not want them to rise at the rate they have been rising, although nobody wants to be asked to take a hit. We also need full integration of the tax and social welfare system to remove remaining disincentives and poverty traps.

When people ask how we turned the economy around, we must acknowledge that, with the social partnership agreements, the education system, our membership of the EU and the euro–

zone, Europe has been very good to us with net transfers to this country. Most of the moneys came from the Exchequer, but the money we got from Europe, in direct and indirect payments, has lit fires under the economy. It has helped accelerate infrastructural projects at a rate we could not have achieved.

I regret the apparent attempt to mine the natural Euro-scepticism that is latent in the electorate. It is apparent in every country. If one scratches the surface one finds a projectionist view of sovereignty, be it Irish, British, French or whatever. We should be encouraging people to be Eurocentric. It does not threaten our sovereignty, nor our identity, heritage or culture, as the Minister for Arts, Heritage, Gaeltacht and the Islands recently stated in Boston. The Minister has not attended a culture council meeting in Brussels for the past two years. If she attended them she might be able to make her case when she has serious concerns. She was not present when the Culture 2000 programme was launched in Europe, nor did she send a Minister of State to represent her. Over the past two years, Ireland was the only country not represented by a Minister at the Culture Council meetings.

I am disappointed that in attending the summit in Biarritz this weekend the Taoiseach is willing to trade a Commissioner for Ireland for qualified majority voting. I support qualified majority voting, but why is he trading something we already have? It leaves him with a very weak hand. Only last week in Strasbourg, the Prime Minister of Luxembourg, the smallest state of the 15 member states, said that the issue of a Commissioner for every member state is off the agenda. The French Commissioner, Michel Barnier, who represents President Prodi, agreed with him. In those circumstances, why are we trading a Commissioner for other matters? Would that we had a stronger hand or that the Taoiseach or the Government would stop trying to mine Euro-scepticism as we head into an election year.

Europe has been good to Ireland. Leaders in all the parties must explain to people why Europe is still important, why we are leading players in Europe with an influence indirectly proportional to our size. We need never fear a two-tier Commission if that was to be the result of the Biarritz and Nice summits. The smaller member states and our Commissioners, from both sides of the House, whether Peter Sutherland, Ray MacSharry or whoever, are fit to sit on any top tier of a Commission if that arises.

Let us not go to Biarritz and Nice with chips on both our shoulders, trading off something we already have. Let us go there in a positive manner, pro-Europe, acknowledging what Europe has done for us but proud about the strength of our country, culture and sovereignty. Although we are a very small nation, we can lead in Europe.

We need never apologise for being part of Europe or part of an enlarged Europe. We must welcome the central and eastern European countries, recently changed from communist regimes to young democracies with very difficult, shaky economies. Let us welcome them as we were welcomed in 1973 when our economy and GDP per capita was way down the ladder. We have nothing to be afraid of.

Although we will not get the same return from Europe as previously and although we have almost worked ourselves out of Objective One classification, we should not start mining Euro–

scepticism and pretend that Europe does not matter, has not mattered and has not contributed. It has been a very important part of the equation, even though we did most of the work ourselves through the implementation of successive Government policies. Without the catalyst of European funds to light the fires under the economy, it would have been a far more difficult job.

Mr. Mooney

I am pleased the Minister of State at the Department relevant to this debate is present. The rotating Ministers of State syndrome that sometimes happens in this House is frustrating. It is out of our hands.

Mrs. A. Doyle

Rent a Minister.

Mr. Mooney

I am aware that given their commitments, Ministers are perhaps prevented from acceding to all our requests. It is a minor irritation in the House. Therefore, I am particularly pleased the Minister of State with responsibility for what we are discussing is here, notwithstanding the excellent work which his departmental officials have been doing all morning, as he has valiantly tried to absorb all of the various points which have been coming from across the floor.

Senator Avril Doyle's speech was a little like the Irish weather in the sense that when she started it looked bright and beautiful but as the day progressed it changed. I found the initial part of it very refreshing and I was saying that it is incredible what happens when Irish politicians, who have been focused locally for many years, are exposed to European mainland thinking, how they then broaden their political philosophy. It is not just reflected in Senator Doyle's speech, it is something I have noticed about all of our MEPs and, indeed, some Ministers and Ministers of State who are exposed to Europe on a regular basis.

Mrs. A. Doyle

I take that as a compliment and thank the Senator.

Mr. Mooney

It is a compliment in the sense that—

Mrs. A. Doyle

I am not sure it was meant as one.

Mr. Mooney

—-her initial contribution reflected the view which would be widespread among those who bat for Ireland. The history of Ireland's participation in the European Parliament, despite its political divisions, has been one of wearing the green jersey most of the time rather than being parochial.

However, I do not think Senator Doyle has read the most recent public statement of the Minister for Foreign Affairs, Deputy Cowen, regarding Ireland's position.

Mrs. A. Doyle

I did. It was an excellent statement.

Mr. Mooney

It was clear and unambiguous.

Mrs. A. Doyle

He was trying to undo the damage of the Minister for Arts, Heritage, Gaeltacht and the Islands, Deputy de Valera, and the rest. It was an excellent statement.

Mr. Mooney

I wanted to link it to what seemed to me to be political point scoring by Senator Doyle and her colleagues regarding the Fianna Fáil position in the recent vote in the European Parliament. I found this a contradiction in terms in that I agree with her that, in the absence of a significant transfer of funds from Europe, we in Ireland are now faced with new challenges and new questions. We are exposed to a debate to which we have not been exposed since we joined. We must talk about common defence, common foreign policy and our continuing and future role in an enlarged Europe. For the Irish electorate, these are very uncomfortable questions which must be faced and we will need to debate it.

Mrs. A. Doyle

A serious debate.

Mr. Mooney

It must be a very serious debate.

Mrs. A. Doyle

Yes.

Mr. Mooney

I am glad Senator Doyle has set the tone of that, but I am not sure that in taking public positions, as they were reported in the national media, relating to those reports, she is sending a pro-Europe message because she seemed to suggest that Fianna Fáil were against everything she said in her speech, that we were against enlargement and that we were anti-Europe. It all boiled down, as I understand it, to one recommendation of 11, which recommended that the decisions related to the CAP should be decided by the European Parliament rather than by the Council of Ministers.

Mrs. A. Doyle

No, co-decision.

Mr. Mooney

The inference seemed to be that the status quo would be changed.

Mrs. A. Doyle

No. Co-decision was the proposal, which is not just the European Parliament.

Mr. Mooney

Co-decision would threaten Irish interests in the current situation under CAP reform but that is a view which we could debate.

Mrs. A. Doyle

It was the lead report by Brok they voted against.

An Cathaoirleach

Senator Mooney without interruption.

Mrs. A. Doyle

I am just pointing it out and correcting him.

Mr. Mooney

I respect Senator Doyle's expertise. She was there, I was not and I am relying on media reports. The conclusive message which was conveyed to Ireland was that Senator Doyle and her colleagues were on the side of the angels and somehow Fianna Fáil was not.

Mrs. A. Doyle

They are cynically mining Euro-scepticism in an election year and it is not fair.

Mr. Mooney

The point is that Fianna Fáil's track record has proven that we have been in the vanguard of developing a Europe-wide philosophy and have been involved centrally in the enlargement process and in the evolution of Europe through the various treaties, but that is a separate issue to what we are talking about here and we must agree to disagree. I strongly believe that there is no dispute between both sides of this House and of the other House. I also suggest there is no fundamental disagreement between the MEPs on the future direction of Ireland's role in Europe other than on the issues, to which I referred and of which Senator Doyle made mention, on enlargement and on common defence and security which Ireland must face squarely over the next couple of years.

I would hope that Senator Doyle and her colleagues will raise the level of the debate beyond that of the Green Party, which has been setting the agenda on European matters in this country.

Mrs. A. Doyle

With the support of the Senator's colleagues.

Mr. Mooney

I remember vividly on the debate on Maastricht in 1992, when the Green Party came out and told the people of Ireland that by 1998 there would be Irish men and women in a European army and that there would be body bags coming back to this country – talk about emotional hyperbole. I would hate to see the debate, which is now entering a serious stage, being lowered to that level.

Having agreed to disagree on that particular issue, I want to turn to the issue being discussing here. Senator Doyle made valid points regarding this debate. It is about our future as a country and about our place in Europe but in the context of the narrow focus of the debate about employment, taxation and social inclusion, there are 75,000 out of work in Ireland. I have not always agreed with a certain slant which has been put on employment policy over the past year or two. I can remember the announcement of initiatives to give work visas to Indian high-tech personnel and various other public initiatives to address the skills shortage, yet there are 75,000 people out of work. I would respectfully suggest that the Department of Enterprise, Trade and Employment look at those people.

I have had this debate within the National Economic and Social Forum and, therefore, this is not a new point. It is a hobby-horse of mine. We seem to be always willing to fly with the kites whenever multinationals cry to the Government that they are short on skills and want them tomorrow, not next month. The Government is then forced in a knee-jerk reaction to look at the laws on immigration and the regulation of work permits and to decide to open it up and get in all these Asians and others.

The simple fact of the matter is, as the Minister of State will confirm, that we are not living in isolation but are competing with England, Germany and the United States for the same high-tech personnel. What is so wrong with just slightly tweaking policy to look at 75,000 people? Ireland is not a large country by any means. We have massive resources at Government and departmental levels. Why is there no focus on those people? Why are all those on social welfare, who have indicated that they are willing to work, not been interviewed to provide an analysis of the reasons there are 75,000 without work in the current climate of employment? I would strongly suggest that the reason is that because the number is so small, they are so disparate across the country and they face different problems, the Department is only looking at the large picture. Maybe it is time it looked at the picture at local level. I am talking here about rural areas where there would be no work as opposed to a disincentive to work.

To take the north-west and the west, for instance, with the exception of the larger centres of Sligo and Galway, where is the work? If there is a possibility of working in Sligo and one is 20 or 30 miles from the job centre, how does one get there? These people do not have cars and there is no public transport worth its salt. One would have all those problems. When one does get there, maybe, because there are no services in place locally, one has not had the opportunity to learn new skills and, therefore, one cannot take up the job on offer.

Recently I saw a famous painting of Confucius talking to a goose and asked for the interpretation of it. I was told that Confucius believed that anybody, including a goose, could be educated. In this world of high technology I have seen evidence of this in the area partnership boards, where people who would not know one end of a computer from another have taken courses in technology. Within six weeks or two months they have the basic knowledge to enable them to operate computers and within three to four months they are capable of finding jobs.

A period of three to four months is not long but, as stated earlier, pressure has been put on the Government and the Department by the multinationals. These companies are screaming blue murder and they want to know what action the Government intends to take. They state they have been given various financial incentives, that Ireland has the proper tax climate, a wonderful environment and a skilled workforce but that even though they are prepared to establish operations here and provide employment for 3,000 to 4,000 people they are encountering difficulties in filling skilled jobs. This means that we, in turn, are screaming for people to return home from abroad.

I am not opposed to encouraging people to return home. That is a welcome initiative. However, the Minister of State is probably aware that, according to the ESRI, by next year the pool of available labour from the Irish diaspora will begin to dry up. In other words, we will no longer be able to rely on significant numbers who left these shores in the 1980s and early 1990s returning home to work. Those who wish to come home have already made their decision or are in the process of doing so. The remainder will be content to remain where they currently reside, be it in Chicago, New York, Berlin or London. That is why it is important that the Department should begin to focus on those who are available for work in this country.

From discussions I have had with colleagues on the National Economic and Social Forum who are members of the Irish National Union of the Unemployed, I know that the myth about the unemployed not wanting to work is merely that – a myth. Most people want to work, they want to experience a sense of dignity by getting up each morning and going out to do something positive.

As several Members pointed out, there are wider issues involved here in terms of social welfare payments and the incentive to work. It is not beyond the capacity and expertise of the Department to focus on the potential workforce that could be drawn from among the ranks of the unemployed. This could be done through the local employment service, which has been established on an ad hoc basis and which has not really developed to its full potential. The concept of bringing together the representatives of the education system, the chambers of commerce, local industry and the Department of Social, Community and Family Affairs in certain localities to identify those who are out of work and try to match them to particular jobs is brilliant. I can see no major difficulties in doing this.

The second matter to which I wish to refer is community employment. I accept that the Minister of State does not have total responsibility in this area and it is a pity that the Tánaiste is not present. However, I appreciate the reason for her absence. Community employment schemes have been tweaked, changed and reduced and I understand the reasons the Department is anxious to ensure they get a better return from those who are on these schemes, which in certain instances have been unkindly referred to as "make-work" schemes. The Department is also anxious to ensure that a "CE syndrome" does not develop whereby people will be happy to clean streets or build walls forever and a day.

In the part of the country I represent and in other rural areas certain older members of the male population living on small holdings of between 30 and 40 acres do not have the opportunity to work. They cannot find work locally and the CE schemes are a vital part of their lives. I have discovered, from experience rather than anecdotal evidence, that in recent years the cream of those workers have found gainful employment. However, there is a residual group of males aged between 40 and 60 who cannot find employment. These people are to be found in Roscommon, Leitrim and Sligo and, perhaps, west Cork. They may be unique to areas located on the western seaboard.

Under the current rules, following three years working on a CE scheme – in the main these are urban enhancement schemes designed to improve towns and villages – those involved, who have done an excellent job and feel they have made a positive contribution not only to the community but to their own lives, are cut adrift. The regulations state that at that stage they should be in a position to find jobs. What happens if they cannot do so? They return home, sit down and stare out the window at scutch grass, rushes and a depressing winter landscape or they go to the bank, obtain a loan and try to buy and sell a few cattle in order to survive. That is not fair.

The group to which I refer is not huge and does not represent a major charge on the Exchequer. The Department has received voluminous correspondence about this matter from me and the sponsors of CE schemes in my area and in other parts of the country. We have written on behalf of community groups asking the Tánaiste not to terminate or reduce schemes in situations such as I have outlined.

I was delighted when the Tánaiste issued a public statement at a recent seminar on the older workforce which she addressed. The National Economic and Social Forum addressed this matter in one of its reports, but given that the report was produced three years ago, it shows how long it took for it to work its way through the system. Three weeks ago, as if it was a brand new idea, the Tánaiste stated that we should consider those over 50 years of age and utilise their expertise rather than having them sitting at home on the scrap-heap. When the NESF addressed that matter three years ago we asked the Government to consider utilising the skills of those aged over 50 years. As the Minister of State is aware, at the time to which I refer there was a significant reduction in the numbers of those working in State enterprises such as the ESB and Telecom Éireann, as it was then. Those companies shed workers, many of whom were only in their early fifties, by offering attractive redundancy packages.

I am not stating that all of the people to whom I refer wish to return to work. It is possible that a significant minority may not wish to work because they made a conscious decision to take early retirement and enjoy their lives. The Tánaiste is correct to state, however, that there are people currently not working who could be upskilled and gainfully and usefully employed. In light of the TánaisteWP extended char 4,28s public statement, I request that the Department pursue that matter. Perhaps in a future debate the Minister of State could indicate what the Department has done to identify those over 50 years of age who are not working and to encourage employers to offer them employment.

Mr. T. Kitt

It is always desirable to have a Minister or Minister of State from the relevant Department present for debates of this sort, but Deputy Treacy and I are expected in the Lower House for Question Time. However, one or other of us will try to be here for the remainder of the debate.

Mr. Mooney

I welcome the Minister of State, Deputy Treacy, back to the House.

I hope the Government maintains an expansionist approach to taxation in the budget. I am fed up listening to prophets of doom stating that the country will go down the tubes if more money is given to workers. Last week, an economist made it perfectly clear in the print media that he believes one of the reasons we are in an inflationary spiral is partly due to the high and excessive profits being generated by national and multinational companies as a result of the success of the Celtic tiger economy. If that is the case, workers should not be penalised on foot of the inflationary pressures affecting the economy. Workers have waited long enough. When things were bad we were told to tighten our belts but now that things are good we are still being told to tighten them. I hope the Minister for Finance has the bottle to see off these prophets of doom.

It is perfectly clear that outside factors are influencing the inflationary spiral in our economy. The strength of sterling – the currency of our main trading partner – the weakness of the euro and, as the Minister pointed out, the higher excise duties levied in the budget, particularly in respect of tobacco, contributed to the increase in inflation. It must be remembered, however, that Ireland's growth rate is almost double that of other European countries. This means we can absorb it so long as it does not affect our competitiveness. I urge the Minister for Finance to hold firm on this issue and to resolve the difficulties between the social partners and the Government. Such an agreement is close but if it is based on giving more money to workers then that money should be given.

I wish I had more time to speak on this issue but time flies when one is having a good time. I hope these matters will be taken on board. My only concern is that comments made during debates such as this are not passed on to the relevant authorities. I hope the statements made today will be passed on.

Mr. Ross

I suppose it is indicative of the way the outside world looks upon the proceedings of the Dáil and the Seanad that only four Members are present in the House, that two Ministers of State have been swapping places and that there is no one in the public or press Galleries.

Mr. Treacy

I was here this morning.

Mr. Mooney

Where was Senator Ross this morning?

Mr. Ross

If this debate was going on—

Mr. Mooney

Where was the Senator this morning? If he wants to go down that road he should say where he was this morning.

An Cathaoirleach

Members should not refer to the presence or absence of other Members.

Mr. Ross

A Chathaoirligh, I am trying to make a point which is relevant to this debate. It has nothing to do with this Chamber or its Members, except those who are sensitive about it.

Mr. Mooney

I am trying to distract the Senator.

Mr. Ross

If this debate was taking place up the road in the palace and if IBEC and ICTU were coming in to discuss these topics there would be pressmen, cameramen and civil servants galore, people outside would be looking to see what was going on and a full Minister would be in place. That is the point I wish to make. Debates on the economy in this House are ignored and pretty well irrelevant. I reiterate Senator Mooney's comments.

Mr. Mooney

I was trying my best.

Mr. Ross

I hope that what Senator Mooney had to say is taken back to the Minister and the Department, but I doubt it. What is taken back to the Minister and the Department is what Senator O'Toole, his supposed rivals in IBEC and the other social partners say outside this House. This is a serious point which has nothing to do with the absence of Members. I am not in any way trying to point to their absence but there is a feeling abroad that power and influence have moved elsewhere, particularly concerning the economy, and we accept it.

Mr. Mooney

The Senator's point is well made.

Mr. Ross

I apologise if anyone takes it as a personal—

Mr. Mooney

It was a breakdown in communications.

Mr. Ross

That is fine.

Mr. Treacy

I was here from 10.30 a.m. until 12.15 p.m.

Mr. Ross

I apologise if anyone takes this comment as a personal slight as it was not meant as such. It was meant to make a point about the shift in power from one place in this State to another, and nothing else.

During this debate I detected an understandable note of self-congratulation on the part of everyone claiming credit for the economic boom. Most speakers gave credit to other side and stated that the boom is due to the great work of successive Governments. I suppose they should be congratulated in that they have not made a complete mess of the economy as previous Governments did for many years. Such Governments displayed an extraordinary ability to spend and tax their way into trouble and to take the wrong decisions for political reasons and without concern for the economy.

Some credit is due to this Government for what it has done for the economy. However, in most cases political expediency and the interests of the economy have coincided and, as a result, we have been lucky in that both have thrived at the same time. This is a rare combination of factors which happens from time to time. In other words, if one pumps up the economy, and it is the right thing to do, and people are happy, then both the Government and the people benefit, certainly in the short term. However, I do not wish to get involved in the sort of euphoria about the state of the economy we are accustomed to in this House. The economy is booming, growth is still in double digit figures and, almost without exception, we are better off than ever before. We should be extremely happy about this situation but we should not be smug because, as sure as anything, the boom will not continue forever.

The Government can take precautions in times of plenty so that if and when the boom ends it does so slowly, without pain and in a controlled and well-managed way. However, the Government is showing no signs of reading the warning signals. Governments rarely do so and the electoral timetable is very tight. An election has to take place within 18 months and it is very difficult for any Government to take on vested interests with a year and a half to go. It is also very difficult for any Government to resist the temptation to pump money into the electorate's pocket when we are told we are thriving beyond all expectations.

However, there are danger signs. I despair at the Government's attitude to inflation and I cannot believe its complacency on this issue. The Minister for Finance was not the only one whose prediction for inflation last year was haywire; the same was the case with economists, civil servants and everyone else. No one thought inflation would run as high as 7% this year and it looks as if that will be the figure announced next week. I may be wrong – it may be 6.2% or 6.3% – but I suggest it will be close to 7%. That is critical and Senator Mooney's suggested reason for that figure is an old mantra we have heard before. Since inflation started to rise I have listened to debate after debate in this House in which Government speakers claimed the rise was temporary. They now realise the situation is more complex but they used to claim there were two factors to inflation – the euro and oil.

Mr. Treacy

Most definitely.

Mr. Ross

It is extraordinary that this is the Government which told us the euro was going to mean the end of inflation and that this was the reason for going in.

Mr. Treacy

When it is operational.

Mr. Ross

The Minister of State has not noticed that it is operational already. Two things have happened.

Mr. Treacy

No. When it is in the pocket.

Mr. Ross

We are now going down the road, "When it is in the pocket". I will nail that to my office wall—

Mr. Treacy

The Senator did not read the qualification.

Mr. Ross

—that inflation will end when the euro is in the pocket. That is wonderful. That is another prediction – what a hostage to fortune. I hope the Minister of State is not in office when that happens.

Mr. Treacy

I hope to be in office.

Mr. Ross

I hope the Minister of State is in a different office when that happens because that is a hostage to fortune I shall remember. We were told the euro would be a strong currency and, as a result, we were going to put an end to inflation. People who claimed so were completely wrong. The euro has been a weaker currency than the Indian and many Third World currencies. It has been a disaster.

There is also the price of oil, and last summer Government spokespersons came into the House and said these two factors were temporary. They said the price of oil was on the way down and the euro was on the way up. They were right that week. They were very lucky in that they came in on a Wednesday and the currency had risen for two days. However, they were wrong before that and have been wrong every since.

The Government has a simple policy on inflation – pray for a rise in the euro and a fall in the price of oil and everything will be all right. It is an extraordinary policy. These are the very people who told us that the euro would bring us low inflation and low interest rates. What has happened to interest rates since we joined? They have doubled.

Mr. Treacy

A minor movement.

Mr. Ross

A minor movement but they have doubled. It is another hostage to fortune – doubling is a minor movement. I hope we do not have a minor movement in inflation because that means it will rise to 14%. Interest rates have doubled. They were at 2.5% and they are now at 4.75% and rising. We also got that one wrong. It is nonsense to say we can blame oil and the euro for inflation. There is no Government policy on inflation except to be concerned about it. There is a certain concern about the consumer price index figures when they are issued every month, but it is explained away with the same excuse that it is only temporary and that we should not worry. It will be the same next week when the figures are issued again.

There is a much greater problem than oil and the euro. There is also what is called service inflation within the economy and that is the principal problem. That does not include the rise in cigarette prices in the previous budget because that is only a small ingredient. There is significant and important inflation within the economy. We are frequently told not to be concerned because this will be resolved by IBEC, ICTU and the other boys who call into Government Buildings whenever they want to tell the Minister what to do. They will sort out inflation.

Mr. Treacy

That is consultation.

Mr. Ross

I wish we had a bit more of it. They will tell the Minister what to do. It does not look like that now because the social contract which is wrongly given so much credit for the boom in the economy and on which we pin so much hope for resolving inflation is as dead as a dodo. The social contract, the PPF, and the wage deal is a fiction and anyone who examines what is happening in the economy knows that. It is a joke. The multinationals have nothing to do with. They do not take any notice of the 5.5% deal because they know it is a joke. The private sector is ignoring it.

We know perfectly well it will be broken one way or another in the latest negotiations. However, it will still be said that the 5.5% deal applies. It will be done by paying people through the budget, which is through the back door. It is so obvious and clever. There will not be an official breach of the 5.5% deal but public servants will be paid through the back door and the taxpayer will pay for it. The Minister of State should not say no because he has said two things which will haunt him and he should not say a third one.

Mr. Treacy

The Government does not believe in back doors.

Mr. Ross

The Government will give the trade unions virtually everything they ask for in their pre-budget submission, but it will be done through tax breaks. The Government will emerge from these talks saying that the contract holds firm and IBEC will say the same. The unions will emerge saying that they got more than they wanted but that it will be through the back door so that the 5.5% deal holds. The Minister of State knows that will be the case and so does everyone else. The deal was done between IBEC, ICTU and the Government weeks ago. What we will see for the next few weeks is window dressing. Let us not have these silly meetings in Government Buildings. The shadow boxing is over.

Mr. Treacy

The first meeting was yesterday.

Mr. Ross

The meetings do not matter. They are only a charade and the Minister of State knows that as well as I do.

Mr. Treacy

The Senator should be present at them.

Mr. Ross

The deal is done, the budget is written and the guys have got what they want. What will happen now is that the charade will continue.

Is this good for the economy? It is great for the Government because it can say that social partnership is still working and that it has held the wage deal to 5.5%. The unions will be able to say it is absolutely wonderful because they have got more than 5.5% and that, while it has not come through a wage deal, it has come through allowances and other types of goodies. IBEC will say that the unions have been held to 5.5%. It is all dishonest but tremendously good in the cosmetic political sense.

However, it is not good for the economy because it means that the economy is out of control and that people will have much more money in their pockets. I agree to some extent with what Senator Mooney said about giving people more money when we are rich. The problem is that no preparations or precautions are being made for the day when we are not rich. We are going to indulge in this budget in a series of reckless spending which is disguised as tax allowances and breaks, yet the Government will be able to say it held the line on 5.5%. It is a mirage and we will come to rue that particular day. I wish that I was wrong but I challenge that against what either of the Ministers has said.

It is not just I who says the economy is showing real signs which we need to take as warning signals. I heard most of this debate on the monitor and I did not hear any mention of the Central Bank report. Perhaps there was some reference on this side of the House. Neither did I hear any mention of the ESRI report. Economists are widely and selectively quoted in this House by those who have a certain point of view and one can always find an economist to support what one says. Most economists are loopy to start with, live in ivory towers, do not know what they are talking about and have never done a day's work at the coalface, but they can produce academic reasons why certain things will happen and why they will not. That is why they always produce completely opposite opinions about what will happen. They cannot even agree about what has happened in the past so I do not know how they can agree what will happen in future. However, they were quoted today.

One thing about the economists who are quoted in this House is that they are normally not from the ESRI or the Central Bank because they are inconvenient. These people are relatively independent. Economists quoted in this House are often anonymous and have vested interests. Are economists who work with stockbrokers going to say that there are danger signs in the economy? I challenge anyone to produce an economist from a stockbrokers who has produced a doom and boom forecast. They have not because they would sacked if they did. They are in the business of selling stocks and shares to foreigners. Therefore, every broker's economist produces a prediction that the economy will boom forever because that is the only way they can go to America and the UK, sell Irish stocks and make money. The trouble is that people down here believe them. They do not realise what they are at. The economists' reports are published as some type of credible forecast for the economy when they are really directed at American investors to fool them. The economists are then quoted in this House as if they were some type of gods. It is ludicrous.

It is the same for banks. Banks have an agenda and they get their economists to write what they want. Their agenda it that they want to keep on lending. If they produce figures or an economist to say the economy is in danger and that we ought to cut our cloth, they will not lend as much money and the guy who produced the report will get fired as well. These guys are not credible.

However, the Central Bank carries a great deal of credibility. It does not have an axe to grind nor is it in anyone's pocket. Its duty was to protect the currency but that no longer exists. Its duty now is to protect the country from inflation. Despite the fact that the Government makes appointments to the board of the Central Bank and has done so very responsibly without any particular axe to grind – all Governments have been much more responsible in this regard than they have been with semi-State bodies – the Central Bank issued a report a few weeks ago which was alarming in what it said about inflation. It said it was concerned about inflation getting out of hand and not just being 7% but going higher than that.

That prompted a discussion, which was very unwelcome in Government circles and which never took off, about recession in this economy. That is not a discussion many people here would welcome and it was not, I note, taken up by the economists for the banks or stockbrokers, those household names we cite here, because it did not suit their agenda. This independent report did not say that recession was necessarily coming, but that there was a danger. The report did not worry about house prices for the reasons we worry about – the fact that our children and nephews cannot afford them – but because it was worried about a house price collapse. What is so important is that this came from an independent organisation. The ESRI said something similar, warning about the dangers of excessive tax cuts in the budget which, though they might be popular, would be inflationary.

It is time people started breaking out and away from those vested interests which dominate not just discussions on the economy but also dominate our thinking. I was particularly refreshed, without agreeing with all of it, by what is termed, in an awful phrase, "thinking outside the box" recently, when the Attorney General – God bless him – made a speech outlining what were, I suspect, his beliefs of the moment thinly disguised as putting his proposals for the future. He asked why we did not seek to reduce the standard rate of income tax to 16%. It is time we thought in terms of paying more money to those who need it and taking money from those Departments which are wasting it. We should be thinking of reducing taxes such as capital gains tax and income tax because there is no reason they should be so high.

I wish to elaborate on that at a future date.

Mr. Finneran

I too welcome the Minister of State. I am glad to address the important issue of employment, taxation and social inclusion. It is important to reflect on where we have been in the last ten to 12 years. We can all recall the mid-1980s, when this country had the creditors at the door. We had massive unemployment and emigration and basically the country and the economy were going down the tubes. Those were the political and financial realities facing Ireland. My party can take credit for the stand it took in 1987 in setting the foundation for the recovery of the 1990s which is now internationally regarded as a major success. We can all feel justly proud of where we have come from since the 1980s.

The record of this Government speaks for itself. There are an extra 300,000 people employed and the live register is down by 100,000, a drop of 43%. The great achievement is the reduction of numbers in long-term unemployment to 1.6%. These are major achievements and the Government can take a bow as a result of its success. Obviously this did not happen by chance. There was pain, there was consensus and there were good economic and political decisions which could not have been taken – I disagree here with Senator Ross – without the social contract. That is the foundation on which the success of the economy has been built. That social contract, which is the envy of Europe, is the foundation of our success.

Irrespective of our present difficulties, the Programme for Prosperity and Fairness must be left intact to operate for the next two and a half years. It is of vital importance that the concept of social agreement is maintained so that we can not only look after the interests of people today but also those of the next generation. The decisions we take now will impinge on that generation also. We must remember that this country, under different Governments, invested heavily in education, which has contributed enormously to the opportunities presenting themselves. We must build on that now.

One area we have neglected in recent years is the trade sector. There have been major omissions in this area with the flow towards the academic field and information technology, while traditional opportunities for plasterers, carpenters or electricians have been neglected. Our booming construction industry must advertise all over the world seeking people to fill jobs which are vital to the economy's further development.

I ask the Government to place greater emphasis in its national development plan on opportunities for young people – particularly those who do not wish to go on to third level – to go into the trade sector. There is a good living to be made in that area. If one searches for a doctor anywhere in Ireland one will get somebody, though it may not be the person you requested. If one looks for a plumber or electrician, chances are one will have to wait until the following morning, if not the following week. The Department of Enterprise, Trade and Employment should concentrate on the trade sector. There are massive opportunities here which have fallen away recently. The vocational education system and FÁS are vital and State bodies such as Bord na Móna, Aer Lingus, CIE and others should be given incentives to encourage people to learn a trade. Those people would find employment and help to develop the economy.

There are concerns in the employment area. Massive developments have taken place in some areas while other areas have not done so well. These areas have not seen the Celtic tiger and do not know what it looks like. There is a responsibility on Government to look at these areas where employment opportunities are not as good as along the east coast and in other major centres of population.

Two decisions have been taken which will contribute to this process, but a proactive approach is now needed. The decision regarding Objective One status will have positive consequences for the BMW region. However, the industrial development agencies must attract business people to these areas and identify suitable towns in the region.

My constituency of Longford-Roscommon has not had much success as regards the creation of industrial or manufacturing employment. A few days ago Bord na Móna announced it will increase employment by 120 jobs close to my home. This is a major boast which will be very important for farming families in that area. Such developments mean that people can obtain employment close to their small holdings and stay on the land. This is important as it protects rural areas and maintains the fabric of rural life.

Towns such as Roscommon, Longford, Ballaghaderreen and Castlerea have fared poorly in recent years. I do not know of any announcement regarding the creation of industrial or manufacturing jobs in these towns in the past ten years. At the same time centres of population such as Dublin, Cork and Galway are bursting at the seams, placing enormous pressure on services. If I drive from the west I am caught in traffic jams and this is the case no matter where one goes in the Dublin region. We have contributed to this problem by not focusing on centres outside the main cities as regards employment.

I accept that the infrastructure is not in place in some areas but we must address this problem. In some areas we are upgrading railway lines and roads and installing broad-band telecommunications, all of which are necessary if high-tech and industrial jobs are to be created in the regions of which I speak. We must continue this process as it will also reduce the cost of enhancing services in the major centres of population, particularly Dublin. The Government must focus on the regions, particularly the midlands, west, Border and parts of the south, and identify them as suitable locations. It must enhance services in these areas and then ask industrialists to provide employment. By doing so the Government will relieve the pressure on services, particularly housing, in Dublin and other areas.

The housing situation in Dublin, and other areas to some extent, is the greatest challenge facing the Government. The local authority system of house building is to be deplored as it is completely failing to address the needs of people. Authorities are focusing on a few local people in terms of getting a council house in rural areas and small towns and villages, while failing to look at the broader picture. Councils are not looking at events in major towns just beyond their borders where there are opportunities for people to live if serviced land and other services are provided. If local authorities do not begin to take on board their housing responsibilities, the Government must look at the situation from a national point of view.

The recent housing report included many positive aspects. To argue in favour of centralising any process goes against everything I have stood for as chairman of the General Council of County Councils and as someone involved in local government for many years. However, we cannot tolerate the current approach of local authorities towards housing and I have a duty to speak out on this issue as a public representative. Many local authorities have not completed their 1998 programmes. As housing authorities how can they claim they are addressing the housing problems in their areas? We cannot tolerate this situation and if local authorities do not respond to a firm letter from the Minister and the Government, we will have to examine the situation from a regional, if not a national, point of view. We must look seriously at this situation from a national point of view. Such an approach goes against all the papers I presented at local authority conferences over the years in which I called for more decentralisation of responsibility and authority to the regions and local authorities. However, I am not happy with our local authority and managerial systems and how they are addressing this issue.

We must also consider the issue of co-operation between local authorities. In some cases, a centre of population begins 20 or 100 yards inside a functional boundary which needs services such as water and sewerage, yet an adjoining local authority will not accommodate it into its system. This means that a second treatment plant has to be built on the other side of the boundary. This does not make economic sense. Local authorities must be instructed to co-operate. If they are not prepared to do so, the Government must refuse to allow two treatment plants to be built 150 or 200 yards apart. This does not make economic sense. Someone needs to take charge of these matters and state that the common good is not being protected. These situations should not be allowed to continue.

An extra 300,000 jobs have been created and people appreciate the Government's measures to reduce taxation. It is important to continue this trend, to reduce the standard rate to 20%, to also reduce the higher rate and to take those on lower incomes out of the tax net. Such measures are in the best interests of employment and opportunity.

When the Minister for Finance, Deputy McCreevy, announced changes to capital gains tax there was a hue and cry from people of the left who claimed the measure was protecting those with money and property. These people argued that the measure was letting people off the hook and there would be a decrease in revenue for the Exchequer, but the sum almost doubled. It is a matter of policy and how one deals with these issues. The policy and the philosophy are and must be that we lower taxes, take more of those on low income out of the tax net and create opportunities at all times. The Minister should continue down this road.

I accept that the euro has not performed as competitively as we expected against the yen and the dollar. It has been kicked around the yard for the first year but has survived this attack. It is now in a position to assert itself and I believe it will do so over the next year and beyond. Oil prices have not contributed positively to the position of the euro and the rate of inflation. Both have had an effect on inflation. However, all the indicators are that it is a temporary situation, that it will resolve itself and that there will be a drop in inflation at the end of the year and into next year.

There are pluses in the current situation, particularly from the point of view of agriculture and horticulture. Up to 30% of our exports are to the UK and the fact that the Irish pound is not strong against sterling has been of benefit to people in those sectors.

I spoke earlier about industrialists coming in and setting up in centres of population, which may seem to be important in terms of providing opportunities in the regions. However, for many people it may mean travelling 20 or 30 miles, perhaps on the public transport system. Therefore, those jobs cannot be taken up by people in rural areas and villages. When we talk about social inclusion we must talk about job opportunities and Government and State initiatives which involve rural areas and which maintain the rural fabric. I am not talking about creating holiday villages or similar developments. While such developments may have some positive aspects, the fabric of life in rural Ireland must be protected on the basis of part-time employment for people in farming. In the past jobs were provided through Bord na Móna, the ESB, Roadstone etc., but such jobs are no longer available and we need a new incentive and initiative. There are many areas at which we could look where local employment and initiatives could be supported.

The local authority system could play a far greater part in supporting local initiatives and local development. Instead, they are applying city guidelines to planning applications. Indeed, it is practically impossible to set up any type of enterprise in rural areas. If one does get through the local authority system, which is difficult, one can be assured that some group, usually based 150 miles away, will object. Only this week the President and her husband got planning permission for a house in my county, the place of her forefathers. Within a week of planning permission being granted for a simple home for herself and her family, a group with an office in Dublin but which may be from outside the country, objected. While the people of the region are quite delighted, as they should be, that somebody would come back and build on their own land and family holding, not on a purchased site, a group from outside has said it is inappropriate and that they should not build a house there because they will not live there on a permanent basis. The group has appealed to An Bord Pleanála to block the permission.

We have a culture of objection. While it is important that we protect our waters and our environment and that we ensure all the guidelines and legislation concerning air and water pollution, including environmental directives from Europe, are adhered to, it is important that we allow our country to develop, not just for one section but on a broad base.

I compliment the Government on two areas of initiative in recent times. One is in child care. The initiative by the Minister, Deputy O'Donoghue, is important. A number of applications are being received from the outlying areas, which is very important. The investment in pensions for the future is also very important.

I will conclude by returning to the point that we must target rural and county towns for industrial and manufacturing outlets and enterprises. It is time that was done, and the Minister and the Tánaiste must discuss with the IDA and other agencies the fact that rural towns in Roscommon, Longford, Galway, Mayo, Sligo and Leitrim need attention and that the Objective One area needs the focus of the agencies to provide jobs if we are to maintain the rural fabric and maintain and increase the population of such areas.

Mr. O'Dowd

I welcome the Minister to the House. This is a very important debate at the beginning of the new session. When talking about the economy we must look at its impact on society, particularly on those in society who are less well off. By any measurement, the indications are that our health services are seriously under-funded. The numbers waiting for procedures and operations are disgraceful given the wealth in our economy, which is enjoyed by many but not by such people. Looking at the indicators for general health, statistics show that the death rate among Irish men aged 55 to 64 years from the highly technical and skilled areas is 13 people per thousand, whereas the death rate among the unskilled in the same cohort is more than 32 per thousand. Therefore, there are many inequalities in society and nowhere is that more evident than in our health services.

It is disgraceful that people have to wait so long for basic procedures. For example, in Our Lady of Lourdes Hospital in Drogheda those seeking a routine barium meal examination must wait two months. Those waiting for an X-ray of their hand or foot must wait over one month while those waiting for ultrasound procedures must wait between five and six months, unless the case is urgent. There are more than 1,156 people waiting more than a year for outpatient appointments in Our Lady of Lourdes Hospital in Drogheda, which is utterly disgraceful. It is not because the hospital is not trying to do its best – it is doing its best – but it cannot get the specialists, nurses or staff to do the job. That is one of the biggest problems with the Celtic tiger, namely, that the State and public sector is losing out very badly.

Last night the Fianna Fáil chairman of Dundalk Urban District Council issued a statement saying how much he regretted that his town engineer and four other senior staff were leaving, people who had given great service to the local authority. How will they be replaced? The reality is that in local authorities up and down the country our skilled people are going from the public to the private sector. Where is the Government strategy to deal with this? The reality is that planners, particularly skilled planners, in all counties are leaving to take up positions in private enterprise.

The entry level for administrators into the health services has been reduced in order to get more people to take up positions. Under this Government a career in the public service is no longer attractive to people, particularly young people. In terms of taxation and Government policy, there has to be a new investment and an increase in the entry level to all these positions so that skilled, qualified people will enter the public rather than the private sector. A four year old child from the Louth-Monaghan community care area with a serious speech defect has to wait more than 12 months for a first appointment with a speech therapist. There is a critical shortage of speech therapists and other skilled people in our health services.

In spite of our economic boom, there is no relief for ordinary people in society. Some 31% of the population hold medical cards. There is an agreement between the Department of Health and Children and the medical profession that that statistic could rise to 40%. Some 9% fewer people are in possession of medical cards than the agreement stipulates. An increasing number of people are losing medical cards because limits have not been raised significantly under this Government. People on the average industrial wage should have free medical care. I personally believe that everyone should have free medical care but, clearly, workers on the lowest level of income should. The Government could afford to provide medical cards for a further 500,000 people in the light of the existing agreement between the Department of Health and Children and the medical profession.

The housing waiting list in Drogheda has risen from an average of 200 families to more than 600. The numbers on housing waiting lists are increasing throughout the country. What are these people to do? They cannot afford to service a mortgage. Last year the average house in Drogheda cost £70,000. Prices have increased incrementally since then to £95,000 and are still climbing. A two-bedroomed local authority house costs upwards of £100,000 in Drogheda. How can people on low income afford to pay for that? I accept that some people can avail of shared ownership loans etc., but many people on low income are not prepared to get a loan for £40,000 with the local authority footing the balance of £60,000. As house prices and interest rates increase, repayments will also increase. People on low income simply cannot afford to buy their own homes and that is not acceptable. Neither is it acceptable that social welfare recipients cannot expect to get a local authority house. This Government's record on the provision of local authority housing is very poor.

A young couple starting out in life in this economy who wish to buy a house are crippled by price increases. House prices seem to be stabilising at the moment but if interest rates continue to rise – they have doubled in the past year – how can an average young couple, both of whom are working, expect to pay a mortgage? The Government is doing very little about this problem and must put a better strategy in place to deal with it.

In regard to the development of the American economy in the last century, transport was one of the key features which created phenomenal population growth between the 1840s and the 1870s. We have an expanding population in Ireland. Senator Finneran spoke specifically about regionalisation. The bulk of investment is going towards big cities whereas we should be investing in towns such as Drogheda, Longford etc. It is taking people longer and longer to drive to work. Since this Government took office, the average journey time from Drogheda to Leinster House has increased from one hour to an hour and a half. We are only using half our roads. In the mornings, all our roads are clogged coming into the city and they are clogged going out in the evening, but there is no traffic going in the opposite direction because there is no Government policy which encourages industry to locate on the outskirts of Dublin.

I visited America recently where I met 12 businessmen involved in some of the top e-commerce companies in Virginia who were due to travel to Ireland. Where were they going in Ireland? Dublin and nowhere else. This Government must re-examine its strategic investment policy and encourage industry and other commercial interests to locate outside our cities. Why are companies such as Irish Life not encouraged to locate outside Dublin? Why are people not encouraged to telework? Why does the Government not introduce a scheme in the next budget whereby people who opt to telework will be given an incentive, be it a grant towards equipment installation or business running costs? We should focus on reducing our transport difficulties by encouraging people to work from home. The Government is failing to do this.

Why is it that in this booming economy, people in the North Eastern Health Board area can no longer avail of routine cardiac angiograms in the Mater Hospital? We have a national cardiac centre in Dublin which is so inundated with requests for routine investigations that it can no longer offer the service. What sort of country are we running? Where is the caring element of society?

Child care is a very important issue. Given the shortage of workers in the workforce, women are being encouraged to return to work. When they do, they find they cannot secure child care places for their children. The problem in Drogheda is that people cannot obtain planning permission for a child care facility in a residential area. This problem must be addressed at a national level. The Minister for the Environment and Local Government must insist that development plans should allow the development of child care facilities in residential areas, obviously in accordance with qualifying criteria and health board requirements. It is practically impossible to obtain planning permission for child care facilities, yet we are encouraging women to return to work.

The Government should introduce a scheme which would encourage employers to prioritise the provision of child care places. I accept that it is difficult to attract people to some lower paid jobs but if the Government were to introduce measures to make it more attractive for people to leave their homes, that would solve some of the problems.

Many speakers referred to education. What percentage of people from unskilled or working class backgrounds are proceeding to third level in our Celtic tiger economy? The statistic is very poor. We must discriminate positively in favour of people who come from disadvantaged backgrounds to facilitate them to proceed to third level. While the benefits of the Celtic tiger are, in theory, spread throughout the economy, there is a disproportionate disadvantage as one moves down the income scale.

This has been a very important debate. On the issue of shortages in the workforce in places such as restaurants, hairdressing salons and other skilled areas, why should refugees not be able to work in these services? The Government must actively pursue a policy of allowing refugees to work. We exported millions of our people to different countries in the past century, including to Great Britain and America. Our economic refugees in America were always welcomed. They have a network, they have created jobs and become part of that society. We should open up our society to people who live here seven days a week and allow them to work, even though some of these people may be economic rather than political refugees.

Ms Ormonde

I welcome my colleague, the Minister of State, Deputy Kitt, to the House. We are talking about the thrust of our economy in relation to employment, taxation and social inclusion, and we have done extremely well on all fronts. The unemployment rate has fallen to almost 4% and it would be very difficult to get it to fall further. The goal of the Government was to reduce taxation and take people on lower incomes out of the tax net altogether. This is being achieved and there will be further achievements in that area in the next budget. The top and standard rates have already been reduced by 4% and they will continue to decrease.

Social inclusion has become a major issue. Just a couple of years ago there were large numbers of ghettos throughout our cities. Now that the level of employment has increased, there are improved living standards, the long-term unemployment figures have decreased to 1.6% and the structures are being created to help those who cannot help themselves. This must be compared to the position 15 years ago when there was high unemployment, huge taxation rates and crime and social exclusion were at their height. No one can say this is not an achievement, and well done to the Government for such commitment and creating such a prosperous economy which is highly rated throughout the world.

Where do we go from here? While we have achieved so much, there is still a problem in relation to skills shortages. This issue has already been documented but I am concerned about apprenticeships, lack of training and the on-off schemes that exist between companies and FÁS. There are huge questions still as to whether FÁS is getting it right. I would like the Department of Enterprise, Trade and Employment to look again at this issue.

In relation to education, there is now a new knowledge society, which means that more people are questioning our way of life. There is the question of whether we have the resources to continue the Breaking the Cycle scheme. Are there sufficient numbers of psychologists, remedial teachers and resource teachers? We should not pump money into the system just for the sake of it. We should put the correct resources and professional expertise in place to deal with the problems that exist in communities. If the Government can deal with these issues in the next 12 months it will be a further achievement.

The lack of proper child care facilities has been mentioned. Part of the national plan and local government plan is that proper medical facilities, social security services and child care facilities will be made available, which is the correct way forward. Local residents may not agree to having child care facilities in some local areas, therefore we must think of new ways of dealing with the issue. We should deal with this issue when new schemes come on board.

There have been great achievements in relation to the improvement of the roads infrastructure in the last number of months. We must also look at the bus services. I was pleased to hear during the debate last night that the numbers of buses in Dublin will be increased and that there will be more bus and cycle lanes. This is the correct way forward.

The issue for the future is quality of life. We need further development at school level, community level, in the workplace and in education. This will bring about a caring society. I am talking about bringing someone to hospital on time, finding a resource teacher or remedial teacher for a school and getting from A to B in the shortest possible time. This quality of life begins in the community. It is not about constantly pumping money into the system. It is about revitalising some structures, scrapping others that have not worked and seeing how they can be streamlined. The core of society is being able to deal with problems in every household such as caring problems, problems with elderly people trying to get into a nursing home, children seeking extra facilities, special needs or problems with the health service.

Problems are not always to do with the economy but we need a flourishing economy in order to solve problems. Now that we have such an economy, we must deal with caring issues such as child care facilities and the standard of life in each community. There should be proper educational and life long learning facilities. People who have been unemployed for a long time should be integrated into society and receive retraining. The budget should make provision for these issues because it is encompassed in the national development plan and in the local development plan. However, there may not be the expertise in terms of staff in the implementation of these policies.

I say to the Government that it is on the right track. We have a thriving economy and we should now concentrate on the quality of life. The Government and Fianna Fáil have always been committed to a caring society. That is the road we must travel and that is what I will be pushing for. I am making this statement today so that the Government will deal with the issue of a caring society in the coming years.

An Leas-Chathaoirleach

When is it proposed to sit again?

Mr. Farrell

It is proposed to sit at 2.30 p.m. next Wednesday.