We have every year in the Finance Bill an opportunity to take account of the kind of leadership the people have a right to expect from the Oireachtas, and the Oireachtas, to some extent, is dependent on the lead given by the Minister for Finance and the Government because only Ministers of the Government are enabled by law to propose the financial provisions which can act as correctives for the national economy.
We recall that on a day such as this in the recent past the Government sought and obtained the support of the Irish electorate on the strength of the slogan "Let Lemass lead on". We therefore look for this leadership which he was chosen by the Irish people to provide and we are entitled to ask where is he leading us now. The country is in a mess. We have unemployment running at a constant 50,000 a year, notwithstanding the fact that we have pumped into efforts to maintain employment more money than ever before in the history of the State.
Emigration is running constantly at a figure between 25,000 and 30,000 a year. Our balance of trade figures are particularly deplorable, £21 million worse than the limit which was regarded as tolerable in the Government's much vaunted Second Programme for Economic Expansion. We are have the Government, by their agent the Central Bank, doing the dirty work of a credit squeeze. We are entitled to say that the slogan “Let Lemass lead on” has become a cynical and deplorable warcry and that his leadership has become like that of the Duke of Plaza Toro—from behind— because the Taoiseach finds that more interesting.
This appalling economic situation is one which the Taoiseach and the Government foresaw last year but did nothing about. They spoke about it during the first two months of this year and indicated at that stage that certain corrective measures would have to be taken. Then, because of a passing political event, the Cork by-election, though knowing the country would end up in a mess in the very near future, they decided to forestall the unpopularity that would deservedly be theirs if the extent of the mess had become known. For a month we had promises of better times ahead, no need to worry. Then the election campaign came to an end and the weeping began.
We had a right to expect that in that situation some steps would have been taken to put the economy back on the right lines. Instead, the reverse took place. Instead of establishing an atmosphere of confidence in which business could not alone be maintained but expanded, the Government have set about the most vicious credit squeeze we have ever experienced, and while the Minister and his colleagues have used in this House glib phrases about productive investment being the test for credit, the fact is many concerned are unable to maintain their production, unable to expand in accordance with the targets of the economic programme, because credit is being withheld from them.
There are many different ways of killing a dog besides choking him with butter. What is happening is that bank managers have been deprived of initiative in determining whether customers of particular branches should get credit. All applications for continued or expanded credit are being referred back to bank headquarters where they are meeting a fate similar to that which awaits applications to the Exchequer for grants or loans—they are being processed over lengthy periods and by the time they may later this year be approved, the circumstances which require the credit will probably have gone or the companies looking for the credit may have got themselves into such dire circumstances that the opportunity to save them will have disappeared.
We are alarmed by the Government's restriction on credit for what they call productive purposes. They declared seven years ago their policy would be that investment in housing and education was not investment for productive purposes. As a consequence, they deliberately set about reducing the amount of money invested in housing with the result that we have at the present time the most appalling backlog of house-building we have experienced since the State was founded.
We can only assume from the activities, or inactivity, of the Government that it is not their wish that money be made available for housing. The small reliefs the Minister for Local Government announced within the past week under the SDA loan scheme are utterly inadequate to meet the problems of house purchasers. They are certainly no relief to people who signed contracts for the purchase of houses in 1964 and who are still unable to complete those transactions because the banks, insurance companies and building societies to whom they made application for loans are not in a position to give them money.
The unfortunate plight of many of those people is that, being unable to complete their transactions, they are, nevertheless, liable for payment of a rate of interest of six per cent or seven per cent on the outstanding balance of their purchase money. Many of those people are paying abnormal rents for one- or two-roomed flats, ranging from £4 to £6 10s. per week. At the same time, because of the gross neglect of the housing programme by the Government, they are paying six per cent or seven per cent interest on the unpaid balance of the purchase money. This involves an additional £16 to £18 per month so that many of those people are paying as much as £20 to £25 per week because of the fact that money is not available from building societies, insurance companies and other loan agencies.
In that situation it is utterly deplorable that the Minister and his colleagues in the Government will not provide money immediately to enable transactions already entered into to be completed. If they do not do it, they will certainly not be forgiven by the unfortunate people concerned. I am upset to think that they do not have any twinge of conscience in relation to it. Perhaps the reason they are unconcerned is that the recent general election indicated that there is abroad an atmosphere of "Most of us are all right; we couldn't care less about those who are not". The Government accepted that the majority of the people are reasonably housed and shod and are not coming to the assistance of the tens of thousands of miserable families living in overcrowded and insanitary conditions, with all the health and other problems such conditions create. Not only are they not coming to the assistance of people wishing to build or purchase houses but they are actually continuing to penalise people who invest their savings in homes for themselves and their families.
We in Fine Gael deplore the continual tendency on the part of the Fianna Fáil Government to imitate, without question or without considering whether or not they are suited to this country, tax laws and revenue collection schemes operated in Britain. Since they have that tendency to look to Britain to find better and more sadistic ways of extorting tax from our people, why do they not apply some of the more reasonable provisions in the British tax code? One such provision which long since should have been applied to a country such as ours, a country of small means in which we believe in democracy and believe in, or pretend to believe in, Christian principles, and in which we should be assisting the people to develop prudence and the Christian virtues of self-respect and of saving, is the abolition of stamp duty on house purchases. This should be introduced up to a reasonable figure like £5,000 which today represents only a modest house in this city and throughout most parts of the country, or if the Minister wishes, he could leave the ceiling at a lower figure.
At present when a person purchases a home for his wife and family and expends perhaps £3,000—and in doing so, he is purchasing only the bare minimum in house requirements—he is penalised to the tune of £90 in a penal tax which the State imposes on such people because of their prudence in saving and because of their service to their wives and families and to the community in purchasing their own houses. It seems to me to be daft in the extreme that the State pretends to be coming to the relief of people by providing, in 1965, housing grants which were barely sufficient in 1948, grants of perhaps £275, and at the same time imposes a levy of £90 or over on people buying similar housing accommodation. It makes little difference whether or not the person is purchasing a new or an old house. The incentive to builders or others to build new houses should be in the housing grants but there should be no difference between the stamp duty payable on a house in respect of which a housing grant is paid and a house built many years ago and in respect of which a housing grant is not now available.
The extraordinary situation is that many of the houses which are subjected to the three per cent stamp duty are houses in respect of which grants are made available in the form of repair and improvement grants. This seems to be bureaucracy gone mad. It is the kind of housing incentive which is damaging the whole housing situation. Everything that discourages people from investing in house property is anti-social, bad for the country and something which the Minister should terminate with the least possible delay.
Earlier in the year I obtained from the Minister an estimate of the cost of relieving house purchases from stamp duties. Unfortunately I was not able to lay my hands on it this morning but if my memory serves me aright—and the Minister can correct me if I am wrong—the cost of so relieving houses of a value of £4,000 or under would be in the region of £250,000 to £500,000. That is only a fraction of the annual revenue collected by the State but we in Fine Gael believe it is something which is socially desirable and would operate ultimately to the benefit of the Exchequer. The more people who are encouraged to purchase their own homes and live in their own savings boxes, the greater will be the relaxation of applications to the State to provide subsidised houses.
The chronic balance of payments position at present is a matter of no small concern. The facts are that our balance of payments position over many years has been deplorable and the only thing that has saved us from ruination has been the high rate of investment in this country by foreigners. That is a trend which at present appears to be halting and a trend which is going to be deliberately discouraged by the strangulating death duties which the Minister is proposing in this Finance Bill. In Fine Gael we are wondering what the intentions of the Government are in regard to the balance of payments, particularly if foreign investment does not continue to enter the country at the same rate to preserve us from ruination. We look back through the records and wonder whether the sinister silence which is operating at the moment indicates that Fianna Fáil may again implementtheir one-time policy of devaluing the pound.
When difficulties faced this country before in the balance of trade figures, the Government of the day, of which Fine Gael were a part, took unpopular measures but they were measures which were patriotic and sufficient to protect the status of the country, economically and commercially. At that time the Fianna Fáil Party were advocating, from the Opposition benches, the devaluation of the pound. One of the people most in favour of this was the Minister for Lands, Deputy Moran. We should like to know from the Minister whether or not this matter is under consideration. If it is not, he has a duty to the people to give a categorical assurance at present that the pound will not be devalued in any circumstances whatsoever. That is fundamental so far as my Party are concerned. We, and the people, would like to be assured that the Government hold the same view, that the pound should remain sacrosanct and should not in any circumstances be devalued.
The retrospective provisions in respect of estate duty are of considerable concern. It is beyond me why the Minister is proposing to increase from three years to five years the period within which gifts made before death can be caught for estate duty purposes. Does the Minister believe that our capacity for premonition is improving and that people are now able to forecast up to five years before death when they are likely to die? A gift made within three years of death is what is known to the lawyers as donatio mortis causa or a gift made in anticipation or in consideration of death. Now, apparently, any man who in his wisdom or in the exercise of his paternal duties, makes a gift of portion of his property to establish a son or daughter or some other relative or friend in life will be penalised if he does not exercise that particular function within five years of death. It seems entirely wrong to penalise people who are unable to have a better premonition of death and are unable to anticipate death by more than five years.
Deputy Lenihan spoke of the particular position in which certain reliefs will be allowed if a person buys land and resells it after three years and a day, but if he sells it after two years 11 months and 29 days, the same facilities will not be available to him. One can certainly see his difficulty and sympathise with him but we ought also to understand the Minister's problem, the problem of anybody levying tax. A line must be drawn somewhere and anybody who comes on the wrong side of the line always has a certain feeling of bad luck. It will certainly be very hard luck on relatives of deceased persons if the provision made for them in life is not made within five years of the death of the person who makes it.
I have always felt that even the three-year limit was a very short one and that the proper and fair system would be not to make gifts of any kind liable to estate duty, unless it could be established that at the time of making the gift the person was in a position to know, by reason of his health condition or otherwise, that he was likely to die within a certain period, but I suppose the difficulty of proving this would justify having some artificial period of limitation applied. The period of three years has in the past worked satisfactorily enough and the State, I think, has not lost a great deal by not having that period extended to five years. I urgently beg the Minister to reconsider the matter and not to extend this period to five years.
I think the vital statistics will show that the sudden death rate is increasing rather than reducing and it would therefore be fair to think that rather than having an improved premonition of death, the position is the other way about. The Lord said He would come like a thief in the night when least expected; the Revenue Commissioners feel, apparently, that is not applicable to present circumstances and that five years notice is available to anybody with property, and if they do not anticipate before that five year period, they or their relatives ought to be punished accordingly. It is a deplorable trend to have in our tax laws.
What will be the effect of this, apart from the penalty it will impose on families who may have to pay estate duty in future who have not had to pay it in the past? It will encourage more money to go out of the country or discourage money coming into it. There are a number of islands not too far away from us which have found immense prosperity as a result of efforts of people to avoid estate duty. I refer to the Isle of Man and the Channel Islands because wealth has come to them because people with property, anxious to avoid the stranglehold which the British and other administrations may impose on the family fortunes, have gone to live there. If we now imitate what Britain did 20 years ago, we must expect a situation similar to that which arose in Britain at that time: we shall have a drift of money away from this country.
There is one activity at present which works to the advantage of people, that is, that they can make deposits in Irish banks in the North of Ireland and against such credit balances in the North they are able to obtain overdrafts down here and so far as our Revenue Commissioners are concerned, they are able to appear to be in debt. I believe the effect this new and extended estate duty will have is that people will start depositing money abroad in the Channel Islands and elsewhere and the serious reduction in bank deposits here will be multiplied. When I speak of a reduction in bank deposits, I speak relatively, not about the number of bank deposits which appears to have increased, but in regard to the value of money, our bank deposits are in fact dropping.
The 1963 Finance Act had a section in it which we were told was designed to capture tax evaders and it appears to be socially defensible because it seemed equitable that one section of the community should not be obliged to pay tax which others were able to evade. But the operation of that particular section, which compelled people to disclose bank deposits, worked to the detriment of this country and our financial standing because it caused a drift of bank deposits from Irish banks to safe places abroad, and whatever marginal advantages may have been gained by collecting a certain amount of additional revenue from bank deposits which previously escaped, I think it is fair to assume that greater damage was done to the economy and the financial standing of our banks by urging people who wished to continue their tax avoidance operations to take their money elsewhere.
I asked the Minister within the last week if he would state the value of the reduction in bank deposits as a result of the 1963 Finance Act. The Minister said that he had not any information on that matter. I do not think any Member of the House is so naive as to accept that the Minister for Finance in any Government or the Revenue Commissioners proposing a new tax measure by way of relief or by way of levy would do so without making an estimate of the financial cost involved. I am satisfied that the Minister and his advisers have in mind a figure of the enormity of the drift in bank deposits as a result of the 1963 Finance Act. I urge them to reconsider these new moves in relation to estate duty and having been bitten by the injudicious step they took in relation to bank deposits in the 1963 Finance Act, to think twice about trying to capture other tax evaders by this extension of the estate duty period to five years.
I know that all of us feel better morally if we participate in legislation to capture tax evaders. We feel it is entirely justified and that we can thump our chests and say that we are capturing the wrongdoers, that the fair thing is to make everybody pay and not allow anybody to avail of any loophole in the law. We must also consider whether or not, in so doing, we shall ultimately do greater harm. I think in fact what we are doing in this kind of legislation is producing a sledge hammer to break a walnut and the result will be that we shall also break the concrete underneath and we shall not be able to patch it up again. I ask the Minister to look into this matter further.
We in Fine Gael are very disappointed that the Minister, like his predecessor, has not yet conceded that income tax should not be levied on people, portion of whose income is frozen for the payment of necessary medical bills. For a number of years, we have tabled an amendment to the Finance Bill asking that a tax allowance be made to persons suffering from medical deficiency which required constant medical attention and drugs and medicines. We have qualified our amendment by saying that this exemption should not be available to people who could have insured under the Voluntary Health Insurance Scheme or other similar insurance scheme and failed to do so but there are people who are precluded from the Voluntary Health Insurance Scheme by reason of suffering from some chronic disease or by reason of at the time of application suffering from a particular health deficiency which is regarded as likely to throw an additional and unusual burden on the finances of the Voluntary Health Insurance Board. We think that these people, having in fact no discretion in the manner in which they use portion of their income because it is frozen for health purposes, should not have income tax charged against that portion of their income or expenditure. We have to point to countries abroad that have accepted this principle and we are extremely sorry that the Minister had not yet seen his way to introduce such a scheme here.
We do not believe it would cost a great deal. Indeed, I am satisfied that the Revenue Commissioners ought to see that in obtaining evidence of the medical and other services paid for by an applicant they would have access to information about the incomes of other people which they have not got at the present time and it could well be that the introduction of such an equitable tax allowance scheme would work to the ultimate substantial advantage of the Exchequer.
The problem of people who make contributions towards pension schemes is one which also deserves to be examined by the Minister. Sometimes cases occur in which people are employed in a company on a particular pension scheme and then they are promoted and by reason of their promotion the contributions which they make to the pension scheme are increased and, likewise, the pensions to which they ultimately become entitled also increase. Sometimes the age at which a person obtains promotion is such that he is unable to make sufficient contributions at the higher rate to become entitled to the higher pension on retirement unless—and this is a matter to which I wish to direct the Minister's attention—he makes a retrospective pension contribution to qualify him for that pension.
If I can illustrate it by an example: It may require contributions for 20 years to a particular pension scheme to qualify for a pension at the particular rate and if the age of retirement in a firm is 65 and a man is not promoted to the rank associated with that pension until he is 50, in order to qualify for the pension related to the rank to which he is promoted, he has to make contributions in respect of the previous five years in one lump sum. Had he, in fact, been promoted at the age of 45 and paid his contributions year by year to the superannuation scheme, he would have received tax allowances against contributions made by him but when he makes one lump sum contribution in respect of the period he is not permitted any tax allowance in respect of that contribution. Thus it is that a man is penalised substantially by the Exchequer because he makes proper provision for his retirement years hence and because he has been unlucky in not being promoted sufficiently in advance of retirement, he is further penalised by having to forfeit the tax allowances which would have been available to him if he had been promoted and was earning a higher salary at an earlier period. This seems to be entirely inequitable and I doubt if it would cost the Exchequer anything really worth while to provide this entirely justifiable relief.
The scope of the Finance Bill is extensive and I have no wish to delay the House in discussing it at any great length. We have indicated from the Fine Gael side our dissatisfaction with certain trends in this Finance Bill and there are other aspects of it which we think can be dealt with very appropriately by detailed amendments on Committee Stage. We would hope that when that Stage is reached the Minister may be in a more receptive mood in order that the Finance Bill will have some humanity in it which it has not got now.
As I said, our principal disappointment with the Bill is that it has not provided the nation with the leadership which it is entitled to expect from a Government which sought and obtained the confidence of the electorate on the slogan, "Let Lemass lead on". The position which the Taoiseach now holds, leading troops from the rear, is an unworthy one and the Minister for Finance and his companions in the Government, all the officers in the battalion, are all leading the country from the rear. We do not think that a Government who sought and obtained the confidence of the electorate on a slogan of leading the country are entitled to behave like the Duke of Plaza Toro. If the Government do not tackle the problems facing the country with courage and, if need be, risk the unpopularity which may flow to them, the consequences for this country and for our community will be appalling and almost beyond comprehension.
