Dáil Éireann díospóireacht -
Wednesday, 20 Feb 1974

Vol. 270 No. 7

Private Members' Business. - Income Tax Allowances: Motion (Resumed).

The following motion was moved by Deputy Colley on 19th February, 1974:

That Dáil Éireann, in view of the inflation now raging in the economy and the consequent hardship being inflicted on most income tax payers and in particular on those with very low incomes who were never intended to be subject to income tax, calls on the Government to increase substantially the personal, earned income, marriage, child and age allowances under the income tax code and to provide by legislation that, thereafter, such allowances will be adjusted annually in relation to movements in the cost of living index.

Debate resumed on the following amendment:

To delete all words after "Dáil Éireann" and substitute "notes that personal allowances under the income tax code were not increased in the financial years 1957/58 to 1972/73 inclusive at a rate commensurate with the depreciation in money values.

—(Minister for Finance.)

Mr. T.J. Fitzpatrick

(Dublin Central): When I reported progress last night I was reviewing the tax-free allowance as it stands today and I was pointing out how totally inadequate it is in view of the massive inflation which has taken place over the past 12 months. I was reviewing the allowance for the single person and the married person and I was moving on to the housekeeper's allowance. Under the present income tax code you are allowed a deduction of £100 for a housekeeper. In the light of the massive increase in the cost of living over the past 12 months, such an allowance is entirely inadequate, especially in the case of a man whose wife is dead and who has to employ a housekeeper to look after his children. A figure such as that is completely unrealistic and I call on the Minister to ensure that it is increased substantially.

A deduction of £60 is allowed for a dependent relative. We believe that it is desirable to keep an aged mother and father at home rather than put them in an institution. Here again a progressive policy could be implemented and something realistic allowed. We put down this motion to prompt the Minister to give realistic allowances right across the income tax board. After their meeting with the FUE and the Congress of Trade Unions, the Government issued a vague statement to the effect that they propose to increase income tax personal allowances. We want something far more tangible. Part of the motion in Deputy Colley's name reads: "...and to provide by legislation that, thereafter, such allowances will be adjusted annually in relation to movements in the cost of living index."

The Minister should make a firm commitment now on the increased allowances he will provide in his forthcoming budget. It is not good enough to say that there will be a review. If we had not put down our motion it is doubtful whether the Government would have made any move. They should have moved in this direction when the national wage agreement was being put to union members throughout the country. If they had we might have had a different result. I sincerely hope that a national wage agreement will be accepted because it is the best type of negotiation in an economy such as ours.

A certain amount of overtime should not be subject to income tax. The Minister for Local Government has already set a precedent with regard to differential rents. The Minister should see if he can give some concessions to people who work overtime because I know from my own personal experience that workers are very reluctant to work overtime when they find that their entire overtime earnings are subject to income tax. A concession in this regard would have a beneficial effect on production. Absenteeism is quite prevalent especially in the early days of the week. I suggest that some overtime earned after working a 40-hour week should be exempt from income tax. This would ensure that every employee would have to report for work on a Monday morning. Otherwise he could not qualify for relief on his overtime. Instead of being a disincentive to production, it would encourage production by giving people an incentive to work overtime. Employers are finding it difficult to get employees to work at night-time and at weekends.

I put down questions to the Minister on this matter two or three months ago asking if he would consider the possibility of exempting some overtime. The answer was in the negative and when I questioned him further he said he thought it would be a disincentive to production. I do not think it would. The Minister has made no firm commitment as to what concessions he will give in the forthcoming budget. I thought he would make a commitment that whatever the national wage agreement would be that amount would be adjusted accordingly. That is the very minimum commitment he should have made.

I have no doubt that when the final VAT figures are made up on 31st March the Minister will have a substantial increase on the amount he budgeted for last year. Inflation has helped the Minister. Every increase in the price of food, clothing and housing utilities helped buoyancy and revenue. The higher the prices the more the Minister collects in VAT.

The price of fuel has brought about an unprecedented rise in the cost of living. It must be unique in the history of the country that the price of a product should rise by 100 per cent. The Minister will gain substantially from VAT on petrol. We all realise the effect the increase in fuel costs will have on the economy. It will affect the manufacturer and the motorist. In olden days motoring might have been considered a luxury but today the average person requires a car to take him to and from work. It will affect the housewife in fuel costs. Today the majority of new houses are centrally heated and do not use hard fuel. The huge rise in the cost of fuel will have a detrimental effect on the standard of living.

Since the Arab countries have doubled the price of crude oil, the Minister should reduce the duty on oil and petrol. He is making it up in one way by taking it in in VAT. He should either remove VAT or reduce the duty. I would suggest a reduction in the duty on petrol and oil. I do not think the Minister would lose very much because he is gaining on VAT. Whatever he budgeted for last year on VAT, on oil and petrol, with the rise in price in the past year he will get a substantially greater sum by 31st March. In budgeting for the coming year he will virtually double his VAT from petrol and oil. He should take this into consideration and give some concession by relieving the duty, which is quite substantial, on oil and petrol. In 1973 receipts were equivalent to £53.84 million. That does not take VAT into consideration. The Minister should look at this and see what additional VAT he will get and reduce——

An Ceann Comhairle

I interrupt the Deputy to advise him that he might now think of concluding. His time is almost up.

Mr. T.J. Fitzpatrick

(Dublin Central): I did not realise I had such a short period. The Minister should make some positive move to reduce this duty. I would ask him to accept Deputy Colley's amendment which is a positive one, and especially the part of it which calls on the Government to “provide by legislation that thereafter such allowances will be adjusted annually in relation to movements in the cost of living index. This is something tangible which I believe trade unionists would trust.

Minister for Lands (Mr. T.J. Fitzpatrick,

Cavan): In putting down this motion calling for a substantial increase in the personal, earned income, marriage, child and age allowances under the income tax code, Deputy Colley has put in issue his own record and the record of his own party on income taxation in their term of office. Deputy Colley relinquished the office of Minister for Finance less than 12 months ago. It is not the case of a party in Opposition for a long time calling for amendments in the law which they have been unable to make. Deputy Colley and his party were in power continuously for 16 years, from 1957 to 1973 and during that period they had an opportunity of doing all the things Deputy Colley now calls on this Government to do.

Mr. Crowley

We never had inflation running at nearly 20 per cent.

An Ceann Comhairle

Let us please have an uninterrupted discussion.

Mr. T.J. Fitzpatrick

(Cavan): Therefore, it is pertinent to have a brief look at the record of Deputy Colley and his predecessors as Ministers for Finance in those 16 years. In that period the number of taxpayers rose from 185,000 to 700,000, an increase of 515,000.

Mr. Crowley

A fantastic achievement.

An Ceann Comhairle

I must ask Deputy Crowley to desist from interrupting in a limited debate of this type.

Mr. T.J. Fitzpatrick

(Cavan): I propose to tell the House and Deputy Crowley how this “fantastic achievement” came about.

Mr. Crowley

The economic policies——

An Ceann Comhairle

If Deputy Crowley persists in ignoring the Chair, he must be prepared to suffer the consequences.

Mr. Crowley

The Minister addressed me.

Mr. T.J. Fitzpatrick

(Cavan): It came about largely through a tightening up of the machinery of the Revenue Commissioners to bring the lower income group into the income tax net. PAYE was introduced in 1961 when the number of income tax payers was 220,000 and in less than three years that number had increased to 320,000, an increase of 100,000 in round figures. That was largely, if not entirely, attributable to the dragging into the income tax net of the lower income group. It was also due to the fact that between 1957-58 and 1972-73 there was no increase in the personal allowance and also to inflation and the increased cost of living and the decrease in real money values. The attack was on the lower income group all the time. That is emphasised by what happened to surtax payers who during the previous Government's term of office fell in number from 9,600 to 6,650. That was entirely due to the fact that the former Government went easy on surtax payers and raised the threshold for surtax from £2,500 to £4,500.

It is interesting to note the income tax and surtax returns in the past number of years. Net income tax receipts jumped from £66,868,371 in 1967-68 to £169,190,962 or nearly trebled while surtax in the same years increased only from £3,078,181 to £4,493,779. Those are striking figures. While income tax almost trebled, sur-tax went up by only one-third. I should have thought that when the former Government saw fit to bring the lower income group into the income tax net they would have ensured that all those liable to pay tax would pay it and that all gains enjoyed would be made liable to tax. During their term in office the Fianna Fáil Party refused to bring in a capital gains tax and as a result vast incomes——

Mr. Crowley

The Minister is going to do it?

An Ceann Comhairle

Deputies must restrain themselves.

Mr. T.J. Fitzpatrick

(Cavan): I am dealing with the past 16 years. Vast incomes were earned and enjoyed free of tax by speculators and such like. For example, according to the Kenny Report, between the beginning of 1963 and the end of 1971 the average price of serviced land in County Dublin increased by 530 per cent, free of any tax. In the same period the consumer prices index increased by 64 per cent. In County Dublin the average price per acre of serviced land was £1,100 in 1960 and it had increased to £7,000 in 1971, again free of tax. The average price per acre of potential building land was £300 in 1960 and it had jumped to £2,500 in 1971.

The report goes on to say that the pattern was the same, comparatively speaking, all over the country. I believe that, as a result, many speculators in land got away with huge untaxed incomes because if a man makes £2,000 a year capital gain on a farm of land, on a house or on the Stock Exchange it is just as much income as the earnings of a man working in a factory or working elsewhere. Yet, under Fianna Fáil, the party who now call for justice in taxation, one person was taxed and the other person was not.

I stated that between 1957-58 and 1972-73 there was no increase in the personal allowances. My namesake, who contributed immediately before me, pointed out that there was no increase in the housekeeper allowance and that such an increase should be granted. I want to point out to the Deputy that the housekeeper allowance in 1957 was £100 and it is still £100. When the small increases were introduced in 1972-73 by Deputy Colley he did not increase the housekeeper allowance. One might have thought that putting down this motion by Deputy Colley was evidence that in opposition he had time to think the matter over and that he had come to the conclusion that there should be a fairer system of taxation. If that were so it would not be so bad, but in view of the happenings at the Fianna Fáil Ard-Fheis, I can only regard this motion as a bit of hypocrisy and a bit of play-acting. At the Fianna Fáil Ard-Fheis a resolution was put down by a delegate from Cork who called for the imposition of a capital gains tax and made the type of case I have been making here. On the advice of Deputy Colley, the Ard-Fheis rejected the resolution.

Mr. Colley

That is not correct.

Mr. T.J. Fitzpatrick

(Cavan): The Deputy has been incorrectly reported.

Mr. Colley

I was correctly reported but the Minister has incorrectly stated what was said.

An Ceann Comhairle

Deputy Colley will have the right to reply and he may take up these points later on.

Mr. Colley

This is just for the record.

Mr. T.J. Fitzpatrick

(Cavan): I want to say, according to the newspapers, there was an acrimonious debate on the resolution calling for the imposition of a capital gains tax and, on the advice of Deputy Colley, the Ard-Fheis rejected the resolution and decided to hold on to the system whereby the people who make huge profits on the Stock Exchange, on speculating in land and on other speculative activities are to be exempt from tax and the people who earn their living by the sweat of their brow are to continue to pay the last penny.

When I was in Opposition I did not contribute very often to financial discussions but on several occasions I intervened in budget debates to call for an increase in the personal allowance on the basis that to leave it static was, in fact, increasing income tax. So far as this Government are concerned we will do the fair thing and the right thing. Deputy Colley comes in here, after his Government being in office for 16 years, and makes a play out of the fact that we did not in our first budget, a few weeks after coming into office, do what the Fianna Fáil Government failed to do during their 16 years in office.

In our first budget we attended to the poorer section of the community and we make no apology for doing that. The Taoiseach and the Minister for Finance have given an indication of our general intention in regard to taxation. The House and the country can be assured that we will embark on a system of taxation that will be equitable and we will not tolerate the system which has been operating in this country for so long whereby the big income was exempt from tax and the smaller man was taxed to the hilt.

Mr. MacSharry

The reason we on this side of the House put down this motion in the name of Deputy Colley is that for the first time the ordinary wage earner's income is in the vice-like grip of raging and uncontrolled inflation. One could elaborate on many aspects of that statement but I think there are many statements on the record of this House which back up what I have already stated.

This year we expect to see the unprecedented situation of up to 20 per cent inflation. The figure for last year was 12 per cent. It is no wonder that the Coalition Government sought to stifle discussion on this motion last week and no wonder they stooped to every trick and Parliamentary device to ensure that the people were kept in the dark. The economy has taken a disastrous turn and I think the public are entitled to know—it is our duty as an Opposition Party to inform them—the disastrous road the economy is now taking.

The Coalition Government consist of two parties, Fine Gael and Labour, who came together before the last general election with the slogans "Price Stabilisation" and "Halt Inflation". Both parties had to practise hypocrisy and deceit to secure a mandate from the public. They are now in Government and they have an opportunity of carrying out the mandate but we have seen many of the issues that they tried to sell to the people being totally and systematically abandoned and wrecked by them since they assumed office last March. I doubt if the people will ever again be deceived in the way they were last year.

The Government have come in here on many occasions in the past six months and said that their policy on prices failed because of outside influences. Outside influences are not the cause of the unrest and trouble in the economy. The trouble is that this Government are made up of two extreme groupings. On the one side, we have the extreme conservatism of Fine Gael and on the other side what might be described as doctrinaire socialists. This must entail the formulation of some type of compromise policies.

An Ceann Comhairle

The Chair is anxiously waiting for the Deputy to come to the subject matter of the motion which is income tax allowances.

Mr. MacSharry

The Minister for Lands was not correct when he referred to Fianna Fáil activities in the past.

An Ceann Comhairle

The Deputy ought not argue with the Chair. If the Minister had been out of order he would have been told so by the Chair.

Mr. MacSharry

I will accept that but, as you are aware, compromise policies are no policies. This is very evident to us all from the situation that exists in the economy today. We deplore the attitude of the Government in this House last week, particularly in relation to the uncertain situation of the national wage agreement.

Mr. T.J. Fitzpatrick

(Cavan): We wanted to give you an opportunity of introducing a capital gains tax at the Ard-Fheis.

Mr. Colley

That is the third explanation.

Mr. MacSharry

We, in Government, on two occasions successfully negotiated a national wage agreement. National wage agreements are agreements between all concerned in the interests of the economy and the progress of the nation. That means co-operation between worker and employer and between them and Government. At times certain requests are made from one side or the other and advice is taken from various sources to ensure that what is best for the country is done and that there is a fair distribution of the resources of the State. Reasonable requests were made by the people involved in the national wage agreement negotiations. Many of these requests related to the subject matter of our motion which is: "To increase substantially the personal, earned income, marriage, child and age allowances under the income tax code."

The first proposals that were put to the Employer/Labour Conference were overwhelmingly rejected. I do not think the Minister for Finance is without blame in this regard because at that very important time before Christmas the Minister for Finance spoke on the Appropriation Bill in the Seanad. I shall quote from the Seanad Official Report of 19th December, 1973, column 438. The Minister said:

In view of this situation one must be realistic about what the economy can afford by way of income increases without doing serious and lasting damage all round. The proposals for the national pay agreement were drafted in good faith at a time when it was felt that growth prospects for 1974 were good. The situation has now obviously changed for the worse. This is worrying since the combined effect of rapidly rising domestic costs and a sharp upward trend in oil and raw material prices could again boost inflationary pressures, slacken demand and lead to unemployment and hardship.

Can the workers really be blamed for the rejection of those proposals?

An Ceann Comhairle

I am very anxious to help the Deputy but he must come to the subject matter of the motion.

Mr. Colley

On a point of order, I submit, Sir, that you have allowed, in the course of this debate, a much wider debate than this. For instance, the Minister for Lands a short time ago was talking about capital gains taxes and many other aspects of the general taxation system which do not refer specifically to this motion.

An Ceann Comhairle

I have allowed Deputy MacSharry to stray a long distance from this motion.

Mr. T.J. Fitzpatrick

(Dublin Central): Deputy Colley's motion mentions inflation and this is what Deputy MacSharry is talking about.

An Ceann Comhairle

The Deputy understands that he must relate his remarks to the motion.

Mr. MacSharry

I am trying to emphasise that the reasoning behind this motion is to assist, in whatever way possible, in the successful conclusion of a third national wage agreement. We are very concerned about this and anything we say on this side of the House should not be taken as interfering with the proposals that are being put to the interested parties at present. It is right to point out that the day after the first proposals were rejected it was announced that ESB charges were to be raised by 50 per cent.

An Ceann Comhairle

I fail to see the relationship between that and the motion.

Mr. MacSharry

Income tax allowances are related to the cost of food and services. The value of the take-home pay packet is related to income tax allowances.

An Ceann Comhairle

The motion is specific.

Mr. MacSharry

We are looking for the raising of these so as to enhance the value of the take-home pay packet and pointing out the necessity for doing so because of increased charges and inflation generally. There has been an increase in the price of food. This was debated not too long ago.

An Ceann Comhairle

I do hope the Deputy is not going to stray into that area.

Mr. MacSharry

It was observed that in one month, the food items making up the weekly basket into a pensioner's home——

An Ceann Comhairle

It seems that he is.

Mr. MacSharry

——had risen by 25 per cent. We welcome the announcement made yesterday but, at this stage, I feel the Government are not going far enough. I should like to know why it is not possible for the Government to state now what those concessions might be because I think this is what will decide the outcome of many problems existing today.

Last night the Minister for Finance trotted out figures which suggested that the personal allowance would have to be raised from £299 to £340; widow's allowance from £324 to £385; married allowance from £494 to £682; child allowance to £220, and the earned income allowance from £500 to £800. By stating those figures in this House does the Minister intend increasing the allowances to that level? If they are going to be less or more, we should like to know, and the public would like to know exactly what is intended by the statement made yesterday when one considers the many false promises that have been made already by this Government that have been either shelved or abandoned.

Over the past 12 months, on many occasions, the present Government tried to deceive the public with statements of intent on issues such as tax on profits of mines and capital gains tax which, in themselves, are creating a certain amount of uncertainty in the economy as a whole. As I said earlier, I think these statements of intent are merely being put on record as statements of intent to be shelved and about which nothing more will be done because of the differences of opinion between the two political parties forming the present Coalition Government.

But the ordinary worker, the person whom I represent anyway, is more concerned about the value of his or her take-home pay packet. This is the concern of many thousands of people throughout the country. Naturally, they are concerned about it now. In my opinion they asked a reasonable request—that the Government would indicate what they intended to do about income tax allowances. We are all concerned about what can be described as the ordinary worker; how his wage packet, his take-home pay, the money on which he has to live and rear his family, how the value of that, has so diminished in the past 12 months and, as I said earlier, will diminish much further in the coming 12 months.

The issue contained in this motion is a fundamental one of fair treatment—at what point the income tax allowances should be fixed. It is our duty here, as an Opposition, and our obligation, to direct the attention of the Government to what is now a very specific and widespread public demand for action in this regard and is related to the circumstances now obtaining. It is foolish of the Government—by this amendment—to try to overlook the circumstances of today because, as was explained by Deputy Colley last night, if what is contained in the amendment is so, then there is all the more reason for much more decisive action by the Government in relation to income tax allowances. We know that the Government have the resources available to them to make a significant contribution now and not even wait until 6th April. I see no reason whatsoever why it was announced, even though two weeks ago it was divulging budget secrets and the information requested was refused here in this House. The Government issued a statement yesterday saying that this matter would be in some way resolved on 6th April, or in the next budget, dating from 6th April. It is another example of how this Parliament is being treated with contempt in this regard.

Deputies

Hear, hear.

Mr. MacSharry

We know there are many demands and all sorts of requests around budget time but we insist, on this side of the House, that no matter what are the other demands, this one has to be met because we know it can be met at this stage. I hope that the national wage agreement is accepted but I think— when the Government were prepared to go so much further yesterday than two weeks ago, in stating their intention of doing something in regard to income tax allowances—there is no reason whatsoever why it could not be done now; from this day, or tomorrow and I should like to be convinced by whatever Government spokesman is involved as to why it is not possible. Have a Finance Bill introduced stating what the Government intend to do; have it implemented as and from 6th April because I think this is what is being requested and, in the circumstances now obtaining, it is a reasonable request.

If the Government are to show sincerity in relation to the many promises they have made over the last 12 months this is one issue on which they should spell out what they intend to do. They will not be giving away budget secrets. They have broken that precedent by announcing their intention to do something in this regard. If the argument can be pursued that it is not the right thing to do until budget day, the number of people who could evade tax between now and 6th April would be minimal. On the other hand, the Government have said that they propose to introduce further taxation, tax on profits on mines and capital gains tax. These are budgetary statements which, in my opinion, are doing far more damage to the economy than if the Government spelled out exactly what they intend to do in relation to income tax allowances.

I could go into more detail about individual items mentioned in the motion because I think it is important. Every public representative, whether he is in this House or is a local government representative, is aware of the hardship caused to many thousands of workers because of the inflationary situation which exists today. The only way to help the taxpayer is to increase these allowances substantially. The Government have said that they will give some increases. I do not want to go so far as to say that they may not be enough, but perhaps it is too little, too late to have the third wage agreement accepted.

The Government have made so many promises that the people are becoming disillusioned and may not accept this new one. I appeal to the Government, in the interests of a satisfactory agreement emerging to think seriously of announcing before 7th March what exactly their intentions are. This is a reasonable request for us to make.

This motion, which was originally submitted last December, was for the purpose of trying to salvage the national wage agreement. I hope the Government will consider what I have said and will announce these immediately——

An Ceann Comhairle

I intervene to advise the Deputy that his time is almost up. He might make his concluding remarks.

Mr. MacSharry

——because it is necessary in the interests of the national wage agreement to have these spelled out in more detail. The vague announcement made yesterday will not satisfy the taxpayers considering their overwhelming rejection of the first proposals.

Mr. Blaney

Are there five minutes to spare on this motion?

An Ceann Comhairle

I am obliged to call the concluding speaker, Deputy Colley, at 7.18. The next speaker would not, in fact, get full time.

Mr. Keating

If the Deputy can finish before 7 o'clock he can use the intervening time.

An Ceann Comhairle

That is a happy arrangement. Thank you.

Mr. Blaney

I am not one for short speeches. There is not a great deal which needs to be said on this motion except that it is a timely motion. The amendment confuses the issue to a degree which makes hollow the allegation of the Minister for Finance who regards the motion as a "bit of political play-acting". I may be quoting the wrong Minister. Maybe it was the Minister for Lands who said that. The Minister for Finance said something similar.

Whether this is play-acting or not, the fact is that the motion could not be more appropriate and never was it more needed than at this time. I appeal to the Government to take it, for what it is worth, on its face value, and relate it to the sad and inflationary circumstances in which we live and the continuing trend upwards of all the living costs for our people. This applies to the vast majority of our people and not only to a relatively few low wage earners. In my estimation it is no use to play-act on the amendment merely because it is said that the motion is play-acting. If the motion is play-acting the amendment does nothing to relieve the play-acting but rather adds to it.

The public, who are looking to us for relief in some manner as outlined in the motion, will not have any great regard for any of us on either side of the House if we finish up by stymieing each other by having an amendment recalling the fact that certain allowances have not been increased for so long. That to my mind is play-acting. I appeal to the Minister and the Government to take seriously the intent of the motion, disregard any uncharitable views they may have formed about what inspired it and take it for what it is worth. There is no doubt that the suffering public, the workers and income tax payers who are seeing more and more of their incomes dwindle against inflation on the one hand, and a bigger slice being taken off their increases by way of taxation, do not appreciate play-acting, whether it be in the motion or in the amendment. They can only think cynically that, if they believe the Government that there is play-acting in the motion, then they can be truly convinced that the amendment is certainly play-acting on the part of the Government.

As I said at the outset, I only wanted a few minutes. I am thankful to the Minister for giving way and I will do better than he asked and let him in before 7 o'clock. I appeal to the Government to let us have the substance of the motion regardless of what we may have said or are saying about the motion or the amendment. It is needed, badly needed, and could not come at a better time.

Minister for Industry and Commerce (Mr. Keating)

I have much to say in a short time. I should like to commence by saying that I agree with the sentiment of the last speaker. We are not at a time in our national economy or our national life when we want to be simply sticking our fingers in each others eyes. Without trying to score points one can gain insight into the thoughts about income taxation of a party by analysis of its actions. In my view that is a legitimate thing to do and I propose to do that in relation to the present Opposition.

The essential, inescapable thing about income tax is that it is a part of general tax. We all, as Government or Opposition, and public representatives, want more money to do things of a socially and economically useful kind. The sources of revenue are limited, and if one does not get it one way it must be got another way. If one is seriously looking for reliefs for the lowest paid from income tax under a series of allowances one has to have some practical proposals as to where receipts for the Government are to come from.

In the Statistic Office's analysis of receipts and expenditure receipts are broken down under three heads, taxes on income, taxes on capital and taxes on expenditure. I now want to deal with the trend of taxes on income from 1959 to 1972. I will take these as percentages, and I will put in 1964 as well because it is a year in the middle and we are picking trends, not a particular year. Taxes on income of our total receipts in 1959 were 25.1 per cent; in 1964 they were 31.2 per cent and in 1972 they were 37.2 per cent. In each of those intervals 1959 to 1964 and 1964 to 1972 as percentage of total receipts tax on income went up. Taxes on capital yielded 2.1 per cent in 1959; 1.8 per cent in 1964 and 1.5 per cent in 1972.

During those years taxes on capital were going down. This represents a trend of thinking on the part of a party that had a chance to change direction a little every year. The trend was that income tax had to contribute more and capital taxation had to contribute less, and less in the case of capital taxation starting on a very low pace but less at a time for capital taxation when the economy was getting bigger and stronger steadily. The yield from taxation on income during that period went up by 762 per cent while the yield on capital went up by 355 per cent. The whole emphasis was away from capital taxation and towards income taxation. That was done year after year, it was the thrust of the then Government's attitude to gaining revenue.

I should now like to deal with the matter of personal allowances because this over a long period of years represents the thrust of thinking about allowances. In the period 1957 to 1972 the consumer price index rose by 119 per cent and money fell to less than half its value. If one were to adjust the income tax allowance in that period without improving the allowance, for the change in the consumer price index by 1972 for a single person the £115 allowance should have gone to £340; the widows' £175 should have gone to £385; the married person's allowance should have gone from £310 to £682. However, in each case the allowances, year after year, did not keep pace with the consumer price index increase.

Speaking for myself I am not proud of the last budget treatment of the personal allowance for the wife who goes out to earn. In 1957 it was £45 and to allow for inflation it should have been £99 in 1972 but it was actually £74. It had not half kept pace. We put it a little ahead of inflation, not enough I admit, but at least we added to it. If one is talking about the size of the income tax net and people who were never intended to be caught in income tax one should bear in mind that in 1957 185,000 paid income tax while in 1973 this figure had risen to more than 700,000. That expresses an attitude, not just one year but year after year, budget after budget, of the role that income tax ought to play in the gathering of income to spend in socially useful ways and to the role that personal allowances ought to play in releasing people from the tax net.

More and more people were caught but the allowances were not even adjusted for the cost of living and this all took place at a time when the economy was thriving and the role of income tax as a revenue yielder was increasing. It is worth saying again that in the period 1957 to 1972, with the huge changes in the economy, the number of sur-tax payers fell from 9,600 to 6,550, down almost two-thirds. That does express attitude to taxation and it is permissible to say it.

I should now like to explain the position in relation to married couples with three children, which is the norm for our society. Since in the period 1958-1959 to 1972-73 money fell to approximately half of its value to compare like with like one doubles the income. People who had £1,000 in 1958-59 should have had £2,000 in 1972-73. One compares the family earning £1,000 in 1958-59 with a family earning £2,000 in 1972-73. In 1958-59 the effective rate of income tax taking into account allowances was 3 per cent on that family and in 1972-73 it was 9.9 per cent. Percentage wise that was an increase of almost three times. That was the people in the lower income group.

For middle income group, those earning £2,500 in 1958-59 or £5,000 in 1972-73, the effective tax rate went up from 21.3 per cent to 24 per cent. In other words, the lower income rose from 3 per cent to almost 10 per cent and the middle income group from 21.3 to 24 per cent. Income tax as a yielder went up during those years but allowances to release people from the net went down during those years. The number of people caught in the net went up over those years and the burden of taxation got heavier relatively on the poor over all those years.

Mr. Crowley

The standard of living went up also.

Mr. Keating

Those figures, while the Opposition may not like them, are inescapable.

Mr. Crowley

They are selective figures.

Mr. Keating

Three things characterise the thinking of the present Opposition in regard to income tax. The first of these is simply confusion, inability to think clearly. If one wants an example of that and there are many I can refer to the budget of 1970-71 because in the budget of 1970 the then Taoiseach stated:

My proposal is that the first £100 of taxable income will be charged at two-thirds the standard rate.

That is from the budget speech of that year which was read by the then Taoiseach for the Minister for Finance. A year later the budget statement was:

I propose to repeal with effect from the current year the provisions under which the first £100 of taxable income were charged at two-thirds the standard rate.

That was a direct reversal within 12 months. It does not show coherence, it does not show a clear sense of direction or strategy. Confusion it has been and a complete willingness to make moment to moment ad hoc changes without any plans of what the role of tax in society ought to be. The second feature of the present Opposition's attitude to income tax is a contrast of words and deeds.

In part II, page 262, in the "Second Programme for Economic Expansion" dated July, 1964, it was stated that the Government's aim was to create conditions permitting, as soon as possible, a reduction in direct taxation. When Deputy Lynch was Minister for Finance in 1966 income tax was increased by eight pence on the standard rate—that was 21 months later. However, the figures I gave earlier show that the whole tendency for ten years—the Second Programme was introduced a decade ago—has been the opposite of the Government's wish about direct taxation as expressed in the Second Programme.

First, there is the confusion; secondly, the contrast between words and deeds; thirdly, and the most serious, a fundamental unwillingness to do any thinking about income tax in relation to other taxes and in relation to the task any government have of gathering enough money to do what they wish. The broadcast I heard of the Fianna Fáil Ard-Fheis at the weekend indicated even now, with the freedom of Opposition, a continual unwillingness to do any re-thinking in this area or to do anything new.

Having said that, I come to the text of the motion which says three things. It refers to very low-income people who were never intended to be subject to income tax. I am pleased to hear it but when one looks at the figures from 1959 to 1972, when one sees the increase in the number of people caught and what inflation did to allowances, it is effrontery for someone so newly in Opposition, who was a Minister for Finance, to offer this thought.

Mr. Colley

There is a fallacy in that argument.

Mr. Keating

Now the Opposition tell us. It is lovely to hear it but it is such a pity they did not believe it before. However, a change of mind is welcome. The motion calls for increased allowances. I have spoken about what the Opposition allowed happen to allowances, not in one budget but year after year. It is nice that they want the allowances increased now and we say to them: "Thank you very much." The motion calls for a relationship to the cost of living index. Year after year in Opposition I talked about the relationship of the allowances to the cost of living index. The present Opposition did nothing about it for 16 years but now they have a change of mind. It is very welcome but what a shame they did nothing about it before. There is a strong strand of effrontery in this whole presentation.

In the 11½ months since this Government came to office, it has been our first year as a member of the EEC which put an enormous strain on certain members of the Government and entailed a lot of extra work. It has been the year in which our relationship with the North of Ireland at last started to evolve. The remarkable progress at Sunningdale was the result of an enormous amount of work at Government level and, since it did not involve the Department of Industry and Commerce, I can say that all the more wholeheartedly. In the last year we had membership of the EEC which was new——

Mr. Colley

What has this to do with the motion?

Mr. Keating

——we had Sunningdale which was new, we had an economic upheaval in relation to prices and interest rates, devaluation and the oil crisis. In that period the Government found the time and the energy to do the most serious thinking about taxation and the role of income tax in the whole of the tax burden than has happened in the last quarter century and more than our vigorous and informed Opposition were able to do in the whole of their period in Government when things were relatively calm and easy.

Mr. Crowley

The Government are wrecking the economy.

An Leas-Cheann Comhairle

This is a limited debate and the Minister should be allowed to speak without interruption.

Mr. Colley

What did the Minister do?

Mr. Keating

The Deputy will have a chance to speak in a moment and he can then practise his oratory. What we did was to produce the document that is now being printed and which will appear as the White Paper. The extent, depth and seriousness of that work will emerge for the Deputy and the country to see. It is now with the printers. The Opposition did not have the time nor the energy in 16 easy years to devote that much thought to taxation. At a time of very serious pressures we were able to devote our energies to this problem.

Mr. Crowley

The country is on its knees.

Mr. Keating

Although it is not mentioned, let us talk about the juxtaposition of these motions with the third national wage agreement. We all want that agreement. Might I remind Deputies opposite that in 1970 it did not go through on the first round and, in fact, there was a threat of statutory action behind it when it did go through, and in 1972 it did not go through on the first round either. Now we are trying again in very difficult circumstances. At a time when we are trying to salvage the national wage agreement, we are offered a thought by Deputy MacSharry, who spoke about the cost of a food basket increasing by 25 per cent in one month, or at an annual rate of 300 per cent. We have very serious inflation but we are not within an ass's roar of that and there are no statistics to prove it. In fact, there are many statistics to prove the opposite. The Opposition are weeping crocodile tears. Exaggerating the state of inflation is dangerous to a national wage agreement; exaggerating the economic difficulties every country is facing and with which we are dealing courageously is damaging——

Mr. MacSharry

Is there inflation or not?

Mr. Keating

The mock concern, with verbalisation about wanting it and with distortion of the facts which make it more difficult, is hypocritical and phoney, like the vast majority of the content of the Opposition side of this debate.

Mr. Colley

Despite the disgraceful and disreputable efforts of the Government to prevent the motion being discussed last week, despite the fact that they tried to spike the guns of the motion by calling in the Irish Congress of Trade Unions for a few minutes to hand them a statement saying what the Government were going to do and getting it out to the media before the motion could be discussed here, and all the other paraphernalia of disreputable media tricks we have come to expect from the Government, the motion has been well worth while. It has forced the Government to face up to their responsibilities not only from the point of view of social justice but in trying to secure as far as possible the completion of a national agreement. This was an area in which the Government were singularly supine up to the time we forced them out into the open.

It is particularly noticeable in this debate that no speaker on the Government side attempted to make any real comparison between their performance and that of the previous Government. What they did was to go back to 1957 and we had the same old figures trotted out time after time. Yesterday I pointed out the enormous difference between the situation today and that of previous years in regard to VAT, under which they increased the rates, in regard to the historically high level of inflation, and in regard to the much greater strength of the economy, the wealth of the economy. No speaker on behalf of the Government has attempted to refute that argument.

I would say to you, Sir, that if anybody wants to make a genuine comparison, as far as you can get it, between the performance of one Government and another, he should compare the situation of the 1973 budget with that of the 1972 budget, although that comparison is unfair to the Fianna Fáil Government because inflation was not so high at that time and because VAT was in operation only for five months and at lower rates than this Government have imposed. Even allowing for all that, if you compare it—and I will quote the Minister for Industry and Commerce who has just spoken, who said that you can get an insight into the mind of a party—I presume he meant two parties in Coalition—by an analysis of their actions——

Mr. Keating

Any party.

Mr. Colley

I suggest that is a fair observation. Analyse the actions of Fianna Fáil and the Coalition in reasonably comparative years and you find that in 1972 when we imposed no new taxation whatever——

Mr. Keating

Apart from VAT.

Mr. Colley

The Minister for Industry and Commerce made a fool of himself in the House last week.

Mr. Keating

He did not.

A Deputy

He did not know when VAT was introduced.

Mr. Keating

The answer I wanted was that you introduced VAT in 1972.

Mr. Colley

Could I point out to the Minister that VAT was introduced five months before the budget I am talking about?

Mr. Keating

You introduced VAT in 1972.

Mr. Colley

His Government increased the rates. If you compare the two you will find that in 1972 we imposed no new taxation whatever——

Mr. Keating

Apart from VAT.

Mr. Colley

We provided more for social welfare benefit in that year than this Government did this year if you exclude the EEC money. We provided substantial reliefs in income tax costing £11 million in that year with no new taxation all round.

Mr. Keating

Apart from VAT.

Mr. Colley

Judged by their actions, as the Minister for Industry and Commerce said, this Government in the 1973 budget imposed taxation on everything in sight at a higher rate than had ever been heard of in this country. What did they give for income tax relief? They gave £½ million. That is the insight into the mind of this Government. We have been hearing excuses from the Minister for Industry and Commerce—and we heard excuses from the Minister for Labour some time ago to the same effect—about why they have not been able to do things they should have been doing. We have been hearing about their difficulties concerning the North of Ireland. We have been hearing about their difficulties concerning the EEC.

Do they really think people will fall for that? What do they think was going on before they took up Government? Do they think the EEC did not exist and that we were not in it? Do they think we did not have problems in the North of Ireland? Of course we did, but we got on with the job. We were more interested in it than in the gimmicks and the nonsense we have been having, like the statement issued yesterday, handed to the Irish Congress of Trade Unions to try in a shabby way to defeat the effect of a motion in this House.

I want to tell the Minister for Industry and Commerce something. He spoke in the debate on the economy not so very long ago, Sir. You may recall that, in the course of that debate, I made certain suggestions to the Government as to what they might do in the interests of the economy and, in particular, in regard to bringing about a national wage agreement so far as the Government can contribute to it. It is a free collective bargaining situation but clearly the Government can contribute to a climate that will enable it to be voted on favourably.

One of the suggestions I made was that the Government should commit themselves to increases in income tax allowances. The Minister for Industry and Commerce, with his usual combination of arrogance and ignorance, said that suggestion was clear evidence that this party deserved to stay on the Opposition benches. He said that only about ten days ago. I want to point out to you, Sir, that yesterday the Government of which he is a member came out and did precisely what I suggested. This is worth pursuing even in the few minutes I have left. There are two possibilities. Either the Minister for Finance has been codding his Labour colleagues in the Government because not only did the Minister for Industry and Commerce make that silly statement——

Mr. Keating

Not true. The Deputy has not given the reference.

Mr. Colley

What is not true? Is the Minister saying he did not say that?

Mr. Keating

I am. The Deputy is distorting profoundly what I said.

Mr. Colley

I yield to the Minister for half a minute to let him say precisely what he says he said.

Mr. Keating

What I said was that your performance in that debate, of which three suggestions from you form part, was so fatuous in relation to the general difficulties in the economy that you deserved to stay in Opposition.

Mr. Colley

Right. I am satisfied with that. People can judge for themselves how the Minister is now wriggling on this hook.

Mr. Keating

Why do you not read the reference?

Mr. Colley

The reference is quite clear.

Mr. Keating

It is on the Dáil record.

Mr. Colley

I did not anticipate that the Minister would have the nerve to deny what was reported in the newspapers as well as in the records of this House.

Mr. Keating

It is on the Dáil record.

Mr. Colley

The fact of the matter is that the Minister for Industry and Commerce made that statement and the Tánaiste backed him up and shouted across the House at me: "You were not so generous when you were in office". He made some reference to budget secrecy. There were references by other Ministers to budget secrecy. They could not under any circumstances make any commitment in advance of the budget. That was nonsense and I said so. The Minister for Finance may have codded his Labour colleagues, and it may be that they are so ignorant and immature that they could not see that he was codding them. There is another possibility, that is, that he did not cod them and that when they made those statements, when they told the Irish Congress of Trade Unions and the workers they could not make any commitment, they knew that they could. Then they come out and make it when they are under pressure from a motion in this House.

We on this side of the House have been particularly concerned in so far as we can do anything from this side of the House—and what we can do is limited—to contribute to bringing about a national pay agreement. I have deliberately refrained from saying certain things in this House, and in particular in this debate, which would be well deserved so far as criticism of the Government goes, but which might possibly contribute to preventing a national pay agreement being brought about. I want to point out that the kind of activity by a Government who say: "We cannot under any circumstances make a commitment because of budget secrecy" and then make a commitment, will not give confidence to workers.

I appeal to the workers over the heads of this inept and incompetent Government, despite the Government's record, to vote in their own interest for a national agreement. At least we could ensure from that that there will be some concessions in income tax. They may not be what we would all hope they would be, but there will be some. It will not be too long, Sir, I believe, before the workers will get an opportunity to show this Government what they think of them, and to put into power a Government in which they can have confidence.

Mr. L. Belton

Wishful thinking.

Amendment put.

The Dáil divided: Tá, 69; Níl, 65.

Tá

• Barry, Peter.
• Barry, Richard.
• Begley, Michael.
• Belton, Luke.
• Belton, Paddy.
• Bermingham, Joseph.
• Bruton, John.
• Burke, Dick.
• Burke, Joan T.
• Burke, Liam.
• Byrne, Hugh.
• Cluskey, Frank.
• Collins, Edward.
• Conlan, John F.
• Coogan, Fintan.
• Cooney, Patrick M.
• Corish, Brendan.
• Cosgrave, Liam.
• Costello, Declan.
• Coughlan, Stephen.
• Creed, Donal.
• Crotty, Kieran.
• Cruise-O'Brien, Conor.
• Desmond, Barry.
• Desmond, Eileen.
• Dockrell, Henry P.
• Dockrell, Maurice.
• Donnellan, John.
• Dunne, Thomas.
• Enright, Thomas.
• Esmonde, John G.
• Finn, Martin.
• Fitzpatrick, Tom (Cavan).
• Flanagan, Oliver J.
• Gilhawley, Eugene.
• Governey, Desmond.
• Griffin, Brendan.
• Harte, Patrick D.
• Hegarty, Patrick.
• Hogan O'Higgins, Brigid.
• Jones, Denis F.
• Kavanagh, Liam.
• Keating, Justin.
• Kelly, John.
• Kenny, Henry.
• Kyne, Thomas A.
• L'Estrange, Gerald.
• Lynch, Gerard.
• McDonald, Charles B.
• McLaughlin, Joseph.
• McMahon, Larry.
• Malone, Patrick.
• Murphy, Michael P.
• O'Brien, Fergus.
• O'Connell, John.
• O'Donnell, Tom.
• O'Leary, Michael.
• O'Sullivan, John L.
• Pattison, Seamus.
• Reynolds, Patrick J.
• Ryan, John J.
• Ryan, Richie.
• Spring, Dan.
• Staunton, Myles.
• Taylor, Frank.
• Timmins, Godfrey.
• Toal, Brendan.
• Tully, James.
• White, James.

Níl

• Ahern, Liam.
• Allen, Lorcan.
• Andrews, David.
• Barrett, Sylvester.
• Blaney, Neil T.
• Brennan, Joseph.
• Breslin, Cormac.
• Briscoe, Ben.
• Browne, Seán.
• Brugha, Ruairí.
• Burke, Raphael P.
• Callanan, John.
• Calleary, Seán.
• Carter, Frank.
• Colley, George.
• Connolly, Gerard.
• Crinion, Brendan.
• Cronin, Jerry.
• Crowley, Flor
• Cunningham, Liam.
• Daly, Brendan.
• Davern, Noel.
• de Valera, Vivion.
• Dowling, Joe.
• Fahey, Jackie.
• Farrell, Joseph.
• Faulkner, Pádraig.
• Fitzgerald, Gene.
• Fitzpatrick, Tom (Dublin Central).
• Flanagan, Seán.
• French, Seán.
• Gallagher, Denis.
• Geoghegan, John.
• Gibbons, Hugh.
• Gibbons, James.
• Gogan, Richard P.
• Haughey, Charles.
• Healy, Augustine A.
• Herbert, Michael.
• Hussey, Thomas.
• Kenneally, William.
• Kitt, Michael F.
• Lalor, Patrick J.
• Lemass, Noel T.
• Leonard, James.
• Loughnane, William.
• Lynch, Celia.
• Lynch, Jack.
• McEllistrim, Thomas.
• MacSharry, Ray.
• Molloy, Robert.
• Moore, Seán.
• Murphy, Ciarán.
• Noonan, Michael.
• O'Connor, Timothy.
• O'Kennedy, Michael.
• O'Leary, John.
• O'Malley, Desmond.
• Power, Patrick.
• Smith, Patrick.
• Timmons, Eugene.
• Tunney, Jim.
• Walsh, Seán.
• Wilson, John P.
• Wyse, Pearse.

Tellers: Tá, Deputies Kelly and B. Desmond; Níl, Deputies Lalor and Browne.

Amendment declared carried.

Motion, as amended, agreed to.