Finance Bill, 1976: Second Stage (Resumed).

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

Mr. G. Fitzgerald

Before the lunch adjournment I referred at length, and I hope in some detail, to the necessity for concern and a positive approach to the serious problems of young persons in employment within our society. I referred very briefly to the lack of consistency shown by the Government regarding the pay pause situation. I also referred to the budget introduced by the Minister for Finance and the contents of it seriously harming any hope there was of seeing a modest increase in wages this year.

The budget over, it was obvious to even the youngest school child that there was no way that anything approaching a pay pause was possible. It was rather childish of the Parliamentary Secretary yesterday evening to have charged this party with looking at the British budget. One is obliged to look at the performance of people in comparable situations faced with somewhat similar problems. Certainly in the field of performance here the Minister for Finance has failed and failed miserably.

The budget being over, it ruled out any possibility of a type of pay increase that in such a time is probably desirable, with the work force of this country penalised and overburdened with taxation, with social welfare stamp increases, with cost-of-living increases generally. Then it showed the lack of knowledge of the situation, the lack of appreciation of the seriousness of the plight of these people by the current holder of the office in Finance, and, indeed, by the Taoiseach himself, when they continued to demand pay pauses.

When the Taoiseach's back was turned and he had gone to the United States, the Minister for Labour came out and took a different line, perhaps for his own political reasons or perhaps he was more aware of the realities of the situation that faced Irish working people. As well as that, the Government at a crucial time like this should have given guidelines. Already spelled out by Deputy Haughey and by other speakers in this House was the necessity for this overall planning, this overall co-operation between participants in national wage agreement negotiations, the employers and trade unions. As well as that a government at a time like this should involve themselves in trying to encourage the approach that was highly desirable. Everybody knows now what harm the budget has done. The cost of living and the inflation it has created are serious, particularly in relation to our credit situation.

We are told, first of all by the Tánaiste, that the bubble has burst. It has but for whom has it burst? For the people who mismanaged this economy over a three-year period and have continued to blame outside factors and are now saying world trends are changing, the United States economy is recovering, the economy of the Continent of Europe is recovering.

We must tackle our own problems and restore confidence in our people so that we can hope for a recovery from our own resources and from within our own resources. We cannot have that recovery while we have the type of Government we presently have, without positive leadership without courage, in fact without anything, but guided by a desire for propaganda and publicity at enormous cost not only to this generation but to future generations of Irish people. There are many instances of the Government trying to pull with both reins, trying to pretend they are going a bit of the road with everybody. This is a time for courage. We want to see confidence restored. It is necessary and desirable to make a positive approach to the unemployment situation. We had one miserable effort last year—the premium employment scheme, as a result of the budget of 1975. This was introduced by the Minister for Labour who set a job target on it of 10,000 jobs. We co-operated and intimated that as far as we were concerned we would not stop at a target of 10,000 jobs, that it would be even far more desirable to put the figure far above that. Because of the narrow conditions of the scheme, because of impossible targets set for some industries, just over 4,000 jobs were created by it—less than half the expectations. But for the waiving of those conditions in certain circumstances not even that figure would have been achieved. We have heard little about it in recent times. We do not know whether it will be extended or the scope widened. It is desirable that it should be.

Dr. T. K. Whitaker, the former governor of the Central Bank, today in The Irish Press endorsed what I am saying and what my party have been saying for many months. The bubble that must burst is how he described the economic trends in pay and costs in public spending and foreign borrowing in recent years. He said there was a temptation to become dispirited and this is what we have been saying. In recent years the difficulties have been great and we were not at our best in dealing with them. I would say we were at our worst. The Parliamentary Secretary to the Taoiseach must be challenged for his completely worthless contribution yesterday to this Bill.

Dr. Whitaker said that people were even to be heard referring to the good years of the 1960s as if they were a flash in the pan. This is exactly what the Parliamentary Secretary spelt out yesterday evening. Dr. Whitaker goes on to say:

There was nothing artificial, nothing unsound, about that series of years in which an annual growth rate of 4 per cent was maintained with only a moderate increase in prices, and virtually no foreign borrowing.

That situation was achieved within a climate created by a sound, constructive and positively led Government from this side of the House at that time. Dr. Whitaker also says:

If we do not have the foresight, courage and discipline to devise and follow a well ordered programme of recovery then we can well be dispirited.

We have been projecting this message for a long time. If we have not the courage, determination and goodwill to inspire our people to help themselves to recovery and stop our absolute reliance on blaming people and events abroad, there is no hope for our young people.

Many thousands of people are employed by the co-operative movement. Their employment is highly desirable not only for the content of the employment but for the location of such employment. Such employment is widespread. In the southern part of the country particularly the employment given by these concerns has meant a substantial benefit to the economies of towns, villages and even local crossroads. Our stand on the proposal to tax co-operatives has been spelt out. Nobody knows exactly what the position is on the other side. The Minister for Finance introduced it in the budget debate. We are not yet sure exactly what is meant by it. We know he is under extreme pressure from his backbenchers who see the folly of his ways. Deputy John L. O'Sullivan spelt out in The Cork Examiner that he is not going ahead with this tax at all or if he does go ahead with it it will be in a very limited form.

I want to stress the importance of the employment content. The consumer of essential foodstuffs within this country will be the sufferer if this tax is imposed because many of these co-operative societies, particularly the bigger ones, the major employers, have expanded considerably. Because of that expansion they have stretched themselves and are committed to repaying entire surpluses to the bank, in many cases for a long number of years. If some of those surpluses are taxed it means that the banks must still get the money and the co-operatives must increase the surpluses. They can only increase them by imposing a greater cost on the consumer. What will this bring in by way of revenue? I suspect very little. The Minister has an obsession for imposing taxes on anything that appears to him to be a profit. So that I will not be misrepresented I will say that I, too, would like to see profits taxed, if they were being used exclusively for the personal gain of individuals, company directors or, indeed, if they were being gained by exploitation of a work force. If profits are being reinvested in industry, to keep our industry and business up to date and to expand and create more jobs within it, it is important that assistance be forthcoming rather than have an attack on profits.

I was coming to the question of how we should tackle unemployment. I have spelled out already—and no response has come from the Minister directly concerned—that the position can be described as a national emergency. All bodies with anything to contribute should try to find ways and means of improving the immediate situation. In his contribution to the budget debate, Deputy Haughey suggested setting aside £100 million for the creation of jobs as quickly as possible. I am not saying the Minister can wave a magic wand. I am realistic enough to know there are serious problems. Unless the Government can create confidence in our people, fail we must. I charge the Government with having encouraged failure, with having failed to create a proper climate, and with disregarding the problems facing our young people in particular. It is incumbent on them to save whatever little honour is left to them by putting their performance on the line and letting the Irish people decide whether they want them to continue in office.

This morning Deputy Desmond said the pattern of a Government was set in their first 12 months in office. The next 12 months are spent trying to persuade everybody their policies during their first 12 months were the right ones. From then on they began to think how they could ensure their return to office in the next election. He went on to say the Government tried to govern the country and run the civil service and failed in both areas. Basically that is what he was saying. He was admitting to failure on behalf of the Coalition. If the first 12 months in office of this Government set the pattern, may God protect us from very many more months with them in office. Perhaps he was reading some signs when he said the average life of a Government here was three-and-a-quarter years. We are approaching that now. I can assure the House the vast majority of the Irish people would like the Government to call it a day and give them an opportunity to return a Government with the courage to take us out of the dreadful mess into which we have been landed, not by any outside factors, but by the mishandling of the Government and their failure to realise the steps which should have been taken in time.

We have another worry. We are a member of the European Community. In 1975, because of our involvement we got £100 million—no mean income from that source. It was a major contribution to our economy. What is the feeling in the Community at the moment? This Government have managed our affairs so hopelessly that we may find they may go further than laying down conditions for our borrowing and instruct the Government, in the short time left to them, on how they should tackle the problems. If the Community lose confidence in the ability of our people to govern themselves, the chances are that we will be affected in the areas in which it is vital that we should be able to obtain money. That is the image which has been created by this publicity-conscious Government.

The saga of the wage agreement is still going on. It was reached after protracted negotiations. It is a tribute to the employer and trade union groups that, despite the breakdown of the conference, when they were asked to come back together they stayed with it until agreement was reached. The size of the increases may be a cause for concern. The Minister who contributed so much to the size of the increases by his mishandling of the budget, by creating more inflation, said this was the end of the story, and he then told us he is going to the IMI conference in Killarney this weekend and he will make a major statement.

I want to say to the Minister who speaks in pubs when there is nobody there that he has a duty to the democratically elected Members of this House, and a duty to the people, to make such a statement, whatever its contents, in this House this evening. I want to stitch it into the record that there is an obligation on him to make that statement this evening to the elected Members of the House. He should state clearly what is involved. Is it the nucleus of a plan which he said for so long was not necessary despite promptings from this side of the House? When it was too late did he realise it was necessary? Up to now he has taken no positive steps, to our knowledge, to set it in motion. Is that the message he will be spelling out in Killarney? There is no point in newspaper correspondents or some of his colleagues in the Labour Party going around the country and blaming the Minister. The blame must rest on the shoulders of the entire Government for the inability of this man, the inefficiency of this man.

The best cartoon I saw was a headstone in a newspaper last week with the words: "In fond memory of the pint. Erected by Richie Ryan." There will be many monuments to the Minister when he vacates the position of Minister for Finance. It is not enough for his colleagues to blame him. They too have to accept their share of the blame for the situation which has arisen.

I want to refer very briefly to offshore developments. This Bill will create further unemployment in areas which matter to us. The increase in the tax on petrol shows how inconsistent this man is. In November or December, 1974, we were all here awaiting a dramatic announcement. We got a huge increase in the price of petrol. The reason advanced by the Minister was that we had to bring it into line with the price of petrol in Northern Ireland and Great Britain. Where is his consistency? What is his excuse now for the fact that we are so far ahead of them? Other speakers have referred to the increased taxation on motor vehicles and have spelled out the necessity for having a motor car today. It is no longer a luxury. It is a necessity for the farmer and for the worker. This is another example of taxation phobia, of hitting the workers with everything one can hit them with. At times one would begin to wonder whether or not it is an offence to work while this man is Minister for Finance. He seems constantly to impose tax on those people. This is a penal taxation on a vehicle that may not be used during a certain part of the year. We all have many constituents affected. We have them in Cork. Perhaps in a more affluent constituency like Meath one may not have such people——

Mr. Bruton

There is nothing to beat the Deputy's constituency for affluence.

Mr. T.J. Fitzpatrick

(Dublin Central): Helicopters figure in Meath now they are so rich.

Mr. G. Fitzgerald

The position in many parts of my county was that working people particularly used their cars for six or nine months of the year, perhaps to have the opportunity of taking their families out on a Sunday, surely their entitlement if they wished to do so. Possibly they garaged them for three months and, in some cases for six months, simply because of economies—not being able to run or tax them for a full year. They can no longer do so with advantage. If such a car is left in a garage, it means now it must be taxed whether or not used. I do not know how much revenue it will bring in. It would not appear to me to be a lot. The important thing is that the Minister has obviously become punch drunk with the idea of taxing our people. But the people of Ireland have become punch drunk with the belting they have received from successive impositions of taxation, especially on their incomes, on their thrift, on their initiative to succeed if they have a little business and are, perhaps, creating jobs.

This Government will be remembered for its failure to take cognisance of the serious question of unemployment, for their failure to spell out remedial action or create some sort of action committee that would tackle the situation in the short term. I refer to the £100 million. I see no reason why Ministers responsible for the economy could not bring together a group of people involving, particularly, the IDA, the financial institutions and banks—where this is money lying idle because of lack of confidence—Fóir Teoranta, the trade unions, representatives of some of the unemployed action groups. Indeed, the Opposition would be willing to take part, if requested, provided responsibility rests with the Government. Such initiative is urgently needed. The terms of reference would be wide. It would not need to be a commission or any such body. It would merely be a group of people politically attuned, aware of the situation obtaining, of the necessity of creating employment in many spheres and spending more money productively for a change. I could spell out many areas that might be examined and on which action might be taken very quickly. For example, we have seen the building industry decline. We have seen approximately 13,000 to 14,000 unemployed in that industry, a tragedy in itself.

There are other ideas along those lines that should be pursued but the important issue is that the Government show an interest in this priority because, otherwise, our entire structure will collapse. It is not sufficient to say—I quoted earlier from what Dr. Whitaker said—that we always had high unemployment figures. Emigration was stopped, not by a Coalition Government but by Fianna Fáil Governments; jobs were created but at a time like this history is of no use to us. What matters is that we have a problem that must be tackled quickly and, unless it is, we shall have dual results—a collapse of our existing structures and the creation of the great social evil of the young, educated, unemployed people. These people are disappointed, frustrated. They have become disillusioned with politicians and with governments. It is those people over on those benches who must accept full and absolute responsibility for that disillusionment.

Parliamentary Secretary to the Minister for Industry and Commerce (Mr. Bruton)

It is necessary to introduce an element of realism into the debate on the budget which this Finance Bill implements. It is fair to say that the Minister had four basic options open to him in the preparation of the budget and this Bill. He could have done what he did, which was basically to raise the money he felt the Government needed by expenditure taxes. He could have gone for increased borrowing and not raised any taxes. He could have raised the money he felt should be raised by income tax or, lastly, he could have cut public spending drastically and in that way render any extra taxation or extra borrowing unnecessary. In the circumstances obtaining I believe the Minister made the basically correct choice between those four options. I challenge the critics of the budget to indicate within the terms of those options which alternative option they would have chosen.

It was correct of the Minister not to go for an increase of borrowing, either internal or external, to finance what was necessary to be done because it is quite clear that the terms on which finance was being made available were very onerous, indeed, and the interest rates very high. It is clear also that any money borrowed now will have to be repaid some time. It would introduce a great lack of freedon for any Minister, present or subsequent, if too much of his current revenue had to be devoted simply to repaying the capital and interest on an inflated national debt. Indeed, although Deputies opposite call on the Minister to spend money on this or that project in the name of employment creation, education and all the other desirable social objectives, they have said also they do not believe that the Minister should have gone for borrowing in excess of what he has done. They cannot have it both ways and I think they agree implicitly with the basic choice not to go for borrowing beyond the present extent. Therefore, that disposes of that potential criticism of the budget.

There are even fewer people who would have urged the Minister to raise the money he has raised in the way he has by increasing income tax instead. I do not think there is a Deputy who would it would be preferable to raise the money being raised on taxation of petrol by increasing the basic rate of income tax instead. What we need most at present is an incentive for people to work and any increase in income tax would be directly and immediately contrary to that objective. I challenge those who criticise the Minister's basic decision to opt for increases in expenditure taxes and who do not believe he should have gone for excessive borrowing, to say frankly if they believe he should have raised the money instead through income tax. I do not believe any Deputy would have the courage to say that.

The other possible alternative muttered occasionally by people opposite, but never very specifically, is that the Minister should have gone for cuts in public spending. Not sufficient people realise the extent to which existing public spending actually directly maintains employment. I ask those who say that we should cut public spending now, in 1976, to say whether they are prepared to take the consequences in terms of public servants, or those directly or indirectly employed through the public service, actually being laid off. I do not think they would be prepared to accept public spending cuts were that to be the result. It must be borne in mind that the amount of public expenditure which is going directly to the pay of public servants is now 32 per cent of all public spending and any cut could only be made on that expenditure by laying those people off. Is that the sort of public spending cut the Opposition want? Most of the other money, whether in grants for schools or other purposes which some might suggest should be cut, is going indirectly to create employment. Take the example of maintenance grants for schools. Some might suggest these should be reduced. But that money is going to employ painters, for instance, who may be painting schools or people engaged in cleaning schools. If the money were not paid either those people would lose their jobs or would be paid less. That is the hard option we face.

I agree that in the long run, perhaps in the next two or three years and subsequently, we must take a very hard look indeed at the growth of public spending but I would argue most strenuously that the trough of a recession is not the right time to administer cuts of the size that seem to be suggested by some Government critics because we would then be unloading into already an excessively large pool of unemployed further numerous companions, thereby creating greater difficulty for all in finding employment. I do not believe many people could seriously, giving chapter and verse, argue that the Minister should instead of what he did have opted for cuts in public expenditure.

I do not believe there is a serious case for criticising the Minister for not borrowing more or for not raising the money by income tax instead of the expenditure tax he chose. I do not believe there is a serious case for criticising him for not rendering unnecessary the taxes he had to impose by making further cuts in public spending. This brings us down to accepting or rejecting the basic choice made by the Minister which was to raise the money required by expenditure taxation.

We can criticise the Minister technically in regard to the particular expenditure taxation he imposed. Some might say that he should have put more on VAT and less on petrol or that he should have put less on drink and more on tobacco or something like that. This is open to argument but it does not criticise the basic option taken by the Minister. Individual taxes have been discussed at such length that there is no need for me to go into them in detail once I have established that the basic choice made by the Minister was the correct one, but I shall mention a few.

How many Deputies realise that despite the most recent increase in tax the Government are at present taking a lesser proportion of every penny spent on petrol than was being taken by the then Government in 1973? The Government are taking something in the region of 58 per cent in tax on every penny spent by petrol consumers and this compares with approximately 62 per cent of every penny spent on petrol in 1973. The larger contributor to the increase in the price of petrol has not been the Government but those selling oil, whether internal oil companies or producers in Arab countries or elsewhere.

As a community, in the long run we must take a careful look at our pattern of consumption of energy generated by petrol. We must look at the life style we had in the sixties and the settlement pattern we then developed based on the no-longer-true assumption of cheap, imported petrol. We must realise that petrol at present is an entirely imported commodity and what the Government do not take from the price of petrol goes almost entirely abroad. It is correct that we should to some extent discourage consumption of material imported to the profit of people outside. That applies to petrol. Perhaps it is not entirely a justification for what the Minister has done but it is certainly evidence in support of it.

I said that I feel the Minister was correct in not seeking at this time further cuts in public expenditure. The clamour generated by the Opposition about the cuts or failure to increase money in some areas where this has occurred, has been such as to cast doubt on their sincerity when they argue for further cuts. I argue that we should not cut public spending now but I most strongly argue that in the long run and when times improve we must take a very hard look at the growth of the public sector. Some people say it is not right to finance this or that scheme now but when times are good the Government will be able to finance all these things people might want. That thinking, to my mind, runs directly contrary to the idea of counter-cyclical action by the Government in relation to aggregate demand. If it is justifiable for the Government, in order to create employment, when times are bad to spend a little more than they have, if the Government are to stay in balance in the long run they must be prepared when times are good to spend a little less than they could. They cannot have it both ways. You cannot spend more than you have when times are bad and still spend more than you have when times are good.

It is for that reason that I would argue that the crucial time for stringent care of increases in public spending will come, not now, but when times start to improve in the Irish economy. It is then we will have to look to repaying our national debt. It is then we will have to look to not embarking on schemes which we feel are not really necessary. I believe that there are probably schemes in different parts of the Government apparatus which, while they are useful, do not represent the optimum allocation of resources but remain because of the inertia which exists in every Department. No Department are going to voluntarily say, "We think we could save money on this, that or the other this year so we are not looking for an increase in our Estimate". No Minister or Department are going to come forward with that of their own accord because that Minister or that Department would take the stick themselves. They are not the people who are going to identify the schemes in their own area which if not wholly redundant do not represent the optimum allocation of resources.

I would argue that perhaps we should examine the need for some sort of an independent commission to look in the long run at public spending and to issue reports on schemes which are in being and which they feel do not represent the optimum distribution of resources. I am thinking particularly of the very good work which is being done by the National Prices Commission in consultancy studies on individual applications, either from public sector bodies or from private sector bodies, which point out on the basis of carefully substantiated evidence where inefficiencies exist and where costs could be cut. Perhaps we need a similar commission on the broader area of public spending to look at all the different schemes which are costing money year in and year out and which will continue to do so unless they are identified. Perhaps we need some such body which would come forward with unpopular recommendations which we as politicians would then have to face up to and do something about.

New schemes should only perhaps be set up on the basis of a statutory time limit in relation to quantifiable objectives which must be met. If the scheme is not meeting the quantifiable objectives within the time limit set, then the scheme should automatically fall to be questioned. Such a procedure does not exist. Schemes have been set up in relation to assumptions and objectives which are no longer relevant; and despite the fact that neither the assumptions nor the objections exist any more the schemes trundle on. We need some built-in safeguard against this sort of operation.

I have listened to the Opposition talking about the need to inject £100,000,000 into the economy to create jobs. We need to be very careful in our assessment of suggestions made to the effect that simply spending money creates jobs with a long-term prospect of success. To take the most obvious example of a public works' programme, if you spend money on employing people in, say, cleaning roads, first of all that process will have to end at some time and those people will cease to be employed. Secondly, that process is not likely to have any direct result in creating any further employment. Thirdly, it is possible that while those people are engaged on their contract on this public works programme that a job opportunity might become available which had a genuine long-term prospect of success, but because they are engaged on this public works' programme they are not available to take it and either the job goes to somebody else or the promoter of the job with the long-term viability does not go ahead at all because he has not been able to get the type of employee he wants.

We need to be very careful about the implication that spending money on public works' programmes generates long-term job prospects. Let us be clear that what we are interested in is long-term job prospects. The Government have been spending money on job creation in the correct way with a view to obtaining such long-term job prospects. We have put it through the IDA who apply a strict viability test in relation to any grants they pay out in the creation of new jobs, and that is as it should be. We gave it in the form of an employment premium scheme which made it quite clear that the responsibility lay with the potential employer to ensure that the job would last.

I believe that was the correct approach by the Government to spending money for the creation of jobs.

We hear references to the need for economic planning. I studied economic planning when I was at university and economic planning is not an elixir for all our problems. After all, what is it? Does some public servant spend six months drawing up a long statement on the mushroom industry and tell us how many mushrooms he thinks we might produce in 1979, giving another equally theoretical figure for the number of mushrooms we might produce in 1980, 1981, 1982 and 1983, and produce this very detailed set of quantifiable targets for the mushroom industry, publishing these and saying "There is our plan. We have a plan to produce X number of mushrooms by 1982."

Is anybody seriously suggesting that that sort of plan is going to have any material effect in ensuring that cattle arrive on our farms, that chickens are produced, or that those mushrooms are produced? Of course it will not. What planning really cannot do is create employment; but it can provide a mechanism for communication between the different sectors in our economy. Planning is not about producing big projections like, for instance—and not being unduly critical—the Second Programme for Economic Expansion. That was full of immensely detailed and scholarly projections which were not even reached—except of course the target for Government spending. Planning is basically communication. The present Government have a very good record indeed in relation to ensuring that communication takes place between the important interests in our economy.

We are all aware that the Taoiseach and Ministers have repeatedly and at considerable length met the different interests in the economy and that there has been as much consultation, and more than ever before, between Government and the important interests in the economy. It is also true that when the previous Government were in office they had a body called the NIEC which was supposed to assist in the planning process but they left the farmers off that council. The present body, NESC, have the farmers, who represent the most important single industry in our community, playing their rightful part in the deliberations of national policy. That is as it should be and that is the position under the present Government.

Ultimately, the problems of the Irish people and our economy will be solved not by 15 men sitting in Government—no matter to what party or parties they belong—but by the people themselves. It may sound very old-fashioned but I believe we need to renew some of the spirit of patriotism which existed in this country in the first 20 or 30 years of the existence of the State. That spirit does not exist to the same extent now. We need that will to work together, to be created again, if we hope to succeed. We also need to build up our confidence—and it is a justifiable confidence—in ourselves as a people and in our ability to achieve things in the world. In that context the Irish presidency of the EEC, although it came in very difficult times, was carried off very well not just by the Ministers, although they played their part, but by many public servants and people in voluntary bodies who acted as chairmen in Brussels and elsewhere in the Community. That showed what the Irish people can do on the international stage. Now we must apply the same ability and talent to solving our problems on the domestic stage. The evidence of our presidency of the EEC gives us every ground for optimism in our ability to solve our own problems.

There are certain obstacles we must get over. We must become a little more honest as a people. There is a culture developing in the community that it is all right to draw benefit to which you are not entitled. It is all right to draw unemployment benefit even though you are doing some work on the side. It is not all right. It is time all the leaders of moral thought in the community pointed out that it is not all right, nor is it all right for people not to pay taxes due by them or to fail to disclose information so that a proper assessment of their liabilities can be made. People who draw benefits they are not entitled to or who fail to pay taxes due by them are stealing money not from an individual but from all the Irish people. The fact that they are stealing from a number of people rather than one does not in any way diminish the extent to which it is stealing and a moral fault; in fact, it enhances it. Until we get over this attitude and the concomitant attitude of looking for the Government to solve all our problems for us, we will not succeed. On the other hand, we must realise that as a people we have a very great potential. We realise that we have natural resources we never dreamed of.

Due to the work of successive Ministers for Education and people engaged in every facet of the educational system, we have people who are as well educated and as capable of tackling work requiring educational ability as any in the world. We also have an ability as a people—and this is most important in any area of economic achievement —to communicate with one another. We have an ability to talk and to express ourselves. If, for instance, economic planning is to be successful, ultimately it is based on the ability of people to know one another and to communicate with one another. As a people, we have this ability, and we should turn that to good effect in co-operative ventures in relation to the improvement of our economic situation. These are a few of the ideas I feel give grounds for optimism in relation to our long-term success as a people.

Depression in the economy, whether it be the world or the domestic economy, is in substantial measure a psychological phenomenon. If enough people think times are going to be bad, they will become bad, because they will not spend money. As a result, others will not have money to spend either. This will reinforce itself and a depression will take hold. Clearly, that is what happened in 1929 and in the early thirties. Those who for political or other reasons or who wished to get notoriety for themselves—which all of us, particularly those in politics, like to do from time to time—by spreading the message of doom about the Irish economy should realise that they are not just making academic observations. They are probably directly contributing to a psychology of defeat in relation to the economy and to a psychology which itself will actually reinforce a depression.

I heard a criticism of the budget at some meetings I attended. Some people asked—particularly when they saw the crowds at Fairyhouse—why did the Government not raise the money they needed by increasing the taxes on gambling instead of increasing the price of petrol. We should realise, first of all, that the taxes on gambling were increased in the last budget and, secondly, that taxes on off-course betting in Ireland are now 20 per cent as against taxes on off-course betting in the United Kingdom of 7½ per cent. Increasing that gap still further would probably not have been a desirable move. There is a certain degree of mobility in the racing industry between this country and the United Kingdom, and if our taxes on gambling go too far out of line with those in the United Kingdom it could have desirable effects. It is also important to recognise that those taxes on gambling which already exist are percentage taxes. The more people spend on gambling the more the Government get and, therefore, people need not worry too much about the crowds they see at Fairy-house. The more bets they put on the more is coming into the coffers of the Government and the better it is for everybody.

Mr. T.J. Fitzpatrick

(Dublin Central): The Finance Bill is one of the most important measures we process through this House every year. It gives effect to the budget and introduces measures against new types of evasion and avoidance which come to the notice of the Revenue Commissioners. It is a Bill which needs serious consideration and we will be discussing it in more detail on Committee Stage.

We expected positive measures in the budget to improve the economic situation and I could not agree more with the Parliamentary Secretary when he said you could talk yourself into a depression and that such a depression can be created by psychological factors. The economic depression we are experiencing today has been created by the Government. When we left office in 1973 the air of depression which is prevalent today did not exist at that time. I blame the various measures which have been brought into this House and bad budgetary proposals over the past three or four years for bringing about this psychological effect on our people. They created that climate among the industrial sector and gave no incentive to the average worker. They produced no positive plan. If there is no lead from the top in industry or business this atmosphere of depression can arise. It applies more than anything to the Government that guidance and example should be forthcoming and reach every level in the community.

The Government neglected that fundamental principle when coming to power. They failed to produce any positive measures from the very outset. They got the economy in a sound condition, and it is important to go back three years to see exactly what the state of the economy was when they assumed office. For the first 12 or 18 months we on this side of the House were criticised, and probably justifiably, by the various sections of the media for letting them off too lightly. However, we know that some of the legislation which was introduced following their assuming office was legislation which was being drafted when we left. We treated that responsibly, but there is no excuse for any mistakes the Government made over the past 18 months or two years. It is from this stage onwards that we believe the Government made their mistakes.

Apart from failing to plan, they overspent in every section. I heard the Parliamentary Secretary say that it is when times are good that you should save. I would dispute that. I interrupted the Parliamentary Secretary on one occasion to say that I remember the Minister for Foreign Affairs, when he was on this side of the House as Finance spokesman and when we were planning our budget, from 1965 onwards—and these were times when budgets were in credit—saying that we should go into deficit and further expand the economy when times were good.

I am not sure that I would contradict that. This would apply to any industrialist today. If you have the money in reserve, by all means expand that industry, and I would give the same advice to any Government. Any borrowing we did in the past was for capital purposes. We were criticised in the past for such borrowing, but I think it is regrettable that we did not borrow more on the capital side in the sixties and early seventies. If we had borrowed beyond what we did borrow we would have further expanded the economy, built new roads, hospitals and schools, and we would have been building them 50 per cent cheaper than we can build them today. While I have been in this House I have never criticised borrowing for capital purposes. If there is anything I would criticise this budget for it is not borrowing enough for capital purposes. We can never borrow enough when we are investing it wisely in the State. Such investment in the future will have to be made in productive projects with a job-generating content. It is important how we direct our capital budget in these coming years if we are to absorb our labour force.

Having regard to the predictions we read in the papers day in and day out, this country is facing a very serious challenge. There is a serious challenge for this Government, but they have failed to take any positive steps to try to expand the economy. The fundamental question for any Government is the creation of new jobs. That is the test of a Government. It must be the test of any Government because it is their prime objective. Every economic correspondent in papers which I read prior to the budget was advising the Minister of positive steps he should take to curb inflation. Inflation is the most detrimental thing facing this country today. Inflation has bedevilled every country in western Europe as well as America and Japan. The prime objective of any Government is to ensure that inflation is brought under control.

What positive measures did the Government take to bring inflation under control in this budget? The contents of the budget speak for themselves. The budgetary measures are definitely inflationary. They will have no effect in bringing down the unit cost. They are no incentive to workers because every measure contained in the budget is increased taxation. At no time during the budget did we see concessions given to the average working man, except a very small concession as regards income tax.

We left office three years ago with growth rate at that time. In 1973 we had our unit cost, the most important thing today as regards our exports, under control. We were keeping our current budgets in balance. When we left office in 1973 we were budgeting for a deficit of roughly £5 million. At the same time we had just successfully negotiated entry into the Common Market. These were all the assets going for the Government at that time. Taking over that type of economy the Government should have done better over the past three years. If we look at the situation today we will find a completely different picture. We have now a negative growth rate. Inflation is the highest in the EEC countries. Spending on the public sector side has risen considerably over the past three years, and our budgets on the current side have gone completely out of control. The Government have failed to keep all these things under control, which is of vital importance if the economy is to be restored to a healthy situation.

It is possible for a time, irrespective of whether in a manufacturing or other type of business, to carry a downward trend in business. This is acceptable in any country, and the Government can at times of depression tide themselves over that difficult time if they have to borrow on a limited scale. Deputy Colley at that time conceded that limited borrowing is acceptable in any country, especially at a time of depression. However, continuous borrowing, that can go completely out of control without any hope of seeing where it is going to stop or of taking any measures to control it, is bound to lead the country into economic disaster.

We know the situation today as regards borrowing. We know that this year alone the Minister is budgeting for a deficit of £327 million. That is an astronomical figure to be budgeting for in the year 1976. If the predictions turn out the same as last year's deficit, then we will find ourselves in a serious situation. The Government will have to take positive steps. The problems which have been created have become so large that it is very difficult to handle them; but proper measures should have been taken in the last three budgets. The ills of mismanagement are not cured in one budget.

When we hear members of the Government, and indeed the Parliamentary Secretary, Deputy Bruton, mentioning what alternatives should be put forward apart from those introduced by the Minister in his financial statement, I would like to tell him or anybody on that side of the House that we would never have allowed ourselves to arrive at that situation. I do not believe there is one Member on this side of the House who would allow the country to mortgage itself to that extent, especially for borrowing for a current budget. I have no doubts at all that positive measures would be taken to boost the economy, to generate money in the right sector. That is where our money should have been spent over the past three years. There is no good in saying: "What would you do with the public sector?" or things like that. These measures should have been taken gradually. The situation should never have been allowed to develop.

The whole situation is that they failed to boost the private sector, and this is where the Government have fallen down. We have various statements from Government Ministers, depending on which side of the fence they are. Members of the Coalition, if they are Labour Ministers, advocate one policy for our industrial development and a fiscal policy. Leading Members of the Labour Party have been advocating over the past two years that we should break with sterling. Statements such as this, especially from people occupying important positions, can be damaging internationally. These are statements that should not be made glibly, especially by somebody occupying an important situation. I do not underestimate the intelligence of the man who is advocating this. But at this time to be advocating a break with sterling when our economy is the weakest in western Europe is an irresponsible suggestion from a man in an important position. I would not mind if it came from some other person whose views would not be taken as seriously, but the Minister for Finance knows perfectly well that, irrespective of how bad sterling is, we will have to stay with it. The only time we can consider breaking with sterling is when we have properly developed our economy, when our unit cost is about 10 per cent under the British unit cost, when our exports represent 25 per cent of those of the UK. We all know that at the moment our exports are well over 55 per cent of the UK's.

To be advocating an action such as that at this time, without properly processing it, is damaging. We have a long way to go before we can consider that. I would be the first to advocate it if I thought it could be done. Of course this type of statement may get plenty of publicity, but such suggestions should be thought out seriously and properly processed. If we should ever dream of breaking the link with sterling the people who advocate it should spell out exactly whom they intend to tie our currency with. Will they tie it with some of the strong currencies, the Deutschemark or the Belgium franc, or will they float it on their own? We should be told what exactly it is intended to do before irresponsible statements are made. If we made such a statement, I am sure the Minister for Finance would be the first to ask how exactly it should be done, and if we had researched the whole procedure.

I do not hear any criticisms from the Minister for Finance of statements from other sections of the community. If the Minister favours this I would like to know the Government's position in this regard? There must be no uncertainty in relation to such matters because they are important to industrial development and foreign financiers. If there is any ambiguity about this, it could retard expansion. These are some of the factors that can create uncertainty. This is what Deputy Bruton was talking about when he referred to the fact that depression can be caused by psychological aspects —that we can talk ourselves into depression.

The Government talked us into a depression by a complete lack of any positive plan over the past three years and by contradictory statements from the two parties in the Government. The Labour Party are advocating a very socialistic policy in relation to public ownership, and from recent Press reports I have read the Fine Gael Party seem to hold an opposite view. The situation is that when there are two groupings in a Government, two different ideologies, it is very difficult for them to come out with any agreement on a set of policies. These factors are holding back the development of our country.

The people do not know what the Government have in mind. They have watched the decline in the economy over the past three years. Some of these problems were caused by an international situation beyond our control, but many of the problems we face today were of the Government's making. It is not good enough for any Government Minister to put forward the excuse that the state in which we find the economy today was completely beyond our control and caused by international events. The oil crisis had a certain effect on our economy at that time. We knew perfectly well that, when the oil producing countries took the decision to charge huge increases for fuel, it would create problems in this country. It also created problems for western European countries who were completely dependent on the import of oil but they grasped the nettle in time and saw what the consequences would be if something were not done about it.

There has been a transfer of wealth from west to east. These oil producing countries are going to industrialise their whole areas. They are entitled to do it and to get a fair return for their products. Whether that is excessive or not I am not in a position to say, but I would not dispute their figures. The Government should at that time have fully assessed the situation to see exactly where they stood. Instead, we progressed along the same line, spending money excessively.

I do not mean spending money where it is urgently needed: on all the weaker sections of our community, old age pensioners, widows and orphans and so on. The Government have spent money to keep their popularity at a high rate. I criticise that type of expenditure. It is not the duty of a Government to remain popular all the time. Their first duty is to see that the economy is kept viable—the creation of jobs and the protection of the standard of living of our people. Sometimes to do that it is necessary to make unpopular decisions affecting some sectors of our community. The good must be taken with the bad when you are in Government. If the Government had taken proper steps at that time the economy would not be in the state it is in today.

Our borrowing power is obviously practically exhausted. Restrictions have been placed on the recent loan of £150 million negotiated within the EEC. Irrespective of whether these restrictions coincided with Government policy or not they are attached to the loan, and have to be adhered to. Government Ministers say that they are in line with Government policy. That is all right, but the Government have no option during this year of changing their minds.

I expected that some positive steps would be taken to try to get the economy moving. Everyone is looking for that today. How are we to expand the economy? What measures will be taken to create new jobs? Many sections of this Bill deal with additional taxation of various kinds. There is not one section to which we could point and say when it is implemented it will be a boost to the economy. That is what budgets are all about. Only proper fiscal policies will restore confidence and the best time to introduce them is in a budgetary period. That is when we should see positive steps taken by the Government through the Minister for Finance. Instead we see the opposite. There is confusion.

In one section of the Bill income tax concessions were given but it is a deferment for this year only. In no other section is there any effort good, bad, or indifferent, to expand the economy. All we see is additional taxation on petrol, motor cars, beer, wine, spirits and luxuries. Anyone with common sense knows this will not expand the economy. I believe it will have the opposite effect because of the amount of money being taken out of the economy. In the last budget, £107 million was taken in taxes. This is bound to have a depressing effect on retail sales.

We saw recently in the papers that during the month of March there was a big drop in car sales. In the budget debate I told the Minister car manufacturers had adjusted their projections for 1976. They give subcontracts for tyres and other parts and they must project a year in advance. The car assemblers adjusted their sales figures downwards by 15 per cent for 1976. Brewers and distillers have also adjusted their projections downwards for 1976. This is quite logical. This decline is bound to take place in sales. When the figures come out shortly we will see it becoming apparent that the downward trend is there.

Dáil Éireann díospóireacht - Wednesday, 28 Apr 1976

Finance Bill, 1976: Second Stage (Resumed).

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Dáil Éireann díospóireacht -
Wednesday, 28 Apr 1976