(Cavan-Monaghan): When I moved the adjournment of the debate I pointed out that the Bill contains a number of anti-social provisions and that it discriminates against the family in more than one way. I find it difficult to understand why in this “giveaway” year, the year of the goodies, no additional allowance has been given to the family man in respect of income tax. A married man with no family or with a grown up family enjoys exactly the same allowances for income tax purposes as a married man with seven children. I want the Minister to explain the philosophy and meaning behind that. This year for the first time in the past six years there has not been any increase in the social welfare code for children's allowances. That is another discrimination, another attack on the family. I should like the Minister to deal with those two specific points.
Finance Bill, 1978: Second Stage (Resumed).
The Minister cannot deal with social welfare in this debate, and neither can the Deputy.
(Cavan-Monaghan): I am asking him to deal with it in the light of the overall financial position for which he is responsible. I cannot understand why extra provision has not been made in the matter of income tax allowance for the family man who has five or six qualified children as opposed to the man who has no family or has a grown up family. I want to protest against the action of the Government in not making any provision with regard to children's allowances. These are two glaring examples of discrimination—it is a word I do not like —against the family. When we go to another stratum of society we find that the Capital Acquisitions Act, as amended by this Bill, again has a swipe at the immediate family circle and treats it less favourably than the donees who are more distantly related than children. I appreciate that there is a much bigger allowance for exemption from capital acquisitions tax in respect of the child but that has always been the case since this code was introduced.
The Minister has increased the threshold in respect of the stranger, the brother and sister, the nephew and niece, the father, grandfather and grandchild but he has not increased the threshold by one penny as far as the gift from the parent to the child is concerned. It is very difficult to understand that. It is true that the capital acquisitions tax only applies when the gift from the father to the child is £150,000 but that was the case on 28 February 1974, when the tax became effective. The Minister and his party then said that that threshold was not high enough.
No. We said that one was too high but that the others were too low.
(Cavan-Monaghan): I accept what the Minister says but the Government of which I was a member went on record then as saying that the thresholds in all those capital tax cases would be revised in 1978 to have regard to inflation and the change in money value. It is true that in 1974 £150,000 would buy a very sizeable farm of land and that it was a generous exemption. The value of money has changed since then and the value of land has increased steeply. I am not exaggerating when I say that a farm of land valued at £150,000 on 28 February 1974 would now be worth at least £300,000. The Minister will invade that transaction and take from that family £75,000. That is the effect of the proposal in this Bill. It is very difficult to understand that.
In 1973 and before that there was great concern here about death duties because they imposed a great hardship on families when the breadwinner died. People were very concerned about the effect of death duties in breaking up family businesses and family farms. I am speaking about family farms because I am closer to the farm than I am to the business but what I say about the farm also applies to a family business. The value of that has changed, whether it is a public house or any other business. A public house which was worth £70,000 in 1974 is worth at least three times that now.
This party and the Labour Party undertook to abolish death duties within the family. We did that by introducing the threshold which the Minister says was too high. We told the people we would replace death duties by a small annual tax on the very wealthy. We did that but the Minister in this Finance Bill is abolishing wealth tax. Is he re-introducing death duties? That is the effect of what he is doing. He is abolishing wealth tax this year and relieving the very wealthy people of paying about £8 million in wealth tax. I am protesting about this as loudly as I possibly can because this will bring death duties into the immediate family circle, particularly the agricultural family circle.
A farm of land of 70 or 80 acres in a good part of the country with good buildings on it will realise much more than £150,000. If we take into account a farm with 100 acres or 150 acres we will get into the £300,000 bracket. The Minister will, through the Revenue Commissioners, relieve that transaction of £75,000. There is not one penny increase in the threshold. There is an increase in the threshold in the case of the stranger from £5,000 to £10,000, a 100 per cent increase. There is an increase in the case of the brother and sister or nephew and niece transaction from £10,000 to £20,000, another 100 per cent increase. In the case of a transaction between the grandfather and the grandchild there is an increase from £15,000 to £30,000, another 100 per cent increase. The gifts which are not to be taken into account at all, even by way of aggregation, are increased from £250,000 to £500,000, another 100 per cent increase.
Why has the Minister done nothing in respect of the transaction within the immediate family circle? The result of this is bound to force sales of agricultural land or force sales of comparatively small businesses on the death of the breadwinner. This is a re-introduction of death duties. Wealth tax was a small imposition. I have even heard people paying it say it was really nothing, only a mere bagatelle. The imposition in this Bill is a reversion from the wealth tax system to the death duty system which was a crippling tax and in relation to the present values of property will be very crippling indeed. I want an explanation from the Minister on that.
I would now like to deal with tax on farmers' profits. I do not think I am being unfair to the Fianna Fáil Party or to the Minister when I say that, in effect, they campaigned in the last election on the basis that farmers might forget about taxation. That was the impression given. The manifesto is there—it can be quoted to prove almost everything—but the general advice given to the agricultural community was: put back Fianna Fáil and forget about taxation. That was the canvass. That is what got Fianna Fáil the votes of the people of Kildare, Louth, Carlow-Kilkenny, North Tipperary and Laois-Offaly. I wonder what these farmers are thinking and talking about now, having had the promise and seeing the performance, because the first thing this Government did was to reduce the threshold for farmers' income tax from £75 to £60 PLV and increase the multiplier from £65 to £90.
I know the Minister says farmers are agreeable to fair taxation. That is so. He also says farmers can elect to be taxed on accounts or on the notional system. If a farmer elects to be taxed on the notional system he will be buying a pig in a poke. Farmers do not like buying pigs in pokes. They like to know what they are getting. But here I say the farmers are buying a pig in a poke because, if they elect for the notional system, they will be tied to that system for three years and there is no indication whatever what the multiplier will be next year or the year after. As Deputy Callanan said this morning, farmers are entitled to know. They are entitled to know how the system will operate for three years and I want the Minister to spell it out when he comes to reply.
The Fianna Fáil Government say the farmer may take credit for his rates against his income tax. That is in the manifesto. What is not in the manifesto is the fact that the Government had plans to revise the whole system of rating on agricultural land. For the first time in living political memory they introduced a Bill here which reduced the agricultural rates relief grant down to £75 from 1 January this year and down to £60 from 1 January next year. They have taken away completely the agricultural grant from 23,100 farmers— from 15,300 as from 1 January this year and an additional 7,800 as from 1 January next year. That is something the Fianna Fáil Party or Fianna Fáil Government kept from the agricultural community.
Now many farmers, perhaps thousands of them, will not be liable for income tax because of family commitments, because of the employment they are giving, because of the interest they have to pay on money borrowed, or because of the expense in running their farms, but they will have their rates increased this year by 33? per cent rising to over 80 per cent next year regardless of their ability to pay, regardless of their liability for income tax and regardless of whether they put in accounts or rely on the notional system. Is the Minister not ashamed of himself for playing that sort of confidence trick on the agricultural community once he had got his majority here of 84? This needs explanation. It is a sort of pea in a thimble exercise, juggling the pea from one thimble to another.
When the Minister for the Environment is here I am told I cannot relate this very closely to income tax because it is a matter for the Minister for Finance. The Minister for Finance is here now and it is he who fixes the ceiling for the agricultural relief grant. He does it in his Finance Act and the figure as from 1 January this year is £75 and it will be £60 from 1 January next year. We do not know, as Deputy Bruton pointed out, when the Minister will introduce another Finance Bill this year and reduce the figure of £60 from 1 January next year to £50 or some lower figure. This was a shabby confidence trick perpetrated on the farming community. It was a piece of despicable doublecrossing and it needs explanation. I have a fairly good memory and good hearing, and when the National Coalition's first budget was introduced here and the Minister for Finance was sitting on these benches beside the present Taoiseach his first question— not very loud—was: Are you not taxing the farmers? That was in 1973. We know what the farmers can expect from the Minister now.
Now, if the intention is to abolish the wealth tax and substitute for it under another name, death duties, I am dead against that. Death duties are quite terrifying. They are most unfair. I also believe we should not borrow £821 million and use part of that huge sum in order to abolish wealth tax. That is not sound financially and I should like to have the Minister's views on it.
There is an innovation in section 45, a very dangerous innovation. Under that section the Revenue Commissioners, the Minister's agents, will be able to disclose confidential information they have received from a taxpayer to a local authority so that the local authority may scrutinise that information and decide whether a farmer is entitled to the agricultural grant against his rates.
The same section authorises the Revenue Commissioners to make available to the Department of the Environment confidential information which they have received from the taxpayer in order that the Department of the Environment may decide whether the taxpayer is entitled to this £1,000 grant for a house. The only result of that will be to discourage people from applying for housing grants. Our history as a people is that we are terrified of the Revenue Commissioners whether we are on PAYE or not and whether we have small or large incomes. One agency that no Irishman wants to bring down on his house is the Revenue Commissioners. They are as objectionable to the average Irishman as is a mad dog. I ask the Minister to tell us the thinking behind writing this section 45 into a Finance Act whereby for the first time information is going to be given by the Revenue Commissioners to the county council to enable them to check and re-check a man's entitlement to the agricultural grant, and to the Department of the Environment in order that they may check and re-check a man's entitlement to a housing grant. What is the thinking behind it? Why has it been written into this Bill? It is new, and it is sinister and a move in the wrong direction, because the information given to or extracted from a taxpayer by the Revenue Commissioners has always been regarded as confidential, should be treated as such, and should not be passed on to anybody without the consent of the taxpayer. Here all that is changed.
In regard to the other objectionable performance of increasing the rates of farmers who could come within the income tax bracket, I have protested about that. It is wrong. I was talking to somebody who seemed to think it was all right and that farmers should be discriminated against in this way, but never in my political memory has any provision been made to increase rates by abolishing grants. The argument was put to me by this person that because farmers are liable for income tax of course there is nothing wrong with increasing their rates. I find it difficult to follow that line of argument. Many people in this country use their dwelling-houses for professional purposes and for earning their living——
Like TDs.
(Cavan-Monaghan): ——and they are liable for income tax, but their rates have not been increased. On the contrary, their rates have been abolished in respect of these houses where professional men are practising and making far more money than are the agricultural community.
The Deputy surely knows that what he is saying is not correct.
The Deputy also knows that we are not going to discuss rates in general on this measure. It is all right to try to relate rates to farmer taxation.
(Cavan-Monaghan): I do not propose to drag it on, but I ask the Minister if he denies that there are professional people in this country using their dwelling-houses for living accommodation and professional purposes and that they have been completely de-rated.
If they have been using them in this way and have been claiming an allowance they will have to divide up the valuation for the purpose of de-rating.
(Cavan-Monaghan): I suggested that.
We are arguing something now that does not come within the scope of this Bill.
(Cavan-Monaghan): I suggested that when the Minister for Defence was here in the House for the Minister for the Environment, and his retort to me was that the sort of chat that I was getting on with had put us out of power. Is it not a fact that houses where medical practices are carried on are rate-free?
If they have been claiming an allowance then the business portion of the premises would not be rate-free.
I ask Deputy Fitzpatrick to get on to the Bill before the House. This can be decided at some other time.
(Cavan-Monaghan): It is very interesting.
I know, but it does not arise on this measure.
(Cavan-Monaghan): Is the Minister going to tell me that the business portion and the private portion of all these houses are going to be revalued?
The Bill dealing with that has yet to come before the House.
(Cavan-Monaghan): It has come before the country, as the Minister knows, but not before the House.
I do not understand the Deputy's concern in this regard. If people are using a portion of their premises for non-domestic purposes and have to pay rates on it, that is one situation. In the case of farmers, if they pay rates they are entitled to set that off against the income tax bill, which nobody else is entitled to do.
Deputies, this is interesting but it is not relevant to this Bill.
(Cavan-Monaghan): The Minister will not confuse me. I am making the case that farmers have had their rates dramatically increased by from 33? per cent to over 80 per cent and other people have had their rates on their places of business abolished.
Deputy Fitzpatrick, the Chair cannot allow this to continue. It was debated at length, and the other matter does not arise on this Bill.
(Cavan-Monaghan): I would have got away from it five minutes ago if the Minister had not come in——
The Deputy cannot get away with it under that heading.
(Cavan-Monaghan): ——and started to tell me about a Bill that has not yet come before the House but has come before the country and been widely circulated.
The Deputy must get back to the Bill before the House.
(Cavan-Monaghan): In another section it is proposed to abolish the rights accruing from the power of revocation. In other words, up to now if a man of property transferred his property to his son or to anybody else subject to power of revocation, the stamp duty on that was virtually nil, and that has been the case since I qualified as a solicitor, which is quite a few years ago. The provision was that a man, be he farmer or business man, could transfer his property to his son subject to the right to revoke the transfer. It operated in two ways. It gave the son an interest in the property and it encouraged the son at the same time to be reasonably sensible and to co-operate in the running of the place. The Minister is changing that, and if a father transfers his property to his son now subject to power of revocation, stamp duty to the tune of hundreds of £s will have to be paid on the transfer. That is new and it is a move in the wrong direction. It is a re-introduction of something like death duties.
The whole trend in this Bill seems to be to impose tax on family transactions. The power of revocation was invariably a device used within the family for two-way purposes, namely to give the child ownership in the property and at the same time to encourage the child to remain at home, to manage the property well and to treat the parent well. Also let us realise that the parent usually got the old age pension as well, but there was no stamp duty on the transaction.
Is it possible to get the old age pension if the power of revocation is retained?
(Cavan-Monaghan): Yes.
That is news to me.
(Cavan-Monaghan): I must admit that when I first heard that, which was a long time ago I, too, was surprised but it is possible to receive the old age pension so long as the power of revocation has not been exercised. I am inviting the Minister to think about this and to allow the power of revocation to remain. Have there been major abuses in this regard outside the family? It is not totally correct for me to say that the Minister is taking away the power of revocation but where that power is inserted in an instrument the Minister is proposing to stamp the duty on the full value of the property passing, irrespective of the power of revocation. I am asking him to allow the old system prevail in cases of family transactions because in most cases there would not be capital acquisitions tax payable eventually but the Revenue Commissioners would collect the £400 or £500 or whatever amount is involved. This is a new way of collecting money. I do not know to what extent there have been abuses but I refuse to believe that where this device was operated in the family there was an abuse. Rather, that device was the type of prudent precaution that would be taken normally and which would normally be advised. It is a different matter if there were transactions outside the family which could be regarded as abuses but in the absence of any such abuses I am asking the Minister to have another look at the matter and to allow the old procedure prevail in regard to family transactions.
In dealing with the social welfare aspect of the Bill I omitted to point out that the qualifying age for the old age pension has not been reduced.
This Finance Bill gives effect to a budget which was based not on social or economic considerations, but on the major political consideration of Fianna Fáil being returned to office. They were returned to office but what is the situation? Today Deputy Callanan expressed disappointment with the performance of the private sector in relation to the 25,000 jobs that were promised by Fianna Fáil but for the creation of which they would rely on somebody else. Deputy Callanan is disappointed that only a fistful of those jobs have materialised. This is the situation with only a few months left before the losing post, as it will be in this case, is reached.
The Minister of State at the Department of the Taoiseach may not realise that we are talking about the 1978 budget at a time when we are going into the second half of the year and when the Taoiseach and the Minister for Economic Planning and Development are warning the people about next year's budget and telling them that the purse strings will have to be tightened, that borrowing will have to be cut back and that public expenditure will have to be reduced dramatically. How could the private sector be expected to get on with the task of creating the jobs promised by Fianna Fáil when there is an atmosphere of stop-go in the economy? However, this situation is not surprising. It was bound to follow on the Fianna Fáil manifesto.
This Bill is the first opportunity the Government have had of giving legislative effect to their proposals as outlined in the budget, in the White Paper on National Development, 1977-80 and, of course, on the famous manifesto. Whether in or out of Government each of us must recognise that while we have very many serious problems and have had these problems for decades, one of the biggest problems and one of the most challenging is that of providing increased growth and increased employment. I can see that it has not been absolutely possible for the Government to put into effect between July last year and the introduction of the budget early this year everything they promised. However, in the budget and now in the Finance Bill they give teeth and authority to these proposals.
It appears that the Government seem to have employed three strategies in an effort to provide for growth and for an increase in employment and, consequently, for a decrease in unemployment. The strategy appears to be to increase personal expenditure in order to increase consumption and demand and the all-important employment. The Government have adopted specific measures to this end. I presume they are confident that the measures designed to increase personal expenditure and demand will result in more jobs. They have adopted also a proposal to abolish rates on private dwellings and to abolish car tax on cars of up to 16 horsepower.
In the second case the Government have provided for a reduction in taxation on business enterprise, abolishing wealth tax—a matter to which I will refer later—and in reducing taxation on business enterprise for the purpose of boosting business confidence and the hoped-for investment.
The third part of the strategy involves direct State expenditure for the specific purpose of creating jobs particularly in the construction industry, in the public sector and by way of special youth employment projects. I suppose much could be done in that respect. There are people who would regard that sort of work as being unproductive but it is necessary that proper amenities be provided apart from the all-important consideration of providing employment. This money can be spent on housing, roads and various other public projects. One is reminded when talking about roads of the extraordinary statement by the Minister for Economic Planning and Development when he suggested that if we were to dig holes and fill them in again it would be worth while because new employment would be created. The roads are in such a bad state that the holes are there already and only need to be filled in.
This Finance Bill is designed to provide for increased growth and increased employment. The Government set as their target in the manifesto the reduction of unemployment by 5,000 between taking office and the end of 1977. It is possible that this has been done, but they went on to say that there would be a reduction of a further 20,000 by the end of 1978. I would dearly love to see the situation in which unemployment could be reduced by 20,000, but the measures in this Finance Bill and the proposals in the manifesto will not give us that reduction. The Fianna Fáil Party overbid their hand in the general election. It is the wont of those in Opposition to promise more than those in Government. But one is surprised that the Fianna Fáil Party, with such experience of office during the past 45 years, would attempt such a "try on" with the people in their efforts to get back into office. A reduction of 20,000 would mean a live register figure of 90,000 at the end of the year. The present figures are in the region of 106,000, so there is quite a lot of leeway to be made up.
I have mentioned the proposals in the budget with regard to personal tax, the reduction of taxation on business, the abolition of rates on private dwellings and the abolition of tax on cars of 16 horsepower and under. These things are good in themselves, but it is clear from the speeches being made by those in Government that they still depend on, or hope, that private enterprise will take over, in the words of the Minister, the "engine of growth." I do not believe that will happen, but that is the belief of the Minister for Finance and the Government. They have raised their sights high. I do not object to that, but they should be realistic as well.
As far as inflation is concerned, their target for 1978 is that it will be 7 per cent. They say we will have a growth rate of 7 per cent and that unemployment will range between 85,000 and 90,000. They have provided for a budget deficit of £405 million and borrowing stands at the massive sum of £821 million, which represents 13 per cent of GNP.
I will not transgress the rules of the House by being irrelevant, but it is well to recall that the economy was back on the growth path at the end of 1975, following the recession of 1974 and early 1975. Though Fianna Fáil refused to admit it and blamed all the ills of the time on the then Government, there was a recession which shook the whole world and there was massive unemployment not only in this country but throughout Europe, Japan and the United States. Despite that, there was a recovery towards the end of 1975 and we were back on a growth path by the end of that year. It is obvious that the present Government took over an expanding economy. I am not saying that the expansion was spectacular but at least the economy was growing and in 1976 that was represented by a 3 per cent growth. The volume of production was 9 per cent and exports grew by 20 per cent. That favourable trend continued in 1977 under the policies of the Coalition Government plus the international economic upturn. If there had not been this international economic upturn the recession would have lasted much longer. We predicted at the beginning of 1977 a growth rate of 5 per cent and that was met. Unemployment was slightly down, but only by a matter of hundreds. I am not boasting that unemployment had begun to settle when we were in office in 1976 and 1977.
If there had not been the Government stimulus, the economy would have grown in 1978 by 4 per cent or 5 per cent. Possibly people would say that this was not enough, but it would still be a growth in comparison with the two previous years. The Government have opted for a massive stimulus on the assumption that there will be an increase in growth over and above the 4 per cent or 5 per cent which would have occurred if there had not been such a stimulus. They have declared a policy which would mean a reduction in unemployment of 25,000 per annum. I would like to see a growth rate of 7 per cent, but I have my doubts in view of the approach of the Government in their financial proposals. I believe that a great proportion of the increased personal spending which is provided for through income tax allowances will go on imports rather than on home produced goods. This is very unfortunate, but because of our international commitments vis-à-vis the EEC we have little control over our imports.
People are not as conscious of buying Irish as they might be. We are told in the manifesto that a 3 per cent switch from foreign to Irish goods would yield 10,000 extra jobs, a worthwhile exercise if we could get the people to engage in it. I know that many such campaigns have been mounted by various Governments, way back to the Cosgrave Government in the early thirties. One of the first political speeches I ever heard was in the Bull Ring in Wexford when the then President, Mr. Cosgrave, spoke in a Buy Irish campaign. It did not seem to be successful.
I was present at a meeting in Wexford recently which was attended by Deputy Burke, the Minister of State at the Department of Industry, Commerce and Energy. He acquitted himself reasonably well, but it appeared to me—and I said it at the time— that there was no follow-up to this. I may be a bit premature in offering this mild criticism but the Minister of State could well be engaged full time on that assignment if, as the manifesto says, a 3 per cent switch would mean the creation of 10,000 extra jobs. This is a massive number of jobs for such a relatively small exercise by the Minister and it should be pursued in a much more vigorous way. Perhaps the campaign has not gained full momentum as yet. What concerns us is whether the target for employment will be met. The manifesto and the White Paper, "National Development, 1977-80", provides a reduction of 25,000 in numbers out of work by the end of 1978 compared to the time when this Government took office.
That also visualised a live register of from 85,000 to 90,000. The unemployment figures given must be confusing to the ordinary public when various figures are thrown from both sides of the House. The Minister for Economic Planning and Development, Deputy O'Donoghue, said recently that by the end of 1978 the figures would be between 92,000 and 100,000. It is very difficult to know what figure the Government are aiming at or what the result will be after the financial proposals are implemented, particularly so far as job creation is concerned. That prediction by that Minister is not very optimistic and cannot be reconciled with the Government's anticipated number of jobs to be created and to the unemployment figures.
It is true that unemployment has fallen by 6,000 since the Government took office but there is still much leeway to be made up. In mentioning unemployment it is important to note with some anxiety that at present we have about 10,000 emigrants. That figure has not been contradicted and is as high as it was in the sixties. We all hope this trend will not continue because over the last 30 or 40 years we have lost too many of our young boys and girls to Great Britain in particular and to other countries.
I regret that I do not believe the employment targets will be met, even through the proposal to provide jobs by direct State employment. I say this because my experience with Fianna Fáil Governments in respect of many other public works and the provision of money for them is that while they say they have the money and provide for it in the Estimate, they do not spend it. Therefore, I would urge the Minister to ensure that any money, whether for housing, road construction or any other works, will be spent. These jobs can be provided if the Government put up the cash, but reliance on private enterprise will not create sufficient jobs.
I am not aware if what I am about to quote has been quoted already but the Confederation of Irish Industry recently held a survey the results of which were published on 28 February last. In that survey one of the questions posed to the member firms was
What employment increase would be associated with actions to increase output by up to 30% over the next two years?
The response as described by the CII was as follows:
22% of firms saw no employment increase ensuing but the main concentration of employment increase was in the 5% to 14% range—that is 56.1% of firms. The implication of the distribution of anticipated employment increases would suggest that many firms see scope for achieving output increases from increased productivity rather than increased employment....
From the results of this survey it is clear that 22 per cent of the manufacturing firms surveyed saw no employment increase associated with the 30 per cent increase in output while 56 per cent of firms felt that a 30 per cent increase in output would on average involve only a 10 per cent increase in employment. I am sure that was brought to the Minister's attention the day after it was published. The Minister has an obligation to comment on the results of that survey because the CII say in no uncertain terms that so far as the Government proposals in respect of industry are concerned, they will not produce the number of jobs the Government expect. It is no secret that the Labour Party have always believed that there has been too much dependence on the private sector and that that would not solve our unemployment problem. That has been spelt out very clearly in the CII survey.
At the last election and at our annual conference this year we confirmed a policy for the establishment of a national development corporation which would be under the direct control of the Government and whose main function would be to participate in industry and to assist industry in every way possible because we cannot depend on private industry to provide more jobs. It always appeared that Fianna Fáil placed too much dependence on the private sector. We believe that the establishment of an institution, such as the national development corporation, would enable this very important and serious work to be undertaken.
We are entitled to question the wisdom of the provisions in this Bill which are designed to stimulate investment by giving incentives through tax cuts. I have already mentioned that as far as personal cuts are concerned we hope any money that accrues from such a measure will be spent on Irish goods and will not be sent abroad to pay for imported goods or materials.
Section 21 extends entitlement to free depreciation for new plant and equipment for an indefinite period. These allowances are given for a period of two years and may be extended by two years. What will this measure cost? If private enterprise say they cannot provide jobs why should we give them this concession? Section 24 applies the same principle in the matter of free depreciation on new industrial buildings from February this year. Taking sections 21 and 24 together must mean a big tax saving. In my view that will mean increased profits, not an increased number of jobs. If that is the case I again ask the Minister are the provisions in sections 21 and 24 really necessary?
In the matter of allowances, section 19 refers to a measure introduced by the National Coalition Government in their last budget in 1977. We introduced a reduction in the rate of corporation tax from 45 per cent to 25 per cent for manufacturing companies who could show an increase in employment and in sales. Section 19 of this Bill amends our policy by removing the sales test and the main criteria for tax concessions will now be an increase in employment. I agreed with the Coalition proposal and I am not opposed to section 19 of this Bill. This was only introduced at the beginning of 1977 but I would like to know how many companies have claimed tax concessions under the provisions in section 19. Is this proposal, initially introduced by the Coalition Government, working? One must question all types of assistance to industry. I am not against helping industry in order to provide employment but recently the Minister for Labour said that the employment premium scheme is not working as well as expected. That is disappointing. This scheme was introduced by Deputy O'Leary, the former Minister, and was continued and the premium increased by the present Minister. The premium is very generous, so it is difficult to know how industry can be assisted. As far as concessions to business are concerned there are better ways of spending money than by giving tax concessions to private enterprise. More money could be invested in State enterprises in order to provide for more efficiency and to provide for more employment. Next year's Finance Bill must come up with better ideas or else the job targets will not be met.
The White Paper on national development introduced by the Minister for Economic Planning and Development described the Government's economic strategy as a gamble. That was a most irresponsible statement. It should not be a gamble. The Minister has no right to gamble with the future of this country. Fianna Fáil regard themselves as the party of reality and they will certainly be up against reality in the next few years. Borrowing £841 million and describing as a gamble the strategy employed by the Government is scandalous. I do not know whether the Minister qualified it or not but he certainly did not present the Fianna Fáil party as a party of reality in that statement.
The main objection we have is to the abolition of wealth tax. The provision for the collection of wealth tax was not abolished but section 36 provides for the non-operation of the wealth tax for this year and I presume this will be repeated in the next budget. Alternatively the Minister might realise that the wealth tax should be collected this year. The abolition of this tax means a loss of £8.5 million a year. The present Minister for Finance when in Opposition vigorously opposed the introduction of the wealth tax and said it was a disincentive to investment and that it favoured foreign investors rather than home investors in industry. That is not a fact but a belief of the Minister. The decision not to collect wealth tax will cost the Exchequer £8.5 million per year. This is not a large amount in the context of all the Estimates and it is certainly a small amount out of over £2,000 million but it is not small so far as social welfare recipients are concerned. That £8.5 million could increase social welfare payments by 4 per cent, it could provide for the increases in social welfare benefits in October next; it could provide 2,000 jobs in the health services, or it could allow the local authority to construct 700 houses per annum. While the amount might be trivial in relation to all the Estimates it is not trivial as far as the use to which it could be put is concerned. Contrary to what has been stated it will not mean an extra job.
There is moral justification for such a tax. People who have amassed enormous amounts of money have an obligation to contribute to the rest of society. People should be rewarded for initiative, effort and investment but I would question how large sums of money have been amassed. There are only 24 hours in a day and there is a limit to what people can do. I suspect that many of the people who complain about the imposition of wealth tax amassed money in a short time by deals, mergers, exploitation and high prices. These people are not interested in the welfare of the country, they are only interested in money. These people are only asked to contribute 1 per cent of their wealth after very generous tax concessions are allowed. There was never such a clamour about a tax since the imposition of the turnover tax. This group of people who own £1,000 million are a very small but vocal group. We are told that this wealth tax is against the interests of the country but it is not peculiar to Ireland. Countries such as Denmark, Germany, Luxembourg, The Netherlands, Austria, Finland, Iceland, India, Norway and Sweden have a wealth tax. Their economies are not much different from ours but the wealth tax has not held back their economic growth. The economic argument against the wealth tax is not proved but the moral argument in favour of it is overwhelming. In abolishing or not collecting wealth tax and in easing capital gains tax the Government have given £2,000 per annum to the wealthiest 5,000 in our society and by contrast the increase given to the old age pensioner for the coming year is £50.
When one considers the immorality of section 36 it is not surprising to find the same lack of moral concern in section 5 dealing with personal income tax concessions. It is amazing that section 5 does not contain any reliefs for children. Section 5 discriminates against families. Deputy Fitzpatrick gave an example of what it would mean to families. It is enough for me to say that a married couple with all their children out at work get the same tax relief as a married couple with six, eight or any number of children.
For the first time in many years the Finance Bill does not give any increase in children's allowances. What has the Minister got against families? Why are they discriminated against in section 5? The income tax allowances generally should have favoured the lower income groups and larger families.
Section 28 provides for the abolition of car tax on vehicles of 16 h.p. and less. That was a very attractive promise by Fianna Fáil before the election and it bought many votes. So did the abolition of rates on private dwellings. I do not think the abolition of car tax on 16 h.p. vehicles has taken the motorist out of his troubles because in the last 12 months there has been a colossal increase in car insurance which will blot out the tax concession.
Naturally, I do not object to the concessions granted, but incomes are being eroded by price increases. The Government should have another look at their manifesto, paragraph 4, in relation to prices. It promised full dissemination, at least once a week, to radio, television and newspapers of comparative prices of the most frequently purchased consumer goods in supermarkets in different parts of the country. I do not think that can be operated, valuable as the idea was. I suggest that Deputy Geoghegan-Quinn should have a look at that paragraph.
This first Finance Bill of the Fianna Fáil Government panders to the rich, not unusual as far as Fianna Fáil are concerned. For much needed employment dependence is almost entirely on the private sector, and I suggest that is a completely wrong approach. The Bill gambles with the future of the nation. The Minister for Economic Planning and Development, young in his membership of the House, considers the framing of a Finance Bill and the running of the economy to be a poker game—he described it as a gamble.
The Finance Bill is not a measure on which one can make a general speech. First of all I will refer to column 552 of the Official Report for 9 May 1978 where the Minister is reported as follows:
The generous increases in the personal income tax allowances were a vital element in securing an orderly and moderate development of incomes. As Deputies are aware, agreement has been reached since the budget on a national pay agreement.
The effect of that agreement is that the restraints of the workers this year will result in a huge increase in Exchequer receipts. When we were in office I saw year after year that, as wage agreements were ratified after bargaining, a huge sum of money became available to the Government for dissemination. We have a mixed economy with many people such as farmers, shopkeepers and professional men self-employed. They get higher increases than those given to workers in national agreements. That means higher revenue from VAT and other taxes.
Now we have the Minister for Finance making speeches to the effect that the hair shirt must be put on. Could anything be more dishonest? Let us consider the various items the Minister put in his shop window. At column 552 of the Official Report, volume 306, the Minister referred to the various incentives designed to encourage what he called "the spirit of enterprise and expansion in the private sector". These included corporation tax reliefs for small companies. If small companies are any good they will become larger companies by re-investment of profits in the form of capital expenditure. That means they do not pay corporation tax. Indeed I suggest that taxation lies very lightly on business in this country.
The Minister in his opening speech spoke of simplification of the arrangements covering a special reduced rate of corporation tax for manufacturing companies which achieve expansion. Before this Bill reached us the situation in relation to what a company could set against net profits in respect of capital expenditure—machinery and plant—was wholly adequate.
On the question of continuation of stock relief, about two-and-a-half years ago there was a huge increase in the cost of stocks and the Coalition Government introduced stock relief. This meant that the person who had a huge investment in stock which was necessary could set that against his tax and defer payment of the tax. That situation has not changed this year. As there has been some levelling out in the cost of living it may be that next year the Minister will make an adjustment, but nothing has been given this year that was not given before.
The Minister was very vocal about well-heeled ladies. At column 553 of the Official Report of 9 May he stated:
Section 2 changes the basis of division of their personal allowances and reliefs between spouses in cases of separate assessment. The section provides that where separate assessment has been claimed or is claimed in future, the allowances and reliefs of the married couple will in general be divided equally between them instead of in proportion to their incomes as has been the case up to now.
That is all very well, but how much extra money does it give the husband and the wife? What is the difference in the tax on the total income? My view is that it makes no difference whatever. I should like the Minister in his reply to tell us what difference that has made to a couple having a joint income of £5,000. I am suggesting that the answer is nil.
The Deputy would be right. I never suggested that these changes will change the total tax payable by a couple. They alter the imposition of tax on one as against the other, but I never suggested anything else.
We can take this, then, as a well-heeled window-dressing?
No doubt the Deputy would wish to do that.
At column 553 of the Official Report the Minister states:
I am anxious to ensure that every married woman who has income of her own will become aware of her rights under existing tax laws, including in particular her entitlement to be separately assessed to tax and to make a separate return of income. I have, therefore, arranged that the Revenue Commissioners will issue to married women with incomes of their own a leaflet explaining entitlements under tax law and a simple form by which a married woman may, if she so wishes, exercise her right to claim separate assessment.
No group knows its rights better than does the married woman. The various associations have excellent, vocal people and I have met them in my political and business life. While a man may be a little slack with regard to seeking his entitlements, the woman with the shopping basket knows all about the bills she will have to pay. Sending out a leaflet, as suggested by the Minister, will make no difference whatever.
I commend the provision where interest on borrowings for capital investment in a company will be charged against tax for the personal investor. This country has large industries such as Cement-Roadstone, Guinness, Waterford Glass and so on, but the small companies that are privately owned total far more than the large undertakings. They may not hit the headlines, they may not have large advertisements on television and in the newspapers but, added together, they are far more important. I am glad that interest on borrowing for investment in such companies can be charged against tax.
Deputy Fitzpatrick referred to the fact that there were no increases granted for children's allowances or increases for social welfare for children. That is a public scandal. Deputy Fitzpatrick also referred to the capital acquisitions tax and the question of valuation as set out on 28 February 1974. He said it was quite improper that this was not increased in relation to the value of property. Even though farmers are doing extremely well, perhaps even having their best decade since the State was founded, the return on capital for them is far lower than in any other branch of production. If a person calculates the return on land that costs £2,500 or £3,000 per acre one can see that the return is extremely low. The Minister for Finance may not be aware of this because of his urban background but it is well known to the Chair and many of us here—
Please do not ask the Chair to comment on that.
Surely the Deputy knows that people who take land at the moment have no hope of paying it back. It is not possible to earn enough per acre.
The return on agricultural land is lower than in any other sphere of productive activity and the reason is very simple. There is not much point in my buying 50 acres of land in County Wexford because I could not administer it, but if that acreage came onto the market within one mile of my farm I would feel like borrowing in order to buy it, and so would ten other people. They would be interested because they could work the land and get to it easily. They could do what I did yesterday evening —walk through two fields of barley to make sure there was no disease in it What is important in this matter is scarcity value. If a farmer has 150 acres and is getting a reasonable profit and if 50 acres adjoining his land comes on the market, he will set aside portion of his income for the next five or ten years. He will pay far too much because it may be his only chance to extend his holding. I do not have to remind the House of the problems of agricultural holdings in this country and the aims of the Land Commission. It is connected with the fact that holdings are far too small. That is why land has reached such a value. That is why the capital acquisition tax was not corrected. When Deputy Fitzpatrick was speaking this afternoon the Minister intervened and said that on 28 February 1974 we set a figure of £150,000 before a person started to pay tax on a gift to his son. He did not say that before the election. It is very interesting to see what Fianna Fáil said before the general election. I should like to quote from page 20 of the infamous manifesto.
A farmer can opt for assessment by submitted accounts with the option of averaging his profits over a 3-year period, due to the cyclical nature of farming or by the notional system.
They did not tell the farmer that if he opted for the notional system he had to stay with it. As Deputy Fitzpatrick said, he had to buy a pig in a poke, because his figure had been brought from 65 to 90 and it stood at 90. He did not know if it would be ten next year or 190, but if he went for one year on the notional system he had to stay with it. That meant that no matter how bad a harvest might be, no matter what losses the farmer had with brucellosis or TB in his dairy herd, no matter what happened to him in whatever sphere of agriculture he was engaged, he had to stay with his notional system for three years and multiply his valuation by 90, or some other figure that nobody knows, deduct the various deductions and pay on what was left. That is totally unfair.
Paragraph 2 on page 20 of the manifesto states:
Fianna Fáil will allow rates on land as an instalment of a farmer's tax bill resulting in a tax saving for farmers of £10 million.
The removal of the agricultural grant is very close to a similar figure. Fianna Fáil in the manifesto told farmers that they could set off their rates against their tax bill but they did not say they would remove the agricultural grant. They gave them one side of the ledger but did not give them the other. The situation is quite simple at the moment. The agricultural grant looks quite small, although it was increased from time to time. It could mean to a farmer employing five men a few hundred pounds and to a small farmer a smaller sum. This went to almost all farmers. In addition there was the agricultural grant in respect of the first portion of the valuation not being rated.
What will happen when the agricultural grant is deducted and the farmer can set his rates against his tax bill? I do not want to quote from columns I have here from the Irish Farmers Association. I simply want to say that they said that with £60 PLV, the net amount payable is £224, an increase of £87.5 and, with £200 valuation, an increase of £592 or 59 per cent. This is an outside body with obviously an interest of their own. The Minister should disprove those figures or he should accept them. He should admit that Fianna Fáil did not tell the farmer they would get rid of the agricultural grant. They just told him that he could set his rates off against his tax bill.
There is also the question of farm family labour. If a man goes for the notional system, there is no provision in the Finance Bill for family labour. The farming organisations have submitted to the Government a system which will remove any abuses which could occur if this allowance were restored—in other words, a proportion of the employment grant. That would be registration for PAYE, limitation of the allowance to children engaged full time on the farm, an age limit of 16 years or over, an encouragement for family labour in line with the encouragement for industrial labour which, following on the Coalition Government's line, is now being given by this Government. Those things have not been done and the farmers must suffer.
We would have allowed contractors' charges against the tax bill and we would also have allowed depreciation on machinery. As Deputy Corish pointed out, we were rising from a very bad depression. We had gone through a period when Fianna Fáil were trying to pull us down instead of trying to build up a Government in trouble, just as all Governments in Europe were in trouble. No depreciation has been given as far as farm machinery is concerned. I cannot understand why it is not possible to give this. I want to question the figure, given by the Minister in his speech, of £14 million collected in farmers' tax last year. He said that it was far too small and that another 7,000 had to be brought in in the interests of equity. He said at column 555 of volume 306 of the Official Report:
The need for these measures is clear from the low yield from farmer taxation in 1977-78, which is expected to be about £14 million. The new measures are estimated to yield about £24 million from farmers in the tax year 1978-79.
How could the Minister hope in the first year of farmers' tax to collect it all? The Government seem to be setting out to tax all the farmers of the country. If the Government want to do that, or even to tax a small number of them, their numbers are so large that, with the existing number of Revenue staff, it is not a job for a month or a year, but one for five years. I suggest that when the Minister gives £14 million in respect of tax paid by farmers last year that that figure is far too low and that the tax payment will amount to far more than £14 million.
This Finance Bill will not pass through the House easily. On Committee Stage many amendments and votes will be necessary. At that time it will be possible to give even better exposition of the duplicity of the Government. I hope to be right in there battling when that occurs.
The affairs of high finance are seldom clear to the average person. As I look on myself as an average person, I have no intention of pretending that I am qualified to speak with any authority on its complexities. However, I am confident to speak of what I regard as the bread and butter issues of the financial structure of the country. I do not know where the Government are heading and, like so many others, I am confused to a degree that there are times when I have to stop and think in the hope of making sense of the situation.
The members of the Government promised the people the best the world could offer when they sought their support this time last year. The people who voted for Fianna Fáil must be questioning their decision today. Who could blame them? The country is in turmoil financially, industrially and socially. Yet we have the Government stating there are no problems that cannot be solved. What concerns me is the failure to solve the problems and I am even more worried by the apparent lack of concern on the part of certain Ministers with the various pimples breaking out on the face of Ireland. Any good doctor will tell us that prevention is better than cure. I am inclined to think this Government have gone beyond the stage of prevention after less than one year in office. What is needed now is the urgent attention of specialist skills in the financial ills of the community if those ills are to be cured.
I look around my own city and I see many young couples almost in despair because they cannot afford to buy the houses they had hoped to call their own eventually simply because prices have jumped away out beyond their means. Many cannot even raise the deposit now. The Government told the people they would make it easier for everyone to buy a home. They made quite a big thing out of it, and rightly so, in view of its importance. Were the Government deliberately misleading the people? Perhaps they were but, if they were not, would they now admit they have bitten off a great deal more than they can chew. Are we to take it the housing situation is to suffer drastically within the next year or two simply because Fianna Fáil were completely reckless in their promises of a better Ireland?
What have they done to halt the exploiters in the building trade? This could be an awkward question to pose in this House in view of the many vested interests in the industry and the huge profits produced by the industry. Nevertheless, if Fianna Fáil are sincere, they will come out now into the open and tell the people just what is happening behind the scenes where housing costs are concerned and where the provision of local authority housing schemes is concerned. Am I to go back to Limerick and tell those who are clamouring for houses that they will have to wait for some time yet because the Government cannot afford to meet their needs or because the Government are, in fact, broke?
There is no great harm in borrowing money provided it is borrowed with the intention of putting it to good use. I would not condemn using borrowed money to create good employment because that is an investment that will give a good return in the long run but I am at a loss to understand why any sane Government should borrow money so that the rich can grow richer while the poor grow poorer. A close look at what has happened with our borrowed money will show that it has quite simply been used to cushion the hard boards we may yet have to sit on.
I said at the outset I am no expert on finance but I am trying to figure out just what happened to the investment that was supposed to provide badly needed employment for so many of our young and not so young people all over the country. I cannot see any great urgency in the Government's task force to deal with unemployment. It is very easy to talk about unemployment when one is oneself employed in a secure job. It is very easy to sit back and discuss plans for the future development and prosperity of the nation in the years to come. No one who has a job would appear to be in any great hurry to help those who are unemployed or to find a job which would offer them a fair return. As I see things today the greater part of the problem where unemployment is concerned stems from too much talk and not enough action. All the reports presented to the Government over the years remain on the shelves awaiting consideration, reports which, if implemented, could change the economic face of the land right now when thousands of our young people are facing their leaving certificate. What kind of future is in store for them? What is the purpose of their education if it cannot be put to the benefit of the nation and themselves?
Our whole approach to the existing crisis of unemployment is all wrong. The Government are well aware of the urgent need to provide bridges, roads, houses and schools, just to mention a few outlets which could provide good employment. When the local authority of which I am a member seeks prompt attention to its proposals every excuse is offered to delay implementation of those proposals. In Limerick we need two bridges over the Shannon, if we are to prevent the entire region from slipping back into a state of chronic disruption. But we cannot get the co-operation of the Government to go ahead with these bridges. I know there is a great deal of red tape involved but I cannot over-emphasise the volume of employment that would be available in both the city and county if only the Government would cut through the red tape and move fast so that these two bridges could be built as quickly as possible. The Government should lead the way. It should show the country it is sincere in its efforts to wipe out unemployment. Make no mistake about it unemployment can be wiped out if the Government treat it as an emergency. An emergency is just what it is, probably the worst and greatest emergency we have suffered in our time.
Finance must be made available to tackle this problem without any more delay because through the provision of finance for such a vital purpose the Government will be investing money in men and women, the best and most important investment of all. The more we have in employment the more money there will be in circulation and, the more money there is in circulation, the more people will find employment. It has often been said that one must spend money to make money. Never would this apply more forcibly than in the unemployment crisis of today. I cannot understand the mentality of some of those who claim to be concerned with the problem because I am satisfied that very few indeed have rolled up their sleeves to tackle the biggest challenge this country has faced. It is about time the Government faced up to the challenge, or else resigned and let those who are prepared to do it get on with the job.
I would like to remind the House that while the Government are barely a year in office there is considerable unrest throughout the country because of the manner in which certain sections of our commercial interests are getting away with high profits while the man in the street is crucified with all kinds of taxation, particularly income tax. Surely the Government are fully aware of the feelings of the people who put them into power. More than one Minister has stated frequently that Fianna Fáil have the trust and confidence of the people. In my book, either Government Ministers are closing their eyes to reality or else they are trying to bluff the people into believing everything will be all right tomorrow.
The big question that bothers the small man like myself is simply just where is all the money going? I am well aware that, if I take time out to study what I will call our balance sheet, I will see there all the details. But I am sure I am not the only one here who cannot fully understand the contents of such a document. In fact, I am wondering whether some of our top economists and accountants understand it. Certainly one cannot be blamed for getting the impression that even they get bogged down in the maze of figures that make absolutely no sense. One thing is certain: such figures fail to tell the tragic story of how so much money has been so badly spent on such useless projects while the man on the ground can only gaze now and then at the growing number of ivory towers, the privileged occupants of which seem to enjoy their own laws and their own dictates in the influential sphere of life, and slot away the knowledge that every penny he has earned is carefully recorded against him by his employer, an employer who is now in fact acting as an agent for the Revenue Commissioners. The sooner we bring this scandal out into the open the better for the country.
We have national wage agreements to keep the worker in his place. But while this applies to workers at all levels—and anyone who earns his or her living may be regarded as a worker —there are those who find no problem in getting away with many additions by way of cash payments. If they are entitled to these payments, the best of luck to them. However, I will not be happy until the Government take some action and have a closer look at the workings of the Revenue Commissioners in regard to income tax. The men and women working in the offices of the Revenue Commissioners are in no way to blame. They do their best to help and advise people, and but for their co-operation many a hardworking person would be grossly overtaxed.
What a stupid attitude the Government are adopting. We are urgently in need of greater employment and greater production in order to compete against the best in the Common Market, but we are obstructing such development. Why can we not give the worker an uplift and an incentive to work harder if he wants to? No matter how good a person's pay packet might be, the extra few quid are always welcome, perhaps to buy something special for the home or for a good holiday. The cost of living today makes it almost impossible to achieve anything, and this position is aggravated by the amount of income tax people have to pay. Surely the Government can show their faith in the workers by the creation of a new form of income tax which would enable those who want to earn more and to prove their worth to their families and their country to do so. Is it because our top brass do not want to be disturbed from their slumbers that this country is being allowed to drift into decay? Unless the finances of the nation are handled properly and unless every Government Department is made aware of the crisis we are in, then God help Ireland in the years ahead. There is far too much slumbering in the Government and in the civil service.
I said at the outset that I do not presume to know a lot about high finance, but in my day I was a punter and I used to go to the races, as did a lot of my friends and colleagues. None of us ever made it pay. The Minister for Finance has been quoted as saying on a few occasions that his budget was a gambler's budget.
I do not think that is right.
Is it not correct?
I do not think so.
It is the wrong Minister.
The Minister would be directly responsible for finance. Did he correct that statement?
I will deal with that in due course.
The Minister is quite capable of dealing with all things there.
May I interrupt the Deputy? I understand that there was an understanding between the Whips that I would be called on to conclude at 5.45 p.m.
It is not 5.45 p.m. yet.
It is on that clock. I merely remind the Deputy of my understanding of the Whips' agreement.
Is the Ceann Comhairle aware of that?
No, I am not aware. If there is agreement between the Whips that is their concern.
There is an agreement between the Whips.
Thank you, a Cheann Comhairle.
This has been a very interesting and revealing debate, not only in relation to the provisions in the Bill before us but also, more particularly, in relation to the underlying economic policy involved in this Bill.
Deputy Barry will recall hearing me on quite a number of occasions, when I was sitting where he is now, pointing out that, no matter how good a policy any Government had, if they did not have or were not in a position to generate confidence in our people then their policy would not work. I said it repeatedly when I was in his position—he might even say ad nauseam. It is interesting to know that that confidence is now there. We are talking about the underlying policy involved in this Bill, and the most important thing is to recall that that confidence is there. Without it we can do nothing; with it and with the right policies we can accomplish a very great deal.
A continuing theme running through this debate, and one that was contributed to by Deputy Cluskey outside the House and by quite a number of speakers on the other side in this debate, was reference to the Taoiseach's speech to the Confederation of Irish Industries and to other Ministerial speeches in which reference was made to the fact that we are going to have to restrain public expenditure in certain areas. In particular in regard to the speech by the Taoiseach but also in regard to the other speeches, Deputy Cluskey said there was recognition by Fianna Fáil of the failure of their policies. Other Deputies said it was said we were indicating how we were going to pay for our promises. Where were these Deputies during the past few years? Seldom has a policy been more clearly and consistently spelled out. Back as far as the autumn of 1976, when Fianna Fáil were in opposition, we issued a document on economic policy. In that document we said there were three major problems facing the country, namely, unemployment, inflation and the state of the Government's finances. We went on to say that even Fianna Fáil could not tackle these three problems together, that we would have to choose our priorities and the priorities were unemployment and inflation, and thereafter the state of the Government's finances would have to be tackled. That was in the autumn of 1976. In our manifesto, on page 8, we said of the economic action programme which we outlined in it:
It will lower inflation, cut unemployment dramatically and then restore stability to the Government's own finances,....
It went on to set out clearly that we propose to reduce borrowing as a percentage of GNP. Having increased it this year, we propose to reduce it next year with a further substantial reduction in the following year. The same policy was spelled out in the budget speech and in the White Paper and is now repeated in the Taoiseach's speech and the other speeches referred to. Where have these Deputies been when all this was being said? Why is this a big surprise? Why is it evidence, according to them, of the failure of the Fianna Fáil policy? It is evidence, of the consistent application of Fianna Fáil policy enunciated over the past few years as being the only way forward to tackle the major problems which we have inherited from our predecessors.
The Coalition Parties would like everybody to forget the shocking state in which they left the finances of this country. They piled debt upon debt with very little to show for it. The major test of success of the Government policy is and will continue to be the situation in regard to unemployment.
There was a good deal of talk in this regard during the debate but I noticed that when in Government neither Fine Gael nor Labour had any remedy for unemployment and when it came to the election they offered no remedy either. But in a state of panic half way through the campaign they produced a document which purported to deal with this question. However that document was discredited the moment it was issued. Apart from its intrinsic lack of merit the members of the then Government at the press conference at which the document was launched were so much at odds among themselves as to what was involved, as to the number of jobs and the cost, that the document never got off the ground. What is interesting is that although they had no policy or no remedy for unemployment while in Government or during the election campaign, they have no policy yet in this regard. Indeed, their general attitude seems to be the same as when they were in Government—the attitude that we must drift along in the hope of an upturn in the world economy. There is the infamous expression of my predecessor that our economy was like a cork on the oceans of the world and that we had as much control over our destiny as that cork would have.
That is the attitude that is put forward clearly in this debate. Thankfully those parties are no longer in office because if they were in office and we were waiting for an upturn in the world economy we would be in a bad way now. Such upturn as there has been in the world economy took place at the end of 1975, through 1976 and petered out in the first half of 1977. That was before we came to office. Despite the fact that the upturn has petered out we are making the progress we said we would make and, luckily, the country is not waiting for an upturn in the world economy and that there is not a Government which says that nothing can be done about our situation. I have always maintained that the worse the situation became the greater was the obligation on the Government to try to counteract it in so far as that is possible. I have never pretended either in Government or in opposition that we are not affected seriously by developments outside but I have contended always that we have an obligation to bestir ourselves in so far as we can in controlling our own destiny. That is what this Government are doing despite the petering out of the upturn in the world economy.
According to Deputy Quinn the Labour Party's answer to the problem of unemployment seems to be to wave aloft a banner with a strange device— socialism—and a very strange device that was on this occasion because Deputy Quinn said that socialism had achieved full employment. He did not say where this had happened but later in his speech when he referred to Cuba and, I think, to China—although it may have been Russia—I asked him if he were holding these countries up as ones that we should emulate. The Deputy denied this hastily and said he would tell us about that later. Very significantly, though, he did not tell us about that later. This ritual invocation of socialism can hardly be thought of by anybody with any degree of intelligence as being an answer to the problems facing this country. If people want the public in general to believe that socialism provides an answer to our problems there is an obligation to spell out precisely in what way socialism can solve our problems. It is not enough to repeat parrot-like the words "national development corporation", something about which we have heard so often. It is necessary to say what is proposed to be done and how it is proposed to do it.
We in Government have committed ourselves to specific targets of job creation. When Labour or Fine Gael are prepared to do likewise and, like us, to demonstrate how they propose to achieve the targets, they can criticise us but unless and until they do so they are largely irrelevant to the real problems facing our people.
There has been much talk of the Fianna Fáil manifesto and in particular of the proposals for job creation. It is of some significance that efforts are being made by our opponents to confuse the situation that arises. It is fairly evident that they expect us to achieve our targets and that they are trying to prepare the ground for pretending that we have failed. They are doing this by shifting around the targets. They seem to have confused even some political commentators, one of whom has referred to the numbers game in a way that implies that we are altering the figures as set out in our manifesto.
Deputy Cluskey is reported in the newspapers as having made a speech outside the House in which he contended that we had undertaken to reduce the live register by 25,000 by the end of this year. We did not undertake anything of the kind and the Deputy knows that well. However, is he making these contentions because he is afraid that we will produce 25,000 new jobs by the end of this year? I think he is so afraid, but whatever is his reasoning he might explain at some stage why he misrepresents deliberately what is stated clearly in our manifesto. In any discussion of this matter what must be understood first is that every job created reduces unemployment by one.
According to the Minister for Economic Planning and Development that is not so.
It is a basic truth but let me develop it. Whether the creation of a new job reduces the live register depends on whether the person going into the job is on the live register but if there is created a job into which goes a young person who is not on the live register, is unemployment being reduced? It is self-evident that it is being reduced. The other aspect is that if a job is created and is filled by somebody who is on the live register and if a redundancy occurs somewhere else, is employment being reduced? Again the answer is ‘yes.' otherwise the unemployment figure would be one greater. Therefore, it is clear that every new job reduces unemployment by one. If the Deputies grasp that point and then consider the manifesto they will realise that it is precisely what is being said.
The Minister is engaging in semantics.
The semantics are on the other side. However, what I have explained was the basis on which we prepared our manifesto. In this connection I would refer the House to page 7 of the manifesto where there is a large heading which reads "Provide 20,000 new jobs within twelve months," and underneath is spelled out the way that is to be done. If the Deputies turn to page 9 they will find set out a table in which it is clear that the 12 months referred to are the 12 months of 1978. It will be seen that it appears there under the heading "Reduction in Unemployment". Any reasonable reading of the manifesto shows that what was meant by a reduction in unemployment of 20,000 in 1978 was the creation of 20,000 new jobs in 1978. One cannot read the manifesto otherwise.
I will not go back over that ground again.
Much more important than that is what the people understood.
That is the point.
I would ask Deputies to cast their minds back to what was said during the election campaign in our speeches and in broadcasts on radio and television. Did we not talk repeatedly about the creation of 20,000 new jobs in the first year? Is not that what we said time after time? Is that not what the people understood us to say? Why do we have this nonsense of trying to confuse the issue? That is what the people understood and that is the way we will be judged. I suggest that Deputies should judge us in the same way that the people, the ultimate judges, will judge us on the basis of what they understood us to promise. They know what we promised and they will decide whether we have fulfilled our promises.
Unfortunately, that is only too true. The people have become cynical about what they understood Fianna Fáil to promise.
I will issue an invitation to Deputy Barry, if he wishes to test this, to go out and knock on a dozen doors anywhere he likes and ask people what they understood Fianna Fáil to promise about unemployment in the first year. I guarantee that nine out of ten will reply that Fianna Fáil said that they would create 20,000 new jobs in one year. If that is true, why are we wasting time here? If it is not true, I trust Deputy Barry's honesty to come in here and tell us that result. Deputy Barry may do this on his own or with me.
We heard a great deal on this topic from people claiming that our job programme has failed. I noticed at the Fine Gael Ard-Fheis that Deputy Garret FitzGerald has been learning a little: he is sounding a note of caution and saying that they should not say it has failed before it has because they have not the evidence. He is very wise in saying that. If it fails we will hear about it soon enough from across the House, but the Opposition should not tell us that it has failed when the evidence is that it is succeeding.
There is some information I should like to give the House on the question of what is actually happening. The most regular source of information on unemployment is the weekly live register and the latest figure is for 12 May 1978. At that date the live register stood at 105,176, which is a fall of 7,800 or 7 per cent on the corresponding week in 1977. This is the largest fall in the live register since it started showing year on year declines in early 1977. The register has fallen by 6,000 since the end of March. There is a message in this and people should not deny what is happening. On a seasonally adjusted basis the register has fallen by over 7,500 since last June, there being a drop of 1,700 in April alone. We all know that the live register is not a perfect measure of unemployment. Its most serious deficiency is that it excludes first-time job seekers. For that reason the drop in the register understates the total fall in unemployment and the rise in employment. Thus the improvement in the live register since the Government took office implies a much higher figure in terms of increased employment. There is every reason to expect that employment will continue to expand sharply in the months ahead.
The Economic and Social Research Institute have noted that a slow fall in the live register, seasonally corrected, should not be used as evidence of a failure of employment to grow. As I pointed out, seasonally adjusted figures have fallen sharply since mid-1977 and this is a further point in support of the claim that numbers at work have expanded substantially.
The question of unemployment is perhaps the major test of success of the Government's policy, but we have had a number of references to emigration in the course of the discussion on unemployment. The figure which is commonly tossed around for emigration last year is 10,000. That may or may not be true; we do not know yet, I hear Deputies talking about emigration and seemingly trying to attribute it to this Government. I recall that when we left Government in 1973 not alone had emigration ended but there was net immigration. We have now inherited a situation from the Coalition in which there is emigration of an unknown figure, possibly in the region of 10,000 in the year. That is no joy to anybody. I thought we had finally put an end to the evil of emigration. We find on resuming office that emigration has begun again under the previous Government. One of the most important aspects of our job creation programme is the restoration of the position as it was under Fianna Fáil when emigration had ended.
Deputy Callanan raised some questions about the employment incentive scheme and qualifications for it. It might be a bit time consuming to go through all the details, but I have here the answer to the questions he put and I will furnish these documents to the Deputy.
Deputy Treacy and at least one other Deputy asked me about the implications of section 45 of the Bill in regard to the disclosure of information by the Revenue Commissioners. In regard to the new scheme giving grants of £1,000 to first-time owner occupiers of new houses, the Minister for the Environment is concerned that the scheme should not be open to abuse. To prevent this he requires to be able to verify from official income tax records statements made by applicants for grants. Section 45 empowers the Revenue Commissioners to provide the Minister with such information. I can assure Deputy Treacy and anybody else who is concerned about this that the only information on a person's income tax return which would be of interest to the Department of the Environment is in relation to a claim for mortgage interest relief; in other words, if a person has claimed for mortgage interest relief, on the face of it he is not a first-time buyer. That is all that is involved in this.
As regards the other part of the section, which deals with the Rates on Agricultural Land (Relief) Act, Deputy Treacy seemed to suggest that this was an ominous measure. I would like to reassure him on that. The provision is an enabling one and has been included to facilitate local authorities in the operation of the system of national aggregation of valuations which is provided for in the 1978 Rates on Agricultural Land (Relief) Bill when such aggregation is introduced. In other words, if we do not have a method whereby we can discover whether a farmer owns land outside a particular rating area, there could be very considerable abuses in regard to the agricultural grant. This is merely a method of enabling a local authority to get the information necessary to ensure knowledge of what was the total holding of the farmer concerned to see where he fits into the scheme for relief under the agricultural grant. Without this provision the only information available would relate to a particular rating area and one can see clearly where this could be abused.
As I said when introducing the Second Stage, a similar provision was introduced in regard to a Social Welfare Act under the previous Government. I was somewhat surprised that two former members of that Government seemed to be expressing considerable misgivings about this without referring to what had been done under their Government. As far as I know no problem has arisen in regard to what was done under the previous Government and the furnishing of information of this kind. As far as the Revenue Commissioners are concerned, they give no information other than what they are authorised by statute to do and such authorisation, including the authorisation proposed in section 45, is extremely limited and only for the purposes therein mentioned.
Deputy Barry and others raised the question of indexing income tax allowances. I suppose he has to do this kind of thing, but he has a bit of a nerve to put this forward considering this Bill provides for very substantial increases in the personal income tax allowances which far exceed the current rate of inflation. The increase of 57 per cent for a married person is much greater that the total increase given by the previous Government in the past three years and the percentage increases for single and widowed persons are almost equal to the total increases given to them over the previous three years. At the same time we have reduced inflation substantially as compared with that experienced under the previous Government. Therefore, the real value of these increases is even greater. I doubt very much if indexation would be a very popular measure at a time when inflation is reduced and is likely to be reduced further.
What about the bands?
The bands are not adjustable for inflation. The levels of the bands are adjustable but not for inflation; that would have to be in the allowances.
Why not?
That brings me to another point. A number of Deputies, speaking of the allowances and the bands, pointed out various people who did not, according to them, get relief under this Bill. All taxpayers got relief. One of the big points made was that there was no increase as regards the tax allowance in respect of children. That is true, but everybody—single person, widowed or married—got a very substantial increase which applies to all whether they have children or not. If you had children you got a very substantial increase. Why did we not provide the other allowances that were desirable, such as children's allowances and so on? We would love to have done so, but we have to be realistic. The amount of money involved in the tax concessions this year far outweighs anything ever seen before. Furthermore, we specified precisely what we were going to do in our manifesto and that is exactly what is in this Bill, no more and no less.
I will let the House into a little secret. Despite the praise which has been lavished on the Fianna Fáil election campaign as an election campaign, we made one fairly serious slip up—our advertisements did not do justice to our manifesto. They gave figures of reductions in income tax which were considerably less than implied in the manifesto and considerably less than what we are doing in this Bill. We still have a little room for improvement.
The Minister is always humble.
We have a lot to learn yet and we are learning. The important thing is that it was not the taxpayer who lost out on that. We actually specified less than we were going to do. We have done what we said in the manifesto and in this year I could not have undertaken to do more or to do less.
Deputy Quinn seemed to be concerned about section 25, which provides tax relief in certain circumstances for measures designed to prevent pollution. I do not know if he is aware of the fact that firms are already entitled in computing their taxable profits to make deductions in respect of outlays directly incurred by them on the control of effluent resulting from their industrial operations. It is only reasonable that they should be so entitled since such costs are a necessary expense of the enterprise. If costs of control of effluent were not allowed as a deduction in computing taxable profits, this would clearly operate as a disincentive to industrial development, would amount to a significant harshening of the tax régime for industry and would act as a temptation for firms to skimp as much as possible on effluent control. Firms already have this relief. All that is provided for in section 25 is that, where there is an operation carried out by a local authority which may benefit a number of firms together so that the contribution is made indirectly by the firm instead of directly—in other words, they have to contribute to the local authority instead of spending it directly—they would get the same tax treatment as if they had spent it directly. I do not think there is any need for anybody to worry in that regard.
Some Deputies spent a considerable amount of their time talking about the abolition of wealth tax which is provided for in this Bill. Whether or not one wants to argue about whether it is abolished or suspended—my intention is that it be abolished—I think it is necessary to treat is as it is treated in this Bill because of the continuing liability mentioned by one of the Deputies for outstanding wealth taxes yet to be collected. As far as we are concerned wealth tax is abolished.
What does the Minister mean by "abolished"?
I mean, gone, except for the collection of arrears.
That is not what the Minister for Justice means by "the abolition of ground rents".
The Deputy is referring to measures which would lead to the abolition of ground rents as distinct from abolishing ground rents. The Deputy can argue that at another time.
That is what I meant, when I said the people were becoming cynical.
Maybe the Deputy thought, unlike the public, that "steps which would lead to the abolition of ground rents" meant precisely the same as "the abolition of ground rents". If the Deputy did, did he not wonder why we did not say "the abolition of ground rents"?
In relation to wealth tax, when this matter came up under the previous Government, the introduction of wealth tax seemed to be a crazy idea. I am more convinced now than ever that it was. Leaving aside the merits or demerits of a wealth tax the time at which it was introduced could not have been more inappropriate. There must be few people who could argue with that proposition. When it was introduced it could only add to the burden that was already bearing down on the economy. Until our economy is vastly more developed than it is now the idea of a wealth tax would still be crazy in economic terms. If we ever reach a stage where wealth tax is feasible whoever is responsible for our affairs will review the matter again but in this situation which is likely to continue for a number of years the idea of a wealth tax does not make economic sense. We have a lot of arguments about the social aspects and so on but it is incontrovertible that the wealth tax was operating against Irish people in favour of foreigners. Nobody can deny that. My predecessor did not deny it. In terms of what we talk about as a return in the context of redistribution, the return was derisory. We know that in specific cases jobs were lost directly as a result of the wealth tax being introduced. What we cannot quantify is the number of jobs indirectly lost or the number of jobs that might otherwise have been created but which were not. Various people have different ideas on this but as for redistribution nobody in his right mind could contend that the wealth tax as we had it was operating as a form of redistribution. There is some evidence of an outflow of money as a result of that being introduced.
The Minister keeps saying that, yet a fortnight ago when Deputy Desmond made a similar statement the Minister immediately jumped up and told him to either put up or shut up and to give the evidence. The Minister should do the same in this regard because to my knowledge there was absolutely no evidence as the Minister suggests.
I am glad the Deputy raised that question. What I said was, and I am putting it no stronger than this, that there is some evidence of this although it is not conclusive.
If it is not conclusive it is not evidence.
The Minister will be allowed to reply without a running commentary from any side of the House.
If the Deputy, when in Government, had available to him the evidence I have since I came back to Government, and I have no reason to believe he did not have it, then he must know as I do that what I have said is correct, that there is evidence to show that there was an outflow of money although it is not conclusive for reasons which I am sure the Deputy is aware of. The suggestion that there is no evidence of an outflow of money cannot stand up.
There is contrary evidence. The balance of payments shows that capital outflow rose very sharply many times over in 1974 after we announced the introduction of the wealth tax.
May we take it that Deputy FitzGerald is now saying that there was evidence not only that there was not an outflow but that there was an inflow?
Yes. I had a circular from a stockbroker in Liverpool advising his clients to get their money into Ireland quickly because the wealth tax rate was so favourable and the outflow of money from Britain so great that the British Government was certain to close down on them before the end of the year.
May I take it that Deputy FitzGerald is implying that the information furnished to me was either not available to him or is false? Is the Deputy saying that he got no official information on this and that he is relying on a stockbroker in Liverpool?
I have given the information about the autonomous capital inflow. It is on the record of the balance of payments.
Did the Deputy get any information from the Department of Finance when he was in Government as to whether there was evidence one way or the other?
I have nothing in writing but the month before we left office I specifically asked and was assured that there was absolutely no evidence in this regard, unless some came up since.
The Minister, without interruption.
It is clear that either the members of the previous Government did not have the information available to me furnished by the Department of Finance or——
Publish it.
I will not publish it, and the Deputy more than anyone else in this House should know why I will not publish it. There are far more implications in this than the wealth tax and the Deputy should know that. This is a bluff on the part of the members of the former Government who have contended all along that there was no evidence. They either know there was evidence or they did not inquire, except from stockbrokers in Liverpool.
We know the Minister refused to produce the evidence.
I inquired and was assured that there was no evidence and it was very carefully watched for the three years.
The Minister is not producing the evidence because he has not got it.
Did the Deputies opposite ever produce one iota of evidence about what they were saying? They did not. They should not try to bluff their way through on this. The fact is that Deputy FitzGerald was just trying to make a point that I should produce evidence. What evidence did they produce?
The Minister is saying that there is evidence that the money went out.
The Deputy is saying that there is evidence that the money did not go out, so we are in the same position.
I will not spend my limited time in this debate arguing in this way. The facts are as I have stated them as far as I know on the information available to me. If the information furnished to the Deputies opposite when they were in Government was different, that will raise a very interesting question about the probity of the civil service and I intend to pursue that matter.
Did the Minister not read the balance of payments?
The Deputy should know very well that the issues involved in this are wider than the wealth tax and cannot be interpreted in any reasonable way on the basis of the balance of payments. The Deputy knows that and if he does not he should not pretend that he knows anything about economics.
That fact is that that tax was totally inappropriate to our circumstances, it discriminated against Irish people and, perhaps most important of all, it was interfering with the provision of jobs. Here I refer to something which Deputy Corish said earlier. If he did not say it, I apologise to him in advance. Deputy Corish talked in the context of social or moral concern. The greatest evidence of social or moral concern that can be shown by any Government is a determined effort to provide jobs for those who have not got jobs. That is the first and most urgent social concern, and that is the reason behind the abolition of the wealth tax—to try to ensure that we do not produce a situation which will hinder the creation of jobs, but on the contrary will encourage it.
Will the Minister quantify the number of jobs that will be gained?
As far as I am concerned the issue is clear-cut. The public know the issue and have made their attitude clear. If the Deputies opposite think differently they are entitled to their opinions, but time will tell.
And the national collection.
I am glad that the national collection was by far the best we ever had—away way up.
I would remind the House that this debate has gone on for a long time and it was particularly marked by lack of interruption. Each Deputy made his point. I do not think the debate should be reduced to the kind of crossfire we have been having in the past few minutes. I will not allow it.
I appreciate your remarks but you will be aware of the reason for the interruptions. Anybody who has spent any time in the House is well aware of what has provoked the interruptions. I am afraid the point is getting home to Deputies opposite, and they do not like it.
Deputies Barry, Bruton, Fitzpatrick and others referred to the threshold for class 1 beneficiaries for capital acquisitions tax. They said it had not been increased and they referred in particular to the effect of this on farmers. As I explained to Deputy Fitzpatrick, I did not increase the threshold because I considered it was already at an adequate level. Indeed I thought it was too high when it was introduced and I said so in this House. I do not think there is any point in trying to speculate what the Coalition might have done about this threshold if they had been in office, but I can refer to the White Paper on Capital Taxation issued by the Coalition and quote from paragraph 122 which is headed "Review of Thresholds":
The Government recognise that in terms of inflation capital taxes may all the time be taking a bite of capital which represents an increase in nominal values as distinct from a real increase in asset values. To cope with this problem, the thresholds set out for the new capital taxes would need to be reviewed at regular intervals. Such review would however be less necessary in the case of the threshold for liability for capital acquisitions tax by the immediate family in view of the high exemption figures proposed.
That is the only indication we have of what Deputies opposite would have done if they were in Government.
No. The Minister for Finance gave an undertaking——
The fact is that under this provision, if a farmer wants either to leave or give a gift to one of his children of farm land and stock, the value of what he gives must be more than £¼ million before a penny of capital acquisitions tax is paid, and if it becomes payable it is only on the excess over £¼ million. Given that, I do not think anybody will be surprised when I say that a search of the tax records has not revealed a single case of where a farmer's son or daughter, within the meaning of the Capital Acquisitions Tax Act, had been liable for the payment of tax on agricultural property. So please do not let us get dramatic in the way some Deputies opposite did.
Deputy Bruton suggested that I have not implemented my proposal in the budget to double the thresholds in Tables II, III and IV. He appears not to understand the meaning of "threshold". Indeed the extract from my budget speech which he quoted draws a distinction between thresholds and ranges. The doubling of the threshold of course involves adjustments to the various ranges within these tables, and I have done precisely that. The increase in the threshold is added to the lower and the upper limits of each range and the result is that each part gets the benefit of the rate of the threshold.
The increases are as low as 5 per cent. Is that not so?
No.
I can assure the Minister that they are.
The Deputy may be talking about something different from what he referred to in his contribution. He was wrong in what he said then and he was also wrong when he referred to a case of a transfer to a nephew who is living and working with his uncle on a 150-acre farm valued at £1,600 an acre. If the nephew is living and working with the farmer one would expect that under the provisions of the original Act he would not be liable at all, but if he were liable he would not be liable for the £67,000 alleged by Deputy Bruton but for £38,900.
A question was asked about the options, about opting for the accounts or the notional system under the income tax code for farmers and about being obliged to remain with the option for three years. I have discussed this matter in relation to the option for the notional system with interested parties, including farming organisations. I do not accept the proposition that somebody is entitled to know three years ahead what the tax will be. Nobody can know that—income tax rates may be changed any year. However, I can accept that there could be a situation under the notional system where one would be taxed on an income one did not have at all, which is a different proposition, and in the light of that risk I have arranged that discussions which are taking place between the Revenue Commissioners and farming organisation representatives on certain other aspects of tax mentioned in our manifesto will also include a discussion on this problem. I am sure a suitable solution will emerge. If it does and it is followed by the people concerned, then those who opt for the notional system in 1978 will not be committed to continue for three years. There can be an amendment of the Act next year in line with any solution that may emerge.
A question was raised in regard to deduction on the notional basis for wages paid to family members employed on a full-time basis. This matter has been abused grossly in the past and I am not prepared to agree to the proposals put forward. However, I would be prepared to agree to deductions in cases where the sons or daughters, as the case may be, are paid not less than the minimum agricultural wage as laid down. I am satisfied that an allowance on this basis will meet the needs of the farmers concerned but will preclude the type of abuse which necessitated the previous restriction as to registration for social welfare purposes, and I am prepared to introduce the necessary amendment on this during the Committee Stage.
Deputy Barry's criticism of section 27 is not well-founded. He criticised the section as involving a reduction in the income of shareholders in Irish companies and so discouraging investment in such companies. The basic principle of corporation tax is that double taxation of Irish companies and their shareholders is mitigated when the shareholders are being assessed for tax by crediting them with a fraction of the corporation tax on the companies' profits out of which they receive their distribution. The tax rate was fixed at 35/65ths of the cash distribution when the main corporation tax rate was 50 per cent. When it was cut last year to 45 per cent a tax credit of 35/55ths of the cash distribution made out of profits was given subject to that new rate, and this means crediting shareholders, and paying to them in many cases, a larger fraction of the underlying corporation tax than before.
That is the purpose of the reduction to 30/70ths. It maintains substantially the fraction of the corporation tax to be credited to shareholders. It should be clear that companies' post-tax profits have increased as a result of the cut in the corporation tax from 50 per cent to 45 per cent. Therefore, companies that continue to distribute the same fraction of their post-tax profits as before will distribute more cash and there will be no reduction in the income of shareholders arising from the reduction in the rate of tax credit. In fact, shareholder's incomes would increase marginally in those cases.
Of course, the companies will also have more cash to plough back into their business because they will be dividing the five points' reduction in the corporation tax paid between them and the shareholders. However, if some companies now decide to distribute a smaller fraction of their post-tax profits and to hold on to most, if not all, of the benefit of the five points' cut in the corporation tax, I suggest that is a matter between the company concerned and the shareholders. Certainly it has nothing to do with the Revenue.
I would mention also that my predecessor indicated quite clearly that there would be a change in the reduction in this tax credit when he spoke as reported at column 494, Volume 306, of the Official Report of 10 May 1977. He made it quite clear this would have to be done. That is as I see the situation at the moment but I am open to persuasion and if it can be shown that the position is not as I have outlined or that it genuinely will operate to the detriment of Irish companies or investment in Irish companies I will look at it again. However, the position seems to be as I have outlined it.
Some people seemed to say we were giving far too much to the private sector but Deputy Donegan said we were giving them nothing. It is true that we are proposing to rely substantially on the private sector but let us not mistake the fact that we are relying substantially on the public sector this year and that reliance on the private sector will begin to operate substantially from the beginning of next year.
There is a grave misunderstanding— it may be more than a misunderstanding—about the role of the private sector. It is axiomatic that industry must provide goods to the domestic and export markets at competitive prices and they must make sufficient profits to finance investment and to give an adequate return on capital. Nobody can seriously suggest that employment in industry will be maintained, yet alone expanded, if profits are nonexistent. Profits are an essential source of investment financing, and thus of job maintenance and job creation. Profit is a legitimate return to those who risk and sometimes lose their capital. We must live with these facts of life. Therefore, I have no apology to make for the basic strategy that we are relying on and which we have outlined. We are relying on the public sector in the first year and thereafter on the private sector. I have made it clear that if the private sector does not perform, we will review our stance on this. I would say that those who talk about the public sector would do well to specify where precisely they see the public sector performing and how in the creation of jobs as against what we have committed ourselves to.
On Committee Stage I hope to get the opportunity to go into detail on a number of points that were raised and perhaps on some of the points of principle in relation to particular sections. However, I understand my time is up now. I wish to commend the Bill to the House.
Tá
- Ahern, Bertie.
- Ahern, Kit.
- Allen, Lorcan.
- Andrews, David.
- Aylward, Liam.
- Barrett, Sylvester.
- Brady, Gerard.
- Brady, Vincent.
- Briscoe, Ben.
- Brosnan, Seán.
- Browne, Seán.
- Burke, Raphael P.
- Callanan, John.
- Calleary, Seán.
- Fitzpatrick, Tom (Dublin South-Central).
- Fitzsimons, James N.
- Flynn, Pádraig.
- Fox, Christopher J.
- French, Seán
- Gibbons, Jim.
- Haughey, Charles J.
- Hussey, Thomas.
- Keegan, Seán.
- Kenneally, William.
- Killeen, Tim.
- Killilea, Mark.
- Lalor, Patrick J.
- Lawlor, Liam.
- Lemass, Eileen.
- Lenihan, Brian.
- Leonard, Jimmy.
- Leonard, Tom.
- Leyden, Terry.
- Loughnane, William.
- Cogan, Barry.
- Colley, George.
- Collins, Gerard.
- Conaghan, Hugh.
- Connolly, Gerard.
- Cowen, Bernard.
- Cronin, Jerry.
- Daly, Brendan.
- Davern, Noel.
- de Valera, Síle.
- Doherty, Seán.
- Farrell, Joe.
- Filgate, Eddie.
- Fitzgerald, Gene.
- McCreevy, Charlie.
- McEllistrim, Thomas.
- Meaney, Tom.
- Molloy, Robert.
- Moore, Seán.
- Morley, P.J.
- Murphy, Ciarán P.
- Nolan, Tom.
- Noonan, Michael.
- O'Connor, Timothy C.
- O'Hanlon, Rory.
- O'Kennedy, Michael.
- O'Leary, John.
- Power, Paddy.
- Reynolds, Albert.
- Smith, Michael.
- Tunney, Jim.
- Walsh, Joe.
- Wilson, John P.
- Woods, Michael J.
- Wyse, Pearse.
Níl
- Barry, Peter.
- Barry, Richard.
- Belton, Luke.
- Bermingham, Joseph.
- Bruton, John.
- Burke, Joan.
- Byrne, Hugh.
- Clinton, Mark.
- Cluskey, Frank.
- Collins, Edward.
- Conlan, John F.
- Corish, Brendan.
- Cosgrave, Michael J.
- Creed, Donal.
- Crotty, Kieran.
- D'Arcy, Michael J.
- Desmond, Barry.
- Donegan, Patrick S.
- Donnellan, John F.
- FitzGerald, Garret.
- Fitzpatrick, Tom (Cavan-Monaghan).
- Flanagan, Oliver J.
- Gilhawley, Eugene.
- Griffin, Brendan.
- Harte, Patrick D.
- Hegarty, Paddy.
- Horgan, John.
- Kavanagh, Liam.
- Keating, Michael.
- Kelly, John.
- Kenny, Enda.
- Kerrigan, Pat.
- L'Estrange, Gerry.
- Lipper, Mick.
- Mannion, John M.
- Murphy, Michael P.
- O'Brien, Fergus.
- O'Brien, William.
- O'Connell, John.
- O'Donnell, Tom.
- Pattison, Séamus.
- Quinn, Ruairí.
- Ryan, John J.
- Taylor, Frank.
- Timmins, Godfrey.
- Treacy, Seán.
- Tully, James.
Will the Minister give a date for the Committee Stage?
Could I suggest next Tuesday subject to agreement between the Whips?
I think Tuesday week would be more sensible to start the Committee Stage, I think I can give a guarantee—I am not sure about the Labour Party—that I would start on Tuesday week.
The Deputy will appreciate that there are some time constraints on us. Furthermore, the Bill has been available to the Opposition and to interested parties outside for a considerable time. I do not think we can agree here on the actual date on which it will be taken. I am suggesting that we order it for next Tuesday subject to agreement between the Whips.
I am sure the Minister will agree that four days for the Committee Stage of the Finance Bill is unprecedented. Indeed ten days, 11 days or even 13 days would also be unprecedented. It is usually three weeks.
I hope the Deputy will not tempt me to talk about precedents on Finance Bills, guillotines and other things. Those are the precedents we have.
I can also talk about the unprecedented filibustering of the previous Opposition.
If the House is agreed on Tuesday next——
I am sorry. The last time I agreed in those circumstances it turned out to be Tuesday, even though I had entered a caveat beforehand that it would not be on that day. I would prefer the Minister to say Tuesday week.
I do not want to——
I do not want to be difficult.
——exclude the possibility of next week if there is agreement on it.
I can tell the Minister now there will not be agreement on next week.
Oh, no.
Could I suggest—it may make Deputy Barry happier—Wednesday of next week, but still subject to agreement between the Whips?
I am sorry. Next week is out for me. That is the point I am making. However, even if it were not, I would not agree to it because it would be an unfair precedent to create. I think we are being very generous in giving the Minister a fortnight.
Not really. Suppose we order it for Tuesday week, but I am not saying subject to agreement between the Whips.
As far as I am personally concerned that is all right.