Léim ar aghaidh chuig an bpríomhábhar

Dáil Éireann díospóireacht -
Wednesday, 7 Feb 1979

Vol. 311 No. 4

Financial Resolutions, 1979: - Financial Statement, Budget, 1979.

This budget initiates the second stage of the Government's strategy for economic and social development, presented in various planning documents, notably the recently published White Paper "Programme for National Development 1978-1981".

The first stage of this strategy was marked by direct Government action to boost growth, increase employment and reduce inflation. In the second stage, public sector resources will continue to be applied so as to maximise their ability to induce growth. At the same time, the increased dynamism of the private sector, resulting from the success of the Government's policies, will enable the contribution to growth from the public sector to be scaled down. The success of the strategy depends on confidence in the ability and the willingness of the private sector to avail itself of the momentum which Government action has generated.

The Economy in 1978

The current state of the economy has already been reviewed in the Economic Background to the Budget, as well as in the White Paper on National Development. I will therefore confine myself to a comparison of the principal economic targets and achievements.

The Government's targets for the economy in 1978 were demanding. Indeed some thought that we aimed too high. What is the record? The growth rate was about 7 per cent, a rate which, for the second year running, was the highest in the EEC and in the larger group of OECD industrialised countries. Our figure was almost double the OECD average, and almost treble that for the EEC. This was a remarkable performance by any standard and one of which the community as a whole can be proud.

We also had the biggest annual increase in employment in decades. In this our experience was quite unusual internationally. Figures published by the EEC Commission show that unemployment in the Community as a whole rose last year. In contrast, it fell here, and by a much bigger amount than in those other member states where it was also reduced.

Next, the rate of inflation was dramatically reduced, from 13.6 per cent in 1977 to 7.6 per cent in 1978. The constant worries which double digit inflation brought to many people over the past few years have been dramatically lightened.

The balance of payments provided one of the most heartening aspects of our economic performance last year. Our initial White Paper—on National Development 1977-1980—made it clear that faster growth would be accompanied by some increase in the balance of payments deficit. In last year's Budget Speech, I thought it only prudent to contemplate the possibility that the deficit could rise to £350-£400 million. I am glad to say that, as a result of a number of favourable factors, including exceptionally high EEC transfers, the deficit amounted to only about £150 million. The official reserves stood at £1,252 million at end-1978, which was £51 million higher than the previous record level at end-1977.

Not only the moderate size of the deficit, but also the satisfactory trade pattern that underlies it, gives grounds for satisfaction. Exports were buoyant. The dynamism of the various sectors of the economy was illustrated by the fact that, as the latest figures show, industrial exports were higher by 17 per cent in value and agricultural exports by 18 per cent. Imports were also buoyant, but higher imports are inevitable in an expanding economy, and to the extent that they assist expansion are acceptable. The category that showed the largest rise last year—30 per cent—was that of producers' capital goods; these imports go to widen the productive base of the economy, and are welcome on that account.

Economic prospects for 1979

The Government's economic targets for 1979 have been set out in the White Paper on National Development. They are for a growth in national output of 6½ per cent, a reduction of 25,000 in the numbers out of work and a reduction in the rate of inflation, so that by end year it will be no more than 5 per cent.

These are targets, not forecasts of what will happen if events are let run their course without real effort on anyone's part. Their achievement depends upon a coherent communal effort. The aim of the Government's economic planning is to give a sense of purpose and direction so as to evoke that communal effort. If the effort is not strong enough, then the targets will not be reached.

Growth of the right kind develops a momentum of its own. The seeds of further growth lie in the achievements of 1978. Fixed capital formation grew by about 15 per cent last year, and investment in plant and machinery rose even faster, by 18 per cent. The productive capacity of our economy was considerably strengthened and there is every reason to expect this process to continue this year, buoyed up by a substantial increase in public capital investment. We have, in other words, the capacity to produce considerably more this year.

Can we find markets for higher output? This depends on our competitiveness, and I will return to this point. The required market growth should be there. The forecasts of the EEC Commission and of the OECD for the countries which provide the bulk of our markets project some increase in their growth rates in 1979. External market conditions should therefore enable us to repeat, and possibly to better, the large increase in exports last year. It is true that the forecasts to which I referred do not take account of the recent OPEC price increase, but the increase, which is phased, is not a major one and should not make a great difference in our export markets. Consumer demand at home should be buoyant.

The forecast balance of payments deficit, at £300 million, is supportable, given the buoyancy in our reserves. But the need to maintain confidence in our currency adds to the significance of the size of the deficit. It must not be allowed to increase much above the forecast level. Therefore, fast growth must be accompanied by increased competitiveness so that we can have the greatest possible export growth.

The target of a fall to 5 per cent in the inflation rate by the end of this year is ambitious but realisable. Its achievement will depend upon there being the minimum possible internal contribution to inflation. Participation in the EMS, to which I shall now refer, should reduce the imported element of inflation.


Exchange Rate Policy

As Deputies are aware, the Government have announced their intention that Ireland should participate in the new European Monetary System. The commencement of the system, unfortunately, has been delayed because of the problem dealing with monetary compensatory amounts in agricultural trade. Discussions to solve this problem are continuing and it is hoped that the system will get under way shortly.

This budget is framed on the assumption that the new system will be established soon but its strategy, which pre-dates the EMS and is based on the need to achieve fundamental national objectives, will be valid whether or not the system starts to operate in the near future. That said, it must be added that our prospective entry into the European Monetary System brings a new dimension to budgetary policy and to economic policy in general. In the past, policy has been framed on the almost unquestioned assumption of continued parity between the Irish pound and sterling. Within the EMS, there will be a separate exchange rate for the Irish pound. While there may not be a departure from the present one-for-one relationship with sterling for some time at least, I must nevertheless take account of the new parity obligations which participation in the EMS will involve for us. We shall be required to keep the parity of our currency stable, subject to narrow fluctuation margins, vis-à-vis the other currencies in the system, which include some of the strongest currencies in the world. Participation in the system will undoubtedly be to our benefit and will make a significant contribution to the achievement of the Government's objectives. Through its beneficial effect on import prices, it will assist in reducing the rate of inflation. The greater monetary stability deriving from it will help promote the growth of trade and investment.

I do not wish to understate the obligations of our participation. We have at all times made it clear that the benefits of the new system will not accrue automatically. The price to be paid by the participating countries for these benefits will be the pursuit of economic policies and disciplines appropriate to membership of the system. This was clearly recognised in the Resolution of the European Council in Bremen last July which said that the member countries were "firmly resolved to ensure the lasting success of the EMS by policies conducive to greater stability at home and abroad for both deficit and surplus countries". It is my task to present today a budget which will promote stability, while also contributing to continued economic and social progress. The Government are committed to achieving a low rate of increase in domestic costs, irrespective of our joining the EMS. Clearly, however, our performance on this front will be of crucial importance in the EMS context if strains are not to be placed on the exchange rate.

Given the impressive performance of our economy over the past year or so there is every reason to feel confident about Ireland's ability to participate successfully in the EMS. Nevertheless, it will be clear that, in order to ensure sustained successful participation in the new system, management of the economy will involve paying particular attention to the balance of payments and the level of reserves. In this, fiscal, incomes and monetary policies will all have a role to play.

Monetary policy

Monetary policy in 1978 was designed to maintain the external reserves at a level consistent with the longer-term economic aims of the Government in respect of output and employment. In the event, the reserves at the end of the year, at £1,252 million, were higher than a year earlier. However, there were some less favourable aspects of the monetary scene in 1978. For much of the year, domestic credit grew rapidly, helping to promote consumer spending and, for a time, putting considerable pressure on the reserves. Some of the growth in the reserves over the year as a whole might be attributed to capital inflows in anticipation of Ireland's participation in the European Monetary System, but the prevailing position is a strong one and gives us a good base for participation in the EMS.

It will be a major aim of fiscal and monetary policy during the year to maintain a strong external reserves position. The reserves are high by international standards, but the rapid economic development to which the Government are committed may increase balance-of-payments pressures. Given this situation, and at a time when an independent Irish currency will be seeking to establish its position on the international exchanges, it would not be appropriate to pursue policies that would tend to weaken the reserves. At the same time, the Government's economic objectives require a positive approach to fiscal and monetary policies.

The monetary policy measures for the year will be announced by the Central Bank. The aim will be to ensure that the rate of increase in domestic credit will be sufficient to meet the genuine needs of the community for productive investment and reasonable levels of consumption expenditure—thereby promoting the Government's objectives in relation to employment and inflation—without weakening the external reserves.

Because of the unsettled conditions in international financial markets, largely on account of the difficulties experienced by the US dollar, the downward trend of interest rates was reversed in 1978. The current high level of interest rates, which imposes extra costs on businesses and house-purchasers, is a cause of concern to the Government. Successful participation in the EMS holds out the prospect of a greater degree of control over domestic interest rates. The situation will be kept under close review, but we must not expect too much too soon. In a world of mobile capital, no country can ignore global trends. Within the EMS we can attain the lower interest rates some members already enjoy only if we follow the appropriate policies. Membership gives us the potential to achieve interest rates more relevant to our requirements. It does not enable us to have lower rates unrelated to our inflation and balance of payments.

Monetary policy must not be viewed in isolation. Together with fiscal and incomes policies, it provides a set of instruments which, if applied coherently and, equally important, if accepted by the community, can contribute to the achievement of our economic strategy. A responsible attitude on the fiscal and incomes fronts will enable us to avoid sudden changes in monetary policy that might set back our economic plans. The more we shirk moderation in fiscal and incomes policies, the greater the burden that will be thrown on monetary policy to maintain a balance in our external position.

The foreign exchange markets, and international traders and investors, will be watching closely the direction of the Government's policies as an indicator of its determination to ensure the stability of the exchange rate. The EMS, therefore, provides a further cogent argument in favour of adhering to the Government's commitment to reduce the Exchequer borrowing requirement as a percentage of GNP and to redirecting expenditure to productive purposes.

Exchange control

As the House is aware, exchange controls now operate between this country and the UK. This step was necessary to counteract the possibility of speculative currency movements as a result of the decision of the UK authorities not to enter the EMS for the present. There has been a certain amount of uncertainty about the new controls. The Central Bank and my Department have been engaged in clarifying various aspects with the financial institutions and individuals and I am satisfied that matters will settle down after a necessary period of adjustment.

I want to stress again that the new measures do not affect the majority of people in any way. Their purpose is to control capital outflows and to supervise inflows, so that the inflows can be regulated should the need arise. Given public co-operation, I believe the controls will be effective in these respects. It is not my intention to apply them in a punitive manner. I would like to be able to ease their impact and I have asked my Department and the Central Bank to keep their operation under close review and to bear in mind the desirability of introducing relaxations whenever possible, consistent with the national interest.

Incomes policy

I should like now to refer to incomes policy, before going on to present the fiscal aspects of the Budget.

Although a framework for wage determination is still under consideration, I have to form a view on the development of incomes in general, including wages and salaries, because of the importance of incomes for budgetary policy and the budgetary aggregates. I reject as unduly pessimistic the proposition that the unrestricted pursuit of self-interest will prevail in pay negotiations this year. Price restraint and the creation of jobs on the scale needed in our country would be totally incompatible with such an irresponsible attitude. I believe that concern for the weaker sections of the community and for the unemployed, particularly our youth, will evoke a responsible attitude on the part of all sectors. As I shall show, this budget has been drawn up to give expression to that concern on the Government's part.

In my Budget Speech last year, I announced personal tax concessions which would, in conjunction with pay increases of 5 per cent, improve real disposable incomes significantly. These tax concessions and the earlier reliefs on rates, motor taxation, and social insurance contributions, expanded disposable incomes substantially in 1978 and will continue to do so during 1979. The implication is that the scope for further increases this year is limited. This view must influence claims and settlements over the next few months if we are to avoid inflicting major damage on the economy and, in particular, on job prospects.

This conclusion is borne out by international comparison of unit costs as a measure of our competitiveness. To achieve the White Paper employment targets, much larger markets must be created for Irish output at home and abroad in the face of competition from foreign output. The average rise in unit wage costs in the European Community in 1979 will, on the basis of forecasts for the individual member states, be about 6 per cent; the rise projected in our main non-Community markets is of the same order. An increase in unit wage costs in Ireland could be kept within such a figure only if further income increases this year are small.

The White Paper on National Development said that, within the context of a ceiling on pay increases and a major effort to secure industrial peace, the Government would welcome an understanding with employers and unions on targets for the creation of employment and, possibly, changes in working conditions and policies in relation to non-wage incomes. This approach has been developed by the Taoiseach who recently proposed that the trade union movement should come together with other community interests to give their full support for a five-year national effort to achieve full employment. Such an approach could assist an orderly development of industrial relations and incomes in 1979 and later years. The 1978 National Agreement provided, ofcourse, for a basic increase of 8 per cent in 1978 and provided for the negotiation of a further 2 per cent at local level. This limit was to be exceeded only where the Labour Court or an Arbitration Board so recommended or where a productivity agreement meeting certain conditions was made.

In the event, the increase in average earnings per worker in 1978 worked out at over 16 per cent. As the average increase in consumer prices was 7.6 per cent, real earnings per head rose by about 8 per cent. This is among the largest rises in the standard of living of the average worker ever recorded in this country.

This rapid growth in nominal and real earnings may have given satisfaction to those who enjoyed it, but its effects were neither universal nor were they economically commendable. The inflation rate for 1978 could, but for the high growth in incomes, have been about 1 per cent lower and we could have got more jobs than the net 17,000 we achieved.

Incomes clearly should not continue to grow in 1979 at the rate set in 1978. It is only reasonable that a year which saw one of the highest recorded increases in real per capita income should be followed by one of pay moderation. Largely as a result of the size and phasing of increases obtained in 1978, average per capita earnings this year will rise by as much as 6 per cent, even if there are no fresh pay settlements.

The approach to an incomes policy set out in the White Paper and developed by the Taoiseach is based on understanding and consensus. I earnestly hope that it will succeed. I must make it clear, however, that if it does not the Government will not abdicate their responsibilities. We cannot allow a "free for all" to take place which would damage everyone's prospects but especially those of the weakest and poorest people in our community.

There are some who might feel it unrealistic to expect the degree of moderation in income increases needed to achieve our employment, growth and budget targets. I want to emphasise that this restraint is not intended as a method of restricting the pace of improvement in living standards.

We are confident that our growth target of 6½ per cent can be achieved provided the right policies, including the right degree of income restraint, are followed. If this is not done, and if excessive income increases were to occur, then our growth target would not be met, and living standards would rise at a slower and not a faster rate than we are aiming at. The path of fastest improvement in real incomes lies along the route we have mapped out, and not in a paperchase pursuit of large money rises which are then devoured by large price rises.

Increases in non-wage incomes this year must also be moderate. There is a degree of discontent about disparities in the disposable incomes of different sections of the community. The Government will pursue a comprehensive and equitable incomes policy to minimise these disparities as far as possible.

Policy will be supplemented by measures to control price increases more rigidly if this becomes necessary. While price control is working reasonably well, the Government will continue to monitor it to ensure the optimum degree of regulation consistent with economic efficiency. I am also taking steps, as I shall explain later, to increase our capacity to counter tax evasion.

Review of 1978 Budget Outturn

I would like now to review briefly the outturn of the budget for last year, before going on to deal with the 1979 Budget aggregates and policy decisions.

The 1978 budget provided for an Exchequer borrowing requirement of £821 million, or 13 per cent of GNP. The outturn was £810 million, or 12.9 per cent of GNP. Three hundred and ninety seven million pound of this was for the deficit on the current budget and £413 million was for capital purposes.

Current Budget 1978

The current budget deficit, at £397 million, was £6 million below the estimate. This arose from changes both in revenue and expenditure.

Tax revenue showed an increase of £74 million on the budget estimate because the growth in incomes led to more buoyant receipts from income and expenditure taxes than had been expected.

Non-tax revenue was £14 million, net, less than the budget estimate. The main reason for this was a shortfall in receipts from Post Office services, most of which, however, will be collected this year; provision for this has been included in the 1979 estimate.

Current expenditure was £54 million over the budget estimate. Sixteen million pound of this excess was for higher debt service charges and £38 million for excess expenditure—mainly pay—on the non-capital Supply Services.

Capital Expenditure 1978

The Public Capital Programme accounted for £798 million of the £843 million of capital expenditure in 1978. Thirty million pound more was spent on the programme than was originally foreseen and £139 million or 21 per cent more than in 1977. The programme, by design, had a major stimulatory effect on the economy. For example, £139 million was spent on industrial investment, mainly by the IDA, and industrial and agricultural credit between them accounted for £154 million of capital expenditure in 1978.

Capital expenditure outside the Public Capital Programme increased by £21 million, mainly as a result of the issue of £15 million equity capital to the air companies.

Exchequer borrowing for capital purposes was £413 million, which was close to the original estimate of £418 million.

Exchequer Financing 1978

Sales of Government securities provided most of the new finance for the 1978 borrowing requirement, receipts from that source totalling some £554 million. During the first quarter of the year, no new money was raised on the gilt-edged market, but after that sales progressed satisfactorily and considerably exceeded initial expectations. Sales to the domestic banking sector accounted for some £67 million and to the domestic non-banking sector £187 million. A substantial part of the receipts, in the region of £300 million, came from abroad.

The indications are that a considerable portion of this inflow may have arisen from external insurance companies and pension funds covering their Irish liabilities with assets denominated in Irish pounds in anticipation of our joining the European Monetary System. There was also some evidence of investment from abroad of a speculative nature. If this investment flows out, it will have to be replaced with funds from other sources, but there are no indications so far that we are likely to be faced with a major problem.

In 1978, six new stock issues were made. Five of these were conventional fixed interest stocks and proved useful in adding to the range of securities available to potential gilt investors. A variable interest rate stock was issued in July and though the initial response was disappointing, demand for the stock increased substantially towards the end of the year and an additional tranche of £10 million had to be issued in November to meet market requirements. Small savings through the Post Office and Trustee Savings Banks in 1978, at £65 million, were the second highest on record.

New direct Exchequer foreign borrowing was kept to a minimum. At £23 million net it was at its lowest level since 1972-73. There was a considerable amount of activity during the year of a refinancing nature, either to repay maturing foreign loans or to replace loans with new loans on better terms. The new loans involve longer terms of maturity and lower interest rates than the loans which have been prepaid. These operations have reduced foreign debt repayments, relative to what they would have been in the absence of rescheduling, by £54 million in 1979, £45 million in 1980 and £80 million in 1981. The capitalised value of savings to the Exchequer in interest payments abroad is estimated at some £5 million.

Job creation 1978

In last year's budget, I described the Government's plans for a wide-ranging short-term programme of direct job-creation under which almost 22,860 jobs were to be created by the end of 1978. This programme—the most radical and ambitious in the history of the State —was vigorously pursued throughout 1978. The overall results achieved exceeded expectations—24,533 jobs were created under the programme and 22,491 of these actually had been taken up by the end of 1978.

Public sector

Job-creation in the public sector concentrated on areas of greatest need. A total of 12,529 new posts was created, consisting in the main of extra health service jobs, additional teaching and clerical support posts in the education sector and additional civil service posts in the Department of Posts and Telegraphs, the Prison Service and the Revenue Commissioners—10,487 of these posts had been filled by the end of the year. The balance of 2,042 posts, reflecting the normal time lag between the decision to authorise a new post and the recruitment of a person to fill that post, will be filled early this year.

Building and Construction

The Government's initial employment target for the building and construction sector was 5,000 extra jobs. This was increased in last year's budget to 6,610 jobs, but the number of jobs actually realised, at 5,592, fell below this figure mainly because of industrial disputes, notably in the cement industry and local authority services. The major contributions to the Government's job-creation programme for the construction sector came from industrial, education and hospital building projects.

Youth employment

The Government's efforts to promote employment opportunities for young people met with a particularly heartening response. Last year I announced that the Government had given the go-ahead for four youth employment schemes suggested by the Employment Action Team, namely the work experience programme, the environmental improvement schemes programme, the recruitment of construction industry apprentices by local authorities and the Ballyfermot Community Survey of unemployment problems. A total of 3,800 people participated in these schemes during 1978.

In addition, the Department of Education temporary youth employment projects scheme provided short-term employment for 1,170 young people and the numbers participating in AnCO's community youth training programme increased by 1,442 during 1978.

The additional employment opportunities provided under the Government's special youth employment schemes in 1978 amounted, therefore, to 6,412 which, I am happy to say, exceeds by more than 1,400 the target set in last year's budget.

Employment incentive scheme

Since taking office, the Government increased the weekly premium payable in respect of school leavers under the employment incentive scheme from £10 to £14. In addition, the coverage of the scheme was expanded to include building and construction, hotels and catering and the services sector generally. Employers clearly found the expanded scheme to be a worthwhile incentive to take on additional workers during 1978: 10,410 new jobs were supported, 7,712 more than in 1977.

Overall results

All in all, therefore, the Government job-creation effort since taking office, through both the direct job-creation programme and the employment incentive scheme, resulted in the filling of well over 25,000 extra jobs. I shall return to the subject of job-creation later.


Before I turn to deal in detail with the budget of 1979, I want to recall some remarks I made on this occasion last year. In my Financial Statement then, I singled out certain points for special emphasis. These were:

— the Government's overriding and firm intention to come to grips with unemployment and inflation,

— the Government's determination to restore stability to our national finances,

— the Government's expectation that the stimulus being provided by the budget would create conditions in which the private sector would take over as the engine of growth, and

— deriving from these, the acceptance of an increase in public borrowing as a temporary feature of our overall strategy, with a reduction in the following years.

The results of the Government's fiscal and economic policies are now on the record. It is obvious that these policies had the desired effect of stimulating economic activity and generating the desired momentum. As a result the Government revenues and capital resources were particularly buoyant. We are confident that this buoyancy will be experienced also in 1979.

Details of revenue and expenditure were provided last week in three documents—in the volume—Estimates for the Public Services; in the paper— Public Capital Programme, 1979; and in the White Paper: Estimates of Receipts and Expenditure, 1979. I do not propose to delay the House except to mention a few points which might otherwise escape attention.

Non-capital Services 1979

Non-capital expenditure falls under two headings—the Supply Services covering day-to-day departmental expenditures and those services charged directly on the Central Fund. If it were not for the extra provision which I am making today, mainly for public service pay, improvements in the social welfare services and job creation, the non-capital Supply Services, at £2,095 million, would register an increase of £140 million or only 7 per cent on the 1978 outturn.

The Central Fund Services show an increase in cash terms of £114 million, almost 25 per cent above the 1978 outturn. Two significant items account for this—debt service and the Irish contribution to the budget of the European Communities.

Debt service costs are estimated at £512 million in 1979, an increase of £94 million, 22 per cent on the 1978 outturn. They reflect the full year impact of the higher interest rates which emerged during last year, as well as the full year cost of servicing the 1978 borrowing and the new debt to be raised in 1979.

Ireland's estimated contribution to the EEC budget this year, at £64 million, shows a substantial increase over the 1978 outturn of £45 million. This is due in large measure to the fact that we are now almost fully on the contribution system known as the "Own Resources" system. Our 1978 contribution would have been significantly greater but for the transition provisions in the Treaty Concerning the Accession to the EEC.

Public Capital Programme 1979

The Government's aim to redirect public expenditure as far as possible towards productive purposes can be seen clearly on the capital expenditure side. Compared with the pre-budget increase of 7 per cent for the non-capital Supply Service, the provision for the Public Capital Programme this year, at £974 million, is 22 per cent greater than the 1978 outturn. Of the total figure, an amount of £428 million, or more than 40 per cent, is being devoted to productive purposes such as lending by the Agricultural Credit Company and the Industrial Credit Company, grants by the IDA for industrial development and the farm modernisation scheme. Some £277 million, or almost 29 per cent, will go to infrastructural expenditure—on roadworks, water supply and sewerage works and on electricity and telephone development. More than £250 million is being provided for social investment, particularly housing and educational buildings and equipment.

Of the total expenditure of £974 million on the Public Capital Programme, almost two-thirds or some £640 million will be financed by the Exchequer. Another £39 million has to be added for capital requirements other than for the Public Capital Programme, bringing total public capital expenditure in 1979 to £1,013 million. Resources available to defray this capital expenditure are estimated at £523 million, leaving £490 million to be found by borrowing.

Revenue Buoyancy 1979

On the revenue side, that is the resources available to finance non-capital expenditure, total receipts for 1979 are estimated at £2,467 million, an increase of £444 million, 22 per cent, over the 1978 outturn. The tax revenue estimate of £2,092 million assumes a continuation of the buoyant conditions of 1978 and is based on a 6½ per cent growth rate for the economy. It also takes account of the additional buoyancy that will be generated by the budgetary adjustments today. The non-tax revenue estimate of £375 million includes an estimated £17 million in Post Office revenue under-collected in 1978.

Opening Deficit 1979

With a revenue estimate of £2,467 million and estimated expenditure on current services of £2,675 million, the opening deficit on current account is £208 million. The Exchequer borrowing requirement on capital account is £490 million. My opening borrowing requirement is therefore £698 million. However, both the revenue and the expenditure sides of the account will be affected by the provisions which I am now going to propose.



The first proposal I wish to discuss relates to job-creation. I have already reported on the success of last year's programme.

Our primary national objective must be to ensure that employment is available for everyone seeking work. This is the main theme of the Government's programme for National Development, which envisages a total reduction of 75,000 in the numbers out of work over the three-year period to 1981. Our target for 1979 is quite specific; it is to get the numbers out of work down by 25,000. The Government will spare no effort to achieve this goal. The importance of the attack on unemployment cannot be overstressed in the context of the Government's social policy.

The recent White Paper describes the sectoral policies which are directed to the attainment of the Government's employment targets. The main growth in employment this year is expected to come from the continued expansion of industry and the inflow of new projects through the efforts of the industrial promotion agencies. The capital resources at the disposal of these agencies this year amount to £131.5 million, which is 38 per cent more than they spent in 1978.

The Government, too, have reoriented their spending programmes in order to increase their contribution to job-creation. The 1979 Public Capital Programme and non-capital Estimates published last week provide for substantial additional job-creation in the public sector and in building and construction.

Public sector

About 5,250 extra posts will be created in the public sector; 2,500 of these, the provision for which is £5.2 million, are civil service posts, mainly in the Department of Posts and Telegraphs, the Revenue Commissioners and the Central Statistics Office. New teaching posts account for a further 1,250, while the continuing expansion of the health services will provide an extra 550 jobs. The balance of almost 1,000 posts will arise mainly in the Statesponsored body sector.

Building and construction

The overall provision for building and construction-type spending in the Public Capital Programme, at £600 million, represents an increase of 27 per cent on the corresponding 1978 allocation. This is expected to give rise to the creation of almost 4,400 jobs on various projects during 1979. Hospital building, roads, sanitary services, AnCO training centres, State office building, harbour works and ESB projects will account for most of these extra jobs.

Special job-creation package 1979

The scale of job-creation in the agriculture, industry and services sectors, including the expansion of public sector and building and construction employment is unlikely of itself to ensure the attainment of the overall target of reducing the numbers out of work by 25,000. I propose, therefore, to make a special provision of £20 million for further measures to support employment creation and maintenance in the economy, including a programme of residual employment activity along the lines described in the White Paper.

Additional Civil Service posts

I have been reviewing the scope for a further contribution to job-creation by stepping up recruitment for the civil service in areas of particular need. I am allocating an additional £2.2 million for this purpose which I estimate will support the creation of 700 extra posts, mainly in the Department of Posts and Telegraphs and the Revenue Commissioners. The latter includes a special allocation of £0.5 million for the recruitment of staff to intensify the campaign against tax evasion.

Extra gardaí

A special provision of £0.8 million is being made to enable the authorised strength of the Garda Siochána to be increased by a further 500 in 1979. This will bring the overall authorised strength of the force to 10,000. The additional strength is designed to meet the growing demands on Garda resources, including the need for an improved police service in the cities.

I am allocating an additional £5.2 million to the Department of the Environment for a special programme of job creation on environmental improvement schemes and road works.

Environmental improvement schemes

With regard to environmental improvement schemes, an extra allocation of £2.6 million is being made over and above the estimates provision of £1.68 million. The total allocation of £4.28 million will enable local authorities to continue and expand the scheme, which is aimed primarily at the employment of young people; £0.5 million of the allocation is being specially set aside for work in the Dublin inner city area. The total allocation is expected to support 1,000 man-year jobs in 1979, 250 more than in 1978.

Road Works

An allocation of £2.6 million is being made to increase employment on road works by up to 275 man-year jobs in 1979.

Retention of employment maintenance scheme

I announced in my budget last year that special assistance would be afforded to firms in the clothing and footwear sectors and some areas of the textiles industry, owing to the increased competition arising from the adoption of special employment measures in the United Kingdom. This assistance took the form of a payment of £5 per week in respect of each worker on the payroll in the industries mentioned. This measure is intended to be a temporary one, but the Government propose to retain this assistance in operation for a further year after 31 March 1979.

To allow for the extension of the scheme, I am providing a sum of £3 million in addition to the allocation of £5 million included in the Estimate of the Department of Labour for 1979. I am glad to say that employment in the areas in question, which have been hardest hit by the advent of free trade, was stabilised by and large during 1978. The Government have taken this step notwithstanding the introduction of the pay-related social welfare contribution scheme in April 1979, which will redress to some extent the competitive disadvantages of the sectors of Irish industry concerned.

Work Experience Programme

The work experience programme, recommended by the Employment Action Team and announced in my last budget, encountered some administrative difficulties which delayed its launching until September. Nevertheless, in the few months in which it was in operation, the programme met with considerable success and, by the end of the year, 1,685 young people had been placed with employers. In view of this very promising start, I am making available an additional provision of £1.8 million which will permit the participation of approximately 6,000 young people in the programme during 1979. The total provision for the work experience programme is, therefore, £3 million, which represents an increase in the man-year employment level on the programme from 1,500 to 3,000 man-years.

Job creation in the education area

A sum of £1.4 million is being provided for job creation in the education area. One million pounds of this is to enable the temporary scheme for youth employment operated by the Department of Education to be continued for a further year but at a higher level. This scheme, which operates on the basis of proposals submitted by youth and sports organisations, has proved very successful both in creating employment for young people and in generating enthusiasm at a local level for worth-while community works. The additional provision brings to £1.1 million the total available for this scheme in the current year and will enable 1,300 temporary jobs to be created, representing about 400 man-years employment activity, about 25 per cent more than in 1978.

In addition, a sum of £0.2 million is being provided for the employment of 50 adult education officers, mainly in the vocational service, and a further £0.2 million is being provided for the appointment of 70 child-care assistants in special schools for the physically and mentally handicapped. These appointments will be made in the course of the year.

Employment of young people as development officers

On the recommendation of the Employment Action Team, a scheme will be introduced whereby voluntary organisations will qualify for special development grants to enable them to recruit young people for development work. The scheme, which will be operated by the Department of Education, will meet the greater proportion of the cost of employing these young people for the first four years. I am making a special allocation of £0.5 million for this purpose and this, I estimate, will allow for the creation of 100 jobs. The details of the scheme will be announced at a later date.


The allocation made in the Departmental Estimates for 1979 would allow AnCO to increase the number of training places available in its own centres, in spare capacity in private and public enterprises and under its community youth training programme, by 860 to 6,150. In accordance with the Government's policy to ensure that adequate facilities are available to enable AnCO to improve considerably its contribution to the development of Irish industry, I now propose to make available an additional provision of £0.4 million. This will enable AnCO to increase by a further 220 places its training activities through the co-operation of external organisations, thus bringing the total number of training places to be made available in 1979 to 6,370.

I propose also to make a special allocation of £1.5 million for the introduction, initially on a trial basis, of two schemes, first advanced in the Green Paper on Full Employment last June, which represent an imaginative and innovative approach to job creation, namely a Temporary Hire Agency and taxation relief in respect of residence-related work.

Temporary Hire Agency

The purpose of the Temporary Hire Agency would be to develop new opportunities for employment. One major area where this could occur would be in placement of workers on a temporary basis to deal with situations such as holidays, sickness or seasonal fluctuations in demand. It is also expected that the agency can play a major role in arranging employment in local areas especially with residence-related works to which I will come shortly. The agency itself would act as the employer for the personnel meeting these temporary or local employment needs.

Relief in respect of residence-related works

In order to improve job opportunities, a scheme will be introduced, to operate on a pilot basis from 6 April 1979 to 5 April 1980, to give tax relief within certain limits for the labour element of expenditure by householders on their residences. The relief will apply in respect of improvement and maintenance work for which the householder would not otherwise be reimbursed. The operational details will be announced as soon as possible.

Further provision to support employment creation

Many of the measures which I have described, particularly the increased provisions for the work experience programme, the environmental improvement schemes programme, the Department of Education temporary grant scheme for youth employment and the employment by voluntary organisations of young people as development officers, will improve the employment prospects of young people.

The Government are also considering other possibilities for expanding employment opportunities, particularly for young people, including some further proposals which the Employment Action Team has recently made to the Minister for Labour. I am, therefore, setting aside £3.2 million for the implementation of further employment creation measures which will be directed, for the most part, at young people. The details will be announced later, but I would expect these measures to result in the generation of at least 1,000 extra posts.

The total of these special job-creation additions to the Estimates is £20 million.

Public Sector Pay

Expenditure on pay and pensions accounts for 49 per cent of the public service Estimates. The total estimated requirement under this heading for 1979 in the Estimates as already circulated is £1,026 million. This contains no provision for increases of a general nature which may follow the standard increases under the 1978 national agreement, or for any special increases other than those sanctioned by 31 December 1978.

In the light of the Government's general approach to incomes, I am setting aside a sum of £75 million to cover all further pay increases, standard and special, and any additional cost arising from the annual revision of public service pensions.

There are many claims for substantial increases in various parts of the public sector which, if conceded, would involve imposing savage tax increases. Even if this burden were to be placed on the tax-payer, what would be the result? The result would be a fresh wave of price rises, a further series of pay claims in private and public employment alike, until any apparent gains were quickly swallowed up by inflation. We have only to look back to 1975 to see what happens when inflation takes hold. Prices in that year rose by 21 per cent. No one wants to start down that road again.

If we are to make real progress, we must get this inflationary fever out of our system, and recognise once and for all that the only sound basis for increasing living standards is to have income increases which are related to increases in output. While the size of the pay increases in such an arrangement may seem small, their real value can be greater, because the extra money holds its value.

Let me make it clear that I wish to see all public sector employees share fully and fairly in the fruits of economic progress. There is no point, however, in groups pressing unreasonable claims to the stage of serious disputes and disruption. The resulting losses, as well as the consequential rises in costs, leave the community poorer rather than richer at the end of the day.

It is regrettable if the funds which might have been devoted to improving social services, meeting reasonable pay claims, or creating employment are swallowed up in losses arising from serious disruption of services or production.

While many of the current claims are at a level which puts them completely out of court, I recognise that there are genuine problems in regard to special increases in the public service. I propose to enter into discussions soon to explore the possibility of arriving at an orderly solution to these problems within the resources available.

Social Welfare

The Government's foremost social priority will continue to be the creation of employment. Job-creation benefits not only the individual but also his family circle; it deals with much of the poverty in our community at source rather than merely treating the symptoms. Palliatives for unemployment are more easily prescribed than cures but they can be just as costly. Until the cure is effected, however, we must be concerned to alleviate the symptoms and the Government are determined to maintain progress over the broad range of social services. The opening up of new job opportunities in the health services and the provision of extra teaching and support staff in education are enabling significant improvements to be made in these services.

For social welfare recipients, an integral part of the Government's programme has been to maintain living standards at least in line with the cost of living. Excessive income increases do not make this task any easier: they both push up the cost of living and, by making industry less cost-competitive, hamper the reduction of the numbers of claimants for unemployment payments. Despite this, the Government have ensured during 1978 that social welfare recipients, with a year-on-year average increase of more than 14 per cent in the value of their payments, have not only kept pace with the cost of living but have had a share in the general improvement in disposable income and living standards. The winding-down of price inflation has, of course, protected social welfare recipients from a rapid erosion of the real value of their weekly payments between one revision of rates and the next.

Increased Weekly Payments

The Government are satisfied that the community would wish that social welfare recipients should continue to share in our growing economic prosperity by a further real improvement in the various allowances payable to them. The Government have, accordingly, decided that there should be a general increase of 12 per cent in weekly rates of short-term social welfare payments. The payments include unemployment benefit and assistance, disability benefit and maternity allowances. Thus, in the case of a married man with three children receiving unemployment benefit, the increase will be £4.20, giving a total of £39.60 per week.

In the social welfare context, the Government see old age pensioners and other long-term recipients, including widows, as deserving of special consideration. Their capacity for work and their living requirements are adversely affected by advancing years, chronic ill-health or the exceptional pressures of widowhood. As a recognition of this, the Government have decided that the increase in the rate for long-term recipients and their dependants should be 16 per cent. This will mean a total increase of £4.50 a week in the maximum contributory old age pension for a married couple, both of pension age and under 80. A contributory widow pensioner with three children will receive an increase of £4.80, bringing her pension to £34.10 a week.

The additional Exchequer cost of the foregoing proposals, all of which become effective from the beginning of April, is £40.1 million in a full year and £30.1 million in 1979. I am sure that taxpayers will not begrudge this transfer of resources to the most needy section of society.

Children's Allowances

The scope for expenditure in the social services is such that the problem of improvements comes down to one of priorities. Additional expenditure in recent years has favoured areas other than the social welfare children's allowances scheme, perhaps because of the fact that the scheme is not related specifically to need. The Government have decided to give the scheme a priority this year. I am providing accordingly for an average increase of some 28 per cent in expenditure, distributed as follows: 1st qualified child, from £2.30 per month to £3.50; 2nd qualified child, from £4.10 per month to £5.50; 3rd and subsequent qualified children, from £4.85 per month to £5.50. It would not make sense if these increases were granted indiscriminately and without reference to relative needs. They will be directed mainly to families in the lower and middle income groups and, as in the case of the other improvements in social welfare benefits, will help alleviate the impact of the reduction in food subsidies. The direction of the benefits in this manner will be effected by reducing the child allowance in the income tax code by £22 per child. Families not liable to income tax will benefit in full from the increases in the social welfare children's allowance. For income tax payers, the benefit will be the greater the lower they are on the income tax scale. The increased allowances will be payable from the beginning of April next. They will cost £11.7 million in 1979 and £14.6 million in a full year, against which there will be an offset of £3.5 million in 1979 and £5 million in a full year from the reduction in the income tax child allowance.

Unemployment Benefit for Married Women

The Government are committed to work towards the elimination of discrimination against women in the social welfare code. They have actively supported the recent adoption of the EEC directive requiring the progressive implementation, within a period of six years, of the principle of equality of treatment for men and women in matters of social security. A first step in the implementation of Government policy, which I announced in last year's budget, was the removal of the special conditions for receipt by single women and widows of unemployment assistance. The White Paper on National Development indicated that the situation of dependent spouses in the social welfare code is being examined by an interdepartmental working party. In the meantime, the Government are satisfied that a further substantial step should now be taken towards eliminating discrimination and they have decided to double the maximum duration of payment of unemployment benefit for married women, from the present 156 days to 312 days.

Means Test and Minor Improvements

The Government are also resolved to remove anomalies in the social welfare means test. I am providing in this budget for a number of significant measures in this respect, together with certain other minor, but still important, improvements.

These changes which, together with the longer duration of unemployment benefit for married women, will take effect from next April at a cost to the Exchequer of £0.7 million in 1979, are listed in a document which I shall make available setting out the "Principal Features of the Budget".

Pay-Related Social Insurance

The changeover to pay-related contributions for financing social insurance benefits will commence in April. Contributions will then become broadly proportionate to earnings. Lower-paid workers will benefit from this change and there will also be significant relief for industries, employing such workers, which are sensitive to competition from low-cost countries. The new system will also bring an increase in maximum short-term pay-related benefits since these will now be related to a new ceiling of not less than £5,000 as compared with the existing ceiling of £2,500.

Ex gratia Public Service Widows' Pensions

Ex gratia pensions are payable to the widows and children of pensionable public servants who retired or died prior to the introduction of contributory widows' and children's pension schemes. Originally, these ex gratia pensions were at half the rates applicable under the contributory schemes. In 1977 the proportion was increased to two-thirds of the contributory rate.

Having considered further the position of these widows, I have decided to increase the rate of ex gratia pension, as from 1 July next, to five-sixths of the rate payable under the contributory scheme. The estimated cost of this concession will be £675,000 this year and £1.5 million in a full year.

Veterans of the War of Independence

I am also providing some further improvements for veterans of the War of Independence and their dependants. Special allowances are paid to veterans who satisfy a means test and who are, therefore, in the less well-off category. Apart from revisions in line with increases in public service pensions generally, the basis of these allowances has not been altered since the early sixties. In view of this and the necessitous circumstances of those concerned, I have decided that the means test ceiling should be raised by £100. This will give an increase of that amount to all allowance holders, over and above the increase which they will receive as a result of the annual revision of public service pensions.

Last year, I introduced a telephone rental subsidy scheme for veterans living alone. I now propose to extend this scheme so that a veteran living with his wife, or with an invalid, or with a person looking after him will enjoy the concession.

I also propose to extend the scheme of funeral grants so that it will apply in respect of holders of "duly awarded" service medals. I also propose to increase the grant under the scheme from £100 to £200.

These concessions, which will apply from 1 July next, will cost an estimated £600,000 this year and £1.2 million in a full year.

Education Services

A total of £399 million has been provided for education in the Estimates. With the approval of the Government, I am making an extra £2 million available in the budget to be devoted to improving educational service, in addition to the £1.9 million allocated to education for the purpose of job creation. The Minister for Education will announce the details tomorrow.

Supplementary aid to the Arts

I have been in consultation with the Taoiseach regarding the financial difficulties of several of our theatres and other arts enterprises, particularly where capital sums are involved which are substantial in relation to the operational costs and the ability of theatres and other organisations to generate their own income.

I have set aside, therefore, a sum of £500,000 to meet this particular need. Details of the assistance will be announced later, following consultation with the Arts Council.

Revenue Changes

The additional expenditure allocations which I have announced will add a total of £141 million to my starting current deficit of £208 million. From this I am deducting £40 million for unspent balances in the hands of Departments at the end of 1978, giving a current deficit of £309 million. Thus, taking account of the Exchequer borrowing requirement for capital purposes of £490 million, the overall Exchequer borrowing requirement for 1979 stands at £799 million at this point.

Before presenting my specific tax proposals, I should like to stress that the Government's objective is to minimise the tax burden, to ensure that it is spread equitably and does not discourage personal and corporate initiative. Many significant changes in taxation have been introduced already by the Government from which all sectors have benefited. The personal and corporate taxation concessions in last year's budget will cost some £130 million this year. The abolition of rates on domestic dwellings and the removal of motor vehicle duties from all but large cars will cost about £124 million this year. The proposals which I will outline today are designed to carry our policies a stage further.

Personal income tax —Allowances, rates and bands

The increases provided last year in the main personal allowances for income tax purposes were unprecedented in size. They have been, and continue to be, of substantial real benefit to all income taxpayers.

It is not to be expected that reliefs of such a large order could be repeated this year. Nevertheless, subject to the resources constraint, the Government wish to give further expression to their policy of reducing the disincentive effects of personal taxation. With this in view I propose a further improvement in personal allowances combined with an amendment of the lower income tax bands.

The increases in the personal allowances will be as follows:

—the single allowance to be increased from £865 by £250 to £1,115

—the widowed allowance to be increased from £935 by £250 to £1,185, and

—the married allowance to be increased from £1,730 by £500 to £2,230.

The structural modification consists of abolishing the 20 per cent rate of income tax payable at present on the first £500 of taxable income and applying the rate of 25 per cent to the first £1,100 of taxable income, that is after the personal and other allowances, including the increases I have just mentioned, have been taken into account.

These changes will benefit all married taxpayers, of whom some 21,000 will be completely freed from tax liability. The great majority of other taxpayers will also benefit and about 19,000 of them will be freed from any liability to income tax.

In the case of married taxpayers without children the liabilities, if not removed altogether, will be cut by amounts ranging from £100 to £135 a year, depending on income.

The effects for married couples with children will be broadly similar, but here it is necessary to take into account also two other budget changes which I have already outlined, namely, the increases in the social welfare children's allowances and the associated reduction of £22 in the income tax child allowance of £240 per child. For those not removed from tax liability, the combined effects of the changes in income tax and in the social welfare children's allowances will be to benefit married couples by amounts varying upwards from about £100 a year in cases where their children qualify for the social welfare allowances.

As regards taxpayers who are single or widowed without children, most of these will benefit by varying amounts. For those of them who are not entitled to any allowance other than the single or widowed person's allowance and whose incomes exceed £7,715, or £7,785, as appropriate, there will be tax increases not exceeding £15 a year. If these taxpayers are, in fact, entitled to other allowances, these income points will be higher.

The document "Principal Features of the Budget" gives further examples of the effects of the various changes I have mentioned.

The cost of these changes in personal allowances and in the tax rates and bands will be £30 million in 1979 and £47 million in a full year.

For single or widowed taxpayers with dependent children there will be a substantial new relief which I shall now indicate.

One-parent families

A category deserving of particular consideration is the one-parent family. Where the parent of a dependent child or children is widowed, deserted, separated or unmarried, the special circumstances justify, in my view, the giving of additional tax relief. I have decided that this should be done by the introduction of a special allowance of £250. The allowance will apply as from 6 April next and will be in addition to whatever other allowances and reliefs are available under existing law. The cost of the relief will be £700,000 in 1979. The necessary provisions will be contained in the Finance Bill.

Interest relief

As Deputies will be aware, income tax relief is given in respect of personal interest, including house-mortgage interest. This relief is a valuable one for householders who, it must be remembered, have also benefited from the abolition of domestic rates. Since 1974, there has been a limit of £2,000 a year on the amount of personal interest qualifying for relief. There have been many representations for an increase in the limit to take account of changed circumstances. I have decided to raise the limit to £2,400 a year, with effect from 6 April next.

I have decided also that the relief ordinarily allowable should be scaled down appropriately in cases where an employee enjoys a preferential rate of interest. The reduced relief in such cases will be computed by reference to the proportion that the actual rate of interest paid bears to a specified rate.

The necessary provisions to give effect to these changes in interest relief will be included in the Finance Bill. There will be no net cost to the Exchequer.

Trustee savings banks

The increase in the limit on interest relief will benefit house-buyers, so this is an appropriate point at which to mention a measure which will increase the amount of funds available to house-buyers.

I propose to empower the trustee savings banks to grant house mortgage loans. The overall limit on lending by these banks will still apply—15 per cent of the balances due to depositors—but, since their aggregate lending has generally been well within this limit, it still leaves them worth-while scope for additional lending in the housing area. The same requirements will apply in regard to the allocation of mortgage funds and certificates of reasonable value as are being applied by the Minister for the Environment in the case of the building societies.

Permanent health insurance policies

At present, premiums paid under permanent health insurance schemes, which are schemes designed to maintain earnings during illness, are not allowed as deductions for tax purposes. The benefits payable are not regarded as income chargeable to tax unless and until they have been received for more than a year. It is now proposed that tax relief will be given in respect of such premiums but the benefits under the policies will be treated as taxable income from the outset. The change will take effect from 6 April 1980.

Business incentives

The tax and other measures taken by the Government during the past 18 months have afforded very considerable stimulus to enterprise and have created a climate in which the business world can plan ahead with confidence.

The various substantial tax reliefs for families and individuals have operated to boost demand. In addition, I introduced in last year's budget a package of tax changes designed to ensure direct relief for businesses. Chief among these changes were the large increase in the profits thresholds for corporation tax and the improvement of the three-year scheme for an incentive rate of 25 per cent for manufacturing companies.

Export sales relief

I should also mention the new scheme, already announced by the Minister for Industry, Commerce and Energy, for the replacement of export sales relief. The 10 per cent rate of corporation tax, which will be applicable to manufacturing profits earned from January 1981 to the end of the century, should act as a dramatic stimulus immediately and lead to continuing growth during the years ahead.

Stock relief

I have been asked to consider sympathetically the continuation of stock relief which, under existing legislation, is available for stock increases in accounting periods ending before 6 April 1978. This ad hoc relief was introduced as a temporary measure in the 1975 budget in recognition of the fact that, because of very heavy inflation, a substantial portion of the accounting profits of many businesses was, in practice, tied up in increased costs of trading stock. It has since been continued, with some modifications.

In considering the question of a continuance of the relief, it is appropriate to have regard to the reduction of the rate of inflation which has taken place. The rate is now down significantly below the level which led to the introduction of stock relief and the grounds for continuing it have diminished, to say the least. However, I have decided to give it for a further year, on the basis of allowing threequarters of the relief granted up to now. The renewal will cost the Exchequer £5 million this year. The detailed technical provisions will be contained in the Finance Bill.

Investment Allowances—Designated Areas

I intend to move in the Finance Bill that the existing legislation governing the special investment allowance of 20 per cent for new plant and machinery in the designated areas be renewed for a further period up to the end of 1980, after which the proposed corporation tax scheme for manufacturing companies will apply throughout the State.

Capital Allowances

At present capital allowances on new plant and machinery are given on the basis of gross cost; in other words, no deduction is made in respect of grants payable from public funds. The effect of this is that the Exchequer gives tax relief in respect of a considerable element of expenditure which the Exchequer itself has borne. This has always been recognised as anomalous and there can be no reasonable ground for complaint if this anomaly is removed. I intend to do so in the Finance Bill.

Industry: General

Clearly, the direct Exchequer cost of tax incentives is not the only indicator of the Government's priority for industrial expansion. So, also, are the massive increases in the expenditure allocations for industrial promotion, development and credit, and for the infrastructural development needed to support industry. The general regime for industry is one of the most favourable in the world, comprising as it does an impressive array of incentives.

The Government now look to private sector enterprise to make decisive progress this year towards achieving the national investment and employment targets.

All enterprises, irrespective of size, have a part to play. The contribution that can be made by small and mediumsized firms should not be underestimated. The Government are gratified by the tremendous response from such firms to the special investment loan facilities that are being provided for them by the Industrial Credit Company in conjunction with the European Investment Bank. The favourable interest rate charged on such loans is made possible by the fact that the foreign exchange risk on the loans is being borne by the Exchequer. This assistance will continue to be available.

For business as a whole, 1979 is a year of opportunity and challenge. Part of the challenge will be provided by participation in the EMS. The potential benefits from participation are considerable. For their part, the Government stand by the assurance already given that, if any significant short-term difficulties should arise from our decision to participate in the system, the Government will respond in a positive and sympathetic way.

Value-Added Tax

I come now to a proposal affecting value-added tax.

As Deputies will be aware, one of the changes required by the EEC Sixth Directive on VAT, which was adopted by the Community in 1977, is the abolition of the first tier of the special two-tier VAT which applies at present to a limited range of goods. As announced some time ago, the general intention is that from 1 March 1979 the first tier of the two-tier VAT will be replaced by appropriate excise duties designed to match the part of the VAT revenue foregone.

I have, however, received representations seeking a variation of that intention in so far as certain goods handled by the electrical trade are concerned. The representations made have stressed the adverse effect on traders in the State of cross-Border smuggling of these goods and have sought an alleviation of this position through a reduction of tax.

The Revenue Commissioners are, of course, making every effort to prevent this smuggling and the associated tax evasion. Having reviewed the position, I have decided, by way of concession, to refrain from imposing excise duties on two of the categories of goods in question, namely, radios and record players, but a VAT rate of 20 per cent will apply to them instead of 10 per cent. This will bring the VAT treatment of these goods, from 1 March 1979, into line with that of other related items.

The concession will cost about £1 million in 1979, inclusive of £0.3 million in respect of a special relief required in order to avoid double taxation of stocks which will have already borne the first tier of VAT.

Agricultural Sector

Taxation of Farming Profits

It is estimated that total farm income last year was almost 140 per cent higher than in 1973, the year of our entry to the EEC. That figure understates the actual improvement in the fortunes of individual farmers because farm income is now divided among a smaller number of farmers than was the case six years ago. Our main agricultural products have had the benefits of guaranteed prices and unlimited outlets. Investment in farming is continuing at a high rate and the prosperity of agriculture—and of rural Ireland in general—is plain for all to see.

This prosperity is highlighted by the 1977 farm management survey of An Foras Talúntais, published last August. The survey noted that:

the standard of living enjoyed by a sizeable proportion of our farmers must have improved out of all recognition and that modernised farming is very prosperous, with many farmers having assets, investment levels and incomes formerly associated with the world of commerce only.

During these years, the farming community have continued to benefit from a degree of State support which is very considerable. The Estimates for 1979 contain a total provision of £160 million for State aid to agriculture. In addition, it is estimated that the European Agricultural Guidance and Guarantee Fund will benefit Irish agriculture to the extent of some £385 million. It is clear that Irish agriculture can no longer be regarded as an underendowed sector of our economy.

It is against this background of increasing prosperity that we must look at the question of farmer taxation. Farmers will pay about £16 million in income tax in 1979 and about £36 million in rates on land. This total of £52 million represents a contribution of 5½ per cent of farm income. Last year the contribution was £38 million, or 4½ per cent of farm income. Making due allowance for investment needs in agriculture, the farmers' contribution falls far short of the share of income contributed in taxation by the rest of the community, as is clear from the fact that employees paid about £526 million in income tax in 1978, representing about 16 per cent of their earnings.

It is equitable that such a thriving sector of the economy should move as rapidly as possible, without damage to its continued expansion, to the stage of full acceptance of its share of funding the community's needs. It is only fair to say that comments from individuals and those in a representative capacity would indicate that the general body of farmers is willing to do so.

In line with this principle, I am taking further measures this year to increase the farming sector's contribution to the cost of public services. The threshold for liability to income tax will be reduced from £60 RV to £50 RV, making a further 6,000 full-time farmers, or 27,000 in all, liable for tax. Also, the multiplier which is used to calculate farmers' income on the national basis will be increased from 90 to 125. This new multiplier is fully justified by reference to farm incomes in 1978. As a result of these changes, farmers' income tax will yield about £30 million in the income tax year 1979-80, almost all of which will accrue in the calendar year 1980.

There are two other income tax matters I should mention. The farming organisations have drawn my attention to the possibility that a farmer who had opted to have his income assessed on the notional basis could find himself then being taxed on an income assessment appreciably in excess of his actual profits, because, under the provisions of the Finance Act, 1978, he must continue on that notional basis for two subsequent years. This could happen, particularly in a case where stock losses occurred by reason of disease. I arranged to have this problem examined in discussions over the past year between the farming organisations and the Revenue Commissioners. These discussions have now resulted in an agreed recommendation to the effect that a farmer may opt out of the notional basis at any stage, provided he remains on accounts for the year concerned and the two subsequent years; the Revenue Commissioners would have the right to demand accounts for the preceding one or two years of notional assessment and to reassess accordingly if the accounts indicated a higher tax liability. I am pleased to accept this recommendation, and I will include provisions accordingly in this year's Finance Bill. I consider that this arrangement will remove any danger of a farmer having to pay tax on an income he did not have, while at the same time it guards against the possibility of tax avoidance, which is the basic aim of the three-year requirement.

The second matter concerns income averaging. I announced in last year's budget that discussions were to take place between the farming organisations and the Revenue Commissioners about the possibility of providing for a suitable system of income averaging. These discussions are now nearing completion and I expect to be in a position to make the necessary provision in the Finance Bill.

Agricultural levy

My final item concerning farmers relates to the cost of services. In addition to the measures which are being taken to recover a proportion of the cost of the animal disease eradication programmes, the Government consider that the farming community is now in a position to pay for the cost of the education, research and advisory services specially provided for agriculture. These are estimated to cost about £30 million in the current year. The cost will be recovered by means of a levy of 2 per cent on the following agricultural products—cattle, milk, pigs, sheep, sugar beet and cereals.

(Cavan-Monaghan): Tax on all farmers.

These products will account for an estimated 90 per cent of total agricultural output this year. The levy will be charged at the point of sale of the products into the processing stage and on unprocessed exports. It will be introduced as from 1 May 1979 in the case of cattle and milk and as from 1 August 1979 in the case of the remaining products. These are the earliest dates from which the necessary statutory and administrative arrangements can take effect. It is estimated that the levy will produce about £16 million in this financial year.

It would defeat the purpose of the levy if it were to be passed on to domestic consumers through the price of food. The Government will be concerned to ensure that this does not happen.

Excise duties

The Government have decided that the various additions to the deficit on current account should in part be offset by an increase in indirect taxation.

It is three years since the excise duties on tobacco products and alcoholic beverages were last raised and it is appropriate to look to these for an additional contribution this year. I propose increases as follows—

Tobacco products

An increase of 6p is proposed in the tax element in the retail price of the packet of 20 cigarettes in the most popular price category. Pro rata increases are proposed for cigars and other tobacco products. These increases are estimated to bring in extra revenue of £16 million in 1979.


An additional 6p is proposed in the tax element in the retail price of a glass of spirits. This will mean an extra 3p on the normal half-glass measure. This is estimated to bring in extra revenue of £10.5 million in 1979.


An increase of 2p is proposed in the tax element in the retail price of the pint of beer. This is estimated to bring in extra revenue of £9 million in 1979.

I also propose to increase the duties on wine, cider and perry.


An increase of 10p is proposed in the tax element in the retail price of a bottle of table wine. In the case of stronger wines and sparkling wines the proposed increase is 20p per bottle. These increases are estimated to bring in extra revenue of £2 million in 1979.

Cider and Perry

The existing rate of excise duty of 5p per gallon on cider and perry has not been altered since 1940 and is now completely out of line with the duties charged on other alcoholic beverages. Moreover changes in traditional methods of manufacture have led to a situation where it is feasible to produce cider and perry at a much higher than usual alcoholic strength. Whilst this very strong cider would not constitute a significant proportion of total sales it is proper, nevertheless, that the excise duty structure should reflect the differences in strengths.

Accordingly, the excise duty will in future provide for three categories. The rate for the lowest category, which includes ordinary cider and perry, will be 30p per gallon. The rate for the intermediate category will be £1.25 per gallon and the rate for the strongest category will be the same as the new rate for made wine, that is £2.466 per gallon. These changes represent an increase of roughly 6p in the tax element in the price of an ordinary flagon of cider. The increases for the stronger cider and perry would be greater depending on their alcoholic strength. It is estimated that these changes will bring in extra revenue of £200,000 in 1979.

The various increases in excise duties will operate from midnight tonight. They will yield £37.7 million of extra revenue this year. It is estimated that they will have the effect of increasing the consumer price index by about 1.1 per cent.

The Minister for Industry, Commerce and Energy will make an announcement shortly about price increases on some of these commodities which have been recommended by the National Prices Commission.

Small Breweries

By way of concession, I intend to continue for a further year at a cost of £270,000 in 1979 the scheme, introduced in the 1978 Budget, which readjusts the incidence of excise duty on beer so that the smaller producers bear a somewhat lesser burden of duty while the larger producers pay somewhat more.


I indicated when dealing with the provisions this year for job creation that I propose a substantial strengthening of Revenue staff to intensify the campaign against tax evasion.

There is evidence that some selfemployed persons, such as traders, landlords of residential premises and professional people, who would be liable for tax, are not making any returns of their income to the Revenue Commissioners. Even in those cases where accounts are furnished, there are indications that there may be evasion. Some people in the community may not be making any contribution at all to the Exchequer when they should be doing so, or may be making a grossly inadequate one. I am determined that this situation must be tackled as a matter of urgency. Progress has been made already in combatting evasion. Forms of evasion have been identified and dealt with by devising systems of control, as for example in the case of the taxation of certain groups in the building trade. Back duty inquiries have been intensified in the special cases which come to the attention of the Investigation Branch. These measures, however, are proving inadequate and it is clear that existing Revenue staff resources are not sufficient to deal with the problem.

I am therefore making provision for a substantial strengthening of the staffing of the Revenue Commissioners in order to enable them to mount an effective and comprehensive attack on evasion. The campaign will include such measures as examination in depth of particular accounts and, where there are indications of evasion, reconciling them with the general state of the business and the taxpayer's life style. Evasion will also be followed up more intensively in the case of PAYE and VAT. In future, more emphasis will be placed on legal proceedings, rather than compromise action, where the making of false returns is uncovered.

I am confident that this deployment of resources will prove worthwhile from the point of view of revenue collection and equity among taxpayers.


The revenue changes which I have outlined involve tax concessions amounting to £37 million in 1979 and tax and other revenue increases which will bring in an extra £57 million in 1979. This gives a net increase in revenue of £20 million. The current deficit will therefore be £289 million, compared with £397 million last year, a reduction of £108 million or 27 per cent.

My final Exchequer borrowing requirement is £779 million, which is 10½ per cent of GNP, in line with the Government's policy commitment.

Cheering on borrowing of £800 million.

Financing the 1979 Borrowing Requirement

Domestic Resources

As regards financing the borrowing requirement, it continues to be the Government's general aim to raise as much from domestic sources, particularly from the non-bank public, as is consistent with not depriving the private sector of credit for productive purposes and with not competing unfairly with other savings institutions.

The ways in which funds are raised from domestic sources, in particular from the gilt market, will be kept under review. I have recently added three new stocks to the range available to investors and it is my intention, given acceptable market conditions, to create some further securities during the course of 1979.

The various savings schemes operated through the Post Office and the trustee savings banks will continue to be reviewed regularly with a view to improving them where practicable.

Foreign borrowing

As regards foreign borrowing, it remains the Government's intention, subject to what I have to say about EMS resource transfers, to keep our reliance on external funds as low as possible. The volume of such borrowing will be decided from time to time having regard to the Exchequer's financing needs and the necessity of maintaining the official external reserves at an adequate level. The information available to me indicates that foreign funds are readily available if needed and that Ireland is regarded as a first-class borrower on the international capital market.

EMS resource transfers

Foreign borrowing includes borrowing from the Community institutions, notably the European Investment Bank. Sums raised by the public sector from the bank have averaged £55 million a year over the last three years. The position will change greatly as a result of the resource transfers negotiated in connection with Ireland's entry into the European Monetary System. The loan capital available from the European Investment Bank and the new financial instrument known as the Ortoli Facility, as well as loans under the separate bilateral arrangements, will facilitate the expansion of the Public Capital Programme.

I have made no allowance in my budget estimate of resources for the capitalised interest subsidies payable in accordance with the resource transfer arrangements. The Government have decided that these resources should not be allocated until the European Monetary System gets under way and the flow of funds commences. There will then be a clearer view of suitable areas for their application in the light of actual participation in the system.


Given the massive expenditure on the administration of public business, the public service in a changing economy such as ours must be continuously adapted to ensure the successful carrying out of the Government's programme. The Government have fully accepted the recommendations on the most urgent areas for change identified by the Public Service Advisory Council. The work of the Department of the Public Service in relation to organisational change has been concentrated on these areas. In a budgetary context, two features of this work are particulary relevant to the need to get full value for money spent.

First of all, the organisation and systems employed must be appropriate to the task to be performed and represent the most efficient way of getting the job done. All energies are, therefore, being directed towards the early reorganisation of line Departments so as to bring about the application of at least the basic elements of the recommendations of the Public Service Organisation Review Group. A continuous process of structural and systems development thereafter should ensure that Departments are constantly adapting to the needs of a changing environment.

Structural change of itself will not secure the results expected unless the best people are available to the organisation. Apart from the general matter of personnel development, which is receiving special attention, I believe that the successful adaptation of our public service depends in large measure on the freedom for individuals of talent to move through the public service to the positions in which they can make the greatest contribution to national development. For this reason, I favour the greatest possible degree of mobility of staff in the public service and I hope I can receive the co-operation of the organised staff interests in achieving this objective.


As I announced last year, a system of reviews, complementary to the normal Estimates review, was initiated in 1978 in order to ensure that schemes of expenditure, which had achieved their original purpose or which changing times and circumstances had rendered obsolete, should be brought to an end. The first results of these reviews are already reflected in the 1979 Estimates; this work will continue so that over a short period of years the entire field of Government expenditure will have been subjected to a systematic reappraisal. This will assist in reaching the Government's objective as expressed in the White Paper on National Development of ensuring that all expenditures will make an effective contribution to achieving national development.

The past year has seen a growing recognition in all Departments of the need to develop a capacity for critical examination of their activities so that both on-going services and new proposals can be systematically reviewed and analysed. Several Departments have already organised special sections with trained staff to carry out this function. It is my intention to support and encourage this development. My Department will continue to foster the use of techniques such as in-depth analysis and management accounting.


In deciding on our basic budgetary strategy last year, two courses were open to us. We could either tackle unemployment and inflation immediately or set about remedying the instability in the public finances—an instability which was not of our making. For reasons both social and economic, the attack on unemployment and inflation had to take priority. Striking progress has been made in reducing inflation and, while we have a long way to go yet to banish involuntary unemployment from our society, it is very heartening to note that never in the history of this State have so many people been put to work in so short a time as under this Government. We are clearly showing by the performance of the last 18 months that the problem can be defeated. The White Paper on National Development provides a clear statement of our aims and strategies.

We achieved growth combined with a fall in the rate of inflation last year. We want to go on doing just that this year—to hold the growth rate at the high level reached in 1978 and to get inflation down. The danger as regards winning against unemployment and inflation by instalments is that partial success could encourage a presumption as to ultimate success and a slackening of the will to defeat these evils. Only unremitting effort, combined with rejection of individual selfishness and excessive sectional self-interest, will prevail against them.

The different proposals and decisions in this budget, looked at as a totality, present a common basic feature: they are very much a matter of striking a balance between social equity and fiscal equity, between investment needs and the resources available, between public sector action and private response, between getting rid of inflation and unemployment with all possible speed and the exercise of financial responsibility.

Specifically, we are running a calculated risk in the fight against inflation by adopting certain expenditure decisions, for example in regard to subsidies. The same risk attaches to our decision to use a moderate increase in indirect taxes to facilitate income redistribution and to protect the interests of the weaker sections of the community, the unemployed and the lower paid.

There is a danger that the net effect on prices of the various decisions, which are clearly in the best interests of the community as a whole and the weaker sections in particular, may be seized on to support wage demands. I hope that that proposition will not emerge, if not for reasons of community concern then in recognition of the direct financial benefits which this budget will confer on wage earners themselves.

The Government do not ask for plaudits for observing their self-imposed discipline of reducing public borrowing to 10½ per cent of GNP this year. They see it as a necessary part of responsible financial policy. The pursuit of such a policy is also apparent from the reduction in the deficit on current account by 27 per cent and in the increase in public capital investment by 22 per cent as compared with last year. Within this reduced borrowing requirement there is a marked shift in favour of investment, both in absolute and in proportionate terms. Forty-nine per cent of last year's borrowing was for current purposes. The proportion has fallen to 37 per cent this year.

It might well be argued that borrowing equal to 10½ per cent of GNP is still too high. I would agree, but the reduction already achieved is a solid indication of the Government's determination to adhere to their objectives. It is my intention, with the full support of my colleagues in Government, to repeat the process of reduction next year. That process may not be unduly difficult seeing that tax buoyancy will progressively reflect growing prosperity in the years ahead. We already have a foretaste of that prosperity in the buoyancy of tax revenue today. We could have made further reductions in expenditure, or we could have imposed more taxation, or we could have decided not to invest so much in the Public Capital Programme. In any of these various ways we could have reduced borrowing below the target of 10½ per cent. We did none of these things because of the conviction that to have done so would have run an unwarranted risk of generating a deflationary tendency in the economy.

I would not be content even with a neutral budget. The needs of the situation were for a budget which would be stimulatory but not excessively so, for a budget whose incentives would coincide with the full emergence of the response of the private sector to last year's fiscal stimulus.

I have not allowed myself to be influenced unduly by the doubtful help of recent cautious-to-pessimistic economic comment. That comment shared two general defects—first, of being framed in the absence of up-to-date budget data and without access to the knowledge of the fiscal opportunities which that data opened up and, second, of largely ignoring the fact that this Government are pursuing an integrated and well-documented economic strategy. That strategy was first outlined by us when we were in Opposition in the autumn of 1976.

You bought Government.

It was put before the people in more detail in our election manifesto and massively endorsed. It has been fleshed out further and brought up-to-date in the White Papers issued by the Government. It has been signally successful and, as this budget shows, we are not allowing ourselves to be deflected from our course either by the faint-hearted and over-cautious or by those pressing for the soft option. The Government are doing their part. They look to the private sector to do theirs and to the social partners for their full support in this great national effort.



£ million


1. Tax Revenue


1. Debt. service and other Central Fund Charges


2. Non-Tax Revenue


2. Supply Services (non-capital)




3. Add:

3. Add:

Personal Income Tax

Job Creation


—child Allowance


Public Service Pay




Social Welfare



—increased rates of benefit




—children's allowances






Cider and Perry


Public Service Widows' Pensions


Agricultural levy


War of Independence Veterans



Education services


Aid to the Arts



4. Deduct:

4. Deduct:

Personal Income tax

Estimated departmental balances


—personal allowances etc.



—one parent families


Tax on business

—stock relief




Small breweries





5. Deficit






£ million



Budget Estimate

Provisional Outturn


1. Public Capital Programme




2. Non-Programme Outlays




of which: (a) Exchequer Financed

(i) Current Budget Deficit




(ii) Miscellaneous




(b) Non-Exchequer Financed




3. Total Requirements





4. Non-Exchequer Resources of State Bodies and Local Authorities




of which: (a) State Bodies




(b) Local Authorities




5. Exchequer Internal Resources




of which: (a) Loan Repayments




(b) Sinking Funds




6. European Regional Development Fund




7. Exchequer Borrowing




of which: (a) Net Sales of Domestic Securities



(i) to the Public


(ii) to the Commercial Banks


(b) Small Savings


(c) Foreign Borrowing


(d) Miscellaneous Borrowing


(e) Change in Liquidity of Departmental Funds


8. Total Resources








Summary of current and capital budgets 1978


Main heads of current government expenditure


Certain receipts and expenditure of the Exchequer and of local authorities


State expenditure in relation to agriculture.

Detailed tables relating to public capital expenditure will be found in the separate publication entitled “Public Capital Programme 1979”.




Budget Estimate

Provisional Outturn



Current Budget

1. Expenditure

(i) Central Fund Services



(ii) Supply Services





2. Revenue

(i) Tax



(ii) Non-Tax





3. Current Budget Deficit



Capital Budget

4. Expenditure

(i) Public Capital Programme



(ii) Other (non-programme)





5. Resources

(i) Exchequer



(ii) Non-Exchequer





6. Exchequer Borrowing Requirement for Capital Purposes



7. Total Exchequer Borrowing Requirement (3+6)



8. Total Exchequer Borrowing Requirement as % of GNP (Estimated)



Note: This table incorporates the reclassification of current and capital expenditures introduced in 1979. (See footnote to Table 2 for details of items reclassified).





Apr.-Dec. 1974




1978 Provisional

1979 Estimate

Service of Public Debt








Central Fund Services Interest








Sinking Fund, etc.








Supply Services Interest








Sinking Fund, etc.








Social Services








Social Welfare
























Economic Services
















Industry and Energy








Tourism and Transport








Forestry and Fisheries








General Services








Post Office
















Justice, including Gardaí








Public Service Pensions








Other Expenditure








EEC Budget








June 1975 Consumer Subsidies






Dept. of Environment grant in relief of rates




















Public service remuneration included above








GNP (in £ millions)





5,400 (a)

6,300 (a)

Current Government Expenditure as % of GNP


25.0% (b)





Note: The figures in this table have been revised to reflect the reclassification of two expenditure items as capital in 1979. These are (1) expenditure on dwellings for the military and their families and (2) I.I.R.S. building programme.

(a) Preliminary estimates.

(b) Represents only 9 months expenditure as % of GNP.




Local Authorities (a)


Non-capital issues

Expenditure from revenue (b)

State grants received

Rates collected
































































































April-Dec. 1974




































NOTE:—(a) Local Authorities comprise County Councils, County Borough Corporations, Borough Corporations, Urban District Councils, Town Commissioners, Regional Health Boards, Vocational Education Committees and County Committees of Agriculture.

(b) The revenue of local authorities comprises rates, State grants (including payments on behalf of Health Boards to voluntary hospitals and homes in respect of general medical services) and other receipts e.g., rents, fees, etc.

(c) Approximate.

(d) Estimated—incorporating reclassification.

(e) Estimated.






1978Provisional £000

1979Estimate £000

1. Aids reducing production and over-head costs and production incentives (b):

Relief of rates on agricultural land






Lime and fertiliser subsidies






Reduction of land annuities






Beef cattle and sheep grants






Small farm incentive bonus












2. Schemes operated under EEC regulations and directives:

Farm modernisation






Farmers' retirement






Aids to farmers in less favoured areas






Dairy herds conversion






Market intervention (c)






Socio-economic advice and vocational training of farmers






Aids for orderly marketing of cattle




Grants for individual projects


Aids for horticultural producers' organisations










3. Education, research, advisory and inspection services:













Farm advisory services






Technical services






Inspection services




Rural organisations












4. Disease eradication:

Bovine T.B.












Hardship Fund





Less: Farmer contribution and EEC Receipts








5. Long term development aids (b):

Arterial drainage






Land project, farm buildings and water supplies






Improvement of cattle, pigs, horses, sheep and poultry






Rural electrification






Restructuring and improvement of holdings by Land Commission






Other rural improvement schemes and grants












6. Marketing aids:

Dairy produce










Potatoes and cereals










7. Technical staff associated with administration of acts, regulations and schemes:












NOTES:—(a) The figures include both capital and non-capital expenditure and are net of appropriations-in-aid which include recoupments from EEC for schemes in section 2 above.

(b) Further aids of these kinds are given under EEC schemes—see section 2.

(c) Expenditure and receipts for market intervention are as follows:—




1978Provisional £m

1979Estimate £m







Receipts from EEC






(d) Includes £1.2 million, being part of the grant in relief of rates borne on the Environment Vote. A sum of £1.1 million, being part of the provision for relief of rates on agricultural land at 1. above, is also related to these services.

(e) From 1977 these costs have been distributed under appropriate heads above.

(f) General administration and overhead costs are not included in this total. The 1979 estimate of these costs is as follows:—




Office of the Revenue Commissioners


Public Works and Buildings


Stationery Office


Rates on Government property


Office of the Minister for the Public Service


Superannuation and Retirement Allowances




footnote; Agriculture also benefits from EEC aid under the Common Agricultural Policy (the figures include intervention receipts at (c) above):—




1978Provisional £m

1979Estimate £m








—receipts under individual project scheme






—Receipts for structural schemes






On a point of order, in his budget speech on page 73 in the last sentence the Minister mentioned——

Surely that is not a point of order. We will hear the Deputy later in the week. Deputy P. Barry.

Has the Minister for Finance taken reliefs off caravans and elderly persons' homes?

An Leas-Cheann Comhaire

Deputy Byrne will have an opportunity of addressing the House during the coming week.

This budget, the second introduced by this administration, is anti-family, anti-farmer and anti the national interest. Perhaps the last point is the most important one, but before I come to it I want to say it was nearly impossible to argue with the crowd of figure jugglers over there until today when they exposed themselves.


Deputies should listen to the speaker. If they do not want to listen, nothing is keeping them in the House. Whether Deputies agree with him or not, they should listen to the speaker. Will every Deputy please keep quiet? Only one Deputy may speak in the House at any one time.

We were told constantly by the Minister for Finance, the Minister for Economic Planning and Development and other Ministers that they were convinced they could get a rate of inflation of 5 per cent this year. Today the Minister for Finance has blown that. He said his level of borrowing of £779 million is in line with the Government's target of 10½ per cent of GNP. That means he expects GNP for next year to be £7,400 million. That is an increase of 17½ per cent on last year. If the figure is 6½ per cent, which the Government practically alone anticipated, that means the inflation rate for next year, on the Government's own internal counting, will be in the region of 10 per cent.

Hear, hear.

I said this is against the national interest. I want to speak about the resource tax on farmers. Every farmer will have to pay that tax.


Hear, hear.

Even if he has only one cow, one sow or one acre under the plough, he will have to pay that tax. That, in itself, is a backward step, but far more important from the point of view of the national interest is the fact that representatives of farmers' organisations and the Minister for Agriculture have been resisting the attempts of the EEC Commission in Brussels to impose a resource tax on farmers in the Community.

It is not a resource tax.

The Minister for Finance has opened the door now, and how can they continue to resist that? It is a silly, unwarranted——

It is not a resource tax.

Of course it is. What else is it? This is the second budget we have had this year. Of course there was no reference to that today except in passing by the Minister when he talked about the allowances for old age pensioners. A further £22 million tax was imposed on 1 January of this year. The total amount of tax imposed in that budget and in this budget amounts to nearly £80 million. Reduced taxes and allowances have been given amounting to £37 million, which means that the gross extra tax imposed this month is in the region of over £40 million. That is in addition to the £364 million increased taxation the Government say they are expecting in the Estimates for Receipts and Expenditure for 1979. The levels of customs, excise, income tax and valueadded tax have been increased today. They were increased by £365 million in the Book of Estimates published last Saturday and a further £20 million is going on them today, making a total of £384 million extra taxation imposed by this Government this month. This is a 22 per cent increase in tax revenue.

The Book of Estimates includes an item for an income tax increase of 37 per cent for 1979. It appears that every tax-payer will be expected to pay extra taxation in the coming year under the income tax code. There is nothing in today's budget to make me think that is not so. Early in his speech the Minister stressed the necessity for moderate wage claims in the coming 12 months for the achievement of growth, the expansion of exports and the maintenance of competitiveness. The Minister did not refer to the vital role played by Córas Tráchtála in exports. The amount of money being allocated to them this year over 1978 does not even match inflation. Therefore they will not be able to pay the increased wages demanded from them.

When last year's budget was introduced, the Minister used virtually the same language as he used today in saying that if wages went beyond a certain level the Government would find it necessary to do something about that. Virtually the same paragraph is included in today's financial statement. I pointed out to the Minister at the time, and in many other debates last year, that because of the Government's stance, and because of the abolition of the wealth tax and the virtual abolition of capital gains tax, he could not expect ordinary workers to be moderate in their pay demands. I said he could not expect that the 5 per cent he was then advocating would be adhered to through 1978. I said the result would be seen first in the private sector and would then overflow into the public sector. I regret to say I was proved correct.

At the time the Minister used very aggressive language about what the attitude of the Government would be if the 5 per cent was exceeded. During the past 12 months everybody on the benches opposite was mesmerised and hypnotised while the country was being torn asunder by strikes. They did absolutely nothing to improve our image abroad, or to come to grips with the industrial relations situation which is by far the most serious problem facing us. I hope the Minister is not again using language just for the sake of putting something into his budget speech. When he says he will tackle the problems imposed on the country by excessive wage demands, as he sees them, I hope he means there will be action and not just words. In the past 12 months we have had a surfeit of speeches, seminars, admonitions and threats from all the Ministers— everything but action. I hope that will not be the case in the coming 12 months.

It is regrettable that not one of the four Ministers who are supposed to be looking after industry and manufacturing has the slightest conception of what it means to work or to employ. The Taoiseach is a lawyer. The Minister for Finance is a lawyer. The Minister for Industry, Commerce and Energy is a lawyer. The Minister for Economic Planning and Development is a professor. Not one of them has the slightest experience or knowledge of what it means to employ anybody or to be employed, if we exclude the Minister for Economic Planning and Development who boasts that when he was a student he worked in Walls' ice cream factory in London. I do not think that gave him real experience of work.

The Deputy is doing well.

The two men on either side of the Deputy are big employers.

Deputy Barry should not get into personalities.

A Deputy

There are many lawyers over there.

This is typical of another lawyer who wished to engage in petty debating points across the floor.

Personalities will not get us anywhere in this debate. Let us keep to the debate before the House.

Deputy FitzGerald thinks he is a professor.

I want to deal briefly with the reliefs in this budget. Old age pensions have been increased by 16.1 per cent, which is welcome, but it does no more than keep them in line with the increase in earnings over the last two years. We must remember that the increase given last year by this Government was 10 per cent and by April it will prove to be inadequate. As well as that, there was no increase in October for social welfare beneficiaries and there will not be an increase for them next October. Contrast the 16 per cent given to old age pensioners with the complaints of those who are being charged tax on interest. There was a £2,000 limit which has been increased by 20 per cent.

I said that this budget was antifeminine, in spite of protestations from the Government. It is wrong to reduce reliefs for families with more than two children. The benefit to parents with three or more children will be a farthing per week for the third, fourth and fifth child. This budget is biased against large families. The pre-1968 widows' allowances were increased by the previous Minister for Finance, Deputy R. Ryan, from a half to two-thirds. They have now been increased to five-sixths but the Minister should have gone the full distance by giving them an extra increase.

What will income tax payers think of the abolition of the lower band of 20 per cent? What was the point in doing this? The people in that bracket are on low incomes and are barely into the tax system yet they are being asked to pay an increase of 5 per cent. The £50 benefit received by a single man will be clawed back by 25 per cent. The increase of £224 for a married man with three children is only a 10.1 per cent increase inclusive of the clawback. There is no change in the bands with the exception of the abolition of the 20 per cent band which was of benefit to those who were less well-off. If the Minister had been trying to keep in line with inflation he would have inflation-proofed the band. This contrasts strangely with the Capital Gains Tax Bill when inflation-proofing was written into legislation. People who make capital gains are inflation-proofed but the ordinary taxpayer is not to be inflation-proofed. The lowest band of tax is now to be eliminated. This is hardly the act of a Government with a desire to protect the lower paid worker and a desire to get a moderate pay settlement for 1979. Whatever applause the Minister may get from his backbenchers, he will not receive any applause when the small print of this budget is examined outside the House. The Minister should have concerned himself with trying to relieve the lot of the taxpayer instead of engaging in this cosmetic exercise. If bands can be indexed for capital gains, which are a form of income enjoyed by the well-off, why not index them for the PAYE taxpayers who contribute more to the Exchequer than any other sector. To achieve a 4 per cent growth in real income in 1979, a man with two children would have to receive a 14 per cent increase in 1979.

I should like to mention the farming community. The multiplier has been increased by 39 per cent which is more than twice the level forecasted last year by the Department of Agriculture. It is almost four times the level of increase in farm incomes predicted by the ESRI for 1979. All farmers will have to pay an increased amount. The resource tax affects 85 to 90 per cent of commodities produced by farmers. This tax will affect all our small farmers. It could be argued that farmers will produce less as a result of the resource tax. I do not understand how the Minister can say that it will not affect domestic prices. This 2 per cent will become part of the CPI and will be reflected in this year's inflation rate. An increase in the inflation rate will affect this year's pay negotiations. If it was, as he claims, his intention to introduce a budget which would assist in achieving a moderate wage claim in 1979, he has failed miserably. The lime transport subsidy, the beef cattle incentive scheme, the sheep headage grants, the small farm incentive bonus scheme, the poultry and egg scheme and the miscellaneous equipment grants have all been drastically reduced. All these extra charges will be on the farming community for the next 12 months and they will be reflected in consumer prices.

A pay-related scheme will be introduced in April. At this stage the Minister knows the level at which it will be set. This will be a further imposition on employers and workers. This is a further tax. It could be set at 5 per cent perhaps so the man earning £100 a week, which is not unknown in most factories, will be paying £5 a week, an increase of £1.50 on what he is paying currently. Why did the Minister not announce this today? He will tell me it is not customary, that this is a matter for the Minister for Social Welfare who will announce it later. But, in fairness, it is one of the points that the trade unions will want to know about before they negotiate a new wage agreement—what is the level of the stamp going to be in April after the pay-related scheme comes in?

Eleven point two per cent.

Between the employer and employee?

That is even worse. I was counting it at 5 per cent for employees but it will be 5.6 per cent if it is divided equally.

All that was disclosed to the House months ago.

It is a further tax being imposed later this year and, of course, a further increase in CIE fares or a cutback in services will also come later in the year because in the Book of Estimates there is provided extraordinarily £2.5 million less than was spent by CIE in 1978. A subsidy of £37.5 million was given to CIE in 1978 and this is being reduced in 1979 to £35 million. The workers can expect an increase in bus and train fares apart from the 2 per cent imposed already by the budget on the consumer price index this month—less than 1 per cent early in January and a further 1 per cent here to-day in the increase in prices.

This is a Government that is now claiming they will have 5 per cent inflation at the end of the year while they have within 30 days at the beginning of the year, imposed 2 per cent themselves. If you annualise that, it is 24 per cent. That is not very possible but I think it is obvious from the amount of the Minister's borrowing and his assessment of what the GNP will be for 1979 that even he does not believe his own figures, that he knows the inflation rate will be 10 per cent this year and is budgeting for it.

How are we to judge this budget? The Minister says he wants it to be seen as something that will assist the economy to further growth in the coming years. He wants it to assist in achieving moderate wage settlements and help in looking after the less well-off in our society. As I pointed out, the lower tax band has been withdrawn, the 20 per cent band. There is no indexation which is what the ordinary PAYE worker wants. He wants increased allowances but he wants the bands indexed because he sees that this is the point where extra taxation comes in when he moves from the 25 to the 35 and so on. This is not included in this budget although we looked for it in last year's budget. We looked for it in the Finance Bill. It was refused on that occasion by the Minister. Yet indexation of bands was included in the Capital Tax Bill. It is not included this year. It will be seen as a budget that will add to the consumer price index because of the imposition of duties and because of the taxes imposed earlier in January by the removal of the food subsidies and the threat that further food subsidies may be removed at the end of the year. It will be seen as a budget that is very anti-farmer. In spite of all the promises given in the manifesto of the Fianna Fáil Party before the last election and despite the most specific promises given on doorsteps by Fianna Fáil canvassers, farmers now find that they are more and more being dragged into the tax net at a very much higher multiplier and, on top of that, there will be a resource tax of 2 per cent.

This budget is inflationary. It will harm the economy: it will not achieve the moderate wage settlements that I agree with the Minister are a very important part of what should be Government strategy for the coming year. It will be seen as a failure outside the country—which is equally important—because it will be seen to be based on false figures. The Minister referred to that when speaking and said the budget would also be examined outside the country. When it is so examined I think it will be seen to be based on false figures.

There is nothing in the budget to encourage wage earners to moderate their demands, nothing to encourage taxpayers with large families to think that they were even being considered by the Government; nothing to make the social welfare classes feel that they will be kept in line with the earnings of other sections of the community. There is nothing in it that would make farmers feel that what they were putting in for the last year was being appreciated and recognised by having no further impositions on them. What is in the budget is the opening of the door to introduce a tax on products—whatever they call it in the Commission—on all farmers in the country. That is not in the national interest. If this budget with its inconsistencies, with an inflation rate double what is being forcast by the Minister is being examined closely in Brussels as I believe it will be, or wherever the EMS headquarters are, I believe the constraints imposed on this country will be far more severe than would be the case if the Minister had adopted a level-headed, forward-looking policy to ensure that the weaker sections of the community were looked after and had played fair with the taxpayer who will now see himself as being codded by the juggling of figures in the budget. This budget will not be a success as it is anti-family, anti-farmer and not in the national interest.

In making an assessment of this budget and whether it may have some positive contribution to make to the improvement of industrial relations—which need improvement on the record of recent months—the answer must be that if the main contribution of the budget is towards alleviating the position of the PAYE worker it cannot be said that the position of such workers has been improved significantly as a result of today's measures. It cannot be said that the sense of grievance felt by the majority of PAYE earners has been in any way mitigated by today's actions on the part of the Minister for Finance in his budget. The budget may gain the applause of some of the backbench Fianna Fáil people today, but it will require further close examination to uncover some of the rather unfair features of it. Behind the headlines of the benefits it is supposed to be conferring lie a good many problems that have not been squared up to. The total cost of income tax concessions in 1979 will amount to only £27.7 million. Prior to this budget the Minister met a representative group of trade unionists and they sought concessions that would amount to a minimum of £100 million. For their pains they receive for the remainder of this year concessions for PAYE earners amounting in all to 27.7 million. Therefore, if this budget is to be assessed by the contribution it would possibly make to improving industrial relations, it has failed that test and cannot be said to take the tension which undoubtedly exists in industrial relations amongst PAYE earners. PAYE earners at present are working under a very heavy tax burden and find that the only area in which they can seek to remedy that situation is in the wage contract itself. Thus we have as good an explanation as any of why so many groups of workers in secure employment have been engaged in militant activity over recent months. The tax position of the PAYE earner is basically responsible and this budget does little to remedy the grievance felt by PAYE earners.

In saying this one must congratulate the Minister on his masterly sense of public relations. This budget is a masterly exercise in public relations and the congratulations are all the more deserved when you consider that the Taoiseach has been complaining of late that he has not himself been having a good reception from the media. This will not be the case with the Minister. I understand he is going on television tonight. Last year it was the Minister for Economic Planning and Development who was on television, but this year the Minister will be there in person. The budget he has presented today is constructed to gain maximum public approval. It will bear closer examination as to the benefits. The Minister has taken prudent care to ensure that this budget is seen in the best light. He ensured that other members of the Cabinet would announce the bad news earlier this month. The strategy that underlies today's exposition by the Minister is that there were cuts in public expenditure amounting to £57.7 million prior to the budget. These include things like food subsidies, cuts in smallholders' dole assistance, and reducing the subsidies to CIE. In time, of course, there will be increased bus fares but the Government will not be responsible for them—it will be "Mac the Knife", someone who disappeared around the corner. Bus fares go up through nobody's fault really, they just happen, though of course the reduced subsidy to CIE will be a contributory factor.

Then there are the cuts in social welfare spending itself. The Minister makes no provision in the Estimates published recently for public sector pay increases, so that has been remedied to-day. The Minister has made it clear in the figures given that he thinks that £75 million will settle increases in the public sector after the expiry of the national wage agreement. One wonders whether that is a realistic expectation. The Minister has expressed confidence that he has dismissed the pessimism of those who think that other counsels might prevail in that area, but he has nailed his colours to the mast. He thinks that such wage expectations as there are in the public sector will be settled by a figure of £75 million in the latter part of the year. Of course he has dramatically understated the likely rate of inflation in 1979.

The Minister's Estimate has been worked in a particular way. He has pared his spending to the bone and he assumes the most generous forecast on the revenue side next year. Therefore, his deficit is rather narrow as he comes here today, and he can receive the applause of his backbenchers. It is on this that one must essentially congratulate him. But the foundations on which this applause are based are relatively flimsy. Lots of things may go wrong and—dare one say it? —the figures for the likely out-turn for next year may not be all that correct. But the Minister has covered all contingencies in his contribution here this afternoon. Near the end of his peroration he referred to the critics, the people about whom the Taoiseach has been complaining recently for not having given him publicity. The critics, those lurking socialists in the Central Bank and the ESRI, those dangerous subversives, have dared not to believe and to criticise the figures on which the Minister rests the entire shaky gazebo of the direction of the economy for next year. Last Sunday the Minister for Economic Planning and Development——

The Deputy's turn of phrase is improving.

The Minister did not even have to worry about the quality of the prose. He could have ignored today's editorial in The Irish Times.

I am admiring the Deputy.

Praising him.

I am admiring the Minister.

I am afraid the Chair is not admiring anybody. We will proceed with the debate.

It was a masterly exercise in public relations. I am a little sceptical as to whether the foundations on which these figures are so gaily paraded by the Minister this afternoon are secure and reliable. I am citing certain institutions who have dared to question them, such as the ESRI and the Central Bank. As I was saying, last Sunday the Minister for Economic Planning and Development dealt with those critics when he said that of course they did not know what the Government knew. He said they could not know either that the Government were pursuing a moderate wages policy over the coming year. Certainly we could not know until today what the Government were doing, but it is open to anyone with eyes in his head to observe what was happening.

Therefore, this budget cannot be seen in isolation from earlier events and earlier actions taken by members of the self-same Government. Cuts in public expenditure have already occured. There has been a reduction in the food subsidies of £22 million and more reductions are to follow. There has been the reduction of £9 million in the disease eradication programme now to be paid for by the farmers. The small farmer's dole assistance is to be cut. Cuts in social welfare are estimated at £15 million to make greater by contrast the kind of generosity announced here today and, of course, there was the cut in the CIE subsidy.

When today's revelries are over there will be substantial increases in the social welfare contributions from next April. Of course they will not be referred to at this time, but undoubtedly they will bite deeply into the pockets of those who must pay for them. While no Minister may be around to declare authorship of the cut in the CIE subsidy, they will result in higher fares at a later stage. They may be delayed until a later stage but they must come one way or the other.

These kind of figures have led some people to believe that there is a likelihood of more budgetary action later this year. That may well happen and some people believe it is possible. A budget should be judged on its possible contribution to improve industrial relations, and I believe the biggest failure of this budget has been the manner in which it has dealt with the plight of the PAYE people. They had been led to expect that in a period when the economy was growing as it has been last year—I am not entering into an argument about what level of growth may be achieved this year; there are many questions and doubts about that—their situation would be dealt with more fundamentally than it has been in this budget with a total cost of alteration of allowances of £27 million when the trade union movement had asked for £100 million. This is not a serious attempt to meet demands which have their origin in a deep sense of grievance felt by the PAYE sector.

The Government have primed the revenue side and have pruned the spending side so that there is a relatively small rise in the cost of the public service as we have gone into this budget. The gap between spending and revenue has been narrowed by estimating a very sharp increase in revenue, particularly from taxation. Tax revenue is expected to rise by 21.1 per cent and the yield from income tax—and this puts into perspective the kind of allowances that have been announced here today with such obvious approval from the Fianna Fáil back benches—is expected to rise by 37 per cent in the coming year.

These are the figures. There were the unpopular actions of the Government some weeks ago. They permit the Government to announce the kind of budgetary strategy put forward by the Minister for Finance. They permit them to give relatively good news to some on a foundation of continued high borrowing. The borrowing figure, which the Minister was pleased to see reduced to 10½ per cent, will be affected in the coming year by whether the expectation of the kind of growth in GNP is likely to be achieved. On the basis of present policies there are people who doubt that it will be achieved.

Therefore, one may doubt whether these figures are reliable and whether the kind of strategy announced today may be sustained in the coming year. It is a fair point that the Government's revenue expectations may turn out to be false. Even if the employment increase occurs, which the Government say is projected, it is hard to see revenue buoyancy of the scale anticipated by the Minister resulting in 1979. All of the figures produced by the Minister must interconnect during 1979. If the employment figures are not achieved it will have adverse results for the tax revenue, and if growth is not achieved other repercussions will follow. Growth, employment, tax yield, as well as expected wage and salary levels are all interconnected and interrelated.

Is the Minister wise in setting aside a figure of £75 million for the public service on the basis of present claims? Is that a realistic expectation? The Minister explained that the Government were pursuing a comprehensive and equitable incomes policy. I do not know if they are. Only the most enthusiastic member in the Cabinet could believe that. After all we have heard today, the Government's approach to incomes and salaries in 1979 remains as deeply ambiguous as ever. I would say that, having regard to the kind of claims being negotiated in the public service at the moment, the Minister's estimate of what he thinks may be realistic and acceptable figures in 1979 may turn out to be well off the mark.

The Government appear to be facing both ways. They are assuming a much lower rate of inflation applying to their spending and have a totally different approach to the question of their revenue yield. Cut the spending and expand the revenue appears to be the kind of equation that is being followed by the Minister. Remove the subsidies beforehand and distance the bad news from what would appear to be the relatively good news announced here this afternoon. That is why I call this budget a triumph in a public relations exercise. The increases in social welfare take place against a position, as revealed in the Book of Estimates, in which there was a cutback even in money terms. Yet the Minister comes here today posing as the friend of the poor.

We consider the increase of 12 per cent in respect of social welfare unsatisfactory. We would have looked for increases in the middle twenties on average rather than what we have got here today. In the period February 1978, to February 1979 the consumer price index showed an increase of 10 per cent. Over the same period food prices rose at a higher level. That means that the 10 per cent increase in social welfare last year was entirely taken up by inflation. We know that average incomes in 1978 rose by almost 9 per cent in real terms. That means that those on social welfare lost by about 9 per cent as compared with those on average earnings. Therefore, there was a compensation of 9 per cent needed for the falling behind that occurred in 1978: there was an increase of 10 per cent needed to compensate for expected inflation in 1979: and there was also an increase needed to allow social welfare recipients to share in the growth in the economy that the Government are so confident of obtaining this year.

I have referred already to the relief given in the budget to income tax payers. It falls very far short of what was required. Before the budget the ICTU requested the Minister to provide for a figure of £100 million. So far as we can make out, the cost of the changes will be £30 million in 1979 and £47 million in a full year. The amount granted has come nowhere near what was sought. That sense of grievance felt by so many PAYE people is a potent source of friction in industrial relations at present.

The very least that we might have expected of a budget occurring in a period of very high conflict in industrial relations was a contribution towards lessening the tension by meeting the problems of PAYE earners. It should not be forgotten by those who applauded the Minister's announcements this afternoon that, on the basis of Government revenue estimates for 1979, PAYE earners will pay an additional £194 million in 1979 at current tax levels. Income tax reliefs amounting to £47 million in a full year and £30 million in 1979 will mean that the Government will get back far in excess of the very small allowances given to PAYE earners this year.

Other members of my party will tackle this budget in a more comprehensive manner tomorrow. Broadly speaking, my case is that the budget has done very little for the PAYE section of the population. I cannot see the pressure on them being lifted by any of the allowances announced by the Minister. The Minister referred to children's allowances but when we turn to page 43 of the budget we note that the children's allowance in the income tax code will be reduced. One is inclined to overlook that fact. The Minister is to be complimented on his masterly presentation. There will be an element of claw-back in the new children's allowances. In a quick assessment of the effects of the combination of income tax and the changes in the children's allowances we find that the married couple on an income of £5,000 per annum, without children, will save something like £2.12 per week or £110 a year and that the married couple on the same income with three children will save £1.67 per week. When children's allowances are added to this their net saving as a result of this budget will be only £2.42 per week. Their position as against that of a married couple without children is that they will be only 30p better off, that is 10p per child. There are probably other examples of other anomalies which do not reflect any great concern in this budget for families with children. On closer examination the changes do not appear to be as beneficial as one might think at first glance, and the Minister is unlikely to help the Opposition by pointing out these little flaws.

The trade unions, as well as I, subjected the budget to an examination as to how it might contribute to improving industrial relations. It has failed the test. The judgement of trade unions is that the budget has not altered appreciably the position of the PAYE earners and cannot be said to have helped in removing the tension which exists in industrial relations. The PAYE earner's sense of grievance that he has to pay very heavy taxation is likely to continue.

The estimate of growth can be questioned. The figures of wages and salaries in the public sector can be questioned. It cannot be claimed that the disimprovement in the living standards of low income families that occured as a result of the food subsidies being removed has been adequately met today in the terms announced by the Minister. A sociological examination has shown that a very high proportion of the income of low income families is spent on food. We must remember the very bad effects of the removal of food subsidies on low income families in considering anything we might say in praise or in qualified approval of the budget.

All in all this budget does not merit the support of the working people and I am afraid it will not receive that support. At first glance the budget seems to give some improvement but on closer inspection it will be seen that the Government are still as insensitive as ever to what should be the redistributive role of a Government in a period of economic growth. This budget will not assist the Government in getting the sort of wage agreement that is vital in 1979 if any of the figures, and the strategies behind them, on which the Minister based his case today are to be sustained.