It is related to the general performance of the economy. I am prepared to accept a bonus on the basis of performance of a Deputy in the House. However, it would be difficult to measure the performance of a Deputy in the House. If the economy goes well in any year public servants do not receive a bonus. Admittedly, they will benefit by virtue of the fact that the base for the next year will be a better one as a result of the success of the economic plans during that year, but public servants do not benefit in bonus terms as those involved in industry do. We are all aware that if plans go well in an industry there is a fair chance that the workers will get an extra week's wages and, in some cases, an extra two weeks' wages at the end of the year. There is no such performance-related measure in the public service.
There is considerable merit in such a measure in which our general performance during the year can merit an additional bonus. It is an incentive, admittedly a small one, to public servants to assist exporters and industrialists to achieve their targets in employment, output and productivity.
I am aware that this concept is reasonably common and successful in countries like Japan, not necessarily in the form of tax rebates but in other forms. Are we afraid to attempt any new concepts after reaching an agreement? It has been stated that if this agreement works the Government will give £39 million in tax concessions. In a full year that will amount to £50 million. Are we not prepared to attempt such measures? Are we too conservative to see a possibility in such measures or, as Deputy Barry stated, do we feel that people are entitled to this rebate anyway and there should not be any relation to performance? In my view there should be a relation to performance if we are to provide the jobs for the children who will be coming on the employment market over the next 10 years. There must be a relation to performance if we are to succeed in the EMS.
I like the concept and its dependence on two conditions is the minimum requirement that could be asked for. One of those conditions is that the budgetary position in the last quarter of the year is reasonably in line with expectations. That is reasonable and it does not tie anything down to percentages or ask too much of anybody. It merely states that we are dependent on our performance together as trade unions, employers and Government. The buck stops here now because the punt is with us. We cannot say, as was stated so frequently in the past, that if the English pound is devalued or changes we have to follow. In the EMS we have been maintaining our own stability and progress is within our own ambit. The Government are saying that the budgetary position should be reasonably in line with expectation and have also told us that funds needed for employment creation, the first priority, will be made available.
I understand that the employers and the Government will contribute 50 per cent each of the funds suggested, to be deducted on a certain basis during the year. If the national understanding goes ahead those funds will be available automatically. I do not see what those who criticise the national understanding are talking about. They are trying to run away from reality, a reasonable option which has been offered. I was amazed to hear the two leading Opposition speakers saying that they would like to see the Minister remove the latter two conditions. They missed the novel concept of it. If we are interested in the economy, national development and in the jobs we have heard so much about we should be prepared to try this concept. I am sure all our people would be pleased to receive an additional bonus at the end of the year, given that the economy will perform broadly in line with expectations.
The national understanding also guarantees living standards in that workers will be automatically compensated for price rises above the 7 per cent which is provided in the package. That represents a major step forward. In addition to the 7 per cent there is provision for a 1 per cent rise for each 1 per cent increase in prices up to 11 per cent and ½ per cent for each 1 per cent after that.
Some of the media and the papers in particular pointed out that the national understanding was a well worked out document and that it is a very valuable supplement to the Finance Bill before us today. As the Minister said, this will be brought into force by an amendment on Committee Stage, particularly to cater for the special allowance of £175 being made. It is interesting to note that this allowance will also apply to a working wife. There will be two allowances in the case of a working husband and wife.
I disagree with the two previous speakers and find it very difficult to accept their arguments. The Minister has stressed that this Bill is geared towards growth in employment. As well as the measures in the Bill the Government have also, through the national understanding, undertaken to establish national hire and enterprise agencies to ensure that the employment targets are reached.
When we talk about people being entitled to certain things we have to think of where we stand in Europe. Deputy Barry said that the main interest of people is the money in their pockets, their take-home pay. I agree with him in relation to that, but people are also concerned with what that take-home pay will purchase. When we look at the gross domestic product per capita of people employed in Ireland and in England and compare that with West Germany and the Netherlands, we find that over the last five years we have been doing very well compared with the UK. We have been closing the gap considerably. Our increase has been 73 per cent over the period 1972-77, while the UK increase was 58 per cent. They are still left higher than us because they started at a higher point. If we take the mean of the UK and Ireland we find that the increase over that period was 3,700 dollars per person employed. The comparison with the UK is very good but when we look at our friends in Germany and the Netherlands we find that the increase there over the same period was 12,000 dollars. People just cannot say they are entitled to an increase. They are entitled to it if they work for it. We must be prepared to work.
West Germany and the Netherlands are currently growing in wealth at two and a half times the rate of the average of Ireland and the UK. We have linked ourselves with the EMS and have brought in a high degree of exchange rate stability. If we want to enjoy the levels of wealth and income on the Continent we must be prepared to raise our productivity and output in line with our possibilities. We have to see our national understanding not alone within our own context but in the much broader context of Europe.
Deputy Barry and Deputy Tully referred to the removal of the 20 per cent income tax band. Deputy Barry said that the outcome was that everybody now pays more. This is not true because the allowances were increased. He did not mention that the reliefs given in the budget have removed 40,000 taxpayers from the tax net, 21,000 married people and 19,000 single people. The single person's allowance was increased by 68 per cent and the married person's allowance was increased by 103 per cent, which was more than doubled in two years. One would think, when listening to the Opposition speakers, that the Minister had done very little in this connection.
I asked a question on 13 March last about the change in allowances which has taken place and was given the information that the allowance for a single person in 1973-74 was £299, in 1974-75, £500, 1975-76, £575, 1976-77, £620, 1977-78, £665, 1978-79, £865, and 1979-80, £1,115. It is quite clear from those figures that the annual rate of increase in 1975-76 was £75, in 1976-77, £45, 1977-78, £45, 1978-79, £200 and 1979-80, £250. During the first two years for which the present Minister for Finance was responsible the rate of allowance for a single person was increased by £450 whereas in the last two years of Coalition the increase was £90. The Minister for Finance has increased the tax-free allowance for a single person during his first two years in office by five times the rate the Coalition Minister increased it in their last two years in office. This does not include the extras that are raised in the national understanding.
With regard to allowances for a married couple during the same period they were in 1973-74, £494; 1974-75, £800; 1975-76, £920; 1976-77, £1,010; 1977-78, £1,100; 1978-79, £1,730 and 1979-80, £2,230. If we make the same comparison for the first two years the Minister for Finance has been responsible for, including the provisions made in the Finance Bill, we find the allowance for a married couple has increased by £1,130. For the previous two years for which the Coalition were responsible, there was an increase of £180, £90 each year.
The figures show that this Minister has done more than anyone else. I am not saying that we have achieved all that is desired or that there are not other ways in which the taxation system could or should be varied; but I am saying that the Minister has done more in his two years as Minister for Finance than anyone else did previously, especially if compared with the two previous years. The increases for married couples with two or three children are recorded in the answers given to parliamentary questions on Tuesday, 13 March 1979. The Minister has been making substantial progress in easing the burden on these people. That is his firm commitment and he is pursuing that objective in this Bill. Combining these tax allowances with the measures in the national understanding of a 15 per cent increase over the next 15 months, if inflation can be kept down to the levels given in the targets for 1979 there is every reason to expect that there will be real increases in income in the coming year.
There are various other measures in the Bill which I welcome. In section 1 the income limit for a dependent relative tax allowance will in future be automatically equal to the personal rate of social welfare contributory old age pension payable to a person aged 80 or over and living alone. The limit for 1979-80 will be £1,129. This measure is welcomed by everyone.
Sections 2 and 3 relate to increased personal allowances and the amendments of those allowances. The Minister has been making considerable progress in improving these allowances while at the same time keeping the value of the pound at a reasonable level through a low rate of inflation. Children's allowances have been a source of considerable comment, and rightly so, because they are extremely important. I, and many other Deputies, am aware of the importance and the effect of these allowances.
The Minister has provided a 28 per cent increase in expenditure on children's allowances, which is very welcome. The increase for the first child is 52 per cent, from £2.30 to £3.50 per month; for the second child it is 34 per cent; and for the third and subsequent children it is 14 per cent. For a family with five children this is equal to a 22 per cent increase. A mother of three children will receive an extra £3.25 per month, or a 29 per cent increase. I welcome these increases but in future I should like the Minister to introduce some differentiation, with higher rates of increases for children between 12 and 18 years of age, because at that stage these children are growing and consuming large amounts of food. Consequently, this is a very expensive period of their lives. Perhaps the Minister would take up this suggestion.
Section 4 provides for an additional personal allowance of £250 for a parent who is widowed, deserted, separated or unmarried, with a dependent child resident with him or her. This measure is welcomed by all Deputies and I should like to record my particular welcome for it.
Section 6 provides for relief in respect of the labour element of expenditure of householders on the improvement and maintenance of their residences. We should be looking more closely at such measures to see how they can be put into operation. The relief in 1979-80 is confined to expenditure in excess of £50 and the maximum amount which would qualify for relief is £450. I note from the Minister's speech that this scheme will apply to, among other things, insulation. I was particularly glad to see the introduction of this measure, which it is hoped will contribute towards job creation and energy conservation.
I was also interested to note in the Minister's speech something which I had not known previously, that is, that included in this scheme is not only the maintenance of residences but also the maintenance of gardens. This is a very interesting measure. I do not think anybody realises that this measure exists; I am not sure if it has been spelt out in detail previously. It offers the opportunity to improve landscaping and amenities throughout the country, particularly in city areas, and to improve gardens, residences and to provide employment at the same time. I hope this measure will be recognised and availed of. A figure of £450 is considerable and offers a great deal of scope for development in that area. This is an area in which we have not been outstanding, probably because we have always had it too easy. We have beautiful countryside and surroundings but we did not have to work very hard to preserve or develop them. Because of the expansion of our cities and towns people are realising that, if action is not taken quickly, a great deal of that beauty will be completely lost.
There is considerable scope for this sort of development, and I would welcome it. We tend to be a little on the mean side when it comes to the planting of large trees and shrubs. If one goes to other developed countries one finds that the transplanting of much larger trees and shrubs is a speedy way of improving the environment. Perhaps this measure could, if used properly, lead to much greater development in this area. We are very competent in production in this area and it could lead to considerable exports if it were developed.
Sections 8 and 9 deal with income tax relief in respect of personal interest. I am glad that figure on which full relief in respect of interest on borrowings can be claimed has been increased to the equivalent of a figure of £20,000, which represents a figure of £2,400, as the maximum amount of personal interest which can qualify for income tax relief. This is an important measure from the householders' point of view. It keeps pace with the changing costs of the normal semi-detached or reasonably priced dwelling. It is a development which will be welcomed by young people and newly-married people setting up homes.
I should like something to be done in relation to savings. The figure for savings last year of £65 million was a record. I should like to see where that figure came from. Most of it came from the farming sector, where the new income provided a flow of cash, a great deal of which would have gone into short-term savings for future development. It is true to say that 1978 was a record year for savings, but it cannot have been a record with the ordinary householder in the city area whose savings would be very small. There is still an allowance of £70 for the husband and £70 for the wife on interest earned on bank deposits or loans. People are reaching a stage where they will be prepared to save a proportion of their disposable income. I should like to see people encouraged to save in the bank and by way of national loans. Interesting saving certificates are available under the post office system. I should like to see an improvement in the allowances for savings. I do not know if there is any technical reason why this should not be done. There would be a greater increase in savings if we had such allowances and I mentioned this point during the budget debate.
When I was in Japan recently at a conference I inquired about savings policy there. I found that it is a major factor in the Japanese approach to investment. Major benefits are given for saving. I heard some commentators say recently that they regard this kind of interest as unearned income and consequently it should be taxed very heavily. I should like to see families encouraged to save £5,000 or £10,000 as security for themselves. We are nearing the time when that should be possible. It would also provide a great deal of money for investment in our economy. I welcome the step the Minister has taken and suggest that this aspect of savings should be considered in future Bills.
Chapter II deals with the question of taxation of farming profits. This is an area which caused a great deal of controversy recently and Deputy Barry had several comments to make on it. He did not say what he might have said and that is that, despite all that was said in between, the 2 per cent levy is still there. People seems to think it has vanished. If one reads carefully the Minister's and the Taoiseach's statements at the time of the budget, one realises that it was intended to be a short-term measure. It was a supplementary measure to the normal taxation. This is a point which did not come across to people. The Minister outlined all the additional taxation and said he wanted a better distribution of taxes and a larger share from the farming sector up to a certain percentage of income. He also said that he was proposing an additional and separate measure to bring in this money. In proposing that, the Minister said he was prepared to discuss an alternative package with the farming community, because it was an unusual supplementary measure. However, the Minister's principal requirement was to bring in the amount of money which would ensure a better distribution of taxation overall within our society.
Deputy Tully mentioned that the incomes in the agricultural sector have improved. Farmers have passed from a very difficult position five or six years ago to one of a reasonable standard of living and are now in a position to make a fair and reasonable contribution to the overall budgetary requirements. In the budget the Minister changed the threshold of liability from £60 rateable valuation to £40 and he changed the multiplier under the notional system from 19 to 125. He also made a number of other changes at that time. As we all know, the Minister has announced, as part of the national understanding, that a new package will apply from next year which will ensure that a fair and reasonable contribution will be made. The package will bring the threshold down to £40 poor law valuation and will mean that the notional system will be gone entirely. It will introduce a resource tax of £3.50 per £1 of poor law valuation over £70 poor law valuation, which is a very reasonable level at which to introduce it. It will mean that the taxes to be taken from the farming sector will be due from 1 September of the current year. In the meantime, until that package comes in, the 2 per cent levy will go ahead and, indeed, has gone ahead as from to-day.
The Minister has tried to be as fair, as reasonable and as patient as he could. He has been misunderstood, and perhaps some people set about to misunderstand what he is attempting to do. If one reads what was said, 1 May was the date by which these final agreements had to be made. It is clear that the 2 per cent was there and it is in operation as of now. Consequently, the Minister has maintained his responsible approach to the problem, which, we all must admit, is not an easy one. Nevertheless, the Government have said that we must face up to the question of a fairer spread of taxation and it can be clearly seen that that is what is being done.
Section 25 provides for the exemption from tax of payments made to employers under the Employment Incentive Scheme and Employment Maintenance Scheme. Again, this is totally consistent with the Governmen't approach throughout the budget and other measures that have been taken, whether the EMS or the Finance Bill here today. Anything that can reasonably be done to improve employment, given the very substantial employment targets that we have, will be done by the Government. That is a consistent aim which can be clearly seen and I welcome this measure in that it may give a further incentive to employers to participate in these schemes.
Chapter VI is concerned with anti-avoidance. We should all be quite clear about the fact that the Minister is committed to reducing avoidance and evasion of tax and ensuring that all sectors pay a fair share. This is again a difficult task, because when one comes to the self-employed or the business sectors there are different norms and different situations to be faced in assessing profit or real income. The steps taken recently by the Minister will go a long way towards ensuring that the various sectors make a reasonable and correct contribution and that avoidance and evasion are kept at the lowest possible level.
I was particularly interested in one statement made recently that the kinds of income in different sectors as recorded by the Revenue Commissioners would be made public, not mentioning the individuals concerned but giving an idea so that people can clearly see levels of income in different types of employment in different sectors. Here also the Minister, in a further effort to counter evasion where it occurs, is aiming at the highest reasonable level of transparency. This is necessary because there is at present a great deal of misunderstanding about who pays what and what they pay for. In fact, a number of self-employed people have come to me who claim—and I believe them—to be paying their full and fair share of tax and yet they are being berated by their neighbours. One man was quite upset. He believes it is essential to keep himself straight and right in connection with taxation, because if one goes wrong and is discovered, the Revenue Commissioners can go back for a number of years and cause one great trouble. Yet, in attempting to keep himself right, he recognised and mentioned to me the fact that the two neighbours who complained to him worked in semi-State organisations and regularly did "nixers" in the evenings in respect of which he is quite certain they are not paying income tax.
It is a pity that we should come down to this level of one neighbour fighting with the next about what they are paying or not paying. We need a fair, reasonable and transparent system, a system that can be seen to be fair and to work and which will give the best possible allowances depending on circumstances. The Minister has gone some of the way in this regard and I am confident that he is convinced that it is one of his major targets and will continue to be such. The much quoted manifesto makes the point that every effort will be made by the Fianna Fáil Government to improve take home pay, particularly through improved tax free allowances, so that when a person works it is more encouraging and valuable because of the amount of money he can take home.
Many other questions arise regarding taxation. Some people are quietly raising one question while others are afraid of it, and that is the question of how the money is spent and administered. We must be constantly concerned and vigilant to ensure that our administrative structures are such that those who administer the finance of the State have every opportunity to do so effectively and efficiently. The Committee on State Sponsored Bodies are currently examining the situation in regard to these bodies and this is something about which the Government and Members of the House are naturally concerned.
The Bill offers considerable progress in regard to the development of our financial and economic affairs. It contains numerous measures which are valuable and, taken together with the national understanding, I think it offers a very good package to both workers and employers for this year, and for the next 15 months in respect of the national understanding. If we could cease focusing on one another and concentrate on national economic development and progress, perhaps we could together make a bigger cake or—to change the metaphor—as has often been said, make more blades of grass grow where one grew before and generally stimulate our economy making the fullest possible use of our tremendous asset of young people, about whom this debate should really be. It is their future that we consider and discuss, their jobs that are in question when we talk of how much we are prepared to accept and whether we are entitled to something or not.
Overall, we must bear in mind that the Government kept inflation down below eight per cent last year and are committed to keeping it at that type of level for the current year. If they do that, these measures are all very valuable because the tax free allowances we get are meaningful. However large tax free allowances may be, if inflation is not kept under control and if economic development and real gain in national wealth are not progressing, we gain nothing. I am confident of the future because I know the Government are tackling comprehensively the development of the economy and it is within the framework of this comprehensive task that this Bill must be seen. I wish to record my own tribute to the employers and the members of the Irish Congress of Trade Unions who have been entirely consistent, in my view, throughout recent months of debate and criticism and upheaval. This shows clearly that those people who are sitting around the table are very conscious of the real task facing the Government and of the real determination of the part of the Government to pass on, to workers in particular, the benefits of our economic development. The responsible attitude being adopted by the Government is clear.
One of our major problems is that the same degree of understanding does not permeate much more widely through our society. Perhaps some of the blame lies with us as public representatives who so far have failed to convince the people generally of what the Government, the trade unions and the employers are attempting to do. The degree of responsibility shown by the ICTU has been high having regard to the noises that are being made. Perhaps we should be doing more to ensure that people further down the line and further away from the focal point have a better understanding of what is being attempted by those with whom rests the ultimate responsibility. There may be a real problem here. If there is not I fail to understand some of the statements that are being made currently such as the statements that we have had from Deputies Barry and Tully in relation to the national understanding and to the two clauses concerning the tax rebate of £175 at the end of the year. This rebate represents a very welcome and novel measure. If people realised what is the intention and also how easy it is to achieve the performance targets that we have set ourselves they would be more inclined to co-operate in this regard.
In principle the national understanding is a mechanism for further participation in the future on the part of all employees and taxpayers in the overall growth and development of our economy. We are all committed to and involved in this growth. All of us either contribute or take from it and I would prefer to see us contribute and in this way living and working together more happily. The economy is in good order. It is in good hands. I congratulate the Minister not only in regard to this Bill but in respect of the measures he has taken recently.
