The Bill before the House is to give effect to a budget which will go down in history as one of the fiasco budgets of the century. Never before in the history of parliamentary budgets has there been so much confusion and confrontation and so little conviction and courage. The Government's composite memoirs, if they are ever written, could be entitled aptly "Profiles in Cowardice" or "Why Ireland Slept".
I wish to dwell a little on why a Government with such a majority are so cowardly and weak, and then I want to deal with the subject of why Ireland sleeps and endures the industrial and social nightmare that now haunts us. Cowardice in Dublin parlance is normally connected with or represented by the colour yellow. The Lynch Government is the yellow Government who published in quick succession white papers and green papers equally insipid, equally infirm and equally based on inequality, particularly as far as taxation is concerned. There lies the paradox. There lies the root of the Government's cowardice. They were elected as and remain the Government of privilege, of the stiff upper lip and the hard neck. Their pampering of the rich and the very rich leaves them exposed nakedly to the wrath of the organised masses so that when confronted by the organised farmers they cave in not, as many suppose, to diminish the tax taken from the farmers but simply because the Government's budgetary proposals, like their election manifesto promises, are based not on sure and defensible grounds of social justice but on the indefensible grounds of pandering to the rich.
It was of course the caving in to the farmers which ignited the smouldering indignation of people on PAYE and brought unprecedented thousands on to the streets. Indeed, given the provisions of the national understanding, it is very clear that those unprecedented marching thousands wasted their time and that the Government have learned nothing from those demonstrations. The fear that controlled the Government five or six weeks ago as the thousands marched by this House—fear not merely for the Government but also for the system—has been forgotten. A deep wedge, hitherto avoided by fair play, has been driven between town and country. I submit to this House that this is potentially the most divisive occurrence in Irish history since Partition. A new division in our society has, in the light of its eventual importance, gone relatively unheralded inside and outside the Dáil. A tax curtain has fallen right across Ireland to the extent that one section of our land is beginning to look at the other not so much as the beloved Mother Ireland but as the begrudging Step-Mother Ireland. We are a nation divided against itself. One of my constituents, describing it as a nation like Humpty-Dumpty, wrote to me as follows: "Humpty-Dumpty elected to the Dáil, Humpty-Dumpty had a great fall. All Jack's promises and all Jack's men Won't get poor Humpty moving together again."
Ireland is Humpty and Ireland is humped so long as it sleeps and tolerates this nightmare. This division in Irish society is due solely and totally to the financial policies of a mistaken, unjust and inept Government, a Government for whom it is to be regretted the bell does not yet toll. This division is based on the notion that the other side are not paying their fair share of tax or that their own side, for one reason or another are being asked to pay a disproportionate share of taxation.
My first reaction to the budget and the subsequent climb down to the farmers was that the Government would exploit the town and country divide, ending up extracting more taxation from both. I said as much in a speech I made at Thurles, County Tipperary, a few days after that infamous climbdown. The point I made then was described by one commentator as innocent and, by another, as precipitate. Three months after budget day what are the facts? The budget and this Finance Bill provide for a 37 per cent increase in PAYE receipts. That is the Minister's own figure and one that will have to be amended not downwards but upwards as a result of the proposed national understanding. Therefore, the House must agree that the thousands who marched around this House and the streets of this and other cities a few weeks ago wasted their time and taught nothing to a Government sold to the rich. The climbdown which precipitated these huge PAYE demonstrations and the consequent deep divisions in our society have ended up with no concession whatsoever, on the one hand, to the PAYE sector and, on the other, the clobbering of all farmers, big and small, regardless of their ability to pay.
It is no part of my brief as a Dublin Deputy to plead the case of farmers. But it is a fundamental commitment of mine and of my party to social justice that compels us to oppose the 2 per cent levy. It is unjust in its application, as is the imposition of income tax on the PAYE sector. I shall not continue at length about the 2 per cent levy. That has been dealt with by my colleague, Deputy Bruton.
However, I want to come to my central criticism of this Bill, of the national understanding and so on, which is the Government's treatment of those in the PAYE sector. If one considers merely the budget provisions in regard to changes in income tax, as if nothing else whatsoever had happened, perhaps I may be allowed cite my own case. As a married man with three children my personal allowance goes up by £500. That is immediately reduced in respect of three children, £22 each, by a total of £66. I lose £500 at 20p and pay now at 25p. That is £500×5p, totalling £25. Translated into a tax-free allowance, that is £75. Therefore, I lose £400 at 25p, and am now paying at 35p, a difference of 10p. The total extra in tax is £40, the equivalent of a tax-free allowance of £120, and I lose my social welfare tax allowance, a total of £68. Therefore, £66, £75, £120 and £68 total £329. If one deducts that figure from £500 increase in married allowance one is left with a net increase of £171 tax-free allowance or, when paid at standard rate, amounts to something like £55 a year or slightly over £1 a week. That is the so-called benefit of this budget to me as a married person with three children. And that is before one takes account of the first budget of this year, the one which removed the food subsidies. My wife when she goes to the shops now must pay more for her bread, butter, milk, cheese and so on and, as any mother with three children will tell you, the increased price of those commodities amounts to a great deal more than £1 a week.
Like the great majority of taxpayers, I am a net loser under the tax adjustments in this budget. That constitutes the most annoying factor for those people at work who read the headlines the day after the budget: "£500 increase in tax-free allowance." Again expectations were raised falsely because, when the 6 April came and went and likewise the first pay packet, there was not that extra cash to be found in the pay packet as the workforce were so erroneously led to expect; in many cases, there was less. Certainly there was less for the wives who had previously demanded an increase in the take-home pay to meet the increased food costs brought about directly by the financial policies of a Government who understand little and care nothing for the problems not merely of the poor but of the majority of our people living from week to week. Those false expectations are at the root of so many of our problems. As I have said so many times before both inside and outside this House, many of our industrial problems today are connected with the euphoric expectations engendered by the infamous manifesto of 1977: we could have everything for nothing, nothing would have to be paid for. The people took the Government at their word. Then came the 1979 Budget with a £500 increase by way of tax-free allowance for married couples. What most people immediately read from that was that they would pay £500×35p less in tax. That is what people were led to believe, that they would have 500 times 35p extra in their pay packets. That was deliberately misleading to the people. It may have been good for a week or two following the budget but was disastrous in the medium and long term.
I should now like to deal with the terms of the Finance Bill as they affect the proposed national understanding. At the outset I should like to state that Fine Gael fully support, and have always done, the concept of national centralised bargaining because we believe that such centralised bargaining offers the best hope of bringing about industrial peace. We must admit that last year's national pay agreement did not bring about industrial peace but rather its provisions fuelled the industrial chaos which now haunts us. Towards the end of last year, when the initial negotiations on the national understanding commenced, we expressed the hope that it would not be a repeat of the 1978 agreement. We stated that Fine Gael would consider canvassing against any agreement that was similar to the 1978 one. We made that statement not because we were opposed to centralised bargaining but because the 8 per cent pay agreement last year turned out to be an average of 16 per cent. It was highly inflationary and not in keeping with the objective of job creation. That was our concern then as it is our concern now.
What then will be the effect of the Finance Bill on this new national understanding and other matters for 1979? According to the ESRI the estimated total national pay bill at the end of the 1978 pay agreement was £3,775 million and a 15 per cent increase on that would raise the pay bill by £585 million. It must be remembered that one-third of that increase will go straight to the Exchequer under the PAYE system and a little more in social insurance. My calculation is that the Exchequer will benefit to the tune of £190 million. The so-called rebate of £35 million at the end of the year is, by comparison, an insulting response to those thousands of people who demonstrated in this and other cities a few weeks ago. It is not a response to the genuine grievances held by the people in the PAYE sector because the net result at the end of the current tax year will not be that the people will pay £39 million less but that they will be paying at least £150 million more.
The Government have not learned anything from the deep-felt sense of injustice of the PAYE sector. The worry is that the ignoring of the grievances not alone threatens the Government but, as was privately articulated around the House by Members of the Government party and Opposition, threatens the system. Like the £500 increase in the marriage allowance which turned out to be a mirage, taking into account the removal of the food subsidies, the tax provisions of the national pay understanding will mean little. That is the area to which I am opposed.
I do not wish to comment on the scale of the increase except to say that without any wage drift it will be three times what the Taoiseach and the Minister for Economic Planning and Development were talking about a few months ago and is a long way from the rigid discipline which the Taoiseach spoke about some months ago. It stinks more of an electoral tactic than economic strategy. Like the £500 tax allowance increase, the beneficiaries will not know the true extent of the fraud being perpetrated upon them until they receive the increase.
In case there is any misunderstanding I should like to state that Fine Gael are anxious to see the national understanding carried. We understand the reservations of certain unions but we want that agreement carried because, warts and all, we believe it is better than any alternative in the short term. However, we also have a duty to point out that the increase in the pay packet would be the same if there was a 10 per cent tax-free increase. The 15 per cent taxed increase will have the damaging result of increasing costs 15 per cent more than a tax-free 10 per cent increase. Therefore, it reduces Irish competitiveness and reduces also our hopes and aspirations for job creation. And one of the most important aspects of the national understanding is in the area of job creation.
Yesterday the General Secretary of the ICTU speaking in defence of the national understanding said that it related to more than pay. It is an understanding which not merely promises the creation of 25,000 jobs—and who could have any credence in a Fianna Fáil promise—but guarantees the creation of this number of jobs. A better way of creating the environment in which extra jobs could be provided would be to maintain and, where possible, improve Irish competitiveness so that we might sell our goods more easily abroad, a situation which in turn would ensure at home that there would be jobs in the area of the production of the goods concerned. Yet the tax provisions of this Bill mean that a 15 per cent increase in wages with the consequent increases in costs and prices is necessary where a 10 per cent increase would have been sufficient if the Government had accepted Deputy FitzGerald's proposal for the indexation of tax allowances and tax bands.
The environment for job creation is disimproved by reason of those tax provisions which, therefore, are in conflict with the guarantee of the provision of 25,000 new jobs. I call, too, for an acceptance of the national understanding but regardless of whether it is accepted, we all have the right to expect the Government to create the promised 25,000 jobs. The country needs those jobs. It is wrong that that man of high repute, the General Secretary of the ICTU, should seem to threaten those who would oppose the national understanding by saying that if it is not accepted there will not be jobs. That seems to imply that the Government would sulk in their corner in such circumstances and would not provide the jobs that are so necessary.
Regardless of the implications for the Exchequer and regardless of the consequences of having to increase perhaps the percentage of GNP which will be borrowed this year, it would be better for the Minister to reconsider the income tax provisions in this Bill. It would be helpful if he would tell the House how much it would cost, for instance, to index-link pay increases and how much it would cost if the Government were to agree not to take any tax as a result of the pay increases. He might tell us also what would be the benefits of such an approach or what would be the loss to the Exchequer. Obviously, there must be money in the Exchequer if we are to help create the jobs that we all agree are needed. Therefore, the Minister might tell us, too, how there could be made up any loss that might result from the policy I have outlined.
I plead with the Minister to consider the inflationary aspects of his taxation provisions in terms of the national understanding. I trust that he will tell us whether 5 per cent of the 15 per cent maximum increase proposed will go back to the Exchequer by way of taxation and also whether price increases could be reduced by the Government saying that they would not take extra tax from the pay increases that would result from acceptance of the national understanding. Such a policy, though resulting in a loss of revenue to the Exchequer, would help to bring about a situation of demands for price increases being less than would be the case otherwise and it would help also in the area of our competitiveness abroad and, consequently, our job creation prospects.
We have been told, not only by the economic mandarins of this House but also by the economic commentators in the media that we need to have a situation of a convergence of wage increase rates, of inflation rates and of growth rates with those of our partners in the EMS, that we need to break away from the British situation of high interest rates and high inflation. We are told that we need rigid discipline but this year there is a proposal for a basic wage increase of 15 per cent during a 15-month period while in Germany, which is our leading competitor on the continent, there will be pay increases of only 4 per cent.