Perhaps one of the most striking features of this budget is that when you look at the tables at the back you find that the revenue from tax increases is double the amount given by way of reliefs, an aspect of the budget which perhaps has not attracted the attention it deserves. More generally, and I intend to come back to this in more detail, it is a budget which does not resolve our economic or financial problems. A budget must be judged by two standards, first its impact on the economic situation of the country—whether it is well judged to meet the needs of the day—and second, its impact on equity.
Financial Resolutions, 1980. - Financial Resolution No. 19: General (Resumed).
Debate resumed on the following motion:
That it is expedient to amend the law relating to customs and inland revenue (including excise) and to make further provision in connection with finance.
—(Minister for Finance)
I should have announced that the debate comes under the Standing Order which sets a limit to speeches. The leading speakers for the Opposition parties have one-and-a-half hours each, all other speakers have one hour and the speaker winding up the debate has one-and-a-half hours.
As far as I am concerned that announcement was unnecessary because I shall not exceed that limit. I propose to deal with the budget under the two broad headings I have referred to—its economic effects and its effects in equity. On the economic side it would be fair to say that the objective of a budget at this time, having reached the stage we have after two-and-a-half years of this Government, should be to protect our £, to correct Government finances and bring our balance of payments to order, to increase employment particularly among young people, to increase incentives for output and work and, extremely important, to bring down inflation and to halt it.
I do not think anyone will quarrel with me for listing these as four major objectives, although people may disagree about their order of importance. I suggest I am right in identifying these four things as matters that need to be taken care of at this time. My question therefore is how does the budget on the economic side, before we come to the question of equity, measure up to these criteria? In the matter of protecting our £—this is something that must be given much higher priority now that we have an independent currency to protect— after two-and-a-half profligate years, the need has been for sounder Government financing.
To what extent does the budget show a better picture? It has been dressed up to show a better picture but when one goes beneath the surface one finds that the basic financial problem facing the Government has not been solved. Indeed in some respects it is rather worse now than it has been. Let us look first at the current deficit. Last year the Government planned on a current deficit of £289 million. This year the planned deficit, after taking the benefit of £100 million carryover from last year because of the Post Office strike, is £353 million. It means that the trend is from a planned £289 million to a planned £453 million current deficit, not counting the £100 million carryover.
That is a marked deterioration, and we all know how big a gap there was last year between what had been planned to happen and what actually happened. I forecast that position on this occasion last year. I was criticised for having done so, but events have proved that I was correct.
Let us look at the borrowing. It is planned at £896 million this year, but again this figure is reduced by the carryover of this £100 million. I do not suppose the Government intend to have a Post Office strike this year and to get similar benefits in 1981. It means that the underlying figure for borrowing, discounting the £100 million bonus, is £996 million. How does that compare with our plans for borrowing last year? The planned borrowing figure—leaving on one side that £100 million bonus—involves an increase from 10½ per cent to 11¼ per cent of GNP, not a reduction. Indeed the increase of almost a percentage point would be significantly greater—and this I think is the correct approach—if borrowing by State bodies were included. I would refer people to the interesting article on this point in this morning's Irish Times on the subject by Antoin E. Murphy pointing out that State bodies' borrowing must be included to give the full picture. Otherwise the Government could solve all of their problems by simply making all State bodies borrow all their money directly and just producing a book-keeping change. Therefore, what we have is a budget in which the underlying trend is that the current deficit on borrowing is up, not down, at a time when there has been, I had thought, general agreement on the vital importance of getting our finances under control.
Moreover, the budget stores up much trouble for the year ahead. Quite apart from the fact that this year's figures look £100 million better off, because of the carryover—and that will not be there next year—we have also the bringing forward of £24 million taxation of the self-employed into this year. That is a once-and-for-all bonus which, by definition, cannot arise next year. There is also a once-off change in arrangements for the deferment of tax on spirits, bringing in £8.3 million this year. One can see the extent to which this year's budget is distorted and dressed up in an artificial manner. On the other side there is also the fact that the tax concessions given in this budget involve a burden which will be far greater next year than this year—that is in the nature of things; I am not complaining about it but is has to be recognised. And to be fair, the Minister's budget speech gave the figures which show that income tax concessions will cost about £100 million more in 1981 than in 1980. That constitutes an extra problem for next year when these special bonuses will not be there.
There is also the fact that the budget makes provision for £100 million in respect of extra public service pay. It talks tough on the subject and then makes the biggest provision ever made in a budget although public service pay, one had thought, had been settled up to August of this year. To allow £100 million for the last four months of the year implies a very large carryover from this into next year's budget. How large will depend on how much of this £100 million is to go on these special increases, which are denounced by the Minister in the budget, and for which he is apparently making some provision, and how much is an estimate of the scale of the wage round that will take place next September generally when the new wage round is negotiated. As far as I can calculate this £100 million for four months, which if one were to extrapolate it to a full year would be £300 million—represents provision for an increase of something over 20 per cent next September, which is perhaps a first admission by the Government of the scale of the trouble they are storing up for themselves in terms of pay claims by the inflationary impact of this budget. Next year public service pay will carry over from this year—apart from any increase that may take place next year—and will involve something up to an additional £200 million of commitments.
There is also the carry-over of £31,500,000 for the cost of social welfare benefits. Next year the Government have promised—and we endorse it—that corporate taxation will be fixed at a 10 per cent level in replacement of the existing export tax reliefs which will involve further reductions in taxation. When one adds all these up the picture with which we are left following this year's budget, in regard to 1981, is a very disturbing one indeed. Far from the finances of the State being put in order they have been dressed up for the benefit of the public this year but at the cost of a very considerable deterioration in the year ahead. I do not think any of this will impress those concerned with the stability of our currency. Nor do I think that those so concerned will be happy with an inflation rate which now seems likely to be the highest in the EEC, higher even than Britain which no one would have thought possible until yesterday afternoon.
Perhaps I should say a word about the inflation rate. I have been struck by some of the comments on this which I find puzzling. A number of commentators both on RTE and in the newspapers suggest that the impact of this budget on the cost of living will be of the order of 2½ per cent to 3 per cent—indeed I think 2 per cent to 3 per cent is the range mentioned. I do not understand how these figures are arrived at. The full year cost of the increases in taxation to be imposed between today and 1 May works out at approximately £310 million. If one takes each item and takes account of the fact that in the current year in respect of a number of items tax is put on today and that one gets only five-sixths of the revenue this year, one realises that the full year cost would be one-fifth greater. Similarly with regard to VAT, in respect of which two-thirds only of the revenue will accrue this year, the full yearly impact would be 50 per cent greater. Taking account of these staggered effects in time, the full year cost of the tax impositions, as far as I can calculate, is approximately £309 million or £310 million. The effect of that is that, month by month, when the full effects will be felt—although most of the effects are felt immediately—by May, and between the dates of the two cost of living indices, mid-February and mid-May, within that period, the monthly burden of indirect taxation will be raised by a total sum in excess of £25 million, meaning an annual rate of £300 million. The effect of that on the cost of living can easily be judged. The projection of the personal expenditure consumption in the current year by the ESRI—and I do not think there would be much disagreement with the order of magnitude—is £5,500 million. This would be reduced somewhat by the deflationary effects of the budget which will cut consumption by £100 million or £150 million. Some part of this total does not come within the framework or grasp of the consumer price index. One can say that in 1980, the personal consumption to which an increase in taxation will apply will be approximately £5,000 million. Therefore, every £50 million increase in indirect taxation, on a full year basis, adds one percentage point to the cost of living index.
This budget, therefore, will increase the cost of living by around, or perhaps slightly more than 6 per cent, depending on one's exact calculation. As far as I can see it could not be less than 6 per cent as it adds £300 million to a figure of retail consumption for index purposes of approximately £5,000 million. One does not have to be a great mathematician to divide 5,000 into 300 million to get 6 per cent. It is important to make that point because certainly there has been a lot of confusion about it. I think many people this morning believe, as a result, that the cost of living increase will be only 2 per cent or 3 per cent, whereas in fact it will be 2 to 3 times as great as the figures that have been mentioned.
The effect of that on our consumer price index seems likely to be that by mid-May, the end year increase—the increase from mid-May 1979 to mid-May 1980—the increase for those 12 months will probably be of the order of 21½ per cent to 22 per cent. We know it is 16 per cent at present. We know that the increase in the cost of living from mid-November to mid-February, not yet published, is unlikely to be significantly lower than the increase of 4¼ per cent in the same quarter last year. Therefore, it is clear that the cost of living index to mid-February will rise to 15½ per cent or 16 per cent.
The ordinary increases taking place as a result of other factors at work in the economy—the effect of pay increase costs, oil price increases working their way through the system and other import price increases—will ensure that the ordinary increase in the cost of living, the non-budgetary increase, for the three months mid-February to mid-May will be about 3 per cent, the same as last year. On top of that the Government are adding a further 6 per cent. That gives an inflation rate of 21½ to 22 per cent for the 12 months ended May. It will be about 20 per cent for the 12 months ended November though it may settle a little and, year on year, 1980 over 1979 about 20 per cent. What other country in the EEC faces inflation of that magnitude for the current year? How can we hope to hold our position in the EMS with this kind of inflation on top of continued instability in our public finances?
In relation to safeguarding our £ it was a budget which did nothing to bring our finances into balance. It involves an underlying substantially higher current deficit and higher borrowing percentage of GNP than was planned in the previous year. A budget which pushes up inflation to 21½-22 per cent is not one designed or likely to strengthen our currency at a time when the existing rate of inflation already threatens.
What about the balance of payments deficit, which is the other aspect of our economy that people from outside will be looking at when they come to determine whether our currency is one they should widely hold or not? The government's own forecast is for a figure this year higher than last year's deficit, now estimated at £760 million. That is their estimate on what they call neutral budget assumptions. The figure will now be somewhat lower because the budget is somewhat deflationary. As far as one can judge from Government documents and the ESRI material provided for calculations, it looks as if the current balance of payments deficit next year will be of the order of £700 million. That is disturbingly high. Moreover, the actual tax changes in the budget do nothing to help the balance of payments because taxation increases are high on products which have a substantial domestic value added, such as beer and spirits, and are lower on cars, the bulk of which are imported. The tax increases in themselves are not in their structure designed to help the balance of payments and the actual impact of the budget is such that it is likely to leave us with a deficit of £700 million, which is not a figure which will satisfy anyone concerned with maintaining the value of our currency. It cannot be said that this budget does much to produce a healthier economy. It will cut growth, perhaps to be below 1 per cent, but is unlikely to increase confidence in our economy.
The second test for a budget is whether it increases incentives. It must be said that the budget does in fact increase incentives by reducing marginally tax rates over a wide band. It would be wrong not to recognise that fact. It would be equally foolish not to recognise that the Government were forced to do this by the Supreme Court's decision, which left them no alternative. They made a virtue out of a necessity, and there is virtue in what has been done. There are consequences also. The much wider tax bands, which are to be welcomed from the point of view of taxpayers, necessarily involve much less artificial buoyancy of income in future years, yet a further difficulty for the 1981 budget. The more one looks at that budget the more the problem looks like being.
One of the results of the action forced on the Government by the Supreme Court is that taxation will bear much less heavily on people with incomes in the £10,000 to £20,000 bracket and it is fair to say that by comparison with other countries people in this tax bracket have been exceptionally heavily taxed. The reliefs in that area, which is the tax band that covers executives upon whose enterprise our future development depends, are to be welcomed. They do increase incentives at that level. The problem is, however, that this improvement has been achieved in large measure by taxing the less well off and at the cost of a massive inflation rate. If the Government had not been in such a financial mess the good results of spreading the tax bands and reducing tax for people in that tax bracket could have been secured without adverse effects. Given the financial situation the Government got themselves into they have been able to achieve this improvement, forced on them by the Supreme Court, only at the cost of taxing the less well off and at the cost of a massive rate of inflation.
The third test for a budget of this kind must be its impact on employment. In this respect the budget is entirely negative. There is nothing in the pre-budget documents related to employment except cuts in employment generating activity. Spending is reduced by more than half on schemes designed directly to increase employment, that is the youth employment, work experience and employment maintenance schemes. These three together now have a provision of £5.8 million as against £12.3 million last year. In addition, provision for the National Hire Agency has been cut by 60 per cent. Other areas where employment would be likely to result from Government spending where the labour content is high, local improvement schemes and environmental work, are also cut sharply as is investment in housing and education, which, apart from their intrinsic value, have significant employment content.
Many people assumed, seeing the cuts in the Book of Estimates, that the budget would do something to balance this. I thought it likely that the Government would have some concern for employment at this time and that the budget, and indeed the Government, would want to show this concern. I speculated as to whether the cuts in the Book of Estimates might not be designed to leave room for some imaginative scheme to put the money back in again to make the budget look as if it was doing something for employment in the hope that people would have forgotten the cuts a week earlier in the Book of Estimates. Not even that degree of commitment to employment for purely political reasons is evident in this budget which contemptuously omits the employment question in any form. Employment simply no longer features. With economic growth reduced to almost zero, possibly less than 1 per cent, employment growth in those conditions could only be achieved if there was some specific attempt to tackle it. If that is not done the only way we can get employment growth with that kind of growth in output would be if productivity stopped increasing, if it dropped from the 5 per cent which we had been having to zero. That is very unlikely. It seems very improbable and, in the long run, would not be very desirable. It is the only way, with the kind of growth the Government have left us with after two-and-a-half years, that employment can be generated without specific measures. The budget contained none of these.
The fourth requirement of a budget in our present economic situation is in relation to inflation. I have already shown what the inflationary impact of the budget will be—an increase of 6 per cent on top of the 15½-16 per cent inflation rate which we already have. The Government's record in regard to inflation can only be described as disastrous. I would remind the House that over a three-year period, after a far worse oil crisis involving a much bigger burden on the economy and heavier imposition on economic growth, the National Coalition managed to unwind inflation and get it down to a figure of 7½-8 per cent.
This was done, first of all, by introducing subsidies to secure a renegotiation of the inflationary wage round of 1975, when employers and workers agreed in face of the heavy inflation at that time to quarterly increases in pay of between 4 and 5 per cent. The minimum increase was 4 per cent whether or not the cost of living went up. We secured a renegotiation of that clause which introduced a minimum level of inflation into the whole situation and, as a result, working with employers and unions we achieved moderate wage increases, the most moderate of all being in the spring of 1977. That led to a decline in the rate of inflation, which was moving rapidly down when we left office and which reached a figure of just over 6 per cent in the 12 months ended May 1978. A small part of that was due to the short-term results of two of the manifesto policies.
Even without those, the inflation rate would have been down to 7½ to 8 per cent. We knew that getting it down to that figure could be achieved. We knew also that it would be very difficult to hold it there—that during 1977 and 1978 there would be an increase in inflationary pressures. When we discussed the 1977 Budget, we could, of course, have done what Fianna Fáil did, ignore the economic future of the country, disregard the inflationary effects of what we had been doing. We could have given away £300 million as Fianna Fáil did in the manifesto. However, we took the decision that this would be totally irresponsible and events have proved us right. We limited our 1977 budget in concessions to £100 million. Why? Certainly not to win the election. We knew that by taking that course of action we were making it less likely than if we had been much more generous. We did so because we knew that we would need the extra money in order to keep down inflation from 1978 onwards.
We knew that in 1978 the external inflationary forces would have to be kept in check and to do this we would have to ensure that we did not have to increase taxes and, indeed, if necessary, we could increase subsidies further, so that we would hold the cost of living increase at 7½ to 8 per cent and, therefore, be able to ensure basic wage increases in single figures, thereby keeping the cost of living also in single figures over a longer period of time. That was our strategy. It was then and is now seen by any impartial observer as the correct strategy. A time when growth had already moved up into the range of 5 to 6 per cent was no moment to reflate the economy and to overheat it in a manner and to a degree that was bound to create financial chaos and, ultimately, a sharp rise in inflation.
This Government, in opposition, took a different view. In order to get into Government, the Taoiseach and his friends decided that there should be a £200 million give away bonanza. That left them nothing with which to cope with the economic difficulties of 1978. Faced with the situation that year, not alone could they not increase food subsidies, but they had to increase taxes and push the cost of living up into double figures by so doing. If our policy had been pursued, we would have entered into the period of the present oil crisis—which, of course, we did not forsee, any more than anyone else—with the cost of living increase running at about 8 per cent, so that even with the 4 per cent increase in prices due to oil which we have experienced already, the rate of inflation today would be no more than 12 per cent. This Government, because of the action it took in its manifesto, got itself into a situation where it had to increase taxes in 1978, making double figure inflation, leading to demands for pay increases at a much higher level and to a general economic situation in which it is now forced, or feels itself forced, to increase inflation by a further 6 per cent. Had we remained in office, inflation at this time, allowing for the oil crisis and using the strategy we had prepared, would have been around 12 per cent. With this Government, it is now 22 per cent. The difference between responsible and irresponsible strategies in running the economy——
Hear, hear.
——is something of the order of magnitude of 10 percentage points.
Did the Deputy say it is now 22 per cent?
The increase in the cost of living in the 12 months ended May following this budget is likely to be of the order of 21½ to 22 per cent.
The Deputy said it is now 22 per cent.
Now, after this budget.
Does the Taoiseach deny this?
If the Taoiseach wants to make a point of it, there is a question of an increase in VAT after 1 May, bringing in £18 million and that involves one-fifth of 1 per cent postponed until then. I give him the point.
The effect of this budget is to increase the consumer price index by 21½ to 22 per cent in the current period between February and May with the consumer price index calculations.
Let us be clear about it, of this increase of 21½ to 22 per cent, only 4 per cent appears to be due to oil. Certainly, up to the latest figures we have, one can only trace 3 percentage points specifically attributable to oil and the indirect effects, up to last November, of oil price increases have not been very great, although they began to become great after that. Up to this point in time, when we get the February consumer price index, it is unlikely that it will show more than a total of 4 per cent of the 16 per cent increase up to that point due to oil. Of the 22 per cent price increase that we are now facing into, only 4 per cent looks like being due to oil. That leaves 18 per cent due to other reasons. One of these reasons is that other import prices have also gone up, but the great bulk of this 18 per cent is due to domestic factors. Almost half of the 18 per cent—two-and-a-half per cent in 1978, I think I am right in saying, and 6 per cent in this budget, 8½ of the 18 per cent—is directly due to Government tax increases and an additional element, unquantifiable, is due to increases in pay claims arising from the increased cost of living which this Government has forced upon the country. That record in regard to inflation is one that the Government cannot stand over and, significantly, has not, so far, ever sought to stand over.
That, then, is the economic situation about the budget. It does nothing to protect our £ by keeping the Government's finances, or the balance of payments in reasonable order. It does nothing to increase employment. On the contrary, it cuts expenditure in that area, with, the only possible effect of reducing employment. It pushes up inflation to 21½ to 22 per cent and the only thing one could say in its favour, under the four headings under which one can look at the budget from the economic point of view, is that, forced by the Supreme Court, the Government has made adjustments in income tax which do increase incentives to work by reducing marginal tax rates.
The other consideration I mentioned at the beginning of my speech is that of equity. I have dealt with the economic aspects of the budget and they are almost uniformly bad, apart from the effects of the marginal tax rate. What about equity? This budget is extremely weak in this area. It is true that it provides 25 per cent increases in long-term social benefits, but almost 3 per cent of this will be absorbed by the price increases to which I have just referred. What is really significant about the budget, however, is that gross inequities have been introduced as between lower and higher paid workers, as between young people in education and those not yet at work, on the one hand, and older people with jobs, on the other. These inequities between the lower and higher paid workers and between the young and those established are very serious. I do not think that their significance is fully understood. I have been concerned, for some time past, about a growing tendency in this country to seek a movement from taxes and income to taxes and expenditure, without taking any account of the fact that there is no way you can achieve such a change-over that is not regressive and that does not bear more heavily on the low-paid worker and give benefits to the better off, unless some other tax system is introduced to compensate.
Shortly after becoming Leader of the Opposition, I looked at this because the proposition is, prima facie, an attractive one. I wanted to establish if there was any mechanism that could be used which would protect the poor, the less well off, the lower paid, from the effects of such a shift in taxation. I examined the household budget inquiry, item by item, the relevant items—wherever it looked as if better off people spent more—and did what calculations I could to see what the effects would be. I could find no item in respect of which, bringing the household budget inquiry up-to-date in terms of current income, you would not get a regressive effect—that is, people paying less taxation than previously over £8,000 or £10,000 a year and, of course, people at the bottom paying more. The lower paid worker with a family at present does not pay income tax, so all these reliefs that we are hearing about are no good to him. He only pays expenditure tax. I had these calculations checked out more recently, to see whether a very thorough analysis could yield something that I had missed, but it produced the same result.
We have to face the fact that any movement in expenditure taxes puts the burden on the lower paid worker for which he gets no relief in income tax because he does not pay income tax but gives reliefs which are proportionately greater the better off one is. This fact, which is calculable from the household budget inquiry for anybody who takes the trouble to do the work has now emerged with stark clarity in the Government's own publication recently produced, The Redistributive Effect of State Taxes and Benefits on Household Incomes in 1973. From this volume it is possible to see the extent to which expenditure taxes have this effect. Information is available in black and white here, even to people who are not prepared to do their work with the household budget inquiry, to the lazy reader, even though I would not say it is easy reading in that form.
This publication shows that excise duties in particular—which is where the Government have placed almost the whole weight of expenditure tax increases—absorb over three-and-a-half times as big a share of the incomes of the low paid than of the better off. Anybody who doubts can look at the figures. I suggest as an example, although an example from any page will do, the case on page 28 of two adults and three children, a typical family. The figures are set out on pages 28 and 29 and show that for the lowest paid category for which figures are available, excise duties absorb 14½ per cent of income while for the highest paid families in this category, they absorb only 4 per cent. When I say that those at the bottom of the scale are paying three-and-a-half times as great a share of income in excise duties as those at the top I am understating the position.
Some pages earlier there is an example of a couple without children, just two adults. In the lowest paid categories 17½ per cent of the income is taken in excise duties and 4 per cent in the case of the better off—a four-and-a-half times disproportion. This range may be slightly narrowed by the forms and expenditure taxes have taken in this budget because they bear heaviest on petrol which features less among the lower paid. Even making full allowance for this, it is clear that the effect of this budget is to bear heavily on the lower income groups and relatively lightly on the higher income groups as far as expenditure taxes are concerned. If one allows for income increases since these tables were produced it is clear that the effect of these additional taxes on the household of a lower paid worker such as an agricultural labourer for whom the statutory wage is now £55.36 in rural Ireland or an unskilled worker with a not dissimilar wage, will be of the order of £2 or £2.50 a week in the typical household, reducing his purchasing power by 3½ to 4½ per cent. Most of these workers, those who are married with children, get no relief from this budget because they do not pay income tax at that level of income. All they get from the budget, if they have, say, three children is the extra children's allowance which gives them £1 a week extra and they are still £1 or £1.50 worse off by this budget.
Who gets the money which is taken from these lower paid workers? The calculations I have done over the whole range of incomes suggest that, broadly speaking, the effect of this budget is to transfer income from those under £8,000 to those over £8,000 a year. In the typical household the expenditure tax increases involved will cost people more than the tax reliefs up to a level of about £8,000 a year. About that level there are net gains and in some cases very substantial ones. For example, if you have £20,000 a year this budget gives you, if you are married and have children, a tax remission of around £2,100 but to pay one of these £20,000 a year people his tax remission of £2,100 something between 25 to 40 low paid workers will each have to contribute £1 or £1.50 a week dragged from them by taxing their cigarettes or beer which the Minister describes in polite language as discretionary expenditure.
The philosophy is that the poor stop smoking and give up the odd pint if they do not want to contribute to making the well-to-do considerably better off. That is certainly the attitude of a rich man's government. I cannot but feel that the lower paid workers whose purchasing power is being attacked in this way to effect perverse transfers to the well-off will remember this when election day comes, everybody under £8,000 a year unless he is below average in his consumption of drink and tobacco—there will be an equal number who will be above average in their consumption. Broadly speaking, the break point is £8,000 per year. This is a budget which transfers wealth from the under £8,000 a year to the over £8,000 a year, not a very democratic budget since there are many more people under £8,000 than there are over it.
The other major source of inequity in this budget is the way in which it hits at the young for the benefit of people more established in life. If one looks at the tax tables of the budget—incidentally these tables, to put it politely, are incorrect; I guessed in advance that they probable would be and that the Government would try to present the figures in a light more favourable than the reality—all these tables include a column for "tax liability existing" but the existing tax liability in every instance, as far as I can calculate, omits the £75 increase in allowances given last December. All the comparisons are made not with the existing situation since last December but with what was planned in last year's budget before that concession was wrung from the Government in the national understanding. All the calculations here are incorrect and all show tax savings which are in most cases £60 to £80 greater than the actual tax savings between the current financial year and next year because they omit the particular provision which was made.
Take a young person in the category up to £5,000 a year—there are not many young people over that—the actual tax remission he or she will get is £70; it is not £130 as set out in these tables. I hope they will not be fooled by them. They got £60 this year which the Government are trying to forget and to pretend they are giving twice. They get a tax remission of £70 compared with the tax they would have paid this year. But extra expenditure taxes for somebody in that category will, on average, cost him or her an additional £100. So, he or she will start off £30 worse off. That is excluding the new taxes the young person will have to pay for going to a dance or disco, excluding also the 10 per cent extra tax on gramophone records, the 5 per cent extra taxation on cars and motor cycles, the doubling of motor registration charges, the quintupling of the similar charge for motor cycles, the 50 per cent increase in the annual driving licence and the quintupling of the tax on soft drinks. Excluding all of those, which particularly hit young people, to whom Fianna Fáil directed their propaganda two and a half years ago, before they have to pay all that they are £30 worse off on the straight comparison of expenditure, taxes and income tax.
It is a budget directed against anything and everything which young people are particularly interested in or likely to spend on, just as the manifesto was very carefully in favour of those things which young people might be interested in. Now, in power Fianna Fáil reverse engines and feel that they must not merely take back, but take back with a vengence and several times over, what they conceded to the younger generation on getting into office. Having taxed everything that a young person might be expected to have a particular interest in, the Government have also concentrated their economies on two other relevant areas that concern young people—employment and education. As far as education is concerned there seems to be a virtual halt in new starts of schools—primary, secondary and third level institutions. The information published at this point obviously does not enable one to track down the effect on individual schools. That will trickle out bit by bit as the year moves on. The information gives figures about third level institutions. I cannot find traces of any new third level buildings to be undertaken. All the provision for third level institutions involves the completion of work already under way. It would appear from what is stated in the Public Capital Programme that further investment in third level institutions is halted. I suspect that the same is true in relation to primary and secondary education but it is not self-evident from the figures at this point in time but will have to come out gradually.
Despite the Tussing Report's convincing case for a doubling of places at third level institutions by 1985 the Government have decided to clamp down on any expansion in education, ignore the very large number of additional young people entering the educational system and the enormous increase in the number seeking third level education of one kind or another to fit them for life as well as giving them an opportunity to develop their particular personalities.
In addition to this halt in educational investment school transport is being hit by having its allocation reduced even in current money terms. I am not certain about this from the reply to a question addressed to the Taoiseach, who was sitting in for the Minister, it would appear that the fuel for school buses is to be taxed. There is a reference to scheduled services not being taxed. I do not know if school buses are scheduled services but the wording of it suggests to me that the intention is that the fuel for school buses will be taxed. I will be glad of clarification on that and, if I am wrong, I withdraw the comment. A reduction in the provision for school transport, especially if the fuel for school buses is being taxed, also hits the educational area.
I have already mentioned the way in which funds for employment for young people have been radically reduced. I want to recapitulate here on one point. The history of the youth employment scheme is worth recapitulating. Let us remember that it started as a manifesto promise, a slightly bedraggled document we always keep by us. It is no harm to remind ourselves of what the Government. said they would do before they got in. In this document they promised to spend £20 million in projects employing young people giving 5,000 jobs. The first action they took on getting in was to reduce the £20 million to £5 million overnight. It got down to £1.5 million in 1979. Now it is almost disappearing from sight. It is down to £5 million, one-fortieth of the sum originally promised. The next best thing to breaking a promise is to get rid of 39 fortieths of it. That is what the Government have done in regard to youth employment.
I cannot offhand find any provision that might be of help to young peoples' education or employment that is not being cut in this budget nor can I find anything that they might have particular interest in buying, using or doing that is not being taxed more heavily or taxed for the first time. I do not know why they have been singled out in this way but they will in due course know how to show what they think of the Fianna Fáil Government that led them to vote for them with false promises and now turn on them with such unnecessary vindictiveness.
This budget is financially ramshackle. It is bolstered up by special once and for all receipts and involves benefits, much of the cost of which is transferred into next year's accounts. It does not in reality cut borrowing, strengthen our finances and shore up our currency but involves, when the carry-over from last year is removed, a higher percentage of borrowing than planned last year and a higher current deficit than planned last year. It hits directly at employment creation, especially for the youth and at education. It transfers purchasing power from the lower paid workers, and indeed all those who have less than about £8,000 a year, to the better paid and, above all, to those with over £20,000 a year. It pushes inflation up to 21½ to 22 percent, almost double the level it would be if the National Coalition had been reelected and had been permitted to pursue their policies, which brought inflation down by three-quarters in the period 1975 to 1978.
The budget also hits directly at rural areas and especially at farmers, because in rural areas the petrol tax will hit hardest. Farmers will feel a sense of betrayal at the repudiation of the Fianna Fáil election manifesto promise about maintaining the notional basis for farm taxation. They will feel bitter about the introduction of the resource tax, which was not in the Fianna Fáil manifesto, the reduction in the threshold for income tax and for rates and the earlier payment of tax. None of those were in the manifesto. The farmers know now how much to believe the next time Fianna Fáil come looking for their votes. They are being asked to believe now in a three year guarantee for the maintenance of thresholds. How many farmers, having seen the guarantee for the maintenance of a notional basis for farm taxation thrown to one side, will pay any attention to a three year guarantee coming from the same source? I do not think our farming community are that naive.
This is a budget without strategy, cobbled together in evident desperation and leading the country nowhere except to greater financial difficulties in 1981. It deserves to be rejected. If the people are given an opportunity to do so—given the troubles the Government have laid up in store for themselves in 1981 they may well be given such an opportunity because things will be so much worse at that point—they will reject it and reject the Fianna Fáil team which put it together.
Sitting here yesterday listening to the Minister for Finance reading the Taoiseach's budget, I recalled an old Dublin saying: "All dressed up and nowhere to go". That is precisely what the budget was. It had all the ingredients of what has become, even in the short space of time since he assumed the office of Taoiseach, closely associated in the public mind with the Taoiseach's style of operation. It had that so called style: it was very big on optics and it was deceptive. While we call yesterday's proceedings here "Budget Day" in fact it was not "Budget Day". We have to look a little back and take it in conjunction with a few other decisions made over the last two months, particularly the week preceding budget week. The Taoiseach was asked recently at Question Time if he intended to meet the British Prime Minister. While the Taoiseach may have some differences with Mrs. Thatcher if he meets her, more verbal than real on some issues, as far as economic and social policy is concerned they will be very much at home together. The Taoiseach is following precisely the same policy as that lady has been pursuing in Britain and is indeed in the same mould as not only Tory but true blue Tory in his approach to the economic and social balance.
The superficial response from some quarters to this budget will not be very long in disappearing when the full impact of what has taken place over the last couple of months registers. Just to bring it into its proper context we should look at price increases over the last couple of months. Before we got to yesterday at all CIE prices increased by 20 per cent. Bread, the standard loaf, went up 5p. Milk is now 13p a pint. The ESB really outshone themselves, with the permission and the encouragement of the Government; in January they gave us a 20 per cent increase, in October, a 10 per cent increase and on 1 February, a 10 per cent increase. Coal has gone up twice; in January, £3 a tonne and in February, £2 a tonne. The price of a pint of stout had 2p put on it; now 6p was added to that yesterday. Petrol had been increased by 10p on 18 February and yesterday was effectively increased by 22p. The price of domestic gas has been increased by 15p. These are just some of the increases that have taken place recently and this budget must be viewed against that.
There was also another development last week when we got the capital programme. We found that in that programme very substantial cuts have been made right across the board. In these cuts the areas that would be most affected are ones where ordinary people, the lower and middle income groups, are dependent; they would not affect the people in the wealth tax category although the Taoiseach and his Government did not see fit to reintroduce that tax. The people who will be affected by the cuts in public expenditure are not those few very vocal, extremely powerful and influential people who would be subject to the wealth tax if it were reintroduced.
The effect on education at all levels is certainly going to be felt by the vast majority of people. One of the calculations that I have done shows that so far as primary education is concerned the provision of new schools and renovation or improvement of existing ones is going to be cut back quite severely. If one does calculations it will be seen that 4,600 less places than were anticipated by the same Government last year are now to be provided at primary level. There is no one sitting in this House and there is no parent of a child attending primary school in this country particularly if he lives in urban areas, who is not aware of the great necessity to provide proper accommodation and to cut back on the numbers that teachers are forced to deal with in primary classes in the city. But that came under the axe of the Taoiseach and the Government under public expenditure.
The restriction in expenditure in the health service is also going to make a bad situation considerably worse. The cutback in the allocation to local authorities will probably have the most severe effect of all. It is going to affect possibly every facet of social life here. It will even be detrimental to the best interests of the people who would have been in the wealth tax category had it been reintroduced because it has now clearly emerged in all the local authorities that not only housing but roads, maintenance, sewerage, water, cleaning of our roads and streets, all aspects of local authority administration and functions, are going to be severely cut back by the programme that was published last week.
Not the least of the victims of the Taoiseach and his Government's economic approach will be employment. The effect on employment will not be seen until later in this year. But I say without fear of contradiction that, come September or October of this year, the real effects of the decisions that have been taken by this Government will be seen in the employment area. One wonders what effect that is going to have on the guarantees given to the trade unions under the terms of the national understanding. One wonders, on reading just one aspect of the Minister's speech on behalf of the Government, if in fact it was not part of the overall policy to seek a confrontation with the trade union movement in order to give the Taoiseach an opportunity of getting out now before the real effects of the decisions taken and to be implemented over the next year are felt by the people because, undoubtedly, no matter how difficult the economic and social problems now, the decisions which the Government have taken and which they intend to implement will ensure that they are much more severe this time next year.
I think that the Taoiseach's approach to what is undoubtedly the Taoiseach's budget was more a political approach than an economic or social approach. We can only wait to see whether or not that is true because it would be totally in character with the Taoiseach's political record that that would be an aspect that he would look very, very closely at, that might in fact play an unduly large part in determining just which road he would go along in framing this budget.
Gracious me.
I knew the Taoiseach would get around to that eventually.
Imagine me being influenced by political considerations.
The Taoiseach cannot recognise himself.
The Minister for Finance in his budget statement said:
The Government at this stage have an open mind about what arrangements should follow the national understanding. But the dominant consideration must be that levels of pay should be appropriate to the more difficult economic conditions with which we are now confronted at home and abroad. Arrangements which ensure this in the interest of our common well-being will be welcome by the Government. Arrangements which did not could not be acceptable.
When one considers the phraseology used there one is entitled to say that it is open to the interpretation that at least there is a signal that if it suits the Taoiseach politically he will seek confrontation with the trade union movement. In that paragraph he is laying down the groundwork for that possibility and knowing the political record of the Taoiseach it should not be dismissed too lightly by the organised trade union movement.
Whatever may have been the initial reaction to the budget by the PAYE sector, I should like to remind the House and some people outside the House that the 700,000 workers who marched stated their demands repeatedly from the time of the first march to the last march. They wanted an equitable tax system but they said they would not accept it at the expense of cuts in public expenditure which would be detrimental to the best interests of most people and particularly to those less able to bear such cuts. The workers who marched sought the introduction of a wealth tax, they sought a serious adjustment in the capital gains tax and an assurance to the trade union movement with regard to job creation. This has been put at risk by the public capital programme that was published last week and by the provisions in the budget announced yesterday, particularly with regard to petrol. The people who marched with regard to PAYE stated emphatically that they did not want cuts in public expenditure that would affect education, housing, public transport, roads, water and sewerage works and so on. Last, but not least, they wanted the provision of local authority housing for the tens of thousands now on waiting lists. Those people had little possibility of being housed in the near future but now having regard to the cuts to the local authorities they have to abandon all hope of being housed. In fact, there are clear indications that many will not be able to keep their existing status because of the financial cuts that have been imposed.
The demands of the people who marched have not been met. A considerable part of the taxation relief announced yesterday was imposed by the laws of this land, by a constitutional consideration on the present Government. They are trying to get kudos for giving that relief but the fact is that it was imposed on a reluctant Government by the highest court in the land. There is one other aspect to yesterday's performance, namely, the change in emphasis from income tax to indirect taxation. Undoubtedly that is a retrograde development but it is one that is entirely consistent with the Taoiseach's political record. When he was Minister for Finance he doubled VAT and in accordance with his political outlook and philosophy again he has gone heavily for indirect taxation.
Who is affected by indirect taxation? There was much talk yesterday about discretionary spending. Will a man who has an income of £20,000 or £30,000 pay more than 20p extra for a gallon of petrol or will he pay the same as a man working on a building site in Dublin and who lives in Navan, Bray or some outlying town? How much discretion is there for a person who has to get to his place of employment and who has to buy petrol to get there? The whole concept of indirect taxation and over-reliance on it which has been adopted by the Taoiseach and the Government will benefit those who are well off and it will impose severe hardship on the less well off.
One could talk at length about the budget, direct and indirect taxation and income tax. I believe that as the days go by the window dressing of this budget will be swept aside and the real effects will be seen more clearly by the people. One of the big selling points of the budget was the 25 per cent increase in long-term social welfare benefits. This was announced with a great fanfare of trumpets by the Minister for Health and Social Welfare. He was reported in one of the morning papers as describing it as "unprecedented and historic".
I wish to remind the Taoiseach, who recently vacated that Department, as well as the present Minister for Health and Social Welfare, that in 1974-75 there was an increase of 22 per cent in social welfare benefits and it did not stop at that. Under the previous administration there was a serious attempt to change basically the structure of the social welfare code. Policies were introduced that were long overdue. However, in June 1977 so far as social welfare and many other aspects of social development were concerned things came to a halt. During the debate on the election of the present Taoiseach when we were talking about social welfare, recipients of social welfare and people living in poverty in this country I said, and I quote:
He has obstructed the work of that committee in every way possible, short of taking any action that would have political repercussions against himself.
I was referring to the present Taoiseach as Minister for Health and Social Welfare and to the National Committee to Combat Poverty and the quotation is from the Official Report of 11 December 1979, column 1342, volume 317. Now that he is no longer directly responsible for the work of the committee and he is not himself in the political firing line the axe has fallen finally. As soon as the Taoiseach got out of that Department what I predicted in the speech I made on the nomination for his election as Taoiseach has happened and there has been a cutback in the financial provision made for the committee in terms of the money involved in bringing forward the national budget. It could not be for financial reasons. That could not have been the consideration that led the Taoiseach, and I understand the Cabinet, to make this decision. The work of that committee was fundamentally opposite to everything the Taoiseach believes in and he cannot wait to see the day when that committee will go out of operation.
I would like to remind the House of one thing. That committee and the whole concept of trying to examine the causes of poverty and to put forward policies to eradicate—not alleviate—poverty in our society were brought up at EEC level in 1974 and there was considerable opposition at that time from fellow member Governments of the EEC to the introduction of that proposal. After considerable difficulty at EEC level the committee were established not only here but in each of the other member states. Their work has been extremely beneficial and when the Taoiseach was looking after his public image as spokesman on social welfare in Opposition he was very fulsome in his praise of the committee's operations. He was also very solicitous about how they were developing. However, when he became Minister that did not suit him at all because he knew that the committee could not and would not be influenced by any political party and that what they saw to be the truth in relation to why poverty existed in our society would be stated as it was seen and they would come up against the establishment at both local and national levels.
In speaking on the appointment of that committee, while I was a member of a party who were involved in a Coalition Government and held office as a Parliamentary Secretary, I told that committee that I believed that if they did not come in conflict with what could be described as the establishment at both local and national levels they would not and could not be successful in their operation. The true reason that the allocation of money has been taken from that committee is that the Taoiseach at all costs wants to stop their work, to abolish that committee, who are comprised not of political hacks, not of people who have political allegiance as such, but of people who have a proven record in their own right and in their own field of work in the area of poverty and who will not be put off by political considerations from stating things as they are. They would be as outspoken if a Labour Government were in office in their own right, if a Coalition Government were in, or if a Fianna Fáil Government were in. But the Taoiseach is more concerned about his political present and future than he is about any serious attempt to eliminate poverty in this society. Considering the amount of money involved, what motivated that action was cheap and shabby and for such a thing to be done by the head of a Government in a country that has between 20 and 25 per cent of its people living in the poverty category is a reflection on our whole society.
Yesterday's budget confirms what I predicated when I spoke on the Taoiseach's nomination for his present office. We have seen a further transfer of resources from the less well off to the better off. That is in total conformity with his public record and his political and personal philosophy. I am not a bit surprised, but I would be extremely disappointed if there was not severe reaction from organisations in this country who describe themselves as progressive, because surely they must know what really happened here not only yesterday but over the last two months.
I have listened this morning to the two leading speakers of the Opposition talking about equity and justice. Deputy FitzGerald spoke particularly about equity and what he regarded as the gross inequities in this budget. He talked about the inequities in the budget between the young and the old, about the lower versus the higher paid workers and he said that he would like to protect the lower paid.
First, it is quite clear that this budget does protect the old. It does give special consideration to the elderly. Nobody would attempt to hide this fact which is abundantly clear. But it is also clear that this budget gives a marvellous tax bonanza to young married people or those planning to marry in the near future. In addition it gives them a special increase of £400 per annum in their tax-free allowances. As we know and as Deputy FitzGerald knows quite well, when young couples marry in more and more cases both parties are working and consequently they stand to gain most of all from these new measures in this budget which will give them not only two basic allowances but also double allowances right up through the tax bands. Not only that but they will also receive, as will others, improvements in the levels of the tax bands. I was quite astonished at the approach which the Deputy took where he attempted to claim that the less well off would suffer. This was an obvious attempt to confuse and draw what he can from the tremendous budget placed before him. As far as the lower paid are concerned, 83,000 taxpayers, the lower paid tax payers, will not pay tax in the coming year.
What about the really low paid who do not pay tax anyway? What do they get?
In addition, 180,000 people will come from the higher tax band to the lower band. There is no question but that those on lower incomes will be better off under this budget. The young people will be particularly well off and they will welcome this budget because what they have got from the Government is jobs. With the enormous increase in investment now promised through the IDA's work jobs will continue to be created.
I was surprised and disappointed at Deputy Cluskey's remarks when he tried to become personal in relation to the Taoiseach and tried to talk about it in a political sense.
The Deputy did nothing of the sort.
The Deputy said that the Taoiseach was looking at it purely in political terms.
That is fair comment.
The Taoiseach of course looked at the political considerations because this budget shows decisive political thinking and effective decision making. I was disappointed that Deputy Cluskey neither welcomed nor appreciated the real equity and justice of this budget, which the taxpayers will appreciate.
The underlying principles on which this budget was based were the restoration of a sound financial and economic base, the achievement of greater equity in taxation and a major redistribution of resources in favour of the needy and disadvantaged sections. Pre-budget speculation over the past few months identified a very real financial difficulty facing the economy in 1980. The Taoiseach recently indicated very clearly the nature and the magnitude of these difficulties. It was obvious therefore that the main budget strategy would have to be directed towards the restoration of a sound economic and financial base which would support a planned future for agricultural and industrial development.
Priority was given to major reform for the PAYE taxpayer. The new measures introduced by the Minister for Finance will remove 83,000 PAYE taxpayers from the tax net. In addition, all married couples will benefit significantly from the new package and every PAYE employee will receive a special allowance of £400 per annum. A special new provision is the increase of the tax exemption limit for couples over 65 from £1,800 to £4,000 per annum. This means that an elderly couple can have an income of almost £80 per week tax free. I am sure all Deputies will welcome this significant improvement for elderly people. As one who has worked closely with elderly people I know this will be appreciated by old folk. Up to now everything they received over and above their pension was taxed. Now, in addition to their pension, they can have a further income of £35 per week and that is a significant benefit. This is one of the most desirable improvements in the budget. I am sure many Deputies know of people who will immediately benefit from this measure. I have had many representations from elderly people who have found themselves taxed on everything they had over and above the old age pension. These people will welcome this benefit, as I am sure will everyone else. It is not a meagre or small benefit. We all know of people who have a little saving which brings in a small additional income on which they have had to pay income tax up to this. This will be recognised as a major improvement.
There are substantial improvements in many other areas for which I, as Minister for Health and Social Welfare, have a direct concern. The tax allowance for caring for an incapacitated child has been increased from £320 to £390 per annum and the tax allowance for persons employed to take care of an incapacitated person or spouse has been doubled from £165 to £330 per annum. This development will greatly facilitate the policy of encouraging community care rather than institutionalised care, which I am pursuing. It will encourage a situation in which more incapacitated people will be cared for within the family and community setting. In the context of the budget it represents a bringing together of policies which the Government are pursuing and I welcome this step taken by the Minister for Finance.
Widows, deserted wives, and other one parent families will now get an additional £500 tax free allowance along with their basic allowances. This is double the previous rate. The blind persons allowance has also been doubled to £330. These taxation measures, coupled with substantial social welfare increases which I will outline, will lead to unprecedented improvements in the lot of those who are most in need.
Deputies will appreciate that it is therefore very hard for me to understand how the Opposition can cry that the needy are not being looked after in this budget. It is patently obvious that those most in need have been particularly well catered for. We must be honest with ourselves and with the community. We should not try to pretend, if we can find someone somewhere on the tax scale who does not benefit as much as someone else, that we can ignore the fact that in this budget we are helping in a massive way which has never been done before those who are genuinely in need.
As Minister for Social Welfare I am concerned with the needs of the underprivileged. The Government have pledged themselves to protect the needy in these difficult economic times. Indeed, the Taoiseach referred to this in some of his speeches both at the Ard Fheis and recently on other occasions. I am privileged to be a member of a Government who have so significantly honoured their commitment. The increases of 25 per cent in long term payments such as pensions and 20 per cent in the case of short term payments such as unemployment and disability payments are far greater than anyone anticipated.
The cost to the Exchequer of these and other improvements, including increases of 28 per cent in children's allowances, will be £95 million in 1980 and £126 million in a full year. Yet people try to claim that the Government are not looking after the needy in this budget. I do not think anyone believes the Opposition when they say this because it is patently clear that massive transfers towards the needy have taken place. These exceptional increases represent the highest allocation ever made to social welfare services in any budget.
It must be borne in mind that the increases I have mentioned are in addition to the temporary increases of about 6 per cent awarded under the terms of the national understanding and which were specifically provided only for the period from 1 October 1979 until 31 March 1980. As these increases are now being continued the real rate of increase is approximately 31 per cent for long-term and 26 per cent for short-term payments. It need hardly be stressed that these percentages are far above the rise in the CPI since April 1979 and provide a substantial real increase in living standards for those receiving social welfare payments.
The increases in long term pensions and allowances mean that a contributory old age pensioner under 80 years of age will get an increase of £4.90 per week from April next, giving him or her a pension of £24.50 per week. If he is married with a wife under the age of 66 he will get an increase of £8.05 per week, bringing his pension to £40.15 per week. There are also increases in the supplements payable to pensioners living alone who are over the age of 80 and have wives over the age of 66. These rates also apply to retirement pensioners. A married couple on contributory old age pension will get an increase of £8.55 per week bringing their pension to a new level of £42.80 per week.
In the case of widows receiving contributory pensions the personal rate of pension is increased from £18.00 per week to £22.50 per week, an increase of £4.50. The rate paid in respect of dependent children is raised from £6.00 per week for each child to £7.50. A widow with three dependent children will therefore receive a pension of £45.00 per week from April next. This is £9.00 per week more than she receives at present.
How would the Minister like to rear three children on £45.00 per week?
I would like to have the rates of pension increased by £9.00 per week. Widows will recognise that this is a major step. I met their association shortly before the budget and I know they will be pleased. I also know that many other things need to be done to which we will bend our minds and our best efforts.
Bring them on holiday to Florida this summer.
Deputy Boland will have his opportunity to speak. No Member should interrupt the Minister.
These rates also apply to deserted wife's benefit. On the non-contributory side the maximum personal rate of old age pension for a pensioner under the age of 80 goes from £16.80 to £21.00 per week, an increase of £4.20. If the pensioner is living alone he gets a further £1.65 per week and if he is over 80 years of age he also gets an increase of £1.50 per week. A single old age pensioner over 80 years of age can therefore have an income of £24.15 per week in addition to his entitlements to free travel, free electricity, free television licence, free telephone rental and fuel allowance. If the pensioner has a spouse his rate of pension goes up from the present rate of £25.25 per week to £31.55 per week, an increase of £6.30. If he is over 80 his rate of pension increases from £26.45 to £33.05 per week, an increase of £6.60 per week. Where the spouse is entitled to a pension in her own right the income of the couple is being increased at the maximum from £33.60 per week to £42.00 per week, an increase of £8.40.
Widows in receipt of non-contributory pensions and recipients of deserted wife's allowance, unmarried mother's allowance and prisoner's wife's allowance are to get an increase of £4.20 per week in their maximum personal rates, bringing them from £16.80 to £21.00 per week from 1 April next. The rate being paid in respect of each dependent child is being raised from £5.50 to £6.90 per week. A widow, a deserted wife, an unmarried mother or a prisoner's wife with three dependent children will have her income raised from £33.30 to £41.70 per week, an increase of £8.40 from 1 April.
In regard to short-term payments there is not the same need to provide for increases over and above the amounts necessary to cushion recipients against the expected rise in the cost of living. Most of these payments are of short duration and many attract pay-related supplements. In these circumstances increases of the order of 20 per cent for short-term payments must be seen as a positive step towards maintaining living standards of recipients of such payments. The increases in short-term payments mean that a recipient of disability or unemployment benefit will have a personal rate of £20.45 per week compared with £17.05 per week at present, an increase of £3.40 per week. Where the recipient is married the rate will go from £28.10 to £33.70 per week, an increase of £5.60. There are also increases in the rates being paid in respect of dependent children. Thus a beneficiary with three dependent children will go from £42.10 to £50.50 per week, an increase of £8.40.
On the assistance side there are increases for recipients of unemployment assistance in urban areas amounting to £2.85 on the maximum personal rate, which will go from £14.15 to £17.00 per week, In rural areas the increase is £2.75 per week, where the recipient has an adult dependant, and the maximum rate goes from £24.35 to £29.25, an increase of £4.90. There are also increases for child dependants which mean that a recipient with three dependent children will go from £36.55 to £43.95 per week, an increase of £7.40.
These are substantial increases and are far in excess of what might have been expected in the light of current economic difficulties. The disabled person's maintenance allowance has also been increased by £4.05 to £20.25 per week.
Children's allowances are an important source of income to families and go directly to the mother. They are particularly important not only to the lower income groups but also the middle income families. As Minister for Health and Social Welfare I am glad that these allowances are being increased again this year from 1 July by £1 for the first child and £1.50 for each subsequent child. This will mean an increase of about 28 per cent in children's allowances and will bring the monthly cheque to £4.50 for one child, £11.50 for two children, £18.50 for three children, £25.50 for four children and £32.50 for five children. The total cost of children's allowances in a full year, taking into account the increases which I outlined, will amount to £80 million. This is a substantial figure and its magnitude raises the question whether in fact the money is being utilised in the most effective way. This year, as in last year's budget, the increases are, by means of adjustments in the child income tax allowance, being directed mainly towards families in the lower and middle income groups. I do not think anyone would quarrel with this approach. Indeed, I feel we should look on those payments not so much as children's allowances but rather as a definite form of family support. The need for family support can vary not alone according to overall level of income, but at different periods in the life of a family. I intend to give further detailed consideration to this matter in the hope that a more positive system can be developed.
As can be clearly seen from the tables presented by the Minister for Finance the reduction in the child income tax allowances, together with the increased children's allowances will in all cases result in a net gain to the recipients. In the case of a married couple with three children and an income of £6,000 per annum the combined tax saving and increased children's allowances amount to £241.85 per annum. Apart from increases in monetary payments there have been other improvements in social welfare schemes announced in the budget. The first such improvement is the continuation of the process commenced last year to redress an anomaly which had arisen in relation to tables of means limits and rates of payment for non-contributory pensions and allowances. That is something we were very anxious to achieve. Because of the application of percentage increases to those on reduced rates of pension or allowance, a course which was introduced under the Coalition Government in 1976, the former position whereby each £1 increase in means meant a reduction of £1 in pension or allowance was departed from so that the point was reached in 1978 where each £1 increase in means meant a reduction of £1.40 in the rate of pension or allowance payable. That was seen to be inequitable in the case of those on lower rates of pension or allowance and a start was made in last year's budget to redress the situation, by providing that each £1 increase in means would mean a reduction of £1.30, instead of £1.40, in rates of payment. This year we are taking the process a step further by providing that each £1 increase in means would only mean a drop of £1.20 in pensioner allowance. Eventually we hope to restore the former position of a reduction of £1 in rates of payment for each £1 increase in means. That provision while it may sound technical is of great importance and will cost just under £500,000.
The second improvement relates to the provision under which blind pensioners' earnings from employment up to £208 a year in respect of the applicant and up to £156 a year in respect of an adult dependant are disregarded when assessing the applicant's means for pension purposes. These amounts are being raised to £312 a year and £208 a year respectively. The third improvement relates to an easing of the earnings disregard for seasonal fishermen. Persons who earn their living from seasonal activities, as seasonal fishermen do, get most of their annual income from a relatively short period of employment. In the nature of things this income would largely be spent as it was earned and it seems unfair to reckon it in full over the 12 months for the purpose of assessing means for unemployment assistance. Consequently certain proportions of such income have been disregarded when assessing the means of persons engaged in seasonal fishing. At present the disregards are one-half of the income which does not exceed £80 plus one-third of the income which exceeds £80 but does not exceed £200. Those figures are being increased to £120 and £300 respectively.
The fourth improvement is a reduction of three years in the qualifying age for blind pensions. This is a significant improvement. At present a blind pension becomes payable at the age of 21. There is provision in the Social Welfare Acts for payment of an increase to a recipient of a social welfare benefit who has a blind child up to 18 years of age as such children come within the general provisions relating to child dependants of social welfare beneficiaries. When the blind child passes 18 he or she must be provided for in some other way. I am glad to say that the gap in the social welfare coverage for this type of blind person is now being closed and entitlement to blind pension will in future commence at age 18.
At present, if the husband of a woman who has been granted a deserted wife's allowance dies, she must apply specifically for a widow's pension. This involves investigations of her claim and delay in transferring her to widow's non-contributory pension. That cause of delay is now being removed and provision is being made for the automatic award of a widow's non-contributory pension in such cases at the same rate as the deserted wife's allowance which had been in payment prior to the husband's death. I have no doubt but that this provision will be of comfort to those who are unfortunate enough to have been deserted by their husbands. A sixth improvement deals with the position of a child who has been abandoned by one parent and whose other parent dies. Such a child is in the same position as an orphan unless the parent who abandoned him or her returns to accept the responsibility of maintenance. He is not, however, entitled to an orphan's pension or allowance and the result in many cases can be his placement in an institution. The intention behind the amendment of the definition of an orphan for social welfare purposes which is included in the budget is to ensure that no child shall be left without entitlement to an orphan's pension or allowance if one parent dies and the other parent has deserted or abandoned him or her. If as a result of this change the award of the orphan's pension or allowance in such cases serves the purpose of keeping the child out of an institution and in the care of a relative or other suitable person it will have been well worth while.
The seventh improvement is the removal of the residence qualification for the receipt of unemployment assistance. At present an applicant must have been residing in the State for a continuous period of six months. No useful purpose is being served by enforcing this requirement and, accordingly, it is being abolished. Some years ago it was decided that because of the much higher cost in the provision of clothes, cots, bed-clothing, toiletries and so on which multiple births entailed there should be an increased payment for such births under the children's allowances scheme. As most of the extra expense was likely to be in the period immediately after the multiple birth the situation was met by the provision of grants of £100 for the birth of triplets and £150 for the birth of quadruplets or more children. Costs have risen since those figures were settled and the opportunity is now being taken to increase them substantially, to £300 for triplets and £400 for quadruplets or more. These sums will greatly ease the financial burden which parents experience when there is a multiple birth in the family.
The next improvement is in death grants. The cost of funerals has risen since the rate of death grants was revised in 1978 and, therefore, an increase in that grant is justified. We are providing for a 50 per cent increase in the maximum death grant of £50, bringing it to £75. There will be comparable increases in the lower rates of death grant.
A small but very significant improvement is being made in relation to qualification for treatment benefits. These benefits, which consist of assistance in the treatment of dental, optical or hearing defects, are very important in the case of young people for whom it is essential that any necessary treatment is obtained as soon as a defect is identified. For this reason the first contribution condition which requires an applicant to have three years contributions was removed some years ago in the case of applicants under the age of 21. In their case only 26 paid contributions are required. As many young people continue in fulltime education up to the age of 21 or may fail to get three years insurable employment before that age, it can happen that they are unable to satisfy the requirement of 156 paid contributions until some considerable time after reaching 21 years. Because of the importance I attach to the early treatment of any of the defects mentioned I am extremely pleased that this contribution condition is being eased by reducing the number of contributions required to be paid from 156 to 26 in the case of young people between the ages of 21 and 23. This easement should enable more young people to avail of treatment benefits with consequential improvement in their general health.
The eleventh improvement in social welfare schemes covered in the budget is one which is intended particularly for young people who take up permanent employment for the first time after completing their schooling. New entrants into insurable employment are given credited contributions in respect of the contribution year prior to the year in which they enter insurance for social welfare purposes. This is to enable them to qualify for short-term benefits such as disability or unemployment benefits, as soon as they have satisfied the first contribution condition of 26 paid contributions because the second contribution condition requiring at least 26 contributions paid or credited in the governing contribution year will have been satisfied by the credited contributions given on entry into insurance.
However, it has been noted that many young people take up temporary or holiday employment while still at school. In their case the credited contributions under the Social Welfare Acts are given on the occasion of first entry into insurable employment and as they continue their schooling at the end of the temporary or holiday employment, these young people do not need to avail of the credited contributions. But this situation can pose a problem when they finish schooling and take up permanent jobs. If they are unfortunate enough to lose their jobs or to become ill in the first year of such employment they may not satisfy the second contribution condition as the credited contributions which would normally satisfy that condition would have been granted in respect of a previous contribution year but not used. To rectify this situation it is proposed to award a second set of credited contributions in respect of the contribution year prior to the year in which these young people leave school and go into permanent employment. In this way their rights to short-term benefits will be safeguarded. This is a very desirable development.
The final improvement provided for in the budget relates to what has become known as housekeeper's allowance. This allowance is an adult dependant's allowance paid in conjunction with short-term benefits and with assistance such as disability, unemployment benefit or unemployment assistance. These represent a number of technical and smaller measures which are of great importance to the people concerned. As Minister for Social Welfare I am very pleased that the Government have agreed to the implementation of each of these measures.
The rate of social insurance pay-related contributions are being increased from 11.2 per cent to 12 per cent.
Another budget.
The employee's contribution is being increased from 3.4 per cent to 3.5 per cent while the employer's contribution will increase from 7.8 per cent to 8.5 per cent. Having regard to the benefits granted, I am sure Deputies will agree that the increases in contributions are modest. The income limit for pay-related social insurance is being increased from £5,500 to £7,000 as and from April next.
Can the Minister give us the yield figure on that?
I do not have the relevant figure here but I shall be able to get it later for the Deputy.
The employer will be paying another 0.7 per cent on his total wage bill.
In effect the change means that for a worker earning £80 per week the increase will be 8p per week while his employer will pay an extra 56p per week in respect of that worker.
These figures relate to a worker earning only £80 per week but what about the worker earning £7,000 per year?
It should be easy for the Deputy to calculate the figure at 0.1 per cent. I do not think that an increase of 8p per week in respect of an income of £80 is something about which the Deputy should become very excited having regard to the tremendously increased benefits concerned.
The position is that each employer will have to pay an extra 0.7 per cent on his wage bill.
In respect of a worker earning £80 per week, the employer will pay an extra 56p per week.
But in the case of an employee who is earning £7,000 per year, the increase to the employer will mean an extra couple of £s per week. What about the health contribution?
The Minister should be allowed make his speech.
This is another budget.
The health contribution is remaining at 1 per cent. Obviously, this is to the utter disappointment of the Deputy.
But the income limit being increased to £7,000.
Yes. That is in line with the national understanding.
This is another budget.
Deputy Desmond must not interrupt in this way. He will have an opportunity later of contributing to the debate.
Much concern has been expressed not only by the Deputy but by the Leaders of the two main Opposition parties regarding the employee but the increase in the context in which I am speaking will be only 8p per week on an income of £80. This is a very marginal increase.
But an increase of 0.7 per cent in the case of the employer represents a substantial increase in the wage bill of a major employer. What about the public service?
Deputy Boland, too, will have his opportunity of contributing later. The Minister should not be interrupted in this way.
Why were these facts not made known to the local authorities?
The Chair is endeavouring to ensure that the Minister may speak without interruption.
We must interrupt when we are presented with another budget.
This is within the context of yesterday's budget. Deputies might go out and tell employees earning £80 a week that they will pay an extra 8p per week so that the old folk, the disabled, the pensioners, the widows and so on can get what they are getting.
(Interruptions.)
Up to now we had two full speeches without interruptions. I cannot see any reason why the Minister should be interrupted.
(Interruptions.)
Deputy Desmond should not interrupt. He does not like being interrupted when he is speaking.
I do not agree that the employees, who will have to pay an increase of .1 per cent in the contribution rate, will be perturbed when they realise they are getting unprecedented tax benefits and that the money will be used to provide extra social welfare benefits for those who are genuinely in need.
What about the employer?
He will pay a slightly higher contribution than the employee to provide these same benefits and I am sure he will be happy to do that.
This budget has achieved its main objective. Those in genuine need in our community have been given a new priority through the improved social welfare services. The tax system has been made more equitable. Incentives have been provided to work hard for increased take home pay and to develop our economy. The measures taken in this budget are imaginative and decisive and deserve the full support of this House.
The only tax not imposed in this budget was a tax on cats. The only tax that was not increased was that on dog licences and that should have been increased because stray dogs are causing great problems for our farmers, and the people living in towns and cities are also complaining about them.
We had indirect taxes—increases on hydrocarbon oils, private motor vehicles, tobacco products, spirits, beer, wine and made wine, cider and perry and table waters. Value-added tax has been increased. Television, gramophone records and even cigarette lighters have been taxed. Stamp duty on cheques and motor excise duties and on-course betting have been increased and dances are going to be taxed. Small brewers will get minor relief but they will still be taxed, and motor vehicle duties will be increased. This is a long list of savage impositions of taxes on a wide variety of consumer spending. As was shown this morning, as a result of this budget taxation revenue will be increased to twice the level of the allowances and benefits given. That is the net effect of the budget.
The most serious aspect of this budget is the economic aspect, the attitude adopted by the Minister, the structure and composition of the budget and its meaning for our economy in 1980. This budget will have an adverse reaction on inflation. Early in 1979 the inflation rate was approximately 13.4 per cent. When the National Coalition left office, having brought the country through a severe economic recession brought on mostly by the energy crisis, the former Taoiseach, Deputy J. Lynch, praised the Coalition because they had left the economy in good hands. The Former Minister for Economic Planning and Development who now sits in the backbenches in exile and who was used as a scapegoat for this Government, acknowledged that too.
When we left office the inflation rate was in single figures, less than 8 per cent. In 1979 as a result of two spendthrift budgets, two budgets of serious deficit financing, the inflation rate rose to 13.4 but towards the end of that year it was running at 16 per cent. That is the type of policy Fianna Fáil have been pursuing and it will have serious repercussions on the economy and on employment in the coming year. The result of this budget can be seen quite clearly. Because of these tax impositions and the increases in VAT the direct contribution of this budget towards inflation will be of the order of 5 to 6 per cent.
There are further implications. Because of this budget the inflation rate for 1980 will be of the order of 20 per cent, unless there is a radical change in the international scene in relation to the price of oil, and on the domestic market in relation to incomes and the volume of expenditure. We can thank Fianna Fáil for raising the inflation rate from 7.8 per cent in 1978 to 20 per cent in 1980. It is imperative at this stage of our economic development that we have a stable, slow inflationary society in which our industries can develop competitively with other economies. We will have the highest inflation rate in the EEC directly as a result of Government policy in the economic field and of budgets introduced in the past two years, especially this budget.
Due to the spendthrift attitude of the Government, the growth rate in our GNP has been reduced substantially since the time of the National Coalition. Despite Government boasting last year that we were to have a magnificent growth rate, top of the league in Europe, it has been halved during the year and on the Government's admission in its paper, Economic Background to the Budget, 1980, it will be less than half. That paper states on page 10 under the heading “Prospects for the Irish Economy”:
The picture that emerges is of a growth rate somewhat less than the estimated outturn of three per cent for 1979.
That is an admission by the Government that the economy is slowly grinding to a halt because any growth rate of less than 4 per cent means unemployment will increase substantially since productivity in industry should grow by about 4 per cent annually. Therefore, we are faced with serious rising unemployment directly as a result of the Government's fiscal policy in the past two years but particularly as outlined in this budget. It would be fair to say that our growth rate for 1980 may be as low as 1½ per cent and this is of concern to economists of serious standing as well as to those interested in industrial expansion.
In stark simple language it means we will have unemployment of a serious nature in 1980. The paper from which I have just quoted also states that the total wage bill in the non-agricultural sector is estimated to have risen by 20 per cent in 1979. If that is repeated in 1980 the competitiveness of our industry will disappear and it will put our exporters at a serious disadvantage abroad. Of course we can lay the blame for the high level of income increases directly at the Government's door because of their policy to promote higher public expenditure and inflation. Perhaps the high wage demands may have been justified when the increases were being sought, but the important thing is that they were caused by a Government intent only on trying to fulfil their manifesto promises, thereby putting the country's economy in jeopardy.
We have just heard from the Minister for Health that pay related social insurance contributions by employers are being increased by 0.7 per cent. That means that the wages bills of all employers in the private sector will be increased by that percentage before account is taken of future national understandings, another nail in the coffin of many weak firms who cannot stand the pace of inflation and the high incidence of new taxation.
Today's Irish Times carries a report of a statement by the FUE to the effect that firms would be severely affected by the increased excise duties and business would be lumbered with higher charges for social welfare. This is the main budget but we have had several minibudgets throughout the year. Postal and telephone services now cost more, when these services are available.
Local authorities will have to reduce employment and services because of the 10 per cent limit imposed on their rates. Already there has been a public outcry about the state of our roads. They are in a shocking state because of lack of money for local authority road maintenance and improvements. The 10 per cent limit in the context of an inflation rate of 13.4 per cent in 1979 and running at 16 per cent and going towards 20 per cent means that local authorities will not be in a position to maintain their present level of employment and that they will have to reduce their services in regard to roads, water and refuse collection, whose present level can only be described as the bare minimum which the people deserve.
There have been price increases on gas, electricity, bus fares, petrol and so forth. All of them will do serious damage to industry and trade—and this is only the beginning, thanks to Government action. Availability of finance for industry and business has become seriously restricted and our rates of interest have become the highest in Europe. Firms are paying up to 20 per cent for loans to keep their businesses going and to maintain employment. Is that the type of interest charge a developing economy should have if we are to try to expand our industry and maintain employment? Of course, it is not. Perhaps these interest rates are artificially high but that is so because our balance of payment situation is in serious disarray. This has caused concern not only here but also among international financial institutions. We cannot afford to have balance of payments deficits like the £730 million in 1978 and the estimated £760 million last year when it was supposed to be reduced.
In this year's budget there is no indication that our balance of payments will be reduced to any extent. No economy can continue to support a balance of payments deficit of this order and hope to survive or be in a position to ask their partners in the EEC or other international financial institutions to come to their aid. Our position in the EMS alone will be seriously undermined by the present balance of payments trend, a trend which is against that indicated by Fianna Fáil and which now constitutes one of the main reasons for our having such an exceptionally high level of interest rates obtaining. That is a direct result of the fiscal and monetary policies pursued by Fianna Fáil in the past two years. The other reason that our interest rates are so high is that our Government are gobbling up all the money available in the domestic economy as well as that on foreign markets, when the amount of money remaining for the private sector, for industry, commerce and agricultural development, is substantially reduced. We are now in the position that we have something a developing country should not have: we have the highest level of interest rates compared with any of our trading partners in Europe and Fianna Fáil must accept responsibility for that.
Continuation of a balance of payments deficit will mean that in the long run our position within the EMS will be at risk and we may have to devalue the IR£ if not in the course of 1980 then in 1981, certainly within one to two years. That is a serious matter because, above all, we need to have a stable exchange rate. Our business and industry must be able to trade in a stable monetary market and unless that is so the prospects of attracting foreign industry here will be seriously jeopardised. Therefore, it is of the utmost importance that this Government come to terms with reality and endeavour to bring our economy back on an even keel. Since they assumed office they have not done so and there is no indication in the present budget that they are making any serious endeavour to do so.
The other matter of serious concern to any economist is the budget deficit itself and the Exchequer borrowing requirements. The budget deficit, which in 1979 was envisaged at £289 million, worked out at £522 million. No householder can say to himself, "I have £1,000 to spend this year," and yet turn around at the end of the year and spend double that amount. That is what this Government have done—they planned on having a budget deficit of £289 million which turned out to be £522 million. That is the type of economic planning in which the Government engaged in 1979. In 1980 the budget deficit is estimated at £353.4 million—higher than was planned in 1979—and to a certain extent constitutes a lowering of the deficit. Those deficits are the main reason for the increases in taxation introduced in this year's budget. They can be described only as savage, regressive tax impositions by a Government bereft of ideas of how to tax people in a progressive manner.
Exchequer borrowing requirements are seriously out of order also. In 1979 the borrowing requirement worked out at £1,009 million, or 13.7 per cent of GNP. That level of 13.7 per cent is acknowledged by all sides of the House, indeed by all independent economists, to be a matter of serious concern. It was brought about directly by the spending policies of this Government, by their unfortunate consumer-induced boom in 1978-79, caused by their fiscal policies. There has been an attempt made in 1980 to estimate the Exchequer borrowing requirement at £896 million, or 10.4 per cent of GNP. I would suggest that is too high. It has been in recent years only, that there has been acceptance of continuous budget deficits forming a part of major economic policy. Going back to the fifties and sixties there was acceptance of the general principle that where there is a recession there will be a budget deficit; that when there is a prosperous year there will be a budget surplus to offset the deficit. In other words, the attitude towards a budget was one of relative neutrality. It is my opinion that that is the proper attitude to be adopted by any good Government. I believe firmly that continuous budget deficits are not good economics and seriously undermine financing of the State's services, including the financing of the whole public service.
I firmly believe, and I do not mind saying so in this House—I was going to endeavour to put this down in black and white in an article—that budget deficit policies in the long—term are of no economic benefit to us. I believe firmly that over a period of years the budget should play a neutral role in our economy, ensuring that our economic environment is, so to speak, protected by the budget. The budget should endeavour to create or ensure a climate favourable to investment and the inflation rate should be tackled when it gets seriously out of hand, thereby ensuring that over a period of time there is created an environment favourable to investment, in which industry may be expanded and farming seen to prosper. Those should be the prime objectives of fiscal policy but certainly they have not been shown to be in the past few years.
However, account must be taken of the two serious energy crises we experienced in the seventies, one in 1975 and the other which we are experiencing now but which has been added to by the imposition of a petrol tax of 20p a gallon. It is a theme that economists should examine in greater detail. I accept that it cannot be done overnight because of the attitude which Fianna Fáil have taken to budget policy. Economists should examine the whole role of budget policy. I am satisfied as an economist that it is too much a tool of politicians. There should be a return to a conservative role for the budget. I realise there are extraneous problems to be faced such as energy, inflation and unemployment but a reassessment of the role of the budget will have to be made especially because of the manner in which Fianna Fáil have used it to seriously damage the economy in the last two years.
Farming is an area which has caused considerable political upset for the past few years. I was a supporter of the National Coalition Government which, for the first time, introduced the concept of an income tax for the farmers. I admit that because of that policy the last Government were put out of office by the farming community. I have said before that it is a pity that leaders of the farming organisations did not come together with the then Minister for Finance and hammer out an acceptable taxation for farmers when it was first brought out. They should have worked out a ten-year plan for the taxation of farmers. The fact that they did not do so then or to date has caused unnecessary friction between the farming community, the Government and workers.
What has been done now on the farming scene is very serious. The 2 per cent levy imposed by the 1979 budget was handled in the most stupid way I have ever seen anything handled. It was introduced amid total opposition as not being a tax that took profit into account. It was just a tax for tax sake. We all recall the shenanigan at the Fianna Fáil Ard Fheis where the tax was severely criticised. It was then amended, subsequently withdrawn and subsequently reimposed. What a way to run a country. What a way to introduce taxation. What a way for a supposedly national party to be scurrying for cover like a caught rat.
The imposition of the 2 per cent farmers levy has been a source of social unrest because the manner in which it was handled brought a tremendous reaction from the PAYE sector. They took to the streets and were on them again this month. Their case was seen to be just. Because of the vast increase in the price of land and because of the good years farmers had, they felt hard done by by successive Governments. Last year they paid about 88 per cent of tax revenue. One aspect of their case was brought to the Supreme Court and was successfully contested. Farmers income has been acknowledged as having reduced by 4 per cent in 1979 in a period of high inflation. The taxation proposals in the budget mean that those farmers with a valuation of £40 or more are liable to income tax. The level has been reduced from £60 valuation to £40 valuation. That means that 9,000 extra farmers will be brought into the tax net.
When we were hearing of systems of taxation, we heard that the accounts system was probably the best, the notional system was a handy one, the resource tax was an alternative and so on. What has happened now is that not only do farmers have to pay income tax, but, if their valuation is £70 or more, they have to pay a resource tax. Instead of evolving a reasonable and simply understood tax system for farmers we are further complexing the situation by having a wealth tax on farmers. The resource tax can only be described as a wealth tax. It will be seen as such by farmers in the coming years. On top of that the agricultural grant relief has also been reduced from farmers with £60 valuation to those with £40 valuation. That is an unnecessary blow to the farming community. That was a relief that encouraged the employment of farm labourers.
The action of the Government in relation to farmers is damaging and needs to be reviewed with farmers in the coming months. The notional system has been abolished and the accounts system has been introduced. On top of that they have to pay a wealth tax if the valuation is £70 or more. The concept of a wealth tax was rejected strongly by Fianna Fáil both in Opposition and when they came into power. They can certainly be noted for their care, concern and protection of the wealthy in our community. The people who benefitted from their policy in the past years are the well-off. If one has a high income one will pay less taxes under this budget.
Where did the votes come from?
If one is living in a big house one does not pay rates. Let us protect big house buyers. The whole direction of taxation has been for protection of the wealthy against protection for the poor. The range of taxation of the farming sector in the budget can only be described as of a serious nature. The need to ensure continued expansion in agricultural output is obvious to all and has been stated by the Minister for Finance in his budget speech. There can be no doubt of its importance in our economy. The situation in farming is that market prices have reached the peak and there is a resistance, at the Council of Ministers level in the EEC, to further price increases. Any sensible Government must ensure an environment in which productivity and output can continue to increase.
I contend that the range of taxation on farmers is such that it will militate against increased output in the coming years. Certainly, society in Ireland is satisfied to have an equitable tax system but the range of taxation on farmers in this budget can only be described as retrogressive. The farmers will be hit now by the abolition of the lime subsidy in the western areas. The agricultural grant relief for farmers has been reduced by between £40 an £60. The incidence of income tax may not be apparent and I accept and say in this House that the proper system for taxing farmers is on an account basis but giving proper allowances, comparable with other trading firms which contribute substantially to our export drive. When it comes to allowances for depreciation, what does the Minister do? He restricts them and they are not restricted for comparable business and manufacturing firms in the private sector. The notional system has been abolished, despite the undertaking given by Fianna Fáil that any farmer who opted for the notional system could do so for a three-year period. That little leeway in the changeover period has been abolished. The reduction in capital allowance is a disincentive for production and can only be seen as such. The change in the capital acquisition tax is only marginal—£100,000 to £150,000. In the context of the value of farming lands it will not encourage the transfer of lands from old people to young in the agricultural sector. It is only marginal and does not approach what social equity would demand.
Another aspect of taxation on farming which has not been mentioned in this House is the damage which the severe increases in petrol and oil prices will do to farmers, one of the biggest users of petrol and oil. The farmer, in order to go to town, to the markets to buy and sell goods, must use his car. He will be substantially hit by the savage increase in petrol prices in this budget and in prices for oil for use in his tractor. He will suffer quite harshly because of the attitude taken in this budget.
Finally, the resource tax is an additional tax, not, as put forward, an alternative one to the accounts system of taxation. This is an extra tax on farmers and mark my words in this House today, next year not only will that resource tax apply to farmers with £70 valuation or more but the threshold will be brought down in line with the threshold for farmers who are going to pay income tax. That fact will lie heavily on the minds of many of our farmers. The budget position is not all that healthy and next year the reduction of the deficit will have to be tackled again.
There are some good aspects of this budget. One is the position in relation to taxation of married couples. That was a direct result of the Murphy case before the Supreme Court where the court found that husband and wife must be taxed separately and given the same benefits, at least on earned income. That is a good and necessary social reform, which I support. However, it was not a voluntary move, a massive social programme announced at the last election by Fianna Fáil. No, it was forced on the Government by a decision of the Supreme Court—nothing more and nothing less.
The reliefs are best for those on higher level incomes. In Principal Features of Budget, presented to Dáil Éireann on Wednesday, 27 February 1980, on page 10, there is shown the income tax payable under PAYE (existing and proposed) on earnings of a married couple with two children (wife not working) and the combined effects of income tax changes and social welfare children's allowances adjustments. A man earning £7,000 a year in that category will save £237.30. Seven thousand pounds seems to be a reasonable example of an ordinary working man's income for the coming year. What does the man earning £15,000 save? He will save £1,749.40 and if his income is £25,000, he is in the happy position of saving £2,252.40. One criticism I have in relation to the approach to personal allowances in income tax is that I would have preferred a greater tax saving for income groups up to say £8,000 and less of a percentage tax saving for those, certainly, over £10,000. This is a social comment on this aspect of the budget. In general, the Supreme Court decision has forced on this Government what has turned out to be a socially equitable approach to taxation, especially of married couples.
The social welfare increases of 25 per cent for long-term benefits and 20 per cent for short-term benefits look good in the monetary sense. In fact, in 1980 they will only keep pace with inflation. The 25 per cent increases look good, they will not be introduced until April and will only have two-thirds of the year to run. With inflation running at 19 to 20 per cent they are only maintaining the real value of the benefits and allowances to the recipient. Let no one on the other side of the House crow about the marvellous increases in social welfare allowances. They merely maintain the status quo, nothing more and nothing less.
In my travels in my constituency, I have come across a lot of poor people in the social welfare bracket, who feel hard done by because of the lack of real increase in their little incomes over the last three years. The persons I pity most are the old age pensioner and the widow trying to rear children. These are the most hard pressed persons in receipt of long-term benefits. Another person I pity is the honest to goodness tradesman who is out of work. In the short term, he is deserving of our full support.
I should like to turn now to my own portfolio, education. It will be a hairshirt year for education authorities. On the current side the amount allocated to the bus transport scheme has been reduced from £16.5 million to £16 million. The result is that either the school bus scheme will be reduced substantially on its present level of operation or, alternatively, a charge will be introduced for its use. The charge may be a £21 flat rate, as suggested by the Hyland Report, if they want to make it a self-financing scheme; or they may take the course of charging, say, £30 for children whose parents do not hold medical cards and allowing children whose parents have medical cards to have free use of the service. There are only two options. The Government cannot, unless they introduce supplementary budgets, which have been more or less ruled out in the budget speech, continue to have a free school bus scheme for all children. I suppose that will be the next mini budget when the Minister for Education announces the introduction of charges for the school bus scheme.
Because of the amounts allocated for teacher's salaries in primary schools, for capitation grants and for free secondary, vocational, community and comprehensive schools it is clear that there can be no reduction or improvement in the pupil-teacher ratio in our schools in 1980. No money is provided in the Estimate to allow any reduction in the teacher-pupil ratio. Maintenance in schools will suffer severely because of the amount allocated for maintenance in this budget. For instance, under the Education Vote the capitation grant towards the operating costs of national schools in 1979 was £6,450,000 and that has been increased by the magnificent sum of £50,000 to a figure of £6.5 million. That will help greatly in the improvement of substandard schools about which we almost had a strike in 1979. So, we can only look forward to the continued downrunning of national schools especially the older ones.
The position on the capital side is even more serious. In the Public Capital Programme of 1980, Table 7, where there is a running summary, makes it clear that the capital sum provided for education, which in 1979 was £53.11 million is being reduced to £49.12 million, an actual reduction. Clearly, that means that the Fianna Fáil Government cannot face up to the task of providing educational facilities for our rising population, cannot now hope to tackle the problem of third level education, where at least one report has sought a doubling of places by the middle of the eighties. How can you possibly build more colleges and institutions if the capital to do so is not provided?
In one of these tables accompanying the budget it is clearly indicated that no new building project would be undertaken in 1980, that the capital sum provided in the 1980 Capital Budget merely covers the ongoing building programme of the Department of Education and of the third level institutions and colleges under the HEA. It is quite obvious that extensions to existing schools and the building of new schools in areas of rapidly growing population will have to be deferred or even abandoned and that we shall slowly return to the situation with classes in excess of 40 gradually creeping up again. The boastings of the Minister for Education that he would reduce primary school classes to 32 by God-knows-when do not seem to be in sight of fulfilment. He may as well return to his tour of America opening art exhibitions. So far as education for the Irish child in 1980 is concerned, it will be a bleak year.
I suggest there can be no recruitment of teachers. I do not want to be misunderstood. There may very well be replacement of retiring teachers, but the intake of new teachers in 1980 will be severely curtailed as a result of the budget. I deal with educational matters and I now demand from the Government an opportunity to discuss the Education Estimates, which I should like to go into in detail.
In conclusion, this budget continues the spendthrift policy of Fianna Fáil. It will damage the country's economy in 1980. It will fuel the fires of inflation; and we are in a year in which we can anticipate an inflation rate in excess of 16 per cent and possibly moving towards 20 per cent. The buses will not be run on time, as Deputy Kelly said when the Taoiseach was appointed. They are slowly grinding to a halt and where they are running at all they will end up in potholes, because that is the Government's attitude to the future of Ireland.
The Chair gives notice that it will call Deputy B. Desmond of the Labour Party next and then Deputy Dr. Browne so that everybody will know where they stand.
Having had the opportunity of studying the budget in detail over-night and making a synopsis of the variety of comments by radio and TV personnel and the media, I suggest that the Minister for Finance in the proposals he put forward yesterday has certainly had his budget accepted by a wide spectrum of the people. I suggest it is a most imaginative, progressive budget and a major policy step forward in structuring the finances of this nation for the eighties.
There is a good deal of background information provided with yesterday's budget and the detailed figures are there for all to read. I feel in this debate it is not necessary to delve in great detail into the actual figures because they have been highlighted over the last few weeks in releases from the Minister for Finance concluding yesterday with his programme for raising the funds——
Notice taken that 20 Members were not present; House counted and 20 Members being present,
Before going into specific details about the content of the budget one has to look at the broader international scene and get indications from the EEC and from the energy providing nations. This is necessary for any country preparing its financial programme for 1980 and further into the eighties. One has only to look at the January issue of the OECD publication——
There is a thing called torticollis, turning one's head around at something. In Waterford it could be called a crick in the neck.
If that is so the Fianna Fáil Party must be suffering severely from it because they have been turning their heads around for the past three years.
The Chair and a number of other people would be glad to know what the Deputy is talking about.
The Fianna Fáil Party must be riddled with it because they have been turning around for the past three years.
The Deputy has had his innings. Deputy Liam Lawlor to continue.
I was referring to the OECD January publication where the secretary general of that organisation has a look back at the seventies and gives a preview of the eighties. It was pointed out that the fifties and sixties saw the opening up of the western economies, a tremendous closing in of distances, greater co-operation and international trade. The underdeveloped countries moved forward rapidly and created tremendous competition within the OECD countries. We, like our colleagues in the EEC, had to contend with this new found competition and to cope with the pressures and the demands of our export potential in order to compete on a restricted market. Then we had an oil crisis and a Coalition Government in the early part of the seventies. Very little was done to plan our economy to take care of the difficulties which arose. Our ability to cope with the situation in the early part of the seventies meant that when we went before the people in 1977 seeking a mandate to take up office again——
It is significant that there is nobody here from the Fine Gael Party or the Labour Party.
The Chair has no responsibility for keeping numbers in the House.
Is the House properly constituted?
As far as the Chair is concerned there is certain precedent for it so we will continue.
It is very bad manners.
They have not yet made one reasonable suggestion about what they would do.
Deputy Liam Lawlor is in possession.
Perhaps we are better off when they are not here.
Let us continue now.
It is a very sad reflection that when we are debating the finances of the country and the programme for the eighties both Opposition parties, who came in initially to criticise severely the budget without dealing in detail with some of the very far-seeing factors within our economy now feel they should not take any further part in the budget debate. I interpret that as meaning the Opposition parties have been very upset about the foresight in the budget. Its innovations and its trends have completely taken the Opposition by surprise. They were expert prophets of gloom and they tried to interweave the political situation and the ongoing situation of the eighties with the financial facts and figures which have been bandied about by them during the last month.
The Opposition yesterday got a very clear message from the Government; they got a constructive, practical and far-seeing budget. Today we have the response from the people in the community who really matter and must co-operate with the Government to ensure that our economy prospers and there is a fair spread of the available finance throughout the community. That is the purpose of the people on this side of the House.
The only criticism I have about the Opposition is their inability to put forward alternative or better suggestions which we would be very pleased to have. We have not had any alternative recommendations or suggestions from the two leaders of the Opposition parties and the other speakers who have contributed so far. We have become accustomed to that since coming back to office in 1977, and during the period when we were in Opposition, when we had to put forward a green paper on the economy to ensure that there was some sort of planning during the period in office of the National Coalition Government.
We are here today to deal with the proposals in the budget and its effects on the economy not alone for this financial year but for the rest of the decade. In the OECD countries the lessons of the seventies have to be looked at in detail and we have to ensure that the same mistakes are not repeated. Far be it from us to point out that all is well in the financial situation within the EEC and within the developing countries. There will be many demands and pressures on the OECD countries. We, as one of the most active members of that organisation, particularly within the EEC and with a rapidly growing young population will face a greater challenge than most. I would suggest the the budget yesterday was a major step forward in gearing this country to cope with the requirements of the eighties.
I will leave the broader spectrum of the EEC and the OECD and come to the practical aspects of the budget and of the capital programme. I come from a constituency that is affected, probably more than most, by the contents of the capital programme. The Minister and the Cabinet are to be complimented on their recognition of priorities. The first item listed in the capital programme is housing. We have had numerous contributions from Opposition spokesmen about housing. Figures count in the housing sector, whether they are the number of houses completed or the amount of capital provided. In 1976, £105 million was provided; in 1977, the last year that the Coalition Government were in office, £100 million was provided. That was a reduction in the moneys provided for housing. That is the situation that this Government inherited. In 1978, there was a £28 million increase to £128 million; in 1979, the expected outturn is £159 million; and in 1980, under the budget introduced yesterday, the Minister proposes to provide £182 million for housing.
I welcome that indication that housing is going to maintain its priority so far as the Government are concerned. We all know that many of our people are in dire need of housing. I hope that in the future more people will endeavour to provide their own homes but we must also ensure that local authority housing is maintained and increased. The local authority of which I am a member has a greater need for funds than any other in the country due to its geographical position on the outskirts of the city of Dublin where we have this development of satellite towns. In the capital programme the Minister has duly recognised the recommendations which we on the parliamentary party's environmental committee put to the Minister for the Environment. We are pleased to see that the message went right through to the Minister for Finance and that this allocation is being made for 1980.
In relation to other urgent areas it is gratifying to see that the IDA are to continue as an important plank in the Government's policy. There are other areas demanding Government spending but it is particularly important not to lose sight of the tremendous amount already invested in job creation and the continuous need and demand for further sums. It would be a backward step if this sector of the economy did not get more than its fair share of expenditure in 1980. Yesterday the Minister reconfirmed his attention to give the IDA a high level of support this year. He said:
This is seen in our decision to increase the State's investment in industrial promotion by £30 million this year. The bulk of this increase is being made available to the IDA and will, we believe, enable the Authority to achieve its target of 30,000 new job approvals in 1980 and so help to guarantee the future employment prospects of our young people.
One must be realistic about some of the criticism from the Opposition. That is one area where money has been very well spent. It is true that since assuming office we have borrowed substantially, but we have gained substantial results. It would be a retrograde step if we failed to maintain investment in employment, although it is probably getting a higher percentage than many other areas where we would like to see increases provided. But it is the basis of future prosperity. We must maintain our investment in job creation. In so doing, based on 30,000 job approvals in 1980, we will over the next two years have 30,000 people making a financial contribution back to the State, allowing us to increase spending on education and on health in 1981 and 1982. We have to plan in this way for the eighties. No longer can political expediency be put before the Government's responsibility to ensure long-term benefits for the country. While other areas may not be getting as much as they need in 1980, this has been a tremendous injection which will pay off in 1981, 1982 and probably as far away as 1983. That allocation is particularly applicable to my own constituency. The IDA are investing vast sums of money in job creation there and at this stage of the growth of the community it is very necessary. There is a tremendous number of teenagers leaving the post-primary schools and looking for employment. The money voted to the IDA in this budget will ensure development in that area.
Telecommunications is a subject which all Members are concerned with. It is a continuous source of problems because it has not developed in line with the tremendous growth we have had in other areas. There are many complex and technical reasons for this. But we must look to the future. Lack of telecommunications can curb industrial development and it is very necessary that we bring them up to a standard to allow development to come on stream quicker than in the past. We should have full confidence in the new Minister's positive approach to date. We should be confident that he will be successful in making this breakthrough. His predecessor was in the early stages of setting up the semi-State board structures. I look forward to quick developments in that area. I am sure the moneys allocated will be spent in this year in greatly improving telecommunications. Let it go out from this House today that the Government are making telecommunications a priority by voting a tremendous percentage increase for telecommunications despite the financial restraints now prevailing.
There has been much discussion from Members on the far side of the House about the state of infrastructure and there is no doubt it is causing some concern. We must be realistic about this matter. The infrastructure has taken more than the normal wear and tear in the adverse winter conditions of 1978-79 and the wet conditions of 1979-80 but the difficulties created cannot be rectified easily. In Dublin County Council there are some major problems in this area but the engineering personnel have pointed out the technical reasons why the problems cannot be rectified immediately. Money is available in many areas for improving the infrastructure but we have not seen the progress we would wish because of technical reasons. There is an additional capital allocation in the budget to ensure further development in this area.
When one takes together the allocation to the IDA, to telecommunications and the increased allocation towards infrastructural development, one can see that the main platform of the Government's future economic strategy is to ensure growth in those areas. Only by getting growth and development in those areas can large numbers of the community have an opportunity to pay back to the State rather than having far too many people depending on the State for assistance, as was the situation during the previous administration. We have injected a tremendous amount of money into the economy in the past two-and-a-half years and this has proved to be the correct policy. I suggest a reasonable comparison is the situation existing in the UK. Their fiscal policy during the same period has not worked and their unemployment difficulties are increasing rapidly whereas we have had tremendous success in creating employment under our strategy.
The major development in the budget that affects most people is the move forward under the PAYE heading. This is particularly gratifying to me because most of my constituents are PAYE payers, although there is also a small section of the farming community in my area. In the past two-and-a-half years the ICTU have put forward a case to the Government and the Minister for Finance has recognised the constructive and positive case put forward by them. This Government have understood clearly that the majority of the contributing sector in the population have not been getting a fair return. The Minister proposes to make alterations to the tax bands and the cost of those changes in personal allowances, tax rates and tax bands is estimated at £131.5 million in 1980 and £227 million in a full year.
The Minister has recognised the need for dramatic changes in the tax bands and he must now look to the ECTU to recognise the foresight of the Government in dealing so efficiently and quickly with a genuine case. There is also the proposal to set up a commission to consider the matter. Some people have criticised this and said that the commission will have an indefinite period to report but the Government have stressed the urgency of reporting on an interim basis on certain areas of taxation. This is recognition by the Government that we propose to get taxation and the nation's finances working in harmony to the overall benefit of the very large number who are paying taxation. That is a major step forward and it calls for due recognition from employees and employers to respond to the Government's approach to the matter. I suggest to the ICTU and to the unions outside Congress that they recognise the tremendous step forward in yesterday's budget and take it into account in the claims for wage increases that will come forward eventually. Unless we co-operate in the financial area we will slip back into a situation where the powerful get the lion's share of the State's finances and the weaker sector is adversely affected.
We agree that we are not putting into education and health the amount of money we would wish to invest this year but we are going to maintain the very good progress in both of those areas. There is a very considerable build-up of investment that will carry forward from the 1978-79 programme in school and hospital development which will see us through 1980. However, we will have to ask for a fair contribution particularly in the area of increased productivity from employees in recognition of what was done in the budget.
With regard to working married women, the Minister has responded positively and generously in financial terms to the Supreme Court's decision. Criticism of the Government with regard to this matter by Members on the opposite side seems rather hollow. I mention in particular the former Minister for Labour who commented on the matter last week-end. During the term of office of the National Coalition the EEC directive on the matter had to be put forward in a legal way to get equal pay for equal work. At that time the two parties opposite had an opportunity of making the token gesture by paying equal pay for equal work but they failed miserably. One must not forget that. In his speech to the Ard-Fheis, the Taoiseach mentioned the Government's recognition that women are contributing to the development of the country. From having a lot of legislation weighed against them and not getting equal pay for equal work they have come after yesterday's budget to having a whole area of their involvement in earning and so forth put right in one fell swoop. As I said to the ICTU, we look to the women within the community for an all-out effort in employment to increase productivity. That is the basic theme of our future success. We are still substantially below our EEC European mainland partners. In the UK productivity is down and far too often we compare our performance with that of the UK. We are calling now on the PAYE sector, the people who have got the most benefit from yesterday's budget, to increase productivity and to assist in improving the financial situation so that we can share the financial gain in 1981 more widely.
We recognised yesterday that the sectors of the community who are not in a position to stage massive demonstrations in the way of marches or otherwise, the people on social welfare have got an increase 5 per cent greater than was predicted. That was well worthy of inclusion in the budget by the Minister for Finance. It is much needed and is a recognition that this Government are looking after the weaker sections of the community.
The Minister dealt with the economic prospects for 1980 and those prospects in the main are within our own hands to guide and to improve. Energy costs rose dramatically in 1978, 1979 and 1980 and we would like to assume, if possible, that the estimates for outgoings on energy costs will be maintained rather than rise dramatically as they did in 1979. That being the case, we are, within reason, in a position to make an assessment of our outgoings and, based on the figures in the budget yesterday, to foresee that the planning which went into the budget will come to a conclusion with incomes and outgoings for 1980 balancing as suggested by the Minister for Finance yesterday.
At the end of 1979 our outgoings increased, mainly as a result of energy costs. A major factor in economic planning at this stage is the cost of energy and the unpredictably large amount of finance which can slip out of the economy and create tremendous difficulties and we as a major importer of oil have to contend with that. There has been a tremendous shift in wealth to the oil producers. We must recognise that and endeavour to turn it to our advantage. The onus here is very much on our semi-State organisations, particularly those involved in food exports. Oil exporters are major food importers and it is up to us to make a tremendous effort to recover some of the vast sums of money that we are spending on energy by an energetic move forward in the food export industry. That challenge must go out from this House today to semi-State organisations in the main. The semi-State organisations with whom I have had the opportunity of becoming involved as a member of the Joint Oireachtas Committee on semi-State Bodies generally speaking have been very successful in the past decade, but there is a tremendous need for closer co-operation, if possible, with the private sector in getting a more aggressive marketing approach in an effort to recoup some of the vast sums of money that the oil-producing countries are getting from us. Food is our natural resource and our best possible product for bringing in foreign currency. Most of our other exports have a high percentage content of imports which makes them less attractive in the way of earning foreign currency but food exports are a tremendous area of potential in earning foreign currency for us. We have a continual debate situation within the EEC about food mountains, yet there are tremendous food shortages in other parts of the world. We, more than any other country in the EEC, have a responsibility to bring forward some really imaginative marketing in an effort to direct the food products which we can produce so ably into the oil-producing countries in particular who in the main are very anxious to improve the standard and conditions of living for their populations. We in Government must mould that challenge into our semi-State organisations and into our private food exporting organisations. There has been much fragmentation in that area in the past but there has been one exception. An Bord Bainne have been positively successful in international terms. We must maintain the momentum of that semi-State body and we must look at the vegetable-growing and meat-processing areas and repeat the successes of An Bord Bainne in these areas.
The situation in the other areas of export will refer back to the ICTU's attitude towards our generous recognition of their case in the budget yesterday. I ask that in negotiating wage claims coming forward that they will recognise the need for restraint in percentage increases. There will be a tremendous amount of pressure on us in this regard, particularly from the more efficient EEC partners, Germany, France, Holland and Belgium. They recognise the difficulties. One of the major and most efficient economies in the world, the Germans, on recognising the increase in the cost of energy have settled for an increase of 3 or 4 per cent for 1979 and possibly the same or less for 1980. I do not suggest that that sort of percentage increase is possible in this country based on the projected inflation rate of 16 per cent. An inflation rate of from 8 to 10 per cent for the 12-month period from the latter half of 1980 into 1981 is more realistic so that we will not have a situation such as we had in the past where there were prolonged negotiations when an employee looked for a rise of 25 per cent and the first offer was about 5 per cent. We should provide what it is practical to provide so as to avoid long negotiations and having a great deal of retrospective money due to employees. That sort of thing makes costing and exporting difficult. If we are to adequately use the potential of our work force we must adopt this new outward approach in relation to exports. Our well educated work force have proved a tremendous attraction to industrialists over the past ten years. However, we will lose the benefit that might accrue to us from this asset if costs rise too dramatically. More efficient economies striving for additional revenue will be able to increase their exports and competition will be much tougher and we will slip back. We should tailor our situation so that we can compete within the European Community rather than looking across the water and adopting their worst economic trends, increases in inflation and wage increases, while trying to compete with the more efficient European mainland countries.
In creating a science budget for the National Board of Science and Technology the Minister is positively recognising the potential that exists for innovation and experiment especially in relation to new energy sources. I hope that the science budget will be mainly directed towards investigation into alternative energy sources. Now that energy is a major topic far too many people are commenting without research on alternative energy sources. People are talking about wave power, biomass and so on. By allocating a sum of money to the National Board of Science and Technology the Government are asking that body to produce practical positive recommendations. There is a lot of potential in relation to alternative energy, and research which is costly and does not produce quick results as yet has not yielded any major contribution to the energy grid as a result of the lack of investment up to now. It is hoped that the money provided in the budget will give the National Board of Science and Technology an opportunity to come up with some viable alternative.
Our energy needs are obviously increasing and this has given rise to the consideration of nuclear energy. That is one way in which we can quickly provide a tremendous amount of energy However, this would have major financial implications and the taxpayer would have to contribute a tremendous amount to the State. That is something we could avoid if we provided an alternative source of energy. Our partners in the EEC recommend that more money be spent on research into nuclear energy and I hope that the National Board of Science and Technology will make some major breakthrough in this area. Although finance is tight, recognising the priorities the Government allocated a sum for that purpose.
It is particularly heartening to see that the Minister made substantial moneys available to Bord na Móna. Recently at Question Time, Opposition Deputies pursued this aspect of Government policy. The capital provision of £16 million in 1980 for the continuation of bog development work, the building of a new briquette factory at Littleton in Tipperary and the board's third development programme with an outturn for 1979 of £12.2 million is indeed recognition of how we can best help ourselves in having the minimum in oil requirements.
In relation to the £120 million required by the ESB for continuing their programme of coal-fired generating stations, the Minister has again recognised the tremendous potential within the ESB. A provision of £4.2 million for the Irish National Petroleum Corporation is a major step forward. This is to cover the expenditure of providing oil terminal facilities for the corporation. There is tremendous goodwill from the oil producing nations towards us and many of them are interested in doing State to State deals. We can only avail of the goodwill of these countries by improving oil terminal facilities. If we have to go through the web of the multi-nationals we will not benefit. The Minister is moving in the right direction by seeking to ensure a continuous supply of oil at the most realistic price. I hope that we can avail of a barter system to obtain an outlet for our food products and to ensure that we get our oil requirements. In relation to any euphoria about oil or gas discoveries off our coasts, on account of the capital requirement, probably at the end of the eighties the community as a whole will have benefited rather than we as a nation getting any immediate benefit.
The Minister yesterday put before the House a budget which has already been accepted by most constructive and forward looking people. The challenge is there, the opportunities are there and the people in the PAYE sector have reason to extend their working involvement and interest. It had been pointed out on a number of occasions that the incentive to work was gone, that the tax percentage was too high, that productivity was down and that absenteeism was at a high percentage. In dealing particularly with that crucial area the Minister has provided the potential for a tremendous movement forward. This budget will be seen as a major step forward in progressive financial planning.
With the permission of the Ceann Comhairle, I wish to raise on the Adjournment the subject matter of Question No. 404 on the Order Paper for Tuesday, 26 February 1980 in respect of the proposed EEC super levy on milk.
I will communicate with the Deputy.
Debate adjourned.