When I reported progress before Question Time I was making the point that one of the major successes of the budget has been to deflect public attention and criticism from the cuts in the Estimates and the capital services. I was giving chapter and verse for that accusation from the public capital expenditure and current expenditure on education. I had not mentioned the fact that on the current side some of the most severe cuts would take place in the area of higher education in general and the universities in particular. The universities have been allocated about 5 per cent more in money terms on the college expenditure side in the Estimates than they were allocated in the previous year.
The irony here is that even a very sharp increase in university fees, which no doubt we can now expect, would not be enough of itself to cover the shortfall between what the Government are going to make available to universities this year and what they are going to have to spend to maintain their services at last year's level. The only option will be that the universities will have to cut their services and no parent of any child going to university, however much he may smile at his pay packet after this budget, can afford to look at it without looking also at what is going to be the effect on his child in third level education.
I was struck by one aspect of the Taoiseach's speech here this morning when he referred to services, the Public Capital Programme and the Estimates. Obviously replying to criticisms, which have been made very justifiably, he said in effect, that this year's allocations were—I hope I am not misquoting him—"sufficient to maintain existing services at a satisfactory level". That sentence would need to be parsed and analysed very carefully. He did not say that the allocations were sufficient to maintain existing services at existing levels. They are not. He said that they would be sufficient to maintain the existing services. Naturally, you can hardly close down a service wholesale, but to maintain them at a satisfactory level we must ask the question what is a satisfactory level?
What is satisfactory to the Taoiseach and to members of the Government may not be satisfactory to members of the public. The inference which it is legitimate to draw is that people are being asked now to accept less in the way of services than they got last year in order to pay partially for the income tax concessions which are being given in this budget. In all the important areas, such as local authority housing which has a cut in real terms on last year, education, which, if one ignores teachers' salaries, is cut also on last year, and no doubt health as well, the member of the public would have to realise that before he gets to the bank with whatever he has extra in his pay packet from the income tax concessions, he is going to be hijacked not once but twice, first by the VAT man and by the tradesman and other people who are selling him the things which are being taxed extra in this budget, and, secondly, by the Government, because if he wants to maintain the value of the services in these important areas such as housing, health and education, he will have to dip into his pocket to make good the deficiency which has been built into the Estimates and the capital programme. The confidence trick of the Government is that the ordinary punters are being led to believe that if they cut down a little bit on the drinks and smokes they will be able to keep all they get back in the way of the extra concession. To put it mildly what is not being emphasised—one might almost say it is being concealed—is that they will also have to dip into their pockets to pay extra for the services in these important areas that would otherwise have been provided for them at the last year's level. It is one thing to talk about discretionary expenditure in relation to drink, alcohol, betting and so on, but when you come to health, education and housing, different members of the public are in very different situations indeed when it comes to filling the chasm which widens in front of them as a result of this year's Estimates. That is the basis for the cynicism of this budget which does not—as Deputy de Valera's budget did in the olden days—merely take money out of one pocket and put it back into the other and charge for the privilege. It takes money out of the two of your pockets and puts it back into only one. The levels of investment in our social services that this Government consider satisfactory are not regarded as satisfactory by the people on these benches.
I turn now to taxation in more detail. I want to underline the fact that, whereas some of the comparatively modest claims that were made by the ICTU in their budget submissions have been met by this budget, the great majority of claims have not. I can identify them very easily for the benefit of the House. I have dealt already with the resource tax that has been proposed by the Government, but since this morning suddenly it has become seriously attenuated. Three of the most important sections of the ICTU's budget submissions dealt with capital taxation. They pointed out—the information came partly at least, from a Dáil question which I put down—that out of a total tax revenue of over £2 billion in 1979 capital taxes are expected to yield less than £15 million which is less than the figure for any of the four previous years. They say that this is wholly unacceptable. If that is wholly unacceptable how much more unacceptable is a budget which does not do anything positive in relation to increasing the yield from capital taxes and in fact lessens the yield from capital taxes in certain important respects?
It seems that nobody on the Government side of the House is prepared to accept that if you relax personal taxation in order to increase incentive, productivity and so on—and there are reasonable arguments for this—an essential concomitant of relief of income tax is a progressive system of taxation on accumulation of capital and wealth. Otherwise you are not encouraging initiative alone, you are encouraging accumulation, and almost inevitably the use of resources not in investment but in ostentation. I remember reading an article by Senator Whitaker in one of the Sunday papers not so long ago in which he referred very pointedly to the fact that as he saw it one of the main reasons for the tax grievances and for the tax marches was the very large perceived difference in lifestyle between some members of our society and other members. These differences in lifestyle are directly related to the absence of any effective capital taxation system. The ICTU say in No. 20 of their pre-budget submission, that something should be done about this. They specifically ask that the wealth tax be reintroduced, that the tax threshold applying to capital acquisitions tax and to capital gains tax should be reduced, certain exemptions amended and the rates of tax raised. They say that particularly short-term capital gains should be treated as income and taxed at the appropriate income tax rate. I was on the tax march and one placard out of every three asked the Government to bring back the wealth tax. If the Government think that these concessions relating only to income tax while doing nothing about capital taxation have satisfied the marchers they have another think coming.
A major aspect of the budget is the change to indirect taxation. I must pose some very serious questions about this. One of the exceptions I hold relates to smoking. We were rather surprised that this was not hit more heavily, even though people say that it is harder to give up smoking than to give up drinking. The Government chose to regard this as discretionary and I find it difficult to disagree with them. A minor item relates to the tax on cigarette lighters. I do not know who thought of that, but he has a splendid future in front of him either in the public service or in Government if he is on the Fianna Fáil benches. To have found something that was not taxed before, on which one can put a tax of 20 per cent to which nobody can object, is the mark of genius and I take off my hat to whoever it was.
One of the problems about the shift to indirect taxation is that we are already very heavily taxed indirectly. About 55 per cent of our total revenue comes from indirect taxation. This is one of the highest rates in the EEC. We already have one of the highest rates of VAT in the EEC. Indirect taxes, in some respects, especially where VAT and excise duties are concerned are open to evasion by many of the groups who avoid direct taxation. Indirect taxes are not related to ability to pay but one of the main reasons why I query this shift to indirect taxation is that although workers will continue to carry an unequal share of the tax burden, it is now harder to prove this. At least under the present income tax system, the unfair burden could be clearly shown.
How discretionary is expenditure on petrol? If one lives in Drogheda it is probably quicker to commute to the centre of the city than it is to get from parts of my constituency in south County Dublin. The Government's failure to adopt a rational comprehensive and co-ordinated transport policy means that for many people a car and petrol is not a luxury if they have to get to work. If the Government were serious about not wanting to pass this on to the general public in the form of rising prices and so on through industry they could have raised the VAT on petrol instead.
For large numbers of working people a modest amount of alcohol is fairly discretionary. Many people working in unpleasant surroundings, under considerable stress feel that a pint at the end of the day is as good any time as the business man's gin and topic, but the working man will have less to spend in terms of discretionary expenditure on his pint, for all the tax concessions, than the business man on his gin and tonic.
I was intrigued to hear the Taoiseach remark that the food subsidies were being retained. Anybody would think that the Taoiseach had introduced them and we were encouraged almost, to forget that a Fianna Fáil Government not only failed to introduce food subsidies but reduced their value by one-third since they came to office. This should not be forgotten and any attempt by the Government to further reduce these subsidies which unfortunately form a decreasing percentage of the price of some of the stable foods of large numbers of low income families, will be resisted from these benches.
In relation to income splitting the Government took their courage in both hands in going further than the Supreme Court wanted them, but it raises certain issues which have not apparently been considered. It makes it more likely that women in general, married women in particular, and married women in the lower income groups most of all, will tend to be forced out of employment and back into the home. In a socialist philosophy, in a socialist society, we believe in the equal division of labour both inside and outside the home. It is because I fear that the application of income splitting, unadorned by any serious consideration of some of the social consequences, may have this effect on female employment and on the right of women to work outside the home if they wish, that I must put a question mark against it. The incentives that income splitting provides are overwhelmingly in the region of those jobs where women are not only better paid but where their employment is better protected often by trade unions.
In relation to tax on businesses there has been a wholesale ignoring of the very modest requirements of the Irish Congress of Trade Unions. In item No. 27 of their pre-budget submission they asked that steps be taken to ensure that the companies sector make a bigger contribution to tax revenue. This year corporation tax is expected to amount to £121 million which represents less than 6 per cent of central Government revenue. They also argue strongly for the need to review the various reliefs and allowances that have grown up during the years which companies can use to reduce their tax liability.
On capital taxation the budget provides three things: stock relief, a concession to be continued for a further year at the level which applied in 1979; a special incentive for manufacturing companies, again a concession which involves a special 25 per cent rate of corporation tax, to be extended to 1980 and the big attack on the world of the corporations in Ireland that the deduction for business entertainment expenses for tax purposes will be limited to 50 per cent. It is extraordinary that anybody can believe that this seriously represents any kind of an attempt to meet the justified call of the labour movement, inside and outside trade unions and on these benches, for a level of company taxation which comes close to meeting some kind of share of the profits they are making. We have the evidence of the Financial Executives Association, as quoted in The Irish Times of 4 December 1979, that there has been a boom in company liquidity or in the growth of company profits in recent years. Far from siphoning off anything from this boom the Government are giving even more away.
The Government are giving more away to the companies and the shareholders at a time when the introduction of new forms of technology make it all the more dangerously likely that these profits, in so far as they are not distributed in dividends, would be used to replace human labour with mechanical labour. Above all this is a time when the advent of new technology in general, and the microprocessor in particular, should be used by the Government as the excuse and the opportunity to bring in financial and fiscal legislation which would force companies to take a more realistic view of their responsibilities in the employment market. I do not believe that because the new technology may threaten some jobs we should never introduce it and no Member of these benches would take that view. However, we are concerned that the benefits of this new technology should be shared and the extra profits it creates should be used to create extra jobs in the service industry and not simply siphoned off into the pockets of directors and shareholders.
In relation to social welfare I should like to state that I do not believe that anyone in ICTU fully appreciated the levels that inflation would reach when they asked for a certain rise in the percentage of social welfare benefits. It is clear when one looks at that situation that we will be lucky if the increase given in the budget will match the inflation that will take place next year and the inflation that took place last year, which the budget increases also intended to cover. When this general approach to social welfare is set against the Taoiseach's action, when he was in charge of the Department concerned, of cutting the funds to the Committee on Poverty it can be said that, as far as Fianna Fáil are concerned, they do not care much if the poor are always with us.
I accept that we will always have relative poverty, that there will always be some people who will be relatively better off than others, but it should be part of the aim of any Government of this State to abolish absolute poverty. That can only be done if the Government have a clear sight of the structural causes of poverty in our society. The Committee on Poverty were doing that and are continuing to do so with limited resources. They are trying to analyse the structural causes of poverty in our society. It is because a clear analysis of this kind would threaten the interests represented on the Government benches that money is being denied.
In conclusion, I can only express the wish that the person who wrote the Taoiseach's speech had known a little more about some of the metaphors the Taoiseach was advised to use. In his peroration the Taoiseach referred to the ship of State and the ship of the economy and said, proudly, that in the months and years ahead he would keep her head to the wind. The Taoiseach does not know anything about sailing because if he did he would know that when one turns a boat's head into the wind she stops dead. The Taoiseach should stick to his horses.
