Dáil Éireann díospóireacht -
Tuesday, 4 May 1982

Vol. 334 No. 1

Special PRSI Allowance: Motion.

Minister for Finance (Mr. MacSharry)

I move:

(1) THAT in this Resolution—"insurable employment" has the meaning assigned to it by section 2 (1) of the Social Welfare (Consolidation) Act, 1981 (No. 1 of 1981);

"specified emoluments" means emoluments within the meaning of section 111 (4) of the Income Tax Act, 1967 (No. 6 of 1967), which arise to a specified employed contributor from an insurable employment;

"specified employed contributor" means a person who is an employed contributor for the purposes of the Social Welfare (Consolidation) Act, 1981, but does not include a person—

(a) who is an employed contributor for those purposes, by reason only of section 65 (1) of that Act,

(b) in whose case section 10 (7) of that Act has effect, or

(c) to whom Article 7 of the Social Welfare (Modifications of Insurance) Regulations, 1979 (S.I. No. 87 of 1979), applies.

(2) THAT, in relation to income tax for the year 1982-83, the following provisions shall have effect—

(a) for the purposes of ascertaining the amount of the income on which an individual (being an individual who is a specified employed contributor) is to be charged to income tax for the year 1982-83 in a case where the total income of the individual for the said year consists of or includes specified emoluments (including in a case where the individual is a husband who is assessed to tax in accordance with the provisions of section 194 of the Income Tax Act, 1967, any specified emoluments of his wife which are deemed to be income of his wife by that section for the purposes referred to in that section)—

(i) a deduction of £312 shall be made from so much, if any, of the specified emoluments (but not including, in the case where the individual is a husband assessed as aforesaid, the specified emoluments, if any, of his wife) as arise to the individual, and

(ii) in the case where the individual is a husband assessed as aforesaid, a deduction of £312 shall be made from so much, if any, of the specified emoluments as arise to his wife,

(b) any deduction to be made under this Resolution from specified emoluments shall be given in priority to any deduction to be made under section 138B of the Income Tax Act, 1967, from those emoluments,

(c) all such provisions of the Income Tax Acts as apply in relation to claims for the deductions specified in section 138 to 143 of the Income Tax Act, 1967, shall, with any necessary modifications, apply in relation to a claim for a deduction under this Resolution,

(d) except as otherwise expressly provided, a deduction under this Resolution shall be given either by discharge or reduction of the assessment, or by repayment of any excess tax which has been paid, or by all or any of those means, as the case may require.

(3) IT is hereby declared that it is expedient in the public interest that this Resolution shall have statutory effect under the provisions of the Provisional Collection of Taxes Act, 1927 (No. 7 of 1927).

This resolution is required to give effect to the Government decision, announced on 22 April, to provide for a special income tax allowance of £312 in the case of employees liable for the new PRSI contributions at the higher rates. The Revenue Commissioners are advising employers to apply this allowance from this week onwards and it is necessary in the first place to obtain the approval of the Dáil before this arrangement can be put into effect. A corresponding provision to this resolution will be included in the forthcoming Finance Bill.

There have been detailed press statements about the allowance and the reasons the Government have decided to take this action. The PRSI increases which took effect on 6 April were substantial. There was a total increase in employees' contributions of 2¾ percentage points, including 1 per cent on gross income in respect of youth employment. These increases had been well heralded. They formed part of the budget proposals introduced by the previous Minister for Finance on 27 January. The youth employment levy was incorporated in the programme of the previous Government and the necessary legislation for it was enacted in December. Indeed, this programme envisaged a number of other additional charges which would have added very considerably to the overall PRSI contribution if they had been implemented. The Social Welfare Bill, which was passed by this House on 24 March, that is the day before the budget was introduced, provided for the 1¾ percentage point increase additional to the youth employment levy.

The Government, therefore, implemented without change the proposals put forward by the previous Government and these proposals had been widely publicised. In the event, however, many workers felt that the imposition was too severe when they received their first pay packet for April. Unfortunately the problem was compounded because it was not possible to implement from the beginning of the tax year the tax changes announced in the budget. Due to unavoidable administrative delays these changes will not take effect until later this month and, for many taxpayers, they will mean an improvement in their income tax position. Also, many workers had ceased to pay PRSI for some weeks at least because their earnings had exceeded the ceiling for PRSI and consequently they moved in one week from a position of no PRSI deduction to a deduction of 7½ per cent. In these circumstances it was inevitable that there should be widespread dissatisfaction. I should mention at this point that the Government are looking urgently at the possibility of arranging that in future PRSI payments for all workers will be staggered over the full year. There are technical administrative difficulties associated with this and I cannot say at this stage whether a workable solution can be found.

Apart, however, from the combination of factors which gave rise to dissatisfaction, the fact remains that the PRSI as it now stands is quite a severe imposition on the worker with average or low earnings and it is time to re-examine it in depth. As PRSI payments are not allowable as a deduction for the purposes of assessing income tax, it is argued in some quarters that those on PRSI are subject to double taxation. I intend to arrange that the taxation arrangements in respect of PRSI will be investigated in detail in the coming months and this investigation will take account of any recommendations which may be put forward in the first report of the Commission on Taxation. I understand that this report is likely to be available in a few weeks' time. In the meantime the Government have introduced for this year a special allowance of £312 as an interim measure for those who have to pay PRSI at the higher rates.

I should mention that the Government discussed the new PRSI changes with the Irish Congress of Trade Unions before arriving at a decision. The view of congress was that some relief now was essential because of the extra burden that workers were being asked to bear and this view, of course, influenced the Government decision. I am glad to note that in their May Day Declaration, congress have welcomed the special tax allowance and describe it as a significant attempt to ease the burden on workers. I should like to quote what congress had to say on this:

Congress welcomes this easing of the burden on workers. What was done may not have matched the expectations or hopes of some but in the light of the severe budgetary constraints, the reasons for which are by now well-known, a concession costing £45 million in the remainder of this year (£69 million in a full year) does represent a significant attempt to ease the situation, as must be recognised by all who have not lost touch with reality.

For the taxpayer on the standard rate of tax the new allowance is worth over £2 a week in take-home pay. This allowance, together with the income tax changes and social welfare child allowance improvements announced in the budget, will ease the overall tax and PRSI burden for the big majority of workers. A single taxpayer will be better off on weekly earnings up to £128, a married taxpayer up to £228 and a married taxpayer with two children up to £236.

There has been criticism that the new allowance provides no benefit for the lower paid who are liable for PRSI but who are below the income tax thresholds. Let me put this in perspective. Altogether there are approximately 700,000 employees who are paying PRSI at the full rates. Of this total all but an estimated 40,000 pay income tax. While precise details of these 40,000 employees are not available, the indications are that the majority of them are in part-time work and some of these undoubtedly qualify for short-term social welfare benefits.

As the congress declaration pointed out, single persons pay income tax on earnings from £42 a week upwards and married persons on earnings from £85 upwards. There can be very few in fulltime, year-round employment whose earnings are below these thresholds.

The only alternative to a tax allowance was a reduction in the overall PRSI contribution. This in effect would have required a reduction in PRSI payments for the social insurance fund or some cut in the youth employment levy. The employee's contributions to the insurance fund now total 23½ per cent of what is required whereas the State has to make a contribution of 25 per cent and in this situation a reduction in the PRSI proper would hardly be warranted. If this year's increase were withdrawn, then the State would be called upon to make a 38 per cent contribution or else the employer's rate would have to be increased. Some employers are already complaining loudly that the PRSI contribution is too big a burden for them and is acting as a disincentive to employment.

The youth employment levy is a contribution to meet the problem of youth unemployment and it is charged on all workers irrespective of their status. I might remind the Opposition again that this levy was introduced by them when in Government and that they did not provide any special arrangements in this legislation for the lower paid workers in relation to this levy.

As already mentioned, the new allowance will cost £45 million this year in terms of tax foregone. This will have to be made good through expenditure savings and other taxes and I am looking at the possibilities in this area with a view to making recommendations to Government in the near future.

Those who clamour for reductions in PRSI should follow through these demands with proposals for alternative sources of revenue or reductions in public expenditure. As to alternative sources of revenue, the reality is that the scope for extra taxation is limited and it is a myth to suggest that there are large untapped sources which can be called upon to solve all our problems. I agree that the tax net has to be widened and I look forward to the recommendations of the Commission on Taxation in this regard.

The only other course of action is to abandon our commitment to reduce borrowing for day-to-day expenses and allow the current budget deficit to rise. I think the House in general would agree with me that this policy would be extremely short-sighted.

There is one other issue that I should like to deal with at this point. There has been considerable criticism at the decision to narrow the 35 per cent tax band from £4,500 to £3,000 for single persons and from £9,000 to £6,000 for married persons. This criticism is based on a misconception of the tax package which I announced in my budget of 25 March. This package was carefully designed to achieve the same effect for individual taxpayers as the January proposals which were based on a tax credit system. Thus, while the 35 per cent band was narrowed, the personal allowances were increased very substantially and this factor is not taken into account at all by those who want to widen the band again.

The allowance provided for in this resolution is an interim measure for the current tax year. We have to look carefully at the whole PRSI structure and its link with the income tax system and devise arrangements which are demonstrably fair and which distribute the overall burden of taxation as equitably as possible. This is a difficult issue and it could not be resolved at short notice in response to an immediate problem. The special allowance is the short-term response. It should be a most welcome change for those who must pay PRSI at the full rates and I commend to the House the resolution which will bring it into effect.

An Leas-Cheann Comhairle

Deputy Bruton to move his amendment.

Mr. J. Bruton

I wish to seek clarification as to whether I should make my contribution first and move it at the end of my contribution or must I move it first?

An Leas-Cheann Comhairle

The Deputy may move it either at the commencement or the termination of his contribution and we will then take the motion and the amendment and discuss both simultaneously.

Mr. J. Bruton

I would prefer to move it at the termination of my contribution.

An Leas-Cheann Comhairle

That is acceptable.

Mr. J. Bruton

I am highly critical of the approach the Government have adopted in meeting what is a real problem. There is a real problem in regard to the burden of pay-related social insurance contributions. The approach chosen by the Government to meet that problem is a bad one for two reasons, the first being the Minister's blank refusal to say how the £45 million necessary to pay for this concession will be raised. I do not believe the Minister is being straight with the people by concealing at this stage how he proposes to raise that money. All of it must be raised before 31 December 1982 if the Minister is to adhere to his stated intention of maintaining the budget deficit as set out in the March budget statement. It is not good enough for him to say, as he said in an interview with the Sunday Independent last week, that, “It would be entirely inappropriate at this point in time to give any indication of how the revenue loss will be made good”.

I submit it is entirely appropriate at this time that such information be given. Never before has the House been asked to vote on a budget proposal, as this is, without being told simultaneously how that budget proposal was to be paid for. Lest any Member of the House be of the opinion that £45 million is a trifling sum, I remind such Member that if the £45 million were to be raised by an increase in the lower rate of VAT before the end of this year it would have to be introduced in the form of an increase in VAT rates from 1 July, and raising £45 million by that method would bring the lower rate of VAT up to a minimum of 20 per cent. I from its present level of 18 per cent. I point out that it is highly probable that this £45 million will have to be raised by means of indirect taxation, for two reasons. First of all, it is well-nigh impossible to raise additional money through income tax in the middle of a tax year. Already major problems have been created by the changes made in the income tax code by this proposal, but if it were to be paid for by further compensating increases in income tax at higher levels total confusion would be created in the tax offices. Therefore, I believe that any recourse to income tax to raise the £45 million which the Minister seeks is impossible for administrative reasons and it would be highly undesirable for other reasons also.

Likewise, I do not believe it is possible to raise £45 million in the next six months in expenditure cuts. I am not saying that it is not possible to raise £45 million in expenditure cuts. It is, but the money would not be available before the end of this year. Modifications in expenditure are notoriously slow to take effect. You can make a decision now in regard to cutting expenditure which will yield nothing for maybe 12 months but will yield quite a significant sum in two or three years' time. As the Minister has said that he would adhere to this year's current budget deficit, he must raise the entire £45 million this year. Therefore, the avenue of seeking expenditure cuts is very unpromising, as the avenue of increases in income tax is administratively and perhaps politically impossible.

Therefore, we must concentrate on the fact that the Minister will have to pay for this probably by increases in indirect taxation. I am sure that by now he has been made well aware of the fact that diminishing returns have already been reached with regard to increases in taxes on drink and cigarettes. The Minister is effectively faced with a choice, if he is to raise this £45 million, between increasing VAT by more than 2 per cent on the basic rate or alternatively increasing the price of petrol. It is not honest for the Minister to say that it is inappropriate or impossible for him to tell the House how he proposes to raise the money. Quite clearly, his options are very narrow indeed if he is to raise the entire sum, as he has said he will, before the end of this year. His choice boils down to VAT increases or petrol increases. This £45 million is to be raised by either of them or a combination of both, and it behoves the Minister to tell the House now when he will make an announcement in this matter, otherwise the Irish taxpayer and the House are not being given a true picture of the nature of the Minister's proposal.

It is a measure of the state of unreality into which this nation's finances have sunk that a tax concession is now being introduced to mitigate the effect of a tax increase and in some weeks' time we will have the spectacle of a tax increase being introduced for a tax concession which was introduced to mitigate the effect of a tax increase. This piggy-backing of concession on top of increase and increase on top of concession could go on forever as long as we have a government who are not capable of making up their mind and sticking to it. I hope, however, that the Government will have the degree of forthrightness with the people to say, if not today at least in the next week, exactly where they will raise this £45 million. I hope that they will not attempt to conceal this information from the electorate of Dublin West before the electors of that constituency go to the polls. It will be entirely dishonest of the Government to announce the concessions before the by-election and conceal the method whereby it is to be paid for until after the by-election. I challenge the Minister for Finance to say now if he is prepared to let that information be known before the electorate in Dublin West go to the polls. Otherwise I will have to say that he and his Government are engaged in a form of confidence trick. That is my first objection to the way in which the Minister is proceeding.

My second objection is to the substance of the proposal. Certainly I agree that there is a need to introduce concessions in regard to the burden of pay-related social insurance contributions, but I believe that the way in which this proposal has been designed makes it about the worst possible form of concession because the maximum benefit of this tax allowance will go to the people with the maximum incomes and the minimum, or indeed nil, benefit of this concession will go to people with the lowest incomes. As the Minister has said, 40,000 people in this country are at work but because they have substantial family responsibilities or particularly low incomes they are not paying income tax. The Minister in his speech seemed to sweep these people aside as if they did not matter — there are only 40,000 people in that position. The 40,000 lower income people at work are not to be dismissed in that manner. They will gain not a single penny from this concession, although they will be paying the full increase in PRSI contributions. It is simply not good enough to say, as the Minister seems by implication to say, that these people do not matter. I point out to him and the House that these are the very people who are caught in what is known as the poverty trap. In many cases they would be better off not working than working, yet the Minister chooses to give them no concession whatever in the concessions he is introducing in relation to the increase in PRSI contributions. Fundamentally, he is wrong in adopting that course. Indeed, the fact that he has choosen to ignore the needs of low income people at work in this manner will surely make many of them contemplate whether they should continue working at all, whether they should instead seek to find a way whereby they can become either certifiably ill or simply unemployed because their income is so low and the Government so obviously do not care about them as to leave them out of the concessions introduced with regard to PRSI contributions.

However, it must be said that it is not only the people paying no tax at all who are being treated inequitably under the type of concession the Minister has chosen to introduce. Let us compare the situation of a worker in the 35p in the £ tax band at his maximum rate with another worker who is in the 60p in the £ tax band at his maximum rate. The former worker is what one describes as a middle income employee and the latter is certainly a high income employee. Who will gain most from this concession? The high income employee. He will get 60p worth whereas the middle income employee will get only 35p worth from his allowance. Clearly this tax allowance is designed to give more benefit to the better off and less or no benefit to the less well off.

The Minister said, inaccurately, that he had no choice in the matter and that he could either have introduced this tax allowance or else cut PRSI contributions. That is not so. As the Minister knows, it would have been possible for him to have introduced a tax credit for social insurance contributions rather than a tax allowance. If a tax credit had been introduced — in other words, a deduction not from a person's income before tax was calculated but a deduction from the actual tax payment — that concession would have been of equal benefit to all taxpayers. It would have been of the same benefit to a taxpayer paying 60p in the £ as to the person paying 25p in the £. Both would have been getting the same level of concession. However, the Minister chose to opt for a tax allowance. I believe he did so not because he objects to the principle of a tax credit but because the Coalition parties have been associated with the idea of tax credits and, whether the idea is good or bad, the Minister could not afford to be associated with the idea of tax credits because of its provenance on this side of the House. That is not a good enough reason for throwing away the opportunity of making these proposals much fairer than they are. The Minister should have opted for a tax credit solution to this problem.

I would have introduced an amendment to this proposal to substitute a tax credit of the same cost, that is, £45 million, for the tax allowance the Minister is giving if such an amendment had been in order but I was advised by the Ceann Comhairle's office that such an amendment, within the strict terms of this debate, would be out of order. The Minister has made a serious blunder in choosing to use a tax allowance rather than a tax credit for this concession. He has lost an opportunity of giving equal benefit to all and instead has chosen to give maximum benefit to the well off and minimum benefit to the less well off.

The Minister might say that there is no precedent in existing legislation for tax credits and that there would be administrative difficulties. That is not so. A tax credit has been introduced in relation to the payment of rates by farmers. Under the tax code a farmer's payment of rates is treated as a tax credit against his payment of income tax in a subsequent year. The mechanism exists already for tax credits and the Minister should have used that mechanism to introduce a tax credit rather than an allowance for PRSI contributions.

Having decided not to opt for a tax credit, it would have been fairer for the Minister to have introduced a concession within the PRSI system rather than a tax-related concession. I put down an amendment detailing this suggestion but it has been ruled out of order by the Ceann Comhairle for reasons which I fully accept. I cannot move that amendment but I am not prevented from talking about it because it is relevant as an alternative to this proposal. I suggested a reduction in the rate of PRSI for people on low incomes and proposed a very modest and perhaps insufficiently generous concession that anyone earning less than £4,000, if married, should have PRSI contributions reduced from the prospective 7.5 per cent to 5 per cent. This would be much fairer because it would give the entire benefit directly to the low paid whereas the Minister's concession will give the maximum benefit to the well paid. The Minister will probably shake his head and say with great rectitude that this would reduce the contributions of employees to the social insurance fund and ask where the money would be found. However, he is prevented from saying that because he has not told us where he intends to find £45 million. If money is to be plucked from some unspecified source, we should at least use it to achieve the maximum benefit for the low paid. If £45 million is available it should be used either to introduce a tax credit or to finance a reduction in the rate of PRSI for the low paid. It should not be used to finance a tax allowance which gives maximum benefit to the well paid.

This brings me to my amendment which is designed, in the only way open to me within the order and rules of this House, to seek to help in some small way the low paid. I am speaking in particular of the 40,000 people, a significant number, who by the Minister's own admission will gain not a single penny from this tax allowance. The reason they cannot benefit is that they will not pay income tax this year due to their low income. My amendment proposes that in any case where the income for this year is of such amount that a person is not liable to pay income tax, the reduction of £312, to be increased proportionately in future years in line with the CPI, shall be carried over to the next and subsequent years. In other words, if a person has too low an income this year to benefit from this concession, he will be able to get the benefit next year or in subsequent years if his income is such that he is liable to income tax. This would introduce some small element of fairness to this proposal. It would not cost a single penny this year because it applies only to future years and merely gives people the entitlement to carry forward an allowance which they are unable to use this year.

I move amendment No. 3:

In subsection (2), to add to paragraph (a):—

"provided that in a case where an individual's total income for the year 1982-83 is of such amount that he is not liable to be charged to income tax, the deduction of £312 (proportionally increased by the percentage figure as represented by the Consumer Price Index to mid-February for each intervening year) shall be carried over to the next subsequent year of assessment in which that individual's income becomes so liable,".

I know that Deputies not just in my party but in the Labour Party and The Workers' Party as well as Independent Deputies are concerned about the problems of low paid workers. This concession need not trouble them if they are worried about the balance of the budget because it will not cost any money this year. However, it will give low paid workers the opportunity of using this year's allowance in future years. I would remind the House that the concession framed by the Minister applies only for this year. There is no question in the resolution — as would be usual — of this allowance being available in subsequent years. It is my view that if people are not in a position to use it this year they should be able to use it in subsequent years. My amendment is reasonable and I hope I will get support from all my colleagues — and perhaps even from the Minister — for the amendment.

I should like to say something about the more general problems of the increase in the rate of PRSI contributions. Why has this occurred? The main reasons are twofold. First, there is an increase in the number of unemployed. Unemployment benefit and pay-related benefits for unemployed persons now cost about four times as much to the social insurance fund as they cost when the system of PRSI contributions was introduced in 1979. In that year unemployment benefits took 11 per cent of the expenditure of the fund but in 1982 they will take 17 per cent of the expenditure of the fund. On the other hand, disability benefits are taking a smaller share of the fund now than they took in 1979. The main reason for the increases, which have to be levied if the State contribution is to go no higher than 25 per cent, is the increase in unemployment. Unfortunately it will not be possible for us to prevent an increase in social insurance contributions until we succeed in reducing the level of unemployment.

I would remind the House that when this system was introduced in 1979 there were approximately 80,000 persons unemployed. This year, when determining the amount of money to be raised through PRSI contributions, provision has had to be made for a level of unemployment somewhere in the region of 143,000 — almost twice as many people unemployed now as in 1979. Of course 75 per cent of that cost has to be met by levies on employers and employees. Unfortunately, to some extent this is a self-perpetuating exercise because every increase in PRSI contributions creates more unemployment and every increase in unemployment creates more demands on the fund and more increases in social insurance contributions. It is a vicious circle in the classic sense. This is so because the larger the proportion of a person's wages that has to be taken for social insurance either from him or his employer — there is not much difference between the contributions of the employer and the employee because it all comes ultimately from the same source, namely, the sale price of the product they produce — the less will be the incentive for job creation in the industries in question. We have reached the stage now where many employers are not employing additional workers, even though they need them, because of the high level of social insurance contributions they have to make, plus the substantial burden of paperwork that must be done in respect of every additional employee. This is a vicious circle because it is creating more unemployment, further demands and further increases in PRSI contributions.

In particular we must look for ways to relieve this burden on small firms. It has been shown in countries throughout the world that in the recent recession the firms who have shown the best performance in terms of creating and maintaining employment have been small firms. I am not particularly concerned about the structure of the companies: they can be private enterprise, co-operatives or even State-owned small firms but small firms have been more successful than the larger firms. Unfortunately this burden falls very heavily on small firms and we must try to relieve that burden to some extent.

An Leas-Cheann Comhairle

I am reluctant to interrupt the Deputy because normally he is a well-mannered contributor. However, we are now dealing specifically with a resolution and an amendment. As the Deputy knows, when we discuss later item No. 12 on the Order Paper there will be ample opportunity for a discussion. I ask him not to set a headline for straying too far from the resolution and the amendment before the House.

Mr. J. Bruton

I accept the point made by the Chair. He is quite right. We must consider two other points with regard to the social welfare code if we are to tackle the problem and prevent increases in the social insurance contributions going through the roof. We will have to do this to avoid creating a type of Alice in Wonderland situation where tax concessions have to be paid for by further tax increases which in turn have to be compensated for with further tax concessions and so on. We must accept that at certain levels there exists a disincentive to work. A significant number — but not a majority — of people are better off not working than working. For that reason I introduced in my budget a proposal to tax short-term social welfare benefits. If one person gets £104 in unemployment benefit and another person gets the same amount in pay they should both pay the same tax. However, at the moment the person who gets that money as pay for work done pays tax while the other person does not pay tax. That is not fair.

The other matter we must consider is the abuse of the social welfare code. That is costing money although it is impossible to say how much less social insurance would be this year if there was no abuse of the social welfare code. There is no scientific evidence available on this but every Member who canvassed in the recent general election campaign will know from the reactions he received at the doorstep that this is seen to be a major problem by large numbers of the electorate who are closer to the ground than we are. It is a problem; it is a scandal and if it were stamped out fewer increases in social welfare contributions would be necessary.

I would like to return to the two main points I started with. First, the Minister must say in honesty to this House and to the electorate, not just of Dublin West but to the entire country, where he is going to get the £45 million. Otherwise, the people will be perfectly within their rights in assuming the worst. Secondly, he must accept, and I hope the House will accept, that he is wrong in giving the concession in the form of a tax allowance because that gives the maximum benefit to the better-off. Instead, he should have either introduced a tax credit which would have given the same benefit to everyone, or a cut in social insurance contributions for the low paid, which would have given most benefit to the low paid and no benefit to the well paid. He should have taken one of those two avenues rather than the tax allowance avenue if he was interested in social justice and tax equity.

It is clearly too late now to do anything about it this year but if any such concession is contemplated for next year — and I believe the underlying problems with the level of contributions that will be necessary to finance the scale of unemployment benefit that will have to be paid next year will be such that some concession will be necessary next year just as one is necessary this year — I sincerely hope that whoever is Minister for Finance he will be able to find a more just and fair way of giving concessions and that he will adopt either of the suggestions I made — a tax credit or a direct cut in pay-related contribution for the lower paid only.

Mr. B. Desmond

When I made my critical comments on the budget and said I would not be surprised to see the current budget deficit being thrown out the door before the end of 1982, little did I think it would happen within three or four weeks. I anticipated that the Minister and the Taoiseach might pull back from telling the people that they would give them what they wanted and that they would not have to pay for it because the Government would borrow the money, but I did not anticipate that that Fianna Fáil disease, which has affected that party since 1977, would break out within three or four weeks.

As the Minister is a constitutional office holder I want to remind him of Article 45 which says:

1º the State pledges itself to safeguard with especial care the economic interests of the weaker sections of the community, and, where necessary, to contribute to the support of the infirm, the widow, the orphan, and the aged.

I thought that constitutional provision was summed up rather well in The Irish Times of 3 May 1982 in their third editorial when they said:

A caring society is a paying society. There is no way of having benefits such as we do without some of the pangs of taxpaying. Bigger peoples can't do it. We can't.

But Fianna Fáil can. The debt is so high at present that it is a wonder Fianna Fáil Ministers can even face going to their offices in the mornings.

While there are many injustices and inadequacies in the general taxation system and in the structure and level of taxation within the PRSI system, the myth is being perpetrated by Fianna Fáil that the people can have social welfare benefits, increases and extensions of scope without having to pay for them. Somebody will have to pay, but that "somebody else" never happens to be oneself or one's fellow workers or even one's employers.

At present there is a surprising campaign being carried out by one particular section of the community. Some trade union officers are campaigning for the abolition of the PRSI system. I never thought I would see that day. Suddenly the system has become unjust; it is a penal tax. In the fifties, in the days of William Norton when the 1952 Act was brought in, the trade union movement campaigned for the reform and extension of the social welfare system. Since October 1972, when I was first appointed Labour spokesman for Social Welfare, I have campaigned for an effective national comprehensive system of pay-related social insurance. I make no apology to anybody for holding this firm belief because what this country needs is a broadly based effective social insurance system for which we pay and from which we get substantial social welfare benefits. That is my philosophy. It is not a soft option philosophy nor is it based on the blatant dishonesty contained in that awful GIS statement on PRSI contributions issued on 22 April. They said that the cost of the concession — the so-called concession — now being given would be £45 million in 1982 and that the loss of revenue would be made good in the course of the year by a combination of additional taxation and economies in expenditure. One must ask the Minister where are the details of the combination of additional taxation and economies in expenditure. That was on 22 April. Today on 4 May we see the proposal watered down again. The Minister said:

This will have to be made good through expenditure savings and other taxes...

Suddenly a clear statement on economies and expenditure becomes expenditure savings and other taxes. With great certitude and the firmness one would expect from the Fianna Fáil Party talking about fiscal rectitude the Minister said:

I am looking at the possibilities in this area with a view to making recommendations to the Government in the near future.

The Minister has been in office for a couple of weeks only and he would not be expected to know all the exigencies of taxation possibilities. We were told that the loss of revenue would be made good. That was a firm statement. It has now been diluted into:

I am looking at the possibilities in this area with a view to making recommendations to the Government in the near future.

Let us be frank, the Minister has already written a letter seeking to borrow another £45 million. Endemically and inherently Fianna Fáil are incapable of saying to anybody: "We will ask you to pay for what you will get." They will not say that to employees, employers, speculators, financial institutions, building societies, farmers, the manufacturing sector, public sector employees or private sector employees. Instead they suggest: "You need not worry. It will be all right on the day." In a sense perhaps they are right. There is a suggestion in the community: "Let us abolish PRSI." We meet that every day of the week.

An Leas-Cheann Comhairle

I want to ask the Deputy to deal specifically with the motion and/or the amendment.

Mr. B. Desmond

I will get down to that.

An Leas-Cheann Comhairle

It is not a question of getting down to it. It is a question of dealing with the matter before the House. What is before the House is the Minister's motion or Deputy Bruton's amendment. I would ask the Deputy not to stray beyond that.

Mr. B. Desmond

In his speech the Minister dealt with everything from the Commission on Income Taxation to the last budget.

An Leas-Cheann Comhairle

The Minister made passing references, but the Deputy will accept that he spent more time with his introduction than the Minister spent on his whole speech. Will the Deputy please proceed?

Mr. B. Desmond

With great respect, the Minister dealt with the ICTU May Day declaration, the Commission on Income Taxation and other related matters. On the fundamental issue of pay-related social insurance and the purposes for which it is intended, I will not be silent. This is a new budget of £45 million.

An Leas-Cheann Comhairle

This is not a new budget debate.

Mr. B. Desmond

It is virtually a new budget debate.

An Leas-Cheann Comhairle

If the Deputy has the capacity to encapsulate his thoughts as the Minister did in his opening statement, the Chair will accept that.

Mr. B. Desmond

I will continue on, a Leas-Cheann Comhairle, and if you wish to rule me out of order, you may.

An Leas-Cheann Comhairle

The Deputy should take the distinct impression from me that I will rule him out of order if he continues to wander in the fashion in which he has been wandering. Please proceed.

Mr. B. Desmond

With respect, in his speech the Minister dealt with a number of matters. I will tabulate them for you.

An Leas-Cheann Comhairle

The Deputy should deal with the motion.

Mr. B. Desmond

On a point of order, the Minister's speech deals with the youth employment levy, the ICTU May Day declaration, the change in rates, the raising of additional revenue, cuts in public expenditure and proposed additional taxation, and I propose to deal with all of those. I find myself in order in that context. I will remain rigidly within that context.

An Leas-Cheann Comhairle

The Deputy is not and may not be the judge of whether he is in order. I will do that.

Mr. B. Desmond

I will not be ruled out of order unfairly.

An Leas-Cheann Comhairle

I will accept references to any of the matters to which the Deputy has referred but I want to remind him that this is not a general budget debate. We are dealing specifically with a motion and an amendment. I appeal to the Deputy to proceed with the debate in that fashion.

Mr. B. Desmond

I will stick to the motion. Quite clearly I was sticking to the motion.

Mr. Kelly

On a point of order, is the House to take it from what appears to be your ruling, Sir, on the course which Deputy Desmond's speech was taking that references to points made by the Minister in his opening speech are to be cut to the same measure as the Minister's own words? Surely if the Minister raises an argument it may suit him, because he is on the defensive, to clothe it in a very short number of sentences. It does not follow from that that it will necessarily suit another speaker to confine himself to the same measure.

An Leas-Cheann Comhairle

The Chair wants to remind Deputy Kelly that when the Chair interrupted Deputy Desmond he was not referring to what was in the Minister's speech. Subsequently he made references to certain matters to which the Minister referred in his opening speech. The Chair will accept such references but appeals to Deputy Desmond and other Deputies not to treat this as a general budget debate. Deputy Desmond to proceed on the motion and the amendment.

Mr. B. Desmond

And matters relating thereto.

An Leas-Cheann Comhairle

On the relevance of which the Chair will decide.

Mr. B. Desmond

And which the Deputy will elucidate. Before I was interrupted I was referring to the fact that there is a viewpoint in the community——

An Leas-Cheann Comhairle

The Chair interrupts Deputies only when the Chair is obliged to remind Deputies of what governs the debate in the House. If the Deputy is not prepared to accept that, he has an alternative. The Chair does not take any pleasure in interrupting anybody and does so reluctantly. When the Chair interrupts it is done with a view to helping the standard of the debate in the House.

Mr. B. Desmond

With respect, I will continue. I was making the point that there is a viewpoint in the community that we should dispense with the general principles relating to pay-related social insurance.

An Leas-Cheann Comhairle

That is not entirely relevant to what we are discussing.

Mr. B. Desmond

We are talking about PRSI and the changes relating thereto.

An Leas-Cheann Comhairle

We are talking about a specific motion and amendment which refer to alterations the Minister has made.

Mr. B. Desmond

A Leas-Cheann Comhairle, I really must take issue with you. There is a motion on the Order Paper to provide a special tax allowance in relation to PRSI. I will not be deflected from relating the content of my speech to that matter. I said there is a viewpoint in the community that we should dispense with the general taxation emphasis on PRSI. I am disputing that philosophy which has grown up in the community.

An Leas-Cheann Comhairle

Such disputation is not relevant to the motion.

Mr. B. Desmond

I maintain that it is relevant and I challenge the Chair to say how it is not relevant.

An Leas-Cheann Comhairle

There is no proposal before the House to do away with it.

Mr. B. Desmond

I am not suggesting it should be done away with.

An Leas-Cheann Comhairle

The Deputy is saying there is a feeling in the community that it should be done away with.

Mr. Kelly

On a point of order, is it not a fact, which is demonstrable by turning to the Minister's speech, that one half or two-thirds of his speech has to do with PRSI and the burden it represents and nothing else? If we are not permitted to talk about PRSI we might as well close down here. Is not this the case, sir, that effectively the Minister, in moving this Financial Resolution which is in no respect different from Financial Resolutions of the kind that are produced on budget day, is now having a second stab at producing his budget and we are entitled to have a second stab at making a budget speech?

An Leas-Cheann Comhairle

Deputy Kelly, this is not a Financial Resolution.

Mr. J. Bruton

It is.

Mr. Kelly

It is, with great respect. It was so described.

An Leas-Cheann Comhairle

It is not a Financial Resolution. Deputy Kelly, if you would presume to tell me my business you should give me the opportunity to say that in so far as it does not propose to put an additional charge on the Exchequer it is not a Financial Resolution.

Mr. B. Desmond

It is a Financial Resolution.

Mr. J. Bruton

On a point of order, sir, may I——

An Leas-Cheann Comhairle

Deputy B. Desmond to proceed.

Mr. J. Bruton

On a point of order, I have not been involved at all in this argument and I do not wish to become so unnecessarily, but might I refer you to the list of amendments circulated, the heading of which reads:

RÚN AIRGEADAIS ÓN AIRE AIRGEADAIS FINANCIAL RESOLUTION BY THE MINISTER FOR FINANCE

That is the heading under which all of this is being debated. So, with the greatest respect, sir, to you it is a Financial Resolution whatever that means.

An Leas-Cheann Comhairle

The Chair's interpretation of a Financial Resolution is one which attempts or proposes to impose a charge.

Mr. J. Bruton

If that is the case perhaps the Minister would ask the officers of the House to avoid putting misleading headings on resolutions because clearly the officers of the House have described this as a Financial Resolution.

An Leas-Cheann Comhairle

The officers of the House then, in my opinion, were in error in so doing.

Mr. Kelly

Is it the case — I ask in all humility — that a resolution, the contents of which have the effect of remitting or relieving taxation, whether in incidence or in distribution, is not a Financial Resolution?

An Leas-Cheann Comhairle

Deputy Kelly will accept from the Chair that ordinarily the definition of a Financial Resolution is a resolution which refers to the imposition of a charge and that type of resolution leads to a particular type of debate. As this particular resolution does not purport to be or aim at such an imposition, but proposes a relief, it is not a Financial Resolution debate.

Mr. Kelly

Sir, with the greatest respect — let us not fall out about this — this resolution has to do with imposing a charge but it is imposing a charge with a certain level of allowance which did not previously exist.

An Leas-Cheann Comhairle

It has to do with lessening a charge. Deputy Desmond to proceed on the terms which the Chair has indicated to him.

Mr. Kelly

That, sir, was the resolution.

Mr. B. Desmond

With respect, sir, I shall proceed but I fail to differentiate, in relation to a Financial Resolution, between a resolution which imposes a charge and a second Financial Resolution which eliminates part of the charge because, in my opinion, they are all Financial Resolutions ——

Mr. Kelly

Of course.

Mr. B. Desmond

—— relating to the House. Any Deputy is entitled to treat them as such and is entitled to deal with the fundamental principles relating thereto. It is as if one had a Financial Resolution relating to income tax generally — in this case it is income tax relief which is being provided by way of special allowance — and as far as I am concerned, and I do not want to prolong the debate unduly, Deputies are entitled to discuss its implications in a general way.

An Leas-Cheann Comhairle

The Chair will decide what Deputies are entitled to discuss. Would Deputy Desmond please proceed with his own business and leave the business of the Chair to me.

Mr. B. Desmond

Deputies too have fundamental rights in this House and I am not going to concede those to you or to anybody else.

Mr. J. Bruton

Everybody, including the Chair, is subject to the rules of order.

An Leas-Cheann Comhairle

I have indicated to the House what are the rules and have given a correct interpretation of the rules — I am quite sure about that — and I ask Deputy Desmond and everybody else to accept them.

Mr. B. Desmond

Many of us were Members of this House — and I, as a fully paid-up social-insured employee — and will recall that when the stamp, as we then knew it, was abolished in 1979 there was a great welcome generally for the introduction of pay-related social insurance. We will recall also that there was great abuse down through the years when stamps were lost, when insurance cards were not submitted. By and large there was tremendous acceptance in the community that a far more progressive system of pay-related social insurance should be introduced.

My current reaction against some of the exploiting propaganda surrounding PRSI is that the wrong enemy is being attacked. The enemy is the inadequacy of the current scheme of payments rather than its dilution as many people would wish. I wish to see the scope of pay-related insurance extended to the farming community, to the self-employed generally. It is my view that until such time as every worker over the age of 16 years is paying pay-related social insurance — until that fundamental principle is accepted — then we are going to have the type of ad hoc measures such as that which the Minister has brought in here today, on giving relief after the imposition of tax increases on a narrow sector of the labour force.

It is of critical importance that the Minister should have stated in his speech that pay-related social insurance in the community now amounts to well over £800 million a year. The Minister has a fundamental obligation to point out that the social insurance fund, to which all of this controversy, relates, for 1982 — even after the £45 million relief is given — will be approximately £829 million. There is a clear obligation to dispel some of the more outrageous propaganda surrounding this area. The Minister should have pointed out that of the £829 million income of the social insurance fund for 1982 employers will pay in the region of £448 million, that employees will pay in the region of £162 million — that is after the relief of £45 million has been granted, as I understand it — and that the Exchequer contribution apparently will now amount to approximately £219 million. It is important that the magnitude and scale of the fund be realised, that its central importance in paying for social welfare and health services, particularly paying for social welfare and social insurance, has tended to be diluted by the running-away attitude adopted by the Government in recent weeks, adopted solely and exclusively because there is a by-election pending in Dublin West. That is a sad and unfortunate situation for our country because the enemy is not pay-related social insurance: the enemy is the fact that our taxation system, or its scope, is far too narrow. Our social insurance system is much too narrow in scope as well, as is our capital taxation system in its general scope. That is where I complain and where I contend there should be reform.

The Minister should have pointed out to the House today that the social insurance fund is necessary if we are to pay, as we are now paying, retirement pensions. The new rate of pension for a single individual is now £40 per week which is not very much to live on. I should not like to see any Deputy trying to live on £40 per week. That is the current rate from April 1982. The money paid into the social insurance fund is entirely necessary to enable those rather meagre payments to be made to working people who retire or go on old age pension. We have a system of disability benefit and unemployment benefit. The current rate from April 1982 is £31.65 and a person with an adult dependant gets £52 per week, a very miserly sum for a so-called Christian country bearing in mind there is much reaction now against people who are unemployed — one would swear they are living on the fat of the land the way some people go on. If we are to pay pension rates of that nature we must have a social insurance fund. Almost one million people in the country depend on social insurance and social welfare all of which has to come from the social insurance fund. About 700,000 people or 20 per cent of the population depend on social welfare payments for their principal long-term source of income. Also, one-sixth of our children depend solely on social welfare to eat and to live. Last year we spent some £260 million on unemployment-related benefits. That had to come out of the social insurance fund. When I remember that I am staggered when people say: "Let us abolish PRSI" or "Let us reduce PRSI".

If we want to have a caring society prepared to pay people substantial general incomes when sick, out of work or retired or when they suffer occupational injuries we must have a system of social insurance. I do not believe we should abolish PRSI or reduce it substantially but we should extend the general scope of it. One of my big arguments is that we do not have an effective system of occupational pensions. I have been fighting for it since I came into this Dáil in 1969. Again and again I have sought the introduction of a system of occupational income-related pensions. Successive Ministers for Health have done nothing about bringing in a White Paper. We had the odd green or discussion paper but most Ministers in the Department of Health, Department of Finance and other Government Departments have done very little about having an occupational national scheme of income-related pensions with full transferability rights. If we are to have that sort of scheme it will have to be based on pay-related insurance contributions in a similar type of scheme or extension of the scheme. I favour such a scheme being introduced.

I hold very strongly that pay-related contributions should be extended to the farming community. I suggest that if one took a substantial number of better-off farmers, about 14,000 or 15,000 out of a total of 150,000, and insisted that they should pay pay-related income contributions into the social insurance fund it would be a very good thing, beneficial to the insurance fund and to the farmers themselves. They should get contributory retirement pensions and old age pensions on a contributory basis.

There is an urgent need to bring all self-employed people in the community under PRSI. I suggest, and many Deputies here might agree with me, that the £9,500 income limit should be abolished. The system is highly regressive. I feel strongly that all incomes should be subjected to the general pay-related contributions scheme and that there should not be an income limit. When I became a voluntary contributor I think I went over the income limit of £600 in the early sixties. I then became a voluntary contributor. Then the income limit went up and I came back into the scheme. Then I went out again. I have been a socially insured person, in fact, since 27 February 1957 when I first went to work. I must have paid thousands of pounds in contributions over that period. Fortunately, I never had to claim unemployment benefit or disability benefit although I benefited in many ways from social insurance, including the fact that children were born into my family who had to go to hospital. I do not regret the fact that I have been paying social insurance contributions from 1957 or that last year I paid, and presumably in the coming year I shall have to pay, up to £9,500. I shall have to pay the full rate as I am a full voluntary contributor. In a society where those who are fortunate enough to retain their health can look after those in need of care in the community, they must be prepared to pay directly.

I am glad to see some of my colleagues in Sinn Féin here. There is an argument that you can abolish PRSI——

Mr. Sherlock

The Workers' Party.

Mr. B. Desmond

My humble apologies.

Mr. Sherlock

The Deputy is just meandering along and I think he should conclude. The Deputy does not make much sense to me.

Mr. B. Desmond

I am not meandering at all. I would point out to our fellow Deputy — I am not sure whether he is on the Government side or the Opposition side — that one cannot abolish the £850 million of the social insurance fund as seems to be implied and replace it by capital taxation overnight.

Nowadays, if you are stuck for any kind of taxation reform or want to get more money anywhere the easy way out is to say immediately: "We will get it from capital taxation." Suppose we abolished the social insurance fund of £850 million and suppose, for instance, we said we would bring back domestic rates, all we would get would be about £120 million or £130 million. You would have to bring back rates and multiply the yield by five in order to abolish PRSI. That shows the magnitude of the problem. Even as regards the Workers' Party as it is now called, even with the most horrendous taxation they were proposing as regards capital taxation, the maximum yield they spoke of or that I read of in any of their documentation at the abolute zenith of Exchequer revenue was in the region of £210 million, which is only the equivalent of the Exchequer contribution this year into the social insurance fund. The social insurance fund is £850 million. The net PAYE income tax yield last year was £1,350 million. If you transfer the whole insurance fund over to PAYE you have to increase income tax by about 30 per cent. I am flabbergasted that it has not yet dawned on those who are proposing to abolish PRSI that the employers are paying 50 per cent of it. This year this is over £410 million. I ask the trade union movement and the Workers' Party, who are so preoccupied with the best interests of the workers, if they favour the abolition of the employers' contribution on PRSI. I am not sure that is their policy.

Mr. Sherlock

If the Deputy concludes his contribution I will make a contribution which will help him to understand it.

Mr. B. Desmond

I find great difficulty in understanding it because there is an element of great confusion. Some of my colleagues who suddenly discovered that PRSI is not a very popular thing among working people were not even here when the Minister for Social Welfare came into the House and announced the new rates. We all accepted the Social Welfare Bill which went through the House unanimously without the slightest dissension on any side. Deputy Eileen Desmond supported the adoption of the new rates of PRSI. Nobody in the House objected to the new rates.

Suddenly overnight some people decided it was time to exploit the situation. There is enough bandwagon politics in the country. If people want an airport give them one, if they want an oil refinery, give them one, if they want us to abolish PRSI let us do so. In the process you put at risk the fundamental socialist concept of social insurance whereby you set up a fund and workers have a right to get from it disability benefit, unemployment benefit, mortality benefit, invalidity pensions and nobody else has a right to interfere with this, it does not go into general taxation. Some of my colleagues in the House feel we should transfer the whole burden over to income tax. What do we do then? We reintroduce the pauper system of the means test. If you abolish PRSI you are back to the means test applications. People have then got to go with cap in hand, state their income and look for pensions on a non-contributory basis from the State.

That is not socialism; that is opportunism. The most opportunist thing of all was after the Social Welfare Bill had been passed and the rates established which cannot be altered in this financial year and no motion can be taken in the House for six months after a Bill is passed. The motion was then put down, because they were confident the motion could not be moved. That is what happened seven days after the PRSI rates were adopted. In the west European democracies the money collected on a revenue basis for social security is totally embedded. I spent eight years on the Social Affairs Committee of the Council of Europe, from 1973 to 1981. In France revenue from taxes for social security totals about 42 per cent. There is a lot of talk here when we consider our contribution of 18 per cent but it is much greater in other European countries. In Austria it is 31 per cent, in Germany 34 per cent, in Japan, a country of very high productivity, it is around 30 per cent. It cannot be said that it is a very penal tax here. If one wants to be opportunist and one wants to promise this, that and the other without saying where the money is to come from, one can just fall into the trap.

I have always been able to distinguish between the industrial and the political. Some other Deputies are incapable of doing so. Congress in its May day declaration welcomed this easing of the burden on workers. It is the job of congress to represent trade union members. I hope when the Minister announces the cuts in public expenditure possibly well after the by-election and maybe as late as October, when all the budget figures will be in such a state that they will not matter. I hope there will be an effusive welcome by those who are now welcoming the £45 million. The Minister mentioned other areas of taxation. I remind Deputy Sherlock that these will have to be made good through expenditure savings and other taxes. Where will the other taxes come from? They will be indirect taxation. The trade union movement go berserk when there is indirect taxation. It is anathema to the trade union movement that there should be an increase in general indirect taxation here. We are all opposed to indirect taxation. If it was not to be income tax or PRSI or, as even Deputy Sherlock knows, capital taxation, as that was reduced in the budget, and since neither was it to be discretionary trust taxation, because that had been abolished, the only possibility remaining was indirect taxation.

Mr. J. Bruton

Perhaps they will tell us what they intend doing.

Mr. B. Desmond

Therefore, let us expect an effusion of welcome generally from those who repeatedly emphasised the rejection of any taxation proposals that would involve a switch from direct to indirect taxation. The ICTU have been very critical of any such switch.

I have been critical of some of the propaganda that has surrounded this whole issue. The Minister for Finance should revert in some way to the original honesty of purpose shown by him when he was asked first about this issue at media level. There is an illuminating and interesting report by the political correspondent of The Sunday Tribune in which a couple of weeks ago she quoted the Minister in his comments on the RTE radio “This Week” programme. At the time the Minister was asked if we could expect a change in the PRSI contribution level within a few weeks. This reply was that the Commission on Taxation would be reporting shortly on all aspects of taxation and that the Government would be taking into account the proposals and the recommendations of that body. He went on to say that the level of PRSI payments generally would be reviewed by the Government in the light of that report. There was no indication then of this sudden about-turn on the part of the Government. During the programme concerned, and as reported in the newspaper to which I have referred, the Minister was asked if the PRSI position was negotiable. That is the big question that was asked. It was then he said that the level of PRSI contributions would be reviewed by the Government in the light of the report of the Commission on Taxation which was expected within a few weeks. Overnight, then, the Minister and the Cabinet changed their minds and decided to make what I regard to have been a ridiculous statement. The best summing up of the measures proposed by the Minister I have found has been that of Mr. Colm Rapple in the Sunday Independent of April 25. He asked the question how crazy one can become, whether any sane man could justify the Government handing out £45 million in such a way that those on top incomes were gaining to the extent of £187 per year while there was nothing for the poor. Mr. Rapple continued and said that, even assuming the Government had the £45 million — and he did not believe they had — no one could argue convincingly that that was an equitable or just way of spending that money. He went on to say that in providing a new income tax allowance for private sector workers of £312 the Government had ensured that those on the higher incomes got most while those who are very poor are not helped in any way. I agree totally with Mr. Rapple in that regard. He stated the position correctly.

The £45 million could have been given in an entirely different way. As has been pointed out by Deputy Bruton, it could have been given under a general tax credit system. Whatever one's views might be in relation to our attitude to taxation, the introduction of the tax credit system was inherently and fundamentally more progressive and more acceptable to the community and should have been introduced by the Minister at the earliest possible opportunity. As I pointed out on the night of the budget when we debated that issue, the marriage allowance of £2,230 was worth only £780 to somebody on a 35 per cent rate, whereas for someone on the 60 per cent rate it was worth £1,338. That was, therefore, a totally inequitable and regressive step. If the Minister had wanted to give £45 million tax relief there were other ways in which he could have done so.

I am critical of the general proposal before us. There is an urgent need for an equitable taxation system in respect of capital taxation, of social insurance and of income tax generally, but so far successive Governments have not succeeded in bringing in a system that would contain the major elements of general equality. That is a major criticism that anyone can make of the system. It is a criticism that I intend continuing to make in my capacity as spokesman on Finance for my party.

I do not intend to indulge in the process of soft options. Neither do I intend to try to con people into thinking that they can have a 20 per cent increase in social welfare and major improvements in standards of living without having to pay for such benefits. We must be honest with the people and tell them the facts. And the fact in relation to the motion before us is that it is a classic deliberate by-election ploy on the part of the Minister by saying: "Here is £45 million relief for you and I will tell you after the end of May how you will have to pay for it, but if you do not wish to pay for it then I will borrow it". That would mean that in the next five years 46 per cent of all the money we borrowed would have to be paid back. I would not wish to see my children being handed down that sort of legacy. The prospect is frightening. That would mean that in a further three or four years 50 per cent of the entire borrowing would have to be paid back and that we would finish up with the collapse, not merely of a property group, but of Exchequer finances. That is something that I would not wish to see any responsibility for devolving on me. While accepting the motion and supporting the amendment in the name of Deputy Bruton, I hope that we will have an interesting debate on the whole question of social insurance.

Mr. Sherlock

I shall be brief. I wish merely to put a few points into perspective and Deputy Desmond has given me the opportunity of doing that because of his having said repeatedly in the course of his speech that we in the Workers' Party created a furore about the increase in PRSI. That is what has really annoyed him. Of course a Deputy of the Labour Party would be annoyed that the effect of what we did was to create a situation in which £45 million is to be raised and redistributed to the PAYE sector who are the victims of the increases in the PRSI contributions.

The increase in PRSI contributions were proposed in the January budget by Deputy J. Bruton and it makes the House a little ridiculous to hear the same person putting forward answers to questions he could not answer prior to January. It is very difficult to understand that. The Minister for Finance presented these increases in a different way in that the increases were contained in a Social Welfare Bill. It is understandable that workers are revolting against such massive increases. Those workers were being asked to accept a cut in their living standards by accepting a pay increase of 16 per cent at a time when inflation was running at more than 23 per cent. It was understandable that workers in that situation and facing such a massive increase in PRSI would revolt.

We are behind the workers four square on this issue, and there can be no doubt about that. The Minister in the course of his speech stated that he intended to arrange that the taxation arrangements in respect of PRSI would be investigated in detail in the coming months and that this investigation would take account of any recommendations which may be put forward in the first report of the Commission on Taxation. We welcome that statement because many changes are needed in connection with our taxation system. To impose PRSI on gross earnings is totally unjust. The Minister also stated:

As to alternative sources of revenue, the reality is that the scope for extra taxation is limited and it is a myth to suggest that there are large untapped sources which can be called upon to solve all our problems.

In our submission we made the point that the restoration of estate duties would have brought in £60 million based on 1971 figures. It is a pity Deputy Desmond is not present to hear me make that statement. The reason we have this problem in relation to taxation is that successive Governments and Members of the House represent one class of the community, those with wealth and property. That is the reason we do not have an equitable tax system as has been demanded for many years by workers. Those who have been making decisions in relation to tax did not represent working class people.

PRSI is not a social insurance scheme under any criterion. It is clearly just another form of taxation and as such it bears heaviest on the working class, particularly those in the private sector. This is illustrated in the 1982-83 rates of PRSI on the following forms of income in the economy: wages and salaries of private working class, 7.5 per cent: wages and salaries of most public sector workers, 2.9 per cent; income and profits of self-employed and farmers,2 per cent; investment and dividend income, zero; capital gains income, zero; and benefits in kind, such as company cars, zero. Workers in the public sector pay half the amount that those in the private sector pay. Farmers and the self-employed in practice pay only one-third of what supposedly the cosseted public sector workers' pay. Capitalists, those who receive their income from dividends or capital gains, do not pay anything at all. Although the self-employed are liable to 2 per cent, inclusive of the 1 per cent youth employment levy, the Revenue Commissioners report that in recent years they have been able to obtain about half of what they are owed by those groups.

On the general level of taxation we reiterate our earlier demand that all people must pay their fair share of tax and that all forms of income should be taxed in an equal fashion. It is our contention that the tax system is inherently biased against the working class whose tax is deducted at source. We welcome the £45 million being provided by the Government in this resolution to give some relief to the PAYE sector who are subject to this massive increase in PRSI.

Mr. Kelly

At the outset I should like to make a few remarks about the way the Minister introduced the resolution. I notice that in combining things which he said with things which were said by one of his colleagues — rather like a lawyer using what is called a rolled-up plea in order to defend an action for libel or slander —"the words were not spoken, or, if they were spoken, they did not mean what the plaintiff says"— in a way reminiscent of that, the Government are trying to provide themselves with two routes of justification and escape from the situation which has left them with their tails between their legs, producing this very defensive and expensive measure this afternoon. The first line of defence is that it is all Deputy John Bruton's fault, that it was the callousness of the former Minister which left poor Deputy MacSharry with no option but to impose PRSI at the rate originally proposed. In the course of his speech the Minister said: "These increases had been well heralded". However, they were not well-heralded enough for his colleague, Deputy Gene Fitzgerald, who did not understand or had not time to get to grips with the matter by the time it arrived on the table here. The Minister stated:

These increases had been well-heralded. They formed part of the budget proposals introduced by the previous Minister for Finance on 27 January. The youth employment levy was incorporated in the programme of the previous Government and the necessary legislation for it was enacted in December. Indeed, this programme envisaged a number of other additional charges which would have added very considerably to the overall PRSI contribution if they had been implemented. The Social Welfare Bill, which was passed by this House on 24 March, that is the day before the budget was introduced, provided for the 1¾ percentage point increase additional to the youth employment levy.

The Government, therefore, implemented without change the proposals put forward by the previous Government and these proposals had been widely publicised.

The word "therefore" is used to accompany or to introduce a conclusion to which the arguments in the preceding part of one's speech have compelled one inexorably. Where are all those arguments in the Minister's speech? Where is the "therefore"? What "therefore" was there in it? The Government were able to scrap the tax on short term social welfare benefits and the VAT on clothing and footwear; but they were "therefore" compelled to go ahead with the level of PRSI increase proposed by Deputy Bruton. It was all our fault. That is one line of defence.

The other line of defence is one which the Minister's colleague, Deputy Gene Fitzgerald, adopted on 18 April. In the newspapers of 19 April he plaintively told a meeting in Ballincollig, County Cork, that "due to time constraints it had not been possible for the Government to reconsider each of the previous proposals as outlined in the budget". That was with specific reference to the PRSI increases; and although they were "well heralded" in advance as the Minister for Finance told us today, they were not well enough heralded for the Government to do anything about reducing them, eliminating them, or introducing at the proper time, instead of making a pig's breakfast of it as we see now, introducing a tax concession in order to mitigate the hardship which these increases represented. We have two defences: they had no time to do anything about it, although it was well heralded, and it was Deputy Bruton's fault anyway. That is what I call a sleeveen route of escape.

The next thing in the Minister's speech which I deplore is his references to "dissatisfaction" and "discontent". I want to tell the Minister something. If there was nothing to the art of Government except rolling with the tide of assent and approval, there would be no need to look for a salary, because job satisfaction would be so limitless. Unless a Government are willing to face up to "dissatisfaction" and "discontent", they are not worth a damn and are not earning their salaries. There was dissatisfaction and discontent with this PRSI increase — we have chapter and verse for it here, we even have, in a four-page speech, the high honour paid to the Irish Congress of Trade Unions that part of their May Day Declaration is incorporated in the Minister's speech. "In these circumstances," he admits, "it was inevitable that there should be widespread dissatisfaction." That was the reason for the climb down. He further says: "... the Government discussed the new PRSI changes with the Irish Congress of Trade Unions before arriving at a decision. The view of Congress was that some relief now was essential because of the extra burden that workers were being asked to bear, and this view, of course, influenced the Government decision." Tell us something new. We know well what influenced the Government's decision. The Government are not capable of making a decision which they can perceive to be unpopular and sticking to it. That disqualifies them from drawing their salaries in my view.

There is always dissatisfaction; and the longer we have governments running away from dissatisfaction and giving in to discontent the longer we will be in difficulties and the deeper we will sink in those difficulties. When I think of the pretensions, of the 20-year campaign, the relentless publicity intended to build up the Deputy's leader into a kind of Mussolini figure, when I see the idea being allowed to spread throughout the country that no matter what the difficulties may be which other mortals may encounter in trying to find money to pay for the public services, this granite figure, this Mussolini cast in bronze will make these difficulties dissolve, I have to ask myself "Are we a nation of dopes altogether? Do we ever measure performance against promise? Was there ever a country in which people are taken more at their own evaluation than here?" The material of which that Mussolini is carved is no granite or bronze; it is a much more malleable material, somewhere around the degree of hardness of marshmallow. Dissatisfaction, discontent——

Mr. Bellew

That is what has the Deputy where he is.

Mr. Kelly

Do not derive too much joy from that, Deputy. You are the men in the firing line now.

Mr. Bellew

Is the Deputy going to oust his leader?

Mr. Kelly

Do not congratulate yourself too much on that. That point of view — that dissatisfaction and discontent which the Government must run away from, shy away from like the devil from holy water — was, of course, reinforced by Mr. Carroll of the ITGWU, when he said, also on 18 April "It is quite obvious that if the Taoiseach is unable to give satisfaction to the Congress Executive there will be loud noises made throughout the country, and in the end the politicians must listen to these loud noises." Politicians seeking the government of a free people are elected to resist "loud noises". They are elected to shut their ears to "loud noises", if their solemn, sober judgment is that the loud noises are not conductive to the general good.

That is the point of view which is allowed to survive, to flourish and spread in all sections of this country. We tried to make a stand and perhaps should have tried a little harder. I do not complain——

Mr. N. Andrews

I am reluctant to interrupt, but did not the Deputy's leader reverse everything which he had said prior to the election?

Mr. Kelly

We tried to make a stand.

Mr. N. Andrews

Is the Deputy not contradicting himself?

An Ceann Comhairle

Deputy Kelly is in possession.

Mr. N. Andrews

The Deputy should be fair.

Mr. Kelly

We tried to make a stand against the mentality which I am describing ——

Mr. N. Andrews

But you did not succeed.

Mr. Kelly

—— the mentality of the party opposite, whatever its virtues may be, and I am not begrudging recognising them, and whatever its achievements may have been, and I have never begrudged them either. The party opposite under its present leader recognises only one imperative, and that is the imperative of running away from dissatisfaction and discontent ——

Mr. N. Andrews

As Deputy FitzGerald did.

An Ceann Comhairle

Deputy Kelly, please.

Mr. Kelly

—— of not facing up to opposition. That is the reason why we are careering down hill at a really horrifying rate. I do not mind Deputy Andrews scoring debating points. I know that he is not the worst of his party. He knows very well that what I am saying is true.

Mr. N. Andrews

I do not know what to do about that.

Mr. J. Bruton

That is why Deputy Andrews is on the backbenches. The worst are in government.

Mr. N. Andrews

The Deputies should examine Deputy FitzGerald's record.

Mr. Kelly

Another dimension of the Minister's approach to this is to be seen in his reference to the youth employment levy which is also, naturally, part of the complex of items which underlay the present fiscal dilemma in which the Government are floundering: "The youth employment levy is a contribution to meet the problem of youth unemployment and it is charged on all workers, irrespective of their status. I might remind the Opposition that this levy was introduced by them when in Government, and that they did not provide any special arrangements in this legislation for the lower paid workers in relation to this levy." I ask the Minister and his party, are they for or against the levy? The Minister had the power to scrap it altogether if he so wished, and equally had the power to exempt from it the lower paid workers, had he so wished.

On 19 April, the Minister opposite was reported as saying that he pledged the Government to review PRSI in the light of the report when it eventually surfaced from the Commission on Taxation, but he was not going to do anything about it before then. The following day, the papers carried headlines to the effect that "MacSharry rules out reversal of PRSI rises". There was going to be no back down on this. At the same time, the representatives of the Irish Congress of Trade Unions were reported as going to meet officials of the Revenue Commissioners and the Department of Finance "to examine the question of equity in the taxation system in the light of the current difficulties which have arisen". That reference to "current difficulties which have arisen" is not invented by me and was not thought up by a journalist. It comes from a joint statement from the Government and the Irish Congress of Trade Unions after a meeting.

I ask the Deputies opposite, would the founder of their party ever, in his life, have consented, as leader of a Government, to issue a joint statement with anybody — union or anything else — and make a reference to "difficulties arising from a budget" which his own Minister had produced less than a month previously? He would have resigned rather than do that, and so would any self-respecting Taoiseach who ever was seen, until last week. Even if I did not agree with him, and I consider that his net contribution to this country was negative, he was a man that one might plausibly call a figure cast in bronze or carved in granite. There was something about him which compelled a certain grudging admiration, even from those who disliked and despaired of the direction in which he was bringing the country on other grounds.

Mr. Bellew

A great man.

Mr. Kelly

He knew how it was possible to say no. He knew, when in his conscience he believed he was right, how to stick to that and not be pushed off it. He did stick to it and was not pushed off it. There were times, in my adolescence and student days and thereafter, when I had to admire him when he was still operating in the political field, for that very quality which has now vanished from his party. There is not a trace of it left anywhere. It occasionally surfaces with some Deputy or other on the opposite side of the House — I will not be hurtful by mentioning names — but they lie down under the lash.

Mr. N. Andrews

The Deputy was very critical of his own leader.

Mr. Kelly

The public perception of the chronology of this change is that first of all there was going to be no backdown and that there was going to be a review after the Commission on Taxation Report came out. Then, lo and behold, on 22 April the Government were going to put £45 million into a new dimension of tax allowance which would have the effect of substantially cushioning the PRSI increase.

I want to mention something which I may come back to in the budget debate if I get in, that is the extraordinary degree to which the press are now showing real signs of panic about the situation in the economy, of a kind which they did not exhibit a year ago, when it was high time for them to have done so. A year ago I made a count of The Irish Times editorials over a period immediately following Deputy Gene Fitzgerald's 1981 budget. In 40 editorials, counting the first, second and third in The Irish Times spreading over a period of three weeks after that, I counted something like four on the world situation, perhaps five on the North of Ireland, two on the Dublin traffic and environmental problems and a whole scattering of individual topics — Thailand, Cambodia, the Caribbean, holidays in Spain and, at the end of the list, with one each, was the fine spring weather and the budget. In three weeks they had succeeded in producing one editorial on any economic theme whatsoever; and that was an editorial on the budget in which they gave an indulgent, roguish slap on the back to the Taoiseach for “a little sleight of hand” that his Minister had been seen to engage in in producing his budget.

That was the sleight of hand which was able to write itself a credit of £25 million in respect of "rationalisation in the public service". Where is the rationalisation? Has anybody ever put a figure on it or what was achieved? Was it 6 pence? Why not pick some other figure out of the air? One can neither affirm nor deny it. He was going to get £200 million from the private sector. What eventually materialised was a sum far less than half of that; but of course these were credits he was able to write for himself on budget day; and he was let off by the press as though he were a spoilt child with an amusing trick for the visitors.

That was a year ago. It is very different now. They are striking a very sombre note now and the economic correspondents who, a year ago, were sounding notes of warning and, indeed, of fright from the rear pages of their journals, are now being allowed to write the editorials. They are doing so with very considerable skill and they do not pull punches as far as we are concerned when they think they are deserved. I think the net effect of their contribution is extremely important and valuable.

The view expressed by the editorials on 23 April after this climb-down was unanimous. It was unanimous that this was the clearest sign that the country was slipping out of control, that the Government did not know where they were going, that they had no purpose to bring us back into fiscal rectitude, that everything in regard to planned budget deficits and phasing the thing out over a certain number of years and restoring fiscal viability had all been abandoned. It was a unanimous note of warning. I notice that one of the few apologists — perhaps it is not fair to call him that but he certainly has a very soft spot for the Taoiseach— one of the few journalists of whom that can now be said, said not long after the election that he thought the economic comment hostile to Fianna Fáil had been heavily associated with UCD, which was ever and always a haven for the Fine Gael Party. I have been associated with UCD for 30 years and I can tell the House that although there are Fine Gael supporters there, there are also a lot of supporters of the other side of the House. The idea that a serious commentator could bring himself to say that merely because somebody was employed by a particular third level institution which had an association which has long since dissolved, if it was ever of any significance, with a particular party, would also take their politics from that lead, is absolutely childish.

The real point I want to get at is that the economic correspondents that were hostile to the present Government both on this occasion and in their previous term from 1977 to 1981, were not confined to UCD. You could comb the entire range of third level institutions, and I defy anybody here to mention one economic commentator, whether he was an academic economist or any other kind, who had a good, substantial word to say for the way the country was being run, once they focused on the issue, since the 1977 manifesto. It was not just UCD, there was no one in Trinity, Cork, Galway, NIHE or the ESRI. You could comb the furthest rookeries of the most obsucure body drawing public money to produce the occasional paper or lecture and you would not find a single economist that could bring himself to defend what was going on.

But now these economists are coming forth, moving out of the obscurity of page 17 and page 23 into the main editorial columns, not because they are leaning on the editorial boards of the papers but because the editorial boards of the papers, and I suppose the papers' owners and the volume of letters which the papers receive, have succeeded in awakening in the press a sense of real alarm. That sense of alarm was expressed with peculiar clarity and in a very concentrated way on 23 April and on following days in consequence of the PRSI turnaround. Even the farmers' column on 23 April in The Irish Times— although one would not think the farmers' column would be concerned with such a matter — asked in connection with the failed Luxembourg talks if this meant that the farmers are going to be even further hit, that the economies will affect them, meagre though their incomes are and great the difficulties against which they have to struggle.

How will this be financed? I know it is easy to shout "Where is the money going to come from?" and, naturally, one does not expect a Minister at every stage of every game to be entirely specific. We have been powerfully concentrated here in the last couple of years at last, very largely due to the efforts of this party, on the question of financial rectitude and on the necessity, which has now begun to get through to the public, via the media, for paying our way out of our own pockets. People are now asking, in a way in which they never did before, where the money is coming from. I want to know where the extra taxation is going to come from or where the economies are going to be effected.

A couple of helpful economists and commentators in the paper made suggestions about where the extra taxation might come from. I have seen a suggestion that we might have another 15 pence on a gallon of petrol which would raise a certain amount and we might have a few more pence on the old reliables to raise some more. I have no doubt that these are measures which will be up near the top of the list of the brief which the Minister gets from his advisers on this matter. I suppose it might be said that there is a certain leeway for additional taxation in these spheres, although I am not advocating it. I can see it might be possible to squeeze a bit more from sources of that kind.

What really interests me is the economies. Will these be fairy economies, like the "rationalisation" of 1981? Will they be economies of that kind, where we can be satisfied that we will feel happy about them now but will not remember to check a year from now whether they ever materialised? Or are they serious economies in the sense of cutting back on the capital or current Estimates? If it is possible to prune the Estimates any further than they have been pruned, it will come as a blinding revelation to everyone who served in the last Government and to myself. We sat around for backbreaking weeks, week after week, trying to see where money could be saved. The atmosphere of the Government in July and thereafter as I said in a moment of despair — because we had to produce a July budget as well as one in January of this year — resembled a field hospital during a 19th century pitched battle; there were severed limbs all over the place and we could hear the groans of people from whom favourite schemes had been amputated. There was a most appalling savagery, the necessity of which everybody recognised. Every Minister was obliged to sacrifice some dimensions, even some whole schemes, of departmental functions to which he was either personally committed or attached or could see the political difficulty in having to deprive himself of and having to do without. We went through that exercise not just once but two or three times. After the first sweep had been made we went back and made a second sweep to see if we had overlooked anything the first time, and then we made a third sweep. That exercise went on in July and at intervals right up to the January budget.

I would dearly like to know where there are further economies to be made of the order of £45 million. If we had been able to find £45 million in economies we could have avoided the controversial and perhaps politically ill-judged VAT on clothing and footwear — and I hope no one will think it worries me to have it said about us now that it was politically ill-judged. We would have been able to do without that altogether if we could find anywhere that we could save a sum like £45 million. I am very interested to hear where it is going to come from. I suspect it is going to come from buoyancy "because there will be more money left in the economy". I suspect that is going to be the Minister's answer, and, if it is not, then it can only be going cap in hand to borrow once again, pushing us that much further down the slope, fraying away a few more of the cords in the solitary cable which attaches us to a reasonable, respectable economy and financial system. I suspect it is going to be that — and all for what? It is all in order to get away from "dissatisfaction and discontent" coming up to a by-election, all so that the seat vacated by Deputy Dick Burke should not be retained by us. That is what it is all in aid of.

In its editorial of 23 April The Irish Times described the Government's present technique in the face of their difficulties as resembling the activity of a man who runs from one point of a dyke to another trying to plug one hole after another, but without any plan for stopping the sea from coming in. That is an altogether too favourable simile, because at least a man running from one part of the dyke to another and plugging the holes is acting purposefully in some way, in that his activity is directed towards some useful object, even if it is a relatively short-term one. If we are going to stay at the seaside for similes, nothing could better illustrate the approach of this Government to this awful mess with the PRSI within a few weeks of the budget than to say that they have all the dynamism and sense of purpose of a dead fish being cast up on the shingle and washed from one part of the beach to another by each succeeding tide.

Minister for Finance (Mr. MacSharry)

When one is sitting here for a couple of hours listening to the serious business concerning concessions and taxation and all that goes with it, it is very entertaining, for the last half hour particularly, to hear Deputy John Kelly's contribution, which I welcome, because I know it must be his first in relation to his bid to become the leader of Fine Gael in the near future.

In so far as the points he made are concerned, I am going ——

(Interruptions)

An Ceann Comhairle

The Minister to conclude, without any interruptions.

Mr. MacSharry

There were many points made in the debate which warrant a reply. I referred to some of them in my opening address. Deputy Bruton, in his initial remarks, first of all welcomed the concession and then criticised us for introducing it. He cannot have it both ways. The same can be said of a certain proportion of Deputy Desmond's contribution which was, I must say in fairness, very balanced in most of its aspects. The main point made by Deputy Bruton was the raising of the £45 million. He was right to raise it. I said quite clearly when it was introduced a few weeks ago, and again today, that through a combination of saving in expenditure and taxation increases we will raise this shortfall of £40 million ——

Mr. J. Bruton

It is £45 million.

Mr. MacSharry

—— and I am confirming that, in so far as specifying it in detail is concerned, any Deputy who knows anything about this House knows that that is not the way the business of this House is run. There will be an opportunity on the Finance Bill to discuss this. But the £45 million will be made good. I want to make it quite clear that there is no question of giving away the £45 million for the sake of doing so without looking for corresponding savings or tax increases to make up the difference. I reject Deputy Bruton's statement, made on a few occasions, that I was not honest in any regard. The concessions as announced by us, and now being introduced here today, have absolutely nothing to do with the by-election.

Mr. J. Bruton

That is the quote of the week.

Mr. MacSharry

If the Deputy wants to say that they have, perhaps the people in the Dublin West constituency should read the contributions here today from Fine Gael and Labour and then they would know for whom to vote. The Opposition cannot be riding two horses. My interest in it was basically to eliminate, because of the size of the PRSI contributions, what has now become a very inequitable situation, particularly in relation to double taxation. That is the way we set about undertaking the task of correcting this inequity in the quickest possible time while awaiting various other measures on which we have not concluded our deliberations. That was the only way we could do it. I did say that we would not change the level of PRSI contributions and we have not done that yet either. That is what I was reported as saying, and I stand over that.

We are getting rid of the double taxation element by introducing this new allowance. Deputy Bruton mentioned the figure I gave of 700,000 people who pay PRSI at the full rate and the fact that 40,000 of them do not pay tax and, therefore, will not benefit from the allowance. That is true. One must be realistic. I refer back to what I said in my opening remarks as to why precise details of these 40,000 employees are not available. The indications are that the majority of them are in part-time work and some of them qualify for short term social welfare benefit.

Deputy Bruton put forward a suggestion that we should introduce this on a tax credit basis which would help that sector. Bearing in mind the reason for doing it — double taxation — those people are not affected. It is not possible to have a credit and allowance system operating together. For PAYE purposes it would not be possible to introduce the tax credit. It would necessitate 12 extra tax tables on top of the existing eight we have at present. It would be an impossible situation for employers and the revenue commissioners to operate. I have sympathy with the Deputy's concern for small industries and employers and the level of contribution they make. If the credit allowance system was introduced it would be a tremendous burden on such people.

Deputy Desmond welcomed what was done but from his contribution one would gather that he was against it to some extent. His contribution was very balanced and I agree with most of it. The reason for introducing the allowance is because of inequities in the high level of PRSI contributions and the double taxation element, which is a justifiable argument and one which was put to us forcibly. We accept it. This is the way we moved, to give some concession.

In regard to Deputy Bruton's amendment, even if I accepted the underlying intention of his amendment, I would have to give very careful consideration to the precise wording of it. As the proposal does not affect tax for this year, it does not need to be included in the present resolution. I would be prepared to give consideration to the proposal when preparing the confirming section of the Finance Bill. However, if I accepted the underlying intention, what we would be doing would be in conflict with the whole basis of the income tax code, which is that allowances and relief are available only for a particular tax year and if unused are not available to carry forward. If this principle of carry forward was concerned here it should apply in respect of all income tax allowances and deductions.

Mr. J. Bruton

It applies in relation to company tax.

Mr. MacSharry

This would lead to untold confusion and would inevitably lead to the manipulation of taxable incomes. It would also give rise to serious administrative difficulties. The Government have announced that this allowance is only an interim measure and the whole PRSI system will be subject to review. The reason I made those points in relation to Deputy Bruton's amendment is that the wording, even if I accepted it, could be inequitable and the parliamentary draughtsman would have to have a serious look at it. There is no provision in it for marginal relief. If the Deputy wishes to pursue it he can do so in another way as we will be discussing this resolution as part of the Finance Bill. The Deputy and I will have plenty of opportunity between now and then to examine it in detail. However, if the Deputy pursues it in the form of wording before us, I would have to oppose it.

Mr. J. Bruton

May I reply to the Minister's statements about my amendment?

An Ceann Comhairle

Yes.

Mr. J. Bruton

It is regrettable that the Minister has not been able to give an indication that he is prepared to accept my amendment. The amendment I am proposing is designed specifically to help the lower paid who are unable to claim the allowance in full or at all.

An Ceann Comhairle

The Deputy is not allowed to reply.

Mr. J. Bruton

The Chair consented to allow me to do so.

An Ceann Comhairle

In the form of questions.

Mr. J. Bruton

I proposed an amendment. It is normal when an amendment is proposed, even within the restricted rules which apply on Report Stage, that the proposer of the amendment is allowed an opportunity to reply to the points made.

An Ceann Comhairle

You never reply to amendments.

Mr. J. Bruton

You do, Sir. There is a possibility in relation to a Finance Bill or any other Bill which comes before the House——

An Ceann Comhairle

To a Bill, yes, but not to a motion.

Mr. J. Bruton

How is it possible for me to respond to the points the Minister made if I am not allowed to speak at this stage? In common justice, I am entitled to an opportunity——

An Ceann Comhairle

I am not trying to thwart the Deputy. The rules are there. I did not make them. The rules say you cannot reply to an amendment to a motion but one may reply to an amendment to a Bill. The rules were there long before I came here.

Mr. J. Bruton

I make no comment on that. It is most regrettable that the Minister is not taking this opportunity to help the lower paid in relation to PRSI contributions. I intend to press my amendment to a vote. Before doing so, will the Minister indicate when he will put his proposal in relation to the raising of the £45 million to the Government, when he expects the Government to make a decision and when he will announce it. Will all this occur before the voting in the Dublin West by-election?

Mr. MacSharry

This has nothing to do with the Dublin West by-election. I have already said publicly that there is an expenditure review being carried out in every Government Department and agency at present. The report will be made to the Government at the end of May. It will be possible then to identify the areas of savings. Depending on the amount of the savings, then and only then will the taxation elements be considered.

Mr. J. Bruton

The Minister will not tell us until after the by-election.

Mr. MacSharry

I have already stated publicly, and mentioned in the House twice, the fact that the £45 million will be made good through a combination of taxation and savings on expenditure.

Mr. J. Bruton

In other words, the Minister will not tell us how he will raise the £45 million until after the end of May. I am right in what I said about the Minister being dishonest in this matter.

Amendment put.

The Dáil divided: Tá, 63; Níl, 74.

Tá

• Allen, Bernard.
• Barrett, Seán.
• Barry, Myra.
• Barry, Peter.
• Begley, Michael.
• Bermingham, Joe.
• Birmingham, George.
• Boland, John.
• Bruton, John.
• Burke, Liam.
• Carey, Donal.
• Collins, Edward.
• Connaughton, Paul.
• Cooney, Patrick M.
• Corr, James.
• Cosgrave, Liam T.
• Cosgrave, Michael J.
• Creed, Donal.
• Crowley, Frank.
• D'Arcy, Michael.
• Deasy, Martin A.
• DeRossa, Prionsias.
• Desmond, Barry.
• Molony, David.
• Naughten, Liam.
• Nealon, Ted.
• Noonan, Michael.
• (Limerick East).
• O'Brien, William.
• O'Donnell, Tom.
• O'Keeffe, Jim.
• O'Leary, Michael.
• O'Sullivan, Toddy.
• Desmond, Eileen.
• Dukes, Alan.
• FitzGerald, Alexis.
• Fitzpatrick, Tom.
• (Cavan-Monaghan.)
• Flaherty, Mary.
• Flanagan, Oliver J.
• Fleming, Brian.
• Gallagher, Paddy.
• Governey, Des.
• Griffin, Brendan.
• Harte, Patrick D.
• Hegarty, Paddy.
• Hussey, Gemma.
• Keating, Michael.
• Kelly, John.
• L'Estrange, Gerry.
• McGinley, Denis.
• McMahon, Larry.
• Manning, Maurice.
• Markey, Bernard.
• Mitchell, Gay.
• Mitchell, Jim.
• O'Toole, Paddy.
• Owen, Nora.
• Pattison, Séamus.
• Ryan, John J.
• Shatter, Alan.
• Sheehan, Patrick J.
• Taylor, Mervyn.
• Timmins, Godfrey.
• Yates, Ivan.

Níl

• Ahern. Bertie.
• Ahern, Michael.
• Allen, Lorcan.
• Andrews, David.
• Andrews, Niall.
• Aylward, Liam.
• Barrett, Michael.
• Barrett, Sylvester.
• Bellew, Tom.
• Blaney, Neil T.
• Brady, Gerard.
• (Dublin South-East).
• Brady, Gerry.
• (Kildare)
• Brady, Vincent.
• Brennan, Matty.
• Brennan, Ned.
• Brennan, Seamus.
• Briscoe, Ben.
• Browne, Seán.
• Burke, Raphael P.
• Byrne, Hugh.
• Byrne, Seán.
• Callanan, John.
• Calleary, Seán.
• Colley, George.
• Collins, Gerard.
• Conaghan, Hugh.
• Connolly, Ger.
• Cowen, Bernard.
• Doherty, Seán.
• Ellis, John.
• Fahey, Francis.
• Fahey, Jackie.
• Faulkner, Pádraig.
• Filgate, Eddie.
• Fitzgerald, Gene.
• Fitzpatrick, Tom.
• (Dublin South-Central).
• Fitzsimons, Jim.
• Flynn, Pádraig.
• Foley, Denis.
• French, Seán.
• Gallagher, Denis.
• Gallagher, Pat Cope.
• Geoghegan-Quinn, Máire.
• Gibbons, Jim.
• Harney, Mary.
• Haughey, Charles J.
• Hilliard, Colm.
• Hyland, Liam.
• Keegan, Seán.
• Kitt, Michael P.
• Lawlor, Liam.
• Leonard, Jimmy.
• Leyden, Terry.
• Loughnane, Bill.
• Lynch, Michael.
• Lyons, Denis.
• McCarthy, Seán.
• McCreevy, Charlie.
• McEllistrim, Tom.
• MacSharry, Ray.
• Meaney, Tom.
• Molloy, Robert.
• Morley, P.J.
• Murphy, Ciarán P.
• Noonan, Michael J.
• (Limerick West).
• O'Dea, William G.
• O'Hanlon, Rory.
• O'Kennedy, Michael.
• O'Leary, John.
• Power, Paddy.
• Tunney, Jim.
• Walsh, Joe.
• Walsh, Seán.
• Woods, Michael.

Tellers: Tá, Deputies Seán Barrett and Taylor; Níl, Deputies B. Ahern and Briscoe.

Amendment declared lost.

Motion declared carried.