I will summarise the points I made before Question Time. I adverted to the possibility of another general election and pointed out that the situation would be that we would be without a Finance Bill in that event for a considerable period. I suggested that might cost the country in the region of £250 million. I concluded my point by pointing to the responsibility of the House to provide the country with a Finance Bill irrespective of whether Members are totally happy with various sections of it. That is a great responsibility on Members.
I went on from there to point to a few headlines in the financial situation. One is that the servicing of the public debt is now eating up virtually 90 per cent of the total take from the PAYE sector which demonstrates that that is a road that we cannot go down for any period of time. I pointed out that over the years we got ourselves into a situation where virtually 50 per cent of total current expenditure by the State was spent in three Departments, Social Welfare, Education and Health. I seriously question whether we are receiving value for money in those areas. I also pointed out the very narrow tax base which applies to this country. I quoted a figure of 700,000 to 800,000 people who could be regarded as the real tax base because the gap between them and the population of 3.3 million is taken up with dependants and those employed in the public service. That is a statistic which is getting worse and one which I pointed out as a headline for the nation which we ignore at our peril. In the past six years the public service grew by 37,000 people while manufacturing grew by 7,500 people. If the public service is to achieve anything close to 20 per cent this year, the cumulative increase in public service pay between 1981 and 1983 will come to 75 per cent. That is at a time when incomes in industry, industrial services and agriculture will probably fall. I pointed to the tension in society and said the greatest tension seems to be between the public sector and the non-public sector. The figure of 75 per cent illustrates the point I am making. The consequent imbalances in income awards, job opportunity and security in different sectors of the economy are factors which make this country harder and harder to govern.
I went on to talk about the situation in Austria. I pointed to the openness of that economy and how they got their inflation rate down to 7 per cent. Unemployment is down to 3 per cent. They did this by putting aside ideological differences which existed in their parliament and among their people. They embarked on a course of putting the economic difficulties before any other consideration. It seems to be meeting with some success.
Those are the points I made before Question Time and I should like to continue by pointing to the situation in Austria where they have appointed a joint commission for prices and wages which consists of 20 people. Labour has abstained from using its full bargaining power in return for a direct influence on price formation and on economic policy generally. Some prices, notably foodstuffs and energy, are controlled by the Government. The others are subject to voluntary control. The joint committee have taken a grip on the economy in that way. Free wage-bargaining is allowed. They do not interfere except to postpone negotiations from time to time. Success on the prices front has moderated wage claims to competitive levels. Bargains have been made with unions which are linked to tax cuts. They have successfully managed a hard currency policy which is difficult to implement. The unions have accepted the need for international competitiveness to be maintained. This has improved the Austrian economy and there is no reason why it could not be done. It has produced a remarkable degree of self-discipline among workers and wages have tended to move with those in the highly-competitive German economy.
The main reason for consensus on income determination has been that all sides, business, Government and unions, are committed to maintaining employment at a high level. They managed to keep inflation under control and because of this have been able to introduce more expansionary policies. There are many similarities between the Austrian economy and ours. Between us all we seem to have failed dismally for many decades to lessen, let alone eliminate, our problems. Perhaps the Austrian experience is one we should look at.
We have had social partnerships, national wage agreements and various gatherings of the brains of the nation to sort out our problems but in the end we seem to retreat into our sectional groups when the chips are down. The interests of the nation seem to come out last. If we are to have a new social partnership now is the time for it. It must be genuine and unselfish. It is obvious to anyone who looks at our situation that our options are limited. Basically in terms of day-to-day finance we have three options. We can put more tax on the people. We can broaden the tax base and pile on taxation. Quite frankly, that is not an option and there is no point in anyone thinking that that is the answer to all our problems or that we can continue to pay for services.
As I said earlier, the level of services is not maintainable. Not only is it not maintainable but, as the years roll on, it will be even more impossible to maintain the present level of services. Seeking to raise extra taxation is therefore not an option. I agree with those who say taxation has reached saturation point. I was speaking to a constituent the other day and I was told the joint income of himself and his wife is of the order of £16,000. With PAYE, car tax, value-added tax and the various direct and indirect taxes, he calculated that he was returning to the State out of that £16,000 something of the order of £13,000. Admittedly some of the taxation involved would be voluntary indirect taxation but, even so, there are not many options these days in personal expenditure.
Taxation in not the answer. Some effort must be made to introduce a broader spread. The tax basis is something of the order of 24 per cent on the entire working population. That is the fresh money coming in. What we must do is spread that, broaden it out and introduce greater equity. I trust the commission will take a major step in that direction because taxation reaches a stage at which incentive dies. It stifles initiative. What then is the other option? I have already pointed out that virtually all the return from PAYE goes in servicing the national debt. It would be quite unsustainable to increase borrowing, thereby adding to the national debt. One need not dwell on that. It is quite obvious. It is now accepted there is no real option in that regard and we can no longer look to it.
That brings us then to the only remaining sensible option. Whether the ideology is left or right, or whether one wants to deal practically with the matter, one thing is quite clear, namely, that the level of public expenditure has reached an all-time high. Someone will have to shout "Stop". I have dismissed the other two options and I know the public at large have also dismissed them. The difficulty in curtailing public expenditure is that somebody who wants to be clever will immediately start arguing about a reduction in gardaí, a reduction in the schools, a reduction in the number of teachers and so on. Over the years we have tried to achieve a successful embargo on employment in the public service. I quoted the figure of 37,000 new people in the public service in seven years and 7,000 in manufacturing industry. This shows that, however much we may try to control public expenditure in the public service, we have not been successful, mainly because of the enormous increasing demands under the headings of social welfare, health and education and more and more State services generally. We may indeed have reached the point at which the effort must be to ensure that the level of expenditure will not continue to rise. Health expenditure in just one decade has doubled proportionately. I emphasise proportionately. We are spending twice as much proportionately on health as we did ten years ago despite the fact that we have not earned the extra money to pay for the service in that period.
We are now spending 8 per cent of GNP on health. That caters for some 45 per cent of our people. Britain spends 7 or 8 per cent of GNP in catering for 90 per cent of the population. That comparison must lead to very close questioning of the cost-benefit of every £ we spend on these services. Public expenditure is growing at an alarming rate.
To digress for the moment, I had a lady to see me the other day. She lives in a corporation house. She waited an hour to tell me that the taps in her bathroom were dripping and she wanted to know if I could get the corporation to fix them. She was living on a corporation estate and she said the repair was not her responsibility. I had a gentleman from a corporation estate who told me his front window had been broken and he wanted me to get the corporation to fix the window. I told both that the State is not there to act as a continual subsidy machine. It is there to protect the vulnerable and encourage people but certainly not there at one's right hand every time something minor goes wrong.
That mentality seems to be growing. It is increasing the cost of the public service and thereby increasing taxation out of all proportion. I say that quite bluntly. Equally bluntly I say that the only real financial option in the foreseeable future is the control of public expenditure. Much as we may hate to do that, much as we may hate to say to schools, or hospitals and so on that they will have to do with less, nevertheless that is now the only approach. But we must not do that on its own because on its own it would depress the economy. Parallel with that we must try to increase that figure of 24 per cent mainly in the private sector so that a surplus can be produced to enable us to pay for increasing services in other areas.
The country needs a double injection. It needs control of public expenditure and at the same time encouragement to the private sector to improve competitiveness. There must be no disincentives to those who wish to create employment. Most of our employers are very small, five, six or ten man operations. They must be protected. I am supported in this by no less a body than the Central Bank in its report, which says:
The primary and immediate objectives of economic policy at present, therefore, should be to
(i) correct the imbalance in the public sector finances — particularly through introducing policies that will lead to the elimination,......of the current budget deficit......
(ii) improve the competitiveness of Irish industry and services.
Therefore, the Central Bank also have diagnosed the remedy we must adopt. To be fair to it I think this Finance Bill has taken a step in that direction. It has tackled the question of the deficit and has budgeted to reduce it in the 12 months to end-December 1982. I look forward to some results in that regard. The Central Bank have advocated that course of action as being the only one now available to us.
I pointed out earlier tensions between the public and private sectors. I want to suggest a road we might take in that respect. For example, in New Zealand the system of awarding wage rounds is as follows. The private sector enter into negotiations in the first place based on what the economy has actually achieved. When the private sector have finished their rounds of negotiations a norm is taken which is automatically and statutorily applied to the public service. The private industrial sector, therefore, set the norm for increases in the public service and the public service have no option but to follow that norm on the instructions of the national parliament. What happens here? We do it the other way round. First of all we sit down — and have done for many years — with the public service and tend to say, "what is the rate of inflation? What do you need? What can we get away with?"Then we set that figure. Then we tend to throw the private sector off the deep end and say, "Well, you can always plead inability to pay". That is putting the cart before the horse. The New Zealand system at least carries the benefit of pinning wage increases to something tangible which is the performance of the economy.
As I pointed out earlier, and must do so again, between the years 1981 and 1982 the cumulative increase in public service pay came to about 75 per cent while the corresponding figures for industry fell. It is quite clear that that road cannot be taken. Without making it a contentious political issue — there are too many of them, they are too divisive and rend the country assunder — we might examine the possibility of getting our order of priorities correct. We might measure the performance of the economy by initiating our negotiations in the private sector, coming up with some figures based on the performance of the economy — that is what the traffic will bear and the country can afford — because the private sector is well able to decide what the country can afford, the unions on the one side and management on the other. Having done that we might then take a similar figure, or some formula based on that figure, to the public service. If we do not do it in this way we shall be off on the old spiral of the public service using its muscle, getting its increase, leaving it to ordinary firms to plead inability to pay, or go out of business thus increasing the employment queues.
I want to come now to the main point I wanted to make in this debate, which is that I look forward eagerly and with some excitement to the production of a national economic plan. I know the Government have committed themselves to this, as indeed had the previous Government. That plan must be the saviour of our economy because if it is not and if it does not come up with solutions to the difficulties at present confronting the country, then we shall have missed a tremendous opportunity to tackle our problems. That economic plan must, first of all, deal with the financial situation about which I spoke. It must take account of the fact that we are using all of our PAYE revenue to pay the national debt, that £2 out of £3 in this country is spent by the State at present. It must take account of the growth in the public service. It must take account also of the fact that we are spending nearly half our current expenditure on three Government Departments, Social Welfare, Health and Education. It must take account of the fact that the options of borrowing and of increased taxation are not real options. Therefore, it must face squarely and honestly the only remaining option as a means of curtaining the growth of public expenditure and must do so honestly and openly. I am confident it will and I urge the Government to tackle it in that way.
Having done that, this economic plan must also undertake something much more fundamental. It must adopt an economic philosophy which defines the economic direction of the nation in the few years ahead. It must define the role of the State. Are we to continue to have the State act as the main generator of employment, to have the State act as the party that picks up all the tabs, to have it act as the great big brother who breathes down the necks of everybody? Or are we to adopt the philosophy which merely says: "Come here a second, the role of the State in this country is to be this — it should guide the people of enterprise who want to provide employment; it should prevent the worst excesses of the private sector; should there be excesses its role should be to prevent abuses of the private sector, to act as a referee, a hand-holder and a general climate setter of the economy." I fear we cannot have it both ways. I fear we cannot produce an economic plan which says on the one hand that we shall have some involvement by the State whenever it suits us and, on the other, some involvement by the private sector whenever it suits us. This country is too small to have opposing ideological approaches to our economic difficulties of the day. I trust and I am confident that this economic plan will seek to address those issues and come up with solutions to them. I am not privy to the information as to when that plan will be produced but I see from parliamentary questions that it will come up in the near future.
I should say also that in writing that plan I trust and hope the Government of the day will take into account not just their own views but those of every Member of this House, of pressure groups and the public at large. If it does not seek to pull together the various philosophies, the various pressures and realities facing the country, if it does not pull together those strands and define a course of action over the next five years — based on the kind of philosophy about which I have been speaking — I personally fear that the country will sink into an even deeper decline. I trust that is something none of us wants to see.
Having dealt with the economic plan at least to that extent I want to move on but, before doing so, I should like to quote an attitude of mind with which I find it difficult to disagree. Here I am quoting the head of the IDA, Mr. Padraig White, as reported in a recent newspaper article:
What was needed was a fundamental change in attitude, and the attitude to hard work, he said. "The basic problem with Ireland is that the public sector attitude and mentality dominates thinking within the country: that attitude is that you rely on the State, you get a job with the State which doesn't involve you in great risk."
Quite bluntly he said:
"That's going to change over the 1980s. It might be turbulent, but it's going to change because the public sector is not going to be able to employ the people."
I think I have demonstrated here today from my earlier comments on the budgetary figures that the public service indeed are not going to be able to take up that slack. There are some 100,000 youngsters at present coming through the educational system at intermediate and leaving certificate levels and there is no way at all, looking at those figures, that the public service can make any real impact on taking up the employment slack there. Certainly I agree with Mr. White when he says that it will be turbulent. Indeed "turbulent" probably is too mild a word to describe it.
Therefore, the only solution is to address the problems honestly and openly in the manner I have advocated within an economic plan. The end of this century is the year 2000 A. D. That probably seems to be a long time away but in fact it is only 18 years. Children born today will be 18 years of age at the turn of the century. We shall see many changes in those years and we shall face many stresses. But from the point of view of the country's infrastructure, for example, we shall need another city virtually the size of Dublin because the average growth of 1 per cent per annum will result in a population in excess of perhaps 4,000,000 people by the turn of the century and a substantial shift in age structure, with the young, the 15 to 29 age group, greatly exceeding the maturer age group, the 30 to 49 or so, group. We will see a very rapid shift towards urbanisation. Half of the population by the turn of the century will be living within a 50-mile radius of Dublin city. By the end of the century also we will have perhaps three-quarters or 80 per cent of the people living in cities and towns if present trends continue.
Our population growth is now among the highest in the EEC and will exceed a figure of four million by the turn of the century. We have not been able to keep pace with the growth in population and we have not been able to keep pace with these developments. It was estimated recently by An Foras Forbartha that between now and the turn of the century we need to spend £30 billion on putting in the kind of environmental infrastructure, roads, schools, telephones and all the various infrastructures we need in the next 18 years. Where in ainm Dé will we get £30 billion between now and the end of the century?
We certainly cannot do that if we continue to milk the system dry to the extent we have been doing for a long time. The State will not be able to meet that bill. We may need more imaginative forms of raising finance, we may need to talk to the private sector more honestly and openly and we may need to involve the public in helping to fund various projects. I have not got all the answers. I am sure the economic plan will include some imaginative answers to the kind of problem. If we have not found the answers by the end of the century we will be faced with traffic jams which will make the traffic jams in Dublin city at the moment look like a freeway, which will make the pollution and all the various environmental difficulties look like kids stuff.
I do not know where the money will come from. On the figures of the economy for the past decade, that kind of money is not here. I am trying to inject the realism which simply says that we need to invest in our infrastructure, that we need to spent that £30 billion which we have not got, so we must give some imaginative thought to the question of where we will get it. Earlier today at Question Time the Minister of State said time and time again that he would love to do this, that and the other scheme if he had the money. Quite clearly he has not got it and no other Minister ever had it. With an expenditure of up to 50 per cent on only three Departments and the figure growing all the time, there is no way the Minister will ever get that money, because that figure will continue to increase as the years go on.
I want to see imaginative answers in the economic plan to the problems of the day. I do not believe the recession has bottomed out. That is disappointing, considering we have a lot of advantages. We have a sterling advantage, we have an oil advantage because oil prices have come down and we now have a dollar advantage. Despite those advantages we do not seem to be able to get ourselves up on our feet. I look to the economic plan to chart the course for Irish business, public institutions and the semi-State companies, to tell them what is on for the next five years and what is not on and to pinpoint the type of objectives and targets they will have to meet in that time. One would not dream of running a business today without a three-or four-year plan for how one would do it. Neither can one attempt to run a state as complex as ours without a similar type of plan. Under such a scheme Irish business will, hopefully, be able to plan its own development and employment needs, what areas it can get into and the areas it can make money on to provide the taxation which the country needs.
The Government are collecting 3 per cent of the total revenue of the State in corporation tax. My friends in the Workers' Party will probably say that that is because they are all dodging tax. I have another view of it. I believe that the vast majority of Irish companies — I will put the figure at 60 per cent — are losing money and are not paying corporation tax because of that. On the national balance sheet, if we continue to allow expenditure to go up and revenue to drop, as has been happening by firms getting into trouble, we will obviously face national bankruptcy and we will not be able to avoid the kind of measures needed to develop the economy in the years ahead. The young people of today expect us to develop the economy.
I do not believe the old simple answer thrown out from time to time — devaluation — is the solution. It gives an artificial boost in the short term. There is a feeling in the country that all of a sudden everything is a bit lighter and easier. But, unless it is accompanied by very stringent financial economic measures it is worse than useless because it gives a short-term reprieve before we go into the same type of cycle again. I am not happy with devaluation because I believe the public would see it as a solution to the problems and not what in fact it is, the start to a series of very difficult measures.
I want to reiterate what I said earlier, that we have become a subsidy-saturated society. There is nothing we wish to do now for which we cannot look for a subsidy. Much as it pains me to disagree with Members of the Opposition, I must recall something said by Richie Ryan on radio one day during the time of the great snow, which everybody remembers. He said: "Go out and clean the snow from your own front garden". That is the type of philosophy I would like to see incorporated in a new national economic plan. I mentioned earlier the people who came to see me in my clinic and who asked me to get their windows fixed and to get other things done for them.