Dáil Éireann díospóireacht -
Wednesday, 9 Feb 1983

Vol. 339 No. 10

Financial Resolutions, 1983. - Financial Resolution No. 7: Value-Added Tax.

The Taoiseach

I move:

(1) That in this Resolution—

"the Principal Act" means the Value-Added Tax Act, 1972 (No. 22 of 1972);

"the Act of 1976" means the Finance Act, 1976 (No. 16 of 1976);

"the Act of 1978" means the Value-Added Tax (Amendment) Act, 1978 (No. 34 of 1978);

"the Act of 1981" means the Finance (No. 2) Act, 1981 (No. 28 of 1981);

"the Act of 1982" means the Finance Act, 1982 (No. 14 of 1982).

(2) That section 11 (1) of the Principal Act be amended—

(a) in paragraph (a) (inserted by the Act of 1978), by the substitution of "23 per cent." for "18 per cent." (inserted by the Act of 1982), and

(b) in paragraph (c) (inserted by the Finance Act, 1980 (No. 14 of 1980)), by the substitution of "35 per cent." for "30 per cent." (inserted by the Act of 1982).

(3) That section 12 (A) (inserted by the Act of 1978) be amended by the substitution in subsection (1) of "2.3 per cent." for "1.8 per cent." (inserted by the Act of 1982).

(4) That the charge of value-added tax on immovable goods, building services and certain other services be increased from an effective rate of 3 per cent. to an effective rate of 5 per cent., and that, accordingly, the Principal Act be further amended in section 11 (2)—

(a) in paragraph (b) (inserted by the Act of 1978), by the substitution of "21.74 per cent." for "16.67 per cent." (inserted by the Act of 1982),

(b) in paragraph (c) (inserted by the Act of 1981), by the substitution of "21.74 per cent." for "16.67 per cent." (inserted by the Act of 1982),

(c) in paragraph (d) (inserted by the Act of 1982), by the substitution of "21.74 per cent." for "16.67 per cent.", and

(d) in paragraph (e) (inserted by the Act of 1982), by the substitution of "21.74 per cent." for "16.67 per cent.".

(5) That—

(a) the rate of value-added tax on certain fuel, excluding electricity, be increased from zero per cent. of the amount or value, as the case may be, in respect of which tax is chargeable in relation to the supply of those goods to 5 per cent. of that amount or value, as the case may be, and

(b) value-added tax on immovable goods, building services and certain other services be charged at the rate of 5 per cent. of the amount on which value-added tax is chargeable in relation to the supply of those goods and services, and

that, accordingly, the Principal Act be further amended—

(i) in section 11—

(I) in subsection (1)—

(A) by the insertion of the following paragraph after paragraph (a):

"(aa) 5 per cent. of the amount on which tax is chargeable in relation to the supply of goods or services of a kind specified in the Sixth Schedule,", and

(B) in paragraph (c), by the substitution of "any of the rates specified in paragraphs (a), (aa) and (b)" for "either of the rates specified in paragraphs (a) and (b)",

(II) in subsection (2), by the deletion of paragraphs (b), (c), (d) and (e),

(III) in subsection (7) (inserted by the Act of 1976), by the insertion in paragraph (e) (i) after "subsection (1) (a)" of ", subsection (1) (aa)",

(IV) in subsection (8), by the substitution in paragraph (a) (inserted by the Finance Act, 1973 (No. 19 of 1973)) of "Second, Third or Sixth" for "Second or Third",

(ii) in section 15, by the insertion after paragraph (a) of subsection (1) of the following paragraph:

"(aa) on goods of a kind specified in the Sixth Schedule at the percentage specified in section II (1) (aa) of the value of the goods,",

(iii) in the Second Schedule (inserted by the Act of 1976), by the substitution of the following paragraph for paragraph (xx):

"(xx) electricity.",

(iv) in the Third Schedule (inserted by the Act of 1976)—

(I) in Part I—

(A) by the deletion of paragraph (xii), and

(B) by the insertion in paragraphs (xxiii) and (xxiv) after "Schedule" of "or paragraph (i) of the Sixth Schedule", and

(II) in Part II, by the substitution of the following paragraph for paragraph (i):

"(i) Services other than—

(a) the hiring or letting of goods,

(b) services of a kind specified in the Sixth Schedule;"

and

(v) by the insertion of the following Schedule:

"SIXTH SCHEDULE

GOODS AND SERVICES CHARGEABLE AT THE RATE SPECIFIED IN SECTION 11 (1) (aa)

(i) (a) Coal, peat and other solid substances held out for sale solely as fuel,

(b) gas of a kind used for domestic or industrial heating or lighting, whether in gaseous or liquid form, but not including gas of a kind normally used for welding and cutting metals or gas sold as lighter fuel,

(c) wax candles and night-lights which are white and cylindrical, excluding candles and night-lights which are decorated, spiralled, tapered or perfumed,

(d) hydrocarbon oil of a kind used for domestic or industrial heating excluding gas oil (within the meaning of the Hydrocarbon Oil (Rebated Oil) Regulations, 1961 (S.I. No. 122 of 1961)), other than gas oil which has been duly marked in accordance with Regulation 6 (2) of the said Regulations;

(ii) immovable goods;

(iii) services consisting of the development of immovable goods, and the maintenance and repair of immovable goods including the installation of fixtures, where the value of movable goods (if any) provided in pursuance of an agreement in relation to such services does not exceed two-thirds of the total amount on which tax is chargeable in respect of the agreement;

(iv) agricultural services consisting of—

(a) field work, reaping, mowing, threshing, baling, harvesting, sowing and planting,

(b) disinfecting and ensilage of agricultural products,

(c) destruction of weeds and pests and dusting and spraying of crops and land,

(d) lopping, tree felling and similar forestry services, and

(e) land drainage and reclamation;

(v) services of an auctioneer, solicitor, estate agent or other agent, directly related to the supply of immovable goods used for the purposes of an Annex A activity;

(vi) farm accountancy or farm management services.".

(6) That this Resolution (other than paragraph (5) thereof) shall have effect as on and from the 1st day of March, 1983, and that paragraph (5) of this Resolution shall have effect as on and from the 1st day of May, 1983.

(7) 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).

Mr. Gene Fitzgerald

In the interests of the implications and seriousness of the impact of this legislation, the Members should stay in the House and listen carefully.

An Ceann Comhairle

Will the Members who wish to leave the House do so quietly and those who wish to stay remain quiet.

Mr. Gene Fitzgerald

I have suggested that because of the impositions contained in this legislation, all the Members should stay. Never have any government put before the House as penal, as hard hitting, or as farreaching a Financial Resolution as this which we are about to discuss. I look across to the Labour Party benches and think of a once proud Labour Party. They are decent Members over there and I ask them very seriously do they realise what they are taking on when they support these resolutions, obviously introduced by a Fine Gael Government and to which they are now going to subscribe? There is 5 per cent increase on VAT on the standard rate from 18 per cent to 23 per cent and on the higher rate from 30 per cent to 35 per cent and the increase on the effective rate for building and agriculture from 3 per cent to 5 per cent. What will this do to unemployment? How many job losses will there be? By how much more is this going to accelerate the dreadful job losses which we have been seeing? We know of the downturn in the building industry. We also know that never did that industry more need a fillip. Yet, in one fell swoop this afternoon when the budget speech was over and the Minister had completed his reply to the budget, we had the pink pages — and by that name they will become famous. They were handed out and in them were the details of the cuts which had been casually referred to by the Minister for Finance — glossed over, I would say, for fear that they would be picked up. We realised, on reading these pink pages, the serious cutbacks in public expenditure in the areas involved. The development corporation about which we heard so much from those benches were given a measly £7 million.

Mr. P. Cooney

Plus £3 million.

Mr. Gene Fitzgerald

I think back on the offers which were being made at the time of the conference in Limerick of hundreds of millions of pounds.

Deputies

£500 million.

An Ceann Comhairle

Deputy Fitzgerald, without interruption.

Mr. Gene Fitzgerald

On decentralisation, the Government are not interested in the Ballinas, the Letterkennys, the Waterfords, the Dundalks, the Killarneys, the Limericks or the Sligos, not at all. They are interested in Dublin. Decentralisation is discontinued. Are the Labour Party going to subscribe to doing away with so many jobs — the once proud Labour Party? I recall the former Deputy Noel Browne standing in this House in June 1981 telling how Fine Gael over the years had devoured and enveloped the various parties. He cast his hand along the benches and said "The Labour Party". I now say the same.

Mr. Reynolds

They are diminishing. They are invisible.

Mr. Gene Fitzgerald

And further diminishing. I speak in the presence of a very respected Member of that party. That man must be seriously considering what a mistake has been made by his party. He should be voting with us against these penal measures when this motion is put to the House. There is a 5 per cent increase on almost every item. Last year we were horrified to hear that VAT was to be imposed on clothing and footwear. The Government fell and, fortunately, that imposition did not occur. Tonight we are in an almost worse position. We talk about essential needs and goods. Surely what is contained among the items in the srtandard rate of tax is essential to the ordinary home, the ordinary housewife and the ordinary worker? I sympathise with Minister Boland on hearing that not one shilling was provided for public service pay——

Mr. Boland

Thank you, Deputy.

Mr. Gene Fitzgerald

——not one shilling over and above what had been provided for the re-negotiated public service pay agreement last November. When has that ever happened before in a budget? I also want the Taoiseach to put on record the impact of the 5 per cent increase on the CPI of VAT from 18 to 23 per cent and from 30 to 35 per cent. His colleague Minister will live with it, eat with it and sleep with it over the coming weeks. I know full well the burden he will have to carry because of the callous acts of the Minister for Finance here this evening. Never did a Minister create so much hardship in such a short time. I want to go through quickly the essential items contained in the goods chargeable at the lower rate — fertilisers which are essential to the farming community. The farmers over there will be voting a 5 per cent increase on machinery, seeds and plants at this time of year. The items include printed books and school books, newspapers, periodicals, materials commonly used in the construction of buildings — blocks, cement and so forth. What unemployment will be created and how many jobs will be lost. I am sure many of my colleagues will have a lot of things to say because no budget has ever been so severe on clearing people out of work, on creating redundancies, creating unemployment rather than employment.

The Public Capital Programme has been cut back more than £200 million. In itself that will completely cripple the building industry already in bad shape. It is proposed to impose a 5 per cent increase in the various VAT bands right across the board. That is something we shall oppose in this House this evening and in coming weeks both inside and outside this House. Even the workers' net income is being clawed back more and more by a Government whom I believe have gone too far on this occasion. The cost of these increases, by way of wage increases and so on, is so horrific one is afraid to venture to forecast the outcome.

I should be glad if the Taoiseach would tell us what will be the effect of these increases on the Consumer Price Index. Above all I must make it clear that we are absolutely opposed to this measure because, whatever is the present future for employment, certainly it has taken a stab in the back, a body blow this afternoon from which it will take years to recover.

Mr. Haughey

On this side of the House we have no alternative, in fact it is our duty to strenuously oppose these VAT increases. They will have a very considerable impact on our economy and on the community in general in many different ways. There are two aspects of them to which we must address ourselves: the first is the burden these increases will place on families and households. In effect one can say that they will increase the price of the entire range of consumer goods within the VAT net by 5 per cent. There are some minor diversions from that general rule, but, as far as we can ascertain, the 18 per cent is going to 23 per cent, the 30 per cent to 35 per cent and a new rate being introduced of 5 per cent on fuels at present zero rated. That includes practically everything one can think of. The 3 per cent rate applicable to building and certain agricultural services is going up to 5 per cent so there is an increase of just 2 per cent there but, by and large, the overall increase is in the region of 5 per cent. Certainly that will very seriously affect the lower and middle income groups and will seriously distort the household family budgets of the over-whelming majority of people. I cannot see how that can be justified in present circumstances.

Of course the second major impact it will have is on employment. From a number of points of view I believe that that probably constitutes its most serious aspect. Certainly it will depress the consumption of the goods concerned. In so far as these goods are produced and manufactured in this country there will be a considerable falling off in output as a result of these impositions. Therefore the increase of 5 per cent is entirely detrimental from the point of view of the cost of living on a very large section of our community and that of employment prospects also.

Therefore we must oppose these impositions. Somebody has pointed out that the building construction industry is on the floor. This budget deals that building and construction industry a series of severe blows, as if it were not bad enough already. Unemployment in that industry is at an all-time high. The condition of the industry as such — which constitutes a backbone type of industry in our economy — has hardly ever been worse. The increase of 3 per cent VAT to 5 per cent on building will deal a very severe blow to that industry. There are many other things throughout the budget that will affect it also but I believe it will have a very serious effect on the house-building side of the construction industry. The picture that will emerge following the imposition of these increases will be a very bleak one indeed and it is very difficult to see how these increases can be justified on any grounds whatsoever.

There are some matters I want to have firmly cleared up by the Taoiseach when he comes to reply. First of all, what exact types of fuel will be involved now in the increase from zero rating to 5 per cent? Are we correct in thinking that this new 5 per cent rate will apply to turf, turf briquettes, coal, various types of heating oil, other than hydrocarbon oils? It is very important that we know exactly what is happening in that area.

Would the Taoiseach confirm also that the only change being made in the other category, the 18 per cent category, is that that is going to 23 per cent; in other words that there are no changes being made in the items coming within that category? Is it just that everything that is subject to 18 per cent at present will be subject to 23 per cent, that nothing will be taken out of the category or added to it? Does the same rule apply to the 30 per cent category at present? Will that 30 per cent rate just go to 35 per cent simpliciter, with no additions to the 30 or 35 per cent category, or no subtractions from it? In other words will the Taoiseach confirm that I am right in saying that building and agricultural services will go from 3 per cent to 5 per cent, everything that is 18 per cent will go to 23 per cent with no change in the category, everything that is 30 per cent will go to 35 per cent with no change in the category and that a new 5 per cent VAT rate will be introduced for certain types of fuel? Will he indicate what those types are? There is also the question of unregistered farmers going from 1.8 per cent to 2.3 per cent. That item does not need clarification. Perhaps the Taoiseach will clarify these points for me.

The Taoiseach

I shall deal with some of the specific queries raised and then deal with the more general issues. Deputy Fitzgerald sought to list some of the items which he said were affected by this. He did not mention very many although he said he could go on forever. Of the ones he mentioned, seeds are at zero rate when used for food production. School books are zero rated as are fertilisers used for agricultural purposes. He was unfortunate in his choice of items. Of course there is a long list of items to which the increases apply but these are not among them.

The effect of the VAT increases on the CPI, including the VAT impact on fuel which we dealt with earlier, is 1.64 per cent. That is the effect of all the VAT rate increases — the introduction of the 5 per cent rate for fuel, raising the 3 per cent rate to 5 per cent in respect of building and other services, the increase from 18 per cent to 23 per cent, taking account of the excise adjustments, and the increase from 30 per cent to 35 per cent. Taking these together the effect on the CPI is 1.64 per cent or just under half of the total impact of the budget on the CPI. There are no changes in the categories. Deputy Haughey is correct in that. Last year we examined some of the items in the categories when in Government and would like to re-examine some of them before the next budget. The increase mentioned by Deputy Haughey of 1.8 per cent to 2.3 per cent is an increased relief for farmers to offset the adverse impact on them of VAT on goods they purchase.

Mr. Haughey

I am concerned with the new 5 per cent.

The Taoiseach

The Deputy referred to the increase in the rebate from 1.8 per cent to 2.3 per cent. With regard to fuel it applies to all fuel other than electricity. This includes coal, coke, turf, firewood, heating oil, paraffin and so on.

Mr. Haughey

This is an entirely new category.

The Taoiseach

Yes, it is a new category. It is a tax on fuel other than electricity. Deputy Haughey seemed to suggest that all consumer goods were included. This is not the case because almost one-third of consumer goods — food, clothing, footwear and electricity — continue at zero rate. There is no change in relation to that.

Opposition speakers have been critical of these impositions because of their impact on the cost of living and the possible effect on employment. The amount raised by these changes is £119 million. Deputy Haughey earlier confirmed that his party's policy was to reduce the current budget deficit to £700 million. The document The Way Forward refers to a budget deficit of 5.5 per cent of GNP. That would mean a deficit of £730 million. Deputy Haughey suggested the EEC had proposed that we reduce the deficit to £700 million. That is not correct. No such guidelines were given by the EEC. The only guideline given by them related to total borrowing. They suggested we should reduce the level of borrowing by 3 per cent of GDP. This budget reduces it by 3½ per cent. There is no authority for the figure of £700 million except Fianna Fáil in their document The Way Forward. The former Taoiseach confirmed the view tonight that that is the figure we should have aimed at.

If Fianna Fáil were in Government what would we face? Deputy Fitzgerald said how terrible it was that the Labour Party had to face this budget. He indicated how much better they would have been with Fianna Fáil. If Fianna Fáil policy had been pursued let us consider how we would have fared. It would have required £165 million net additional revenue to reach the target to which Deputy Haughey referred and incorporated in The Way Forward. To achieve that figure, allowing for the impact on buoyancy, would have required £230 million gross additional revenue because of the loss of buoyancy which such an impost would lead to as regards the return to the Exchequer. The Deputy is now telling us that the Opposition opposed this tax which will yield £120 million.

We are in the position where the Opposition are telling us that we should have imposed £350 million taxation other than VAT. I am sure they would scarcely suggest that we should have imposed more excise duty on drink and tobacco. Indeed it has been suggested that we have gone past the point of no return in that regard. It is legitimate for me to ask where that £350 million would have come from if Fianna Fáil were in office. What taxes would they have imposed? If you exclude VAT and excise duties the only other major item of taxation capable of yielding large sums is income tax. The only way that could have been raised and the deficit reduced to the level of the Fianna Fáil target would have been to increase the total income tax take by one-fifth, from £1,750 million to £2,100 million. It is fair to ask Deputy Haughey if that is Fianna Fáil policy, and, if not, where they would have got the revenue from in order to achieve the target set in The Way Forward and confirmed by him here tonight. I look forward to hearing his answer.

Constructive criticism from the Opposition is welcome but in this case we know their policies in broad outline. We know what they feel should have been done. They apparently feel this is not part of how that should have been achieved. We are left with the question of where the additional £350 million revenue would come from. I am more than happy to sit down and let Deputy Haughey answer that question.

Mr. Haughey

We are not concerned with discussing an imaginary Fianna Fáil budget. Fianna Fáil unfortunately are not in office.

The Taoiseach

Fortunately for the country.

Mr. Haughey

It is a Fine Gael and Labour Government who are bringing in this budget and it is the duty of the Taoiseach and his Ministers to defend the budget and everything in it. It is no excuse for the Taoiseach to start romancing and fictionalising about some different type of budget that would have been brought in. We are not in Government.

The Taoiseach

I did not think the Deputy would like it.

Mr. Haughey

What the Taoiseach must do is defend this budget, its arithmetic and the increases in taxation, not some imaginary increases in taxation that he is conjuring up in his own head that we might have put on. I will take you up on a few of your calculations which, as usual, in your case in this kind of situation can be airy fairy. You can paint a broad picture and make loose assumptions.

An Ceann Comhairle

The Deputy should address the Chair.

Mr. Lenihan

The Deputy is a great sketcher.

Mr. Haughey

I apologise if I suggested that the EEC put forward a suggestion for a £700 million deficit in our circumstances in 1983. I think they did so but if the Taoiseach says otherwise I will accept it. We were certainly planning on a budget deficit of £750 million but that was at the time we left office and we ceased our calculations in November. It is probably legitimate for us to say that the figure may have been somewhere between £700 million and £800 million, depending on the level of GNP attainable in 1983. It seems from the White Paper on Estimates for receipts and expenditure that the situation this year may be a bit more buoyant than we were led to believe last November.

I do not think the Taoiseach should make too much of an issue of our aiming for a current budget deficit of £750 million. It is legitimate for us to say that the figure might in our case have gone to £800 million but that is only £100 million of a difference between us. The really significant difference between us is that the Government have decided to phase out the current budget deficit over five years instead of four years. I know this must be going in the teeth of every piece of economic and financial advice they are receiving. That is where the real cost in Exchequer borrowing will arise. When we were preparing The Way Forward we were under considerable pressure from a certain section of our advisers to eliminate the current budget deficit in three years and it was only after a great deal of argument and discussion that they were prepared in The Way Forward to agree to a four-year period. The Government have extended it to five years and this is where the Taoiseach is playing politics in order to keep the Coalition Government together and keep the Labour Party with him in order to stay in office. The stretching of the phasing out period from four years to five years will add at least £500 million and probably more to our Exchequer borrowing.

The Minister for Finance has for some time been very articulate on the question of the amount of our taxation which is being used to pay for borrowing and he says that situation must be put right so that we can use the revenue from taxes for the building up of the economy, the provision of services and so on. At the same time by a conscious political decision taken in the face of advice he is certainly getting from the Department of Finance, the Central Bank and the ESRI, he has stretched the period for eliminating the current budget deficit from four years to five years, adding at least £500 million to our Exchequer borrowing.

The Taoiseach

That is a fine piece of smoke-screening but it does not get away from the basic issue which the Deputy has raised. He suggests that the £750 million might have become £800 million because of greater buoyancy of GNP. I understand the position to be that the target of 5.5 per cent of GNP fixed in The Way Forward would, applied to the present estimate of GNP, involve a deficit of £730 million, not £800 million. The Deputy, I think, is wrong. It is the difference between that and the figure in this budget which Fianna Fáil believe should have been raised in additional revenue. To raise that £165 million net over and above what is provided for here would have involved gross additional taxation of about £230 million to allow for loss of buoyancy. To raise the further money required not to impose the taxation the Opposition are now opposing would require another £120 million and the fact remains that Fianna Fáil policies, as enunciated here tonight, would require the raising of £350 million by other means.

Mr. Haughey

Fantasy.

The Taoiseach

I can understand the Deputy's being a bit annoyed at my drawing attention to that fact. We have heard this evening in the same speech from the Leader of the Opposition two totally different streams of thought, depending on which piece of paper he was looking at. One referred to the undesirability of such a high level of deficit, which he said should be around the figure of £750 million, and the other stream of thought suggested that the budget was too deflationary. Anybody who can within the same speech and in the space of five minutes put forward these two opposite propositions is certainly better on the Opposition benches than in Government.

Mr. F. Fahey

I want to raise the issue of the increase in the rate of VAT from 3 per cent to 5 per cent but I must take up the Taoiseach on his reference to two streams of thought.

I have before me his abortive budget of 27 January 1982 and a copy of today's budget statement. He has taken a very different line in this budget to that taken last year, particularly in relation to the current budget deficit and in his ideas regarding the need for financial rectitude, something which is absent in this budget. He said last year that one of the main objectives was to change the income tax system so as to make it fairer and to lessen the burden imposed on the lower paid. He went on to say that budget deficits are demoralising and that his Government would eliminate the budget deficit in four years. The Labour Party have clearly made an impact on him and his Government and the reported exit of the Tánaiste from several Cabinet meetings has changed the Taoiseach's views of a year ago.

I should like to ask the Minister what exactly is meant on page 21 of the now infamous pink document by the requirement to reduce by £10 million the 1983 provision for the Housing Finance Agency. One of the most serious aspects of this budget will be the effect of the VAT increase on the construction industry which is now in a very serious state. They made their position clear to the Minister for the Environment some weeks ago and he gave a clear commitment that no action would be taken which would in any way damage the construction industry, already seriously affected. This action will bring that industry to its knees.

We have already seen during the term of this Government the teachers and the publicans protesting at the gates of Leinster House and I am convinced that we will soon see the construction industry making a public protest, if they can afford to come. This is a reprehensible step and it is clear that the Government have no commitment to one of our most vulnerable industries. We can expect very serious repercussions because of this action. Perhaps the Minister would answer my question regarding the reduction of £10 million in the provision for the Housing Finance Agency.

Minister for Finance (Mr. Dukes)

We are being treated to a display of the zeal of the recent convert and I find the lesson to be drawn from that very interesting. Had all the considerations which Deputy Haughey developed a few minutes ago been applied in 1980 we might not be having this discussion in these terms this evening.

On the specific question raised by the Deputy it is pointed out on page 21 of the Principal Features of the Budget that a revised assessment of the requirements of the Housing Finance Agency has enabled a reduction of £10 million to be made. This reduction is in the non-Exchequer provision for the agency and it becomes possible to make that reduction because it is now forecast that the level of activity in this area will be such as to reduce the requirement below the level originally intended. I might add that this in itself does not in any way involve a reduction in the amount of finance available for housing as compared with last year.

Mr. F. Fahey

It is clear that the reason the money is not required is because the scheme has been a complete failure and people are not taking up the finance that is available from the agency. It points to the type of policy which has seriously injured the construction industry, in particular housing construction. It is clear that the agency which was established by the last Coalition Government——

Mr. Boland

On a point of order, I hesitated making this point before but we are dealing with Resolution No. 7 which relates to changes in VAT rates and the question of the non-programme outlays provision for the Housing Finance Agency does not arise in any way under this resolution.

Mr. Haughey

That is not a point of order.

Mr. Boland

I am sure the Chair is in a position to rule for himself and make up his own mind.

Mr. Haughey

The Minister should sit down and take his medicine.

Mr. Boland

The Deputy might be able to influence the Chair at certain meetings but not in this Chamber, hopefully.

Mr. Lyons

I am also opposed to this resolution because of the serious affect it will have on the motor industry. In recent months all Members were made aware of the critical state of that industry and I should like to know how Government backbenchers will be able to explain the situation that will exist as a result of the budget to those engaged in the motor industry in their constituencies. They will have to explain to those people that they were unsuccessful in their efforts to have the VAT rate for services in the motor trade decreased from 18 per cent to 3 per cent. Those Members got a great kick in the teeth from the Minister for Finance today because instead of getting a decrease the VAT rate is being increased by 5 per cent. That will take some explaining. Representatives of the motor trade have pointed out to us all what was happening in the motor trade and what would occur if there was not a decrease in the VAT rate. They expressed concern at suggestions that VAT might be raised in the budget — I wonder if information was leaked from a Government meeting about this matter — and they feared that if that happened it would spell disaster for the motor trade. They pointed out that VAT registered outlets had already suffered a loss of 6,000 jobs in three years.

We have all expressed concern about the unemployment situation and what should be done to rectify it but now an uncaring Minister, and an uncaring Government, are inflicting more damage on an industry that has already suffered and has reached the stage of diminishing returns as a result of the increase in petrol. We will be discussing the proposal to increase road tax at a later stage. It should be evident to the Government that an industry which lost 6,000 jobs in three years will be hopelessly uncompetitive as a result of the budget and the big number of unregistered outlets. There will be more redundancies and company failures and there is little prospect of any apprentices being taken on in that industry.

Representatives of the motor industry told us in recent weeks that in 1982 there was a drop of 34,000 in new car sales compared to the previous year resulting in a loss to the Exchequer of at least £50 million from excise duty and VAT. It should have been obvious to the Government that there was no scope for imposing a further increase in the tax on new cars. The recent massive hike in the price of petrol has also affected the industry. I should like to know what Fords of Cork will do now. How will the Government backbenchers from that county explain to the workers of Fords the effect of Financial Resolution No. 7 on that thriving industry? That industry gives tremendous employment, direct and indirect, in Cork city and county but undoubtedly, it will be under tremendous pressure. We should be considering ways of expanding such an industry to take up the slack in other areas. The increase in VAT in this area will have disastrous effects on the motor industry.

Mr. Mac Giolla

I am also opposed to the terms of this resolution. Already we have the highest indirect taxes in Europe. Such taxes are very regressive and hit hardest on those least able to pay, the lower income group, because a higher proportion is paid out by them in VAT, which covers everything from washing powder to Pampers and all items purchased in supermarkets. Consumers will be hardest hit because there is widespread evasion of VAT by those who also evade income tax. Consumers do not have any way of avoiding paying VAT on the items they buy. This resolution covers a wide range of goods and activities. The tourist trade has been hit by a whole range of increases in the last month and such matters as closures in B & I and CIE but now it will be hit again by these VAT increases. They will have an appalling effect on tourism.

One item that sickens me about this increase — Deputy Haughey asked a question about it but I do not think he was given a satisfactory answer — is in regard to VAT on fuel. I do not know how much the Government expect to take in on this but it is appalling to put 5 per cent VAT on briquettes, a bag of logs or a bag of coal. It must be remembered that some people can only afford to purchase a bag of coal per week. Will the imposition of VAT on wax candles and night lights bring in £100? Will it bring in £10? Will it bring in enough to pay the cost of having them printed in this resolution? It should be remembered that excluded are candles and night lights which are decorated, spiralled, tapered or perfumed. I am in a position to bring the Minister to houses in Dublin where wax candles are used for light because the electricity has been cut off. I am aware of one house where the electricity was cut off five years ago and the occupants have not been able to pay the amount required to have it restored. There are people who depend on wax candles for light. What will the Minister make from them? Why put VAT on wax candles and night lights?

The Minister should look again at the tax on heating and, in particular, on the solid fuel items, coal, logs and peat, and also gas and central heating. I doubt that the amount of money brought in will in any way cover the possible medical problems which will arise particularly for old people, and the cost generated for the State when they are taken to hospital or suffer from diseases of one kind or another as a result of lack of heating.

The whole range of VAT will affect jobs in various industries such as the car trade which was hit disastrously over a number of years past. The 5 per cent on heating and fuel is an absolute disaster and the Minister should look at it again.

Mr. Dukes

Like Deputy Lyons I had a number of discussions with people in the motor trade about the difficulties they face now. For some time past they have been wondering what the effect would be if there were increases in taxation in this budget. As to whether they had access to a leak, I must say I bow to the superior wisdom of the Opposition in matters of that kind. They did not get any indication from me as to what they might expect.

I fully understand that the motor trade is in a difficult position. It is not the only industry in a difficult position. It is in a difficult position not because of increases in petrol prices only, or increases in VAT on cars only. It has not been helped enormously by the reduction in rates of excise on spare parts only. A whole complex of factors has to do with their present economic situation which combined to create difficulties for the industry.

Deputy Lyons said 6,000 jobs were lost in the motor industry over the past three years. I do not dispute those figures. They come from the motor industry itself. What I am proposing to do tonight has not had any effect over the past three years, and still the industry has had a problem over that period. We must look at the problems of that industry in a wider context than the measures we are discussing here this evening.

During the course of my statement this afternoon I said I wanted to have a look at the effects of increases in VAT rates on the competitive position of registered businesses as opposed to unregistered businesses. That is a problem from which the motor industry suffers at the moment. It is one of the areas I had in mind when I said I would examine it between now and the introduction of the Finance Bill with a view to seeing what legislative measures might be taken in order to go some of the way towards dealing with that problem.

It is a general problem. I pointed out that high levels of VAT have this extra complication in them. We can all agree on that. The point at issue is not the specific proposal we are making this evening. It is the wider problem of how we get more of the unregistered businesses to register. I suppose that, in this connection, the words "unregistered businesses" are in some cases a euphemism for what we normally call the black economy. There is a major problem here and we will have to deal with it. It is a separate issue from the one we are dealing with now.

It can be said that if we had a more buoyant level of activity in this industry and in many others, the revenue to the State would increase because of the fact that we would be getting extra excise duty or extra VAT on those higher levels of activity. At the moment we have the levels of activity which we have and, on the other hand, the public finances are faced with their own problem of financing during this year. We have to make up our minds on how we will face those problems. Taking account of all the factors before us, the series of measures which I proposed to the House today appear to us to be the best balance of measures we can take in order to meet the problems.

Deputy Mac Giolla claimed that VAT is highly regressive. There is a great deal of evidence to suggest otherwise in our present system, particularly because of the large number of items which are zero rated and items at the lower rates. The items which are zero rated compose a large proportion of the expenditure of lower income households and therefore moderate the effect of VAT on people at the lower end of the income scale. For that reason in proposing these changes we have not proposed a large number of changes from the zero rate into the 5 per cent rate.

Deputy Mac Giolla also made a point about VAT on fuel and on certain wax candles and night lights. They are not in the lower rate but in the higher rate. As regards wax candles and night lights generally, there is a point for consideration between now and the introduction of the Finance Bill. These items would not account for a large proportion of revenue. Apart from that, we must look at the overall question of what proposals we can make and what measures we can take to bring about the revenue versus expenditure situation at which we are aiming.

To pick the measures we are discussing out of total context, and to make all these points about it — with many of which I can agree in isolation — and to home in on it and criticise it in the way it has been criticised, is to lose the perspective of the overall budgetary situation.

The measures we propose are designed, taken together, to achieve a particular result. We have fashioned them to give the best balance possible taking account of equity requirements, the effect on people at the lower end of the income scale, and we want to do this in the most equitable fashion possible.

Mr. Leonard

We are very concerned about the increases in VAT and the introduction for the first time of VAT on fuels which will have the effect of adding 25p per cwt. to the price of coal. Fianna Fáil introduced measures such as the Turf Bill to encourage the use of native fuel. The Minister now proposes to put VAT on the price of peat. The Minister will not have much of a problem with the produce of Bord na Móna but, since the Bill was introduced and since grant aiding was available for machines to cut the turf, the contractors have leased bogs. They cut the crop and sell it by area, by rood, or by three hours' cutting. They purchase or harvest this crop. How does the Minister propose to assess VAT on peat at that level? VAT on contracting has been increased from 3 per cent to 5 per cent. This is going to have a very serious effect in an area of operation where it is almost impossible to secure contractors, because for one reason or another, it was not profitable. Many small farmers now have to purchase jointly very expensive machinery for a short period because those contractors have gone out of business. It is a retrograde step to increase VAT on contracting, whether it is silage making, spraying, land drainage or land reclamation.

Mr. L. Fitzgerald

I was very disappointed at the attitude of the Taoiseach when he treated almost with derision questions addressed to him by the Leader of the Opposition in relation to the effects on the underprivileged of the 5 per cent increase in fuel. I am also worried about the effect of the increases on the construction industry. I am sure the Minister will agree that the construction industry, despite going through a difficult patch, is one of the areas with the highest multiplier effect and, as such, is looked upon by economic experts as an area to generate growth and to promote employment. I was surprised that the Taoiseach refused to deal constructively with this matter.

The Minister advised us not to home in on any particular matter. The more you move out into the wider area of Government policy as it relates to this budget and look at areas even like education, you will see that this Government are acting in an élitist fashion. The underprivileged and the lower paid seem to be treated with far less sensitivity and concern than we had been led to believe this Government would do. The Leader of the Opposition and a number of other Deputies have asked a question in relation to the total revenue that is likely to accrue from the 5 per cent on fuel but we still have not got a reply. I am seriously concerned that the application of this percentage right across the board would have a most damaging and injurious effect on the lower paid. I would like the Minister to give us the information in relation to that question. I would also like him to address himself to the problems that will definitely arise in small industries, retail outlets and manufacturing units who are not in a very strong competitive position in relation to the increase in VAT from 18 per cent to 23 per cent. I spoke to a number of business people with small retail units who had already been suffering losses in employment due to the ravages of the recession and who expressed extreme apprehension about the likely effects in the area of employment of the increase. I do not know where they got their information but they were anticipating this 5 per cent increase with great fear and trepidation. I would like the Minister to think again in relation to the 5 per cent on fuel and in relation to the effects the increase from 18 per cent to 23 per cent are likely to have on small retail units. I would ask him to think about the implications they have for employment and the likely effects on the building industry.

Mr. H. Byrne

Having listened to the Minister reading politely and articulately from this white document, we believed the budget was going to be reasonably harmless but on reading the pink and cream documents we found out where the real venom was. I suppose it could be regarded as the pink and cream budget with a very black content.

I should like to comment on the hotels industry. I am sure the Minister is well aware of the dire straits in which that industry is at present. He has had many submissions and deputations from them. An increase in VAT from 18 per cent to 23 per cent will have a disastrous effect on the industry because they had sought a reduction in the rate. The Minister will be aware of the fact that many hotels are for sale because of the enormous VAT rate. To increase it now adds insult to injury. I would ask the Minister to think again about this because he will be aware that the employment generated by the hotel industry, especially in summer, can be high. Unfortunately, as a result of what is proposed here, the unemployment levels will increase significantly this year. It is whitewash to suggest that because a deferment of the increase to 31 December 1983 is being allowed, it will make a noticeable difference. I would ask the Minister to seriously consider the hotels industry.

Mr. Conaghan

I wish to comment on the tourist industry which the Minister is aware of because the Hotel Industry Federation met him in relation to the impact that the previous tax impositions had on the industry and the effects of VAT on the services given by the industry. I had the pleasure of meeting the Minister when I was on a deputation from County Donegal. The hoteliers there are going through a very bad patch at present because they depended mostly on cross-Border tourism, day trippers, night functions and so on. So far as that county is concerned, the tourist industry has collapsed completely and the imposition of a further 5 per cent will erode completely the remaining business.

I should have thought that any Government would have considered sympathetically the tourist industry, an area over which our people have control because we must face the fact that there are many industries over which we have no control. The work of the people engaged in the tourist industry and the hospitality of the Irish people has made this country attractive to many visitors from Europe and throughout the world. Yet, this industry which has provided many services is being taxed to such an extent that it cannot survive. Serious consideration should have been given towards helping the tourist industry which has been of considerable benefit to the economy. I ask the Minister to consider again the results of the impact of VAT on this industry and to give the matter a second thought.

Mr. Hilliard

Nobody likes VAT increases but I do not know if the Minister is aware that the furniture and carpet business is on its back. By increasing VAT on both industries I wonder if the Minister will get any extra VAT in the long term? He stated he will collect £131.4 million in VAT returns and I ask him to tell the House how much will be taken from the furniture and carpet industries. I agree with the principle that firms exporting 75 per cent or more of their products be allowed to import raw materials and components without payment of VAT from 1 April 1983 and I ask the Minister to tell the House the cost of this concession in 1983.

The furniture and carpet industries depend on selling most of their products at home and I doubt very much if they will qualify for this concession. I would be glad if the Minister would correct me if I am wrong in this. I do not think the Minister has been wise in his proposals on this point. These industries will not be able to carry the burden being placed on them. There is considerable unemployment in carpet and furniture factories in Navan. The trade is not able to make any profits because of various charges and also because of the recession. The building trade will also be affected by VAT charges and indirectly this will affect adversely production in carpet and furniture factories. I repeat my two questions to the Minister. Of the £131.4 million, how much will be taken from the furniture and carpet industries and, secondly, what will be the cost of the concession to companies who export more than 75 per cent of their production?

Mr. Dukes

I begin by making the point this is not the first time that VAT has applied to fuel. It was imposed on fuel in 1972 at a rate of 5.26 per cent and it was removed by the then Government in July 1975 when the rates stood at 6.75 per cent. The total revenue which I expect to get from VAT on fuel is £7.7 million in 1983.

With regard to the effect of this charge on sectors of the population who have been mentioned, I make the point that to discuss the matter in these terms is to get back into the wider budgetary context. There is a series of specific provisions in the budget designed to assist people with lower levels of income in order, among other things, to help them to deal with the extra charges because of increases in the tax rates. For example, I mention increases in social welfare payments and the new family income supplement, both measures intended directly to help people with lower incomes. Therefore, they will offset the effects of increases in charges in these areas to the extent that they have an impact on people at lower levels of income. In addition, other schemes that directly assist people on lower incomes are being continued in force, such as the fuel voucher scheme. All of these will moderate the impact which appears at first sight to be imposed on lower income people by the kind of charge we are talking about.

As far as VAT on peat is concerned, I make the point that VAT becomes payable and collectible when a business moves to the point where it becomes liable for registration under the system. In the normal course of events, someone who is harvesting and selling peat will not be liable unless his sales go over the threshold where he comes into the VAT system — that is £30,000 of sales.

Mr. Calleary

Bord na Móna to the ESB?

Mr. Dukes

The Deputy made the point he did not see any great difficulty in the application of this VAT in the case of Bord na Móna. As far as the hotels industry is concerned, I take the point that was made. Deputy Conaghan mentioned I had a discussion with a number of delegations from the hotels industry, including a delegation of hoteliers from County Donegal. Here, again, the problem is not just the problem of VAT. It is another case of an industry where problems have been developing over a number of years because of the growth of costs in the industry. They certainly ante-date increases in VAT rates and, consequently, we cannot put all the blame for the difficulties in the industry on increases in VAT. The case of the Donegal hoteliers is a different one which we meet in a number of industries in Border areas. It arises from the difference between VAT levels here and those in Northern Ireland. As I said in my statement this afternoon, while we must be conscious of that kind of problem, we must fix our tax structure to suit our requirements. We cannot fix our tax levels here only because other people fix their taxes at different levels. The representatives of the hotel industry sought a reduction in the level of VAT applicable to the services they provide and they make a very convincing case, as many other industrial groups can make, but the cost of making a substantial reduction in the level of VAT applicable to that service would be very high and would mean that increases in other forms of tax revenue, in order again to keep within the global figures we have fixed within the budget increases in other forms of tax revenue, would have had to be higher and might have had more damaging effects than the combination we have chosen. I will come back to the combination of the measures we have put forward.

Deputy Hilliard made a point about furniture and carpets. The total cost of the overall concession of VAT on imports, as I mentioned during the course of my statement this afternoon, is £12.3 million. That is the cost this year of making the arrangements for firms who export more than 75 per cent of their production. It will reduce our income from VAT by £12.3 million this year. As far as the amount in regard to furniture and carpets is concerned, I have not the information asked here but I will get it for the Deputy if we have it broken down to that level.

Mr. Hilliard

Of the £12.3 million cost of the concession to firms exporting over 75 per cent how much will go to the carpet and furniture business?

Mr. Dukes

On that I could not give a detailed breakdown for particular sectors of the industry, but obviously none of the benefit of that measure would go to firms who do not export more than 75 per cent of their output. That measure applies only to firms who export more than 75 per cent of their production.

Mr. Hilliard

Does that mean that no furniture and carpet business in the country are exporting more than 75 per cent of their production?

Mr. Dukes

I do not know. If a firm manufacturing carpets or furniture are exporting more than 75 per cent of their product then they will benefit from this concession. I can think of one firm in that line of business whom I think will benefit from that concession because they are exporting more than 75 per cent of their production. It depends upon the makeup of the activities of a given firm. The concession will not have an across-the-board effect on any sector of business.

Mr. E. O'Keeffe

Section (5) of the resolution imposes a low rate of VAT on the goods and services set out in the Sixth Schedule. The Sixth Schedule refers to such services as land drainage and reclamation, the services of an auctioneer, solicitor, estate agent or other agent directly related to the supply of immovable goods used for the purposes of an Annex A activity, farm accountancy or farm management services. What is the logic in having a special low rate of VAT on those services? What is it about those services that attracts a special low rate of VAT? I understand that the rate of VAT on those services up to now has been 3 per cent. Now it is being increased to 5 per cent.

I want to refer also to a few points the Minister made in his statement in reply to some speakers on this side of the House a few moments ago. The Minister has been as helpful as he can during this debate and I appreciate that. However, I am at a total loss to understand the logic in much of what he said. He made the point that this is not the first time that VAT is being introduced on fuel. It seems completely and totally irrelevant whether this is the first, second or 20th time that VAT was put on fuel. The Minister should look at the effect of the imposition of VAT on fuel for use for domestic purposes in the social and economic circumstances of the country now. It is now that he is imposing that VAT.

He also made the point that the family income supplement will to a certain extent offset the effect of these fuel increases on the poorer sections of the community and the old. It seems totally illogical to introduce a tax and then have to introduce something reasonably complex, like a family income supplement, which will require probably extra civil service staff and certainly at least extra man-hours from the civil service to offset the effect of a tax increase which the Minister has just introduced. It seems to be giving with one hand and taking away with the other. I cannot understand the logic of it. Perhaps the Taoiseach can help me.

Finally, I want to associate myself with the remarks of the other speakers who have criticised the imposition of a 5 per cent rate of VAT on fuel at this time. The effect of that on the poorer sections of the community and on the old cannot be looked at in isolation. It must be looked at in combination with the direct price increases which will arise with the increase in the lower rate of VAT from 18 per cent to 23 per cent, which is enormous, and also with the miserly increases in social benefits which the Minister introduced earlier this afternoon. The net effect of what the Minister has done this afternoon is to hit the poorer sections of the community savagely. I am sad, genuinely sad, that the Minister has done that and I am even more sad that he has done it with the assent, assistance and collusion of the Labour Party.

Mr. L. Fitzgerald

I asked the Minister, previous to the Taoiseach's re-entry, to give us the total revenue that would accrue from the imposition of 5 per cent on fuel and also I asked him to address himself more seriously to the questions addressed to him by the Leader of the Opposition before he left the House.

Mr. O.J. Flanagan

I would direct the attention of the Minister for Finance to the imposition of VAT. Nobody wants to pay VAT. Nobody likes to pay VAT. Nobody wants to pay any taxes because taxation is extremely painful when it comes to having to pay them. Nevertheless, taxes have to paid, but a degree of commonsense and intelligence should be exercised in imposing taxes and particularly VAT. I disagree completely with the imposition of VAT in relation to auctioneers, estate agents and solicitors. Particularly in the country, the auctioneer or estate agent renders a very useful service. This is not the first time that VAT has been imposed on the services rendered by estate agents and auctioneers and it would be unreasonable to accuse the present Minister of doing this for the first time, but I am surprised at the extraordinarily limited vocabulary in this House in relation to auctioneers, valuers and solicitors. I could never see any degree of commonsense in making auctioneers and solicitors tax collectors. Heaven knows, it is extremely difficult with the depressed markets, and markets have been considerably depressed, particularly during the recession without making it more difficult for city auctioneers to pay staff, office accommodation, rent, ground rent and still be subject to VAT which must be levied on every pound that goes into the auctioneers' and valuers' pockets.

With regard to solicitors I am surprised we have not heard more on this from the Incorporated Law Society and I am surprised that there have not been stronger representations from all sides of the House because it is solicitors' clients who suffer. The staff in solicitors' offices have to decide on the amount of VAT that has to be paid, levy it on the clients and collect it. It is quite wrong to have the legal profession and the auctioneering profession, who give a good service to their clients, being liable for what they describe as a penance for the continuance in a satisfactory manner of the service they give to their clients. People of the highest standards of integrity are in the auctioneering and legal professions.

Mr. Leyden

The Deputy is one.

Mr. O.J. Flanagan

No. I have not been an auctioneer since 1975. The Deputy is completely out of touch. I was one.

(Interruptions.)

An Ceann Comhairle

The Chair does not consider that to be relevant to the debate.

Mr. O.J. Flanagan

I appreciate that and I also appreciate that while I was an auctioneer the Chair was a solicitor. That is why I am now making this case.

An Ceann Comhairle

The Chair is very nearly an inanimate object.

Mr. O.J. Flanagan

We can both share that title in the circumstances. I am glad I am not a practising auctioneer in the present circumstances but I am in close touch with my colleagues in the profession. I keep in close touch with members of the Auctioneers and Valuers Institute. I am an honorary life member of the institute. I meet those people very frequently and I know how difficult it is for their staff who are obliged to be collectors for the State. I do not care whether it is Fianna Fáil or a mixture of Fine Gael and Labour. It is wrong in the case of the auctioneers and legal professions to expect them to be tax collectors for the State for the amount of money that is collected. I believe it is not very great.

The amount of time taken by auctioneers, valuers and solicitors in preparing accounts and the difficulties which both professions have in extracting money from their clients is so great that I feel it would have been a considerable help to both professions if steps were taken to remove this VAT imposition from them. They could run their businesses more easily, more efficiently and more effectively without having to penalise their clients by asking them to pay VAT. I know in the case of many auctioneers and solicitors that when the accounts are sent out to their clients when those clients come into the offices to settle their accounts or send their cheques in they leave the VAT out and there is no means by which many auctioneers and solicitors can collect the VAT which their clients will not pay. The result is that many members of both those honourable professions are out of pocket. This is wrong. That is the reason why I do not approve of this. I hoped the Minister for Finance would have relieved the legal profession of this obstruction to their high standard of efficiency. This is an unfair burden on their clients who have to seek legal aid and also on the clients of auctioneers who want to obtain the best possible professional services from those skilled people who are engaged in the auctioneering business. I want to express, on behalf of both professions, my disapproval of this burden of taxation imposed on them.

Mr. Leyden

Will the Deputy vote against it?

Mr. MacSharry

In all fairness to everybody, we are entitled to ask what exactly the increase will be arising from the VAT increases and the hydrocarbon increases in addition to the 15p on a gallon of petrol, 12p on a gallon of diesel and 12p on a gallon of LPG. How much extra will go on to a gallon of each of those three commodities arising from the hydrocarbon oil and the VAT increases? This is one simple question and there are three figures in reply.

The Taoiseach

I believe the Minister for Finance dealt with the points raised up to the time he left the House. I want to deal with the points in the order they were raised since I came into the House. A point was raised with regard to the reason for the inclusion in the resolution of "services consisting of the development of immovable goods and the maintenance and repair of immovable goods including the installation of fixtures, where the value of moveable goods, if any, provided in pursuance of an agreement in relation to such services does not exceed two-thirds of the total amount on which tax is chargeable in respect of the agreement ...". I do not blame any Deputy for asking questions about what that means. It is not self-evident to the layman. I understand that what is involved here is a lower rate of VAT being imposed on agricultural contracting services because a higher rate would require an increase in the flat rate rebate to farmers. This is an attempt to give the money back but it does not necessarily give it back in the exact amount to the precise people who gave it. The purpose is to avoid an undue imposition of VAT on the agricultural sector. These agricultural contractor services have always been at the lower rate for some time. This merely maintains that situation although the rate is now raised from 3 per cent to 5 per cent.

With regard to the question of fuel, I was asked about the effect of the provisions in regard to fuel. The figures I have been given are £7.7 million in 1983 and £14 million in a full year. With regard to the other question put to me now by Deputy MacSharry, I understand the answers are 11.3p on petrol, 9.6p on diesel and 8.6p on auto LPG. One of the Deputies opposite asked me to reply to something that Deputy Haughey said but I was not clear as to what was the issue he raised.

Mr. L. Fitzgerald

I found it rather disconcerting and disappointing that the Taoiseach seemed to treat with derision some specific questions that were put to him, though in saying that I do not intend any disrespect to the Taoiseach. The point in question, and it is one that I put to the Minister for Finance but which he failed to take up, is that I consider this budget to reflect an elitist approach by the Government to the overall situation but especially to those who will be hit hardest by the budget. I refer to the least protected people in our society who will suffer as a result of the increase in VAT on fuel.

The Taoiseach

I may have misunderstood but I thought that some Deputy referred to my not having replied to a point raised by Deputy Haughey but on the point about the VAT on fuel, I must recall that when VAT was introduced by Fianna Fáil it was imposed on fuel at the rate of 5¼ per cent. Our Government removed that specific imposition in 1975.

Mr. Gene Fitzgerald

That is history.

Mr. MacSharry

Is the Taoiseach accepting now that he should not have removed it?

The Taoiseach

In the circumstances of 1973-75, when we had not faced the rigours of the oil crisis, it was possible to effect reductions in tax on goods which would affect the less well off in terms of tax. In present circumstances, regardless of who is in Government, we do not have the same freedom of action after ten years of failure to cope with our problems. The point that the Deputy seemed to be making was that it was irrational to impose this duty at the same time as we were introducing a family income allowance to compensate for it. That is a misconception of the nature of the two decisions. The decision with regard to fuel affects everyone, including the less well off. The impact of 5 per cent on fuel on people who are less well off will, in terms of the actual increase in the cost of living, be relatively small but one of a number of additional imposts affecting everyone, including that group. In this budget we have set out our intention to introduce a family income supplement for low-paid workers who are at work, who consequently are not in the social welfare category and who are not well off enough to pay income tax so that they cannot be relieved by any change in the income tax code and who never get anything from anyone because the system does not allow that. Last year in our January budget we introduced a family income supplement but for reasons that I have not been able to identify, two months later Fianna Fáil failed to include that provision in their budget.

Mr. MacSharry

That had nothing to do with Fianna Fáil.

The Taoiseach

There is often room for disagreement between different parties on various impositions but I would have thought that a measure designed to help the low-paid worker who is often in receipt of significantly less than are others who are unemployed and receiving pay-related benefit, for example, would have had the general agreement of the House. Not only was I very disappointed but I was puzzled by the decision of Fianna Fáil to eliminate that provision. However, we are back in power and we are determined to reintroduce measures on those lines. As the Minister has outlined, he has made provision for about £5 million which he hopes will benefit about 20,000 people in the low-paid category.

Mr. Gene Fitzgerald

That will be £5 per week.

The Taoiseach

Depending on the distribution it will average £250 per year per person.

Mr. MacSharry

Or per family.

The Taoiseach

That will be for whatever part of this year that is involved but the sum may be greater next year.

Mr. Gene Fitzgerald

This is not relevant to the resolution.

The Taoiseach

I am answering a question that has been put.

Mr. Gene Fitzgerald

Obviously, the Taoiseach is filibustering. On a point of order, how do these present remarks relate to Financial Resolution No. 7?

Mr. P. Barry

They are relevant because Deputy Liam Fitzgerald asked for the information.

An Ceann Chomhairle

The Chair understands that the Taoiseach is replying to points made from the other side of the House.

The Taoiseach

I am not filibustering but trying to answer questions as fully as possible. I was asked how I justified VAT on fuel while at the same time bringing in a scheme to help low-paid people, having regard to all the extra work involved in that. I am trying to explain that the two are not related, that we are not bringing in a family income supplement because of a 5 per cent VAT impost on fuel, the impact of which will be very small on a family budget and will be a very small fraction of the £5 per week on average by way of family income supplement. The family income supplement decision derives from our commitment to the low-paid worker as indicated in our budget of last year. This measure will not merely have the effect of cushioning the impact of this VAT on fuel and of other tax increases but will go far beyond that so that when these low-paid workers face the full implications of the budget they will, with this additional income, be better off, as they should be. Therefore, the family income supplement ante-dates this other measure, is separate from it and is on a scale totally incommensurate with the impact of the 5 per cent on fuel.

Mr. MacSharry

I am sure the Deputy is satisfied with that answer.

An Ceann Comhairle

I have been handed a timetable by the Whips which would require me to put Financial Resolution No. 7 at about this time.

The Taoiseach

I am happy to allow that happen but there seems to be some confusion among Deputies on the other side. Deputy MacSharry seems to think that he is still deputy leader of the party and can tell other members to be quiet.

(Interruptions.)

Mr. Calleary

That sort of remark does not become the Taoiseach.

The Taoiseach

I apologise.

Mr. L. Fitzgerald

The Taoiseach has made a number of other remarks this evening that have not become him.

The Taoiseach

I am very impressed by this concern for behaviour from the back-benchers opposite. Even the word "becoming" has a delightfully old-fashioned air about it in the light of recent events. I understand Deputy Flanagan's concern about certain professions being included for VAT but that is a decision that was taken last year. It is true that the raising of the VAT rates from 3 to 5 per cent in respect of auctioneers selling agricultural land and from 18 to 23 per cent in other cases involves a heavier burden so far as these services are concerned. When this measure was introduced last year the aim was to ensure that VAT would be paid equally by all to whom it could be applied, there being certain professions such as medicine where it cannot be applied because of EEC requirements. It was in the interest of general equity that we imposed this VAT last year but it does not arise in this budget because of its having been in last year's budget. It is not something that we would go back on in this year's budget.

Mr. MacSharry

I should like clarification with regard to certain increases. Is it the position that, in addition to the 15p increase on the gallon of petrol in January, there is now being imposed an extra 11.3p, making a total of 26.3p while in respect of a gallon of diesel there is an increase today of 9.6p in addition to the 12p imposed in January giving a total of 21.6p extra in that regard and that in addition to the 12p increase in auto LPG in January there is a further imposition today of 8.6p, making a total of 20.6p.

The Taoiseach

The figures are correct but not from today. They are from 1 March.

Mr. MacSharry

But they are being imposed today.

Question put:

The Dáil divided: Tá, 81; Níl, 71.

Tá

• Allen, Bernard.
• Barnes, Monica.
• Barrett, Seán.
• Barry, Myra.
• Barry, Peter.
• Begley, Michael.
• Bell, Michael.
• Bermingham, Joe.
• Birmingham, George Martin.
• Boland, John.
• Bruton, John.
• Bruton, Richard.
• Burke, Liam.
• Carey, Donal.
• Cluskey, Frank.
• Collins, Edward.
• Connaughton, Paul.
• Coogan, Fintan.
• Cooney, Patrick Mark.
• Flaherty, Mary.
• Flanagan, Oliver J.
• Glenn, Alice.
• Griffin, Brendan.
• Harte, Patrick D.
• Hegarty, Paddy.
• Hussey, Gemma.
• Kavanagh, Liam.
• Keating, Michael.
• Kelly, John.
• Kenny, Enda.
• L'Estrange, Gerry.
• McCartin, Joe.
• McGahon, Brendan.
• McGinley, Dinny.
• McLoughlin, Frank.
• Manning, Maurice.
• Mitchell, Gay.
• Mitchell, Jim.
• Molony, David.
• Moynihan, Michael.
• Naughten, Liam.
• Cosgrave, Liam T.
• Cosgrave, Michael Joe.
• Coveney, Hugh.
• Creed, Donal.
• Crotty, Kieran.
• Crowley, Frank.
• D'Arcy, Michael.
• Deasy, Martin Austin.
• Desmond, Barry.
• Desmond, Eileen.
• Donnellan, John.
• Dowling, Dick.
• Doyle, Avril.
• Doyle, Joe.
• Durkan, Bernard J.
• Enright, Thomas W.
• Farrelly, John V.
• Fennell, Nuala.
• FitzGerald, Garret.
• Nealon, Ted.
• Noonan, Michael.
• (Limerick East).
• O'Brien, Fergus.
• O'Brien, Willie.
• O'Donnell, Tom.
• O'Keeffe, Jim.
• O'Leary, Michael.
• O'Sullivan, Toddy.
• O'Toole, Paddy.
• Owen, Nora.
• Pattison, Séamus.
• Prendergast, Frank.
• Quinn, Ruairí.
• Shatter, Alan.
• Skelly, Liam.
• Spring, Dick.
• Taylor, Mervyn.
• Taylor-Quinn, Madeline.
• Timmins, Godfrey.
• Treacy, Seán.
• Yates, Ivan.

Níl

• Ahern, Bertie.
• Ahern, Michael.
• Andrews, David.
• Andrews, Niall.
• Aylward, Liam.
• Barrett, Michael.
• Barrett, Sylvester.
• Brady, Gerard.
• Brady, Vincent.
• Brennan, Mattie.
• Brennan, Paudge.
• Brennan, Séamus.
• Briscoe, Ben.
• Browne, John.
• Burke, Raphael P.
• Byrne, Hugh.
• Byrne, Seán.
• Calleary, Seán.
• Colley, George.
• Conaghan, Hugh.
• Connolly, Ger.
• Cowen, Bernard.
• Daly, Brendan.
• De Rossa, Proinsias.
• Doherty, Seán.
• Fahey, Francis.
• Fahey, Jackie.
• Faulkner, Pádraig.
• Fitzgerald, Gene.
• Fitzgerald, Liam Joseph.
• Fitzsimons, Jim.
• Flynn, Pádraig.
• Foley, Denis.
• Gallagher, Denis.
• Gallagher, Pat Cope.
• Geoghegan-Quinn, Máire.
• Harney, Mary.
• Hilliard, Colm.
• Kitt, Michael.
• Lemass, Eileen.
• Lenihan, Brian.
• Leonard, Jimmy.
• Leyden, Terry.
• Lyons, Denis.
• McCarthy, Seán.
• McCreevy, Charlie.
• McEllistrim, Tom.
• Mac Giolla, Tomás.
• MacSharry, Ray.
• Molloy, Robert.
• Morley, P.J.
• Moynihan, Donal.
• Nolan, M.J.
• Noonan, Michael J.
• (Limerick West)
• O'Dea, William.
• O'Hanlon, Rory.
• O'Keeffe, Edmond.
• O'Kennedy, Michael.
• O'Leary, John.
• O'Malley, Desmond J.
• Ormonde, Donal.
• O'Rourke, Mary.
• Power, Paddy.
• Reynolds, Albert.
• Treacy, Noel.
• Tunney, Jim.
• Wallace, Dan.
• Walsh, Joe.
• Walsh, Seán.
• Woods, Michael.
• Wyse, Pearse.

Tellers: Tá, Deputies Barrett (Dún Laoghaire) and Taylor; Níl, Deputies B. Ahern and Briscoe.

Question declared carried.

Financial Resolution agreed to.

An Ceann Comhairle

May I appeal to Deputies out of respect to the Chair, not necessarily for the occupant of the Chair, that while the Ceann Comhairle is making announcements, such as the putting of the question or the result of a division, there should be silence. The time table requires me to put Resolutions Nos. 8 and 9 at 10.15 p.m., No. 10 at 10.40, Nos. 11 and 12 at 10.50, No. 13 at 11.40, No. 14 at 11.55, which will be just moved and the debate adjourned. The final item on today's Order Paper, the take notice motion, will be taken at 11.55 p.m.

Mr. B. Ahern

Might I say that those times are all "not later than"?

An Ceann Comhairle

That is correct. Financial Resolutions Nos. 8 and 9 are to be discussed together, but put separately.