Deputy Prendergast moved the adjournment of the debate yesterday.
Economic Situation: Statements (Resumed).
Is there some new arrangement for the debate today?
The speakers will be allowed 30 minutes.
On my way into the Chamber I was asked if I would facilitate the Minister for Health this morning. It was pointed out to me that a Member from his party was in possession and he was willing to give way to the Minister. I was told that the Minister would conclude by 11 o'clock but at this stage it would be ridiculous to ask him to conclude in that space of time. I have no objection to the Minister being allowed 20 minutes.
I should like to thank Deputy Ahern for agreeing to the arrangement. Deputy Prendergast contributed for ten minutes last night and he agreed that I should take the remaining 20 minutes. My observations this morning will be confined to three main points. The first point I should like to make about our role in Government, whatever perceptions there may be in other quarters about that role, is that we have one particular overriding perception, we were elected as a two-party Government — something which many people had difficulty getting to grips with in terms of two parties working together in Cabinet — on one major public political desire on the part of the Irish people. The electorate perceived that we could manage the general budget finances in an honest, efficient and open manner whereas the previous administration had manifestly failed to do so. That was probably the strongest single reaction I got from the electorate through the last two general elections. As far as the programmes for current expenditure were concerned the electorate felt that the Coalition Government could be trusted to a great degree to act in an honest manner in the national interest. As far as I am concerned in regard to current day-to-day programmes of expenditure and the capital expenditure programme of the Government I am satisfied, after spending one year in Government, that we acted properly. I am satisfied that no matter what difficulties we will face we will continue to act in that way. That is perhaps the single most important differing feature between the Opposition and the Government.
Another reason why the Labour Party decided to get involved in Government was because we were anxious to protect the weaker sections of our community. Thirdly, we wanted to endeavour during the Government's term of office to have implemented a planned strategy of economic and social development to deal with our major unemployment problem. I do not propose to analyse the first principle of the Government. There is little point in going back over the budget situation of the last administration in 1981 and 1982 because the evidence is there.
I do not believe there is an economist or political commentator who would not agree with me when I say that the economy was appallingly mismanaged, particularly in the middle of 1982. At that time the state of the nation's finances was in total chaos. There was quite deliberate fiddling — that is the only word one can use — of revenue and expenditure projections in early 1982 and that blew up into the face of the Fianna Fáil administration by July of that year. I can recall — and I am sure Deputy Brennan remembers also — the August weekend of 1982 when the whole thing fell apart and emergency decisions had to be taken by the Government. I do not propose to go back over that but I reject absolutely the appalling statement by Deputy Haughey, which he continues to repeat, that the strategy devised by our Government in January-February 1983 was a monetarist reaction. The fact of the matter is that Fianna Fáil in their panic stricken reaction had tried almost everything before the final solution of July 1982. They decided in The Way Forward to fight a general election on a current budget deficit of £750 million. If that strategy had been put into operation during 1983 the number of unemployed here would not have been 193,000 as it is now on the live register. I believe another 8,000 to 10,000 would have been added to that live register because of the deflationary impact of taking out another £200 million of current Government expenditure. That is the policy that was proposed by Fianna Fáil in the general election and which was jettisoned last week by Deputy Haughey when he reverted to another of his famous code words. I am afraid Deputy Haughey operates exclusively on what one can only call a code word type of politics. Currently he is using a phrase that sound very well, namely, “a prudent, cautious stimulation of the economy”. It is magnificent stuff, a quite masterful vocabulary, but on analysis it means absolutely nothing.
Far from being monetarist, in an effort to keep the economy intact and to turn it around from the appalling mismanagement of Fianna Fáil when they were in Government in 1982, this Government agreed that the budget deficit would not be £750 million but that it would be at least £869 million on current account. In mid-year in an effort to keep going a basic stimulation of the economy that amount was increased to more than £900 million. Probably it will work out between £940-£950 million of a current budget deficit at the end of 1983. At the end of 1983 there will have been a continuous and reasonable injection of current expenditure into the economy to maintain the situation and to ensure that employment will not escalate towards a figure of 260,000 or 280,000 which could easily have happened if Fianna Fáil were in power. I think unemployment would have been at those figures by mid-1984 if they were in office. That is not an idle observation or forecast but it is based on the then economic policy of Fianna Fáil.
The Tánaiste, and the Taoiseach in his address to his party's Ard-Fheis, have pointed out that the prospects of economic recovery are reasonably good and encouraging. The inflation rate has been falling. The Central Bank has reported that most likely it will be 11 per cent at the year-end but it is important to point out that the general underlying inflation rate is about 7½ per cent. That is what matters, not the calendar year rate. That is something we can welcome.
I must confess I am boggled by the observations of Deputy Haughey in relation to the inflation rate. I think he may be about to coin another phrase: in about two or three months time we may hear from him the phrase "self-reducing inflation rate". We have had self-financing subsidies from Deputy Reynolds and in the past week Deputy Haughey has talked of "self-buoyancy taxation cuts". Leaving aside the nonsense of the approach of the Opposition with regard to economic policy, we have a falling inflation rate which is encouraging, a substantial improvement in the balance of payments deficit, a real and measurable reduction in Exchequer borrowing in terms of the proportion of GNP and, provided we have prudent management with regard to development, we have the ultimate prospect of reasonable oil revenues in the years ahead. However, I would add a caveat in this regard, namely, provided Deputy Haughey does not get back into office. I believe if he had any prospect of getting back into office the potential yield oil revenues in the years ahead would be squandered overnight in a pell-mell rush for political power. This is why Fianna Fáil are in Opposition. Tragically, that party put the prospect of political power before the national interest. That is a grave charge but it has been proved correct in the past two or three years. It was something that was singularly lacking in that party in the years of Seán Lemass and Jack Lynch to a degree. Unfortunately some of Mr. Lynch's policies were hijacked. There is no doubt that the policy of Deputy Haughey has been one of blatant party political advantage over the national economy. This Government have resolutely withdrawn from that temptation, great as it has been from time to time.
The rate of inflation is still high. At the year-end it will be 11 per cent but the underlying rate is about 7½ per cent. It has moderated significantly from the figure of 17½ per cent recorded in 1982. There has been a marked improvement in the deficit of the current balance of payments and Exchequer borrowing has been reduced by about 3 per cent of GDP in 1983. These indications are reasonably good. According to the bulletin issued by the Central Bank which was circulated to Deputies, our foreign exchange reserves have reached an overall total of £1,914 million.
While the prospects for our economy are reasonably good, unfortunately our tax base is excessively narrow. I agree with the Minister for Finance in this regard and I share the views of the Tánaiste. No Government can run this country on a tax base that is confined to VAT, excluding all the sections of consumer goods that are zero-rated. We cannot run the country on the narrow base of 700,000 or 800,000 people paying PAYE or PRSI and on excise duties on drink and tobacco. There is a great need to broaden the tax base to bring in many areas including the black economy, many areas of property and of wealth accumulated by those who do not pay their full proportion of tax either in agriculture or in the area of the self-employed. The tax base must be broadened if the country is not to end up without sufficient revenue for day-to-day expenditure. Likewise, we may have to change our concepts of employment. There have been massive changes in the processes of production, technology and computerisation even in the most conventional industries. The whole concept of employment and unemployment, of what constitutes a social wage and of income for people coming out of school and going into employment has to be re-examined.
The Government are on target in terms of the management of the State finances. I do not necessarily share all the ideological views of Business and Finance but I share their view about the approach of the Opposition with regard to the economy. In their publication of 20 October they state, “The trouble with Mr. Haughey is that he has never taken his economics as seriously as he takes his politics”. That is a reasonable summing up of the situation. Looking at the Government benches one can see already the scenario for the European elections next year and for the next general election. When one thinks of Clondalkin Paper Mills, a maternity hospital in Carlow or maternity services in Bantry or Monaghan, expenditure on various aspects of capital works——
The broken promises for Castlebar.
—— and all the promises already made, I estimate now that in the last four months of Deputy Haughey and his party travelling around the country they have now a projected promised expenditure on current account alone of about £64 million and on the capital side of about £70 million. The Dutch auction has started already in terms of the next election. I believe the people dealt decisively and adamantly with that kind of politics in the last general election. The trouble with the Opposition is that they have tried about everything for the grave economic problems. It is starting all over again with the appalling ludicrous proposition of Deputy Haughey yesterday that we should now reduce excise duties on drink and tobacco. As Minister for Health I would not dare advocate that course of action particularly in relation to our having at the moment 45,000 people suffering from alcoholism and 75,000 families who are suffering from the effects of it. It ill behoves any opposition to suggest that kind of simplistic solution for complex economic problems.
I believe the Government are managing the current and capital programmes of expenditure in an honest way. We will face very controversial decisions in the months ahead relating to public expenditure and taxation. These decisions will impose great strain on the parties in Government and will present a great temptation to opportunism for the Opposition. If the Opposition succumb to that and slip back into their old culture I am afraid the people in the next election will be equally savage in their reaction to the Fianna Fáil Party who deserve better in terms of leadership and who have a greater capacity to be more constructive in the national interest than they have been to date.
Deputy Flynn. The Deputy has 30 minutes and each succeeding speaker today has 30 minutes with the proviso that a Government speaker will be called on to conclude at 4.30 p.m.
It must be a great disappointment to the general public, when they consider the way this debate has gone so far. Everybody expected that this debate would give the Government an opportunity to outline their strategies to deal with the many difficulties that confront our economy. It has not worked out that way so far. We have not had any constructive suggestions from either of the Government parties about how they would tackle those problems. It seems there is self-justification of Government activity in the past, which has resulted in the highest unemployment figure and the greatest loss of business the country has ever witnessed. Still the country waits in the hope that some day in the near future the Coalition will recognise that they are in Government.
I always felt that the responsibility of the Opposition was to outline Government failure as we see it, to pinpoint the deficiencies of the policies being enunciated by the Government, to indicate another way that would help to achieve the national desire, to secure a proper way of life for our people, to provide secure living standards for the people and to provide job creation situations and the opportunities necessary to deal with our young unemployed and restore national confidence. The Government have failed miserably on all fronts. If they were succeeding we would have no alternative but to support whatever philosophy they were producing to deal with all those problems. That is not the way it has been. The Leader of the Opposition yesterday laid to rest the idea that has been fairly successfully floated about by a pretty good publicity machine of the Government in saying that it was always Fianna Fáil's bad doing. Deputy Haughey yesterday gave the historical background to all this talk about borrowing, budget deficits and balance of payments and set the record straight.
We have to bear in mind that our foreign indebtedness has gone up since the Coalition Government came into power. The current budget deficit has not been tackled. It has been tackled in the way the Minister for Health wishes it to be tackled. The Fine Gael policy statement agreed in the joint Programme for Government will not be achieved. The Labour people never intended that to be permitted so they must be very pleased about that. The people are entitled to ask what was the reason for making it such a great plank in the joint Programme for Government if the Fine Gael people will not be able to deliver on that promise.
The current expenditure has not been reduced. That also pleases the Labour wing of the Government but it certainly leaves a big gap of credibility about the Fine Gael side. There has been very little reduction in inflation despite what the Minister for Health says. We are entitled to ask who is in Government at the moment because it appears to the public from the outpourings from this House and other places of mass hypnosis, which we had during the past week, that there are two Governments functioning at the moment. We have the Fine Gael people, who I suppose are entitled to fly a kite to test the electoral atmosphere to see if it is possible to do something, but they are not flying the kite to test the reaction outside. They are doing it to test the Labour reaction and Labour are responding as the Labour Government of the day.
It is not a question of how much the public can take but how much the Fine Gael side of the Government can get away with with Labour. Labour are putting them on notice in the immediate response to all these outpourings that this is not on and they will not tolerate this. That is a kind of self-justification of the Labour point of view to keep the diminishing number of their supporters happy, but it leaves the general public in total confusion as to what Government are running the country. Is it the Labour element of the Coalition or is it the Fine Gael element? These divisions in Government are now becoming a national scandal. We know that their basic policies are diametrically opposed but at least they could do the decent thing of keeping them to themselves, keeping them within the Cabinet room rather than testing the public with them every second weekend. Who speaks on behalf of the Government for the economic strategy that is to be followed for the foreseeable future? We had the Fine Gael Ard Fheis last weekend and they spent most of their time licking their Labour partners in Government, obviously trying to build up a situation where the Labour people cannot pull the plug on them in the near future. It is the price of Coalition but what do we find? We find the Minister for Finance telling the people that we are back on the financial rails, that all is well and that the Taoiseach is saying that the turn around has come about and we are going into a period of growth now. I put it to the Minister and the Government that if that is the case it took very little to get the matter back on the rails if it could be achieved in such a short time and achieved on Fianna Fáil figures. They are working on Estimates prepared by us and strategies outlined by Fianna Fáil less than a year ago and incorporated in our document The Way Forward. That is the strategy the Coalition have been following, according to themselves, for the past few months as far as the figures are concerned. Therefore, if matters are now all right, if the all-well syndrome is a fact of life for the Irish people, the credit must go to Fianna Fáil. The next set of figures will be the Coalition set and they will have to take full responsibility for the measures they outlined in those, but the opposite view is being trotted out in the House this week. Things are not as good as they were outlined last week to the general public at the Fine Gael Ard Fheis. We are to have further hikes in taxation.
The Labour Party are putting on record here that they will not tolerate any of these public cuts unless they are matched by a new wave of wealth taxation. I put it to the Labour people in Government: what wealth are they talking about? There is no wealth left in the country. It has been stripped by the activities of this Government over their past few terms in office. Do they realise the number of factory closures we have had in the past two periods of Coalition Government? Do they realise that a considerable number of industries and businesses in the commercial sense are not paying their VAT returns on time or making proper returns for their PAYE and PRSI? I presume these are the generators of wealth and if they are not able to pay their normal commitments to the State on a day-to-day basis, how in the name of all that is good and proper in equity can they be expected to yield the enormous amount of wealth tax which is to be demanded from the Irish people in next year's Finance Bill?
It is important that the people in Government realise that consumer spending is at an all-time low. There has been a huge drop in the sale of goods such as petrol and a whole range of products and this is the reason for the diminishing returns. The Irish people are no longer able to pay more. We have heard the Minister for the Environment, today backed up by his Minister for Health, another Labour man, say that they are setting out the terms by which they are going to stay in Government after next spring and it means further capital and wealth taxation in response to these cuts that they will have to oppose if they do not get their pound of flesh in response. These people should be put on notice that the Irish people know full well what is going on, that the Coalition deal of last year is not standing up and will have to be renegotiated. Unfortunately, the sufferers in all this are the Irish people and the unemployed who, you would imagine, would be protected by the pseudo-socialists who trot in and out of this House. The most usual platitude is, "We are most caring about how these people will get job opportunities in the future", but not a single symptom of economic strategy to deal with the unemployment crisis has been uttered from the Government benches since this economic debate started, and that is the one thing that the people of Ireland are at least entitled to expect from an economic debate when facing into a winter of 200,000 unemployed and the lowering of standards of living which every person in this country has had to suffer.
There must be an alternative structure. It is not for the Opposition to make all the running for the Government in these matters. I resent Government Ministers saying, "What would you do if you were in?" That is the Government's job. They were elected to rule. They had all the answers when they went to the electorate, but not a single promise was given by them in their joint programme for activity has been implemented, not a single target has been reached. We are entitled to ask if they have any policy to deal with our problems, and if not then Deputy Haughey and the Fianna Fáil Party, the rightful party for Government, are quite entitled to put forward alternatives to see if the Government even at this late date will take them under their umbrella and implement them. That was why the Leader of the Opposition on behalf of Fianna Fáil suggested that there was another way. If we have established beyond any shadow of doubt that the Government measures have failed, that they were putting forward no strategy of their own, then Fianna Fáil will take their rightful place in leading this country and put forward an alternative, even in Opposition. That is what the Leader of the Opposition was at yesterday. He said that there was need for the priming of the economic pump. It is a cliché, but we can say safely that if what the Minister for Finance says, backed up by his leader, is true, that we are back on the financial rails and that we should take full advantage of the growth potential available in the world starting now, is there not a need for the priming of the economic pump and is not that what is killing the Fine Gael side in Government, that they lashed themselves into that propaganda machine of talking about borrowings for so many years that they are now in the strait-jacket that the Irish people will see that they are lacking in credibility if they move away from it? They want to move away from it, and so do the Labour Party, and they are looking for a suitable vehicle to do it.
We will give it to them. We will state that there is need for priming that pump and we will support their view if they take the stand to do so and to accept that there is need for restructuring the tax rates on a number of selected products. The very fact that petrol sales are down 30 per cent in the last month compared with this time last year is a clear indication that the hardy annuals for tax revenue collection are beginning to fall down. That being the case, we presume that the obvious reaction of the Government will be that they will jack up the tax on these products so as to maintain the tax revenue from them. We do not see that as the way to provide a better living standard for the people. We say that there is room to look at some products with a view to restructuring the tax in that area. What steps will the Government take to stimulate the economy on any front?
An incident occurred this morning when it was necessary for one Deputy to leave the House on the question of tourism. While I might not have been at every single Cabinet meeting that was held while I was Aire na Gaeltachta and Minister for Trade, Commerce and Tourism—I may have missed two in the whole period and maybe it happened then—at no meeting that I attended did the Fianna Fáil Government take a decision to terminate OIE as a subsidiary of CIE. There is no heat on it here now so I can refer to it. I will say that recommendations and options were put forward and an option to sell them to private interests was put up on more than one occasion and it was never accepted by Fianna Fáil. I am stating the Fianna Fáil view now. I was Minister of State at the Department of Transport and it was my view then that not only should they have been maintained but they should have been restructured in the financial gearing of those companies so as to bring them into line with modern financial arrangements. The whole board should have been restructured. On the Tourist Traffic Bill last week while the Minister of State was here listening to me I stated that, and that is the Fianna Fáil view.
However, it was not to protect the hotels that the glib statement was put out yesterday that they were following the Fianna Fáil decision in the matter. It was to protect Deputy Michael Moynihan's seat in Kerry. Both he and the Minister for the Environment have agreed that the hotels are not to close; they will be kept open, and they are trying to convince Deputy John O'Leary, the Fianna Fáil Party and the Fine Gael Party that they are the people who wanted to close them but the Labour Party kept them open. Let the record show the truth. Fianna Fáil had a commitment to keeping them open. I am reiterating that commitment here now, not because it will be a bit of profligate strategy but because it is necessary in the national interest. It would be a death blow to tourism and the standards of hotel tourism in rural Ireland if these hotels were let go. They can be made profitable. I outlined here last week the reasons they have not been profitable over the last few years. I am glad that the Minister of State has obviously convinced his master, the Minister for the Environment, that they are going to have their way in this matter with the Government. I tell the Minister of State that he can challenge them and be sure of support from this side. How dare they put their hands on something that is in effect a national asset.
Tourism is an important aspect of our economy and the third biggest money earner in exports, running at £500 million last year. Bold initiatives are necessary and I shall continue to harp on that subject until the Government of the day give the tourist industry due regard in the order of things and in the expenditure of public finance. We must change some of the Government policies which have placed that industry at a considerable disadvantage over the years. We must recognise that it is an export industry working in a highly competitive market. All other export industries working in that market are actively supported economically to a very large extent, but not the tourist industry. Because of the foreign currency brought in here through the successful efforts of our tourist industry, resources should be ploughed into it. It is not getting fair play.
One area in which something could and should be done is that of VAT. We are out of line with the VAT rates which apply internationally and must see if we can accommodate a reduction down to the 10 per cent average in Europe. It can be positively proved that reducing VAT rates on various charges in hotels does not result in a loss. The increased rate of traffic flow will more than offset the difference.
Should we not consider reducing the price of petrol at the points of entry? That would not be a difficult administrative operation. It would bring back the biggest money spinner which this country has had over four decades—the motoring tourist. Could we not have tax-free shopping during the holiday period as against just at points of entry and exit. Could we not have the same system as in Sweden where on production of one's passport one gets a reduction of a certain portion of tax and VAT paid on goods purchased. This is done to stimulate growth in the industry and in the tourists purchasing power. Could we have a positive indication from the Minister that our plant will be protected and that improvement grants and renewal grants will be introduced in the immediate future? Too many hotels have had their categories reduced in the past 12 months because the plant is crumbling due to low profitability over the years. We must restore the standard of these hotels.
Business confidence in this country must be restored, venture capital and increased investment encouraged. This has all been said before and we could have expected at this stage when the Government are facing into another set of Estimates, that they would have outlined their strategy in these areas. Personal tax is too high, which has reduced the incentive to work throughout the economy. The disposable income of all wage earners has been reduced, as has the standard of living in the past nine months. The increased cost of wages and the consequences of that in manufacturing industry has brought that industry to its knees. If the truth were known, half of our industries are not paying their way on a day-to-day, month-to-month basis, in so far as their national commitments are concerned. We are out of line with our competitors on too many things which has resulted in the huge job losses in existing industry. We are out of line with inflation, and yet the Government say that they have done something positive in that regard. They have done nothing and the people are entitled to know what they propose doing. I am entitled to criticise, without the Government blaming Fianna Fáil.
The Coalition Government are destitute of any strategy to deal with our economic and unemployment problems and are returning to the same old tricks used in the past — and successfully, I agree. They blame Fianna Fáil for everything that has gone wrong in the economy and they blame Deputy Haughey. They will lose on both counts, because the estimates of the figures with which we shall have to live for the next couple of years are those of the Coalition Government. I do not know whether it is on the Fine Gael side, because of the cuts, or on the Labour side because of the wealth tax. But whatever little conglomeration can be put together in the next few weeks, we will have to live with that. It is no longer acceptable that Fianna Fáil be blamed for everything. I shall give the Government an electoral hint. That trick has fallen on deaf ears. They are now in Government. It might not have dawned on them that people are beginning to realise, to their detriment, that they are tricking them.
The level of personal tax here is so high that it is reducing the number of specialists and the executive staffs of our major companies. It is no longer possible to recruit these on the open management market. The international specialists say that Ireland is not a suitable place to live in because of tax. Our basic costs, together with personal taxation, have gone completely out of line. Our interest rates are wrong. Petrol, diesel, communications, electricity supply — the whole range of basic fundamental costs are out of line with our competitors and consequently we are finding it increasingly more difficult to sell on the international market. Not a single thing has been done by the Government to reduce these costs. In 1982 Irish costs rose 6 per cent further than those of our international competitors. All these things have been indentified before, but it appears that they have not penetrated the Coalition mind yet with the result that we have a complete shutdown of a large section of our manufacturing base. We are now down to bedrock in manufacturing and still the Government will not help out on the question of taxation, basic essentials and competitiveness.
Regarding VAT, we are entitled to ask is it intended in a couple of weeks' time to tell us that the 10 per cent, and the 20 per cent, which is now 35 per cent, will be raised again? Is that the only answer? All those indirect taxes and charges are putting up our costs inexorably. If we are to believe the publicity campaign outlining what we can expect, we are going to have further increases in all these areas. This Government have given no incentive for investment. Our productive base has been starved of that one thing which can create job opportunities. Our dividends are taxed more heavily than any other form of income. It is about time that the Labour people began to realise that. The Fine Gael people know it and it is time some of them told their people in Government that dividends are taxed out of all proportion. Capital gains are subject to a penal taxation code. Yet these are the areas which Labour say can be utilised to get the huge extra sums next year. That is not the way to encourage risk-taking investment and venture capital risks, which is the only way to produce economic growth and the jobs which we talk about so glibly here as being essential.
One part of the economy is certainly thriving, and that is the black economy. It has become virtually a way of life here to dodge the Government. One can give it any definition one likes. One can give it the International Monetary Fund's definition that it is the part of the GNP which, because of our reporting or under-reporting, is not measured by the official statistics. Call it what you like, but dodging the Government is the way of life of many here. All walks of life are organising themselves to circumvent the record-keeping system which allows the Government to monitor income and economic activity. An estimate of the black economy can be gauged from the statistics which are available, but are very sparse. It is suggested that it is about 7.5 per cent of GNP in Britain and it might be up to 10 per cent in France. I say that it is a minimum of 10 per cent in this country. It is well worth noting that the black economy has grown here by twice the rate of the regular economy over the past ten years. We give it attention occasionally only, because it does not suit the Government to talk about it. A symptom of that fundamental change of attitude is there for everybody to see. The black economy is acceptable and fashionable, and is no longer the disturbing factor it was some time ago. We can call it whatever we like: moonlighting, the informal economy, the black economy, or slush money. It is rampant at the moment and its implications for the economy are very disturbing.
There is a public disregard for the authority of the law in this area of activity. Tax evasion is not perceived as a criminal attitude. It has no social stigma. It is the thing to be in, and increasing numbers of people are getting into it. It has assumed the aura of respectability in the economic way of life, not only here but in other places. There has to be a reason for it. Cash transactions and the barter system are back in full swing in everyday Irish economic life.
The loss of revenue caused by the black economy can only be guessed at. I will leave that to the Minister for Finance. He is the best juggler of figures we know. It is disastrous if he is talking to us here but, when he is talking to the fine Gael Ard Fheis, everything is all right, and they are putting the economy back on the rails because Fianna Fáil left it in a desperate condition. The reasons for moonlighting and the black economy are quite simple. Instead of calling it moonlighting I would prefer to call it the twilight economy.
We have excessive taxation. The restrictions imposed by the Government make the visible economy unattractive to the persons working in it. They are major reasons for that flourishing black economy. It will be the darkness economy before very long. Inflation and unemployment play a large role in the success of that economy, but the motivators of the black economy are not being tackled by the Government. The reverse is the case. They are driving investment out of the country. They are driving away business people. They cannot recruit a decent international executive because of the personal tax situation. They cannot create any future foreign investment because the Tánaiste has forewarned investors that they will be further crucified if there is any wealth to be taken from them. They will get the same result from the proposed wealth tax next year as they got from the residential tax this year.
I will give the Government credit for one thing. Their public relations machine has worked well for them in blaming Fianna Fáil and Deputy Charlie Haughey for our present ills.
The Deputy has one minute left.
As a former Fianna Fáil Minister stated last week about something else, the chickens are coming home to roost. The Irish people are no longer prepared to say that Fianna Fáil are to blame for everything. The two parties are in Government now. We do not know whether a Labour Government or a Fine Gael Government are running the country because we hear conflicting statements every second week. Whoever is running it is making a very poor job of it, and that is the reason the black economy has reached its present heights. The Irish people have no faith in the Government's policies. They have destroyed the normal natural confidence of the Irish people. They have destroyed the hope of half of the population who look to them for a strategy to bring them out of their blues. If they have not got the strategy, we have the alternative policies. We are putting them forward and it is up to the Government to accept them.
Listening to the previous speaker expounding eloquently the proposition that the previous Fianna Fáil Government have no responsibility for our present situation would almost convince a bystander that he was speaking the truth. It would almost convince people on this side of the House that there was some segment of truth in what he was saying. Worst of all, he might convince himself that what he was saying was true. He latched on to quite a number of throwaway remarks, such as that anything positive in this Government's performance was a result of Fianna Fáil projections and Fianna Fáil figures, and anything distasteful or anything which was not happening according to plan could be attributed to the Government.
He said there is another way. If there was another way while he and his colleagues were in office, surely they would have found it. It is amazing that they did not have that foresight when they were in office. It would have saved the country a great deal of money if the other way could have been found three, four or five years ago. The economic policies pursued from 1977 to 1979 were totally different from the type of policies proposed in The Way Forward. It appears at this late stage that Fianna Fáil are returning to the policies of 1979; selective cuts in indirect taxation and priming the economic pump.
Our educated and perceptive population will no longer buy that kind of nonsense. It is a gross insult to young people to suggest that they would accept this sort of nonsense. We need realism. Some Members on the opposite side of the House went on public record some time ago suggesting that what we need is a dose of realism. It is a pity that did not percolate into the Opposition front benches. That would do more good for the people than any amount of rhetoric in this House.
Looking at the economy after a year of Coalition Government it can be said that everything is not as rosy as we would have liked it to be. Everything has not been successful. Nobody would expect that after a year in office the Government could have pulled the economy back into line and produced the dramatic results which seem to be so easily achieved from the point of view of the Opposition.
Did the Minister for Finance not tell the Fine Gael Árd Fheis last week that everything was all right?
We have the problem of unemployment, and the previous Government had the same problem. They proposed to solve that problem by borrowing vast sums of money abroad to pay for their type of economic policies which went awry. We are now meeting the results. There was a suggestion by the architect of that economic policy that full employment would be provided even if it were necessary for people to dig holes in the roads to provide employment. There are many holes in the roads now.
There is no money to repair them.
Whose is the voice in the wilderness?
Unemployment is undoubtedly the biggest problem facing us at the moment particularly from the point of view of young people, and the not so young such as people who have young families, people with teenagers going to secondary school or university, and people who entered into financial commitments such as mortgages four or five years ago. They expected the boom period to continue idefinitely. Unfortunately, their aspirations have not been realised. In fact, they have been let down miserably. Unfortunately, because of high interest rates, high inflation rates and the general recession, they find themselves in considerable difficulties.
I accept that it is the responsibility of any Government to follow policies which will not create too much hardship for them. We do not want a Government policy which creates further difficulties. We have seen enough of that in the past. The Government must be humane and take account of the needs of the people, regardless of the social and economic strata they represent. It goes without saying that the modern poor come from a somewhat different income group. They are the group who feel they are carrying a vast burden of taxation and a vast burden of responsibility, and are getting all the knocks in our modern society. They are the people who go out, have a reasonably good salary, which is heavily taxed, but they take all the risks. They do their best for themselves and their families and they have to pay for almost everything they get by way of health and educational services and so on. They feel they are carrying an unfair share of the burden of responsibility.
It must be recognised that the country is very heavily taxed both directly and indirectly. We should all try to find ways and means to ensure that that level of taxation does not go higher. If levels of taxation continue to rise over a long period and the levels of indirect taxes rise at the same time, that will put a very great strain on our economy. The Opposition are fully aware of that because under their careful guidance the levels of taxation rose dramatically.
I would like to deal very briefly with the prospects for our young people. We have a very large young population many of whom, unfortunately, have no work at present and have very little prospect of work. They would like to know how Government policy will affect their future. There are two options open to the Government. One was pursued by Fianna Fáil and the results are now patently obvious to all. There has to be another way, and that is being pursued by this Government. They are trying to get the country to pay its own way and to accept the responsibilities of Government. They are trying to get all the people to accept their responsibilities now as opposed to postponing difficult decisions for perhaps a future Government or for future generations. Those policies have been pursued, exhausted and they have failed. This Government accept every day that difficult decisions have to be made and reality has to be faced. There is no point in running away from these facts. We ran away from them for long enough and we are paying the price with each passing day.
We must be able to tell our young population — those who have work, those who hope to have work, and those who have little hope of work — that if they give us the support we require for a reasonable period, the tide will turn. Deputy Flynn spoke about "other ways".
Live horse and get grass, but where there is no grass how can one get it?
Fianna Fáil lived a lot and did not get any grass.
They gave the people hope.
Deputy Flynn mentioned divisions in Government and laboured the fact that, hopefully from his point of view, there were divisions in Government. That is wishful thinking, but I realise the Deputy has a vested interest in pursuing that line. He will be disappointed. The only thing I can say to him is that his sensitivity to divisions in Government is something to behold. There was a time when there were serious divisions in previous Governments, but amazingly little or no attention is being paid to them now, nor is attention being paid to the damage done by those divisions. I am not going to enumerate them because Deputies opposite know the difficulties that were created.
What is the Deputy talking about?
As a backbencher and from talking to my Labour colleagues I can tell Fianna Fáil that the Government parties want to stand together and work together for the betterment of the people, for an improvement in the economy and, perhaps, for the confusion of the Opposition.
Until you ditch them.
Much has been spoken in the last few days about which is the better line to pursue in the area of job creation. We must rely on the private sector. Fianna Fáil may not credit it, but we believe in the private sector. In times of economic difficulties the private sector is where the Government should go for help to take the economy out of the lurch. We should be able to utilise the resources of the private sector to create jobs, to sell on foreign markets and to improve our balance of payments. This Government have done a considerable amount along those lines because there has been a considerable and consistent increase in our export markets. This is generally accepted and was covered in the recently published Central Bank report.
There has been a remarkable reduction in the rate of inflation, which is the basis for setting the economy on a firm footing. If we had allowed inflation to continue we would have more problems of the type we inherited. Over the last few years the private sector were not able to do the job they could have done for a number of reasons. Deputy Flynn referred to the black economy. The black economy was helped along by Fianna Fáil.
We had the private sector trying to borrow money at exorbitant rates of interest and they were totally incapable of meeting repayments. There is no way industry or agriculture could survive while borrowing at rates in excess of 20 per cent and at the same time remain in business and make a profit without passing on their increased overheads to others, thus creating further inflation. Thankfully interest rates have been reduced. That is a realisation of part of this Government's policy. I would not accept this as a positive measure, but it will take a considerable time before the effects of those measures — the reduction in interest rates and the lowering of the inflation rate — percolate to the economy by way of job creation.
I asked the Government to lay particular emphasis when meeting industrialists, farmers, trade unionists and other interested parties in the course of the preparation of the Estimates, on the expectations that the private sector could, given certain circumstances, carry a considerable burden for creating extra jobs, improving the economy and giving our people what they most need at the moment, that is, hope for the future.
Government action to date has been constructive, consistent and, ultimately it will gain the respect of the people. No longer do they accept the old clichés, the throwaway remark and so on. The people are very discerning. They expect realism and they are getting it. In turn, the Government will need the support, acknowledgment, recognition and help of the people on behalf of whom they are acting in order to carry through their programme. Hopefully we will get that kind of realism from the opposite side of the House.
I mentioned the importance of opposition. It is extremely important that the Opposition, in the current economic climate, be responsible at all times, that they would not run away, contending that there are other, easier ways, contending that were they in power they would pursue a different line ultimately leading us to the land flowing with milk and honey. The people no longer believe that kind of nonsense and I hope the Opposition will not pursue that line.
A number of things could be considered which might have the effect of improving our unemployment situation. I might refer here to possible further investment in the food processing industry, a matter which has been covered already by a number of other speakers. There is further scope in the beef and dairying industry and in food processing generally. In the processing of vegetables, and so on, there is also considerable scope. Further attention should be given to import substitution. There remain countless items required daily by business and industry that are imported at present. There is no reason why very many of these could not be manufactured at home. In this regard I compliment the Government and the IDA on their policy in relation to small industries. We should utilise the very valuable resource we have, that of a young, intelligent, highly-educated population coming on to the job market, leading such young people, not into jobs in the public service — which would further increase taxation, thereby imposing an additional burden on our economy — but rather encouraging them to set up their own businesses, providing for themselves the standard of living they have a right to expect. We should pursue that area more aggressively.
It is soul destroying for young people leaving school to find themselves visiting the local labour exchange over a long period. They may well then find that they have little purpose in life. The danger there is that their confidence will falter as a result of which the country will be the poorer. There is need to pursue the small business sector, giving greater encouragement there so that they might be enabled to fend for themselves. That should be the motto, the catch-cry of Government today, that they should help people to fend for themselves.
I think it was the Tánaiste who mentioned yesterday the prospect of early retirement. That may be another way of improving job opportunities for younger people; it does not necessarily create more jobs. It is wrong that people who have reached retirement age in any respect of public service should continue in employment when there are so many young people seeking jobs.
Some speakers on the opposite side of the House mentioned the level of taxation in relation to industry, that VAT at the point of entry was hardly an incentive from the point of view of the manufacturing industry, particularly for those involved in the export trade. It was one of the most backward steps ever taken by any Government here and the sooner this Government abolish it the better.
I might mention another matter which can be regarded as constructive when compared with what happened heretofore. Despite all the criticism, there has been a moderate round of wage increases generally, particularly in relation to the public service. When one compares that round with the kind of wage increases rampant a few years ago—some of which were granted around election time — and when one considers the careful programme now being pursued in that area with that former period, one recognises the value of the consistently constructive policy being pursued by this Government.
In regard to business and industry, I contend that the financial institutions have a role to play. In the domestic area it can be contended that they created some of the problems obtaining amongst domestic borrowers. Very few lending institutions told people a few years ago that things might not continue as they appeared at that time, that perhaps there might be difficulties ahead. Nobody told prospective borrowers that at the time. I suppose there was good reason for not telling them; interest rates were going up and up. From the point of view of lending it was good policy to lend money at those rates given the then economic climate. But unfortunately it must all be repaid. I would ask those financial institutions to consider the impact of extracting all of that borrowed money at one time. There are many businesses at present in a rather shaky financial position. If the financial institutions with whom they deal do not have regard to the effects of drawing in all of the money they loaned, if they do not have regard to the ill effects of that type of policy, then we shall see even more redundancies. I appeal to those financial institutions to accept their share, role and responsibilities in that regard; in short, give their borrowers a break.
With regard to the prospects for the future as I see them — I suppose I regard myself as a relatively young person — if this Government can pursue their current policies over a reasonable length of time, if they can get the full support of our people with the consistent, constructive criticism of the Opposition, then our economy will turn around, which will be to the credit of the Government and of ultimate benefit to our entire population.
We are now more than half-way through this debate on the current economic situation. It is taking place against a scene of 200,000 unemployed, in a situation in which the prospects for young people with regard to jobs in the future must be examined, against a scene of 50 per cent of our population in the Dublin region being under 21 years of age. It is being debated also against the scene of our industry generally and individuals being taxed out of existence, against a scene of no hope for our school leavers, with many of our people who until recently had been thought to be in secure employment now finding themselves unemployed. There is the scene also of householders who bought homes, took on mortgages now finding themselves being asked by building societies to place their houses on the market when there is no market for them.
Half way through this debate it would be fair to ask what we have achieved by it. This has been a time-limited debate following the usual pattern. What will be the general public's perception of it? From the Government side we have had the slogan, in effect; "We are right, we are on the right path". On this side we have been saying that everything the Government are doing is wrong. Is that what the people elected the Government and the Opposition to do at this period of national crisis? Surely the people are looking for something more from us, their representatives.
There was one distinguishing feature about this debate. It was the speech of the Minister for Finance who had the audacity to come in here and say that there is no alternative to what the Government are doing. As a personality, I regard the Minister for Finance as a decent man and I do not want to cast aspersions on him as an individual, but to say the least of it, it was presumptuous of him to say that there is no alternative to his policy. When the Taoiseach appoints a Government and when the President gives the Ministers their seals of office, our Constitution imposes obligations and grants rights to the individual Minister but nowhere in the Constitution is there a provision that confers Papal infallability on individual Ministers.
Therefore, it is sad from the point of view of the national interest that at a time when our economy is falling down around his ears, the Minister for Finance tells us there is no alternative to the policies he is following and that no suggestion from this side will be listened to — that he will plough on regardless, even though his recipe is one for disaster. His recipe is to get Government finances in order. As far as he is concerned that is an end in itself.
I suggest to him and the Government that getting Government finances in order should not be the end but the means to the end, the means to give hope to our young people, to industry, to those engaged in education, to the nation as a whole. But this Government have been following a path of financial rectitude without any thought for the consequences of that path for the people.
In the course of following that policy we have had a series of disincentives, tax disincentives to individual effort, to investment in the economy generally, to the construction industry, to the property market thought property taxation. The Government believe that their policy should be geared to proceed in that direction.
What we should be doing is trying to devise policies which will give greater hope to our people. We need a general national philosophy like that which we had in the thirties under de Valera. He said that developing our home industry behind tariff barriers was the proper policy then, and he was successful. He also went about developing our agriculture although our markets were limited because of the British cheap food policy. As a nation we were successful in developing our industry behind tariff barriers and that policy brought us successfully through the forties and into the fifties.
Then we had Seán Lemass, who said we should be able to lift ourselves up by our own efforts in a free trade economy. We had the Anglo-Irish Free Trade Area Agreement, and then came entry to the EEC. In such free trading conditions some industries which had not adapted to such conditions went to the wall, but since our entry to Europe many industries which took up the challenge offered by Seán Lemass have proved successful, as can be seen from their export performances.
Now we need something that will lead us through the eighties and into the nineties, and it is lack of such proposals that is featured in this debate. It is not sufficient for the Government to say that they are right and that we are wrong on this side, or for us to say the Government are wrong and that we are right. Our people should be offered more. We should be striving for a growth philosophy. We should be prepared to say what is the role of the private sector in our future economic policies. The Government should be striving to build a climate for growth, for general investment, rather than higher capital taxation and a high level of PRSI. This policy has given us only a penal tax system without incentives.
As a nation, where are we in the mid-eighties? We are now in Europe and that should not present difficulties for a nation of our size, with all our national resources, our ability to grow the best grass in Europe, our greatest national asset. We have the ability to produce the best cattle in Europe but what are we doing about it? We are producing them and exporting them on the hoof. Does the processing of our agricultural products have any part to play in our philosophy? Where are the Government policies that will encourage research and development in that industry? Some years ago when I was Minister of State at the Department of Industry and Commerce a magazine ran a competition to find the ten best Irish food products newly on the market. Through the Irish Goods Council we had to search around and almost rig the situation in order to put Bailey's Irish Cream on the list of new Irish products. No research and development was being done in the food processing area. We have the best grass in Europe and we are falling down as a nation if we do not take advantage of our God-given assets.
Many areas of our seas are teeming with fish, yet we have no national policy for our fishing and fish processing industries. We have the ludicrous situation in Europe where the fishing quotas for 1983 have still not been decided, although it is now October. We have an obligation to those who will come after us to prepare and develop policies for the expansion of our fishing industry and the encouragement of research and development.
At a time when 200,000 people are unemployed, what are we doing to develop our infrastructure? We should be investing in programmes for the development of roads, sanitary services and communications so that industry will be able to expand when the world economic climate allows it. We have been talking in recent years about stop-gap policies, throwing money at redundant industries trying to keep them open rather than standing back and looking at where we are going as a nation. We must look for the opportunities that will occur in the future. Such opportunities will depend on our agricultural and fishing industries, as well as on industries which have a modern technological base. We also need a proper import substitution programme, particularly in the construction area.
Our hopes for our young people must lie in the services area. We cannot comtemplate an expansion of the clothing and shoe industries when third world countries such as Korea are producing and selling these products so cheaply in Europe. We must concentrate instead on the services industries, whether in the public or private sectors. We should attempt to become a banking centre and policy should be geared towards this objective. We should also try to make this country a centre of the insurance and reinsurance industry. It is in such areas that employment opportunities for our young people will lie. In the Dublin region 50 per cent of the population are under 21 years of age. We were not elected to score cheap party political points but to plan a future for such people. I would ask the Government to consider that policies should be incentive orientated in an effort to expand the national cake rather than directed towards cutting up the existing cake.
This country has great natural assets and we should do more to encourage the expansion of the tourist industry. There is an attitude among many of our people that a job in, say, an hotel is menial or bordering on the dirty. That is not the case. We should be proud of the work we do, no matter what the task is. A person should do a job to the best of his or her ability.
We must look at the role of the public sector and at public services. It has become a catch-cry recently that we should reduce the size of the public sector. A recent CII budget submission to the Government called for such a reduction as if it were the answer to all our ills. I question that. Could the public service not become another engine for growth in the economy? Why is it automatically presumed that every public servant is a drain on our economy? I take the view that many of our public servants are adding to the economy and helping to produce the national wealth.
Some of our semi-State bodies have been disgracefully inefficient but many of them have been successful and merely need a new philosophy to make them even more successful. I believe that the chiefs and the heads of Departments in semi-State sectors should not be in permanent positions. They should be on a five-to six-year contract, that they give of their best during those years and their contract should then come up for renewal. At present there is no incentive to give of their best.
We should have a public register of all State assets. We have a disgraceful under-utilisation of many of the State's assets. CIE have large, unused yards in prime sites throughout our cities; the Army have barracks which are no longer used, or totally under-used, in prime city centre sites throughout the country; local authorities have property which is either under-used or not used at all in prime city centre sites also. I should like to see a Bill which would insist that the State and semi-State sectors would prepare a register of their assets, that it would be available for inspection by the public and that the assets would be eligible for purchase by interested people in the private sector who are prepared to utilise our national assets.
I should like to see a situation where we have greater investment by our pension funds. Our climate for investment should be such that our pension funds should be able to invest in the country. I should like to see the question of a bond market in local authorities examined to see what the potential for that market is. These are the sort of things I should like to see in the future rather than just standing up and bashing the Government or the Government blaming the Opposition for their supposed sins of the past. That is a sterile debate but I am afraid that that is what we have had. I should like to see a philosophy turned not just on efficiency but on effectiveness. The Government seem to think that if they do things right that is efficiency. I should like to hear somebody asking what the right things are and let us do them right. That would be effective Government and I should like to see that. Let us decide where our priorities are and where we are going.
Let us do the right thing by our children in the area of education. Why should this generation of children at the ages of 15, 16, 17 or 18 have to suffer for the rest of their lives on the basis of cuts that the Government are now undertaking? Perhaps these cuts will get the books in order — which is praiseworthy — but it should not be the only factor. If those children are deprived of educational opportunities at this stage, how are they going to make up for that loss for the rest of their lives? Is that the type of mentality leading the Government? If so, it is wrong.
We have a responsibility to this and future generations to decide where we are going as a people. That is what we should be thinking and talking about at this stage. As it is we are failing them and a sterile debate will not help them either. Please let us stand back from the day-to-day politicking and decide on a national philosophy for the remainder of the eighties and the nineties.
I am delighted to have an opportunity to speak in this debate. I do not want to get involved in any political party hackery and I want to make my contribution as objective as I possibly can. However, it is not possible to do that without setting some of the background.
Many of the problems we faced in recent years were brought upon us because of the international oil crisis but we should have been in a position, given the structure and orientation of the country, to deal with the oil crisis and to weather it better than we did. We were not in that position mainly because of the borrowing incurred between 1977 and 1981 when we borrowed £5,000 million more than we had borrowed in the previous 25 years, thereby doubling the national debt. It was borrowing which was made for day-to-day purposes and which we are now funding by almost all the money we collect from income tax.
There is an essential difference between borrowing for investment purposes where there is a return, where that return funds the borrowing and helps the growth of the economy and encourages employment, and the alternative type of borrowing for day-to-day purposes. It is on that point that there is divergence between the Government and the Opposition. There cannot be continuous borrowing for day to day purposes because there is no source for funding that borrowing. The day of reckoning must come at some state. It has arrived for what was done between 1977 and 1981 and that is part of our problem.
The third part of the background to our problem is the removal of revenue sources. We borrowed huge sums of money and abolished all sorts of revenue sources but we found ourselves with a growing youth population. We were transferring enormous sums of money, almost every penny collected in income tax, out of the country at a time when we needed to retain funds here to provide for the fastest growing youth population in Western Europe. That is the background to our problem. The plan to deal with that problem is centred on the advice of the Central Bank which is to eliminate the current budget deficit over a fixed period. The Central Bank described this as the fulcrum of a plan for economic recovery. We have started down the road towards the elimination, over a fixed period and on a phased and planned basis, of the current budget deficit, the Government's day-to-day overdraft.
The Central Bank were wise in their advice and objective in their assessment of the problem we face but as politicians we have to examine carefully all the advice we get. We must use the advice we consider to be in the best public interest and reject what we consider not to be in the public interest. At some stage in the not too distant future we will have to question closely the elimination of the current budget deficit in the manner planned over a four- to five-year period as proposed by the Central Bank. It may be possible when we have that deficit down to a reasonable figure, when the international bankers who advance us the money we need to continue to borrow for investment purposes and to survive see that we have our finances under control, to look at a further phased reduction of the deficit rather than its elimination entirely over a fixed period. Certainly, that cannot be done this year because we must get our finances under control if we are to continue to have credibility internationally and access to the funds we need for investment purposes. However, at some future date we will have to have another look at the question of the total elimination over a short period of the deficit. We will have to be satisfied that this fulcrum of the plan has not moved its centre of gravity.
I should now like to deal with the question of unemployment, one of the biggest problems we will have for some considerable time. The way we look at employment, the question of the 40-hour working week—I believe we had a 42½ hour working week when I started out—the whole business of people clocking in at 8 a.m. and out at 5 p.m. signing on at 9 and off at 5 p.m. and the whole question of how we occupy our population is something the Government will have to direct their attention to in the not too distant future. We will have to ensure we have leisure time facilities and that our people are involved in their communities outside this compulsive work ethic. Like it or not, if there is an upturn in the world economy in the long term, it will not solve our unemployment problem and we will have to deal in some way with a better share out of the employment we have.
With regard to the wisdom of and commitment to solving the unemployment problem, I wonder how well our public institutions serve our people. The question of whether or not a company goes to the wall often rests on whether the rescue service, An Fóir Teoranta, decide that the company meet the four or five criteria they have set down in their restricted terms of reference. Sometimes—I have a company in mind—a loan of £100,000 may save 120 jobs in a factory with a full order book and where employers are prepared to back up their investment by giving securities not involving the company. Instead of letting such workers join the dole queue costing the State money in redundancy, pay-related and unemployment benefits an effort should be made to save such firms. It would not take long to pay out £100,000 in the event of such factories closing. The IDA have different criteria. It is time that a member of the Government was given power to override those authorities, if necessary if, in his view, on a profit and loss basis the balance sheet of Ireland Incorporated would be better off by keeping such people at work.
There are potentially viable companies which would cost the State less to keep them going but which are being let go to the wall because certain bureaucratic criteria are not being met. We have the power to cut through that bureaucracy and red tape. It is time we asked the Government to appoint a member to take powers to deal with employment and, if necessary, to give that person emergency powers to override the power delegated to certain authorities. That will not lead to a dramatic improvement in the employment situation but I know of a number of small factories employing 100 or more people where it would not cost the State much money to permit them to continue rather than wind them up.
We are always talking about the big numbers who are unemployed and I accept that that is a serious problem but we must remember that of the 1.283 million people in our workforce in 1982 1.146 million were employed. In other words, 89 per cent of the workforce are employed. It is no great consolation to those who are unemployed to know that 89 per cent of the work force are employed but if we do not get our house in order we will be lucky to keep that number of people at work let alone make a dent in the unemployment figures. Employment has to be the central concern in any economic plan. I do not believe everything possible is being done to ensure that the maximum opportunities are given to keep people at work. I do not believe that the cost effectiveness of the Government's expenditure on unemployment compared to what they might benefit by having people at work has been done properly. That needs to be looked at urgently.
I should now like to deal with the public sector, public service wastefulness and the numbers employed in that sector. There is a certain amount of wastefulness in the public service and we cannot blame individuals unduly for this. It is the nature of the public service. People will be more careful with their own property than they will be with somebody else's property, particularly if they are being supervised by a person who does not own the property. We have a situation that has built up over the years in regard to budget allocations made to certain sections of State bodies. Towards the end of the year, if it is found that there is a plus balance they will spend like hell or otherwise they will not get the same allocation the following year. It is time we went about the public service in a more business like and open way. It is time we told those people that if they save on the allocation given to them we will give them some kind of incentive. This could be organised within sections of the Public Service and I am convinced there would be quite considerable balances returned in credit at the end of the year. In that way the annual public expenditure requirement could be identified and determined.
There are approximately 300,000 people employed in the entire public service but no Government Department can give the precise figure. Nobody knows at any given time the precise numbers involved, taking account of staff in semi-State companies and the commercial and non-commercial bodies. Worse still, nobody knows at any given time the amount of pay involved. We know there are 66,000 people employed in the Civil Service and that the pensions and pay bill for 1982 for them was 31.7 per cent of current expenditure. However, we do not know how much the other 234,000 are costing the State. If we base the rate on the figures available they cost in the region of £3,000 million or £10,000 per job.
The Minister, the Ceann Comhairle and I are in the public service. I do not deny anyone a proper rate of pay but we have to remember that the public service pay alone takes up 31.7 per cent of current expenditure. This means that one-third of all current expenditure is committed before we even consider the rest of the pay bills. The public service pay bill is central to the whole question of Government employment. For instance, we need not continue the policy of only replacing one in three of the people who retire from the public service if there were more restraint in the pay bill. We should try to keep some of the people in the public service at work on more fruitful enterprises: for instance, the environment needs considerable attention. If we spread out the bill more evenly it would not mean an enormous restriction in regard to increases but it would mean moderation. We cannot ignore the fact that we are spending up to one-third of current expenditure each year on this bill. This creates problems in the public service because of the numbers who retire early and who are not replaced. It restricts the other funds available for investment or for assistance to people who are unemployed outside the public service. The public service pay bill has to be looked at in order to ensure that the maximum numbers benefit. We must make sure we are not just propping a select, elite few who remain in their well-paid posts. We cannot forget that there are many people unemployed.
I do not want this to be seen as knocking the public service or the trade unions. If we had not trade unions we would not have obtained benefits and rights and democratic developments in the past 60 years. However, the trade unions, and particularly those in the public service, are very colourful in their condemnation of Ministers and they are quick to use the most colourful language when talking of Ministers. I recall a recent savage attack on the Minister for the Public Service by a public service trade union official. They are very good at defending their corner but it is time they were asked to defend the positions they take. It is my belief that trade unions have got to the stage where they are contributing to unemployment although I am sure it is not intentional on their part. We have to tell them we have a joint objective to maximise employment and that will need magnanimous action on the part of the Government and the trade unions. I do not believe there is this absolute commitment to pulling out all the stops on the part of Governments and trade unions. To a certain extent, the attitude adopted is that we wait until we get to crisis point. That is not satisfactory. We cannot forget that people have to queue up each week at a hatch to collect a few miserable pounds and they must be helped. The objective of maximum employment must be superior to all objectives, whether it be balancing the books or any other matter.
For the future we will have a well-educated and well-fed population but it appears to me we will become more "Asian" in our cultural development from the next decade onwards. People will not have available to them the same kind of employment potential that has existed up to now. We will have to plan to provide for a well-educated and well-fed population, who will not have the benefit of the same growth in consumer goods that we have been used to in the past and who will have a considerable amount of leisure time. Government should not be just about figures and statistics. Our long-term and short-term objective has to be concerned with the general well-being of the community.
In 1982 there were 131 industrial disputes and 434,000 man-days were lost. This compares with 182 disputes in 1973 but only 207,000 man-days were lost. I cannot accept that anyone can have authority without responsibility or responsibility without authority. There seems to be a breakdown in good management and good industrial relations throughout the industrial and commercial community. It is totally outrageous that, in the economic circumstances of the moment, we have 434,000 man-days lost in 1982, more than twice the number lost a decade earlier although there were more disputes a decade earlier. That sort of thing cannot continue. I spoke about the need for maximising the trade union effort. What about the management effort? The only thing we hear from management bodies and employer bodies from time to time is the need for wage restraint and for trade unions to be curtailed. It seems to me that management in industry are not taking their role seriously and are not helping to reduce the crisis of man-days lost.
I would like to speak about hope for the future and economic recovery. I believe there is great hope for the future and that recovery is on the way but that recovery will not bring with it the type of employment creation we have been used to up to this. In the May to July quarter of this year in America the rate of growth was such that, if it were annualised, there would be an annual growth rate of 10 per cent. That is not achievable. But it is realistic to expect that there will be a 3 to 4 per cent growth rate in the United States next year. Even if we had a 1 per cent or 2 per cent growth rate next year, it would be phenomenal for the economy. Our economy has, traditionally reacted well to American growth rate. The European growth is a bit sluggish, but Germany has done better than forecast. If the European scene, in particular the Irish scene, can benefit from the United States growth, we can realistically expect that real signs of economic recovery are on the way. That brings great hope. We should look forward and say that there is a good potential coming our way, which we feel will benefit us during 1984.
In the period 1971 to 1981 there was a growth of 21.6 per thousand of the population, which is comparable to the period at the begining of the century. Our population is growing rapidly, whereas there is a decline in most other countries. The growth rate in Belgium is something like one-third of that. At the same time, the death rate has been declining to 10.4 per thousand of the population compared to something like 17 per thousand at the beginning of the century. At the same time the net migration figure, which was something like -13.4 per thousand of the population in 1951, is now +3.2. We have from all sides — birth, death and net migration — a growing population which presents a great challenge for us. We should not always be looking at it as a millstone around our necks. It is a challenge and brings with it a certain amount of enterprise, commitment and urgency. It brings very positive features that we should be reacting well to and planning for. If the economic recovery comes next year we must be prepared to use it to benefit our peculiarly structured population. It is peculiarly structured in comparison with any other country in Europe, but yet it is positively structured. We should use that opportunity to get the country back to where we would like it to be if all the factors were within our grasp.
With regard to accounting within the public service, I welcome the pilot study, Comprehensive Public Expenditure Programme, which affords us an opportunity to focus on the excessive growth of public expenditure in recent years and also to consider the extent to which inadequacies in budgetary procedures can be monitored. I do not believe that management accounts are being used to their full extent within the public service. It is time we stopped looking at the public service as something other than an enterprise which has to meet certain financial constraints the same as the market places constraints on private enterprise outside the public service. It is time we got more away from the financial accounts which we are used to receiving and more involved in management accounts and developments such as the Comprehensive Public Expenditure Programme. If that type of development is to take place it will be beneficial to us, to the public service and the public generally in eliminating Public Service wastage.
"Job creation is more important to us than to any other country in Europe. This conclusion is further underlined by the level of unemployment which we are now experiencing. This conclusion must underline and inspire all our basic decisions about economic and social policy." I have chosen to begin my statement with those words from the address of the Minister for Finance at the Fine Gael Ard Fheis. They might well be the words I would address to a Fianna Fáil Ard Fheis, but this statement, and other statements from the Taoiseach and members of the Government last weekend, demonstrate that the stark reality of growing unemployment is now even accepted by them as a major crisis, affecting not only our economy but the very stability of our society. The Taoiseach at the weekend acknowledged the obligation "of all those of us who have political responsibility to propose solutions to this problem". It is in that spirit that I approach this debate.
I am forced to assert that in their contributions so far to this debate the Government have not put forward a single concrete proposal to generate employment, much less — this is perhaps even more important — a broad economic philosophy for developing and activating the immense personal and physical resources of the nation. The Government are suffering from a paralysis of inertia. This is best exemplified in the extraordinary suggestion from the Minister for the Environment in his contribution yesterday that they are enlisting the support of independent expertise to set out the options and decisions that are open to us. The people did not elect independent expertise to govern this country, and it is a measure of the disastrous failure of the Government that they are now abrogating responsibility and living in the forlorn hope that some time next year someone else will do the job for them. Almost twelve months after coming into office the Government have no broad direction of policy, no clear, specific indication in any sector, no plan for agriculture which was already there when they came into office, but merely pious platitudes, analyses and appeals — which were repeated in the course of this debate — which point no way forward to discharge Government responsibility but merely continue to indicate the difficulties — which are obvious — facing this Government or any Government now.
This debate comes at an important time for this House. We are all aware that the Government decisions on public expenditure are concluding — if there is to be any conclusion in a short period — round about this time. We await that outcome with bated breath, but the least the House and the country are entitled to expect in this debate is a broad outline of the Government's priorities in public expenditure, because it is a question of using public expenditure to stimulate priority areas. We were entitled to a broad outline of their priorities. It is a matter almost of public record now from the much-publicised leak of the Government's approach that they have adopted certain criteria which I will deal with in a moment. The Leader of the Opposition, Deputy Haughey, yesterday outlined in detail the manifest failures of the Government to achieve even their own stated aids in fiscal policy at the cost of enormous human suffering and deprivation. I will not repeat those obvious failures. They outline the precise measures which might be taken to arrest the decline in the economy. In the same spirit I propose to point the way forward at this stage.
In the first instance, the Government must turn away from their announced intention of a 6 per cent reduction across the board in current expenditure and freezing to this year's level the capital programme which, as we recall, was already decimated with disastrous consequences to employment in the production sectors of our economy. Many of those who were engaged in enterpreneurial activity would tell you that the biggest single support the Government could give them would be to ensure that we had an efficient telecommunications system. They will tell you that the second problem they face is that of added transport costs because of our weak road infrastructure. Nonetheless, despite those obvious disadvantages because of the all too evident weak infrastructure, the Government decimated the programme already last year, and this year apparently propose to freeze it to last year's level. That is not management. That is merely an accounting decision which could be done better by the Secretary of the Department of Finance and his officials, but they are not elected to Government and theirs is not the responsibility to manage the economy. That is the fundamental role of Government.
In this context economic planning and development are an essential role of the Department of Finance. In the last 12 months we have heard nothing from the Minister to indicate that that element in the Department has any significant role to discharge now. They have concentrated only on revenue raising and public expenditure cutbacks across the board which the Chairman of the Revenue Commissioners and the Secretary of the Department of Finance could themselves do more effectively if it were to be done in that form. Surely the Government must realise that public expenditure can and must be applied selectively and that wasteful expenditure must be not only controlled but eliminated and that wealth creation areas must be supported and strengthened. I repeat what I have said here many times to the Minister for Finance, and it is on the record, that he will not find me as spokesman opposing control of public expenditure. I have indicated to him that if at any one time he can point to where I am inconsistent in this, he is welcome to do so. We too recognise that it must be controlled and applied in a positive way but not in an unselective way as the Government apparently are doing at this stage.
The first and most obvious area of potential resource development is our own people, particularly our young people. Countries such as Japan and Switzerland have few or no natural resources, yet they have sustained a level of wealth and economic wellbeing which is based on one simple but vital component, the added value of the skills and expertise of their own people. We are now in a new era of techniculture — it may have been agriculture previously and I am not suggesting that agriculture is no longer of vital importance; it is — where computer software and information technology are the order of the day and the service industries which are part of the backbone in the US, Japan and Switzerland, are not only adjusting to this reality but are creating the way forward. If we do not put ourselves in the van of this development, then by reacting to what is happening elsewhere we will always be at a disadvantage. For that reason instead of cutting back on expenditure in education indiscriminately, as in this year, the Government should as a matter of urgency launch a programme for investment in technical and technological education to gear and equip our young people not just to avail of jobs which may come on stream — this is a weakness in the thinking of many of us — but, because of the level of technological expertise, capacity and confidence, to create employment through the application of their high technology qualifications. Our spokesman on education Deputy Mary O'Rourke, will deal with this in greater detail.
I want to make two points. First, impact must be on the areas of technological development and education, and any cutbacks will be disastrous, as we have seen this year. Secondly, marketing will be a vital component in everything we try to achieve to promote our industrial exports. If our educational programme is not geared to equipping our young people to be familiar with the market place, its language, its habits and its environment, our marketing will continue to be a weak arm of our industrial development policy. That flies in the face of the short-sighted decisions taken last year by the Minister for Finance in respect of education which our spokesman on education, Mary O'Rourke, will deal with at greater length.
She should be referred to as Deputy O'Rourke.
Deputy O'Rourke, I am sorry. I do not think she will mind it very much.
The record minds.
The Government in their statement on actions and expenditure allocations place more emphasis on short-term work experience on training programmes than on educating and training for permanent employment. The Youth Employment Agency this year — we wait with bated breath for what is to happen next year — for their various activities enjoy an 88 per cent increase over last year. I have asked outside the House, and will continue to ask until we get value for money to generate employment for our young, how much of the growing and substantial allocations for the Department of Labour — for instance, an increase of 60 per cent over last year — is spent on administration and how much is reaching the target of equipping the young through formal, strong, technological qualifications to have the guarantee of permanent rather than short-term employment? I use this debate to give the Government formal notice that we will be particularly critical of any wasteful Government expenditure in this area and will judge their effectiveness by one simple test — permanent employment and the skills and qualifications necessary to achieve this.
Expenditure on our national resources of agriculture, fisheries and forestry, by comparison with the growth in administration expenditure of this Government and their Coalition predecessors in setting up all these agencies, must not only provide adequate education and research facilities in these areas, because they are vitally necessary, but also formulate long-term plans for each of these sectors. There is a growing fear in the meat industry that security of supply, which is the most vital element of any industrial activity, cannot be guaranteed over the next four or five years because of the lack of a comprehensive policy on agriculture. That industry is already at a disadvantage because of intervention mechanisms and MCAs, but now have the added disadvantage of not even knowing if there will be supplies to maintain production programmes. That is a matter of vital importance which must be clarified and faced up to by the Government.
Our economy must be based on the added value of our people. Whatever we have in productive resources, it is the added value — whether in technologies, our own raw materials, or otherwise — which will underpin our development. Added value in these areas has been nowhere near realised. We need sophisticated research, education and marketing programmes to guarantee maximum employment.
Quite frankly, the Government are travelling in the wrong direction. They are extending and spreading the administration on more and more agencies — and could one ever forget the National Development Corporation which we are told are still going to dream up ideas for somebody else to implement — but do they not realise that it is the person out in the market place, the person with the spirit of incentive and, could one say, patriotism who will bring us through and not some group alternating themselves in various proliferations of committees. Apparently the Government still have the determination to live with the lie of what the National Development Corporation can achieve for those who are creating the opportunities of employment of our young people. The Government are extending and spreading administration while actually reducing the provision for our natural resources. They are turning their backs on the concepts of self-reliance, initiative and enterprise. Even in money terms, this year's allocation for fisheries is less than last year and in real terms dramatically less. I wait to see whether, in the indiscriminate cutting that went on and is being planned at the moment, a 5 per cent cut may be coming off fisheries, forestry or agriculture, farm development or otherwise. If it is 5 per cent across the board, these will be treated in exactly the same way as others. One catch emerges. In administration, one is stuck with salaries. The Department of the Public Service can hardly suffer a 5 per cent reduction in this exercise because the totality goes to the growing cost of salaries for the Department. When it comes to educating others, one takes 5 per cent from the 20 per cent which is not taken up by salaries — which means a decimation of their actual development programme.
The Government are setting a notoriously bad example when, almost 12 months after their Coalition pact, there is no sign of a broad, comprehensive policy or philosophy to which the people can respond. Government have a responsibility to manage the national enterprise, and management of any enterprise is not discharged just by the book-keeper alone. It is discharged by a board of management working in conjunction with the manpower in the enterprise and in a way which will generate confidence and a sense of purpose. All we have so far heard are analyses, appeals and tired platitudes — not even a broad philosophy, much less precise planning in any one of these areas.
This Taoiseach and this Government seem incapable of rallying the people in a sustained and worthwhile determination to sacrifice, because sacrifice is called for in the cause of success. Let it be said that sacrifice was called for before, in the thirties when we had to underpin the economic independence achieved in our political independence. Look at the sacrifices made then by the small farmers and the workers in new industries in a concept of self-reliance in answer to the call that this place is our place, this land is our land and that we do not pay annuities to anybody else, only on what we own. They responded under Eamon de Valera and his Government and under Seán Lemass's industrial programme. They will respond, given a clear sense of direction but not to loose vague appeals and general recommendations such as the Taoiseach indulged in last week-end from the Ard Fheis, regarding créche arrangements and everything else. They cannot even begin to comprehend where all that is going. This Government began with no policies and look like ending up in a worse position — a plethora of reports and analyses which lead to no firm action and, quite frankly, undermine the morale and confidence of the people.
There is at the moment a growth area in our economy, the black economy and that is its only growth area. The current penal levels of taxation are mainly responsible for this growth. Why? Because if we feed on the growing administration we have to find the expenditure through tax revenue to feed that growing appetite. We find that expenditure through increasing levels of taxation, which means that many people, to avoid its impact, turn to the black economy. The Government preoccupation with raising taxation to far higher levels than any of our competitors in Europe and the USA is clearly acting as a penalty on incentive and enterprise, when we need, above all else, to generate wealth and activity.
The Minister for the Environment picks the present time to threaten that that wealth—and if it existed we would be very lucky—must be taxed, in his own words in a visible, measurable and substantial way. What kind of incentive is that to the person who finds the present climate suffocating to make an effort for himself and his associates in the knowledge that this threat will be hanging over him? It is time that we had an end to the tired repetition from the Taoiseach, heard from this Coalition and the last, that there never is a division around the Government table on ideological grounds. The Labour and Fine Gael Parties apparently appear to have no problem in that respect. If there is not, there should be. Otherwise one is forced to ask of the Taoiseach's damning praise of the Labour Ministers at the week-end—and while some may have been reassured by this their supporters outside must have been worrying at this damning praise— does that mean that they have all now submerged their party policies in a vague and hopeless compromise of having no policies but waiting for something to turn up from reports, analyses and—as the Minister for the Environment called them—independent experts who will somehow tell them how to discharge their responsibilities? The Government should have ideological differences. The two main parties start from different bases, after all. We hear of these differences outside in various statements but are expected to believe that they do not exist at the table. The public who are expected to believe that are, no wonder, losing faith in the sense of direction of the Government.
The characteristic of this year's budget and Finance Bill was to devise new forms of taxation and add significantly to existing levels of direct and indirect taxation. Taxation is not an end in itself. The capacity of Government to devise new forms and levels of taxation may be unlimited. The capacity of the private sector, the vital part of the economy to shoulder the burden, is not.
For that reason when I established the Commission on Taxation in 1980, I specifically included in their terms of reference that they should inquire generally into the present system of taxation and recommend such changes as appeared desirable and practicable to achieve an equitable incidence of taxation, due attention being paid to the need to encourage development in the national economy. The need to encourage development in the national economy forms no part of this Government's priorities. Anger and frustration are rampant throughout the productive private sector. Instead of a spirit of enterprise and risk-taking, we are witnessing a retrenchment pattern which is not only damaging to our employment prospects now, but is diminishing the capacity of the private sector to gear and equip itself for survival, not to speak of expansion, in this new era of techniculture.
What price investment in research and development in these companies when they find that the whole climate penalises such development? Total taxation has soared this year to 41 per cent of gross domestic product, compared with 32 per cent of 1978-79. I have to acknowledge that I gave the Commission on Taxation an almost impossible task because the level of taxation has grown in the meantime. Direct taxation on personal income has risen sharply to 47 per cent of total taxation this year. Obviously, the failure to adjust the tax bands this year, the youth unemployment levy introduced by the last Coalition, the 1 per cent income tax levy imposed this year and the new tax a rate of 65 per cent and others are responsible for this penal growth.
A budget deficit is a consequence and not a cause of our economic problems. A well-known professor of economics and adviser to President Reagan is Edward B. Laffer, from the University of South California. He said that preoccupation with a budget deficit in its own right gives rise to a condition he has diagnosed as the MEGO condition. It means my eyes glaze over; I lose sight of all other priorities by concentrating on that one area. I hope what I have said indicates that I acknowledge the need to bridge that deficit.
The Deputy has five minutes left.
This cannot be done in a shortsighted book-keeping way. The increase in the current budget allocations for social welfare and health charges is a direct consequence of the Government's inertia in the face of a mounting unemployment crisis. The unacceptable levels of taxation are killing the spirit of incentive and self-reliance of the self-employed and employees. Meanwhile, unemployment is eating like a cancer into the fibre of our society. The prospect of a disillusioned and alienated young population is raising real fears about the stability of our society.
The Government are not discharging their primary responsibility to manage the economy and to create a climate for investment and activity to maintain social stability. The level of investment in our economy this year has dipped drastically to 24 per cent of GNP—an 11 per cent drop this year, the same as in the depressing period of the mid-seventies. Current indicators point in a consistently downward direction, despite the renewal in the world economy.
The Government must create a healthy investment climate where the incentive is such as to outweigh the risk factor. I want to emphasise that it is the unemployed and not the self-employed who have the first call on the Government. Equally, it is clear that the Government can offer no hope or dignity to the unemployed unless they provide incentives and encouragement to the self-employed. The time for internal Government wrangling is over. The urgent need now is for comprehensive development policies and a sense of direction and purpose from the Government.
The Taoiseach and the Minister for Finance in Opposition tried to undermine our international credit rating by insisting that we, Poland, Mexico and Brazil — note the company they included us in — were seen as high risk borrowers. There was no evidence from any international organisation to support this contention in our case. Now once again they choose to distort the reality of the international economic recovery to excuse their own failure, as if the world outside was sinking deeper into depression rather than planning, as it is, to sustain the recovery now clearly under way. We cannot afford to let it pass us by, as it did in the hopeless Coalition years of the fifties.
If there was a theme in the Minister's budget address, apart from the budget deficit and the taxation to bridge that deficit it was to restore competitiveness by reducing inflation. In the 12 months before this Government took office, inflation had been reduced from just 24 per cent to over 12 per cent. The Central Bank pointed out that this year inflation will be 11 per cent, at a time when the rate of increase in consumer prices in the OECD countries is likely to be less than 6 per cent. The external influences are all favourable, but the disastrous internal policies are pulling us downward. I want to say a word about indirect taxation and devaluation. How much time have I left?
About a minute and a half.
Because of the extraordinary indication from the Taoiseach in his public statement before devaluation, I had an opportunity to plead publicly with the Government not to follow that path. We gave the reasons why it would add to our interest repayments. The Minister has now acknowledged that what I said then was true. As he said recently, it is £40 million to £50 million higher than acticipated. We anticipated it and we put those figures on the record of this House. We told them it would be disastrous, because the effective exchange rate of our currency had declined by one-third since 1980. Our competitiveness as a function of our exchange rate was being looked after by the market place, and yet we insisted on devaluing within the EMS, which was in conflict with our basic reason for joining the system in the first instance. The Minister has suddenly discovered the cost, not just to the budget deficit but to our national morale.
We need a redefinition of the role of Government and of every State and semi-State agency. It is clear that the old ways of the sixties and seventies will not do for the eighties and nineties. Even bodies such as the IDA and SFADCo, which have served us well in the past, must be tested and scrutinised to ensure that the huge resources allocated to them are yielding results in actual and permanent jobs. The provision of industrial sites and advance factories makes no sense unless the incentive is there for the industrial promoters to avail of them.
We must not ignore the potential at home in a continuing focus on the potential aborad. The reality is that in this year unemployment has risen by over 26,000. A new dynamism must be released to contain the cancer. That dynamism is staring us in the face, our own people and our own resources. The co-operative movements, the rural resource organisations are all there to be strengthened and developed. Management training in marketing in these organisations must be strengthened by the direct application of the growing funds from the EEC social fund which this year will exceed over £150 million and next year will probably be over £200 million. Are we to see that wasted by administrative agencies? When so many of our major national companies and banks are investing abroad rather than at home, the message to the Government must be clear and obvious: create the climate for our people to do it for themselves. We are in danger of becoming a public service economy while the commitment and capacity of our own people are being ignored. The Coalition fifties were the years of the vanishing Irish. We cannot allow this Coalition to reactivate that haemorrhage in a nation with so much personal and physical resources.
When we look at our major industry, agriculture, we find that, although it has its own difficulties and worries, its future gives grounds for optimism. The outlook for the current year's performance is one of continued growth in farm output and incomes, despite a particularly unfavourable spring and early summer.
While projections of developments in the agricultural sector are necessarily tentative at this stage they indicate that the volume of growth in agriculture output should be some 2 per cent or 3 per cent in 1983. Net agricultural output should grow by about 1 per cent. It now looks likely that the final figures for 1983 will show that farmers' incomes will have increased by at least enough to keep abreast of inflation. While the magnitude of this year's projected increases in output and incomes is not as large as those for the mid to late seventies, nevertheless there should be a second year of solid growth with agriculture setting a most desirable trend for the rest of the economy.
On the production side, the greatest difficulty confronting the industry has arisen from the depletion of livestock heards in 1980 and 1981. It takes time to bring herd numbers back up again, but the latest livestock census, for June of this year, is encouraging in showing a small increase in overall numbers and a more significant increase in dairy cow numbers. In view of the various inducements available to farmers under different schemes operated by my Department, I am confident that the upward trend will continue and, hopefully, strengthen, thereby laying a good foundation for the future.
I referred earlier to worries I had about the Commission's proposal for the introduction of a super levy on milk. Enough has been said recently by myself and by other members of the Government on this subject to indicate that we are completely opposed to this proposal because it would freeze our milk output. It is essential that I speak on this issue which is causing such concern to everybody, not just the farming community. If this proposal for a super-levy on milk is implemented in its present form, it would deny us the opportunity of continuing development of our dairy industry, which is the basis of our agricultural industry and constitutes a major section of the entire national economy.
It is estimated that the dairy sector alone accounts for between 8 and 9 per cent of our gross national product, a very sizeable proportion. The milk and beef sectors together account for 70 per cent of out total agricultural output. When one realises that about 75 per cent of our beef herd originates in the dairy herd, one can easily visualise the vast significance of the dairy sector to this country and see why we are not going to accept the proposal for a super-levy on milk. I am not against the concept of a super-levy, but I feel it should be applied to other members in the Community who have used the system to the point where surpluses have been created. I am adamant that Ireland should be exempt from the effects of that super-levy.
It is unacceptable to us — and I have repeatedly made this quite clear at Council meetings and in contacts with other Community Ministers — that under the Commission's proposals a super-levy would freeze our milk production at about the 1981 levels. This would deny our industry the opportunity of catching up with the stage of development already achieved in other major dairying regions of the Community. Although these regions contribute most to the existing milk surplus, they could emerge relatively unscathed under the present levy proposal. This would clearly be unfair.
The historic background explains the reasons why we would be so harshly and unfairly treated if we had to accept a super-levy on milk. We have not had the opportunity of 25 years' membership of the EEC. We did not have the financial resources to build up a highly efficient dairying industry. The build-up here has commenced only over the last ten years. Now that we are at the stage to increase our output of milk vastly we are told that milk production will have to be frozen at 1981 levels. That is clearly unacceptable. The other countries supporting this proposal for a milk super-levy have reached a very advanced stage of development and can absorb the consequences because their farmers are well insulated against any cuts in milk production. We accept that the problem of the Community milk surplus must be tackled.
The present EEC agriculture sector is beset by problems that threaten the continued existence of the Common Agricultural Policy. That is a very relevant fact. We can see from the recent financial problems in the Community that something will have to be done. It is very much in our long-term interests that these problems should be solved and we are willing to play our part in the resolution. But the solution now proposed in the milk sector by the Commission does not represent a fair approach. It would be ironic if what purported to be a Community solution were to devastate the economy of one of the Community's weakest members, Ireland. The Government are negotiating to ensure that whatever decisions are finally arrived at, they will afford us reasonable and realistic scope for the expansion of our dairy industry.
The financial problems facing the Community were recently illustrated when curtain advance payments in respect of agricultural exports were postponed. This had to be done because of cash flow problems. People realise that the Community budget is being used up and that there is no further scope for increased spending unless the budget is increased. There is a proposal before the Commission that the budget should be increased — the terminology used is that the Commission's own resources should be increased. The main way the Community is financed is by the collection of VAT receipts to the extent of 1 per cent from all member states. The proposal for increasing the Community's finances has been that the VAT to be collected should be at the rate of 1.4 per cent. We are in favour of that increase in own resources. However, a number of countries, in particular the countries which contribute most to the Community's finances, have declared that they will not agree to an increase in financing until certain items are dealt with. The two specific items they speak about are, first, the agreement to the accession of Spain and Portugal — and I am not putting them in any specific order for certain reasons — and, second, the Common Agricultural Policy be restructured, that surpluses be curtailed and that spending on the Common Agricultural Policy be brought under control.
A very important decision was taken last week in Luxembourg which affects the whole movement towards securing an increase in the Community's financing. That decision passed largely unnoticed in this country because it would not seem to have any direct significance for Ireland — and the fact that the decision was taken at 5 a.m. may be one good reason why it did not get as much publicity as might otherwise have been the case. The decision was to reach an agreement on the guaranteed price support for Mediterranean produce, primarily fruit and vegetables, and also olive oil which is a very significant commodity in countries such as Italy and Spain.
The Italians and French were very insistent that a regime for the pricing of these commodities be finalised before Spain and Portugal acceded to the Community, primarily because Spain is a very efficient producer of these commodities. They fear that they will be swamped, perhaps not swamped but that the competition to which they would be subjected from Spain would be considerable and would damage their commodities in these sectors. Therefore, before accession talks with Spain and Portugal could proceed it was imperative that an agreement on the pricing of those products be finalised, and that was done last week.
The largest remaining problem with which we must now deal is the Commission's proposals on the future of the Common Agricultural Policy. By far the largest component of those proposals is the proposed super-levy on milk. People were of a very definite opinion that talks on the milk super-levy would continue well into 1984. I was of that opinion also, but because of the conclusion of the talks on the price regime for Mediterranean products it appears now that we could have a decision on the milk super-levy at the Athens Summit in December. That is by no means certain, but it is now a real possibility; whereas, up to last week it was not on the cards. The public in this country should be made aware of that. They may be unaware of happenings last week in Luxembourg, because Mediterranean products are of little significance to us. That means that the next meeting of the special council which is examining the Commission's proposals on the Common Agricultural Policy will be crucial. That meeting will take place in Athens in November. It could well be that considerable progress will be made at that meeting and that the whole of the future financing of the Community will be settled then. That is a possibility; how strong remains to be seen. But last week's decision has increased that possibility.
I do not want to give the impression that there is nothing good in the Commission's proposals on the Common Agricultural Policy. I welcome the Commission's expressed intention to get to grips with the problems caused by MCAs and by imports of cereal substitutes as well as the proposed tax on vegetable oils and fats. MCAs cause a distortion of the market. Because of the strength of the German currency, of the Dutch and, for that matter of the British currency, those countries have a trading advantage vis-à-vis ourselves and the remaining countries of the Community. The Germans — because of the strength of their currency — at present have a 10 per cent positive MCA which means that their farmers have a 10 per cent price advantage in trading in comparison with ours. That is a major bone of contention among our farming community. The Commission have put forward proposals that these positive MCAs be abolished over a two-year period, which proposal we support. However, this is being vigorously opposed by the Germans because it would mean a 10 per cent reduction in prices being paid to their farmers over a two-year period, the idea being that the MCAs be reduced by 5 per cent each year for two years. They have declared that they will not accept the Commission's proposals in that regard. That is an issue which remains unresolved. They have declared that it is a Government decision and that they will not change their stance.
The import of cereal substitutes is another topical issue giving rise to ferocious debate here in that certain countries in the Community by importing cereal substitutes can produce milk on a vast scale by way of factory-type farming. The Dutch in particular, the Germans and for that matter, the British avail of these cereal substitutes on quite a large scale. We do not have the advantage of the availability of these cereal substitutes. Their large international ports, such as Rotterdam and Hamburg, can quite easily accommodate huge consignments of these substitutes well below the price of cereals produced within the Community. Therefore they can produce vast quantities of milk at a relatively modest cost. This factory-type farming is one of the real reasons there is a vast surplus of milk in the Community at present. The importation of cereal substitutes by those countries must be curtailed or at least stabilised if the milk surplus problem is to be resolved. It is not easy to have these imports eliminated. They form part of GATT agreements negotiated largely during the sixties and it would prove extremely expensive to terminate them because of the amount of compensation that would have to be paid in so doing. These imports of cereal substitutes should be very considerably curtailed wherever possible and we have repeatedly made that case in Europe.
There is a further problem encountered in that some of these cereal substitutes emanate from the United States. The United States are competing with us on world markets in milk products and, for that matter, in beef. It is important that we have an understanding with the United States so that we do not start price cutting or have a trade war. That is a possibility as matters stand. That is being threatened if we set about reducing their exports of cereal substitutes, such as maize gluten and citrus peel. It is a difficult problem and will continue to be so with the American Presidential Election looming on the horizon. It is just about one year off and their farming lobby, although perhaps not as effective as ours, is proportionately none the less strong. They are determined that their exports of these commodities should not be affected. It is a major political problem. We are determined that the importation of cereal substitutes should be curtailed because they give rise to the further problem of a milk surplus.
People will wonder what this tax on vegetable oils and fats mean. The industrialised countries of Europe, including Britain, import vast quantities of vegetable oils and fats. These compete with dairy products, margarine being a classical example. The Commission have decided to put a major tax on those items so that butter, cheese and other dairy products can compete with them on a fair basis. That tax has been vigorously opposed by countries which make vast use of vegetable oils and fats. We support that tax on vegetable oils and fats.
Three items, including MCAs, we contend, should be got rid of and we agree with the Commission's proposal that there should be a tax on intensive producers of milk, but we say that the level proposed by the Commission is too low. It is about 1,300 gallons per acre. Production above that level per acre will be taxed at 4 per cent. We feel that this tax is at too small a rate and that the threshold is too high at 1,300 gallons. We have been making that point at Council meetings because if the tax rate were large enough it would contribute to relieving the milk surplus problem.
At the same time, the Commission and a number of member states want the continuation of substantial imports of New Zealand butter. How can we contemplate the continued importation of New Zealand butter when there is such a serious problem in Europe? I had a meeting yesterday with the New Zealand Minister for Foreign Affairs and External Trade and I repeated to him what I had said at a Council meeting last week in Luxembourg, that we will not agree to any further importation of New Zealand butter until we get a satisfactory outcome to the discussions on the milk super-levy. He understands our position and I think the nine other member states of the Community understand it as well. We will continue that resistance to any importation of New Zealand butter until we get a fair deal in Europe.
The House can be assured that we will not relent in our opposition to the super-levy. In that opposition, we are heartened by the support of the Irish general public, the farming organisations, the trade unions and many commercial bodies and Opposition politicians. There is unanimity here in our opposition to the Commission's proposals, and that is as it should be. Petty politics or any other type of division should not stand in our way in the fight against this proposal. I am gratified at the support the Government have received from all sides. It strengthens our hand considerably.
Through our intensive lobbying abroad we have secured recognition of the importance of milk to our entire economy and of the disproportionate impact which the milk super-levy would have on us. Here at home we all realise the fundamental importance of this issue. The Government are determined to achieve a fair, balanced outcome. Both in our interest and that of the Community it is essential that an equitable solution should be found. We are willing to contribute to the savings being sought by the Commission in some areas: we are not demanding that we should be exempt from every saving, but we are demanding exemption from the super-levy. We know that the CAP must be rationalised, restructured and brought up to date. However, we must look after our special situation on milk. Our economy is five times more dependent on milk than the average economy in the Community. We are eight times more dependent on it than Britain. Therefore, it will be appreciated that we cannot accept the proposals in any form and we will demand that the Irish dairying industry be given an adequate opportunity to expand fully.
There has been talk about Ireland seeking a derogation in terms of time. I do not go along with that theory because I believe we should be seeking, as we are, a derogation in terms of production levels. That is what I am demanding in the Council of Ministers — that we should be allowed to attain a level of production comparable with the main milk producing nations in northern Europe.
If we asked for a derogation on a time basis we could be damaging ourselves. Here we never can tell what climatic conditions will be. For instance, in 1979, 1980 and 1981 we had a decrease in milk production because of unsuitable weather conditions. Therefore, to look for a derogation linked to time or a specific number of years would not be the best way for us to approach our problem. I strongly suggest that we would be better suited by a derogation based on production levels.
I am heartened by the general acceptance in Europe of our peculiar difficulty. They accept that we have a real problem and I feel that the majority of the members support us. However, some members repeatedly have stressed that there should not be any exemptions because they say that if there is any exemption the whole super-levy concept will collapse and that the milk problem will not be dealt with properly. We have opposition from some countries, but I am most heartened by the particular help we have had from the Greeks who have the Presidency of the Council. Their assistance will be necessary in the discussions.
It is particularly apt that I am following the Minister for Agriculture because, like him, my interest lies in a particular sector of Irish life. I suggest that because of our huge young population the matter of education here is in a unique position. Indeed, I put education before agriculture. Not enough attention has been paid to our special situation. Strenuous measures are needed to deal with the large numbers in second and third level education. I will dwell briefly on the cutbacks which have been effected, but much Dáil time has already been spent on that topic.
It is appropriate at the start of the academic year to review the education scene. Many of the cutbacks announced earlier this year are only now beginning to take effect. The Minister has spoken many times recently about the need to set up a curriculum and examination board which will broaden the range of options available to students. She has spoken strongly about the need to remove the sex bias in education. The rhetoric is fine, the speeches are pretty and the sentiments are laudable, but the reality is completely different. Reports are reaching me from second level educational establishments about the effects of the increased pupil-teacher ratio. Hard choices are having to be made, in spite of the talk of flexibility. The increase in the ratio means that this year subjects will have to be dropped in many schools and principals will be faced with agonising choices. Schools where perhaps six or seven girls took honours mathematics may now find it impossible to offer that option.
Education is not my prerogative or that of the Minister; it is the prerogative of everybody because we are all touched by it. Education should not be my province or that of my opposite number because it is the right of every person to have an input to the educative process.
Up to now the proportion of teachers has been maintained but as vacancies occur due to natural wastage principals will find themselves trying to cater for a variety of subjects with a reduced number of teachers. Hard core subjects such as Irish, English, mathematics and languages must be retained but those subjects which some might regard as peripheral, such as art, music, agricultural science or, in a girls' school, mathematics and chemistry, may have to be dropped from the curriculum. The Minister emphasises the need for a broadening of the curriculum but these subjects cannot be taken if a choice has to be made between them and other subjects which are essential for State examinations. There are science laboratories equipped and ready for action but they are empty because teachers cannot be provided.
I refer now to the oral tests in foreign languages. I understand from a former Minister, Deputy Wilson, that when he was leaving the Department a huge amount of work had been done towards the introduction of oral tests in European languages. The present Minister announced that this work would stop but that she hoped to introduce aural tests. They are not the same thing.
We have been a member of the EEC for 10 years but we do not seem to be proficient in speaking European languages. This has been remarked upon by industrialists, the CII and educationalists. The Minister is taking a short-sighted step. I cannot see that the outlay involved in the introduction of oral tests would be very great, apart from the cost of teacher substitution while some teachers would be engaged in holding the examinations. That would be the main expense but it would be a small price to pay to enable us to send young people out into the world with a better spoken knowledge of European languages. Textbook knowledge of languages is of little avail if one cannot speak a language well. This debate is taking place leading up to the production of the proposed Estimates which I understand from what the Taoiseach said today that he hopes to have them laid before the House for discussion and consideration in early November.
I am glad that the Minister of State for Education is here today. I know he will be taking note of what I say but whether he will take heed is another matter. I hope that the oral proficiency test in European languages will gain his attention and be taken to the Cabinet table.
I want to speak about capital expenditure in the primary sector. There are cases all through the country of national schools with many large classes catered for in very unsuitable circumstances. I have seen many schools where children should not be doing their lessons. I am glad to say that a school in my own constituency got sanction yesterday and I thank the Minister. However, there are many other areas which are not so fortunate and there seems to be a slowing up of capital expenditure in the primary sector. That policy is shortsighted because, if children are kept in undesirable circumstances of education, we will not foster a tradition or a love for education, apart from the fact that we are committed in our Constitution to seeing that every child up to a certain age receives proper education. If there are to be cutbacks in capital expenditure — I speak of what I fear will happen — I urge the Minister and her Departmental officials to think again.
The whole thrust of the Government's strategy in the current economic situation is that it is hair-shirts now but fine garments tomorrow, tomorrow meaning some years hence. However, that policy cannot apply to education. Of course, everybody thinks that about their own portfolio but it is short-sighted, when there are so many children to be educated, to curtail the funding for education. If that is the case we will have a plethora of policies, review bodies, action plans, development boards and submissions and we will be snowed under with paperwork on every aspect of education. The present crop of young people, especially those going through second and third level schools, will not have a second chance. They will only go through the educational system once. We pay lip service to continuing education and to adult education and that is fine but we must have solid education for children first.
Forward planning is necessary in any Department but, as far as education is concerned, we must plan for the here and now. In other Departments perhaps you can side-track a particular development until better times come but you cannot wait for the better times in education because they are affecting the children going through the system now. If the thrust of the Government's debate is that we are to be prepared through hard times now for the good times to come, we must now educate our young people for the age we are going through and the age we are aiming for. To that end, I am not satisfied that enough emphasis is being placed on the technological aspect of education.
I am also very unhappy with the current proliferation of youth training schemes. I want to be very explicit on this subject. I know that many Members on the Government benches and the public at large share my disquiet and concern because my correspondence has proved that this is so. People feel that there are many agencies catering for training courses of six months, 12 months or even a six weeks' course, but there is no overall plan or structure for the training courses for these young people. I am not knocking the Youth Employment Agency but I put it to the Minister of State that there is a serious situation with regard to the various and diverse training schemes for young people.
I should like to see in every second level school an element of training an essential part of the senior cycle of second level schools. By that I mean when a boy or girl had concluded their group or inter cert and were moving into their senior cycle, that an essential part of that cycle would be a training programme. This programme would enable that student, on leaving their second level establishment, to go into whatever further training or job opportunities or whatever course they had decided to take up much better equipped and ready for what they are going to do. There is too much divorce between leaving school and going on one of these training courses, leaving school and going on to higher education or leaving school and looking for a job. There is very little connection between the world of second level education and the further world of either third level education or job opportunities.
I have spoken for the need of a training service in all schools and I submit again that the proliferation of the present agencies engaging in such exercises is leading to the facilities available being diminished. The £11 million of the youth employment levy which was not spent at the end of the year should have been devoted to an important area in education, guidance teachers. The provision of vocational training for young people is an important aspect of the work of the Youth Employment Agency and in vocational training guidance teachers are essential. It was wrong of the Government who did not use that £11 million for the purpose intended to scatter it to various Departments. We do not know where it went but it certainly was not spent on education.
Debate adjourned.