Dáil Éireann díospóireacht -
Tuesday, 31 Jan 1984

Vol. 347 No. 6

Financial Resolutions, 1984. - Financial Resolution No. 11: General (Resumed).

Debate resumed on the following motion:

That it is expedient to amend the law relating to customs and inland revenue (including excise) and to make further provision in connection with finance.

—(Minister for Finance.)

Mr. S. Brennan

Before I completed my contribution on the budget last week I made two main points and I wish to repeat them very briefly. First, I considered the strategy adopted in the budget as an incorrect one for this time in our economy. I regarded it as a missed opportunity. I had taken the view that progress to restore our national finances is a necessary and legitimate objective of budgetary policy and I said that a reduction in public spending must be a priority because it is, and it has been for some time, at an unsustainable figure. However, policies to promote growth and to reverse the unemployment situation can and must be pursued concurrently if public finances are not to deteriorate further. A balanced budget may be achieved but at such a high level of unemployment and low level of domestic economic activity as to preclude any hope for the future.

It is my view that both objectives can and must be pursued concurrently. If they are implemented in this way they can be mutually reinforcing, thereby establishing a virtual circle of growth and recovery in place of the vicious circle in which the economy is trapped. This is my core objection to the financial strategy adopted in the budget. It fails to adopt the twin approach of encouraging industry and employment while seeking to reduce the budgetary deficit. It sees a balanced budget as a precondition of and as a prerequisite to a revival of economic growth and employment rather than as a parallel approach. The approach in the budget will so reduce the numbers at work as to destroy the already dangerously narrow tax base and it will necessitate a greater tax burden on this dwindling base.

If the Minister had made employment the thrust of the budgetary strategy he could get people back to work, broaden the tax base, save social welfare and unemployment funds and lessen the enormous appetite of the State for more and more tax receipts. Last week I concluded that the Minister missed the opportunity to take the twin approach. The Government have correctly identified the restoration of competitiveness in our economy as the central policy requirement but, amazingly, they proceeded to ignore that central requirement by announcing a 1 per cent increase in inflation. Incidentally, that will give us a rate of 9 or 10 per cent next year compared with a figure of 4 or 5 per cent for America and the industrialised countries of Europe. The increases in regard to petrol and clothing, the tax base lendings and the ACT are a direct attack on competitiveness which the Government had identified correctly as the central policy requirement. It is a pity the Government missed the opportunity in this regard. The increased costs in the budget will be felt by industries who will become less competitive and it must lead to more unemployment. Last week I said a concurrent policy is needed, that it is not a matter of one being a precondition of the other. It is a pity the opportunity was missed then.

Taxation should be used as an instrument for promoting equity and for increasing incentive. I will contrast the excellent treatise given by the Minister in his preamble on taxation last week with the situation that exists today. Taxation imbalance has not been redressed, especially the burden on the PAYE sector. The fact is that the tax paid will increase by some £300 million: £1,664 million as the 1983 outcome and £1,952 million as the post budget 1984 figure, giving almost £300 million of additional tax taken from the PAYE sector. That is done with 30,000 fewer people at work, so clearly the burden of taxation has increased substantially. The widening of the tax band, I calculate, will give the average family between 70p and 90p per week in the context of the additional levy, the PRSI burden and the 1 per cent inflation which this budget will impose.

In the Budget Statement at column 826, Vol. 347 of the Official Report, the Minister said:

It would be desirable in the coming years to set ourselves the objective of restoring the tax base by progressively reducing or abolishing allowances, reliefs, and deductions . . .

The Minister wants to restore the tax base. The way to restore the tax base is by getting the country back to work. The loss in revenue which stems from unemployment as a cost of servicing the dole queue will be £650 million next year. That is £500 a year for every working person, or £10 per week. That makes it impossible in the short-term to restore the taxation base.

Fundamentally the Minister's view in respect of the scope for tax reform runs contrary to many experts in this area. The Minister said: "Fundamental reform must await a better budgeting situation". That is disagreed with by Mr. Donal De Burca, the secretary of the taxation committee, who said in a recent article that it is impossible to implement many reforms, indeed fundamental reforms; and their implementation, far from not being possible, would actually help to lighten the load and give greater tax equity. The budget in the United States of America this year concluded that taxation reform can be and is often a prerequisite to lightening the tax load and not a consequence of it.

I am saddened to find that the Minister takes the view that tax reform must await a better budgetary situation. I put it to him that if he makes some progress in the area of tax reform he would make it easier to tackle the whole question of lightening the tax load. I am sorry that he sees it the wrong way around and I think that is the reason he has got so much of his budget strategy wrong. At another time when unemployment may not be so high this might be the correct strategy in ruthlessly tackling the budget deficit; but at this time, with enormous unemployment, the correct strategy has to be increasing competitiveness, adopting a twin-pronged attack on national finances and getting the country back to work.

That has got to be the basis of any economic strategy and I am dismayed that the Minister has missed his opportunity in that regard. There are just one million people today at work. There are only 760,000 taxpayers. There are another one million people dependent one way or another on social welfare. That is in a population of just over three million people. There are 760,000 taxpayers in a population of just over three million. Clearly, on any analysis and with any Government we are bound to have heavy taxation on the few. That is all the more reason for adopting the correct budgetary strategy which should not be one of reducing further the one million people at work but rather a policy of putting people back to work and, in parallel, a fundamental — not just a tinkering with — reform of the taxation system designed to bring greater equity and restore investment and incentive. It is sad that that opportunity was missed last week.

The higher rates are still very much with us. A great deal has been said about the difficulties facing the ordinary worker. The ordinary worker now includes a huge mass of people who in other times might have been inclined to regard themselves as middle class. Suburban poverty, hidden poverty, white collar poverty is now a serious feature of the Ireland of 1984. Bus fares, VHI contributions, university fees, mortgage repayments, petrol bills, shrinking take home pay and increasing inflation all add up to one sad fact which the banks know all about and that is that most ordinary "three and four bedroom semi-detached land" people are living today on overdrafts and the goodwill of their bank managers. The net effect of the budget therefore will be to increase the percentage of income presently being taken away by the State. That fact must be driven home. That clearly means a drop in living standards. That will inevitably start a demand for additional pay increases because the average family last week was given less than one pound by the Minister and they will spend that pound on petrol, PRSI, the extra VAT and the 1 per cent inflation. It is a disgraceful situation.

However, I am not so concerned about that as I am about the missed opportunity to inject economic philosophy into the bones of this nation and try to put our people back to work. The President of the Institute of Chartered Accountants made a statement last week and I can do no better than quote what she said about taxation:

Taxation must be the single most detrimental ingredient in endeavouring to reward enterprise and work in Ireland today. When one includes PRSI a taxation rate of 72 per cent is reached by a single person when they earn £12,000 to £13,000 a year. The taxation level of 45 per cent is reached by a single person at £6,300. Let there be no doubt that these rates of taxation contribute to the development of the black economy, abuses of the social welfare system, dissatisfaction by those involved in the PAYE system and the self-employed, employers' discouragement because they are unable to award the take home pay to workers who have made an above average contribution to the business.

One could not put it better. That is the view of a professional source. An employer now has to give a person £4 if he wants that person to take home an extra pound. What kind of crazy taxation structure have we built for ourselves? We are killing whatever golden goose is still left to us.

Unemployment is not just an urban problem. It is also a rural problem and the Farmers Journal recently pointed out there is a certain lack of commitment by the Government to the development of Irish agriculture. They also said there was a failure to acknowledge the problems in agriculture today. I am an urban Deputy but I regard agriculture as an area in which there are tremendous possibilities to provide employment and create new jobs. We must give up the idea that agriculture is an area of job loss and assume that jobs in agriculture will continue to dwindle. It is the foundation of our economy and if we look at it in an industrial way and give it the same incentives comparable to manufacturing industry I believe it can in a professional way increase employment considerably. Recently a number of suggestions were put forward particularly the suggestion seeking an agricultural enterprise zone of a Shannon Airport type. Suffice it to say that a number of schemes are operating in other countries which, if applied to our agriculture in a professional and industrious way, could place agriculture as part of the solution to unemployment, not as part of the problem. That is the way in which we should view our agriculture.

Our problems are far greater than would be tackled or solved by one year's budget. We might consider a three year budget period in place of the annual one, which is too restrictive, too inflexible and too short a planning period. I welcome the additional funds for Córas Tráchtála to aid our exporting, but propose that we do more in this area. The Americans have a saying "All sale is profit and everything else is expense". That is a healthy attitude for an open economy such as ours. We would be foolish not to put our resources and our young people into exporting and marketing.

We have a young, educated mass of people out there. On the other hand, we have less than 1 per cent of total world trade. A small percentage increase in that world trade would change the face of Ireland and wipe out unemployment. Is there not a case for trying, in an imaginative scheme, to match up our young, educated, determined population with these markets in trying to penetrate them and so contribute to the solution of unemployment? This is a positive suggestion which I have seen operate in other countries and which I would like the Government to consider.

The reduction of unemployment is the central policy facing us today; but, unfortunately, this budget will increase unemployment. Indeed, it seems that the Government are planning for this, if one looks at the additional social welfare payments. We should be using this budget as an instrument of economic policy and a vehicle for reducing unemployment in the immediate term. I am not asking for an overnight reduction, but the start of a medium-term plan. All the Members are acquainted with the magnitude of the problem confronting us. There will be at the end of 1984 some 50,000 extra on to the figure which the present Government declared, in their Programme for Government on coming into office, was "a disaster". They went on to say that short-term emergency measures would be taken to deal with the problem. Unfortunately, the figure will be 50,000 higher, despite any measures taken. It will be a disaster if this Dáil acquiesces in the perpetuation of unemployment on that scale. If we in this Dáil, as the Government are doing, plan our industrial strategy around a figure of 225,000 unemployed, we cannot claim, by any stretch of the imagination, to be a Christian society, let alone a just society.

There is, of course, an economic cost in the waste of our most precious resources. There are serious economic consequences from a policy point of view which I have attempted to point out. We are locked in a vicious circle of high unemployment, high social welfare payments and high transfer payments. Worst of all are the social consequences and recent research has linked high unemployment with child battering, marital strain and indeed, in many countries, suicide. I know from my constituency work, as do most Deputies, that unemployment is being reflected in the high admission rate into our psychiatric hospitals. As political leaders, entrusted by the people with responsibility for their future and welfare, we cannot wash our hands, saying that unemployment will come right when the sums add up. That philosophy is not acceptable to our rising generation. There is a better way. I have tried here and in other recent contributions to suggest real alternatives which promote fiscal balance within a framework which promotes employment and raises living standards. I believe that that is the better way.

The kind of policies we need are those which do not tax jobs or employment. Our taxation structure simply says that the more you employ, the more tax you pay. Should it not be at this stage in our development, with enormous unemployment, that the more you employ, the less tax you pay? That is an incentive to employ people rather than a taxation on employing people. A child in the street could grasp that philosophy. Unfortunately, we have adopted policies which have as their core a taxation system which does not assist employment at this critical time. At another time that policy might be all right, but not today with the present unemployment situation. It is unfortunate that the budget increased PRSI even further. That has to be a tax on employment.

The Government have pointed to a percentage reduction in the budget deficit as a percentage of gross national product. I applaud any reduction in the budget deficit, but we must put clearly before the House that the budget target in 1983 was £897 million. Six months later it was adjusted to £960 million and the proposal in the budget now is £1,088 million. Whatever about percentages and their validity — and one could argue on that for a long day — the realities are that the budget deficit is almost £150 million higher than was originally targeted at the start of the year. We would not as a nation want to get it that wrong every year or we would be in some difficulty.

I am not clear if this is the appropriate debate in which to do so although this matter hinges on our economic wellbeing, but I want to refer to the recent newspaper reports about the visit of President Reagan to this country and the suggestion by some Members of this House that perhaps that visit would not be welcome. I, for one, would welcome it. I do not dispute the right of any Member of the House or of any citizen to have strong views on the political policies of the United States and on their military policies abroad. However, I remind those who might disrupt a possible presidential visit of a few facts about our economy. Firstly, American companies in this country provide 36,000 jobs, which is twice as many as are provided by United Kingdom companies and four times as many as are provided by German companies. These figures were taken from the IDA report of 1982 and 1983. Also, according to that report — and this must be borne in mind by those contemplating giving a message to the American people that their President would not be welcome in Ireland — United States planned investment here at the latest available date was £165 million. That is four-fifths, 80 per cent, of total planned investment by all countries in Ireland. If one is still not convinced I might add that the Telesis Report says that the relative importance of United States companies as a source of new employment is growing rapidly.

I give those figures in this House today, lest we get ourselves into a national frenzy about the visit of the United States President to this country, to remind people that this country can ill afford to bite any hand that seeks to help us feed ourselves today. Certainly I take the opposite view, that the visit is to be welcomed. We endorse, support and encourage further investment by the United States in this country. I would stress that all of that is aside from whatever views one may hold about the political or military situation.

I might conclude by making one other point: that this country in 1983 had exchange rate losses of £810 million. That does not constitute a deficit in the ordinary sense of the word; it is a deficit of £810 million of a once-off loss attributable purely to the change in the value of currencies. It is as it were, a capital loss. In fact it is close to the size of what should have been our total budget deficit. I wonder whether there is not a better way of making our people cough up on an annual basis to pay off an exchange rate loss of £810 million than by charging it to current expenditure on a regular basis. From such investigation I have carried out I am aware that a number of other countries have found a better way of doing that. They have found a way of recycling such exchange rate losses in the capital budget and not making them a charge on the current budget, thus spreading them out. If I might put it this way, if one lost money on selling one's house one would not dream of endeavouring to pay it off out of one's wages in one year; one would have to endeavour to reschedule it. That is what should be done with that £810 million, which constitutes a once-off exchange rate loss mainly because of the strengthening of the dollar and the Deutschemark.

The main thrust of this budget should have been employment. The major policy error made in this budget was to miss the opportunity to tackle that central area. Perhaps it would have been worth it not to get any progress on the unemployment situation if we had a large reduction in the budget deficit. But from the figures I have given the House it is quite clear that there has been no reduction in the budget deficit. Therefore, we have fallen between two stools in this budget. At this time in Irish history, with this new modern, young generation, it is a sad, missed opportunity. It is wrong strategy at this time.

Minister for the Environment (Mr. Kavanagh)

A major achievement of the past year has been the substantial reduction made in the rate of inflation. As pointed out by the Minister for Finance in his Budget Statement the average rate of inflation dropped by over six percentage points in 1983; this budget will ensure a continuation in the current year of this trend and this is recognised by most informed commentators. This will significantly improve our competitive position and enable us to benefit from the expected upturn in the world economy. It also creates the necessary prerequisite climate for job maintenance and the creation of new job opportunities. Reduction in inflation rates will contribute in a meaningful way to the protection of the living standards of the less well off in our society, including in particular pensioners, unemployed and those in receipt of other social welfare benefits. The improvements, as indicated in the broader social welfare field as outlined in the budget, will be of far more real benefit to these recipients than apparent more substantial increases in a situation of rampant inflation.

Let us briefly look at the other positive favourable indicators now emerging due in no small measure to the responsible statesmanlike policies pursued by the Government. To quote from the recently published quarterly economic commentary of the Economic and Social Research Institute, 1983 has witnessed:

a massive improvement in the balance of payments, a significant increase in industrial output, a marked reduction in the rate of inflation, some slowing down in the growth of unemployment and a small reduction in the budget deficit as a proportion of Gross National Product.

These indicators give no grounds for complacency — but they are not bad for our first full year in Government.

We could easily at this stage have switched to more popular budgetary policies by increasing expenditure at the expense of increasing the current budget deficit. However, to do so would seriously impair the prospects for a continuation in 1984 of the emerging favourable trends to which I have already referred. And in my view what is important is that we continue with the policies which are already showing notable results and gradually again recreate the confidence and conditions in which development will more freely take place — not, of course, as an objective in itself but rather as the essential road to the creation of critically needed new jobs and an improvement in the standard of living for all our people. In my view the budget guarantees a continuation in the current year of the favourable trends now emerging.

What of the budget itself? It delivers on what I see as a priority and an absolute necessity, namely, to look after persons dependent on social welfare allowances. Short term rates were increased by 10 per cent, and other weekly benefits by 12 per cent as from 1 June last. In addition the long-term unemployed had a further special increase of 5 per cent as from October last. I was particularly pleased that we were able to give pensioners a double week's payment at Christmas. The budget provides for a 7 per cent increase in both short and long-term benefits and allowances as from July. Again special concern is shown for the long-term unemployed who will be given an 8 per cent rather than 7 per cent increase. Provision is also made for a 7 per cent increase in children's allowances. We would, of course, have liked to have given more but this could only be done at the cost of higher taxation rates or by cutbacks in existing programmes.

Areas suggested as likely for cutbacks in recent weeks in the media and elsewhere included the food subsidies, termination of the mortgage subsidy scheme for first time house purchasers operated by my Department and indeed the payment of children's allowances. Of course all of this speculation was again misplaced. The Government have and will continue to deliver on the commitment to keep short term social welfare benefits in line with increases in the take-home pay of workers and to maintain the living standards of other weekly welfare recipients.

On the income taxation front there is only limited scope in the present state of the economy for concessions. At the same time provision is made for increases in personal allowances and in the general exemption limits for persons on low incomes.

The role which key services administered by my Department, such as housing, roads and sanitary services, must play in facilitating future development is an important one. The budget provides an extra £8 million for roads and £6 million for housing.

I will now speak in more detail on the building industry and these key services of my Department.

The building industry is one of my primary concerns as Minister for the Environment. It is an industry which is of vital importance because of its size and output, because of the employment it generates and because of its role in providing the basic infrastructure for future development.

Over the past few years the general trend of the industry has been downward with falling output and reduced employment. It is my aim as Minister to seek to halt — and reverse as early as practicable — this downward trend and to establish solid foundations for sustained future growth. The industry's problems can be attributed mainly to two interdependent factors. Firstly, effective demand has been depressed by the persistent world and national recession and secondly, private investment in the industry has fallen dramatically in recent years.

On the international front, there are signs that the worst of the recession may be over. This is good news for the construction industry since, more than anything else, a resumption of growth in the industry is inextricably tied up with what happens in our economy as a whole. It is encouraging that some hopeful signs have already appeared. Cement sales, which are a reasonable indicator of activity in the industry, began to recover quite sharply from about the middle of 1983 and fell by only 7 per cent in the year. This fall compares with a 15 per cent drop which was being forecast by many commentators at the beginning of the year. In comparison with 1982 home sales of cement increased by 12 per cent in the last quarter of 1983. Housing activity, which accounts for over 40 per cent of construction output, was quite strong during 1983 and I am hopeful that it will improve in 1984 given the particularly favourable indicators now emerging in the housing area to which I will again refer.

As regards private investment in the building industry, which has fallen so badly in recent years, our aim must be to create the conditions within which it can begin to grow again. That is precisely what this Government are attempting to do. It is vital to get the country's finances in order — otherwise we can never hope to have stability or soundly-based growth in the building industry or indeed in any other industry.

One of the disturbing results of over-investment in the building industry in the late seventies was the growth of imports. Notwithstanding the fall in output since then, the level of import penetration has remained high. We are now importing some £300 million worth of building materials annually and it has been estimated that half of these at least could be produced at home. These statistics illustrate the vast potential there is for expansion in the building materials sector — expansion in both the quantity and range of products and of course also in employment.

As I have already mentioned, the indicators are there that the economy is now being handled in such a way as to create a climate of confidence for investors generally including those in the building industry. The Government for their part will continue to maintain a high level of commitment to the industry by providing a substantial part of the total investment in building output and by creating a climate of confidence within which private sector investment may grow.

Of major significance for firms in the building industry are the changes introduced by the Minister for Finance relating to the stock relief concession. It was generally recognised that in the last year or so the clawback arrangements in force had been operating to the disadvantage of many firms. Indeed, the industry itself had claimed that what had been introduced as a benefit had, because of the recession and the need to rationalise on the part of many firms, turned out to be a millstone threatening to drag firms into liquidation. The changes will mean that there will in general be no clawback of relief once granted and, as regards relief already given, the clawback deferred last year will be waived. This concession, therefore, will confer a major benefit on those firms and on the industry in general.

I would now like to refer in more detail to the housing area both in the context of its critical economic role in relation to the building industry and also to the broader social role of providing a decent standard of housing for every person in this country, particularly for those whose resources are not sufficient to enable them to house themselves. In 1983 the decline in housing output tapered off and total new house completions were down only slightly on the previous year with 26,121 new houses built compared to 26,798 in 1982. In addition, the signs are promising for a return to growth particularly in the private housing sector in 1984. For example, new house grant allocations in 1983 were 12.8 per cent higher than in 1982 and new house loan grant approvals by the building societies increased from 6,163 in 1982 to an estimated 6,800 in 1983, an increase of 10 per cent. With regard to loan approvals for existing houses, a remarkable increase from 9,092 in 1982 to 12,700 in 1983 or 40 per cent was recorded. This shows, I think, that people are again finding the confidence in their future which enables them to undertake the greatly increased financial commitments involved in moving house.

Regarding the social aspects of housing policy, I have already indicated in this House that I see the need for a fundamental review of some of the existing statutory provisions governing the local authority housing programme. I intend to push ahead quickly with this review and I hope to have new legislative proposals formulated by about mid-year. A central aim of these proposals will be to provide a better legislative framework within which the problem of housing the homeless and other deprived sections of the community can be effectively tackled.

While the scale of the voluntary housing movement in this country has been small in the overall housing context, it nonetheless continues to play an important role by providing housing for the elderly and certain other special categories of housing need. A special scheme to assist the provision of housing for the elderly by voluntary bodies was introduced in 1979. In 1981 the terms of the scheme were revised and extended to the provision of housing for other categories including the handicapped, deserted wives, battered wives and families on local authority waiting lists. I am satisfied that voluntary bodies can play an increasingly significant role in the provision of social housing and especially in circumstances where support and back-up services are required. The existing scheme of assistance for this type of housing has not, I regret, been as successful as originally hoped and the terms are being reviewed in my Department following consultations with representatives of the voluntary housing movement. I hope to be in a position to announce the outcome of this review in the near future.

The ready availability of adequate mortgage finance is crucial to the private housing programme. I am glad to say that a record total of about £560 million was advanced in 1983 for house purchase by lending agencies, both public and private. The SDA and the Housing Finance Agency schemes continue to play vital roles in encouraging home ownership by those on lower incomes who would not normally be catered for by the commercial lending agencies. In the light of the importance of these schemes and in order to generate increased activity and employment in private housing construction, I am pleased that the Government have been able in the budget to increase by £6 million the provision of £134.5 million in the 1984 Public Capital Programme for these schemes.

An increase of £3 million in the allocation for the SDA scheme brings to £77.5 million the total capital provision for house purchase loans under the scheme for this year. I am now particularly glad to be able to announce increases in the SDA loan and income limits. The maximum ordinary loan which may be advanced is being increased from £14,000 to £16,000 and, in addition, the maximum special category loan is being increased from £18,000 to £20,000. The income limit is being increased from £7,000 to £8,000 which will also apply to improvement loans, the maximum of which is being increased from £4,000 to £6,500. The new loan and income limits will apply to houses, the contracts for the purchase of which are entered into on or after 3 February 1984 or, where an applicant is building his own house, the foundations were completed on or after that date. The increased limits in the case of home improvement loans apply where improvement work commenced on or after 3 February 1984. I am sure that these increases will be welcome news to aspiring home owners and to persons carrying out much needed improvements to their houses.

The increase of £3 million in the PCP allocation for the Housing Finance Agency means that a total capital provision of £63 million is available to the agency for the payment of home loans this year. I expect that this will fund a total of about 3,150 loans. The Housing Finance Agency are successfully raising extra funds for house purchase through the issue of index-linked bonds to certain financial institutions such as pension funds, insurance companies, unit trusts, and so on. There is no doubt that the agency's loan scheme has contributed significantly to the housing programme and the building industry. The agency's scheme by its lower initial deposits and repayments has brought home ownership within the reach of persons who might not otherwise be able to provide their own homes. Since the first loans were advanced by the agency in September 1982 until 31 December 1983 about 3,650 loans valued about £71 million have been paid out and there is a continuing strong demand for the agency's loans.

Building societies are continuing to contribute enormously to the provision of mortgage finance. In 1983, the societies paid out a record amount in excess of £400 million — an increase of almost 40 per cent compared with 1982 — for about 17,500 houses. With loan approvals by the societies running at high levels and the inflow of funds holding up very well, the outlook for 1984 is very encouraging. A further feature giving much satisfaction is the present mortgage rate of 11¾ per cent which is the lowest it has been for six years.

To conclude on mortgage finance, I believe that the prospects for this year are good and that a sufficient supply of mortgage finance will be available from both public and private sources throughout the year to meet any demand that arises. This is particularly satisfying because the experience over the years has shown that the availability of mortgage finance is a critical factor in sustaining the level of private housing output.

A total of £211 million is being provided for the local authority housing programme in 1984. This allocation represents an increase of £3 million over last year's provision and will ensure the maintenance of the programme at the relatively high level achieved in 1983. About 6,100 houses were completed in 1983 — the highest figure achieved since 1979 and about 400 more than in 1982. The expansion has not been confined to completions since over 8,000 houses were in progress at the end of 1983 compared with 7,460 at the end of the previous year and the average monthly employment on the programme increased by some 500 to around 6,400 compared with the 1982 average of 5,900. In short, the local authority housing programme is currently in its healthiest state for years.

My confidence that the programme can be maintained at the present high level throughout 1984 is an indication of the good value being obtained in tenders over the past year or so. In addition, we have begun to benefit from new cost control procedures introduced by my Department during 1982 and 1983. These procedures were introduced in order to ensure that we achieve the desirable objective of getting the best possible return on the capital provided for local authority housing but without reducing standards below an acceptable level or going back to the concept of low-cost housing that caused so many difficulties in the past. In addition to the capital provided for the construction of local authority houses a sum of nearly £155 million has been provided in 1984 to subsidise in full the loan charges on moneys borrowed by local authorities to build houses. This subsidy and its size is a further clear indication of the Government's continuing commitment to provide housing for those members of our society whose resources do not enable them to house themselves.

I have already referred to the high level of new house grant approvals in 1983. For 1984 the Government are providing £11 million for new house grant payments. In 1983 approximately £14.3 million was paid under the special mortgage subsidy scheme. This scheme gives valuable assistance to first-time purchasers of new houses to meet the heavy mortgage repayments over the first five years of a loan. In 1983, approximately 25,000 claims for payments under this scheme were met. In addition, over 11,700 new applications were approved. To allow for payment of these and the cumulative effect of instalments due in respect of applications received in past years, the Government are providing £20 million for this scheme in 1984. This represents an increase of nearly 40 per cent on the 1983 budget provision.

The Government's continued commitment to the conservation and improvement of the country's existing housing stock is shown by the provision for this year of £6.25 million for grants under the house improvement grant scheme, disabled persons and essential repairs grants. The house improvement grant scheme is aimed specifically at the provision of basic amenities in houses, the relief of overcrowding and the carrying out of necessary works to the fabric of a house. For the third year in succession, £1 million is being provided for the task force on housing aid for the elderly. It will allow for the continuation during 1984 of this important programme to improve the living conditions of elderly persons living alone in unfit and insanitary accommodation.

Despite the present difficult economic situation, the State provision for road improvement works this year is £98 million. This includes an additional sum of £8 million which I am pleased to have been able to provide in the budget. The provision of just under £100 million will be used to continue the significant programme of road works now in progress around the country, with priority being given to improving the national routes and selected major works on other important routes.

State expenditure on road improvements in the five year period from 1980 will come to £366 million, representing a four fold nominal increase over the previous five year period 1975-1979. This accelerated rate of investment has allowed substantial progress to be made in implementing the road development plan for the eighties. A major review of the plan is now almost completed in my Department and will be considered by the Government over the next few months in the context of the preparation of the medium-term plan for the economy. It is my aim to ensure that improved major roads will continue to bring easier access to our principal ports and harbours, shorter travelling times on the major inter-urban routes and reduce traffic congestion in our larger cities and towns.

Major projects which will continue into 1984 include further work on the Cork/Mallow road; Redmond Bridge in Waterford; the ring road in Kilkenny; the Bandon Line road and bridges in Cork; the new Corrib Bridge and approaches in Galway; by-passes of Leighlinbridge, Middleton, Navan and Athlone; and, in the Dublin area, by-passes of Swords, Palmerstown/Ballydowd and Cabinteely. Schemes due to commence in 1984 include Stage 2 of the Santry by-pass, the Wexford by-pass, works from Dunkettle towards Carrigtwohill in County Cork and at Slievrue in County Kilkenny. These major works will be supplemented by a programme of improvements on other roads in the national road network. Provision will also be made for essential works on a number of important urban and regional roads.

The extensive capital asset represented by the existing road network must be preserved by an adequate programme of road maintenance. This year grants totalling £25.5 million are being made available to road authorities for maintenance works on national and other routes.

Road works have the capacity to generate direct and indirect employment. They give a wide distribution of direct employment both on-site and off-site throughout the country as well as considerable indirect employment in quarrying, plant and other related industries. I am satisfied that the additional capital provision of £8 million made in the budget will maintain employment in road works at a satisfactory level.

The investment of considerable additional funds on the roads area could of course be economically justified. With this in view, I am examining the scope for involving the private sector more in the financing of road improvements to supplement the amount available under the Public Capital Programme.

I would like to refer here to the fire services. The effects of fire, both in terms of lives lost, human misery and also destruction of property, are very serious.

The Government are fully aware of the need for adequate levels of capital investment to provide for the development of the fire services and are increasing their funding accordingly. Despite the difficult economic situation, I am happy to state that this year's capital allocation of £7.5 million for the fire services represents an increase of 25 per cent over the £6 million provided in 1983 and is three and a half times greater than the 1980 figure.

This is concrete proof of the Government's real commitment to the development of the fire service. It will enable good progress to be made with the on-going programme for the provision of new fire stations and training facilities and the upgrading of old and unsuitable stations. At present, work is in progress on stations at Phibsboro, Rathfarnham, Blanchardstown and the O'Brien Institute in Dublin and at Bray, Tinahely, Clonmel, Athlone, Limerick, Killeshandra and Dundalk. Work is to commence shortly at Galway, Cavan, Ennistymon, Foynes, Cappoquin, Leixlip, Bantry, Cashel and Abbeyfeale.

The substantially increased level of allocation which I have provided for the service enables planning to proceed for the provision of additional stations throughout the country. The £7.5 million allocation will also be used to assist local authorities to purchase fire appliances, rescue tenders, communication and ancillary equipment. These developments will improve the protection for life and property and reduce the economic waste from fire.

The increased level of borrowing for capital investment in the fire service would normally result in fire authorities having to meet heavy loan repayments when there are many other demands on their resources. To ease this burden my Department recoup 50 per cent of the loan charges incurred by fire authorities on such borrowing. This is a substantial encouragement to them to provide and maintain the facilities that are needed. Subsidy amounting to £1.46 million is being provided for in 1984.

The Government are conscious of the vital importance that the provision of infrastructure has in the promotion of economic development and the sanitary services programme has a key role in this regard. With this in mind this Government made substantial capital available in 1983 for the programme and I am glad to say that a similar high level of investment is being made this year. The amount provided in 1984 for the programme is £98.6 million, the bulk of which is provided for the local authorities.

I was glad to see that the sanitary services programme in 1983 provided employment to almost 1,900 persons during the year and this level of employment is expected to be maintained in the current year. The high level of investment in the programme will again allow some £7 million to be provided for the small scheme programme for schemes that cost £50,000 or less. These small schemes are carried out by the local authorities on a direct labour basis and, apart from the benefit derived from their construction, these schemes are of assistance to the local authorities in maintaining employment in the labour units involved.

In 1984 the subsidy on the sanitary services programme will amount to £36 million as against £27 million in 1983. This subsidy consists of contributions to local authorities towards loan charges incurred on the works financed under this programme. The high level of subsidy required is a reflection of the higher activity generated in this area in recent years and the corresponding increased capital provision made for it.

In my short time as Minister for the Environment I have become increasingly aware of the severity of the financial problems which beset our local government system. The importance of the role of local authorities both as elective local representative bodies and in providing and maintaining essential local services to the community requires that every effort be made to ensure that they are both structurally and financially viable for the future.

The Government are committed to proceed with local government reorganisation but improvements in the forms of local government cannot be of benefit unless adequate financial provision is made for the maintenance of new structures. Since the abolition of domestic rates and, more recently, the High Court judgement — now confirmed by the Supreme Court — on rating in accordance with the land valuation system, local authorities have been experiencing significant financial difficulties.

Various factors have combined to produce a situation in which local authorities are dependent on the Exchequer for the major part of their revenue. This is neither appropriate nor desirable for the effective functioning of local government. The extension by the Local Government (Financial Provisions) (No. 2) Act, 1983, of local authorities' powers to charge for services and the decision in 1983, and again in 1984, not to limit the amount by which commercial-industrial rates could be increased have gone some way towards recognising the need for local financial discretion.

As mentioned on previous occasions in this House and elsewhere, an examination of local finances has been underway in my Department in recent months. The purpose has been to identify areas of concern, such as the growth in the share of Exchequer financing of local government and to seek to redress the balance by finding some means of restoring local financial independence.

Finding a solution to local authorities' financial problems will not be easy. The task is to devise a system which will satisfy the basic needs for the medium and longer term. These include, firstly, the need for a firm basis to be provided for adequate funding of the various local services and programmes; secondly, the need for a fair degree of local financial independence and discretion; and, thirdly, the need to keep within reasonable and manageable limits the evergrowing demands on the Exchequer in line with the requirements of national economic policy. A sum of just under £280 million has been provided by way of rate relief grants for local authorities for 1984 as against £277 million for 1983. It must be remembered for comparison purposes that the 1983 provision included a special extra provision of over £31 million provided by this Government in last year's budget.

One of my objectives in the area of policy is to bring to fruition the review of local government structures which is at present proceeding. I do not think that anyone who has any knowledge of the system would at this stage query the need to modernise and adapt local government to the requirements of the current age. It is essential that local authorities should be able to respond quickly and effectively to the challenges presented by social and economic change and that the system should be efficient in delivering services to the public.

I am also very concerned to strengthen the democratic operation of local government. This applies particularly to adapting the system to the major changes which have taken place in town populations. In many cases now a major proportion of townspeople are living outside their own town boundaries — in some cases indeed there are more living outside than inside: Ennis and Navan are examples. These people have no say in the election of the town councils on which they depend for major services and this is an obvious anomaly — and a serious one — in the practical operation of local democracy. In Dublin, of course, special problems of area definition and representation have also arisen in consequence of the massive increase in population there.

We also have to see how reform in local government systems might reflect the growth in community organisations and their willingness and capacity to contribute to local well-being. Before concluding this review I will be having discussions with the County Councils' General Council and the Association of Municipal Authorities and it will be my intention to bring forward comprehensive proposals for reform as soon as possible.

A major criticism made of this budget by the Opposition is that "it does nothing". What it does, of course, is that it provides for a continuation of the conditions in which the substantial gains emerging at the end of 1983 and to which I have referred can be further built on — these include a substantial reduction in inflation, improvement in balance of payments, increased industrial output and exports, reduced interest rates, etc. In particular it will further help to create the essential pre-conditions to enable us to benefit from the expected gradual upturn in the world economy. The measures being pursued by the Government are boosting business confidence which is necessary if we are to reverse the decline in private sector investment and in the process facilitate development and create jobs. All in all this budget is a further step on the road back from the brink of economic disaster as reached by the Opposition prior to their U-turn on the irresponsible economic policies pursued by them over the period 1977 to 1981.

As Minister for Labour I became acutely aware of the very real talents and commitment among our younger people. What is essential is that we provide the necessary confidence and create the climate to utilize and build on this unique asset. I am convinced that the responsible lead being given by this Government, together with the benefits accruing from the expected upturn in the world economy and the substantially reduced inflation rates, with related improved competitiveness, will create the conditions in which new development will again freely take place. It is in this way that we will provide the required new jobs and improved living conditions for all our people.

Mr. Flynn

Having listened to the Minister for the Environment, one could be excused for saying that this budget is an extraordinary exercise in political cynicism typified in the abandonment of everything on which the so-called Coalition were elected. They have reneged on their employment strategy, on the questions of the budget deficit, on social welfare allowances and health charges, on their treatment of the taxpayer and the lack of attention to tax reform, as well as their shameful disregard for the agricultural sector. This budget cannot achieve what the economy requires. There is a refusal to accept responsibility for the depression that prevades the lifestyle of every section of the community. It fails to recognise the potential for reform and for a return to growth in the economy.

This budget condemns those at work to new levels of frustration and insecurity; it condemns those without work to the prospect of never having employment; it condemns those unable or too old to work to the poverty line. It is a total negation of the joint agreement published in December 1982. It is an abandonment of that agreement which was sold to the electorate as the means whereby this Government would deal with our social and economic ills. It is an abandonment of the Fine Gael sacred cow of so-called financial rectitude. This is not a neutral budget. It is just a hotchpotch of compromises more concerned with elections and staying in power than practising what the Coalition parties have been preaching for a number of years.

The greatest single disappointment is the acceptance by the Government of the inevitability of unemployment at an unacceptable level and their obvious incompetence or impotence in dealing with the job crisis. Our unemployment situation is the greatest social and economic problem we have. That has been said by every speaker in this House during the past 12 months but it must be borne in mind that the Government are charged with the responsibility for doing something about it. They have reneged on it and have so frustrated the population that people are left with no option but to believe that their children will never obtain gainful employment.

The increase in youth unemployment is double the EEC average and what should be our greatest strength is turning out to be our national nightmare — youth unemployment. That very statistic should have been the only figure which really mattered in the budget strategy but it received only one mention when the Minister said that the labour force was increasing. That was the only recognition given by this Government who stated in their joint programme that unemployment would be their primary concern. What was the expectation of youth just a week ago? It was that the Minister would find it possible to announce some new initiatives, some new incentives to business, some new planning structure in relation to our resources which would give hope to the throng of unemployed. Their hopes were dashed. Some 70,000 young people under the age of 25 have lost faith in our democracy and in this institution. The requirement is 20,000 new jobs per annum to deal with the job demands of our young unemployed. One would have thought that the Minister for Finance would have recognised that fact and put us in the picture.

Between 1982 and 1983 there were 55,000 redundancies and the Government have not attempted to find replacement jobs. There are 30,000 fewer people in manufacturing industry than there were in 1980. The industrial base has been stripped naked. This was made patently clear to the Government in recent submissions from interested parties who were seeking a change of heart by the Government in regard to opportunities for business to regenerate itself. They were disappointed and our young people are totally frustrated. The Government have neither the will, the capacity nor the competence to deal with that one issue which they promoted as the primary objective in their agreement for coalition. The cost to the economy in 1984 is estimated at approximately £900 million to meet the payments and to cater for the lost tax revenue of the unemployed. The number unemployed is not 208,000; it is much closer to 250,000, because there are many people, particularly young people, who do not sign on. The Department have made the conditions for qualifying so restrictive that many people have ceased to sign on. However there is no recognition in the budget that the position is so bad except for one miserable line which gave the total number of people coming on stream.

Ministers and Government spokesmen always ask what alternative the Opposition would provide. I will give a brief outline of some measures which could be taken. There is need for a short-term emergency strategy to deal with unemployment. It could be catered for under the following headings. There must be a greater emphasis on the construction industry and not in accordance with some of the figures the Minister gave just now which I will blow a hole in later on. There is need for greater investment in infrastructural developments. There is need for the development of our natural resources. No cognisance has been taken of the potential that exists there to deal with unemployment. If necessary there should be a transfer of financial aid to cater for renewed activity in fishing, forestry, agriculture, tourism and everything that we have or can grow or export.

No great notice was ever taken of the potential of the services sector. There should be a plan to cater for that. There was a complete negation of our plan to deal with import substitution. If the Government were serious about this there are a minimum of 50,000 jobs which could be created in this area. We are told that we import £800 million worth of products for the building industry which we could make here. Even if one job could be created for every £10,000 worth we import, we could create 80,000 jobs in this area.

There is great need to develop small industries. We have heard a lot of lip service paid to this area but nothing concrete has been done. I am talking about the development of enterprise centres and so on. There is one area which the Minister might consider getting money from to cater for the programmes I am suggesting. I am sure this will please the Labour Minister opposite. The time has come when our financial institutions, if properly approached, could make a considerable contribution to these programmes. They have vast funds available. They should be approached in the national interest. They should make their resources available with perhaps a moratorium on the interest. The banks and financial institutions will not be able to survive if we continue on the path we are now on.

The Minister for the Environment referred to the construction industry. I found it difficult to know what Budget Statement he was referring to. On page 66 of the published Public Capital Programme for 1984 there is reference to the productive infrastructure capital money made available over the years. In the last two Fianna Fáil administrations there was an increase of 51 per cent and 25 per cent respectively in what was made available to the building industry under that heading. Last year the out-turn represented a reduction of 17 per cent on the total moneys available for the building industry. This year it is suggested there will be a 1 per cent increase which, with inflation at 10 per cent, means a 9 per cent decrease. The Minister for the Environment had the audacity to say he was proud of these figures. Does he realise that the figure for the unemployed is totally inadequate and is an inadequate response to the crisis which exists in the construction industry? The indicators, as far as the industry are concerned, are dismal. The amount of work they have for the future is declining. The professionals one would expect to remain in the business are seeking the quickest way out to other jurisdictions and walks of life. If they are staying they are on the dole hoping for the return of a good Fianna Fáil Government who always understood the need to protect the construction industry. We always believed it was one of the fundamentals for job creation on and off site.

The volume of investment fell in 1982 by 12 per cent and by 15 per cent in 1983 in this industry. Total unemployment is now at 50,000 people. Is the Minister seriously telling the House that he has a solution to that from the figures outlined in the capital expenditure programme? It does not make sense and the people in the construction industry are on record as telling the Minister and the Government that that is their view as well. The 50,000 people unemployed in the construction industry are costing the Government and the taxpayers about £70 million in unemployment and pay-related benefits. It is accepted that about £30 million is lost in revenue to the State. That adds up to £100 million approximately, which has to be catered for in the current budget deficit. If there was a reduction of £124 million last year in the capital programme for the building industry it seems very poor economics to lose £124 million of construction and infrastructural development and at the same time include £100 million on the current deficit to cater for those unemployed in the industry.

To put the Minister in the picture, I would remind him that a substantial proportion of the total number of companies which closed last year were construction companies. An unfortunate consequence of any such closure is that trainee, apprenticeship and recruitment schemes are discontinued also. That area of activity almost ceased in 1983. We experienced also the virtual destruction of the construction industry materials industry and of the services backup. Therefore, it is not a matter only of the number of people working for a construction company at the time of closure who become unemployed. There are many other people involved also.

Despite the seriousness of this matter, there is no effort being made to deal with it. We have a situation in which not even lip service is being paid to the problem. In the public capital expenditure in so far as it affected the building industry there was an increase of 31 per cent in 1981 and an increase of 14 per cent in 1982 — on both occasions Fianna Fáil were in Government — while the outturn for last year represented a reduction of 10 per cent in a grand total of £1.154 billion. This year we are told there will be a further reduction of 2 per cent on the already reduced figure. We may take it, then, that in effect there is a reduction of about 12 per cent in real terms in the public capital expenditure programme in terms of the building industry. That situation can only spell disaster for another 10,000 people who otherwise might continue to be employed in that industry.

The disintegration of the capital expenditure programme in terms of the building industry is the fundamental reason for the high level of unemployment in the industry. The budget deficit is being increased by leaps and bounds in order to cater for both the lost revenue and the benefits that must be paid to those people who lose their jobs, whether they have been employed directly in the industry or in ancillary industries.

There is a great need to increase capital expenditure to allow the construction industry, not just to revive itself, but to survive. The time has come when the Government must stop starving existing contracts of necessary funds to complete the work involved. This is another strategy that has been developed by the Department of the Environment in the past year or so. The idea is to ensure that once a job starts the certificates are not sent in for some time and that when they are received, the whole situation is stalled long enough to render it impossible to finish the job. The only result of this is an increase in the completion cost, a factor that is to the detriment of the taxpayer.

The Minister announced recently that he intends to make further capital moneys available for the road network. What are being made available in this respect are the most paltry and insignificant sums imaginable. If the Minister thinks that these amounts will result in relieving the situation in so far as the transportation needs of the country are concerned he should take a few Ministerial trips so as to see for himself the extent to which the road network has disintegrated in the past 12 months. Obviously, the Minister does not travel far from the Pale in his journeys. He has not succeeded in persuading his colleagues in Government to make available the capital moneys the local authorities need to deal with what is an essential part of our infrastructural needs.

As I have said, for a long time there has been only scant attention given to the need to develop small industries. We can all recall with some joy the big movement that took place in the past 15 years in attracting major foreign multi-national concerns, particularly in the technological field, to this country. It was not popular in those earlier years to advance the need to cater for our small industries. However, there was a change of heart, with all the verbosity that accompanies such changes from time to time, but that is no substitute for doing something positive.

The Opposition must again put forward the alternatives that will regenerate growth in our economy. I say this because of the lack of any fresh thinking from the Government. The time has come for us to have a national plan that will incorporate innovation and small enterprise centres. To undertake such work effectively it would be necessary to transfer some of the resources that are available and to move away from the red tape that is preventing some of the Government agencies from dealing properly with this area. I suggest that some of the existing floorspace under the control of the IDA should be made available to organisations and groups who are interested in utilising it for small enterprise-centre type operations. It is time also that the existing floorspace owned by local authorities is made available for such purposes. One can hardly credit how slow local authorities are in making floorspace available to interested parties. There seems to be much reluctance on the part of State agencies, both nationally and locally, to provide, to lease or to give accommodation to people interested in helping themselves from the resources that are available. We should utilise more capital to build, to purchase, and to lease workspace, not to cater for the big multi-nationals who are in a position to cater for themselves from their own resources but for the small operator who requires 300 or perhaps 500 square feet of workspace and who has not the expertise that the bigger operator has. It is not enough that the small operator be told by politicians that he will be given all the assistance that can be given to a new entrepreneur. He should be actively supported and promoted. There are one or two incentive centres that have been very successful but they should be repeated in the context of a national plan throughout the country. We should start by choosing a few towns and making available to those who are willing and interested some of the floorspace that is available to national and local agencies.

Minister for Labour (Mr. Quinn)

Will the Deputy include Upper Mount Street in that?

Mr. Flynn

The Minister has transferred from the Department of the Environment where obviously he was responsible in some part for the disaster as outlined on page 66 of this book. But if he is to repeat that sort of performance in his new Department he would be well to keep quiet at this time.

There is a need also to mobilise the regional offices of the IDA in conjunction with county development teams. There seems to be somewhat of a strain in that connection all the time. Perhaps the Minister would apply his good offices to that area to help those young people coming from the programme set up under another agency under the control of the Minister and who are now frustrated because at the conclusion of the programme they have no place to go. I have met several of them in recent weeks. Their one cry is what will they do now. The Government have the power to deal with the matter and I suggest that they apply themselves to it. I would support the setting up of trade fairs for small industries in each county to show what is available and what can be sold on the home and the foreign markets. We are trying to encourage young people to learn new skills but at the end of the day we are sending them out on the streets without any hope of work.

It all comes back to the joint programme entered into by the Coalition parties. They should be honest and say they have failed and are not accepting that document as the standard to be applied to the economy. The budget deficit is a typical example. At one stage last year the figure was £897 million, as a result of a trick in summer it grew to £950 million and the outturn was £1,085 million. I do not know if that is in accordance with the language in the joint programme but I could not find it stated there that it was the intention of the Government to allow the budget deficit to increase. Obviously they have abandoned the joint programme, as they have abandoned the task of reducing the budget deficit during the next four years. I wish they would state that.

This budget is just one of three this year and everyone knows that. The man in the street knows that if there is no allowance for public service pay in the budget it is obvious that a supplementary budget will be needed later. In addition, it will be a case of diminishing returns in respect of the hardy annuals and there will be no buoyancy in the economy. These items will have to be dealt with by means of further budgets. I presume the first one will be after the European elections and the second budget sometime after the summer recess. The general public are well prepared for that. Let us not forget one point, namely, that removing the budget deficit in five years won the Coalition Government the last general election. They have abandoned that now and they should do the decent thing and say so.

They hope the deficit will go away by allowing it to reduce as a percentage of GNP and they are depending on international economic growth to provide them with the necessary excuse. I should like to put them on warning with regard to this matter. Last year in the United States the deficit was $64 billion and the outturn this year is expected to be $100 billion. I hope the Government get the message. What is happening in the United States is election politics also. While the American people can tolerate a deficit of $100 billion this year to elect the incumbent in office, there is nothing surer but that as soon as the election is over there will be a battening down in America again and we will be back in another recessionary period. That will not give us the growth of 2 per cent or 2.75 per cent about which we have heard so much recently.

The man in the street does not want to know about gross national product. He wants to know about the Government's actions with regard to their Programme for Government. If that programme stated the budget deficit would be reduced, how did it happen that last year the outturn was £1,085 million and that for this year it is estimated at this point, without taking into account what will happen later in the year, at £1,088 million? The simple truth is that the budget deficit is not being reduced, rather is it increasing.

It can be further substantiated that the Government have reneged on their written stated commitment to the people. Last year the national debt was £15.7 billion, an increase over the previous year when it was £12.8 billion. In simple arithmetic it means that in one year the national debt increased by £2.9 billion, an increase of 22 per cent. That was borrowed money and I want to know what is all this talk about the Government reducing international foreign borrowing. The truth is that £15.7 billion means a sum of £4,485 per person of the population and last year the Government increased the national debt for every individual by £800.

What did we get for that increased borrowing by the Coalition Government, despite the fact that they were adopting a "holier than thou" attitude, that they would reduce borrowing and the budget deficit? What return did we get for that extra borrowing? The Irish people know what they got so far as hardship is concerned. Last year's budget was referred to by all commentators as the toughest since the foundation of the State. If that was the case, then the budget this year must have been even tougher because it simply added to the 1983 budget.

What about the "funny money" in the budget? I will give the House a few examples where the Government found it useful to cook the books in the bookkeeping exercise last Wednesday. There was a sum of £50 million pre-payment of interest from An Bord Telecom. A sum of £20 million was brought forward from the building societies and £7 million extra tax revenue from the self-employed. All of those moneys will have to be catered for next year. The Government are borrowing this year in advance of the outturn for next year. That money will have to be found and it will be done in budget No. 2 or budget No. 3 this year.

With regard to the income tax provisions, it is unfair and misleading to the ordinary taxpayers to suggest they will be better off. Whatever about the civil servants who framed the figures for the budget, I am quite sure the poor innocents who typed the reports knew well they were being codded and every PAYE worker knows this also. If there had been no change in the tax bands, allowances would have had to increase by about £650 for married people to enable the taxpayers just to stand still. The increase granted by the Minister is £700 and the bands adjustments and the tax allowance increases mean, according to the Minister, that 15,000 people will leave the tax net temporarily. He forgot to use that word but he brought into the Budget Statement a new sentence that will reflect on him for the rest of his life. He said the tax would move progressively. I say to him that the 15,000 people who might, he says, temporarily find themselves out of the tax bracket will only result in 56,000 persons going from the 25 per cent to the 35 per cent bracket. How else could the Minister not suck in from the taxpayers the extra £90 million in his revenue figures? He had to get it from someone in the PAYE sector and he is simply trying to create an illusion when he says people will be better off.

Many of the 15,000 he says will temporarily find themselves out of the tax bracket will before the end of the year find themselves back in again. But they will be back in when they get a small increase in their wages. If that increase is in accord with the inflation rate it should be somewhere around 10 per cent and so these people will not find themselves back in at 25 per cent but at 35 per cent. The PAYE sector will therefore be worse off. There is no concession to them despite the fact this is our second effort at a concession. Each budget has sucked in more money from the PAYE sector despite the fact that it was stated here unequivocally in their joint programme for action that they would relieve the burden of tax and reform the tax structure. If that is not cynicism I do not know what it is. It is an abandonment of a promise given. It is a reneging on something duly agreed, on something expected by the general public, but we still do not have it.

A great many people were taken aback last week. Mark you, the Government have done a fairly good job at selling the next item with which I shall deal but it will dawn before too long on the ordinary person that the bond washing operation is not all it is alleged to be. The Minister has cleverly suggested to the general public that he has got hold of some tax evaders and, because of that, he is a great fellow. Let me put the matter in perspective. If I am wrong the Minister can put me right. The Minister and the GIM and the agencies attached to the Government are seeking to create an image of some investors and some institutions being involved in some kind of large tax fiddle. That is the perception they would like to generate in the public mind. The short-term advantage they are getting as a result of that provision in the budget will have very long-term consequences and it is not true to say the Government were not aware of that. They were fully aware of the practice. The Department of Finance were fully aware of the practice. Why would they not be? Government securities were involved and successive Governments have always maintained that these securities should be exempt from capital gains tax. That was a Government ploy down through the years.

This Government are not coming down on some tax avoiders. They dream up the figure of £30 million. I would like to know where they got that £30 million which will come into the coffers because of the bond washing operation. The budget could not suggest a figure. If the Minister had a figure, if he could have dreamed up a figure as he dreamed up so many other figures to make his balancing act a little more credible, he would have shoved in the £30 million. He could not give us the figure in his Budget Statement but suddenly now the Department of Finance can serve up a figure of around £30 million. Had they had that figure last week the Minister would have used it. This £30 million figure is a fiction. The figure will be nothing like that.

On the other side of the coin we have to deal with the disadvantages of what the Minister is doing. The Stock Exchange is our financial market and even the ordinary man-in-the-street knows that when that goes into spasm there is something seriously wrong and no amount of shoring-up publicity that tax avoiders are being caught will disabuse the mind of Seán Citizen, not to talk about the loss of credibility and creditability as a result of this provision. But it will not be just a lack of confidence — something that has been well articulated by people — but what about the non-availability of borrowing from the domestic financial market, borrowing which will be sorely needed by this bankrupt Government? It will not be there if it is all washed out and so the Government will have to borrow somewhere else and that somewhere else will be the foreign international money market. We are being put in pawn. There is no better way I can say it except to say it is surely in accordance with what I viewed in the past two weeks coming into the House — the pawnbrokers parade. Take a look at it outside between here and Kildare Street. Beautiful rows of three balls running round both sides of the enclosure. We have turned the precincts of the House into a pawnbrokers' parade and this provision more than any other condemns us to that. There will be need for security.

Where will all these new funds that have been dispossessed of their true and natural home find a new home? What new paradise is available to them? Someone suggested the building societies would mop up the thousand millions. I do not think it would be in the best interests of the building societies to take on more short-term money. It would certainly give a jerk to building societies' balance of payments and their prospect for loans if they have the money for a fortnight and suddenly found that it was gone at the end of the week. The money will not find a home with the building societies. It will find its way out of the jurisdiction. It has been suggested it might find its way into other institutions but what has happened in the last week where bond washing is concerned is that £1,000 million of Irish taxpayers' money is now being made available to restructure the British economy at the expense of our own.

It is not true to say that it is only financial institutions which will suffer. Financial institutions get their money from small investors. In turn that money is invested and subsequently comes back by way of interest and an increase in capital. But investors are being forced now to invest outside the country and they will have no control. The market has been taken away from them and bond washing is simply an exercise in whitewashing the budget hardship we have endured for the past week.

There are other provisions not quite as serious but yet provisions which will have a very big impact on Seán Citizen. I refer to the VAT. The introduction of VAT on clothes has been a pre-occupation of Fine Gael for the last couple of years. They were thwarted on one previous occasion but, with political vindictiveness, it was going to be rammed down the throats of the general public whether they liked it nor not. The tax was brought in at 8 per cent, but the aim is progressively to apply it up to the level of other goods taxes of 18, 23 or 35 per cent. That is the reason for the new term mentioned in the Minister's speech of progressive activity in so far as economic matters are concerned.

This provision takes no notice of the number of clothing companies which have been forced to close in the past couple of years. For this industry to survive there must be a stable trading climate. One must generate consumer spending, but the position of the industry has been weakened in the past week. This is going to lead to increased imports, which means increased closures. It is typical of the attitude permeating the whole Budget Statement which is: get the figures right irrespective of the job losses. Fourteen thousand jobs are at risk in our clothing industry, in which 8,000 jobs have been lost since 1979. There has been an erosion of competitiveness in that industry in those few years. Importation of low class merchandise is flooding the market but, nevertheless, although this could be the straw that would break the back of that industry, the Government got back at the general public. Because they were defeated on this once, they would not continue to be defeated on it.

Mr. Quinn

Garbage.

Mr. Flynn

Cross-Border traffic was going to be reduced. We are all the time talking about traffic going up in the opposite direction. There had been a fair traffic down here for the purchase of our merchandise in the clothing industry, but the Government are just cutting that out as not being worth while. This is an insensitive measure imposed on the most sensitive employment industry. It spells the end of another indigenous industry in the short-term.

In the midst of a whole range of bad deeds, the social welfare provisions of this budget take their place in the order of merit. The unsocial, insensitive face of the Labour Party is shown. It was understood that if any provision of the budget was under the direct control of the Labour Party, it surely must have been the social welfare provision. What a disappointment to everybody who has to be a beneficiary under our social welfare system. There will be no largesse in that respect, so far as the Labour Party are concerned. That party have learned very little. One would have thought that the defection of one of their better Members on one previous occasion, would have shown them the light but that lesson has not yet been learned by Deputy Bell.

Mr. Bell

That is a compliment.

Mr. Flynn

It is a pity that some of the pseudo-socialists who jabber away beside that Deputy had not a little more courage when the opportunity was given to them. They are more concerned with protecting their own rotten seats in here than in providing, even in the harshest of harsh times, the limited amount necessary to keep body and soul together in the thousands depending on our social welfare system. The provision is 7 per cent from next July, but I presume that it is for the whole year, that that 7 per cent will last to the end of December. A simple bit of arithmetic will show that that is 3½ per cent in the whole year, if starting from 1 January. These people have to live other weeks as well, not just from July. The actual increase would amount to one-third of the inflation rate to which the Government are admitting. If that is not telling the old age pensioner, the retired or sick person, the deserted wife and any other beneficiary that there will be a positive decrease — excuse the paradox — in their living standards, I do not know what is. If anyone can suggest, and particularly the Labour Minister present, that reducing the standard of living of the old age pensioners and the sick is in accordance with the so-called document on joint agreement on Coalition strategy and in accordance with socialist thinking, it is time all the Labour Members did what their former Leader, Deputy O'Leary, did and joined up with the ultra right-wing conservatives to whom they are latched anyway.

An Ceann Comhairle

The Deputy has seven minutes.

Mr. Flynn

Thousands of medical cards are being withdrawn every day. Whether the Minister knows it or not, the limit now is £85 per week for a married couple to qualify for a medical card. In this Budget Statement two old age contributary pensioners would have £96.50p between them for the week, which would mean that they would not be entitled to a medical card, even if the £5 extra is given to them from next June. If that provision of £5 extra eligibility limit for certain old people had to be made, it means that nobody else will be entitled to that before the end of the year. That is the realism of it. It will be trotted out that all this shows the need for reform of the health services. Children's allowances are increased by 7.1 per cent — from August next, of course. That is the princely sum of 20p per week per child. In effect, it is 8p a week per child from today on. What a magnanimous gesture to the campaign against poverty of the so-called Coalition Government.

The unemployment assistance for smallholders has already been dealt with by many speakers. This is a matter of concern right now to the 16,500 small holders on our west coast from Donegal to Kerry who have had their benefits slashed and their living standards cut in half by the imposition of something which does not stand up to scrutiny, because the High Court decision need not apply in this case, if the Government so wished. You cannot use the Griffiths valuation system to gain tax revenue, but there is nothing in the court judgement which says that it cannot be used as the yardstick to give out benefits. The living standards of all smallholders from Donegal to Kerry are being decimated in support of some new policy which nobody can yet quite understand except the political reason that there is no Labour participation, front or backbench, in the Government of this House and that there will be none. That is why we must suffer the brunt of their ire at this time.

We also have to suffer in other ways as well so far as health is concerned. We have the new health system under which one can get sick on a five day week — the new sickness syndrome of "get sick from Monday to Friday, but do not dare to attempt to do so on Saturday or Sunday". That is what, in effect, the health cuts mean to the health boards, as they have been directed by the Minister for Health and Social Welfare. To give the Minister one simple example to bring it home to him, it involves a reduction of £4.5 million, or a cut-back to the Western Health Board. Whether the Minister knows it — and the proposals are not now a matter for negotiation — it is being directed at that £4.5 million——

An Leas-Cheann Comhairle

The Deputy has two and a half minutes remaining.

Mr. Flynn

I went to the trouble of taking down the time when I commenced — and I have had this out with you before — I have six minutes to go by that clock. If you insist, fair enough but remember I took it down deliberately this time.

An Leas-Cheann Comhairle

I have just taken the Chair and I am told you should finish at 4.52 p.m. I am sure the Deputy will accept the ruling of the Ceann Comhairle.

Mr. Flynn

I have no choice but to accept it, but it is not the first time I have had this. There is a cut-back on essential emergency services directed now by several health boards because of the direction of the Minister. I understand the response to be: who will take responsibility if somebody should be unfortunate enough to get caught up in some tragedy? The answer is that the health boards will pass on that responsibility to the Minister. Therefore in effect what we are being told is that this country will no longer be able to provide the minimum emergency services necessary to keep the health boards going. To save that £4.5 million in the Western Health Board means that Castlebar General Hospital would have to be closed for 15 months. Today we are told that the emergency ambulance services in the Western Health Board area have to be curtailed, that there are new rostering systems, which means there will not be an ambulance to bring the unfortunate ill to hospitals.

I shall conclude by saying that the unemployment will remain unemployed and will be joined by thousands of others this year. The employed will have their frustration turned into despair. Whatever about the pawnbrokers' parade that goes on out in the Kildare Street forecourt, I contend that this Government are selling out our greatest national asset, our people, and they are doing it for short-term monetarist advantage. I put it to them now, that the IMS poll said there was 68 per cent of our people——

An Leas-Cheann Comhairle

The Deputy's time is up.

Mr. Flynn

I am finishing a sentence; do not be so arrogant, a Leas-Cheann Comhairle.

An Leas-Cheann Comhairle

The Deputy is the last person who should accuse anybody of being arrogant. Would he please conclude?

Mr. Flynn

The IMS said last December that 68 per cent of our people were dissatisfied with the people opposite. By a straw poll even today they will find that it is now complete, they want them out and the sooner they vacate office the better.

Minister for Labour (Mr. Quinn)

I listened, as I normally do, to Deputy Flynn with a degree of interest, concern and attention. Certainly I was gratified that we had seen fit in this budget to reduce VAT on theatre tickets from 35 per cent to 5 per cent because Deputy Flynn's performance certainly justified the belief that there is within the Irish people a theatrical tradition, which if properly harnessed, could earn great revenue.

Mr. Flynn

If that is the Minister's response I am sorry for him and his Government.

Mr. Quinn

In the Deputy's hour long flight of fantasy he was driven at one point to exclaim, in relation to his critical analysis of our policies, that there was not even lip service paid in the budget to some of the problems he went on to identify. I heard Deputy Flynn speak from these benches in 1977 and describe the Fianna Fáil manifesto published at that time — during that enormous epochmaking year — as the most important book to have been published in Ireland since the Bible. I heard him say that with my own ears sitting over there. I say to Deputy Flynn, and to Deputy Ormonde who was not in the House at that time, that the last time we had a budget with which people thought they could be happy or cheer about was in 1977. Yet they are still paying for it and their children and their grandchildren will be paying for it because of the kind of extraordinarily confused mixture of liberal popularism and contradictory arithmetic, logic and semantics we have just heard from Deputy Flynn.

Mr. Flynn

I am glad the Minister has been paying attention to my speeches in this House since 1977; he may learn something from them.

Mr. Quinn

I always listen. If position papers could build houses, then we would not have anybody homeless.

Mr. Flynn

The Minister should get on and justify that thing last Wednesday.

Mr. Quinn

If policy documents could provide schools we would not have overcrowded classes. If manifestos could create jobs we would not have any unemployment and if resolutions could build hospitals we would not have anybody awaiting hospitalisation. Finally if election promises, such as Fianna Fáil election promises, could drain this land, then the Shannon would have been drained years ago.

The Deputy advanced one good idea in the course of his contribution, one which I give him an undertaking to pursue, that is the question of investigating the available floor space in IDA advance factories and other such institutions. but, for all of that, it seems to me that the Deputy was incapable — and it is a tragedy for this democratic process hopefully soon to be broadcast — that, for example, in relation to the question of VAT on clothes, he obviously did not hear Mr. Jodi Carr on the radio last Saturday say that the rate was reasonably acceptable, that by and large the industry was not surprised. Finally in relation to the so-called telling point of the Deputy's argument — that it would contribute to job losses as a result of extra imports — Mr. Carr's considered view, and he is one of the major manufacturers in this area, is that because for the first time the importers of foreign made clothes will have to pay VAT at point of entry, domestic manufacturers of such clothing items, now subjected to VAT at 8 per cent, will for the first time have a differential advantage.

Mr. Flynn

What about the 8,000 who lost their jobs over the last three years?

Mr. Quinn

Therefore some of his arguments advanced in that area, his journey down the woes of the building industry were like a broken record. He refused, as do Fianna Fáil's speakers frequently, to put the other side of the argument. At present the ordinary taxpayer pays over 70 pence in every pound that goes on to every building site in this industry. And if there has been a withdrawal of capital from the construction industry it has not been by the public sector, rather it has been by the private sector, the same private sector that did very well in boom years in the building industry. In particular the Deputy bemoaned — and I had to give some information in this regard to the Deputy's colleague, Deputy S. Brennan — the importation of building materials, the importation of materials generally. He should realise that that was as a direct consequence of the Fianna Fáil overheating of the building industry in 1978-1979. Many of the importers are prominent Fianna Fáil supporters. The Deputy well knows to whom I am referring when I say that.

Mr. Flynn

Pretty lame.

Mr. Quinn

For all of that, in so far as the Deputy came forward with the idea of stopping the building industry getting any more advance factories — which no doubt did not form part of his criticism but that of the CIF — I will accept that there is need for no more advance factories, despite the——

Mr. Flynn

Transfer the resources.

Mr. Quinn

All right, in so far as we have such empty factories, I will certainly pursue the point. It is a constructive idea and we will investigate it.

Mr. Flynn

Two point five million square feet are available. I would appreciate just a portion of that.

Mr. Quinn

That point certainly has merit and we should look at it. I might turn now to points I want to make in my capacity as Minister for Labour and to confine the remainder of my remarks to the priorities I want to set for myself in the Department of Labour. Nineteen eighty three, as even the most biased commentator will admit, was a year of significant economic achievements for this Government. Difficult economic decisions were forced upon us, not least due to the pied piper policies which had brought this country to the brink of ruin. These decisions enabled major improvements in several aspects of our nation's finances. The balance of payments and industrial production significantly improved, the downward trend in the rate of inflation was continued, there was a significant reduction in the current budget deficit as a proportion of our gross national product. Most importantly, the rate of increase in unemployment has slowed down and in recent months has been halved. It is still far too much but, if we can take any comfort from trends — and we cannot take an awful lot — there is comfort to be taken from those I have just mentioned.

Unemployment remains the greatest single manifestation of our economic difficulties. The human dimensions of unemployment — the social and economic deprivation to individuals and families, the loss of opportunity to develop skills and talents, the crisis of confidence which it engenders — are not really registered in these statistics. In the final analysis the total waste of the resources of our educational system are not reflected in the impact that unemployment has on the individuals who suffer from it. It does not give me much comfort to say that our unemployment problem is not unique. It derives in part from the world economic crisis which, with its combination of structural and contingent features, is sparing neither the industrialised nor the developing countries.

Although certain economic indicators are improving a little, we can scarcely expect that, at the present time, growth rates will be sufficient in the near future to bring down or even hold in check the level of unemployment in Europe, given the demographic features in play and the probability of increased productivity through the introduction of new technologies.

As a small open trading economy, Ireland has not been in a position to remain isolated from the effects of the international downturn in aggregate economic activity and we have witnessed a depressing succession of major industrial closures. Regrettably and painfully this House has had to debate some of them. The level of unemployment now stands at over twice that which obtained in Janaury 1980 when the recession first began to show up in the unemployment figures.

At least Deputy Flynn and I are sensible and wise enough to know that we cannot play party politics in that regard because there has been a succession of administrations presiding over those figures since 1980. The widening gap between the demand for and the supply of labour has been particularly evident in the area of youth unemployment, where unemployment has been rising at over twice the adult rate.

The Government are acutely aware of the urgency of coming to grips with our unemployment problem. We have made exceptional efforts to implement policies targeted at youth in the areas of education, training, work experience and employment through the commitment of substantial Exchequer resources. On a wider level, the commitment of this Government to proper economic planning through the establishment of structures such as the Task Force on Employment and the National Planning Board and the development of strategies to maximise industrial development will ultimately bear fruit in the creation of self-sustaining employment.

In addition, a Government Task Force on Employment has been established in order to identify measures which can be taken immediately to relieve unemployment.

The planning board report to the Government through the Task Force. Their main functions are to identify the strengths and weaknesses of the productive sectors and to recommend policy measures which would maximise their contributions to output and employment. I am now going to propose that, in addition to the work which they are already doing, they will try to explore how public works could be undertaken and financed at minimum Exchequer cost as an alternative to expenditure on unemployment benefits. This will be done in consultation with the social partners but as part of an overall policy of considering measures whereby the imperatives of social equity can be reconciled with the need to secure an efficient use of public resources.

In that context, the board will also be submitting to the Government a draft medium-term plan for the economy as a whole. The Government have decided that a medium-term public capital programme will also be prepared this year. In addition, arrangements are being made to streamline the Government accounting system to indicate the level of expenditure on major areas of policy. All these measures are designed to bring more order and clarity into the business of Government.

Arising from these initiatives at national level, it follows that corresponding improvements in the planning, implementation and review of action at Departmental level are also required. As Minister for Labour, I am currently in the process of drawing up a two-year work programme for my Department, in the light of the budget provisions showing what measures are to receive priority treatment in the allocation of resources and staff and what results are expected. I intend to keep developments under review so that such modifications as may appear necessary in the light of experience will be quickly made.

I am also examining what type of institutional arrangements are needed to improve the overall management of my Department by the clearer identification and definition of the Department's aims, policies and strategies and how policies can best be translated into detailed programmes and activities incorporating time scales, targets and quantified outputs, where feasible. Obviously, action in these areas will have to accord with priorities and targets as determined by the Government. The major consideration in all these exercises is to ensure the best value for money through the most efficient and effective use of available resources.

The development of manpower policy which will complement strategies of employment creation falls within my brief. I am determined during my period of office, that manpower policy will achieve a priority status within the work of my Department, that occupational guidance, training and placement services to job seekers will be improved and that every initiative which can contribute to the alleviation of our present unemployment crisis, will be taken.

In this connection I wish to refer to the work of AnCO and the Youth Employment Agency. I am aware that there has been some criticism of the lack of co-ordination of the activities of the various manpower agencies, including the Youth Employment Agency, and in particular — I want to stress this point — a perceived lack of co-ordination between certain bodies in the education field. That there are serious problems both in regard to the definition of a coherent policy for manpower development, youth employment and training, as well as in bringing about a co-ordinated approach by the various state agencies involved must be broadly acknowledged. I am not afraid to do so. Since taking office I have been able to help the agency come to grips with some of the teething problems which have constrained them from achieving their objectives. I propose to pursue these as vigorously as I possibly can.

The Minister of State at the Departments of Labour and Education, Deputy George Birmingham, has been given special responsibility to produce an early and complete report on the co-ordination of the activities of the manpower agencies associated with the Department of Labour and the educational agencies associated with the Department of Education in so far as these impinge on labour market developments.

Within the policy framework recently published by the Youth Employment Agency, there is a consideration which I would like to highlight. This is the need to develop the enterprise and commitment to self-help among young people. That there is considerable potential for a positive response from Irish workers, of every age, to initiatives of this kind is well illustrated by the enterprise allowance scheme launched last month.

This imaginative innovation, which recognises the initiative and self-enterprise of so many among the unemployed, has proven remarkably successful and generated a significant response in its very short period of operation. Prior to the introduction of this scheme, many unemployed people found themselves in a Catch 22 situation. While drawing social welfare benefits, they could not engage in work or business; if they set about establishing their own business they could not guarantee themselves or their dependants an income, no matter how basic.

As Minister for Labour, I have responsibility for administering the enterprise allowance scheme which is designed to encourage people drawing unemployment assistance or unemployment benefit for at least 13 weeks to set up their own enterprise. Instead of the social welfare benefits, they are paid a weekly allowance of £50 or £30, depending on marital status, for up to a period of one year. With its introduction on a pilot basis in December 1983, 500 places were made available, 300 for persons over 25 and 200 for younger applicants. The demand, even already, has more than matched the targets, particularly for those over 25. In one small provincial town, the allocation was less than ten and there were over 300 applications.

In the light of this experience I have directed my Department to review the scheme immediately with the object of its expansion and development upwards to a level of between 2,000 and 5,000 places depending on demand to ensure that its continued operation will make the maximum possible contribution to the job creation process.

In regard to developments at EEC level, I have identified four main lines of approach which I will be pursuing in my capacity as Ireland's Social Affairs representative within the European Community both in the period leading up to and during the Irish Presidency.

The first concerns implementation of the social guarantee of vocational preparation and training for young people which the European Community adopted last June. This guarantee is a political commitment aimed at all young people, but in particular at young people leaving at the end of compulsory education without vocational or educational qualifications. If there is a category of young persons with least potential to get jobs on the labour market, then it is that group. The Community have given this commitment but what precisely does it entail? It is similar to the original Youth Employment Agency policy on which we went before the people in 1981. In short, this is a commitment to ensure that over the next five years all young persons entering the labour market for the first time will receive vocational training or initial work experience of at least six months' duration and, if possible, one year to break out of the catch 22 situation — not being able to get a job until they have had experience to qualify for a job. The implementation of this commitment is one of the Government's main policies for the Youth Employment Agency.

My second priority will be to take account of the recent review of, and to maintain the impetus of successful participation in, the European Social Fund. It is not recognised by many people just how critical that fund is to the finances and welfare of so many young people. The important features of that review, which was conducted in 1983, are that 75 per cent of the fund will in future be allocated to operations for young persons and, perhaps of more importance to this country, that 40 per cent of the budget will be allocated to the six regions of absolute priority, of which Ireland is one. This allocation should ensure that Ireland will obtain at least the same level of assistance from the social fund as heretofore, which, in the present climate of the EEC finances, is a considerable achievement.

Looking to the future, it is important that the budget of the Social Fund should continue to grow. While the EEC Commission has indicated that it wishes to see the ESF budget double in size over the next five years, this will hardly be possible unless the Council of Ministers manage to resolve the question of the United Kingdom budgetary refund and the more difficult one of reform of the CAP. If the financial resources of the Social Fund should become tighter, competition for the available funds would become more intense and Ireland's share, which now stands at £124 million for operations in 1983, or 9.6 per cent of the total budget, which, having regard to our population represents just under 1 per cent, could be endangered. During Ireland's Presidency of the Council it will be my intention to ensure that Ireland's position as a region of absolute priority will be safeguarded and that no measure which might undermine that position will be adopted.

My third area of emphasis is to ensure that during our Presidency the Community will move towards a clearer definition of social policy in the medium term, particularly in regard to unemployment. In this respect I am in total accord with my French colleague, Mr. Beregovoy, currently President of the Council (Labour and Social Affairs) who has referred to the phenomenon of Commission projects remaining for years on the table of either the Council or the Working Party on Social Questions and of the uncertain fate awaiting them in the absence of a consensus of our Governments on the actual nature of such topics or the form of the legal instrument. I will be having early discussions with the French Minister to ensure that our thinking should lead us to clarify the role and specific nature of Community social policy in relation to the competence of the member states and the two sides of industry.

Finally, I would mention one proposal which has surfaced in the discussions and which has caused some considerable disagreement and, probably, unease. This is the so-called Vredeling Directive — named after the commissioner who formulated it — on procedures for informing and consulting employees. I believe that there is need — particularly during a recession when the need for social cohesion is more and not less important — for a positive response to a Community instrument which contains the basic principle for improved procedures for informing and consulting employees.

The most significant aspect of the debate at present taking place in Ireland concerning the proposal is the negative repercussions which the adoption of a Directive may have on decisions by foreign companies to invest here. This, I have no doubt, is a consideration which is of importance for other member states, also. Some member states which already have legislation on information disclosure may be able to maintain foreign investment because of their central location and ready access to large home markets. But with the ever increasing competition between countries for new industry, both within and outside the Community, it is clear that even a small reduction in the available pool of internationally mobile projects would have a disastrous effect on Ireland's ability not only to increase but to maintain the existing level of investment. This is particularly the case as regards technologically-advanced companies which are knowledge-intensive and whose success depends on knowing more than their competitors.

For these reasons it is necessary during the further consideration of the Vredeling Directive to distinguish between real opposition, that which has been termed "the element of demagogy in the opposition campaign" and the residual opposition which, I believe, is considerably more valid opposition, and which was based on the original text whose modification is not yet fully known or fully understood. There have been intimations — and perhaps a more forthright assessment is called for — that the strong and hostile initial reaction of Japanese and American industrialists has been abated somewhat where detailed explanations of the thrust and contents of the revised proposal have been provided.

The point must be made that this proposal is the result of extensive debate over a number of years. There is nothing very dramatic or revolutionary about it. The original proposal has been significantly altered, and some would say excessively watered down, and it is clear that the Commission have given effect to the more far-reaching changes proposed by the European Parliament. It is also the case that the text, even as it stands, provides a good deal of flexibility and leaves member states considerable latitude in the form, content and timing of implementation. I say to industrialists and promoters that the fears expressed in financial and commercial journals are exaggerated and not properly based in relation to the provision of a constructive system of information between employer and employee.

It is my firm view that the sharing of information between management and workers and the development of participative structures within the workplace can only have a positive impact especially in regard to the development of a healthy industrial relations environment. I believe that the communication of all relevant information which does not directly threaten the commercial security or confidentiality of the enterprise is a prerequisite for the development of trust between workers and their employers. There is nothing to fear from such developments. The positive effects in terms of increased industrial peace, as international experience illustrates, far outweigh any misconceptions which may exist regarding the desirability of such measures.

The question of improved information-sharing and consultative machinery was raised in the Discussion Document on Industrial Relations Reform which was published by my predecessor and colleague, Deputy Liam Kavanagh, in November last year. I want to repeat and underline the commitment he gave during his term of office as Minister for Labour, that is, that I intend to examine during the course of discussions on reform with both sides of industry, what measures are necessary to stimulate the proper development of such structures at local and national level.

In regard to the strike statistics for 1983, a number of significant trends are obvious. Firstly, my Department estimate that the number of days lost due to industrial disputes in 1983 — standing at 311,000 — was the lowest number since 1975. This would appear to be part of a longer term trend. The average number of days lost in the four years 1980 to 1983 are about half of the days lost in 1983 according to my Department's estimate. This fits in with previous trends that a small number of strikes account for a large proportion of the days lost. The proportion of strikes which were unofficial has continued its decline since 1976 when records began, but at 38 per cent these strikes still represent a major cause for concern.

Any temptation to exploit the genuine fears of workers about their jobs to make short term bargaining gains should be resisted by management. Managements who handle industrial relations in a restrained and professional way during a recession will be best placed to maintain good relationships and improve productivity further during any upturn.

In so far as the actual functioning of industrial relations is concerned, the Minister for Labour's role is, of necessity, a limited one. Above all else, he must avoid becoming involved in individual disputes. Any such involvement on his part can serve only to devalue the efforts of official agencies such as the Labour Court or the Rights Commissioner service and to absolve the parties directly concerned of the responsibility to settle their own differences.

Rather than supplanting the responsibilities of either union or management personnel, I see my role as that of helping to create and sustain the conditions conducive to good industrial relations at the level of the individual plant or industry. This is a matter primarily of ensuring that our general structures and practices are adequate for the purposes for which they are intended and are capable of meeting the demands which are placed on them.

I am pleased, as a consequence, that it will fall to me to advance the process of industrial relations reform initiated by the Minister, Deputy Kavanagh. Following publication of the discussion document on industrial relations reform in November 1983 meetings were held with ICTU and FUE on the procedural aspects of the proposal discussions. Progress was made at these meetings and, while one or two matters remain to be clarified, I am confident that we will get the discussions proper under way in the near future.

Finally, I wish to advert to my commitment to full equality between men and women in employment. I have directed that the review of equality legislation which was begun in 1981 should be completed within a specified time period during this year. I expect then to be in a position to introduce worthwhile and meaningful amendments to the legislation which will eliminate many of the anomalies which have arisen in the operation of these Acts and which will be in accord with developments in relation to the elimination of discrimination on the basis of sex which are taking place within the European Community.

I have taken this opportunity to highlight the priorities I see within the Department of Labour and to respond to some of the general points raised by Deputy Flynn. This budget was carefully balanced between conflicting demands from different sources outside this House, between the need to get our finances right and to stimulate the economy to protect existing jobs, to protect the weak and the needy and create a positive climate for job creation. Nowhere was that conflict so evident as it was in the contradictory speech made by Deputy Flynn. On the one hand, he called for massive public expenditure and, on the other hand, he berated us for not getting the budget deficit down to the level he thought necessary, and which was indicated as being necessary in the Fianna Fáil document The Way Forward.

If we have achieved the target of £750 million set out in The Way Forward, there would hardly be a construction worker on a building site today, instead of the reduced numbers about whom he appeared to have so much concern. We have not been given an easy job, and the public at large recognise that. Within difficult constraints we are attempting to balance the two forces, both of which must be recognised and handled with care and delicacy. We want to steer a course which will bring us all through our present difficulties, and not just the strong or those who have been able to survive in different capitalist societies by virtue of their own strength and their own social position. There is room on our ship for everyone in our society. The Labour Party in particular will make sure that the most vulnerable passengers will get special treatment in the kind of economy we know we can achieve given time, patience and, above all, courage and endurance.

Dr. Ormonde

I want to refer to the Minister's opening remarks about Deputy Flynn and myself. Deficit budgeting was begun by Richie Ryan in 1973, not in 1977. The Coalition aimed at a budget deficit of £850 million in 1983 and we saw what happened to that. The figure for 1984 is in excess of £1,089 million and they talk about deficit budgeting. I am glad to have this opportunity to contribute to the budget debate. The Minister referred to a finely balanced budget, but we all know how finely balanced it was — what was required to keep Labour in control and how far Fine Gael could go.

Mr. Quinn

I thought we were supposed not to have any influence.

Dr. Ormonde

You could have fooled me. It seems there are signs that the long awaited recovery is under way. A sustained economic recovery is vital to the solving of the problem of unemployment. At present the recovery is extremely fragile. We must not continue to hurl political insults at each other and criticise for the sake of criticising. When we feel the Government are doing a good job we must commend them, admittedly rarely. We must point out to them where we think they are going wrong in the hope that in the Finance Bill, they will make any changes we feel they should make.

We also have to ensure that the recovery does not mean that those who have will have more in wages, overtime, and so on, while those who have not remain stationary. The recovery must be translated into more output and more jobs, rather than higher wages and prices which could lead to restrictive monetary policies and choke off the apparent recovery.

How does this budget help the recovery? The report of the National Planning Board under Professor Louden Ryan asked for no deflationary package. The Minister delivered on that. The report also emphasised the importance of domestic demand to the recovery. The Minister reneged on that. The introduction of budgets which fuelled inflation has been halted finally and this should lead to decreased pay demands.

I want to refer to the famous bond washing operation we all read about in the past few days. The NESC report prepared by a group of UCD academics, which was not published, condemned the fact that investing in gilts leads to high post tax risk free returns while investment in inherently risky manufacturing industry is discriminated against positively relative to Government and property investment. Money which finds its way into gilts is not available for industry.

I do not fault the Minister for closing this tax loophole. I do fault him on the way he set about it. His vague references led to confusion. We all know the stock market can stand everything except confusion and uncertainty. Money estimated at between £250 million and £300 million may be driven out of the system altogether. This seems a bit like cutting off your nose to spite your face. Is the divisiveness in our community now extending to the bond washers? Are they to join the self-employed and the farmers as the new villians of the piece? We must remember they were engaged in tax avoidance, not tax evasion. The Minister is to be congratulated on finally getting something moving, even if it was only a rush on the stock market.

I will move on now to the 8 per cent VAT on clothes We all accept that a broader VAT base could lead to a lowering of the rate. Again I cannot really fault the Minister for putting a low VAT rate on clothes. But is this the time to do it? Ten years ago we had 25,000 people employed in the clothing industry. Today we have 14,000 employed in that industry. Last year alone, 17 clothing firms closed down with a loss of 2,000 jobs.

However, 80 per cent of our clothes are imports, and I can see no disadvantage in putting 8 per cent VAT on them. I wonder whether VAT on clothing material at the point of entry could be reconsidered because this leads to a reduced cash flow in an industry already very much troubled. I would also quibble with the Minister on his arbitrary assignment of ten years as the age at which VAT on clothing applies. Nobody can consider an 11-year-old to be an adult capable of earning money for his own clothes. If the Taoiseach is worried about the small woman, I would reassure him that no woman, no matter how small, wishes to wear clothes appropriate for an 11 or 12-year-old.

The Minister for Industry, Trade, Commerce and Tourism's leaked White Paper confirms that he expects the present rate of unemployment to continue until at least 1993. This means that many well-educated young people will be spending the best years of their lives on the dole. Will they be doing so on £28 per week? Middle-aged workers with heavy family responsibilities are now among the long-term unemployed. They need to be able to live with dignity and with the respect of the community. How can they do so when they are thrown on the bread-line as at present?

Civil servants work on the assumption that the average man is trying to milk the system. Of course, they have to work this way because their primary aim is to save tax pounds. We are not civil servants; we represent the people. We know that most of those 208,000 people would give anything for a job. They want to work and they have a right to work. Where is the mention of them in this bloodless budget? There is not one word about the unemployed.

General demand stimulation in priming the pump to stimulate additional employment may have to be ruled out because it would worsen our budget deficit and lead to increased Government borrowing, as well as a possible increase in inflation which is already double that of our competitors. However, selective stimulation as advocated by the OECD would be less likely to generate additional demand for imports. They suggest energy conservation and, more important, renovation and improvement of existing housing blocks. To this end the Minister has reduced VAT on concrete to 5 per cent but this reduction does not apply to concrete products or cement. It appears that only ready-mix concrete is reduced.

The Minister has given an extra £6 million to housing, £2 million to primary schools, £2 million to Ringaskiddy and £8 million for roads, a total of £18 million to an industry where one in every two is unemployed. It would be laughable if it were not so tragic. It should be remembered that money put into job creation leads to a net budgetary cost which is substantially below the gross cost because of reductions in unemployment benefits and increased taxes and PRSI, not to mention the increased spending power of the people now unemployed.

Tax concessions for venture capital are most welcome. I hope this will cover services as well as manufacturing industry. In the US services account for 50 per cent of consumer spending and service industries have added an enormous amount to the quite unexpected strength of the US recovery and are expected to do so for the second year in succession. The IDA now cover industry-related services which, although not capital-intensive, are employment-intensive. Government grants and subsidies should be directly tied to the number of jobs created instead of being linked to capital expenditure. If only new industry is included in the tax concessions for venture capital, existing industry may suffer from the capital outflow. There is no doubt that the increase of 0.5 per cent in employers' PRSI is adding to an already crippling burden. There is definitely a case for a decrease. I know that other EEC countries have a higher PRSI rate but they do not have our inflation rate.

The deserted wife is to receive an increase of £2.85 and a person on disability benefit is to get an increase of £2.45. That works out at 7 per cent. With inflation running at 8 per cent as well as VAT on clothing, they really are doing well.

We must not forget that we got 19 per cent ourselves.

At the end of last year £13 million of unspent money was returned by the Department of Health to the Exchequer. How many more sums of this magnitude are lying around?

I am very glad that the new Ardkeen Hospital is included in the capital allocation for health. It is one of nine such projects, six of them being in Dublin. I wonder if the Minister and the Government realise that there is an area outside the Pale called the rest of Ireland. It galls me that we in Waterford have to stand in line for capital funds with hospitals such as St. Vincent's in Dublin. I worked in that hospital in 1971 when we moved from the old premises on St. Stephen's Green to Elm Park. We in Waterford must now stand in line with this hospital for capital funds. Waterford, like neighbouring Cork, has suffered more than most during this recession. The building of the hospital at Ardkeen would give a vital boost to the building industry in that area and I plead with the Government to ensure that this project goes ahead.

The abolition of student medical cards seems an incredible decision. The Minister's projected saving of £2.5 million is fantasy. Our student population are without doubt the healthiest sector and students will only rarely go to see a doctor. They have now been deprived of a medical card so they will go to the casualty department of a hospital where much more money will be spent on investigating them. I assure the Minister that there will not be any saving through the removal of the medical card from students.

There was a reduction this year of £3.5 million in the allocation for the South Eastern Health Board. We have been asked to carry out various cuts to try to live within our budget. Indications are that there will have to be a minimum of 150 job losses to achieve this, not to mention various other types of cuts. All this is from a Labour Minister for Health while the Labour Party are reputed to be the conscience of the Coalition.

Deputy Flynn spoke about the five-day syndrome. This may be a possibility in the west and it is also a possibility in the south east. Among the measures being considered is the operation of certain hospital wards on a five-day basis. Patients will have to be told that they can only get sick between Monday and Friday.

There is no doubt that we are extremely weak in marketing and research and development. The Irish Export Board are to receive only £17 million, a grossly inadequate sum. I presented this very forcibly to John Delaney, an Irish American whom I persuaded to come to Waterford some time ago. Mr. Delaney and a group of Irish American business colleagues are venture capitalists who would finance marketing and research scholarships for young people. On-the-job training and vocational education raises the productivity of the worker and increases his earning potential. It helps him to adjust to the rapid structural changes now occurring. The Government should provide better information on occupational requirements so that the skills essential to future growth can be nurtured. This will lead to a better matching of supply and demand in the labour market.

The Labour Party's proud boast is that the food subsidies were retained. Food subsidies are for everyone, rich and poor. The bread, butter and milk for the Mirabeau Restaurant are subsidised to the same extent as those for the deserted wife and the widow. There must be some other way of ensuring that the lower paid can get the benefits they deserve rather than the country as a whole. I would be interested in getting views on that.

This year is our last chance for a little pump priming and therefore some growth, because if the forecasters are correct 1985 is the year in which the US budget deficit will drive American interest rates even higher. The total borrowing requirements for 1985 for the US are estimated to be nearly 600 billion dollars. The Federal reserve will also have to deal with the inflation which is due to rise about then and will have to become tight-fisted, leading to a reduction in growth. They will have to tackle their deficit by rising taxes and reducing spending. The big danger is that they may lead us into another recession. The rising tide raises all boats but the ebbing tide lowers them.

I should like to refer to the economic comment made by Reynolds, Cooper, McCarron, Chartered Accountants. They say:

The 1984 Budget was perhaps the least significant, in terms of changes actually made, for many years. There have been no cuts in expenditure of any consequence, and the burden of taxation is set to rise once again . . . a tax allowance has been introduced for lower income payers of the income levy, a further complication to the system of direct taxation of incomes. This now has five components —income tax ... PRSI ... health and related charges . . . youth employment levy . . . and the income levy ... It would be difficult to devise a more complicated system, and it would appear that the Commission on Taxation has, despite the quality of its work, had no impact.

When will we do something for the PAYE sector? We paid lip service to them in the budget and told them that something would be done in the future. I plead that we do something for them now.

Mr. Bell

I take this opportunity to congratulate my colleague, Deputy Quinn, on his appointment as Minister for Labour. I am satisfied from my knowledge of his ability that no better man could have taken the job. I should like to go on record as wishing him well. I was particularly impressed by his address which reflected many of the problems that are facing the trade union movement and workers generally. He spoke about giving workers more information and having better consultation. We know from experience that workers are not given full information and the latest example of this was with Fords of Cork where there was a clear case for the legislation the Minister spoke about. I look forward to seeing that policy put into operation. I am sure the trade union movement will welcome that.

I was also impressed by his reference to the enterprise allowance scheme. We have reached the age of the nixer. This had developed as a result of unemployment and the level of social welfare payment which workers find it difficult to survive on. It has forced many people who sign on for the dole to do nixers to supplement their benefit. The enterprise allowance scheme is a very positive approach to combat that. Workers do not like to spend their time signing on the dole and playing hide and seek with social welfare investigating officers.

From my experience in my area I know the interest shown in this new scheme. It may be the answer to the trade union call over many years to assist people, particularly those made redundant, to get back into productive employment. What better way to do that than to be able to start up their own business and be financially assisted in an honest way by the State? As the nixer age has developed so also has the level of investigation. I congratulate the Minister on this scheme. I hope he can get the finance to develop this and assist young people who have ideas. As a trade unionist with experience in this field I hope to be able to give him some ideas we have encountered in this area.

I was also pleased that he referred to the equality legislation. There is no doubt that while definite progress is being made in this field there is still substantial discrimination against female workers in the work place. Many trade unionists pay lip, service to this aspect of female workers' working life. The existing legislation has never been employed with the energy which should have been used by trade unionists. In many cases discrimination exists with the support of male trade unionists across the industrial field. I am glad the Minister has clearly indicated he will pursue this and will strengthen the legislation in relation to equality of opportunity and equality in the work place.

The reference made by the Minister to disputes that occurred during the year gives a clear indication that the level of disputes has been the lowest for many years. I am happy that this has happened. I have been involved in national negotiations since 1969 and I said last year that I was satisfied that, at least for a period of time, the national wage negotiation had outlived its usefulness. Although I advocated that policy in the early years of the national wage agreements, as time went on I realised that it was not in the best interest of the trade union movement, of industry or of the services. That thinking has proved to be correct because last year there was an agreement in the public service which to a large degree was based on the settlements that had been secured in the private industrial sector. If that policy had continued for a few years it would have been to the benefit of industry, of the services and of the public service. I say that in the belief that there should be an inter-relationship between the level of wage settlements in the public service and those in the private sector. One is interdependent on the other. In their final form national agreements discriminated against both the productive and the non-productive sectors. Therefore, I regard the present formula as being in the best interest of all concerned.

I am happy to have the opportunity of following my colleague, the Minister for Labour, in this debate and I look forward to the contribution he will make during this time in the Department. At this time last year I found myself in a position of total and utter disagreement with a number of aspects of, first, the budget, and secondly, the Social Welfare Act that was proposed subsequently. I do not wish to rehash all that now. We are a year further on and many things have happened in the meantime. On this occasion I am satisfied that the Labour Ministers in Government have made a more positive contribution in the direction that you, a Leas-Cheann Comhairle, and myself would consider to be Labour Party policy. I appreciate fully that two parties in Government, each having a different philosophy, cannot travel the same road and that therefore there must be some compromise along the way. I hope that the sort of progress we are witnessing in this year's budget will continue and that by the end of the term of office of this Government we will have secured at least those major policies the Labour Party stand for. I trust that that achievement will come about while working in harmoney with our colleagues in Government. In these circumstances I was in a position to vote for the budget thought it did contain quite a number of items which I disapproved of strongly. However, that is probably the position so far as the Ministers and backbenchers alike in Government are concerned. It would be dishonest for any one of us to say that we agreed with everything contained in the budget but there has to be some kind of balance. The budget must be considered by any Member in, first, the national context and then in the context of its effect on the people in one's own constituency and in one's own party.

Since the footwear industry is one of the largest and most important industries in my constituency, I am glad that for the second year in succession there is no VAT being imposed on footwear. Regarding the imposition of a low level of VAT on clothing, with the exception of childrens clothes, I do not believe that the application of VAT in this way will succeed. This was demonstrated on "The Late Late Show" on Saturday last, though anyone who knows the industry would have known that anyway. It is difficult to understand how the Minister could have put forward a proposal of this nature. I cannot see working a system whereby certain aspects of clothing are VAT-rated while others are exempt from VAT. Surely it would have been better if, as the lesser of two evils, there had been an application of VAT on an equal basis right across the entire industry. The Minister's proposal will create major problems for manufacturers, wholesalers and retailers. I appeal to him to consider amending the proposal at the appropriate time. If it goes through in its present form it will cause major problems not only for the people I have mentioned but also for the Department and for the Revenue Commissioners. But if the Minister decides not to amend the measure, I forecast that by this time next year it will have proved so unworkable as to have to be either withdrawn or altered.

Those of us who have had responsibility for workers in the clothing and textile industry in the past 20 years have been proven correct in the forecasts we have been making down through the years. The footwear industry, which was healthy and thriving and in which 7,000 people were employed, now employs fewer than 3,000 people. Despite the fact of there not being VAT on footwear at any stage, 85 per cent of the total home market consist of imports. The corresponding figure in respect of clothing is in excess of 50 per cent. As a trade unionist I must ask myself what will be the advantage or otherwise that will accrue from the imposition of VAT on clothing. The imposition of VAT on clothing at the point of entry, provided the rate is not increased substantially in future budgets, might result in a slight advantage to the home industry. In saying that I am not extending an invitation to the Minister for Finance to increase this VAT, but the point has been made to me by a number of clothing manufacturers. I should welcome the opinions of the clothing section of the CII on my suggestion.

Whether we belong to a party who are in opposition or to the parties in Government, the biggest issue concerning each of us is the unemployment problem, a problem about which there is much talk though in respect of which I do not consider this budget to be making any major contribution. There are some areas in which the budgetary measures will be of help in dealing with this problem.

Debate adjourned.