Deputy Bell is in possession and has 45 minutes.
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).
I had referred last evening to the contribution by the Minister for Labour in relation to the enterprise allowance scheme and his proposal to introduce legislation in relation to equality, with particular emphasis on equality for women. I also spoke about the enterprise allowance scheme with regard to getting people into productive employment — in other words, paying them for working rather than being on the dole doing nothing. Certainly the enterprise allowance scheme will make a great contribution in this regard. I also made the point that on this occasion, as against this time last year, Labour Party Ministers had made a substantially greater contribution to at least moving toward what I would see as being Labour Party policy and I congratulate them on having done so.
I welcomed the decision of the Government not to apply VAT to footwear in view of the fact that that industry is one of the largest in my constituency, indeed one of our most important native industries. Not being too happy with the application of VAT to clothing I made a very strong point in this regard to my colleagues in Government. Its application, as announced in the budget, will not be very practical. I do not think it will succeed. I think it will create more problems than it will resolve. It may resolve some financial problems, but the system, as outlined in the budget, will create major problems of administration, manufacturing, retail and wholesale level. If it was necessary to apply VAT on clothing it would, as the lesser of two evils, have been better to apply it uniformly on all clothing. I do not think that excluding one section of the industry will benefit employment, the consumer or the Exchequer.
As a trade unionist, I want to refer to unemployment. We are all aware of the problem and all parties are united in agreeing that unemployment is the greatest issue facing us today. I do not see any major strides being made towards relieving that situation in the budget, but there are some concessions which will obviously be of help. With regard to my own Border constituency, on a number of occasions I made a strong case to the Minister for Finance and other Ministers who have responsibility in financial areas, and I am glad that Deputy Moynihan is here this morning because he must be aware of the problems in the tourist industry as he comes from a major tourist area.
We were pleased last year when VAT in the hotel industry was reduced from 23 per cent to 18 per cent. However, even that does not really help in the Border areas because of the price differential. There is still too great an incentive for people to flock across the Border in their thousands. It is estimated that about £40 million was lost to the Republic in the Newry area in a six month period last year. This is a frightening figure, although I appreciate that our brothers and sisters in Northern Ireland had to cope with the same situation when the position was reversed. Our policy should be designed in such a way that the differential will not be as great as it is now. There is no point in saying that we will improve surveillance on the Border and provide more customs and excise officers. That will not work, because it is well known that you cannot physically stem the tide of people crossing in their thousands, especially at weekends. Whilst the price increases on a number of items have been much smaller than in previous budgets, they do very little, if anything, to solve the problems. Therefore, the Border area must be singled out for special consideration, because there is a difference between the competitiveness of Cork and Kerry, Newry and Dundalk or Clones and its neighbouring towns on the other side of the Border. A Cheann Comhairle, as a Deputy in a Border area you will appreciate what is happening there. We will be faced with mass unemployment growing on a daily basis in garages, supermarkets, shops and all the service industries that provide employment in Dundalk, Drogheda, Ardee and Carrickmacross.
If we cannot get concessions in the budget what should we get? I have already spoken to the Minister for the Environment in relation to the natural gas pipeline, which I hope will go ahead without further delay so that we will be able to utilise this very valuable natural resource to attract alternative employment in Border areas. It took quite a lengthy period to resolve the differences and to reach agreement on prices with Northern Ireland. I hope it will not take as long for An Bord Gáis to proceed with this pipeline through County Louth, via Drogheda and Dundalk, which are the two major industrial towns in the Border area, and that the natural gas pipeline will have links which will service towns like Ardee, Carrickmacross, Cavan and Monaghan. This is the only opportunity we have to attract alternative employment, but it will only come if it is given to us at the best possible competitive price. There is no point in giving us natural gas as simply an alternative energy, as this will be no incentive to industries which are already operating there. All the large companies, Premier Periclase, Carroll's and the breweries, use a considerable amount of energy. Dundalk is still operating on town gas and would benefit greatly from the new gas if it is supplied at the right price and not in competition with Dublin Gas. Premier Periclase are one of the biggest users of energy in the State. They extract magnesium from sea water and would benefit more than most from natural gas. I am satisfied from the discussions which I had with the Minister for the Environment that he will use his influence and decision making function with An Bord Gáis to have this natural resource supplied to County Louth and the Border areas.
There is no doubt that Irish industry is suffering greatly from the cost of energy. If the Government wished to develop employment, the key to doing so is in the cost of energy. It has been clearly established that we have the most expensive energy costs in Western Europe. I cannot understand why successive Governments have not been able to see that a cheap energy policy with regard to industry would substantially increase our job potential, secure existing jobs and attract foreign and home industry. Everybody agrees with this policy but no one does anything about it.
The IDA have given the State very good service. It was easy to attract jobs when we were offering a package on a competitive basis which was unequalled in European terms. The Americans, Japanese and the British were flocking here to avail of the package we had to offer, especially companies located outside the EEC who wanted to get a foothold in the EEC market and inside the trade barriers. That no longer exists, and, therefore, it is necessary for the IDA to substantially change their direction. They have done that to some degree in relation to the development of small industries. We now agree that small is beautiful and that large companies, even multi-nationals, are in jeopardy. We have to concentrate on building up national industries. We have a clear example in Japan where over 85 per cent of industry is small and locally based. That policy has to be developed, but that can only be done successfully if the regional offices of the IDA operate on a more co-ordinated basis.
Very often a young man who has been made redundant asks local representatives for advice on setting up a new industry. We tell him that the IDA, AnCO, the county development officers, YEA and so on can help him. We tell him where to go to get planning permission, to arrange water and sewage facilities and so on. It should not be necessary for elected representatives to do this. The IDA regional offices should be structured in such a way that all these services are brought under the one umbrella at regional level. If someone has an idea and a few pounds redundancy pay to start a new business, and all the necessary expertise, he should be able to get all the necessary help at local level because every town and village should have small ready-made industrial units to attract these young entrepreneurs. If the IDA examine the amount of imported goods in the engineering, industrial or commercial fields, they will find there are thousands of opportunities for young and not so young people to set up their own businesses, but they are discouraged from doing so because of the web of problems they find at every level. I came across such a case very recently where a young man had a very good idea to set up a new industry, which would employ three or four people, to produce an article which would replace an imported article. He spent six months putting all the pieces together after consulting with the IDA, AnCO, the county development officer, the local authority and so on. The structure of the IDA should be looked at: it should relate more to our natural resources, there should be more local offices and there should be more co-ordination locally.
I would like to refer to the building industry. There are about 60,000 people unemployed in this industry. Small incentives were given to this industry in the budget, but not enough to justify a revival of the industry at national level. Co-ordination between the Department of Social Welfare and the Department of the Environment on the following basis might be very helpful. The Labour Party are committed to setting up a national pay-related pension scheme. I was disappointed that this was not referred to in the budget but hopefully the Minister for Social Welfare will take that as a priority in the very near future. The funds from a national pay-related pension scheme could be invested in house building and the industrial building sector. In the same way as the new loan system under the housing finance scheme is attracting money from private sources, I believe a national pay-related pension scheme would generate millions of pounds which could be channelled into the building industry by way of house loans, incentives to builders, loans to State organisations — such as the IDA for the purpose of providing factory buildings — loans for badly needed school buildings, civil engineering works, sewage and water facilities and so on. New areas for seeking finance have to be found, and here is an area where money paid by workers could be channelled into productive work to create employment.
Unemployment is the source of our present economic problems. The State has to carry too high a percentage of our non-working population. At present one-quarter of our total working population are drawing from State funds, whether by unemployment benefit, unemployment assistance, disability benefit, old age pensions, widows and orphans allowances and so on. The social welfare burden has grown enormously because of unemployment. If we solve our unemployment problems we will not have the type of budget or balance of payments we had over the past two years. Unemployment is the source of all our problems. If the Government cannot see that they are not doing their job and if they are to do their job, they must resolve this problem immediately.
I was pleased to see that there has been some relief of VAT on concrete products and stock relief. I hope this will help to stabilise the building and supply industry. I want to refer to the problems my colleagues and I have at local authority level and the disaster we had in County Louth trying to apply a £26 charge for services. Many of us forecast that this would not succeed, and we were proved right. It has not been possible to collect that money. If local authorities are to be reorganised, and if they are to charge for services, this will have to be done in an effective way.
The rates relief grant from the Department of the Environment to local authorities is such that almost all local authorities will have to introduce new charges or increase existing ones. Last year it was not necessary to apply charges in Drogheda corporation and Dundalk Urban District Council because of good housekeeping by both authorities but, as mayor of Drogheda, I am not sure if that will be possible this year. I will have more to say about this when we discuss the estimates shortly. It appears that there will be a net deficit in relation to the amount of money applied to local authorities this year as against last year. We all accept that our problems were caused by the elimination of rates. We no longer have the money to run local authorities.
Talking about unemployment, it is a shame that, while we are knocking off men right across the board at local authority level, in the craft sector, in the general sector and even in the professional sector, putting them onto unemployment benefit and paying them for doing nothing, at the same time we have not got enough men to repair potholes, or to repair windows, doors and roofs for old ladies. In some cases we pay people the same amount of money for doing nothing. This is degrading and nobody wants it. We have fully qualified, skilled men who could be employed by the local authorities, but they are queueing up to collect the dole on a weekly basis.
There is no logic in that. It appears to those of us charged with the responsibility to run our local affairs that there is no co-ordination between Government Departments. The Department of Social Welfare have their allocation and do their own thing. The Department of the Environment have their allocation and do their own thing. There does not seem to be any attempt to transfer money from the Department of Social Welfare to the Department of the Environment to take people off the dole and get them into productive employment in the building industry or wherever it may be.
I find it difficult to understand the system. I do not know whether it is that Ministers cannot agree or civil servants cannot agree. There must be some disagreement at departmental level when millions of pounds are being spent on social welfare benefits while employees of local authorities are being knocked off and put on social welfare. On a businesslike basis the Government and most of the Departments would be out of business long ago.
I should like to refer to people who are fortunate enough to be at work. Last year I had to vote against the Social Welfare Bill. I am glad we have nothing like that this year. Hopefully nobody will get a brain storm and introduce that type of legislation. It did not succeed in resolving any of our problems or in correcting any of the abuses. This time last year we had 13,000 people working a three day week and being paid for three days. Now we have approximately 2,000 people on a three day week. Rather than carrying people on a three day week employers have disemployed them, made them redundant, and put them on full-time unemployment. While they are on full-time unemployment they are making no contribution to the Exchequer. They are not paying PRSI. They are not paying unemployment benefit. They are not paying anything apart from the normal VAT and so on. At the same time the Department of Social Welfare are paying them for doing nothing.
I warned that this would happen, and it has happened. It is unfortunate that Ministers are not getting the right advice. Those of us in industry could see what would happen, and it has happened. We now have 10,000 more people on the unemployment heap, drawing full-time social welfare and paying nothing into the system. Workers who are employed are paying more and more into the Exchequer from their earnings, to a degree where the incentive has been taken out of the workplace. I see nothing in the budget to restore that incentive. Naturally as a trade unionist I welcome the fact that 15,000 people will be taken out of the tax net. Last year I was shouted at by a number of people when I said old age pensioners with miserable pittances were paying tax while millionaires were getting away with substantial sums of money.
Last night I heard the case of a man who lives in Drogheda. I will not mention his name. His retirement pension from the building industry is £13.12 after working for over 30 years in the building industry. Believe it or not his tax was £8.53. His net take home pension was £4.59. This should be noted by those of us who are fortunate enough to have pensions, including those in the public service who operate the system. Last year people said what I was saying was untrue, but there is the proof of it.
I do not know what is happening in this country of ours. This man contributed all his life to the system. He worked his guts out in all sorts of weather and conditions in the building industry. He gets a pension of £13 after 30 years. Why? Because most of the employers he worked for did not pay any contribution. Even though he paid his contribution it was not returned to the Exchequer. There is no machinery in the State to ensure that those contributions are returned. He has no State pension. He has no guaranteed pension. He has no pension given to him by the Oireachtas. He has to depend on his own miserable old age pension, plus £13.
I spoke about this in the first contribution I made to the Dáil, and nothing has changed since. I want to send a clear message to my colleague, the Minister for Health and Social Welfare. He should introduce a national pay-related pension which will bring people working in the building industry and the factories into line with those sections of the community who are privileged, those people who have guaranteed pensions of two-thirds of their salary for administering the affairs of the State. What is the difference between those of us who are in a privileged position and those who have to earn the money to pay for the pensions of people with guaranteed State pensions of two-thirds of their pay?
The public servants within the Departments should get off their backsides and put that case to the Minister for Health and Social Welfare, the Tánaiste and the Taoiseach. That would be doing a good job for the working classes. If we call ourselves socialists, or if we have a social conscience, we must realise where the maximum poverty arises: with old people and widows who have to exist on miserable pensions. We would not need a committee on poverty if every man and woman who retired from employment had a decent take home pension after working for a lifetime. You will excuse me, a Cheann Comhairle, but that is a subject which really gets me going. As long as I am here I will make this contribution at every available opportunity.
I should like to refer very briefly to a number of areas where there is employment potential. Clogherhead is a fishing village not far from the town of Drogheda. They have a healthy and thriving industry there. They have been waiting ten years for a pier. They have been caught up in a web of bureaucracy between the Department of this, that and the other, Louth County Council, the Department of the Environment, the Department of Fisheries and all sorts of other red herrings.
(Interruptions.)
I think that is funny myself. This is an opportunity to develop an industry based on a natural resource. That village has existed for 100 years and the community has survived based on fishing at Clogherhead. Boats are very expensive and it is an expensive operation having regard to the cost of fuel. It is not possible to develop that industry unless the village is given a new harbour, a new pier. For over ten years successive Ministers and successive Governments have spoken about it and nothing has been done. At this moment a delegtion is meeting the Minister on the subject of Drogheda Harbour. Two sections of the harbour wall are in the river. This is one of the few ports employing over 400 people but we cannot get money. The necessary work would cost a couple of million pounds but it would be put back into the economy very quickly by way of increased employment and increased business and would aid industrial development in north and south Louth.
If we are serious about creating employment then we have ample opportunity in fishing and agriculture. It is time that the trade unions and the farming organisations got together. It is time that the farm leaders and the trade union leaders stopped having a go at one another and put the interests of the country before personal interests. It is time for the formation of a national forum involving the farming organisations, the trade unions and the State and semi-State sectors so that there could be an exchange of views enabling co-ordinated action in the interests of the country. If the agriculture-based industries are doing well the economy is doing well and industry and services will prosper.
I take this opportunity to pay tribute to AnCO of which I was a founder member. I have seen this organisation grow from five people to 5,000 people. I have seen their contribution to the community. I feel that money which has been raised in various ways would be more productively used if channelled through that organisation. They seem to be one of the most progressive semi-State organisations. I am particularly conscious of the work they have done in every town and village in my constituency.
I welcome the extension of the AnCO redundant apprentices scheme. Under this scheme young men have reconstructed derelict buildings which would never have been reconstructed by the local authority, and made them fit for human habitation. This is the way we should be moving. Here is a typical example of State money, together with EEC money, being used to take young apprentices off the dole to work for a local authority on the reconstruction of derelict buildings. That example should be followed by the public service. The YEA should certainly examine this project.
The NBA have adopted a policy of expandable housing. When I first saw that term I wondered what it meant, and I have now discovered that the NBA are building small private houses with one or two rooms designed in such a way that they can be added to as a family grows. A young married couple could obtain an SDA loan from the local authority to enable them to purchase the house from the NBA and at a later stage the house could be expanded if necessary. This is a novel idea which should be taken up by the Minister for the Environment in the interests of activating the building industry.
Another good idea was adopted recently by a clothing manufacturer who decided to use the profits from his business to build private houses instead of investing his money in the bank or outside the country. That type of initiative should be encouraged both locally and at Government level.
I now call the Leader of the Opposition, Deputy Haughey. In accordance with the Order of the House he has one hour, but I understand Deputy Haughey feels that his speech may exceed the hour. I further understand that there is agreement between the Whips that he should be given extra time if he requires it. We had better put a time limit on it. Is there agreement that Deputy Haughey may speak for a period not exceeding one-and-a-half hours? It is agreed and is an Order of the House.
I cannot recall a previous occasion on which a budget could be so clearly identified as the direct outcome of a political situation, nor indeed has there been any occasion which I can recollect where the entire political background to the budget has been known in such detail by the general public.
Before Christmas I gave it as my view that the budget would be decided on the basis of a political compromise formula, rather than on what the economy required. This is exactly what has happened. The political battle began when the Taoiseach, Deputy Dr. FitzGerald, indicated in a radio interview that he would be looking for a cut of about £500 million in current expenditure. The battle raged through an unending series of Government meetings until it finally became clear that nothing could be agreed. This is why we have got a budget which has no identifiable strategy and no particular financial or economic objectives. This budget is in fact a political compromise. It does not respond to the needs of our economic situation. It is all that could be agreed. The political reality is that no action can be taken to deal with our economic problems because we have a deeply divided coalition Government.
The year 1983 was disastrous, one of the worst in the history of the State. Unemployment rose by 28,000. Investment fell. Building and construction practically ceased. Consumer spending declined, and the endless procession of factory closures seriously undermined a large section of our industrial base.
To some extent these catastrophic economic developments resulted from the worldwide economic recession. The results of that recession, however, were greatly exacerbated in our case by the mistaken policies pursued by this Government in the 1983 budget. These policies inflicted widespread hardship and deprivation throughout the community. That hardship and deprivation is real and persistent. It has been especially severe on social welfare recipients and lower income families, but families were also affected for the first time who had never known deprivation of this kind before. Most families were faced at every turn with increased taxes, higher prices, new costs, charges, fees and levies; some new attack on their living standards. For all but a small privileged section of the community the struggle to make ends meet became a grim everyday reality.
But all this unemployment and hardship were endured for nothing. The whole bookkeeping exercise turned out to be one of the greatest mistakes in our economic history. The fiscal targets have not been reached and have now been abandoned. The current budget deficit is no nearer to being eliminated than it was at the beginning of the year. The national debt increased by an all-time record of almost £3,000 million. Foreign debt increased by about £100 million more than in the previous year.
The full realisation by the Government of how wrong the strategy of the 1983 budget was and the extent of the damage done to the economy is clearly expressed in this one damning quotation from the Minister for Finance's speech:
While inflation has come down significantly and the balance of payments problem has been greatly alleviated, consumption has declined, investment has fallen, unemployment has risen and growth has been stifled.
There was only one thing left for any honourable Minister for Finance to say after that admission of total failure. He should have gone on to say: "And because I have been responsible for this dreadful damage to the economy I now intend to resign."
This whole question of the current budget deficit has been turned into something of a comedy. This Coalition Government no longer retains any credibility in regard to it. The first act in the comedy was the clearly stated objective in the programme for Government of this Coalition when it was formed, of eliminating the current budget deficit by 1987. In the run up to the 1983 budget the Fine Gael side of the Government indicated that a start would be made on this programme of elimination by fixing the current budget deficit for 1983 at £750 million.
In the event, that became £897 million in the budget itself. Subsequently, at a meeting in Barrettstown Castle in July, the £897 million was revised upward to £950 million. When the figures were published at the end of the year it was clear that the actual deficit was certainly more than £1,000 million.
The latest step in this fiscal farce was the setting in last Wednesday's budget of a current deficit for 1984 of £1,088 million. This was accompanied by statements from the Minister for Finance and others that the target of eliminating the deficit by 1987 had in effect been abandoned.
Being the sort of Government they are, however, a Government which do not in fact formulate and implement policies but rather conduct public relations campaigns about policies, they were not prepared to come before the public and state openly and honestly that this objective about which they had preached at such great length was being abandoned. Some pretence of fiscal rectitude had to be maintained. Accordingly, they set the public relations machine to work to sell the idea that the amount of the current budget deficit was not what was important but what really mattered was the percentage of GNP that the current budget deficit represents. We no longer hear about the actual amount of the current budget deficit from the Minister for Finance or the Taoiseach or anyone else on the Government side. Instead, we are now told that what is being reduced is the percentage of GNP that the deficit represents. This is, of course, totally misleading. The figure for GNP for any particular year is very difficult to calculate. Economists keep revising it long after the year has ended. To claim that the current deficit of £1,088 million represents a particular percentage of the 1984 GNP, which is not yet known, and that this represents a reduction of 1 per cent on the 1983 percentage, is meaningless.
Economic forecasting is a fairly hazardous business at any time, and it is impossible for anyone at this stage to state with any certainty what the figure for GNP in 1984 will be. Different institutions have given different estimates of the projected rate of growth in the economy in 1984. How then can the Government attempt to claim that the current budget deficit will, as a percentage of GNP, be down by 1 per cent?
The possible margin of error in the measurement of the GNP itself for any year is more than 1 per cent. This specious claim must be exposed as bogus.
One figure totally dominates the scene into which this budget has been introduced, and that is the number of persons out of work — 208,000. The central issue of our economic and social life is that frightening level of unemployment and the fact that it continues to rise. The full extent of the economic and social damage that mass unemployment of this size causes can hardly be overestimated. It brings hardship and deprivation to thousands of homes; it spreads frustration and unrest; it destroys human dignity and self-respect; it takes away from the young their hopes and ambitions for the future.
Having 16 per cent of our labour force receiving unemployment benefit or assistance distorts the whole structure of the public finances and the normal level of taxation. In regard to this key issue, however, this budget is largely irrelevant. It offers no prospects of any improvement, no hope is held out to those who are already enduring the misery of unemployment or those who will face it in the period immediately ahead. There is no strategy designed to reverse the upward trend. On the contrary, there is a defeatist acceptance of a further rise. An average of 225,000 is projected for 1984.
Developments which have taken place in the first month of 1984 offer no grounds for optimism. The year has barely started and already 1,500 additional job losses have been announced. These are the inevitable outcome of this Government's non-interventionist policy, a policy which is continued in this budget. The contribution made to unemployment by factory closures and redundancies has become a major factor. It grew to alarming proportions last year. This Government clearly have a policy of standing back from the situation and letting matters take their course. In fact, on a number of occasions, they have precipitated the close-down of particular enterprises by their own action.
Because of the size of the avalanche of closures and business failures and their impact on employment a complete review of the present situation should be carried out urgently with a view to formulating a definite programme of action. Some particular firms may have to close; there may be no alternative because of technological or commercial development which make this inevitable. But this is not always the case. There have been some closures which need not have happened or which should not have been allowed to happen. The Government's action in causing the closure of Scarriff Chipboard was very significant in that it disclosed the Government's attitude and approach. Because of the widespread economic and social repercussions of the closure of Scarriff, a responsible government would have made exceptional efforts to keep that particular enterprise going. It has, apparently, been demonstrated that the company was actually making a profit when it was closed. If this is so, then the decision to withdraw support and cause the factory to close is inexcusable. It should now be reversed.
This particular decision opens up the whole question of the role of the Government in this type of situation. People frequently ask why nothing can be done about the paying out of enormous sums in unemployment benefit, without any return to the community. In effect, however, something of that kind is achieved when the Government, through one of the agencies, subsidises or supports a particular enterprise through a difficult period because people who are thereby kept at work producing goods or services would otherwise be paid unemployment benefit.
When we were in Government we established an early warning system so that firms which were heading for trouble could be looked at and timely action taken. I do not know if that mechanism still functions. It would not appear that it does. In present circumstances, a wide ranging review of all firms should be carried out and their position for a reasonable period ahead assessed so that where action is required it can be taken in time and survival programmes worked out where these are shown to be necessary and possible. Shock announcements of closures cannot be tolerated any longer. Proprietors and management have a duty to both their work force and to the community and the Government share this responsibility to act in time and to avoid sudden unexpected closures.
When sudden unexpected closures are announced, it is only natural that an atmosphere develops which makes rescue action difficult and indeed which adversely affects the prospects of the particular area or region in so far as possible future development is concerned.
The Central Bank shows that in the first half of 1983 employment in industry was running at 7 per cent below the level of 1982. We know that total manufacturing employment declined by almost 10,000 in the first half of 1983, one-third of the total loss of 30,000 jobs in manufacturing since mid-1980. The Government's capital programme provides for a real drop of 10 per cent in investment in industry. The message now emanating from the IDA appears to be a very bleak one, suggesting that only 1,000 jobs a year will be created in manufacturing industry over the next decade. The advice we received, when drawing up “The Way Forward” only 15 months ago, was that up to 12,000 manufacturing jobs a year could be created towards the end of the decade. The present reports represent a major downturn which can only reflect the fact that high prices and high taxation are driving a certain type of industry away.
We must get from the Government a full explanation as to why estimates of manufacturing employment have been revised so drastically downwards and what implications this has for future planning.
The years between 1977 and 1981 will increasingly be looked back to as golden years, when this country experienced a wave of industrialisation and when virtually every week a new project offering industrial employment could be announced. Between 1977 and 1980 we created 80,000 new jobs, an achievement that in the circumstances of today must seem like a dream.
The basis on which Fine Gael and Labour came together to form a Government when unemployment was 170,000 was the promise of "firm and decisive action" to deal with the unemployment situation. No such action has been taken and, in fact, diametrically opposite policies have been deliberately pursued and are continued in this budget.
The instruments set out in this Coalition's Joint Programme for Government have either been ineffectual or abandoned. The National Planning Board is a total fiasco, like its predecessor the Committee on Costs and Competitiveness. It has so far done nothing to justify its existence. The performance of the Cabinet Employment Task Force can only be described as pathetic, with its one or two mouselike recommendations.
Next we have this great stalking horse, the National Development Corporation. Token bookkeeping entries were provided in the last year's estimates, but were never used. There is no legislation and no action in sight. If the Government believes that State enterprise has a genuine role to play in the present crisis, why are they doing nothing about it? Capital expenditure on building and construction was savagely cut back in 1983 and it is being cut by a further 10 per cent this year. According to Government figures issued yesterday the fall in employment in the construction industry was 19.5 per cent in 1983 compared with 9.5 per cent in 1982. Employment in the construction industry is 36,000 down since mid-summer 1981, that is over 40 per cent of the increased unemployment we have had in the last two-and-a-half years. I think that figure shows just how important the construction industry is and how real progress could be made in reducing unemployment if some attention were paid to it. Our plans for 1983 would have led to a slight rise in employment in the construction industry instead of the job losses of 14,000 that actually took place in 1983.
It is inevitable that the provisions made in this budget for local authorities, health boards and hospitals will result in further widespread job losses. That is something of which we should all take note. Those who are in a position to know tell us that the allocations made and the budget set for hospitals, health boards and local authorities will mean fairly massive unemployment during 1984. I do not know if the Government have taken due note of this or have any plans to do anything about it, or are they again just prepared to stand back from the situation and watch major job shedding take place in those bodies.
I found some parts of the Taoiseach's contribution to this budget debate last week very hard to take. In particular, I found what he had to say about the social welfare provisions of this budget offensive. The families and individuals who have to rely on social welfare for their standard of living have been under very severe pressure during all of last year. The increase provided in the 1983 budget was inadequate and it did not come into operation until July. In addition to that, however, this section of our community were faced with a whole series of extra costs and charges during the year. It is undeniable that their standards of living and comfort were greatly reduced and many, many thousands suffered real hardship.
This year's budget can only make their position very much worse. The increase of 7 per cent is miserly and hopelessly inadequate. It will not be paid until July. With inflation anticipated to be around 9 per cent the gap between their income and living costs for this section of the community is going to widen greatly. They face a hard year. The Taoiseach, nevertheless, tried to claim some credit instead of apologising for that situation. He made an absurd comparison with other European countries, countries where the welfare systems are so comprehensive and at such a level that no basis for comparison with ours exists. The Taoiseach in the past has spoken a great deal about poverty in our community. He projected himself as one deeply concerned about it. All those protestations can now be seen for what they were, hollow, empty, meaningless. Actions speak louder than words. In two budgets the Taoiseach and his Government have implemented a policy of deliberately lowering the standards of living of the poorest and weakest section of our community. He has added greatly to the level of poverty in our community. His record is a shameful one and he should not even have the audacity to even come in here and talk about it.
There is now fairly widespread agreement that this Government is no longer adhering to any coherent economic or financial strategy. In particular, no financial targets have been set. Financial rectitude is dead and the goal of eliminating the current budget deficit in the foreseeable future has now been abandoned.
There are two statements in the budget speech of the Minister for Finance which occur on the same page which clearly need to be examined in relation to each other. The first of these is: "It is clear that the overall level of borrowing remains excessive". We have then to relate that statement to the second, which is:
I have indicated that overall policy requires a slower pace of contraction in the borrowing requirement than would result from a purely arithmetical approach to the elimination of the current budget deficit by 1987.
What the Minister for Finance is saying is that the level of borrowing is too high but he is not prepared to reduce it by eliminating the current budget deficit at the rate to which he and this Government had committed themselves. Despite this clear abdication of responsibility by the Minister in regard to the level of borrowing and the current budget deficit the Taoiseach spent five or six pages of his speech on Thursday last rambling on about restoring control over our own financial affairs, the threat posed to our financial stability by the enormous rise in borrowing and claiming, mark you, that the Government have succeeded in attaining some objective which can be regarded as no mean achievement and which he did not propose to undersell. Unfortunately for him the Minister for Finance has disclosed that there is no achievement either to sell or undersell.
The Minister for Finance actually goes so far as admitting that in bringing in the sort of budget they have brought in the Government are gambling with the public finances. He acknowledges in his budget speech that this policy of not proceeding with the elimination of the current budget deficit necessarily involves some element of risk. In fact the Taoiseach towards the end of his speech admits that reducing the pace of progress towards the reduction in the current deficit and borrowing will have to be made up in the years ahead and may be painful indeed. How can the Taoiseach in the teeth of these statements keep up the pretence that he is adhering to a policy of financial rectitude and responsible Government? It is now obvious to everyone that there is no longer any pretence of eliminating the current budget deficit by 1987 and that this Government have failed, and have acknowledged that they have failed, in what was stated to be their primary financial objective. All the amount of convoluted waffle by the Taoiseach cannot conceal that central inescapable reality.
The Taoiseach once more in what has now become a ritual diatribe has again attempted, in an effort to distract attention from the Government's budgetary failure, to distort recent economic and financial history. I have on previous occasions outlined to this House the major part the Fine Gael and Labour Coalition of 1973-1977 played in creating the burden of foreign borrowing which we carry today. The latest quarterly bulletin of the Central Bank confirms this when it states clearly:
The need for adjustment in the public finances should be seen as the inevitable outcome of fiscal policy during the 1970's ...
The present Taoiseach was a leading economic voice in that 1973-77 Coalition Government, but he has so far failed to acknowledge his share of responsibility for creating the problems about which he now talks so much. In each of the years 1974 to 1976 foreign debt rose by percentage levels of between 80 and 90 per cent levels unequalled in any year since. Budget deficits and borrowing soared for the first time in 1974 and 1975 to the sort of levels we have today. All this happened with the full support of and positive encouragement from Deputy FitzGerald as a member of that Coalition Government. In the budget debate on 4 April 1974 he stated:
A suggestion has been made that the budget in some way is irresponsible, that the size of the deficit cannot be justified and that it will create dangers of some kind for the country. It is a criticism that needs to be dealt with.
He went on to say:
What we had to do this year was plan for a bigger deficit than we planned for last year. Last year's planned deficit would be too small in the current year. It was necessary to go for something larger and that is what we did.
Deputy Dr. FitzGerald returned to this theme later on 4 February 1975 during a year which saw the Exchequer borrowing requirement rise to 16 per cent of GNP and the budget deficit rise to 7 per cent of GNP. He came into this House and argued that the current budget deficit and foreign borrowing were not high enough. He said, if anything we under did it. We can and will if necessary produce many more quotations along these lines from speeches by Deputy Dr. FitzGerald to prove that in the seventies he was a vociferous advocate of budget deficit strategies financed by foreign borrowing.
I hope we will hear no more from the Taoiseach or any member of this Government about previous Fianna Fáil Governments being responsible for our present difficulties.
Deputies
Hear, hear.
Who carried out the research for the Deputy?
Deputy Mitchell is only a political tick.
The record is clear and Deputy Dr. FitzGerald's full and active participation in what happened in the seventies is fully and accurately recorded. Indeed, in so far as Deputy Dr. FitzGerald is concerned, history only repeated itself in 1983. In 1983 our total national debt went up by £3,000 million and in the first nine months of 1983 foreign borrowing was £100 million more than it was in the corresponding period of 1982. Our foreign debt today is 52 per cent of GNP compared with 31 per cent in June 1981 at the start of the recent period of two-and-a-half years for which Dr. FitzGerald——
The Taoiseach should be referred to as the Taoiseach.
Sorry: for which the Taoiseach, Deputy Dr. FitzGerald claims to have been managing our affairs though there was a slight interruption at one stage.
Let Mr. Peter Prendergast publish those figures.
(Interruptions.)
It can be clearly established from the budget speech of the Minister for Finance that this Government have no specific economic or financial targets which they are seeking to achieve. They are, as one commentator has put it, in a state of paralysis.
The sort of financial crisis that occurred on the Stock Exchange last week following the budget reflects very seriously on the competence of the Minister for Finance and his advisers. The Taoiseach will recall boasting before Christmas about "the new Government commanding greater confidence amongst those from whom the State borrows".
No one objects to tax loop-holes being blocked-off, and the Minister for Finance of the day must decide in any situation where the best interest of the Exchequer lies. That is his solemn duty.
We hold no brief on this side of the House for financial institutions. They are well able to look after themselves and their tax affairs. But it is important that the Irish money market be constantly strengthened and developed on a basis of trust and confidence so that it will be available at all times to help in the implementation of Government fiscal policy, whether in the raising of investment funds or some other manner. If as a result of what happened last week the Minister for Finance will have to resort to extra foreign borrowing this year or there will be an out-flow of funds from this country, then it will have to be acknowledged that a serious blunder was made which will cost the Irish taxpayer money rather than save it.
The Minister for Finance stated in his interview in The Sunday Press that “the reaction was bigger than expected”. Despite the efforts of the Government public relations machine to create a smoke-screen of propaganda it is clear that the handling of the matter was incompetent. It is dishonest for the Government to try to convey the impression that the Minister for Finance is standing up bravely to big financiers who have been robbing the Exchequer and that the ordinary taxpayer will benefit. The simple answer to that is that the Minister did not include in his budget one extra £ of tax to arise from this change.
He will get it now.
He will not. I guarantee that there will be nothing in the accounts this year from this change. In fact there will be a loss to the taxpayer as a result. I am prepared to stake my reputation on that. If action were to be taken then it should have been carefully prepared and any repercussions anticipated and avoided. Even this Minister for Finance can hardly claim that he deserves credit for bringing the Stock Exchange to a complete halt.
Does Mr. Prendergast claim it?
In the present state of the economy and in the wake of the failure of the Government to reach its targets in 1983 this sort of sensational development should have been avoided at all costs.
The latest figures published by the Central Bank make it clear that the out-flow of money from this country in 1983 reached alarming proportions. Dr. Antoin Murphy dealt with this phenomenon in a very interesting article in the Sunday Tribune last Sunday. In 1983 there were unrecorded out-flows of £837 million. There are two possible explanations for this, both of which are likely to be true in some measure. The first is that the balance-of-payments deficit is considerably higher than official figures would suggest. If account is taken of cross-Border smuggling and other unrecorded transactions, then the balance of payments deficit last year is most certainly higher than the official figure, for which the Government like to take credit, and could be of the order of £500 million, £600 million, £700 million or more. The other explanation, if most of the £837 million is on the capital side, is that investors do not have confidence in the way that the economy is being run by this Government. If they did not have confidence last year they will have even less confidence after the Minister's budget and the “bond-washing” debacle.
Whether we have a much larger balance of payments deficit than the Government have claimed or whether we have a loss of investor confidence, there is a situation that is a cause for concern and one which the Minister for Finance must deal with when he is replying to this debate.
The Minister made some very cryptic remarks in his budget speech about the taxation of petroleum development operations. He pointed out that the tax provisions were drawn up almost ten years ago and that they are being "reviewed". The Minister must clarify these remarks and clearly state what he intends.
Our position is that oil is a national resource that belongs to the Irish people and must be fully developed for their benefit. We want to see all the oil landed and processed here and Irish industry involved to the greatest extent possible in the provision of onshore and offshore facilities and in any downstream industries. The terms worked out must ensure that this happens as well as securing the greatest possible benefit for the Irish taxpayer having regard to the desirability of encouraging further exploration of our natural resources.
The budget has one extraordinary major policy gap, and that is in relation to agriculture. This basic industry is dismissed in three short paragraphs. The key sentence is the following one taken from the publication The Economic Background to the Budget.
Prospects for incomes in the agricultural sector in 1984 will depend largely on the outturn of the EEC price negotiations and on the outcome of the present review of the Common Agricultural Policy.
This sentiment is repeated in the budget speech. That can only be read as a decision by this Government to opt out of agricultural development and to leave the future of the industry entirely in the hands of the Commission in Brussels, and this at a time when powerful forces are lining up to undermine the entire agricultural support system of the EEC.
Government support for agriculture has declined not merely in real terms but in nominal terms. In 1982 Government spending on farm investment was £109 million. This was cut to £85 million in 1983 and in 1984 to £77 million. That is a cut of 30 per cent in nominal terms, and a cut of 42 per cent in real terms.
EEC agricultural policy and domestic agricultural policy should be complementary and mutually supportive. Under this Coalition they have been complementary only in depressing farm incomes. EEC schemes require some financial input by the Governments of the member states. The EEC Commission has ruthlessly exploited this lack of commitment of the Irish Government to its own agricultural industry and used it to withdraw EEC support. The Farm Modernisation Scheme was illegally suspended by the Government for most of last year. When the Commission suspended the scheme the Government were left with no comeback because of their own conduct. Similarly, when the Irish Government extended the delay in intervention payments to 90 days, the EEC promptly responded with a proposal to extend it to 120 days.
Agriculture fared badly in the budget in other ways. The disease levies raising £5 million, the cuts in small farmer's income supplement, the ending of the group fodder scheme, more than cancelled out the extension of the AI and the ground limestone scheme.
Last year was a year in which the progress made in restoring farm incomes during 1982 faltered. This year there is enormous uncertainty because of the stalled negotiations in Brussels. The Government's policy is to let Irish farmers fend for themselves. They have scrapped the recommendations of the Four-Year Plan for Agriculture, which was prepared by us as a definite programme for agricultural development and investment. The Government are effectively ignoring the role which our major natural resource can play in securing economic growth and reducing unemployment. It is time we had from the Government a major statement on what they propose for Irish agriculture in 1984 because the present uncertainty emanating from Brussels and from Dublin is disastrous from the point of view of the individual farmer and entire sectors of the agricultural industry.
Last year, as each month's unemployment figures were published, the Government made statements stressing that competitiveness was the key to the solution of the unemployment problem. The clear implication was that improvements in competitiveness are the responsibility of trade unions and management. Yet all the evidence is that real wages have fallen sharply. If the economy is not competitive today, it is because of the very high level of taxes and Government charges. This emerges with devastating clarity from the latest OECD Report on Ireland. It states:
Competitiveness deteriorated despite a large drop in real earnings ... real after-tax earnings have fallen very sharply indeed, but higher taxes have meant that this drop in living standards has not been reflected in improved competitiveness. Indeed, the contrary has occured. Similarly, a large part of the deterioration in relative consumer prices reflects sharp increases in indirect taxation.
In other words, it is the heavy taxation imposed in the 1983 budget that is responsible for our loss of competitiveness, not any action on inaction by trade unions, workers, management or anyone else. The clear responsibility for loss of competitiveness in Irish industry is directly attributable to the taxation policies pursued by this Coalition Government in the 1983 budget. That is not my statement or Fianna Fáil's statement: it is a clear statement of the position by the OECD. We have now the highest level of indirect taxation in Europe. In particular, a large gap has been allowed to emerge between prices here and prices in our nearest neighbour and competitor, Britain.
The budget has done nothing whatever to ease the overall burden of taxation, either on the direct or indirect side. On the indirect side there have been some increases in excise duties but the main addition is the imposition of 8 per cent VAT on clothing. Two new rates of VAT, 8 per cent and 18 per cent, have been added to complicate the system still further, thus increasing the burden of administration. VAT receipts are set to rise by 16 per cent this year, by nearly double the rate of inflation.
The Minister missed an opportunity to go for selective reduction which could have yielded him as much in revenue, either directly through increased consumption or indirectly through increased employment. In his speech the Minister stated, "We may be near the point of diminishing returns in some areas." I would suggest we have actually gone past the point of diminishing returns and the Minister should have reversed this trend by reducing taxation in specially selected areas. Before the budget I urged a drop in some specific excise duties. I believe if tax on petrol had been left alone it would have yielded as much as is now anticipated. Some of the VAT levels that are most out of line with our competitors could surely have been reduced if only on an experimental basis. The level of taxation is directly relevant to the level of employment and that fact should never be overlooked when additional taxes are being imposed. In particular the Government were totally oblivious of the need to reduce unemployment when they proceeded to place this extra 8 per cent VAT on clothing.
The income tax burden, including levies, will increase by 18½ per cent this year. Since there will be even fewer people employed, the burden for each taxpayer could even be in excess of this. The lowest number of people in any recent year were taken temporarily out of the tax net. The figures are 15,000 this year, 21,000 last year, 24,000 in 1982 and 37,000 in 1981. The nominal relief has been negligible. The real tax burden has increased substantially, with an extra £662 million being taken in taxes in one form or another. Equity for the low paid can hardly have been improved by abolishing the 25 per cent income tax band no matter how that is sold and putting 56,000 extra lower paid workers into a higher tax band. It is hard to see how this is consistent with concern for the welfare of the lower paid.
What is the position of this Government on tax credits? The Minister for Finance seems to have discovered that tax credits which have been a central item in Fine Gael's tax reform promises would in fact be inequitable, and would penalise middle income groups. Is this the official Fine Gael Party position? Does the Taoiseach agree with it? It is important that the position in this regard be clarified.
However, the Minister promises even more taxation next year. He states: "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". I would respectfully suggest to the Minister that his task over the coming years should first be directed towards reducing rather than increasing the overall burden of taxation.
Two quotations from the speech of the Minister for Finance on budget day underline more clearly than anything I could say, the financial cul de sac into which this Government have steered themselves. At one stage the Minister for Finance states "However desirable it might be to reduce taxation, this cannot be done on a significant scale, if at all, until current expenditure is reduced and the current budget deficit eliminated".
Elsewhere in the same speech he states "progress so far on the financial front would suggest that another significant step should be taken this year in the reduction of the Exchequer borrowing and the elimination of the current budget deficit. Pursuit of these goals must however be tempered with caution". The implication of those two quotations put side by side is quite clear. There will be no reduction in current taxation until the current budget deficit is eliminated and as of now we have postponed indefinitely the elimination of the current budget deficit. The Government, left in a cul de sac as far as taxation is concerned, offer no hope of any reduction in the future.
I do not think the taxpayers of this country will stand for very much longer the ever-increasing burden of taxation, or will accept the Minister's implication that nothing at all can be done about it for the foreseeable future, as he, in effect, states in those two quotations which I have given. Another point I should like to make is that perhaps the Minister will explain where he obtained £15 million for positive revenue buoyancy, which conveniently spared him the embarrassment of a current budget deficit of over £1,100 million? Could he explain, please, what positive effect this budget is supposed to have on economic activity to justify his taking credit for an extra £15 million of revenue buoyancy?
Cod.
Bingo.
If it had been our responsibility to bring in the budget for 1984 it would have been a different one; one which recognised that the major economic and social problem facing our community today is unemployment.
Hear, hear.
I have already indicated some specific changes we would have made in the budget to stimulate employment in the short term: increased capital expenditure on building and construction and selective cuts in taxes which were designed to be self-financing. We would have endeavoured to frame a budget which would chart a clear course for future development.
Our future in this country, in my view, lies in becoming a high technology economy. We are ideally suited and equipped to move in this direction, but it will require our developing a new concept of national economic management. We have a relatively small, well-educated adaptable young population and a good structure of educational and training services. Already we have more than 250 companies in the micro-electronics field employing more than 22,000 people and there is continuing expansion in this area. The National Micro Electronics Research Centre in University College, Cork, are capable of carrying out fundamental research and there are some research facilities in the NIHE in Glasnevin, though our plans for a training laboratory and research centre there have been shelved by this Government.
These are assets on which we can build, but a concerted national effort is needed if we are to succeed in our objective of becoming a high income, high technology economy. This will require co-ordination of effort in all the relevant areas and the dovetailing of many different services.
We will have to go for the right high-technology growth industries, adapt our educational and training programmes to fit in with these industries, secure the full co-operation of the trade unions and invest heavily in research and development.
Scientific and technological research are of fundamental importance in the modern world. The countries which are forging ahead are investing vast resources in research and the research capacity of their universities is linked directly into industry. We have a certain level of facilities and capabilities in our universities and in our colleges of technology and in industry itself, but there is not as yet any coherent direction of the work being done. The National Board for Science and Technology, for instance, have been moved around from one department to another. Recent sweeping changes in that board made by this Government which are bound to have harmed continuity must be deplored.
Absolutely necessary.
We have excellent, well qualified people in the technological and scientific field. The Deputy tells me that it is absolutely necessary to put an accountant in charge of the National Board for Science and Technology?
The Deputy does not understand.
It was a useless body.
(Interruptions.)
In case Deputy Skelly did not get my point, I want to repeat it.
He did not understand it. It will have to be said twice.
That is, that to completely or almost entirely change the personnel of the board which is in charge of science and technology at national level for political purposes is irresponsible.
It was not for political purposes.
Is that simple enough for the Deputy now? Does he understand it now?
That is what we have been suffering for the last few years.
(Interruptions.)
The third time might be necessary because it is breaking through now.
Deputies, please. Allow Deputy Haughey to continue.
It may be hopeful.
What about the Deputy's brother? He fixed him all right.
We have excellent, well qualified people in the technological and scientific field.
On a point of order, Deputy Fitzgerald made some reference to a third brother of mine.
I did not hear it.
I would ask him to withdraw the remark.
I did not hear it. I call Deputy Haughey.
Has the Deputy something to say?
I said it.
(Interruptions.)
Deputy Mitchell, please. I did not hear what was said. Would you allow Deputy Haughey to continue?
A Deputy
Jobs for the boys and the brothers.
The National Board for Science and Technology should be the key organisation in so far as science and technology are concerned, in so far as the vital question of applying research and development to Irish industry is concerned. I feel — and it cannot be contradicted — that to change completely, suddenly, the personnel of the National Board for Science and Technology and the lack of continuity that that implies cannot be beneficial and must be deplored. We have excellent, well-qualified people in the technological and scientific fields. They are brimming with ideas for the development of our technological base, our natural resources and in other areas. We must provide them with an opportunity to develop their ideas and their skills. Fianna Fáil intended that the National Enterprise Agency would do that. The Trade Union Movement in particular were quite enthusiastic about that concept. Unfortunately, like so many other things of a progressive nature, the National Enterprise Agency seems to have been abandoned by this Government. As far as this whole area is concerned, the aspirations of our younger generation and their ambitions and their vision for their country are concerned, this budget is totally irrelevant.
We believe that a new concept of national economic management is needed to give an entirely new thrust and line of development to our economy. We must take clear decisions on where we want to go, what areas we are going to specialise in and then mobilise all our national resources to get there. The present depressed economy, with high unemployment, falling standards of living, is not the natural order of things. It represents only a temporary failure of political leadership and economic management. We in Fianna Fáil see clearly the way this country and this economy should develop. We are ready to give the necessary leadership and direction whenever we get the opportunity to do so.
The Irish economy is drifting downhill in neutral gear. Unemployment will continue to rise in the months ahead. This Government in their budget make no attempt to reverse this appalling depressing situation. In effect they have abdicated their responsibilities as a Government.
The budget presented to the Dáil last week reflected the constraints which continue to limit the Government's policy options. However, within those constraints, it was recognised that the budget should reflect certain key priorities of Government policy for 1984, for example, that any deflationary impact must be the least possible, that certain adjustments should favour enterprise and growth, and that the poor and less well-off sections of the community should be protected.
It must always be remembered that financial targets in the budget should be considered as relevant only in so far as they are essential to ensuring over the medium term economic growth and development, the fair distribution of resources in society, and the achievement of major social policy objectives and in so far as they are required to ensure our creditworthiness abroad, and our flexibility in maintaining discretion over our own domestic policy-making.
There is no point in national bookkeeping for the sake of "bookkeeping". The "books", however, in terms of the size of current deficit and the level of the Exchequer borrowing requirement, are in the conventional sense and, by comparison with other countries, rather daunting. There is no merit in pretending otherwise and in running away from the facts of the short-term limitation on Government budgetary actions. To retain our economic independence, it has been necessary to slow the rate of growth of foreign borrowing, conscious of the fact that up to 1983 budget targets were for many years exceeded, and always in the wrong direction. Much foreign borrowing was essential at different times throughout the last decade, though with hindsight a significant proportion of the resultant expenditure may have been poorly directed or targeted. Our purpose has been to get the rate of increase of Exchequer borrowing and the rate of growth of foreign borrowing down in 1983, and to make further adjustments in the overall borrowing requirement in 1984.
"Balancing the books" might be considered to mean the elimination of the current budget deficit with the Government borrowing only for essential capital purposes. We are, of necessity, a long way from that situation — but it was never our intention to proceed to such a target in equal steps or without regard for the real economy, and for the effects on employment. It was necessary in 1983 to take sharp action to reduce the current deficit and the borrowing requirement as a percentage of GNP compared with earlier years in order to maintain control over policy-making at home. Now, in 1984, in view of the unemployment situation and our concern to protect the underprivileged in our society, it is necessary to maintain the highest sustainable level for the budget deficit and for the public capital programme that is possible in the circumstances.
In 1983, for the first time for many years, the broad overall budgetary targets were reached. Corrective action was taken in mid-year to prevent any major deviation. In both 1983, and now again in this year, the Government have to pay due attention to certain key financial targets, because otherwise the level of correction that would ultimately be required would be such as to damage all prospects for growth and would involve the slashing of the public and social services and prove a threat to the democratic cohesion of the nation. Careful "bookkeeping" is not a matter of choice; it is a question of necessity, which I think the Fianna Fáil Party came to believe in the second half of 1982.
As I indicated in a debate in the House last year, the task facing the Government can be examined in two ways. Firstly, there is the dimension of control which is necessary if we are going to be able to exercise choice at national level in the management of our economy, and to sustain and build on the social progress already achieved. We have begun that task in 1983 and this year. It has involved difficult choices which have had to be carefully evaluated and considered. Then, secondly, there is a need for a major innovative element in national policy aimed at creating the huge number of sustainable jobs that are required over the next decade. As a nation, we have committed ourselves to an open trading environment as a member of the EEC. That membership is most unlikely to bring us any bonanza of increased transfers in the years ahead. While I must stress that the continuation and indeed acceleration of the international recovery is of vital importance to this economy, a favourable environment at home and abroad will not be sufficient in itself. We need to encourage genuine risk-taking and increased investment in worthwhile projects in both the public and private sectors, and, in the framework of any overall plan, find the will to readjust and to seek new ways of tackling the unemployment crisis.
The National Planning Board have been working on a draft medium-term plan. This will shortly (April, 1984) provide a major input into the Government's social and economic planning for the medium term. If we are to contain the unemployment problem in the years ahead, hard choices will have to be faced. It will not be just a question of adding one "incentive" here and reducing another "incentive" there, nor, as I have said, merely a matter of improving the economic environment. The Oireachtas, the social partners and the community at large will need to be involved in the task of national development. I would visualise a rejuvenated commercial state sector, and the impetus to be given by the National Development Corporation from later this year onwards to be an essential part of this process. This will require, however, major attention to operating performance and the commercial realities in the market place.
Investment decisions in the State sector should be carefully evaluated and the performance of boards and managements carefully monitored. In recent years, the control system we have had has involved too many major funding and strategic problems emerging too late in the day, when if adverse trends had been identified early on, minor corrections would have sufficed. It is important, on the other hand, to remember that the State sector should not be confined to purely developmental and long-term tasks, but should play an active part in extending the base of domestic industry in both new sectors and in the natural resources area on a commercial basis.
Deputy Reynolds, criticised the budget on the ground that its contents could have been settled in a few meetings rather than by long hours of Cabinet deliberations. I am not sure how long the Fianna Fáil Administration took to compose the 1981 Estimates and budgetary arithmetic, but the targets were blown off course so quickly that one could be excused for believing that no meetings at all were held, but rather that the stars were consulted.
The budget has been criticised on the basis that public expenditure has not been cut, and that income taxation has not been significantly reduced. Deputy Haughey, in his contribution this morning said that the budget did nothing for deprivation in our society and yet he was looking for a larger elimination of deficit. It seems that Deputy Haughey cannot be satisfied. He wants to have his cake and to eat it at the same time. Unfortunately, that option is not available, and Deputy Haughey must be well aware of that fact.
The facts certainly dictate the need for a careful and planned approach to public expenditure. Unless, however, a major attack were to be made on the quality and quantity of public and social services, we find that inevitably the greater part of public expenditure in practice is committed in advance in any given year. For example, interest payments must be made to service existing debt and a certain volume of new debt is in present circumstances inevitable, public sector pay levels are carried forward from one year to another, and transfers are necessary for social welfare and other areas.
I do not accept what has in certain quarters become something of a catch cry, namely that a high level of public expenditure is of itself socially and economically undesirable. Public expenditure is of major importance in securing certain key economic, social and redistributive objectives, and will remain so. What should be an issue is the efficient management of the various public spending programmes, the elimination of waste and the restriction of programmes that serve no necessary social or economic objective, but which are retained by inertia and tradition in our political system.
In drawing up the Estimates and the budget the Government were concerned with the necessity for a balanced and sensitive approach to the current expenditure side. On the capital side, it was necessary to be selective as overall resources were limited, and to maintain a balance between economic, infrastructural and social needs. We have, indeed, passed the stage whereby our future problems can be solved by large and profligate increases in public expenditure.
There were a variety of options in deciding on the overall expenditure-taxation pattern for 1984, inside the framework of the overall constraints of the size of the deficit and the borrowing requirement. For example, it can be argued reasonably that the £97 million spent on food subsidies could be targeted more selectively, especially as the subsidies benefit the well-off as well as those on low incomes and those in receipt of social welfare entitlements. However, those on low incomes spend more as a proportion of total income on the subsidised items than the better off, and in present circumstances, the Government decided that the existing level of subsidy should be retained. On this criterion, it was more justifiable to re-impose VAT on clothing at 8 per cent (with the exception of clothing in certain children's sizes) as the higher income groups spend more on clothing items as a proportion of total income than lower income groups. In addition, competition in the trade may well limit price rises, and in fact some 70 per cent of clothing is imported.
The imposition of VAT on clothing has extended the VAT base, which, in recent years, with over 40 per cent of consumer expenditure exempt, has been extremely limited by comparison with other countries in Europe. Any move to rationalise the basis of the VAT system with a narrower spread of rates would have to take account of the incidence on different categories of consumers and of any parallel changes in the tax system, as well as the likely effect on domestic output and on imports and on the overall revenue yield expected. As is known, it has been possible, however, to reduce VAT from 23 per cent to 5 per cent on theatres and other live performances, to make adjustments in the rate of VAT on the short-term hire of cars, caravans and boats to 18 per cent from next month on, and also to adjust the rate on concrete. In addition, there will be a scheme to allow the refund of VAT on goods bought in Ireland at retail level by visitors and exported in their personal baggage, which should help the tourist industry.
That is about the only thing the Government did not tax.
Give us time. The Estimates contained an increase of some £88 million in expenditure on social welfare, arising mainly from the necessity to allow for a full year's provision from the increased rates of payment last year and to provide for estimated increases in employment. The increases outlined in the budget were for an 8 per cent increase in July in unemployment assistance rates with a 7 per cent increase generally for other recipients. It should be noted that these increases are likely to match the expected rate of price increase from mid-1984 to mid-1985. The 10 per cent increase for short-term weekly rates of benefit last June with 12 per cent for other recipients followed by 5 per cent for the long-term unemployed in October will be most likely to more than compensate for inflation between mid-1983 and mid-1984. In fact, last year's increase followed a 25 per cent rise in 1982, as originally sponsored by Deputy Eileen Desmond at that time. All in all, long-term benefit rates between 1978 and 1983 have increased, in real terms, by 40 per cent more than average industrial disposable earnings. This year, falling inflation, the retention of food subsidies and by comparison with recent years the low rate of increase of under 1 per cent in consumer prices generated by the budget, will help to protect the real value of benefits.
In addition, the rate of payment of children's allowances will be increased by 7 per cent in August. Provision in the budget for new expenditure in 1984 on social welfare exceeds £70 million.
In planning current expenditure for 1984, the Government have sought to achieve greater efficiency in the management of the overall system while protecting the framework of our social, educational, health and public services generally. Tighter budgets will mean that managers in the public sector must seek to provide the best level of service possible with the available resources.
On the taxation side, with limited VAT and excise increases, the rate of price inflation caused by the budget will be comparatively low, and should not generate by itself any demand for increased incomes in 1984.
It has been possible to grant limited income tax reliefs for all taxpayers with a small reduction in the projected income tax yield in 1984. Low income persons will be exempt from the income levy from April onwards, the PRSI allowance of £286 has been retained, the age exemption limits will be raised from £2,500 to £2,800 for persons aged 65 years and over and from £3,000 to £3,300 for persons aged 75 years and over, and the general exemption limit raised by £100 for single and widowed persons and by £200 for married couples. In addition, the age threshold for income tax relief for rent paid in respect of private tenancies has been reduced from 65 years to 60.
It is now widely felt, especially by those on the PAYE system, that the burden of taxation is excessive. However, at present it is possible to give significant PAYE relief only on the basis of unacceptable reductions in public expenditure or by increases in indirect taxation or capital taxation.
However, to us in the Labour Party, reform in the taxation system is not just merely a question of reducing the tax burden. Rather it is our belief that real equity in our taxation system can come about only through a broadening of the tax base, including capital taxation. Progress was made in the 1983 Finance Act, which contained numerous provisions aimed at stamping out evasion and closing off avoidance loopholes. While the yield from the residential property tax was disappointing in 1983, it should be remembered that new capital taxes very often take some years to achieve their full yield potential, as liabilities become firmly established and the revenue authorities gain experience and know how in administering the tax.
This year it is planned to broaden the base of capital taxations by limited action on the capital gains tax front, by changes in the capital acquisitions tax code, by levying a once-off charge on certain categories of discretionary trusts and by various changes in stamp duties. In a related area, the bank levy is being retained and restrictions placed on tax-based financing schemes will yield some £7 million this year.
In 1984, collection procedures will be improved, which should improve the equity of the system as tax evaders are brought into the net.
I would like to refer to the outcry which followed the announcement of the Minister for Finance last week to counter the practice known as "bond-washing" to which the Leader of the Opposition referred. This represents a legitimate objective of the Government to counter tax avoidance. What is of interest, apart from reactions from those who feel affected by the proposed change, is the stance of some people in Fianna Fáil who are crying out on their behalf. Have Fianna Fáil any interest in tax equity, or in closing tax avoidance loopholes? Not on their record of abolishing the 1975 wealth tax, or in their general stance in relation to taxation reform.
Last week we saw on the Stock Exchange an over-reaction which was more stimulated by a champagne breakfast on Thursday morning than by constructive comment and analysis of the budget announcement the previous day. I do not understand the reaction of the Fianna Fáil Party to closing a loophole in our tax system to bring justifiable money into the Exchequer.
The champagne is having a very sustained effect.
I would not drink it myself; a pint of plain. The level of unemployment has been and will be the great problem that confronts those in Government and indeed politicians on all sides of the House. Indeed, it is now the major problem facing the industrialised noncommunist world.
I want, however, to lay some stress on the nature of the recent recession and the long-term problems it poses for the Irish economy with our rapidly growing young labour force. From the second world war till 1973, the western world experienced strong growth with minor cyclical movements — from 1973 we have had two major recessions and one major recovery in the 1976-79 period — with the most recent recession developing into a slow recovery. We chose, as a people, and especially by the referendum choice in 1972 to join the EEC, to be part of that international trading economy. Therefore, our performance is linked to it and it must be remembered that there can be no long-term answer by every OECD country, for example, seeking continually to be more competitive with one another by current realignments or any other means.
We will need, of course, to urge expansionist policies in the EEC and elsewhere. We have to be prepared to take maximum advantage of any recovery and hope that it continues into the future, but we also have to be prepared for the possibility that world economic growth on the pattern of the sixties may not return.
In 1983, while unemployment continued to rise, certain other economic indicators moved favourably for us. Inflation fell sharply and will continue to fall this year, the balance of payments deficit has been reduced to a manageable level, manufacturing exports increased by 14 per cent in volume, and output recovered. We have obtained a little more room to manoeuvre than existed a year or two ago, and against this background the Government will this year develop a medium-term plan for the economy.
Even with this, conventional solutions may not be sufficient. We have to look, I believe, at the whole social pattern of work and rewards for work, in the context of the new technologies. We have to be conscious of the gap between rich and poor countries, of the scandal that society can be organised in a fashion whereby huge social needs for housing, education and basic services exist side by side with massive unemployment. We must be in the forefront of seeking answers to these issues particularly in the European context.
Finally, in the context of the formulation of budgetary strategy, it is important to remember that both parties in Government have their own political philosophies, policies and perspectives. Our agreed set of common objectives does not mean that we, any more than Fine Gael, have abandoned our long-term aspirations. We have agreed to try to reach consensus on the broad range of issues that face the nation in the next few years, and this includes budgetary strategy.
In such a situation neither party can impose a dominant philosophical approach on the other. At different times on specific measures the views of one or other party may be perceived to prevail but the broad orientation of Government policy must be seen to represent the spirit of the agreement entered into following the election. This is a real basis for stable and effective Government.
This Government is a two-party one, based on an agreed programme for a four to five-year term. Labour and Fine Gael must be expected to differ on policy and philosophy as separate parties. We have however the resolution and determination to resolve problems and policy in the framework of Government. That is the task before us and our aim over the next four years is to steer the economy steadily to recovery and to make this country a fair and better society to live in. I believe we have the will and the resolve to accomplish that task and the people will appreciate it.
I would like to start by commenting on the statement made by the Minister for Labour in his contribution yesterday. To say as he did, that 1983 was a year of significant economic achievement would be laughable were the reality and the consequences not so serious. How can any person say that the addition of 30,000 people to the unemployed list is a significant achievement? I can assure the Minister that the workers of Dunlops, Fords, Lunhams, Youghal Carpets, Blackwater Yarns, Mitchelstown Co-op, people who are on or facing the dole queues, would not agree with him. It is a sad state of affairs that the Minister for Labour who is responsible for workers should make such an irresponsible contribution to this House.
It is time the Government and the Minister for Labour stopped trying to pull the wool over the people's eyes by spitting out meaningless statistics in their efforts to distort the facts. I can assure the Government they are not succeeding because the public we represent are aware of the performance of this Government since they came into office in November 1982. I will give the Minister some real facts and figures. This year actual current expenditure will increase by £720 million; the actual current budget deficit, not the codology we have been getting from Government speakers, will increase; and actual Exchequer borrowings will increase by £21 million. These are the figures this Government include in their "neutral" budget. They are trying to make a virtue out of these figures. These are the figures for which they want to be praised. They may be trying to reduce the budget deficit but look how they are going about it. Instead of reducing current expenditure they are to take an extra £288 million in income tax in 1934; they will collect an extra £188 million VAT in 1984; and the income levy will bring in an extra £34 million in 1984. On his own admission, the Minister is managing to take more tax from fewer people. This year 30,000 fewer people are employed and in 1984 a further 30,000 will become unemployed. This means the burden on all taxpayers will be increased. This is very clear from the figures I have given and they cannot be disputed no matter how many Government speakers try to distort that fact.
On a point of order, is a speaker, from the Opposition entitled to read a speech written by someone else.
The Deputy is reading from notes.
Deputy McLoughlin will be able to contribute later and I will not interrupt him if he is as constructive as I intend to be. If he does not want to hear the truth he can leave the House.
Last week's budget was nothing more than an non-event, the greatest non-event and non-entity for many years. The Government continuously extol their own virtues, but there is no virtue or merit in any group procrastinating for so long to produce so little as this Coalition Government have done. No one has analysed our problems so much or done so little about them as the present Government. Where is the direction? Where is the control? Where is the commitment to tackle any of our major problems? Where is the reform? Where is the leadership? I will tell the House where — nowhere. There is no control or commitment because we do not have any leadership. We are witnessing the greatest paralysis of Government for a long time. What we witnessed last Wednesday was nothing more or less than lack of commitment, lack of will, indecision, ambiguity, evasion and, most of all, downright failure to lead.
This Government of moral indignation laud themselves in producing a neutral budget. This is the problem. They have done nothing to deal with the problems facing this country. Let us take a quick look at these problems, what this Government promised to do about them and what they are actually doing. The commitment to reduce the number of unemployed is gone. Instead of trying to alleviate the problem, this Government willingly accept that the number of unemployed will increase by 25,000 to 30,000 in the coming year. They have made provision in the budget for that. Is it not a sad state of affairs that the Government who have been given responsibility to deal with the problems on behalf of young people should give this response: to provide more money to create more unemployment?
Public expenditure grows and grows aimlessly. It is now out of control. What do the Government do? They allow for an increase of 11.4 per cent on current Government expenditure in 1984 as against 1983. No doubt they will trot out their perennial lie that this is due to the burden of servicing our national debt. That is not so. Even removing debt service costs, current Government spending will increase by 10.4 per cent this year. Even the Minister recognises that. In his budget speech he said:
Because we have to borrow to meet our maturing debt obligations, as well as to secure new funds for the Exchequer each year, we are, in effect, paying off no net debt. Instead, we are continuing to add massive amounts to our outstanding debt each year. The only way we can effectively moderate the rapid growth in debt service costs is to reduce our appetite for new funds each year by controlling the Exchequer borrowing requirement.
In his budget speech last week the Minister said:
In the time that has been available to this Government since we took office, we have had to concentrate on making the decisions required to restrain the built-in pressure for further growth in expenditure rather than getting down to the fundamental readjustments which will be necessary.
He also said:
The main impact of today's budget on the current budget deficit will be largely through tax changes, but our intention is that expenditure adjustments will be the primary focus of Government attention during the coming year.
The Government promised to control borrowing. They have now presided over a period during which borrowings have increased by £3,727 million. The commitment to reduce and alleviate the burden of taxation is gone. Indeed, the opposite can be said to be true. Before the budget was introduced it had been estimated that the take from income taxation would increase by approximately 22 per cent in 1984 if the Minister changed nothing. To provide cover for inflation effects, only around 10 per cent would have necessitated reliefs costing £90 million. Yet the Minister provided only £40 million relief. Thus the take from income tax will increase by approximately 16 per cent in 1984.
To highlight the problems regarding our current excessive levels of income taxation, in 1973-74 8,000 people, or 1.1 per cent of our total income taxpayers, paid tax in excess of 35 per cent. In 1983-84 this has increased to 363,000 people or 40.1 per cent of total income taxpayers. For pay-related social insurance the total amount is 20.6 per cent between employers and employees, 8½ per cent for the employees and 12.1 per cent for the employers. This can be seen as nothing more than a direct tax on the creation of employment. It is totally unjust in that it is levied on the same income as PAYE, and this constitutes one of the worst forms of double taxation.
I have met employers who were giving consideration to taking on extra workers even though times were hard, but because of the red tape and the constraints on them they decided not to do so. We are responsible for that because of the levies and taxes we have imposed on employers. We did not encourage them to take on people. They have said that to me, and it is very clear that other Deputies are also aware of it. Employers now prefer to give overtime to their existing staff rather than take on new workers.
I want to refer to the levy imposed on the banks by the Minister last year. I am glad he has retained it this year. I have already spoken publicly about this. The banks must be criticised for the manner in which they are dealing with this levy. They have passed it on to their customers in one form or another. Last July the Minister expresed dissatisfaction at the fact that the banks intended to bring bank truncation into their system. This would be detrimental to all their customers. It would make the system inside the banks very effective, but the people outside the counter would not benefit. There has been a wide range of increases in bank charges since the levy was introduced last year. I am open to correction, but as far as I know one bank official indicated that they would be passing on the levy to the customers. They have done this in all sorts of ways. They have increased the charge for bank cards and there are charges if there are errors in your account.
I am very concerned about cheque retention. Last July the Minister indicated his concern at the fact that the banks intended to introduce cheque retention without consultation with the Department and the Minister for Finance. This has huge implications for all concerned, and particularly business people. If you write a cheque the bank will retain it and you will have no way of knowing whether the cheque was altered or whether somebody fiddled with it. If a person applies to the IDA for a grant he must produce a cheque to show that he has paid for his equipment. This is a very serious area for the whole economy. We have taken it too lightly. I have spoken about it on a number of occasions. The banks have not responded to me in any way. I expected they would not, because they know damn well they are wrong.
The IFA, the accountants' association and other associations are very concerned and dissatisfied about it. I am surprised the Minister has not come out more strongly against it and put the banks in their places. They are the one sector of the community who are in a healthy position and they are not playing their part. We heard a good deal about people playing their part in a time of recession, but the banks are not playing their part. I hope the Minister will take a serious look at this and see what he can do about it.
It is generally accepted that the whole direction of our taxation system has gone wrong. The burden has got to be reduced and an incentive has got to be provided. Instead, we find that, through the Minister's actions, current levels of taxation are so high that they have killed initiative, stifled economic growth and act as a direct deterrent in the reduction of the numbers unemployed.
On social welfare, the concern for the poor and needy of any Government who presided over a budget which provides such a miserly increase as 7 per cent, which will not even match inflation, has got to be questioned seriously. The Labour Party claim that they represent the workers and the less well off in the community. Yet they subscribe to a budget which provides for an increase of 7 per cent. We all know there are people on the dole living in terrible conditions. They do not have enough to eat, and we must be realistic about that. There has been much criticism of people claiming dole who are not entitled to it, but there are many living on the dole who cannot feed themselves properly, and this is an indictment of everybody in this House. The Government have given them an increase of 7 per cent while we have taken 19 per cent for ourselves.
Rates of VAT have risen enormously in the past few years. In 1980 they were 10 per cent and 25 per cent and they now stand at 23 per cent and 35 per cent. Current rates are so high that it would appear they equate to an average rate of 17 per cent on all items. Our present VAT system, combined with excise duties, openly encourages evasion, smuggling and unfair trading, as well as having enormous detrimental effects on many businesses such as tourism, the retail trade and the drink industry.
It is my contention that VAT and excise duties on certain items have already reached the point of diminishing marginal returns. Thus the returns to the Exchequer are decreasing at the same time as the detrimental effects on business are increasing. Brendan Dowling, a leading economist, has recently pointed out that export sales of whiskey in Northern Ireland have increased by almost 300 per cent in the year to August 1983 as compared with the year to August 1979. As export sales to mainland Britain rose by only 23 per cent in the same period, it is reasonable to infer that over half of the sales in Northern Ireland are for unauthorised re-export to the Republic.
If the trend in whiskey smuggling is indicative of total spirits activity, then 5 million litres of spirits may be evading excise duty and VAT. The excise duty on such illicit trade would amount to almost £46 million. In addition, a further £15 million in VAT revenue is foregone. The existence of exceptionally high taxes on spirits in the Republic, combined with the inability to enforce excise laws across the Border, has resulted in a net gain to the UK Exchequer from consumers in the Republic of up to £36 million sterling. That represents the potential loss in one single commodity which is highly taxed. Overall, at present tax rates, the loss of revenue from domestic consumption diverted to Northern Ireland could exceed £100 million. Mr. Dowling concludes that a 17 per cent reduction in excise duties would generate the same revenue as the present tax rates. The Minister must look seriously at this problem, because our taxes are driving people to break the law and the State is losing out.
In the light of these facts, what has the Minister done? He has put 8 per cent VAT on clothing, excluding those under ten years of age. What fun we will have in implementing this system. I am sure the Government have not forgotten the response to their proposed imposition of VAT on footwear, but they appear not to have learned their lesson. Time will tell whether this measure works out. Getting away from the ridiculous side, let us look at the implications of this new tax. Where is the consideration for a family with school-going children? Where is the consideration of the family whose children are about to be confirmed? Where is the investment in our future? The fathers of many of these children are on the dole. At last this Government have found something to do for our young population — they have taxed them. They were not satisfied to learn their lesson regarding VAT on footwear. What could we expect from a Government led by a Taoiseach who has a phobia about women with small feet?
The Minister for Finance appeared last night on television and said that the services sector should be looked at as being a developing sector. What has the Minister done in this budget for the services sector? Absolutely nothing. It is easy for a Minister to go on television and pontificate about what should be done, but he and the Government have the responsibility for taking the necessary measures and have done nothing.
I would ask the Government to act immediately regarding decentralisation of Government Departments. The proposed re-location of An Foras Forbartha to Cork would have created many much-needed jobs in the ailing construction industry, yet the Government have failed to proceed with this project, thus adding to an already chronic unemployment situation in Cork. The provision of money for the deep-water berth at Ringaskiddy only gives back to Cork what the Fianna Fáil Government had provided for in the Estimates last year. There has been much ballyhoo about the £2 million being provided in this budget, but it is a pity that the Minister did not leave the amount provided last year. In spite of that, I thank him for this year's allocation. There have been innumerable trips from Cork to Dublin by the Cork Harbour Commissioners and many other organisations trying to convince the Minister that the project would provide many jobs in the area and enable the IDA to encourage industry to locate there. We had to bring half the people of Cork to speak to the Minister on the matter.
The construction industry has been one of the hardest hit. The Government claim that jobs cannot be created by infrastructural development. I do not know where they got this notion. The whole community is affected by the construction industry, and it is good for everybody if jobs are created in this sector. We cannot get that message across to the Government although they claim to be concerned about unemployment.
It is very clear that the Minister and the Government have no commitment to solving our problems and would prefer to sit back, throwing leadership to the winds and waiting for the American economy to pick up and solve our problems. The insincerity of the Government has been clearly brought home to us in this budget by the callous manner in which they have disregarded its effects on the community at large. The collusion of the Labour Party will forever be a millstone around their necks. State finances of almost £8 billion are under the control of the Government, but they are not using this money in the best interests of the country. The harsh and difficult measures were taken by the Government last year when we were told they were necessary for recovery. This year we are worse off than ever. The difficulties the people experienced achieved nothing, contrary to what the Tánaiste said. There are 30,000 more people unemployed and there is provision for another 30,000 this year. We listened to the Tánaiste trying to hoodwink the people. The people know how the Government have performed and they have learned their lesson. If the Government go to the country next week or in three years' time the public will not forget their performance.
We have higher unemployment, low standards of living, no confidence in the community and the Government making provision for an extra 30,000 people unemployed. Where is the effort to tackle unemployment? What confidence can young people have in the Government? The Labour Party claim to represent the working classes. The pseudo-socialism of Fine Gael has been clearly demonstrated in last year's and this year's budget.
There was a parliamentary meeting held by the Labour Party last Friday. One of their members said that the budget was not bad enough to bring down the Government. It must be very easy to please the Labour Party. It is a pity that the people they claim to represent do not see it in the same light. It shows where the Labour Party have been swallowed up by Fine Gael and have lost sight of their responsibilities to the public. After all the punishment the people had to endure we are worse off today than we were last year. If the Government call this achievement all I can say is God spare us from their failures in the future.
Deputy Wallace raised some interesting points. One of them I fully support. It is the question of the banks proposing to retain cheques and not return them to the account holder. That would be a regressive step, and the House should express its concern. I hope the Departmental officials will communicate the concern of Deputy Wallace and others to the Minister in the hope that he will raise this question with the banks to ensure that they do not pursue a policy of retaining such cheques. It will present difficulties for many people, particularly in the area of revenue returns.
The Leader of the Opposition spoke about the Fine Gael objective of having the current budget deficit at £750 million. He went on to say we had watered this objective down to £950 million. It is extraordinary that the Fianna Fáil proposal was for a current budget deficit of £700 million, which means Deputy Haughey would have taken a further £350 million out of the economy. This presumably would have been from PAYE workers, since he showed no ability in the past to tax the wealthy or the new found aristocracy which he is used to mixing with. It is not possible to criticise the Government for having cutbacks in expenditure and reduced numbers in the public service and then criticise them for not taking enough out of the economy and out of the PAYE taxpayers' pocket. It is this kind of contradictory nonsense which has us in the mess we are in. The Leader of the Opposition has attacked us, and that is part of his function. We do not know what the Opposition proposals are even now. There is no vigour or fire coming from them. There are no suggestions but only attacks. They have a right to attack, but surely we should get some suggestions from them instead of hearing how we should increase employment in the public service, cut the current budget deficit and reduce the borrowing requirement. It is impossible to do that——
Is the Deputy asking for a solution to their failure?
Deputy Haughey has given support to the bond-washers. It is extraordinary. Only a few weeks ago people were marching because of PAYE and today Deputy Haughey took the side of the bond-washers against the PAYE worker. One cannot have it three or four ways at the same time. Deputy Haughey is an able man. He has his faults like the rest of us. He will be Leader of the Opposition for another four years, if he is not removed, and he should use his ability to stimulate discussion and promote ideas in the House which would help to deal with the hopeless position many people are in. Deputy Haughey will be pleased that the Government reduced VAT on theatre tickets, and it should be of great interest to some of the actors he has about him.
In a publication by the NESC —Economic and Social Policy 1983: Aims and Recommendations— chapter one stated:
There are signs that a world economic upturn is under way. The current recession, which began in late 1979 and lasted longer than any recession since the Second World War, appears to have bottomed out in late 1982. Clear signs that the recovery is under way in the US emerged in the first half of 1983 with economic growth reaching an annual rate of almost 10 per cent in the second quarter and indications of continuing strong growth in the third quarter. It is time to stop all the talk of doom and gloom. While the 10 per cent growth rate for the second quarter in the US economy could not be expected on an annual basis we can still expect there will be significant growth in that economy. Hopefully that will continue.
The Central Bank has forecast a growth rate of 2¾ per cent. That is very important, and we should stress it. We must be responsible when we are speaking, without going too far and telling the people we are going for boom and bloom. Once that fails the credibility of the people who utter it also fails. We must be hopeful and positive without being unrealistic. It is realistic to say there are positive signs that growth is on the way.
In the last quarter of last year — economic commentators bear this out — the purchase of capital equipment by industry has been significant, which would indicate that employment opportunities will start to improve towards the end of the year. Regrettably we have not yet seen the end of unemployment. Given the growth rate anticipated and the level of investment in the first quarter, it is likely that employment will increase. There will be many young people coming onto the employment market, and although it is expected that there will be significant growth, particularly in the manufacturing industry, they will presumably take those jobs or will replace people on the unemployment register who will take those jobs, so that the unemployment situation itself will remain serious unless something quite different is done. I shall develop that point later on.
The background to the problems we face — problems we started to face up to in the last 12 months — began in the period 1977 to 1981. In that period we borrowed more than we did in the previous 25 years, doubling our external debt from something like £5,000 million to £10,000 million. In the same period we abolished rates, almost abolished capital gains tax and wealth tax, did away with car tax and led the people to believe no one had to pay for anything because the Government would somehow provide. That sort of reckless thinking, that creation of wrong attitudes, that mismanagement, is the background to the problems with which we are confronted today. Whoever is responsible, that is the background. Having borrowed so much the interest on that borrowing is now an enormous burden on the Exchequer.
It is important to stress that the rate of inflation has now been halved and is expected to continue improving. The balance of payments deficit on current account has declined from 13.5 per cent GNP in 1981 to 2.5 per cent in 1983. That is a very significant figure. The Government's objectives in the fiscal area are on target for the first time in almost a decade. Those achievements have not been gained, of course, without some sacrifice. They have not been gained without some tight control and tight management on the part of the Government, and I believe that even tighter control and tighter management would be in the interests of the public.
I want to quote now from the NESC Report of 1983 which says:
"The council recommends that having regard to overall economic and social objectives there should be a significant reduction in the EBR as a proportion of GNP in 1984. It believes that the present levels of borrowing are unsustainable. The failure to reduce borrowing would jeopardise any hopes of sustained growth in output and employment".
If we are hoping for sustained growth in output and employment then we have to be able to borrow externally. That does not necessarily mean that we have to continue to raise taxes on people in the PAYE sector because, as far as I am concerned, further reliefs for that sector will not come quickly enough. There are people in the bond washing sector, in the capital sector, who could contribute more, and they should be made to contribute more and, in that regard what the Taoiseach said yesterday was very significant.
There is also need to cut out wasteful expenditure in the public sector. Of all the committees recently appointed that on public expenditure has a very serious responsibility to pursue wasteful expenditure. Again, there is need for the State to cut out subsidies given to people who are well off. I shall give examples of that later on. There are many people who are three times better off than the average citizen who are being subsidised more than the average citizen and taxpayers are mulcted in order to subsidise such people. The Central Bank report of 1983 had this to say:
In the last ten years total central government expenditure expressed as a proportion of GNP rose from 35 per cent to 66 per cent, the corresponding figures for current spending being 28 per cent and 50 per cent.
That rise is absolutely incredible. Imagine spending 66 per cent of GNP. It meant Government control of the lives of almost everybody, leaving nothing to local authorities or to individuals. That sort of intrusion and that sort of central control only results in people being tied up in bureaucracy which is very hard to control, very expensive and not in the interests of the common man. It is time we cut back on all this bureaucracy and left people with more money in their own hands to decide what they will do with it, to dispose of it as they see fit and, if they want to provide certain local services, they should be in a position to do that without having to go through the Exchequer.
The current budget deficit was referred to this morning and the question of the Government's elimination of that deficit over a fixed period was raised. The Central Bank in 1982 had this to say:
The fulcrum of a plan for economic recovery would be the elimination of the current budget deficit over a fixed four-year period.
The Central Bank give good advice based on economic and financial information available to them, and so do people like the NESC. Indeed, very often they say the same thing. The NESC for many years has been calling for a four-year elimination. They were looking for it in 1976, in 1977, in 1978, in 1979 and they are still looking for it. A Government have to take into consideration the social consequences of any action designed to do this, and now that there is a sign of economic growth the Government are doing the right thing. Instead of eliminating the actual figure they are going for elimination as a percentage of GNP, and at the end of the year we will have a current budget deficit which in percentage terms will be a lower percentage of GNP than in 1977 or 1978. That is a very significant step forward without actually putting the boot in on people who need a few bob. There is no interference with existing growth and there is a bit of encouragement at the same time designed to raise the economy out of the apathy it has suffered in recent years. I support that. I think the Government are right to reduce the current budget deficit as a percentage of GNP, and they are also right in not trying to take too much out of the economy this year.
I said earlier that the State is spending money in areas where it need not necessarily spend money. In times of economic stringency we should be looking very carefully at waste. Take, for instance, the reference in the NESC report to bed occupancy in hospitals. We have the highest bed occupancy rate of any country in western Europe. It is a regular trick — I use that word advisedly — to bring people into hospital on Friday and carry out tests on them on the following Monday. Presumably this is related to the fact that certain people in the medical services are paid an extra fee in respect of people who are hospitalised for three days rather than for one day. If there were to be no more of this trickery, we might not need the sort of increases in VHI contributions as the one imposed recently. This is the sort of carry on that is taking the State for a walk. People who present themselves at hospitals for the purpose of having tests carried out could in many instances be dealt with in a matter of hours, instead of which they are admitted on a Friday, fed and left occupying beds for the whole week-end, when they would prefer to be at home anyway, then attended to on the Monday and discharged. This is the sort of nonsense that is being indulged in at a time when the State is on its uppers in terms of financial expenditure. The practice will have to be discontinued.
Regarding other areas of public waste I wish to read into the record a further reference. I quote from page 25, paragraph 2.11 of the NESC Report:
Rents are low in local authority dwellings for several reasons: firstly, under the 1983 differential rents scheme, the maximum rent chargeable is 5.25 per cent of the original all-in cost (up dated by the CPI). This would put the maximum rent for a new house at just over £35 per week.
That is dear enough. The report continues:
Secondly, very few tenants would earn enough to be liable for such maximum rents. A male earner with wife and three children would have to have a net income of £200 per week (close to £300 per week gross) to be liable for £35 maximum rent.
Thirdly, rents can be increased only by a maximum of £4 per week in respect of each subsidiary earner, with the result that multiple income households may pay proportionately less of income in rent than single income householders.
The report continues at paragraph 2.12:
An examination of local authority rents in relation to income levels (Table 2.3) shows that the differential rent scheme did not, in 1980, operate in a way which related rents systematically to ability to pay. Rents accounted for an average of under 6 per cent of disposable income of local authority tenants but the highest income group paid less than 2 per cent of their incomes in rent.
In other words, the more money one earns, the better the subsidy. The higher earners are paying 2 per cent of their incomes while for those in the lower-income brackets, the figure is 6 per cent. That is nonsense. It represents the sort of hidden subsidy of which people with incomes of £500 or £600 per week are availing. I support fully subsidising people who are in need but we should not subsidise those on vast incomes. The NESC who are representative of business, of Government and of the trade unions have drawn attention to this absurdity time and again and are asking that something be done to rectify it.
I represent a constituency which is very mixed but in which there is a huge number of local authority houses. The vast majority of those people would not wish that people who are quite wealthy be subsidised. We must be prepared to tell people that they must pay according to their ability to pay. Those people who, because of their enormous incomes, are paying only 2 per cent in rent, should have to pay the same proportionately as any other local authority tenant pays. The stage has been reached where there are people applying for local authority houses but who are quite wealthy. Therefore, we have a situation in which those who are well able to provide for themselves but who are either too lazy to do so or who are determined to live off the State are displacing people who are in need of local authority housing. There are 6,000 applicants on the housing list of Dublin Corporation alone. If we were to remove from that list those people who are well able to house themselves, we would be in a position to house the poorer families and people who are living in overcrowded conditions. Our job is to help those who are in need. Another Member of the House related a story to me recently of representations he had had from a teacher, who happens to be married to an officer of the State, regarding the possibility of their getting a local authority house.
Regarding income to the Exchequer from housing rents, if we were to consider extending 100 per cent loans to people to purchase houses, we would be doing a service to the public. It is argued sometimes that to provide a 100 per cent loan is to bring about a situation in which people will take on mortgages they cannot afford to repay, but that is not a very good argument so far as the Housing Finance Agency are concerned, since one's ability to pay in respect of loans from that agency is related to one's income. In addition, there is the factor that we remove people from the housing list, provide them with a house at a small rent without asking about their ability to pay. There are many people on the housing list who would be happy to purchase houses if they could get a 100-per cent loan through the Housing Finance Agency and if they could repay at a fixed rate based on a percentage of their income similar to the situation of those who have already qualified for loans under the Housing Finance Agency Scheme.
That is something to which we should give consideration. The percentage of income that would be involved would be much more significant than is the 2 per cent of income which some people with large incomes are paying.
At paragraph 2.47 on page 37 of the NESC Report, there is the following observation:
There has been little change in housing policies over the last year despite increasing evidence of the undersirable regressive distributional effects of many policies. The Council considers that there is a need for a fundamental review of housing policies and their effectiveness in relation to social and economic objectives. The Council believes it would be appropriate for the Government to publish a comprehensive policy statement on housing policies.
I hope the Government will do that and that the economic and financial commitment of the State will be outlined and justified and that we will make more clear our thinking in this area.
This NESC Report has the unanimous support of the various representative groups in the community, including the trade unions. When we talk of people sponging on the State there is a tendency to think only in terms of social welfare recipients. But there are businessmen who are fiddling in respect of income tax, while there are farmers who are receiving benefits that are unrelated either to their income or to their needs. There are pillars of society who sit in judgment on others but who are availing of large travelling allowances or some other hidden income and who have the audacity to talk about people sponging in terms of the social welfare system. There are many spongers in our community but not all of them are in receipt of social welfare benefits.
I have here a document that is being circulated to members of the crime committee by The Irish Federation of Self Employed. It is advocated in this document that for those already engaged in crime a more rigid form of punishment is called for than that which obtains in our prisons now. The federation say that it should be a penalty to be sent to prison for a felony, that imprisonment should involve the loss of all privileges available normally at home, for example, television, choice of food, tobacco or cigarettes and that there should be strict discipline and few visits allowed. The group say also that where certain serious crimes are involved convicts should be liable to varying numbers of strokes of the "cat" possibly in public. I wonder how many strokes of the "cat" some of our tax-avoiding businessmen would like to be given for some of their activities within the economy.
Debate adjourned.