Dáil Éireann díospóireacht -
Friday, 8 Jun 1984

Vol. 351 No. 5

Estimates for Public Services, 1984. - Vote 6: Office of the Minister for Finance.

Minister for Finance (Mr. Dukes)

I move:

That a sum not exceeding £18,513,000 be granted to defray the charge which will come in course of payment during the year ending on the 31st day of December, 1984, for the salaries and expenses of the Office of the Minister for Finance, including the Paymaster-General's Office, and for payment of certain grants-in-aid.

The main items arising in relation to this Vote are an increase, which is substantial in percentage terms, in relation to consultancy services and a further substantial increase in relation to payments to the Special Border Areas Fund. In relation to consultancy services the greater part of the increase provided for is accounted for by the salary and superannuation of an extra accountant who has been taken on in my Department, seconded from the Industrial Credit Company, in order to improve my Department's capacity to deal with a number of financial items.

Deputies will notice that there is also a substantial increase in relation to the provision for Post Office services as compared with the 1983 provisional outturn. The main difference there arises as a result of the fact that in 1983 there was a substantial overcharge by the Post Office that eventually affected the 1983 outturn bringing it down to the figure which is given in the provisional outturn as published. We have provided for 1984 what seems to be the appropriate amount but the combination of those factors gives rise to an apparently large increase in the Vote.

In relation to the Special Border Areas Fund we have made an allocation of £5.5 million for 1984 of which, so far, £1.8 million have been expended. This fund is one which has been the subject of some discussion here in recent months. I think there is agreement on all sides of the House that we should ensure that the funds made available in this way are properly and fully utilised. I might remind the House that the total allocation to this special fund from the Exchequer over the five year period 1981 to 1986 will be approximately £23 million, of which 50 per cent will be recouped to the Exchequer from the non-quota section of the European Regional Development Fund. The total amount that is available for expenditure in 1984 is £6.2 million, that is the allocation of £5.5 million being made for this year plus an unexpended balance of £700,000 at the end of 1983. As I said in this House on previous occasions, it is my intention to ensure that these funds are fully utilised because there are a number of projects covered by these funds which can make a useful contribution to the level of economic activity, to tourism and to infrastructure in the Border areas.

Mr. S. Brennan

Without prejudicing my right to speak later in the debate I should like to put a question to the Minister. He mentioned the Post Office, and the receipts his Department received last year, and I should be obliged if he will spell out to the House how much precisely his Department earned last year from the Post Office and if he expects that to change. I am anxious to inform the public whether or not the Post Office was a net cash flow into the Minister's Department or a net outflow and if it will remain that way.

Mr. Dukes

Strictly speaking what the Deputy is asking does not arise on the Estimate for my Department. It will arise more properly on the Estimate for the Department of Communications. The references I was making to postal services were simply the postal charges arising on the Estimate for my Department during the course of the year. The wider question does not arise on the Estimate for my Department.

An Ceann Comhairle

The Chair does not wish to appear to be too strict, but the Chair must point out that we cannot have anything in the nature of a Committee Stage debate on this. The Minister will be called upon to conclude in due course and questions may be put to him in the course of contributions by Deputies in the meantime.

Mr. O'Kennedy

I should like to put a question to the Minister although I do not know if he will choose to reply to it now. My question relates to the fund for Border areas. Will the Minister indicate now, or at some stage during the course of the debate, whether the Government are providing a separate programme distinct from any other element of funding for Border areas? Will the Minister tell the House whether the Government are ensuring that the funds to be applied in the Border areas are additions to those that would be applied in the normal course because of the acute problems in those areas?

An Ceann Comhairle

Is the Deputy making his contribution on the Estimate?

Mr. O'Kennedy

No. I would prefer to wait until I see what is going to happen.

An Ceann Comhairle

The Minister has introduced Vote No. 6 and I am now calling on any Deputies offering.

Mr. O'Kennedy

On the Estimate for the Department of Finance it is surprising that the Minister has not as yet, as other Ministers have done, given us a breakdown of the role and purpose of the Department, what they have achieved and their plans and projections. That has been standard practice in the House for a considerable time and I would have thought that the Minister in introducing his Estimate would have indicated how his Department under his guidance, or lack of it as the case may be, is contributing to the achievement of aims of overall Government policy, whatever that may be. It must be unprecedented for the Minister to introduce his Estimate without giving any indication — I do not know if he proposes to do so in the course of the debate — of the priorities in the Department and his own priorities. Many people are anxious that those priorities be stated clearly so that those affected by the direction, or lack of it, of the Minister and the Government can see more clearly where they stand. For instance, one might ask what is the role of economic planning and development, if any, in the Department of Finance at this stage. We have not heard from the Minister in that connection over the last 12 months as far as I can recall. We have heard about policies but we have not seen any evidence of them even in the course of debates in the House during this week. The Minister indicated that the Government were going to adhere to the "policies" they have presented, but I do not think anybody but the Government have any idea as to what those policies are beyond being able to identify shortsighted reactions dealing with revenue projections and tax collection.

If the Minister has a speech to introduce his Estimate I will be happy to give way to him and listen to that speech. Since Fine Gael and Labour took office in December 1982 the position here has deteriorated seriously. The budget of 1983 was described by the Minister as a shock to the economy but in fact it plunged Ireland into the depths of a serious recession. In the course of his budget speech this year the Minister commented on the effect of the 1983 budget and said that consumption had declined, investment had fallen, unemployment had risen and growth had been stifled. That amounts to telling the world at large what they know already and confirming for the Irish people that consumption has declined, investment has fallen, unemployment has risen and growth stifled.

Our people do not just want confirmation of what they can see plainly but rather what the Government propose to do to ensure that those unacceptable conditions will be changed. They want the Minister, if he says consumption is rising, to say that investment has renewed, unemployment has fallen and growth was being encouraged. The role of a Minister for Finance is to create a climate in which those who can ensure the success of investment programmes can get a signal from the Government of the investment opportunities that will arise for them. Just 18 months after they took office the Government are still seeking alibis from the past. We have all made mistakes in the past. I served in Governments who made mistakes, but if we are to engage here in an analysis of what happened in the past in respect of a Government who have responsibility for today and tomorrow we will not get anywhere. This is not a Chamber for historical debate, and that is why this preoccupation of the Government of seeking alibis from the past is wrong. They seem to suggest that by criticising the Opposition they will exonerate themselves entirely from having to act as a Government.

Some time ago I tabled a question asking the Taoiseach — the question was directed to him as the Head of the Government — when the Government proposed to publish the plan for economic development, or any plan, and to outline the broad priorities of any such plan. However, the Taoiseach, because of the absence of any indication of when it would be published, transferred the question to the Minister for Finance. The question now rests safely at No. 298 on the Order Paper. It is a safe bet that we might reach that question about October or November next. I hazard a guess that when we do we will not have got any indication from the Government of any plan for development. That is unacceptable in terms of the discharge of the role of the Minister for Finance, who has responsibility not just for regulating and controlling tax revenue but, above all else, for ensuring he creates an economic climate in which we can lift ourselves out of the recession into which we have been plunged.

The single biggest mistake the Government have made was to allow, or rather to ensure that taxation has risen to intolerable levels, removing all incentive at an individual level to work harder or invest. It has also had the effect of creating unnecessary divisions within our society between the employer and the employee. When each is bearing an intolerable burden it is understandable that they tend to feel that others do not bear the same burden. Just when we need cohesion in our society to bring forward a great new spirit of renewal, we find in these tax levels quite the opposite, dissension and division which are undermining the very cohesion we want to promote.

Even this week Business and Finance has shown what I have said many times in this House over the last 12 months in relation to our tax levels. It has shown dramatically what has happened to taxation since — and it took the year in which I was Minister for Finance. I do not claim to have been the only Minister for Finance who tried to have a reasonably broad and objective approach to tax and tax collection, although it is fair to say that in that year we introduced more tax reforms than in any other year and tried to create a climate for development investment. Business and Finance indicates, particularly in relation to income tax for which the present Minister and his colleague, Deputy Bruton, bear responsibility, the pattern over the last three budgets. In 1980-81, 12 per cent of taxpayers or 107,000 were paying above the standard rate. In 1983-84 this had risen to 40 per cent of taxpayers and the numbers had more than tripled to 363,000, and we are talking about a diminishing workforce. In 1984-85 the totals will be still higher. I doubt if any parallel is to be found in other countries of the OECD. In fact, anywhere one goes to make comparisons between levels of direct and indirect taxation we find that, unfortunately, no comparison can be made to equate the level of taxation here with what applies in our competitor countries.

An Ceann Comhairle

I must point out to Deputy O'Kennedy that taxation policy is not in order on this Estimate for the simple reason that it requires legislation. It is a matter for the Finance Act. This is not an innovation as far as I am concerned. My predecessors have ruled that taxation policy may not be discussed.

Mr. O'Kennedy

For clarification, I am not proposing, as one would in a Finance debate, specific tax measures to the Minister now which would require legislation, but if I am not free to comment on the Minister for Finance and his tax policies — not at any great length — that would stifle any debate in the House. That is all I propose to do. I am not going to propose tax changes beyond a broad outline. That surely is reasonably within the realms of this debate.

An Ceann Comhairle

Let me give the Deputy what is and what is not in order. I hope that we will not have any hassle about it. The scope of the debate on each Estimate is the policy and administration of the Minister and of any bodies operating under his aegis. Criticism of existing legislation — Finance Acts — or advocacy of new legislation is not in order. Also — I am reading from the book of precedents — taxation policy may not be discussed.

Mr. O'Kennedy

I would like to have precedents. Obviously the policy is relevant and if this does not come within the area of policy I cannot understand why. We are not going to have too many speakers engaging in a protracted debate here, but when you mention criticism of existing legislation, surely if our role on a Finance Estimate debate was simply to come in here to find approval rather than make criticism, we would have no function here.

An Ceann Comhairle

Existing legislation may not be criticised nor may new legislation be advocated.

Mr. O'Kennedy

I am not referring to legislation at all. I am referring to policy in respect of which the tax levels here are posing problems. I do not intend to go into a Finance Bill debate on this. I am simply talking of policy and the impact it is having on selected people. I was talking about tables that are available which demonstrate, for instance, that a married couple earning £16,000 a year were paying 60 per cent in tax at the margin whereas their counterparts in, say, the US would be paying only 23 per cent. The highest rate of tax in the US is 50 per cent and in my time here it was 60 per cent, but we are up to 65 per cent introduced at £12,500, which is intolerable compared with what applies amongst our competitors and our customers.

An Ceann Comhairle

I assure Deputy O'Kennedy that it gives me no pleasure — in fact I dislike — to intervene and pull Deputies up when they are making speeches, but the Deputy now is clearly criticising the Finance Act.

Mr. O'Kennedy

Not the last Finance Act or the one before it. I am criticising a policy in so far as one can be identified. I have not much further to go on this.

An Ceann Comhairle

Existing taxation is governed by the Finance Act, 1984.

Mr. S. Brennan

It is money he is spending on his Estimate.

An Ceann Comhairle

He can criticise how the Minister is spending it and he can criticise any of the bodies under his aegis or that of his Department. The Minister has the money. You can criticise the administration of his Department.

Mr. O'Kennedy

Just the administration, the civil servants? I am concerned about the Minister and the Government.

An Ceann Comhairle

Civil servants do not enter into it.

Mr. O'Kennedy

I could, of course, take the option the Minister took, saying nothing to justify what he is at.

Mr. Dukes

That is only so far.

Mr. O'Kennedy

That would not be our role. I presume the Minister has taken the view that he is not going to introduce his Estimate.

Mr. Dukes

No, I like to get the Deputy out there.

Mr. O'Kennedy

It is not an unprecedented approach. In that connection I have stated the obvious which is there for all to know, that our tax levels are intolerably high. In terms of general policy in each of the budgets of the last three years, Fine Gael Ministers for Finance have greatly increased that tax burden. At the same time they have not been able to achieve any worthwhile cuts in public expenditure despite the stated intentions of the Minister for Finance and the Taoiseach. Could someone please explain to the Irish public how you halve a current budget deficit, as the Taoiseach said in this House during the week, by increasing it? A current budget deficit that has been increased by this Government in the last 12 months by about £15 million is now, in the words of the Taoiseach, halved. If we are to use terms of that nature is it any wonder that the people are confused? For instance, the Minister indicated in the House that there would be no significant change in the trend of the balance of payments deficit when it emerged, and we found out that that seemed to mean that £500 million was not significant.

In any event, the heavy level of taxation is onerous to individuals but, more important, has had a devastating effect on job-creating investment. EEC figures show that in 1983 investment slumped to its lowest level here in 15 years, just when we needed to create a further drive to provide employment, hope and opportunity. In particular the Government have cut back heavily on public investment in defiance of the EEC and of accepted economic wisdom. The present level of public investment has been cut by one-third in real terms in comparison with the public capital programme in 1982. It is not surprising, therefore, that employment in the construction industry has declined to a considerable extent and that industry largely uses native components and has a high labour content. The level of investment there is 40 per cent lower than in 1981. Chief executives of major construction companies have come to me, as Fianna Fáil spokesman on Finance, to inform me, as a matter of public duty that the level of their investment outside the country is five to one vis-à-vis native investment. They are maintaining only skeleton investment in Ireland.

This demonstrates the impact of lack of Government policy on the economy generally but particularly on the construction industry. I found it shocking that representatives of that industry should have to come to me to put their case. They felt that as a matter of public interest and duty on their part, I should be made aware of lack of Government policy on their activities. Of course other countries, Saudi Arabia and the US, are benefitting. Even to maintain a skeleton activity at home they have to invest to that extent abroad. It is not surprising that employment in that industry is 40 per cent lower than in 1981.

The Minister must be too ashamed of the level of IDA job approvals in 1983 to refer to them. Last year they were at their lowest level in three years, only half what they were when Fianna Fáil were in Government.

An Ceann Comhairle

The Deputy is departing from the Estimate.

Mr. O'Kennedy

There is a department or section on economic planning in the office of the Minister for Finance.

An Ceann Comhairle

This Estimate does not provide a platform for an economic debate. The IDA are under the aegis of the Minister for Industry, Trade, Commerce and Tourism who was questioned here yesterday and the day before. We cannot have a debate on the IDA.

Mr. O'Kennedy

The investment climate for which the Minister now in the House is responsible is the criterion which will determine the level of investment and jobs.

An Ceann Comhairle

That would be relevant on the budget debate.

Mr. O'Kennedy

The Minister has a lot to conceal.

Mr. Dukes

I have nothing at all to conceal.

Mr. O'Kennedy

Like £500 million?

Mr. Dukes

The Deputy knows very well that there was nothing concealed there. The Deputy is descending to a very low point when he has to argue like that.

Mr. O'Kennedy

If job approvals dropped to 26,000 from the 35,000 level when I was Minister for Finance and to 14,000 in 1983 we can begin to see the effect of the lack of policy and of the attitude of this Minister towards public investment. He bears the responsibility, more than any other Minister. Fine Gael and Labour pretend to have confidence in him but the Labour Party have absented themselves from all the debates on financial matters, including the Finance Bill, but they can go out and express their concern to their constituents who are diminishing in numbers. They go into the lobbies to support the Minister for Finance but if they look at investment in a concrete way they will see that investors have no confidence in the Minister or the rest of the Government. It is significant that the Government had to borrow abroad——

An Ceann Comhairle

I have a job to do. I informed the Deputy that taxation policy may not be discussed, that major financial policy may not be discussed. The general question of inflation, which is proper to the budget debate, may not be discussed.

Mr. O'Kennedy

You indicated to me that policy may be discussed.

An Ceann Comhairle

The policy and administration of the Department.

Mr. O'Kennedy

That is what I am dealing with.

An Ceann Comhairle

The Deputy is dealing with major financial policy.

Mr. O'Kennedy

I have been saying that within the Department of Finance there is one section which dealt with borrowing abroad. This is an important section which is alive and well.

Mr. Dukes

All sections are very much alive.

Mr. O'Kennedy

It was very active in January and March because of the level of borrowings in those months and the influence it had on investment at home. This matter needs to be brought under close supervision and control because of the amount of money the Government raised from borrowing at the beginning of the year, equivalent to 85 per cent of the amount raised last year. We proposed that if these matters could not be brought under control by the Minister we would be prepared to take part in an all-party committee to review the policy programme of the Minister and the Department of Finance, who happen to borrow on behalf of the Government. Domestic investors were not prepared to put their money into Government stocks and the Building Finance Agency have not been able to get any investment with which to promote their programme because of the policy of this Minister and his Department. Here are a Government-sponsored agency in which people had sense enough not to invest. There is much money lying around which could be put to good use to promote natural resources in forestry and fisheries, and in pension funds, but the Minister for Finance has not found any way to channel this money into programmes that would create an atmosphere for renewal.

I am personally aware of a lively interest in pension funds and in investment in forestry and fisheries programmes. The various Departments dealing with our natural resources could do with proper funding because of the limited amount being given to them by the Minister for Finance, but the Minister or the Government do not have the confidence to tap those resources. The public are not prepared to put their money into Government stocks. The Government came to office committed to restrict foreign borrowing, but from the size of the current budget deficit one can see that they are very far from doing that. Perhaps one day the Taoiseach will explain how something can be halved while it is being increased. Any businessman approaching his creditors on such a basis would not get very far yet the Taoiseach told us this week, at a time when the deficit has increased by more than £100 million, that it has been halved.

An Ceann Comhairle

Clearly, the Deputy is embarking on a major debate on finance. I would direct Deputy O'Kennedy to the Estimate. We are discussing Vote No. 6 and the various headings as set out. The Deputy may discuss any of those headings but he may not enter into a major economic debate. The Government, not the Minister for Finance, impose taxation.

Mr. S. Brennan

The Minister spends the money.

Mr. O'Kennedy

There was within the Department a section for economic planning and development and that section comprised very able people. I presume there is still such a section and that I am entitled to comment on the role of that element within the Department.

An Ceann Comhairle

I am directing Deputy O'Kennedy to the Estimate.

Mr. O'Kennedy

In any case, the section dealing with foreign borrowing are alive and well and there is a section also for the purpose of advising the Minister on matters of taxation. It is hardly inappropriate that I make some comment on that. Even the Minister's stated objectives are far from being realised. The size of the current budget deficit indicates that he is as far as ever from phasing it out. The indications are, too, that the Exchequer returns to the end of May show a significant shortfall of revenue. I said this last year.

Mr. Dukes

The Deputy was just as wrong last year.

Mr. O'Kennedy

I thought there was a shortfall at the end of the year of more than £63 million. I thought also, as I said at the beginning of the year, and which was proved right by the end of the year, that the revenue from excise duties would be less than the amount suggested by the Minister. Yet, he is telling me I am wrong. Evidence shows that there was a fall-off in consumption last year of about 20 per cent in petrol and beer. I do not wish simply to stand up here and say, "I told you so", but the record will show that I pointed all of this out to the Minister. Unfortunately, I was proved right. Surely everyone is aware that because of the hopeless investment climate, money that would otherwise be accruing to the Revenue in a more benign tax climate is flowing away from us. The Minister insists not only in ignoring the obvious but in contradicting it.

The returns for the end of May appear to show a significant shortfall in revenue and it seems more than likely that the Minister will not achieve his deficit targets without further adjustment. Progress in reducing inflation has been dis-appointingly slow. I do not know who in the Department advises the Minister in relation to the policy on exchange rates and especially on devaluation but we are still paying the price for that ill-informed decision of the Minister, a decision that I opposed in March 1983 and which I pleaded with the Government not to proceed with. Its effect is now being felt both in terms of inflation and of adding significantly to our borrowing requirements. Earlier this week we discussed the balance-of-payments situation and the embarrassing disclosure that the budget was based on——

Mr. Dukes

The Deputy should choose his words carefully.

Mr. O'Kennedy

——figures that do not stand up.

An Ceann Comhairle

The budget is still before the House.

Mr. O'Kennedy

There is much talk of a recent closure but this was something we knew, which the commentators knew and which the Central Bank knew in January last yet the Minister insisted on ignoring the fact that the figures were out by £500 million.

An Ceann Comhairle

That does not arise on this Estimate.

Mr. O'Kennedy

I will merely say in passing that this Minister has no economic plan within which we would find an industrial policy, an agricultural policy, an educational policy or a policy for investment. There is no evidence of priorities so far as the Minister is concerned.

An Ceann Comhairle

The Deputy is entering into a major economic debate which clearly is not in order on this Estimate.

Mr. O'Kennedy

I am talking of the role of the Minister in terms of economic and planning development, something the country needs now more than ever before. After 18 months in office the Government have failed to take any positive decision. Can the Minister tell us about the Cabinet employment task force? What are they doing? If the evidence so far is an indication of what they are doing they are a fiasco.

I wish the Minister would tell us what the Government are trying to do because the only evidence so far is of their drifting without any sense of direction. Is it any wonder that investors lack confidence? It is hardly coincidence that in periods when Fianna Fáil were in office there were times of high investment, both public and private, and of higher employment.

An Ceann Comhairle

I am ruling out further discussion on those lines.

Mr. O'Kennedy

The point is that at times when there were other Ministers for Finance from other parties in office, there was high investment and high employment.

An Ceann Comhairle

The Deputy might say that at times when there was a different Ceann Comhairle in office, such and such was the situation.

Mr. O'Kennedy

We are not discussing an estimate for the Office of Ceann Comhairle.

An Ceann Comhairle

Neither should we be discussing the items the Deputy is raising.

Mr. O'Kennedy

The investment incentives, notably the 20 per cent rate of corporation tax introduced during my time in office——

An Ceann Comhairle

Deputies should familiarise themselves with standing orders. I am reading from another wise ruling of one of my predecessors, that was, that on the Estimate for the Department of the Taoiseach only major aspects of Government policy should be raised. These are the sort of matters the Deputy is raising on this Estimate.

Mr. O'Kennedy

I presume that on the Estimate of the Minister for Finance only major aspects of the policies of the Minister for Finance should be raised.

An Ceann Comhairle

But not major aspects of Government policy.

Mr. O'Kennedy

It is a nonsensical situation that I am not being permitted to discuss matters of economic planning and development for which the Minister has responsibility.

An Ceann Comhairle

The Government are responsible.

Mr. O'Kennedy

If the Minister tells me that he is no longer responsible for matters of economic planning and development I shall refrain from further comments on those lines.

Mr. Dukes

The Deputy should not try to bring me into the argument he is having with the Chair.

Mr. O'Kennedy

Is the Minister responsible for economic planning and development?

An Ceann Comhairle

I am telling the Deputy that major matters of Government policy are properly raised with the Head of the Government on his Estimate — in other words, on the Estimate for the Office of the Taoiseach.

Mr. O'Kennedy

The point is that when I asked the Taoiseach whether he proposed publishing a plan for economic development he transferred the question to the Minister for Finance. I am not going to be caught between the two. This Minister is responsible for economic planning.

An Ceann Comhairle

I am telling the Deputy that I will not allow aspects of major Government policy to be discussed on this Estimate.

Mr. O'Kennedy

This Minister has no economic plan. He has no plan for the development of industry.

An Ceann Comhairle

It is the Government who have to plan. The Minister is not in charge of the Department of Industry, Trade, Commerce and Tourism.

Mr. O'Kennedy

The Minister has been in office for 18 months. During that time no positive decisions were taken. No doubt he will play his part in making comments on the planning board's detailed analysis. If we had some indication of where we were going or what the Minister was trying to do the public might begin to respond. We are drifting at present. It is no wonder that investors lack confidence.

Incentives such as the 20 per cent rate of corporation tax which I introduced are more than cancelled out by high personal taxation——

An Ceann Comhairle

This is governed by the Finance Act.

Mr. O'Kennedy

——high rates of interest and high charges for public services. We have become a high cost country. We do not have a policy for national development. In the absence of such a policy the Government, through the Minister, continue to react by short-sighted decisions based solely on immediate accountancy criteria. The Minister gave a good example of this yesterday when he asserted in relation to investment projects:

No longer will it suffice to argue that a project is worthwhile because it is labour intensive or that it contains a low import content or that it is necessary to keep abreast of the latest technology in some area.

He went on to say that "In future, all the benefits and costs associated with the project will have to be listed and quantified". That is what the Minister dearly loves — having everything listed and quantified on a page so that every item can be ticked off.

Mr. Dukes

You would rather not be confused with the facts.

Mr. O'Kennedy

I am quoting from what the Minister said yesterday. If quoting you is being confused with the facts I agree.

Mr. Dukes

You do not want to know the facts.

An Ceann Comhairle

The Minister and the Deputy should address the Chair.

Mr. O'Kennedy

I am quoting the Minister who just interrupted me. He said yesterday that: "In future, all the benefits and costs associated with the project will have to be listed and quantified as far as possible and only where it is clearly shown that the benefits outweigh the costs by the required amount will a project be considered for inclusion in the annual budgetary allocation".

Mr. Dukes

Do I conclude that the Deputy does not want to have an examination of benefits and costs of investment projects?

Mr. O'Kennedy

You can draw no such conclusion.

Mr. Dukes

That is what you are saying.

An Ceann Comhairle

I have asked both the Minister and the Deputy to address the Chair. We cannot have a Committee Stage type debate.

Mr. O'Kennedy

I am quoting what the Minister said. He seems to detect from my intonation that I have reached conclusions which I have not.

Mr. Dukes

The Deputy never comes to any.

Mr. O'Kennedy

That is a comment from the Minister which I will treat with the disdain which it deserves.

An Ceann Comhairle

The Minister should not interrupt the Deputy.

Mr. O'Kennedy

Capital investment projects should not be considered simply as a profit-loss ratio confined to its own immediate area in its own year as the Minister suggests. They must demonstrate that the benefits will outweigh the cost in relation to the annual budgetary allocation.

Mr. Dukes

Read the rest of the paper. It is all dealt with comprehensively.

Mr. O'Kennedy

I am sure it is. Perhaps that is why it received such a critical reaction from the people to whom it was addressed. The capital programme is not a series of isolated and unconnected projects but rather should be a comprehensive plan.

An Ceann Comhairle

The capital programme is a matter for the budget. The Minister is accountable to the House under his Estimate for the expenditure of any such money.

Mr. O'Kennedy

I do not intend going into detail on the capital programme. I hope I am free to comment on a statement made yesterday by the Minister in his capacity as Minister for Finance.

An Ceann Comhairle

If it is relevant to the Estimate.

Mr. O'Kennedy

Of course it is. Otherwise why was he speaking as Minister for Finance yesterday in terms of the criteria he would apply in judging the viability of capital projects?

An Ceann Comhairle

He might have been talking about next year's budget.

Mr. O'Kennedy

This is impossible.

An Ceann Comhairle

I find it very difficult to keep Deputy O'Kennedy to the matter before the House. He is inclined to ramble away from it.

Mr. O'Kennedy

I do not. I am quoting what the Minister said.

An Ceann Comhairle

That does not make it relevant to the Estimate. The Minister could have been talking about agriculture yesterday for all I know but that would not make it relevant to this Estimate.

Mr. O'Kennedy

He was talking about the criteria he would apply as a matter of policy and the Ceann Comhairle ruled——

An Ceann Comhairle

I have ruled on the policy of the headings in the Estimate.

Mr. O'Kennedy

Perhaps it is just as well, despite all these interruptions, that I prepared something.

An Ceann Comhairle

That is the difficulty with Deputy O'Kennedy. He prepared something which is not in order and he should switch to something else.

Mr. O'Kennedy

Perhaps those who read what I have prepared will be able to make sense out of it without the constant interruptions which are less than necessary. Capital investment projects should not be judged simply on a profit-loss ratio confined to its own area in any particular year. If the capital programme was a series of isolated and unconnected projects rather than a comprehensive plan within which each element interacts positively in an overall development climate I would agree with the Minister but it is not. The capital programme must be part of a comprehensive plan. In the absence of that plan the kind of priority expressed by the Minister yesterday is short-sighted and damaging. Will we now apply the same crude criteria to all capital projects in the public service? For example, will the capital programme for education be further decimated? It will not demonstrate in any one year a benefit that will outweigh the cost.

Mr. Dukes

Did the Deputy read the paper?

Mr. O'Kennedy

I will read it in greater detail if the Minister wishes.

Mr. Dukes

There is a long passage in it about benefits which cannot be qualified in money terms.

An Ceann Comhairle

The Minister will have an opportunity to reply.

Mr. O'Kennedy

I draw the Minister's attention to the need for an enhanced capital programme for investment in education.

An Ceann Comhairle

The capital programme is a matter for the Government.

Mr. O'Kennedy

I was just making a passing reference to it. It is essential to our future wellbeing and competitiveness. We must encourage through our policies and through the technological skills of our people added value in employment.

An Ceann Comhairle

That is dealing with industry and commerce.

Mr. O'Kennedy

A one word reference——

Mr. S. Brennan

Everything costs money.

An Ceann Comhairle

The Minister for Finance is not responsible for the administration of the schemes the Deputy is talking about.

Mr. O'Kennedy

Our tax and investment policies should be such as to encourage added value through the technological skills of our people. We should be moving ahead of technological development in every direction wherever possible and not just, as the Minister seemed to hint yesterday, try to keep abreast of it. I hope the Minister will apply criteria which will not just enable us to keep abreast of this technology but move ahead of it.

Mr. Dukes

Would the Deputy read the paper before he makes facetious remarks like that?

Mr. O'Kennedy

This approach is scandalous at a time when so many young people are emigrating. Perhaps I will be told the Minister for Finance has no responsibility for that either. The unemployment figures would be much higher if it was not for this exodus of our young people. We do not have to wait for the CSO to tell us in two years time what we already know. I am putting it on the record in the month of June 1984 that, even as we speak here, there are hundreds of people emigrating because of the lack of opportunities here for them and the absence of policies. The events will prove me right when the CSO eventually catch up whether it is under the new supervisory council or whatever.

Now more than ever we need an investment programme, an economic plan and a climate for renewal from the Minister. We need policies which will create that climate instead of shortsighted, ad hoc decisions which are presented to us as policies. After two years all we have are policies — if you want to call them policies — which can be seen as tax impositions, that and no more. That is meant to achieve what it has not done, bridging a current budget deficit which is expanding. That is what this Minister has to answer for. As long as he sits back in a sense of inertia——

An Ceann Comhairle

The Minister is not responsible for taxation.

Mr. O'Kennedy

If he is not, who is? Is it the Taoiseach?

An Ceann Comhairle

No, the legislature. The Minister introduces the Bills in this House but the legislature are responsible for taxation and impose it.

Mr. O'Kennedy

If that is the way the Chair is ruling, I have to protest most vigorously. This legislature is responsible for everything that goes through this House but the Minister responsible introduces the legislation and gets the feet to walk through the lobbies——

An Ceann Comhairle

Today is not the first time this has come up. I am reading from the Book of Precedents where it says that major financial policy may not be discussed, taxation policy may not be discussed and the general question of inflation which might be more proper for budget may not be discussed. You are confined to the headings in the Estimate, and for the administration——

Mr. O'Kennedy

You are reading from the Book of Precedents, but in my view I would nearly want to apply the precedents in the Book of Job for these constant interruptions which need not——

An Ceann Comhairle

You are ignoring the Chair.

Mr. O'Kennedy

If the Chair bears with me for a few moments, I will finally conclude and maybe we will hear some comments from the Minister as to his policies and that of his Department.

This Minister and this Government, in which he has a key role, are condemned for ignoring the problems and doing nothing to realise the potential particularly of our young people. I hope the Minister in looking at policies from now on will give priority in the allocation of resources under his Department in the public expenditure programmes. I will give an example: the research and development programme, when his colleague, the Minister for Industry, comes to the Minister for Finance I hope he will concentrate on the criteria of product development as distinct from physical assets in terms of industrial promotion and marketing programmes. There is a section in the Department of Finance dealing with this matter. I hope the Minister will give priority to these areas when defining the criteria for development and that they particularly will not confine themselves to an immediate or quantifiable return on investment in the short term but rather to the impact of the programmes in the medium and long term, which could be enormous.

The short-sighted tax regime promoted by this Minister is not only killing incentive but it is frightening off investment from abroad, and, worse, forcing established Irish companies to invest abroad. That is something this country never witnessed before.

An Ceann Comhairle

That is relevant on the Finance Bill, the budget debate, but it is not relevant today.

Mr. O'Kennedy

It is relevant as evidence of our capacity to go into the market place and compete with the best. When we find some of our companies investing at a ratio of five to one abroad at a time when we need investment for employment, this is far from being welcome. We cannot afford this constant drain on our resources and on our morale——

An Ceann Comhairle

I am sorry for Deputy O'Kennedy. He came in here to adopt a certain line. I have told him that line is out of order and he should get away from it.

Mr. O'Kennedy

The day I come in here simply to approve what this Minister does——

An Ceann Comhairle

You do not have to approve.

Mr. O'Kennedy

——without commenting on his policies——

An Ceann Comhairle

That is in order on the Finance Bill and the budget but it is not in order today. It is also in order on the Taoiseach's Estimate——

Mr. O'Kennedy

I think we should tell the Deputies and the Press to go home——

An Ceann Comhairle

When a Deputy is preparing a speech he should keep an eye on Standing Orders and the Book of Precedents.

Mr. O'Kennedy

With respect, when you tell me what is in order is the policy of the Department, you should interpret that in the way that would allow debate in this House and not try to stifle it as you have been trying to do this morning.

An Ceann Comhairle

The policies of the headings for which the Minister is responsible——

Mr. O'Kennedy

May I again introduce you to the role of the Minister for Finance, because you do not seem to be aware of it. I want to say this, and I insist that you listen——

An Ceann Comhairle

The Deputy will resume his seat and behave himself. The Deputy will not address the Chair like that.

Mr. O'Kennedy

Is the Chair aware that in the Department of Finance there is a section devoted to economic planning, another to borrowing and yet another to expenditure allocations? Are you aware that the Minister will spend at least three months from September dealing with those allocations?

An Ceann Comhairle

I am aware.

Mr. O'Kennedy

Am I allowed to comment on that?

An Ceann Comhairle

I am aware that the Minister for Finance has an input into every expenditure for which the Government are responsible, but that does not mean we can discuss prisons or agriculture——

Mr. O'Kennedy

I am not discussing prisons or agriculture.

An Ceann Comhairle

The Minister for Finance has the same input into all these matters. I ask that the Deputy direct his attention to——

Mr. O'Kennedy

As Deputy Brennan commented, the Minister has shown his power in one area and that is tax. Under this Minister one man rules, and that is the taxman. He rules supreme. It is time that the Irish citizen who will promote investment began to rule.

An Ceann Comhairle

Before the Deputy sits down——

Mr. O'Kennedy

I suggest that some time the Ceann Comhairle or his advisers inform themselves of the various responsibilities within the Department of Finance. When you do you will find that there is a section dealing with foreign borrowing, another dealing with economic planning, yet another dealing with expenditure control——

An Ceann Comhairle

There is a section in the Department of Finance dealing with every Government Department.

Mr. O'Kennedy

There is not.

An Ceann Comhairle

There is.

Mr. O'Kennedy

The real discharge of the Minister's role is to ensure that when the expenditure allocations are made——

An Ceann Comhairle

If the Deputy wants to lecture the Chair he will have to put down a resolution. I am ruling here.

Mr. O'Kennedy

If we are to confine the role of the Minister to the role of inertia which he seems to have accepted for himself by not even introducing his Estimate this morning, and if I were to confine my comments simply to his Department — in a way which I cannot accept — without making any comments or criticism on the lack of policy, debate here would be meaningless. I do not know how Deputy Brennan or anybody else will be relevant, but I hope they will get some degree of understanding from the Chair and that we will get some degree of enlightenment from the Minister about what exactly his Department are doing now as distinct from suffocating investment by tax preoccupation which seems to be their main and only concern at this stage.

Mr. Brennan

On a point of order, is it possible for the Minister to intervene at this stage?

An Ceann Comhairle

No. If he speaks now he is concluding.

Mr. S. Brennan

I start by supporting Deputy O'Kennedy's view that any discussion on the Department of Finance runs the risk of walking over a very thin line into economic policy. I will try in a few brief moments — I suspect they will be a lot briefer in view of the Ceann Comhairle's ruling than they would have been — to avoid, if possible, overstepping that line. As I said, this is a very thin line considering the dominance of the Minister for Finance in the area of economic policy.

This Estimate is excessive in that it is not being applied in the correct areas. The money voted is not being spent and administered in the Department to the best possible extent. There has been much talk recently on the question of Irish neutrality. The greatest threat to that is our financial situation. That is reflected in the excessive dependence of the Department of Finance on foreign borrowing and on foreign investment in the country. This danger to our neutrality is an economic danger. It is seen in the failure to curb, over a long period——

An Ceann Comhairle

The last thing in the world that I want to have is any sort of disagreeable intervention between us.

Mr. S. Brennan

I shall be finishing up in ten minutes.

An Ceann Comhairle

I have been trying to get Deputy O'Kennedy back on certain lines and cannot adopt a different attitude towards the Deputy.

Mr. S. Brennan

I understand.

An Ceann Comhairle

I think that the Deputy is now embarking on major financial policy. My predecessors ruled, and I agree with their ruling, that major financial policy may not be discussed.

Mr. S. Brennan

I wish to raise with the Minister recent borrowing trends in his Department. I am speaking about borrowing in the last three to four months, as opposed to major policy. The Department of Economic Planning was for some time under the Department of the Taoiseach and was debated under that Department. The Economic Planning Section has now substantially, I understand, gone into the Department of Finance. Would it not be appropriate that the money which the Minister is spending in running that section in his Department be open to some criticism on his Estimate? I submit that that Estimate is excessive because of what he is spending in that area of economic planning. I suggest that he should not be allowed the Estimate which includes that money. It is in that context that I wish to approach the subject this morning.

An Ceann Comhairle

If Deputy Brennan can direct his attention to subhead E of the Estimate, he may be able to keep himself in order.

Mr. S. Brennan

I shall attempt to do that, a Cheann Comhairle. On subsection (3)——

An Ceann Comhairle

Subhead E.

Mr. S. Brennan

Subhead E — I am grateful for the guidance. I shall not detain the House very long. The borrowing for the months of January, February and March of 1984 amount to £677 million, arranged by the Department of Finance under subhead E, I would think. I am worried by that trend because this figure is almost equal to the total of last year's, which was £794 million. I suggest that the Minister's Department look into that. The Minister should spend more of his Estimate in seeing that this trend is blocked and in inquiring into the foreign borrowing position of the semi-State bodies. This now stands at £1,829 million, a lot of which has come about under the State Guarantees Act, by so-called letters of comfort and letters of intention. I shall raise that matter later on.

The real threat to our neutrality is the level of our financial indebtedness. The Minister's Department might try to take charge of our financial destiny in a more specific way; otherwise our neutrality, in a financial sense, will be compromised internationally. I have to look to the Department of Finance to see that that does not happen.

An Ceann Comhairle

If the Deputy is talking about something on which the Minister has a discretion and is within his Department, then it is in order. However, if he is simply indicating some policy which has been decided on by the Government and has been put through this House by an Act, then it is not in order. That is the situation, as I see it.

Mr. S. Brennan

I am suggesting that the Minister use his discretion to ensure that the Government foreign borrowing trend and the level of borrowing of semi-State companies, which has escalated out of all proportion, be managed better by his Department. This latter borrowing is off the balance sheet, not coming under the same microscope as other borrowing. I look to the Minister in this Estimate to do that.

The Minister should spend a lot more of the money voted to him in preparing the forthcoming financial and economic plan which will be before the House in the next session. I think he will agree that politicians should look beyond the next electoral battle or crisis and to the next generation. I stand unequivocally for a well-created enterprise economy which will have the State serving the individual, not the individual serving the State which is increasingly the situation in the economy at present. I want a socially responsible and sensible private sector which is growth-orientated.

I ask the Minister under this Estimate to examine seriously the role of the State. That role should be supportive, not dominant. Unfortunately, it has become extremely dominant in this economy. The figures are well known to the Minister in this respect. By any estimate, the State dominates the financial and economic life of this country in a way which no other non-socialist, non-communist country does.

An Ceann Comhairle

I think that the Deputy is into major policy matters now. They would be more appropriate to the Taoiseach's Department.

Mr. S. Brennan

I shall suggest a few matters at which he might have the unit within his Department look. I suggest that they be pro-employment policies, rewarding those who employ people as opposed to blaming them in some way for taking that course of action. I ask the Minister to use his estimate to lay out, in the forthcoming financial plan, a clear time-table for the reform of the taxation structure. I shall not dwell upon that because of the Ceann Comhairle's ruling. I ask the Minister to note that in the United States, in 1983 alone, four million jobs were created. In the recent Central Bank Report it was noted that much of this came about because of a flexibile manpower policy. I do not think that that means a hire and fire situation but rather mobility, retraining, decentralisation and taxation policy. Would the Minister's Department include a manpower policy in the financial plan which would lay out for us how best to create a flexible labour market somewhat similar to that of the United States.

An Ceann Comhairle

The Minister for Labour is responsible for manpower.

Mr. S. Brennan

I suggest that the Minister advise the unit dealing with economic planning to consider my suggestions. It is in the national interest that I take a few moments to suggest how he might use his own and his civil servants' time. That is a good criticism of the spending of the money in his Department. I am suggesting how he might better spend the money being given to him today. I know that that is a thin line but that the Minister can see it through.

I also want to suggest to the Minister that the service area has been the Cinderella sector for a long time. I ask him to bring forward specific proposals to develop that in the banking sector, the personal services sector and insurance sectors because it can be a major contributor to the solution of our financial problems. In that context I want to criticise — I know it is a thin line but this is the only opportunity I will have to do so — the comments made by the Minister for Energy recently in regard to the level of profits of the banking institutions in Ireland.

An Ceann Comhairle

That is quite unreasonable because the Deputy is now either criticising this Minister for something another Minister said or he is using this debate as a platform to criticise another Minister who is not responsible for this Estimate. I certainly cannot allow that. If I were to allow that I would allow anything.

Mr. S. Brennan

The banking system is an important part of our financial structure and, as such, I should be given a few moments to make a few comments in that area. At a time when there is a lot of undermining of our economy and a lot of growing criticism of the shape of the economy we need like a hole in the head the comments of the Minister for Energy recently that the banking system was somehow not living up to its social obligations. The Minister for Energy did not seem to be aware that the profits of the banking system at the moment are regulated by the Central Bank and, as such, the State has some control over it. He could take it up with the Government if he wished rather than do it in the way in which he chose to do it. Considering the shock to the banking system in the USA recently it was a very dangerous approach for the Deputy Prime Minister to take——

An Leas-Cheann Comhairle

On these Estimates the Deputy is out of order in referring to another Minister.

Mr. O'Kennedy

The other Minister was out of order too.

An Leas-Cheann Comhairle

Deputy O'Kennedy is now out of order.

Mr. S. Brennan

I do not believe the Minister for Finance would say to the House, in replying to this or any other debate, that the returns on the sales and assets of the banking system are in any way really excessive. I would like to call today for an examination of our banking system. The last examination we had of our banking system was the Second Banking Commission Report in the thirties. It is over 50 years since we examined the banking system in the same way as Telesis had a look at our industrial policy. It is surely time to have a look at our banking policy. I would like to see coming out of that examination a dissolution of the banking cartel. I do not believe it is in the interests of our economy to have a banking cartel like that. I believe it should be broken up. It is interesting to see that the Central Bank and the other banks seem to be broadly agreed that this should happen. Will the Minister set up a banking commission along the lines of the one of 50 years ago to bring our banking system up to date.

The amount of finance which the Minister's Department have to spend in this Estimate is, obviously, covered by the amount of revenue he can get in. In that regard the black economy is an area I would like to see the Minister in the financial and economic plan tackling very crisply. I know it is not an easy one because it is very hard to pin it down. As the Minister knows there are various ways of estimating it. There is the relationship between bank accounts and currency holdings, the rate of GDP to the number of transactions in an economy and there are also other ways of doing it. There are many caveats in trying to measure the black economy and I know the Minister is aware of them.

A recent article in the Irish Banking Review of March 1984 was written by Mr. Boyle of the National Planning Board. In attempting to estimate the black economy, he put it at £70 million in 1970 and by 1980 it has risen to £700 million. By 1982 the black economy income was £1,100 million and he estimated that in 1983 it would jump to £1,536 million. He suggested that it was at an almost unmanageable level. It is quite clear from any objective analysis of the black economy area that it had increased dramatically, particularly in the last three or four years. That obviously is something we have to worry about. At the same time the burden of taxation on the economy has been increasing at exactly the same rate. In 1970 it was 35 per cent and in 1983 it is pinned in his article at 47 per cent. Any attempt to sort out our financial difficulties which spending in the Minister's Department is aiming to do in this Estimate has to take account of the dramatic increase in our off-the-balance-sheet economy because it is growing dramatically. I do not believe any set of proposals coming from the Minister will be sufficient if it ignores that area. We cannot continue to deal with the regular economy and ignore the rest of it.

I want to raise with the Minister the letters of comfort. I am referring to circular No. 4/84 which the Department of Finance issued to all Departments in May 1984. It is headed "Department of Finance, Circular No. 4/84". It is addressed to all the Departments and it says that a letter which, expressly or by implication, gives a guarantee or undertaking not already authorised by legislation should not in any circumstances be issued. It also states:

Furthermore, letters of comfort should not be issued as a device to facilitate avoidance or postponement of major policy decisions, for example, on the future of State bodies, or of the seeking of any necessary Oireachtas approval for justified increases in powers to increase borrowing.

I would like to know, as soon as possible, to what extent has this practice been going on which prompts this advice to all the Departments? Was this advice not always given to other Departments that they were not entitled to issue letters of comfort, that is letters purporting, insinuating or suggesting that State funds would be available to back borrowing for certain projects without being legal documents in the sense that they actually did that? To what extent has this practice been going on in the past? How much is involved? How much of our total borrowing do we now owe as a result of this type of letters which were not issued under our statutes but rather issued as letters comforting would-be lenders? How many projects are involved? How widespread is it? Section 8 of this circular states that Departments should furnish to the Department of Finance by 15 June 1984 copies of any letters of comfort issued by them in the past which still have effect, together with any relevant background information. All the Ministers for Finance should have been informed as to the number of letters of comfort issued. They are being taken, and have been taken in the past, as guarantees that the State will meet the funds in question.

I now find that by 15 June 1984 the Department of Finance want copies of all letters of comfort issued in the past which still have effect. I am suggesting that there may be more debt than the Minister is aware of, on the basis of these letters. If he is aware of it, why send this letter to all other Departments? I would ask the Minister to clarify this matter, although I appreciate that he may not be able to do so today. I intend to table some questions at an early date to find out the extent of this practice. I would compliment the Minister on putting a stop to it, since the circular seems to say that the practice must now stop. Perhaps it would need legislation rather than a circular.

My main thesis is that the neutrality of this State is affected by the economic shape of the State in a much deeper way than any threat from military or other alliances. In the first three months of this year we borrowed virtually the same amount as we borrowed in the whole of last year. There is an incompatibility between independence as a sovereign State and a weak economy. There is a cliché that a rising tide lifts all boats and the Minister's approach seems to be based on the fact that the world economy is improving. However, a rising tide will not lift a leaky boat. This economy could be described as a leaky boat and appears to be fundamentally weaker. I am much more worried about our economic neutrality than about all the other neutrality matters that have been bandied around the House in recent months. Real neutrality will begin in the area of financial independence and financial sovereignty. If we are not financially neutral than we cannot be neutral in any other sense because we will not be allowed to be so. The Minister's policy must be to ensure at all costs a lessening of dependence on foreign investment and foreign borrowing.

Mr. O'Kennedy

On a point of order, while I accept entirely the disposition of the Chair in respect of the comments made by Deputy Brennan, which in my view were appropriate in every respect, I have to say that the Chair has not been consistent. I was interrupted at every stage of the way in commenting on matters upon which Deputy Brennan has since quite properly commented while the Chair made no such interruption. This inconsistency on the part of the Chair is totally and utterly unacceptable.

Minister for Finance (Mr. Dukes)

I do not intend to reflect in any way on the conduct by the Chair of our business, but I was a little taken aback at the degree of restriction placed on this debate. I regret it a little because I have no difficulty whatsoever in debating any or all of these issues with Deputy O'Kennedy here or elsewhere. I could wish for Deputy O'Kennedy's own sake that he would more often read the papers on which he bases his remarks. He would find more substance and solidity in those papers if he were to read them himself.

In regard to a remark made by Deputy O'Kennedy at the beginning of his speech, we have not followed an exceptional procedure this year. Deputies seem to be surprised or disappointed that in introducing the Estimate I did not make a long and very general speech.

Mr. O'Kennedy

Not necessarily long.

Mr. Dukes

I followed exactly the same procedure as last year and my remarks covered less than one column of the Official Report. We went on to have quite a wide-ranging discussion and there is nothing unprecedented in the way we have gone about it today.

I was very struck by the final comment of Deputy Brennan. I am not so sure that I entirely agree with his concept of financial neutrality, although perhaps we can discuss that again. Deputy Brennan said it was essential at all costs to bring about a lessening of our dependence on foreign borrowing. I begin to feel now that we are making some impact on the thinking of the Opposition. Were I to make such a statement I am quite sure the gentlemen opposite would start jumping up and down, talking about book-keepers, control, discipline and so on. I would never go so far as to say that at all costs we must do any one of these things, but I am glad to see that there is a movement on the part of the Opposition in the same direction the Government have been following. Deputy Brennan has shown an appreciation of the real difficulties that face us and which have to be coped with and surmounted by Government policy.

I fully agree with his suggestion that we should plan beyond the next general election, bearing in mind that we are planning for the next generation. I am very glad to hear him put forward that view on behalf of his party and I hope he will get agreement on the notion within the party. He is moving in the direction I have been following since December 1982 and coming to the heart of the justification for the kinds of policies we have been following on the economic and financial sides, policies which have nothing to do with books, book-keeping or balancing for themselves. They are policies which have everything to do with bringing about those things, for the sake of people who are now looking for jobs and those who will be doing so in the future. If that was all that came out of this debate I would think we would have done a very good day's work because, at last, I would see the beginnings of a movement within the main Opposition Party towards the kind of policy this Government have been following for some time and an understanding of the fundamental and most important reasons for so doing.

There has been an amount of general discussion and comment about areas of economic policy. Deputy O'Kennedy referred to questions of planning and pointed out, as the House will be aware, that there is a planning function within my Department — paid for by the Vote for my Department — which is an important one.

Mr. O'Kennedy

I appreciate the Minister's acknowledgment but the Chair did not seem to accept that.

Mr. Dukes

I am not making any comment at all about the Chair. Through you, a Leas-Cheann Comhairle, I have every confidence in the Chair's ability to defend itself.

An Leas-Cheann Comhairle

Thank you, Minister.

Mr. Dukes

——in whichever person it happens to be manifest before us.

Planning is a function of my Department and we are currently preparing a national plan. I do not intend here to go into its details but I can tell the House that it will follow the broad lines of the strategy we have set out since December 1982. It will be our concern to bring about a situation in which we can alleviate the burden of taxation on the community to the greatest extent possible. We can do so by adopting a much more rigorous approach in all areas of public expenditure, carrying out a proper assessment of the benefits of different kinds of public expenditure and of the desirability of different types of expenditure undertaken on behalf of the people rather than by the people themselves.

That is a point in which Deputy S. Brennan raised. I think it is what he had in mind when he said that the State should serve the people rather than having the people serve the State. Very often we have taken the view that, if it appears that something needs to be done in our community, whether it be the provision of a service, of goods or a very wide range of things like that — and here I am not making a point about any particular government or group — the first question that seems to arise in the newspapers, the media, even in general conversation, is to identify a need and then ask immediately: what will the Government do about it? Very often, of course, that is a fair question to ask. But equally very often it would be far more relevant to ask: is it really the place of the Government to do anything about that? Would it not be better to go and do something about it oneself?

There is need to examine a great deal more critically the approach we adopt to the provision of services or the fulfilment of needs within our community. Let us not always ask automatically: what will the Government do about it? Let us endeavour to develop to a far greater extent than we have in recent years a feeling on the part of people themselves: what can we ourselves immediately do about it? Unfortunately — and here I think Deputies opposite will agree with me — the most frequent manifestation of that kind of spirit tends to be focussed on relatively localised issues, problems and relatively small groups within the community. But it is an approach in dealing with problems that all of us in this House particularly should endeavour to cultivate. That is not in any sense to deny the responsibility of public authorities for the services they should provide but simply to endeavour to heighten an awareness within the community that we all have responsibilities to ourselves and the community in which we live. That may be a little by the way but it has a lot to do with the mentality underlying a great deal of our public expenditure.

Mr. O'Kennedy

I entirely agree. I acknowledge that it is vital that the Minister be allowed make this kind of analysis — I happen to agree with him in some of that analysis. But I must say, and I want this on the record of the House, that I was interrupted constantly this morning when I was not even drawing an analysis of that nature. It is intolerable.

An Leas-Cheann Comhairle

My reading of the situation at present is that the Minister is endeavouring to reply to different aspects of the debate——

Mr. O'Kennedy

I think even the Minister himself acknowledges that but the performance of the Chair this morning was intolerable.

An Leas-Cheann Comhairle

He is in that process at present and I should like him to be allowed continue.

Mr. O'Kennedy

I shall not interrupt the Minister again.

Mr. Dukes

It has been said in the course of this debate — and it is a matter of policy — that taxation in this country is too high. That, put forward as a proposition, I have no difficulty whatsoever in agreeing with; indeed it is something I have believed for quite some time. We should ask ourselves: why is taxation too high? The simple answer is that most of us in the community do not draw any direct link between taxation and expenditure. We have all seen cases — certainly Members of this House will have seen it — when, on one evening they may attend a meeting in some community, when they will have to listen to people inveighing the inadequacy of some given service, and the following week attend another meeting and hear those same people inveighing the excess of taxation. A lot of people seem to do so quite happily without ever endeavouring to link the two things. I would think it part of our function in this House to bring home to people just how close is the link between taxation and expenditure, indeed to point out that the total level of taxation raised at present — and which has been the case for some years — does not come anywhere near covering the total of expenditure. That is why we have a current budget deficit which is forecast to be £1,089 million this year, or some 7½ per cent of GNP. Those are the main factors underlying the policies we have been following since the end of 1982.

Deputy O'Kennedy asked: what are the Government's priorities? What is the role of economic planning in the Government's activity? I cannot see that there is any difficulty in discerning what these are. Neither can I understand why a Deputy should feel he must keep asking that question when I spend much of my time explaining and setting out what are our policies. We have deliberately set out to reduce the gap between our expenditure and taxation. Bearing in mind the high level of taxation, we have deliberately set out to reduce the degree of our dependence on foreign borrowing. Deputies opposite placed great stress on both those factors this morning. In a debate like this, it is quite right that they should. But it was totally inconsistent of them on other occasions to criticise me and this Government for doing just that.

Deputies opposite have failed themselves to show that they appreciate the link there is between expenditure on the one hand and taxation on the other. In fact we had it here even this morning. We had Deputy O'Kennedy particularly criticising the level of the current deficit, criticising the Government for not making progress against the current deficit, or against the level of borrowing to the degree he appeared to think appropriate. At the same time he made suggestions and advanced proposals that would, if anything, tend to increase the level of our current deficit, increase our reliance on borrowing and, in a most extraordinary intervention, he read a few selective passages from a paper I delivered yesterday, actually seeming to suggest that we should not be concerned with the quality of public investment, and that we should not be concerned with the way public investment projects are selected. I find that absolutely extraordinary and more than irresponsible on the part of the Opposition spokesman on finance. I hope Deputy O'Kennedy, who apparently has gone off for a coffee break, will take the opportunity of reading the rest of the paper. I will reserve my remarks on what he said until he returns, if he does.

Mr. S. Brennan

Deputy O'Kennedy has gone to make a telephone call.

Mr. Dukes

That is grand; he will be back. We have been making substantial progress along the lines of policy which I have just announced. As I pointed out in my budget speech earlier this year we have reduced the average rate of inflation by more that 6 percentage points in 1983 and we will have a further substantial reduction in the rate of inflation during the course of this year. Also during the course of 1983 we reduced the current budget deficit as a proportion of GNP. It was 8¼ per cent for the adjusted outturn in 1983 and our target for this year is 7½ per cent of GNP We have equally reduced the proportion of our dependence, the relative level of our dependence, on foreign borrowing and on total borrowing. In all of those areas we are making progress and moving in the direction which the two Deputies opposite were recommending this morning but seem to find something which needs to be criticised when we are involved in a budget debate.

Mr. S. Brennan

I should like to tell the Minister that the borrowing for the first three months of this year does not bear out what the Minister is saying.

Mr. Dukes

It does. There is no inconsistency whatsoever. I will deal with that later. Deputy O'Kennedy then moved into the area of Exchequer returns for the first five months of this year. At first he claimed that he was right all along last year. I can remember Deputy O'Kennedy at the end of the first quarter last year suggesting to me that I was deliberately underestimating the returns we would get from VAT last year so that I would produce a current budget deficit that would turn out to be lower that the targets we had fixed for last year. He was quite wrong at that time last year and I told him so, although it did not seem to impress him all that much. Part of the reason he was wrong was that he failed to take account of a number of factors that influenced the comparative flow of revenue from VAT as between one year and another. For example, in 1983, the first full year of operation of VAT at the point of entry, that obviously had an effect on the flow of VAT. It was also a year where we had a different timing of changes in VAT rates. I am afraid that simply taking the first five months figures for one year and comparing them straight with the figures for the corresponding period of the previous year does not necessarily, and in fact mostly does not, produce a proper comparison in the sense that there are other factors that influence the level of receipts in a given period which are not taken into account if one makes a comparison of that type. I am afraid that Deputy O'Kennedy is committing the same error this year in looking at the revenue for the first five months.

Deputies O'Kennedy and Brennan have spoken about the level of foreign borrowing in the first quarter of this year. I referred to that on Thursday last in the course of a statement in the House and again in the course of our debate on the failed Private Members' Motion put forward by the main Opposition party. Yes, we have arranged a substantial amount of foreign borrowing in the first few months of this year and, yes I have now arranged the greater part of the foreign borrowing programme for 1984. I could venture a little further and say to Deputies opposite that I have already a fair idea of where I am going to carry out some of the foreign borrowing for 1985. I am glad to be in a position to be able to say that. I am glad that coming up to the middle of June I can say to the House that I have already arranged the greater part of our foreign borrowing programme for this year. We have got it on good terms. We had a deliberate policy, given the state of financial markets, to take advantage of conditions and offers that seemed to us to be favourable. It has been a deliberate policy to do that and it is perfectly in keeping with the proper management of our finances to do that. I do not see anything wrong with doing that. Were I to take another view that by waiting until later in the year I might get better terms then I could well have produced a situation in which the level of our foreign borrowing in the first quarter of this year would have been well below the level of last year. Again, there is no virtue or necessarily right course that can be discerned just by looking at the comparisons between the first three months of last year and the first three months of this year. That is the most blind form of bookkeeping that Deputies seem to be allergic to.

Mr. S. Brennan

Is the Minister going to borrow money he does not need in the first quarter?

Mr. Dukes

It has been deliberate policy early this year to arrange as much as I could of our foreign borrowing for this year. That has been my judgment of the market and the way the market is going to evolve in a full year.

Mr. S. Brennan

Has the Minister arranged in three months the total of all national borrowing?

Mr. Dukes

Not quiet yet.

Mr. S. Brennan

It was £677 million for the first three months of this year compared to £794 million for all of last year.

Mr. Dukes

That is right.

Mr. S. Brennan

What is the Minister going to do with that money?

Mr. Dukes

The Deputy should go a little further into the analysis on that. He is talking about the total amount of borrowing that was carried out last year.

Mr. S. Brennan

They are Central Bank figures.

Mr. Dukes

The Deputy needs to ask himself, what was the pattern in which that was arranged? We did not have as big a proportion of it done in the first quarter of last year as we did have this year but the market position was different. The Deputy should ask himself, for example, what was going on in international money markets in the first quarter of last year? We had an EMS realignment in March of last year.

Mr. O'Kennedy

We know all about that.

Mr. Dukes

It was the right thing to do. Obviously, that had an effect on the condition of markets in the first quarter of last year.

Mr. S. Brennan

The Minister is borrowing money he does not need.

Mr. Dukes

Before Deputies start making simple comparisons of the figures from the first quarter of last year to the first quarter of this year they should look at the other factors that inevitably surround any decision.

Mr. S. Brennan

They are Central Bank figures.

Mr. Dukes

I am not disputing the fact——

Mr. O'Kennedy

The Minister will have to borrow more this year because the Exchequer borrowing requirement is greater this year than it was last year in spite of what the Taoiseach has said.

Mr. Dukes

It is a smaller proportion of GNP, and that is what Deputy Brennan was saying. He has come nearer than Deputy O'Kennedy to acknowledging that the economic policy of the Government is following the right course. He has set out clearly the principles he thinks are important.

Mr. S. Brennan

The borrowing for 12 months has been done in the first three months of the year, and that comes from the Central Bank.

Mr. Dukes

There may be years when if we could arrange 12 months' borrowing in a month it would be the wise thing to do because we may not get as good terms again from the market.

Mr. O'Kennedy

After this week's disclosures the Minister will have difficulty.

Mr. Dukes

I am not being disputatious about this.

Mr. S. Brennan

How does the Minister know that he will not get good terms in December?

Mr. Dukes

This is good management.

Mr. S. Brennan

To borrow money before it is needed? Is that good management?

Mr. Dukes

One can never know in advance the exact terms one is going to get in the months ahead.

Mr. O'Kennedy

The Minister is the person responsible.

Mr. Dukes

Those involved in this business are very skilful people and they make the judgment. All the proposals for borrowing must be examined and sanctioned, if it is agreed, by the Minister.

Mr. O'Kennedy

How much time did the Minister spend examining them?

Mr. Dukes

I cannot speak for Deputy O'Kennedy. He may have spent no time at all examining them. That is not my course of action. Whether you talk about Exchequer returns or the level of borrowing, or even levels of expenditure, you must take account of more than the simple book figures.

(Interruptions.)

Mr. Dukes

I am enjoying this. The Deputies opposite who criticised me for bookkeeping are falling into the first most fundamental and simplest error of the book-keeper, that is, not taking account of anything other than the figures that are written on the page.

Mr. S. Brennan

Returns from the Central Bank report a whole year's borrowing in three months.

(Interruptions.)

Mr. Dukes

I propose to come back for a moment to remarks that Deputy O'Kennedy made about a paper which I read yesterday regarding public investment reappraisal. This is of considerable importance in overall economic policy. Deputy O'Kennedy quoted — accurately — sections from remarks I made about project appraisal. I think I am quoting him fairly freely. He said that we should not judge investment solely on a profit and loss basis in its immediate area. I think that I put it much better and more comprehensively than that in the paper that I gave yesterday. I will be very happy to furnish Deputy O'Kennedy with a copy of it. In that paper I was talking about project appraisal, not about the overall public capital programme, and I mentioned the criteria we should apply in deciding whether a project should go into the public capital programme. I make the point that a project should not go into the public capital programme — I am paraphrasing here for the sake of brevity — unless we can show that over the life of the project the benefits that flow from it exceed the cost involved.

Mr. O'Kennedy

Directly?

Mr. Dukes

No, there is also a passage in the paper which refers to the external cost or, indeed, external benefits of the projects which would also be taken into account. There is also a passage which deals with the difficulties of estimating the economic and social benefits of projects which do not produce a direct financial return. I was questioned on that point at the meeting in question yesterday. I said that it was very important that we find ways of doing something to which Deputy O'Kennedy seems to be allergic, quantifying the benefits.

Mr. O'Kennedy

No, in isolation.

Mr. Dukes

There are many different ways of quantifying social benefit and it is essential that we should do this. From the trend of the remarks being made by Deputy O'Kennedy here this morning he seemed to be suggesting that we should not look at the flow of benefits or of costs in public investment programmes. I cannot believe that he really thinks that.

Mr. O'Kennedy

I made no such suggestion.

Mr. Dukes

I recommend that Deputy O'Kennedy read that paper. If he really believes what he says about both social investment and direct economic investment he will find a great deal of comfort in that paper and we may avoid the sad spectacle of him coming in to this House and making fatuous points taking out small bits of sentences that are in a paper which sets out a point of view which he really ought to support. Deputy O'Kennedy seems to be worried that I might be looking at just the short-term immediate returns from an investment project. Not at all. I made it clear that it is a fundamental principle of any kind of economic appraisal that you look at the benefits and the cost over the whole period of the life of the investment which, depending on the kind of investment you are talking about, can be anything from several years to several decades.

Mr. O'Kennedy

You look at the annual allocation.

Mr. Dukes

That is different matter. When you have decided which investments are worth taking place you fit them into a programme which must be financed over a period.

Mr. O'Kennedy

Multi-annual.

Mr. Dukes

Multi-annual, of course; but you must make your allocations for each part of the multi-annual programme. Deputy Brennan made some remarks about our banking system. I do not intend to go into that in detail. I agree that we should keep banking policy under close review, and I assure the Deputy that that is being done. I do not intend to set up a banking commission because I do not think it is required. Later this year we will have a new Central Bank Bill which will give us the opportunity of dealing with various issues in relation to the banking sector. I look forward to the debate on that because now in the financial markets among the financial institutions we need to take a serious look at the divisions — I do not use that word in any pejorative sense — that we have held between different kinds of financial institutions.

Mr. O'Kennedy

I agree entirely with the Minister. Would someone tell the Tánaiste in the meantime that any undermining——

Mr. Dukes

Have no fear. Everything is under control.

Mr. O'Kennedy

Will you talk to him?

Mr. Dukes

I will talk to the Deputy any day.

Mr. O'Kennedy

Will you talk to the Tánaiste?

Mr. Dukes

Probably a very interesting reflection on the Fianna Fáil Party is that Deputy O'Kennedy should find it strange that I should talk to somebody in a Government party. I know that on the other side of the House they have to be careful of what they say. One person told me the other day that any time he made a speech he felt he should have a Bible in his hands or he might be slung out. Deputy Brennan raised the matter of the issue of letters of comfort. I should ask Deputy Brennan how a copy of a Department of Finance circular came to be in his hands.

Mr. S. Brennan

It was available at a meeting of the Joint Committee on State-Sponsored Bodies of which I am vice-chairman. The Minister had better follow some other road.

Mr. Dukes

I am happy to hear that. There is always point in asking a question when the answer is going to be illuminating. That reference picked out by Deputy Brennan is important. In that reference in that circular I was underlining a point which I had made previously and which my Department have made to other Departments and that point has been commented on by the Comptroller and Auditor General. I am glad that Deputy Brennan agrees with my intention there because the substance of the matter itself is important. If the State is to incur liabilities they must be incurred in a proper and conscious manner. I am glad also that an action such as this which, judging by their normal statements, members of the Opposition would again classify as one of these reprehensible forms of book-keeping, is one which in fact they applaud.

Mr. S. Brennan

Has the Minister any figures?

Mr. Dukes

I have not got figures. That deals with the points raised by Deputies opposite in relation to the Estimate, except to come back to one final point in relation to economic and financial policy in general. I do not intend to go over again the ground which we went over on Thursday of last week and Tuesday and Wednesday evenings of this week. I find it disappointing that after the debate and the clear statement made by me last week Deputy O'Kennedy should be plugging away at this £500 million.

Mr. O'Kennedy

It is more. It is £860 million.

Mr. Dukes

He knows we have always been aware of what the total outflow was. They have to be revised from year to year. I pointed it out on 7 February.

Mr. O'Kennedy

I dispute it. It is a matter of record. Would the Minister look back on what he said?

Mr. Dukes

One year's deficit cannot be predicted without knowing the total size of the outflow. Here, there has been an element whose components we have not been able to identify up to now. We have identified them, £293 million at the end of the day. As I pointed out last Thursday, that unexplained residual amount is well within the comparative unexplained residual amounts in countries like the UK the US and European countries. There is no country in the world which does not have some unexplained residual element.

Mr. O'Kennedy

The unexplained element now is higher than what we have had in any previous year — £290 million.

Mr. Dukes

Of course the Deputy does not like to hear this. He ignores the fact that there are some years in which the component is positive, as it has been here, and that there are other years in which the component is negative, as it has been here. Contrary to the pretension of the Opposition, we explained our outflow when we knew what it was instead of suddenly finding it. There has been talk about a black hole. The only blackhole I have seen is in a particular gentleman's head, but since he is not here to defend himself I will not say who he is. Neither will I speak to The Sunday World. There is no black hole.

There is now a greater degree of clarification that there has been. I might add that that clarification was brought about by an intense study carried out by a number of agencies, initiated during my predecessor's last period in office. I do not know if Deputy MacSharry was aware of it. If he was not he should have been and if he was he should have had a chat with Deputy O'Kennedy in the past couple of weeks to give him some details of what was going on. I am glad we have got that information and put it together. A little more work needs to be done and it will be brought forward at the earliest moment.

The Deputy seems to be totally unaware that the world as a whole has an unexplained residual element of $1,000 billion. I am not saying that we should be comparing the £290 million we have here with that, but it shows the problems of definition. If Deputy O'Kennedy had looked at the figures he would have found that the level of our unexplained components is lower than the corresponding figures for the UK and the US, and that it has been in recent years.

Mr. O'Kennedy

That is not so.

Mr. Dukes

It would be far better if we could explain every last transaction to see if it would be possible to bring about changes in our statistical work. The Deputy need not have any worries about that. The Estimate provides for the continuing functioning of the office of the Minister for Finance for 1984, and this is an appropriate moment to say that the Minister for Finance is very well served by a relatively small Department——

Mr. O'Kennedy

Hear, hear.

Mr. Dukes

——with a very high level of competence and expertise, and dedication to the work. It is a very difficult Department to work in. The Ceann Comhairle said earlier that the Minister for Finance is involved in the business of every other Department in one way or another. That is true. The people who work in that Department have very wide-ranging responsibilities. I have been very well served, and so have my predecessors, by those who work in the Department. I have no hesitation in recommending the Estimate to the House.

Question put and a division having been demanded, it was postponed in accordance with Standing Order of the Dáil No. 123, as modified by order of the House, until 8.30 p.m. on Wednesday, 20 June 1984.