There are three amendments to this resolution and I suggest in view of the time element that for discussion purposes we should take the resolution and the amendments together and vote on them separately if necessary. Is that agreed?
Financial Resolutions, 1985. - Financial Resolution No. 7: Value-Added Tax.
On a point of order, I would suggest to the movers of these amendments that we are completely in favour of the amendments, but to save time our proposal was to vote against the entire resolution.
It is agreed now, Deputy, that we discuss Resolution No. 7 and the three amendments together and vote on them separately?
No. I would suggest to the movers of the amendments that we just vote on the resolution because otherwise we will waste a lot of time voting on three amendments and the resolution when we are all agreed on our approach.
I am not certain that we are agreed on our approach, but in any case could the Ceann Comhairle say at what point the debate on Resolution No. 7 will end?
There is an order of the House that the debate will terminate at 11.15 p.m. I will put at 11.15 p.m. whatever question or questions are to be put.
I maintain our right to vote on the amendments.
Then it is agreed that we discuss Resolution No. 7 and the three amendments together but with no agreement as to the voting. There will therefore be separate votes. Would the Minister move the resolution, please?
I move:
(1) That in this Resolution—
"the Principal Act" means the Value-Added Tax Act, 1972 (No. 22 of 1972);
"the Act of 1976" means the Finance Act, 1976 (No. 16 of 1976);
"the Act of 1978" means the Value-Added Tax (Amendment) Act, 1978 (No. 34 of 1978);
"the Act of 1983" means the Finance Act, 1983 (No. 15 of 1983);
"the Act of 1984" means the Finance Act, 1984 (No. 9 of 1984).
(2) That—
(a) the rate of value-added tax on goods and services at present chargeable at the rate of 35 per cent. (that is to say, taxable goods and services other than those chargeable at any of the rates zero, 5, 8, 18 or 23 per cent.) be reduced to 23 per cent. of the amount or value, as the case may be, in respect of which tax is chargeable in relation to those goods and services,
(b) the rate of value-added tax on the letting of accommodation in the course of a hotel business and certain similar businesses, and the short-term hire of road vehicles, boats, caravans, mobile homes and tents be reduced from 18 per cent. of the amount in respect of which tax is chargeable in relation to those services to 10 per cent. of that amount,
(c) the rate of value-added tax on certain newspapers be reduced from 23 per cent. of the amount or value, as the case may be, in respect of which tax is chargeable in relation to those goods to 10 per cent. of that amount or value, as the case may be,
(d) the rate of value-added tax on certain concrete blocks be reduced from 23 per cent. of the amount or value, as the case may be, in respect of which tax is chargeable in relation to those goods to 10 per cent. of that amount or value, as the case may be,
(e) the promotion of and admissions to certain live theatrical or musical performances (including circuses) be exempted from value-added tax,
(f) the rate of value-added tax on footwear (excluding certain footwear for children), on leather of a kind normally used for the manufacture and repair of footwear, and on soles, heels and insoles of any material be increased from zero per cent. of the amount or value, as the case may be, in respect of which tax is chargeable in relation to those goods to 10 per cent. of that amount or value, as the case may be,
(g) the rate of value-added tax on certain fuel (excluding electricity and certain candles), immovable goods and certain related services, concrete, repair or maintenance of certain vehicles and machinery, and certain services related to agriculture be increased from 5 per cent. of the amount or value, as the case may be, in respect of which tax is chargeable in relation to those goods and services to 10 per cent. of that amount or value, as the case may be,
(h) the rate of value-added tax on clothing and textile handkerchiefs (excluding clothing made wholly or partly of fur skin, certain clothing for children, and certain sanitary goods), on fabrics, yarn, thread and leather of a kind normally used in the manufacture of clothing, and on yarn of a kind normally used in the manufacture of clothing fabrics be increased from 8 per cent. of the amount or value, as the case may be, in respect of which tax is chargeable in relation to those goods to 10 per cent. of that amount or value, as the case may be, and
(i) the rate of value-added tax on livestock at present chargeable at an effective rate of 2 per cent. be charged at the rate of 2.2 per cent. of the amount or value, as the case may be, in respect of which tax is chargeable in relation to those goods, and
that accordingly—
(i) the Principal Act be amended—
(a) in section 11—
(I) in subsection (1)—
(A) by the deletion of ", subject to subsection (2),",
(B) by the insertion in paragraph (a) after "(a)" of "without prejudice to the provisions of paragraph (c),",
(C) by the substitution in paragraph (aa) (inserted by the Act of 1983) of "10 per cent." for "5 per cent.",
(D) by the substitution in paragraph (aaa) (inserted by the Act of 1984) of "10 per cent." for "8 per cent.",
(E) by the insertion after paragraph (aaa) of the following paragraph:
"(aaaa) 2.2 per cent. of the amount on which tax is chargeable in relation to the supply of livestock,", and
(F) by the substitution of the following paragraph for paragraph (c) (inserted by the Finance Act, 1980 (No. 14 of 1980)):
"(c) 23 per cent. of the amount on which tax is chargeable in relation to the supply of any goods or services, other than goods or services on which tax is chargeable at any of the rates specified in paragraphs (aa), (aaa), (aaaa) and (b) or which are mentioned in the First Schedule.", and
(II) by the deletion of subsection (2) (a) (inserted by the Act of 1978),
(b) in section 15—
in subsection (1)—
(I) (A) by the insertion in paragraph (a), after "(a)", of "without prejudice to the provisions of paragraph (b),", and
(B) by the insertion of the following paragraph after paragraph (aaa) (inserted by the Act of 1984):
"(aaaa) on livestock at the percentage specified in section 11 (1) (aaaa) of the value of the livestock, and",
and
(II) by the deletion of subsection (4),
(c) in the First Schedule (inserted by the Act of 1978) by the insertion, after paragraph (vii), of the following paragraph:
"(viii) promotion of and admissions to live theatrical or musical performances, including circuses, but not including—
(a) dances to which section 11 (7) relates, or
(b) performances in conjunction with which facilities are available for the consumption of food or drink during all or part of the performance by persons attending the performance;",
(d) in the Second Schedule (inserted by the Act of 1976) by the substitution of the following paragraph for paragraphs (xviiia) (inserted by the Act of 1984) and (xix):
"(xix) articles of children's personal footwear of sizes which do not exceed the size appropriate to children of average foot size of 10 years of age (a child whose age is 10 years or 10 years and a fraction of a year being taken for the purposes of this paragraph to be a child of 10 years of age), but excluding footwear which is not described, labelled, marked or marketed on the basis of age or size;",
(e) in the Third Schedule (inserted by the Act of 1976) in Part I—
(I) by the substitution for paragraph (iv) of the following paragraph:
"(iv) live animals, other than horses, greyhounds, cattle, sheep and pigs;",
(II) by the substitution for paragraph (viii) of the following paragraph:
"(viii) newspapers and periodicals, excluding newspapers of a kind specified in the Sixth Schedule;", and
(III) in paragraph (x) (a), by the insertion after "blocks" of "(other than those specified in the Sixth Schedule)",
(f) in the Sixth Schedule (inserted by the Act of 1983) by the substitution for paragraph (iiia) of the following paragraphs:
"(iiia) (I) the national daily newspapers published in the State;
(II) other newspapers, normally published at least weekly, the format, and the range and nature of the contents of which are similar to those of any newspaper referred to in subparagraph (I) of this paragraph;
(iiib) articles of personal footwear, other than articles of personal footwear of a kind specified in paragraph (xix) of the Second Schedule;
(iiic) sole and upper leather of a kind normally used for the manufacture and repair of footwear, and also soles, heels and insoles of any material;
(iiid) blocks, of concrete, of rectangular cross-section, the length or the breadth of any side of which in any case is not greater than 460 mm and is not less than 65 mm;",
(i) the Act of 1983 be amended by the substitution in section 89 (2) of "10 per cent." for "18 per cent.", and
(ii) the Act of 1984 be amended by the substitution in section 96 of "10 per cent." for "18 per cent.".
(3) That section 12A (inserted by the Act of 1978) of the Principal Act be amended by the substitution in subsection (1) of "2.2 per cent." for "2 per cent." (inserted by the Act of 1983).
(4) That this Resolution shall have effect as on and from the 1st. day of March, 1985.
(5) It is hereby declared that it is expedient in the public interest that this Resolution shall have statutory effect under the provisions of the Provisional Collection of Taxes Act, 1927 (No. 7 of 1927).
Since I know that Deputies want to discuss each item I do not intend to make an introduction but to leave it to the Deputies.
On a point of order and to give clarification to all contributing to this debate, could the Minister do something that he failed to do but which was done in other budgets and that is to give to the House the cost to the Exchequer of items (a) to (f) and the revenue——
Just a moment, Deputy. I am dealing with a matter of procedure. I must now call on Deputy De Rossa or Deputy Mac Giolla to move amendment No. 1.
Before you have the debate, I wanted to raise the point that this is the first time that these figures have been left out.
Is it a procedural point?
It is a procedural point, very much so.
If it is a point asking for information——
For clarification as to why these figures are not put into the budget.
That does not arise now.
It is a very important question.
Will Deputy De Rossa please move amendment No. 1?
I move amendment No. 1:
In subsection (2), to delete paragraph (f).
This refers specifically to the imposition of VAT of 10 per cent on footwear, other than that of children, and on other items.
If Deputy De Rossa would bear with me for a second, I want to make it clear that he can and should say whatever he has to say at this stage to the three amendments and the Resolution.
Right. I am afraid that you have confused me even more in relation to this matter. This imposition of VAT on footwear is a reintroduction of a proposal which brought the defeat of the last Coalition Government, and rightly so. It is really brass neck on the part of the Government to reintroduce it. They are effectively introducing the proposals on which they were defeated in 1982, which was the placing of VAT on footwear and clothing. They introduced VAT on clothing at 8 per cent and are now increasing that to 10 per cent. They are introducing VAT on footwear now. In theory, they are excluding children's shoes, but clearly this will have a very serious affect on the capacity of ordinary working class people to clothe and put shoes on their families. The fact that the parents will have to pay extra money for their own shoes will reduce the amount of money available to them to provide for their families.
There is obviously the other angle to this imposition, which is the effect it will have on jobs. We have heard on the news today that Clarks of Dundalk are closing with the loss of 370 jobs. We have the Tuff factory in Killarney working on short time. Is there anybody who would doubt that this imposition of VAT on shoes will have the result of the loss of further jobs in that sector? This is wrong on a number of counts. The fact that the Government are increasing VAT on shoes will make it more difficult for people to buy them and will also have an effect on maintaining jobs in an industry which is at this very time on the point of extinction.
The other angle which also must be dealt with is the process in which this Government are engaged of trying to hoodwink people into believing that they are introducing tax reform. What, in effect, they are doing is shifting the burden from pay-related income tax on the PAYE sector on to direct tax, which is completely unfair. Not only are they trying to fool the working class people by effectively trying to give with one hand and take with another, but they are not even going about the reform of the PAYE system in a fair or equitable way. This whole procedure of putting VAT on shoes and raising VAT on clothes is wrong. I am to speak on all three amendments and I refer now to paragraph (g) concerning fuel and other services, concrete, repair of vehicles and machinery and so forth. This smacks of a confidence trick, as I said before in relation to this Government. There is an attempt to present an image of reform when, in fact what is being done is creating a more unjust tax system.
This resolution brings into focus very clearly the whole fraudulent approach of this budget. This budget is a complex of sleight of hand and conjuring tricks. To a large extent, it is all done by mirrors. Resolution No. 7 is probably the clearest example of the whole bag of tricks, because what the Minister is doing here is endeavouring to cloak up a certain situation. The Taoiseach earlier on spoke glibly about maintaining the promise of the Government to keep taxation in line with last year. The simple fact of the matter is — and the blue tables that we all have here show it as clearly as possible — that, overall, there is going to be £400 million of extra tax revenue taken from the community in 1985.
That is the nub of the matter.
£400 million more will be taken in tax revenue from the community than was taken from them in 1985. Specifically, of that, £164.7 million will be taken in extra income tax. Let the House be absolutely clear about that. All the adding and subtracting that the Minister has gone on with and all the taking away here and putting back there, cannot disguise the simple fact that the Irish income tax payer, namely the PAYE payer, is going to pay £164.7 million more in 1985 than he or she did in 1984. In addition, under this Resolution the families and households of this country in 1985 are going to pay £122.3 million extra in value-added tax. These are the net results of all the Minister's manoeuvrings in his budget speech today.
I want to draw attention to something on which Deputy MacSharry sought clarification, to which he was perfectly entitled. There is a new little trick being played by the Minister in his budget arithmetic this year. In this matter of VAT he just inserts the net figure of £9.2 million. Previously a Minister for Finance in his budget arithmetic would have shown what he was giving away under certain headings and what extra he hoped to take in under others. That would have been very useful and informative for us. Perhaps the Minister will give us that figure during the course of the debate on this resolution. We are specifically concerned to find out what extra he is taking under the different headings, under footwear, clothing and the fuel rate that is going up to 10 per cent. We would like to know exactly what extra revenue will be raised under those headings and not just have this nice neat net £9.2 million inserted in the budget arithmetic.
I want to suggest also that this is an anti-family budget. That will become increasingly clear to people when all the mirage of propaganda that has been engaged in today ceases, all the special interest groups have been paraded before the television. Families and households will then very quickly realise that they are the people who are being hit by this budget and that under this resolution they are being very harshly treated indeed.
The principal objective of this resolution is to introduce a new VAT rate of 10 per cent on footwear. It will also, nice and gently, push up the rate of VAT on clothing to 10 per cent and double the rate of VAT on fuel to 10 per cent. These three things will directly impact on lower income households and families. It is quite fair to say that, in so far as there is any particular balance of advantage in this budget, on the whole, it is in favour of the well-off to the detriment of the poor and weaker sections of our community, in particular lower income families. That is exactly what Resolution No. 7 sets out to do.
I might add that we all welcome the reduction of VAT on newspapers to 10 per cent but I might point out that it is some considerable time since we sought to have that rate of VAT reduced to 5 per cent. In many parts of this budget introduced today the items being hailed by Coalition commentators and spokesmen are things we have been seeking and demanding over the last two years. I mention in particular the reduction of VAT on newspapers, though in our opinion it has not gone far enough.
I do not wish to take up too much time because I know many Deputies wish to speak on this resolution. I just want to reiterate that the main thrust of this resolution, and indeed of the budget as a whole, is to take more tax from people both in income tax and in VAT and not less, and that the impact of this resolution in particular will be very severe indeed on lower income families and households. There is nothing in the budget elsewhere which will in any way compensate for the additional expenditures being imposed on that section of our community. As my colleague, Deputy O'Kennedy, was quick to point out today, nothing has been done for children's allowances in this budget in an obvious year in which to effect some improvement in that scheme.
We will be voting against this resolution as a whole in order to indicate our objection to these particular provisions and our opposition to them. We feel that to be the quickest and most direct way of dealing with the situation, because in the time at our disposal we do not have time to waste on too many divisions. Therefore, we intend to vote against Resolution No. 7. But I want to make it clear that in doing so we are not opposing the other provisions in the resolution which effect a reduction in VAT rates in certain areas.
Do I take it that the 5 per cent to 10 per cent rate of increase in VAT goes on the cost of buildings? At a time when the constuction industry is on its knees I am appalled that the Government — to use the Taoiseach's words — used their "judgment" to do something like this. There was a great chorus of "Hear, hear" when the grant for first-time buyers of new houses was announced as being increased from £1,000 to £1,750. The result of the increase from 5 per cent to 10 per cent on a house, the average cost of which, particularly in the Dublin region is approximately £30,000, will eliminate the £750 extra grant — in other words, something in the region of an extra £750 on each new house, but the Minister slipped very quickly over that. I do not hear very many "hear, hears". Perhaps he will confirm that my arithmetic is correct in this instance. It is an appalling thing for any Minister to do. Instead of encouraging the building industry, which can provide much badly-needed employment, the Minister has increased the cost of the average house by approximately £750. Not alone that, but he puts that into every building contract throughout the whole industry. He talked glibly about the extra 15 per cent on school buildings and claws back 5 per cent straight away. That is the net input as a result of the "judgment" of this Government, to use the Taoiseach's words. I am appalled at this decision. It is not so long ago since a Government led by this Taoiseach fell on what is happening here this evening. One wonders how a child will be defined. Will it be size four, size five, size three or two? If it is a large child, will he or she be counted as an adult? If I want to buy a pair of shoes must I bring a birth certificate along with me?
The clothing and footwear industries are very sensitive. They have been very good employers. They are labour intensive industries. Yet the "judgment" of this Government is to impose 10 per cent on one section and an extra 2 per cent VAT on the other.
Paragraph (2) (e) reads:
the promotion of an admissions to certain live theatrical or musical performances (including circuses) be exempted from value-added tax.
What is meant by that? Must they take place in a theatre before they can get the benefit of the VAT exemption? Many parish halls and community halls are being built at considerable expense to the community. Will they be eligible for this exemption, or has the entertainment to take place in what would normally be described as a theatre? In many rural areas and in many small rural towns, unless this reduction applies to rural halls and community halls this provision will have an adverse effect on rural life as happened already in one or two of the other resolutions passed here tonight.
I would be grateful if the Taoiseach could give us an explanation of the complete folly of a Government who boast of giving £400 million for roads and then claw back 10 per cent. Instead of encouraging the building industry, this budget has driven another nail into its coffin. It has done nothing to encourage employment or to assist the many hundreds of young people who are saving to provide their own homes and who will be very worried by the implications in the Minister's speech about what might happen to certain building societies. It will do nothing for the hundreds of small communities who are awaiting new schools and in many cases it will add another 10 per cent to the cost of local contributions. Rather than helping the building industry this budget is curtailing its progress further.
In making a brief contribution on Resolution No. 7 I should like to welcome the overall change in the VAT rates. This measure is long overdue. From six rates we are now down to three rates. I talked to one hotelier who told me about the number of rates on equipment and goods in the sports element of the hotel, and the nuisance and the difficulty of having to consider six different rates on different items. The changes announced today are most welcome.
The fact that the 35 per cent rate has been reduced by 12 per cent is a great boost to the economy and to the public. The Government deserve credit for being able to move in the direction of synchronising the rates and we hope that eventually they will arrive at one VAT rate. The 35 per cent rate was a disincentive and was one of the reasons why there was such an exodus of money from here into the North. I hope there will be a response from the public and that more money will be generated by the new rates when they are in operation. The three rates will be easier to operate and the fact that the 35 per cent rate has been abolished will provide a boost which we hope will be reflected in jobs and confidence.
I should like to deal briefly with some of the headings and to welcome a couple of items in particular. A boost for tourism is provided by the reduction from 18 per cent to 10 per cent on the letting of accommodation, the short term hire of cars, mobile homes and boats. In the past foreigners have complained about our high VAT rates. If we can now attract visitors a great deal of money will be generated. The Government have had the initiative and the courage to take these decisions in order to back up our tourist industry. I hope that in the returns next year we will see extra money coming here in many forms. If people come here and spend money on the items which have been reduced, money will be spent in other areas as well.
Like other speakers I welcome the reduction in VAT on newspapers. Other speakers said they have been advocating this over a period of time, but the fact is that some of them left the rate as it was when they had an opportunity to reduce it. This Government have delivered and have reduced the VAT rates on newspapers. We all like newspapers. Some of the smaller ones were in severe difficulties and were making great efforts to keep going and keep their local communities informed. I hope recognition will be given to the fact that the rate has come down by 13 per cent.
In what form does the Deputy want recognition to be given? What is the pay-off?
The Deputy will have his chance. I also welcome the recognition given to live theatrical performances and to circuses which are to be exempted from VAT. It is always a boost to the Irish economy when our artists are performing. Many of them have gained recognition abroad.
None of us can be overjoyed at the fact that the rate on some items has had to be increased. We have made a start. We have made an effort in relation to the overall reduction of high VAT rates. I hope that more money will be generated and confidence will be restored in business as a result of the move towards the restructuring of the VAT rates.
The slight increase in the rate on clothing will affect certain people but I hope, with the benefits given and the restructuring of the bands, that increase will be offset. The Government have started down the right road. There have been many calls for the restructuring of VAT and the lowering of tax on this and that. The gentlemen on that side would like tax on everything to be reduced to 5 per cent, but what about VAT at the point of entry? I repeat that the budget has reduced VAT rates by 12 per cent on many items and by more, and I welcome the decreases, which are part of our overall taxation strategy.
Deputy Cosgrave apparently is opposed to VAT at the point of entry. This is the Government's third budget. I should like to learn what the Taoiseach's views are on VAT at entry.
I gave the answers during the 1982 election campaign but the Deputy did not listen to them. This is a Fianna Fáil egg which is very hard to unscramble, now that the damage has been done.
Some of the changes in VAT rates today hit at the poorest sections, some of whom will be faced with 10 per cent more on footwear, increased VAT on fuel and a 2 per cent increase in the price of clothing. They have already faced cuts in the health services which do not appear in the budget.
I must point out to the Taoiseach that in the past three budgets the total increases given to social welfare recipients have been less than that given in the last three years by Fianna Fáil when in office. In the last three years of office Fianna Fáil gave increases totalling 25 per cent to the social welfare section, those increases to date from 1 April, unlike this budget which provides for the increases from July. The Taoiseach said earlier there are elements in the budget which will eliminate the differential between prices here and in the Six Counties. Which reductions in VAT will eliminate differentials in prices?
A document circulated to us yesterday gave the estimated revenue from VAT in 1985 as £1,475 million. Today the Minister for Finance told us that it is estimated the net effect of these changes in VAT in 1985 will be a reduction in revenue of £9.5 million. The post-budget figures for revenue given to us today show a decrease of £8.9 million in VAT takings. Therefore, the Government estimate that they will take in from VAT a total of £1,483.9 million if the figure for VAT is £8.9 million rather than the £9.2 million given to us by the Minister for Finance.
This is one of the few occasions on which I will say something in favour of the Government. It is in relation to their movement downwards from the exhorbitant 35 per cent VAT rate on a number of items to certain lower figures. There is a reduction from 18 per cent to 10 per cent in the VAT on hotel accommodation and related services. This is going in the right direction — but it is the only thing that is.
These are offset by increases in respect of other commodities. These increases are totally anti-family, whether the Government intended them to be or not, I refer to the increased VAT rate on clothing and the introduction for the first time of VAT on footwear for children of more than ten years of age. According to the blue document there is a discrepancy; because it refers to 11 years as being the age up to which there would be exemption. There has been exemption in relation to clothing for children. The Financial Resolution, however — this may be an oversight — provides exemption for children up to ten years. If the feet are small and the shoes fit them and if the size marked on the shoes is appropriate to ten years and a couple of weeks or a couple of months, the children will be exempt. If I did not say it in the House before I said elsewhere that it is the craziest thing to try to relate exemptions for children according to the size of their feet. This qualification varies so widely that it must have been some daft screwball who came up with something like this.
Here in the Financial Resolution we have the age of ten years, plus a few weeks or a few months, but we have 11 years in the blue document as the age of exemption. Clothing and footwear are being VAT rated, one being increased and the age of exemption in the other reduced. Fuel comes into the picture of family costs.
I should like to know how it has become cheaper to maintain a child after he or she has reached ten or ten and a half years? How is it sane to imply that this is so as children get older, up to the age of 18 years? That applies to both clothing and footwear and it was daft in concept and will be daft in its application.
The building and construction industry was referred to and we have been told it has been boosted by a lower VAT rate on the cost of concrete blocks. You would have to be a blockhead if you took that in as meaning very much because blocks are the cheapest part of any house.
They put up the price of them in No. 6.
That may be. In fact if they are not careful they might fall down on them, but that is another day's work. There has been talk also about increased expenditure on roads. As far as the building industry is concerned if the Government believe that any of these cosmetic operations they engaged in in the budget will help that very sick industry they have another think coming. It is in a bad state but it is the one industry that in the midst of our depression if aided properly by the Government, would reduce unemployment and redound to the credit of the Government, even to the point of disregarding many of their past deeds that must bury them at the next election whether that is held next year or the following year. It does not matter when the election is held because we will have another 1977 all over again and the Government will be replaced, regardless of what they do in the meantime.
I should like to ask the Government why is it that they do not try to put our people back to work. Why not try to help the construction industry? Why are they trying to get the impression across that they are doing something, because they are not? They are doing a lot of fiddling around, exchanging, distributing and redistributing but the end result is that the Government will take more money at the end of the day, and very often from those who can least afford it. They are not helping the building industry even with the increased grants because they will not meet the increased costs that will result from the extra duties and taxes.
The Government had a good idea some time ago when they decreased the VAT rate in respect of car repairs from 18 per cent to 5 per cent. The idea was to try to bring back to the established garages the business that was going from them to the back streets and laneways. That move was effective, but now the Government are doing the reverse: they are increasing that 5 per cent rate to 10 per cent. At the same time the Government are telling us that the increase is being offset by a reduction in the excise duty on parts. Those parts are available to the people who operate in the backyards and backlanes and they will continue to take business from the long-established legitimate garages. The move is self-defeating. I suggest to the Government that they had the right idea but got it the wrong way around. One does not compensate for the other. The reduction in the VAT rate on parts is available to those who will not be paying the 10 per cent VAT on repairs. Those people whose overheads are lower and who will not be paying VAT will be able to wipe out the legitimate struggling garages who had been helped by the reduction in VAT last year.
I would like to see one rate for VAT. Perhaps the Government would like one rate also but we may have different ideas about the figure. One rate of VAT would make life so much easier for business people, who have been turned into book-keepers in recent years. If we had a realistic flat rate I have no doubt the Government would reap immense rewards. They would get a lot more than they are getting with the fiddling about that is going on at present.
I should like to put a question to the Taoiseach, one I tried to raise at the outset of the debate on a point of order. It is difficult for us to deal with these matters when we do not know the cost involved. This is the first time in my 16 years here when this information was not made available in the Minister's speech. It is deplorable that no allowances were given for the new taxes on footwear, clothing or fuel. Will the Taoiseach give the House the cost of (a) to (e) and the revenue expected to be gained from (f) to (i)?
Before the Taoiseach replies I should like to point out that many other Members are anxious to contribute.
Normally in this debate there is a certain amount of to-ing and fro-ing.
I will have something to say when the Taoiseach gives the information to the House. That information should have been given at 3.30 p.m. today, not six hours later.
I am anxious to give the information but at the same time I must deal with the other points raised because it is hard to keep all the pieces of paper together. I will give figures for the yield in 1985, which I believe will be sufficient for the Deputy. The figures are as follows: (a) -£67.1 million; (b) -£6.7 million; (c) -£7.0 million; (d) -£0.3 million; (e) -£0.1 million; (f) +£6.9 million.
Is that for footwear?
Yes. In respect of (g), fuel, the figure is +£54.4 million. That figure covers all the items covered by the 5 per cent. With regard to (h), clothing, the figure is +£5.7 million. In addition there are other effects which net out at an additional +£5.0 million. So that the House will have the full picture I will outline them. It is estimated that there will be a once-off VAT at import loss of -£13.0 million arising from these changes. I should mention that the total cost of putting right the damage done by Fianna Fáil in February 1982 would be about £200 million. We have not got £200 million at this stage but what we are doing here does in a very small way reduce it. It reduces it by £13 million.
Is that the amount the budget deficit is up by, £200 million?
It is the amount it would go up by if we tried at this stage to get round the tricky alternative budget Fianna Fáil introduced in February 1982 and abolished VAT at point of entry.
It is up by £200 million.
The other two figures that are necessary to complete the picture that are part of the net £5.0 million addition are increased revenue from purchases diverted from Northern Ireland etc., +£3.0 million, and increased revenue from reduction in evasion, +£15.0 million. Those three together give an extra +£5.0 million. If the Deputy adds up all the figures I have given him as far as (h) — there is no effect for (i) — he will get -£9.2 million.
I have been asked a question as to how it is that, if one takes £9.2 million off VAT when one starts at £1,475 million that one ends up with £1,483.9 million. This is a question which requires an answer, and the answer is quite complex, but I will endeavour to get it across to the House. You start with pre-budget figure £1,475 million, the actual effect of the VAT changes in themselves is a net reduction in VAT of £9.2 million composed, as I explained to the Deputy, but there are two other factors. One is that the excise duty increase has a VAT component, but for technical reasons part of the increase comes in as VAT for the purpose of achieving 10p on cigarettes and 10p on petrol. That means that £4.7 million of the excise duties increases are technically VAT and the other thing is that the overall buoyancy effects of the budget on VAT are +£13.4 million because of the buoyancy effects of the budget on the economy as a whole. As the Deputies will recall from the table with the budget, the impact of the budget on the tax revenue buoyancy is £58 million, an indication of the extent to which the budget will be stimulating the economy.
Estimated.
Because there is a net reduction in tax, the tax reliefs exceed the tax increases on the one hand and there is an impact from considerable provisions for this year's expenditure in terms of social welfare, public service pay, grants to local authorities and so on, on the other side. The stimulatory effects of the budget are such as to increase buoyancy of revenue generally by £58 million of which £13.4 million comes under VAT. That is the reconciliation asked for of the £1,475 million we start with and the £1,483.9 million we end with. The actual reduction in VAT rates is £9.2 million. I hope that is clear but if Deputies want me to go over it again, I will be happy to do so because I am anxious that they will understand it fully.
I understand it.
Why was this not done at 3.30 this afternoon, but it was in the blue paper at 4.30 p.m.?
I do not think I have ever seen figures set out in those tables changed.
They were done for petrol and excise duty a few minutes ago.
I accept what the Deputy says that it should be, because it would be simpler for everybody and it would not waste your time and mine while I read it out here. This has not been done previously because we never had as extensive a reform of VAT as this.
The Taoiseach wants the people to ignore this because it is a bitter pill.
On the contrary, I have been trying to get to my feet for the last half hour to give the House the figures. The Deputy is less than fair to me in that respect. I have been endeavouring to catch the Chair's eye in order that the House should have the full figures which I feel are necessary to the debate.
Deputy De Rossa spoke about the increases in footwear. He said they were unjust and asked about their effects. In the case of footwear, 90 per cent of home consumption is imported and two-thirds of home output are exported. The economic effects of VAT increases on footwear are relatively small and 90 per cent of the burden falls on imports and there is no VAT on exports.
What about the person buying shoes?
(Interruptions.)
I was asked about the economic effects on employment and I am trying to answer the question. The effects are relatively small in this instance because the bulk of the economic effects on employment of this increase falls as to 90 per cent on imports. As far as exports are concerned, they are not subject to VAT. This increase has an exceptionally small impact on either production or employment. The benefits of the reductions are much greater on employment and production because of the diversion back to domestic outlets of purchases of goods and the stimulation of domestic production. Many goods come under the 35 per cent rate, pottery, glassware and so on. In the case of clothing the figures are similar but not as extreme; 70 per cent are imported and so the impact of the VAT falls mainly on imports. More than 55 per cent of home production is exported and is not affected by VAT.
The effects of this budget on the consumer is an increase of ¼ per cent of the CPI, the smallest increase in any budget since 1978. The effects on the consumer are extraordinarily small. They are almost imperceptible. The economic effects on clothing are also imperceptible for the reasons I have mentioned.
Deputy Calleary and Deputy Blaney spoke about building. The Government's plan, and the budget implementing the plan, involve a very substantial increase in Exchequer expenditure on construction, an increase of 11½ per cent. What is the effect of the increase to 10 per cent in the VAT on building? Obviously it was not the Government's desire to increase the tax on building, but there is clearly no way that we can arrive at a simplification of the VAT structure without some going up and going down. There is no way this can be done in a way which balances out without a significant net loss of revenue unless the lower rate is about 10 per cent and the higher around 23 per cent. If we try to minimise the effect on building by having a rate of 7 per cent or 8 per cent, you would not have a 23 per cent rate; it would be around 30 per cent. The Government had to make a choice as to what the two rates would be. In achieving that simplification the figures that emerged to give a balance in revenue between losses and gains were 10 per cent and 23 per cent. The Government recognised the increase as potentially adversely affecting the construction industry and sought to mitigate that. Where do those effects fall? Let us be clear where they do not fall. There will be no effective increase in the amount of tax borne by the industrial sector or by the commercial sector in respect of hotels and shops or in respect of offices used by registered persons, since in all these cases the tax borne on building work qualifies as a credit against the tax due on supplies. Second, the increase will apply to all supplies not completed by 1 March. If completed on or after 1 March the new rate applies. If the sale of a new house is completed before 1 March, the old 5 per cent rate will apply. The burden of this falls on supply of buildings and building work in the areas of housing and public authority construction work, in buildings for use by unregistered persons, such as public authorities, banks, insurance companies, schools and hospitals, which come into the public capital programme, and churches. Leaving aside the banks, insurance companies and churches the two areas left are housing and public authority construction work. In the housing area we sought to compensate to a significant degree by an increase in the grant of £750, or 75 per cent.
From when?
From 1 March also, to tie in with this. That accounts for more than half the additional cost in that instance. In regard to the public authority construction programme generally, that programme is planned to increase by 11½ per cent so that even if this has some impact on it, the net increase in this programme will nonetheless be significant. Taken overall, the impact of the budget on the construction industry is positive in terms of Exchequer expenditure——
(Interruptions.)
The Government's Exchequer spending on the construction industry is up to 11½ per cent and even allowing for the impact of this increase, incidental to our simplification, falling on the public authority area, it still leaves an increase which is in excess of the rate of cost increase in the industry this year. There will still be a net volume increase in public contruction. There is a £750 increase in the housing grant. There are also other measures, such as the new incentive for letting, new tax incentive for multiple residential occupation and a reduction in the price of concrete blocks although this is quite small and I do not place great emphasis on it for the reasons mentioned by Deputy Blaney. There is also an increased sum provided for fishery harbour development works. Taken overall, the net effect on the construction industry is positive. We managed to simplify the code in a manner which was bound to lead to an increase in the building rate of 5 per cent and at the same time to ensure that the impact of the Exchequer on the construction industry is positive. That is a considerable achievement by the Government, even if the Opposition are slow to recognise the fact.
The question of children's shoes was raised by Deputy Calleary. I wondered if that old chestnut would come up again but I thought after the drubbing the Opposition got last year that they would be slow to raise it again. I am sure Deputy O'Rourke remembers the exciting debate we had when she asserted that there was no way in which children's clothing could be distinguished. I made the mild suggestion that children's clothing is labelled by age and size and she denied any such thing. I came in the next morning with the labels in my hand from a shop in Grafton Street and Deputy O'Rourke was nonplussed.
I was not here.
I know and I commented on that at the time.
(Interruptions.)
Will you bring her to the dentist this year?
I regretted having to raise the issue to show how little Deputy O'Rourke knew about children's clothing. I apologised for doing it in her absence but I had no alternative.
The Taoiseach was nonplussed in absentia.
I would have thought, in the circumstances, that Deputies would have been slow to raise this issue today.
The Taoiseach is an expert on shoes.
If Deputies wish to advocate taxing children's shoes, that is their affair. Fianna Fáil imposed tax on clothing in 1972 and we removed it in 1973. The manner of determining the distinction between children's and adult's clothing is quite clear. It refers to shoes up to the size appropriate to a child of 11. The same method is employed in Britain. They have the wit which Fianna Fáil do not have, to exempt children's clothing and shoes from VAT.
We do not want the British system.
The Taoiseach wears odd shoes.
The problem of distinguishing children's shoes will be done here by arrangement with the trade as was done in relation to clothing last year and the Deputies opposite should have more sense than they are showing at present. Of course they never learn.
Deputy Calleary raised the question of live entertainment in parish halls. All live entertainment, including that in this House, is exempt unless food or drink is served at the function. There is usually no problem in that regard in parish halls, so Deputy Calleary can be reassured on that point. Deputy O'Hanlon spoke about VAT at the point of entry and asked if we would remove it. We can only afford to reduce it by £13 million.
Deputy Blaney raised a number of points and I have dealt with them. I wish to thank him for his remarks in relation to the reduction of the 35 per cent rate to 23 per cent and from 18 per cent to 10 per cent. Praise from that source is praise indeed. Deputy Blaney also raised a point upon which we should all reflect. He mentioned the desirability of a single rate of VAT. As far as I can recollect, that has been recommended by the Commission on Taxation. However, the difficulty is that if one were to impose such a rate, to achieve the present revenue gained from this source, it would be strictly a rate of 14 per cent but the savings through eliminating evasion would perhaps allow a rate of 13 per cent to be imposed. Do Deputies consider that imposing a rate of 13 per cent on food in order to reduce the 23 per cent rate is a policy that they would wish to see followed? I have considerable hesitation in that regard considering the reaction to the very modest change in food subsidies which involved an increase of 1½ per cent to 2 per cent in the price of food. If it were increased to 13 per cent, I am sure Deputies would not greet it with much enthusiasm. If the Deputies opposite wish to advocate this and to support Deputy Blaney, I should be interested to hear their views. The impact on social groups at different levels would be considerable and it is certainly not something which one could embark on overnight.
Deputy Haughey argued that because the level of taxation is £400 million higher than last year, we have raised the burden of taxation. He must think that people are extraordinarily simple if he thinks he can put that across. He knows perfectly well that the increase in taxation arises from the combination of increased consumption and increased national output in the year ahead and inflation at a very low rate which is now estimated at 5¾ per cent for the coming year. This combination automatically yields an increase in revenue even if taxation is kept at the same level. In fact, the budget marginally reduces taxation because the table attached to the budget shows that the new tax increases involve £66.1 million and the new tax relief is £75.3 million. Therefore, there is a net reduction of £9.2 million in the burden of taxation between tax increases and tax relief.
What about buoyancy?
Buoyancy arises because the combination of the modest reduction in the burden of taxation, the increase in social welfare payments and public service pay and grants to local authorities creates a buoyancy of £58 million through the stimulating effect on the economy which is one of the very significant effects of the budget. I am very glad that the Opposition have drawn attention to it by the questions they asked. I think I have dealt with most of the points raised and I do not want to interrupt the debate for any longer than necessary.
The Taoiseach referred to the increase in housing grants from £1,000 to £1,750 to compensate for the increase in VAT which is a net income to the Exchequer. Can he confirm that there will be a pro rata increase for houses in the Gaeltacht areas? Will there be an increase from £2,000 to £3,500? Will there be an increase from £3,000 to £5,150 for houses on islands? If there are not such increases people living in the Gaeltacht and on islands are being discriminated against.
I cannot confirm that at present. I will check the points raised by the Deputy and will come back to them again.
I understand Deputy MacSharry gave way to the Taoiseach. Perhaps it would be possible to agree an order and I would call speakers in that order.
We put up our hands to the Leas-Cheann Comhairle a few hours ago and I understand he is taking us in that order. I thank the Taoiseach for giving us the information.
It is not usual to follow a list in a Committee-type debate and this is a Committee debate.
I thank the Taoiseach for giving us this information which is relevant to the discussion on this resolution. His explanation sounded as if it was from someone who was in orbit and did not really understand how the economy works.
The Taoiseach and the Minister for Finance said on a number of occasions that the effect on the consumer price index would be a quarter of 1 per cent. I understand they are assuming that the £67.1 million saving and all the VAT changes will result in price reductions to that extent. That is absolute and complete nonsense. It is ridiculous to assume that the goods affected in the change from 35 per cent VAT to 23 per cent VAT will result in consumers who buy those goods saving £67 million.
The same applies to the prices that will be charged for accommodation. The benefit of £6.7 million which will be enjoyed by those who own hotels and so on will not be passed on to their customers nor is there any guarantee that the price of newspapers will be reduced as a result of the change in VAT. We welcome the reduction of VAT on newspapers. It is no harm to point out that VAT on newspapers went from 15 per cent to 18 per cent under a Coalition Government and from 18 per cent to 23 per cent under a Coalition Government. It is about time they brought them down to 10 per cent or even 5 per cent as suggested by us.
This is an anti-family budget. There is no doubt but that £6.9 million will be collected through VAT on footwear. The consumer will pay that increase. A further £54.4 million will be brought in through the increase in the price of fuel, houses and so on. The increased VAT rates will be passed on to the consumer through increased prices but there is no guarantee that the VAT savings will be passed on to the consumer. This totally undermines the consumer price index given in the budget. It is ridiculous for the Government to suggest such nonsense on budget day.
The Taoiseach tried to put it over on us a few moments ago but I wonder if we are moving to a stage where VAT will be put on food. It would have just the same impact on household budgets as putting VAT of footwear and clothing will have.
That is why we took it off after the Deputy's party put it on.
It is nonsense for the Taoiseach to suggest that. It undermines the whole impact on the consumer price index.
I will be putting the vote at 11.15 p.m. As many speakers wish to contribute, speeches should be kept short.
With respect, might I say to the Taoiseach that it would be very difficult for me to be nonplussed on the day following budget day because I was not in the House. It would be a new experience to be nonplussed in absentia.
The Taoiseach said I did not know what I was talking about when I spoke about clothing and footwear for children. I know that the people living in terraced houses and small farms around the country will not understand when the Taoiseach says this will have no economic effect on their budget. A woman who goes into a shoe shop to buy shoes for her 12 year old or 18 year old who is unemployed will have to pay the increased VAT rate. No gobbledygook in Dáil Éireann will convince her otherwise.
I have two children with great big feet. The Taoiseach knows that boys and girls of 13 years of age and upwards are at their most expensive age. Their parents have to pay for school books, school transport and so on. No matter how the Taoiseach tries to present it, VAT on footwear will represent a huge burden on a family's budget. This is the first time in many years that there has been no increase in children's allowances.
The increase in the VAT rate on clothing will affect teenage children. They are the ones who put the greatest strain on a family budget. The VAT rate on fuel has been increased to 10 per cent. Let us take an average family of a mother, father and four children sitting around the fire as we like to think our constituents do. The fuel for their fire will cost them more tomorrow. Their shoes and clothing will cost more as and from tomorrow. How can the budget be described as a family budget? It is not. No matter what the Taoiseach says the net effect is that the family purse will be worse off. I hope parents know what is contained in these resolutions. I am totally opposed to them and will present them at every forum where I get an opportunity of doing so.
Since I came into the House I have, on a number of occasions, spoken about the complexity of VAT rates and the different VAT rates. We are now back to three rates and I welcome the fact that there is some uniformity in the rates. I should have liked to see the exemption limits for registration of VAT increased in the budget but this is not the case.
I heard the Taoiseach say in reply to a question from this side of the House that the VAT rate on building will be increased from 5 per cent to 10 per cent from March-April 1985, the normal period at which VAT changes will take place. This will increase the price of houses. The Taoiseach in reply to a question said that the date of application for the new grant will probably be from 1 March 1985. I can foresee grave problems in the next six or seven weeks if that is the case and the building industry will grind to a halt. People will not close deals until after 31 March 1985 if their grant will be increased from £1,000 to £1,750. On the other hand, if they wait until after that date to close the deal the builder will have to put up the price because of the VAT increase. I ask the Taoiseach to recheck the matter. There will be much confusion in the next six or seven weeks because people will not know whether to go ahead and close deals on houses. If they do that now they will get a grant of only £1,000 whereas if they wait until after March it will increase to £1,750. That point should be clarified.
The position is that if a contract is entered into before the end of February the person will pay VAT at the rate of 5 per cent and get a grant of £1,000. After the end of February the person will pay VAT at 10 per cent and will get a grant of £1,750. Obviously the advantage lies in completing the contract as soon as possible.
If that is the situation there will be a lot of confusion and consternation regarding the matter. Deputy MacSharry asked the Taoiseach a question regarding the VAT increases. To compensate for the reduction in the VAT rate from 35 per cent to 23 per cent, which will mean a loss of revenue of £67 million to the Government, the majority of the money will be made up by increasing the VAT rate from 5 per cent to 10 per cent under paragraph (g). The present 5 per cent rate includes building, motor repairs, agricultural contractors, accountancy fees to farmers and so on and obviously the greatest part will relate to the building industry. As Deputy Blayney pointed out, it does not make any difference to registered builders if there is an increase or a reduction in the rate of the various materials. There are various other items that will be caught in the increase of 5 per cent to 10 per cent, but the largest figure is the increased VAT in relation to building. In the case of a house costing £30,000 the price will increase by £1,500 because of the VAT change from 5 per cent to 10 per cent. The person concerned will get a grant of an extra £750 but he will suffer a net loss of £750.
To complicate matters further it is proposed that the grant will increase from March 1985 while the VAT rate will increase also from that date. The builder who has agreed the price will have to change the VAT rate or else have the contract closed before that, but the purchaser knows that if he closes the contract before that date it will cost him an extra £750 or more. I know the Taoiseach does not deliberately intend to mislead the House but I do not think it could be the intention to apply the grant from March. Whenever there has been a change in grant regulations it has always been done on the date announced in this House and I hope that will be the situation now.
No matter what happens with regard to the increase in the grant and the increase in VAT, house prices will increase. All Members are aware of the mass unemployment in the building industry and if house prices increase it will lead to a further recession in the industry. Otherwise the builders will have to take the increased VAT out of their profit margins, but they are very small at the moment. Most contractors are liquidating their land banks to keep their cash flow going. We know that only 50 per cent of the people who should be employed in the building industry have work at the moment.
We have been told that it will cost the Government £67 million to decrease the VAT rate from 35 per cent to 23 per cent but I think that figure was picked out of the sky. I do not think it was possible to estimate the figure. However, an estimate can be made of what could be obtained by increasing the VAT rate from 5 per cent to 10 per cent. House prices have to increase when one takes into account both the extra grant and the increase in VAT and there will be a further depression in the economy. If the changes are carried out as the Taoiseach announced, there will be total confusion in the next six or seven weeks.
The increase in VAT on footwear will lead to a deepening of the recession in that industry, apart from the effect it will have on ordinary people as was pointed out by Deputy O'Rourke. Today a major footwear factory in Dundalk closed, but one factory has survived. It is situated fairly near my constituency. However, what is being proposed in the budget will affect that industry also.
It was a good idea to reduce VAT rate on motor repairs in the second last budget. I accept the point regarding having a uniform and streamlined VAT rate but because of the recession in the motor repair industry, which is also affecting garages, probably on this occasion it would have been better to have a zero rate rather than increase the rate from 5 per cent to 10 per cent. I know that it would be a matter of judgment, that the Government of the day must make a decision as to what would be the best way to do it, but I would approach it in that way.
Probably the most ominous part of the Minister's statement is that he is using a certain amount of stealth in this VAT reorganisation. He said that he would like to see the introduction at some future date of a single rate of VAT, and the Taoiseach would seem to be canvassing that idea.
On the contrary, I explained why it was not on at this stage.
We must be somewhat suspicious of the resolution in this regard. Last year he brought in VAT on clothes, this year he is bringing it in on footwear, and we feel because of its introduction and the reference to it in the Minister's speech that he is contemplating the introduction of a single rate and including food in his calculations. That, together with the removal of the subsidies, is typical of the stealth in so far as the penalty being applied to families is inherent in the speech and particularly in this resolution.
There seems to be a strange logic in the reductions in VAT contemplated today. The Minister is reducing the levels of VAT on certain luxury goods and increasing them on essentials. From the Minister's blue book it can be seen that he sees it as reasonable to reduce the level of VAT from 35 per cent on such items as cosmetics, jewellery and watches, but he thinks nothing of increasing it on footwear and clothes. That is a strange thing to sell to the housewife who is having some difficulty in making her household budget match up these days. He persists also in giving the relief in VAT to the fur coat but is at the same time increasing the VAT on clothing and footwear.
On Financial Resolution No. 7 (2) (a) and (b) we have a strange situation this evening. The Minister is claiming that as his original thought. I put it to him that those paragraphs in the resolution have been Fianna Fáil stated policy for some time. Only last week the Minister for Finance said that this was an impossible thing to do and castigated the Fianna Fáil side of the House for even contemplating these selective reductions in taxation. Now they are taken on board one week later and offered up as some panacea for our economic ills. It is strange that Deputy Cosgrave could state that he expected recognition from the newspapers of what Fine Gael had done for them. That is a type of insidious blackmail: "You print us right tomorrow for what we have done." I hope and pray that the newspapers, as they always have been objective and fair in their assessment of these matters, will not be taken in by that kind of threat from a backbencher.
There is not much fear of that.
Bear in mind that we have been saying that the reduction of VAT for the tourist industry and for newspapers was and is stated Fianna Fáil policy. The Minister now is trying to find some soft comfort in taking it on board because it suits his political purposes. The whole thrust of the resolution is for a political purpose. Let the Government remember that, as they are reducing the level of VAT on hotel accommodation and they expect it to cost £6.7 million, the argument can be made that the hotel industry puts the figure at £4.6 million. We will not argue about it this evening, but will it attract any increased tourist traffic to the country? There is no recognition or suggestion in the Minister's statement that it will be passed on by way of tariff reduction to the consumer. From my knowledge of the tourist industry they are in dire straits and need the extra revenue to stay afloat. Consequently, it was preached by two Government backbenchers that this would result in a huge inflow of revenue and tourists. I do not believe that.
The Minister made a pretty detailed analysis to his own liking of the buoyancy situation but we put it to him that it was purely a balancing act on both sides of the balance sheet at the end of the Minister's statement to make the books balance today. It is not possible to create so much stimulation in the economy considering that IR£400 million extra is being cut out of the economy by way of taxes, direct and indirect. How can you have extra disposable income to create this stimulus that will generate the extra £58 million buoyancy? There is no way to rationalise that to the satisfaction of the people unless the Government are going to do something drastic, like the first thing I referred to.
Consequently, we believe that this is another bookkeeping exercise and that the Government have balanced the balance sheet at the back to suit their own purposes, using the trick of unseen revenue by way of buoyancy and conning the electorate further by saying that £28.6 million will be introduced sometime in the near future. That is not the way to stimulate the economy and the people will see through it for what is is.
The Minister for Finance is now here, but I will deal with the points raised up to this stage since I last intervened. Deputy MacSharry and Deputy Flynn have stated in relation to hotels and others that the reduction of VAT will not be passed on but that, of course, the increases will be passed on. It is an interesting thesis. I do not believe that in the very competitive situation that Irish industry and businesses find themselves in at present, where they are struggling for survival and in competition in most cases with goods or services from abroad, there will be any slowness in passing on reductions. Some domestic industries, such as construction, are protected but most of them are highly competitive. The assumption that the firms will grab these reductions as profits and not pass them on when they are faced with such pressure and competition is unrealistic. It is a barefaced political point to suggest that if you increase taxes in respect of domestic industry in the home market, such as building, every penny will be passed on, whereas if you have reductions where there is competition from outside then they will not be passed on. That point does not add up and I do not take it seriously. In present circumstances reductions in taxation will be passed on. We are not now in a boom period when there is fat in the economy. All these firms need every penny they can get to get their prices down to stay in business.
Will they be required to do it?
Not in a competitive situation. In any area where there are dominant firms or semi-monopoly situations, the prices commission will operate as they always do but in most of the areas we are talking of there is a high degree of competition. The Deputy knows that we do not have price control in so far as every individual or sector is concerned: far from it. We have selective price control in the areas where it is needed — where there are dominant firms or where there is a monopoly. In those cases there is control and we ensure that the reduction is passed on. For the remainder, competition will do the trick, as happens in a free economy which, thankfully, ours is.
Deputy O'Rourke referred to the tax on footwear as being a terrible burden. If footwear for children under 11 is zero rated while footwear for those older than 11 carries a 10 per cent VAT, I do not consider that the burden for children as a whole can be much different from what it was when Fianna Fáil VAT-rated all children's footwear at 5.26 per cent. The Deputy is chancing her arm somewhat in suggesting there is a distinction between the two.
Will shoes be dearer tomorrow or next week?
The higher rate will apply from 1 March.
That is the answer.
VAT on children's shoes, taken as a whole, for children of all ages will average at about 5.26 per cent, the figure Fianna Fáil imposed in 1972 and which we removed after coming into office in 1975.
We are talking about 1985.
Yes, but I am merely pointing out to the Deputy that the party opposite are in no position to criticise taxation on footwear because that taxation is almost identical to what it was when Fianna Fáil applied it originally.
Deputy McCreevy welcomed the three VAT rates and went on to say that he would favour an increase in the exemption limits for registration. I note the point. This is something that will be looked at in due course though obviously not at this stage when the budget has been fixed.
With respect to the Deputy, I had difficulty in following precisely his point about complications in the building industry because of the date of the introduction of the grant coinciding with the date on which VAT is applied. It seems to me a fairly simple proposition that if the two coincide, people are in a position where if they can complete a contract before 1 March, they pay 5 per cent VAT and get a grant of £1,000 whereas if they cannot complete a contract by that date they pay at the rate of 10 per cent but get a grant of £1,750. For reasons relating to the grant itself not being the subject of VAT, the actual extra cost involved is not £750 but £631. The synchronising of the two would seem to be an incentive to complete contracts before 1 March. Therefore, I do not see any reason for confusion. Obviously, Deputy McCreevy is much better equipped with the details of this than I am so if I have failed to grasp the point, I am sure he will pursue it with the Minister who will be taking over in a few moments.
I do not think the change will involve any decrease in the volume of housing. The £631 on a house costing £30,000, that is, an increase of 2 per cent in the price, will hardly lead to a reduction of more than 1 or 2 per cent in demand, given the elasticity of the demand for housing. I would consider the reduction in demand to be well below 2 per cent. The scheme we introduced of paying £5,000 to local authority tenants buying new houses we anticipate would be taken up by about 700 people.
The Taoiseach has almost succeeded in confusing us in addition to confusing himself.
I am trying to assess the net effect of the measure.
The Taoiseach should have a look at the market in housing.
(Interruptions.)
Will the Deputies opposite please allow me to finish my brief intervention? If they are not able to follow me, I shall go over what I have said carefully for the class of ten.
We are not in a classroom.
Obviously, there is a problem of comprehension. The net increase after 1 March, allowing for the grant, in the cost of a £30,000 house will be 2 per cent or £631. The question is what effect that will have on the demand for housing. I am simply suggesting that the demand would be reduced by no more than some fraction of that so that the figure would be less than 2 per cent.
Demand is not good now.
On the other side, the measure we are taking of offering a £5,000 grant to local authority dwellers buying private houses was expected by us at the time of its introduction to lead to a demand of the order of 700 in the current year. The applications for the grant to date are closely in line with that expectation. That would represent a 3 per cent increase in demand for private housing from that source alone. The net effect of the two provisions is likely to be in the region of a 2 per cent increase in total housing demand. The 3 per cent increase by way of the £5,000 grant will exceed whatever reduction in demand there might be because of the increase in housing prices.
Has the Taoiseach taken into account such items as stamp duties and planning charges?
Yes.
Order, please. Interruptions in a debate like this are usually a waste of time.
The suggestion of a drop in the demand for housing is not well taken. Deputy McCreevy says he would prefer if car repairs did not attract any VAT. I do not know whether he noticed that there is to be a reduction on the exise duty on car parts. This reduction is designed to compensate for the increase from 5 to 10 per cent on car repairs. The compensation will be equivalent to the increase in the duty on car repairs. Our aim is to achieve an equitable balance so there should be no adverse effect.
Deputy Flynn raised a grand hare but a hare that was raised by Deputy Blaney and not by us in regard to the taxing of food. Deputy Blaney proposed a single tax rate but I put it to him and to other Deputies, some of whom have shown a disposition to talk in these terms, that there is a real objection and difficulty in this regard. While the attractions of a single rate are great, this could only be achieved if a rate of about 13 per cent applied to everything, including food. I do not consider that to be something that would be acceptable or that we could possibly move to it except on a very gradual basis during a long period of years, regardless of whether the Deputies think it would be a good idea.
Can the Taoiseach explain the words of the Minister for Finance that such a move is not feasible at present? The Minister was the one who introduced that kind of terminology to the debate.
As I have said, to do now what is being suggested by the Deputies would necessitate a 13 per cent increase in the price of food and that is not on.
But the Minister has told us that that is the most efficient system.
It would be the most efficient system but it could be effected only by increasing the price of food by 13 per cent. That is what Deputy Blaney advocated but this Government are not prepared to do that.
Not this year.
Not in any one year. It could be done only over a long period of years because otherwise the effects would be significant.
The Taoiseach should be careful. He is confusing the issue.
That is a hare that will not run so far as we are concerned. Deputies opposite may chase Deputy Blaney with it but they will not chase me nor the Minister for Finance with any such suggestion.
The Taoiseach is on the slope.
Order, please.
The next point made was that we are reducing taxation on luxuries and increasing it on footwear. Deputy O'Kennedy in his opening speech welcomed the reduction in the number of VAT rates. Other Deputies have welcomed the change also including Deputy McCreevy and Deputies cannot have it both ways. If we are to have a small number of VAT rates the rates on some items must go up and on others must go down. Obviously, the demand from every source, including Fianna Fáil, has been to reduce the 35 per cent rate. We have done that, bringing the rate down to 23 per cent but for Deputies to complain then is an attempt to have it both ways. Fianna Fáil are either for or against in respect of the 35 per cent rate. Let them tell us straight where they stand but let them not say that while they are in favour of a reduction to 23 per cent, they do not wish the tax on luxuries to be reduced. They must make up their minds before the question is put.
The only other point made by Deputy Flynn was his suggestion that he does not believe our figure of buoyancy of £58 million. I must tell the Deputy that since this Government came into office, no figures have appeared in any budget document or statement that have not been verified by and supported by the work of civil servants and experts.
Like the budget deficit.
(Interruptions.)
Order, please.
That is not true——
(Interruptions.)
When the gentlemen opposite are ready I will conclude.
Deputy Fitzgerald will withdraw the statement he has made.
What did he say?
He said, "That is another untruth" and I will not tolerate that. I want an unqualified retraction. I am asking Deputy Fitzgerald to withdraw that remark.
What about the figures of the three wise men?
(Interruptions.)
Deputy Fitzgerald accused the Taoiseach of telling another untruth. That is an unparliamentary expression.
The Chair has forced the withdrawal of the word "lie" here but this is an extension. I have never before heard of the withdrawal of the word "untruth".
(Interruptions.)
Does Deputy Haughey attempt to distinguish between the two, that untruths are not lies?
After today's trick of the loop——
When muck was thrown you threw a lot of it in your time and you are still trying to throw it if you can get away with it.
Order, please, there is no necessity to lose tempers. What Deputy Gene Fitzgerald said is "It is untrue and he knows it" and he then said "Another untruth". I am simply asking him to withdraw it.
(Interruptions.)
On a point of order, is it now——
I rule that it must be withdrawn. I am asking Deputy Fitzgerald, I am pleading with Deputy Fitzgerald, to withdraw that remark.
On a point of order, is it now unacceptable to say something is untrue?
Look, what Deputy Gene Fitzgerald said——
He did not call him a liar.
(Interruptions.)
I am——
(Interruptions.)
You are looking for trouble.
I am appealing to Deputy Gene Fitzgerald.
(Interruptions.)
I am ordering Deputy Fitzgerald to withdraw that remark or leave the House.
This is an extension beyond anything that has ever happened in this House before but, if it pleases the Chair and helps to continue the debate which has been conducted in an orderly manner, I will refer to it as "another inaccuracy".
The Deputy withdraws that remark and substitutes "another inaccuracy"?
Yes.
I accept that.
(Interruptions.)
If the Chair checks the Official Report he will find that expression widely used and it has been accepted over the years.
The two expressions coming together——
"Untrue" and "untruth" have been used often.
(Interruptions.)
You know, a Cheann Comhairle, that you are wrong in this instance.
(Interruptions.)
I am at a loss because I did not hear the remark.
(Interruptions.)
I am asking the Taoiseach to continue.
I cannot continue. I do not know what I was supposed to be inaccurate about, if I may use the less unparliamentary expression.
On a point of order, the Chair has just forced a very artificial and dictatorial ruling on Deputy Gene Fitzgerald. During the course of the incident the Taoiseach asked if I was incapable of distinguishing between "true" and "untruth".
I did not.
Deputies
You did. We heard you.
(Interruptions.)
If the Chair is going to be very meticulous in relation to this sort of thing I would ask him to be at least objective.
And impartial as well.
(Interruptions.)
It is not what I said, Deputy. The point was raised that a suggestion was made that the figure for buoyancy in the budget table is in some way phoney or incorrect or decided by us to fill a gap and to bridge the gap in figures. Since I came into Government I have made certain that no figure appears in any budget document that has not been verified by the advisers and experts in the Department of Finance. I will not ever allow that to happen. The Deputies will recall that last year there was provision in the budget for unemployment based on 227,000 people on the live register. I contested that strongly with the civil servants at the time and said that I thought that the figure was far too high and that it would be under 220,000. I could not persuade the civil servants in the Department of Finance and in the Department of Labour of that fact and accordingly I said that, as I could not persuade them, the figure must go in because this Government will not twist or turn any figure or fake any figure in any budget.
Interruptions.)
Only on the deficit. What about the deficit?
We had that——
If you say you will bring it down to £750 million——
(Interruptions.)
We had that experience under Fianna Fáil where they took £150 million off the figures without taking any decisions to implement it. That will not happen under this Government and I hope it will never happen until Fianna Fáil come back into power as a reformed party——
(Interruptions.)
On a point of order——
Deputy Michael O'Kennedy on a point of order.
The Taoiseach is indeed asserting a certain view in the House in respect of Government. I will just ask, on the Government's projections——
That is not a point of order.
It is, because the Taoiseach is asserting that the Government, as a matter of order and regularity, take a certain approach.
It is not.
This is a point of order. I want to be clear on the distinctions in this order that the Taoiseach claims to represent.
It is not a procedural point of order.
It is. The Chair will have to hear it first.
I will give way to the Deputy if he seeks clarification of my remarks.
The Taoiseach——
Will the Taoiseach please tell us in his use of terms when he says "reduce", does he mean "increased"?
That is not a point of order. It is a debating point.
It is. If the Taoiseach is reducing unemployment he does it by increasing it.
It is a debating point. Let us get on with the debate.
(Interruptions.)
I would like to proceed with my remarks, if I may, a Cheann Comhairle.
The Deputy is entitled to ask for information. The Taoiseach has diverted from the motion before us at some length——
The Deputy may ask a question.
I want to point out something to the Chair on a point of order. The Chair is very meticulous in keeping order this evening and the Taoiseach has rambled very far from the motion before us and has talked about the integrity of the Government and the fact that they do not put figures into budgets which cannot be stood over.
That was a reply.
Arising from that I want to refer the Taoiseach to page 6 of the blue book and direct his attention to the following words in regard to the public service pay award, the cost of——
That is not a point of order.
(Interruptions.)
I am making my point of order.
(Interruptions.)
The Deputy is correcting the Taoiseach. He is directing his remarks to the Taoiseach and not to the Chair. Surely a point of order should be made to the Chair.
The blue book uses the words "The cost of this finding, if implemented throughout the Public Service, would be £108 million". Now the blue book says if the public service pay award were implemented, whereas the budget document before us puts in the figure for implementation. I suggest——
I am ruling that this is a debating point.
I suggest that there is a lie and an untruth between those two documents.
Deputies
Hear, hear.
(Interruptions.)
A Cheann Comhairle, I would draw your attention to the use of the word "lie" by the Leader of the Opposition.
(Interruptions.)
I totally fail to understand the point made by the Leader of the Opposition.
Why is that wording used in the blue book "if implemented", while the Budget Statement implements it? The Taoiseach forgot to change——
Order, order.
The Budget Statement makes provision for a sum of money which would be the sum required to implement that award throughout the public service. The figures are precise and accurate. The Deputy has no point to make. I have no point to answer. I wish to conclude——
The point in this debate is this.
Deputy Haughey, please.
This document was drawn up on the basis that were an award made to the public service——
Deputy Haughey——
This document was drawn up on the basis that if you were going to; you changed your mind at the last moment, but forgot——
(Interruptions.)
The arithmetic is exactly the same. There is no conflict whatsoever.
The Taoiseach has done a U-turn. Where is the £750 million that he spoke about in Athy? If he goes to the Burren they will tell him.
Please, I am appealing for orderly debate.
I could speak on the amendment to the resolution, but nobody else seems to be interested.
I am trying to get order. I call the Taoiseach.
Let me just answer Deputy Haughey. In the blue document is the following:
The cost of this finding, if implemented throughout the Public Service would be £108 million.
In the Minister's speech the wording is:
The finding would cost £108 million, if implemented and applied throughout the Public Service.
What point is the Deputy trying to make?
Would the Taoiseach look at the last page?
Both quotations have exactly the same words.
A Deputy
The £58 million. Where is that?
Deputy Haughey has no point to make and he knows it.
Deputy Haughey tried those tactics in Wexford.
(Interruptions.)
They did not put an increase on the fur coats.
Deputy Haughey is very shattered by this budget. If he is trying to distinguish between those two sentences which are using exactly the same words, he is scraping the bottom of the barrel. That is all that he can scrape tonight and he knows it.
Deputies
Hear, hear.
As far as the Deputy is concerned, I absolutely reject his accusation in respect of the buoyancy figure. That figure is calculated by the officials of the Department of Finance, given to us and taken by us and put in by us as we have done throughout our period in
Government and will continue to do in Government.
Based on what?
There will be no further doctoring of figures in this country so long as we are in Government. That has come to an end.
How long has the Taoiseach been doing it then?
(Interruptions.)
He has been doing it already.
I want to talk for a few moments on what is the most scandalous provision in this budget. That is the imposition of 10 per cent VAT on shoes.
Deputies
Hear, hear.
We have been less than severe on the Government for this scandalous imposition. I do not know where the Labour Party Members are. Deputy Bell has arrived in here. Is there anybody left over there with a social conscience? Is there anybody left to stand up for the people who are no longer able to afford this kind of impost which the Government have put on to them? Where is Jim Kemmy? He brought the Coalition Government to their senses some time ago. Why is there nobody in the Labour Party to do so? There are people in the Fine Gael Party who have social consciences. Why are they not speaking up on this? We here should be addressing ourselves to that and not listening to the Taoiseach quibbling and twisting and turning with facts, figures and statistics until he winds himself up into a ball and cannot make his own way out.
When Deputy O'Rourke put to him the question of an impost on shoes he started talking about the average impost put on by the Fianna Fáil Government in 1972. Does he realise what he was talking about a few minutes ago, that there are 225,000 people unemployed? There were not 225,000 people unemployed in 1972. Are those 225,000 people better able to take a 10 per cent impost on shoes than the people were in 1972? We in this House are not standing up for the people for whom we should be standing up and the Labour Party, in particular, have a serious obligation with regard to this 10 per cent imposition by the Government.
Over to you, Minister.
I see Deputy Bell on the opposite side, a distinguished trade unionist who represented the leather workers at national level with the Transport and General Workers' Union. I would like to hear from him, because I know him to be a man with a social conscience. Was he consulted about this? Was anybody consulted? Where is Deputy McLoughlin from County Meath? Where are the other members of the Labour Party? Where is the Whip, Deputy Taylor? He is not here now. He was here today and sat as if he had a stroke affecting both his hands when the Minister for Finance sat down. There was no applause there, because he realises the harm that has been done.
We should not allow this occasion to pass without condemning this out of hand, in particular in relation to the large number of people who are unemployed. For a while at least, when they get their unemployment benefit and their pay-related money, they will not be doing too badly, but the moment of truth arrives when the redundancy money is spent and they switch from unemployment benefit to unemployment assistance. They have to cope now with an extra cost on shoes. I know people in my constituency who have to bring a sack to the shop at the beginning of the school term in September to bring home shoes. Those people have a very heavy burden placed upon them by this extra 10 per cent.
It does not affect children's shoes.
From ten years of age upwards.
It so happens that a Minister for Education on this side of the House extended the period for education here substantially many years ago and by providing the first grant for third level education extended it still further. The imposition on clothes is not quite so bad as that on shoes, but it is an increase of 2 per cent. Again, the hardship will fall upon the unemployed in particular. It will be felt right around the population, but they will be the most severely hit.
Not the fur coats.
Let me say this. As Deputy O'Rourke said last year, the teenage period is a period when the clothes bill is the highest for families. The young people today are much more choosey than they were years ago with regard to clothes and change their gear much more regularly. A crafts exhibition was held here recently, with many young people who were being trained in schools of design — textile design and clothes design. You would not call it haute couture quite yet, but they are tending in that direction. This is a damper on their enthusiasm to develop themselves and get jobs going in situations where there are very few jobs available.
There is one further point. The Six Counties situation has been mentioned time and time again during the course of this debate. Why can we not, even in some areas such as shoes and clothing, keep an advantage over the Six Counties? Why can we not have some lodestone here to pull the people towards the South rather than towards the North? If we stole the pass on electrical goods and on cheap beer, to which Deputy Blaney referred, why could we not steal it with clothes and shoes, so that something would draw people down here?
Could the Minister tease out section (g) where there is a colossal amount of money involved — £54.5 million, we are told by the Taoiseach. This section has not been adequately explained. All the things to which the increase from 5 per cent to 10 per cent VAT applies have not been clarified. It mentions fuel, excluding electricity and certain candles, if you do not mind.
There is a story told about a Greek philosopher who used to go around with a candle looking for an honest man and he spent all his life doing that. I shall tell you one thing, he will not find him where a constitutional crusade was promised. He will not find him where fiscal rectitude was promised and reneged on. He will certainly not find him in the architect of this budget and these taxes.
I call Deputy O'Kennedy.
What Deputy Wilson has been pointing out is very significant, particularly on a day when the news has come through from Deputy Bell's constituency that one of our longest established footwear factories, Clarks of Dundalk, are closing due to the recession and the general depression and going into receivership, even without this VAT which is imposed on footwear. Deputy Wilson is quite right. Let me ask the Minister if he can explain to us, in his reply, on VAT——
Is Deputy N. Treacy wearing an Irish pair of shoes?
Yes, from Ballinasloe.
The grand toreador of the party branch bull.
Order, Deputies, please.
In relation to the yield on VAT generally I want to make a a point to the Minister. When the increase projected for 1985 is of the order of £122 million over the outturn for 1984, I presume the Minister will accept from me that that represents just short of a 9 per cent increase. Unless he can do his figures in a different way he must come to that conclusion. If it represents a 9 per cent increase over the outturn for 1984, if the Government are telling us that we will have a 6 per cent inflation rate, does that not clearly indicate that the take from VAT in real terms — adjusting downward for the impact of inflation — will be considerably more than last year? While we have acknowledged that the move towards narrowing or reducing the bands is welcome, because we have called for it, this was the Minister who introduced the six rates or bands. We argued it on the budget last year and the previous year. We argued it in the course of the Finance Bill and the Minister down-faced us all the time. The record of the House is there to prove it.
Naturally we welcome the belated conversion of a Minister who previously told us that this was not possible. Allowing for the fact that we have now at least some degree of normality in the range of bands, will the Minister acknowledge — for the sake of honesty, so that we all know where we are going — that within the new banding system he will take more from the consumer than he did last year. That is my first point.
In view of the reduction in other bands would the Minister acknowledge the introduction of VAT on footwear? I do not know if the Minister has given any figures yet as to what he projects will be the take from that imposition ——
£6.9 million.
God help the workers in the shoe industry.
And the 2 per cent increase in VAT on clothes I presume has also been quantified, which represents, if the Minister will indicate——
I will answer that as well.
Between the two we are talking about something over £12 million. It is quite clear from what the Minister has been saying that, if anything, those estimates probably are understated at this point. If the Minister is going to make the case on the one hand that the whole trend here is downward in the VAT impositions — and he said that not just here, that as a result of the whole level of indirect taxation and taxation generally, people would be paying less next year than this year; he said it on radio and television this evening — if it is down and he is providing £12 million only in those two areas I must suggest to him now that those are under-estimates and that the yield at the end of the year will indicate that the imposition on these categories will be considerably more than the figures he has now indicated in the House.
The Deputy tried it last year and the year before and he was wrong.
I have been proved correct on so much. How could I have tried it last year when we were not talking of these issues?
I am anxious to give the Deputy the information he is seeking.
The Minister has to get in before the division.
I might make one further point in relation to this area, that is in terms of the need for taxation of this kind to meet the current expenditure obligations of the Government. I am not sure that we have been given by the Government an accurate picture of what the public expenditure outturn will be. It is very important that I give this single, concrete example. I do not think the tax we are speaking of here would be adequate to meet what will be the Minister's expenditure in 1985. One example will suffice. As we speak now 225,000 of our people are unemployed. Nonetheless this Government have made provision in this budget, in the Estimates for 1985, for an average of 7,500 to 8,000 fewer — 217,000 is the provision they have made in their public expenditure programme, on average, for 1985.
The Deputy should adhere to the resolution before the House.
This is very important——
It may be but the Deputy must relate his remarks to the resolution before the House.
Can the Minister explain to us how, if we begin the year with 225,000 unemployed, in the course of this year we will have an average of 217,000 because that is the provision this righteous Government have made in their expenditure programme? This comes from a Taoiseach and Minister who have been telling us that they never put a false entry in any book. Would the Minister care to explain to those of us who do not understand how one works out such an average?
I am waiting to give the Deputy some information on all of these points.
And I hope that information will be based on substance and not on speeches.
The Deputy may be quite assured he can rely on it.
(Interruptions.)
Will Deputies cease talking to one another across the floor of the House.
I did not hear what the Minister said; I think he used the word "lie" or "liar". Did the Minister use the word "lie" or "liar", a Cheann Comhairle?
I thought he did too.
The Chair has a very keen ear for that.
Anyway, to summarise, we have a 9 per cent increase in VAT. Can the Minister explain to us how that becomes what he calls a reduction in taxation, when within the VAT the real imposition will be on the lower paid people particularly in regard to clothes and footwear. Perhaps he can explain to us how suddenly 217,000 average can emerge from a start of 225,000 unemployed for which he has not made provision, he says, in his budget Estimates?
Minister for Finance on Resolution No. 7 and the amendments.
I regret I was not able to be in the House for all of this discussion, including the requests made for information about the take, or forecasted yields from the various segments of the VAT system and the difference that these changes will make. Subject to correction, I think the Taoiseach indicated already for each one of these changes what difference it would make, what the revenue would otherwise be in the course of next year.
He did but it was very confusing.
I do not intend to use up the time of the House by going over that ground again unless Deputies insist.
Will the Minister give the figures?
I will do it very quickly because we do not have a lot of time. The change from 35 per cent to 23 per cent in 1985 will reduce the yield by £67.1 million.
Deputies
We have all this.
Deputy O'Kennedy seemed anxious that I give the figures.
No, I was not, I just wanted clarification.
I will then continue with the other points.
I wanted to ask the Minister how an increase of £122 million over £1,361 million last year can be presented as a reduction and not an increase; that is all.
I will come to that directly.
The Minister is spoofing now.
To respond to Deputy Wilsons last series of remarks, the change in relation to shoes, for example, the bringing of adult footwear and footwear materials into charge to VAT at 10 per cent will increase the yield in the course of 1985 by £6.9 million.
(Interruptions.)
The CPI effect of that——
Would the Minister define an adult?
The CPI effect of that——
Order.
If Deputy O'Rourke has not learned at this stage in her life what an adult is, there is nothing I can do to help her.
Is a child an adult at 11?
The increase that will come about in the consumer price index as a result of that change is 0.14 per cent, one seventh of 1 per cent. It increases the CPI by one-seventh of 1 per cent. I would point out to Deputies on the other side of the House that, on the latest information available to me, two-thirds of the output of the Irish shoe industry is exported and, therefore, will be unaffected by this measure. I want to point out also that at 10 per cent the VAT on footwear which is introduced in this resolution will be lower than it is in any other country in the EC.
On a point of order, for the information of the House can the Minister tell the House what does he mean by an adult for the purposes of this Financial Resolution?
I will put it the other way around. We will define a child in the same way as we did last year in relation to clothing. When we have passed this Financial Resolution the Revenue will get together with representatives of the industry and they will work out an effective and applicable cut-off point. I expect that, with a bit of good sense all round, we will not have any great difficulty in arriving at an effective definition which will allow us to apply this measure with clarity and to the satisfaction of everybody concerned.
Is it 21 years or ten years?
Can the Minister explain how an increase of £122 million is a decrease?
I will come to that point. In relation to clothes this Resolution provides——
(Interruptions.)
Order.
The Minister does not want to answer my question. Can he explain how an increase of £122 million is a reduction?
I will come to that. As has already been pointed out, the increase in the rate of VAT from 8 per cent to 10 per cent will increase revenue by £5.7 million in 1985 and the CPI effect of that in a year will be one-tenth of 1 per cent, 0.1 per cent. It has already been pointed out that, as half of the output of our clothing undustry is exported, that half of the output will not be affected in any way by this change in VAT. With VAT on clothing as we have proposed it here, where it applies we will again have the lowest rate of VAT on clothing in the EC countries.
And the highest rate of unemployment.
They all have higher VAT rates than we have, including the United Kingdom, our nearest neighbour. Deputy O'Kennedy is trying to do many very fancy sums arguing from the basis of an increase of 9 per cent in the total take of VAT. Deputy O'Kennedy knows perfectly well that what we are doing here is reorganising the rates. Deputy O'Kennedy has this lovely habit of turning around and laughing at the press gallery when a point is coming up which he does not like. If we were to leave the VAT rates unchanged, the revenue from VAT during 1985 would be £9 million higher than the figure the Deputy is talking about. That is the post-Budget forecast for VAT revenue if we were to leave the rate unchanged.
Why would the revenue form a tax increase while the rate of tax remained unchanged? The only reason why that would happen would be that the tax base was increasing. Specifically in the case of VAT, revenue will increase at unchanged rates for one reason only, that is, that people are spending more money on the items which are subject to VAT and you inevitably get an increase. That is not fiscal drag. That is not hidden taxation. It is simply a reflection of the fact that the volume of demand for the products being taxed is increasing and, as expenditure increases on the products, you get more tax inevitably. What we are actually doing is changing the rates and bringing about a substantial improvement in the pattern of the rates and reducing the revenue below what it otherwise would have been. If we did not change the rates in the way I am proposing. VAT revenue in 1985 would be £9 million higher than the figures the Deputy has taken out of this.
Deputy O'Kennedy is making the cardinal and very simple mistake of confusing tax rates with the tax base. I am more than amused at the Opposition's position on this. Of course they want to have the bits in this resolution which reduce VAT rates and they do not want to have the bits that increase VAT rates. The Opposition have been touting around for the past few months something they never had the guts to implement when they were in Government, what they call self-financing selective tax cuts. We have decided that we will not go for that kind of mickey mouse package which Deputy O'Kennedy said he wanted. I am sorry, Sir. That is an unparliamentary word for the rather tattered package which Deputy O'Kennedy claimed he supported a couple of weeks ago and, having met all the interests involved in the trade, he gave a press conference.
I must now put the question.
He said Fianna Fáil supported that, but they did not want to be tied to figures. They did not believe it then and we have gone for a far better package.
Please, Minister, I must now put the question.
Question put: "That the paragraph proposed to be deleted stand."
The Dáil divided: Tá, 82; Níl, 76.
Tá
- Allen, Bernard.
- Barnes, Monica.
- Barrett, Seán.
- Barry, Myra.
- Barry, Peter.
- Begley, Michael.
- Bell, Michael.
- Cluskey, Frank.
- Collins, Edward.
- Conlon, John F.
- Connaughton, Paul.
- Coogan, Fintan.
- Cooney, Patrick Mark.
- Cosgrave, Liam T.
- Cosgrave, Michael Joe.
- Coveney, Hugh.
- Creed, Donal.
- Crotty, Kieran.
- Crowley, Frank.
- D'Arcy, Michael.
- Deasy, Martin Austin.
- Desmond, Barry.
- Desmond, Eileen.
- Donnellan, John.
- Dowling, Dick.
- Doyle, Avril.
- Doyle, Joe.
- Dukes, Alan.
- Durkan, Bernard J.
- Enright, Thomas W.
- Farrelly, John V.
- Fennell, Nuala.
- FitzGerald, Garret.
- Flaherty, Mary.
- Flanagan, Oliver J.
- Glenn, Alice.
- Griffin, Brendan.
- Harte, Patrick D.
- Hegarty, Paddy.
- Hussey, Gemma.
- Kavanagh, Liam.
- Keating, Michael.
- Bermingham, Joe.
- Birmingham, George Martin.
- Boland, John.
- Bruton, John.
- Bruton, Richard.
- Burke, Liam.
- Carey, Donal.
- Kelly, John.
- Kenny, Enda.
- L'Estrange, Gerry.
- McGahon, Brendan.
- McGinley, Dinny.
- McLoughlin, Frank.
- Manning, Maurice.
- Mitchell, Gay.
- Mitchell, Jim.
- Molony, David.
- Moynihan, Michael.
- Naughten, Liam.
- Nealon, Ted.
- Noonan, Michael. (Limerick East)
- O'Brien, Fergus.
- O'Brien, Willie.
- O'Keeffe, Jim.
- O'Leary, Michael.
- O'Toole, Paddy.
- Owen, Nora.
- Pattison, Séamus.
- Prendergast, Frank.
- Quinn, Ruairí.
- Ryan, John.
- Shatter, Alan.
- Sheehan, Patrick Joseph.
- Skelly, Liam.
- Spring, Dick.
- Taylor, Mervyn.
- Taylor-Quinn, Madeline.
- Timmins, Godfrey.
- Treacy, Seán.
- Yates, Ivan.
Níl
- Ahern, Bertie.
- Ahern, Michael.
- Andrews, David.
- Aylward, Liam.
- Barrett, Michael.
- Blaney, Neil Terence.
- Brady, Gerard.
- Brady, Vincent.
- Brennan, Mattie.
- Brennan, Paudge.
- Brennan, Séamus.
- Briscoe, Ben.
- Burke, Raphael P.
- Byrne, Hugh.
- Byrne, Seán.
- Calleary, Seán.
- Collins, Gerard.
- Conaghan, Hugh.
- Connolly, Ger.
- Coughlan, Cathal Seán.
- Cowen, Brian.
- Daly, Brendan.
- De Rossa, Proinsias.
- Doherty, Seán.
- Fahey, Francis.
- Fahey, Jackie.
- Faulkner, Pádraig.
- Morley, P.J.
- Moynihan, Donal.
- Nolan, M.J.
- Noonan, Michael J. (Limerick West)
- O'Connell, John.
- O'Dea, William.
- O'Hanlon, Rory.
- O'Keeffe, Edmond.
- O'Kennedy, Michael.
- O'Leary, John.
- Ormonde, Donal.
- Fitzgerald, Gene.
- Fitzgerald, Liam Joseph.
- Fitzsimons, Jim.
- Flynn, Pádraig.
- Foley, Denis.
- Gallagher, Denis.
- Gallagher, Pat Cope.
- Geoghegan-Quinn, Máire.
- Gregory-Independent, Tony.
- Harney, Mary.
- Haughey, Charles J.
- Hilliard, Colm.
- Hyland, Liam.
- Kirk, Séamus.
- Kitt, Michael.
- Lemass, Eileen.
- Lenihan, Brian.
- Leonard, Jimmy.
- Leonard, Tom.
- Leyden, Terry.
- Lyons, Denis.
- McCarthy, Seán.
- McCreevy, Charlie.
- McEllistrim, Tom.
- Mac Giolla, Tomás.
- MacSharry, Ray.
- Molloy, Robert.
- O'Rourke, Mary.
- Power, Paddy.
- Reynolds, Albert.
- Treacy, Noel.
- Tunney, Jim.
- Wallace, Dan.
- Walsh, Joe.
- Walsh, Seán.
- Wilson, John P.
- Woods, Michael.
- Wyse, Pearse.
Tellers: Tá, Deputies Barrett(Dún Laoghaire) and Taylor; Níl, Deputies V. Brady and De Rossa.
Question declared carried.
Amendment declared lost.
I move amendment No. 2:
In subsection (2), to delete paragraph (g).
Amendment put and declared lost.
I move amendment No. 3:
In subsection (2), to delete paragraph (h).
Amendment put and declared lost.
Question put:
"That Financial Resolution No. 7 be agreed to".
The Dáil divided: Tá, 82; Níl, 75.
Tá
- Allen, Bernard.
- Barnes, Monica.
- Barrett, Seán.
- Barry, Myra.
- Barry, Peter.
- Begley, Michael.
- Bell, Michael.
- Bermingham, Joe.
- Birmingham, George Martin.
- Boland, John.
- Bruton, John.
- Bruton, Richard.
- Burke, Liam.
- Carey, Donal.
- Cluskey, Frank.
- Collins, Edward.
- Conlon, John F.
- Connaughton, Paul.
- Coogan, Fintan.
- Cooney, Patrick Mark.
- Cosgrave, Liam T.
- Cosgrave, Michael Joe.
- Coveney, Hugh.
- Creed, Donal.
- Crotty, Kieran.
- Crowley, Frank.
- D'Arcy, Michael.
- Deasy, Martin Austin.
- Mitchell, Gay.
- Mitchell, Jim.
- Molony, David.
- Moynihan, Michael.
- Naughten, Liam.
- Nealon, Ted.
- Noonan, Michael. (Limerick East)
- O'Brien, Fergus.
- O'Brien, Willie.
- O'Keeffe, Jim.
- O'Leary, Michael.
- O'Toole, Paddy.
- Owen, Nora.
- Desmond, Barry.
- Desmond, Eileen.
- Donnellan, John.
- Dowling, Dick.
- Doyle, Avril.
- Doyle, Joe.
- Dukes, Alan.
- Durkan, Bernard J.
- Enright, Thomas W.
- Farrelly, John V.
- Fennell, Nuala.
- FitzGerald, Garret.
- Flaherty, Mary.
- Flanagan, Oliver J.
- Glenn, Alice.
- Griffin, Brendan.
- Harte, Patrick D.
- Hegarty, Paddy.
- Hussey, Gemma.
- Kavanagh, Liam.
- Keating, Michael.
- Kelly, John.
- Kenny, Enda.
- L'Estrange, Gerry.
- McGahon, Brendan.
- McGinley, Dinny.
- McLoughlin, Frank.
- Manning, Maurice.
- Pattison, Séamus.
- Prendergast, Frank.
- Quinn, Ruairí.
- Ryan, John.
- Shatter, Alan.
- Sheehan, Patrick Joseph.
- Skelly, Liam.
- Spring, Dick.
- Taylor, Mervyn.
- Taylor-Quinn, Madeline.
- Timmins, Godfrey.
- Treacy, Seán.
- Yates, Ivan.
Níl
- Ahern, Bertie.
- Ahern, Michael.
- Andrews, David.
- Aylward, Liam.
- Barrett, Michael.
- Blaney, Neil Terence.
- Brady, Gerard.
- Brady, Vincent.
- Brennan, Mattie.
- Brennan, Paudge.
- Brennan, Séamus.
- Briscoe, Ben.
- Burke, Raphael P.
- Byrne, Hugh.
- Byrne, Seán.
- Calleary, Seán.
- Collins, Gerard.
- Conaghan, Hugh.
- Connolly, Ger.
- Coughlan, Cathal Seán.
- Cowen, Brian.
- Daly, Brendan.
- De Rossa, Proinsias.
- Doherty, Seán.
- Fahey, Francis.
- Fahey, Jackie.
- Faulkner, Pádraig.
- Fitzgerald, Gene.
- Fitzgerald, Liam Joseph.
- Fitzsimons, Jim.
- Flynn, Pádraig.
- Foley, Denis.
- Gallagher, Denis.
- Gallagher, Pat Cope.
- Geoghegan-Quinn, Máire.
- Harney, Mary.
- Haughey, Charles J.
- Hilliard, Colm.
- Hyland, Liam.
- Kirk, Séamus.
- Kitt, Michael.
- Lemass, Eileen.
- Lenihan, Brian.
- Leonard, Jimmy.
- Leonard, Tom.
- Leyden, Terry.
- Lyons, Denis.
- McCarthy, Seán.
- McCreevy, Charlie.
- McEllistrim, Tom.
- Mac Giolla, Tomás.
- MacSharry, Ray.
- Molloy, Robert.
- Morley, P.J.
- Moynihan, Donal.
- Nolan, M.J.
- Noonan, Michael J. (Limerick West)
- O'Connell, John.
- O'Dea, William.
- O'Hanlon, Rory.
- O'Keeffe, Edmond.
- O'Kennedy, Michael.
- O'Leary, John.
- Ormonde, Donal.
- O'Rourke, Mary.
- Power, Paddy.
- Reynolds, Albert.
- Treacy, Noel.
- Tunney, Jim.
- Wallace, Dan.
- Walsh, Joe.
- Walsh, Seán.
- Wilson, John P.
- Woods, Michael.
- Wyse, Pearse.
Tellers: Tá, Deputies Barrett(Dún Laoghaire) and Taylor; Níl, Deputies V. Brady and Barrett (Dublin North-West).
Question declared carried.
Financial Resolution agreed to.