This amendment is being discussed with amendment Nos. 8, 9 and 10.
Finance Bill, 1985: Report Stage (Resumed) and Final Stage.
Debate resumed on amendment No. 6:
In page 40, between lines 25 and 26, to insert the following:
"(d) Five per cent of the amount on which tax is chargeable in relation to the supply of the following goods or services:
(i) services consisting of the development of immovable goods, and the maintenance and repair of immovable goods including the installation of fixtures, where the value of movable goods (if any) provided in pursuance of an agreement in relation to such services does not exceed two-thirds of the total amount on which tax is chargeable in respect of the agreement;
(ii) concrete ready to pour;
(iii) blocks, of concrete, of a kind which comply with the specification contained in the Standard Specification (Concrete Building Blocks) Declaration, 1974 (Irish Standard 20: 1974);
(iv) articles of personal clothing and textile handkerchiefs excluding——
(a) articles of clothing made wholly or partly of fur skin, other than garments merely trimmed with fur skin unless the trimming has an area greater than one-fifth of the area of the outside material, and
(b) articles of personal clothing of a kind specified in paragraphs (xvii) and (xviii) of the Second Schedule;
(v) (a) fabrics, yarn, thread and leather, of a kind normally used in the manufacture of clothing, including elastics, tapes and padding materials in the form supplied for the manufacture of clothing, and
(b) yarn of a kind normally used in the manufacture of clothing fabrics;
(vi) articles of personal footwear, other than articles of personal footwear of a kind specified in paragraph (xix) of the Second Schedule;
(vii) 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;".
—(Deputy O'Kennedy)
Before we adjourned our debate I was outlining the many options that can be considered in a restructure of the number of rates of VAT and I was saying that my personal preference would be that there would be a labour or service rate of VAT which would be somewhere around 5 per cent, that the materials rate would be increased from 23 per cent to 25 per cent, 26 per cent or whatever was necessary. In that way one would be dealing in a dual way with nixers and the black economy by virtue of the differential in the labour rate being minimised, and because the materials would be more expensive, they would be obliged to be registered.
I want to make three other points briefly. First, Deputy O'Kennedy has lost sight of the fact that he has shifted the winning post in this debate. I remember very clearly that on the Finance Bill last year he was berating the Minister about the need for the rationalisation of the rates and the cross-Border situation. When the Minister moved from those, the winning post is shifted to the other areas.
In relation to the 2.2 per cent VAT refund for farmers, it is my personal view — I think one shared by a great number of farmers — that they would rather see that refund abolished than have a new imposition like the land tax with all its added administrative costs.
The other point I wanted to make in relation to VAT vis-à-vis its effect on small businesses and retailers is that in Belgium they have a sales or equalisation tax under which the retailer's margin is not liable to VAT. This means that the retailer is placed in the position that the consumer is now in, that when they buy from the manufacturer, the supplier or wholesales they pay the VAT and their margin is not liable to VAT.
I might say that because there are such large quantities of footwear, including Clarks, and clothing imported, that is not necessarily all bad news for the indigenous footwear and clothing industries, because VAT was increased by 2 per cent. It should be remembered that VAT is imposed at the point of entry and will affect the cash flow of importers and those agencies rather than the indigenous sector.
I have been impressed with the case advanced by Deputy Yates in respect of a special rate of VAT in the labour or service sector.
Once again, the only real proposal coming from this side of the House.
I promised Deputy Yates — in as much as that I am responding to this debate — that when someone, like myself, with a more open mind than the Minister, assumes his responsibility I will certainly take full account of the points he has argued with such persuasion. The reality is that anything that penalises employment, anything that encourages the black economy — as he has been underlining — is something that we should not alone discourage but, where possible, avoid by way of incentives of the kind he has mentioned. It is certainly something worth looking at. But I have to tell Deputy Yates that, until such time as I have had an opportunity of considering it in my Ministerial capacity, he has little prospect of having the amendment adopted at this point.
Deputy O'Kennedy might have the same advisers.
Deputy O'Kennedy should not hold his breath; Deputy Yates might get there before him.
Nonetheless I shall take a note of what the Deputy has said and will bear it in mind, promising action at the earliest possible date.
I noted that the Minister's contribution on this issue steered clear of the major burden of the case we made, namely, the economic implications for the building industry and the economy generally. He will recall that we referred to the numbers unemployed in the building sector at 50,000. He will recall also that we referred to the cost of unemployment benefits for that number of the order of £110 million per annum. We referred to all of these as being major implications, not just for that sector but for the economy generally. For that reason I cannot say that the Minister's response was anything like adequate. I might be permitted to say that the Minister's response was confined almost, as it inevitably tends to be, to pointing out, as he sees himself from his omniscience, the lack of comprehension, of understanding, of knowledge and expertise on this side of the House on the part of myself or my colleagues. Some time back there was a wise old philosopher called Socrates who said that the beginning of knowledge was to recognise the extent of one's ignorance. On the basis of the omniscience, or the subjective opinion, of the Minister as to his knowledge and our ignorance, I have to say that it will be a very considerable time before the Minister even begins on the road to knowledge. Not until such time as he begins to reflect on the old Socratic concept of where real knowledge begins — namely, recognising the extent of one's own ignorance — will he spend less time pointing out the extent of ours.
Deputy Wilson tells me I have passed that point.
Perhaps the depths of our ignorance are even more abysmal, perhaps they are, than the Minister, for his omniscience, recognises.
Surprising.
At least, if they are, it means we have begun to know but, for those who know it all already, there is a long road to travel before they begin to know. I would commend to the Minister, in this and any other discussion, that he might not confine himself to pointing out from his heavenly pinnacle the inadequacies of those of us who make points on this side of the House, our lack of knowledge or comprehension as the case might be.
That being said I might comment on some of the points the Minister has made. The increase in the public capital programme affecting building this year is of the order of 5½ per cent in nominal terms over last year. When one deducts the value-added charges from this, the actual increase represents less than 3 per cent, approximately 2.9 per cent over the public capital programme, affecting the building industry which had already been reduced last year. That is clearly a reduction in real terms. The Minister had to acknowledge that the real problem was in the private housebuilding sector. In the course of his examination of this sector the Minister might also look at another implication——
I said the problem was wider than that, not just private dwellings.
I did not say "not just". I pointed out yesterday that it is clearly obvious in the commercial sector where the throughput this year is estimated to be approximately 8 per cent to 9 per cent less than last year. Therefore it is not confined to the private housebuilding sector but it is particularly acute in that sector. If the Minister thinks it is any consolation to the construction industry to have it established by him that it is not confined to the private house sector only, I am prepared to allow him that point. Certainly the desert is very much more extensive than that as far as the construction industry is concerned. We are talking about an increase of 2.9 per cent over last year, already a year in which the public capital programme affecting the housing industry was very much reduced.
The Minister talked in terms of the costs as he estimated them. Those are merely slide rule figures calculated on the basis of bringing in the blackboard and getting a total at the end. There is a little more to it than that. I might suggest this basic consideration to the Minister, that a VAT charge will yield no revenue — no matter at what point it is fixed — on companies gone into liquidation. Might I suggest to the Minister that, when he is bringing in the blackboard giving us lessons over here, he might consider that the calculations and the issues to which the professor addresses himself would be affected to a great extent by the simple fact that a number of those who would——
Did I hear reference to "the professor"?
Sorry, a professorial Minister.
I have no professorial ambitions at all.
Fairly soon the Minister will have other ambitions to pursue.
A fact which might be of assistance——
I do not need assistance.
(Interruptions.)
I have pointed out that we have taken into account in the calculations the dynamic impact of the change in the VAT structure. I will be quite happy to talk to the Deputy about that if a suitable opportunity arises.
When does one register for the course which the Minister proposes to give, so that we can all become a little more enlightened?
It is permanently open and I charge no fee.
We will all be rushing to register. The Minister suggested that the representatives of the building industry were much more sharp in their presentation than we were. There is a very good reason for that. They have been meeting the Minister over the past few months and they know of their own experience. We can only speak on the basis of what they convey to us.
Any increase in VAT will yield no revenue from companies going out of business. I recommend the Minister to consult with the Revenue Commissioners after the passage of this legislation and ask them for a general picture of the returns for those engaged in the building sector — contractors, sub-contractors and agricultural contractors. He will find that those who are not being prosecuted by the Revenue Commissioners are in a very serious state. If that does not illustrate the case we are making, nothing will. I do not have the information available to me but I know from the case made to Opposition Deputies and to me as spokesman that a very considerable number of these people are in great difficulty. VAT charges on people going out of business yield no revenue.
The Minister said that the cost of adopting our amendment would be £54 million in a full year.
That is the figure for 1985. Otherwise it would be over £100 million.
Let us accept the figure of £54 million for 1985, although it is questionable since the Minister has indicated that the restoration of the 5 per cent rate on building would lose £36 million to the revenue. That is not the case. The Minister seems to be assuming that all of those who are now in business would be contributing through VAT this year. I have some bad news for him. They will not be doing so throughout the year and the figures should be revised downwards.
The VAT revenue is produced by the level of expenditure, not by the number of people in business.
The level of demand is determined by those who are expending.
Not by the number of people in business.
The level will drop considerably during the year. If it is the case that £36 million of the £54 million would be associated with a reduction in VAT on building, that leaves only £18 million for the reductions we propose on clothing and footwear. It is very significant that a 2 per cent reduction on clothing and a 5 per cent reduction on footwear would cost only £18 million. Since these are universal consumer goods, I would have thought that the amount would be somewhat more.
That is the figure for 1985.
I appreciate that. VAT on clothing and footwear is always a major issue in this House and brought down a Government on one occasion. I am surprised to hear that the amounts concerned in this instance are so low. I have to take the Minister's figures on trust.
The Minister has not even considered our case, much less answered it. He has confined himself to pointing out the lack of comprehension on this side of the House and the fact that he is speaking above our heads. That being so, I do not think there is much point in my communicating further with the Minister. The decision has been taken but I am pressing my amendment.
Amendment put and declared lost.
I move amendment No. 7:
In page 44, between lines 6 and 7, to insert the following:
"and
(c) by the insertion after paragraph (xx) of ‘(xxi) hurleys"'.
I hope I do not irritate the Minister again but I am quite prepared to do so. Is cuimhin liom an bhliain seo caite gur mhol mé an rún seo i dtaobh VAT ar chamáin agus an chúis a chuir mé os comhair na Dála an bhliain seo caite, is í an chúis chéanna atá mé á moladh anois inniu. Is é tuairim páirtí Fhianna Fáil agus mo thuairim féin go bhfuil áit faoi leith ag cursaí iománaíochta — ní amháin i gcúrsaí spóirt ach i gcúrsaí cúltúir. Is é mo thuairim féin go bhfuil baint daingean ag an gcluiche seo le cúrsaí ar fud na tíre, ar fud na tuaithe, sna bailte móra agus i ngach aon áit san tír. Ag caint mar dhuine a bhí in a iománaí uair amháin, tamaillín ó shin, sílim gurb é seo an spórt is aicillí ar domhan. Einne a raibh baint aige leis an spórt seo agus a bhí seans aige bheith ag féachaint ar Thiobraid Árainn, Corcaigh, Loch Garmain, Cill Choinnigh, bhí gach éinne díobh ar aon mheas. Fiú amháin is cuimhin liom uair amháin a tháinig Leas-Uachtarán Choimisiún na hEorpa anseo, Francois-Xavier Ortoli agus shocraigh mé go mbeadh suíochán aige i bPáirc an Chrócaigh don chluiche ceannais iománaíochta agus tar éis bheith ag brath ar an chluiche sin, dúirt sé gurb é an cluiche is fearr a chonaic sé riamh in aon áit sa domhan.
Táimid ag caint i dtaobh an chluiche sin agus i dtaobh costas camán do na buachaillí óga agus do na cailíní óga ar fud na tíre. Cé go bhfuil meas agamsa ar an bpeil, ar an chluiche láimh agus cricket and rugby, tá áit faoi leith sa tír seo ag an gcluiche iománaíochta. Ba cheart dúinn anseo taca a thabhairt dóibh nuair atá costas na gcamán comh daor is atá. Sin an cás atá mé á mholadh anois.
Tá baint le Cumann Lúthchleas Gael — sin an fáth go bhfuil mé ag labhairt as Gaeilge — leis an teanga atá againn. Ba cheart go ndéanaimid an-iarracht taca a thabhairt don chumann sin agus gach aon chumann eile ar son na Gaeilge chun cúrsaí na teangan a laidriú agus a athbheochan. Tá a fhios agam nach bhfuil costas mór ag baint leis seo. Tá a fhios agam go mbeadh costas mór ag baint leis dá mba rud é go mbeadh ar an Aire an rud céanna a dhéanamh do gach aon spórt eile: tennis, cricket agus mar sin de. Ceapaim féin go bhfuil an ceart ag an Aire anois agus an ceart ag gach Aire Airgeadais an rún seo a ghlacadh, agus roimh chríochnú, más rud é go bhfuil an tAire chun a chur in iúl domsa anois nár dhein mé féin aon rud, ba mhaith liom a rá roimh ré go ndearna mé rud antábhachtach i dtaobh an rúin seo nuair a bhí mé i mo Aire Airgeadais. Ní raibh mé in ann, leis an moladh a cuireadh ós mo chomhair, an VAT a aistriú ach fuair mé amach ó na Coimisinéirí Iomcaim an costas a bheadh ann dá nglacfaí leis an rún. Séard a rinne mé ná gur thug mé deontas den mhéid céanna do Chumann Lúthchleas Gael chun an cluiche seo a chur chun cinn ar fud na tíre. Sin an fáth go bhfuil mé ag moladh an rúin seo arís i mbliana. Tá súil agam, os rud é nach bhfuil an tAire sásta glacadh leis, go mbeidh seans agam sar i bhfad é a dhéanamh agus beidh mé ag déanamh rud éigin fónta ar son cúrsaí spóirt agus cúrsaí cúltúrtha na hÉireann.
Deputy O'Kennedy has made the case most eloquently for reducing VAT on hurleys. Hurling, our national game, is artistic and is a part of the Irish culture. It should be treated as exceptional. The cost of an adult's hurley is £10 which includes about £2 VAT. Taking into consideration that five or six hurleys may be broken in one game one can see that the cost to any club is enormous. The danger is that with increased costs hurling will become a dying art. I should like to request the Minister, whose father got some of his earlier education in Dongourney, where I am sure he heard people talk about hurling because they won some All-Irelands in the early days——
I did not hear that comment.
The Minister may have been an All-Ireland hurler because his father stayed in Cork.
The Deputy has the wrong county. It was Kerry.
I did not say if the Minister's father had stayed in Cork but I pointed out that he got some of his earlier education in Dungourney and he must have heard about some of the hurlers of the early part of the century.
The Deputy is putting a few years on to his age which he does not deserve.
It was slightly before his time but I am sure he heard about those hurlers and will impress upon the Minister the need to reduce the VAT rate on hurleys. I hope the Minister will give a favourable response to our request. The GAA, particularly those involved in hurling, are waiting for a favourable reply from the Minister.
I am sure the Leas-Cheann Comhairle, who comes from the Premier County whose teams have won many All-Ireland championships, will appreciate what we are trying to do in having VAT removed from hurleys. We hear a lot of talk about our national games and the protection of our heritage and culture but the imposition of a 23 per cent VAT rate on hurleys is a penal charge. It is affecting the running cost of clubs throughout the country. It is possible that the Minister never played hurling and does not appreciate how hurling clubs operate but I can tell him that most clubs spend between £5,000 and £6,000 annually on hurleys. They cost £10 each and £2 or £2.50 of that is VAT. That is ridiculous. Our national game of hurling is accepted as being the greatest field game in the world and many countries would give a lot to have their own field game. However, in Ireland we penalise our national field game.
The Minister should give serious consideration to our proposal. Clubs are operating on a shoestring. There appears to be an opinion abroad that the GAA are a wealthy organisation. There may be wealth in Croke Park but in the half-parishes and urban areas they are not wealthy. Those clubs are barely surviving. They are trying to buy hurleys and pay other expenses from limited resources. I do not make any apology to anybody for saying that the greatest social workers we have are the officials who run the GAA clubs. Those involved spend many hours on a voluntary basis catering for the under 14s, under 16s and under 18s. They train those children and transport them in their own vehicles to games, paying for the petrol themselves. However, at the end of the day the Minister, and the Government, ask those clubs to pay 23 per cent VAT on hurleys.
The Minister is being very unfair to those voluntary workers. He should give serious consideration to removing VAT on hurleys and give clubs a decent chance to provide hurleys. Unemployment is rampant and we are encouraging people to join clubs and organisations but we are not doing anything to help the one organisation we should be encouraging people to join, the GAA. Parents cannot afford to purchase hurleys and clubs are finding it difficult to do so. The Minister should give clubs a decent chance to protect our greatest national game, hurling.
Bhí saghas ionaidh orm gur thosaigh an Teachta O'Kennedy ag labhairt as Gaeilge. Tar éis na díospóireachta a bhí againn an bhliain seo caite bhí mé ag súil go mbeadh sé ag labhairt as Iodailís no Fraincís mar a rinne sé ar feadh cúpla noiméad an bhliain seo caite. Caithfidh mé a rá i dtosach báire nach bhfuil pionós ar bith á chur agam ar iomaníocht, chamáin no chlubanna de shaghas ar bith ar fud na tíre. Cosúil le gach earra a cheannaíonn muintir na tíre seo tá cáin bhreisluacha ar chamáin. Is mar sin atá. Dá mhéad rudaí a fhágaimid as an gcóras is mó a bheadh an ráta cánach ar na rudaí atá istigh sa chóras. Baineann an prionsabal sin le gach cuid den chóras. Baineann sé le camáin, lasáin agus gach aon rud eile.
Níl pionós ar bith á chur agam ar chámáin. Is é a mhalairt de scéal atá againn an bhliain seo mar go bhfuil an cháin ar na camáin á laghdú agam ó 35 faoin gcéad go dtí 23 faoin gcéad. Is leor sin chun laghdú 9 faoin gcéad a dhéanamh ar na praghsanna. Níl a fhios agam an bhfuil laghdú tagtha ar na praghsanna ó thosach mhí Márta go dtí seo. B'fhéidir go bhfuil eolas ar leith ag an Teachta O'Kennedy nó ag duine éigin den bheirt chara no heavies atá aige don díospóireacht seo. Níor chuala mé go raibh laghdú ar bith ar na praghsanna ach tá laghdú ar an gcáin.
Faoi mar a dúirt mé inné bheadh deacrachtaí áirithe ann ó thaobh an Chomhphobail Eorpaigh de ráta zero a chur ar chamáin. Tá sé raite go fírinneach ag an Teachta O'Kennedy agus ag an Teachta Ahern gur féidir cúpla camán a bhriseadh i rith cluiche ach is mar sin atá d'earraí spóirt go forleathan. Tá rudaí eile a chailltear nó a bhristear i rith cluichí mar shampla, liathróidí gailf. Níl a fhios agam cé mhéad liathróidí gailf a chaill an Teachta Ahern nó an Teachta O'Kennedy le deanaí ach tá siadsan daor go leor de réir mar a deirtear liom. Níl an t-am agam bheith ag gabháil de ghalf. B'fhearr liom rudaí eile a dhéanamh.
(Cur isteach.)
Amendment put and declared lost.
Amendments Nos. 8, 9 and 10 not moved.
I move amendment No. 11:
In page 45, between lines 23 and 24, to insert the following:
"(c) magazines;".
This amendment is to apply the same rate of VAT to magazines as to newspapers. The House welcomed the decision of the Minister to reduce the level of VAT on newspapers. The producers of magazines now find themselves at a severe disadvantage vis-à-vis newspapers. Most people employed in the magazine industry do similar work and have similar qualifications to those employed in the newspaper industry. The same level of VAT should apply to both industries because the industries are similar. Whether people read the old philosophers, biographies or autobiographies, I hope they will read them with an inquiring mind and will not always take as a fact everything that is written in a magazine or a newspaper. Sometimes one can learn a lot from an old man or woman down the country who will never be quoted in a newspaper or a magazine. However, the general contribution of newspapers and magazines is towards the dissemination of information and knowledge. I do not see why there is any distinction to be made between the newspaper industry and the magazine industry. The revenue implications of equalising the VAT would not be considerable so I would press the Minister to respond positively to our amendment.
Chosnódh an leasú seo thart ar £2.4 milliún i mbliana agus £3.9 milliún don bhliain iomlán. Mar is eol don Teachta, tá an ráta cháin bhreisluacha ar nuachtáin íslithe ó 23 faoin gcéad go dtí 10 faoin gcéad agus rinneamar é sin chun teacht i gcabhair ar na nuachtáin laethúla agus seachtainiúla mar go raibh deacrachtaí faoi leith á bhfulaingt ag na nuachtáin sin. Ní mar an gcéanna an cás ag na tréimhseacháin agus ceapaim gurb í aidhm an leasaithe seo ná an ráta céanna a chur ar fáil do na tréimhseacháin uile. Ní dóigh liom go bhfuil aon deighilt á déanamh ag an Teachta O'Kennedy idir tréimhseacháin de shaghasanna éagsúla. Tá deacracht faoi leith ag na nuachtáin laethúla agus seachtainiúla anseo ach go mor mhór na nuachtáin laethúla os rud é go bhfuil oiread sin nuachtán ag teacht isteach ón Ríocht Aontaithe.
Is mó go mór an tionscal atá againn anseo ó thaobh na nuachtán de ná mar atá i gcás na dtréimhseachán. Is cás eile é seo a bhaineann leis na spriocanna atá againn agus leis an gcinneadh a dhéanaimid idir cúrsaí áirithe sa mhéad go bhfuil tábhacht ag baint leo. Tá níos mó tábhachta ag baint leis na nuachtáin laethúla agus seachtainiúla ná mar a bheadh ag na tréimhseacháin seo. Bhí sé i bhfad níos tábhachtaí teacht i gcabhair ar na nuachtáin ná mar a bheadh anseo agus caithfidh mé a rá — agus ní bheidh ionadh ar an Teachta O'Kennedy go ndéarfaidh mé é seo — go bhfuil slite eile atá, i mo thuairimse i bhfad níos fearr chun £2.4 milliún, nó £3.9 milliún i mbliain iomlán, a chaitheamh, slite atá níos tábhachtaí agus níos luachmhaire ná ísliú ar an ráta cháin bhreisluacha ar na tréimhseacháin.
Bhí mé ag feitheamh leis an bhfreagra sin ón Aire agus níor chuir sé ionadh ar bith orm. Níl an t-am againn díospóireacht an-fhada a bheith againn ar an rún seo mar tá rud antábhachtach ag teacht ar an gclár anois díreach, ach ba mhaith liom a chur in iúl don Aire go gceapaim nach ceart dó siúd ná domsa aon tuairim a bheith againn cé chomh tábháchtach is atá na tréimhseacháin agus cé chomh tábhachtach is atá na páipéir nuachta. Tá siad go léir tábhachtach iontu féin ach ní raibh mé mé ach ag moladh don Aire go mba cheart an leibhéal céanna cánachais a bheith ar na tréimhseacháin seo agus atá ar na páipéir nuachta. Níl sé sásta glacadh leis sin. I am sorry he is not, but it comes as no great surprise and I hope that he will be able to convey to the people who wrote from the magazines to me as Béarla, as they did, the reasons for his refusal. When Cumann Lúthchleas Gael were in contact with me they were in contact with me as Gaeilge. I trust they will understand the burden of what the Minister said here today. I welcome the fact that at last I have stimulated the Minister to use his own language, which he uses rather well, rather than the reaction I got from him last year when he accused me of shamrockery when I used it. Tá mé buíoch den Aire as sin ach níl aon bhuíochas eile agam dó.
(Cur isteach.)
Amendment put and declared lost.
Amendment No. 12 in the name of Deputy Michael O'Kennedy.
In view of the time I do not propose to move this amendment. It is associated with amendments that I have already moved which the Minister has turned his face against.
It was defective in its form anyway.
Amendment No. 12 not moved.
Amendment No. 13 is in my name, but the Cheann Comhairle indicated this morning that, if an amendment in my name as spokesman was moved by any other Member, that Member could reply.
That is in order.
I move amendment No. 13:
In page 52, to delete lines 31 to 40.
It is vital that in the best interest of the future development of Bord Telecom Éireann this section be removed because it gives legal authority to proposals in the Government plan Building on Reality to extract £180 million from BTÉ. I quote from Building on Reality, page 148, paragraph 7.80:
The service will be required to pay its way on a commercial basis, including remunerating both the debt and equity capital. In the short term, this will involve BTÉ being required to make contributions to the Exchequer of £50 million in 1985, £60 million in 1986 and £70 million in 1987.
I am proposing to delete section 68 of the Finance Bill. The inclusion of the section gives the Minister for Finance an open cheque to extract any amount of money from BTÉ, not just over the next three years as in Building on Reality but for all time. Is the Minister aware that his policy has led to the proposed resignation of Mr. Tom Byrnes, Chief Executive of BTÉ from the end of May? Indeed, there is much speculation that it will lead to further resignations from BTÉ in the very near future. It should be noted that BTÉ were prepared to offer Mr. Byrnes a new seven year contract with effect from 1 June 1985. Mr. Byrnes indicated that his acceptance of this further term as chief executive was contingent upon approval of the BTÉ corporate plan as formulated by the board and submitted to the Government in September 1984. I call on the Government to accept this corporate plan because failure to do so will lead to failure of this young fledgling company. Fianna Fáil's position has always been that BTÉ will be expected to repay their investment to the Exchequer when they are in a position to do so — in other words, when the company are in a viable and satisfactory state of health.
Is the Minister for Finance aware of the crisis in BTÉ in relation to the proposed levy of £180 million? Is he aware that the company borrowed £180 million in 1984 for their capital programme and would be borrowing £160 million in 1985 and £130 million in 1986 at an interest rate of 14 per cent per annum to complete their capital investment programme? It should also be noted that over £30 million allocated by the EC for telecommunications purposes in 1984 was retained by the Exchequer. Surely the Minister for Finance is aware that BTÉ borrowed £250 million in 1984 and will have a trading loss estimated at £50 million in that year, 1984. The Government received a total contribution of £94 million from BTÉ in 1984 and this already has resulted in increased telephone and telex charges.
I take this opportunity of requesting members of the Labour Party to support this amendment as failure to do so will result in the following policy decisions for BTÉ: (1) massive redundancies among the 70,000 staff of BTÉ; (2) increased borrowing to provide levy for the Government; (3) an increase of approximately 25 per cent on telephone and telex charges. All these options are totally unacceptable to Fianna Fáil and we will be voting against this section of the Finance Bill. I remind the Minister also that Mr. Seamus de Paor, General Secretary of the Irish Post Office Engineering Union, speaking at their annual delegate conference in Killarney, as reported in the Evening Press of Wednesday, 15 May 1985, accused the Government of ripping off BTÉ and said that the union have pledged a campaign against the charges being imposed by the Minister for Finance at the rate of £180 million. I quote the report:
Mr. de Paor added a warning, that he intends to take legal action, "if necessary, to restrain the board if they should decide to meet the Government's demands." And he also warned that his union — the largest in Telecom Éireann — may eventually have to consider industrial action in a campaign of opposition to the Government's proposals.
He said that under the 1983 Postal and Telecommunications Services Act, there is provision for repayment of certain advances to the Minister for Finance — the amount due was calculated in the region of £305 millions.
Telecom Éireann will be in a very difficult position if the Minister persists in his present policy because the company are going through a very difficult time. Under section 22 of the 1982 Postal and Telecommunications Services Act the Minister has powers to impose certain conditions but those powers would be discretionary in consultation with the board and the Minister for Communications who should be involved in this area. Section 68 of this Bill gives the Minister major powers to impose charges and there is no limit mentioned. I would like the Minister to spell out exactly what his policy objectives are in relation to Telecom Éireann. Is he aware of the widespread anxiety expressed by union representatives, by Mr. Tom Byrnes, Chief Executive of Telecom Éireann, who is resigning from the board of Telecom Éireann at the end of May and will be emigrating to America as a result of this Government's policies? Is the Minister aware of the feeling among board members who are considering resigning from the board also as a result of this Government's policies?
This is the first Finance Bill which contains provisions for raking off money from a semi-State body. I cannot see any justification for including section 68 in this Bill, because under the Postal and Telecommunications Services Act there was provision for the Minister for Finance and the Minister for Communications, the sole shareholder, to take any steps necessary. I think the Minister's next step will be the privatisation of Telecom Éireann. I would like him to confirm or deny that the Government are considering the privatisation of Telecom Éireann and endangering the future of 17,000 staff.
We will not confirm or deny it. Deputy Leyden is flying the kite.
Those people were assured of continuity of secure employment on 1 January 1984, but that commitment has been broken because the company are being destroyed by this Government. There will be a collapse of the telephone and telex services as a result of the withdrawal of £180 million over the next three years from a service which should receive that type of investment.
Telecom Éireann are a fledgling company who are going in the right direction to make a tremendous success of the telecommunications area. If the Minister has patience Telecom Éireann will return to the Exchequer the investment made over the last five or six years. That is our view. We are not going to force a levy on Telecom Éireann because this levy is a form of taxation by the backdoor on telephone and telex subscribers. Instead of taking this money directly from the PAYE taxpayers, the Minister is imposing a tax on telephone and telex subscribers.
Is the Deputy saying that we should put this tax on the PAYE taxpayers? If that is what he is saying, he should put it on the record.
That is not what I am saying. The Minister is imposing a tax of £180 million on telephone and telex subscribers over the next three years. This is a dishonest way of imposing taxation. I am not in favour of further taxation; Fianna Fáil are in favour of reduced taxation. The Minister is trying to destroy a young company and putting the jobs of 17,000 at risk. Surely a man of Mr. Byrnes integrity, ability and commitment would not lightly give up his job and emigrate? He is making this move because the Minister is making it impossible for Telecom Éireann to fulfil their commitment to provide telephones on demand. The Minister is imposing a tax on subscribers which will make it impossible for Telecom Éireann to carry out their mandate to provide a modern and good telephone service. Before the last general election the Coalition Government said they were against borrowing but were for fiscal management. The Minister must be aware that the imposition of this levy will require Telecom Éireann to borrow money, to lay off staff or to increase charges.
Fianna Fáil are for borrowing.
Does the Minister wish Telecom Éireann to increase charges? Does he want them to borrow money or to lay off staff? Will he please give a policy directive to the board of Telecom Eireann explaining how they are to raise this levy of £180 million over the next three years? Will he say if there will be an increase in telephone charges, in voluntary redundancies or will he instruct the company to borrow this money? Those policies would be against the best interests of the country and the Government. The Minister should study the submission made by the board of Telecom Éireann. They put forward a very comprehensive and corporate plan. Did the Minister read that plan? Did he study what they put forward in support of their case in relation to the removal of this levy? I would like him to explain the situation to the House.
I would like to mention one of the major statements made by Mr. Tom Byrnes at the opening of the Dun Laoghaire new digital E-10B exchange on Wednesday, 24 April 1985. He said:
In preparing Telecom Éireann's first Corporate Plan, which looks forward for the next five years, our aim was to take up where the previous programme left off and provide an average connection rate of over 60,000 lines per annum, equivalent to the average connection rate achieved during the past five years.
Those connections were achieved under Fianna Fáil.
Our goal was to do this with a real level of capital investment 60 per cent of that required in the preceding five years, representing a significant decrease in the borrowing requirement, which we expected to achieve through better management of our operations and finances.
We considered this goal realistic because we still have overall a very low level of telephone penetration in comparison with other OECD countries. Yet despite the fact that the Board of Telecom Éireann had decided on a substantially reduced investment programme, the overall capital investment allowed for the next three years for Telecom Éireann in the National Plan Building on Reality is only four fifths of what we, after careful consideration, proposed in our Corporate Plan. This arbitrary reduction flies in the face of Ireland's obvious growth potential, the experience in other already well developed countries and the fact that the new technology incorporated in the exchange we formally open here today has a shorter working life, necessitating more frequent renewal, albeit at reducing cost per line, at an earlier time than was the case with previous telephone exchange equipment.
He went on to explain why the levy is totally unacceptable.
I appeal to the Minister to accept this amendment to delete the section which refers to the levy of £180 million and spell out his long term demands for Telecom Éireann. I appeal to him to allow this company to succeed. When they are in a position to refund the money to the Exchequer, it will be a very viable company. We are opposing the arbitrary charges being imposed without consultation because they would place the company in jeopardy. The Minister will turn Telecom Éireann into a white elephant. I hope he will have second thoughts and will withdraw this section.
I want to put on record my opposition to section 66 and to strongly support our spokesman on Finance. What is proposed is to help the Minister to cut down his deficit. I had occasion to mention in the House that the Iris Oifigiúil figures issued for May indicated that there was a deficit between receipts and expenditure of nearly £900 million. This seems to be a dodge to get Telecom Éireann to borrow money to pay into the Exchequer to cut down the deficit with which the Minister is faced. He has denied that he will introduce a second budget but the thrust of this amendment seems to be in that direction.
I got a great deal of job satisfaction prior to the setting up of Telecom Éireann. I had dealings with the chairman and the chief executive when settling the financial structures for the new organisation. I have never been so impressed by two people before in regard to their knowledge of what had to be done and their dedication to doing it. The very fact that they were two people who had made such an impact in a free enterprise economy was highly consoling. They were dedicating themselves to a semi-State company and laying down the guidelines for success in that regard. I know that certain members of the Government, especially in Fine Gael, have developed an antipathy to semi-State bodies. There is no question or doubt about that.
Deputy Wilson is the only person who believes that.
I would have thought that the fact that these two men, Mr. Smurfit, as chairman, and Mr. Byrnes, as chief executive, who proved themselves in the marketplace and had an objective which they could achieve, was very consoling. The Minister's actions should be taken very seriously. The fact that Mr. Byrnes is going is, as stated by Deputy Leyden, due directly to what the Minister has inserted in the Bill. We never envisaged that Board Telecom Éireann would be cut loose from their responsibilities to the taxpayer and the whole scheme was sanctioned by the Fianna Fáil Government, as were the financial structures, with the intention of gaining from Telecom Éireann when it came into profit. The potential was and is great but, if a number of millstones are tied around their necks, we will be back to where we were before.
Even at this late stage, we would appreciate the Minister yielding on this. We established the whole financial structure, debt equity ratio, etc. and I had the privilege of bringing the Bill through its Second Reading in the House. It was launched by my successor, Deputy Mitchell, with the same understanding, as far as I could make out, with regard to the work that we had done when he took over for Committee and subsequent Stages. At that time, we knew through dealing with the trade unions, specifically one major technical trade union, that they had great hopes for the new company. Morale is now very low. They know they are losing the chief executive and although they will tell you he was a tough man, they felt that he knew what he was doing and would make a success of it. By withdrawing this section, the Minister could restore morale to the workforce, allow the board of Telecom Éireann to develop the plan which they outlined to the Minister for Communications and, indirectly, to the Minister for Finance, and bring us into an era in which we could hold up our heads proudly in the OECD and eleswhere as a country with a developed communications system.
I support the two previous speakers on this side of the House with regard to the Government's handling of Telecom Éireann. When I mentioned this matter to the Minister on Tuesday he said he would comment on it but, unfortunately, we do not have much time left.
The Department of Posts and Telegraphs was split up during my period of office and it was agreed that that was the right thing to do because these two areas should be run on a commercial basis and taken out of the arm of State. Two excellent boards were set up with very good executives and we were very lucky to find executives of such a calibre. There is a great deal of talk at present about people in semi-State bodies not being fit for their jobs but that accusation cannot be levelled at either of those two boards. It saddens me that the Government have now changed course. Perhaps the Minister could explain how he can make a levy a dividend. Dividends are paid out of profits. In this case, the Minister and the Government are trying to label it a dividend to pay back for the investment which has been put into it. If you want to get dividends from an investment, you must wait until the company show a profit. This organisation, which has been doing a very good job, will now become demoralised. To get the amount of money required — about £180 million — Telecom Éireann must borrow. This, in effect, means that you are strangling them before they start and, eventually, they will end up like CIE. Has the Minister any idea of the enormous job that had to be done in motivating that organisation, after a very long strike, to bring us into the telecommunications age of the eighties and nineties? Lack of good telecommunications was one of the major elements holding back industrial development. The Minister is now undermining all that work because he needed the sum of £180 million for the national plan. As Deputy Tunney said, the Minister is like Houdini. If charges are raised it will not solve the problem because people are not installing telephones now to the extent they used to because of the huge charges already in operation. The secret of making money in telecommunications is to have a fully operational and profitable network and to use it to the maximum. Any company in the United States or anywhere else will tell you that. We were on course to do that, and now the Minister is going to strangle the company and create such an enormous price barrier that many people who would have got telephones will not get them. The Government are pricing them out of the market.
That is a typical State approach to a commercial enterprise. The company were taken away from the State and put into a commercial environment and the Government are now reversing that decision. Tom Byrnes was honest and spoke his mind, which more people should do. I know he annoyed the Government. He also annoyed us. He may not have annoyed the Minister personally, but he annoyed the people who are advising the Minister on his approach to Telecom Éireann. The Minister should not deny that. I know it for a fact. I would clap Tom Byrnes on the back for telling people from this House that he would not let them into his office. When they went out there and had to come back here, I said fair play to him. He was running a commercial organisation and they did not think it worth their while to ring up and make an appointment with him, as if he should be there when every Tom, Dick or Harry came to the door. He is entitled to close the door to the Minister, to me, or to anybody else.
After that he started to attack the institutions of the State in relation to the levy and the dividend. People in the Minister's Department, whom we all know are all powerful, kept telling the Minister they had the money and were cooking the books. They told the Minister he should stick by his decision. That was a terrible indictment of the chairman of the board and of every member of the board. If the Minister persists, I will not be surprised if the chairman and many members of the board resign. If they are worth their salt that is what they will do. They were charged with a responsibility to develop telecommunications. They were given a programme.
The Minister changes the goal posts as he goes along. He has changed his target so often since he became Minister that it is easy for him to say he reached his target. He shifted the goal posts every time. He is doing that to Telecom Éireann. He will strangle and demoralise that organisation and set back the attainment of a proper telecommunications network for a number of years. Trouble will blow up in his face. There will be industrial unrest. The trade union movement were very progressive in that area, but they will now say: "If they do not want us to do the job, and if they want to have the organisation back in a State stranglehold, we will play that game too." The Minister should change his course before it is too late. His epitaph will be that he set back the development of a telecommunications network with a loss of good people to the State sector who were prepared to take part in the development of that network.
I support the call for the withdrawal of this section. The start of this was the levy put on the ESB a few years ago which brought the company from the black into the red and damaged the morale of people in the ESB. Telecom Éireann were established recently. The workforce were developing a clear understanding of their task and their standing in the community and developing into a team of workers. To hit them on the head at this stage is an enormous blow. The word from the staff in Bord Telecom is that it is an irretrievable blow to their morale. They were tied up in red tape and traditions in the Department of Posts and Telegraphs. Now they were moving into a new era and developing a new approach. That has been destroyed by this hammer blow from the Minister for Finance.
This is an underhand method of taxation. The Government are trying to maintain the statement in Building on Reality that there will be no further increase in taxation and they are hauling in £50 million or £60 million in this way. This is taxing the consumers of the product in a discriminatory manner. The word in State companies is: who will be levied next? If the Government put a levy on a State company they must get it from the consumers of their product. A number of Ministers have said they recognise the importance of the State companies and their intention is to promote them and make them more efficient. This is not a method of making them more efficient. I support all the points made and I appeal to the Minister to look again at the section.
We have been treated by Deputy Leyden to what I called bogeyman politics. He is a fair old man to put up a kite to frighten people. I want to nail immediately two specific things he said. The provision in the section we are discussing is not open ended as he claimed. He may not have read it with great care. It relates only to the Exchequer debt and a vesting date and is confined to that. It is not an open ended provision. Deputy Leyden and Deputy Mac Giolla used the word privatisation without any justification. Deputy Leyden should have taken the trouble to find out, and Deputy Wilson could probably have told him from his own compendious memory, that section 21 of the Postal and Telecommunications Services Act, 1983 precludes privatisation. Having got rid of those myths we can turn to the facts.
The section provides:
The Minister for Finance may, after consultation with the Minister for Communications and Bord Telecom Éireann (in this section referred to as "the company"), require payments to be made to him by the company, at such times and in such manner as he may appoint, in respect of moneys to be repaid by the company for the benefit of the Exchequer under that Act, and the company may, with the consent of the Minister for Finance and the Minister for Communications, make any arrangements necessary to finance such payments.
That refers to the amounts covered by the original Act. It is not an open ended provision.
The Minister should read his own Bill.
The company have not managed to achieve the financial position envisaged when they were being established and when the Bill establishing the company was being debated in the House. In mid-1983 it was projected——
The Minister has misled the House.
(Interruptions.)
If Deputies opposite spent a little more time listening than they do shouting, they might hear what I said in the first place. In the middle of 1983 it was projected that the company would have a surplus in the calendar year 1984. Now it appears that the company are projecting, on the basis of new accounting policies which have the effect of worsening the profit and loss account, a loss of about £60 million in the year to the end of March next. This has resulted from a lower volume increase in the use of the service than had been anticipated. At the time Deputy Wilson was involved in bringing the Bill through the House, we had projections prepared by the board in good faith of a surplus of £19 million in 1983, £52 million in 1984 and £116.7 million in 1985.
Things have disimproved since then.
That has not come about. Nevertheless there has been an upturn in business in the company in the past year which will be reflected in the turnover of the company. That improvement, taken together with the reduced VAT rate on telecommunications equipment, which in itself will produce a positive cashflow to BT of about £5 million a year, and the increase in charges from 1 April last should have a significant and positive effect on the company's cash flow position. After 1987 the company will have no interest to pay on Exchequer debt capital. In addition, the Exchequer may purchase equity capital in the company up to the maximum specified in subsection (2) of the section we are talking about, that is, £170 million. At that stage the company are projecting a comfortable surplus even on the basis of the new and more stringent accounting provisions which the company have now decided to use. On the basis of the company's corporate plan, in interest it will cost the service in the period 1985-86 to 1987-88 about £120 million per year.
I must put the question.
I have a minute or two left. The interest on borrowings for the payment of these contributions will build up gradually from about £6½ million to £30 million in the fourth year. In the fourth year the revenue is projected to be £600 million with a positive cash flow position of £129 million.
As the amendment is in my name I am asking that it be put now.
In accordance with an order of the House I must put the question at this stage.
Deputy O'Kennedy must be disappointed. He abandoned his amendment.
I am putting the Question "That the Fourth Stage be hereby completed and that the Bill be hereby passed."
The Dáil divided: Tá, 64; Níl, 55.
Tá
- Allen, Bernard.
- Barnes, Monica.
- Barrett, Seán.
- Barry, Peter.
- Begley, Michael.
- Bell, Michael.
- Bermingham, Joe.
- Birmingham, George Martin.
- Boland, John.
- Bruton, John.
- Bruton, Richard.
- Cluskey, Frank.
- Collins, Edward.
- Conlon, John F.
- Connaughton, Paul.
- Cooney, Patrick Mark.
- Cosgrave, Liam T.
- Cosgrave, Michael Joe.
- Coveney, Hugh.
- Crowley, Frank.
- D'Arcy, Michael.
- Desmond, Eileen.
- Doyle, Avril.
- Doyle, Joe.
- Dukes, Alan.
- Durkan, Bernard J.
- Farrelly, John V.
- Fennell, Nuala.
- FitzGerald, Garret.
- Flaherty, Mary.
- Flanagan, Oliver J.
- Harte, Patrick D.
- Hegarty, Paddy.
- Hussey, Gemma.
- Keating, Michael.
- Kelly, John.
- Kenny, Enda.
- L'Estrange, Gerry.
- McGahon, Brendan.
- McGinley, Dinny.
- McLoughlin, Frank.
- Manning, Maurice.
- Mitchell, Gay.
- Mitchell, Jim.
- Molony, David.
- Moynihan, Michael.
- Noonan, Michael.
- (Limerick East)
- O'Brien, Fergus.
- O'Brien, Willie.
- O'Keeffe, Jim.
- O'Leary, Michael.
- O'Sullivan, Toddy.
- O'Toole, Paddy.
- Owen, Nora.
- Pattison, Séamus.
- Quinn, Ruairí.
- Ryan, John.
- Sheehan, Patrick Joseph.
- Skelly, Liam.
- Spring, Dick.
- Taylor, Mervyn.
- Taylor-Quinn, Madeline.
- Timmins, Godfrey.
- Yates, Ivan.
Níl
- Ahern, Bertie.
- Ahern, Michael.
- Barrett, Michael.
- Brady, Vincent.
- Brennan, Mattie.
- Brennan, Paudge.
- Briscoe, Ben.
- Browne, John.
- Burke, Raphael P.
- Byrne, Seán.
- Calleary, Seán.
- Connolly, Ger.
- Coughlan, Cathal Seán.
- Cowen, Brian.
- Kitt, Michael.
- Lenihan, Brian.
- Leonard, Tom.
- Leyden, Terry.
- Lyons, Denis.
- McCarthy, Seán.
- McEllistrim, Tom.
- Mac Giolla, Tomás.
- Molloy, Robert.
- Morley, P.J.
- Moynihan, Donal.
- Noonan, Michael J.
- (Limerick West)
- O'Connell, John.
- Daly, Brendan.
- Fahey, Francis.
- Fahey, Jackie.
- Faulkner, Pádraig.
- Fitzgerald, Liam Joseph.
- Flynn, Pádraig.
- Foley, Denis.
- Gallagher, Pat Cope.
- Geoghegan-Quinn, Máire.
- Harney, Mary.
- Haughey, Charles J.
- Hilliard, Colm.
- Hyland, Liam.
- Kirk, Séamus.
- O'Dea, William.
- O'Keeffe, Edmond.
- O'Kennedy, Michael.
- O'Leary, John.
- O'Rourke, Mary.
- Power, Paddy.
- Reynolds, Albert.
- Treacy, Noel.
- Tunney, Jim.
- Wallace, Dan.
- Walsh, Joe.
- Walsh, Seán.
- Wilson, John P.
- Wyse, Pearse.
Tellers: Tá, Deputies Barrett(Dún Laoghaire) and Taylor; Níl, Deputies V. Brady and Barrett (Dublin North-West).
Question declared carried.
This Bill is certified a Money Bill in accordance with Article 22 of the Constitution.
The Dáil adjourned at 5.15 p.m. until 2.30 p.m. on Tuesday, 21 May 1985.