asked the Minister for Finance if he will make a statement concerning the effects of current taxation policy on the building industry.
Ceisteanna — Questions. Oral Answers. - Building Industry.
3.
While there is no special tax regime for the building industry I would point out that the industry enjoys a number of tax incentives such as rented residential accommodation relief and stock relief. I would also draw attention to the recently announced tax incentives for construction development in inner city areas. The industry also benefits in an indirect way from other tax concessions such as mortgage interest relief. Overall, I do not consider that taxation policy has an undue disincentive effect on the building industry.
Can the Minister give an assessment of the effect of recent VAT changes in the construction industry in so far as they affect the building of new houses?
It is not yet possible to give an overall estimation of the effect of VAT changes on the construction of new houses. It had the effect, of course, of increasing the VAT content to be borne by the purchaser. As far as the construction industry is concerned, it is not a net burden on them but a price that has to be paid by the customer.
It has put them all out of business.
The Deputies opposite may not realise that VAT, which has been in existence for some time, is a consumer tax. Perhaps they brought it in without realising that——
It is a massive disincentive.
The £5,000 grant scheme introduced by the Government has had a marked effect in stimulating demand for new house construction among particular groups of the population.
Does the Minister agree that the index of construction is depressingly increasing month after month and that the taxation policy is a factor — although not necessarily the only one — in that? In the circumstances, does the Minister have any plans in his taxation policy to stimulate the construction of new houses?
Taxation would be a factor in the trend of demand for the products of the building industry, particularly in the sector to which Deputy Taylor referred. However, it is far from being the only factor. Other important factors are the level of disposable income, which I regard as being a far more important factor——
The Minister has done a good job on that, too.
Deputy O'Kennedy may sit there muttering into his papers——
I said it quite clearly.
If the Deputy wants to put down a question we can discuss it. Complex factors determine the level of demand for the products of the construction industry, most of which tend to be ignored in discussion on the matter.
The numbers unemployed in the construction industry have risen by about 23,000 since the Government came to office and we now have a total number of unemployed of 45,000 in the construction industry. In view of the fact that the output in the construction industry——
We have resolved to make progress at Question Time. A decision was taken and agreed on that we would not have speeches or preambles.
In view of the facts I have stated and the figures which demonstrate that the output in the construction industry is down by almost 30 per cent since 1981 and a forecast of a further 6 per cent decline in 1985 and reductions in 1986 and 1987, will the Minister not acknowledge that the tax policies that he has imposed on this industry, particularly, are a major burden on the industry? Does he agree that the rapid decline is exactly parallel with the imposition of double the rate of VAT which he personally imposed despite our advice?
I do not acknowledge any of that. During that period demand for the output of the industry declined, and demand is the big factor here. We have introduced, maintained and improved a number of measures to assist purchasers, the people who provide the demand for the products of the construction industry. To ascribe all of the effects which the Deputy suggested to taxation is a partial and very narrow view.
Does the Minister accept the figures provided by the Department of the Environment that there will be a further drop of 3,500 in employment in the building industry this year? Does he accept that it is no longer possible to realise the output target of a 7 per cent increase in Building on Reality? That being so, does the Minister propose to make the appropriate adjustments in the next budget to ensure that at least the Government's targets will not be seen simply as fairy notions which cannot be realised?
I would willingly defer to Deputy O'Kennedy's familiarity with fairy notions. For example, I remember The Way Forward, which was littered with them. I repeat the point I made on a number of occasions this year, that taxation policy is only one of a number of factors affecting this industry.
The reality is that in the building industry there is no building going on.
There are more important factors than taxation policy, as Deputy O'Kennedy agrees with me, which must be taken into account.
How can the Minister maintain that the introduction of the £5,000 grant for local authority tenants resulted in a marked improvement in the construction of new houses when the statistics issued by the Department of the Environment show a substantial drop in the number of new houses being built and when the figures of the loan institutions show that many of those people are purchasing secondhand houses and not new houses? The Minister referred to VAT as a consumer tax. Does he not realise that the increase from 5 per cent to 10 per cent in this year's budget extracted £50 million out of the Public Capital Programme resulting in further unemployment in the industry?
The figures would not support the claim which Deputy Molloy alleged I made. That is precisely the reason I did not make it. What I said was that the £5,000 grant had a very substantial effect in increasing demand for private housing among certain groups. The Deputy alleged I had made a claim which I did not make and I am reminding the Deputy of what I actually said, which is borne out by the facts, as the Deputy knows. The grant was a factor that brought about a marked increase in demand for the product of the construction industry. There is no gainsaying that. I do not accept the claim in Deputy Molloy's final question that the increase in VAT rates from 5 per cent to 10 per cent took anything like £50 million out of the Public Capital Programme. Strictly speaking, it did not take anything out of it.