asked the Minister if he will restore the 5 per cent VAT rate on the construction industry, in view of the current recession in the industry and the reduced level of revenue yield.
Ceisteanna—Questions. Oral Answers (Resumed). - Construction Industry VAT.
18.
I have no proposals to reduce the VAT rate as requested as this would run counter to the rationalisation of the VAT system which I undertook in the 1985 budget and would require significant compensating tax increases elsewhere.
In view of the fact that there are now 50,000 people unemployed in the building industry, does the Minister agree that he is effectively taking about £50 million out of the public capital programme and, that by any objective analysis of the building construction industry, there will be a further decline in activity next year of between 10 per cent and 12 per cent? Will the Minister acknowledge that, even in the interests of revenue from which we have seen diminishing returns, confirmed by him and the Taoiseach, it is time to lift the burden from this industry which generates employment activity and revenue? In doing so, he could ensure the people would come off social welfare payments and also enhance his own revenue which he is failing to do at present?
Deputy O'Kennedy's suggestion would not have the result which he thinks it would. The House will appreciate that it is not possible to separate the VAT yield from any particular activity but, in so far as it can be inferred from the data we have, there has been a substantial increase in VAT revenue from this activity so there are no diminishing returns.
It is not just what I represented. The Taoiseach indicated yesterday that we are getting less from VAT revenue than anticipated in the budget. Would the Minister not withdraw the implication that I am the one who dreamed up the diminishing returns? The construction industry is a prime example of the consequences of the Government treating the symptoms and aggravating the problem. There are now more people unemployed and on social welfare payments than ever and there are diminishing returns from an industry that is not showing any degree of activity at this stage. Would the Minister, in his own interests, as well as those of the industry, review the main cause of the problem on which we are all agreed, the 5 per cent imposition which he levied?
As I told the Deputy on a number of occasions, his premise is wrong and therefore comes to the wrong conclusion. It is not the case that we are getting less VAT revenue than before; we are getting less VAT revenue than we expected. That means that the increase in revenue is a little less than we expected. If the Deputy could get behind that, he would get out of the area where he seems to see diminishing returns on every side. I suggest that he review the definition of "diminishing returns". We are getting less extra revenue than we thought.
Might I suggest to the Minister quietly, that he make contact with the real people, the workers and the builders in the industry, anyone of a thousand people and ask them who is living in reality — the Minister who so confidently ignores reality in his nice, calm, reassuring, dismissive tone, or all these other people, myself included, who ask him to face the reality he is so determined to ignore?