Dáil Éireann díospóireacht -
Wednesday, 5 Mar 1986

Vol. 364 No. 5

Financial Resolutions, 1986. - Financial Resolution No. 13: General (Resumed).

Debate resumed on the following motion:

That it is expedient to amend the law relating to customs and inland revenue (including excise) and to make further provision in connection with finance.

— (The Taoiseach).

Mr. Allen

In my contribution on the last day I stated that any Government would find themselves in a vicious circle with the demands to reduce the high levels of taxation and to maintain services. I said that there were a number of ways in which we could break out of this vicious circle. I outlined the ways in the time I had and said that what was required was more efficiency in public spending. I said that a greater emphasis was needed on wealth creation and I broke that suggestion down into the need for a review of our energy policy and the need for the development of indigenous industry.

Since I spoke, I note that the Opposition party have brought forward a policy on food. There is much merit in the proposals put forward but I do not agree with the idea of setting up another board. This is the third or fourth new board which Fianna Fáil have proposed to set up. The setting up of new boards means further public spending, further layers of bureaucracy and more tax. The appointment of a Minister to deal specifically with food and its development into processed and added value foods for the European market is the way to do it. To set up a new board is not practicable.

In relation to efficiency in public spending I will deal with an area where further spending could be avoided before firm decisions are made. This relates to the announcement by the former Minister for Education to build a new dental school in Dublin. That affects our budgetary policy. The plans as set out by the Minister include facilities for training 50 dentists

The Dáil divided: Tá 72; Níl, 63.

Tá

• Allen, Bernard.
• Barnes, Monica.
• Barrett, Seán.
• Barry, Myra.
• Barry, Peter.
• Begley, Michael.
• Bell, Michael.
• Bermingham, Joe.
• Birmingham, George Martin.
• 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.
• Desmond, Barry.
• Donnellan, John.
• Dowling, Dick.
• Doyle, Avril.
• Doyle, Joe.
• Dukes, Alan.
• Durkan, Bernard J.
• Enright, Thomas W.
• Farrelly, John V.
• FitzGerald, Garret.
• Glenn, Alice.
• Griffin, Brendan.
• Harte, Patrick D.
• Hegarty, Paddy.
• Hussey, Gemma.
• Kavanagh, Liam.
• Kenny, Enda.
• L'Estrange, Gerry.
• McGahon, Brendan.
• McGinley, Dinny.
• McLoughlin, Frank.
• Manning, Maurice.
• 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'Sullivan, Toddy.
• O'Toole, Paddy.
• Owen, Nora.
• Pattison, Séamus.
• Prendergast, Frank.
• Quinn, Ruairí.
• Ryan, John.
• Sheehan, Patrick Joseph.
• Skelly, Liam.
• Taylor, Mervyn.
• Taylor-Quinn, Madeline.
• Timmins, Godfrey.
• Yates, Ivan.

Níl

• Ahern, Bertie.
• Ahern, Michael.
• Andrews, David.
• Aylward, Liam.
• Barrett, Michael.
• Brady, Gerard.
• Brady, Vincent.
• Brennan, Mattie.
• O'Connell, John.
• O'Dea, William.
• O'Hanlon, Rory.
• O'Keeffe, Edmond.
• O'Kennedy, Michael.
• Ormonde, Donal.
• O'Rourke, Mary.
• Power, Paddy.
• Brennan, Paudge.
• Brennan, Séamus.
• Briscoe, Ben.
• Browne, John.
• Burke, Raphael P.
• Byrne, Seán.
• Calleary, Seán.
• Collins, Gerard.
• Reynolds, Albert.
• Treacy, Noel.
• Wallace, Dan.
• Walsh, Joe.
• Walsh, Seán.
• Wilson, John P.
• Woods, Michael.
• Wyse, Pearse.

Tellers: Tá, Deputies F. O'Brien and Taylor; Níl, Deputies V. Brady and Browne.

Amendment declared carried.

Motion, as amended, put.

in Dublin and facilities for continuing educational post-graduate training of dentists. The most recent surveys carried out show that we need 50 or 60 dentists per year. The Minister's proposal to spend £17 million contrasts starkly with the setting up of a new dental school in Cork some years ago at a cost of £2.9 million. These figures are at present day prices.

The decision to allocate an extraordinary level of expenditure on dental teaching should be reconsidered for a number of reasons. In the past 20 years in common with other developed countries there has been a vast improvement in dental health here. Recent surveys funded by the Department of Health show that there has been a dramatic decline in the level of dental decay and that 50 per cent of five year old children in the EHB area are now free of dental decay. European figures show that the need for dental care is reducing. Dental education is under-financed here at present and, looking at the current annual running costs of the two dental schools——

An Ceann Comhairle

I appreciate Deputy Allen's concern about this but there is one rule on the budget and that is that one may wander about a bit but one cannot go into extraneous matters in detail.

Mr. Allen

This is relevant to budget policy.

An Ceann Comhairle

I know that it is relevant to a number of things——

Mr. Allen

The sum of £17 million spent on a major undertaking in Dublin which would cater for 50 dentists per year, almost the total needs of this country, is a serious case of needless spending. It is a waste of resources and it puts the future of the dental school in Cork under serious threat. The day will come when we will decide to limit output from the dental schools to the required number of dentists and that raises questions of rationalisation. Decisions should be made now to cater for the foreseen needs. Decisions should be made taking into the account the output from Cork, Dublin and Belfast. We should re-examine this proposal before we spend this money.

I welcome the increases in personal allowances, the reduction in the top rate of tax band and the abolition of the 1 per cent income levy. This should provide a reduction in direct taxation. I welcome the Minister's confirmation of the commitment in the national plan to ensure that tax bands and allowances are adjusted so that the overall income tax burden will not be increased. As a matter of future policy, will the Minister provide for automatic indexing of the bands and allowances by reference to the consumer price index from year to year in order to provide a statutory protection for the taxpayer?

I had hoped that this year the Minister would have come out in favour of introducing a current year basis of assessment for the self-employed. I am sorry he was unable to do so for administrative reasons. I ask the new Minister to look at this again and speak to his officials as there seems to be a blockage in relation to introducing a current year basis of assessment for the self-employed. The changeover from a preceding year basis of assessment to an actual year basis of assessment was achieved for corporation tax purposes in 1975. My experience is that the preceding year basis of assessment is a major irritant for the small and not so small businessmen who cannot understand the situation whereby they are required to pay tax, say, in OctoberNovember 1985 in respect of the accounting period which may go back as far as May 1983.

I welcome the Minister's decision to introduce relief in areas of research and new product development. Research and new product development in this country are receiving one of the lowest financial supports of developing countries. I hope the Minister will not allow the legislation branch of the Revenue Commissioners to surround this relief with broad ranging anti-avoidance measures which may lead to this scheme becoming unworkable and unattractive as so many schemes have become in the past. Regarding the retention tax on deposit accounts, with many of my colleagues I am disturbed about the effect this will have on small deposits.

Mr. O'Kennedy

We will give the Deputy a chance to vote against it on the Finance Bill.

Mr. Allen

I hope to put forward a few views here without interruption. The Deputy did not put too many views forward in his speech after the budget. It has been suggested that to allow for any exemption in the deposit retention tax proposals would be too administratively difficult. I believe that that is not the case. All it would require is some positive thinking on the part of legislators and the financial institutions. How could it be done? There are probably quite a number of ways in which those exempt from this tax could be facilitated. One would be a tax free limit. It would be possible to exempt from tax a certain amount of interest in all deposit accounts. If the first, say, £100 interest was exempt from tax it would eliminate all deposit accounts up to almost £2,000 depending on interest rates. The drawback to this would be that big depositors would split their accounts in several ways to qualify for this relief.

It would also be possible to set up a system to allow those depositors who have been taxed but who have no tax liability to reclaim the tax. Investors who receive tax dividends could receive dividend counterfoils enabling those eligible to reclaim the tax deducted at source. The financial institutions already issue certificates in respect of loan interest so that the appropriate tax allowances can be applied where eligible. Similarly, these institutions could issue certificates either for the deposit retention tax itself or the net deposit interest paid. Eligible depositors could then claim a refund of tax from the Revenue Commissioners. This solution, while quite possible, might be administratively very costly in terms of both people and time for the Revenue Commissioners and for the deposit institutions.

The banks and other financial institutions have a facility through their computer systems both to charge and to pay at different rates. For example, in the Associated Banks at present over a dozen different interest rates are being charged and about half a dozen rates are used for paying deposit interest. The exclusion of the accounts of genuine non-residents from the deposit retention tax proposals seems to mean that all deposit takers will have to operate separate rates of deposit interest for residents and non-residents. It would be administratively as easy for the Minister to exempt other categories as to exempt non-residents. The financial institutions must make special arrangements to cater for non-residents. Therefore, it would not create undue problems for them to include other categories such as long term social welfare recipients. In those cases I believe that exemption certificates valid for 12 months could be issued by the Department of Social Welfare. In the case of charities, exemption certificates could be issued by local tax offices, and arrangements could be made also in the case of children's deposits, although there would be special difficulties there.

All the financial institutions have an important role to play in the growth of the economy despite their different roles, and the new proposals on deposit retention tax remove one of the anomalies which existed in the past between the different categories. I hope that any further proposals now being made will apply equally to all institutions and will avoid the favouring of one over another, thereby creating further anomalies.

A major problem at present in relation to job creation is the non-availability of insurance such as employer liability and public liability insurance. At present we are investing large amounts of money in public service projects, but there is a huge reservoir of jobs to be created in the private sector if a number of major barriers can be eliminated in job creation in that area, and one of the most serious barriers is the non-availability of insurance. Any attempt to create jobs at present cannot ignore that major problem, and I am glad to see that the Minister responsible for that area is here tonight. We need to look at that problem urgently and to address ourselves to the root causes of the non-availability of insurance for employers at present. I am aware of at least four individuals in my constituency who have good business ideas with an employment potential of 200 to 300 people, and these individuals are prevented from setting up business because of the problems they have with insurance.

The Minister for Industry and Commerce is very familiar with one project with a potential of 15 jobs which is now killed because of non-availability of insurance. We must address ourselves to this issue and to the root cause of it which is the high rate of claims and the high cost of litigation because of the inefficiency of our court system. Over-representation in the courts is a subject that I have spoken about previously and I will not bore the Chair tonight by going over it in detail again. However, we must address ourselves to major reform in this area of litigation. It is costing insurance companies enormous amounts. It is so serious at present that I would like to read for the House a circular that has issued to a number of employees in a firm in Cork. I shall read it out to show the extent of the problem.

An Ceann Comhairle

This cannot be relevant to the debate.

Mr. O'Kennedy

It sounds more relevant to the Courts Bill.

Mr. Allen

It is relevant to job creation. If people setting up this risk cannot get insurance they cannot create jobs. The employer says as follows:

Insurance has now become a crippling burden and consequently the Firm has been forced to cancel its policy with the Insurance Company due to the enormous cost involved. As a consequence, we will employ people only on the following conditions as and from January '86.

1. All accidents are to be reported immediately they happen.

2. Company Doctor must be called immediately and be in attendance at all times and be responsible for all medical reports etc.

3. No legal action to be taken.

4. If in the event of a serious accident settlement must be——

An Ceann Comhairle

For the record, I am telling the Deputy that he is out of order. Otherwise it might get abroad that I did not know.

Mr. Allen

If I may continue:

6. A levy of 2 per cent per year is to be put into fund immediately.

Mr. O'Kennedy

With respect, if this is in order what is not?

Mr. Allen

I have listened to Deputy O'Kennedy so many times.

An Ceann Comhairle

When the Deputy goes into details, he is obviously out of order.

Mr. Allen

I accept your ruling. The point I am making is that we can invest large amounts of money in projects and temporary jobs but there is a vast reservoir of jobs to be created if we tackle the root causes and we are not doing so because we are afraid to in some cases.

I want to deal briefly with the question of investment in our roads infrastructure. Several EC studies in recent times have highlighted the fact that an adequate road network is an essential prequisite to economic and social development. The legacy of underinvestment in the major roads in the sixties and seventies has left us at a great disadvantage with respect to our European trading partners, notably Northern Ireland. It is interesting to note that the hourly transport costs in Ireland are about 25 per cent higher than the EC average in circumstances where road conditions enable road transport operators to achieve significantly higher mileage within the limits of the eight hour driving day. It is obvious that investment in major road improvements can be justified on economic grounds. In that area I am pleased to see the allocations for the coming year continuing with the investment of previous years. I should like a greater emphasis on efficiency in public expenditure in this area. Too often in the past we have seen too many examples of inefficiency in road construction.

I conclude by welcoming the main thrust of the budget to create greater employment and reduce tax levels. I hope that the trend in the reduction of tax levels will continue in future years.

Mr. O'Kennedy

The budget of 1986 is a very serious attack on investment and I propose to give some precise examples in the first instance of how it has undermined what is already a very weak investment climate. Then I shall deal in more general terms with its lack of direction.

The budget in a mistaken, naive, and ideological attack on financial institutions has succeeded instead in seriously damaging the flow of investment for productive purposes. The most major problem which Ireland faces today is that of mounting unemployment on which we are all agreed, and the ESRI tell us in a recent study that the figure will reach 250,000 by the end of the decade if we continue on our present course. Viable long term jobs can be earned only through the production of goods and the performance of traded services. This means that viable long term jobs can be earned only by enterprises in the private and public sectors. An enterprise cannot even come into being unless there is investment. The budget in attacking the flow of investment to productive enterprises has made a direct attack on jobs and on living standards. There are at least six specific ways in which this attack has been made, although it is undoubtedly possible to find very many more negative points in the budget that I shall deal with later.

In relation to section 84 the stamp duty of 12 per cent on interest paid in respect of section 84 loans must be borne by the industrial and commercial borrower. The conditions under which most of these loans have been negotiated clearly state that any tax, duty, or charge will be met by the borrower. The additional imposition will, therefore, add directly to industrial costs at a time when the competitiveness of Irish industry is being seriously eroded on international markets. The erosion has been intensified in recent weeks because of the strengthening of the Irish pound against sterling which has made the price of our exports to the UK far less competitive than heretofore.

With regard to the second point, capital allowances, it may seem on the face of it that to calculate capital allowances for taxation purposes in business and industry on a basis net of grants is just and equitable. The change does, however, add to industrial costs. What is far more serious is that the change increases significantly the cost of leasing. Many industrialists are forced to acquire plant and equipment through leasing because they do not have adequate capital to purchase the equipment. Financial institutions have been able to give competitive quotations for leased equipment because the institutions were able to obtain the benefit of full capital allowances. In extreme cases, the cost of leasing for industry will now increase by up to 54 per cent. This takes money directly out of industry which could otherwise be used to maintain or expand output and employment, and in other cases it will place the cost of leasing beyond the financial capacity of the enterprise and will thus mean that the project does not proceed.

The third element of disincentive against investment can be seen in the insurance levy. It is a direct attack on policy holders because the vast majority of life assurance companies operating in Ireland are mutualised. This means that the profit, or a substantial portion of it, goes to the with profits policy holders. From the point of view of business and industry, there is another serious detrimental effect. The life assurance companies are significant investors in productive enterprises and in property. Any attack on the funds of the life assurance companies will inevitably lead to a diminution in the funds available for investment. It must be emphasised once again that a diminution in the funds available for investment is a direct attack on jobs and living standards, which is the central theme to which I am addressing myself now — this is an attack on investment, jobs and living standards at a time when this is the fundamental national priority. A fourth element arises in relation to the advance corporation tax. The budget in this instance is silent and this means that unless there is an appropriate transitional provision in the Finance Bill, full advance corporation tax will now be payable. There are a number of serious points which I would like to illustrate in this regard.

First, there is no transitional arrangement for indigenous Irish companies which have invested heavily in the past and which now have a significant volume of unexpired capital allowances. This means that there is no net liability to corporation tax, and such a liability will not arise until all of the unexpired capital allowances have been used. Notwithstanding this, such a company which now pay a dividend will be required to make a payment under advance corporation tax which cannot be offset against a liability to corporation tax until such a liability actually arises. This eventuality could never have been foreseen when the original investment was made, so that the entire viability of the investment is now altered, and the cash flow situation is significantly damaged. Remember that I am talking about indigenous Irish companies which have invested heavily in the past. These are the companies which we are now penalising. The payment of advance corporation tax for a 50 per cent corporation tax company will be 54 per cent of the amount of the dividend, that is, 35-65 tax credit and it will be about 5.56 per cent, that is 1-18 tax credit for a 10 per cent corporation tax company.

There is also the serious anomaly that a company which sutters a current loss and which pays dividends out of accumulated reserves in order to maintain its position on the investment market will have to pay advance corporation tax although it has no profit, and the advance corporation tax cannot be recouped until there is a profit in a future year.

There is a serious anomaly in respect of companies entitled to export profits sales relief. A company in this category which earns a profit will have a zero tax credit, and no advance corporation tax will, therefore, be payable. A company in this category which does not have a profit will not be able to obtain export profits sales relief and will, therefore, become a 50 per cent corporation tax company. Such a company if it pays a dividend will be required to pay full advance corporation tax at 54 per cent. It is obviously the height of nonsense to penalise further a company which is already incurring a loss.

Mr. E. Collins

A company cannot pay a dividend out of losses.

Mr. O'Kennedy

I know a company cannot pay a dividend out of losses, but what the Government are doing is penalising companies which are already incurring a loss.

Mr. E. Collins

The case does not arise.

Mr. O'Kennedy

The Minister will see that unfortunately it does, in too many cases.

Mr. E. Collins

A company cannot pay a dividend out of losses.

Mr. O'Kennedy

It is not a question of paying a dividend out of losses. If a company has accrued profits it can be liable for tax on losses in the following year.

I want to turn now to the retention tax of 35 per cent in so far as it affects investment, and I will deal with it later in so far as it affects other things in terms of equity. Quite a lot could be said about the detrimental impact of the retention tax of 35 per cent on deposit interest. What has not been emphasised to date, however, is the detrimental effect which this can have on some investment funds. It is important to realise that pension funds will not be able to recoup the retention tax and any deposit interest earned by pension funds will be diminished by the amount of this tax. This will tend to cause a switch in deposits made by pension funds to securities which will not attract the retention tax.

It must be noted that the Minister for Finance very deliberately excluded Government gilts from the impact of the retention tax, thereby further distorting what is already an unduly heavily balanced market in favour of gilts. This will tend to cause a switch in deposits made by pension funds to securities which will not attract retention tax. Deposits made in banks and certain other financial institutions covered by the retention tax form the basis on which loans are made to business and industry for productive purposes. This is what we should be encouraging at this time. This Government keep soaking more available funds thereby distorting the market and putting pressure on interest rate to ensure that our interest rates are way out line with those obtaining elsewhere. I pointed this out many times to the former Minister for Finance but unfortunately he did not listen and the consequence is that the current climate for industry and business here is further penalised by unnecessarily high interest rates. We now have the situation where these types of deposits will be diverted to Government funds rather than be retained in a system which will pass them on as loans to the productive sector.

I want to make a brief reference to the bank levy which is my final example of the disincentive in this budget against investment. The bank levy is being continued at IR£25 million despite the fact that the levy has been judged to be unnecessary and inequitable by the Central Bank. The impact of the levy is not on some remote financial institution; it impacts directly on depositors and borrowers. The levy reduces the capacity of the banking system to lend, and it directly reduces the ability of the banking system to support investment in the productive sectors. I give those specific examples to illustrate that what we need is to encourage investment in the private sector. This budget does the opposite. In line with anything else the Government have done in terms of economic policy particularly, this shows the Government have no sense of direction or purpose.

This House has been treated with contempt by both the Taoiseach and the Government. Five weeks after the presentation of the budget by the former Minister for Finance, the Government have refused to give details of the £55 million additional budget reductions on the amendments published in the Book of Estimates.

The procedures of this House require that the allocations of public expenditure should be published in advance of the budget to enable Deputies and the public at large to consider the budget proposals in their proper context. The major unspecified reductions announced in the budget this year make a nonsense of Government accounting practices.

The present Minister for Finance in his widely proclaimed "A Better Way to Plan the Nation's Finances" in 1981 announced his firm intention to ensure that the Estimates would be published in October each year to enable full and detailed examination by the Dáil well in advance of the budget debate. The same Minister now resolutely refuses to make the full Estimates available five weeks after the budget when the debate in the Dáil has all but concluded.

The Taoiseach in particular has deliberately refused to account to Dáil Éireann for his Government's budget. Despite the fact that on Wednesday, 5 February, he sought and got agreement from the Dáil to extend the time for his budget contribution to one and a half hours, he has failed to make any statement to Dáil Éireann on the budget proposals. Having witnessed the outraged reaction of the public to the budget, the Taoiseach sacrificed the former Minister for Finance in the famous Cabinet reshuffle in an effort to shield himself and his Government from public attack. He is the first Taoiseach in recent years who has not come into this House in the days immediately following the budget to make a statement as Head of Government in support of the budget introduced by the Minister for Finance on behalf of the Government. He has allowed the former Minister to take the opprobrium of public attack and, in a cowardly fashion, having sacrificed and relegated that Minister, will not come in here to make the statement which each of his predecessors has made for as long as I can remember.

The budget is a collective decision of the Government and as head of Government the Taoiseach must take full responsibility for its obvious inadequacies at this critical time in our economic experience. It may be that as a consequence of this he may be shamed in the last week of the debate, and before the Finance Bill is introduced, to make a rushed, hasty statement. He is not short of words on many occasions and this is one occasion when he should have come into this House to justify his position and that of his Government.

Mr. E. Collins

The Deputy will be disappointed.

Mr. O'Kennedy

I am sure I will.

Mr. E. Collins

Do not worry about it.

Mr. O'Kennedy

The record is still being written. The budget aggravates the problems which have been all too obvious in the country for some time——

Mr. E. Collins

The Deputy will hear the Taoiseach, and he will not have to ask anyone's permission to speak.

Mr. O'Kennedy

When the Minister is as long in the House as I am he will realise that his own authority——

(Interruptions.)

Mr. E. Collins

The Deputy will have to ask Charlie about that.

Mr. O'Kennedy

The Minister may make his comments, but I will let the record speak for itself.

An Leas-Cheann Comhairle

The Deputy without interruption, please.

Mr. E. Collins

The Deputy's Leader said he was wrong.

(Interruptions.)

Mr. O'Kennedy

I do not know what the Minister wants to say about our leader, but do not attribute any such motives to me. The Minister should worry about his own motives.

An Leas-Cheann Comhairle

We are on the budget, the Financial Resolution.

Mr. O'Kennedy

Nothing I have ever said on behalf of the Fianna Fáil Party, as spokesman on finance, has been repudiated. Indeed, far from being repudiated, it has been confirmed.

Mr. E. Collins

The Deputy's leader said: no promises.

An Leas-Cheann Comhairle

Would the Deputy please continue——

Mr. E. Collins

The Deputy's leader said: no promises.

An Leas-Cheann Comhairle

Deputies, please.

Mr. O'Kennedy

The record is there and the Minister of State knows it. The budget aggravates the problems which have been all too obvious in the country for some time. Its provisions increased total taxation, already the highest in the whole OECD area, by £536 million to £6,117 million. Within that the hard pressed income tax payer has been burdened with an extra £217 million this year, bringing the total figure, including levies, to £2,477 million. This imposition of record and penal tax levels by this Government has brought the economy to its knees and has killed incentive and enterprise in every sphere of activity.

Unemployment and emigration have drained the morale and energy of the nation, particularly of our young people. This Government treat our young people as a major problem when the reality is that they are the richest resource we have and the key not only to our survival but to our growth and prosperity.

In this area of technology it is essential to invest in knowledge and expertise, thereby generating added value and employment in this country, and not elsewhere as is happening under this Government with the drain by way of emigration of our skilled young people. The Government's cutbacks in education at every level are in direct contrast to the huge increase in expenditure for short term schemes and agencies which now total almost £200 million. I can assure the House that Fianna Fáil will pursue a better, more enlightened policy by switching our resources — I want to place this on the record — from training for short term schemes to education for permanent employment.

Mr. Allen

How will it be funded?

Mr. O'Kennedy

By taking some of the £200 million that the Deputy's Government have put into all of these schemes going nowhere, at least half of it, and putting it into education. That is how we will fund it. We are on the record in that respect more than once. The Government can have their schemes, their one-stop shops. They can see for themselves their effect on our young people, that of demoralisation. We will invest in them in the confidence that their knowledge is the guarantee, not just to them but for the future.

Mr. Allen

The Deputy's party set up many of those schemes.

Mr. O'Kennedy

The Deputy is not long enough here to know. The added value which can be generated in our economy will be guaranteed by highly qualified personnel in research and development, computer programming and marketing skills to avail of the rapidly expanding world markets——

Mr. E. Collins

That has already been done. That is nothing new.

An Leas-Cheann Comhairle

Would the Minister please cease interrupting?

Mr. O'Kennedy

I get great pleasure sometimes listening to the Minister. I do not find him too persuasive or, quite frankly, articulate when he is asked to speak himself. If he wants to make a speech I will yield to him now.

An Leas-Cheann Comhairle

The Minister will not interrupt any more.

Mr. O'Kennedy

I will listen to the flow of the Minister's eloquence any time, but will he allow me to continue my speech?

The dramatic fall in oil prices has already had a major effect on every other developed economy in the world. Growth projections in the EC this year are the highest for 15 years. For example, the Federal Republic of Germany is projecting a growth rate of 4½ per cent which will give a major boost to all European economies. The international economy is expanding at an unprecedented rate as of now. One country alone is going backwards, as it did in the fifties — this open economy of ours — because of a lack of direction or purpose on the part of our Government. Instead of increasing the opportunities for exploiting that growth to our advantage the Government persist in negative measures which stifle our growth and reduce out capacity to expand.

The Government's attitude to agriculture and the agri-food industry is but a dramatic example of their failure in this instance. The added value in processing, packaging and distribution in this vital sector of our economy is less than one quarter of the average added value in the member states of the EC and they are not agricultural economies. That figure is based on the published figures of the Community itself. Our food industry is in crisis at a time when it should be expanding at an unprecedented rate. Government cutbacks in investment in agriculture and in all the related research and marketing programmes are indefensible at a time when this great natural resource has such huge development potential.

Now that the Minister of State who knows something about sporting commitment and achievement has come into the House, might I use the analogy that it is high time in this nation we played to our strength and launched an all-out attack in expanding world markets instead of retreating into a defensive formation which can only guarantee that we continue to fall back even further? For instance, the Government have propagated the nonsense that any development in our economy is dependent on increased public expenditure and taxation, whereas the opposite is the case. Many economies as disparate as India, Spain and Japan in recent years have proved that selective reductions in tax levels actually generate more tax revenue for the State. Reputable journals, such as the Wall Street Journal, and professors of economics have shown that this is demonstrably the case. But our Government persist in adopting the opposite approach.

Here I should mention that my scripted text is slightly inaccurate. The cumulative shortfall in tax revenue of £545 million in the last three to four years, almost £200 million in 1985 alone is a direct and inevitable consequence of the penal tax levels introduced by this Government. I want to put on record that in the last 12 months, as Opposition spokesman for Finance, I have had numerous inquiries from potential investors around the globe, investors who recognise the huge potential in our economy, whether they be from Hong Kong, the United States, Britain or elsewhere, and all of those regions have been represented. They were all agreed on the investment opportunities that should exist here. Unfortunately, they were all equally agreed on the fact that current policies actively discouraged such investment. We must no longer tolerate the attitude of this Government which ignores the great potential in our land, forestry, fisheries, tourism and indigenous sources of energy. The Government have turned their back on our resources, concentrating instead on discouraging any productive investment in the private sector.

For instance, tourism has been a major growth area internationlly in recent years, even during the international recession. Yet this Government persist in erecting official barriers against tourists by the high level of indirect taxation and protective air transport restrictions. It is high time we participated, like every other country in Europe — and this does not cost one penny of taxpayers' money — in common fares from long distance locations like Japan, Australia and New Zealand which would give a major boost to our tourism industry and the employment and revenue that would follow directly therefrom. It is bad enough that we discourage investment or spending from abroad, but it is beyond comprehension that we should encourage our people to place their funds elsewhere. That is precisely what the Government seem hell bent on doing.

The final example of the consistency of a Government who believe in discouraging investment coming in and encouraging investment going out is the inequitable and shorsighted retention tax about which our party made a statement. That tax which was announced in the budget is another example of a Government hell bent on gathering tax revenue from every available source, whatever the consequences. While many successful economies, particularly Japan, give significant tax incentives to savings, not to borrowings, our Government blindly impose taxes on young people, old age pensioners and voluntary organisations who have no liability to tax. They discourage prudence, independence and self-reliance. The Government's motto seems to be: "Save at your peril; we are determined to get you anyway". It is time for the people at large to give a resounding reply to this hopeless, helpless Government: "Stay at your peril; we are surely determined to get you."

Debate adjourned.