In the brief time available to me to refer to the budget I would say that this budget is, in essence, a cynical public relations exercise indicating the contempt with which the Minister for Finance and his Cabinet colleagues treat the already outstretched resources of the Irish consumer, at all levels.
It seems like only yesterday that the Cabinet summoned the State's industrialists to the lavish launching at Iveagh House of the gravely misnamed Building on Reality. With the benefit of hindsight the document could rightly have been titled Building on Unreality.
Planning is necessary but should never be an end in itself. This budget underlined the fact that it was purely an exercise designed to scuttle an already tidetorn economy at the expense of the ultimate paymasters of the economy. The Minister is treating the public as gullible individuals by presenting a budget, liberally treated and prepared, to present a rose tinted picture by some back room economic gurus and public relations consultants. The Minister admits that his first requirement is that it will not depress the economy in 1986 — a modest requirement that reflects a view that covertly says that "Things are so bad that we cannot let them get much worse".
I contend that contrary to the Minister's aspirations, this budget will make things much worse. The Minister's aspiration is, at best, pious, and at worse, a recipe for economic disaster. Economic commentators have remarked that the budget will shift the burden of taxation. This is one of the smooth platitudes that have been used to market the contents to the Fine Gael Party's socialist bedfellows. The fact is that the personal tax burden will increase significantly during the year. Taxes on both personal income and spending will rise rather than fall, directly as a result of the budget.
Financial analysts suggest that taxes on personal income will rise more than twice as rapidly as inflation in 1988, consequently direct taxes on personal incomes will account for almost 15 per cent of gross national product. This compares with a figure of just over 12 per cent in 1982.
The apparent concessions granted by the Minister on tax allowances, tax bands and the top rate of tax are only an illusion. Incomes are expected to rise by 7 per cent this year. This is considerably higher than the expected rate of inflation. As a result, increasing incomes will push taxpayers into a situation in which they are actually paying more tax. One commentator has spoken of the extreme "progressivity" of the Irish tax structure — this is truer than it ever was. This structure will now levy high taxes at relatively low levels of income. The Minister gave with one hand and took away with the other. This shows his scant regard for the intelligence of the people.
Suggesting that the burden of taxation is being shifted to the financial institutions is grossly misleading. The deposit interest retention tax, appropriately abbreviated to DIRT, reflects the Minister's intention of doing the dirty on the personal saver. The situation at the moment is that thrift is penalised, investment is penalised, there is no incentive to work and spending, even at a moderate level is next to impossible. These ingredients combine to bring the economy to a standstill.
While the deposit interest retention tax is portrayed as a tax on financial institutions, on the banks and the building societies, it is, in reality a tax on savers at source. Personal savers, it is estimated, will save £2,500 million this year. These are the people who will pay this tax, while also paying high taxes on the income they will earn from work.
We are told that the burden on the PAYE taxpayers will be eased, however, these same individuals will pay £125 million more in tax this year. This represents a rise of 6.3 per cent on last year's tax take from the PAYE sector, so individuals are faced with a heavier direct tax burden in 1986.
There is also an increase in the indirect tax burden on the individual. By increasing the standard rate of value-added tax from 23 per cent to 25 per cent the Minister expects to bring an extra £160 million into the Exchequer in 1986. This is going to come out of the consumer's pocket. This is a tax on spending.
The spending taxes, such as value-added tax, excise and motor vehicle duties, directly hit the consumers and ultimately their spending power. A drop in consumer spending hits manufacturing and service industries and this in turn reduces the Exchequer's annual take and thereby forces cuts in public expenditure. The development of our infrastructure will be halted. We have seen the effects of this in the immediate wake of the budget with the health and education sectors being particularly hard hit.
By coupling direct taxes on income with indirect taxes on expenditure it can be seen that total tax revenues from the personal sector will increase from 33.9 per cent of GNP in 1985 to 34.6 per cent in 1986. This is the highest level of personal taxation yet recorded in Ireland.
Primarily the Government have failed miserably, despite the platitude contained in their economic plan to control current spending. The Government can no longer blame sharply increased debt servicing costs. Favourable exchange rate movements and favourable interest rate movements in the international economic environment have eased this burden somewhat.
In the lifetime of this administration we have experienced an average growth rate of a miserable 0.3 per cent; over 17 per cent of our labour force unemployed and a public sector debt of over £20 billion. These conditions exist as a direct result of the economic mismanagement of the current administration. The private sector are being suffocated by a taxation system that is destroying the incentive to work.
The former Minister for Finance described employment as being the one area where economic performance has been disappointing. In short, the Minister is admitting the failure of his own Government's policies.
People in all sectors are looking for hope and encouragement. Our own party's Finance spokesman has referred to the absence of any reference to people as a priority in our nation. Fianna Fáil have always recognised our great natural resources. Our people are what makes us a nation, not, as our former Minister for Finance would have us as, a blundering public limited company. The Minister for Finance is limited in outlook. Fianna Fáil will protect the rights of the people and will not sell them to the highest bidder.
It can be observed in the media in recent weeks that the Taoiseach is keeping his options open with respect to his next social partner.