Deputy Connolly is in possession.
Finance Bill, 1986: Second Stage (Resumed).
Question again proposed: "That the Bill be now read a Second Time."
I was dealing with the taxation position in general. I wanted to conclude on one item, which was farmers' taxation. I have no doubt that the farming community in general were producing accounts and making returns to the Revenue Commissioners. The recommendation in the fifth report of the Commission on Taxation regarding self-assessment should come into operation. If this were so, money would be collected much more quickly from the farming community.
Land tax is coupled with farm tax. It will be interesting to see how the adjusted acreage principle will work. To adjust acreage in the west and to do so in the midlands are different matters. The land is different in every respect. The only fair taxation system is that based on income. If you earn the money, you pay the tax. If you do not, you cannot pay. The question of land tax will create problems for those advanced in years who are not able to work their farms as younger people could. Also, if they are incapacitated that must be taken into consideration. My firm view and that of my party was that the system of tax returns on income was beginning to work well and the returns will show that the yield was increasing. If a commitment had been given that this system would remain in operation, it would not have been long before the farming community would have been paying up to £100 million a year.
I now turn to the question of stamp duty relief on the transfer of holdings. Young farmers can qualify provided they complete ACOT courses and meet other criteria laid down. I am disappointed that the age limit is being reduced from 35 to 30 years. Until recent times owners of land, parents of sons and daughters, were holding on to their property as long as they possibly could. There seems now to be a move towards earlier transfer but it is not happening on a wide enough scale. For very many reasons parents are reluctant to hand over their holdings. The leasing of land to the Land Commission was a total failure because these people were debarred from many other essentials such as medical cards, old age pensions and other assistance.
I am anxious that the Minister for Finance should amend this regulation on Committee Stage and leave the age limit at 35 years. As the Bill stands, a person over the age of 30 will not qualify for relief of stamp duty. I am anxious that this matter should be re-examined, especially in relation to transfers to spouses. I do not think anyone objects to the extension of the ACOT course from 100 to 150 hours. That will benefit the farming community in the long run by giving young farmers very good experience.
I will deal now with personal tax allowances. Much has been made of the new child benefit scheme but many people who are employed, lucky enough to have a job, will not benefit at all from this scheme. The increase of 25 per cent in children's allowance from £12.05 to £15.05 per child per month amounts to an increase of £36 per child per annum. This move, however, is coupled with the elimination of the child dependant tax allowance and a freezing of child dependant social welfare rates. The elimination of the child dependant tax allowance of £100 means a loss of £48 per child per year in the case of those paying tax at 48 per cent. Since the increase in the child benefit scheme amounts to only £36 per child, there is a net loss of £12 per child. The lower paid worker paying tax at 35p in the pound loses £35 per child per annum and gains only £1 — virtually nothing.
What of the other claim by the Minister that lower income families on social welfare will benefit from this new scheme? The significance of the 25 per cent increase in children's allowance is outweighed by the 4 per cent increase in flat rate unemployment benefit and short rate unemployment assistance, combined with the freeze on child dependant rates, which means that the family income of such social welfare recipients will be frozen, at best, in real terms. To sum up, this is a gimmick. The father is robbed to pay the mother. In 99 per cent of cases, the mother draws the allowance but the money is being deducted from the father, the wage earner. It is a case of robbing Peter to pay Paul. Do not let anybody try to say that this is a lift for the mothers of families. In the light of what I have described, how could it be so regarded? Many of the increases to social welfare recipients will not come into effect until July.
The Deputy is incorrect.
These are the facts. Can the Minister say what is the position of a person with three children and paying 48p in the £ tax? The £100 allowance has been discontinued.
Is the Deputy interested in the facts?
Nobody has denied that that allowance will no longer apply. If the money were taken from the pockets of people like me to give a little extra to mothers, that would be fair enough but the Government took it from me and not from themselves.
That is incorrect. There is a saving of £18 million and an expenditure of £33 million.
Can the Minister disagree with the example I have given?
Yes. The £100 was an allowance. It was not cash.
The Deputy is trying to switch matters around but I know from the notification of my tax free allowances that I will be at a loss.
The benefit to the family is being virtually doubled.
The chickens are coming home to roost. The Government are trying to defend the indefensible but the wage earners know where they stand in regard to these tax changes.
There is £33 million by way of benefit to families. The Deputy should give the facts.
Regarding relief in taxation, there is a reduction from 60p to 58p in the top rate.
There was a reduction last year from 65p to 60p in the £.
To give an example of what the Government's policies mean in reality, I shall refer to the Midland Health Board which would come within the financial package. In respect of that health board there was a shortfall of £2 million. The chief executive officer did not mince his words. He said, "The pruning is over. There must now be real cuts." Those cuts involved reducing the income of the handicapped by £9.50 per week. Would any wage earner be pleased that his income be reduced by that amount? Any such reduction would result in people taking to the streets but that did not happen in the case of the handicapped, the defenceless who are not in strong enough a position to make a case for themselves. If that reduction of £9.50 per week was for the purpose of reducing my tax rate from 60p to 58p, the Government can have the 2p back because I do not like to see the handicapped being treated in that way. It is shameful. The cuts that were effective resulted, too, in people being unable to attend hospital clinics. There were many other effects, too. Therefore, the sufferers were the weak, the under-privileged and the handicapped, those who are least able to speak for themselves, who are not able to parade on the streets or, in other words, to disrupt. They were the soft touch but I will continue to defend those people as I defended them at a meeting of our health board when I said they were entitled to better treatment. A good deal of lip service has been paid to improving conditions for the retarded and handicapped but that meant little when ways were being found of making cutbacks. Members of the health board were told that if cuts to the extent of £2 million were not made, section 31 would be invoked. That would mean that the board would be disbanded and the health services in the area taken over by a faceless bureaucrat. Our members had to behave in a responsible manner in regard to the Estimate and try to do the best possible in the circumstances.
How many millions were allocated to the board?
Wards have closed in the midland area as a result of insufficient moneys being made available to the health board.
The Deputy has not told us the extent of the board's budget.
The Deputy should be allowed to proceed without interruption.
The Government are not justified in implementing tax cuts at the expense of the poor and under-privileged. The people are waiting for their opportunity to deal with the Government.
Another bone of contention is the deposit interest retention tax, as it will affect group water schemes, for instance. A good deal of the cost of these schemes is borne by the organisers of the schemes. I am mentioning this aspect in the context of the references in the Bill to interest earned on money on deposit with financial institutions. In the case of group water schemes such interest would be of help in financing the work but now that interest is to be taxed. Interest on moneys invested in bona fide group water schemes should be exempt from this type of tax.
Likewise, old age pensioners, some of whom may be incapacitated but who have small amounts of money on deposit in the bank, will be subject to deduction of tax on whatever little interest they earn on that money. It is fine to say that the money can be reclaimed at the end of the tax year but in that case we are talking of leaving those people without the interest for that period. Another factor is that if we are to have regard to the way the tax offices are clogged up now, old age pensioners or others would not want to be in a bad way in terms of having the tax repaid because they could be waiting a considerable time for their money. The Government are only adding to the piles of papers that have built up in the tax offices.
During Committee Stage I shall be endeavouring to have some points clarified in regard to this tax. I do not agree with some of the financial institutions who say that if the first £5,000 was exempt it would cost a lot of money. The deposits in banks and other institutions would be substantially higher than that. It would relieve the position somewhat to have the first £5,000 in a deposit account exempt from the deposit retention tax. At the moment pensioners, particularly noncontributory old age pensioners, are penalised if they have over a certain amount of money in a financial institution to the extent that, for example, a single person with over £1,500, gets a reduced pension. That is a great bone of contention. The position in regard to charitable organisations seems to be very grey. What will be defined as a charitable organisation? I would like to see that spelled out in detail on Committee Stage.
In regard to industry here, particularly home industries, I have been informed by many people who have started up that it is not long before they receive a letter asking where they got the few pounds to start, what post office or bank had they had it in. Reams of paper are going out to them on that. That will not encourage many to start up in business. If the Minister had £100,000 in the morning would he put it into labour intensive industry here with the climate that we have? With the tax system operating as it is many persons anxious to form companies here are pessimistic about the outlook. One would need a secretary in the smallest operation to keep account of all these taxes. Any group of individuals starting a company here to give employment should get a break. Above all, they should not get letters asking where they got the £5,000 or £10,000 to put into it. Is it not better than having them down at the labour exchange where the taxpayer is being bled to the last drop? At the end of last year we had to bring in a substantial Supplementary Estimate to give almost £50 million more to the Department of Social Welfare. That is not encouragement. Many who were anxious to start up a small industry are having second thoughts about doing so. The day is gone when we will have large employers employing over 1,000 people. From now on we will be depending on small industries throughout the country. So we must make it attractive to make it work. I do not condone the non-payment of a fair share of taxes by any company. I would not go along with any company that would withhold taxes duly collected from the employees. But we must create a climate where it will be attractive to start up industries.
The number of liquidations, receiverships and closures in the first three months of this year has been staggering and the indications are, according to leading industrialists, that this trend will continue. I hope not, but the first three months were alarming. In regard to company law, as far as I know no company will be loaned money by any financial institution here unless a personal guarantee is given by the director. These companies are operating under difficult trading arrangements, that is, a system of free trade. All the financial institutions, as well as tying up the company, its assets and so on, are now looking for personal guarantees. If the directors are married they will tie up the wife's property as well, so that they have the directors, body and soul. The financial institutions are closing up all the loopholes. That is the situation. There was a time when the assets of the company, land and property would be sufficient. But that is no longer the case. They want the directors, body and soul. They want their private houses and everything they have. They are making sure that they are carrying no risk. No company will be entertained unless it is 100 per cent secured. If I may be critical of our financial institutions, the risk factor in their case is practically nil. They are looking for gilt-edged projects. They are interested in nothing else.
Earlier a Deputy mentioned that companies were closing down or going into liquidation. People I know whose businesses closed down lost many personal assets. My heart goes out to them. They took risks when times were bad. It has been said that some people closed one business and started another the next day, but this happened in very few cases because today the financial institutions are secure. They are not involved in risk taking. The businessman takes the risk. If the financial institutions give you money they own you body and soul and if you are not prepared to give a personal guarantee you will not get cash.
Another Department which came a cropper under this Bill was the Department of the Environment. Last June before the local elections people were asking candidates about the county road network. Nobody can deny that our county roads are a disgrace. All they can do in many counties is to patch up the roads but the holes are back after a shower of rain. I was disappointed to note that no extra money is provided to improve the county road network. I believe a case could be made to the EC for money to improve the county road network, and we could agree to match it pound for pound. If money was pumped into our county roads it would bring about badly needed employment and create a good infrastructure. This would improve many industrial areas and the roads leading to our major towns. I cannot understand why additional money was not made available for this work.
New arrangements were made in the programme announced last year for house improvement grants. At that time we said badly needed assistance should be given to the construction industry. The home improvement grants scheme was welcomed by the Fianna Fáil Party. I am disappointed that very little, if any, of this work got off the ground. About a month ago a letter was issued by the Department, but it was very vague. It said that people could start the work, but that they should keep the doors and windows which had been replaced so that the inspector could examine them. He might say the door did not need to be replaced and that of the three windows which had been replaced, one was all right, and only the standard amount would be allowed for these replacements.
In other words, if the householder wanted teak and weatherglaze, the Department would not meet the full cost. The problem, as I see it, is that when a house was inspected and before the work started the Department sent grant approvals and, if planning permission was required, the approval was marked "subject to planning approval". When the householder complied with that arrangement he could go to a bank for a bridging loan to start the job, or he might make the necessary financial arrangements. That is not happening now.
My information is — and it is reliable information — that it would cost between £120 million and £150 million to do all the work for which applications have been received, but the allocation is something over £20 million. It is clear that what we are seeing now is a stalling operation. This could be another reason the inspectors are refusing to pass all the windows and doors which have been replaced. I want to ask a very simple question. If a person is replacing the windows in the front of the house, generally he will replace all the windows. How can a person be expected to replace two or three windows? One would be laughing at the other. This problem should be re-examined.
I have heard of cases where the householders were to get the grant of £800 but a much smaller amount was paid. I can only guess that the amount granted was for a smaller job. As I said, we welcomed the house improvement grant scheme but it is causing many problems at present. The chief of those problems is that the money is not allocated under the financial arrangements to back it up. We have not got the money for that, so they stall it and the delaying begins. I am led to believe that when a house improvement job is completed the inspection will take anything up to ten weeks. That is too much. I hope that when these houses are inspected there will not be another stalling job with the word going out from the Department, "Take it easy lads, cool it down", and when they go out on the job the gutter or a window is not right.
Is that what the Deputy did when he was there?
No, the set-up was altogether different. We provided the money but under the scheme, which we welcome——
The scheme was abolished.
We did not refuse. We brought in the new housing mortgage subsidy and we honoured it.
The Deputy's party abolished the scheme.
Acting Chairman
Allow Deputy Connolly to make his contribution, and I ask him to stick to the Finance Bill as much as possible.
I come back to the tax assistance for those people who need transport in their jobs — travellers and companies. The increase in that is rather meagre. I understand that that means more money.
In 1977-81 Fianna Fáil did not increase it once.
Yes, but the economic climate was different, as Deputy Molony knows.
Inflation was 20 per cent, that was the difference.
It was different altogether. It was expanding. When we left in 1982 the national debt was £12 billion. It is £21 billion now. The Government came in and they said——
(Interruptions.)
Acting Chairman
Deputy Molony, allow Deputy Connolly to make his contribution.
They said they were going to settle the balance of payments. The deficit was to come down. Last year it was the highest in the history of the State. Those are the facts, so let them not get into the financial area. Every figure quoted by the former Minister for Finance went out the door. He bandied the figures around any way he liked, but at the end the Taoiseach said, "Good boy, now you depart to another arena". Now we are deeper in debt with all the tightening of belts, tightening up on capital expenditure and so on. Worse, we are borrowing money for day to day spending for social welfare and unemployment. I will have more opportunity on Committee Stage to go into this Bill in very great detail.
Good. More competition.
The greatest disappointment regarding these Bills over the years is the statutory time limit. I presume that will apply this year under law. We would like to debate many of the sections in this Bill in more detail. The new sections introduced in recent years have made the whole thing very clumsy and the Revenue Commissioners do not get a chance to do their real job of collecting the tax.
I conclude by saying that I hope that the recommendations of the fifth report of the Commission on Taxation — which we welcome — will be brought into operation.
It would be most remiss of me if I did not compliment my friend Deputy Connolly on his spirit of adventure in lecturing this Government in his concluding remarks on not engaging in the use of borrowed funds to meet current public expenditure. If I heard that from somebody who was new to this House from a by-election in the past few months there might — though it is highly questionable — be some case to be made for smiling.
The Deputy is on his swan song.
I am still here and I hope the Deputy will remain for as much of my speech as I did for his.
My apologies——
No, it was most interesting and educative to listen to what Deputy Connolly had to say, but as he has served in administration in the eighties it was stunning to sit and listen to what I heard from him.
I hit them hard.
Not only that, but to come out and complain as he did about the dramatically enhanced house improvement grant scheme despite what they did when they were here is astounding. They abolished the scheme.
Does the Deputy remember the day he was locked out?
I can only compliment Deputy Connolly on his spirit of adventure the like of which I never witnessed in this House previously. He is a colourful speaker who would get away with anything. May the Lord guide him in his ways. He will be here for years to come.
I hope I guide the Deputy at home in Tipperary in the future and that he passes on to higher and greener pastures.
Acting Chairman
Deputy, allow Deputy Molony to make his contribution.
If the Deputy's speech today means anything in terms of vote gathering he is guaranteed to remain here until eternity.
If the Deputy was here long enough he would listen to what would give him a bit of education.
His speech had to do with everything except truth and reality. That surprises me, particularly from somebody who has served in administration. I am astonished at some of the words he offered particularly in his concluding remarks. However, I wish him luck.
And I wish the Deputy likewise.
This is a remarkable Finance Bill in many respects. It is one of the biggest in terms of size that we have seen for many years.
There were two Ministers. It is a double volume.
That is right, but what is important and interesting about this Bill is that it is a new departure containing measures which address for the first time in the last decade or two some very serious structural problems that we have in the economy. Specifically, it proposes a package of incentives to generate a little more buzz in business and industry, and that must be welcomed. It seems to me that often forgotten is the fact that, whether we like it or not, and some people in the House like it and others do not, we are a capitalist society. The majority of the Members of this House accept that this is the type of society we want. If it is the type of society that we want and want to keep, we must recognise that to have growth and movement in that we must have respect for and give encouragement to enterprise whether it be in the private or public sectors. Enterprise, particularly in the private sector, but also in mixtures between the public and private sectors, is critical and central. This Finance Bill is one of the first for years to begin to address those problems.
The tax reliefs which are there for companies established to deal with research and development recognise the importance of technological industries today and particularly the importance of research and development in those industries. Reductions in capital gains tax and longer term capital gain from 40 per cent to 30 per cent will be a great fillip to industry and business. The tax relief on dividends for manufacturing companies and the profit sharing schemes included in the Finance Bill can generate real movement and additional activity where it matters — in business. As the Minister pointed out at the press reception launching the Bill — I do not know if he said this in the House as, unfortunately, I missed his speech — he wants to use this to generate a switch in funds from what he described as riskless deposits in banks and elsewhere into enterprise.
That is the type of investment we need, a point well made by Deputy Connolly a few minutes ago. Irish business has been starved of equity finance as a result of which it had to rely heavily on borrowings and, because the base and relationship between debt and equity were wrong in business, banks were insisting — wrongly in my judgment — on personal guarantees for individuals. Obviously where company limitation of liability is abused, we cannot condone it, but where it is used in the proper sense of the word it is damaging to enterprise to insist that the promoters of the company literally, as Deputy Connolly so graphically described, write away their dwellings and family assets. The approach in the Bill is welcome and should be encouraged and pushed.
Business ownership of substantial assets carries a certain odium in this country, which is wrong. I know there is a negative side to entrepreneurialism but we must still recognise the fact that, whatever about the negative side, many people doing a job for themselves, the economy and the country have been suppressed for too long, in some instances necessarily, but in others the general atmosphere created has been unnecessarily restrictive to business and industry. I welcome the approach in the Bill which will, I hope, change that emphasis.
One of Deputy Connolly's incredible offerings to us this afternoon was his complaint about the miserly allowance and the ordinary current expenditure allowed for tax relief in regard to company cars. He complained that the Minister had increased it from £3,500 per annum to £4,000 per annum. He omitted to refer to the fact that this is the first time in ten years that there has been a change in that figure. It is something that should have been altered over the years because of inflation and in a ten year period of enormous inflation it was wrong for that figure to remain as it was. I congratulate Deputy Connolly on the gay abandon with which he approached the question. It has been very unfair to business people and to the motor industry. If that figure had kept in line with inflation it would amount today to something in the region of £12,500 or £13,000.
I hope that the concentration evident in the Bill on giving incentives to industry and investment will continue because it will encourage people, whether they are entrepreneurs, employers or owners of business, or people who benefit under profit sharing schemes such as employees of a business. I hope they will see in this the opportunities they have to gain a reward for hard work and that those who intend to leave Ireland because of the high levels of taxation will see an attitude evident in Government to encourage them to stay and to play an important part in guiding the economy to prosperity in the future. This must be applied across the board, not just to industry but also to agriculture which is going through an extremely difficult period at present.
Unfortunately, although there are arguments to be made in our case to get certain advantages in the restrictive policies now necessarily adopted by the European Community in so far as the Common Agricultural Policy is concerned, we must still recognise that there is no point in continuing to produce food that is not wanted. We need to inculcate into the people involved in agriculture, not just farmers but those involved in food production and marketing generally, the importance of delivering to the consumer what he or she wants. We have shown that we have the capacity to produce quality goods, particularly in agriculture, and there are opportunities in that field. The way to identify those opportunities is by offering rewards to people who are enterprising, who engage in agricultural terms in research and development and who sell a product which consumers want.
In welcoming those thrusts in the Finance Bill, it also has to be admitted that, generally speaking, for non-agricultural business things are looking up. There has been a substantial and dramatic drop in oil prices and inflation has dropped beneath that of many of our competitors for the first time in years. This is of enormous importance and has given a great fillip to industry. It gives us an opportunity which we have not had for years to go forward and to steer the economy on a path of growth. There are a couple of points of importance to bear in mind in that regard. There will be a temptation as movement begins to generate itself in the economy to draw off some of it and political parties in an election year might be tempted to do so.
Demands from sectional interests within the community will be quick to identify that this buoyancy is there and should be taken advantage of to satisfy short term or sectional needs. That would be a tremendous mistake which has been made many times before and it would be intolerable that it should happen again. We must guard against it, particularly at present. Because of lower inflation and falling oil prices, the ordinary working man and woman are beneficiaries as well as industry. For example, the tax reliefs in the budget, small though they may be in the context of the crippling burden of personal taxation, are now about twice as high as inflation and in the context of what was predicted as inflation when the budget was prepared. That means that people will benefit in real terms from the tax reliefs in the budget. It is significantly more than indexation. When that is combined with wage settlements, which by and large this year have been about 7 per cent at a time when inflation has dropped — over the period of the wage agreement it will be less than half that — a very real new level of purchasing power has been delivered to the man at work. Real benefits are there for the average earner. Equally, social welfare increases are running significantly above the rate of inflation. All the figures we are talking about are low but, low though they may be, the real purchasing power of people is increasing.
It is important that that benefit goes through the community. It will inspire additional spending within the community. It will allow people the opportunity, for the first time in a number of years, to have an increased standard of living. However, it is terribly important that we control the position because, as Deputy Connolly pointed out, our debt is enormous. If we are now benefiting from dramatically reduced oil prices we must not forget that it was about the time of the dramatic increase in oil prices in the early seventies that we first began in a real way to engage in current deficit budgeting to solve our problems. I am as good as anybody at showering blame on one or other side of the House, but the fact is that as a community we have accumulated this debt. It is of enormous importance that we endeavour to control it and not spoil ourselves by using any increased buoyancy there is at the moment to splurge, whether for electoral purposes, or to satisfy any short term sectional interest. We owe that to our young generation and, perhaps, to future generations.
I should like to refer to a point I have been making for a long time in regard to oil pricing generally. On many occasions in the past I argued in the House, until the present structure was changed, that the Irish consumer was frequently being ripped off. A change came about whereby on a very regular basis the ingredients that make up the oil prices are examined and alterations take place. On a regular basis we have seen the benefit of that being passed on to the Irish consumer. However, there is a slight danger that in some areas not readily apparent to us, companies, particularly those that enjoy monopolies, may begin to draw off some of the benefits of a drop in oil prices for themselves. That would be terribly wrong and it is important, particularly in the absence of the National Prices Commission, that this is watched and monitored carefully by the Department of Industry and Commerce and other Departments, particularly the Department of Energy. The Irish consumer is entitled to have that benefit passed on and nobody, individual, corporation or semi-State body, has the right to enjoy that benefit.
They have not got it up to now.
The only exception to that rule that I am aware is where the State was involved. I have to say that I think it is legitimate and proper that the State should do it. They do it in an open way but I am talking about somebody who in a clandestine or surreptitious way draws off the benefit of the drop in oil prices. Obviously, oil prices take some time to go through the economy and get to the consumer in certain respects. In respect of purchasing a gallon of petrol the reduction should be through straight away and with the changes brought about by the Minister, Deputy Bruton, when he was responsible for that area, it is passed on on a regular basis. Deputy Hyland was about to criticise the Government for engaging in this. It is good crack to have a go at the Government on a point like this, but it is fair too that the Government should meet their debts. I do not see anything wrong with that. If one is to complain about the level of debt we have, then one must recognise that those debts must be paid. If that calls for a rise in taxation then it is done.
What have the Government done about the debt they have created?
We are paying off Fianna Fáil's debts.
That horse is dead. After all the Coalition have been in power for almost four years.
If Deputy Lyons wants to engage in this type of discussion he should look at the record of Fianna Fáil. I will listen to the Deputy when he makes his contribution and, if he can explain to me the change in the position of Fianna Fáil from The Way Forward to speeches made by the Leader of the Deputy's party on the economy in the years afterwards, by the party's spokesmen on Finance and Industry and other Front Bench spokesmen, then I will take him seriously.
The Deputy should tell us about the promise the Coalition made, that on coming into Government they would cut out borrowing. Where are we today after three years of Coalition Government?
We are draining the Shannon again.
It is my view that the Government could have done more in that area.
They have not done anything.
However, I must add that having listened to Deputy Lyons and other Fianna Fáil Front Bench spokesmen I am aware that if they got what they wanted our debt would be about 50 per cent more than it is today. I am not going to put up with any cant and hypocrisy from Deputy Lyons or any other Member.
The hypocrisy is on the Deputy's side.
As the Deputy is aware there is another view and we had it from Fianna Fáil. They complained that the Government were monetarist but they like to have it both ways. That is the way Fianna Fáil work or what is left of them.
Ambiguous.
They objected to what they described as the monetarist policy of the Government but now they are complaining because it is not more monetarist.
The hypocrisy is on the Government side.
They complain when any control is brought to bear on public expenditure and also want to give more all the time. They cannot have it every way.
We will remind the people of the position.
Acting Chairman
Deputy Lyons, we must have order and Deputy Molony should be allowed to continue without interruption.
I challenge Deputy Lyons when he is speaking to address himself to the question I have put to him.
What is it? Is it to explain how the Government have borrowed more?
If the Deputy has a new interruption he should let me know. I asked the Deputy to explain the move in Fianna Fáil from the position outlined in The Way Forward to the change that took place in the movement from this side to that side of the House. If I cannot wait for all of the Deputy's speech I will search the record for his explanation because his contribution on the subject will be interesting.
I will explain that to the Deputy.
Some weeks ago another Deputy on this side of the House and myself made a point about the cost of Whitegate. The cost factor involved in that was denied by a spokesman on behalf of Whitegate. An operation like Whitegate can only survive by the imposition of an obligation on oil companies operating here to buy one third of their throughput of oil from Whitegate at a price fixed by Whitegate. Unfortunately, I do not have the resources to determine whether the price fixing by Whitegate is fair. I cannot figure out the basis on which it is done. On any basis that I have been shown by economists working in the area I have come to the view that Whitegate add a cost of about 10p per gallon on petrol. Whitegate say I am wrong. I cannot argue with their figures because they have total control of the position but if they say they are as competitive as other people trading in oil, why is there the necessity for this statutory obligation on oil companies here to purchase one-third of their needs from Whitegate? If it is the position that Whitegate are competitive then they can survive in the market-place. I say to the INPC who run Whitegate that they were originally charged with responsibility to deliver to the Irish consumer the benefits of that corporation being able to deal in the market-place for oil and they have an obligation to prove their efficiency.
I challenge them to request a legislative change to remove the compulsory offtake provisions obtaining at present. Certainly, I would be willing to sponsor legislation, to bring in a Private Members' Bill, proposing its deletion from our laws as they stand. There is an argument advanced about security of supply and all the rest of it. Frankly, I do not believe that. I do not believe it to be the real reason and I do not believe that the INPC believe it is the real reason. I know that several years ago they had a problem; but, from figures they have published themselves now, they appear to be competitive. I should like to see that competitiveness tried out in the market-place. I would urge them to indicate to the Minister responsible that they no longer need that statutory whip over all the oil companies. It would be a matter of very considerable pride for us to have a State corporation that could prove itself in that way. The INPC say they can do it and are doing so. I believe they can prove it to us and to the international oil industry by agreeing to the removal of the present restrictions.
There is a provision in this Finance Bill that reflects a policy of Government announced some months ago, urban renewal. Deputies from Dublin, but also those from other cities mentioned in the Bill, must be very pleased. I am not. I am from a town that would not be of a size to benefit from the largesse available or proposed in the Finance Bill. I must admire the thinking behind the provisions of the Bill. I might address myself to Dublin particularly, because it is a city I like. But I have to say that in recent decades its development has been an absolute and utter disgrace. I am not going to allocate blame. It may have been the fault of planners or of developers, but the reality is there for everybody to see. The results of their endeavours are a monument to spectacular failure. It is a beautiful city destroyed visually. From the point of view of having a living city centre it is dead. The proposal for urban renewal in this Bill is something that can play a very potent part in changing that. As a provision it is all right, but it will require commitment, whether on the part of Dublin Corporation or the Department of the Environment to push it and make it work. The areas described in the Bill are ones that have suffered tremendous deprivation. They are areas that are structurally vital to the city and that can enjoy a good commercial or residential future if people put their minds to the task. There is a great opportunity not to be lost. The general performance in planning and development of this city has been so bad that an awful lot of ground must be made up. This is a good approach, to be pursued vigorously by the people afforded the opportunity.
There are a number of points I want to make in relation to the Bill which, while small in themselves, are of some importance. The proposal to introduce a new annual tax on discretionary trusts introduces capital acquisitions tax and capital inheritance tax into the Bill. I am very conscious of the complaints with regard to the returns from capital taxation. I cannot understand why those returns are low.
There is another side to it to which I want to refer briefly. I am concerned at the fact that there has not been a significant or reasonable enough increase in the thresholds of capital taxation over the past several years. Whether or not one is a property owner does not really matter. There is a consequence for the country and it is well that we realise precisely what we are doing. It does not take a big business nowadays, in terms of employment or profit, to find itself with assets of many hundreds of thousands of pounds, even £1 million, £1.5 million or £2 million. There would be many companies with asset bases of that size who might be barely ticking over in the current difficult economic climate. Many of those Irish-owned businesses are being placed in the position of having to be sold to pay enormous capital acquisitions tax liabilities.
We need to question whether that is what we want to achieve. I subscribe largely to the view of those who feel that the tax base should be widened as much as possible. It should be done with regard to capital taxation. But we need to assess the effect capital acquisitions tax is having at present on the ownership of businesses. Agricultural land has not been that badly affected, although it went through a period of being very badly affected. Because agricultural land prices have remained low and because of agricultural relief the position there has not been quite so bad, though it can be bad. In relation to business the position has caused sales where they should not have had to take place.
There is one other point I would ask the Minister to take note of and reply to me when responding to the debate or by letter afterwards; I do not mind. I understand a certain situation to exist at present whereby, merely because one owns property in Ireland and has a foreign domicile, liability to capital acquisitions tax does not arise at all. If I may I will give an illustration. Take two people, let us say, both of UK domicile who, let us say again, own stud farms. If one of those persons owns a stud farm through a company registered in Ireland liability to capital acquisitions tax will arise on the transfer of shares on the death of that person. But if the company who owns the stud is registered in the United Kingdom, then liability to capital acquisitions tax does not arise. That is my understanding of the position obtaining. I may be wrong in my understanding. It seems to me extraordinary that in relation to a capital tax that arises on the transfer of real property in the country—whether through a company or otherwise does not really matter because there are all sorts of guises that can be set up to deal with these—where in both instances the beneficial owner of the shares of the company is of foreign domicile but, in one instance, merely because the company is registered in Ireland the shares are regarded as being Irish assets and liability arises. But where the shares belong to an English registered company——
Or an Arab.
——or an Arab, or whatever, liability to capital acquisitions tax does not arise. I may be wrong. If I am, I should like to know. If I am not wrong then there is discrimination obtaining which should be removed.
Deputy Connolly referred to the proposal in the Bill to change and ultimately withdraw the stamp duty relief applicable at present on transfers of lands from father to son. That relief was introduced some years ago to encourage transfers of land. Deputy Connolly was correct in what he said—it is and has been a very great problem in this country to get land holdings transferred from elderly people to their children. The provision introduced in, I think, the 1982 Finance Act to exempt from stamp duty transfers of lands from parents to children has been beneficial in that respect. But the fact is that if that provision remains on the Statute Book indefinitely, then its effect is lost. The proposals of the Minister for Finance are good. He tells us now that it will be left until the end of September as it stands and then it will be changed by lowering the age from 35 to 30, increasing the obligation in terms of time spent on an agricultural course, time spent studying agriculture. People are placed on notice that it will happen. They had better get their act together. They have approximately six months, affording them loads of time in which to do what they must. The opportunity is being given them and they are being placed on notice. If the measure were to remain on the Statute Book as it is, without any change, people would assume simply that it would remain indefinitely and the incentive that was there when the relief was introduced the first day would go. A change is desirable.
As Deputy Connolly said, there is a problem because many farmer landowners are concerned about their own security and for that reason are unwilling to transfer their lands to the next generation. There has been only one means for dealing with this problem — I am talking particularly about families in which several children may be left unprovided for. It is a fact of life that when a child, whether a girl or boy, is not married there is a fear about how a new spouse would fit into the existing family home. The only means for dealing with that in the past was to put in the formal transfer deed a revocation clause so that if circumstances arose to threaten the parents' security in some way the power of revocation could be exercised and the difficulties overcome. More often than not it was the mere existence of that power in the transfer instrument that kept control of what otherwise might have been a difficult or impossible situation for the older folk in the family.
For reasons that I do not understand, the Revenue Commissioners take the view that where there is a power of revocation in a transfer of land from father to son, the relief through the exemption in the 1982 Finance Act does not apply. I know they have taken that view and I ask the Minister for Finance to amend that provision in this Bill to get over that problem. I am sure the Revenue Commissioners have no objection to the power of revocation; I believe they are interpreting the law as they are obliged to and that they must apply the law as it stands, but giving the power of revocation or giving somebody stamp duty relief while putting the power of revocation in a transfer deal will enhance greatly the Minister's wish and intention that there would be a greater degree of transfer of lands from one generation to the next. I believe that one step would generate more transfers of lands than anything that I could suggest as a change in that section of the Bill. I have thought about it a lot and I cannot see any harm in it.
I cannot finish on the Finance Bill without making some reference to what is known as "the DIRT", the deposit interest retention tax, and the tax on insurance companies. I cannot say I like either tax because I regard them both as blunt instruments: though they may be efficient in terms of collection, they can cause injustices that are not intended.
The case for charity and for elderly people who are not otherwise liable to income tax has been made and largely met in the Bill, but I would urge the Minister for Finance to consider, despite possible enormous practical difficulties, the making of some arrangement whereby elderly people who are not otherwise liable to income tax would not have to suffer retention tax at all or, if they must suffer it for reasons of its practical application, can recover what is taken within a short period.
On the day the retention tax was announced here I spoke to the Minister for Finance and other Ministers and expressed the view that injustices would ensue from it. They rightly pointed out that there are other places in which people can invest money and actually get better returns than in the banks. It is extraordinary that people do not avail of these. For example, saving certificates can be bought in the Post Office that will yield ten per cent, tax free. I cannot understand why some people still want to have their money in the Bank of Ireland or AIB at 7 per cent, shortly to be subject to the retention tax. I cannot understand that, but there it is.
I understand the Government's attitude that much money was being earned in bank interest on which income tax was not being paid. That problem has to be addressed, and without doubt this tax is doing so. I venture the view that the anticipated return from this tax will be significantly higher than the Minister or the Revenue Commissioners have suggested. I presume the Revenue Commissioners have determined the amount, but if I were a betting man I would bet that the returns will be greater than indicated by the Minister.
This tax is efficient but I am not happy with it because people who otherwise would not have tax liabilities will suffer. I think the problem could have been overcome if the Government had announced it a year before introducing it. There is no doubt that the deposit interest retention tax had to come — it has been in existence in Britain for the past few years. Because of the way our tax legislation has gone and the need for efficiency and the complaints made about tax avoidance, this tax was inevitable. I am concerned because it was introduced without adequate warning and without enough opportunity being given to people in the community to explain to elderly people the opportunities for investment elsewhere. Because people who were not acclimatised to this new environment injustices may be caused. I do not regret the existence of the tax — I can see the logic and sense behind it — but a weak section in our society may suffer because of it. I hope bank managers throughout the country will advise people who have no tax liabilities of their opportunities elsewhere to earn more than in banks at present.
Changes have been announced since the budget with regard to the insurance tax. Even people involved in the insurance industry will honestly tell you that the Government have been denied taxation revenue that they should have received. Most people in the industry who are fair would acknowledge the fact that the Government were entitled to more revenue than they were obtaining from the insurance industry. Given the frustration the Department of Finance gurus must have been experiencing I can understand them resorting to something like this tax. However, it is another blunt instrument which has been improved considerably in relation to the amount the Minister proposes to take. However, in the longer term it is an unsatisfactory tax, it is so seen, and I believe that the same amount of revenue or more could be obtained through a more refined tax system. I urge the Minister to examine that area with care and to have discussions with insurance industry interests during the next 12 months in an effort to tackle the problem. I am sure that the problem can be tackled. There is goodwill and understanding in the insurance industry of the necessity for changes in this area. I urge that a form of taxation be found which is not as blunt and which would not cause the problems which this tax might cause.
I am sorry that some of my concluding points are critical. I ask the Minister to explain the intention and purpose of section 100 of the Finance Bill, which proposes to reduce from 1.25 per cent per month to 1 per cent per month interest payable on refunds of capital tax. In other words, where overpayment of capital tax has occurred and interest is due to be paid to the taxpayer, that interest is being reduced from 1.25 per cent to 1 per cent per month. In the context of the deposit interest retention tax, there is a certain logic in doing that. A person might be caught under that section who would not otherwise be liable for income tax. Perhaps there is another reason for this and that I am wrong in my interpretation, but it seems a little unfair. I urge reconsideration of it.
On a general note, over the past year or two I have listened to several debates in the House, particularly in relation to the National Development Corporation, the function of left and right, the function of the private side and the public side of our economy. I was of the view that in this country the public side had more often failed than succeeded. In the past few years I have come to the view that the mix is what is most important and that we should never lose the opportunity to use the talents we have on the private side to develop certain public facilities— for example, the establishing of roads, building of houses and the like, or the development of forestry. Equally, it is important that those who work in the public service are exposed to the private side. There is a great dilemma there. There is also a lack of understanding, of communication and appreciation on both sides as to the function of the other. In some countries, particularly France, there is much exchange of personnel from private industry to public. That operates on a tiny scale here and it is not practical to think that that alone would deal with the matter.
We are reaching a time of change in our economy. This Bill gives certain signals of willingness to change. I urge the Government for the remainder of their time in office and future Governments to be willing to use the best talents in the private and public side together to do certain things. As the Minister for Finance has highlighted on many occasions in his speeches, it is not what you have that matters, whether in terms of ownership,. investments, or whatever, it is performance that matters. We have the talent here to do a great deal better than we are doing. We should try to get rid of some of our ideological hang-ups about whether things should be done by the private or the public side and recognise the great importance that both sides have in developing our economy.
A Chathaoirleach——
A Chathaoirleach——
Acting Chairman
I call Deputy Lyons.
I understood from you earlier that I was the next speaker. You had no other speakers listed. I asked that question. If you had had any other speakers listed, I would not have intended to anticipate anybody, but you had no other speakers listed and accepted that I was the next speaker.
Acting Chairman
I was issued with a list of speakers and Deputy Lyons is the next speaker. I call on him.
Could you explain the basis of the decision which was made, because I was the first to offer?
Acting Chairman
I am calling Deputy Lyons.
Would you not give any explanation as to why you are doing so?
Tháinig sé i gcuimhne dom go ndúirt mé, nuair a bhí mé ag labhairt ar an gcáinaisnéis i Mí Feabhra, nach raibh sa cháinaisnéis sin muinín ná treoir, beag ná mór. Bhí mé ag rá go raibh teipithe ar pholasaí an Chomhrialtais cé go rabhamar ag tnú go mbeadh a leithéid san cháinaisnéis a thabharfadh dóchas dúinn agus don tír uilig, athrú a thiocfadh as ghníomhaíochtaí an Rialtais.
Dúirt mé chomh maith gurb í an dífhostaíocht an fhadhb is mó sa tír faoi láthair. An figiúr oifigiúil atá luaite ná timpeall 250,000 duine. Tá a fhios againn go léir go bhfuil i bhfad níos mó ná sin dí-fhostaithe agus go bhfuil slua mór ag imeacht diaidh ar ndiaidh as an tír agus ag lorg fostaíochta i dtíortha eile.
When contributing to the budget debate, I indicated that there was a feeling of some hope, before the publication of the budget, that the Government might realise, after their three continuous years in office, by some stretch of the imagination or from some of the advisers of which they have a superfluity, that they should come up with some solutions of the problems in the country and in the economy. The greatest expectations came from the people who were seeking employment, the almost 250,000 who are registered as unemployed, the many more seeking employment but not registered for various reasons, people on short term courses and participating in training schemes of various kinds in the hope of sustainable jobs at the finish. A certain hope was building up in their minds and attitudes that the budget which we were about to have would contain some measure of hope, some direction away from the path that the Government had been travelling and from the state into which they had allowed our economy to drift.
I must point out that the people felt let down by the budget. Despite many suggestions and ideas put forward during the budget debate, this Finance Bill of 108 sections has emerged which, as the Minister said in the opening lines of his Second Stage address, gives statutory effect to the taxation changes introduced in the 1986 budget. The Bill also contains a number of provisions not announced in the budget. Many of us had hoped that the Finance Bill would contain improvements, ideas put forward during the budget debate when indications were given of where the Government were on the wrong course. The changes which have actually been introduced are minimal.
The Finance Bill is one of the most important Bills to come before the Oireachtas in any year. I am very much aware of the restricted time allowed for Second Stage and the suggestion by the Government that the 108 sections should be dealt with in three sitting days. I am aware that there is a statutory date by which the Finance Bill must be completed. Time was lost because the commitment as to the date of introduction of the Bill was not honoured. Many times our spokesman on Finance asked the Taoiseach when the Finance Bill would be introduced. Dates were given but they were not adhered to and hence we are dealing with the Bill in a rather confined way. This is never satisfactory but, when our economy is in such a state, it is only reasonable to expect that more time and importance should be attached to the Finance Bill.
We have heard time and again that measures aimed at improving labour market conditions in times of recession and population growth have been severely restricted by the necessity to implement policies geared towards adjusting public finance and external payment imbalances. Two of the main planks of the platform of the Coalition parties before the 1982 general election were the phasing out of the budget deficit and the reduction of foreign borrowing. Deputy Molony threw out some kind of a challenge but we will continue to remind the people of the commitments given and the promises made on those two aspects of our finances. We will remind them, although I fancy they do not need reminding, that more money has been borrowed by this Government than by any other. The money borrowed was not used for productive purposes. Our economy has contracted and the money is being used for day-to-day spending. It is extraordinary that Deputies opposite should raise that matter because we are in a much worse situation, having borrowed much more. They will hear much about this subject before the next election. On the question of deficit budgeting, one party said something different from the other before the election but, in their cobbled-together programme for Government, they changed that in order to accommodate one another. The target and the year set were abandoned long ago.
During the Estimate debate in June 1983 the then Minister for Labour said:
Notwithstanding these restrictions the Government have established the appropriate economic structures which are aimed at securing the environment for economic regeneration through proper economic planning and management. These structures are centered on the Cabinet Task Force on Employment which brings a co-ordinated and integrated approach to the problem and also ensures that the competence and expertise available in the State are fully utilised.
That is very nice phraseology but what has happened in the meantime to the coordinated and integrated approach to the problems as they saw them in 1983?
The Minister went on to say:
... programmes have been expanded rapidly in recent years to meet the twin objectives of maintaining a dynamic labour market and making some reductions in the level of unemployment.
These are very interesting words three years later for this Administration.
What about the challenge? Answer the challenge.
In the face of that kind of commitment, it would be fair to say three years later that the Government must acknowledge absolute and total failure in this regard. I have indicated that we have never really been able to put an exact figure on the number of unemployed. We have to go by the CSO figures but it is reasonable to suggest that the number out of work is close to 300,000.
We must take account of the estimated 45,000 who have emigrated in recent times. On the matter of emigration, I hope the Government are aware that the annual report of the London Irish Centre gives some startling information. It states that more and more Irish emigrants are arriving in London and facing difficulties in finding work, accommodation and food. They say their forecast of a continual emigration upsurge has been confirmed by their community services department. In 1985, 2,136 new clients arrived seeking help and advice. The number of new clients represented an 18 per cent increase on the previous year and a 300 per cent increase over the preceding three years. Many arrived in groups of four or five searching desperately for work. Many brought with them personal problems, more often than not caused by the lack of employment in their own areas.
The report makes the observation that either they had to leave in order to send home money or because there was continual family friction because of unemployment. It details the procedure as follows: "They collect their dole money, buy a ticket, escape another family row, get on the boat with nothing except resentment and fear". The report contains the observation that many still believe that the streets are paved with gold but that they often get a rude awakening when they are refused benefit by the Department of Health and Social Security — because they failed to bring identification with them, that many want to return home but that is difficult if one has no return ticket and no money.
I would add to that that the problem would be increased because of no hope of employment at home. The report continues:
While looking for employment desperation often takes over after 20 to 30 phone calls, interviews and often fearful underground journeys. It is not unusual to find a whole family on the doorstep of the centre, with cases, requesting accommodation apologetically.
If we wish to measure the performance of this Government in any one area, that report is an indictment of that performance and of the reluctance of the Government at all times to show their concern at least by inquiring about the welfare of the many young people who find themselves in those circumstances as they have been called on to do repeatedly by Deputy Fahey. These matters are not dealt with in the Finance Bill. The whole trend of the budget and of the Finance Bill should be to give some measure of hope to our people.
In Building on Reality the Government projection was that the unemployment figure would be 226,500 at the end of the period of the plan. After only one month of the plan's existence the unemployment figures were off target by 13,000 and have continued to be very much off target. There is no plan for reducing the unemployment figure. In recent years the number of jobless has spiralled. Closures and impending closures continue unabated. The incentive to work has been diminished to some extent by the impact of high taxation, direct and indirect.
Government speakers have been telling us that the changes both in direct and indirect taxation will have the effect of encouraging incentive to work and of encouraging people to invest in the area of the creation of employment. That is not the reality because the minimal changes announced in the budget will have no effect so far as taxation is concerned. Personal investment in risk taking enterprises is treated less favourably for taxation purposes than are other forms of investment. I acknowledge that a small effort has been made in that direction but the level of the changes compared with the size of the problem indicates that the Minister should have gone further. In that way he would have been helping to create an atmosphere conducive to investment in industry by both groups and individuals.
Increased employment depends on a sustained growth in manufacturing industry plus a recognition that many jobs can be created in the service sector and that there be an expansion and development of small businesses; but these improvements will only occur if all the necessary ingredients for that expansion are available, not necessarily in the order of priority but certainly in terms of both direct and indirect taxation. Those outside factors that we have heard about so often in terms of detrimental effects on our economy — the oil crisis and inflation — are no longer of such significance because the trend is being reversed in both cases. However, one must ask whether in terms of their policies the Government are in a position to take advantage of those changes on the international front. There is clear evidence that the Government are not in that position. If we do not take the action that is required on a number of fronts to improve the climate for enterprise and to restore the incentive to work we will continue to experience increasing unemployment. That is why the Government must change their policies. In that respect I suggest that they face up to the fundamental question of whether they are prepared to take the road of development, incentive, encouragement and so on, or whether they merely intend continuing in reverse gear with all the cutbacks, controls and stagnation that involves.
There have been many studies and task forces and reports. One would have thought that by now the Government would have had sufficient documentation available to them. In May 1985 the Organisation for Economic Co-operation and Development commented "Ireland faces a bleak economic outlook". That forecast came amid news that exports had taken a sharp tumble in April. The OECD predicted a gloomy economic future because of Ireland's huge debt and the poor prospects of recovery by our private industries. Was that warning totally ignored by the Government? The OECD also indicated that we now have proportionately the biggest debt of their 24-members. The debt, in May 1985, stood at 128 per cent of gross national product, the highest figure in the OECD area.
They further stated that the economic and employment outlook in Ireland was particularly bleak. I am not au fait with where the Government get their advice but surely a body like the OECD should have been of sufficient stature to put the Government on notice, apart altogether from the promptings from the Opposition side of the Chamber. The Government have ignored the warnings. They have failed dismally to create an environment in which enterprise and investment and job creation can grow and develop. Since they took office they have pursued policies which have had the effect of running down the Irish economy. We have had retrenchment, cutbacks, closures, receiverships and liquidations regularly. They have been the hallmark of this Government. They will be remembered for many things. But they will certainly be remembered for that lot. They have not yet managed to create an environment which is conducive to investment. Regrettably this Finance Bill, with its 108 sections, has addressed that problem in a very minimal way only. To enumerate the failures of this Government since they took office would take the remainder of Private Members' Time and all of tomorrow as well and I still would not be finished. What positive proposals or decisions have emanated from this Government in any Department? There was one, the National Development Corporation.
Tell us about it.
It is as dead as a doornail. There is no sign of success from that august body, from the Programme of Government between the two parties. I always said it was a matter of keeping the two parties together. I have been proven right because I see no evidence of activity on the part of that body except holding them together, and it is still holding them together because they are still together. Suffice it to say that the propaganda machine, despite working at full production, will not distort the facts. The electorate, when they get the opportunity, whether it is in a week's time, a month's time, in 12 month's time or in 18 month's time will not be fooled by the Government's promises and platitudes. This time it will not work because the electorate are only too well aware of how they were conned by the propaganda machine during November 1982.
What about Senator O'Donoghue?
I will not depart too much from the Bill under discussion. I was going to deal a bit more with the NDC, which is just another empty gesture. It is obvious to even the beginner studying economics that this Government have failed. I am reminded that the Taoiseach was proclaimed to the country as a great economist. What has happened to that great economic mind that this country was blessed to have?
What happened to the 1977 manifesto? Where is Senator O'Donoghue? He is in limbo.
The Coalition have failed, not alone in the three years and four months that they have been in Government but in the eight and a half years out of the past 13. It does not matter which way the Coalition switch the dates around, talking about 1977 or 1947 or whatever date they care to mention, that horse has been flogged so often that it is stone dead. Surely the Government must be aware that everybody, whether coming out of a football match or coming out of the church or whatever, is wondering how long more the Coalition will last and asking when we are going to get them out. No matter how the propaganda machine goes to work, this time it will not work. The people have had enough and they will let the Government know that.
Half of the Deputy's party is gone.
Industrial development depends primarily on the development of the people who have the ideas for new, viable and improved products and services and who have the skills, motivation and resources to bring those ideas to successful commercial fruition on the home and export markets. We must acknowledge that times are changing with electronics and microelectronics. Technology is changing so much that, of course, we have to take up some slack. Nobody in this House except myself and my colleagues from Cork knows what it is to lose traditional industries.
What about Dundalk?
We lost Dunlops, Fords and the dockyard. I could go on naming them. We had the dubious distinction of being the unemployment black spot because we were worst hit by the recession. That was a dreadful distinction to have. We had the sympathy and concern of many people which we appreciate, but we have been overtaken all around the country by Wexford, Dundalk, Drogheda, the Border regions and the west where all the emigration arises. Unfortunately, where Cork led, the rest of the country has followed. We do not wish it to be like that, but this Government in the Finance Bill, in their budget, in any other of their activities have done absolutely nothing to redress the situation, which is becoming worse.
Deputies might be amazed that because we put through an enabling Bill to designate an area of Cork as a free port, which has not been done yet because the legislation to confirm it has not been introduced, we have had requests from all over the country, from Dún Laoghaire, Wexford, Carlingford in County Louth, and I am sure Killala will be next. All these areas see a possibility of a free port area having benefit for them. They are grasping at straws, as we in Cork are, in order to recover, but the straws are not even falling from this Government.
If people are reasonable about it, they will admit that it is the responsibility of the Government of the day to create an environment in which enterprise can grow and develop. I have never said — and I hope will never resort to saying — that the Government themselves should create jobs, because that is not correct, but the Government have a role to play in creating an atmosphere in which jobs can be created by the policies being pursued and by assistance being given to people with ideas and enterprise. That is not happening at this time when we need it so badly. Only very small encouragement is given in the Finance Bill in that direction. Small though it is, I acknowledge it but it is not nearly enough, given the magnitude of the problem.
You are getting your free port.
We got an indication on the passing of the free port legislation. It was an enabling Bill. Ringaskiddy was mentioned but nothing has happened since then. We must live on and wait and wait, and let me remind the Deputy that legislation came in as a result of a report submitted by the Cork task force to the Government, two years previously. The Government have failed dismally to create the environment that I speak of. Since taking office they have pursued policies which have had the effect of running down the economy. Instead of growth and development, we have reached this awful situation of closures and liquidations that I have mentioned.
The environment seems hostile to enterprise, and that has the effect that talented Irish young people are unwilling to undertake the risks involved in bringing their ideas for new products and services to the marketplace. The return on industrial investment is much too low to attract funds, and the evidence of that surely is in the fact that people are not investing in industrial development. They are putting their money into Government gilts. It is time the Government faced up to that.
Let me be more specific on industry and consider one of the best industries for the creation of employment, the construction industry. I learned by listening to the debate that when this was mentioned by some of my colleagues there was almost an uproar to emphasise the great value that is accruing from the house improvement grants. What is the situation regarding them? We will come to that, but let me say that no industry has the facility or ability to create jobs more quickly than the construction industry and it does that at a lesser cost than many other areas of activity.
You let them sign on for the dole too.
The cost of creating employment in the construction industry, per job created, is much lower than per job created in other elements of industry. There is considerable scope for Government action to increase employment in the construction industry, if they have the political will to stimulate the industry. I have never understood why, in periods of Coalition Government, the construction industry zooms downwards. Have they lost faith in Coalition Governments? One sure fact is that now they have no faith in Coalition Governments. Coalition Governments have demoralised the construction industry.
A recent decision — taken last year, but again we are talking about the Finance Bill and the budget — was this 5 per cent increase in VAT in the construction industry, 100 per cent increase. Despite the Second Stage debate, the amendments to the Finance Bill and the introduction of a Private Members' motion on that 5 per cent, the Government persisted in retaining that increase in VAT in the building industry, also despite the submissions made to the Government by that industry. Why should the Government treat the construction industry in that manner? We are all aware that, on our return to the Dáil after the 1985 summer recess, in order to stave off a near revolution from the back benches, the Government hurriedly, without any preconsultation, without studying the programme in any way, introduced as a saver — they were on the brink then — the famous or now infamous house improvement grants. The backbenchers had come back in a fighting mood after the local election campaign because they had been told on the ground where we were and where the building industry was.
They had not thought out the scheme and this was evidenced by the fact that the announcements made contradicted each other. The rate of demand for forms because of the publicity was to be expected, but the Department were not geared to handle that demand. The inspectorate had not been increased to examine the applications and when that was realised the message came out. We can see the doubt, uncertainty and confusion this Government can create by the one small action of introducing the house improvement grant scheme when they could not do it properly. Every Deputy here knows well the confusion that still exists. We had an invitation in the media: "Go ahead with the job. We will look at it and then we will tell you how much we will give you."
I am sure that message has gone back to the Department but, if it has not, it is because they are not listening. People are not accepting that sort of decision from this Government. They do not trust the Government. They will wait until the inspector comes and tells them they may do this or that because there is so much doubt in the minds of the people and lack of credibility that they will not accept that they should do the job, that it will be inspected later and that then they will get the grant. As I said, if the message has not gone back to the Department by now, it will be there soon because that is what I have been hearing from my constituents, and I am sure other Deputies have heard the same.
I would like to refer briefly to the 7 per cent growth rate between 1985 and 1987 mentioned in the Government's document, Building on Reality. Everybody knows that is not achievable under present Government policies. This Government's attitude to the construction industry makes it even more impossible. Why they ever set it down in that famous, or otherwise, document is a cause for wonder. The killer blow this Government inflicted on the construction industry in December 1982 was the reduction of capital programme money — £200 million. That reduction must be condemned without qualification. At that time the Government should have considered additional funding. This is not the first time that has been said because we have been condemning the Government for that £200 million reduction since then. Yet they blunder on and leave the construction industry to decline into the extraordinary position in which it finds itself, with 50 per cent of the workforce out of work.
Last October the home improvement grants scheme was introduced and now five months later the great increase in the number of people to be employed because of this famous announcement has not yet been seen. Why? Because the Government rushed into a decision they had not thought out or planned properly. That announcement has created a great deal of confusion.
I want to take this opportunity to discuss a local matter which is really of national importance. I tried to raise this matter on the Order of Business yesterday. I accept your decision, Sir, that it was not a matter for discussion on the Order of Business. I also sought to raise it on the Adjournment, but it was not considered to be of sufficient urgency. Therefore, I am taking this opportunity to discuss Verolme Dockyard. This Dáil and this country may think they have heard enough about that dockyard, but they are going to hear a lot more.
The liquidation of Irish Shipping and allowing our only shipbuilding and ship repairing yard to go into liquidation is another hallmark of the failure of this Government. But worse is happening. The local people, workers and former workers, got together to form a consortium to take over that dockyard. They contributed some of their redundancy money, and sat long tedious hours with the liquidator with the specific purpose of re-opening the dockyard, perhaps on a small scale at the beginning, employing 50 to 100 workers, but with the obvious intention of making it pay, developing it and restoring it somewhat, if not entirely to what it was previously, that is a ship repairing and shipbuilding yard, and providing the skills and abilities which are latent in Cobh and the city of Cork. All these people require from this Government at this time is the support of two Ministers — Minister Noonan and Minister Mitchell. Their support is vital because the consortium are not in a position to put up anything like the £2 million the receiver is seeking.
At the end of the day the Government will have to decide if they are willing to get involved and save the dockyard. They let it go into liquidation before and I am asking them tonight to give a very serious and positive response to the efforts being made in the Cork area to have the dockyard reopened. Minister Noonan and Minister Mitchell will have to decide the question of indemnifying the consortium against losses.
The former workers formed a company known as the Great Island Shipyard, but so far they have missed much of the repair season. Shipping repair jobs have gone abroad — the Leinster for a £2.5 million refit, to be followed by the Connacht for a similar job. With Irish Shipping scuttled we had this unacceptable situation of a semi-State body, the ESB, supplying thousands of tonnes of coal to Money-point, using foreign vessels because we do not have our own since Irish Shipping was liquidated, and bauxite being brought into Aughinish in foreign vessels. I hope this Government realise what is happening. We have Englishmen repairing our ships; we have Liberians and Panamanians transporting our cargoes; Irish people are stranded — some of them have been brought home — and more of them are idle. An effort is being made by the workers in the Cork area to reopen the dockyard. I am taking this opportunity to ask the Government at least to give recognition to what these people are attempting to do and to give a positive response to their efforts.
The Finance Bill should be modified further to boost investment in industry and to enable the economy to take advantage of the improved economic climate to which I referred earlier. Falling oil prices and the projected drop in interest rates and their attendant consequences mean that the economy should be in a stronger position to take advantage of the upturn being experienced across Europe. Is it? I should like Government Ministers to answer. This will only happen if there is increased investment and that is why the Bill should be modified. I reiterate that I welcome the measures designed to boost investment in industry in the Bill, but it is regrettable that the Minister did not modify the operating conditions of the business expansion scheme to enhance its attractiveness to investors in the manufacturing industry. This is one positive result of the change of Ministers in the Department of Finance, because Minister Bruton, other Members and I discussed the Designated Trust Fund Bill and the Industrial Development Bill and I can see the effect in this measure which he introduced. Clearly, it is a positive element and an improvement on the Bill introduced by Minister Dukes.
There is a huge need to encourage the growth of venture capital, to encourage individuals to invest in manufacturing industry and to provide a new source of finance for small and medium sized businesses. Under present legislation the designated trust funds are very restricted in their operation and cannot function as venture capital funds in the normal way. There is no need to elaborate any further on that. We have discussed it. The Minister obviously recognised the arguments we advanced during the discussion on designated trust funds, although he has not gone the total distance I hoped he would. At the same time the urgency of generating an investment drive in Ireland was underlined by the review of the European Commission of industrial investment in 1985 and its proposals for 1986. When Governments, particularly Coalitions, make excuses for failures they blame outside influences. I mentioned that already. Across the Community industrial investment has been very buoyant, with European firms increasing their investment spending by 10 per cent in real terms. In Ireland, however, instead of expected real increases, there was an average decline of 11 per cent in industrial investment in 1985.
What hope have we of recovering if that is the trend? We should be part of the positive trend in the Community, but I doubt if the provision made in the Bill will solve the problem. The buoyancy of industrial development in Europe for 1985 reflected a new confidence and optimism and resulted in a 10 per cent increase in investment while ours dropped by 11 per cent. The Minister and the Government must realise that this should not be the case and take the necessary steps to correct it. Denmark and Holland led the way with a well above average investment growth of 33 per cent for Denmark and 21 per cent for Holland. Real investment growth reached double figures in a number of other countries. West Germany was up by 14 per cent, France by 10 per cent, Luxembourg by 14 per cent and Greece, our new member, was up by 32 per cent. What is wrong? When we see these figures for our partners in Europe why is our figure 11 per cent in the wrong direction?
In Ireland the gap between planned investment and the outturn was the widest. There may be reasons for this, but the Government should identify them and take the necessary action to correct it. The optimism sweeping across Europe may be gauged from the example of Luxembourg, a small nation, who instead of remaining static as expected found that investment rose appreciably in real terms and was up by 14 per cent.
These statistics indicate that we are part of the same Community but we are not in the same league. It shows that the Government must address themselves to the reasons for this, because we need investment in industry very badly to provide employment. The Government must take a lead in the drive to make up the severe investment shortfall which has plagued Irish industry over the past four years. A strong impetus to investment is a prerequisite if we are to exploit the improved economic climate to boost growth in output. For this reason Minister Bruton should think again and further modify the quaifying conditions governing the attraction of investment under the business expansion scheme in the Bill.
The Government are failing to provide jobs for young people. A rock concert will be held very soon — I wish it well — to raise money to provide jobs for young people. Does that suggest that the many existing agencies have failed in that respect? Why are so many young people still unemployed in view of all the money being paid by taxpayers towards the youth employment levy? I am often asked that question and I ask it here because it is relevant. The youth employment levy was introduced in 1981 and so far has provided £384 million to help young unemployed people to train for jobs and in some cases to start their own businesses. This year a total of £90 million will be divided among the various agencies engaged in the vocational preparation programme, employment incentive and environmental improvement schemes. When that levy was introduced there was a feeling among taxpayers of being willing to give the 1 per cent to cater for the young people who need to be trained and retrained, if they fail in jobs. I am not so sure that the same feeling exists towards the levy today. It has been said very often that the efforts of the Youth Employment Agency are not having the desired effect.
In the course of my contribution in the debate on the budget I, like other Members dealt with the retention tax or, as it has been described, the DIRT tax. The Minister, realising the unpopularity and unsavouriness of the measure, has attempted in the Bill to modify it and mollify the feelings of resentment. Sections 27 to 34 relate in some way to this tax. However, as I said on February 13, the Minister is discouraging young people from saving, although down the years we have all encouraged them to get involved in saving. We all encourage our children to save. When I was young we were encouraged to save for the rainy day but we had to abandon that phase because it has been raining every day in recent times, I am not talking about rain falling from the sky but the fact that the day of need has arrived. The Minister who introduced the tax, and the Minister who has retained it in the Bill, have destroyed something that was painstakingly built up over the years in our national schools — the need to save. Since I referred to this in the course of the budget debate I have not had any reason to change my views on the issue.
Last year we all encouraged people over 60 because of the spate of crime throughout the country to deposit their savings with the financial institutions. We did so for their safety, because if it became known that they had money in a biscuit box under a mattress or elsewhere they would be the subject of an attack. All sides of the House encouraged those people to deposit their savings in banks and elsewhere and the Government introduced certain measures to encourage them to do that. The only way to describe what the Government have done in regard to the interest on the savings of such people is to say that it amounts to a betrayal of the confidence of the people we encouraged to deposit their savings in such institutions. The retention tax will be a direct imposition on those we encouraged for their own safety to put their money in banks and so on. Is it any wonder that people continue to question the credibility of public representatives when the Government betray — I do not know any other suitable word — the confidence of old people?
It was because of the hostility of Members on all sides of the House to tax being levied on voluntary organisations and community associations — we are all part and parcel of them — that the Minister decided to change the provision in the Bill. It is my view that the Minister has left this issue open in that the term used in regard to the taxing of voluntary contributions and money raised by voluntary associations does not accommodate them adequately. In the course of my contribution on the budget I quoted correspondence I had received from an association. It is my view that when people write to us they expect us to use the correspondence in the course of debates on various issues. In regard to this tax I received a letter from The Sisters of Mercy who said:
As you probably know, our congregation supports missions in Peru, Kenya and the Philippine Islands where our sisters depend on us for means. At home we run meals-on-wheels, care for the sick, aged, travelling people and we are engaged in many other social works.
For our works we depend principally on interest from investment and deposit accounts. We contribute to these accounts from our salaries which are heavily taxed.
The recent proposal made by Mr. Alan Dukes, then Minister for Finance, to introduce deposit interest retention tax proved to be disturbing and alarming. Its introduction would necessarily spell the end of much of our social commitment. I request you, as our interested representative, to act on our behalf and make the strongest possible protest to the Taoiseach on this matter.
That has now been amended.
I acknowledge that it has been amended to some degree. I contend that the reference to it in the Bill and its amendment have not been dealt with adequately. That Bill of 108 sections is page upon page of technical detail. I am not satisfied that all the voluntary organisations are covered. For instance, the registered friendly societies are not mentioned. There is a whole group of organisations not accommodated. I want to stress that point. This matter will have to be dealt with on Committee Stage to ensure that the people who need accommodation under the provisions of this Bill will be so accommodated.
In his introductory remarks the Minister said:
The reduction in energy prices and the continuing downward trend in inflation have increased confidence. This will be reflected gradually in improving investment and employment prospects.
I would not dispute at all the sentiments expressed in the first part of those two sentences but I am very doubtful that the Minister's expressed wishes will be achieved because the Government have not provided the environment in which to take advantage of those factors. That must be emphasised in the context of the Minister's remarks. The Minister went on to say;
... we must encourage investors to break out of the traditional mould.
I suspect that the Minister is trying to find a scapegoat. I will not go along with that. I am convinced that this Government, through their overall attitude, their policies and directions, are unable to take advantage of the conditions prevailing internationally.
Then the Minister said:
Investment should also maintain the upward momentum experienced last year due to the better economic climate now in prospect and due to the measures introduced by the Government to assist activity in the building and construction sector.
I have already mentioned that and there is no need for me to comment further. Then the Minister said:
While price reductions and other developments will give a welcome boost to economic activity, ..
Would somebody on the Government benches indicate where these price reductions have been effected, when we are told that the benefit in the reduction of the price of oil will not become available from the ESB until September next, when that portion of the food subsidies remaining has been removed resulting in increased prices of essential commodities such as bread, butter, milk and so on? It is wrong to leave that type of statement unchecked. That is why I want people on the opposite benches, the Minister when replying or anybody else for that matter, to say where all of these price reductions have been effected that will benefit our economy to the extent envisaged by the Minister.
Then the Minister said:
The budget deficit remains uncomfortably high and reducing this deficit must continue to be a priority.
After three years and four months in Government the Minister, in as light a way as possible, says that the budget deficit remains uncomfortably high. Nobody knows better than the electorate how uncomfortable are this Government. They know well that that was one of the planks on which this Government were elected, that budget deficiting would be phased out over a four year period. Now it is so high the Minister has acknowledged that it is uncomfortably high and its reduction must continue to be a priority. That is not much of an indication of confidence or of achievement on the part of the Government.
That is what the Deputy's party left us.
The Minister continued:
In emphasising this I am not preoccupied with book-keeping ...
Now the Deputy opposite will see why I need plenty of time. After three years and four months in Government, a total of eight and a half years out of the past 13 in office when we heard so much about the book-keeping exercises necessary to get our economy right, to get public finances in order, now we have it from the Minister that he is not preoccupied with the book-keeping exercises. Perhaps this is a change of policy on the part of the Government. Perhaps the Minister is honest enough to admit, in a couched way, that all this preoccupation with book-keeping about which we heard so much has contributed in no uncertain manner to the dismal failure of this Government, that they are running from the deficit and the book-keeping exercises. It would be as well for them to run and keep running because the electorate will run them anyway.
Where is the Deputy's book-keeper now?
Then the Minister said that the consequences of high taxation are disturbing. I have to agree with him that the consequences of high taxation are disturbing. I will add that they are more than disturbing, that they have disturbed everybody in this country and have put an awful lot of people out of work. Even at this late stage in the life of this Government it is good that at least one Minister has realised that the consequences of high taxation are disturbing.
With regard to taxation and its collection, the fifth report of the Commission on Taxation — a commission initiated by our Government over four years ago — indicates that there could be tremendous savings effected in the manner in which the system is operated.
On budget day when the deposit retention tax was introduced, there was a group of people in those middle benches cheering at the idea. They have since learned that their cheers were misguided because the ideological theory was that it was the financial institutions that were being taxed. The present Minister referred to it in his introductory remarks when he said:
Much attention has been focused, however, on the taxation measures affecting the financial institutions.
All of us have learned that this supposed taxation of financial institutions turned out to be taxation of the individual — the children, the not so young and the small saver.
I was pleased to hear Deputy Molony say there is some hope needed. However, he did not say there is any measure of hope in this Bill. There is no doubt that the hopelessness of the Government is reflected in people's attitudes. The national debt was referred to by Deputy Molony and when I said something to him, out of order, he said it was hypocrisy to be talking in those terms about it. Now we know where the hypocrisy is in regard to the national debt. The second plank, after deficit budgeting, in the Government's election propaganda was foreign borrowing. Now we know their hypocrisy because the national debt stands at £21 billion. When the Government came to power it was at the unacceptable level of £12 billion.
I will refer briefly to the child benefit scheme, a new gimmick by the Government. They took away the £100 income tax relief and said the children's allowance was being increased from £12.05 to £15.05 per month per child, amounting to an increase of £36 per year per child. This is coupled with the elimination of the child dependant tax allowance and a freezing of the dependant social welfare rate. The elimination of the £100 tax allowance means a loss of £48 per child per year in the case of those paying tax at 48 per cent. That outweighs the increase in the child benefit, meaning a net loss of £12 per child. The loss in real terms is even greater, so I suggest that Deputies opposite stop making such a great show of the child benefit scheme.
In their eight and a half years in office out of the last 13 years, the Government have not succeeded in retaining any semblance of the confidence expressed in them when they were last elected. The Government tried hard to create an opinion, through a PR exercise, that they were the greatest. Where is the leadership we heard so much about but saw so little of? Where is the integrity and the honesty the electors heard so much about? Their failures in Government have been matched only by their arrogance. Their only commitment is to hold on despite the widely expressed desire of the people that, in the best interests of all of us, they should resign and put their case to the electorate. In all areas they have failed dismally. They have not listened to promptings from this side on many issues. We put forward suggested remedies in an effort to divert them from the course of ruin they were following. They have failed in Government. As they did last October when they frightened the Government into introducing the house improvement grant, I hope Government Deputies will frighten them into further activity before the country goes down the drain altogether.
Deputy Lyons is such a nice fellow and good friend that I am loath to criticise him or to wish him anything but success in any election he will fight in the near future.
The feeling is mutual.
If the worst befalls him then, and I hope it will not happen, he will be able to earn his livelihood as a storyteller. If the position of O'Brien ever becomes vacant in the children's fantasy in RTE I will feel obliged to do what I can to see that he gets the job. He has made numerous criticisms of the Government and, listening to his simplistic solutions, I wonder why the Soldiers of Destiny are on that side of the House, why they have been banished into limbo.
We will be back.
They may be back in coalition, which the Deputy criticised earlier. In his analysis, Deputy Lyons failed to put his finger on the problem that beset the Government when we came to office. He did not talk about the 1977 manifesto which offered the Irish nation a bribe which was accepted. The people will be paying for it well into the next century because the reverberations of that manifesto will be spoken of with awe, with the same awe with which we speak of the Famine in the last century. That is the root of the economic problems besetting the nation. It is why those gentlemen are in limbo and will remain there.
Temporarily.
Deputy Lyons spoke of a revolution on this side. The revolution occurred on that side. In the short time I have left this evening I can say very little. I want to discuss the neglected Border area which has borne the brunt of the Ulster troubles on behalf of this nation, without compensation from any Government, this one included. Deputy Lyons shed tears for Cork, justifiably. The Cork area was stocked full of industry by successive Governments in the past 20 years and, though we have had a bad patch in recent times, my town of Dundalk, the biggest town in the country, has withered to economic extinction because of lack of action by successive Governments. If Deputy Lyons wants to see deprivation and hardship he should come up to the Border region and he will see it.
I have been there.
Debate adjourned.