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Dáil Éireann díospóireacht -
Tuesday, 31 Mar 1987

Vol. 371 No. 5

Financial Resolutions, 1987. - Financial Statement, Budget, 1987.

Before calling on the Minister for Finance to make his Budget Statement I wish to remind Members that none of the confidential information which will be circulated in advance by the Minister to certain Members may be disclosed to anyone until the Minister has revealed it to the House. Premature disclosure of the information is considered to be a serious breach of privilege. Members should not take from the House any part of the Budget Statement before that part has been read out.

It is time to give a new sense of direction to the economy and to harness more effectively the resources that are available to us. People are dispirited because the economy has been on a downward path. There have been too many failures, too many missed opportunities and a prevailing lack of confidence in our ability to achieve progress.

The first priority of this Government on coming into office has been to prepare a budget for 1987. Despite the short time available, we have undertaken a detailed analysis of budget options. It is evident that conditions are extremely difficult and that there is no room at all for soft options. On the contrary, it is in all our interests that the Government follow a very strict discipline. There can be no concessions to interest groups and all sections of the community will have to bear some of the burden. Today's budget has been framed on the fundamental principles that:

—public finance targets must be consistent with good management of the economy,

—there must be a special focus on productive economic activity and on employment, and

—borrowing and the cost of servicing the national debt must be progressively reduced.

The Government consider that firm action and clear signals as to the direction of policy are now necessary if interest rates are to be reduced and confidence restored. The objective, therefore, has been to reduce the budget deficit and the borrowing requirement below the targets proposed earlier.

For 1987, it is proposed to follow generally the spending profiles in the Abridged Estimates Volume and the Summary Public Capital Programme, as already published, subject to a wide range of adjustments under individual headings. The taxation proposals announced by the previous Government will largely be implemented and further taxation measures, in line with the policies in the Programme for National Recovery, are being introduced.

Real opportunities exist to speed up the development of the economy on a properly balanced basis and to exploit new employment possibilities. Opportunities for growth have already been identified and it will now be the responsibility of Government to provide the right guidance and the right support facilities for the new initiatives that must be taken.

The Economy

The performance of the economy has been disappointing over a long period. The level of national output in 1986 was lower than in 1980. The economy has thus shown no growth at a time when other economies have been experiencing steady, if unspectacular, growth. Employment levels have fallen significantly and unemployment is on an unprecedented scale. Investment has been declining steadily and last year there was no growth in exports. There have been some positive aspects, such as a substantial improvement in the balance of payments, a reduction in inflation and containment in annual Exchequer borrowing. The challenge to this Government is to make the decisive breakthrough and to initiate economic recovery after several years of decline.

There are good prospects that the international economic environment will remain favourable over the next few years. Growth in world trade could be reasonably buoyant and, even with some recovery in oil prices, inflation is expected to remain low in most industrialised economies. The Government are confident that, in these conditions, the potential exists for a significant and sustained improvement in our economic performance. This improvement will not happen, however, without radical and courageous policies and significant changes in attitudes and patterns of behaviour throughout the economy.

The strategy and principles outlined by the National Economic and Social Council in their report entitled "A Strategy for Development 1986-1990" will form the basis for the Government's general approach. It is well to note what the council have to say about our difficulties and the solutions. The council warn that, if existing policies are not changed, unemployment will be significantly higher in 1990 than it is now. Prospects for economic growth through the policies followed up to now are not good. The existing state of the public finances acts as a powerful brake on economic growth and it is imperative that the level of debt be stabilised as a prelude to reducing it. The council set out a range of policies for increasing the productive capacity and efficiency of the economy to create more jobs. They also identify the present tax system as a major source of economic inefficiency and outline tax reform leading to a more effective and equitable system.

The Government are determined to set the economy on to a higher and sustainable growth path over the medium term. This will require the restoration of confidence, better management of the public finances, the active pursuit of development opportunities and maintaining stability of the exchange rate within the European Monetary System. It will also require sacrifice broadly spread across all groups in society, while protecting those most in need. A disciplined economy where sectional interests do not prevail to the detriment of the common good is essential to a strong and balanced recovery. Today's budget is a first step, but nevertheless a critically important step, along that road and is a clear earnest of the Government's determination to see the task of national recovery brought to fruition over the next few years.

Some of our difficulties, especially those related to the high level of interest rates, follow from the unidentified outflow of funds in recent years. While we cannot be completely sure as yet about the nature of such outflows, we must reverse the trend without further delay. We must do more to encourage nonresidents, and especially expatriates, to invest in the Irish economy. They will do this only if they have sufficient confidence in the economy and feel that their investment is secure.

Incomes

The success of any strategy for growth and higher employment will depend critically on developments on the incomes front. Pay increases in excess of what employers can really afford and of the economy's capacity to bear have contributed greatly to our economic difficulties — the dismal growth performance, the decline in investment, heavy job losses and inadequate job creation. Over the past decade, earnings in Irish industry rose 50 per cent faster than in the countries with which we trade. This trend must be reversed if we are to achieve sustained economic growth on foot of expansion of the trading sectors. There should now be a better understanding of the need for moderation in regard to pay. Pay increases, if warranted at all, must be below the rate of inflation and every means of containing costs must be fully explored. This is the only way to improve competitiveness, increase exports and improve job opportunities.

European Community

Developments in the European Community will be of critical importance for us in the next few years. In several areas, and in particular in agriculture, regional and social policy and taxation, major changes are envisaged which will have a very big impact on our whole economic well-being. It is the Government's wish to be fully supportive of developments which help to bind the Community into a more cohesive economic and social unit. At the same time, we expect that there will be full and proper recognition of our particular difficulties and an acknowledgement that, without special arrangements, we cannot fulfil the role we wish to play in the development of European economic and social unity.

Debt Management

The annual cost of servicing the national debt is a severe burden on the economy as a whole and on the individual taxpayer. The stage has now been reached where virtually all the receipts from PAYE are absorbed in servicing debt. It is not sufficient that we contain the rise in debt which generates such a cost; we must at the same time be fully satisfied that the large portfolio is managed with the utmost efficiency so as to keep service costs to a minimum.

Budget Policy for 1987 and Future Years

The Government recognise the essential importance of reducing dependence on borrowing, which means that public expenditure must be curtailed. The commitment was made in the Programme for National Recovery that public expenditure will be contained in real terms at or below the 1986 expenditure levels measured as a percentage of GNP and that the budget deficit will be reduced. The alternative is a substantial increase in taxation which is just not acceptable.

This is the basis for budgetary policies in this and future years. It requires continuing curtailment of public expenditure which will have a widespread impact on the provision of public services. It is the Government's intention that this impact should be spread across the full range of public services as far as is reasonably possible, taking economic and social considerations into account.

OPENING BUDGET POSITION

The opening deficit position, based on the Estimates of Receipts and Expenditure, was £1,343 million, after allowing for the deduction of departmental balances. From this must be deducted £48.5 million, the expected receipt from excise duty increases already implemented, giving an actual position of £1,294.5 million. The opening Exchequer borrowing requirement on this basis is £2,028.5 million.

The Exchequer receipts and issues for the first quarter of this year will be published tomorrow. The figures overall are as expected. While the deficit for this quarter will be higher than in previous years, this reflects the pattern of spending and collection of revenue at this stage and does not indicate any deterioration in the underlying position.

Public Expenditure

We simply cannot afford our present level of public services. For as long as public expenditure and, in consequence, taxation and borrowings remain at their present levels, productive activity in the economy will be stifled and we will not achieve the recovery in output and employment that this Government are determined to bring about.

In the three weeks since taking office, the Government have conducted as searching an examination as possible of all departmental spending programmes, looking closely at the justification for the expenditures and the scope for reductions. The message I have to deliver is unpalatable but it is critical to the revival of our economic prospects. We cannot be content to announce our intention to curtail spending while at the same time deferring action. We have to act now. Some schemes must be terminated, others must be reduced in scope and all public services must become more cost-effective. I am only too well aware of the number of lobbies for increased spending and how vigorously they will contest any curtailment of State services. But the national interest must take precedence over sectoral concerns.

The Estimates Volume published on 20 January by the previous Government proposed that non-capital supply services this year should amount to £6,013 million. A further £14.5 million was added to this figure in the budget proposals of 20 January, making a total of £6,027.5 million. This is too high. The Government have decided on substantial further reductions in departmental estimates amounting to over £63 million gross. When allowance is made for modifications decided upon by the new Government, the net saving amounts to over £35 million.

I am publishing today a separate document showing revisions to the previous Estimates Volume and Capital Programme which sets out the departmental allocations, current and capital, decided upon by this Government. The main decisions and assumptions underpinning these estimates are set out in the Principal Features of the Budget. Copies will be made available to all Deputies. I will also present as soon as possible after the budget a revised Estimates Volume incorporating these changes.

I would like to comment briefly on the more significant features of the revised Estimates Volume.

Social Welfare

We have studied closely the proposals of the previous Government for reducing spending on social welfare and we consider that some of them would bear too harshly on those who have no option but to look to the State for income support. We have decided to modify them in the following respects.

The 3 per cent increase in social welfare allowances will be brought forward from November to July. In this way we are ensuring that those who have to rely on welfare payments will not fall behind.

We will not shorten the duration of entitlement for unemployment benefit from 15 to 12 months because the saving involved would have been achieved at the expense of one of the most vulnerable and deprived sectors of our community — the longer term unemployed.

The proposal to extend the waiting days for disability benefit from three to six and the imposition of waiting days on transfer to disability benefit from maternity allowance will not be implemented.

For extended entitlement to disability benefit, the required number of paid contributions will be increased from 156 to 208, not to 260 as was proposed by the previous Government.

We intend to proceed with the proposals of the previous Government to reduce pay-related benefit for new applicants from rates of 25 and 20 per cent down to a new uniform rate of 12 per cent and to increase the contribution test for disability, unemployment and maternity benefits from 26 to 39 contributions.

The PRSI ceiling is being increased to £15,500 with effect from 6 April.

We do not intend to introduce a living alone allowance for the over-45s on long term unemployment assistance. This proposal cannot possibly be given priority in present circumstances. The problems of those on long term unemployment assistance have already been recognised by giving them specially increased rates of payment.

The extension of treatment benefits to the spouses of qualified insured persons will take place in October. This is necessary to give time for the new administrative arrangements to be put in place. Finally, the increase in the rate of payment under the family income supplement scheme from 33? per cent to 50 per cent will be paid with effect from July.

Job-Search Programme

The Government have decided to initiate a national job-search programme commencing tomorrow. The objective is to interview 150,000 unemployed persons by the end of the year and to offer them a minimum of 40,000 Manpower scheme opportunities. The programme will also provide job-search courses for an additional 12,000 people. The agencies involved are being geared up for the campaign. The additional resources necessary to carry out the nation-wide job-search process will be made available by redeployment of staff to the Department of Social Welfare from other areas in the civil service and by the re-allocation of resources within the Department of Labour and their Manpower offices. With adequate resources and a determined effort that will be sustained, we are confident that the programme will both enhance the prospects of those genuinely seeking employment and ensure that the live register more accurately reflects conditions in the labour market.

The effect of the measures decided upon by the Government is to increase the cost of social welfare services from £1,549 million in 1986 to £1,592 million, or £6.5 million above that fixed by the previous Government. This will be more than offset by further reductions in other public spending programmes.

Health Services

A total of £1,111 million is being provided from the Exchequer for non-capital expenditure on the health services in 1987, as against the 1986 outturn of £1,115 million.

This is a substantial provision given the severity of the budgetary problem and the manner in which it is to be used reflects the Government's determination that, in particular, economies will not be achieved at the expense of the less welloff.

We have decided to reverse the previous Government's proposal to impose prescription charges on medical card holders and their proposal to abolish the dispensing doctors scheme.

The charge of £10 for hospital outpatient treatment, as announced on 20 January, is being retained and a daily charge of £10 for public ward maintenance will be introduced. In addition to generating income the charges should have the effect of reducing unnecessary recourse to hospitals. Medical card holders will, of course, be exempt from these charges. The charges will be brought into effect to coincide with the introduction of VHI schemes to cover those who wish to take out insurance cover.

As already decided, consultants will be required to contribute to the cost of public facilities used by them for private practice.

Legislation necessary to allow outpatient charges to be made will be introduced tomorrow. Other necessary changes will be made by way of regulations or administrative procedures.

Overall, every effort must be made throughout the health services to achieve savings by enhanced efficiency in the delivery of services and in the purchases of supplies in order to ensure that essential services are maintained while respecting the allocations decided. Substantial savings will also be made by a reduction in recruitment and pay "extras".

As decided on 20 January, the Health contribution income ceiling will be raised to £15,000 from 6 April. At the same time, the rate of contribution will be increased from one per cent to one and one-quarter per cent to yield about £11 million extra in 1987.

EDUCATION

The Government have decided that the net non-capital provision for Education will be £1,051 million which, when account is taken of increased resources, involves an £11 million reduction on allocations decided by the previous Government. Expenditure on Education will be £106 million above the 1986 outturn which is an increase of 11 per cent.

The Government have reversed the decision of the previous Government to bring career guidance teachers within the "quota" in second-level schools because of the importance of career guidance in current economic conditions. We have, however, decided on a substantial number of steps that will secure savings over all levels of education. None of these will restrict access to education, or remove any essential part of the educational system. The main steps are set out in the document, Principal Features of the Budget.

The Exchequer cash that will be available to educational institutions will be reduced. The Government recognise that many of these institutions are already operating under tight financial constraints, but further economies are unavoidable. I would emphasise that reductions in Exchequer aid must be accompanied by real economies; the Government will not accept that the outcome of the decisions which they have taken in the education area should be increased borrowing by educational institutions, no more than they will be in other areas, such as health or local government.

Other policy measures will also be taken. For instance, the Government have decided to defer the computerisation of the certificate examinations. They have also decided not to implement the previous Government's youth policy pending re-examination of the youth area. In the light of that re-examination the Government would hope to make such further provision as financial circumstances permit.

Social Employment Scheme

The Government intend to increase participation in the social employment scheme by 1,500 in the current year to provide additional opportunities for unemployed workers to regain a foothold in the labour market. The cost of this measure will be offset partially by a reduction in the allowances payable to single participants, from the present £70 per week to £60 per week for new recruits to the scheme.

Agriculture

In determining the allocation for agriculture for 1987, the Government have decided, as in other sectors, that priorities must be established in order that essential services are maintained. Exchequer support for certain schemes such as the livestock improvement programme which, although desirable, are not of paramount importance, is being scaled down.

Beneficiaries will be expected to contribute towards the cost of some of the essential services. Some new charges are being introduced, while other existing charges are being increased. The most significant increase in charges is that in the disease levy where, in line with the previous Government's approach, higher rates of levy are being introduced to finance an increased level of BTE testing.

Public Service Pay

Public Service pay is obviously a key element of this budget. The previous Government's Estimates, framed on the basis of no further general increase after the expiry of the current public service Pay Agreements on 30 June next, put the Exchequer Pay and Pensions bill in 1987 at £2,840 million. The Government are seriously concerned at the size of this bill and the problem of financing it in present circumstances. There are two major factors accounting for the size of this Bill — the rates of pay and the number of public servants. Action must now be taken on both fronts.

As regards pay rates, although the present Government are prepared to honour the previous Government's commitment to pay the third phase of 2 per cent under the 25th Round Pay Agreement from 1 May next, we intend to adhere firmly to that Government's decision to make no provision for any further general increases on the expiry of the present agreement on 30 June. Indeed, we now find that we have no option, given the present state of the public finances, but to go further and direct that as from today no public service employers are to pay any special increases other than those already approved and for which provision is being made in the revised allocations for non-capital supply services. Similar restrictions will, of course, apply to claims for improvements in conditions of employment. Deputies will be aware that the Government have already set a headline as regards pay restraint by the announcement on 13 March of the decision to postpone indefinitely any action in relation to the Interim Report of the Review Body on Higher Remuneration in the Public Sector.

I propose to arrange for discussions with the various staff organisations on the implications of these decisions for the existing negotiating machinery.

As regards numbers, the public sector in its widest sense today employs 300,000 people. Some 187,000 of these are in the public service area which is directly financed from the Exchequer at a cost, as I have already said, of £2,840 million. Over the past few years, reductions have taken place in some areas but there has been no overall reduction because of increases in other areas. The cost of the public service still represents too great a burden on the Exchequer. This burden must be eased in the interests of putting the public finances on a sound footing to allow a shift of resources to the private sector. In particular, it is of the utmost urgency that the wealth-creating sector of the economy should be expanded.

I have already indicated the measures being taken in relation to pay rates. These must be matched by measures to secure a reduction in the numbers employed right across the public service.

Accordingly, with effect from today, the Government have decided on the following measures to reduce public service numbers:

—in the Civil Service no vacancy may be filled without the consent of the Minister for Finance;

—the Minister for Finance will have authority to redeploy staff within the Civil Service as required;

—no vacancy will be filled in any other area of the public service funded from the Exchequer without the express approval of the Minister responsible for that area with the consent of the Minister for Finance.

The combined effect of these measures is to reduce the Exchequer Pay and Pensions Bill in 1987 to £2,813 million. Despite the reduction, this figure still represents an increase of over 5 per cent on last year which is much higher than the rate of inflation.

The Government have, of course, to consider the question of public service pay not just as it bears on the 1987 budget, but also in a longer term context. What happens to the pay bill over the next few years will have a crucial bearing on the scope for re-orienting the balance of public expenditure more towards promoting growth. The greater the share of State resources that the pay bill absorbs, the less will be available, against the background of the overall budget constraint, for other purposes.

It may be difficult for individuals and particular groups to accept the necessary restraint on pay, especially if they consider themselves to have fallen behind their colleagues, but they have to bear in mind the compensating advantages, such as job security and pension arrangements, which they enjoy. Moreover, the State, in remunerating its employees, has to be as sensitive as any employer to borrowing and revenue constraints. Otherwise the security of public service employment and the level of public services will be jeopardised.

National Lottery

The National Lottery was launched last week and I am pleased to note that it is enjoying considerable popularity. As a revenue-earning operation it enjoys the dual advantage of being voluntary and offering those who buy tickets the opportunity of a substantial prize. I would like to congratulate An Post on their very effective launch and wish them every success in the future. I have made a provision of £7 million in the budget, on both the revenue and expenditure sides, for the Exchequer's share of the lottery proceeds in 1987.

Capital Expenditure

The Government have had a searching look at the State's capital expenditure. We have decided to reduce the Public Capital Programme from the level of £1,721 million, previously announced, to £1,655 million — a reduction of £66 million, just over £59 million of which related to Exchequer-funded elements of programmes. The outturn for 1986 was £1,645 million.

As with current expenditure, all individual programme areas have been closely examined and reductions have been made in almost all categories. We have considered the demands likely to be made for non-programme outlays and have decided that a provision of £75 million, £15 million less than proposed by our predecessors, will be sufficient.

Details of the main programme reductions are set out in the Principal Features of the Budget. I would, however, like to refer briefly to two items.

Housing grants

There has been a massive build-up of commitments under the house improvement grants scheme. The previous Government increased the allocation for this scheme from £27 million in 1986 to £100 million in 1987. We considered carefully whether this could be reduced but had to conclude that it could not. The day is past when we can accept every new service as simply an addition to all existing services. It has, therefore, been necessary to terminate a number of housing grant schemes and to make adjustments to other Environment capital programmes.

The Government have decided to terminate three of the four housing grant schemes operated by the Department of the Environment with effect from 27 March 1987.

The schemes terminated are:

the house improvement grants scheme,

the £2,250 builders' grant for new houses,

the £5,000 surrender grant for local authority tenants and tenant purchasers moving to the private sector.

(Interruptions.)

The Chair will not tolerate any interruption at all. It is most unusual and unruly that the Minister should be interrupted.

(Interruptions.)

The Minister to proceed without interruption, please.

These steps will lead to savings of £6.5 million in 1987, and much more in 1988 and later years. A scheme of improvement grants will continue to be available to disabled persons and for essential repairs. The new house grant of £2,000 for first-time purchasers of new houses will continue in operation.

Decentralisation

The Government believe that the more widespread location of public service employment is a desirable long-term objective to help reduce regional imbalances and the pressures on the Dublin region. The decentralisation programme initiated in October 1980 was cancelled by the previous administration in the context of the 1983 Estimates. This Government continue to believe in the efficacy of decentralisation in the promotion of these objectives and I have made an additional allocation of £1 million to the office of public works this year for this purpose.

Exchequer Borrowing Requirement for Capital Purposes

The adjustments I have announced today, together with buoyancy in Exchequer capital resources, mean that borrowing for capital purposes will now fall to £658 million this year, £77 million less than the figure set by the previous Government and £92 million less than in 1986.

Taxation

Personal taxation is at an all time high and is a serious deterrent to our development. There must be reform in order to remove barriers to economic activity and to make the system demonstrably fairer. There must also be radical improvements in tax collection.

In the short-term it is not possible to reduce taxes. The Government will, however, give early consideration to major changes, as soon as the budgetary position allows. We have now reached a point of diminishing returns in relation to some taxes. The loss of trade to Northern Ireland, in particular, because of high taxes is an intolerable drain on the economy.

Before dealing with new tax measures, I would like to refer briefly to the proposals put forward by the previous Government on 20 January. These are being implemented with the exception of the proposals to change the terms of the travel tax and to extend the farm tax to an increased number of farmers. The appropriate legislation will be incorporated in the Finance Bill. The full details of the 20 January proposals, amended where necessary, are outlined in the Principal Features of the Budget. The tax yield from the proposed increase in the stamp duty on life assurance premiums will, however, be down from £4 million to £2.4 million for this year because of the delay in implementing the change. An order has now been made to bring the increase in duty into effect from 1 May.

I will now turn to the new taxation measures which are being introduced by this Government.

Income Tax

First of all I have to say that, because of the difficult budget situation, it is not possible on this occasion to provide for reductions in income tax. A choice has had to be made between reducing borrowing and reducing income tax and the more responsible course for all concerned at this time is to lower the borrowing figure.

It is the Government's intention, as soon as circumstances permit, to move to a stage where two-thirds of taxpayers will pay tax at the standard rate only. It is an essential element of income tax reform that the proportion of taxpayers liable for tax at the higher rates should be reduced. In the past six years this proportion has increased from 14 per cent to over 43 per cent. The present figure is altogether too high and, with an improving budget situation, it will be a Government priority to bring substantially more taxpayers down to the standard rate.

Mortgage Interest Relief

Mortgage interest relief will cost about £160 million in 1987-88 in terms of tax revenue foregone. The present ceilings for this relief are £4,000 in the case of a married couple and £2,000 for a single person. It is an extremely expensive relief and it is now proposed to claw back a small proportion of this revenue for the coming tax year. Accordingly, the interest qualifying for relief is being restricted to 90 per cent of the amount which at present qualifies. This will mean a small reduction in the relief available to all claimants, with the biggest claw back from those who are currently benefiting most. The tax benefit will still be very generous and at the present mortgage rate will be, at maximum, the equivalent of full relief on a loan of nearly £29,000. The yield from this change will be £10 million in 1987 and £16 million in a full year. The position for future years will be reviewed in the light of interest rate developments.

Withholding Tax on Fees

Substantial sums are paid annually from State sources in fees and similar payments for professional services. These include payments for medical, legal, financial, training, engineering and similar services. It is considered that tax should be deducted from such payments at source because employees generally are subject to an immediate deduction system under PAYE. Accordingly, from 6 June next, there will be a withholding tax of 35 per cent on all payments for professional services made by Government Departments, local authorities, health boards and certain other State agencies. This will have a cash flow benefit for the State which is estimated at £25 million for this year.

The gross payments before withholding of tax will continue to be included in the normal way in the calculation of profits for the year for which they form all or part of the basis of assessment. The resulting tax charge will be reduced by the amount of withholding tax deducted. Where no tax liability arises for that year or where the liability is less than the withholding tax deducted from the fees included in the profits assessed for that year, an appropriate refund will be made by Revenue. There will be provision for interim refunds where the deduction of the withholding tax gives rise to hardship.

Tax Treatment of Expatriate Remittances

At present under the "place of abode" rule Irish people working abroad are liable to Irish tax on their remittances home if they maintain a place of abode here and return, even for short periods, during the tax year. I propose to abolish this rule so that remittances home will in such cases be free of tax. This will be provided for in the Finance Bill. It is entirely appropriate that Irish people working abroad should be able to visit home and transfer their savings here without being subject to tax simply by virtue of such visits.

Non-Resident Accounts

I mentioned earlier our desire to attract more funds from abroad. There appears to be some misconception about the tax status of non-resident deposits. Let me make the position clear. Such deposits are entirely free of retention tax in our jurisdiction. I can give assurances that we have no intention of changing this arrangement. Non-residents can lodge deposits here in complete confidence.

Farmer Taxation

It is the view of the Government that farmers should be taxed in the same manner as other sections of the community, that is, on actual income. It has been decided, therefore, to discontinue the farm tax — normally called the land tax — from 1987 onwards and legislation to this effect will be introduced shortly. Farm tax liabilities due and unpaid in respect of 1986, which total approximately £5 million, will be pursued by the local authorities and there can be no question of an amnesty.

The number of full-time farmers actually assessed now for income tax purposes is approximately 55,000. The expected yield from income tax on farmers this year after abolition of the farm tax and on the basis of existing collection arrangements is £35 million. It is the intention that all farmers likely to have taxable incomes will be assessed for income tax as soon as possible and to this end the system of issuing simple profile forms for smaller farmers, which was first introduced in 1983, will be extended. Completed farm profile forms enable the inspector of taxes to make a speedy judgment as to whether or not a particular farmer is likely to have a taxable income. Formal income tax assessment can then be confined to such cases. This system simplifies procedures considerably both for the tax authorities and the individual farmer and will in many cases avoid the need for a specialist accounting service. The increased use of profile forms is expected to bring in an extra £1 million this year.

The abolition of farm tax involves a reduction of £9 million in taxation from farmers this year. This shortfall must be made good by the farming community from another source. Accordingly, I propose to reduce the flat-rate VAT addition to farm prices from 2.4 per cent to 1.7 per cent with effect from 1 May. Farmers retain, of course, the right to be registered for VAT and thus to recover any VAT paid by them on inputs. This change is expected to give a yield of £9 million this year. In consequence of the abolition of farm tax or land tax the Farm Classification Office is being closed down.

Taxation of Business

The tax contribution from the business sector is small by comparison with other countries. This is primarily due to the exceptionally generous tax concessions that are available.

It is the intention to continue with the review of the structure of the corporation tax code, initiated by the previous Government. This review will investigate in particular the feasibility of reducing initial allowances and free depreciation with a parallel reduction in the standard rate of corporation tax.

Selective incentives, however, geared towards specific objectives can make a very significant contribution to business development. One such incentive, which is making a useful impact, is the business expansion scheme. Up to now it has been restricted to manufacturing and certain service industries. While the Government intend to maintain this restriction generally, it is proposed to extend the scheme to certain export tourism activities. This means that in future total relief from income tax on amounts up to £25,000 in any one year will be available to individuals who invest share capital in qualifying tourism activities. This kind of investment is essential to maximise our share of the fast expanding specialist holiday segment of the tourist market. The appropriate legislative provisions will be incorporated in the Finance Bill. The Bill will also provide for extension of the business expansion scheme to certain Irish shipping activities.

Financial Services

The growth of the financial services sector internationally, stimulated in large measure by advances in technology, has been one of the more significant features of economic life in recent years. We must aim to share in the benefits to be derived from this growth. Modern communications mean that we are no longer isolated from the main financial markets and so now have the capacity to develop here a strong international financial services sector if we provide the right conditions and a favourable taxation climate. It is the Government's intention to provide incentives to promote this sector. There will be considerable benefits to the economy, in particular the creation of well paid and highly skilled jobs and increased demand for telecommunications and professional services. This development will generate further substantial investment opportunities that will attract capital from abroad and give a further welcome impetus to the economy.

Excise Duties

A number of excise duty increases were introduced from midnight on 20 January by Government order under the Imposition of Duties Act, 1957, as amended. These increases applied to cigarettes and tobacco products, road fuels, gas oil, kerosene and the like, and non-auto LPG. The yield from these changes is estimated at £48.5 million in 1987 and £51.8 million in a full year. I do not propose to make any further changes in the levels of excise duties. The House will today have the opportunity to debate a motion noting the changes in excise duties already made.

Travel Allowances

There has been widespread abuse of the measures permitting duty free allowances by persons who are not genuine travellers who make short journeys outside the jurisdiction for the sole purpose of exploiting these allowances. These duty free allowances are intended to benefit the genuine traveller in respect of goods in his own personal luggage and which are of no commercial character. A person whose sole purpose of travelling is to benefit from the duty free allowances cannot be considered a genuine traveller.

The nature and extent of the abuses to which I have referred have led to a distortion and a deflection of trade of substantial proportions which require urgent action. For the purpose of preventing this widespread abuse, the distortion and deflection of trade and to clarify the law, I have today made regulations under the European Communities Act, 1972, which provide, with effect from midnight tonight, that travellers' allowances will no longer be permitted for persons whose journeys outside the jurisdiction of the State are less than 48 hours' duration.

Existing limited travellers' allowances relating to frontier zone residents and international transport crews will continue to apply. I also intend to enter into consultation with the European Commission and our European partners in connection with this problem with a view to preventing any further or continuing abuses or distortions of the kind to which I have referred.

Tax Administration

The Government recognise the essential need for further improvements in tax administration. Reform of the structure is of limited value in practice if the administration is not properly geared to take advantage of improvements. As a result of the departmental re-organisation now taking place, in particular the merger of the Department of the Public Service with the Department of Finance, staffing resources have been freed for essential urgent tasks. I am, therefore, forming a task force composed of some 25 highly qualified and experienced officers from the Department of the Public Service to be put at the disposal of the Revenue Commissioners to concentrate on the collection of tax arrears. It is expected that this arrangement will result in an increase in revenue this year of £10 million.

The Government favour the principle of self-assessment for income tax and corporation tax and this will be given priority. The implications of a change of this nature will be examined in the light of comments being received from interested parties. In view of the significance of such a development and the changes that would be required to make it work, the Government may consider publication of a further paper, outlining requirements in more detail.

A measure that has been particularly successful has been the introduction of a tax clearance certificate as a precondition for securing public contracts over £10,000. It is estimated that as much as £12½ million in back taxes has been recovered directly as a result of this requirement. To date, however, a number of public bodies have failed to implement this requirement satisfactorily in awarding contracts. The Government will not tolerate this further. These bodies must now comply with the requirement without further delay or account for their failure to do so.

Arrangements are going ahead for the introduction of a requirement whereby applicants for all grants from State and public authorities must give their tax number and confirm that their tax affairs are in order.

Deficit and Borrowing Requirement

The current deficit and Exchequer borrowing requirement proposed by the previous Government on 20 January were £1,293 million and £2,028 million respectively. The expenditure and taxation changes which I have made today will significantly lower these targets to £1,200 million and £1,858 million respectively. In terms of GNP, today's figures translate into a current deficit of 6.9 per cent of GNP and an Exchequer borrowing requirement of 10.7 per cent of GNP. The corresponding percentages proposed on 20 January were 7.4 per cent and 11.7 per cent of GNP and the figures for 1986 were 8.5 per cent and 13 per cent.

The planned reductions in the current deficit and Exchequer borrowing requirement compared to those proposed by the previous Government represent a significant achievement. They are firm evidence of this Government's determination to improve the public finances and to maintain the stability of our currency. They are also a clear signal to all that borrowing will be progressively reduced.

It is the Government's intention to ensure that there will be no overrun on the budget targets and that the individual decisions underlying the figures will be implemented fully. Any additional expenditure or shortfall in taxation will have to be balanced by adjustments elsewhere because there is simply no room for any relaxation of these targets.

Conclusion

As I said at the outset, we all have the obligation to work together to overcome our difficulties. We must generate a new sense of purpose and a new confidence. We must identify both our strengths and our weaknesses and develop new avenues for investment and employment.

The Government are very conscious of the need to provide a stable economic and financial environment and positive attitudes towards investment. The economy is essentially in a sound position, and we have advantages in terms of raw materials and a skilled labour force which are not being used to the best advantage. Indigenous industry has been stagnant for too long. There is an air of despondency that is unwarranted. We have problems but it is well within our ability to correct them.

We have the essential resources to get out of the depression that has enveloped the country in recent years and to open up new possibilities for growth and employment. We simply cannot afford to let opportunities slip. Optimism does matter. We must provide the best conditions for the inflow of capital into the country, for lower interest rates and for higher investment.

This budget is the first step in providing the right balance for a new outlook based on a sound financial situation. New possibilities for steady economic growth and employment are being opened up. The policies being implemented this year will be continued and developed over the next few years in line with the Government's programme and people can plan in the certainty that there will be no change of direction. The public finances will be managed prudently; there will be a better distribution of the tax burden and the economy will become increasingly competitive.

We must not be intimidated by the difficulties or give way to defeatism. Let us take the opposite course. Let us talk of opportunity. Let us work together in a new spirit of co-operation, determined to get things right. This requires a contribution from all sections of the community. The essence of consensus is that the various interest groups will each make some contribution to the public good.

As things come right, success will become self-sustaining. Jobs will become available again. Taxes can be lowered. We will have a stronger economy that will allow us to improve social conditions. These are the rewards for exercising the necessary discipline and restraint in the short-term.

I commend this budget to the House.

TABLE EXPLANATORY OF CURRENT BUDGET, 1987

Revenue

Expenditure

£m

£m

1. Revenue

7,168.5

1. Central Fund Charges

2,445.0

2. Delay in implementation of 20 January proposals

– 1.6

2. Supply Services

6,027.5

3. Commitment in relation to earlier implementation of social welfare increases

+ 19.0

3. New Items

—Extension of farm profile system

+ 1.0

4. Expenditure reductions

– 63.6

—Reduction in flat rate VAT additions to fram prices

+ 9.0

5. Adjustment resulting from revised farmer taxation arrangements

+ 9.0

—Additional receipts from Task Force on Arrears

+ 10.0

6. Estimated Departmental balances

– 20.0

—Withholding tax on professional fees, etc. paid from public funds

+ 25.0

—Reduction in mortgage interest relief

+ 10.0

—Gain from restriction on travel allowances

+ 20.0

—Effect on tax receipts of reductions in expenditure and additional taxation

– 25.0

+ 50.0

4. Deficit

1,200.0

8,416.9

8,416.9

PART VI: BUDGET TABLES.

TABLE 1: SUMMARY OF CURRENT AND CAPITAL BUDGETS 1986 AND 1987.

1986

1987

Provisional* Outturn

Post-Budget Estimate

£m

£m

CURRENT BUDGET

1. Expenditure

(i) Central Fund Services

2,253

2,445

(ii) Supply Services

5,852

5,972

8,105

8,417

2. Revenue

(i) Tax

6,096

6,569

(ii) Non-Tax

614

648

6,710

7,217

3. Current Budget Deficit

1,395

1,200

CAPITAL BUDGET

4. Expenditure

(i) Public Capital Programme

1,646

1,655

(ii) Other (non-Programme)

98

75

1,744

1,730

5. Resources

(i) Exchequer

318

371

(ii) Non-Exchequer

676

701

994

1,072

6. Exchequer Borrowing Requirement for Capital Purposes

750

658

7. Total Exchequer Borrowing Requirement (3+6)

2,145

1,858

8. Total Exchequer Borrowing Requirement as % of GNP

13.0%

10.7%

*The 1986 outturn figures based on end-year Exchequer issues. The supply services figure and as a consequence the current budget deficit figure have been adjusted to include an excess of £16 million on the Environment Vote.

Table 2:

SUMMARY OF CAPITAL BUDGET REQUIREMENTS (INCLUDING CURRENT BUDGET DEFICIT) AND RESOURCES: 1986 OUTTURN AND 1987 ESTIMATE

REQUIREMENTS

£ million

1986

1987

1987

Budget Estimate

Provisional Outturn*

Original Estimate at 20 January

Budget Estimate

1. Public Capital Programme

1,681

1,646

1,721

1,655

2. Non-Programme Outlays

1,320

1,493

1,383

1,275

of which

Exchequer-Financed

(a) Current Budget Deficit

1,250

1,395

1,293

1,200

(b) Miscellaneous

70

98

90

75

3. Total Requirements

3,001

3,139

3,104

2,930

RESOURCES

4. Non-Exchequer Resources

672

676

708

701

of which

(a) State Bodies

637

637

669

663

(b) Local Authorities

35

39

39

38

5. Exchequer Internal Resources

248

241

288

291

of which

(a) Loan Repayments, etc.

66

72

88

91

(b) Sinking Funds

163

158

178

178

(c) Appropriations-in-Aid

19

11

22

22

6. European Regional Development Fund

80

77

80

80

7. Exchequer Borrowing

2,001

2,145

2,028

1,858

of which

(a) Net sales of domestic securities

(i)to the public including non-residents

1,156

(ii) to domestic licensed banks

13

(b) Small Savings

254

2,028

1,858

(c) Foreign Borrowing

2,001

812

(d) Decrease in Central Bank's holdings of Government securities

– 11

(e) Miscellaneous including change in liquidity of Departmental Funds

– 79

8. Total Resources

3,001

3,139

3,104

2,930

*The 1986 outturn figures are based on end-year Exchequer issues. The current budget deficit figure, however, has been adjusted to include an excess of £16 million on the Environment Vote.

Table 3:

CURRENT REVENUE 1986 AND 1987

1986

1987

Outturn

Post-Budget Estimate

£m

£m

Tax Revenue

Customs

81,473

85,000

Excise Duties

1,380,338

1,449,000

Capital Taxes

33,784

36,000

Stamp Duties

158,605

142,400

Income Tax

2,388,454

2,721,700

Income Levy

32,899

2,000

Corporation Tax

257,970

261,800

Value-Added Tax

1,527,103

1,631,000

Agricultural Levies (EEC)

12,853

13,000

Motor Vehicle Duties

130,782

132,000

Youth Employment Levy

91,329

95,000

Total Tax Revenue

6,095,590

6,568,900

Total Non-Tax Revenue

613,694

648,000

Total Current Revenue

6,709,284

7,216,900

Table 4:

HOW CURRENT EXPENDITURE WILL BE ALLOCATED AND FINANCED 1987

Where current expenditure will go

How current expenditure will be financed

Item

1987 Post-Budget

% Total Gross expenditure

Item

1987 Post-Budget

% of total

£m

£m

Service of Public Debt

Borrowing

1,200

14.3

Interest

1,965

20

Sinking Funds, etc.

181

2

Tax Revenue

Customs

85

1.0

2,146

22

Excise Duties

1,449

17.2

Capital Taxes

36

0.4

Economic Services

Stamp Duties

142

1.7

Income Tax

2,722

32.3

Industry and Labour

276

3

Income Levy

2

Agriculture

425

4

Corporation Tax

262

3.1

Fisheries, Forestry

46

Value-Added Tax

1,631

19.4

Tourism

23

Agricultural Levies (EEC)

13

0.2

770

7

Motor Vehicle Duties

132

1.6

Youth Employment Levy

95

1.1

6,569

78.0

Infrastructure

116

1

6,569

78.0

Social Services

Health

1,159

12

Non-Tax Revenue

648

7.7

Education

1,134

11

Social Welfare

2,623

26

Housing

241

3

Subsidies

266

3

5,423

55

Security

677

7

Other

791

8

Gross Expenditure

9,923

100

Supply Services Receipts

1,506

Total Net Expenditure

8,417

Total

8,417

100.0

(Limerick East): A Cheann Comhairle, since you exercised your casting vote three weeks ago amazing things have been happening in this country. We welcomed the conversion of the Taoiseach to the implementation of the Anglo-Irish Agreement. We further welcomed his conversion to the fact that there was no problem with Article 1 of that agreement I have great pleasure today in welcoming Fianna Fáil's acceptance of the Fine Gael analysis of the problem and of the targets which we have set down.

Deputies

Hear, hear.

(Interruptions.)

(Limerick East): This is grand larceny of our policy as put before the electorate. The road to Aras an Uachtaráin will now take precedence over the road to Damascus. Only one conversion took place on the road to Damascus. We had 15 on the road to Aras an Uachtaráin. If the Government were subject to the Trades Description Act they would be in the dock tonight for putting before the Irish people a product totally different from what they were contracted to deliver. I am glad they realised there is a better way. Of course there is, we told them that weeks ago. We debated it in public, on radio and on TV. The better way is the Fine Gael way and I am glad the Government have come around to that position.

(Interruptions.)

(Limerick East): During the last session of the Dáil between October and December the party opposite when in Opposition put down 13 motions, almost one every second day, each of which involved irresponsible extra public expenditure. We should welcome conversions when they come and this indeed is a great conversion, although not the first. We had conversions before. In the first coming of Mr. Haughey, he arrived on the scene in 1979 when the current budget deficit had overshot by £233 million. In one of the best analysis of the economic problems facing this country, he went on TV explained what was wrong and did nothing. At the end of that year he overshot the budget deficit by £193 million. In 1981 the target was overshot again, this time by £304 million.

When we went out of power, Mr. MacSharry was appointed Minister for Finance and he introduced his first budget. Deputies will recall the policies during that first budget of Fianna Fáil. Targets were set and we thought that Fianna Fáil were accepting our economic policies but at the end of that year they overshot by £310 million. This was despite the Taoiseach saying on the 1982 budget that they intended to adhere to these targets, to have rigid control of the public finances, that should any additional expenditure become necessary it would be met by a corresponding reduction in expenditure elsewhere.

Yet, at the end of the year they overshot by £310 million.

This is a conversion all right, but we have seen conversions before and the targets were not adhered to. If there is any indication of funny money in this budget, if there is any indication of deferred expenditure in this budget, the Government will not have the support of this side of the House. We will mark Fianna Fáil man for man and woman for woman; we will insist that Fianna Fáil adhere to their targets, if we know what they are.

(Interruptions.)

(Limerick East): We have an unprecedented situation here today where a Minister for Finance comes in, does not circulate the main features of the budget and where there is £100 million of public expenditure, between capital and current, undeclared in that speech. I do not know where the Minister is getting £60 million in capital expenditure cuts. I do not know where he is getting the cuts on the current side because he does not specify them. This Government are afraid to go out over the airwaves and explain to the Irish people where these cuts will be made.

(Interruptions.)

(Limerick East): We will examine each specific proposal. The details of the budget are now being circulated and I hope these specifics are spelled out in these documents, that we will see the validity of those specifics, and we will insist that they adhere to them. Fianna Fáil did not adhere to them in the past but we will insist that they adhere to them this time.

While I am discussing a minor historical analysis of previous conversions, the result of the second conversion of Mr. Haughey was as follows.

The Deputy will call the Taoiseach by his appropriate title.

(Limerick East): I apologise. The Taoiseach's targets in 1982 were totally overshot. At the end of that year manufacturing output had fallen by 1.3 per cent, the purchasing power of industrial income was down by 3.7 per cent, consumer sales were down by 5.5 per cent and gross national product was down by 1.6 per cent. We came into this House, the Government told us those targets and we accepted them, but they were not adhered to. Prayer without good works does not achieve salvation. We will insist that the Government stick to the targets this time. If they do not, they will have to face the public because the electorate in their wisdom put them in power. To be fair, the graph was not going down in every area at the end of 1982. There were some increases. Unemployment was up by 26 per cent, interest payments on foreign debt were up by 97 per cent and inflation was up by 17.2 per cent. That is the record of previous conversions.

(Interruptions.)

Order, please.

(Limerick East): I hope this is a real conversion, not a spurious one as happened on two previous occasions.

Tell us about the battle of Clontarf.

(Limerick East): I welcome the Government's targets but I question their enthusiasm to implement them. As I have said I would like to have the specifics spelled out.

I note the Government depend a lot on a decline in interest rates. The market has already discounted 1 per cent on the basis of the current budget deficit coming in at around 7.4 per cent. If the targets are believed, the Government may get another 1 per cent on interest rates. This means they may achieve a reduction in interest rates, and I hope they do, but they must remember they do not control the whole scene. A Minister for Finance in this economy is like a cork bobbing on the ocean. As late as this morning orders which had been placed on the gilt markets were cancelled, not because of an expectation of a bad or a good budget, but simply because there is uncertainty in Wall Street about relationships between the United States and Japan. All I am saying is that the Minister for Finance does not hold the destiny of this nation in his hands when it comes to interest rates. I hope the signal to the market is strong enough to bring down interest rates because this is the hinge on which economic activity turns. If the Government's targets are correct and they stick to them, we will underwrite them because we want to reduce interest rates.

There are items in the targets with which I find difficulty and I would like to deal with them. The Minister restored about £1.2 million to the education budget when we had introduced a mechanism to reduce the pupil-teacher ratio by action on career guidance and vice-principals. Elsewhere he has taken £11 million out of the Education vote, but he has not said how this will be done. Knowing the Education Estimate, these changes will have a devastating effect.

The Minister provided money for the better collection of tax revenue and set up a task force. I have experience of task forces from the other side of the House. When Deputy Woods was shadowing me in Justice, the solution to every problem was to form a task force. If a bicycle was stolen in a rural village and the local sergeant investigated it, it could not be effectively done unless you called him a task force. Now we have a task force for the collection of revenue and £10 million is provided. Who comprises the task force? People from the Department of the Public Service who are unwillingly being assigned to the Revenue Commissioners and have no experience of revenue collection or enforcement.

The concept of a retention charge is being introduced for the payment of professional fees. A figure of £25 million is mentioned. I assume this means that a doctor under the GMS scheme will have 35 per cent deducted from his cheque before it is sent out to him. I assume the same will happen where a chemist is concerned. Does this apply to the Voluntary Health Insurance? If it does, I want to remind him that VHI cheques are paid direct to the patient, not the doctor. I would like that point clarified. Will this apply to architects and engineers? These people are working on a turnover figure, not an income figure. All over the country there are engineering consultants and architects employing 20 or 25 people, and the Minister will now take 35 per cent of their cash flow. Of course, because of what this Minister and this Government are doing to the building industry, these people will not have very much work and they will be forced to let a number of their employees go.

On the tax side, I am disappointed with the measures taken. I have dealt with the retention tax and I would like to deal now with the farm tax which is being removed. The farm tax was a fair tax and was welcomed by many farmers. It was doubly welcomed when we introduced the concept of self-assessment. I cannot understand why the Government are taking this out completely, unless they are giving in to one of the biggest lobbies in this country, the IFA. Many farmers around the country, and the majority of farmers in the intensive dairying areas, are happy with the land tax. What this Minister is doing now is removing the land tax and jigging with the VAT rates to compensate. I do not believe a proper income tax or land tax system should be removed while the Minister jigs with the VAT rates to recover the £9 million revenue lost.

As regards the health charges, this Minister did something we would never have done. He introduced a £10 charge for beds in public wards on one of the most vulnerable sections in society. I realise people on medical cards will be exempt and that the VHI will introduce a scheme to compensate their members, but what about that group whose income is too high to qualify for a medical card but who are not in the VHI scheme, that is the majority of low paid workers whether in industry or the public service? The Minister is introducing this charge of £10 a day, £70 a week for people with a take-home pay of £110, £115 or £120. What are these people to live on? Did the Minister understand what he was doing when he introduced this £10 charge for people in public wards?

The Coalition brought in prescription charges.

(Limerick East): This vulnerable section of the community, those who are above the welfare theresholds but with small family incomes are being directly hit. This is a disgraceful charge.

What about the prescription charges?

(Interruptions.)

(Limerick East): Deputies on all sides of the House know that people on medical cards have their bathroom cupboards filled with drugs which they are not taking. Something has to be done about the abuse of prescribed drugs and a small charge on prescriptions would have done that. It would have improved the health of the country far more than many of the measures which are being brought in today.

I would now like to proceed to one of the main planks of the Minister's economic policy which is the question of pay and numbers. Again, I would like to put down a marker. What is the Minister telling us? He is saying that he is going to honour the agreements; we are ad idem on that. We have always honoured agreements on this side of the House. He is saying that no new specials will be paid in 1987 but that the specials which are in the system are being paid. Therefore, there is no saving. He is also telling us that from the end of June no money is being provided for any extra pay increases. That is exactly what we had in our budget, but how is he going to achieve it? Is he going to introduce a statutory wage freeze? Is this a negotiating position? Is it an opening shot in the 26th round? Yet, he has provided no money and no strategy. We have been informed of no strategy.

I am sure he is aware, for example, that if the Aer Lingus deal was applied right across the public service, an extra £70 million would be required in 1987. If the ESB offer was applied right across the public service, an extra £95 million would be needed in 1987. What is the Minister's policy on pay in the wider public service? What is he going to do with the offer in these areas and what is he going to do when the pressure comes on? Are we going to be faced with industrial action with concessions in the autumn and are his figures going to askew on the pay side? I would like an answer to that question.

Secondly, I would like an answer to a question on the Minister's policy on the extended embargo. We carried an embargo of replacing one in three for a long distance and it resulted in a reduction of 9 per cent in the Civil Service. We had increases elsewhere. There are more children and there are far more teachers. Obviously, more teachers were employed during the past four to five years. We had problems with crime and security. Therefore, more gardaí were employed. We had more people in prisons. Therefore, we needed more prison officers. We probably even employed more nurses. Therefore, during the past 18 months by a cash limit system the embargo was extended to health boards and local authorities.

The Minister has put in a figure of £27 million for his extended embargo. The only exception in the Civil Service will be if the Minister for Finance authorises a replacement. The only exception in the public service generally will be if the appropriate line Minister sanctions the exemption. Does that mean no more gardaí and no replacement if any garda retires? Does that mean that if there are retirements in Mountjoy Prison they will not be replaced? More seriously, because the numbers are bigger — I say more seriously in terms of current expenditure — does it mean that if a teacher retires or goes on a career break there will be no replacement? Does it apply to doctors and nurses in hospitals? Does it apply to the officials of health boards and county councils? It has to if the Minister is to achieve the figure of £27 million because to squeeze £27 million out of numbers for the remainder of the year is some achievement. It must mean that every line Minister is being instructed by the Minister for Finance that there will be no concessions whatsoever unless it is absolutely vital, such as the appointment of a key medical specialist in a hospital.

Or the Governor of the Central Bank.

(Limerick East): It seems that the Minister is getting a colossal amount of money, £27 million, and he has two choices. He can impose cuts rigorously in schools and in hospitals and, if he does, it will make our education cuts look like the teddybear's picnic. I would like clarification on that before we commit ourselves to supporting that policy.

I would now like to move to the capital side. The Minister did not specify what he is doing on the capital side but he did give general figures for the cuts he is making. There are colossal cuts in the public capital programme. He is taking out a total of £79.5 million on the public capital programme. Where is that going to hit? The Minister has not told us. It might have been circulated since I got on my feet but the people who were listening on radio did not hear it and I do not know where he is making those cuts or whether they are achievable or not. But I do know this: if you take that much out, it must affect the construction industry. The Minister is cutting the public capital programme by almost £80 million and he is taking out the housing grants. The expectations of a reduced VAT rate on the building sector have not been met. How will the Minister's friends in the building industry look on this budget?

They will be looking for their cheques back.

(Limerick East): Is this the budget that was going to create thousands of extra jobs through increased activity? Will the Minister explain what that is about or how he arrived at that kind of decision in a budget which was supposed to increase employment?

It is a nice change from the irresponsible action you were——

(Interruptions.)

(Limerick East): Conversions are usually followed by the canonisation of the first saint. I think we have an applicant on the Opposition benches.

(Interruptions.)

(Limerick East): There is one aspect of the Minister's policy on the building industry, specifically in regard to housing, I want to take issue with. We brought about a situation by encouraging people to build their own houses where the housing lists of local authorities were at an all time low. Deputies on all sides of the House know how the situation changed over four or five years. People with one child and sometimes with one not quite arrived got three bedroomed houses in some counties. That was an enlightened policy and it encouraged people to do things for themselves. One of the main planks of that platform was the £5,000 grant for those who gave up local authority houses and bought their own homes. We know the effect of the grant. It provided the incentive for people to buy their own homes and it left a good supply of local authority houses to be used by other people.

Socially disastrous.

(Limerick East): We will see. I now want to raise something akin to that. A corollary of our policy in controlling the public finances was that we cut drastically the provision for local authority houses because we no longer needed to make those provisions as people were housing themselves and new houses were becoming vacant which were in good condition. After removing the £5,000 grant, as far as I can see the Minister has not increased the allocation for local authority houses. I think he has reduced the £79 million on the capital side further. I am informed that on the specifics of the budget he has reduced it by £12.5 million. The first thing that is going to happen is that local authority housing lists are going to lengthen and lengthen over this year and the Minister will not catch up with them. It is a reversal of the very strong social policy which was followed by the outgoing Government especially as it related to housing the homeless. That is a disgraceful change in public policy. I am amazed that the Minister has taken that decision.

I should now like to deal with the employment effects of the budget. Obviously, this is a deflationary budget. The Minister is cutting both the capital and current sides. He may get some boosts from a decline in interest rates. If the markets take the Minister seriously that might transfer into street rates. I hope it does. The Taoiseach is quoted in The Cork Examiner, I presume correctly, on 6 February as saying:

It is an inevitable outcome of cuts in Government spending that they result in unemployment — that is the iron law of economics — not just in the public sector but right across the economic spectre.

I presume he means spectrum and that he was misquoted there. He mentioned the iron law of economics and yet today he took £80 million out of the capital programme, abolished all grants in an unspecified way and slashed current expenditure also. Where are the programmes for jobs? Where is the developmental approach? Where is the going for growth? Where is the 2½ per cent increase in GNP between now and 1991?

I am not too sure what growth figure the Minister put in because it was not specified in his speech. I am not sure what inflation figure he put in but, at first glance, from the prima facie evidence I have it appears the Minister has not increased it very much beyond what our figures were, a 1 per cent growth rate built on top of 3 per cent inflation approximately. May I take it they are the figures which underpin the Minister's GNP projection, 1 per cent plus 3 per cent?

The Minister and the Taoiseach are agreeing.

(Limerick East): Fianna Fáil made great play during the election campaign of development policies and growth in the sectoral areas. A lot can be achieved there whether it is in marine, aquaculture, forestry, technology or food processing. If Fianna Fáil build on the achievements of the previous Government there will be scope for improvement but they will not provide hundreds of thousands of jobs, not even thousands of jobs. They are more likely to provide hundreds of jobs rather than anything else. I do not think the Government's economic approach should be to go around trying to pick winners. I do not think it is their job to pick winners. In my view it is their job to provide the atmosphere and environment in which winners can be developed. In doing that I hope one peg of their economic platform will be realised, that they will get low interest rates.

The Government have not given any indication of what they propose to do in other areas. While interest rates are very important in deciding which way investment will go and in terms of the cost to industry, there are other cost factors. The Minister did not mention pay in the wider area. Has he a policy in regard to pay in the private sector? Is that to be allowed to fall where it will, a free negotiation of individual in-house agreements? What is the Minister's policy in regard to the private sector? We must compete for jobs and the only way jobs can be created is by people filling order books abroad, and when the capacity of their plant at home is taken up by employing others to fill those orders. How can we compete for jobs if the environment at home is not right? I do not think the Government can pin their whole economic or employment policies totally on a putative reduction in interest rates.

For example, diesel fuel in the UK is £1.70 per gallon while it is £2.30 here. There are at least two Ministers in Cabinet who are aware of that because of their location in a Border constituency. Haulage costs are 50 per cent higher here than in the UK and vehicle insurance for staff is four times higher here than in the UK. Employers' liability insurance is 7.5 per cent on average of the wage bill here while it is about 1 per cent in the UK. Electricity charges and telecommunication charges are 25 per cent higher than the EC average. Interest rates, as of today, are 4 percentage points higher.

The Government will have to get those matters right. Sending a task force in to sort out the ESB and make them pay the rates that have been levied on them is great stuff, good macho-politics but it drives up the cost of electricity. Is that the Government's only policy in the area of energy?

The Deputy tried to do that but failed.

(Limerick East): I did not fail.

The Deputy did not have the guts.

(Limerick East): I was six weeks in that Department and I set this up for the Government with the result that they did not have any problem when they took office.

The Deputy should tell us the story about the three bears.

(Limerick East): If that is the only energy policy the Government have they will not be successful. I am disappointed that the Minister has not done anything for income taxpayers. I know the scope is not there and that there are difficulties but at least a strong statement of intent and an indication that the Minister knows where he wants to go, if he had the scope, would have been welcomed.

That has been said clearly.

(Limerick East): A wide range of tax policy incentives could be provided to create employment but the budget is very short on them. We had included many specifics and I take it that the Minister is accepting them, although I did not hear him state that. Another lamentable fact is that the Minister ignored completely the relevance of what has come to be known as privatisation of the semi-State sector. The State is involved in activities that it should not be involved in. Unlike another party in the House, we would advocate the selling of those companies and using the resources to reduce the borrowing requirement. I do not think it would be right to use whatever money might be obtained by selling Ostlanna Éireann or Irish Life for tax reduction purposes. The bill for tax reductions goes on from year to year but the advantage from the sale of an asset is a once-off. If the Minister is contemplating the selling off of such assets, and I advocate that he should, the proceeds should be used on a once-off basis to reduce the debt. On the other hand, there are very sound, effective and efficient semi-State companies here. They are sounder and more efficient now thanks to the activities of Deputy Jim Mitchell when he was Minister for Communications. They are all showing a profit.

The Minister can see from an examination of the arithmetic of the budget that whether he likes it or not he will not have the resources to provide the capital that will allow semi-State companies to expand. Many of the semi-State bodies have played a crucial role in the economy of the country but the blunt fact is that some of them are starved for capital. The way to get the capital is to sell off shares against their assets and use the money to expand those companies and increase employment. I have no ideological problem with such a policy and I doubt if the Minister has. In my view he should do that. His rejection of our proposals during the election campaign was totally shortsighted. The Minister should look at this area again and he should not feel embarrassed doing so because he has turned on his head so often in the past three weeks that he will not get dizzy from another turn.

What about the workers of Irish Shipping? What happened to them?

The Deputy should ask Deputy Jim Mitchell.

Jim fixed them.

Was that pre-conversion?

Fianna Fáil made promises.

(Limerick East): I should like to contrast the position the Minister found himself in when he entered the Department of Finance a few weeks ago with that of Deputy Dukes when he took over that Department after the election of November 1982. The Minister is a fair man and I am sure he will give credit where it is due. When Deputy MacSharry took office inflation was 3.4 per cent but when Deputy Dukes took office he faced an inflation rate of 21 per cent.

That is wrong.

And the Deputy knows it is wrong.

(Limerick East): Now that Deputy MacSharry has sat around the Cabinet table I am sure he can imagine the difficulties Deputy Dukes faced in trying to frame a budget against an inflation rate of 21 per cent. If we exclude borrowings and interest payments the budget is balanced but Deputy Dukes faced total disarray in 1982. There is a balance of payments surplus now but Deputy Dukes faced a balance of payments deficit of between 13 and 14 per cent of GNP. The task is much easier for Deputy MacSharry because of the firm foundation laid by the previous administration over the past four years. It is a good time to be in Fine Gael because there is a certain sense of satisfaction in looking around the House at all the people who have been stealing our clothes for so long.

It is small but select.

It is not smaller in Kildare.

(Interruptions.)

(Limerick East): I see that interruption came from the former Minister for Defence. I should like to comment briefly on our colleagues on my extreme right. First of all they adopted the Anglo-Irish Agreement; then it was Fine Gael's social policy and Fine Gael's economic policy. The PDs with all the zeal of the convert advocated those policies in a frenetic manner which caused one revered Deputy in this House to refer to them as the military wing of the Fine Gael Party. I prefer to think of them as the provisional wing of Fianna Fáil.

Fianna Fáil have made amazing progress in three short weeks. We have heard about the working of the Anglo-Irish Agreement and not a word about any constitutional difficulty with Article 1. There is no problem with the Single European Act — as a matter of fact, it is a good thing if you look at it closely. The ACOT Bill is marvellous stuff. On extradition, the Minister for Justice, Deputy Collins, did a soft shoe shuffle around the perimeters of prima facie requirements and as the year goes on we will see how that moves.

The Minister for Social Welfare is staying very quiet about that these days too.

(Limerick East): I always take very seriously everything the Taoiseach says and I went to the trouble of getting a copy of the speech he made on Thursday night. It was a good speech and it predicted many of the things he is trying to do today. There was a gem in the middle — the NDC has suddenly become a Fianna Fáil baby. It is good for the country and good for employment and is fundamental to sectoral development. This is the NDC which they wanted to kill at birth and they claimed they would no sooner be back in office than they would strangle it, but now the NDC is a very good thing indeed.

We have today's budget, renowned for the things it does and the things it hides and renowned most of all for the things it does not do. I remember the election campaign when we were all together walking the roads. Many of us have a fairly clear memory of what happened. I remember the Minister for Justice, Deputy Collins, during what has become known as the "Limerick shout-in" on the first Saturday of the campaign, telling me that DIRT tax would be abolished as soon as they got back into office. It would be no problem. I heard the present Minister for Agriculture, Deputy O'Kennedy, on television informing us all that there would be social welfare increases of at least 7 per cent. There would be no difficulty with this, the night before the Fianna Fáil election policy was published. We know Fianna Fáil and we will be watching them. In every division which took place over a period of four years they cast their votes for the good of Fianna Fáil. They put down 13 motions between October and December, each one requiring extra public expenditure. They are marked men and we will mark them man for man and woman for woman. If they depart from those targets we will have them walking and there is only one destination.

On a point of order, I should like to ask at what time the copies of the Principal Features of the Budget were brought to the House and at what time their distribution began. It has been suggested to me that a Member of this House had a copy before the Minister stood up to speak.

The procedure that was followed on all other occasions was followed exactly today. Maybe what happened in Deputy Noonan's case was that while the ushers were handing the documentation around he was on his feet and other Deputies had it before him. The normal procedure was followed today as in all other cases.

It is nothing to do with Deputy Noonan. It has to do with something which, it is suggested to me, happened before that. Since the Minister assures me that the normal procedure was followed, I think that at some later stage I will come and see you alone, about this matter, a Cheann Comhairle, when you have the opportunity.

This debate is one in which we are reminded, especially by the speech given by Deputy Noonan, that this is an adversarial institution where people come together to argue what is proposed by the Government rather than to get together to do what is best for the country. Listeners at home who heard Deputy Noonan's speech on the radio, if it was broadcast, cannot fail to have been impressed by the derision and scorn he cast upon the Fianna Fáil benches for doing what his party were too gutless and too afraid to do themselves. I find it remarkable that somebody could be so abusive and so scornful when on the Fianna Fáil benches we now see a change of heart of a very substantial kind which has been made in the interests of the country at large. Everyone should have the generosity to accept it. It ill-befits Deputy Noonan or any of the laughing people behind him in his party to forget that when people choose to do the right thing, albeit at the eleventh hour, they deserve support for it and not derision. The people will remember the behaviour today of Deputy Noonan and his colleagues and they will pay for it in the long run.

Another conversion.

They are on their way back. Open the doors.

It is in the nature of this institution that the Government introduce all money Bills and that the Opposition do not have a direct say, at least at the outset, in the money Bills passed by this House. Therefore there has been a habit, exemplified today by the Fine Gael reaction, to oppose, cast scorn and abuse rather than attempt to understand or to find the good things in this budget.

The Progressive Democrats have been founded as a new and separate political party not for the purpose of stealing anybody's political clothes. I will remind the Fine Gael Deputies that they do not own any policies. What is best in the interests of the country belongs to the country at large. They have no monopoly of virtue and no monopoly of policy. The pulpit from which Deputy Noonan has lectured this House for the past few minutes is, in fact, the dock in which he stands adjudged for his economic failures and those of his colleagues over four of the worst years of Government this country has ever experienced. Let us not have any double standards here. He is not let off the hook, and neither are any of his colleagues, for the mismanagement for which they were responsible during the past four years. We will not permit them so to be.

The Progressive Democrats were founded as a new and separate political party in order to make the Irish political process not more devisive but more decisive. I venture to suggest that the tone of the debate today and what was done by the Fianna Fáil Party in bringing forward this budget would not have happened had the Progressive Democrats not come into being. People will judge that issue for themselves. Our response to the measures and proposals put forward today will be constructive, positive where possible and critical where necessary. We will not make the best the enemy of the good in this debate. We will support any proposals which are necessary and point out where proposals made by the Government are insufficient.

We believe in an economic approach which is different — in some respects radically different — from the thinking underlying this budget. Because we believe that these measures are insufficient we will criticise them but, to the extent that they are necessary, they will receive our support.

The context of this budget makes it stand apart from others. First, it is a budget which has been the subject matter of a general election; secondly, it is a budget which largely falls to be implemented by those who sought to prevent others from implementing it; and, thirdly, it is a budget introduced by a party who, with the greatest respect to them, sought and failed to obtain an entirely different mandate on very different policies and attitudes. I say that without rancour or discrimination because the self-justification and "I told you so" which we have just witnessed are pathetic and futile and do not add anything to the debate on the economic crisis confronting us. I merely emphasise the difference between what is being done here today and what was offered by Fianna Fáil to the electorate in order to make the point that an opportunity was lost.

The radical changes needed in the way we conduct our affairs nationally and in the way we finance the Government's activities need a strong political will to sustain them. That political will would have been immeasurably stronger if the Fianna Fáil Party had gone to the people and sought a mandate for the kind of budget they are introducing here today. Their mandate would also have been immeasurably stronger if they had indicated what they propose to do over the next five years because none of what was done today is consistent with the document Programme for National Recovery. It is all one way traffic in the other direction on another street.

If there is a weakness in the extent or quality of the mandate which Fianna Fáil received from the electorate it is, to a large degree, explained by the weakness and lack of courage on the part of Fianna Fáil in seeking a mandate for these measures. Things might have been very different today and in what could happen in the future if lessons had been learned and if the people had been told directly what mandate was being sought.

We take the view that these measures are indirect and insufficient from a particular economic and political standpoint. It is reasonable, in the circumstances, since I intend to criticise, that I should set out that standpoint. The greatest and single most important agent for achieving economic and social justice is to encourage employment and economic participation by those who cannot find, strictly speaking, employment, such as the self-employed. A society which consigns its weakest and youngest to the economic margins will never achieve political justice. Therefore, I suggest — particularly to Deputy Noonan — that everything we consider in this House, every penny we spend, every pound we borrow, every asset we own, every law or regulation we enact must be judged by one criterion only — is it calculated to foster or to hinder economic participation in the form of jobs, work and business by the greatest number of people? That is the dominant political ethic and yardstick by which the Progressive Democrats act and by which we propose to be guided during the course of the life of this Dáil.

Some Members of the House see the Progressive Democrats as the prejudiced handmaidens of enterprise alone without any regard to justice. Equity, enterprise and employment go hand in hand; none can be achieved without the other and, therefore, we do not apologise for putting forward our point of view. This is not simply ideology; it is common sense. We are not speaking in the sectional interests of the "haves" who are interested in maintaining some form of status quo. The whole point is that there is no such thing as a status quo which can be maintained. The destructive process of spiralling indebtedness and increasing taxation which pass for a political status quo cannot be maintained. The present situation cannot continue and the way in which it will end is the business of this House. It is on that issue that the House should debate and divide. What alternative is there to the present set of economic circumstances? That is the question, and not whether we can continue as we are.

The measures proposed by the Minister are inconsistent with his Programme for National Recovery. Perhaps it is just as well because that programme, in so far as it was meant to be understood clearly, suggests that progress could be made by restoring our economic well being by Government led economic activity coordinated by at least 27 new semi-State bodies or committees. I am happy to say that, on the face of the Estimates brought forward in this House, there does not appear to be a commitment to the establishment of such bodies on the part of the Minister. In the Programme for National Recovery put forward by Fianna Fáil on the basis that they were seeking support from the people for its implementation, the fact that we are an over-taxed nation was stressed heavily and at great length. If you look at the increase in taxation involved in the budget, it is obvious that a step has been taken in the diametrically opposite direction. The effect is that income tax will increase by more than 13 per cent which is a 10 per cent increase. That is not consistent with what was said to the people and is a fundamental flaw in the budget.

My party and I consider that pay-related social insurance is no longer an insurance in any shape or form; it is just another employment tax. Any scheme of insurance which permits — as has been the case here today — the person who holds the insurance fund unilaterally to change the manner in which it is paid out and to increase the amount of premiums without any change in the risk involved is not insurance; it is taxation. It is quite clear that any pretence that maintaining the PRSI scheme as a system of insurance has been abandoned here today and, for the first time, its taxation nature has been explicitly recognised by a Minister.

The same applies to the 25 per cent increase in health charges. They are not a special levy any more than they would be if they were described as a Defence, Justice or any other form of charge. They and the PRSI charges which are provided for and increased in this budget are all increases in tax on income and should be viewed as such.

The Progressive Democrats believe that as long as the question of taxation and its levels remains unconfronted the country will not come to terms with the basis of its economic problems. The country is overtaxed and employment and enterprise are being stifled by the high rates of taxation. We must concede that, if there is to be a reduction in taxation as part of the process of regenerating our national fortunes and if the economy can take on the debt we have inherited, there must be substantial cuts in public spending. Although the figures suggest a lower budget deficit as a percentage of GNP, the level of Government spending has not been tackled and the gross size of public spending has remained relatively static. The narrowing of the gap between tax revenue and expenditure is made up mainly by increased taxation and that is exactly the process which has led to those problems, and it is sad to see that a start has not been made on this occasion at reducing spending for the purpose of reducing taxation.

I suggest to the House that the vague and inflated promise made by Fianna Fáil in their Programme for National Recovery to bring two-thirds of people down to the ordinary standard rate of taxation is a gross deception here in our circumstances. To reduce the number of people who are paying the higher rates of taxation to two-thirds means that only 33 per cent of those people will be paying them when Fianna Fáil have had their way. At the moment, according to the Minister's figures, that figure is 43 per cent, so he is talking about changing the rates of 10 per cent of taxpayers as his contribution to making the change in our taxation system, and the effects of that will be insufficient. It will not be achieved. The reason is that altering tax bands to give the figure of 43 per cent to which he referred in his speech will mean that it will be 45 per cent, 47 per cent or 48 per cent before this year is out. That is the problem. The higher rates of taxation will be greatly increased at the end of this year rather than reduced. That is the inexorable logic of what has been told to us today and there is no point in pretending otherwise.

We are walking away from tax reform in this budget. An interesting acknowledgement of the fact that high taxation has a disincentive effect is the arrangement which applies in relation to building society and bank deposits and the confidentiality which has been afforded to banks in order to outweigh the DIRT taxation scheme. If it is seriously felt that higher rates of taxation would be a disincentive to people to make deposits at even those very attractive interest rates we have today, those higher rates of taxation would also have a disincentive effect on every other form of enterprise. The truth shines out that the high rates of taxation which we suffer under have a very strong disincentive effect and will prevent us making any recovery.

Even if we accept that the existing deficit makes any progress towards tax reform far more difficult there is still room for political thinking as to how assessment of taxation should be changed in the short term and the long term. I suggest that no party in this House has attempted to consider seriously the Commission on Taxation Report. No party in this House has ever suggested what they believe the level of personal and corporate taxation should be. These matters have never been the subject of honest appraisal by any of the parties in this House save our own party and for having the bravery to do that we have received nothing but abuse. I am also going to suggest that the question of taxation is not one which this country can afford to ignore. With the perfection of the internal market in the EC we are going to be forced into approximate and in direct taxation in our excise taxes. Even if that is postponed until after 1992, more than five years from today, it will not be postponed for more than five years thereafter. Therefore, in the next decade the question of indirect excise taxes will have to be tackled by this House.

The obligation to bring them into line with the spirit of the rest of Europe will be forced upon us. In that matter our sovereignty in regard to fixing tax rates will be undermined by the advancement of the unification of the EC. Once the internal market is perfected it will be as possible and realistic to have a different rate of income tax in this jurisdiction as it would be to have different rates of tax between Kerry and Cork. There will be no possibility of stemming the outflow of enterprise capital and workers, so maintaining the widely developed tax system which this House has had for the last 15 years. It is not a question of this House saying that lower taxation is something which we cannot afford; it will be thrust upon us. In addition to that, even if it were not for the EC our standing geographically between the British economy and the American economy — although we are separated from America by distance at least we have a community of language — means that our taxation system will never be capable of a radically different solution, and Britain's movement of capital and labour is high.

We are an avowed party of low taxation confronted with a budget which causes a problem. The effect of the budget, even though disguised and implicit rather than explicit, is to raise the burden of taxation, but, having regard to the dramatic refutation which this budget represents in relation to what was put forward for the people by Fianna Fáil and having regard to the fact that it is a necessary if insufficient step on the road to righting our economic wrongs, we believe that the increase in taxation implicit in this budget is not a feature the public will support.

I turn to a number of areas of the budgetary policy as put forward. First there is an increase in taxation in excess of £20 million due to be achieved if the Minister can enforce the regulations. He says that from today he will prohibit duty-free carriage of goods by persons who have remained less than 48 hours outside the State. This regulation meets the Minister's statement that he proposes to discuss the matter with other European nations. This falls foul of the Treaty of Rome. I do not believe that he will be able to sustain it but if he does, if he is capable of doing that, then I am sure that there are areas along the Border which will be very grateful to the Minister for stemming the flow of money North of the Border, but one wonders whether he will be able to sustain this.

I want to comment on the moneys which it is alleged will be saved by reason of this efficiency programme in relation to the unemployed. Who is going to interview these unemployed people, these 150,000 people? How are they going to be interviewed? Who is to be the interviewer? Is this, under the guise of an interview, an effort to sort out those who are in the black economy and to flush them out in order to examine their circumstances more carefully? How are the 40,000 jobs the Manpower service are to provide to be financed and in what circumstances are people to be employed in this way? These matters have not been outlined to the House.

I want to deal with the question of the £25 million which the State expects to gain by virtue of introducing a withholding tax on certain fees paid to professional people. I have no doubt there are many cases where the State pays fees to professional people who are tax defaulters and tax dodgers. This cannot be seen as anything but a temporary bringing forward of revenue. In the last analysis there are, as has been correctly suggested by Deputy Noonan, many cases in which this withholding tax will cause chaos in the ranks of those who are providing services of a professional kind to the State. Architects with very substantial overheads will find that a 35 per cent withholding tax will throw their cash flow into total confusion. If that 35 per cent is withheld in the context of a loss-making concern or a concern that is only breaking even, the effect of its implementation will be to drive professional firms dealing with the State into liquidation or at least to make them raise their fees when dealing with the State to compensate for this cash flow loss. Therefore, the £25 million which is sought to be recovered under this heading will not be as substantial in the long run as is thought. The £25 million may never materialise, even in this financial year.

The reduction of 10 per cent in the amount that can be claimed on mortgage interest relief is also, under any disguise, increased taxation. It is not increased taxation, as suggested by the Minister, which hurts the rich more than the poor; it is a proportionate tax which will hit very hard the families who are least able to afford it. The rich who may have larger mortgages, but who have a larger surplus and discretionary incomes to meet it, will be affected less by it. It is not progressive as suggested by the Minister; it is purely proportionate among householders and, in the last analysis, it will probably cause injustice. It is not supported by any theoretical argument as to why it should be brought about. Why is it being reduced to 90 per cent and why is this rate to be considered later in the light of interest rates? Is it a progressive abolition of mortgage interest that has started here today? If so, let us hear the reasoning behind it. Are we going towards 50 per cent of zero per cent? Is the official departmental thinking which advised the Minister to introduce the 10 per cent in this case based on any long-term conception as to whether mortgage interest relief should be retained? I query that. I wonder to what extent we will be enlightened in the course of the passage of the Finance Bill.

I want to deal with the moneys which it is assumed will be generated by the task force on tax collection. As I understand it, this task force consists in the main of 25 public servants with no experience in the area of tax collection. It is my understanding they are a remnant of the Department of the Public Service who found themselves physically isolated in another office and who have been told that henceforth they are to become experts in tax collection. It is not that easy. Anyone who has carefully read the contents of the Fifth Report of the Commission on Taxation can only draw the conclusion that there is a great deal more wrong with our tax collection process than could possibly be remedied by bringing together the efforts of 25 inexperienced and inexpert people to swell the ranks of those who are already labouring under an inadequate and inoperable system. Where are the additional remedies to recover tax? Where is the Government's serious concern to implement the additional methods of recovery proposed by the Commission on Taxation? I suggest that these 25 people will not generate £10 million or anything like it. They will not succeed in unleashing untold sums in tax which have been withheld from the State by taxpayers.

The real problem lies in changing the relationship between the Collector General's department and the inspectorate. One is assessing at a great rate liability to taxation and the other is unable, because of a lack of power, to do anything about it. There is not merely lack of cooperation between the two bodies, there is hostility between them. In many cases tax inspectors in rural areas assess tax which they know to be due but because the Collector General's office operates from Dublin none of that tax is collected. Many people who have some acquaintance with the system of tax collection are driven to the conclusion that merely to throw 25 people in these circumstances into a losing battle against bureaucracy, outdated legislation and so on is to do nothing to solve the problem. This £10 million which the Minister says he will collect in that way is funny money.

Some £20 million is likely to be recovered by way of eliminating short-term duty free importation of goods, £14.2 million by way of job search interview scheme, £8 million in relation to efficiencies, £25 million in respect of the withholding tax and £10 million as a result of the efforts of the task force on taxation. That amounts to £77 million which is a vital element in reducing the percentage deficit to the low level which the Minister claims will be reached. There is a large question mark over much of that money. A lot of it is clearly suspect. I want to put on record my suspicion that these sums of moneys will not be available to the Exchequer and the deficit will be greater than what is now suggested. On the other hand, if the Minister is correct and if I have arrived at these suspicions too quickly or if I am wrong, then I fully concede that some, if not all, of those steps are a sensible way of trying to bridge the gap. However, in general terms, I have reservations about their practicability.

An interesting aspect of the Minister's budget speech which was commendably short was what was not stated in it. The public sector borrowing requirement was not stated or articulated. The Exchequer borrowing requirement was stated. I am left with the suspicion that it is the Minister's intention to increase non-Exchequer borrowing and to describe borrowings by semi-State bodies as——

It is in the Principal Features of the Budget.

I would like to be corrected if I am wrong.

It is on page 1.

The Minister came to the House with a speech and he outlined certain proposals. However, the proposals are unintelligible as outlined by him because of his brevity. They are mainly contained in tables which were handed to some Members of the House at a late stage in the debate. I must pay tribute here to the proposals brought forward by Deputy John Bruton, when he was in a position to do so, for the reformation of the budgetary process. We face here today a budget which was set out in tables. We do not see in place a budget which is fairly and squarely set out in the Minister's speech, nor would anyone listening to that speech have a clear view of the effect on ordinary people of the implementation of the measures he is outlining in these tables. It is regrettable that the development has taken place in this budget speech that it has become more detached from reality and less intelligible than was the case.

Our budgetary process is bad enough as it is. The Estimates as provided are difficult enough to follow. There are cynics who say that they are compiled with a view to making them obscure and that the documents which arrive in the autumn of each year, which sets out the programmes and explain them nine months too late for anybody to decide whether those programmes are justified or not, would be far better as a basis for a budget debate than the Book of Estimates with which we are confronted. There are those who say that categorisations of moneys and of expenditures set out in the Books of Estimates are wholly inadequate and wholly antiquated, being based on mid-19th century legislation at the most recent.

All these are valid criticisms of our budgetary process. This House is not now in a position, even with all the documentation which has been handed out after the Minister's speech, really to understand the exact intent of the Government in relation to each of the changes they have proposed. That is undesirable. Even if the ordinary budgetary process had been followed here the House would be at a disadvantage, as would the ordinary Deputies of the House. I am suggesting that the Minister, with the public accounts committee, should expedite the implementation of the programme A Better Way to Balance the Nation's Finances. He should expedite, with that committee, a real change in the manner in which the budget is reviewed by this House. I have grave doubts as to whether what we are doing today is constitutional at all because we are not doing what the Constitution requires us to do, today certainly. By the time the Estimates have been passed most of the money will have been spent. The 1956 Act which permits 80 per cent of any particular Estimate which was voted last year to be spent this year is of doubtful constitutionality.

This House is supposed to approve each Estimate, to be able to understand each Estimate. The budgetary system as heretofore falls far short of what the Constitution requires of us. Anything the Minister does to improve the budgetary procedures and to bring the reality of what we do in this House into line with what the Constitution requires us to do and to make the debates on Estimates a real examination of a forward budgetary process rather than a retrospective validation of things which cannot at that stage be cured will be supported by this party. I have a personal suggestion that the Committee on Public Expenditure and the Committee of Public Accounts should be one single committee, or that the Committee of Public Accounts should be given the functions of the Committee on Public Expenditure so that a good super-committee of this House could address these issues other than in the now entirely narrow confines in which the public accounts committee find themselves at the moment and the rather unreal and pointless activities which the public expenditure committee under Deputy Keating found themselves involved in on many occasions because they could not change anything even though they could criticise.

There are many features in the budget which I believe require some degree of amendment. One may appear small at this stage because the Minister found it in place when he came into office; this was the excise increase of 9.9p per gallon on non-auto LPG. That was the same increase per gallon as was applied to heating fuels. The problem is that LPG cannot be equated on a one to one basis, gallon per gallon, with heating fuels. I am aware of one factory in Arklow making glazed ceramic ware for export and the domestic market which have converted to LPG as their primary source of power and which, as a result of the increase in the rate of excise on LPG, will have to face this year an increase in their energy budget of £25,000.

I appreciate that LPG cannot be marked and one cannot differentiate between its use by some visible characteristic, but it should not be beyond the Minister's capacity to allow a rebate for industrial users if the import of what he was doing was to catch home users of LPG for heating purposes and put them on the same basis as central heating oil users. Even at this stage it is not too late for the Minister to consider whether it is unfair, artificial and arbitrary to ascribe to LPG per gallon the same value as heating oil when the two fuels are not comparable and when they have the effect of increasing disadvantageously one form of energy as against another, with no particular national interest involved.

I want to make as strongly as I can a point in relation to the charge of £10 per night for patients in public hospital wards who are not covered by the GMS. It is well appreciated by everybody in this House that it is not just the rich who will be caught by this measure. Those with very modest incomes indeed, of less than £6,000 or £120 per week, will find themselves paying, if they are hospitalised say, for four weeks, a vast amount of money. Unless there is some scheme to compensate these people, some method by which they will be saved this expense the financial damage and hurt it will do to them and their families will be incalculable. It will absorb most of their disposable incomes and leave their families penniless. It will send them to moneylenders and banks. It will eat into any savings they may have. It will be an extremely grave imposition on those people.

Let me remind the Minister that they are the people who are being asked to pay more under the legislation to be proposed tomorrow by way of health levy — if that means anything, which I doubt. Some of these people are paying more in terms of PRSI. Is it not the case that they deserve particular consideration and that the introduction of a charge of this kind, which is designed to eliminate waste to some extent and to prove an incentive to people not to be unnecessarily hospitalised, will come hardest on those who are the sickest and the weakest? Can it not have some feeling put in it? Is there some provision which the Government can come up with even now, to suggest that it should not exceed a certain amount in each week or each month, or that some allowance should be made for people who are crippled by bills of this kind?

I am reluctant to interrupt you, Deputy, especially when you are on your second maiden speech, as it were. However, I should just remind you at this stage that, while I appreciate that you can move from the particular before making a general comment, it is not the tradition to deal in too great detail with matters which will be available to you to deal with in great detail presently.

I appreciate that and I am grateful to you, a Leas-Cheann Comhairle, for your guidance on the matter. I am addressing those two matters which will be dealt with this evening. They form part of the budget. I want to draw them to the Minister's attention while there is still time to do something about them. We shall be voting on them this evening.

We shall be voting on the excise matters this evening. I should like to draw attention also to the fact that there is proposed an increase of £2 in the amount of money each child who avails of school transport will pay per term. Is this the beginning of a process or is it to be the end of the matter? Is there a long-term plan for that scheme? The House deserves to be informed.

There are a number of matters I want to briefly identify which do not appear to have been dealt with in this budget and which the people were told would be dealt with. There is no provision for the product identification centre mentioned in the Fianna Fáil manifesto. What is proposed in relation to the promotion of Ireland as a major financial centre is entirely vague; there is no concrete proposal in relation to it. There is nothing new proposed in relation to research and development. The business development scheme has not been extended as promised. There is no new provision, as was promised for expansion of the national gas grid. There is no indication of promised tax incentives for mineral exploitation. There is no financial provision made, of which we are aware, for the agricultural food council. As far as we are aware neither is there any provision made for the land authority or its funding.

There is no provision made, as was promised, for drainage in western areas. There is no provision made for reorganising the half bred horse industry under a reorganised Bord na gCapall. I am under the impression, contrary to what is contained in the Fianna Fáil programme, that that body is to be abolished. There is no provision made of which we are aware for the promised horticultural development authority. There is no provision made for the proposed investment programme in horticulture or for the new forestry semi-State body about which we were told. There are no moneys made available for the marine research and technology institute about which we were told. There is no money made available for investment in shipping even though the business expansion scheme has been extended in that direction.

No new moneys have been provided for the inland fisheries research and development process, no new resources provided for the implementation of the provisions of the Air Pollution Bill now before the House or for the prevention of water pollution mentioned in their programme. No moneys have been provided for development of the financial services areas, whether that is to be undertaken; it may be that they have been provided but we are not told. No provision has been made for reliefs of any kind for the entertainment industry which formed such an important part of the programme for national recovery.

I thought the Deputy's party wanted to cut public expenditure.

I know, but I am just pointing out that these were promises which appear to have been set aside already. No new moneys have been provided for regional manpower boards or for counselling services. No new moneys have been provided for the decentralisation programme with the exception of £1 million. I should like to hear from the Minister at some stage what £1 million he has in mind. For example, we are talking about a decentralisation to Sligo? Is there one particular scheme in mind? There appears to be £1 million provided for that. Neither is there any provision made for the costing of a local broadcasting authority and, of course, none for reducing — as was pointed out by Deputy Noonan — builders' VAT rates from 10 per cent to 5 per cent. Nor is there any provision, of which we are aware, for the construction industry development board or for the five year plan for local authority roads maintenance. Neither is there provision made to finance the promised reduction in planning and development charges or to finance the proposed advisory body——

I am sorry to interrupt the Deputy but I must advise him that that is not the custom on a statement. Unless the Deputy is advocating that the Budget Statement is all the weaker for having omitted those, then the point would not appear to be appropriate in respect of this statement. On Second Stage debate the Deputy can refer to what is not proposed but, unless the Deputy is going to proceed to make the statement that he regrets the omission of the expenditure that would provide for that miscellany, then it would seem to me to be rather fruitless to be making the point.

That was not my intention. My intention was to do quite the reverse, to point out the extent to which what is now proposed diverges completely from what was promised the people and I am entitled to make that point.

Not in this particular debate.

I stand corrected. It boils down to this, that this budget is one which increases taxation, which seeks to eliminate a number of heads of public spending. In so far as it does the latter we commend it because it is important that this House comes to grips with the level of public expenditure. In so far as it increases taxation we regret it. In so far as it represents, as I have pointed out, a departure from what was promised, an improvement on what was promised and for which a mandate was sought, we breathe a collective sigh of relief.

In regard to the effect of this budget I must say it is not consistent with the 2.5 per cent growth rate on which the Programme for National Recovery was predicted. There will be no growth of that kind this year. This is a deflationary budget. I shall finish on this point. Had a mandate been sought with honesty and courage from the people for measures of this kind, for the measures which must inevitably follow in order to reduce taxation to render this country one in which private enterprise can thrive, had the people been asked to pass judgment on a programme which would have taken a number of years to implement but which had the inherent promise of a major reform of public spending, taxation, reduced taxation and a reform of our methods of borrowing this Government would be immeasurably stronger. I dare say they would not be relying on the support of others in this House to push through these measures. Rather such measures would have constituted the first step in a sustained programme in respect of which there would be a clearly stated political mandate.

What I regret so much is that this reversal, though welcome, leaves us in the position that the Government have forgotten completely the very basis on which they sought support. I look back with some degree of regret — and I am not saying this bitterly — to the huge billboards around this city stressing what would happen if there were cuts in health and who they would hurt. I look at the thinking that went into that and the effort implicit in that advertising campaign to build up a strong constituency against any reduction in public expenditure. I contrast that with what has happened here today. I say it is a welcome surprise but I express a deep and lasting disappointment that what could have been achieved has not been, that a great opportunity to build the political will to rebuild this country's finances was thrown away in the interests of political opportunism.

It is difficult to tease out the precise implications of the budget in terms of its deflationary impact on the economy, on the new figure for GNP which has not been stated and on its exact redistributive impact. For example, there is a substantial reduction in the environment programme of approximately £35 million on the capital side. One must pose the question when the details are available, what will be the precise impact of that on the live register? For example, the various measures are outlined in the current Estimates which also indicate an impact on employment but the details are very imprecise at present. One way or the other, with those two reservations — in that as yet we do not know the new live register figure for 1987, and presumably there is a revised figure; we do not know the revised GNP figure for 1987 and presumably there is a revision in that also — it is noted that we are down to a current deficit of 6.9 per cent of GNP and an Exchequer borrowing requirement of £11.7 million.

How that was calculated has not been disclosed to this House as yet.

Pending that information we will suspend judgment on the accuracy and correctness of the figures. Certainly I intend to make some comments on the way the Estimates have been constructed here. There are some quite alarming statements made which give grounds for grave doubt as to whether by mid-year we will be at 6.9 per cent of GNP or at around 8 per cent of GNP. From what I have read so far all the indications are that we will rapidly go back up to 8 per cent if the internal inconsistencies in the revised Estimates are adhered to. Indeed, inconsistencies are manifestly evident even in the documentation we got here today.

Notwithstanding all that, this is quite an extraordinary budget. It is extraordinary in that it has an element of conversion on the road to Damascus in it. The Fianna Fáil budget of 1982 fell apart by the middle of June and one has to go back to the early seventies to find a budget which has as many surprises. Officially, Deputy Haughey, now the Taoiseach, and the Minister for Finance are prepared to accept that there is a great need for control of public expenditure and for simultaneously increasing taxation in order to maintain the essential social services but the way they have gone about it poses very considerable questions.

The first point which must be made relates to the massive increase projected for income tax revenue for 1987, a projected increase of from £2.388 billion to £2.721 billion, a projected increase in income tax of close on 14 per cent. This is probably the highest ever projected increase in income tax yield and it will impose an exceptional major increase in income tax on those who pay virtually all the income tax, namely, the ordinary PAYE workers. If we are to pay for essential public services, inevitably taxation will tend to go up. Yet, notwithstanding the figure for income tax we have the abandonment of the land tax by the Fianna Fáil Government, and the substitution of a mere £9 million in VAT revenue receipts. The inconsistency of attempting to do anything at all in relation to PAYE or income tax revenue is manifestly evident for all concerned. When Deputy Haughey came into the House last June in a long polemical statement on a Private Members' motion of no confidence at column 180 of the Official Report he said:

Within the income tax category the estimated proportion of tax from PAYE as opposed to income tax from farmers and self-employed has risen from 87 per cent in 1982 to 90.3 per cent in 1986. They are not my figures, they were given in an oral answer by the predecessor to the Minister for Finance on 20 February 1986.

He then went on to say:

Income tax and PAYE as a proportion of total tax has increased from 31.3 per cent in 1982 to 32.3 per cent in 1986. These figures do not however, include levies deducted at source.

Deputy Haughey then went on to confirm that with the levies included, income tax from the PAYE sector would grow to 34 per cent. I would hazard a guess that the PAYE contribution now has gone up from 90.3 per cent in 1986 to 94 per cent or 95 per cent of total tax revenue. We have this extraordinary budget which copperfastens the fundamental inequity in our tax system, whereby for the most part those who bear the burden of taxation are those who are liable for PAYE contributions of income tax, and for the most part the self-employed and the farming community do not pay a fair contribution. That is the fundamental issue at the moment in meeting the cost of running our social services and the country. This has not been faced up to by any party in the Dáil other than the Labour Party who, through Deputy Kavanagh, managed to get a land tax established. This was done despite great difficulty in Government at the time in having any kind of a land tax introduced giving any kind of a yield. We introduced it and today it is being abolished. We are reaching a stage in relation to contributions from that sector where it looks as though it will be one unending constitutional wrangle from one High Court case to the next and from one Supreme Court decision to the next because as the Taoiseach knows now all hell will break loose in relation to VAT returns as they affect registered farmers and non-registered farmers. After they get working on the back benchers, the Taoiseach will be running in here with modifications which will reduce the yield again.

My heart does not bleed in the slightest as a result of the special plea made by Deputy McDowell on behalf of the legal profession in relation to withholding tax. It is about time it was put on. That was one of the proposals of the Labour Ministers in Government. We fought tooth and nail to get that in, but we did not succeed. I am glad it is in now and I welcome it. The £26 million, small as it is from those sources, is welcome. With due respects to those concerned in those professions, they are not singularly ill-paid. I know a lot of people in my constituency would not agree with me in that regard, but we must all pay and that includes the self-employed in those professions.

We are now down to the reaction, the understandable reaction. A great deal of anger at this budget will be generated by PAYE workers. Not only is there no tax relief but there is a substantial tax increase. The health contributions will be increased to 1.25 per cent and the income ceiling will be raised to £15,000. The level of contribution in respect of PRSI will also be substantially raised but in return we will get a substantial reduction in benefits and entitlements.

I can foresee the reaction of the employee who finds himself paying substantially more income tax and who, if he has been in hospital for a week, will get a bill for £70 to pay for a bed to which up to now he had free entitlement. I remind the Taoiseach that under the national understanding public beds in hospitals were provided free of charge. That is now being abolished and a charge of £10 for a bed in a public ward is being imposed. That will provoke great anger among insured workers. From next Monday, a worker with a wife and two children who is made redundant, goes to his employment exchange and, assuming his average earnings have been £200 a week or £10,000 a year, his unemployment benefit claim will be reduced by £17.50 pay-related benefit, the result of the halving of the pay-related benefit. In any town, such a worker may meet a farmer neighbour who has a medical card by virtue of the non-existence of an income tax return or of a declared income.

The Taoiseach now wants to introduce an accounts system. I foresee great difficulty in this. Here we go again, from farm tax to VAT clawback, then the notional system of farm tax assessment. I foresee enormous problems facing the Government when they attempt once again to construct a farm income assessment system with the farming community paying tax under an income tax system in the year 2000.

It is the right decision and the Deputy knows it.

I suggest with profound respect to the Taoiseach that the Government have abolished the farm classification and have decimated much of the fundamental work done in terms of the basic assessment of incomes. The Revenue Commissioners are inflexible. They could not even operate a simple system of child benefit clawback in respect of the farming community. God protect us if they attempt a system of income taxation assessment for the farming community. I say that harshly because I hold the view that there should be a separate Minister responsible for taxation collection.

Once again I see the fundamental difficulty in raising the necessary revenue to pay for social services when 200,000 people do not pay the same proportion of tax as the PAYE workers.

That is contradictory.

I believe the Estimates presented here are fundamentally flawed. What will be the impact of the anticipated forecast of a reduction in iterest rates on the live register? How will it affect the GNP aggregates? Where does it appear in terms of the final outturn of 6.9 per cent of GNP? If this information is available, perhaps the Minister would tell the House. I believe these Estimates are contrived to say the least. I was very critical of the last Government's Health Estimate. It was contrived not by any malintention but largely due to the events which occurred towards the end of that Government's decision-making process. In the end it was put in the Estimates and now it comes up like a sore thumb here.

The Government do not believe the Deputy either.

I would never accuse the Leader of Fine Gael in that regard. The other Minister for Finance was inclined to jump his fences. He jumped his fences so fast that he left his riding whip behind.

Under the Education Estimate there is an extraordinary series of statements. The savings projected are £3.860 million. It said in the original Estimate that the proceeds of the National Lottery would be available to fund sport and sport-related activities. Under this Estimate the savings are to grow from £3.860 million to £6 million. Here we have a unique statement:

The saving is increased to £6.060 million on the basis that some of the proceeds from the National Lottery will be devoted to sports organisations and that the National Youth Policy is not to be implemented....

That requires close examination. God help the poor National Lottery. Its projected yield is only £7 million. Since health, the arts and sports are to get allocations from this lottery, I would be very interested in hearing the Minister's explanation of that statement.

I notice that the overall budgetary cost of abolishing the farm tax will be £9 million and that by way of rate support grant the local authorities will be given an additional £13 million. That needs examination. Is that going to be given or is it a formal Government decision to allocate an additional £13 million rates support in lieu of the £9 million which would accrue to the local authorities? The first quarter of the year has passed and by the time the circular is issued and we get bureaucracy moving, April will have passed and one-third of the year will have passed. I appreciate that there can be great difficulty in controlling 14 Cabinet colleagues — although I assume they are very acquiescent, unlike the Coalition Cabinet.

Give us a little history.

Now I come to the real gems in the Education Estimate. It is stated in the Principal Features of the 1987 Budget: that the savings on VEC costs will grow from £1 million to £2.1 million — arising from what? Greater efficiency. An interesting concept. It goes on to say that the economies in the provision of the third level services will grow from £1.875 million to £4.525 million. Arising from what? Greater efficiency. It says that greater efficiency will be achieved in the running of the HEA institutions. That is a tricky way of saving money. I remember being berated by very competent mandarins in the Department of Finance when I dared to suggest that we had achieved savings in health by greater efficiency. They said I must be specific and that it must be a policy decision. They told me I had to go through my savings line by line saying who, where and what. I know from negotiations with the then Minister for Finance, Deputy Dukes, that that kind of statement would not be passed by a Cabinet seriously concerned about controlling the public Estimates.

This is the Minister who allowed the health boards to run overdrafts of £80 million.

I am bemused because under the revised Government decision £700,000 will be saved through improved efficiencies within the terms of the existing school transport scheme. If there were several hundreds of thousands of pounds knocking around a few months ago, I would love to have known about them, as, I am sure, would the Minister for Education.

The Deputy did not stay long enough.

In addition, there are going to be increases of up to £2 per pupil per term. These are to be introduced from 1 September and are included in the £700,000. Community and comprehensive schools have been docked £500,000. They are going to save £500,000 by greater efficiency. I would love to know the community schools currently wasting money to the tune of £500,000. In the regional technical colleges £1 million is going to be saved by greater efficiency.

Any third rate Minister for Finance can take any Book of Estimates and he can take out £1 million here and cut out £1 million there and write in the words "greater efficiencies". There is only one slight problem. Come September it will be hung around his neck. I have great doubts about the capacity of the Minister for Education, tough woman and Deputy as she is, in the context of that kind of Government decision, to implement the provisions of the Estimate. All this builds up to 6.9 per cent.

Extraordinarily, there is going to be an extra £5 million on ESF moneys arising from greater than expected receipts. I wonder where Deputy Bruton was a few weeks ago. I think we will put down a Dáil Question on the matter. I am aware that there have been substantial increases in terms of ESF receipts into the country but I was not aware that the Department of Education were going to be allocated an extra £5 million.

We collected about £60 million in 1986.

Not additional moneys.

That is what you lost.

It is rather interesting that the Department of Education have got an extra £5 million and, for example, the Department of Health——

We will show you.

I will take your word on it but I have grave doubts about consistency in this regard. It is important to look at the precise analysis. There is a further £400,000 to be saved under ACOT and AFT by savings through greater economies. Specifically, one must ask exactly what are these economies to be. A third of the year has now gone and, by the time these measures leading to greater economies are implemented, I am quite certain we will be well into the summer and I can see little prospect of their being made in that regard.

I now turn to the Labour vote. Again, I do not know of any socially justifiable reason for the cut. I do not want to sound unduly personal, but there has always been an enormous antipathy within the Department of Finance to the various schemes, such as the social employment scheme, the Teamwork scheme, the enterprise allowance scheme, and the many other proposals put forward. Having docked another £930,000 from AnCO on top of the £50 million which on a totally regressive basis was being docked, there is the appalling decision that new single participants in the social employment scheme will have their payment reduced from £70 to £60 per week. I do not know what the rationale behind this move is. The former Minister for Labour, Deputy Quinn, is well aware of the discussions in Government as regards the payment of £70 per week. That payment is now being reduced to £60 per week while simultaneously it is hoped that there will be a substantial uptake under the social employment scheme. Recruitment to the scheme is being increased by 1,500 in the current year. The consistency of that policy decision is open to question in a very big way.

Likewise, under the Teamwork scheme the reduction in allowances payable to new participants will be from £70 to £60 per week. That reduction is expected to produce a saving of £500,000 in the current year. It most certainly will. The statement went on that the new rate is still set at a level which is attractive to young unemployed people participating in the scheme. It is going to be rather difficult to explain to young people as and from tonight that their payments under the Teamwork scheme will be reduced from £70 to £60 per week but they should still find the scheme attractive. That is a regressive policy change and one which does not stand up in terms of attracting a young person into the scheme. Again, that decision is open to question.

I hesitate to interrupt the Deputy but he is tending to go into a lot of detail which would be more appropriate to the budget debate proper. I must ask him not to go into great detail at this stage.

I regret that the Minister's statement was a very attenuated one and that we got the Principal Features of the Bugdet after we got the statement. Contained within the Principal Features of the Budget are some of the major policy decisions.

There will be ample time for going into detail in the budget debate proper.

I propose to refer briefly to some of the other points before going on to some of the major ones. There is a cut of almost £750,000 in the allocation of CTT. CTT have been given a very simple policy decision. Their original estimate has already been reduced substantially and now it is going to be cut by a further £750,000 and they are being told to achieve this reduction through greater economies. Apparently, no other aspect of the Government decision is included here. Obviously, a great many decisions have been taken on a global basis. They have not been confirmed by way of precise Government decisions which, in effect, would put the cuts into operation. Where they have been adopted a number are very regressive.

I now come to the position with regard to social welfare. I have the greatest doubts about the intensified job search programme. I do not know who dreamt that up. It certainly did not exist in my time in the Department of Social Welfare.

On the contrary, there were three pilot schemes.

The pilot schemes were under the aegis of Manpower. To suggest that there would be a saving of £11.5 million in unemployment related expenditure — according to the estimate as constructed — by virtue of the introduction of an intensified job search programme is not realistic. I will read what is proposed to be done. According to the Principal Features of the Budget a major expansion of £150,000 in the throughput of the NMS-operated job search programme — this is based on three pilot schemes and would refer to a couple of hundred people — which helps the unemployed through retraining, job placement or participation in various Manpower schemes, will yield a significant consequential saving in unemployment payments. We have pencilled in £11.5 million but I would find it difficult to get an uninvolved higher executive officer in the Department of Social Welfare to stand over that figure. I have no doubt that no principal officer, or assistant secretary, would stand over that figure. If I know the senior officers in charge of the public expenditure division of the Department of Social Welfare and the Department of Finance I doubt very much if they would produce that £11.5 million.

These are agreed figures.

This is an ingenuous effort to construct a 6.9 per cent budget deficit of GNP. It will not stand together. With regard to the social employment scheme the Principal Features of the Budget states that the expansion of 1,500 in recruitment to this scheme would reduce the 1987 average live register by 1,000 with a consequential saving to Social Welfare of £2.6 million. In my view the Estimate for the Department of Social Welfare by the middle of the year will be well and truly out of plum. Although I do not have much money left after the election campaign I would put a couple of pounds on that forecast.

In regard to Health the Government made an extraordinary decision. I was in total disagreement with the decision of the previous Government to save £3.4 million by reducing pay levels in 1987. However, the Government have decided on that £3.4 million reduction on top of the Building on Reality provisions which amounted to £10 million, making a total of £13.4 million. I disagreed with those figures because I did not believe it was possible to attain them or, if it was, it would impose enormous hardships resulting in the removal of 1,300 jobs out of the health services within nine months. In my view it would completely destroy any allocations to agencies. However, in the budget savings have been increased from £3.4 million to £14.4 million through “no new recruitment”. The Taoiseach, and the Minister for Finance, are well aware that in the health services there is no such thing as “no new recruitment”. A cardiac surgeon who retires is replaced by a cardiac surgeon or else a hospital will cease to function. If a senior theatre sister retires she is replaced. It is not possible in the health services to implement a policy of “no new recruitment”.

It is very interesting to hear what the Deputy has to say but I should like to ask him to bear in mind that there will be legislation dealing with these matters tomorrow or Thursday when the Deputy will have a full opportunity to deal with these matters. The tradition in this House has been that on this occasion brief statements of a general nature are made.

I should like to ask the Deputy to please conform with that procedure. The Deputy has been going into a lot of detail which more appropriately should be left for the budget debate proper. In that debate all Deputies can elaborate on these matters in great detail but the Deputy's contribution is not appropriate now.

There will not be an opportunity tomorrow, with profound respect.

I am not suggesting that but I am referring to the General Resolution, the budget debate proper, when Deputies can go into great detail on all issues. Such a contribution is not in order now.

I should like to remind the Chair, with profound respect, that between 7 p.m. and 8.30 p.m. tomorrow night all stages of health legislation that contain fundamental changes will be put through. A Bill imposing outpatient and public ward charges will be dealt with within a short space of time.

I am ruling on the business before the House now and I am not concerned about what will happen tomorrow. The procedure, in accordance with normal precedent, is that speeches on this occasion should be brief and there should be no attempt to go into detail.

They would be very attenuated if the Government had given time to discuss that legislation. I will not have another opportunity to discuss it. I do not accept that the decrease in the Health Estimate of a further £11 million can be achieved in 1987, despite the statement that key vacancies will be filled by redeployment or promotions. If that is done at least 1,000 jobs will not be filled in the health services this year.

I must disagree with the statement by the Minister that as an offsetting measure against the decision not to go ahead with the introduction of prescription charges which would, allegedly, have saved £16.5 million, he will now be able to obtain £6 million in charges for public wards on the basis of £10 per day for non-medical card patients. Is it the intention to charge maternity patients the £10? I would be glad to hear that they will be exempt. Will children under the age of 16 be exempt? According to the draft Government decisions there was a major effort to impose that provision on me but, for obvious reasons, I would not wear it. Will children, currently legally exempt from charges, be exempt from the £10 charge? Since section 62 of the Health Act, 1970, prohibits charges in relation to maternity I should like to know if that exemption will continue to apply. Under the Health Act, 1947, those with infectious diseases — I presume we can include AIDS in that category — were not liable for public ward charges and I should like to know if that prohibition will continue. We need a lot more information on these issues.

I must point out that that move will affect about 600,000 people. Many people will automatically find themselves obliged to pay the £10 charge. Only about half of those outside the medical card category are in the VHI. I understand that about 350,000 people are members of the VHI which means that there will be 300,000 other families caught for the £10 charge. That will be a substantial imposition by any stretch of the imagination. The imposition of a £70 a week charge with the consequential difficulty of endeavouring to introduce a new system of administration will affect many people. How does one bring in a new system of administration and a £10 charge when there will be no new recruitment in the hospitals.

I should like to ask the Deputy to desist from elaborating on these issues.

The Labour Party are totally opposed to the introduction of that draconian measure. It is a fundamental withdrawal of the public health entitlements of the vast bulk of middle income families who are paying their taxes. I had no hesitation whatsoever in bringing in a £100 charge in relation to farmers who did not pay their health contributions. That was quite fair and reasonable, but it is totally wrong to bring in a £10 charge in this budget. We reject it adamantly.

I want to refer briefly to the other major change in social welfare proposed in the Budget Statement. I am sorry that the Government have taken the retrograde decision to increase the minimum number of social insurance contributions from 26 to 39 before a person qualifies for disability benefit, unemployment benefit and maternity allowances. Many of the people affected by this live in Deputy Haughey's constituency. A person must now have nine months' contributions before qualifying for any of those major benefits including maternity allowances. It is a pretty mean and vicious decision to take. It is bad enough having nine months of maternity but now one must have nine months' contributions before one is eligible for maternity allowances. Ten thousand people will fail to qualify this year and great hardship will be imposed on those insured workers who are ill, unemployed or pregnant. They will not qualify for eligibility. There will be a very irate reaction from insured workers when they discover that not only is the ceiling for social insurance going up but their eligibility is being substantially reduced. This is one of the reasons we resigned from Government. We could not accept a draconian proposal of this nature. There was a proposal for a five-year contribution requirement for long duration disability benefit. Now it is going up from three years to four years. It is being modified somewhat by the Fianna Fáil Government but nevertheless it means that this year about 3,000 people will fail to qualify for long duration disability benefit. What will they do? Off they will go, á la PDs means test, to the community welfare officer. These are people who have been on extended disability benefit but will now be debarred from long duration benefit because they have not four years' contributions. They will be obliged to resort to the health boards' supplementary welfare allowance.

I again appeal to the Deputy not to go into this detail.

This is an extraordinary budget.

It is not appropriate at this stage and if the Deputy persists in going into detail I shall have to ask him to resume his seat.

I must disagree. All stages of the Social Welfare Bill——

The Deputy will have to accept my ruling in this matter. It is the normal procedure and Deputy Desmond knows it very well. There will be time for elaboration on the budget debate proper.

Are you aware that these major changes in social welfare are going through this House between 10.30 a.m. and 5 p.m. next Thursday? It is unprecedented that a Social Welfare Bill should go through all Stages without an opportunity to table amendments or to have a Fourth Stage. It is to be rammed through the Dáil on Thursday afternoon and then through the Seanad.

The Chair is dealing with the Budget Statement before the House. It is not in order to go into the kind of detail in which Deputy Desmond is engaging.

There is no other opportunity.

There will be.

I accept your ruling but I do make the point that insured workers are having their social welfare disability reduced substantially. We in the Labour Party reject this. It was the late William Norton who brought into this House in 1949 the fundamental concept of social insurance. We produced a White Paper in 1949 on social welfare and produced a Social Welfare Bill in 1951. Progressively we introduced social insurance. We now have a social insurance fund of £900 million a year which is being frittered away and decimated because there are people in the community who do not want to pay for social insurance. I contrast that with the fact that we are paying about £180 million a year in non-contributory pensions to farmers, shopkeepers who have given up their shops and the self-employed who have decided they want a non-contributory pension. They will continue to have their benefits in no way affected by this budget. It will not be suggested that somebody should not get a pension by automatically handing over a farm to his son. Why should there not be some contribution requirement? There is none at all. The insured worker is crucified under this system of claw-back of entitlements while at the same time we hand out non-contributory pensions and benefits. That is why the Labour Party are strongly opposed to these measures and that is why we will vote against them on Thursday.

I do not wish to detain the House much further but I want to refer to the quite exceptional decision on the part of the Government to decimate the capital programme. It is easy to be glib about capital moneys and to decide to cut them. This is the PD business, although at the end of Deputy McDowell's peroration he listed about 18 measures on which he wanted to spend an extra couple of hundred million, but simultaneously he wanted a reduction in taxation. I deplore the decision of the Government to cut another £2 million from the special amenity grants scheme. The scheme has not been cut — it has been terminated.

We know what happened with the amenity scheme when Deputy Boland was Minister.

Whither the heritage of Ireland? One would not have contemplated that such a decision could be made by a Government of which Deputy Haughey was Taoiseach. The funding for the Metropolitan Streets Commission is suspended. Whither the ould Dub?

Does the Deputy want to build Nelson Pillar?

I would suggest the Taoiseach might even be tempted to have his dear statue on top of the pillar but I do not think he could rise to that extravagance now because the £3 million for the Metropolitan Streets Commission is gone. The Dubliners will not even be able to sing a song about it.

A sum of £12 million has been slashed from the local authority house building programme. I acknowledge that we are the best housed people in Western Europe and that there has been a decline in demand for local authority housing, but to slash the programme by £12 million is a drastic step. In my constituency during the election campaign a widespread slogan was "Bring back the JCBs and CJH". The only JCBs we will see on the streets now will be those chasing Fianna Fáil Deputies in irate procession.

A sum of £3 million has also been slashed in the sanitary services programme. A sum of £2 million of non-Exchequer funding has been provided for the necessary site acquisition and clearance cost of the development at the Custom House docks. It is extraordinary that there should have been such a hooha regarding the press conference about this project when it will cost well in excess of £2 million to clear even half the site. The Minister, Deputy Flynn, will be windblown and windswept when he comes back looking for the other £3 million which was taken out of the capital Estimate today. He certainly looked incongruous as he walked on the site. He seemed to think he was back at Knock Airport when he stood on the seafront and said work would commence in midsummer and that anything up to 4,000 jobs would be provided.

The allocation to the IDA has been reduced by a sum of £9 million. Any Minister with a good felt pen — they are used quite a lot in Government — could go through the capital vote and knock off £7 million here and £8 million there and, hey presto, it will all come out at 6.9 per cent of GNP.

I thought my eyesight was defective when I read in the Irish Independent of 27 March that the Taoiseach said that the National Development Corporation would “play an important role in helping firms to grow in strength and provide viable long term jobs through share capital and management expertise”. What has happened? The allocation has been reduced by £3.3 million.

The Taoiseach stood in the foyer of Beaumont Hospital and waxed eloquent about the faults of the previous Minister but I notice that the allocation for hospital building equipment and furnishing allocations has been reduced by a further £3 million.

The Deputy seems to be ranging over many subjects.

I would be very impressed by Deputy Desmond's remarks but for the fact that he allowed the health boards to go into debt by over £50 million last year.

In one fell swoop the public capital programme has been reduced by £65,896,000 but not one adjustment appears to have been made to the live register.

It has been taken into account.

It will be very interesting to know precise details.

What figure is projected for the end of the year?

It will amount to a sum of £25 billion.

If this is a job creation budget——

We could not get away from the £100 million on the house improvement grants which the Coalition Government threw down the drain. We have to pay that.

(Interruptions.)

I will conclude soon. I regret having to detain the Taoiseach and his colleagues——

I will stay all night listening to the Deputy.

The Labour Party, in Government or in Opposition, accept the overriding need to keep a reasonable balance in terms of public finances and taxation but we reject the prescription in today's budget as we did in Government. In Opposition we cannot, for the most part, accept what Fianna Fáil did today. I support their taxation measures but the mixture is wrong because the balance of taxation once again has swung quite sharply against the 880,000 people who pay their income tax and PRSI every week and who have established a fundamental entitlement to benefits. It has not had an impact on the rich apart from the mortgage interest relief provisions which, in any event, apply to those on a relatively high income and who are quite capable of contributing towards the maintenance of social programmes and public services.

For these reasons, the Labour Party do not support the budget. In many respects, it is quite extraordinary and when the details are fully thrashed out it will be regarded as a budget which most people would not support. Indeed, I have great reservations regarding its prospect of maintaining cohesion and consistency because, although the Taoiseach underwent a major political change of mind, I am not so sure that the Cabinet will have the determination or the confidence to push through measures which are so inherently regressive that they will provoke a backlash within the Fianna Fáil organisation which will not enable them to be implemented. Even with the tacit support of the Fine Gael Party and the confused support of the Progressive Democrats it will still be seen as a socially unbalanced budget which has done nothing for employment, exacerbated taxation imbalances and caused further social divisions between town and country, taxpayer and non-taxpayer, tax evader and tax contributor. For these reasons we do not support the budget and I regret the fact that we must pass all these measures by Thursday evening.

I doubt that many Radio I listeners have survived that marathon. I must open with a nice quote from the Sunday Independent“Every day in every way Fianna Fáil grow more like Fine Gael in all respects and next Tuesday's budget will provide final confirmation”. That has been proved true in this budget. People now must be scratching their heads wondering what was the point in having an election at all. All that has changed is the faces around the Cabinet table. The actors have changed but the script remains the same.

The events of the last two months show why so many people are cynical and disillusioned by Irish politics. In January the detested former Government introduced a savage budget which led to the collapse of the Government and a general election. The election was fought on the basis of the budget, with Fine Gael defending it and Fianna Fáil attacking it vigorously. The Taoiseach and his colleagues portrayed themselves during the campaign as the defenders of the poor and the weakest sections of society, opponents of health and welfare cuts, champions of the working class and defenders of the public sector, every sector which is hit in this budget.

The people voted on 17 February, leading to some of the heaviest losses the Fine Gael Party had ever suffered as the authors and defenders of the budget. Fianna Fáil were returned to power but the people now find to their cost that Fianna Fáil election promises has about as much value as a national lottery ticket, an "Instant 3" with two stars. The very same budget that people thought of voting decisively to reject in the election is now reintroduced by Fianna Fáil in an even more severe and heartless form. There is a better way, as they said. We all knew that Fianna Fáil were masters of the U-turn and we began to suspect what things might be like on budget day when we saw the U-turn on the Single European Act, first when Deputy Haughey was in Brussels, and then the extraordinary and remarkable turnabout in regard to the Anglo-Irish Agreement while he was in Washington, but this budget has really proved that they are masters of the art.

In the budget debate of last year on 5 February 1986 Deputy Haughey said that the existing levels of taxation, particularly personal taxation, were in a very large measure responsible for the prevailing mood of frustration, low morale and lack of confidence. That was true and we agreed with him totally at that time, but the existing levels of taxation, in particular personal taxation, still remain in this budget. The mood of frustration, low morale and lack of confidence that Deputy Haughey spoke of last year continue under this Government. In the same debate Deputy Haughey said that the increase of 4 per cent on social welfare was completely inadequate and that it was deplorable it would not be paid until the third week of July. Of course, in this budget it is there as a proposal of 3 per cent, not 4 per cent, on social welfare, also to be paid in the third week of July. He said in that debate that no matter how difficult the economic and financial situation a Government had a moral duty to protect living standards of those who are their special responsibility. As I say, they are masters of the U-turn because those principles are all thrown overboard in this budget.

There is undeniable evidence for many years that the taxation system is unfair. Hundreds of thousands of people marched when the previous Fianna Fáil Government were in office in 1979 and 1980 because of the unfair taxation system. The result was that a Fianna Fáil Government set up a Commission on Taxation. That was all they achieved after all the marches. This Commission on Taxation did tremendous work and produced volume after volume or reports for a period of four or five years all of which have not been reopened since by any Minister for Finance.

We are told by a number of parties here, the PDs, and Fine Gael in particular, that the overall level of taxation is too high. That is untrue. The overall level of taxation is not too high. The level of personal taxation is too high. The level of taxation on the PAYE worker is far too high, but the overall level of taxation outside that is much lower than in other countries in Europe, in Britain and elsewhere. The PAYE workers — the latest figures I have is that there are 816,000 of them — pay 90.3 per cent of all income tax. When they were marching in 1979 and 1980 they were marching because they were paying 87 per cent of all income tax and the others were paying only 13 per cent of all income tax. After all that marching, after all the reports of the Commission on Taxation, after all the speeches and all the demonstrations, the level of taxation for them has increased from 87 per cent to 90.3 per cent and the level of taxation for the self-employed and farmers has been reduced from 13 per cent to 9.7 per cent. The situation is worsening all the time and now the Minister for Finance brings in a budget where the tax take from the PAYE workers is going to increase by £333 million or 14 per cent.

We have called repeatedly and again in the general election for a beginning to be made in reducing that burden by 10 per cent, from 90 per cent of the tax take to 80 per cent of the tax take while transferring that burden to the others who are not paying their fair share. The PAYE sector would still be overburdened by having to pay 80 per cent of the tax take. Of course, nobody listens; nothing is done because they take it and they vote for the various parties who are beating them into the ground. For some reason or other they vote for Fianna Fáil, Fine Gael and now for the PDs whom they think will reduce the burden of tax on them.

The budget says the Government are going to put the task force to work on the tax dodgers. Unfortunately when you read it again you see that they are going to put 25 people, a task force, to work on bringing in the money that is outstanding. There is a difference there. The Comptroller and Auditor General said £707 million was outstanding in taxes on 31 May 1985. That is the last figure I have. Last year the figure was probably higher. The self-employed, including farmers, owed £201 million. This was money that has been assessed and is legally due and they have refused to pay. PAYE and PRSI taken from PAYE workers and not paid over by employers amounted to £104 million, health and other levies £17 million, corporation tax £207 million, taxes on capital £25 million, VAT £149 million, other taxes £3.5 million making a total of £707 million. Why do you need a task force to bring in that money?

Because it will not come in.

Because it will not come in, as the master and expert on these matters here tells us from the back benches of Fine Gael. When the ESB did not pay up their £16 million the Minister was very quick to take it from them, to pull it out of the till practically. There are other people who stole money, who took money from PAYE workers in PRSI and PAYE contributors and did not hand it over to the Government. This amounted to £104 million. That is robbery; they are thieves, robbers, frauds. They are acting criminally but yet they are not in jail with the other thieves and robbers. Why are they not prosecuted? Rather than setting up a task force, why not simply make it plain once and for all that we will not tolerate this? Anyone who takes money from his employee and does not hand it over is a criminal and should be prosecuted in court for robbery, thievery or fraud. We do not need a task force consisting of people who know nothing about taxation or legal proceedings knocking on their door and asking them to pay up. We need the task force to follow up the people who are avoiding tax. What we are dealing with is non-payment of taxes due which have already been processed. The numbers in the Revenue Commissioners have been reduced by 11 per cent. There are now 850 fewer people in the Revenue Commissioners than at the time of the tax marches. What is required is a serious attempt to tackle the whole area of evasion and avoidance of tax as well as prosecuting those who refuse to pay.

I have repeatedly been accused of being anti-farmer. I believe the farmers are a very special case. They say they want to be treated like everybody else, that they want to pay their income tax like everybody else but they are not like everybody else and we discover that in every budget. In 1979 farmers paid £39 million in rates and £16 million in income tax. Last year they paid £33 million in income tax and did not pay rates. In this budget the Minister for Finance said he will take £35 million from the farmers, an increase of £2 million. Last year unregistered farmers got back £17 million in VAT refunds. That is a gimmick, a hand-out from the Exchequer to the farmers. Why not tell them to register like everybody else? If they want to be like everybody else then we should treat them like everybody else. Only registered farmers should get VAT refunds.

For the first time since 1978 the Minister, in this budget, has reduced the amount of VAT refunds to farmers by £9 million. It should be abolished and farmers should be told to register. Even after the reduction in VAT refunds farmers are getting back twice as much as they pay in income tax. In addition, they get all the health services, education services, local authority services, all the services of ACOT and the services of the TB eradication scheme which costs us millions of pounds. The money for all those services comes from the other taxpayers. The PAYE sector pay 90.7 per cent of that income tax in order to help farmers to eradicate TB, to get a decent education for their children — most of whom are in third level education — to help them with their health services, with their ACOT services and so on. How long can society stand that? The farmers know they are not paying enough. They are embarrassed at the fact that they are not paying anything like their fair share. Yet, the Minister is now abolishing the land tax.

I referred to the tax marches in 1979. They took place at a time when Fianna Fáil abolished the 2 per cent levy on farmers. Workers were very annoyed that this small levy was abolished. Later a resource tax was introduced and in 1981 Fianna Fáil abolished that tax. In that year they refunded the money to the 10 per cent of farmers who had paid that tax. The Coalition Government brought in a land tax which was reduced considerably, especially under Deputy Bruton who has a very big farm. Now the new Minister has abolished the land tax. Previously farmers with 40 adjusted acres or less, the vast majority of small farmers, did not pay any land tax. A 200-acre farmer would pay only about £30 a week under the land tax but that has been abolished now. We are now left with a totally unjust tax system where some people pay too much and others do not pay their fair share.

In the social welfare area we had hoped the Government might attack poverty rather than the poor. I pointed out what they said this time last year. They contributed 3 per cent, which is now less than the current rate of inflation, to those on social welfare. A commission on social welfare has shown that the minimum income should be £60 for a single person. One would think the new Minister would work towards that and would gradually improve within a reasonable period, for example, four, five or six years. The single person's allowance is £37 a week. The most unjust aspect of it all is that if that person is living at home the Government take £20 or £25 a week from him which leaves him with £10 or £12. If that person is living in a a flat, he gets £37 so that he can pay £21, £22 or £25 to his landlord. He does not get £37 to enable him to pay £21, £22 or £25 to his mother or father who are keeping him at home. That is most extraordinary and most unjust and I cannot find a satisfactory explanation for it.

In this budget the Minister has not tackled any of the real problems of those on social welfare. The real problems were shown in the distribution of the EC food over the past number of weeks. We have all seen long queues for this free food. Many of these people had not had meat for months and months. They are people who have insufficient money to buy enough milk, cheese, butter and meat for their families. They went out and queued publicly where they could find this free food. One sees references regularly to queues for food in other countries. If this happens in a socialist country, the news is splashed all over the front pages.

You do not see queues for food here. Why? Because if you have not the money, there is no point in queueing. If you have the money you buy the food, but if you have not you stay at home and starve. There is no point in queueing outside Quinnsworth, Superquinn or elsewhere if you have no money in your pocket. As soon as the food is available, you see the queues. That shows the problems of so many families today. I know that it broke people's hearts that food was being distributed by the St. Vincent de Paul Society; it meant that they were looking for charity. They did not want to have anything to do with that society. They are a very independent people. However, they were prepared to queue publicly for that food which they needed for their families.

If that is not sufficient demonstration to the Minister of the position we have reached, what is? That shows the level of poverty and the difficulty that people have in feeding their children. This budget has not in any way considered that. If the Government had abolished the VAT refund to farmers they would have had £70 million in their hands and would not have had any problem of cuts in health, or social welfare, or anything of that nature. What do the cuts in health mean? A woman who has a sick child goes to the doctor who now charges £10 for the visit — this charge goes up by £1 per year. The doctor advises that the child be sent to hospital for a check-up and for one day's stay this amounts to £10, for two days £20. There is no conception of what this means to parents and how they must struggle and fight to try to give their families a decent standard of living.

I have no intention of speaking for an hour and in general I have made the points which I wanted to make. However, I did seriously expect this budget to be a jobs budget from Fianna Fáil. I told somebody recently that the Government were making big cuts, that they were going to cut the budget deficit but still borrow the same amount so that they would have more money for capital programmes for jobs and such things. The man to whom I was speaking said that was fair enough, that they might do that and get away with it. What have they done? They have cut the capital budget. They have cut the house building programme. After this, Fianna Fáil can never again say they are the party of the building industry.

A Deputy

They never were.

Last autumn, all house building by Dublin Corporation was stopped. They are building almost no more local authority houses. They might build 15 to 30 but the 1,500 houses they used to build are a thing of the past. They said the £5,000 grant was releasing local authority houses because people were buying houses elsewhere. That £5,000 grant has now been stopped. In addition, there is a £12 million cut in the Department of the Environment housing programme. One would expect when the £5,000 grant went that money would have to be put into local authority housing. Where will the houses be in a few months time? By summer, there will be no more vacancies caused by people taking up the £5,000 grant and there will be no new houses being built. Where is Fianna Fáil's commitment to the building industry?

I am also wondering what happened to Deputy Haughey's specific proposal that he would make available another £300 million to the building industry. That has disappeared also. The construction industry have been set back considerably. Apart from three house improvement grants being abolished, mortgage relief is abolished and there is the £12 million reduction in the housing programme. Presumably, the Dublin Metropolitan Streets Commission have been abolished. The funding has been suspended. The commission will probably be able to pay themselves somehow or other, but Nelson's days are numbered anyway.

Deputies

No harm.

Deputy Haughey also promised to reduce VAT on building operations from 10 per cent to 5 percent.

I know the Deputy has still some difficulty, but ordinarily we refer to the Taoiseach.

I am sorry. That is the second time I made that mistake.

It takes a bit of getting used to.

The Deputy will get used to it after a while.

It is definitely growing.

The Taoiseach seemed to promise that VAT would be reduced from 10 per cent to 5 per cent. That was being looked forward to by the building industry because it would put about another £30 million into that industry. However, it seems to be gone.

I have not had time to go in depth into the education aspect of the budget but it seems that £10 million is being cut on post-primary education, which includes something that I am involved in. There is a £2 million cut in the VEC programme. I cannot see how the VECs will survive, considering the expansion which is needed there. One must consider the numbers coming through from primary level to post-primary. There is also the £2 increase in school transport.

My last disappointment concerns overseas development aid. We made a commitment some years ago that we would increase our contribution gradually until it was 0.7 per cent of the budget. Previously there had been some small increases. I had hoped that promise of previous Governments would be honoured — that we would at least be showing an increase, even a small one, each year. I had hoped that we would be heading up to that target, which seems a very small one. That would bring us barely into line with other countries' contributions. However, we have reduced our overseas development aid and are now down to 0.25 per cent, a total of £43.3 million, which I find very disappointing.

Debate adjourned.
Sitting suspended at 8 p.m. and resumed at 8.30 p.m.
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