The Minister has 39 minutes left.
Financial Resolutions, 1987. - Financial Resolution No. 3: General (Resumed).
Debate resumed on the following motion:
THAT it is expedient to amend the law relating to customs and inland revenue (including excise) and to make further provision in connection with finance.
—(Minister for Finance.)
The Government are committed to taking the necessary measures to halt the haemorrhage of the loss of jobs. After four years of high taxes, high unemployment and high emigration, this Government have framed a budget containing a range of measures specifically designed to confront our single greatest challenge — the problem of unemployment. The implementation of these measures will provide the basis for a recovery which will start to create more jobs.
Before lunch I was trying to explain to Deputy Bruton and Deputy Keating that it was impossible to discuss these two measures together. I said our priority is to restore confidence in the economy and to open new opportunities for employment. To achieve this objective we must improve investment, reduce interest rates and encourage capital flows into the economy. It is naive for anybody to argue that all this can be done in a short three week period.
This budget represents the essential starting point for economic recovery. The Government recognise that unemployment reflects our economy's failure to adjust to the circumstances and opportunities of today. Unemployment represents, in terms of both its social and economic cost, a burden which we cannot continue to bear. Determined and concerted action is required, using every means at our disposal, in order to tackle the problem. The success of the measures outlined in the budget yesterday, especially those directed to tackling unemployment, will ultimately depend on the understanding and support of the community as a whole, on the responsiveness of the administrative machinery, and especially on the efforts of employers and trade unions at local level. The only complete and satisfactory solution to unemployment is the creation of jobs. It is clear that new jobs will not materialise unless all the resources of the community are mobilised in a positive and co-ordinated way harnessing the talents, skills, creativity and energy in our community.
The Government are determined to take full advantage of the opportunities offered by the modest improvement in economic conditions abroad, particularly within the major markets of the EC and elsewhere, in order to achieve faster rates of growth and employment. These objectives call for improved competitiveness and the progressive introduction of necessary changes to expand our share of freer and more efficient markets.
Our labour market policies will have to be directed to achieving higher rates of job creation as distinct from simply preserving existing employment. The Government have identified the scope for improvement. They now call for a contribution from everyone involved, even where that means difficult or uncomfortable change, not least for the majority who have jobs. They aim to enhance the job prospects of the unemployed and socially disadvantaged so as to prevent their total exclusion from participating in economic activity.
These goals cannot be achieved without concerted action and effort on behalf of all interest groups in society, but particularly trade unions and employers as well as the Government.
Economic life today entails a faster and continual process of change. Technical and technological change usually helps to improve productivity and income. However, it can also impose severe social costs on individual workers and communities.
It is the duty of Government to see that burdens and gains are equitably shared with particular reference to those at the end of the jobs queue and in greater need. Special measures have now become necessary to provide for the needs of the unemployed and those whose jobs are most at risk. The fact is that the longer people are out of work the harder it is for them to get back into active life in the labour market. Despite the safety net which these provide, there will always be vulnerable categories who lose their jobs and whose restoration to active occupation is a difficult and challenging process. Income maintenance schemes can help but they are not enough. It is better, therefore, that prevention measures, such as adult retraining and further education, should be provided.
The scale of the unemployment problem with which we are now confronted as a nation is daunting. At the end of February there was a total of 252,500 persons on the live register, corresponding to an unemployment rate of 19.4 per cent. Over the past four years registered unemployed has increased by well over 100,000 to the stage where unemployment now exceeds a quarter of a million.
Long-term unemployment has continued to increase as a proportion of total unemployment. The Government's announcement of a major reorientation of the activity of the manpower agencies in the form of a Jobsearch programme for 150,000 unemployed persons is a measure of the kind of response which is needed to provide assistance to the long-term unemployed.
Some of the points made on the job search programme this morning were totally negative. This programme is an effort to assist those who are unemployed for a year or more. These people feel that they have been neglected by the agencies and feel that society and the administrative machinery of the State care little for them. They have continually put forward to all of us in this House that the system has an obligation at least to be interested in their needs and to assist them.
In the job search programme we have highlighted all the agencies which can help these people. If there are people on the live register who should not be there they are breaking the law but the purpose of the programme, and what I hope it will do, is to give the long-term unemployed an opportunity to be properly interviewed in a professional way by the National Manpower Service who will be geared to handle this task between 1 May and 31 December. The purpose of this programme is to try to assist and advise people and to show them the wide range of schemes which are available.
Many Members in this House are not fully aware of the range of schemes that are available. There are 29 very detailed programmes, some are complex, some are straightforward, some have complicated guidelines and others have very simple ones. The long-term unemployed, many of whom we met during the recent campaign, and who have not for years been interviewed by the National Manpower Service, have a right to be brought in not just for a 30 second interview but for a detailed interview. There the options which are available to anyone on the live register will be pointed out to them and the National Manpower Service will tell them about the considerable training and employment scheme opportunities which are available. To say that is anything other than a positive move is incorrect and ignores the views of the long-term unemployed. They wish to know what is going on and they wish to be assisted and helped.
The one example I have often used, including when in Opposition in this House, is that if you happen to be a person who cannot write a letter of application, who cannot spell well and who happens to have the wrong address — which occurs when you happen to write to certain employers — you require assistance and advice. A properly organised National Manpower Service are able to give that help. Under the job search programme 40,000 places in the various training schemes will be kept for the long-term unemployed. Twelve thousand places will be kept on special job search courses, including also the enterprise allowance scheme, the employment incentive scheme, the social employment scheme, the teamwork scheme and the work experience programme. The AnCO programmes specialise in areas such as computer training and they will help people to obtain jobs. There are also the CERT and Youth Employment Agency schemes.
No one in this House can truthfully tell me that all those schemes are known to the long-term unemployed and that they know how to get on these courses. The fact is they do not. Perhaps they should know and perhaps it is all written down somewhere for them but under the job search programme these schemes will be explained to them in detail and they will be given advice on how to register for these courses. Forty thousand places on these training schemes will be held for the long-term unemployed this year and a further 12,000 places are being held for those taken in on special training courses who will be shown how they can assist themselves.
According to the latest figures available in October 1986, in excess of 100,000 persons were unemployed for more than 12 months. This compares with the long-term unemployment figure of 49,418 in October 1982. The incidence of long-term unemployment is far more widespread among the older age groups, those over 25, than among the youth. In round figures, about 80,000 people over the age of 25 have now been unemployed for at least a year. When allowance is made for the fact that many of them are married people with families to support, it is obvious that in their case the social and economic side effects of unemployment will impinge on a much wider group. At the end of February, there was a total of 76,899 persons under 25 on the live register, or 30.5 per cent of total unemployment. The youth share of the live register has generally remained constant over the past few years, at around 30 per cent. Since the start of 1982, youth unemployment has increased by over 80 per cent from a January 1982 level of 41,700.
It must be accepted that long-term unemployment cannot be treated in isolation from the solution to the overall unemployment problem. It must be recognised, however, that the long-term unemployed experience particular difficulties. Even in a situation of increasing labour demand such disadvantages are still likely to persist.
The longer people are unemployed the more rusty they are likely to get about work habits, their motivation becomes undermined and they are likely to become less confident about their ability to compete for a job. In fact, such people are unlikely to find jobs simply by applying. Their experience of failure in finding jobs can lead to a loss of self-esteem and can result in depression and a too-ready acceptance of unemployment as a trap in which they have got caught.
The Jobsearch programme announced in the budget is designed to tackle headon the problems of chronic unemployment which keep some people out of the active workforce for months rather than weeks. The limited schemes which were run in a number of locations have shown that it is possible to help the long-term unemployed to obtain a fairer share of the available jobs and training and temporary employment. The Government have taken a bold step by extending the programme to the entire country and targetting it at a total of 150,000 people currently on the live register. As part of the programme all of these unemployed people will be offered one-to-one counselling interviews and guidance on how to improve their job finding techniques.
The participants in the programme will be able to avail of a minimum of 40,000 job opportunities which have been reserved for them between now and the end of this year across the range of schemes provided by the manpower agencies. An additional 12,000 persons will be given places on special job search courses between 1 May and 31 December of this year.
The manpower agencies are gearing themselves up to undertake this important task. The staff of the manpower agencies have already shown their energy and commitment in developing a wide range of new schemes to assist the unemployed in recent years. I would like to pay a special tribute to the staff of the National Manpower Service which now provides the main gateway to opportunities on special employment and training schemes. I am convinced that they will respond positively to the new challenge. Personal interviewing will transform the target figure of 150,000 unemployed persons from a collection of statistics and files into people. When the faces behind the files turn up for interview they will undoubtedly reveal a range of skills and experiences which could lead in a number of directions.
By directing that the resources of the manpower agencies should be immediately concentrated on a major programme of assistance to 150,000 unemployed persons, the Government have made it clear that they are not prepared to await the enactment of the National Employment and Training Bill to see that these resources are used effectively. The challenge faces us now. The active measures being taken from today — only three weeks after we came into office — show clearly the kind of general policy direction the new authority will be expected to pursue.
The pivotal role which the National Manpower Service are being given in assisting the Department of Social Welfare also reflects the positive way in which the National Economic and Social Council viewed the significance of their contribution as the focal point in identifying, classifying and placing persons in the context of the range of special programmes now in existence. The National Economic and Social Council correctly recognised that the era has ended in which the placement service could afford to adopt an arms length approach towards the unemployed.
Inevitably it follows that the operational links between the manpower agencies and the Department of Social Welfare will be strengthened as part of this radical new programme. It is also inevitable that the majority of the clientele of the NMS will now come from among the registered unemployed and that it must increase its awareness and sensitivity towards the problems of the group which it is assisting. 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 its manpower offices.
Long term unemployment becomes a massive handicap in the search for jobs. Employers will often show a preference for candidates with recent work records. Already the experience of the pilot schemes conducted to date has shown that the knowledge and skills imparted were significant for the individuals concerned.
The feedback from the pilot schemes also showed that what those who went through the programme valued most was the motivation they received from the courses and the encouragement they got to undertake intensive job seeking activities. In addition to those who went on to find employment, quite a number of participants on the pilot schemes opted for places on suitable training courses with AnCO or expressed an interest in the various other special employment schemes.
The Government are convinced that action on this scale is needed to restore the morale and self-respect of many of those who have been without a job for several years.
As the House is aware the National Employment and Training Authority Bill, 1986 which was designed to give legislative effect to a number of decisions contained in the White Paper on Manpower Policy lapsed with the dissolution of the Dáil in January last. In the course of the Second Stage debate on the Bill it was clear that there was a large measure of agreement for the White Paper and the principles underpinning the Bill itself. In order to ensure the most efficient and effective delivery of manpower programmes and schemes it is necessary to provide an integrated service by bringing together, as far as possible, the various manpower agencies into a single body. In the present economic situation it is essential that our scarce resources are developed and used to the maximum possible extent.
The House will recall, however, that certain reservations were strongly voiced about a number of features of the National Employment and Training Authority Bill particularly in relation to the relationship of CERT to the proposed Authority. I accept that in view of CERT's particularly close association and involvement with the tourism sector — which has been identified by the Government as an area with substantial potential for employment growth — there may be a case for allowing CERT to retain its distinctive identity. Just how this can best be achieved is under consideration at present. I have been reviewing the position and will make a decision on the matter shortly. I intend to press ahead with the reintroduction of the National Employment and Training Authority Bill to the Dáil after Easter.
I would like to remind the House that in our Programme for Government particular emphasis was placed on the need for regionalisation of manpower services to make them more responsive to local requirements. It is my intention to see that the new authority will be structured in such a way as to ensure that there is a strong regional bias in the organisation and delivery of its services to the public.
It is now timely to have a radical rethink about how to make the integration of manpower services more effective at local and regional level. What I have in mind is not simply the rationalisation of the existing manpower agencies or ensuring closer collaboration between them and the education system and the administration of social welfare at local level.
We also need to look at other means of improving the relationship between the manpower services and their clients. I intend to explore the extent to which scope exists for improvements in flexibility so as to deal with the variety of client needs. I also intend to look to the scope for innovation in regard to our delivery systems and services and to a greater degree of devolution of decision-making. Obviously, the plans for the development of the National Employment and Training Authority will reflect the Government's policy on the devolution and decentralisation of decision making.
Very often community groups have demonstrated valuable creativity in developing ideas of job creation and temporary employment. Such groups also have the capacity to generate resources at the very level where unemployment and its consequences are most visible and where the commitment to action is most urgently needed.
Our support services in the manpower field must be ready to respond to the challenges and opportunities in local employment initiatives. We must guard against any danger that these administrative services might act as gatekeepers rather than as stimulus agents where local projects are concerned. Looking at the experience of many of the community based programmes and the success of the social employment scheme, I think that we can go much further in harnessing the potential of community-based organisations as vehicles even for operational purposes such as delivering services.
I have been struck by a new positive approach towards direct action to assist the unemployed which is being adopted by some trade unions at national level and by many trade councils at local and regional level. In my view the most notable of these new developments is the special jobs fund established by the Federated Workers' Union of Ireland in 1985 to assist the unemployed on the basis of a levy imposed for a three year period. Already it has assisted a number of projects throughout the country including the recently established Ballymun Unemployment Centre. I fully appreciate that there has been a history of extensive involvement on the part of trade unions in the work of the manpower agencies. In fact the co-operative and constructive approach taken by the trade unions by and large towards the development of the social employment scheme grew out of their favourable experience of involvement at national and local level with AnCO's community youth training programme. In the case of the social employment scheme trade union co-operation has been forthcoming in resolving many practical problems and in ensuring the successful integration of worth-while projects involving work which would not otherwise have been undertaken.
Schemes like SES and Teamwork have also been used by groups in many cases composed of local trade union activists to support drop-in centres geared to offering an open-ended commitment of support to the unemployed for as long as it takes them to find a job. Youth Employment Agency grants have also been made available through the Irish Congress of Trade Unions to assist the establishment of centres for the unemployed people administered by trades councils in a number of urban centres.
I see the Government's job search programme as a complementary initiative and as another means of helping unemployed people to find jobs for themselves.
An essential element in the job search programme announced in the budget is the recognition that the unemployed do not constitute a homogereous group. Irish case studies point to a variety of factors which can be identified in addition to the normal categories such as age and duration of unemployment. Other important indicators include economic and social characteristics such as local rates of long-term unemployment, the level of services and facilities available in the community, previous employment histories, accommodation etc. The existence of such a critical variety of factors highlights the need for carefully targeted measures rather than responses based on crude classifications. A strategy based on flexible and cost effective measures will go further in helping those worst hit by unemployment and will improve their chances of getting back into work.
The Government are confident that, with the benefit of coaching in job-seeking techniques, some of the participants in the programme will secure employment. This should help to equalise the job chances of all those looking for work by equipping those on the programme with the same job-seeking skills and techniques as those who, up to now, have been socially and educationally more advantaged.
The various schemes operated by my Department will continue to have an important role in their own right in the fight against unemployment. While some schemes provide worth-while temporary employment and work experience, other schemes like the employment incentive scheme and the enterprise scheme will help maximise the employment impact of an improving economic situation.
The funds originally provided for the SES would have limited average participation in the scheme to about 7,900 persons. As a result of the changes announced in the budget it will now be possible to put a further 1,500 long-term unemployed people back to work under the scheme.
The SES is now widely recognised as a very worthwhile scheme which breaks the cycle of long-term unemployment while, at the same time, improving the local environment or enhancing the provision of voluntary services. We have no shortage of worthwhile projects awaiting the green light so I expect the extra 1,500 places to be taken up quickly.
The enterprise scheme has been helping unemployed people to become self-employed by giving them a weekly payment in lieu of unemployment payments. The funds allocated for the scheme will mean that we can help about 80 people a week to become entrepreneurs provided they come up with worthwhile projects. This could mean about 3,000 new small businesses between now and the end of the year with the help of the scheme.
The employment incentive scheme encourages employers to take on extra workers by giving them generous wage grants. Last year employers notified about 10,000 recruitments under the scheme to the National Manpower Service and we would expect at least a similar number this year.
Teamwork provides grants to community and voluntary bodies for the temporary employment of young unemployed people on projects of value to the community. The scheme is aimed primarily at those unemployed for six months or more. Close on £6 million has been provided for this scheme in 1987. This will mean that about 2,500 young people could participate on Teamwork projects.
I have previously emphasised my commitment to greater employee involvement at the workplace and in the running of enterprises. I propose to press on with the enactment of the Bill to extend arrangements for worker participation in the public sector which is now with the Seanad.
The Bill has two main purposes. It provides for the development of worker participation below the level of the board in a broad range of State enterprises at the request of a majority of employees. The Bill also provides for the appointment of worker directors in three further State enterprises — Aer Rianta, An Foras Forbartha and the National Rehabilitation Board. The Bill had reached Committee Stage when the Dáil dissolved. It is my intention to seek restoration of this Bill to the agenda of the incoming Seanad. In the meantime I hope to be able to consider the views of all the interests concerned with a view to proceeding with the Bill in both Houses over the coming months.
It is my intention to proceed as soon as possible with the Safety, Health and Welfare (Offshore Installations) Bill, which lapsed with the 24th Dáil. Work on oil rigs is notoriously hazardous. The Bill will facilitate the proper regulation of health and safety standards for offshore installation workers. Exploration installations have been operating in Irish waters for over 15 years and the Kinsale Head gas field came on stream in 1978.
The safety of the workers in the industry has been governed by a condition in licences issued by the Minister for Energy, requiring the companies concerned to comply with the requirements set down in a document entitled Safety Instructions for Offshore Petroleum Operations issued by my Department. So far these arrangements have operated satisfactorily but it is highly desirable that they should be placed on a statutory footing as soon as possible.
I have been concerned in recent years about the delay in bringing forward legislative proposals and an apparent uncertainty which affected some proposals as soon as they were unveiled. My approach will be to select a number of practical and sensible measures which will safeguard the welfare of workers without raising any obstacles to flexibility or the expansion of jobs.
In the general area of safety and health at work, it is my intention to give early legislative effect to the main recommendations of the Commission on Safety, Health and Welfare at Work — the Barrington Commission. This is a comprehensive reform measure and will involve a "framework" approach to legislation. I have asked my Department, in liaison with the Interim Board for Occupational Safety and Health, to give priority to the completion of their work on the drafting of the legislation which will extend legislative protection to all employers, workers and the self-employed.
I intend also to give priority to incorporating into domestic law European Community standards on precautions in the use of lead and asbestos and to introducing legal controls on liquefied petroleum gas.
The primary emphasis in the Government's programme is on creating economic growth. One of the factors which has a key role to play in ensuring conditions which will facilitate the attainment of this objective is a good industrial relations environment. As a small open economy many of the factors influencing our economic performance are outside our direct control but industrial relations is one area which we can influence.
In this budget the Government have shown that they are prepared to help set the framework for the nation's efforts. The Government have already stated their intention to create a forum in which the social partners can negotiate the terms of a national plan for recovery. The reform of industrial relations practices could be an important element in this approach to consensus planning.
Employment creation in this country depends also to a considerable degree on our ability to continue to attract foreign investment in the face of increasing competition for this investment. Foreign investment is highly mobile. Large companies are not interested in the historical, structural or cultural reasons for our industrial relations problems. In looking at the overall industrial environment they are only interested in the effect of these problems on their business. Will delivery dates be missed? Will orders be lost? Will return on investment be reduced? If they are not happy with the answers to these questions they can choose not to locate here or not to increase existing investment.
Good industrial relations cannot be legislated into existence. It is primarily the responsibility of those actively involved in the day-to-day operation of negotiations and industrial relations practices to contribute to the creation of an environment in which existing firms are more likely to expand employment and new firms are more likely to be established. Our aim is to involve the social partners directly in planning the route to recovery and in ensuring that this team approach is also extended right through to the development of greater co-operation in the workplace.
With regard to my own sphere of responsibility for labour affairs, I intend to have meetings with the representatives of employer and trade union bodies, as well as other interests associated with the work of my Department in the coming weeks so as to be able to draw on their constructive contributions in shaping my own programme of work in the Department of Labour.
First, let me wish the Minister for Labour well in his portfolio. As the youngest member of the former Cabinet, I will be keeping an eye on him. Perhaps he should reconsider his decision to retain the office of Lord Mayor. I remember in 1981 and 1982 the strenuous objections by the Fianna Fáil Party in Opposition to members of the Labour Party and our partners in Government remaining in office in local authorities and corporations. I know that each of the portfolios which Deputy Ahern, as Minister for Labour and as Lord Mayor of Dublin, holds are onerous and very distinguished offices. It would be in the best interests of both that he should consider his position and do his duty to this House. That is not said in any personal way. I know the Deputy understands that, but I know that in the past it was a precedent in this House that Members, on being appointed to Cabinet, resigned from local authorities and corporations.
The budget was introduced quite briefly yesterday by the Minister for Finance. The details will unfold over the next couple of weeks, it will take a considerable period of time for them to do so and it will not be clear until then how savage a document the budget is. It will also become clear that a massive con trick was perpetrated on the Members of the House and on the public generally by the Minister's presentation yesterday which was perhaps the briefest budget introduction in the history of the State. It would have been more appropriate perhaps if he had delivered the speech today, April Fools' Day, because it certainly was a massive hoax.
I do not like interrupting Deputies but I am sure that, when Deputy Spring realises what he said in referring to the budget as a con trick, he will realise that it does not do justice to himself, to Government generally or to the reasons for having discussions of this nature. I suggest that perhaps there is a more appropriate term which could be used by the Deputy.
It is an area into which I do not delve too often and, therefore, I am short of terminology in that regard. What was presented yesterday by the Minister for Finance in a strong and stern manner was a misleading document in relation to being a solution to our economic problems. Does that pass the acid test?
There is an inference that a Minister in any Government would be anxious to mislead the House. On reflection, I assume that a former Minister would have regard for the feelings of others in relation to remarks of this kind. I am formally putting to the former Minister and Leader of the Labour Party that, generally speaking, we should be careful to avoid phrases of the kind used by him. However, I will not interrupt the Deputy any more.
I appreciate that and I accept your guidelines. However, I wish to direct your attention to some of the speeches made from the Opposition benches in post budget days for the past four years.
The budget which the Minister presented on behalf of the Government was based on three fundamental principles and he said that one of them was the need for a special focus on unemployment. That statement must either be a typing error or a wrong statement by the Minister because the rest of his speech concentrated directly on driving people out of jobs. It could only have been written with a view to creating a special focus on unemployment. Throughout the brief speech there are gaps, unfinished sentences, details not filled in and, indeed, many Members of the House had to wait for this morning's newspapers to find details not included in the speech or in the Principal Features of the Budget. They were reserved for the press briefings which were given away from the scrutiny of the Members of this House.
It is my intention to focus on some of these areas but first I want to lodge my protest in the strongest possible manner about the way in which the whole budget process is being rammed through the House today and tomorrow. The Government propose to make a huge number of cuts in the living standards of the poor sections of the community in the social welfare area and to make their situation even worse by charging for basic, essential health services. The changes they propose would be illegal if they did not change the law and, therefore, the Government propose to introduce two new Bills, today and tomorrow, to carry out some of the most fundamental changes we have ever seen in these areas and ram them through the House in a very short period. The Seanad will sit on Friday to pass the legislation so that it can be signed by the President before the weekend. The only reason for the haste and the rush in relation to these matters is so that they can be introduced by Monday next. It is a scandal, anti-democratic and a flagrant abuse of the Dáil and Seanad.
What is as bad — if not worse — is the fact that this cannot be done without the co-operation of Fine Gael and the Progressive Democrats and it appears that both these parties have given their consent to allow this to happen today and tomorrow. Even if Fine Gael and the Progressive Democrats agree with the proposed cuts and with the measures in health and social welfare being put through the House without adequate debate and the opportunity to highlight how mean and petty the cuts are, there should not have been agreement to allow them to go through the House so quickly. I suggest the only reason they are agreeing to curtail debate is that they obviously agree with the cuts although they are afraid to take responsibility for them. They believe that, by allowing them to be rammed through in this way, nobody will notice the role they played and that the impact of the cuts will be obscured by the publicity for the whole budget. People who act like that do not deserve to be called an Opposition in the House.
The cuts in health and social welfare are among the most savage attacks on the poorer sections of our community that we have ever seen. The rights workers have paid for over many years in social welfare are being taken away at the stroke of a pen. From next Monday, people who begin a period of unemployment will know what it is like to live in the year of the poor law. People who become unemployed are being told in the budget that it is their own fault and that they will have to pay for losing their jobs by being deprived of benefits to which they are entitled. They will probably be told by some Members of this House that it is good for them to be without work and to do without, that it will give them an extra incentive to look for alternative work.
I do not agree that poverty is good for anyone. The hardship which the Government will inflict on the unemployed from next Monday is shameful. It will also be compounded by an assault on their dignity which will take the form of a new and sinister job search programme which was not clarified by the Minister for Labour in his contribution to the debate. One of the massive gaps in the speech of the Minister for Finance to which I referred earlier was in this area. You could search and re-search the Minister's speech without finding the true meaning of the Jobsearch programme. It was not until he was questioned by the press last night that he admitted the centre will be an effort to find what he regards as malingerers and deprive them of any benefit, thereby effecting a spurious reduction on the live register.
I and every Member of this House should be asking the Minister for Finance, the Minister for Labour and the Minister for Social Welfare how this is to be done. If one can believe what one reads, 150,000 unemployed people are going to be interviewed during the remainder of this year in the 40 Manpower centres, and they are to be offered one of the 40,000 places. I am not sure whether we should call these places jobs, placements, positions or training courses. By my calculations that means 4,200 unemployed people being called in during each working week, 22 in each centre on every working day. Have the Government and the Ministers concerned in particular studied the details and implications of what this means? Obviously, no extra staff resource is being made available to find the people, to carry out the interviewing or to find the jobs. Presumably they are to be given an option. Manpower will tell them that they have been unemployed long enough, something which most people on the live register hardly need to be told because they are well aware of it, and that they must now go to work at whatever job may be designated or face the alternatives.
What will those jobs be? Will they be what the Leader of the Progressive Democrats, who now supports this scheme, once sneeringly referred to as "pulling nettles in our graveyards"? Will they be local jobs? Will the unemployed have to travel? Will there be a rate of pay or will it be subject to the Minister's whim? Will they be asked to fill vacancies in essential services which cannot be filled otherwise because of the total embargo introduced yesterday by the Minister for the Public Service and the Minister for Finance?
What will happen to people who do not believe that they should be asked to do jobs for which they have no training, skills or background? What will happen if they are ill when summoned to an interview? Will the prospective employers involved have any say in relation to selection, assignment, suitability or any other essential issue? Above all, where are these 40,000 jobs to come from? Why can the Government not tell us the truth about this scheme?
I suggest that Members of this House, particularly those who have been involved in public life for many years and doing their clinics on a regular basis, are well aware of — most Members of this House will have attempted to impress this on employers — the necessity of taking on extra people, of starting schemes to try to encourage people and communities, but where are these jobs to come from? I and, indeed, the Labour Party will be pursuing relentlessly both the Minister for Finance and the Minister for Labour in relation to these jobs on a weekly basis, on the basis that as of next week they are going to have to interview 4,200 people, and we will be asking what is going to happen.
It is rather ironic that two-and-a-half years ago when the former Minister for Labour introduced the social employment scheme, if I recollect correctly, and I think I do on this occasion, it was derided at the time by the Opposition benches as a "make work" scheme.
I am afraid the Deputy is incorrect. I supported it from the very first day it came out. Obviously he was not listening to my speech. He is totally wrong.
We will take that as a point of clarification.
I am glad to hear it.
It is on public record.
I stand corrected. I am glad to hear that the scheme was supported by the then spokesperson on Labour.
In relation to this Jobsearch programme, there is a calculated and deliberate attempt to frighten unemployed people. By its operation it will serve to remove the last shred of dignity left to people who are without work. The summons from the Manpower offices will come to be seen as yet another threat, thereby changing for all time the role Manpower have been playing and are supposed to play and the perception that should be attached to the Manpower offices. Turning Manpower into Big Brother may have its Orwellian overtones, but there are definite Cromwellian similarities as well and perhaps the cry for 1987 shall be "To Hell or to Manpower". If so, it will be a matter of great shame for everyone involved.
The notion arising out of yesterday's finance speech that there are 40,000 available jobs is rather pitiful. As I said, we have all been involved in working to create jobs, to get job placements for people and to ensure that people are given the dignity of work. However, the direction of yesterday's budget, its impact and the effect it will have on jobs and job creation in the economy, rather than creating 40,000 jobs, will go in the other direction. Fewer jobs will be a able in two months' or four months' time than at present exist.
It is perhaps the most deflationary budget we have had in years, certainly in the past five years. It is taking millions of pounds out of the economy and this can only have a disastrous effect on employment. A good deal of the money that has been taken away has been taken from the poor. Apart from the moral issues this raises, which are very profound, money taken away from the poor is money that would have been spent on home produced goods. In terms of real jobs there is not one single specific job creation measure in this budget. The massive reduction in the public capital programme will have a disastrous effect on the building industry which the Opposition party bleated about during the last four years and to which they have made over the years detailed and specific promises and, God knows, we in Government had to listen to long playing records from the construction industry about the fact that if Fianna Fáil were in power the problems of that industry would be over.
The absence of any tax relief will reduce the disposable income available to families, the PAYE sector. This will depress demand further and lead to more unemployment. The increase in the tax take from, generally speaking, the PAYE sector is the largest that most Members of this House can recall. It will amount to almost four times the rate of inflation. The impact on jobs of this approach will be catastrophic.
In overall terms, not only is this budget going to do absolutely nothing positive about jobs, it will have an enormous negative effect. This is an extraordinary outcome from a Government who campaigned for four weeks about growth and development. The only growth possible as a consequence of this budget is the growth in the hardship that thousands of people are suffering already, and the only development possible is the development of deeper and deeper divisions between those in our society who have and those who have not.
The great irony is that the Government have adopted willy-nilly the philosophy of the Fine Gael element of the previous Government. The arguments now being made by Government Ministers are practically the same as those which they denounced with passion on our television screens a few weeks ago. Now the only claim they make is the one that the Fine Gael members of the previous Government made constantly, that their proposals would create jobs by the simple route of driving down interest rates through cutting Government borrowing. This theory remains to be tested, certainly in this country. In Britain we have seen examples of how this theory was meant to work and has been working. In Britain they say that the incentive to work has been restored there and the level of Government borrowing has been driven down. The result is that the numbers out of work have reached historic proportions and the country has been divided into two societies as never before.
I do not believe nor I think does any Member of this House believe that this is what Ireland needs for the eighties. Even if interest rates fall rapidly in this country by as much as five per cent they will still be at much the same level as they were 12 months ago, and there is very little evidence that those much lower interest rates of private sector investment had anything like the level we need to solve our economic problems. As the Fianna Fáil Party admitted during the election campaign, what we need as a basis for solving some of our economic problems is a consensus about how our problems must be tackled, and that consensus must be generated among the groups and interests who can contribute to growth and fairness. It must be generated not by making concessions across the board but by recognising and channelling the contribution they can make. One of the largest sectors that can make such a contribution is an efficient and dynamic public service.
How do the Government respond at the first occasion possible to this challenge? They can identify the challenge. They launch an attack on the public sector the likes of which we have not seen before. It is unprecedented in its severity and its lack of fairness. It may be quite popular in certain circles to talk about cutting public service pay but it is based on a misconception and on some mischievous propaganda. The public service are regularly and routinely described as underworked and overpaid but this is a totally untrue picture of the realities of the public service. Less than one-third of the public servants earn more than £11,000 per annum. Less than five per cent earn more than £20,000 a year. I will give an example of some of the very basic levels of salary that people in the public service survive on. For instance, about 90 people in the Taoiseach's Department, out of a staff complement of 150, take home £120 a week or less. I will bring these figures to the attention of the many critics of the public service. There is no good reason why people such as those I have given examples of should be the only ones in the community who are forced to forego any wage increase in 1987.
The Fianna Fáil Party already committed themselves to amicably resolving — that was the expression used by them — the teachers' outstanding grievance over their special pay award. How are they going to do that within the parameters of a pay freeze? The House is entitled to know what proposals the Government and the Minister for Education have in this regard. How will they live up to all the promises they made to interest groups throughout the community, many of whom are paid from the public purse? Perhaps some of those promises may be easily forgotten when a Government start facing up to the serious economic problems. It is worth recalling so that we maintain the realities and focus on the problems in front of us in this House. Some of the promises which were made glibly and offhandedly in the last number of months by the Fianna Fáil spokespersons were basically along the following lines. There would be £200 million for the construction industry; there would be relief in the region of £300 million for farmers. We also heard at Question Time today a sum of £50 million will probably not be forthcoming for disadvantaged areas if there is re-classification in 1987. There were to be major reductions in VAT along the lines of self-financing cuts which is practically a myth; there was to be the abolition of the deposit interest retention tax which was later downgraded to a review — we would now be inquiring as to what is happening with that review. There was to be the abolition of local charges, the abolition of residential property tax, a reduction in the top rate of tax from 58 per cent to 50 per cent and two-thirds of the taxpayers were going to be put on the standard rate of tax. These are the sort of promises, a political shopping bag, that were made in the last number of weeks. It is a sad cry from what we were treated to in this House yesterday. It is no harm reminding Members of the House and the public generally of what was on the television screens and what was on the table less than six weeks ago. There is hardly a table left at all after yesterday.
There have already been rigorous controls over public service numbers in the past number of years. I will be submitting to the House that any further cuts will be counter-productive. It is hard to see how further cutbacks can be effected without drastically impairing the health service, essential local authority and education services and security. The cutbacks envisaged here, even if they can be operated, will have a disastrous effect on the quality of life, an effect that will not be fully appreciated until the services which have possibly been taken for granted by many members of the community begin to disappear.
We should not be under any illusion in relation to the package which was unfolded yesterday and which will be unfolding on a gradual basis in the next couple of weeks. Local authorities will get notification of their allocations, many of which had been directed before 10 March but which were put on a total freeze since Friday of last week. There will be a requirement in regard to the local authorities — I am not sure if the same will apply to the health boards — that a redirection be given in relation to allocations and permitted expenditures for 1987. That will have to be given as a matter of urgency because at present there is practically a total freeze on local authority work and expenditures.
One of the hidden features of the Minister's speech yesterday is the cut of £30 million in the revenue available to local authorities. This will bite very hard on the work of local authorities and the maintenance and services provided by them during the coming 12 months. I would be very surprised if that type of cut did not result in job losses. I suspect that is the only recourse that will be available to the managers and the accountants in the local authorities when they are trying to put their budgets together for the remainder of this year. It is a strange cut by a party who campaigned so vigorously both at local and national level in relation to the local charges for the past four years. One of the options is that they can reintroduce charges at twice the rate that ever existed previously. Another is that they can begin the process of laying off about 4,000 local authority workers. As the details of this cut filter through the effects will be absolutely disastrous. It will have an enormous impact on local communities all over the country.
I suspect there are very few Deputies in the House today who have not received queries or contact in relation to the massive scale of cutbacks in relation to home improvement grants, new house grants and grants available to local authority tenants who are trying to better themselves. From contact with my own party members and looking at the newspapers today, I can honestly say that the phone lines are jammed in the Department of the Environment today. Any Minister who can stand before the House and retrospectively cut entitlements in this area is not acting in a very just manner. Many thousands of young couples and single people with the intention of getting married have been working very hard to put together the basic cost of housing. They have calculated the money required on the basis of the grants available to them. Some people, those aspiring to move from local authority houses to new houses which they will build themselves, now have a shortfall of £7,250 in their calculations.
There is no possible way that these people, most of whom are working for meagre and low salaries, will ever be able to provide the housing which they had intended providing. Many of these people will have sent in their applications over two months ago and signed contracts, subject to loan approval, for the acquisition of housing and this will now go by the board. It is quite unjust and I shall be appealing to the Minister for the Environment, in conjunction with the Minister for Finance, to have it reviewed. Notice should have been given to persons who were intent on purchasing housing because of the impact this will have.
I am quite concerned about the impact of this measure on the building industry because it will have an adverse effect on house starts and house sales, certainly in the coming weeks. However, I am more concerned about the fact that many thousands of people who were in a position to house themselves, to take themselves off local authority housing lists, to provide housing from their own resources, will not be in a position to do so. Members of the Fianna Fáil back benches and of the other parties in this House should also put it to the Minister for Finance and the Minister for the Environment that this facility should be restored to give some justice and equity to the many applicants for these housing grants.
Needless to say, many small builders throughout the country will be seriously affected. From my own experience, many people who had been unemployed heretofore, many who had been, in fact, in the black economy, were quite happy to come into the legitimate economy, to register for VAT and income tax when these grant schemes were introduced with the prerequisite that people had to be registered. For once, I believe we had been making a positive step towards eliminating the advantage to small builders working in the black economy as against registered regular builders. Now, at one stroke of the pen that has all been set at nought. It will affect the builders, the small builders in particular, and the aspiring young couples who were hoping to house themselves. There was an incentive and it is one that in justice and humanity you cannot remove — and remove retrospectively. It was particularly insidious to remove it from a date prior to yesterday's speech. One could understand if for some reason, given the state of the public finances, notice were given that these would be scaled down from a certain date forward, and if the Minister for Finance were to say that where contracts were signed they would be acknowledged and the grants would be paid. For people who have signed contracts, many two or three months ago, to be given this blow was a very sad day's work indeed.
Likewise, in the health area the effect will be detrimental. The health boards and health agencies as we head into the month of April, have not been informed of their individual and reduced allocations for 1987. Because of that and until that is done, the full impact of the health cuts proposed by the Fine Gael Government as of 20 January and largely contained in this budget is as yet wholly unappreciated by the public at large or, indeed, by those who work in the health services. The 1987 Estimate for health boards, for the voluntary hospitals and other agencies such as for the mentally handicapped, was cut by £40 million. In addition, the GMS medical card scheme was cut by £30 million. All these agencies involved are three months into their expenditure for 1987. They are entitled to know their allocations, in accordance with the long established practice in the Department of Health, immediately following publication of the Book of Estimates. In the past the health boards have always been informed before the start of the year.
The publication of individual allocations will make apparent in the starkest of terms the precise reality that each hospital and health board programme faces and the precise impact of the cuts decided upon. It will be absolutely horrendous. These cuts cannot be realised without ward and hospital closures, without great increases in waiting list numbers, without job losses. I know from my own experience that for certain operative treatments which are required at present by constituents of mine there is already a waiting list of 12 months in hospitals in Cork. I suspect this is now about to be doubled by virtue of the cuts in the funds available to these hospitals and, indeed, to the Southern Health Board. I presume the same will apply right across the board with the other health boards as well. Obviously there will be job losses and to that must be added the obvious antisocial decision not to replace any staff who leave.
Perhaps worst of all is a matter which needs the attention of this House because it will be debated at some length here this afternoon when this debate is adjourned to enable Deputies to focus on the new regulations and the amendments to the 1970 Health Act. In terms of impact on ordinary people the most severe effect will follow the new charges being imposed. The outpatient charge of £10 is perhaps something that we all have been expecting for some time. The silence of Fianna Fáil on the subject during the election campaign was perhaps testimony to their intentions. However, the £10 charge per day for maintenance must shock even the most hard hearted of Fianna Fáil supporters. I am glad to hear echoes of shock from those on the right who sit on my left. These are people who advocate cutting public expenditure, rolling back the State and who use all these grand global expressions which hurt when one comes down to implementing them. This £10 charge per day will be extracted from people who are already perilously close to the poverty line. Now we are penalising people in this way because they are ill, or have had an accident. I do not know how the Minister for Finance, and in turn, the Minister for Health can justify this charge to this House this evening. How can we regard ourselves as a civilised society and yet impose a charge of this nature?
The staff who will operate this charge will obviously be placed under intolerable pressure by the new impositions, in addition to the already onerous burdens which the cutbacks will mean. I would not be at all surprised if the staffs of our medical institutions refused to operate this new scheme. I also would not be surprised if the persons of whom this charge will be demanded will not pay, because I do not believe they should be asked to pay it. It is quite an immoral charge. All we need to have is an example of a low wage earner who is £2, £5 or £10 over the eligibility qualification for a medical card and a person on a salary of about £120 or £130 per week who has to spend seven days in hospital. In effect, it will cost the greater part of that person's salary. It does not make sense in relation to what we have been trying to achieve here and the services we have been trying to supply. I certainly am not aware of people going to hospital for the sake of going to hospital. There is, perhaps, an anomaly in the VHI scheme whereby treatment is not covered unless people spend a night in hospital. That should be rectified by the Department of Health to encourage treatment on the same day. Certainly that does not apply to non-VHI, non-medical card people because hospital is not a place anybody wants to be.
Something that has not been highlighted to date in relation to this budget, which is also a mean and low aspect of it and which to the best of my knowledge remains uncontested by the other right wing parties in this House, is the proposal to remove over £7.5 million from overseas development aid. There is a grotesque irony about the amount, in question when one considers that, in the past 12 months, the Irish people voluntarily gave £7 million to Live Aid. Now the Irish Government in effect are taking it all back. We must ask ourselves: have we become so inward-looking, as a society, that we are prepared to cut back on the paltry amount of money devoted each year to assistance to the Third World Whatever our problems at home, and they are many, there can be no excuse for taking out those problems on people who are, as we all know, literally starving. I believe this proposal would cause horror and shame among people who believe that ours is a Christian, caring society. There is little in this budget which would make anyone believe there is a Government here interested in developing a caring society. What is more sad — and perhaps is not surprising in some ways — is that there are very few Deputies in this House who are prepared to stand up and fight this trend. The actions of Fine Gael and the Progressive Democrats, particularly with regard to their abstention on votes so far, is a sad reflection of how much the sterile, divisive attractions of right wing economics have taken hold.
An aspect of this budget which perhaps bodes ill for the long-term consequences for this country is the diminution in capital taxes coupled with the abolition of the land tax. From my discussions with small farmers — and I will attempt at various times to defend small farmers because large farmers have adequate defence mechanisms — they certainly had no objections to the land tax. I believe what was involved was reasonable as was the basis of calculation. Given the diminution and decrease in capital taxes here from 1965 to date Fianna Fáil are being consistent. There was their abolition of the wealth tax back in 1977 and now their abolition of the land tax. How they can stand in this House, how many of their rural backbenchers can stand in this House, and defend actions like the abolition of wealth tax of some years ago and that of land tax as of last evening, and claim to represent working people or the PAYE sector, is something I cannot understand. It is rather tragic. I am not one to quote from the bishops too often but it would be worth putting on the record that in their 1977 Pastoral the bishops said that justice does not happen, that it has to be willed, worked for and built into legislation. They said that only a combination of moral commitment to justice and political commitment to the legislation and the structures of justice would create a just society. They went on to say that the Christian must keep insisting that property, wealth, profits, jobs and incomes are not absolute rights but carry with them weighty moral and social responsibilities. We should keep those comments in front of us because there was no attempt in yesterday's budget to establish equity in the tax system or to place on the owners of property and wealth, on those making profits on those in jobs, a social and moral responsibility.
I should like to stress the notion that the budget constitutes a starting point, that it is a preliminary and essential clearing of the ground. I should like to welcome also the historic consensus achieved in this House on the direction in which we need to go. In itself the budget does not constitute a recipe for growth nor does it pretend to. Rather is it the essential precursor of that recipe, a recipe we are fully determined to provide. Nobody should be in any doubt after yesterday's budget of our commitment to cook the omelette, as it were, that that commitment is as strong as our readiness and courage to break the eggs.
Inevitably this budget contains cutbacks but we do not make the mistake of thinking that, in themselves, cutbacks can promote growth. Cutbacks constitute only a prelude to such growth. I should like to assure the House that we have not changed in the smallest degree our firm conviction that real growth in the economy and in particular export-led, market-driven growth constitutes the only way in which to get the country back on some sort of stable course.
The budget has sent an unmistakable message to the financial world and that of industry in general. The message is simple: the new Government mean business, they will deliver and will do whatever needs to be done to gain control of the State's finances which have been in disarray now for some years, and put some firm direction into our economic affairs. The significance of that message is that it should remove, once and for all, the uncertainty that has paralysed our economic activity for the past year at least, if not longer. We are told repeatedly from all sides of the house that what the world of business hates most is uncertainty, above all that created by doubts of whether the political will exists to put hard decisions into effect. One only has to speak with anybody who has been engaged in business for some years past to get that message loud and clear. They have doubted the existence of such political will. After yesterday they will not doubt the existence of that political will again. Surely there can no longer be any doubt in anyone's mind as to the existence of that political will today. It is for that reason I particularly welcomed the consensus arrived at in the House yesterday.
This budget was designed to restore confidence among those whose actions are most directly connected with our ability to create more wealth in our economy. Already there have been indications that the budget is having that highly desirable effect. I might quote just one example of this early reaction — and it is an early one only — in referring to the comment in The Irish Times today by the Investment Manager of Abbey Life Assurance, a major insurance company when he said:
Yesterday's budget in my view marks the first serious attempt to come to grips with the problems of the public finances in the 1980s.
That is a fair description. I am confident from my soundings that it is a view shared widely, particularly in the business community.
I was pleased also to note the favourable reaction today to the budget by the Irish Exporters' Association in respect of whom I have some direct responsibility and links. For exporters particularly I do not need to tell the House that lower interest rates are a major concern. As most people now know and accept fully, bringing about lower interest rates is the keystone of the budget strategy. What is also crucial for exporters is the certainty of exchange rate stability within the EMS. The budgetary provisions have provided effective reassurance in that regard. Exporters need certainty of exchange rate stability. Lower interest rates will lead to that certainty in exchange rate stability and significantly boost exports in the period ahead.
I want to use this occasion, my first opportunity to speak to the House as Minister of State with responsibility for the exporting area, to assure all our exporters that this budget framework is but a first step in a radically new approach to the task of developing and promoting Irish exports. It is true that in the budget provisions CTT have suffered a cutback, albeit a small cutback, in their allocation. That is a good illustration of the paramount need to effect economies right through the system. CTT who deal largely with the private sector, I am happy to say, are prepared to give a lead, to accept that cutback and run a slimmer, tighter, more efficient organisation. They are prepared to lead by example. The small cutback does not reflect any dilution in our commitment to exports, nor does it represent any dilution in our conviction that we must export more and very quickly indeed. What it does is demonstrate that we do not believe there is an automatic linkage between how much is spent in getting exports and how much we get in the way of results. In this year and in the years ahead we will be looking for considerably more effective export promotion because we are determined to spend a smaller amount of money more effectively. What exporters need is more effort focused on the right corners in the right places. What they do not need is to have money thrown at them as has been the case to some extent in the past.
As Minister of State for this area I stress that the days of regarding CTT as a soft touch are over for good. From now on CTT will be highly selective in those people whom they help. They will help those and only those who want to be helped and who are prepared to approach the business of exporting in a businesslike manner, including the development of strategic marketing plans for their export activity. For those people, and only those, our aim will be to make CTT even more effective as a business partner, not as a soft touch. It is on those people we will focus the limited resources available to CTT and in doing so I am confident we will get a far better pay-off than has been the case up to now. The relationship between CTT and export companies will in the future be a more businesslike approach. I will be looking for a much closer relationship between the money the State pays in and definite measurable results. Where it is appropriate we will expect export companies to pay for some of the services they receive from the State. Some of these companies are well able to pay for those services.
We have a good record over the years in the promotion of exports but the time has now come to spring clean our systems and give them a new clarity of vision that is fully appropriate to the conditions we face today and the conditions we will be facing in the years immediately ahead. Within a matter of weeks I will be bringing before the House what was originally intended as a routine Bill relating to CTT. I propose to take that opportunity to begin the process of restructuring our export effort and redefining the role of the State and State agencies. I will shortly submit to the Government my proposals in this area and while this is not the occasion on which to go into them in great detail there are a few broad comments I would like to make to the House today.
We need to look closely at the way the private and public sectors can work together in developing a policy on exports. In the past there has been too rigid a division between those two elements in the mixture. One result has been proposals from the State side that failed to take off either because they were ineffectively communicated or because they were not really appropriate to the needs of the marketplace. What I want to see from now on is considerably more teamwork between the public and private sectors in the approach to exports. This problem is too big, too urgent, for any of us to waste resources through not getting our act together or through not acting together. We want a much greater concentration by everybody at every level on the development of exports as one of our most important national tasks. A further example is the need for strategic marketing in the export area. By strategic I mean as opposed to the short-term reaction, to one-off opportunities or sudden orders that we have put too much effort into many times in the past. Businesses have to develop that strategic view and I will be looking for that from them, in leading the export drive. On the State side, we have to support their moves in that direction.
There is a major shift of emphasis needed here which has already been recognised by most of the sectors in this area and I will be concerned to give considerably more impetus to that shift in the weeks ahead. We need new ideas and new approaches in the promotion and development of Irish exports. For instance, I am particularly attracted by the way the Japanese approach exporting through their export trading houses. These trading houses, which are basically private sector concerns, specialise in the export market function and have provided a most effective outlet for many companies that would be far too small to penetrate a wide range of world markets. I am excited by this example and am determined that we shall take what we can from it and apply it to the benefit of our own export effort. I will be looking closely at that in the weeks ahead and we will have some proposals in that regard. I am not at all interested in the idea of State trading houses, except possibly in the case of dealing with centrally planned economies such as China. The Japanese model I am examining is a private sector model and that is how it should be. What we need to decide is whether that model has something to offer us and, if so, what we need to do to facilitate this development here. I am interested also in hearing the marketplace view on this approach and I would like to invite those concerned to let us have their views on the suggestion of Japanese-type export trading houses led by the private sector. I hope we can move quickly with ideas like that although there is a lot of work to be done yet.
With regard to trade representation abroad, Deputies will know that the Government are committed to the more effective use of our diplomatic missions in the development of trade. We must aim to have a trade attaché with all the appropriate support in every diplomatic mission. In the short term, however, we must aim to put trade attachés into missions where there is the greatest immediate opportunity. In this, as in export marketing generally, it makes sense to focus our efforts on key areas rather than spreading ourselves around too thinly and widely, with the consequent loss of effort.
Another trend to which I wish to add impetus is the increasing emphasis on the export of services. In the years ahead what we will have to offer the world with a competitive edge will be, I believe in the service areas, especially in what is loosely termed the knowledge based industries. The employment potential of export services is particularly important because they offer suitable outlets for the talents of our highly educated population. This is an area in which the public sector, too has potential. The State agencies are the repository of considerable talent and experience and many of them are successfully exporting that know-how around the world. I have already begun to encourage the further development of these activities in the public sector. I will be seeking greater effort from those already engaged in it and a commitment to begin exporting from those who have not already done so.
There are very few State agencies which do not have some potential for exporting their services. There are 27 or 28 commercial semi-State companies which between them have a turnover of £3 billion to £4 billion, and I see no reason that those commercial organisations cannot achieve a somewhat similar result abroad and earn that kind of revenue for this State. I call on semi-State companies to actively seek opportunities abroad and, as it were, bring home the bacon. If they can do it at home they can do it abroad. Some of them have dominated the home market so much that they need to earn foreign revenue if they are to continue to grow. I invite them to look at the world markets to see if they can achieve exports. I believe they have not been as successful in this area in the past as they should have been. The office of trade and marketing will ensure that the gates are open if they want to do it now or in the future. I ask them to do this today. The budget has given them a lead.
In the service sector financial services is an area where there is a once-off opportunity to develop. Now is the time to create a niche for Ireland in financial circles. If we lose this opportunity it will be gone forever. We already have some of the conditions necessary to get into this business and we have to identify what we lack and seek to create those conditions. I look forward to some progress in that area.
I am stressing the vital importance of the concept of marketing our products abroad. I am pleased the Government recognised the importance of marketing as a concept, because for the first time ever the title "marketing" has been assigned to a Department and a Minister of State, and the office of trade and marketing is being established to take responsibility for leading that export drive and reorganising the structures so that that export drive can work.
I am in the process of reorganising the trade division within the Department of Industry and Commerce so that I can have a marketing unit which would separate the trade functions from the marketing functions, thus giving a new impetus to the business of marketing. That will be a useful reorganisational element and will allow us to bring forward marketing proposals much more quickly.
I want to speak to Irish firms and Irish industry generally. One of the difficulties for this country selling abroad is that about two thirds of all our exports come from the multinationals. These firms are welcome because they provide very good employment but indigenous firms are lagging behind. I am a little distressed to see that many indigenous firms are not interested enough in exporting. They seem to be production orientated. That means that many manufacturers came into this business because they knew how to make and design a particular product but it was only later they realised that the biggest job was not making the product but selling it. It should be said again and again to Irish manufacturers and would be entrepreneurs that if they cannot sell their product they should think twice before they make it. First they should find the market to sell their wares or services and then make the product.
I am concerned about the production orientation nature of Irish industry today. The biggest single challenge facing our industry is to turn it from a production led sector to a marketing led sector so that manufacturers can find the market and then produce the goods the market wants. We cannot force goods on an unwilling market. That basic philosophy will permeate my time in the office of trade and marketing and is a message I will sell hopefully for some years throughout the country so that we can lift our sights and provide a better standard of living for all.
The Government do not have any option in terms of growth other than export led growth. Gone are the days when the Government could get growth by pump priming, by reflating or by just borrowing and using that money to activate a consumer group. The day has arrived when the only way we can get economic growth is through export led growth. I am very conscious of the fact that a large part of the budgetary strategy and the economic policy of this Government will fall to the office of trade and marketing to assist and lead the export drive to earn more foreign revenue.
This budget is a first step to create the right framework, and I invite Irish industry to see it in those terms. It lays the foundation and industry must take it from there and build on that foundation. The Irish Exporters Association have welcomed this budget. It is a good budget for exporters because it will reduce interest rates and stabilise exchange rates. Anything that does that will have the blessing and support of our exporters. That is our lifeline and we have to take very good care of it.
I am conducting a fundamental examination and review on how the State can best promote exports along the lines I described earlier. I invite the private sector to become more involved in policy creation. I am going to the private sector to seek new ideas on how our exporting business can be developed. I will be looking for advice from marketing people and entrepreneurs and I will be marrying the private sector advice with the advice available from the State offices and other organisations. I will aggressively follow up and put into action any new policy idea which will work, whether it comes from this Government, the other side of the House, the associations, or the private or the public sector. The only criterion I will apply is whether it is for the benefit of this country, and particularly for the benefit of our exporters.
I want to stress the importance of the service industry in exporting. We think of exporting as ships leaving the docks carrying crates laden with goods, but it is no longer about that. There is a lot more to it. Now we have an opportunity to export services — people taking aeroplanes and selling their know-how and technical ability. I hope to foster a great deal more activity in this area in the years ahead. Exporters are interested in a developmental approach to the economy. As I stressed at the outset, there is no point in having cuts for their own sake. They have to be cuts which put the foundation down and which lay the basis for future growth which I believe this budget has done.
The budget has laid down a framework and it has pointed the developmental road forward. It aims at very courageous targets and if we are able to achieve them, which I believe we are, the economy should start to lift. The basis for these targets is falling interest rates which should start to move down very soon. On that point, let me say that falling interest rates are important to three different groups of people. They are crucial to recovery. First of all, they are important to the Government. The Government have a domestic debt of £13 billion and lower interest rates will reduce the variable financing costs of that debt. Therefore, the Government as an institution will benefit greatly from falling interest rates.
The business sector will also benefit from falling interest rates. It is not generally recognised that the manufacturing industry owe the staggering sum of £1.5 billion. One can imagine what the interest on that sum is. It is close to £300 million a year. Therefore before they make any money for their employees or shareholders, the manufacturing industry have to pay £300 million in interest charges on a debt of about £1.5 billion. Clearly, falling interest rates will take great pressure off the manufacturing industry. If it does, employment will be created in the manufacturing industry.
That is why I refute the suggestion that the budget has done nothing and will do nothing for employment. There will be a direct spin off in employment if the interest bill of the manufacturing industry is reduced. Interest rates in Ireland are 9 per cent above those in Germany; they are 8 per cent above those in the Netherlands; they are some 6 per cent above those in Belgium, and they are over 2 per cent above those in the UK. Therefore, it is quite clear that employees and the growth of Irish industry have a crucial vested interest in getting these interest rates down. That is the strategy behind the budget. Clearly, therefore, the Government and the manufacturing industry will benefit.
The householder will benefit because, if lower interest rates are achieved by this strategy, as I believe they will, I can see a reduction in interest rates of up to 1.5 per cent, perhaps even 2 per cent, by late summer. If that happens pressure will be taken off the debt of the manufacturing industry and the Government and, more important, the householder whose mortgage, despite yesterday's hike, should come back to more or less what it was before the budget. Therefore, I do not think householders need worry unduly for anything more than a few short months.
Finally, the most positive aspect of the budget is this. I was interested to hear what Deputy Spring had to say about the national finances. Some £1.5 billion — I recall that Deputy Spring was Tánaiste during that time — left the country in a few short years. The indications from the Central Bank are that some of those funds are beginning to flow back into the country. It is hard to put an exact amount on it because, obviously, it would not be called a black hole if it was that quantifiable. From reading some of the Central Bank documentation the indications are that there is an inflow of funds into the country beginning to happen. The strategy, I suggest, is beginning to work.
Interest rates are widely expected to fall and some of them have already begun to fall. If that happens and the inflow of funds accelerates and the pound remains steady, which I believe it will, and the business sector in particular takes this budget to heart, by midsummer we could see a reawakening in the Irish economy and a move upwards. I am glad we have taken the first step in that regard. It is hurting but I think people understand that the benefits can be great if we stay with it.
The Chair wishes to congratulate the Minister of State, Deputy Brennan, on his maiden ministerial contribution. Similarly, in calling on Deputy O'Keeffe, may I congratulate him on his promotion to the front bench of his party.
I join with you in congratulating the Minister of State, Deputy Brennan, and in wishing him every success in his new position.
In opening my contribution to this debate let me say that I agree with the broad thrust of the budget in so far as its targets are concerned. That essentially was the basic reason for the very constructive attitude which we adopted to the budget yesterday. Having said that, I have to say that the manner in which the budget is framed gives rise to very worrying and serious questions and reservations. When one goes through the small print of the budget and assesses the impact of its various measures, it is clear that it will lead to more unemployment and more tax. Everybody in this House will agree that that is not what is wanted.
It is not the recipe for the national recovery which was spoken about by Fianna Fáil in Opposition and during the election campaign. I am not one of those who go back to check what was said by the other side in the past and force them to eat their words. That is a sterile exercise. So many words have been eaten by Fianna Fáil in the past month that they must be gorged and stuffed at this stage. That is not my approach in speaking to the budget. I want to be as constructive as I can.
With regard to interest rates which were referred to by the Minister of State, Deputy Brennan, I want to say to him that I hope the expectations of the Government will be fully realised. If interest rates fall, it will be good for the country, business, agriculture, tourism and for the individual. I wish the Government every success in the realisation of their expectations in this regard. I hope the Government will not think it unfair of me if I recall the emphasis which both in Government and during the election campaign, we placed on this very objective. That was a central part of our budgetary strategy. That was the message we tried to get through to the people during the election campaign — the real need to reduce interest rates.
The Government have joined the club. Genuinely, I hope that the fall in interest rates which the Government expect will be fully realised. I was disappointed that the immediate reaction of the market was not a little better and it is my hope it will react more positively in the weeks and months ahead. I hope we will see the reduction in interest rates which is needed for an improvement in our economy.
I should like to comment on the reductions on the capital side as opposed to the reductions on the current side. While I accept the overall need for reductions in borrowing, it seems to me economic sense dictates that those reductions have to be concentrated on the current side. Most people with basic economic training will find justification for borrowing on the capital side in so far as job opportunities and the development of our economy are concerned. It would be rare to find an economist who would see any such justification for borrowing on the current side. If we proceed from that basic position we must raise question marks when we see a considerable reduction in borrowing on the capital side not being fully matched by reductions in borrowing on the current side. I suggest to the Government that if they are seriously interested in job creation they should concentrate their attention on reducing the current budget deficit. Any reduction in borrowing on the capital side must be examined carefully because of the implications for employment.
In examining the budget package one thing that alarmed me was that there will be more taxation. The previous Government made it clear that despite the financial problems of the country the answer did not lie in increased direct taxation. I was disappointed to note that that aspect of our budgetary policy was not followed through by the Minister for Finance. The additional burdens on the income tax area will result in a 14 per cent higher pay-out by those in the PAYE sector in the current year. Is that a good thing? I do not think so and I question the wisdom of imposing such increases in taxation, particularly in the area of direct taxation. That represents a misguided and unfair approach bearing in mind the huge share of the taxation burden being carried by the PAYE sector.
Those on PAYE will also be affected by the reduction in mortgage relief. It will mean that those in the PAYE sector will be paying more tax and it will impact on the building industry. Anything that reduces the incentive for home ownership will impact on that industry and I wonder if that has been fully realised. On looking through the budget one cannot help wondering if there was a deliberate attempt to cut the socks off the building industry. The previous Government made an effort to improve that industry. Fianna Fáil may not have agreed with the house improvement grant scheme or the grant to those who surrender local authority houses but they represented a stimulus to the building industry. Having listened to Fianna Fáil's sustained criticism of our efforts, I wonder how any member of the Government will be able to look any builder, or workers in that industry, straight in the face from now on. It is clear that many jobs can be created in this area. It is unfortunate that the stimulus created by the previous Government is to be withdrawn by a series of measures by the Government. I doubt if they have considered the serious impact those measures will have on that industry.
I note that house improvement grants and other benefits were withdrawn. I wonder if those measures were well thought out. In the past when schemes were being withdrawn those who had applied before the cessation date were accommodated. However, it appears that if an application has not been processed due to any delay or because of a deliberate policy by the Government in the past three weeks to hold back letters of sanction, it will not be included in the scheme. That is most unfair. Inspectors called to many applicants and they proceeded on the understanding that their application would be approved. I have no doubt that the Government's nasty decision will lead to a great deal of hardship. I would urge a re-examination to allow those who had applied before the withdrawal of this scheme to be dealt with. Justice, fairplay and equity dictate that approach and I would ask the Minister to discuss it with his colleagues. Unless that approach is adopted there will be a major setback for individuals who have made building plans for new houses or those in local authority areas who have embarked on plans to hand over their houses and move into the private sector.
On the question of taxation, the Government should reconsider the decision in relation to deductions from professions. In the light of the serious constraints on our finances, I will not express outright opposition to the very principle but the manner in which it appears this scheme is to be implemented will cause considerable difficulty and hardship. It is not a proposal that can be considered as being on "all fours" with the position in relation to those involved on sub-contractors' certificates. Many of those who will be affected by this change are themselves major employers who have to carry the expenses of an office, paying their staff and various outgoings. What is proposed here will not amount to a withdrawal tax on income; in effect it will be a withdrawal tax on turnover. The advantages to the Government from the improved cash flow are obvious but the disadvantages to those affected will also become very obvious. In many instances this proposal, if implemented in the crude form indicated yesterday, will lead to unemployment in the offices of many of those professionals. Many of them will have difficulty in surviving. The proposal should be looked at again in an effort to refine it and ensure that the worst effects are avoided. I appreciate that there is a clause relating to hardship in the Financial Resolution debated last night, but I do not believe that is the answer to the problem. If the Government are genuinely seeking an answer, we are quite prepared to co-operate in discussing a reasonable amendment to the proposal. I am not expressing outright condemnation but I am suggesting that it should be refined so that the worst impact will be removed.
I mentioned at the outset that my party are agreed on the particular thrust of this budget from the point of view of the targets set, but during the course of this debate and the debate on the Finance Bill there will have to be a fair amount of teasing out on how those targets are to be achieved. I am not saying that the Government have no hope of achieving them. I hope they do but there are many unanswered questions as to how this will be done. I am worried that some of the figures included in the budgetary arithmetic sound like figures plucked from the air. Answers are necessary in respect of a sum of £100 million on the current side and it is in the interest of this Government that such answers are provided.
There is the question of travel allowances. There has not been any full explanation as to how an additional revenue of £20 million will result from this change. I have to question whether this will be so. The general thinking appears to be that those who have previously been going across the Border and bringing home booze will buy it at home. It may be that they will stay at home but I question whether they will still buy the same quantity that they bought at duty free prices. There is also the matter of whether this provision will pass the EC muster. I do not want to give any judgment but at first glance I can see eyebrows being raised in the Commission at what some will allege to be a restriction on cross-Border trade. I raise that question because I believe the figure of £20 million arising from this provision is suspect. The same has to be said for a variety of figures in the budget where savings are added in as arising from efficiencies. Many answers will have to be given in various Departments as to where those savings can be found. Efficiencies were continually sought after by the previous administration in relation to all Departments. I wish this Government every success in finding them but the House is owed a full explanation on the matter.
Two other major areas with which I wish to deal are the public service and agriculture. Since this debate will be adjourned shortly, I will speak after the resumption about my disappointment at the provision for agriculture and the lack of a developmental approach. There will be a cold, damp hand on the activities of the farming community. The land tax is to be abolished and this will be a major disappointment to many thousands of farmers.
Regarding the public service, we were criticised for imposing the embargo on recruitment but we felt it was necessary in initiating the reduction in Civil Service numbers. We achieved a reduction of almost 10 per cent. The main criticism was that the embargo was a blunt instrument and we replaced it with the staffing level target approach. We achieved a reduction but we were able to accommodate areas that clearly needed an extra deployment of personnel. I wonder about the approach now being adopted. Let me take, for example, the area of education. There was much talk during the election campaign about the proposals of the outgoing Government in relation to vice-principals and career guidance teachers. Here we seem to have an approach which involves not just a change in the pupil-teacher ratio but a total abandonment thereof. Nobody can now be appointed without approval by the relevant Minister with the consent of the Minister for Finance.
Debate adjourned.
In accordance with the Order made by the House this morning, Nos. 5 and 6 will be taken together for the purposes of debate and shall be brought to a conclusion not later than 7 p.m.