On the last occasion I pointed out that Fine Gael accepted the general thrust of the budget in so far as the targets were concerned. It is, however, already clear that Fianna Fáil will have major problems in implementing the budget. That relates to a number of factors. First, there was the total irresponsibility of Fianna Fáil in Opposition. For four years any proposal which involved savings to the Exchequer was stridently rejected and virtually any proposal involving extravagant expenditure was roundly applauded and fully supported. Secondly, during the course of the election campaign Fianna Fáil consistently refused to provide any detail of expenditure cuts and the consequence now is that Fianna Fáil have gone into Government without any popular mandate for such cuts. Thirdly, because Fianna Fáil in Government have made cuts and produced figures for cuts in excess of £100 million, cuts which are unspecified to the extent that there are now already major doubts as to whether they are reliable, the budget arithmetic is in doubt. Fourthly, I will refer to the introduction of some measures done in a particularly insensitive and ill-conceived fashion. I will single out two of those for special mention.
If a deliberate effort was made to make a complete botch of the termination of the housing grants a greater mess could not have been achieved than that created last week. In spite of the changes made for anomalies and so on among applicants, some of whom will now qualify while others will not as a result of the U-turn euphemistically referred to as the clarification of last Friday, I am sure the former friends of Fianna Fáil in the building industry have strong views on the decision to terminate those grants. When one is considering the termination of grant schemes, surely the only fair way to do that is to make an announcement to the effect that all applicants after the date of the announcement will be excluded and that those who have applied on the basis of existing schemes will not be excluded.
The other major area which stands out is the proposal to impose a charge of £10 per day for patients in public wards. It must be remembered that there was also a proposal to increase the health levy. While the increase in the levy will not be greeted with loud hurrahs, at least it imposes additional burdens on those who are healthy and at work. However, the proposal to impose a charge on those who are ill and, consequently, not at work does not have that merit. This must be considered in the broader context of a decision to reject a small prescription charge under the GMS which would have raised about three times the amount of money involved.
As spokesman on Agriculture, I want to focus on those sections of the budget which impact directly on the farming sector. The lowest priority for the axe must be schemes of a developmental nature where the consequence is a reduction in wealth creation. I question the advisability of reductions in the farm improvement grants and the abolition of the young farmer installation aid, as well as cuts which have been made in a number of other areas. I accept the overall needs for cuts, but in the agricultural area moneys of a capital nature which are helping in wealth creation must have the lowest priority from the point of view of expenditure cuts.
My greatest criticism is directed towards the proposal to abolish the land tax. I consider this to be a very unwise move indeed. It is neither in the interests of the farmers nor of the country as a whole. This tax was developing a broad acceptability among the farming community. Of course there were protests when it was first introduced but this was to be expected. The same would apply if one were introducing a new tax in any area. Over the centuries Governments have introduced new taxes on windows, hearths, soap, salt and even on wigs. The introduction of each of these taxes brought protests, since nobody relishes paying tax of any kind. The issue in this case is not whether farmers like land tax but whether it is more acceptable than a full accounts system. In a perfect society where all farmers have perfect book accounts, a strong case could be made for a full accounts system, but when we look at the farm structure we find a multiplicity of small holders, most of whom are not very adjusted to book-keeping. Because of that, I felt the farm tax was the answer.
It gave, in addition, an incentive to greater productivity and essentially allowed the farmer to concentrate on the plough rather than the pen. The interim accelerated valuation arrangements proposed in the January budget would have enabled all farmers up to 80 adjusted acres to pay farm tax and be exempt from income tax in 1987. When it comes to a choice between a land tax and a full accounts system, I believe more than three out of four farmers would opt for the farm tax. Of course there are some very substantial farmers in the category above 80 adjusted acres but they represent a small proportion of the total number of farmers. While one will never make people happy about paying tax, the question of broad acceptability is of some importance. On those grounds the farm tax scores over the full accounts system.
A second point is that in a time of scarce resources it must be lunacy to introduce such a measure at a cost of £9 million to the Exchequer. It is not as if the farmers will be saved this money. They will pay it and more to the accountants under the full accounts system. The most recent estimates suggest that the total revenue from farm tax could have developed up to £65 million in a few years' time, whereas farmers last year paid £37 million in income tax. The Minister for Finance expects a modest £1 million extra from the increased use of profile forms in the current year. It is not as if the additional sum that would accure to the Exchequer would be an extra imposition on the farmers.
The most recent estimates from the ICMSA suggest that the cost of accountancy services to farmers runs at about £40 million per year. If we retained the land tax most of the need for that kind of expenditure would be eliminated. Then we would have a considerably larger return to the Exchequer at virtually no net extra cost to the farmer. Essentially Fianna Fáil propose to abolish the system which suits the vast majority of farmers and they are looking a farm gift horse in the mouth. On the score of return to the Exchequer it was a mistake to abolish this tax.
To add insult to injury, Fianna Fáil now propose that the smallest farmers should contribute to the revenue shortfall resulting from abolition. This is as a result of the proposal to reduce the flat rate VAT addition to farm prices from 2.4 per cent to 1.7 per cent from 1 May. This change, according to the Budget Statement, will yield £9 million in the current year, the same sum as we are told will be lost to the Exchequer as a result of the abolition of the farm tax. It is important to note that the reduction from 2.4 per cent to 1.7 per cent comes into effect only from 1 May. If that will yield £9 million in the current year, am I right in thinking that in a full year the total imposition on the farmers as a result of that change will be 50 per cent higher? If £9 million is raised over two-thirds of the year, the yield for the total year will come to £13.5 million. This amount is effectively being taken away from the farmers by reducing their entitlement to VAT credit.
I consider this to be an outrageous proposal. If we look at the VAT credit system we find it does not apply to registered farmers. Obviously the registered farmers are entitled to obtain credit for their VAT inputs by filling up the forms and dealing with the matter in the normal way but who are the registered farmers? The registered farmers are the bigger farmers. I do not know of any small farmer who is registered. This system was developed to allow the unregistered farmer to obtain credit for the VAT inputs into his agricultural undertaking. It applies to all small farmers, virtually none of whom are registered.
It should be noted also that many of these farmers would not be liable for either farm tax or income tax. The proposed change takes no cognisance of their profit, borrowings or family commitments. Effectively it amounts to an arbitrary tax on production as it withholds the VAT credits to which they are entitled. As I understand it, the flat rate VAT addition was introduced to take cognisance of VAT payments on agricultural inputs such as sprays, machinery parts and repairs, leasing contracts, packaging materials and silage covers — areas where there are VAT payments to be made by farmers and where they would be entitled to a VAT credit. This system was introduced to cater for the smaller unregistered farmer. It was designed to give him, on a carefully calculated basis, credit to which he is entitled on VAT paid on inputs. I think this point should be made clear, it is not a question of handouts to the farmers. It merely gives back to him his entitlement under the VAT system. Here we have a confusion between a tax system and the VAT credit system whereby the Government have in an arbitrary fashion abolished the farm tax. What, they are saying is, the abolition of the farm tax will cost £9 million in the current year so for the rest of this year we will take £9 million from the smaller unregistered farmers and they will be entitled by way of VAT credits to reclaim a similar amount. That seems to me a totally unfair way to do business. Nine million pounds will be taken in the current year but this will amount to £13.5 million in a full year. I feel very strongly about this. The House will understand my outrage at what seems to be a reverse Robin Hood proposal. I think we all agree that in our approach to managing the financial affairs of the State we should lean less heavily on the smaller people rather than the big people. It seems outrageous that those in the smaller farm categories should be leaned on in order to make up what has not been collected from the more substantial farmers.
Another aspect of the proposed abolition of the farm tax needs to be highlighted. The effect of this proposal will mean the closing down of the farm classification office. This will mean that the excellent work being done by this office will be set at nought. I know it was fashionable for Fianna Fáil to deride this excellent work. The last comprehensive survey, Griffith's Valuation, is almost 150 years old. It is now totally out of date being helped along by the Supreme Court decision in relation to the whole valuation system. Apart altogether from the question of tax it is very much in our own interest that we do have a comprehensive survey of all the land holdings in Ireland. This work which was being completed as a by-product of the introduction of the farm tax will be of immense value in the years ahead. Apart from the tax system it will be of immense value in the context of agricultural planning and of deciding future priorities. This work is absolutely necessary on its own merit irrespective of the tax system.
A fair amount of progress has been made to date. I understand that all holdings over 80 adjusted acres would have been reviewed and classified by September of this year. Because of the detailed nature of the work I accept that it would require at least another couple of years to complete the job fully. In the January budget we had provided for a provisional tax assessment system. This does not deny the fact that this work stands very much on its own merits and if we were not introducing a farm tax system but had sufficient funding, priority should be given to work in this area. In a time of tight financial conditions I accept that it would not immediately attract funding, but it is a job that needs to be done. It was a very useful by-product of the introduction of farm tax.
What is to become of the work that has been done so far, the very many excellent reports that have been compiled, the maps that have been prepared and the efforts at computerisation? Will all this be just thrown aside? Will this major work be left to rot? What will become of the highly motivated, highly qualified and well trained staff? The people involved in the farm classification office were doing a very good job. Serious questions have to be raised about their future. Other opportunities may not present themselves so easily. This factor should be borne in mind in considering this decision. I do not think it can be denied that the comprehensive survey in itself would have uses of all kinds in the years to come.
We had a marvellous corps of highly qualified graduates doing an excellent job. I have not heard a single word of criticism of them. Are these people to be thrown on the scrap heap following this foolish decision? On the grounds of reason and logic, in the interests of the farmer, for the benefit of the Exchequer and the national interest generally, I am adopting what is probably a unique position for an Opposition spokesman. I am proposing that the farm tax be retained and that this proposal to turn farmers into book-keepers for the benefit of accountants and nobody else be shelved. I make that proposal in all seriousness. I believe genuinely that this is the right thing for farmers and for the country.
I accept entirely that there are Members in my party who do not totally share my enthusiasm, but everybody is entitled to a point of view. This issue should not be considered totally in the political context. I believe a strong body of opinion in the Government party strongly favours farm tax as opposed to full accounts. I accept that some farmers, particularly the bigger ones, would prefer the approach now proposed by Fianna Fáil, but I believe that the vast majority would opt for farm tax rather than full accounts. Therefore, in this, as it were, non-political way I am putting forward seriously the proposal that the Government reconsider what they are doing in this area. At the very minimum the proposal to abolish farm tax requires to be examined further, to be looked at in all its implications. I have pointed out some reasons which obviously suggest a strong case for the retention of farm tax. I am asking the Government to consider these points seriously, to look again at the decision to abolish farm tax and to institute in its place full accounts for all farmers. Essentially, if that decision is followed through the only people who will gain in the end will be the accountants and surely that is not in the interest of the farmers, the country or the Exchequer.
I want to refer to a couple of other items in the few minutes that remain to me. I am glad of the emphasis which the Government are placing on the development of the food industry and the horticultural industry. I have already congratulated my constituency colleague, Deputy Joe Walsh, on his appointment as Minister of State with responsibility for the food industry. I wish him every success in that job. While I am at it I suppose I should congratulate the Minister of State with responsibility for horticulture as well. Even though he is some distance away from me, certainly I wish him well. I suppose it is fair to say that already there are some question marks about these appointments but not, of course, from the point of view of the calibre of the people appointed. How strong is the commitment of this Government to the development of these areas? I know their importance. I was involved as chairman of the ministerial group who examined the food industry a couple of year ago and I was the person who recommended the appointment of a Minister of State for Food. That proposal was adopted by the previous Government and Deputy Paddy Hegarty was appointed as Minister of State attached to both agriculture and industry. I have strong reasons for suggesting that as the best approach because agriculture is the area where the strong interest is on the part of the producer, where many of the problems are at the processing and marketing end and where industry perhaps has a greater input. However, I will not go into that at this stage. We might go into that issue in more detail at some other time.
The point I want to make is that even when money is tight if the Government were seriously interested in developing the food and horticultural industries, surely that interest should have been evidenced by an allocation of resources, done possibly by way of reallocation from other areas. However, I have examined the documents and I have seen no resources allocated to these areas. At this stage that raises questions in my mind as to the Government's commitment to achieve the grand aims which they set out in their document A Programme for National Recovery. I will confine myself to those remarks at this stage——