Deputy Carey was in possession. I call a spokesman from the Government side.
Financial Resolutions, 1990. - Financial Resolution No. 9: 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.
—[The Taoiseach.]
We were a minute or two late starting Question Time. I thought we were getting a bit of injury time. Deputy Carey was probably under the impression that we were getting a minute or two.
I would not mind waiting a minute or two.
Could we take Question No. 20 since we were a minute or two late starting? The Minister was a little late coming into the House.
I have given some latitude to the Deputy to enable him to be present. He is not present. I call a spokesperson for the Government side, the Minister for Industry and Commerce, Deputy O'Malley.
This is the first budget of the Coalition Government, I venture to say the first of many. It gives effect to many of the provisions of the Programme for Government agreed between the Progressive Democrats and Fianna Fáil last June. It provides a clear answer to those who said Coalition Governments do not work. This budget shows that not alone can Coalition Governments work but, dare I say it, they can even be progressive. In the past certain Coalition Governments clearly failed to achieve their potential. However, if proof is needed that Coalition Governments can be effective, this budget provides it.
The Programme for Government announced last June included a number of key provisions relevant in the context of the 1990 budget. I will mention some of them. First, we established job creation as the major priority of the Government. We promised to increase the level of job creation through tax reform to encourage employment, attacking anti-competitive and restrictive practices at all levels in the economy, and action to keep inflation and interest rates at the lowest possible level. We are delivering on these promises and the budget clearly demonstrates that.
Specifically in the area of public finances and tax reform we promised to reduce the Exchequer borrowing requirement to 3 per cent at most and the debt-GNP ratio to at most 120 per cent by 1993 and to accelerate the process of public finance improvement as economic and budgetary circumstances allow. We promised to reduce the standard rate of income tax to 25 per cent by 1993 and to move towards a single higher rate of tax, to broaden the tax base and increase the tax yield from the corporate sector, to bring in improvements in tax exemption limits for lower paid workers and their families and to make progress on achieving tax harmonisation in the context of developments within the EC.
In social welfare we promised special increases for the long-term unemployed over and above the level of inflation, special increases for families with dependent children and improved payments for those caring for elderly and handicapped relatives in their own homes.
The Programme for Government gives a major impetus to putting into place new measures, organisational reform and resources which would protect the environment in both urban and rural areas.
The orientation and the content of the 1990 budget has been shaped and determined by the commitments entered into by the two parties in Government in the agreed Programme for Government. Economic growth and employment creation have been restored to the centre of Government policies and actions after a period during which control over the public finances was the overriding and necessary focus of Government policies. Good financial and economic management by the Government are essential pre-conditions to maintaining the impetus for new job creation. It would be very easy, following the progress made in recent years and in 1989 in particular, to succumb to the old temptation of forcing the pace of economic growth in the short-term beyond what can be sustained in the medium to longer term. We have learned a bitter lesson in the not too distant past that this is a "rakes's progress"— the road to economic stagnation and social deprivation. It is an approach that we have avoided in the 1990 budget — an approach that a Coalition Government, of which the Progressive Democrats form a part, are very unlikely to follow in future years.
During 1989 we have seen our policies of creating a better environment for enterprise and investment and job creation achieve major progress. Despite the increase in interest rates in Ireland during the year, they remain several percentage points below the UK level. Wage cost competitiveness improved by 3 per cent on average against our main trading partners under the influence of the wage moderation achieved under the Programme for National Recovery. International factors pushed inflation upwards during 1989 but the prudent management of the domestic economy ensured that it remained well below that of the UK and average EC levels. The public finances were kept well under control so that the Exchequer borrowing requirement fell to less than 2.5 per cent of GNP — well below the 5.3 per cent target set in last year's budget.
All these factors ensured that output and employment increased strongly in 1989. Redundancies were at their lowest level since 1979 and overall the number of people employed throughout the country grew by an estimated 13,000 to 14,000 in 1989.
The provisions of the budget will provide a further impetus to job creation in 1990 in line with the agreed Programme for Government. The changes in indirect taxation combined with a projected outturn in energy prices and interest rates more favourable than last year should bring inflation down towards 3 per cent on average in 1990 compared with an average rate of 4 per cent in 1989. The current budget deficit and the Exchequer borrowing requirement will be further reduced so that the commitments agreed to in the Programme for Government are being fully honoured or exceeded. On the basis of present progress it should be possible to bring the debt — GNP ratio down to 100 per cent by 1993 — one-third lower than where it was a year ago. These provisions, together with the changes in taxation to be implemented, will maintain a favourable environment for investment and job-creation during 1990 so that we should see further improvements this year with a projected net increase of some 16,000 people in the total at work.
The 1990 budget takes a decisive step in the whole area of tax reform. The reduction in the lower rate of income tax from 32 per cent to 30 per cent and in the highest rate from 56 per cent to 53 per cent means that we are well on the way to meeting our commitment of having a standard rate of income tax of 25 per cent by 1993 together with one single higher rate. We are beginning to remove the disincentive to work and enterprise which our income tax system has spawned over the past 20 years. The process of income tax reform on which we have embarked is now irreversible, assuming reasonably favourable international economic conditions over the next two to three years. The reform process will also help to contain the brain-drain from Ireland of some of our brightest and most talented people. These are people who have gained high educational qualifications and expertise with the aid of subsidies from other taxpayers but who have been discouraged from putting these talents to work for the benefit of our people and our economy by the penal rates of personal taxation that were levied up to now. We have made a good start on this front in the 1990 budget. Further progress will be made in the 1991 and subsequent budgets in line with the commitments we made in the Programme for Government.
While the personal taxation burden in Ireland became penal over the past ten years — in particular under the strain of a level of public expenditure far beyond the capacity of taxpayers to sustain — the corporate tax yield in contrast remained low by international standards. The tax yield from the corporate sector will increase in the coming years as a result of the reductions in accelerated capital allowances, and the restrictions placed on section 84 financing in recent years, the ending of export sales relief from 5 April next and tax receipts expected from firms located in the Financial Services Centre.
The 1990 budget introduces further reform in this area. Accelerated capital allowances will be phased out by April 1992 apart from those that apply in the case of the Financial Services Centre, in the Shannon Customs Free Airport and the special building incentives for areas designated for urban renewal. These measures will contribute to a much needed widening of the tax base and help to remove the bias in our incentive system towards the support of capital rather than employment creating developments.
Domestic sourced section 84 loans provide relatively cheap finance for companies in the traded goods and services sector — but at a considerable cost to the Exchequer — a cost that has been increasing significantly in recent years. As an incentive the loan subsidies derived from the Exchequer are not particularly well focused and are a fairly blunt and non-selective form of support for industrial projects. The increasing burden of these loans on the Exchequer and the tendency for their abuse as tax avoidance schemes in recent years cannot be sustained in current circumstances.
The restrictions introduced in the budget to reduce the volume of such loans and their cost to the Exchequer is justifiable and will contribute to achieving a higher yield in taxation from the corporate sector. The approach set out in the budget is along the lines that I and my party have advocated for some years. The budget also gives effect to the commitments made in the Joint Programme for Government to take steps to move towards indirect tax harmonisation in the context of 1992. The reduction in the standard rate of VAT from 25 per cent to 23 per cent will reduce the price of a wide range of consumer goods at an estimated cost of some £125 million to the Exchequer in a full year. Perhaps the public may under estimate the range of goods to which these reductions will apply and the significance of them, which is borne out first by the cost to the Exchequer and second by the fact that this proposal alone will have the effect of reducing the consumer price index by 0.7 per cent. We will monitor the situation closely to ensure that the benefits of this reduction are passed on to the consumer in lower prices so that the reductions benefit the consumer and are fully reflected in the recorded rate of inflation. The reduction in excise duties announced in the budget will also bring many of these rates more into line with the situation in other EC countries and contribute further to the control of price inflation and reduce distortions in trade that are particularly noticeable in towns along the Border.
One of our principal concerns in the agreed Programme for Government was to provide tax exemption limits for the lower paid workers which would increase their take-home pay, maintain the incentive to work and contribute towards improvement in their living standards. These concerns and objectives are reflected in the 1990 budget provisions. The income tax exemption limits and allowances for children are being increased significantly so that some 31,000 taxpayers with 58,000 children will be exempt from paying PRSI. It is estimated that this provision will benefit over 50,000 employees. It represents a first important and practical recognition by the Government of the taxation nature of employee PRSI payments and lays the foundation for further progress in this area next year and in future years as economic circumstances permit. These provisions to help the lower paid will also be complemented by making available an extra £1 million to finance further improvements in the family income supplement scheme in line with what is set out in the agreed Programme for Government.
The creation of more jobs is the single most important contribution that can be made to tackling the problems of poverty and underprivilege that are all too apparent in our society. As I have indicated, policies and action that will support this fundamental requirement have been brought back to the centre of the Government agenda.
There is no magic formula by which we can create overnight the level of new jobs required to meet the demand of the labour force. What we can do is to maintain and accelerate the progress of recent years to bring more and more people off the unemployment rolls and into work. Inevitably unemployment will remain a problem for the foreseeable future. We fully recognise the facts of life in this area.
In the 1990 budget we have delivered on our commitment to provide increases for the long-term unemployed over and above the level of inflation. Weekly welfare payments and health allowances will be increased by at least 5 per cent and, in the case of many welfare recipients, the increases will be significantly greater. In the case of the long-term unemployed for example, an increase of almost 11 per cent will be provided and a 10 per cent increase for dependent children. Many of these increases are approximately three times higher than the expected rate of inflation and will make a modest but significant contribution in alleviating the hardship suffered by the less well-off in our society. The budget also provides special increases in other areas including allowances for pensioners, lone parents, children's school and winter clothing, particularly those caring full-time for sick and elderly relatives. We will continue in future budgets to take similar action to alleviate the worst features of poverty for the less-advantaged in our society.
In agreeing the Programme for Government my party and I were concerned to make the protection and improvement of the environment central to Government policy. This has been done. A major action plan to give effect to these concerns was announced last week by the Minister for the Environment, Deputy Flynn, and the Minister of State with special responsibility in this area, Deputy Harney. The additional commitments of over £20 million now made in the budget towards this plan for the remainder of this year demonstrates clearly that what is involved in not simply rhetoric but a major new initiative to create a green, clean Ireland. We will follow through with our commitments in this area in 1990 and in each subsequent year.
During 1990 also I will be undertaking a number of further initiatives related to the content of the budget.
Under the Programme for Government we made commitments to reduce anti-competitive and restrictive practices at all levels in the economy in order to create the conditions in which real jobs can be created and sustained in an outword-looking, internationally competitive economy. We said we would introduce legislation to give effect in domestic law to provisions similar to Articles 85 and 86 of the Treaty of Rome.
My Department is at an advanced stage in preparing the necessary legislation. The prohibition of anti-competitive agreements and practices and abuses of dominant positions will create conditions that allow all businesses to grow and develop. The existence of such practices in the past has created a sheltered sector of the economy which has been to the detriment of efficiency and the consumer. On the other hand, the beneficiaries have been few.
The internationally traded sector of our economy is vibrant because it already faces the conditions which will be brought about for all by the new legislation. This legislation will ensure that all sectors of the economy are faced with the real discipline of open competition.
The regulations under which life assurance companies operate provide for the localisation of assets within the State.
The requirement is imposed with a view to protecting the interests of policyholders by ensuring that assets are readily available at all times to meet liabilities to policyholders. At present, life assurance companies are required to have 80 per cent of assets, representing their basic insurance liabilities, localised here. In the case of branches of non-EC companies a 100 per cent requirement is imposed. These restrictions do not apply to free assets, that is those which are in excess of liabilities.
Following representations from the industry and having considered the matters fully I have decided to reduce the 80 per cent requirement to 60 per cent subject to the 80 per cent requirement remaining in respect of non-linked technical reserves. The latter condition is attached for prudential purposes bearing in mind the guarantees generally associated with non-linked business. This relaxation will afford life companies greater latitude in developing their strategies for the investment of linked funds. I will be introducing an amending regulation to give effect to my decision at an early date.
My decision in this matter was taken having regard to the general relaxation of exchange control regulations in recent times. I am also very conscious of the need to maintain the competitive position of life companies vis-à-vis other investment vehicles such as UCITS which are not subject to localisation requirements. With the increase in competition within the financial services sector and the advent of 1992 — with its implications for the freer movement of capital — it is essential that life companies, which contribute significantly to the economy in terms of employment and investment, remain in a position to compete effectively.
In recent years companies operating in the traded goods and services sectors have become increasingly professional and sophisticated in their use of financial instruments. The range of expertise and instruments available in areas such as debt financing, treasury management and foreign exchange activity has increased significantly. These developments have enabled companies to manage their financial assets and requirements more efficiently.
This trend is likely to continue. The internal impetus will come from the need for firms to become increasingly efficient and innovative in the management of all functional activities likely to affect their competitiveness on the market-place, including the financial function. The external impetus comes from developments such as the removal of exchange controls, the moves towards the creation of an integrated financial market in Europe and the increasing sophistication of the financial activities undertaken in Ireland including those undertaken in the Financial Services Centre.
The reductions in Government borrowings achieved in recent years — and on which we are set to make further progress this year — has been, and continues to be, essential to maintaining the confidence of investors in the Irish economy. The policies in relation to the prudent management of the public finances that my party has advocated since its foundation have been put into place and are now widely accepted as successful.
One result of this is to be seen in the bond market where the supply of bonds available has fallen sharply as Government borrowing requirements fell. At the same time overseas investors have shown an increased interest in the purchase of these gilts. Gilt purchasing activity by overseas investors last year was particularly strong and constitutes a further vote of confidence by these investors in the management of the Irish ecomony.
These developments, however, together with an increasing tendency to seek portfolio diversification in overseas markets, have resulted in a sharp reduction in the relative holdings of Government bonds by the Irish institutional investors.
Taking these developments together with the need to allow private sector firms the greatest possible range of market instruments in meeting their financial requirements, provided that market distortions are avoided, points to the need to examine how the development of a corporate bond market might be encouraged here in Ireland. Corporate bonds form an important element of the capital markets in most developed countries. Such a market could be of considerable interest to State agencies and the larger private sector companies in Ireland. It could contribute to the achievement of a more competitive market in providing for the debt-financing needs of companies. The Government have decided that the possibilities which exist in this area should be evaluated with the objective of taking definitive decisions in the coming months.
The 1990 budget provides the first significant financial foundations for the programme agreed last June between the two parties in Government. That programme derives stength and stability from the fact that it incorporates the best thinking of both parties in Government towards the solution of the economic and social problems in this country — problems that are daunting by any standards.
As a Government we are not complacent about what has been achieved. All I will claim is that a good start has been made to the 1990s in this budget in major areas such as tax and PRSI reform, providing the conditions which will facilitate increased employment creation, in improving the position of social welfare recipients and in maintaining essential discipline in relation to the public finances.
The decisions set out in the budget have benefited from the different viewpoints expressed on all sides and by all Ministers in Government. The fiscal, monetary and policy measures outlined are stronger and more stable because of the positive and constructive debate to which they were subjected in Government. This is the correct and necessary model for Government in Ireland in the 1990s — a model which is shared with most of our European partners but which for too long has remained buried in the rhetorical dust that characterised Irish politics in the past.
First of all in the context of the budget I congratulate Deputy Des O'Malley, Minister for Industry and Commerce, on his recent announcement of industrial benefits in the south-east region and in south Tipperary in particular. In spite of efforts by other Members in the constituency to upstage him, his announcements were very welcome in Tipperary town and particularly where I live, the village of Ardfinnan and in the town of Clonmel. My only regret is that the package announced by the Minister did not include some measure for the town of Carrick-on-Suir which has been devastated by unemployment and emigration and the consequences of long-term social welfare. I invite the Minister to visit Carrick-on-Suir and to address the problems in that town. However, I feel it is appropriate, as the Labour Party constituency representative from south Tipperary, to thank him.
Before dealing with the specific aspects of the budget I would like to place on the record of the House the overall reaction of the Labour Party to it. We have discussed the matter at length in the parliamentary party since the budget was announced by the Minister for Finance. Many of the individual items in the budget are welcome but in overall terms it is a budget that tinkers with many of the social problems rather than addressing them in a fundamental way. No serious attempt has been made in the budget to address the unemployment problem and the emigration that stems from it. Not nearly enough has been done to address the growing crisis in health. That matter will be dealt with next week when the Labour Party will be proposing a motion of no confidence in the Minister for Health, and it is appropriate that the House has an opportunity of doing that.
While I welcome the recognition of a major need for residential places for people with mental handicap, the money allocated will do no more than begin to reserve the cutbacks implemented by the Government. Let it be remembered that the Government cut capital spending on mental handicap by almost 90 per cent in the last three years. It is not fair to expect the handicap services to depend on schemes such as FÁS to address the crisis in staffing of these centres such as An Scoil Aonghus and An Scoil Cormac in Cashel. The crisis in our health services generally has been totally ignored in this budget and there is still need for this House to adequately discuss this matter. There is nothing in the budget to shorten the waiting lists, to reopen the acute beds that are urgently needed or to employ additional doctors or nurses. In short, nothing has been done which would restore confidence in the Minister for Health of this Coalition Government.
The budget will lead to more benefits for the higher paid taxpayers. The combination of measures outlined today and yesterday will ensure a disproportionate benefit to all those in the higher income brackets. Many of the measures applicable to the lower paid will have effects that are more cosmetic than real. For instance, the PRSI exemption package is clearly designed to benefit casual workers only and even then they will not secure that benefit every week. In spite of all the aspirations of commentators and other people who made submissions, there is no incentive to employers even to employ workers on low pay, as a result of exempting that level of employee from PRSI. The base rate of £60 which has been set is so low that it is almost equal to social welfare. It is equal to some of the FÁS and social employment schemes. If we could get people into insurable employment they could then benefit from the family income supplement scheme but nothing was done to bring that about.
Child benefit was increased yesterday for the first time in four years but it continues to lag well behind inflation. In general the provisions in this budget, for children in particular, show that the Government have not studied the evidence that was made available to them by the Conference of Major Religious Superiors, the Combat Poverty Agency and other agencies who are charged with the responsibility of making submissions not alone to the policital groupings in this House but to Government. They have said that 40 per cent of all children in Ireland are living in poverty. They have also said that the minimum level of unemployment assistance for a husband and wife should be £96 per week, £20 a week more than the rate provided for in the budget. The figure is now £76 a week when it should be at least £96. We have researched that figure further and suggest that, in order to keep people out of the poverty trap, it should be in the region of £106.30 per week.
The Government have ignored the evidence that was made available to them, which shows that the cost of nuturing children is almost twice what they have provided. An increase of 19p per week in child benefit can only be described as cynical. The increase of £1 in the allowance for children of social welfare recipients bring the total to only £11. It has been accepted by all of these agencies that up to £20 is required to nurture a child under the age of four and up to £28 is required for an older child. We are talking about £11 when the need is for £20. We should compare that with the continuing favourable treatment of companies in the corporate sector. The real value of the tax reductions should be measured against increases of up to £70 per month in mortgages under the jurisdiction of this Government against increases in local authority rents, against increases in telephone charges and against increases in the cost of electricity. The Taoiseach last night admitted that there were anomalies and that small businesses and people running bed and breakfasts who are not registered for VAT will all face increased electricity charges. In spite of the arrangements the Minister made with the agencies, increased costs will be passed on to the consumer. Because of the reduction in the amounts capable of being claimed back on insurance premia there will be increased insurance costs. The reduction here will lead to unattractive policies.
Only the very well paid will reap any benefit from this budget. The budget does nothing to deal with the growing housing crisis or to alleviate overcrowding in the classrooms. The Minister has introduced a great many measures, more of them cosmetic. The Minister cut £84 million in public spending Estimates before introducing the social measures, so the real improvement is a lot less than it appears. All that can be said for this budget is that it is a populist budget. It is certainly not a reforming budget in spite of the efforts of the Progressive Democrats. The equitable sharing of the fruits of growth demands more fundamental reform than the Government have attempted in the budget.
A Government can avail of a number of policy instruments in pursuit of their goals whether social or economic. The Book of Estimates and the budget are two important instruments. In the past both documents were used to signal the Government's intentions under a variety of headings. Very often the signals sent out by Government in the Estimates and in the budget are oblique and difficult to read. On this occasion the signals were easy enough to read as this was the most leaked budget in the history of the State.
The Government intend to do nothing more than continue a bookkeeping policy with a largely cosmetic veneer of populism of the kind always so skilfully practised by Fianna Fáil in times of economic growth. The Government will not take action to halt the flood of emigration. They will ignore the unacceptable level of unemployment and try to sweep under the carpet the growing poverty crisis by giving a few goodies to the very poor while ignoring the need for fundamental structural reform. The Government will take only cosmetic action to deal with our many difficult social problems. This Government will carry on with this charade quoting the famous rising tide that will lift all boats, without any direct intervention by the Government. That approach ignores the reality that good bookkeeping is not enough. The indicators might be right but unemployment and emigration are still at crisis levels and poverty is rampant throughout society.
The growth in exchange revenue achieved during the past year reflects only increased consumer spending on imported durable goods, especially motor cars. Many of the new changes in VAT and other duties will lead to more consumer spending on imported goods which means that our healthy statistics reflect the jobs being created in other countries but not here in Ireland. Indeed, we have exported jobs. The economic growth we are seeing will result in increased imports and in extra profits for repatriation abroad. Yesterday's budget did more for video manufacturers in Japan and car manufacturers in Germany than for food manufacturers here. That kind of economic growth is meaningless. We need a detailed programme to end emigration, to reverse spiralling unemployment and to combat poverty.
A great deal of the growth we have seen, and are likely to see, is in a very restricted area, that is the growth in multinational profits and in the profits of the financial services sector. A great deal of this growth has already drained out of the country. It is clear from the warnings, particularly those in the recent ESRI report, that a continuation of the policy of wealthy Irish companies investing the bulk of their profits abroad will deny us the opportunity to benefit from that growth.
It is clear that the Government have no coherent industrial policy aimed at translating growth into wealth that can be retained here and into jobs for Irish workers. We need radical changes in our industrial policy. The Minister has indicated that he will examine the IDA in relation to what they are doing to secure jobs here and to maximise investment in our economy. Nothing in yesterday's budget suggests that the Government understand the importance of that concept. Without change our economic growth will have a greater impact on countries like America, Japan and Germany than it will have on Ireland.
Admittedly growth has been good for some people. In the period when the two largest banks here report huge increases in their half yearly profits, it is appropriate to reflect on how they continue to fail to make a contribution to the economy where they have made their profits. On several occasions the Labour Party have called for the establishment of a commission of inquiry into the regulation of our financial services industry. Many other people have also called for such an inquiry. There are a number of major issues involved, for instance the lack of exchange controls, the growing practice among fund managers of distributing funds abroad at a time when investment here is vital, the growing practice of the banks investing their profits in capital acquisitions abroad and the management of the Stock Exchange. All these things indicate that more care is being given to this type of development than to creating jobs here. All these areas are surrounded by a sort of mystique. The Government are not even fully aware of everything that is going on in this area. Some Government Ministers could not put their hands on their hearts and say that the financial services industry always operate in the best interests of the country. A full scale inquiry into this area is urgently required.
In general terms, the cuts of the past few years and yesterday's budget have gone further down the road to creating a two-tiered system, than has Mrs. Thatcher in the past ten years in England. In health, education and social welfare the poorest and most vulnerable have suffered most.
The Estimates published last year envisaged substantial cuts in allocations for social welfare and education, and the number of houses to be built this year will not meet our housing needs. In the Tipperary County Council area none of these needs is being met. The money available for road repairs is just about enough to bring one county up to the required standard by 1992. The worst feature of the Estimates is that they just paper over the cracks. They will not undo any of the social and economic damage of the last three years. Yesterday's budget will do very little to redress this imbalance. It will not create one extra job to stop our young people from emigrating; it will not provide any meaningful additional educational opportunities; it will not alleviate the continuing crisis in the health service and it will not build the houses needed for thousands of prospective local authority tenants on waiting lists.
Over the last three years the Estimates and the budgets originally produced by the Fine Gael Government, a Fianna Fáil Government and now by a Fianna Fáil-Progressive Democrats Coalition Government, have sown the seeds of a divided society. There is a two-tier system, those with money have access to health, shelter and education and those without money must wait. The Conference of Major Religious Superiors asked if the poor must always wait. Figures published by the Government illustrate the point. The consumer price index has risen by 10.8 per cent from the end of 1986 to date and by the end of 1990 will have increased by at least 12 per cent compared to 1986. It means that even taking the 1990 Estimates into account spending on economic services generally will have been cut by 20 per cent in real terms by the end of 1990. Current spending on infrastructure will be cut by 22 per cent, spending on social services will be cut by 12 per cent and the same applies to the area of security. Is it any wonder that the levels of poverty, emigration and alienation within society have grown?
On the capital side the principal areas cut are those where the EC Structural Funds will impact or do not apply, in other words, in relation to housing and health facilities, where we must look after our own needs. The Government decided they will not spend the money even though there are adequate resources available. I will give one example to illustrate the mean spirit which has motivated the Government, their approach to Third World aid. The total allocation for international co-operation was £28 million in 1986, having been increased by 23 per cent over 1985. In 1987 it was reduced to £24.9 million and by the end of this year it is expected that £22.8 million will have been spent. The provision for next year, according to the Book of Estimates, is £24 million. If the 1986 Estimate had been increased merely in line with inflation, aid to the Third World would now stand at approximately £33.6 million and would meet some of the demands made in this area. Indeed it would make a real contribution to solving the problems of the Third World.
The most recent Estimates I have seen of the gross national product at current market prices is £18.784 billion. This figure appears in the statistical information published by the Central Statistics Office. This means that the proportion of national wealth which we will spend on the Third World next year will have shrunk even further, to 0.13 per cent of GNP. The United Nations' target for the Third World is 0.7 per cent so we are getting further and further away from the target instead of getting closer to it, which we would all like to see. We had hoped that the Government would take advantage of the growth in our economic development to make even a small gesture to the Third World in yesterday's budget but we are sorely disappointed. Surely it would have been possible for a Government willing to spend £3.5 million on racehorses to have done something about starvation of people in the Third World?
In the three years since Deputy O'Hanlon became Minister for Health the service has deteriorated although the Minister says there is no crisis. However, as a result of his and the Government's policies — in particular as a result of the policy decisions taken by the Government regarding financial allocations to health — there is a crisis. When Deputy Desmond was Minister for Health he was much maligned by Fianna Fáil and others but health spending was kept at a constant rate of 7 per cent of GNP or £7 for every £100 of national wealth. In 1987 this was reduced to £6.50, in 1980 to £6.30 and, by the end of this year, it will stand at £5.80. They are the figures at which people should look when talking about the health area.
The last time international comparisons on health spending were published in 1984 they produced evidence that Ireland spent 6.9 per cent of its GDP on health; the OECD average was 5.6 per cent and the United Kingdom was 5.5 per cent. It might appear from these figures that Ireland is well up in the spending league but the truth is that the only reason we are spending a higher proportion of our national wealth on health care is that our national wealth is considerably smaller. When per capita figures of spending are looked at the true picture emerges.
The crisis in the health service will be discussed next week but it is appropriate to mention them in the budget debate. We have lost 5,000 workers in the health area, comprising nurses, doctors and operatives. Charges have been introduced for essential services which were normally freely available to people before. There are now transport charges for medical card holders and others. I have had many letters from people in difficulty: many of them were taken to hospital as an emergency case with a broken leg or other injury and, after treatment, told to find their own way home although they all had medical cards. There are no longer any entitlements. There are charges for day attendance and out- and in-patient care although most of these people are paying PRSI which, up to now, covered these charges. Four thousand beds have been removed from the system, 3,000 of these beds were for acute cases and they were badly needed this winter. It is impossible to get a bed for a geriatric patient who has been discharged from an acute or semi-acute hospital; 700 psychiatric beds have also been lost in this whole process; 19 hospitals have been closed and the threat of closure hangs over more of them. The Minister does not accept this and he does not believe that any hospitals have closed in some areas. In a reply to a parliamentary question which I tabled last week he said that some of the hospitals which have been closed are still open. However, he then admitted that some of them had been changed to day care centres. This playing with words is typical of the Minister's approach but next week he will have to answer to this House for his attitude.
The Minister and the Government had a glorious opportunity yesterday to do something for the health service. They could have diffused this crisis but they did not do so. Indeed they blew the opportunity to diffuse it. The money allocated yesterday, welcome as it is, will not reopen one bed or ward. It will not hire additional staff, shorten any waiting list or alleviate the sufferings of many thousands of people who need treatment and cannot get it, unless they can pay for it. As I said earlier, it will not restore the confidence of this House in the Minister for Health. There is every possiblity that we are now facing into a period of sustained economic growth.
The medium term review published by the Economic and Social Research Institute heralded the possibility of us being able to make capital repayments on our debt within a few short years rather than simply servicing the interest. According to the ESRI, our economy will grow by an average of 5 per cent over the next five years and by 1991, on the basis of present revenue and spending policies, we will be taking in more in taxation than we are spending. That will be the first time that has happened since the early seventies.
That is a very rosy picture to paint but I wonder if it is too optimistic. However, it poses the question, who will benefit from the achievements in this book-keeping exercise? Certainly, while the poor will be perceived to have benefited from the budget by July when the increases will be paid they will have a better idea of what it will mean for them. The Labour Party time and again have posed questions about the policy dilemma, and the need to reconcile economic efficiency with the desirability for social equity, but we have not seen any evidence in the budget of any list of priorities for the areas we are concerned about. All parties in the House and Independents, with the exception of the Government side, consider the problems of the people in need to be the priority. The non-Government agencies and voluntary organisations throughout the country are aware of what we should be doing for those people.
If there is economic growth those people should benefit. Side by side with increasing efficiency in our economy we have witnessed increased polarisation of sections of our society. We are now cursed with a two-tiered system which can be a recipe for disaster. The British Prime Minister now realises that that type of policy has led her into a disaster area and she is in trouble with the Community in regard to it. At a time when we hold the Presidency of the Community, we must ensure that we do not go down that road. We must give priority to those in need. They should benefit from the buoyancy that is apparent to everybody, except those in need.
I should like to raise a point in regard to the rules of the House. I should like to ask the Chair, whether the rules of the House refer to the number of speakers from the different sides of the House who should be called. Four speakers from the Government side and three from the main Opposition benches have been called today. A Member of the Labour Party has just concluded his contribution and yesterday we listened to nominated speakers from the major parties but the Independents — and there are five of us including the Ceann Comhairle — have not had a look in to say one word about the budget good, bad or indifferent. Is that enshrined in the rules of the House? If it is, I appeal to Members on both sides to have a thought in these days of growing democracy in far away places behind the Iron Curtain, and the Berlin Wall, about not erecting walls and drawing down curtains in the House. This was not always the way the business of the House was conducted.
In other days those who offered after the spokespersons for the major parties had contributed were taken in their turn and in the order in which they offered. Perhaps I am being unfair to the Acting Chairman, who is relieving on a day such as this, by putting this question to him, but I should like to ask him to convey to the Ceann Comhairle my concern and my protest if this is the way the business of the House is being conducted. We are not progressing as far as democracy is concerned. In fact, we are receding, and receding fast.
I will convey the Deputy's views to the Ceann Comhairle and I hope the Deputy will get an opportunity of contributing very soon.
On a point of order, and this is not directed at the Minister present in the Chamber or other Members, I understand that the rules of the House have enshrined in them a clear directive to the Chair that speeches must be made and not read. I understand that supplied scripts are not allowed under the rules of the House. I have watched Members reading their scripts today. In fact, it has become a growing practice here. We should either apply those rules or abandon them and let Members who have prepared scripts supply them for inclusion in the Official Report so that the time of the House is not taken up.
Like Deputy Blaney, I enjoy an odd speech without a script but when in Government that can be dangerous territory. The budget has been good for the tourism and transport industries. I am pleased to report that the two sectors — transport and tourism — for which I have responsibility have continued to play their part in the growth of the economy. A useful transport barometer is the fact that 1989 saw a growth of 14 per cent in the number of passengers moving through our State Airports. This growth was in parallel with a continued dramatic resurgence of the tourism industry. I am anxious to ensure that our State airports' capacity should not constrain the growth in passenger numbers in future years. In this context I should point out that the National Development Plan provides for total expenditure of the order of £100 million at the State airports up to 1993. This investment is designed to complement other transport investment programmes on both a national and regional level and will have a major role in developing access transport linkages and providing the necessary support infrastructure for the development of the tourism industry.
The primary objectives of the investment programme are to provide first rate international and efficient facilities for both passenger and freight traffic and to prepare for the projected increases in traffic expected to arise from the further liberalisation of air transport within the community. These investments are regarded as major priorities in the context of EC Structural Funding.
In addition to the increase in capacity in State airports, I am also ensuring that the facilities at regional and local airports are augmented. Already the major development programme which commenced in 1988 involving total expenditure of up to £5 million to upgrade the regional airport network has been completed. This has placed these airports in a position to exploit fully the opportunities for traffic and tourism growth. Arising from the investment programme passenger traffic is now running at over 500,000 persons per annum and is expected to reach 650,000 this year. Those figures point to the great success of the regional airport network which has been such a valuable part in developing the country.
As the House will be only too aware, the development of the regional airports is an essential element in the creation of a complementary and properly integrated national transport network and is a crucial element in Ireland's access transport policy and strategy to reduce our peripherality. The development of the regional airport network is also regarded as essential for the stimulation of local investment and for the economic, industrial and tourism development of the regions. Further major development and the regional airport network will take place over the next few years with the assistance of EC Structural Funds. I will be making further announcements in that regard during the year.
Turning to the performance of our airlines I am pleased to report that 1989 has been another very good year for Aer Lingus with a continuation of growth in passengers and cargo which has been a feature of recent years. In 1989, Aer Lingus carried 578,000 visitors from Britain to Ireland, a new record and it represents an increase of 25 per cent over the previous year. That is very significant. The airline also had a record increase of 34 per cent in visitors from Europe. US visitors carried by Aer Lingus increased by 21 per cent. These are very significant figures.
In the financial year ended 31 March 1989, the Aer Lingus Group returned a record profit of £41.3 million, an increase of 9 per cent over the previous year, enabling a dividend of £3.5 million gross to be paid to the Exchequer. The airline results, including airline related services, contributed to this improvement. In the current financial year, Aer Lingus is continuing to perform well, although there are a number of unfavourable factors which the airline has to contend with, notably increased expenditure due to rising fuel costs and a continuation of the additional expense which is being caused by air traffic congestion in Europe. I am confident, however, that Aer Lingus will show a good profit performance for the current financial year. It is essential that the company not only maintains its present level of profit, but increases it in order to finance fleet renewal and expansion through the nineties.
The estimated Aer Lingus expenditure for the 1990 Public Capital Programme amounts to over £189 million, or more than double the previous year's outturn. The bulk of this expenditure relates to fleet replacement — £131 million approximately. Eight new aircraft are due for delivery to the company this year, bringing to 14 the number of new aircraft acquired since 1987. The need for these new aircraft reflects the expansion in traffic arising from the general liberalisation of European air transport and the increase in inbound tourism in line with Government policies.
In addition to expenditure on aircraft, the company will also be making substantial investment in airline related activities, most notably the establishment of a wide-bodied hangar at Dublin Airport, which received much media coverage recently. This project, which involves an investment of £35 million, is scheduled to come on stream in early 1991. It will be capable of servicing the largest aircraft currently in operation, notably the latest Boeing 747-400, and the new facility will be targeted at a world market. Substantial IDA grants have been approved by the Government for the project, which is expected to create 560 new jobs, mainly for skilled people, by 1997. This development is very much in line with the spirit of the Programme for National Recovery to which Aer Lingus is making a substantial contribution in terms of employment creation, not only in its subsidiary companies but also in the front line areas of its air transport business.
During the coming year I will continue to promote the liberalisation of air transport, seeking the widest range of opportunities for Irish airlines to provide new air services to those countries with which we are developing our trade, commercial and tourism links. In this regard, I expect that revised bilateral arrangements with the United States will be formally concluded in the near future, which will give Aer Lingus the right to provide passenger and freight services between Ireland and Los Angeles. This is a major breakthrough for the airline. The question of services to Japan and Australia is also being pursued.
Additional routes within the European Community became available to Irish airlines as a result of the first phase of EC air transport liberalisation measures which were adopted by the Council of Ministers in December 1987 and the bilateral memorandum of understanding concluded with the UK in 1988 which, in terms of liberalisation, went even further than the first phase of EC liberalisation. Both these measures opened up considerable opportunities for Irish airlines to develop new routes. In this context, it should be noted that in recent years, Aer Lingus has initiated new services from Dublin to Newcastle and Dublin to Hamburg. In addition, they have taken advantage of fifth freedom rights to operate through Manchester to Amsterdam, Copenhagen, Hamburg and Zurich.
Ryanair for their part have been instrumental in developing new direct routes from the regional airports, Connaught Galway and Kerry to a number of UK points, including Luton, Coventry, Leeds-Bradford and Manchester. Ryanair have also introduced services from Dublin to Liverpool, Coventry and Munich. All of these developments have brought significant benefits to our tourism industry in terms of low fares and improved access.
Negotiations on the second phase of EC air transport liberalisation, which will mark a further major advance towards the goal of achieving a single air transport market in Europe, are due to be concluded by 30 June 1990, under the Irish Presidency.
Members will agree that we cannot have an internal market in the real sense unless we have an internal market in transport, particularly air transport. That is why the second package is so central to the opening up of the internal market. I expect the results of these negotiations to increase the commercial opportunities for Irish airlines to expand the range of their services as a result of more liberal fifth freedom rights and capacity sharing provisions. This should enable Irish carriers to continue the programme of expansion of services through Irish airports with particular benefits for Irish tourism generally.
I should point out, however, that the very welcome growth in aviation activity over the past few years has created a need to expand the capacity of the air traffic control and air navigation systems. Expanding the capacity of the air navigation system is a complex task that cannot be accomplished instantly. In the current year we are recruiting additional staff and investing £11 million as part of an overall investment programme of £30 million on new radar, communications and navigational aids. The programme will be completed by the end of 1992 and will increase capacity at Dublin, Cork and Shannon Airports to a level which is more than capable of meeting all air traffic demands. I am pleased with the progress that is being made — work is on target and within budget. Investment in the system was badly needed. This is the first such major investment in a long time and it will bring air traffic control fully up to international standards.
While I am happy that good progress is now being made in expanding the air navigation system, I believe there is room for improvement in the structures through which we provide our national air navigation services. I said at Question Time today that I am looking at a number of options in regard to future structures for air traffic control in full consultation with the members of staff who do an excellent job under much pressure.
I am pleased to report that the ferry operators have continued to respond well to competition from air services. While they have lost market share to the air carriers in the foot passenger market, they are successfully developing their own market in car party traffic. To this end, the ferry companies are offering very attractive fares for car parties, together with special incentive fares for package holidays, especially those which are activity-related.
The substantial progress made by B & I in 1988 has continued into 1989 and the company's recovery programme remains on target. This will be borne out when the company's 1989 results are published. B & I have recently negotiated improved sailing slots at Holyhead which, I believe, will help the company's performance in 1990 and beyond. I am confident that B & I management and staff will continue in their efforts to turn the company around and make it into a commercially viable concern. Although substantial progress has been made, it should be clear to everybody concerned that there is still a long way to go.
With regard to the Cork-Swansea ferry service, the Government have decided that financial assistance comprising a grant of £500,000, together with a repayable loan of £500,000, should be made available to Swansea-Cork Ferries Limited for the provision of a service in 1990. This assistance is subject to certain conditions being met by the company. I again emphasise the exceptional nature of this package and also reiterate the Government's policy that access transport services to Ireland must operate on a fully commercial basis. To this end, I must stress that no Exchequer assistance will be available to Swansea-Cork Ferries after 1990. It is now up to the people of the Cork and Kerry region to support the service and prove that a self-sustaining and competitive service can be maintained beyond 1990.
As regards developments in international road transport, the criterion of competitiveness is also to the fore. In the context of the completion of the single market, one key objective is the full liberalisation of the road freight transport sector by 1993. Under the Irish Presidency of the European Communities, I will give priority to reaching agreement on substantial increases in the quota for international haulage within the Community leading to this liberalisation. I am confident that this will benefit the whole of the Community and that Irish hauliers will respond well to the increasingly competitive climate. We can already see a notable increase of activity in the Irish road haulage sector since liberalisation of the industry in 1988.
In December last the Council of Ministers of Transport gave a further boost to the liberalisation of the haulage market when they reached agreement, on the basis of a compromise which I had put forward at the October Council. This was to allow hauliers to carry goods within another member state on a limited basis — a transport phenomenon known as "cabotage". From 1 July 1990 Irish hauliers will be able to avail of licences to operate such services in other member states. This is a major breakthrough in the sense that we cannot have an internal market in transport without also having freedom for road hauliers to move freely within the Community.
Perhaps the Minister would move the Adjournment of the debate.
I should like to point out that I have concluded my remarks.
Who then moves the Adjournment of the debate as I understand the Minister has concluded his speech?
I do not wish to resume.
As I have not spoken, I will move the Adjournment of the debate if that is suitable.
I thought Deputy Blaney might offer.
I have no objection.
I move the Adjournment of the debate.
Debate adjourned.