Prior to this budget, in common with practically every other Deputy, I received a huge number of prebudget submissions from groups representing every strata and every interest in society. I am sure the Minister for Finance received ten times as many written submissions and God knows how many deputations prior to the budget. These submissions, because they came from such a wide variety of groups and interests, were often contradictory and conflicting as each group tried to better its own lot, if not at the expense of others then certainly at the expense of the taxpayer. One would need the wisdom of Solomon and the produce of his fabled mines to meet all these varying demands. Although in many respects the submissions were conflicting, they had in common that by responding fully to them the Minister would be put in a position where the cost to the taxpayer would be billions.
When one considers the general welcome with which the budget was received, it is clear that the Minister listened very carefully to all the submissions and while he might not have the riches I referred to at his disposal, he at least seems to have been endowed with much of Solomon's wisdom. The fact that he got the mix right in the budget is verified by the fact that there was a general and widespread welcome for it from a huge variety of interests. Even some Members of the Opposition in the course of this debate welcomed the general thrust of the budget and the efforts the Minister is making to ensure that all sectors benefit from the improvements in the economy during the past year and will continue to do so.
The main Opposition criticism is that the budget gave too little to too many. Deputy Noonan described it as a confetti budget. I think he meant it in a derogatory manner but it was a tribute to the Minister's ability to consider all the conflicting demands and come up with a budget that was fair to everybody. It is very easy to take up an extreme position in respect of any number of good causes and argue that this or that should have been done, but what Deputy would argue against the desirability of giving a single unemployed person £60 or £70 per week as a basic payment? Who would argue against giving the elderly complete tax exemption on private sector pensions or argue against a family on social welfare or low pay getting more help and assistance? Who would argue against providing a free medical service to everybody or against giving employers financial incentives to employ more people? I do not think anybody in this House would argue against any of those desirable aims.
Everyone in this House, despite what the public sometimes seems to think, would argue the case for improved benefits and living conditions for the poor in our society. No one member of any group or party can claim a monopoly of concern for the disadvantaged. If it has taught us anything, the history of the last 20 years has taught us that given half a chance politicians will dish out goodies and spend money freely. While some people might question their motives, their willingness to spend is never in question.
Unfortunately, we have also learned that we can get nothing for nothing and somebody has to pay for it in the end. The average householder saved £150 a year on average in rates since they were abolished in 1977 but they paid for it in increased VAT and personal taxation. The few hundred pounds that was saved for a few years because of the abolition of car tax has been well and truly paid for by heavier taxes both direct and indirect. The biggest price paid for the spending that occurred from the 1970s up until 1987 has been paid in terms of human hardship created by huge unemployment and emigration problems. These problems did not occur as a result of the policy of the previous Government or this Government but as a result of the policies pursued from the mid-seventies up until 1987.
The task facing this Government is to try to undo the damage done during that time. It cannot be done overnight. It must be part of a gradual process, such as the process we have pursued since 1987. Any sudden knee jerk reaction will only make problems worse. We must continue to try to eliminate borrowing, reduce taxation and provide for the disadvantaged people in our community. We must also maintain the confidence of the business community in our ability to take the necessary decisions to ensure continued economic growth. We must do all of these things at the same time. We have to try to keep a balance. We could solve an individual problem by concentrating fully on it but that could lead to major problems in other areas. If the Minister in his budget reduced income tax to 25 per cent and 48 per cent he would not have been criticised in the House and he would have been praised by the general public who would have thought it a great move. However, the extra income which the taxpayers would have got could have led to major overheating in the economy and caused further problems for everyone. The same could apply to other problems if they were tackled on an individual basis. The budget deals with the problems in a balanced way and we must continue the policy outlined by the Minister. We have to resist the encouragement from members of the Opposition and others to start spending more and more money.
I was surprised that before the budget a number of Fine Gael spokespersons, who have always claimed to be whiter than white in terms of a fiscal rectitude policy, were encouraging the Minister to spend more and more money. The Fine Gael Party alleged that they were the first party to adopt fiscal rectitude and that they always put the interests of the country first in financial terms. Before the budget they were suggesting that the Minister had £400 million extra to spend although that was not so. Fine Gael have claimed all along that they have been the virtuous people when it comes to fiscal rectitude but the record as far back as 1973 will show clearly that they were never the party with a commitment to balancing the books. They advocated deficit budgeting and started that policy which caused so many of our problems. In the early eighties they started a propaganda war in relation to this and they portrayed themselves as the knights in shining armour and fiscal rectitude was their slogan. In fact, the rot that started in this economy started in the first Coalition era. All the propaganda we had from the last Coalition could not change facts. The Coalition Government, in office between 1973 and 1977, started us on a downward slope that could not be arrested by Fianna Fáil or the Coalition of the eighties.
The problem was not tackled until 1987 when Fianna Fáil took the necessary steps. In 1972 the current budget deficit was £5 million or 0.3 per cent of GNP and our foreign debt was £126 million. By 1977, when Fine Gael and Labour left office, the deficit had jumped by 2,000 per cent to 6.9 per cent of GNP, and the foreign debt had increased by 825 per cent to almost £1.1 billion. Apart from that spending and the deficit budgeting, the major effect of this policy was to condition people to accept the idea of foreign borrowing to finance current spending. The activity between 1973 and 1977 also led to a huge increase in the Exchequer borrowing requirement from 5.8 per cent to a high of 16 per cent in 1975.
Why was that done? In the 1973 election Fine Gael and Labour made a series of extravagant promises to the electorate. They called it a 15 point plan which included proposals to do away with estate duties, VAT on food and the phasing out of rates and so on. As a result of that and subsequent budgets, the Minister for Finance, Deputy Richie Ryan, took a huge amount of public odium and earned the nickname "Red Richie" for his troubles as Minister for Finance. Was he the real culprit? He was not, the culprit was Deputy Garret FitzGerald who was the chief economic spokesman for Fine Gael in the 1973 election.
Deputy FitzGerald had a pivotal role for Fine Gael in economic matters. Even after he was appointed Minister for Foreign Affairs he enjoyed a powerful position within Fine Gael and the Government on ecomomic matters. Although he was Minister for Foreign Affairs he had his own private economic adviser for his input to Cabinet discussions on the economy, a very unusual move. The evidence is there to show that he was one of the strongest supporters of current budget deficits and of the heavy recourse to foreign borrowing. In 1974 the Central Bank warned:
Those interests who, in an unqualified way, advocated expansion of public expenditure, foreign borrowing and bank credit in the immediate interest of economic growth and employment would do well to keep in mind that an expansionary policy can lead only to disaster if it is pursued to the point of accelerating the relative increase in domestic costs and prices by unduly straining productive capacity, of which skilled labour is an important element, and if it requires an inordinate volume of external indebtedness to finance it.
However, Deputy FitzGerald persisted in his support for this disastrous policy. In the budget debate on 4 April 1974, probably in answer to the criticism of the Central Bank, he said:
A suggestion has been made that the budget in some way is irresponsible, that the size of the deficit cannot be justified and that it will create dangers of some kind for the country.
He went on to criticise Fianna Fáil's attachment to fiscal rectitude and the science of economics. He said:
Nobody need be surprised that that is the policy of the party opposite because, in the years in which they were in Government, they regularly, on every occasion, pursued this particular policy. They balanced their budget with as much concern for arithmetic precision as if each one of them was Mr. Gladstone incarnate. Never did they allow economics to creep into the budget; their budgets were book-keeping exercises carefully balanced.
Deputy FitzGerald then went on to claim support from all the expert agencies for his view. He concluded:
What we had to do this year was plan for a bigger deficit than we planned for last year. Last year's planned deficit would be too small in the current year, it was necessary to go for something larger and this is what we did.
However, one expert agency — the Central Bank — was far from happy with Deputy FitzGerald's remarks or the policies of the then Deputy Richie Ryan, Minister for Finance. They expressed very grave reservations about the Government's budgetary strategy. I again quote from their report:
Given our relatively high propensity to import comsumer goods out of additional income it is probable that much of the stimulus expected to result from the heavy borrowing —— much of it external —— will go to increase consumer imports rather than to promote investment and economic growth.... The bank is unhappy about the pursuit of expansion on the necessary unsustainable basis of a relatively rapid price inflation and a widening gap in external payments requiring heavy borrowing to finance it.
The result of the 1974 budget was that the deficit soared to £92 million, foreign debt doubled to £312 million, inflation rose to 17 per cent and unemployment rose from 68,000 81,000. Deputy FitzGerald did not seem to learn anything from that because the 1975 budget continued the disastrous policies. In fairness, Deputy Richie Ryan, the then Minister for Finance, hinted at a certain amount of unease about the deficit and indicated that he would bring it into line over several years but that it could not be done immediately. Deputy FitzGerald did not see it that way and in a budget debate on 4 February 1975 he said:
We had the foresight to see that it would be necessary for us to have a fairly expansionist budget to maintain the momentum of our economy. If anything, we underdid it. If anything, it should have been more expansionist than it was in 1973. The current deficit, plus the capital expenditure to maintain economic growth, involves overall a very large deficit of the order of £250 million to be financed by external borrowing. Again, in a normal year, this amount of residual borrowing could not be justified but in this year it is justified and it is essential. It will make it easier for us to borrow the sums we need, vast sums by the standards of a small country.... With hindsight one could say that the budget could have been somewhat more expansionist. The same could be said of 1974. I am afraid the Opposition have got everything so much upside down that all their criticisms have been directed in the wrong direction. Instead of encouraging this Government to be a little bolder and a little more expansionist on those occasions, all the criticisms were the other way. All the criticisms were: "You are going too far too fast, you are expanding the economy too rapidly, you are spending too much money, you will overheat the economy".
I do not think that Deputy FitzGerald and the then Minister for Finance needed any encouragement at that stage, it was as well that somebody was crying halt.
By mid-1975 inflation was 24.5 per cent and the Central Bank were openly critical of the policies being pursued. At the end of that term of Government our foreign debt was £1.1 billion, the national debt was £4.2 billion and unemployment had increased from 66,560 to 106,469. The cost of servicing the national debt trebled during that period. When you put that in the context of the fact that they were the first four years in which we were in the EC and that there were transfers of approximately £550 million from the EC, it underlines the totally irresponsible attitude adopted at that stage. In the period immediately afterwards, when Fianna Fáil came to power in 1977, it was not possible to cut off that expenditure completely and immediately. We were then saddled with the increasing debt and borrowing over the next few years. The next worst year after the 1977-81 period for financial borrowing was 1981. Deputy FitzGerald was in power for half that year. I read comments which Deputy Bruton made during the period of the second Coalition Government, the one from 1983 to 1987. He said the reason the national debt doubled from £12 billion to £25 billion was that they were busy paying off the foreign debt which Fianna Fáil raised in the period 1977-81. That is total nonsense and I would have expected something better from someone of Deputy Bruton's stature considering that he was a former Minister for Finance. Maybe he thinks the people are complete fools.
I comment on that period of Government because it is very difficult at times on this side of the House to listen to people on the Opposition benches talking about the irresponsibility of Fianna Fáil and that they were the cause of everything during the period 1977-81.
One of the important features of the budget is the attempt by the Minister to spread the tax base not just to relieve the PAYE sector from the burden of taxation but to increase the levels of taxation from the capital and corporate sectors. Deputy Mac Giolla made the point that the PAYE sector carry everybody on their backs. While I do not disagree that the PAYE sector carry a huge burden of taxation it should be pointed out that since 1987 Fianna Fáil have managed to change the burden around. In 1986-87 the average PAYE taxpayer was paying £2,690 in tax while the business, professional and self-employed sector, including farmers, were paying £2,970. In 1988, excluding the amnesty figure of between £500 million and £600 million, the comparative figures were £2,942 for PAYE sector and £3,225 for the business, professional and self-employed community. Between 1987 and 1989 capital taxes almost doubled at a time when inflation averaged 3 per cent. During the 1982 to 1986 period capital taxes increased by only £13 million, from £21 million to £34 million, at a time when inflation averaged about 7 per cent.
One of the major points that should be highlighted about the budget is that it has addressed our social problems and come to the aid of the disadvantaged in our society. The package of improvements in the social welfare provisions will be welcomed by all, irrespective of their political affiliations. Some people will argue that the Minister did not give them enough but some significant improvements have been made. The weekly social welfare payments will be increased by a minimum of 5 per cent and the child benefit will be increased by the same amount. However, the important thing to stress is that the social welfare improvements are being targeted at those who need them the most. There have been increases ranging from 10 per cent to 12 per cent for specific groups. That is a good policy and one that should be pursued.
I should like to refer to the services for the mentally handicapped, a topic that has received a certain amount of attention in recent months. I am pleased with the provision made for the mentally handicapped by the Minister for Health. In 1990 approximately £140 million will be spent on services for mentally handicapped. Of that figure £76 million will be paid over to the major voluntary agencies. That will allow for 11,000 mentally handicapped people to receive the appropriate services. I welcome the provisions that have been made in my own health board area. I understand that 30 extra day places and five residential places have been made available, one speech therapist appointed and that there is a proposal to complete and maintain the computerised register of mentally handicapped for the north-east. Those moves are welcome and are an indication that the Government are moving in the right direction.