I would like to share my time with my colleague, Deputy D. Ahern, who has a particular interest in this matter.
Adjournment Debate. - Cross-Border Trading.
Is that agreed? Agreed.
It is a coincidence that we happen to be talking about cross-Border trading following the important motion that has been unanimously carried. This debate results from the announcement made at the EC Court which effectively said in a statement — not a judgment — that the 48 hour restriction imposed by the Government some time ago is illegal. This is only a declaration, it is not a judgment. Later in the year the judgment will be given.
Nobody in Louth or in the Border area was foolish enough to believe that the 48 hour rule on cross-Border shopping trips would become a permanent fixture. At best it was only a temporary measure but it helped in a small way to reduce the level of unfair cross-Border trading — I emphasise the word "unfair". It is not the fault of the business community or the unfortunate workers in the immediate Border area that this position exists. The fault, I would submit, rests with successive Governments who, by raising customs and excuse duties far in excess of those applying in the UK and Northern Ireland, have made business and trade uncompetitive in the South, and particularly in Dundalk and the Border towns.
Let us take a few examples of price differentials: in petrol there is a difference of 98p per gallon, beer £1.20 per six pack, cigarettes 23p per packet, wine £1.40 per bottle approximately, different brands of whiskey £4 per bottle and in the case of television sets and other electrical goods more than £50 per set on average.
We voted for the Single Europe Act because we were conned into believing that we would have tax harmonisation by 1992. Now we are being told that the Government cannot afford to apply this measure as it would cost in the region of £500 million per year. How much is it costing now not only in financial terms but in terms of jobs and business and factory closures? We only want fair trading, and I emphasise this because for many years the balance was in favour of the Republic. During that period people on the other side of the Border suffered very severely because of the tax differential. The only way this problem can be dealt with is through a fair trading arrangement, and the only way a fair trading arrangement can exist is if we achieve tax harmonisation so that traders and people in business, on both sides of the Border, can operate. This was the object of the Single European Act. I appeal to the Minister and the Government, irrespective of the short-term cost, to find ways and means before 1992 to ensure that fair trading can exist by achieving tax harmonisation. Nobody has put down the facts and figures and quantified that for us in this House, for the business community or for the general public.
We heard earlier about the problems of the subversive activities in the North and in the Border area which were affecting very substantially the employment position and the economy of our State. This is another area where we are being hammered and this is one of the reasons the level of unemployment in County Louth and in other Border areas is the highest in the country. Deputy McGahon said earlier that the unemployed rate was 34 per cent but I think it is even higher. At a recent function held in London for people from Dundalk 600 young people turned up and it is expected that that figure will increase to 1,000 when the next Dundalk function is held in London. If all those young people were living in County Louth the level of unemployment would be substantially higher and the level of poverty would be even greater.
I want to establish what the Minister and the Government propose to do in the short term. Has the Minister any other alternative plans? Is he examining alternative ways of ensuring that in the short term — and until we achieve tax harmonisation — some measures will be taken to protect the remaining jobs and to stop the unemployment spiral, particularly in the north Louth area? What can be done? I do not know the answer. I am sure the Government have considered that question very seriously and that they felt this would be only a short-term measure. However, it has probably lasted longer than anyone anticipated. It is not our intention in County Louth to destroy business activity, particularly in the Border areas. We must encourage the Government to achieve tax harmonisation on excise duties so that we will have fair trading. In the long term this will not only help to restore the level of employment in north Louth and in the Border areas, but it will help to achieve the policy of all parties of a united Ireland by peaceful means at some future date.
Like my constituency colleague, I query the 48 hour rule and the Minister's views on the opinion that was handed down yesterday. I represent Dundalk where I was born and bred. The 48 hour rule introduced in 1987 was the first recognition by a Government of the serious Border problems that started 15 years ago. Governments have been criticised down the years for not doing enough for the Border areas, and to a certain extent, rightly so. In 1987 a number of senior people in Fine Gael acknowledged that they would have introduced the cross-Border restriction if they had thought it would succeed. Unfortunately, this opinion from the European Court now puts that 48 hour rule in jeopardy. If we live within nine miles of the Border on the land frontier zone exemption and if four people travel across the Border by car, they are entitled to take £110 duty free goods across the Border. Where I live people said that the 48 hour rule would not have an immediate effect on cross-Border trade between Dundalk and Newry. It did have an effect and that is acknowledged by most people, including Deputies on the other side of the House. In 1987 I was stopped on the streets of Dundalk and asked to congratulate the Government and the former Minister for Finance, Mr. MacSharry, for introducing that rule.
I had an opportunity to read the Opinion handed down yesterday. This Opinion acknowledged the problems in the Border areas — I think the phrase used was "unquestionable problems". The person who handed down the Opinion criticised the European Commission for not having tried to come to some agreement between the defendant and the plaintiff in that proceeding. I think he felt that not enough negotiations. had been entered into before the court action took place. Perhaps there is a glimmer at the end of the tunnel in that regard and it will be possible to bring in alternative arrangements.
I agree entirely with my constituency colleague that the ultimate answer in regard to cross-Border trade is the equalisation of VAT — the Minister has acknowledged on many occasions that he intends to equalise the VAT rates as much as possible come 1992, and he took the first step towards this in the budget — and the abolition of excise duty, which would help dramatically. If the 48 hour rule is ultimately abolished when the judgment is handed down it will not have as dramatic an effect as people may think, particularly as the economy in the Republic is in a far better state of health than it was prior to 1987 and the economy in the North and England, which has an inflation rate of 7 per cent, is not in as good a state.
The 48 hour rule, as it came to be known over the past number of years, was introduced in the 1987 budget to correct the very substantial distortion and deflection of trade that had arisen on the land frontier between the North and South of Ireland. As Deputy Bell said, mainly as a result of the differences in tax rates, large numbers of people crossed the Border every day to avail of the cheaper shopping prices in the North. On the basis of surveys conducted at the time by Customs and Excise staff it was estimated that some 3.6 million shopping trips were made by residents of the Republic to the North of Ireland in 1986.
Undoubtedly this had many serious economic consequences. It was estimated that people returning from trips to the North imported goods to a value in excess of £300 million in 1986. This represented a huge loss of trade to the economy, including the Border areas. There was also a significant loss of tax revenue to the State which compounded the severe problems of the public finances at that time.
The success of the measure can be assessed on the basis of the dramatic falloff in the number of residents making one-day shopping trips to Northern Ireland. A survey by Customs and Excise staff in December 1987 found that in one day only 4,000 persons passed through the customs crossing at Carickarnan after a same day visit to Northern Ireland. This represented a reduction of some 78 per cent on a comparable day in 1986.
The pattern is similar when other pre-and post-48 hour regulation survey results are compared for other dates — for example, June 1987 was down 77 per cent on June 1986 and March 1988 was down 94 per cent on March 1987. One-day coach trips to the North almost disappeared following the introduction of the 48 hour rule regulation. On a day in December 1986 over 220 coaches travelled North with shoppers from the State. On a comparable day in December 1988 only seven coaches made the trip.
The curtailing of what was largely an artificial movement of pre-48 hour rule traffic thus played a very significant part in the subsequent improvements recorded in both the public finances and the economy generally.
The Irish regulations, which, in our view clarified the position by drawing a valid distinction between genuine and fiscal travellers, that is, those whose sole reason for the journey was to avail of travellers' allowances, was challenged on the grounds that they infringed EC law. The matter then followed the usual procedures in such cases and culminated in a formal hearing before the European Court in Luxembourg on 21 February last. The Irish defence, prepared by the Attorney General's office in consultation with Senior Counsel, based its arguments on the major distortion of trade involved, the artificial nature and scale of the abuse and the failure of the Commission to respond to requests made by the EC Council of Ministers in 1985 for the Commission to look into the feasibility of making a distinction between "genuine" and "fiscal" travellers.
The legal arguments in the case now fall to be considered by the full court and a formal judgment will not be available for possibly two to three months. I do not propose to comment, therefore, on these legal aspects or to speculate on the final outcome. As I have already indicated, the opinion given by the Advocate General is not binding and, of itself, does not call for any action in relation to the 48 hour rule which remains in operation.
While the Advocate General's Opinion proposes that the court should find against Ireland on the legal grounds it nevertheless stresses the serious difficulties with which Ireland was faced.
The opinion states, and I quote: "Everyone agrees that the problems with which Ireland is specifically confronted under the exemption arrangements are serious". It is also notable that the Advocate General has raised the question as to whether the stance adopted by the Commission has prevented solutions being found which could have forestalled these court proceedings.
Pending the formal judgment of the court, the Government will be considering all the options available should an unfavourable ruling for Ireland be given. I do not propose to anticipate the outcome or to go into the possibilities at this stage, but one course of action which might be taken would be an approach to the Commission seeking a derogation which would recognise the enormous problems which Ireland faces before indirect tax rates are approximated throughout the EC.
The Commission have recognised the problems facing this country in the whole area of tax harmonisation and, following the case which I made last year in the EC Council, is at present carrying out a special study on measures that might be taken to assist us. I should stress that the Government have a positive attitude to tax approximation, as I indicated with the VAT and excise reductions that I introduced in this year's budget. We are prepared to play our part in the approximation process. The objectives in mind can be achieved only with a fair sharing of the burden of adjustment as between the member states. Pending approximation being achieved, we must have regard to the economic realities for the economy and the Border areas. This is why the Government took the action they did in 1987.