Dáil Éireann díospóireacht -
Thursday, 25 Feb 1993

Vol. 426 No. 7

Financial Resolutions, 1993. - Financial Resolution No. 10: 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.

Mr. J. Bruton

This House in conducting this debate and assessing this budget should recognise that it is taking place under the shadow of what is, perhaps, the most disastrous piece of industrial news in the history of this State. Some 800 jobs have been lost in Digital in Galway, in a high technology company, a company which was one of the flagships of the modernisation of the Irish economy since the 1960s. This company was in a sector which was considered to be one where opportunities for expansion were immense and almost unlimited, a sector to which Irish industrial policy makers have devoted perhaps more attention than any other, namely, electronics.

On the day the Government introduced a tax on jobs in a budget, we hear that another 800 jobs have been lost. Could there by any greater dichotomy between the needs of the economy and the people and the budget introduced by the Government than on the very day we have news of the loss of 800 jobs, this Labour-Fianna Fáil Government introduces a further 1 per cent tax on jobs? There is no greater demonstration of the gulf between the understanding of politicians in Leinster House in their newly refurbished offices and the needs of the people than the imposition of a tax on jobs on the very day that 800 jobs are lost.

Those who look for divisions in this Government are missing the point. The most disturbing feature of this Government is that the two parties actually agree on their approach to dealing with the finances of this country. Both believe extra taxation is the answer. Both parties refuse to see that while increasing taxation may be the simplest way to solve immediate, short term problems it is no substitute for a long term realistic strategy. There is no strategy at all. At every hand's turn the Government addresses symptoms rather than underlying causes.

Relief for mortgage holders is welcome. The real long term response to the problems of those on mortgages is a strategy to bring down interest rates. This would have an immediate beneficial effect on employment and would in a more sustained way relieve the mortgage holder. It must be clear to everyone that the Government has no plan to bring down interest rates even though our economy has been rocked by the currency crisis since early autumn. The Government operates on a muddle through approach.

This is supposed to have been the first budget of a new Government. It sounded like the last budget of a tired and retiring Government. Usually in its first budget a Government tackles difficult and unpopular issues and sketches out a vision for the future. Yesterday's budget did the opposite. It dodged all the difficult tax reform proposals of the Culliton report and postponed all decisions on pay and conditions in the public service. This budget marked time for another year. There was no sense of urgency about the fact that one-third of our people can find no work and an unemployment rate of 20 per cent is costing the taxpayers billions of pounds ever year. There was no sense of urgency about the waste of human talent, the hopelessness and the indignity of the dole queue. There was no sense of urgency about rates of interest that reward those who leave their money lying risk free in a bank account and penalise those who borrow to produce jobs for someone else.

This budget rewards those whose mottoes are safety first and hold what you have and forget about the country. There is no sense in this budget of a Government wanting to mobilise the people to tackle the nation's problems together. There is every sense of a Government who has settled in very quickly indeed, settled to draw their salaries, to employ their relatives, to refurbish new offices and to avert their eyes from the world around them.

We sit in Kildare Street, Dublin, today, barely a mile from two of the biggest employment exchanges, Werburgh Street and Gardiner Street, where thousands sign on each day—a mile on the map but a thousand miles in the mind as far as the priorities of this Government are concerned. People outside Leinster House are angry with TDs, their salaries and allowances and the empty benches in this House not because they begrudge us the money but because they begrudge the fact that while TDs individually may be sympathetic to their problems, TDs as a group, acting through the Government of the day, seem increasingly unable to do anything about the problems about which they talk all the time. That impression of powerlessness is confirmed by this budget.

This budget should have put job creation at the top of the national agenda. Instead it increased taxes on work, it introduced a 1 per cent levy which increases poverty traps and increases even further the incentive to take or create a job. The Labour Party once said that their policy was one of full employment, yet the same Labour Party now sits in Government having refused the portfolio of the Department of Finance and watches unemployment exceed 300,000 for the first time in our history. Having watched this unemployment figure rise, this Government puts an extra arbitrary levy on those who create or take a job. Its policy of full employment went out the window as it entered in the door of Government Buildings. The Labour Party, which once used the Dáil to advocate the creation of large Irish owned food companies big enough to develop our indigenous resources, now prefers to use Dáil privilege to refuse to disclose to a tribunal established by the Dáil sources for grave allegations it has made against the Irish food companies. The Leader of the Labour Party, Deputy Spring—the present Tánaiste—in a speech in Cork last year, called for tax free lump sums to promote job-sharing and create 75,000 new jobs. Now all that is forgotten and the Labour Party prefers to confine its job creation efforts to the families and friends of its Ministers.

The introduction of a 1 per cent income levy in their first budget says all that needs to be said about the Labour Party's distinctive contribution to the governance of this country. Crude across the board levies of this kind have all the hallmarks of last minute dodges designed to plug a looming gap in the budgetary arithmetic when only a few days were still to run to budget day. Ministers had reached a stalemate and could not think of or agree on anything else.

This is characteristic of the Labour Party in Government. They postpone difficult decisions for so long around the Cabinet table that eventually the only option left is a last minute across the board levy on all income. That is what happened in 1983 and now the Labour Party is only one month in office and it is happening again. This 1 per cent is a betrayal by the Labour Party of those who voted for them. It is a case of a Labour Party taxing labour, a Labour Party taxing work in a country where 300,000 people have no work and 150,000 people have emigrated because they could not find work, yet the supposed party of work wants to tax work so that we can have even less of it.

This levy will be placed on all income without allowance for mortgage, and life assurance commitments. A married person with a dependent spouse will pay the same levy as a person with no family responsibilities. That is Fianna Fáil and the Labour Party's concept of tax equity.

Fianna Fáil's and the Labour Party's definition of the well off comes through very clearly in the arrangements for this 1 per cent levy on work. With great generosity they have decided that anyone earning less than £173 per week will not have to pay the levy. Anyone earning more than £173 per week is seen as sufficiently well off to pay the full levy on their entire income, including every penny of the first £173. Who are these well off people? Country council workers, Government messengers, clerical assistants, shop assistants, the low paid at work, about whom the Labour Party said so much when they were in Opposition, but are now sufficiently well off to contribute to Labour's 1 per cent levy on work. We are told this levy is temporary. Yes it is temporary, but it will last as long as the Labour Party is in Government, no longer and no shorter than that.

This levy results in double taxation. First your income will be levied at 1 per cent, and then the same income, including the 1 per cent you have already paid, will be liable for income tax. It is double taxation, contrary to all the arguments advanced by Deputy Stagg when he complained that water charges amounted to double taxation. What is his view on this form of Labour Party double taxation on people's income and work?

Mr. Broughan

We did not tax it.

Mr. J. Bruton

The first priority of this budget should have been to reduce the costs of creating a job. I believe the Government should have cut employers' and employees' PRSI by a total of 7.5 per cent. To ensure this resulted in extra jobs, not extra overtime and profits, the reduction could have been confined to employees working a 38 hour week or less. By directly tackling the cost of creating a job would have allowed people to find their own job opportunities without form filling, lobbying FÁS, lobbying county boards for a grant or to see if they know somebody on the board, or lobbying other bureaucracies. People could be empowered by a PRSI cut to get on with creating their own jobs without having to ask a favour from anyone. That would be too simple for the new policy making establishment consisting of the Government and social partners.

The architects of this disastrous currency policy, on which I will speak later, do not believe that people can be trusted to create jobs for themselves or to run their own enterprises. Unless an enterprise consists of filling forms, completing feasibility studies, applying for grants or inviting Minister to official openings, it is not worthwhile in the eyes of the new Government and its chosen social partners.

Labour Party members who are students of European socialist history might recollect what happened to Philip Snowden and Ramsay McDonald. In order to obtain respectability from the big houses of England, they decided to opt for a hard currency policy. They eventually split their party and would never have seen office again were they not rescued by the privations of the Second World War. Those in the Labour Party who are currently enthused by the reception they are receiving from monetarists and economists should reflect on this.

The fundamental cause of poverty is unemployment. This Government has done nothing to address the root cause, but deals with the symptoms. Both Fianna Fáil and the Labour Party see social welfare as a constituency which must be addressed separate from those on PAYE, in agriculture and the self-employed.

They do not see those on social welfare —most of whom do not want to be on it —as wanting to work. In many cases, it is not worth their while to work, when account is taken of the increase in their rent and travel costs — all of which are taxed—and the new levy they will have to pay to fund the Labour Party's inability to agree on other more just areas of social expenditure or of taxation curtailment. They are not a constituency to be treated with palliatives. They want to work, but are being prevented from doing so by the policies of this Government.

Fine Gael starts at the other end of the spectrum. We see those in receipt of social welfare as individuals, not a collective constituency of 300,000 unemployed. They, above all else, want to get out of the trap they find themselves in. Taxing the employed to fund benefits for the unemployed will create a vicious circle with those at work struggling to support more people out of work. Those who are unfortunate to be on the margin of society must have an adequate income, but taxing work to pay for this is ultimately self-defeating. I regard this as an obvious truth.

The imposition of the 1 per cent levy was an easy option for this Government. I did it so that it could avoid making more fundamental decisions. This budget proves that, after barely a month in office, this Government is already suffering from terminal fatigue. The people voted for change last November, but got nothing of the kind.

Notice taken that 20 Members were not present; House counted and 20 Members being present,

Mr. O'Malley

It is difficult to be optimistic or positive in assessing this budget, which is the first from this historic combination of Fianna Fáil and Labour in Government. My kindest opening comment would be to state that it confirms my worst fears, although I will admit to being surprised at the proposed £150 million privatisation programme, but I will return to that later.

I wish I could welcome this budget, and hail it as a refreshing and radical package of measures that would target the unemployment crisis with its myriad of social and economic downsides dogging Irish society but I cannot. The reality of the unemployment crisis has been brought home by the tragic announcement that the manufacturing operation of the Digital plant in Galway, one of the most outstanding plants in the country, is closing leaving only the software operation here.

The difficulty about the cessation of manufacturing is that all the spin off firms and industries spawned by Digital in Galway over the last 20 years, were almost exclusively established for the purpose of supplying components for the manufacturing operations. The need for components in software and other services is limited because development in this area consists almost exclusively of brain power. I deeply regret what has happened there. I continued to hope, despite ominous rumours circulating in the last number of days, that things might improve, but unfortunately, this did not happen.

This is possibly the most serious closure in Irish manufacturing history, not just because of its size but because of the effect it will have on so many other firms, which will effect many more than the 800 direct jobs now lost. That makes the job creation provisions in this budget even more topical and necessary. Viewed in the context of that news it renders this budget and its provisions very disappointing because they contain nothing to overcome such problems.

As a result of being in Government up to recently, I appreciate the difficulties confronting any Administration and the conflicting demands it faces at budget time, but I am saddened and depressed by the absence of even a semblance of a strategy for getting the economy working efficiently, and the lack of awareness on the part of the Minister for Finance and this Government of the scale and urgency of the problems facing the country.

While in Government the Progressive Democrats sought to advance a coherent strategy aimed at getting this economy working efficiently and generating more sustained employment. The core of that strategy was embodied in a series of measures which we championed, and some of which we saw come to fruition. There were measures, such as the new Companies and Competition Acts to increase the efficiency and accountability of Irish firms on both the domestic and export markets. We advanced radical pro-jobs tax reforms on the simple premise that a society with a record surplus of labour should not continue to tax labour as if it were a rare commodity. The reality of Digital makes what occurred yesterday, particularly the 1 per cent levy on employment, all the more regrettable.

We advanced significant reform which had realised partial success before our enforced departure from Government. Our period in office was marked by a significant widening of the tax net. There was a very large increase in the tax take from the corporate sector which has roughly trebled in the past four years. There was the removal of a range of anomalies and disincentives and a reduction in personal taxation to two rates, and their reduction in turn to 27 per cent and 48 per cent. The aborted revised Programme for Government which we negotiated in October 1991 envisaged these rates falling further to 25 per cent and 44 per cent. We also wanted to achieve a considerable widening of the standard tax band so that people on average incomes would pay tax only at that rate. We advocated radical overhaul of the PRSI system, which is simply a direct income tax by another name.

Complementing this coherent pro-jobs tax reform strategy, I commissioned the Culliton review of industrial policy on the premises that we would never sustain an effective onslaught on the unemployment crisis unless it was grounded on the development of a massively expanded native industrial sector manufacturing goods and producing services of a quality and price that would command buyers on international markets.

The Culliton prescription was scarcely novel. Anyone who had seriously analysed the problems underpinning our under-performing economy, and the poor returns on massive State investment over many years, already knew them, but its significance lay not in its assembling of the problems but rather in the clarity and coherence of its prescriptions for resolving them. Culliton outlined the institutional changes that were urgently needed from top Government level downwards, as well as the infrastructural handicaps vis-à-vis energy, telecommunications and transport that had to be overcome. The Culliton report also outlined changes that were essential in the education and training systems, and in the tax system to create an enterprise culture with incentive-based employer and workforce sectors.

It is interesting to recall Culliton's observations that there was no single area within this overall prescription where Government has the greatest opportunity to act than in the area of tax reform. In effect, Culliton confirmed and complemented the Progressive Democrats' analysis of the problem and the necessary solution. In the context of yesterday's budget it would be no harm to remind ourselves of what Culliton said:

By removing the demoralising effect of the current tax system and removing the waste of non-productive tax avoidance activities, reform will create a far more conducive environment for productive enterprise and for more solidly based investment decisions. In no other single areas does the Government have at its disposal the tools to make as far-reaching and effective a reform to support an enterprise economy as in taxation.

I ask the House to look at yesterday's budget in that context. Has anything been done to remove what Culliton calls "the demoralising effect of the current tax system?" I see absolutely nothing. In fact, I see an addition to the demoralisation with the 1 per cent levy which sets back some of the advances that were otherwise made in terms of tax reform, and increases the degree of penalisation. The Culliton report is much talked about now but it is beginning to fall into the same unhappy, slightly sanctified, category as motherhood, apple pie and the Irish team. In other words, everyone agrees with him but when it comes to actually doing something, our support is purely verbal and we effectively ignore the recommendation.

Part of the previous Government, in which I served, saw the whole of the Culliton report revolving around institutional changes. In the first speech I made on the publication of the Culliton report, on 10 January 1992, I said that I did not want to see a debate about institutional changes. I said Culliton was a prescription that had many components which needed to be taken on board as well as the spirit of the report as a whole. One of the most important elements was to face up to the disincentive aspect of our taxation system, not just of any one particular tax but of the amalgam of taxes, as well as facing the fact that we have huge cost impediments, which Culliton identified in telecommunications, transport and energy. Yesterday's budget increased VAT on telecommunications and energy, which is ridiculous.

There is a petty effort being made to raise £11 million by doubling the existing 1 per cent levy on non-life insurance which consists of motor employers' liability and public liability. I do not know the reason for doing that. The Minister for Finance's justification was that the former levy, which was used to bail out the bankrupt PMPA company, had now come to an end after nine years payment, and that, therefore, it should be replaced. This implied that the former levy to bail out the bankrupt PMPA was beneficial to the economy, and instead of rejoicing that this was at an end, it is replaced by a taxation measure which has the effect of further increasing the cost of essential parts of the economic or commercial process which are already more expensive than in any country. I know of no other country where motor insurance, employers' liability and public liability are more costly than here.

Public liability cover for a function organised by a voluntary organisation used to cost £5 some years ago. It now frequently costs £750 or £1,000 to cover one, simple public function that lasts for a few hours. Frequently, the £1,000 premium is not taken by the organisers at the gate. Even if they were able to devote all the proceeds to the insurance cost, it would not cover the cost. It is in these areas the Government chooses, in defiance of the Culliton report, to increase the costs of Irish business.

One of the reasons for my disappointment is that it is clear from yesterday's budget that the Culliton report has been, effectively, abandoned by the new Government. I state this, not merely because of the budget's reversal of the tax reforms strategy championed by my party in Government and endorsed by the Culliton report but for a variety of other reasons. Some of the key institutional changes urged by the Culliton report have been abandoned, notably, this Government's decision to hive off the marketing activities of An Bord Tráchtála from an integrated single industrial agency, embracing equity research and development, training and marketing for indigenous industry. The greatest failure of the budget, in regard to the Culliton prescription, is its total failure to address the combined cost handicaps of Irish industry and, in particular, the cost of employing people. The unemployment crisis combined with the competitiveness problems faced by this country, arising from the currency crisis, made it imperative that this budget should have had as its main focus the reduction of the cost handicaps facing Irish Industry. It was obvious that the reduction of PRSI burden, while costly, would be the way forward but this budget offered nothing in this regard. In so far as it addressed the question of the cost of employment, it simply hiked up the cost of employing people through the cynical and administratively easy device of the new 1 per cent income levy.

The extent to which this levy reverses the progress made in recent years, in reducing the income tax burden and easing the plight of the PAYE sector, is graphically summed up in the Minister for Finance's admission on RTE television last night that this measure was the equivalent of moving the present 48 per cent rate to 52.5 per cent. Is it any wonder the Minister for Finance and the Taoiseach, during the course of the debate on the financial resolutions said that they regretted the tax reform strategy they had pursued in Government with the Progressive Democrats. This only demonstrates how blind they are to the appalling impact of a high labour tax regime in this country and to its inevitable blight on job creation. Faced with that attitude, is it any wonder there are over 300,000 in the dole queues and that the Minister for Finance is budgeting for an average rise of 26,000 in the numbers out of work this year.

Instead of facing up to the root and branch agenda presented for radical action by the Culliton report, both parties in Government prefer grandiose sounding projects called special job schemes. This budget proposes something called a £260 million jobs fund while, at the same time it projects only an extra 6,000 jobs or a net 3,000 when the inevitable further loss of jobs in agriculture are taken into account. The figure of 6,000 extra gross jobs puts a price tag of over £43,000 on each of these jobs. The more effective, but less glamorous way forward would be to tackle the excessive cost of employing people, highlighted especially by the PRSI system, and to cut the excessive input costs for Irish industries of essential services like energy, transport and telecommunications. Instead, there is a 5 per cent increase in the cost of phones and electricity, areas where we have some of the highest charges in Europe. How can any Irish industrialist or entrepreneur create jobs faced with the hostile costs environment generated by our own Government? The cost of an overseas call from this country is, on average, 35 per cent higher than that in competing countries in the European Community. Adding 5 per cent to the overall cost is going to make the differential perhaps 36.5 per cent. I cannot see any sense in such moves.

One ray of hope in this budget is the £150 million privatisation programme but we have no details from the Minister on it. My guess is that it consists simply of selling off the remainder of the State's shareholding in Greencore and Irish Life. While I welcome that, it does not achieve a great deal. The Government should be examining precisely what other opportunities exist to dispose of assets that are almost entirely unproductive and where they can be used to reduce the level of national debt.

The extraordinary employment policies pursued the last number of weeks by the Labour Party in particular, strike me as being far removed from what is required. It seems extraordinary that so many people would be employed at such high salaries for no reason other than the political benefit of Ministers and Ministers of State and that such people should include senior members of, for example, the Labour Party. One such person is the national treasurer of the party and others are close personal relatives of the Ministers and Ministers of State involved. It is not necessary to say much more about this because the people of this country have very strong views about it.

Mr. J. Bruton

It is called job creation.

Mr. O'Malley

It comes under what I describe broadly as the employment creation policies or, as Deputy Bruton said, job creation. It does not seem to me to bear much reality to the kind of job creation required in the city and county of Galway on this bleak morning——

Miss Quill

Or Cork.

Mr. O'Malley

——or Cork, or many other places. This Government was in a unique position. It is a new Government. It has a majority of 40, or at least 39 since last night. This majority goes beyond anything that was ever seen in the parliamentary history of this country. It has, therefore, at the beginning of its period of office a unique window of opportunity to take steps which could not be taken by a Government with a narrow majority or a Government coming towards the end of its term of office.

If we were ever to see a different approach to the country's problems, we should have seen it yesterday. What did we see? We saw a lame tinkering about with the status quo. We saw the outstandingly coherent call in the Culliton report for fundamental change absolutely and finally abandoned. If this Government, at the beginning of its term of office, is not prepared to look forward or to cast aside the policies which have patently not worked and have cost the taxpayers so much, then I begin to wonder what hope there is for the future.

Where is the element of change in this budget? Where is the influence of the Labour Party on the budget? It is remarkable that the party is prepared to accept many of the existing policies that obviously do not work. Minor adjustments have been made and are pronounced beneficial. We exist in a situation which does not work. The Government had an opportunity yesterday to cast it aside and to attack our problems from a different angle but it failed to exploit the opportunity. The Government is in a stronger position in parliamentary and political terms than many other Government but it has chosen to tinker about with the status quo rather than change it.

If the Government did not take the opportunity for change this year the possibility of its doing so in the future is virtually nil. That is the depressing aspect of this budget. It must also be depressing for the many unemployed and for those who have become unemployed today and who face such an appallingly bleak future. The manner in which the Government has chosen to approach our difficulties is profoundly disappointing and can only make many people feel there is little hope for the future.

There is not even the prospect that any new worthwhile thinking will be introduced because the provisions introduced yesterday are patently inadequate. It is a sobering thought that yesterday's budget is far less radical than the relatively modest ones introduced in each of the previous years. I expressed regret at the relatively modest budgets of the past three years but at least they had a coherent direction. There is no coherent direction or underlying philosophy in yesterday's budget. It frightens me that the glorious opportunity, available to a Government with a majority of 40 and with a mandate for change, should have been so miserably missed.

Mr. Gregory

I regret the dreadful job losses announced in Galway this morning. It is a tragedy for Galway and the country. Nothing can be said to lessen the impact of this terrible blow.

According to media speculation, inspired or otherwise, this was going to be the harshest budget in recent times. On budget day, even as the Ceann Comhairle warned the House against divulging the context of the budget before it was formally announced in the Dáil, the early edition of Evening Herald carried a very detailed account of the new income levy. Perhaps the source of this leak should be investigated by the Committee on Procedure and Privileges. The objective of the leak seems to have been a calculated tactic to soften the blow of the formal announcement of what, in reality, is a form of taxation, and an inequitable tax at that. It is not based on ability to pay and will be levied against even those wage earners who are below the average industrial wage, those who can least afford it. This manipulative use of the media should not be ignored.

It is difficult not to use strong language when referring to aspects of this budget. At least one aspect brings politics further down the road to disrepute, a road politics has travelled at a fast pace for some time. I refer to the litany of broken promises contained in the Minister's Budget Statement. Not only are there numerous broken promises, but the Government reneges on the solemn election commitments given before the last general election. I consider the practice of making commitments and then, when safely in power, abandoning the commitments as unethical as any other form of corruption in politics. I believe this is more damaging to political life and to the public perception of politicians and politics than anything the ethics in politics measures recently put before this House hope to address.

The broken commitments are: the reversal of the "dirty dozen" social welfare cuts, the promised equity for Aer Lingus, the promised end to privatisation, the promised full mortgage interest relief for hard pressed homeowners, the promised permanent Christmas bonus, the promised protection of the lower income groups, the promised measures to combat unemployment and the promised moves to implement the recommendations of the Commission on Social Welfare. What happened to all of these promises? It is clear from this budget there is no intention of honouring any of them.

The infamous election slogan "health cuts hurt the old, the sick and the handicapped" was not a once off exercise in hypocrisy. It has been more than matched by the Labour Party's slogan "vote Labour and reverse the welfare cuts". If there was an award for duplicity, it would have to be awarded to the Minister for Health, the most vociferous opponent of the hospital charges introduced by Fianna Fáil. The day before the budget he jammed on the brakes and did the biggest U-turn of all by substantially increasing the hospital charges.

The Labour Party are, or I should say were, regarded as the party of the working class, the unemployed and the poor. However, to raise the expectations of the poor and then ignore their plight must be the most unseemly and dishonourable experience of recent political times. It appears there is no honour left in politics and the poor must pay the price. It seems the strategy of defeat, dishonour, lies and hypocrisy is now an acceptable way to attain power today.

The workers in Aer Lingus were told by the Labour Party that the necessary equity would be provided. However, the Budget Statement belatedly makes the reality clear, and I quote:

Subject to the constraints on the national finances (of which there was no mention before the general election) which rule out very large injections of equity, the Government will be prepared to support a viable and convincing plan.

This was Fianna Fáil policy before the general election but it was not the policy of the Labour Party. The Programme for a Partnership Government said there would be no large-scale privatisation and indeed there will not be because they have changed the term "privatisation". Instead, assets worth £150 million will be disposed of. "Asset sales" is the new term. There appears to be no end to the cynicism.

The limited assistance given to mortgage holders is welcome. Full mortgage relief was promised to hard-pressed mortgage holders if the problems with interest rates continued. This is another empty promise that will, no doubt, shatter the hopes of thousands of families fighting to keep up mortgage repayments. It is like the promise to make the Christmas bonus a permanent payment.

Some of the lower income groups are to be removed from the tax net. Once again, there is a catch because it is only a temporary measure. As soon as they receive the Programme for Economic and Social Progress increase they will be back in the tax net and as badly off as they were in the first place.

The income levy is a further tax on the PAYE sector. It is difficult to believe the Labour Party could get away with this. That is why it had to be called an income levy. One of the disgraceful aspects of this new tax is that it will be levied on workers whose earnings are below the average industrial wage. So much for the protection of lower paid workers. One in three workers in the public sector earns less than the average industrial wage and will be worse off as a result of the measure contained in this budget. This is, once again, a glaring example of the refusal of successive Governments to move towards a more equitable society by concentrating harsh measures on the higher paid, on those with the ability to pay. Recent tax reductions favour higher income groups. In this budget the burden falls on all earners, including those least able to afford it and especially workers on low incomes who, on balance, will be worse off as a result of this budget.

The biggest single issue facing the country has been given the least attention or, as previous speakers said, did not receive any attention. This budget offers little hope to the 300,000 unemployed. It accepts there will be an additional 26,000 on the dole by the end of this year. Those who voted for change in the general election were voting for jobs. They were voting for imaginative ways, schemes and projects to create jobs but they received nothing in this budget. There were more imaginative ideas among unemployed groups on the recent "Late Late Show" programme than there are in the 39 pages of the budget speech.

The prediction of more than 400,000 unemployed by the end of the 1990s is almost inevitable. The real disappointment is that this budget, the first for a Government with major participation by the Labour Party, the party of radical change, is not a radical one. It could have been presented by a Fianna Fáil Government without Labour involvement. I would be interested to know how a special delegate conference of the Labour Party would view this budget and its omissions.

It has become mandatory to pay lip-service to the poor at the beginning and end of Budget Statements and this budget is no exception. At the beginning it speaks of ensuring that the less well off in our society are protected and at the end it states that the position of the weaker members of our society will be addressed in several respects. As a Member elected to represent a constituency that has a high proportion of people living in poor circumstances and where unemployment levels can be in excess of 70 per cent to 80 per cent, a constituency shared by the Minister for Finance, I find these references offensive to the poor because in reality their position is not protected. They are worse off as a result of the budgetary measures.

Much publicity surrounds social welfare increases which are said to be set at the rate of inflation. However, they will not come into effect until July. Meanwhile VAT increases, the increases in the price of clothes and food will become effective immediately. Combined with local authority rent increases and the failure to reverse social welfare cuts, even the most casual analysis will show that the poor will be worse off, or at best will simply remain in a poverty trap. These people will remain below the basic recommended minimum income levels set down in 1986 by the Commission on Social Welfare. The commission regarded people with an income below the level as having an inadequate standard of living. The failure to provide the increasing number of long term unemployed with an adequate minimum income is condemning them to a life of poverty which Members would not accept for themselves or their families. This budgetary-imposed inequality lies at the root of our increasingly divided society and shows clearly how poverty is perpetuated by political decisions.

Each year in the weeks preceding budget day, Members of this House receive a number of detailed submissions from the Conference of Major Religious Superiors Justice Commission, the Combat Poverty Agency, groups working with the homeless, principally Focus Point and Simon, and the unemployed, as well as trade unions and various interest groups. I wish to refer to the submissions from the organisations concerned with social inequality. I agree with their viewpoint but their voice is not being heard. They argue that the type of society which those in power wish to maintain, whether it is an increasingly divided and unequal society or one where the attainment of social equality is a priority or even an objective, can be judged by the budgetary decisions taken by the Government of the day. In recent budgets, for example, where tax concessions have been more beneficial to those on high incomes and where increases in social welfare payments have been minimal, it may be said that Governments, at best, are simply not interested in creating a more equal society or, at worst, are deliberately committed to serving the interests of the rich and affluent and, therefore, have a vested interest in social inequality.

This budget is no different. Once again, the lower paid and those on social welfare are the hardest hit. It is a budget of the status quo, with no element of change. While it is true that Governments have set up commissions to examine and make recommendations to alleviate inequality, most notably the 1986 Commission on Social Welfare——

An Leas Cheann-Comhairle

May I interrupt the Deputy as there is an inconsistency in the papers before me. The Deputy has three minutes to complete his 20 minutes. Does he propose, as the nominated representative of the Technical Group, to take the full 30 minutes?

Mr. Gregory

I propose to take more than 20 minutes.

An Leas Cheann-Comhairle

In that case, the Deputy has 12 minutes remaining.

Mr. Gregory

No Government so far has been prepared to implement its recommendations or to set a time-scale for their implementation. Even a Government with strong Labour Party participation, as we have at present, is not prepared to do this. Instead, all recent Government, including the present Labour-Fianna Fáil coalition, have stated that they support the main recommendations of the Commission on Social Welfare and they are working towards their implementation.

According to the Justice Commission of the Conference of Major Religious Superiors the effect of the absence of any genuine political commitment is to condemn at least one million people to live in poverty or below a "minimally adequate standard of living". They argue that in 1993 the poverty line of minimum income, following from the recommendation of the Commission on Social Welfare, would be £65 for a single person and £104 for a couple. They pose the question which must be asked here: could anyone in this House live with basic dignity on less than this amount? I do not believe it is possible to do so. This budget forces people to live substantially below these levels.

In their budget submission the Justice Commission of the Conference of Major Religious Superiors urge the Government to ensure that everyone would have a minimum income equivalent to these figures in 1993. They believe, as I do, that the cost could be met from the resources which already exist. We must have a Government with the political will to make the necessary choices. The first choice must be a commitment to eliminate poverty and the Government must have the political will to bring that about. However, the message from successive Governments and high profile economists and commentators who are their fellow-travellers is that social welfare payments represent a spiralling drain on our resources which the State cannot afford and which must be reduced. This approach culminated in the so-called "dirty dozen" welfare cuts under the then Minister for Social Welfare, Deputy McCreevy. This approach has not been reversed in this budget and those members of the Labour Party who fought the general election campaign on a platform committed to reversing the cuts and defending the interests of the poor are now open to the charge of hypocrisy and political dishonesty.

The arguments and statistics presented by the Justice Commission of the Conference of Major Religious Superiors provides us with a different analysis to that of conservative Governments and economists. They point out that in the six years since the publication of the report of the Commission on Social Welfare, Ireland's GNP increased substantially, but the percentage of GNP spent by Government on social welfare, health, housing and education has declined during those years. They point out that the percentage of national income spent specifically on social welfare declined from 14.9 per cent to 13.8 per cent, even though the number of people depending on weekly social welfare payments increased by almost 100,000. This analysis shows that in our divided society the poor are getting poorer and the rich are becoming richer.

This can be readily verified when we examine the salary scales and increases enjoyed by the top of the scale salary classes in the public and private sector. The salaries of heads of Departments and large Irish companies rose by 52.3 per cent from an average of £28,960 in 1986 to £44,100 in 1992 while, at the same time, the salaries of Departmental Secretaries in the public sector rose by 66.2 per cent, an increase of £23,623. The Justice Commission of the Conference of Major Religious Superiors argues that the income of the better off has risen by more than the income of the lower paid employees and social welfare recipients.

When preparing this analysis, the Justice Commission of the Conference of Major Religious Superiors choose 1986 as the base year because this was when the Commission on Social Welfare published its report. Since then we have heard endless statements from various Governments, economists, public commentators and academics that the recommendations of the Commission on Social Welfare could not be implemented because they were too costly. We now realise that if the percentage of GNP allocated to social welfare had been maintained at 1986 levels, the vast majority of the Commission on Social Welfare's recommendations would now have been implemented, even though an additional 94,000 people depend on social welfare today. Successive Governments have made choices over the past six years. These choices have benefited some people, principally the better off in Irish society. However, these choices have also led to the growing exclusion of other people.

The Justice Commission of the Conference of Major Religious Superiors argues that the agenda of the better off is kept at the forefront of national consciousness by the media which, for the most part, is owned, controlled and operated by members of that class and by high profile economists and public policy commentators who argue their case. All recent budgetary strategy has favoured the socio-economic position of the more affluent, while aggravating the state of exclusion of the minority who are on or below the poverty level.

That minority is growing and the gap between them and the more affluent is widening. If the centre is to hold, argues the Commission, then a new budgetary strategy is required which would give priority to the elimination of poverty and social division. This would help develop a society which would be less violent, more humane and a safer one in which to live.

That is the analysis in the submission by the Justice Commission of the Conference of Major Religious Superiors. I have quoted from it at length because I do not believe it is even read by those who shape the budgets. I support the position of the Justice Commission and would go further in saying that if the strategy of yesterday's budget continues, and no real attempt is made to create a more equal society, then we are heading for violent social conflict.

Tánaiste and Minister for Foreign Affairs (Mr. Spring)

I feel I should reply to some of the comments made by Deputy Gregory. I have listened carefully to his contribution. I find it difficult to understand why someone speaks in this House for 25 minutes without making one constructive suggestion in relation to what should be done. The Deputy has not observed the media comment on myself and others close to me in the last number of weeks if he thinks we have the power to influence the media in relation to either the headlines or what is put out in advance of the budget. I find a certain inconsistency and selectivity in the quotations used by Deputy Gregory.

I have had numerous meetings with the Conference of Major Religious Superiors. They have produced some excellent work which I have no difficulty in supporting. Deputy Gregory tends to be very selective in quoting from their deliberations and conclusions. He attacks the Government for not doing enough in relation to mortgage relief and then goes on to refer to other aspects of the conclusions of the Conference of Major Religious Superiors. But if he looked at some of their conclusions he would realise that they, in fact, have discussed and pointed towards the phasing out of mortgage relief completely, the taxing of child benefit and the phasing out of VHI relief. If Deputy Gregory is to be consistent he should present the reports in total rather than selecting the pieces that suit his point of view.

The Deputy also mentioned the Labour Party's commitments in relation to social welfare and mortgage holders. The whole question of social welfare will be dealt with in detail today by the Minister for Social Welfare and there will be no difficulty in seeing progress in relation to social welfare and promises made in that area.

The budget, which was presented to this House yesterday, represented a series of promises and commitments kept, in a context that required and demanded total management, hard decisions and shared sacrifices. In that sense it is a budget with which I am proud to be associated. It was not a radical budget. There was neither the time nor the room for that. This Government took office five or six weeks ago and since then it has had to grapple with a series of economic and other issues that were not of its making. Inevitably the first budget, and it is the first of several, had to be drawn carefully and prudently.

From the day this Government was formed it has operated against a background of turbulent economic conditions, nationally and internationally. The continuing European recession has been aggravated by the upheavals that have taken place in the financial markets. The task has not been made easier by the attacks of speculators on our currency. High interest rates have damaged our economy and created a great deal of hardship for families with mortgages. Above all, there has been the spectre of unemployment which has passed through the all-time historically high figure of 300,000 people. Behind that statistic lie, on the one hand, countless stories of human suffering and indignity and on the other, the need for far reaching and fundamental reforms of structures and policies to begin to turn the spiral downwards. In that context the news in relation to Digital this morning is a serious blow, not just to the city of Galway, but to the many families involved and indeed to the economy. It highlights the fragility of mobile investment. Hidden behind the statistics too is a story of disadvantage and inequality — of families in need of shelter, of children going to school cold and ill-equipped, of elderly people waiting patiently for hospital treatments they should have had months, if not years, before.

No Government, coming new to office, can ignore these stories. No Government, coming new to office, can ignore the need to tap into the commitment of its people to change. Above all, no Government, coming new to office, can ignore the demand for wealth and job creation throughout the economy.

This is the first of four budgets that will be presented to this House by this Government. Even though every subsequent budget will be more radical than this one, I believe it is already clear that this Government has not shirked the hard decisions. It is already clear that this is a Government that intends to keep its promises.

The budgetary discipline that we have imposed will ensure that the Exchequer borrowing requirement will be one of the lowest in the European Community this year — well within the range that satisfies our commitment to the Maastricht Treaty. At the same time, we have produced a public capital programme that is up by 20 per cent on last year, demonstrating a commitment to job creation and to steady improvement of the infrastructure of our economy.

We have asked for sacrifice in the budget — I do not deny that for one moment. We have ensured that, to the maximum possible extent, that sacrifice is spread across the community and borne by those most able to bear it and we have begun the task of eliminating disadvantage, starting by substantially improving the situation of a great many families in Ireland.

Above all, the commitment that this budget has made is that jobs are the number one item on this Government's agenda. No budget in recent years has provided anything like as much money for extra investment in jobs. I have no doubt that the great majority of our people fully recognise the need for such investment.

I have no doubt either that the people will willingly put their shoulders to the wheel in the effort to modernise our economy and infrastructure, position ourselves for further growth and wealth creation, and create jobs in the short and medium term.

The £500 million increase in the public capital programme will result in a whole series of major projects in roads, rail, housing, sanitary services, schools, hospitals, and communications. Coupled with this investment, the new county enterprise boards will spearhead an effort to unleash local dynamism and commitment, and to channel much better use of Structural Funds and the new Cohesion Fund in the creation of jobs and the improvement of the quality of life throughout our country.

Added to these measures, improvements in apprenticeship and training, together with targeted measures for people who are long term unemployed, and a range of incentives for people to invest in jobs, will make as big an impact as possible on our unemployment crisis.

I fully accept that we have a long haul if we are to bring our unemployment level down to anything like an acceptable level, and I have to say that those of us in jobs have to be prepared to accept some measure of sacrifice if we are to achieve that objective in a reasonable period of time. I believe that if the budget and the Estimates are taken together, any objective political commentator will recognise that most of the promises and commitments made, both during the election campaign, and in the Programme for a Partnership Government, have been honestly kept, despite the very considerable difficulties that the incoming Government faced.

Many of the specific measures to be found in the budget can be traced directly back to their origins in the recent election campaign. I make no apologies for concentrating on those commitments made by the Labour Party in the course of the recent campaign. The following are some of these measures: the resources available for income tax relief are being concentrated to ensure that those on low incomes will be protected; we have gone as far as we can to protect families with mortgages who have been hit by higher interest rates in recent months; the increase of 27 per cent in child benefit is the largest kind in many years, and it is the first phase of much needed reform in this essential area; the provision in the Estimates for 3,500 local authority housing starts, coupled with other spending plans in social housing, represents a complete reversal of policy in this area, and will enable us to make a very good start in redressing the housing crisis; basic rates of Social Welfare are being fully protected against inflation, and many of the measures in this budget will be of particular benefit to elderly people; as the details unfold, it will be clear that many of the cuts in social welfare of the last couple of years are being reversed— and even more work will be done in that area over the next few months; in the area of health care, a significant start is being made in attacking the waiting lists that have so damaged patient care in the past; the increase in the provision for mental handicap is the biggest such increase since the issue of mental handicap was rightly forced to the top of the political agenda; in both Estimates and budget, education spending has been increased to take full account of our determination to redress the growing disadvantage in the whole system, and to honour a series of important commitments; the budget featured the largest increase in Third World aid in many years, and has put us on course to meet a high international standard in this area. All these issues featured in the election campaign; all of them are dealt with in the Programme for a Partnership Government. Anyone who wishes can examine the manifesto we published in the campaign and they can examine the programme.

I have no doubt that an honest examination will show that to a degree that is perhaps unique in recent years, promises made then are being honoured now. There is much more to come over the next few years as the economy begins to grow and as we come more and more to grips with the issues of equality and justice that are an essential part of the reason we are in Government.

In the light of some of their recent utterances, an honest appraisal would be too much to expect from some of the Opposition parties. I have been astonished by the carping, the vilification, and the sheer dishonesty and hypocrisy of some of the Opposition benches since the Government was formed. Since this is my first opportunity to address it, I would like to take a few moments to refute some of the hypocrisy that has so diminished the Fine Gael Party in particular.

Much of their dishonest criticism has centred around the establishment of the Office of the Tánaiste, and the appointment of advisers to the Government. Let me set the record straight for the benefit of anyone who may have been misled by Opposition comments — the people on the Opposition benches already know what the true position is, even though they choose not to admit it. The Office of the Tánaiste was established, with the agreement of the Government, for one reason only — to monitor the Programme for a Partnership Government effectively and to help ensure that all of its commitments are delivered. It is there to assist in the delivery of a democratic programme, nothing more, and nothing less. It does not exist for the sake of my ego. The only egos in this place that need soothing are the battered and dishevelled egos that failed so totally to make any impact in the election and compounded that failure by the arrogant way they approached its aftermath.

The cost of running the office is made up almost entirely by re-allocating personnel from other Departments and not, as some would seek to pretend, by incurring extra expenditure. The only extra cost involved is made up by employing two or three people hired for their very particular expertise and I will refer to them in detail in a moment.

In other Departments, we have employed a number of advisers to assist in the process of delivery. The great majority of them, even when they are not civil servants, have come from other areas of the public sector and do not represent any significant additional cost. Some have come from the private sector and some have taken a cut in their private sector incomes to assist in delivering our programme. All of them are motivated by a high degree of public commitment and none of them deserves the vilification that has been heaped on them by some of the begrudgers on the Opposition benches.

The system of advisers, working side by side with committed, dedicated and able civil servants, was essentially pioneered in this country by Dr. Garret Fitzgerald. He knew the value of the system, particular in helping a Government commited to wide-ranging and fundamental changes, and I feel absolutely sure he must have cringed at some of the cheap and dishonest comments on the issue made by representatives of the party he once led with such distinction.

As far as my own position is considered, I want to deal with the suggestion of "jobbery" head on. I carry a fairly heavy work-load. That is well known. I am not complaining about that, it goes with a job that I am proud to do. For ten years, I have employed the same three people to help me with that work-load and to help me provide an effective level of representation to the people that I serve, both as a constituency TD and as Leader of a major political party. One, my sister, runs my constituency office and has done so since she resigned from the Department of Agriculture ten years ago to become my secretary. One runs my office in Leinster House, and another works as an adviser, researcher, and spokesperson for me. For ten years, they have worked as public servants, in the best sense of that term, and have been paid accordingly. They could stand before any forum and relate the hours of dedicated service they have given to the public, to me and the Labour Party for the past ten years. All of them are well-known to everyone associated with Irish politics and they are well known for their dedication, skill and commitment to their jobs. At no stage in the past ten years has any one of them been accused of being in receipt of political patronage and at no stage in the past ten years has the accusation of jobbery been levelled against me for employing them.

Now that I have become a member of the Government, I have no intention of firing these three people as some have indicated. I intend to continue to employ them because they do good work, serve a very wide community and public interest in the work they do and because they earn every penny of the salaries they are paid. Everyone who knows them knows that. That is is not "jobbery", it is good sense.

I want to tell the House quite frankly that I am determined to do a good job over the next four years and that I will need help to do it. I greatly value the advice and commitment of every civil servant who works for the Government and I greatly value having sources of independent advice too. I believe strongly that co-operative interaction between civil servants, all of them expert in their own fields, and other experts, with skills and day to day experience of a wider world, can only strengthen the contribution that this Government can make.

For that reason, I intend to employ expertise and to make no apology for doing so. In addition to the three people I have already mentioned, I am recruiting a top-class business manager, a leading and highly-respected economist and an expert lawyer and legal draughtsman to strengthen the Office of the Tánaiste and to make a a major contribution to the work of reform and change. All of them will be paid the rate appropriate to the job, all of them, will be worked hard over the next four years, and each of them, in his or her own way, will contribute to making Ireland a better place.

Before concluding, I wish to advise the House that as Minister for Foreign Affairs, I have responsibility for two Votes; Foreign Affairs and International Co-operation. With so many fundamental political and economic interests at stake, the need for an active, well-informed and effective foreign policy has never been clearer.

I am actively engaged in examining these issues, in close consultation with the people who represent Ireland so well around the world, and I am determined to ensure that our foreign policy, which has always been an expression of our independence and sovereignty, as well as our commitment to the community of nations, will continue to reflect values as well as interests. I am examining which of our bilateral relations needs to be strengthened, and how we in the Department of Foreign Affairs can contribute even further to the development of trade, investment and cultural links.

In so far as possible, however, we are determined to ensure that new challenges are met within existing resources and the 1993 budgetary allocation reflects this.

It would be remiss of me not to say a few words about the continuing tragedy of Northern Ireland in this context. I will not, however, go into detail here, since I intend to address the whole subject of Northern Ireland at some length in the next week or so. For the moment, let me refer to the proposals in relation to the establishment of the Foreign Affairs Committee in so far as they concern Northern Ireland. I know that there has been some adverse reaction to the seeming exclusion of Northern Ireland from the deliberations of the committee. It is not my intention that Members of the Oireachtas should be precluded from putting forward views and ideas or debating issues in relation to Northern Ireland, but Members must accept and realise that there are sensitive issues involved and that there will be times when it is simply necessary, and in everybody's interest, that matters relating to Northern Ireland be dealt with on the basis of total confidentiality. Subject to that understanding, I am prepared to examine ways and means of dealing with the reservations expressed by Members in regard to the terms of reference of the Foreign Affairs Committee.

Mr. Cox

Well done.

Mr. Spring

In the International Co-operation Vote we have provided £53 million for official development assistance in 1993, an increase of 44 per cent over the 1992 allocation. This fulfills the commitment in the Programme for a Partnership Government to increase overseas development assistance to 0.2 per cent of GNP this year. Despite the acute pressure on every area of public expenditure, the Government has remained resolute on the issue of assistance to the Third World. The difficulties we face in Ireland cannot blind us to the needs of those in the developing world who are suffering from drought, famine and disease. Whatever our problems, they do not bear comparison with the wretchedness of the poorest countries in Africa and elsewhere.

The additional funding for development assistance will be used to increase our bilateral aid efforts and also to provide additional contributions to the various Irish and international aid and development organisations. The allocation for bilateral aid will be increased from £10.9 million in 1992 to £15.3 million this year. My Department is currently finalising plans for expanding our aid programme and we are examining the possibility of including new priority countries, in addition to the four currently targeted — Sudan, Tanzania, Zambia and Lesotho. The increased allocation of £3.35 million for emergency humanitarian relief will allow us to respond more quickly and generously to requests for assistance following disasters in developing countries.

We will also this year double our voluntary contributions to a range of UN development agencies, including UNICEF and UNDP, as well as strengthening our co-operation with Irish non-governmental organisations such as Concern, Trócaire and the Red Cross. The 71 per cent increase in the allocation to APSO will allow for a significant increase in the number of Irish volunteers working in developing countries.

In the Programme for a Partnership Government, we committed ourselves to increasing ODA expenditure by 0.5 per cent each year after 1993 in order, by 1997, to place us on a par with our EC partners and to make steady progress towards achieving the UN target of 0.7 per cent of GNP. I can assure the House that despite the difficult financial situation we will have to confront over the coming years, the Government will not waver in its commitments to the developing world. This is a moral and humanitarian obligation which, as a nation, we cannot shirk.

Once again this week, with the tragic death of Valerie Place in Somalia, we have had the most compelling illustration of the extraordinary commitment and dedication shown by Irish volunteers in so many parts of the developing world. It is entirely fitting that we as a Government should show the fullest support for their work. The tributes that have been paid to Valerie Place this week have been moving and thoroughly well-deserved. I can think of no better tribute than that we should intensify our efforts to bring relief, support, and encouragement to the countries of the developing world, for whose people Valerie Place gave her life.

Mr. J. O'Keeffe

Today is one of the blackest days in Irish industrial history. We are debating the 1993 budget in the shadow of the Digital disaster, where 800 employees have lost their jobs. Neither the Taoiseach or any of his Ministers was able to confirm this to the Dáil. It was left to Deputy Bruton to raise the issue this morning as the Leader of the Opposition. This is symbolic of the appalling contribution of this Government to that disaster, and of its approach to the question of jobs.

My contribution to the House today must focus on the jobs crisis. The Fianna Fáil-Labour Government budget is a coward's charter in its failure to confront the problem. It is a blueprint for bigger dole queues. At an individual level, the helplessness of each of the one third of a million without work will now be converted to hopelessness. What is even worse is the phony rhetoric in the budget about jobs.

The Minister for Finance, once again, claims that the budget is framed on the principle that jobs are the overriding national priority. He talks about having to face hard choices and of the need for those in employment to put the need to create jobs above their personal interests. However, neither the Minister nor his colleagues in Government have done this. If the Minister genuinely confronted the jobs crisis, unpopular decisions would have to be made which could impinge on many powerful lobbies, most of whom represent those with jobs.

In his Budget Statement yesterday, the Minister for Finance mentioned that a provision of over £4,000 million is being made for public service pay and pensions for 1993. This represents an increase of 7.5 per cent over the 1992 outturn, which is well ahead of inflation. Even worse, the 1992 figure represented a 10.5 per cent increase over the 1991 outturn. Over the past two years, public service pay and pensions have increased by almost 20 per cent, and all the Minister can tell us is that the scale of this expenditure and its increase continue to be matters of major concern for the Government. Then this Government tells us its overriding priority is job creation. I know there are many low and middle-paid public servants who need their increases badly. However, overall increases of almost 20 per cent in the public service pay bill surely deserve more than a passing reference by the Minister and his Government, who still pretend that job creation and enterprise are their primary objectives.

If you want to discourage cigarette smoking, you tax it. If you want to further discourage it you tax it more. The problem with the way our public finances are based is that this is exactly what this Government is doing in relation to jobs. Apart from additional taxation, additional PRSI is now payable. Having consulted with economists, Fine Gael made it clear that our objective was to see a reduction in PRSI, because it is essentially a tax on employment. Yet, ceilings will increase from £20,300 to £21,300 for employers, and from £19,000 to £20,000 for employees and the self-employed. Instead of reducing tax on jobs, this Government has increased it and this has been accompanied by the savage imposition of a 1 per cent income levy, which further taxes enterprise. The hard choices made by Fianna Fáil and Labour appear to be nothing more than deciding to give a kick in the teeth to those on PAYE and to those who believed their elected promises about job creation.

In the United States President Clinton produced a budget package calling for sacrifice, which clearly set forth the basis on which those sacrifices could impact on the dole queues and have a real economic effect. Unfortuntely, we have a sacrifice which will have nothing but an adverse impact on these two factors. Those who might have been happy — I know there is a strain of idealism here, if one could only reach and tap it — to shoulder the burden of such a sacrifice would certainly not be willing to undertake it in these circumstances. Charles Lamb wrote: "Young men see visions, old men dream dreams." If one contrasts the approach of President Bill Clinton and Deputy Ahern, it is clear that the young man seeing the vision is President Clinton and the old man dreaming dreams about job creation is Deputy Ahern.

The Government solution to the job crisis is the imposition of £130 million annually, by way of extra tax from the iniquitous 1 per cent income levy, as well as an extra £25 million, which has not been referred to, by way of PRSI contributions. The overall PRSI take will rise much more having risen by £100 million last year. The increase will probably be the same this year because of increasing income. There will, however, be a further £25 million because of the increase we have seen that is coupled with an additional annual £130 million yield from the changes in VAT. The additional VAT will also impact on jobs.

Reference was made to the iniquitous 1 per cent income levy as being temporary. I was reminded of William Pitt the Younger who imposed income tax at sixpence in the pound as a temporary measure to pay for the Napoleonic Wars. That is not a good precedent for anybody who would rely on this Government's promise that this levy will be temporary.

Let us not ignore the impact on jobs of the increase in VAT. We have a domestic economy which is as flat as a pancake. There is no confidence in it at all. In many ways the Government does not realise the contribution the domestic economy makes to the creation of jobs. There are hundreds of thousands of people in the domestic economy providing goods and services, many of whom will have to pay a high price for yesterday's Government measures in lost jobs, particularly in the hotel and catering sector. The VAT increase also affects the clothing and footwear industry. I remember all the bruhaha years ago and reference is still made to our party Leader, Deputy Bruton, and the VAT on shoes. Yesterday's budget put through an increase in VAT on shoes, clothes and jobs, yet people who had the brass neck to criticise what was at the time a minor part of the budget and which was approved incidentally by the Labour members of the then Cabinet, now ignore the impact on jobs of these crushing VAT increases.

The optimistic assumptions of the Government put GDP growth at 2.5 per cent, a figure rejected by most independent commentators. The Government says that real disposable income and personal consumer spending will rise by the same figure which has again been rejected by most independent commentators. Even on those optimistic assumptions we are talking, on Government figures alone, of an increase in the annual live register of 26,000. I believe that this figure is unfortunately an underestimate.

One other aspect of the budget's impact on jobs that has not been highlighted involves the £11 million smash and grab raid on the insurance compensation fund. Essentially, the 1 per cent levy on insurance liability arises out of the ICI disaster and that levy terminated at the end of the year. What we now have is employer, public and motor liability insurance premiums that could have been reduced by a sum equivalent to £11 million per annum. Instead the Government has sequestered this money and the cost to employers will again be adversely affected. Only last week the Minister for Enterprise and Employment, Deputy Quinn, admitted to me, in reply to a Dáil question, that high costs, whether insurance costs or otherwise, have an adverse effect on the trading sector of the economy in terms of output, employment and the ability of firms to compete in the marketplace. Yet that same Minister is a Member of a Government which contributes to those high costs.

A recent report from the NESC pointed out that the rate of employment growth in Ireland has never been sufficient to cater for the potential increase in the labour force at prevailing wage rates. The result is that we have had prolonged episodes of large-scale emigration and/or high unemployment. This report pointed out that over the period 1960-90 total employment in Ireland grew by just 8 per cent from 1.04 million to 1.13 million. During those three decades employment in the EC rose by 13 per cent while employment in the wider OECD group of countries grew by as much as 39 per cent. As a result of this year's budget this appalling record is set to continue.

I had hoped that the link up between the Labour Party and Fianna Fáil in Government would have provided a new standard of which this country might have been proud. Hopes in this regard have, however, been dashed. The Tánaiste has given no justification whatever for the enormous expenditure on the separate office apparently established, as we all believe, merely to boost his ego. He denied this, yet if one examines what he has to say, reinforces the argument that this office was established to boost his ego. Is it any wonder that there is a cynical reaction amongst the general public to the activities of our £1 million Tánaiste from the Labour Party whose main contribution, despite what he had to say this morning, has been jobs for the boys and to spend money on himself?

Mr Cox

Two paragraphs on unemployment in 12 pages.

Mr. J. O'Keeffe

I am grateful for that intervention — 12 pages of self-justification. No, methinks he doth protest too much. I do not believe that he is giving the full picture. He refers to the fact that virtually no costs are involved because the cost of running the office is made up almost entirely by reallocating personnel from other departments. How then in the Book of Estimates have we a situation where, of the £831,000 provided for the office of the Tánaiste, there is not a single penny under subhead A for salaries, wages and allowances? The Estimate comprises: travel and subsistence, £450,000; incidental expenses, £65,000; postal and telecommunication services, £75,000; office machinery and other office supplies, £100,000; office premises expenses, £70,000; and consultancy services, £10,000. How then does the Tánaiste justify telling the House that the cost of running the office is made up almost entirely by reallocating personnel from other Departments and not incurring extra expenditure? This is all extra expenditure. This £1 million Tánaiste is not going to get away with that kind of rubbish that we have had to listen to this morning.

Mr. Woods

Stop talking in misleading terms.

Mr. J. O'Keeffe

I am talking about correcting the misleading record that has been put to this House this morning by the Tánaiste. In relation to jobbery we had hoped for something new, something fresh from the Labour Party. Instead we have had the establishement of an office for the £1 Tánaiste, accompanied by his own colleagues in Government who are giving a disgraceful example by spending substantial public moneys, estimated by one commentator with experience of this House at almost £3 million, on bloated ministerial staff, some of whom are apparently members of their own families. Will this kind of example from either Labour or Fianna Fáil Ministers do anything other than add to the general cynicism with which politicians are viewed? It is certainly not the kind of change for which the people voted last November.

It is important for us to be clear that the kind of justification produced by the Tánaiste this morning is not acceptable. He tells us that for the last ten years he has employed three people to help with his workload and he challenges us to say whether he should fire them. If he employed people for the last ten years that is his own business and he can continue employing them. Does he expect the taxpayers to pay for them now? Even worse, we have a situation where with the greatest bravado he tells us he is not satisfied with all the people already taken on from the Labour Party who were solely helping and advising him on how to run the Labour Party. They had great pride in it. He has the gall to announce that he is to recruit even more highly paid staff. It is outrageous that this House should be subjected to a speech of this nature by somebody who in Opposition talked about high standards and ethics in Government, and who now, with the greatest brass neck comes in and delivers this lengthy speech of self-justification which the hard-suffering taxpayers will laugh at. I am appalled at the reaction of the Tánaiste, from whom I had expected more.

I also expected a caring approach from the Labour Party when it joined the Government. I am glad to see the Minister of State, Deputy Stagg, here. I presume he is here to justify the health charges which are the meanest cuts of all. They amount to a tax on the sick.

It is ironic that it is now a Labour Minister for Health who is attempting to justify them.

The Tánaiste and Minister for Foreign Affairs, Deputy Spring, referred to ODA. I am pleased with the approach now being taken in relation to ODA. Public finances are not a huge factor in foreign policy except in relation to such aid.

I also welcome his reference to reviewing the very restrictive terms which he has proposed for the Joint Committee on Foreign Affairs — we pressed him very strongly from this side of the House on that issue. There is a solution in regard to the position in Northern Ireland. It is ludicrous, as we said, to exclude Northern Ireland from discussions at the Joint Committee on Foreign Affairs. Reference has been made to the political and security aspects of Northern Ireland. I see no justification whatsoever for excluding from discussion the political aspects of Northern Ireland. We are politicians and ultimately there is going to be a political solution there. In relation to the security aspects there may be a case for some arrangement which would ensure that sensitive issues might be discussed in private.

We should put the position regarding ODA in perspective. I am glad that the totally hypocritical approach adopted since Fine Gael left Government in 1987 has been arrested. When Fine Gael left office ODA, for which I was the Minister with responsibility, stood at 0.26 per cent of GNP. The moneys now provided only partly restore the level of ODA that existed when we left office. I am delighted to see the level of ODA going up from 0.16 per cent of GNP, an utterly outrageous figure, to 0.2 per cent. However, it is only partly restoring the situation which we bequeathed to the nation when we left office.

One other new tax deserves to be highlighted. Death duties have been restored for the rich and poor. It has been overlooked that the 2 per cent probate tax will affect every bereaved family. This is another example of the unthinking, uncaring approach of this Government. Clearly, in the Ireland of Fianna Fáil and Labour, it does not pay to work or provide jobs. There is no escape from the dole queues, one cannot afford to be sick and now there is even an exit tax for everyone who dies.

Minister for Social Welfare (Dr. Woods)

I too am very disappointed at the decision of Digital to phase out the manufacturing facility at Galway. Galway is an excellent centre of expertise and professionalism and excellent people work there. It ranks as one of the best technology centres in the world. I hope further development can take place there yet and that some of its operations can be redeemed during the proposing phasing period. I am particularly disappointed as the Department of Social Welfare is one of Digital's largest customers, and I intend to convey my views in that regard also to Digital.

The budget is a budget for people, for people at work, for people trying to generate business, for home-owners, for people who depend on our social welfare services. Most of all, it is a budget for jobs. The budget will keep confidence in the economy. Last year we astounded our European partners with our strength of resolve in managing the currency problem. We successfully held our place in the ERM and proved the inherent stability of our economy. The budget will also stimulate investment and kickstart job creation with the £500 million investment package for roads, ports and housing. The county enterprise partnership boards are getting a £25 million cash boost and the extension of the BES will attract new tourism and leisure projects.

The budget will also protect and strengthen the position of workers, particularly those with families on low pay; and maintain and safeguard the position of people depending on social welfare.

The social welfare improvements announced in this budget protect the incomes of those dependent on social welfare by maintaining the real value of their social welfare payments, improve payments for children considerably, provide extra support for families at work, underpin the status of the social insurance fund for workers and employers, and underline the work of the voluntary sector.

The Government has provided an additional £180 million a year to maintain the real value of social welfare payments. This brings overall expenditure for 1993 to £3.7 billion, more than £10 million a day for each day of the year.

More than 800,000 people and their 700,000 dependent spouses and children depend on social welfare payments each week. These include 250,000 pensioners, people who have worked hard all their lives and have contributed to the growth and prosperity of our country. Now in retirement, they have the right to expect that their financial position will be safeguarded. Pensioners will be reassured by the provisions in this budget.

Children are a priority with this Government. We are providing an extra £62 million a year for child income support. This is made up by £50 million in child benefit increases and £12 million in higher child dependant allowances and improved FIS.

Child benefit is our universal income support for children. It goes to every mother in the country. It is funded entirely by the taxpayer. It is recognised as a most effective means of directing resources to families. In contrast, increases in child dependant allowances have been shown to create barriers for workers wishing to return to the jobs market, especially for those with large families. Child benefit is paid to families both in and out of work.

Almost half a million families receive child benefit each month and all of those will benefit from the significant increases being provided. This is the beginning of a process in which we plan to increase child income support with the main emphasis on child benefit. Child dependant allowances payable with all weekly social welfare and health board payments are being increased by £0.30 per child per week, that is an increase of the order of 2.4 per cent in line with this new approach.

The main features in this year's budget are:

3.5 per cent increase in all weekly social welfare and health board payments. These increases will apply to personal rates and adult dependant allowances and come into effect at the end of July. This will cost £113 million a year and some £50 million this year.

A special increase of 4.9 per cent in all short term payments at a cost of £7 million a year. Child benefit is being increased to £20.00 per child for each of the first three children and to £23.00 for the fourth child on. This is an increase of £4.20 per month or 26.6 per cent in the rate for each of the first three children. The new rates will come into effect from the beginning of September. A £12 a week increase in the family income supplement. An increase of £6.20 a week, 11.7 per cent in the carer's allowance to bring it to the long term rate of £59.20. An increase of £5 in both the minimum and maximum rates of maternity benefit. A new grant of £200 for mothers on the birth of twins. A better deal for unemployed people who qualify for the third level education scheme. The maintainence element of their higher education grants will be disregarded in determining their allowance. An extra £1.37 million in grants to the voluntary sector and to assist in measures to conteract moneylending.

An additional grant of £100,000 to the Combat Poverty Agency. Changes in recent measures which adversely affected people's claims to unemployment assistance, disability benefit and treatment benefit. Changes in the regulations improving the entitlement of part-time workers. Free colour television licence for pensioners who already qualify for the black and white licence and who also qualify for free fuel.

Over the last number of years the Government has progressively increased the lowest social welfare payments. The long term payments reached the Commission on Social Welfare's priority rates in July 1991. All pensioners, widows, lone parents, deserted wives and the long term unemployed have been receiving at least the priority rate for the past two years. That group represents 80 per cent of the total number of weekly recipients. Special increases, over and above the general increase, for all short term payments were given last year and I am glad to continue that process this year. The current personal rate of £53 per week is being increased to £55.60 per week, an increase of 4.9 per cent. This new rate applies to: disability benefit, unemployment benefit, short term unemployment assistance, and supplementary welfare allowance. Considerable progress has been made in recent years towards bridging the gap for this group. That progress is being considered this year with £7 million a year being allocated for that purpose.

The package of general, special and child benefit increases, is best illustrated by the following examples: a couple with two children on short term unemployment assistance or supplementary welfare allowance will receive a total of £125.94 per week, taking child benefit into account — they will be £6.34, or 5.3 per cent a week better-off. A couple with four children on long term unemployment assistance will receive an increase of £7.34, or 4.7 per cent per week, taking child benefit into account, bringing their total weekly payment to £165.07. An old age pensioner couple each on a non-contributory pension will receive a total increase of £4 bringing their weekly pension to £59.20 each. A couple both over 66 on a contributory old age pension will receive a payment of £112.80 which is an increase of £3.80 per week. A widow or deserted wife with four children, on a contributory payment, will receive a total payment of £147.77, taking child benefit into account, which is an increase of £6.24, or 4.4 per cent, on their weekly payment and a lone parent with one child will receive an increase of £3.27 a week, taking child benefit into account, bringing their total payment to £78.72 a week.

The carer's allowance, which I introduced in 1990, was designed as an income maintenance payment to cares providing full-time care and attention to social welfare pensioners. It recognised, for the first time, the important role of carers in society. Since its introduction, the allowance has been increased and improved each year and has been extended to cover carers of people receiving payments other than social welfare payments. With effect from July next, the weekly rate of carer's allowance is being increased to the long term rate of social welfare payments, that is £59.20 a week. There are 4,400 people receiving the carer's allowance at present.

The weekly income thresholds for the family income supplement have been increased at each point by £20. This will give recipients an additional £12 per week in their payment. More than ever, this scheme now represents major support to workers bringing up families on low pay.

The social insurance fund is the cornerstone of the social insurance scheme. It exemplifies the partnership consensus which exists between workers, employers and the State. Since 1988 the selfemployed have been making an increasingly important contribution to the fund.

The social insurance fund is working well. This year, the fund will spend £1,800 million, of which £1,080 million, 60 per cent, is contributed by employers; £470 million, 26 per cent, by employees; £72 million, 4 per cent, by the self-employed with the State meeting the balance required of £178 million, 10 per cent.

This fund provides benefits for all insured workers. The main groups benefiting from the fund are: 84,000 unemployed people and their families, £179 million; 95,000 people who are ill, £362 million; 129,000 pensioners, £556 million; and 86,000 widows, £294 million.

As Deputies can see, the fund is an important investment for both workers and employers. Despite the extra pressure it has come under in the recent past, it is vital that PRSI contributors have confidence that their rights and entitlements will be safeguarded.

Some recent changes in schemes covered by the fund impacted on contributions to the social insurance fund in a way that undermined their confidence in the ability of the fund to meet their needs. The Government has accepted my proposals for the following adjustments. On Unemployment Assistance, I propose to increase substantially the daily earnings which will be disregarded in assessing earnings from casual employment. Details of the improved disregards will be announced in the forthcoming Social Welfare Bill.

Mr. Cox

Excellent.

Dr. Woods

On disability benefit, the rule requiring at least 13 paid PRSI contributions in a recent contribution year will not apply to people on long term unemployment assistance and the pre-retirement allowance when they claim disability benefit. On treatment benefit I am introducing the following changes in the treatment benefit scheme. The earnings limit of £25,000 per annum for eligibility will be increased to £30,000 — the corresponding limit for a non-working spouse will be £60,000. The rule requiring at least 13 paid PRSI contributions in a recent contribution year will not apply to people on long term unemployment assistance and pre-retirement allowance — this rule has already been lifted for invalidity pensioners and people receiving long term disability benefit and pensioners who were adversely affected by the increase in the contribution condition requiring five years paid contributions will be restored to benefit — the former contribution condition will continue to apply in their case.

With regard to the recent measures concerning exceptional needs payments under the supplementary welfare allownce scheme, I am at present examining the effects of these measures on people who have recourse to supplementary welfare allowance. The suitability of dealing on a regular basis with periodic household bills under what are exceptional needs provision is being addressed in my review. I am convinced that there is a better way of meeting these needs and I expect to make an announcement soon. Meanwhile, the Government has allocated an additional £11 million to the scheme and I wish to stress that community welfare officers have discretion under the Act to make payments for exceptional needs and to ensure that the needs of families in particular are met. The total allocation for supplementary welfare allowance is now £112 million.

Earlier this year, part-time workers, brought into insurance for the first time in April 1991, became eligible for unemployment benefit and disability benefit. A new condition for entitlement to unemployment benefit was introduced under which claimants had to have suffered a substantial loss of employment in order to qualify for benefit. I have decided to relax the substantial loss of employment condition by reducing, from two days to one day, the loss of employment which a claimant must incur. This change will make it easier for part-time workers to qualify for unemployment benefit.

My Department provides a free black and white television licence to about 180,000 pensioners and disabled persons in receipt of certain social welfare payments. I am delighted to be able to give a free colour licence to those already getting the black and white licence and who also qualify for a free fuel allowance. This will be of considerable benefit to these pensioners. I also intend to include a small number of persons in other categories who would qualify were it not for their particular living conditions.

I am particularly pleased to introduce the new grant of £200 for mothers on the birth of twins. The minimum payment of maternity benefit will be increased from £60 to £65 and the maximum rate from £154 to £159. The increase in the minimum payment will ensure that the maternity benefit rate will be at least as much as a worker would receive if they were out sick from work.

There are 330 people on the third level allowance which I introduced to enable the long term unemployed people to take on full-time study. Where a higher education grant is payable, the maintenance element is assessable in full for means test purposes. I propose to disregard the maintenance element of the higher education grant for the third level allowance means test.

Voluntary and community groups play an important part in improving the quality of the lives of people dependent on social welfare. I would like to put on record my personal appreciation of the invaluable work being carried out by voluntary and community groups throughout the country. I am committed to continuing and developing the supports provided by my Department in this area. I am delighted that the Government has accepted my proposals for an additional £1.37 million for this activity in 1993. This brings the overall allocation this year for support for voluntary activity to £4.73 million.

In addition to maintaining the supports already provided for, I intend to make a number of once-off special grants to voluntary organisations in need of assistance or to fund proposals for innovative services — £780,000 has been provided for these grants in the budget in addition to the £600,000 provided in the 1993 Estimates; increase by £250,000 the amount available under the community development programme to enable the programme to be extended to a number of new areas — this brings the overall allocation for the programme to £1.5 million; continue and develop a pilot programme of advice and assistance to low income families to combat the problems associated with moneylending — I am providing an additional £240,000 for this pilot programme bringing the overall allocation in 1993 to £500,000. I intend to increase by £100,000 the amount available for locally based women's groups bringing the total allocation in 1993 to £600,000. In addition I am allocating an extra £100,000 to the Combat Poverty Agency bringing their allocation for 1993 to £1.48 million.

I have outlined for Deputies a number of once-off special grants which I made in the context of the budget. The Minister mentioned some of them yesterday and I will outline the remainder. The total allocation is £1.37 million. A grant will go to the Respite Care Trust Fund amounting to £500,000. A sum of £100,000 will go to a special fund for retired people to facilitate the introduction of a social mentor scheme. I want to encourage voluntary and community groups to develop innovative measures aimed at providing support for vulnerable elderly people in the community and also to give retired people the opportunity to help enterprise groups by making their skills available to them after they have retired.

There will also be a grant of £40,000 to Senior Citizens Concern at Ramsgrange; £25,000 to Energy Action; £100,000 for voluntary groups who bring forward schemes to help lone parents to get back into the work force or education; £50,000 to the National League of the Blind for people with disabilities; £40,000 to the Rehabilitation Insititute; £40,000 to the Irish Wheelchair Association; £25,000 to the Capuchin Centre for Homeless Men; £20,000 to the Carmichael Centre for Voluntary Groups to enable them to provide accommodation and administrative facilities and a training resource to more than 30 small voluntary organisations; £20,000 to Barnardos; £20,000 to Cherry Orchard Family Resource Centre; £20,000 to Droichead Nua Family Support Group and £20,000 to Newbury House Family Centre in Cork.

Mr. Cox

The Minister should come up for air.

Dr. Woods

A sum of £40,000 will be provided to ICTU to enable it to employ two training officers to develop the social welfare advice role in their unemployed centres; £20,000 will be paid to our good friends, the Irish National Organisation of the Unemployed, to help them with their works so they can criticise us more; £25,000 will be paid to the National Headquarters of the Catholic Marriage Advisory Council; £50,000 will go to Incare, Centre for Independent Living to enable it to employ 25 unemployed people and train them as personal assistants for people with severe physical disabilities and £30,000 will go to the Fountain Resource Group.

Mr. J. Mitchell

I warmly welcome that.

Dr. Woods

The Tallaght NOW group, AONTAS and the Lourdes Youth and Community Service will receive £50,000 each under the EC NOW programme.

In relation to moneylending we will be able to extend the existing programme, and I propose to bring to Government shortly plans for a new transition to work programme. This programme will build on the successes of various Programme for Economic and Social Progress initiatives piloted in 12 designated areas of high unemployment. These arose from the community development programme introduced by me in 1990 but will now also include new initiatives to support people preparing to re-enter the workforce and find a niche for themselves in gainful employment. We will work closely, of course, with the county enterprise partnership boards in developing initiatives. Greater support for people and security for their families in making the transition to full-time or part-time work will be a main element of the proposals.

I will return to the House later with more details but I want to encourage inexperienced young people to get training and education and get into the workforce — that is something Members on all sides of the House would want.

Unemployed people are not just part of the jobs equation. Thousands of them have ideas, motivation, the drive and the courage to confront their situations. I want to provide them with the flexibility and support they need to take that step. This budget consolidates the provisions of our social welfare services and allows me a certain latitude to do some of the things Members would like.

Proinsias De Rossa

On a point of order, I would like to ask the Minister a brief question. I welcome much of what he said in his speech today. Would he agree to withdraw Circulars 14/92 and 18/92 pending a review of how the system works.

Acting Chairman

The Deputy is taking advantage of his point of order and he knows it. The Deputy will be speaking later. I notice the Minister is not going to reply.

Proinsias De Rossa

It would not cost the Minister anything to drop Circulars 14/92 and 18/92. Can he drop them now?

Dr. Woods

I have made it quite clear that community welfare officers have discretion.

Proinsias De Rossa

Not under Circular 18/92.

Dr. Woods

If some of them do not realise that they may use their discretion the Deputy should tell them to contact me and I will reassure them.

Mr. J. Mitchell

I am glad to have an opportunity to participate in this debate directly after the contribution of the Minister for Social Welfare. I will make a few general observations before I speak in detail on the general economic effects of the budget and its effect on poverty. It is ironic that the Minister for Social Welfare should make his speech flanked by Deputy Stagg, who is now a Minister of State. Deputy Stagg single-handedly managed to have Deputy McCreevy transferred from the Department of Social Welfare because of what, he very aptly called, "the dirty dozen". There is a smile on Deputy Stagg's face and I do not know why because not one of the "dirty dozen" have been reversed in this budget.

Minister of State at the Department of the Environment (Mr. Stagg)

The Deputy must not have been able to read my simple and straightforward leaflet.

Mr. J. Mitchell

Can I take it that Deputy Stagg is happy that things have not been changed?

Dr. Woods

Progress is being made.

Acting Chairman

Deputy Jim Mitchell, without interruption please.

Mr. J. Mitchell

The reality is that most of the outrageous cutbacks in social welfare were ill-advised changes which were made in the past year and remained firmly in place.

Dr. Woods

That is not true.

Mr. J. Mitchell

I will be happy to highlight the outrageous anomalies and problems that still remain in social welfare after this budget despite all the protestations of the great "socialists", Deputy Stagg and his colleagues. The sad fact which has emerged in the past six weeks is that the Labour Ministers and Deputies are on a gravy train since they came to power. They are appointing their families and friends to office while there is no money to pay people living in poverty and those who are entitled to social welfare payments.

The Labour Party's behaviour has been quite disgraceful and unconscionable. The Tánaiste's new highly promoted Office is costing £800,000 to the taxpayer, £600,000 of which is new expenditure. Can the two Ministers of State opposite justify that expenditure when people who were paying £10 a day for hospital charges will now pay £25? The £800,000 being spent on the Tánaiste's Office is only being spent on one Minister. We will get the full bill for the rest of the Ministers and Ministers of State, and their handlers shortly. That £800,000 is the equivalent of 80,000 bed nights at £10 and those bed nights could have been paid for by the Government and the burden lifted from workers. The Labour Party have increased hospital charges to £25 per night. Deputy Stagg is silent, will he answer now?

Deputy Stagg should examine his conscience and the Minister of State at the Department of Social Welfare should do likewise. How can they justify this? The fact is that the Deputy, and his colleagues, are all on a gravy train, they have filled their pockets and those of their families and friends since coming to office. How many Minister's children, brothers and sisters, have been put on the State payroll since the Deputy came to office? They have been filling their own pockets and those of their families and friends since assuming office.

Mr. Stagg

That is a scandalous remark.

Mr. J. Mitchell

How many Minister's children, brothers and sisters have been appointed and placed on the State payroll since the Government assumed office?

Mr. Stagg

That is an absolutely scandalous remark.

Mr. J. Mitchell

It is scandalous but true.

Acting Chairman

Deputy Jim Mitchell cannot engage in an argument across the floor of the Chamber, as he well knows. I will listen to the Deputy. The Minister will reply later.

Mr. J. Mitchell

I do not mean to be disorderly but I am angry like the vast majority of people, about what the Labour Party is doing in Government.

Mr. Stagg

The Deputy must find it difficult to discover anything wrong with the budget since he has not referred to it yet.

Mr. J. Mitchell

According to the Tánaiste's office, up to yesterday £800,000 would have paid for 80,000 nights in hospital beds. However, because the cost has increased to £25 per night, the number of bed nights will decrease.

There was nothing new in the contribution of the Minister for Social Welfare. Everything had been announced yesterday. The Minister went through the Budget Statement of the Minister for Finance, what was contained in the Principal Features of the Budget 1993 or in the press release issued by his Department. There is no suggestion that the Minister understands the role of the Department of Social Welfare in regenerating this economy as the principal means of alleviating poverty. There is no mention of economic development in the Minister's statement. That is the central point of my speech. I have believed for a long time that the manner in which the Department of Social Welfare spends its considerable budget causes poverty. It is wasting hundreds of millions of pounds. I will give illustrations shortly.

The budget is £3.7 billion, a considerable sum of money but the end result will be more unemployment and poverty. A central feature of our social welfare system as it relates to our tax system is that it traps people in poverty. When I was a Minister I wrote a memorandum when Barry Desmond was Minister for Health. He took it as an attack on social welfare when I said that everybody wants a good social welfare system. However, our social welfare system traps people in poverty.

Prior to the 1988 budget I wrote an article for the Irish Independent highlighting the poverty trap. I devised a table showing all the adjustments vis-à-vis a person on the average industrial wage and a person on unemployment assistance, especially someone with a family. When one makes all the adjustments after transport costs to work, pension contributions, medical cards, differential rent, Christmas bonus etc., the reality is that since 1988 people are worse off in work on the average industrial wage than they would be on unemployment assistance.

Mr. Stagg

Is the Deputy suggesting that social welfare benefits should be cut? Are recipients being paid too much?

Mr. J. Mitchell

The point I am making is that everyone, even the Labour Party, knows people on the dole are not being paid enough. They are living in poverty.

Mr. Stagg

What is the Deputy's argument? Are wages too low?

Mr. J. Mitchell

If a person takes up a job he or she will be worse off. That is my argument.

Mr. Stagg

Are the wages too low?

Mr. J. Mitchell

No, the taxes are too high and the Government increased them further in yesterday's budget. That is my first point, the Government does not understand what it is doing. The Government placed another 1 per cent levy on all income yesterday which has further increased the poverty trap.

Mr. Stagg

That is not true.

Mr. J. Mitchell

It is true. I will demonstrate it in another article I shall write next week which will adjust tables as a consequence of this budget. Deputy Stagg and his "socialist" colleagues do not understand that people living in poverty on social welfare are trapped in that poverty. If they take up a job they will be worse off in every single circumstance.

Mr. Stagg

The Deputy is talking about slave wages.

Mr. J Mitchell

I am talking about the average industrial wage, not slave wages.

Acting Chairman

The Minister of State, Deputy Stagg, knows he cannot continue to interrupt the Deputy in this fashion. If he does, I remind him there is a cure.

Mr. J. Mitchell

I name the Minister of State.

Acting Chairman

Will Deputy Mitchell please continue?

Mr. J. Mitchell

It is clear from the Minister's heckling that he does not understand the problem, nor indeed does the Government. The tax and social welfare policies of the Government mean that this economy is trapped in poverty. Anyone married with two children or more on the average industrial wage will be worse off than if they were in receipt of unemployment assistance and they are already living in poverty. The budget makes that position worse because of the 1 per cent levy and the increased ceiling for PRSI for employers and employees.

Two further significant costs will make matters worse. Disability benefit is to be taxed, a great socialist development. People who get sick and go into hospital will have to pay more — £25 a day instead of £10 and £250 instead of £100 if they are there for ten days.

This situation started in 1988. At that stage people on the average industrial wage were £2.30 worse off, not counting the cost of a medical card in that assessment. In answer to a question to the Minister for Health I discovered this cost is, on average, £6 per week. People were worse off then by approximately £8.88. After last year's budget they were worse off by approximately £33 a week, and, as a result of this budget they will be worse off by approximately £37 a week. Many people do not qualify for a medical card because they are assessed on gross rather than net pay. The rent differential will be adjusted upwards, as always happens, quietly and unannounced. Transport costs for work go up because of increased petrol prices or bus fares. All these factors mean workers will be worse off each year.

A worker on the average industrial wage of £240 a week will be worse off than somebody living in poverty on social welfare of £140 a week. It costs the employer £350 to pay that sum, when one considers public liability insurance, sick pay, PRSI etc. This economy is caught in that bind. This is the sixth budget in a row in which the Government has demonstrated it does not understand the problem because it has made matters worse.

Ms E. Fitzgerald

What about the family income supplement and the increase in children's allowance?

Mr. J. Mitchell

The children's allowance benefits equally those in and out of work.

Ms E. Fitzgerald

It helps those in poverty traps.

Mr. J. Mitchell

The Minister of State at the Office of the Tánaiste will receive the children's allowance. She is not living in poverty. Hers is a two income family. I do not need the children's allowance but I receive it. Thousands of my constituents living on small incomes receive the same children's allowance as the Minister of State. How socialist is that? How can it be maintained that it is targeted at the poor?

The Labour Party ceased addressing that constituency; it is addressing the new middle classes of Dublin South which the Minister, Deputy Fitzgerald now represents. They are looked after, not the poor of Dublin Central. The rich have received as much as the poor in children's allowances. How can a socialist Minister justify that when there is so much grinding poverty? I know all the arguments about paying everybody equally.

Mr. Stagg

Obviously, the Deputy does not understand them.

Mr. J. Mitchell

I understand——

Mr. Stagg

There was a 26 per cent increase in children's allowances.

Ms E. Fitzgerald

Deputy Mitchell does not understand.

Mr. J. Mitchell

I also understand that when there is a shortage of funds those funds should be directed and targeted at those who are in dire need.

Mr. Stagg

Does that mean means-testing?

Mr. J. Mitchell

I would tolerate means-testing if it meant that the less well off would receive the allowance rather than those who do not need it.

Mr. Stagg

The Deputy is good at that.

Ms E. Fitzgerald

That is what creates poverty.

Acting Chairman (Mr. Browne,

Carlow-Kilkenny): I would remind Ministers that they cannot continue to interrupt. The Minister of State at the Department of Finance, Deputy Fitzgerald, is the next speaker and she will have the right to speak without interruption.

Mr. J. Mitchell

I am very glad of the interruptions because——

Mr. Stagg

I know the Deputy is.

Mr. J. Mitchell

——I know that not alone am I annoying the two Ministers of State present because what I say is true, but I am touching a sore, raw nerve among their supporters. Before the Minister of State at the Department of Finance came in, I said the Labour Ministers and backbenchers were on a gravy train looking after themselves. There will now be the chairmanship and convenors of the various committees which will result in more money for Labour backbenchers in addition to the advisers to Ministers and Ministers of State. We are more than doubling the cost of hospital beds to workers who are already less well off by being at work. Clearly, the Ministers have lost the run of themselves and have abandoned the working class and are now going helter-skelter for the middle classes. There is no other explanation for what they are doing.

It is not profitable for anyone to take or create a job here. We badly need several key reforms; one of which should be to reduce taxes on employment, notably PRSI, which the Government increased yesterday. We should reduce PRSI which amounts to a 20 per cent tax on jobs. In addition, taking into account the two income levies, the health levy and the other encumbrances we put on employers, it is impossible to employ people. Employers — and not only Digital — are reducing their workforces. I understand some of our banks will produce major redundancy programmes in the next few weeks. We are talking about up to 1,200 job losses in one of our major banks in the near future.

Mr. Stagg

And they make no profits?

Mr. J. Mitchell

If they can make more profits elsewhere — I know the Minister of State deeply resents anyone making profits — they will go elsewhere. If it is profitable for them to employ people they will but the Minister of State, and his philosophy, is making it impossible for them to employ people. We increased the pay roll tax by levies and increasing the ceilings when we should have been doing the reverse. That is one key element. I wish to give an example. I will not name the private company concerned which has a turnover in excess of £500 million and employs 123 people. It pays in employers PRSI, £300,000. CIE, a public company, which employs 12,000 people has a turnover of less than £500 million, and they pay £32 million for the pleasure and privilege of employing those people. It is no wonder that the management in CIE, An Post and Telecom Éireann have been reducing their workforces.

I had hoped it would be announced in the budget that all means-testing would be on take home pay rather than gross pay. I have been pressing for years that change, which was introduced in the United Kingdom in 1984. One of the great anomalies is that people are losing entitlement on money they never see. Eligibility for medical cards, differential rent, civil legal aid and higher education grants should be based on take home pay rather than gross pay. People are being assessed on money they never see and can never enjoy. The 1 per cent levy is a form of double taxation because people will be taxed on the element which is taken away from them in PAYE.

We must also decisively reduce income tax, preferably by substantially increasing allowances and bands. That has to be paid for.

Mr. Stagg

We did increase them.

Mr. J. Mitchell

They were hardly indexed. Let us set as an objective for the next three years——

Acting Chairman

Deputy, you are exceeding your time limit.

Mr. J. Mitchell

——to attain the bands and allowances prevailing in Northern Ireland and Scotland where they have won 850 jobs from this country. I am angry because not only the social welfare element, but this entire budget has gone in the wrong direction. It has exacerbated all that is wrong in a system which is accentuating our unemployment problem.

Acting Chairman

I will be angry if the Deputy does not finish.

Mr. J. Mitchell

The Chair should allow me some injury time because of the ministerial heckling. I hope it is not too late this year to reverse some of the Government's ridiculous social welfare rules such as forcing young people out of their parents' home in order to qualify for unemployment assistance, thereby qualifying for the full assistance, a medical card and rent subsidy and costing the State a great deal of money because of stupid social welfare rules and policies. It is one of hundreds of anomalies which these Ministers have refused to change. The social welfare budget which is supposed to alleviate poverty is causing poverty.

Minister of State at the Department of Finance (Ms E. Fitzgerald)

I am six weeks in Government today, unlike Deputy Jim Mitchell who spent five years in Government. I have not been able to change the world overnight but the budget marks key progress and the fulfilment of key commitments made by the Labour Party and included in the Government programme.

First, there has been a £500 million increase in public investment, from £1.85 billion last year to £2.34 billion in 1993, with a significant impact on jobs. There was reference on the radio this morning to this being only £500 million as if it was only £5. This is a very significant increase and injection into public capital spending which will have a significant impact on jobs now and in the future. Secondly, and my colleague, Minister of State, Deputy Stagg, is responsible for this, 3,500 council homes are to be constructed to begin to tackle the housing crisis which has built up over the past five years. Thirdly £20 million is being provided to tackle waiting lists for hospital treatment, fourthly, £8 million is being provided for people with mental handicap, the largest step yet in implementing the needs and abilities report.

There has also been a 27 per cent increase in child benefit and social welfare improvements well ahead of inflation for those on the lowest rates, in line with the recommendations of the Commission on Social Welfare. We targeted help for mortgage holders in difficulty and income tax relief and improvements in family income supplements focused on the low paid.

This has been a particularly difficult budget to frame for two reasons. First, the acute difficulties caused for our open economy by the downturn in world economic activity, high interest rates and uncertainty in the exchange markets. Second, there are problems this year because of a series of once-off factors which were there before we took office. In these difficult circumstances, it is all the more welcome that we have been able to move ahead on so much of the Government programme in the first year, and, in particular, during the first weeks.

Within the constraints of the tight financial discipline it has been possible to give a significant boost to job creation through expanded public sector investment, funded both under the Public Capital Programme which has increased by 25 per cent and through the investment of Cohesion Fund and other revenues. Table 6 in the Principal Features shows the substantial boost to public sector investment which is being undertaken in the current year. A sum of £500 million is large money in anybody's book.

Over the last five years, housing capital has borne the brunt of cutbacks in Government spending, and housing waiting lists have soared. This has led to an acute problem of homelessness. Full hostels have led to significant spending by local authorities on bed and breakfast accommodation for homeless people. The supplementary welfare allowance scheme has been paying up to £20 million a year in rent allowances for insecure and often substandard private rented housing.

I am therefore, particularly pleased to see the substantial investment in local authority housing planned for the coming year, with work on 3,500 houses due to begin in the near future. This represents more than the investment in housing during the last three years and it is a significant change. The Labour Party influence in Government is clearly seen in this measure which will make inroads into a serious housing problem. It makes far more sense to invest in long term homes of good quality than to spend a high proportion of public money on stop gap solutions. It must, however, be recognised that it will not be possible to eliminate overnight a backlog on housing waiting lists which has built up over a number of years.

The housing programme will have considerable spin-offs in terms of local employment. Building is a labour intensive industry, using primarily Irish materials, and the direct and indirect effects on jobs will be positive. This investment will also make a significant contribution to urban renewal.

I am delighted that it has been possible in this budget to carry through two important commitments in the Programme for Government. First, £20 million has been allocated to tackle waiting lists which have grown to unacceptable levels. Second, £8 million has been allocated to handicap services, primarily mental handicap. I know the pressure on parents who have been trying to soldier on caring for a handicapped son or daughter when they are no longer able to cope, and the tremendous worry and fear those parents have about what will happen their child in the future. The Needs and Abilities report documented the extent of unmet needs in the mental handicap services, particularly the acute shortage of long term residential places and the shortage of day places for adults. Another longstanding problem has been the inappropriate placing of mentally handicapped people in psychiatric hospitals. These often forgotten people have a right to services which are appropriate to their needs.

I believe it is better to make substantial progress in tackling areas of longstanding need in the health services, even if it means a modest increase in charges for certain hospital services, than to let the situation drift and to let the backlog that has built up over the last number of years go unchecked. I am sure anyone on a waiting list for a hip replacement operation who now has a realistic chance of having that operation done in the near future would prefer to pay an extra £5 a day as a public patient and be seen this year, than pay nothing, and stay on a waiting list for another couple of years. It is also important to point out that the cost of outpatient and inpatient care can be claimed against tax on the MED 1 form where unreimbursed medical expenses go over £50 for an individual or £100 for a couple in the tax year.

Deputy Mitchell discussed the issue of poverty traps. He seemed to be confused because at one point he was advocating more means testing, which creates poverty traps, and at another point he seemed to be castigating child benefit.

The increases in child benefit which will cost £50 million in a full year are an important way of directing help towards families. A study by Brian Nolan and Brian Farrell of Child Poverty in Ireland which was conducted for the Combat Poverty Agency stated:

Child benefit is the most direct and effective means of assisting all low-income families with children, irrespective of the source of their income, labour force status, or whether they are inside or outside the tax net. It also has the crucial property that unlike most other approaches it should not entail significant adverse effects on the incentive to work, and therefore acts to reduce rather than increase dependency.

The authors also point out that 93 per cent of families with children have income under £25,000 a year, so that very little of the expenditure under this heading could be regarded as going to families who do not need it.

Our system of child support has developed in a way which offers significantly less to parents in employment than to those who are out of work. This is one of the key areas which creates poverty traps. It is striking that 45 per cent of families with four or more children have parents who are out of work or on welfare. This structural defect in our child support system needs to be addressed. Increasing the level of child benefit is the key to child support system which is neutral as to the work status of the parents. This year's increase marks the first step on that road. It is an important element in tackling the poverty trap which has been identified by Deputy Mitchell. Child benefit has a key role in combating these poverty traps. Deputy Mitchell said at one stage that we were protecting the middle class, and then he thought we were protecting those on low incomes. He should make up his mind.

The focus of the budget changes has been on protecting people on the lowest incomes. The social welfare increases for those on the lowest rate are ahead of the rate of inflation. Together with the moves being taken to reverse a number of last year's welfare cuts, announced by the Minister for Social Welfare, and to restore the principle of social insurance as conferring entitlement to benefit, this marks a return to the principles of the Commission on Social Welfare, on which I was proud to serve.

There are tough decisions in this budget, we are living in tough times. However, we have taken care to protect those at the lowest end of the income spectrum, and half a million people at the lower end of that spectrum are exempt from this income levy. The income tax reliefs, unlike when the Progressive Democrats participated in Government, have been concentrated at the lower end of the income scale. Unlike Deputy Cox, I do not weep any tears over the tax clearance measure being introduced to ensure compliance with the existing provisions of the residential property tax. Those at the upper end of the income spectrum should pay the taxes they are legally obliged to pay.

I repeat the Tánaiste's comments this morning in relation to the Office of the Tánaiste and the myths about the £830,000 budget. The bulk of this budget is to pay staff who are redeployed from other sectors of the public service. Only three new staff members have been engaged. It continues a practice initiated and successfully operated by Dr. Garret FitzGerald when he was Taoiseach. The new members of staff are an economist, an accountant who leads the team, and a legal draftsperson. It is interesting to note, in the autobiography of the former Taoiseach, that Fine Gael was unable to implement its programme for government because of its own embargo on employing legal draftspeople. It is sensible to ensure that the Programme for Government is implemented and the new structures are there to secure that aim. After six weeks only a small element, although significant, of a four to five year programme has been implemented. We must ensure that the radical elements of the programme will be implemented.

It is important in the current uncertain international climate to provide a reasonable balance between spending for jobs and prudent management of the nation's finances. The budget provides for an Exchequer borrowing requirement of 2.9 per cent which should indicate to the markets the serious policy of this Government on prudent management of the finances and should help to establish favourable interest rates which are a key element in encouraging job creation and job growth. I commend this budget to the House.

Mr. Finucane

I very much regret the announcement of lay-offs by Digital in Galway. I agree with Deputy Kemmy's recent statement that the Minister's action in relation to Digital constituted a fire brigade type of action. It must have come as no surprise to the Government that Digital had been experiencing difficulties over a period of time, that they were concentrating on large main frame computers at Galway and had changed their manufacturing emphasis in Ayr. I am very surprised that stronger remedial action was not taken by the Government long before now. When one considers the vacuum in politics due to the procrastination of Deputy Dick Spring, now Tánaiste and Minister for Foreign Affairs, one can better appreciate those difficulties.

In his Budget Statement yesterday the Minister described it as a pro-jobs budget. Any analysis of the budget will reveal that it is not pro-jobs. It has been accepted that we are heading rapidly to an all-time record of 400,000 unemployed unless strong remedial action is taken.

I was highly amused during the recent currency crisis to note the criticism that emanated from Government circles of both the British Prime Minister and the German economy. We have a tendency to lash out at others in relation to problems which are often our own. I remember the Minister of State, Deputy Fitzgerald, in the course of a television programme describing the British economy as a sick economy. While I have no axe to grind in relation to the United Kingdom, interest rates there have been reduced to 6 per cent, and the Prime Minister has said it is his objective to reduce those rates to 3 per cent. They have mortgage rates of 8.5 per cent and 9 per cent while the rates here are excessive. If we want any evidence of our economic problems, such is immediately available in the prohibitive interest rates, deterring any potential employer from investing in jobs and farmers from investing in agricultural buildings. Until we rectify the interest rates we shall continue to experience serious unemployment problems. Neither the Taoiseach, nor Minister for Finance has referred, as did British Prime Minister, to any objective of reducing interest rates. Rather than criticise other economies we should examine the defects within our own. Over a period of four months during the currency crisis we appeared to have an exaggerated perception of the importance of our role within Europe, to such an extent that the Government contributed to the excessive mortgage rate increase of 3 per cent and further job losses. In relation to this budget the impetus intended to create jobs within the construction sector probably will not compensate for the loss of jobs during that currency crisis. We all know of clothing companies that went to the wall, being unable to compete with those in the British economy. This Government stands indicted on its procrastination in dealing with this issue, thereby creating many of our present problems. It is understandable that budgetary measures are taken, to help out those people holding mortgages, paying prohibitive interest charges. These people are in many cases the new poor of our society. We should remember that the Government created many of those people's problems. The budgetary palliative will not in any way compensate them for their loss of income resulting from such high interest rates.

I have observed enormous efforts by the Tánaiste, Deputy Spring, and by the Minister of State at his Department, Deputy Fitzgerald, to justify the creation of his new office. We all know that Deputy Spring is engaged in a giant-sized ego exercise in relation to the role of Tánaiste; he is endeavouring to assume responsibilities never intended for that position within our Constitution. When viewed against the background of the Labour Party's preaching to us on ethics it demonstrates arrogance about ethics in Government on their part. I do not see any reason this should not be described as a Coalition Government, as in the past. Perhaps they are afraid of the taint of any coalition idea being attributed to their party.

It is public knowledge that £831,000 is being expended on the Tánaiste's office. One might well ask why should it be publicised. The answer is that there was no similar expenditure on that office in the past.

In regard to the recruitment of business consultants, economists, legal draftspersons, I know from having participated in the Special Committee on the Finance Bill of last year, that a whole battery of people are deployed on the Finance Act. I am sure there are economists and accountants within the Department of Finance. I wonder whether the Taoiseach intends moving existing personnel within that Department, or does he perceive the recruitment of outsiders as more jobs for the boys, more jobs for Labour supporters? When one thinks of a total of 135 jobs to date, at a cost of £3 million to the State, to support this Government one realises the degree of nepotism which is unparalleled in the history of the State. The main contributors are the Labour Party, who have not been slow in employing members of their own families. As a Deputy, one is entitled to one secretary. I will have my secretary based down the country but, even though my daughter is looking for a job, I would not resort to the type of nepotism practised on such a wide scale by this Government. With the enormous shortage of jobs within our economy, it is only right that other people be given opportunities. This is the Tammany Hall style politics the Labour Party have brought to this Government.

Were I to welcome one budgetary measure it would be the commitment to build 3,500 local authority houses. I have been a councillor for the past eight years and have experienced enormous frustration in relation to long local authority housing waiting lists. Why has there been such an increase in those waiting lists? Why is such frustration being experienced? During the four-year period between 1983 and 1987 approximately 11,500 local authority houses were built nationwide. Since then the building of local authority houses has been put on the back burner. In my own county 24 houses were built last year. We have a waiting list of about 350. We welcome the increase from 24 to 60, but I do not see it alleviating the backlog created. Nonetheless I welcome it, as a step in the right direction. Hopefully we will accelerate the building of local authority houses in the future thereby creating jobs into our economy.

I should like to have seen reconstruction grants reinstated even if in an amended way. Restrictions were imposed to ensure that such grants were allocated to people who deserved to be housed. Any rural Deputy knows of buildings around the country which have been vacated, in respect of which an extra £10,000 or £15,000 would do an excellent reconstruction job. Many younger people cannot afford a mortgage. A grant of £10,000 or £15,000 would give them a start in life; many of them are considered ineligible for local authority houses.

I could not understand the Taoiseach's logic in justifying the increase of VAT on concrete blocks and poured concrete from 10 per cent to 21 per cent. He maintained it would give legitimate builders an edge over rogue business people in the construction sector. I could not understand that logic because it will contribute to increased housing prices.

VAT increases which it is hoped will yield approximately £71 million have been imposed on newspapers and telecommunications. So much for the commitment to business people. We observe many other charges which will lead to increased costs generally. In the course of the present currency crisis many clothing and footwear companies went to the wall, especially clothing companies. Now we see an increase in VAT on clothing and footwear. Is the objective of that to create jobs? I do not think so.

The PAYE sector, the "pain after you earn", people are now subjected to an extra penalty of a 1 per cent income levy. The Labour Party, as people who championed the working class and made a lot of play of their commitment to it in the last election, duped the public by their promises. Regarding what they were going to do for the working man and as agents of change in Irish politics. The Labour Party agree with a budget and with a prohibitive levy which will help to contribute further unemployment. Many people are caught in the poverty trap. The differential between working and not working is balanced in favour of the unemployed. People will ask why they should work in this environment which is so hostile to working. The 1 per cent levy is a punitive levy. It reminds me of the youth employment levy which was introduced in 1982. It was introduced as a temporary measure, but ten years further on we still have that levy. I have no doubt that it is the Government's intention to continue with this levy, which will have a destabilising effect on many people.

I forgot to say initially that I wanted to share some of my time with Deputy Deenihan.

An Leas-Cheann Comhairle

Is that proposal agreed to? Agreed.

Mr. Finucane

I am concerned about county enterprise boards. The objective of the Shannon Free Airport Development Company is to promote small industry and community development. Shannon Free Airport Development Company straddles three local authorities and one corporation and covers areas such as north Kerry and south Offaly. The county enterprise boards have been criticised by councillors because they see them as a contradiction. The Government is saying it wants to give more responsibilities to local authorities, yet local authorities are not strongly represented on these boards and within county councils these boards are seen as diminishing their role. My concern relates to the functions of the county enterprise boards and the possible duplication of functions of Shannon Free Airport Development Company.

I am also concerned about the lack of commitment to group water schemes. Within the Estimates £2.5 million is devoted to group water schemes. There is already an overrun on last year's capital allocation of £1.5 million. Every rural Deputy knows the importance of group water schemes. They generate jobs. Apart from Exchequer funding, there is a commitment on the part of the participants in group water schemes to provide some of their own funds. We have roughly 87 group water schemes throughout the country, including ten in my own county, and I am continually asking if the funding will be provided. The answer is almost always in the negative. I waited with great patience for the Estimates to see if finance was provided and I am bitterly disappointed. Out of that 87 group water schemes which are awaiting final approval and funding, 61 are entirely new schemes and the remaining 26 need an extra injection of cash. What will happen to those 61 group water schemes? The 87 water schemes cater for at least 4,000 members. What hope do I have in relation to the group water schemes in my own county? We expect one basic essential — good quality water. People have to put up with iron content in water and difficulties in relation to wells which become polluted and so on. What hope do I give them in relation to a water supply? I can give very little, from what I see within this budget and in these Estimates. I had hoped, when I saw the Cohesion Funding — this magical chunk of money which is due to materialise from the 1 April — that there might be some funding for providing this basic essential. It is an area which the Government will have to address urgently. I am sure they will be under pressure, not alone from Opposition Deputies but from their own Deputies in relation to group water schemes. Last year the commitment was £2 million but this year it is only £1 million. Something will have to be done.

This budget is very bland. Fianna Fáil had the difficulty of trying to accommodate Labour's wishes but they fell between two stools. The reaction to this budget is one of disappointment.

Mr. Deenihan

I thank my colleague, Deputy Finucane, for sharing his time with me. We would all agree that the major problem is unemployment. It is the source of many of our social ills, including the breakdown of law and order, marriage breakdown, the increase in delinquency, ill health and so forth. This budget will do little to create employment. Indeed, many of its provisions will have a further negative effect on employment creation. The increase in PRSI ceilings for both employers and employees and the increase in VAT on building material, tourism and telecommunications will have an adverse effect on employment creation. The increase in VAT on newspapers, combined with the abolition of the cap on RTE advertising, could cost jobs in many of our provincial newspapers.

The budget lacks coherent economic strategy. It lacks the radical approach which the country is crying out for. It lacks the promised imagination and creative content that we expected from the Labour input. It reflects a lack of leadership and direction in Government.

The establishment of the county enterprise boards seems to be the only response to a worsening jobs crisis. The Minister provided £25 million in the budget to set up these new bureaucracies. This figure when divided will result in a figure of less than £1 million for each board. When the administrative structures are established, there will be very little left for enterprise creation and the developments leading to increased employment that the Minister referred to in his budget speech.

I am in favour of the concept of enterprise boards. However, I question the necessity for another layer of bureaucracy. It surely would have been possible to extend the present brief of the county development teams and to make them more representative of the areas they serve. The Government and especially the Labour Party have lost the moral authority to ask people to make extra sacrifices, when they have feathered their own nests first. They have given very lucrative positions to their families and friends as managers and special advisers. They have shot themselves in the foot and certainly this Coalition has lost its way already.

I welcome the provision of £20 million for the reduction of hospital waiting lists for hip replacements, cataract operations, ENT operations and heart bypasses. Unless beds are made available in our hospitals, these extra procedures will not be carried out. I would refer to the hidden agenda of this Government regarding health. The announcement on the eve of the budget of a 20 per cent increase in the charge for entry to hospitals will certainly push up the costs of private and semi-private beds. It will place a further burden on middle income taxpayers already hit by mortgage increases and with little relief on third level grants. There are few concessions to the hard pressed PRSI sector in terms of third level grants. The agricultural community is penalised to the extent of £20 million and the new 2 per cent inheritance tax will hit all farm families. The tax on disability benefit is a penal tax on sickness. These people are forced to leave jobs because of sickness. This Government has lost its way and this budget reflects a lack of decision and direction.

Mr. Power

I wish to express my disgust at the treatment of some Members of this House yesterday. I asked last Tuesday that a copy of the Minister's speech be made available to all Members of the House, not just to Ministers and Ministers of State or to former Ministers. I have yet to hear a proper explanation for this practice which has been followed in this House for some time. Equality seems to be the buzz word around Leinster House recently but unfortunately it was forgotten yesterday. I cannot understand why all Members are not treated in the same manner. This is a ridiculous practice and one that must be changed for future years.

This year's budget has been presented a little later than usual due to the prolonged negotiations that took place in trying to form a Government. On the night the Taoiseach, Deputy Albert Reynolds, announced his Government I acknowledged the tremendous talent and potential among those selected but I said that if it was to work collective responsibility would be required not just in Cabinet but also among members of the Fianna Fáil and Labour parliamentary parties. The previous Government was threatened on many occassions by a certain member of the smaller party who was not even a Member of the House at the time.

Mr. Cullen

He can answer for himself.

Mr. Power

In any coalition — I make no apology for calling it a coalition because it consists of two parties — there is bound to be tension and difficulties. Compromises have to be made on a regular basis. Most parties tend to use their time in Opposition to formulate new policies, find faults with the Government performance and, more importantly, promise the electorate that they can do a better job. As soon as a party gets into Government it becomes abundantly clear that all the promises that were made cannot be lived up to. Responsibility becomes the order of the day.

Both Fianna Fáil and Labour faced serious difficulties in trying to put together their first budget. While there is an acceptance among the members of the Government parliamentary parties that tough decisions are necessary, unfortunately it became very obvious from the early days of this Government that one Member in particular was not prepared to accept collective responsibility — I refer to Deputy Jim Kemmy. Maybe he did not expect to be still wearing the track suit. I say to the Deputy, even though he is not present, "You ploughed a lone furrow for some time and maybe you are still adjusting to your new field". This country needs a Government. It is not interested in personal grievances and if Deputy Kemmy is so unhappy with recent events, perhaps he would like to move to greener pastures. It is most unfortunate that this situation should arise, particularly in view of the commitment by both Fianna Fáil and Labour members to make the Government work.

This budget was formulated in a very difficult period, just a few weeks after the currency devaluation at a time when the number of people unemployed has exceeded 300,000. The Minister explained yesterday that he was trying to strike a careful balance. On one hand he did not want to jeopardise the financial discipline we have achieved which is so vital for investment in the future and at the same time he had to stimulate the economy with a view to creating employment. More has been written in the run up to this budget than any other budget. Reports were published to the effect that this was going to be the toughest budget to date. Major increases in taxation were predicted, and anyone who smokes or drinks will have had a few sleepless nights over the last week. Despite the predictions and the major difficulties confronting the Minister he struck a good balance. I am sure the majority of people were pleasantly surprised at the Minister's proposals.

The improvements and changes in social welfare reflect the caring attitude of the Government. An additional £8 million will be provided for people with a mental handicap. This money will create extra residential and day care places and emergency and respite care. The needs of people with a mental handicap and of those who look after them have never been fully appreciated or understood. For that reason the Minister's initiatives are very welcome. They will provide much comfort and help to hundreds of very deserving cases throughout the country.

I would like to deal at some length with the changes in regard to tobacco products. Yesterday the Minister announced a proposal to increase tax on cigarettes by 10p per packet of 20. Last year tax on cigarettes was increased. One reason that has been continually given for these increases relates to the health aspect. The Government acknowledged this fact some years ago when an order was made making it compulsory for all packets of cigarettes to carry a Government health warning. There has been great emphasis on health education, aimed particularly at young people, and legislation has been passed banning smoking in certain areas. Collectively all of these changes and initiatives have created an awareness of the serious health hazards not just for smokers but for people who work and live in a smoking environment.

Depite these efforts more and more young people are starting to smoke. The time has come for the Government to make illegal the advertising of tobacco. The case against tobacco is easy to make. Statistics show that each year in Britain, 111,000 people die from smoking — 26,000 from lung cancer and 85,000 from other tobacco-related diseases. Smoking is by far the greatest public health hazard facing this country. Unlike other industries the tobacco industry faces a serious problem, with thousands of their customers dying each year and the industry must set about recuiting new smokers to take the place of those who have died. This campaign takes place by way of advertising.

The majority of smokers begin the practice while in their teens and for that reason tobacco advertising is directed at young people. As a result this is the only age group in which the number of smokers in Ireland is not falling. A ban on tobacco advertising would be strenuously opposed by the industry. In Britain more than £100 million is spent annually on tobacco advertising and the argument put forward is that they are simply promoting brand switching. As everyone knows, it is impossible to persuade a person to change brands if you have not already persuaded them to start smoking.

It would be a courageous move by the Government to ban tobacco advertising. This is something that must be done. A ban has been imposed in many countries, with very positive results. In New Zealand an advertising ban succeeded in reducing tobacco consumption by 7.5 per cent; in Canada the reduction was 6 per cent; in Finland, 7 per cent and in Norway, 8 per cent.

It is often argued that a ban on tobacco advertising would result in a huge revenue loss to the Exchequer. While it would not be difficult to calculate what the loss would be, it would be impossible to calculate the damage smoking causes to people's health and the cost to the Exchequer in paying for patients' hospitalisation due to tobacco-related illness. How many people are absent from their work place today due to tobacco-related illnesses and what is the cost to industry? I am not in a position to give the answer but I am sure that the cost is enormous. I emphasise that I do not want smoking to be banned.

Mr. Cullen

Thank you very much for that.

Mr. Power

As the Deputy is getting ready for an international, I hope he is not smoking. People must choose for themselves whether they want to smoke, but it must be recognised that in some cases the public interest is more important than freedom of choice.

This country has a long history of smoking. For that reason it has become very difficult to change people's thinking. I venture to say that if cigarettes were invented today, it is likely their production and sale would be banned. I repeat that I am not suggesting that smoking should be banned. This is a freedom of choice issue: to do good or evil, that is the question. Can anyone say that tobacco advertising is in the best interests of our people?

Tobacco is a most peculiar product. Even when it is used in moderation it kills. It kills and damages the health of not just the person who uses it but also those who live and work in a smoke filled environment. These stark realities cannot be ignored and I demand an immediate response from the Government. I call on the Minister to bring forward the necessary legislation to ban tobacco advertising.

There has been much debate during the last 24 hours as to whether this budget is pro-jobs. I listened to the contributions of a number of Opposition speakers yesterday and again this morning. While I did not expect them to throw bouquets over to this side of the House, I did expect them to offer some constructive criticism. In the majority of cases speakers were very selective. We all realise the problems and the difficulties politicians face and that they lack credibility with the public, but we can change that. I admit we did the same when in Opposition but I would like to see Members on all sides of the House adopt a different approach——

Mr. Cullen

I am glad the Deputy said that.

Mr. Power

——whereby they would offer constructive criticism rather than make negative contributions which are difficult to listen to. This would require maturity on the part of politicians but it is necessary that we see such a change in this House. When we talk about reform we should look at ourselves first.

The increase in capital spending will provide a major boost to the economy and in particular to the construction industry which everyone recognises has been on its knees for some time. We need a vibrant construction industry if we are to reduce the unemployment figures. When the agriculture and construction industries are booming the rest of the country also seems to prosper. I am delighted that emphasis is being placed on the need to create a vibrant construction industry and to give it a helping hand that has been missing for various reasons over the last few years.

The Government, which has only been in office for a few weeks, acknowledges that it faces a major task in curtailing unemployment. The proposals made and the initiatives announced yesterday will have a beneficial effect in the not too distance future.

For home owners the increase in interest rates was a major blow which has swallowed up their disposal income. Indeed many have been unable to meet the increase. A reduction in interest rates would be of help in increasing employment. The financial discipline the Minister adhered to in the budget should make that a reality in the not too distant future. In relation to mortgage interest relief, the commitment made prior to the budget has not been honoured in full but the Government has adopted a caring approach and accepts that many families are experiencing difficulties and hardship. It has made a serious attempt to rectify the matter.

I want to comment briefly on the banks. During the past six to 12 months many small businesses which had been thriving, which have succeeded in employing thousands of workers and which we take for granted, have found the going tough due to circumstances outside their control. Unfortunately, the banks have not been willing to facilitate them during this difficult period. They are not giving them the money they need. I regard this problem as being short term but unless they are offered assistance to cushion the blow many of these businesses will find themselves in serious trouble due to the increase in interest rates. I call on the banks to adopt a more caring and compassionate approach in dealing with small businesses.

A committee on employment has been set up to consider policies that would lead to a reduction in unemployment. Over 300,000 people are unemployed at present. This is a marvellous resource but we are paying people to do nothing. Unlike others, I have no difficulty in accepting that the majority of the unemployed want to work and there is much work to be done. We must devise schemes in the near future to create jobs for these people so that they will have a reason to get out of bed in the morning. This would provide the country with a tremendous boost and I do not think it would be impossible to devise such schemes. I would like to see the new Minister for Enterprise and Employment bring forward proposals in that regard because it is unacceptable in such a small nation that there are 300,000 people unemployed. As I said, this is our greatest resource. We must channel their energy and talents to give them back their pride and a reason to get up in the morning.

I welcome the increase in the carer's allowance from £53 to £59. While the allowance is a recognition of the tremendous work being carried out by carers at home, the conditions attached make it impossible for many deserving people to qualify for it. The conditions should be broadened to allow more people to take up that allowance.

I compliment the Minister on his second budget. It was expected by many political commentators to be the toughest budget to come before the House. When the Minister presented his first budget he was under different pressures at that time for various reasons. He had more time to put his budget together on this occasion and did a good job. We have heard much criticism from the Opposition benches, but this Government is in place only a few weeks. It deserves a chance. It is in the interests of the country that we have a good Government to pursue the proper policies. I ask the Opposition to judge the Government by its performance.

Mr. Cullen

It is somewhat ironic, after a budget which is purporting to be a pro-jobs budget, that this is our blackest and one of the most devastating days, in terms of job losses, with the announcement by Digital in Galway this morning. People should bear in mind that while we speak of 800 jobs there, the value of those jobs is more than double the value of the average job that could be lost. People have lost their incomes and the disposable income which went into the local economy in Galway will be lost with a far greater impact than stacking up the value of a number of individual average industrial jobs. Digital was one of our flagship companies with a tremendously committed workforce. Because of their productivity and ability they earned a very high income. The trauma that will occur as a result of lost income to those people and their families will be great over the coming months. There is a question as to the impact on mortgages, homes, and the future for their children. That is very serious, not to mention the loss of the manufacturing end, and there is a question mark over the existence of the ancillary service industries, the small industries in the Gaeltacht areas and centred around Galway that were dependent upon Digital.

We know that the cost structures in that plant were excellent. We know that industrial relations were excellent, even to the extent that the workforce offered to take wage cuts. We know that their productivity was excellent. We know that production capacity was way ahead of the Ayr plant and was far more sophisticated and modern than the Ayr plant. I would surmise that all of these factors would negate any extra transport cost that would be incurred in moving goods from this country to the UK.

What was the other reason this decision was taken? One can only look to very serious political interference in the decision-making process of this company, pressurised by the British Government at the highest level. For me, somebody who has always been a committed European, what happened in Digital tears up the underlying unifying force of Europe, which was to strengthen the regions of Europe so that Europe can be a truly unified single economic entity. That concept has been torn up by a more powerful economy than the Irish economy. That poses very serious questions for the continuing development of Europe in a cohesive way. Regional strengthening and EC cohesion has been undermined by what has happened. It behoves the Taoiseach at the next Heads of Government meeting to bring to the table as a matter of urgency the question with which we are now faced in the country of creating a balanced single market in Europe which takes special regard of the need to strengthen the regions. That must be done and I urge the Taoiseach to do so.

When we heard of the prospects of the Labour and Fianna Fáil parties forming a Government in the latter part of 1992, the words which kept recurring on all occasions were, "This will be a radical Government, particularly in tackling the national jobs crisis." That was the consistent message. Because of the message one made allowances for what I could only call the elephantine gestation period before the Government's ultimate formation. What have we got? They have been radical in what they have said because they have disregarded Telesis, Culliton, NESC, and every independent commentator over the last decade as to what it will take to create jobs. Last evening the Taoiseach said that he did not understand the efforts of the last few years. He did not adhere to the policy of tax reduction and incentives for people to go back to work and in particular the policy of creating an environment where productivity could be enhanced, coupled with the ability to earn more income, thereby engendering more disposable income which could be spent in the local and national economy and create jobs. This has all been torn up, and ignored by this Government.

The Minister in his speech said that the budget is framed on the principle that the over-riding national priority is jobs. I could not agree more. He said that we have to do whatever is required to raise the pace of sustainable employment growth, both short term and long term. I agree with that. He also said that we have to have policies that promote and underpin genuine economic progress and that those of us who have jobs must put the need to create jobs above our personal interests. He goes on to say that there is no greater inequity than joblessness.

The budget speech yesterday began on a very interesting note. The Minister could have effectively left the House after the initial part of his speech, because he had nothing else to contribute to create an environment whereby jobs would be created and existing jobs sustained and enhanced. What we got was a contribution by the Minister for Finance to ensuring that existing jobs will be under threat and the prospects for creating new jobs have been further diminished. It is an interesting paradox that the Minister expects GDP growth to be of the order of 2.5 per cent this year. The Minister is over optimistic because his budget strategy was not consistent with bringing about that sort of growth in the domestic economy this year. That figure is over optimistic when considered in parallel with the policies the Minister enunciated yesterday.

Debate adjourned.