I wish to share my time with Deputy Pattison.
Finance Bill, 1996: Second Stage (Resumed).
Question again proposed: "That the Bill be now read a Second Time."
Is that agreed? Agreed.
I welcome the Bill and I commend the Minister for Finance for presenting it in a much more accessible way. It is the first time a Finance Bill has been on hard disc and this makes it much more simple for tax practitioners and accountants to study it in detail and examine areas which may require fine tuning and alteration. I congratulate the Minister for his initiative in that regard.
I also congratulate the Minister in relation to the complexity of the Bill, a point raised earlier by Deputy O'Dea. The Deputy also has some accountancy training and he found that aspects of the Bill are difficult to follow, even for qualified practitioners. Part of the solution to this problem is to take the major elements of taxation and consolidate them in legislation. I am delighted the Minister has embarked on this process. For example, a range of matters are consolidated in Parts XI and XII of the Bill. The Minister promised to bring forward major consolidation legislation and the Department is engaged in that process for 1997. Undoubtedly, this will be of major assistance to our constituents and the public, particularly professionals who advise investors, businesses and others on taxation.
I commend the Minister for his sure footed handling of the economy over the past 18 months. The macro performance of the economy, with the glaring exception of employment, in the past 16 months has been outstanding. The key indicators include employment growth of almost 45,000 last year and 31,000 this year, a 7 per cent increase in GNP last year and 5 per cent this year, the successful efforts by the Minister to keep inflation below the Maastricht criteria, averaging approximately 2.25 per cent this year, and the maintenance of the rates of investment at major levels, 11 per cent last year and an expected rate of 8 or 9 per cent this year. The Minister must be commended when these are combined with strong export growth of approximately 13 per cent this year. He has shown outstanding competence in running the Department of Finance, which is perhaps the most difficult and complex Ministry.
As the Sunday Business Post stated in its editorial last weekend, the Labour Party has a good story to tell. Many parts of the story are excellent, including the party's handling, through its leader, of the difficult Northern Ireland situation, the creation of the Department of Arts, Culture and the Gaeltacht and the delivery of important social measures by the Minister for Equality and Law Reform, Deputy Taylor. The performance of Minister Quinn is definitely part of the good story, both in the Department of Finance, where he is holding the country's financial affairs together so well, and previously in the Department of Enterprise and Employment.
His efforts mean he can credibly indicate that Ireland, if it wishes, could be part of the core group of the European currency, as he said at the recent meeting in Verona. However, I urge caution in that regard because many major food companies, such as Cadbury's which is located in my constituency, are deeply affected by the interaction of the exchange rate between the punt and sterling. If Ireland wishes to become part of a European core group the guarantees and facilities put at our disposal must be significant. Discussions may be held in the future on how the outer rings of a European currency will work.
A disappointing aspect of the Finance Bill each year is that a large portion of it is taken up by the provision of tax reliefs for business and enterprise but only a small proportion of the Bill refers to the taxation of workers and their families. I wish it was possible to reverse that and examine areas in which workers and their families deserve tax relief also. I welcome the new reliefs in relation to workers' taxation. For example, some people will be exempt from tax and the standard rate band has been increased. There is an attempt to take more people completely out of the tax net and there are other measures relating to people who suffered as a result of the hepatitis C problem. However, there is a need to embark on a major programme of tax restructuring for workers and their families. This was highlighted recently by media discussions and commentaries on the recent by-elections.
As the leader of the Labour Party on Dublin City Council I am proud that there are no water charges in the city. The council has successfully managed its finances without imposing service charges for the past five years. It is no accident that Dublin and Limerick cities, where the Labour party is also the leading group, are the only areas which do not have service charges at present. Unfair and inequitable regional taxes, which are linked to an already inequitable national taxation system, should be abolished. I strongly advocate the abolition of service charges. This would ensure that discussions, such as those in the mid-1980s in Dublin, do not arise again. In 1985 Dubliners voted overwhelmingly in local elections against such charges. Those elections were a referendum on service charges; I heard that message and I have opposed such charges since. They should be abolished.
From my questioning of the Chairman of the Revenue Commissioners at the Committee of Public Accounts, it is also obvious that residential property tax is primarily a Dublin tax. Approximately 70 per cent of the £14 million raised comes from the Dublin region, this cannot be justified. Dubliners are most unhappy about the tax and I ask the Minister for Finance to remedy that. I favour the abolition of residential property tax and water service charges in the Dublin region because they are inequitable, particularly in terms of a national taxation system which needs to be geared more in favour of workers and their families.
I ask the Minister to examine the entire regime of personal taxation. It is outrageous that one hits the top tax rate on a modest income of £250 a week. I urge the Minister to cut the top rate of tax — 48 per cent — to 45 per cent. Deputy Ahern may be disappointed because the Fianna Fáil Party will not be in a position to offer these goodies in its next manifesto as the Labour Party will, as in so many other areas, have delivered them.
I ask the Minister to consider introducing a tax rate of 42 per cent which would cost £220 million. The psychological advantage of that would be important for workers. In the mid-70s a former Labour Minister was instrumental in having the Government of the day introduce a basic 20 per cent rate and the Minister should examine that. I advocate a 20 per cent rate for the first £2,000 or £4,000 of taxable income. At present tax reliefs are primarily for enterprise and business, rightly so in many cases. However, such measures would redress the balance in favour of workers and their families.
We know that a large section of the population would benefit from job sharing yet we have not tried to bring this into the tax system. Why did we not give a tax break in the budget to people returning to work?
Many State companies must be restructured. They operate in a competitive climate with a market of 300 million people. It is essential that they remain competitive, particularly if we join the European Monetary Union. In future national agreements — I hope we will negotiate the next one — we must compensate workers through tax reforms and encourage them to acquire shares in the companies in which they work.
As part of a Dublin City delegation I travelled recently to America. The workers in United Airways have a 55 per cent stake in the company. Under the US tax code employees get significant tax breaks if they acquire shares in their companies and hold on to them for a number of years. The Minister has moved in this direction and I congratulate him and others such as Deputy Ahern who tried to encourage people to go down this road, particularly in TEAM Aer Lingus. However, such a measure will be successful only if it is encouraged through the tax system. We could encourage banks to lend money to companies where there is a significant employee shareholding. Nothing inspires workers with a sense of determination to succeed than to own their companies. In United Airways, pilots, air hostesses and so on own the company.
I compliment the Minister for expanding BES to the artistic area and I welcome the involvement of the Minister for Arts, Culture and the Gaeltacht. As expected, the Minister for Finance strengthened the anti-avoidance section of the legislation and has tried to improve the financial landscape for entrepreneurs. All Members rightly gave credit to the Minister for Arts, Culture and the Gaeltacht for his wonderful initiative in creating an Irish film company. Almost every second person we meet has been involved in "Braveheart" and "Michael Collins". The Minister for finance is to be congratulated for reforming the old section 35, raising the maximum levels of qualifying expenditure and introducing other measures.
The Minister found the patents area a difficult one. I agree with some of the comments made by Deputy O'Dea. R & D is vital and it is worrying when foreign companies seem to leave their R & D hat in silicon valley. The Minister has tried to ensure that we get real change without putting managements and Irish boffins who are developing new concepts under too much pressure. There were abuses which the Minister had to examine.
I welcome the exemptions from corporation tax and the back-to-work and other schemes which have been a weapon in the Government's arsenal to try to redress unemployment. Corporation tax is an important element in an enterpreneurial climate. The Minister's initiative in introducing a 30 per cent rate is welcome and valuable. We should aim for a 25 per cent rate by the year 2000 because comparable rates in the British economy with which many of our companies compete are lower and our companies must retain that vital edge. The Minister might examine that area in successive budgets.
I welcome the island relief scheme. Bere island will benefit under it as will other island communities. Could anything be done for the islands of deprivation in the Dublin region? We know where they are on the north, west and south side of the city. Could we introduce tax exemptions and reliefs to help refurbish houses in some suburban areas? More power to the island populations but there are some people living in deprived areas in Dublin who could benefit from similar support.
I am glad to have an opportunity to contribute to the debate. This year's Finance Bill is being introduced at a time when the economy has never performed better. Growth is at record levels and far surpasses the performance of our EU partners. Labour force surveys confirm that this growth is leading to extra employment and the unemployment rate is falling considerably in real terms. The tax burden continues to ease, although slowly. At times like this there is a sense of impatience among taxpayers. They see the economy performing well and want tax reforms and reliefs introduced quickly. While there has been some criticism of the rate at which the tax burden is declining, it should be borne in mind that in European terms Ireland's unique demographic profile imposes burdens on us that do not apply to many of our partners. Rather than view this in a negative light, however, this augurs well for our future despite the burden it imposes on us at present.
I have listened on the monitor to many contributions to this debate and there is a schizophrenic approach to public spending. There have been numerous calls for a reduction in public spending. There has been severe criticism, particularly of Labour influence in Government, that there is provision for increased public spending. The most vociferous suggest that public spending is out of control, but recent Exchequer returns give the lie to that view. We make no apology for spending. We love spending money on education, housing, the social services, particularly hospital services and waiting lists, and the aged and infirm. I make no apology for declaring publicly that we love spending money on providing housing for the homeless — our record is to be seen in the whole area of public housing. Because of neglect of our road system over many years we need to spend much money in that area. I remain of the view that public spending, when properly focused, is an essential investment in the future of this country. The Minister for Finance can be proud of his record since taking office. There was a time when the financial markets and some elements of the private sector would have baulked at the thought of a Labour Party Minister for Finance, but that fear has proved unfounded and the economy has never fared better.
Tax has two functions. Through tax we collect the revenue to pay for essential public services, the most important of which I have mentioned. The record of this Government and its predecessor in this regard is impressive. When we came to office some years ago many things needed to be done, particularly in terms of waiting lists, hip and heart operations and other hospital procedures were in a crisis. For more than a decade there had been little or no public sector housing and our road system had been totally neglected. All these matters are now being addressed. Unfortunately all the problems cannot be solved overnight; it will take many years to put right some of them, particularly our road system.
One area in which our performance has been very good is in education. Despite the criticism at the recent teachers' conferences, the record of the Minister for Education far surpasses that of any of her predecessors. Nowhere is the link between public spending and investment so close as in education. Much of our recent improved economic performance comes on the back of a well trained and educated workforce. Regardless of whether we accommodate it, a new social order is descending on us. Young people will spend a greater number of years in education and that is recognised in this year's budget — the Social Welfare Bill provides that certain child dependant rates will continue up to 23 years of age.
Trends in the EU and other developed countries indicate that the productive working life of a person will decrease. Provision must be made, therefore, for early retirement for a generation of people who will live longer as a result of improvements in medical science. There is a great need for public spending in education and the provision of services to care for a generation of people who will retire from employment at an earlier age. As people live longer increased resources must be provided for care and attention.
The second role of taxation is to focus and direct activity in the economy to maximum benefit. There is a view, shared by many people in this House, that we continue to have a problem in this regard. Too much of our tax take is from income, thus reducing the incentive to work, and the primary source of wealth generation is work. I share the view that taxation on work is far too high although some progress has been made in this area in recent Finance Bills. I am proud that since my party entered Government tax relief has been directed at the low paid and middle income groups, as is evident from a report issued earlier this year by the well known Davy stockbrokers.
The justification for such an approach is twofold: first on grounds of social justice and second, and perhaps most importantly — this approach is for the betterment of all — by removing employment traps at the lower end of the scale and encouraging people to enter and stay in the labour market we improve the overall performance of the economy. The long-term reasoning is that the tax burden can be reduced by reducing the number of dependants on the taxpayer. I welcome this trend of recent years. It is clear, however, that much more needs to be done. With the present Minister for Finance we are pushing an open door in this regard — we will encourage the Minister to continue in that direction — but one would not think that was the case from listening to Members opposite.
We have benefited enormously from the social consensus approach of recent years, and we must ensure that consensus continues. That approach has created conditions of stability whereby businesses are able to plan for the future. It is welcomed not only by indigenous firms but by all sectors of the economy. Management can have no excuse for failing to invest in and plan the future of their firms. The social consensus of recent years has provided that opportunity. While workers have benefited in real terms from national agreements much more can be done. The economy has grown significantly in recent years and workers are entitled to reap a dividend for the restraint and responsibility they have shown in making that possible. The Minister is aware that workers are getting impatient in that regard and I look forward to his views on the subject.
There is much to be welcomed in the Bill. The increase in personal allowances for single and married taxpayers is a further step in the right direction and complements measures in the Social Welfare Bill. The increase in the relief payable to carers from £5,000 to £7,500 is a huge step forward in one year and is to be welcomed. The introduction of a corporation tax rate of 30 per cent for the first £50,000 of profits is also a welcome measure. The need for a tiered system in this area has been evident for many years. If small firms are to fulfil their potential as employment creators, they must be given every encouragement. Businesses have fared reasonably well in recent budgets. There have been reductions in their PRSI contributions and the overall corporation tax rate. I hope that type of progress will continue but businesses must give as well as take. In the context of the forthcoming negotiations for a new national agreement, which I sincerely hope will take place, they should seek to involve workers in true co-operation in the workplace. Even in the United States, the bastion of liberal capitalism, the benefits of partnership through employee share ownership plans are evident to all. This is an area we should investigate further.
I welcome the expansion of tax incentives to encourage firms to invest in research and development. This is an area in which we have not performed as well as we might have but it is crucial to ensuring the long-term well-being of the economy. Without new products and ideas, companies cannot hope to maintain or expand market share. Without market share new jobs will not be created. Moreover, with an improved research and development environment, we may be in a position to encourage trans-national firms, on whom we depend so much, to increase their added value to the economy.
The Bill provides for a streamlining of some of our more successful schemes such as the BES and the section 35 tax relief scheme. I welcome the changes made to them which will ensure the continuation of the merits of each scheme and increase the benefit to the economy.
The Bill continues the steady management of the economy that has been so successful in recent years. Given the level of growth in the economy in recent times we cannot have been doing much wrong, as Senator Lee stated in an article earlier this year. More needs to be done and I look forward to next year's budget which hopefully will address some of the remaining issues such as simplification of the tax code and delivering on promises made to the PAYE sector.
The different parties to this rainbow Government will find out too late next year that an electoral deathbed conversion to tax reform will not save them. The over-taxed workers and employees on PAYE will not accept the political cynicism according to which they are entitled to a little tax relief once every four or five years when an election is looming and when social partnership is due to be renewed.
The Deputy had his chance.
The Deputy, without interruption. Let us have the same order that has obtained up to now.
The Deputy had four chances.
I am sure the Deputy is feeling happy that the £286 tax relief for the lowest paid people in society was abolished.
What did the Deputy do?
I retained it. It took a Labour Minister for Finance to do away with that. We rejected that idea for 18 years in the Department of Finance.
The present Government of Fine Gael, Labour and Democratic Left seems to believe that, provided it can succeed in giving some tax relief in an election year, all will be well with the electorate and the social partners. It could not be more mistaken. The public and the social partners will judge the Government on the whole record of its budgets and, as I pointed out during Question Time today, find it seriously wanting. If the public want to know the sort of tax relief they can expect from Fine Gael, Labour and Democratic Left in future years, the 1996 budget will probably be a better guide than the 1997 flash in the pan give-away budget we are being promised, although we were promised that for 1996 also.
Which 1997 budget?
That is assuming the Government will be in a position to put together a budget.
We have two chances.
The Labour Party has deserted the trade union movement again.
The PAYE workers, the trade union members and the small entrepreneurs have been let down by this Government. The principle of social consensus put in place by Fianna Fáil in three successive national programmes from 1987 to 1994 has been placed in severe jeopardy by the failure of this Government in its two budgets to fulfil its side of the bargain. The underlying philosophy of social partnership, which underpinned our outstanding economic performance since 1987 and to which many Deputies referred today, is based on the simple quid pro quo that significant tax concessions, together with income restraint and moderation, provide in normal circumstances for steady increases in real incomes. This happened under the Programme for National Recovery and the Programme for Economic and Social Progress but it has not been happening since 1995 under the Programme for Competitiveness and Work since it became the responsibility of the rainbow Government.
When the country was in a period of economic slowdown or stagnation, or when we were in the midst of the currency crisis, people understood that it was more difficult for the Minister for Finance to be generous. They cannot understand, when we have had two years of record 7 per cent economic growth and good prospects of a third, that the Minister does not have anything to give back to the taxpayers.
Labour and Democratic Left have raided the taxpayers' kitty for large hikes in public spending with an impotent Fine Gael Party looking on.
We will not cut social welfare the way Fianna Fáil did.
When did we ever cut social welfare?
I am referring to the Deputy's speech to the Institute of Directors, which we have framed on our wall.
The Member in possession, without further interruption.
When did we ever cut social welfare? The Deputy should give the year.
Deputy Broughan should be silent. Let us have no further interruption. We had excellent order in the House and we should have the same order for the Member in possession.
I think Ernest Blythe was the last person to cut social welfare. I cannot recall anybody else doing so.
The Deputy should refer to his speech to the Institute of Directors.
I ask the Deputy to name any Fianna Fáil Minister for Finance who cut social welfare.
The Deputy was planning to cut it.
The Deputy is out of touch on that matter also.
We have framed the Deputy's speech to the institute.
The Deputy should frame some of the other announcements made recently as it is the only way they will be preserved.
The so-called champions of the PAYE worker have let down the workers and trade unions. No wonder Democratic Left did not dare show its face in either of the two recent by-elections, and we know the Labour Party fared worse than Sinn Féin in both.
The vast majority of workers and employees will barely notice a difference in their pay packets since 6 April, the reason being that all the resources which could have been used to lower income tax have been pre-empted by extra spending of 13.7 per cent over two years or, in real terms, 16.4 per cent, as the once off 1994 amnesty spending should have been deducted from the base. Prices increased by 4.7 per cent. In other words, Government spending has grown in two years by three times the rate of inflation. The Government, in its programme of renewal, set itself targets which it breached. The targets were a 6 per cent nominal increase in 1995 and a 2 per cent real increase in 1996. If the Government had adhered to its original spending targets, it would now have at least £230 million to give away in additional tax relief in the Bill before us. Everyone would have noticed the difference. Even an additional £100 million would have made an enormous difference to Deputy Broughan's constituents in north Dublin.
What about debt ratios?
Unfortunately, nothing could be done other than eliminating the £286 PRSI allowance for his hard pressed constituents.
The Government was honour bound by the commitments in the Programme for Competitiveness and Work which promised to focus resources in improving the position of lower and middle incomes, alleviate the burden on lower income workers and families and raise the income threshold at which the higher rate comes into play. The Government's main concern in the Programme for Competitiveness and Work was to seek to redress the long running tendency for earned income to contribute a growing proportion of total revenue.
When I was Minister for Finance in the year of the Programme for Competitiveness and Work, and supported by Deputy Broughan, I reduced the proportion of revenue raised by income tax and the income levy from 39 per cent of tax revenue to 36 per cent. Last year, that increased to 36.5 per cent and this year it will be approximately the same, while the out-turn may rise even further. While in the first year of the Programme for Competitiveness and Work I carried out the Government's commitment in a convincing manner, nothing further has been done about it by my successor. The rise in the proportion of tax revenue from earned income represents a breach of the Programme for Competitiveness and Work in each of the last two years by the rainbow coalition. The main concern in the reform of the Programme for Competitiveness and Work has been ignored since I left office.
The increase in personal allowances, which was 8 per cent in my 1994 budget, was reduced to 6.4 per cent in 1995 and 6 per cent in 1996. The widening of the standard rate band, which was 6.8 per cent in 1994 and 8.5 per cent in 1995, was down to only 5.6 per cent this year. When account is taken of the ongoing reduction in mortgage and VHI relief to the standard rate, the position this year for most taxpayers is, to all intents and purposes, one of no real change.
The Deputy started those reductions.
We started them but the Deputy's party stopped them.
Let us not have any interruptions.
Middle income and lower middle income earners benefited in my 1994 budget from the lifting of the 1 per cent income levy, in addition to the other tax changes I have mentioned. This year the budget changes will make the most minimal difference to real incomes and will not provide any real reward for income restraint. The Government is simply marking time. None of the growth dividend will go to the PAYE sector this year. At least the Minister had the decency to drop all pretence of any commitment to tax reform from this year's budget speech. We acknowledge that he never mentioned those words in his long speech.
The biggest handicap to employment growth is our tax system. We need, particularly over the next couple of years, effective expenditure restraint so that we can bring spending and revenue into balance by 1999, as the ERSI recommended, and reduce what we spend on debt servicing — over £2 billion per year. We can argue about what the priorities should be in reducing the tax burden. The first priority is to create the scope in which to do it. Our priorities should be to lighten, as far as possible, and remove the tax burden from the lower paid, particularly those with families, and to ensure that lower and middle income earners are not subjected to a marginal rate of tax of 56 per cent as at present. Nobody should have to pay more than 50 per cent on any portion of their income.
We are all concerned that militancy over pay by the public sector could undermine the basis for current economic dynamism. I am glad of the many signs that the Government and unions want to resolve their problems in a spirit of partnership without destroying industrial peace. What matters is not so much nominal pay as take-home pay and this is where the tax system can be decisive. While we are rightly attached to the maintenance of a caring social system, we cannot completely ignore or disdain the American experience of continuous dynamic employment expansion. Many jobs created are low paid and, in general, they have not moved ahead. However, that does not stop the income of many individuals rising through promotion and seniority. There is irrefutable evidence of a relationship between employment and wage increases which should be borne in mind by everybody. There should be strict adherence by all parties, including the Government, to the Programme for Competitiveness and Work which provides scope in the public service for productivity-based increases but which precludes industrial action.
The jobs embargo in the public sector is a blunt instrument which runs counter to the spirit of a more enlightened arrangement of the public service as represented, for example, by the strategic management initiative. The embargo also contrasts sharply with the uninhibited expansion in the number of special advisers and programme managers, all equipped with expensive mobile phones, drawn from outside the Civil Service. We need more flexibility in the system at any particular time. While a tight control of numbers is needed, we may for example need an increased number of gardaí and prison and court staff to deal with the crime problem. There are other areas in the public service where we may not need as many staff. Where possible, we should create autonomous self-financing agencies which can recruit whatever numbers are needed for optimum efficiencies. Job embargoes obviously increase pay pressures because they tend to block promotion. This has always been the case and the reason we moved away from them in the past to the administrative budget system.
I detected from what the Minister said on the "This Week" programme last week that he is going back to the administrative system and he will have the support of this side of the House. He found himself conned by Fine Gael which influenced the job embargo system in the 1970s and 1980s. As soon as the Minister entered his Department, it stuck this on him. However, he now sees that it does not work. We want to encourage him in his efforts to get away from the blunt instrument embargo, which will not solve his difficulties. A tighter control of Government expenditure across the board would pay handsome dividends. If we could achieve balance by showing restraint, we could probably sustain in the long-term lower tax levels and a higher quality of public services through increased numbers at work paying tax.
The function of the Finance Bill is to encourage enterprise and employment. A limited move has been made to further reduce the rate of corporation tax on service industries. Fianna Fáil reduced corporation tax from 50 per cent to 40 per cent, while the Minister reduced it to 38 per cent last year. He claimed it was a first step towards securing a standard rate comparable with overseas competitors. This year a start has been made by introducing, somewhat on the lines of a proposal made in the Task Force Report on Small Businesses, a lower rate of corporation tax for those with a threshold income under £50,000. The task force recommended £80,000.
As far as the small business and much of the service sector is concerned, the competition is not international but mainly with Britain where the standard rate of corporation tax is 33 per cent, while a lower 25 per cent rate applies to profits of less than £300,000 with tapering relief up to £1.5 million. This is clearly an area where the long-term aim should be to align ourselves with Britain, as this would have hugely beneficial and positive employment effects.
We have seen in a number of sectors of the economy what a favourable tax regime can achieve. The publishing and the bloodstock industries, writers and artists all benefit from a zero tax regime. The Minister, no doubt under the Tánaiste's influence, has extended the bloodstock regime to greyhounds, which is a good idea. A lower VAT rate on restaurant and hotel accommodation, which we introduced, has had a favourable effect on that industry.
The concessions I introduced in 1993 for the film industry under section 35, on foot of the review group into the film industry commissioned by Fianna Fáil in 1992, were having a similar impact. I regret the uncertainty in this year's Finance Bill as the regime was the envy of other countries. People throughout the country were involved in successful films.
Since 1993 the availability of section 35 was successful in the generation of film production activity with the resultant potential for the growth in the Irish film industry, which we all support. Momentum has been established in relation to the development of the infrastructure and job creation. The high profile for Ireland associated with the production of some of these films and the international status of many of the actors involved has created a focus on Ireland which has provided promotional opportunities in areas such as tourism and many other related industries.
Between 1993 and 1995 section 35 successfully fulfilled its purpose in stimulating production activity and generating momentum for growth. Film production activity amounted to £133.2 million in 1994, compared to £58.5 million in 1993. Prior to the amendments of 1993, this was not viable legislation and was not utilised to a great extent. No other legislation framed for industrial growth is expected to yield a net return in its initial development period in such a limited time span.
The limited benefits available to the film industry from section 35 have had a remarkable impact. Instead of building on this growth, it has been decided to introduce restrictions. This not only forfeits the possibilities of significant additional growth, building on the momentum which has been created to date, but it seriously jeopardises the growth which has already taken place and has sent out negative messages to the international industry as to the attitude of the Irish Government to the development of the film industry. Since the budget, and notwithstanding subsequent amendments introduced in the Finance Bill, the industry has already experienced a reduction in production activity planned for 1996.
I have no doubt my former colleague in Government, the Minister for Arts, Culture and the Gaeltacht, Deputy Higgins, who worked on this is aghast at these changes. He would not have supported them and will probably agree with our amendments on Committee Stage, but will vote against them. Many other Ministers and backbenchers would probably be like-minded.
The film and audio visual industry is one of the growth industries in the latter part of the 20th century. There is considerable potential for job creation. Ireland has demonstrated the potential for capturing a percentage of this market. Section 35 has proved to be an important part of the process. It defies logic — my colleague Deputy Ó Cuív will highlight the situation relating to the islands — that, notwithstanding the series of recommendations contained in the Indecon report commissioned by the Department of Finance and the Department of Arts, Culture and the Gaeltacht, the amendments and restrictions now introduced will negate many of the achievements to date and forfeit future potential.
What about the islands?
What about Inishbiggle?
(Interruptions.)
I kept the school open with one pupil.
When the Government is finished with it there will be no island. It has closed down the access today as it would not give a few pounds to allow them to use a modern way of getting across to the island.
Paddy Cooney closed the school and I opened it.
The Government probably does not want the people to have access because it knows how they would vote.
We will see at the next election how they vote.
They will not be voting. The Government has closed their school and now wants to prevent them from moving around the island.
There will not be a polling station on it.
That has been a pleasant interlude but let us hear Deputy Ahern without interruption.
I am trying to highlight and give support to my good friend the Minister for Arts, Culture and the Gaeltacht, Deputy Michael D. Higgins, to prevent the Government's decision on ruining section 35. I was the Minister who worked with Deputy Michael D. Higgins in the preparation of this amendment. All the groups with whom we worked then have all been in touch with me to say that the amendments to the Finance Bill are a disaster and must be changed if we are to save an industry which was successfully built up in the past few years from ruin. The uncertainty which had been removed from the section is now under threat. The Minister should go back to the drawing board and pay close attention to the representations made to him by the audio visual production federation of IBEC. We have a thriving film industry, indigenous and foreign, and its important spin-off effects in terms of tourism and general promotion of the country go far beyond employment in the film and ancillary industries. The Minister for Finance should resist the fatal temptation of killing the goose that lays the golden egg.
There has been a long tradition in this House about how the Finance Bill is handled. I agreed some years ago in the interest of efficiency, to alter the form of the debate. This was an issue on which the former Fine Gael Minister for Finance, Deputy Noonan, ran a campaign, which had much merit advocating that the debate should go to the Seanad where it would be debated at length. It was always a three or four day debate. Subsequently it was moved to the committee. I notice with regret an effort to corral the major item of legislation for the year into a back committee room, where, for the past couple of years, it has received no media coverage or publicity. This is now being reduced to two days.
One needs a good Opposition for that.
It is a bad Finance Bill.
There is plenty of opposition on the Government side.
If we are to have a serious debate on the Finance Bill which belongs to this House, I ask the Whips — I understand people were trying to make arrangements within a committee — to reverse what is a bad decision for the House. It is not within your remit but it is within the remit of the Whips to ensure that the Bill is debated in this House and if not, at least, in the Seanad, as it is not sitting this week. It can be organised in one of the main committee rooms but at least for the three day period. We are taking the financial management, the taxation Bill and the budget for the whole year and hiding it in a committee room where it receives no coverage.
There was a lot of interest in it last year.
Yes, on the whistle blower's issue, which was never debated. A final amendment was tabled in the final 25 sections and it was voted on without being debated.
I was criticised in an editorial in The Irish Times.
I ask the Whips to ensure we have a three day debate. There is no parliament in the modern world where Committee and Report Stages of a Finance Bill are debated in this fashion. I ask the Minister of State, the senior Government member here, to raise this matter. It does not matter what cosy agreement was entered into by anybody. If I am speaking against anybody I am not upset about it. A Finance Bill is very important and we demand it be dealt with, if not in this House or in the Seanad, at least in the committee for three days.
Tell us about Inishbiggle.
Inishbiggle talked at the by-election. I have a great opportunity to say a few words on the Finance Bill and I am pleased to speak about the Government's performance. This Government is performing well. The Taoiseach, the Tánaiste and the Minister for Social Welfare are performing well and I congratulate the Minister for Finance, Deputy Quinn, who brought in an excellent budget. In case Deputies across get carried away I do not agree with it all. There are a few points in the budget I do not like and that I would like to have changed. Twelve months ago the Minister for Tourism and Trade, Deputy Enda Kenny, and the Minister for Finance, Deputy Quinn, announced a pilot scheme for Westport and Achill. There is no doubt that that scheme bred life into both these areas. That scheme has worked and has given life which was needed to Achill and Westport.
Does the Deputy understand it is being curtailed in the present Finance Bill ?
All associated with the Deputy spoke about the islands for 20 years and did nothing. I will speak about the islands in a moment and outline what the Government did.
Nobody is living on the islands now, they have all gone.
This year Westport had the highest number of planning applications not only in Mayo but in Connacht. At the urban council meeting on Monday last, members were informed of the receipt of £32,000 for one month's planning applications. We are now getting quality development and people who want to spend money in the west. This is a step forward. The new census of population will indicate a major increase in population in Westpost.
Is the Deputy claiming credit for that too ?
I want to say a few words about Achill.
What about the islands?
We have got the grants, do not worry about them. Achill experienced a high level of emigration to America, England and all over the world. At last a change has taken place in that the number of people who wish to develop in Achill is unbelievable. Sites that could be bought for £2,000 and £3,000 five years ago cost £15,000 to £20,000 if they are available. The same applies in Westport so the pilot scheme has been successful. I concede the Minister should have continued the tax exemption for the three year pilot scheme. Nevertheless, I compliment the Minister for Tourism and Trade, Deputy Enda Kenny, for putting the scheme in place.
I used to read in my local newspaper every week that Deputy Hughes raised all these issues at the parliamentary party meetings. I spoke to him last week on a radio programme and said nobody must have attended the parliamentary party meetings because nothing was happening. I used to read every week about various pilot schemes, including urban renewal, coming to Westport, which he had raised at the parliamentary party meetings. I suggest nobody was at the parliamentary party meetings because nobody listened.
Mr. O'Keeffe
What point is the Deputy trying to make?
We have been in Government only a short time. The pilot scheme which has been introduced in Westport has transformed the town and the area.
Of course, it was prepared by Fianna Fáil.
The Deputy should not talk rubbish. He should be ashamed to say that he represents Westport because Fianna Fáil did not do anything for it. Castlebar was the only town in County Mayo that received money for roads. No other area received money for roads or water and sewerage schemes. I am glad the position has been reversed. There have been more improvements in County Mayo in the past year then occurred in the past 20 years. I am proud to be a Member of this Dáil at a time when the Government, which includes Deputies Michael D. Higgins and Enda Kenny as Ministers, has helped County Mayo. The people of that county will have their say at the next election and if Fianna Fáil is not careful the Government parties will take all five seats in the constituency.
I wish to refer to the offshore islands.
The Deputy has not mentioned one word about Deputy Bhamjee.
In the past Éamon de Valera informed this House of the great work he did for the islands from the foundation of the State and his grandson, Deputy Ó Cuív, claims he is working on behalf of islanders. I recently visited Inishbiggle, Clare Island and Inishturk to discuss the problems experienced by the islanders. The Minister of State at the Department of Arts, Culture and the Gaeltacht, Deputy Carey has spoken on behalf of the islanders. They accept that the Government cares about them. The Minister of State must keep up the good work.
In the past Fianna Fáil, and other parties in Government, at election time promised to do a great deal for the people of County Mayo and the islands. They did not keep their promises to the islanders. The Government has introduced a pilot scheme for the islands and has granted money towards infrastructure.
What pilot scheme ?
I assure the Deputy that islanders will show their gratitude when they cast their votes in the next general election. Their votes will not be cast in favour of those who made promises but for those who took action.
Do the people of the islands speak Irish?
There is a number of other issues to which I wish to refer. The Minister announced an improvement in the scheme under which people in rural areas can claim £800 for the installation of an alarm system. I am glad it is being extended to people living alone. I compliment the Minister on this. The Minister responsible for introducing this scheme made a mistake. We are not afraid to admit that we made a mistake and have corrected it.
On public housing, I compliment the Minister of State at the Department of the Environment, Deputy McManus who has announced that this year an extra 10,000 houses will be built. When Fianna Fáil was in Government two years ago the figure was 7,050. I am glad that more local authority houses are being built.
I am disturbed that people buying new houses are entitled to a grant of £3,000, while those buying second-hand houses, even though they are first time buyers, do not. Will the Minister and the Department reconsider this matter? A young couple who buy a house, new or second-hand, should receive the first-time buyers grant. Most people buying second-hand houses must redecorate them while those buying new houses receive a grant of £3,000 but do not incur any decoration costs. I am not afraid to be critical of the Government.
The Deputy is welcome on this side of the House.
I would never sit on the same side of the House as Deputy O'Keeffe. I believe in, and am very happy with, the party of which I am a member. I have confidence in the Taoiseach and the Fine Gael, Labour and Democratic Left Ministers. I am glad this Government is in power because it is one people can trust and is doing a good job.
Many grants are provided for big businesses and people who can pay accountants to advise them on how to obtain tax relief. Those people can look after themselves. The Government should consider reintroducing housing grants. Opposition Deputies are silent on this issue because their party abolished those grants. Private citizens are as entitled to receive grants as those involved in big business who can obtain special tax reliefs. The Minister should introduce grants for those earning £20,000 per annum or less who wish to redecorate or improve their houses. Such people pay their water charges, income tax etc. and do not receive anything in return from the system. The only grants available are for the disabled and the elderly. Local authority houses bought some years ago are in need of new windows, doors and, in some cases, need to be reroofed.
The Deputy does not understand the meaning of a Fine Gael parliamentary party meeting.
Meetings of the Fine Gael or Fianna Fáil parliamentary parties are not the place to discuss these issues. I was elected to represent my constituents in this House, not at meetings of my parliamentary party. I do not believe in press releases, I believe in action. If I wish to have an issue resolved, I will approach the Taoiseach or the Minister involved.
The Deputy is the messenger boy for County Mayo.
The Government has had a good year and the people are aware of that. They know they can trust the Government who will be in office after the next election.
The Government could run the country by mobile phone.
The Deputy should not concern himself with mobile phones. The Minister for Finance will introduce many more Finance Bills on behalf of the coalition which is a caring Government. On a previous occasion I raised the issue of the elderly and carer's allowance and suggested that the means test on the first £50 be scrapped. Those who care for an elderly person should not be means tested on the first £50 of their income because they are saving the State a great deal of money.
The Finance Bill also provides relief for mining companies. The Government must keep an eye on those companies. In the west the tourism industry provides employment for many people. The Government may grant companies prospecting licences to mine underground, but the Minister for Transport, Energy and Communications, Deputy Lowry——
Many of the Deputy's party members live above ground.
Deputy O'Keeffe should be quiet until I have concluded my contribution. Mining companies should not be permitted to destroy Delphi, Croagh Patrick or any other area in that the most beautiful part of the country. If Deputy O'Keeffe has not booked his summer holidays, he should consider visiting County Mayo where he will receive quality of service and value for money. If he visits the county, I will be delighted to buy him a drink at one of our local hostelries.
Does the Deputy know Martin Joe?
He is a good friend of mine. I am glad to have had the opportunity to contribute to this debate. The Government should keep up the good work. Deputy O'Keeffe is disappointed that his party is not in Government with a Fianna Fáil Minister introducing this Bill. He will have to wait a long time for that to happen.
I have a hard act to follow after that trenchant defence of Government policy by Deputy Ring. I do not have his expertise on island or west of Ireland policy but I certainly share his sentiments about the efforts of various Government Ministers, particularly the attempt by the Minister of State, Deputy Carey, to assist the people who live on offshore islands.
I welcome the debate on the Finance Bill. It is the most important financial legislation debated by Dáil Éireann each year. It attempts to set the agenda for the economy for 1996 and 1997. I take on board what was said by the Opposition Leader. Deputy Bertie Ahern about the need to debate this Bill as openly and fully as possible. I am not familiar with the procedure on Committee Stage but it is important that as many Members as possible on all sides of the House get an opportunity to have their say, not just on Second Stage but on Committee Stage.
The Minister's announcement on budget day that the 1998 budget will be published in late 1997 is a welcome development. It is important to plan ahead and it is good policy to announce the budget for a particular year in the autumn of the preceding year. It helps planning and allows time for the different political and economic interest groups to respond to the budget and prepare for the Finance Bill. I look forward to what the Minister will do in 1997, namely, introduce the Coalition Government's first budget of 1997 and a second budget later in 1997 in advance of the Finance Bill of 1998.
The 1996 Finance Bill was published against a positive economic backdrop. There was a time when budget and Finance Bill debates were stormy and controversial. In recent years that has all changed. Most politicians and political parties recognise that the economy must be run in a particular fashion. There must be strict control of public finance, a moderate increase in spending and a genuine effort to share resources as evenly and fairly as possible. In the past few budgets, various Ministers from different parties have worked in that direction. As a result it has become difficult for the Opposition parties to make political capital out of the budget and the Finance Bill. It was the same this afternoon.
The leader of the Opposition tried to paint a negative view of the Finance Bill and a glowing picture of what he or his party would do if they were on this side of the House. One would have to take that with a grain of salt. I listened to my Fianna Fáil colleagues on Cork County Council give their economic view of the world. It is a local authority view but the leader of the Opposition said more or less the same thing this afternoon.
On one hand he called for more tax reform and reduced taxation and on the other he called for increased spending. He talked about the need for greater increases in social welfare benefits although it was pointed out to him by Deputy Broughan that he had called for lower social welfare last year. One cannot have it both ways. One cannot call for higher spending and simultaneously for lower taxation. I take with a grain of salt the alternative economic presentation made by the Opposition because if it held the reins of power the budget and Finance Bill would not have been dramatically different.
The one welcome difference resulting from this combination of parties being in power is that there is a genuine effort to use both the Social Welfare Bill and the Finance Bill to give people an incentive to work and create work. To some degree, the fruits of that have been seen over the past number of months. A record number of jobs were created during 1996 and we hope to see that repeated, during 1997. There are positive economic statistics in the form of low interest rates, a lower rate of inflation and job creation. We cannot ignore the fact that we still have a totally unacceptable level of unemployment, particularly a high level of long-term unemployment. All policy decisions, both from a financial and social welfare point of view, must have one thing at the top of the agenda and that is trying to put people back to work.
Tax reform plays a major role in that regard. The 1996 budget was cautious. The Minister made his priorities plain but there have been strong signals from the Minister and other Government Ministers in recent weeks that we will see a more pro-active budget in 1997 as far as tax reform is concerned. Across the political and economic spectrum people will expect significant progress on tax reform. Tax reform does not simply mean more money in the millionaire's pocket. It must mean more money into every taxpayer's pocket. That money can only be found by cautious management of spending and by attempting to put people back to work. I look forward to Government progress during the year in putting in place a tax package for the 1997 budget because we need to move towards lower personal rates of tax which must benefit every sector of society.
Deputy Ring mentioned some sections of the Bill. I welcome the improvement in tax relief for the installation of alarms. The political landscape can change quite dramatically. When the Minister for Finance rose a few months ago to read the 1996 budget, crime was on the top of the political agenda, on the front page of every newspaper and on the lips of all our constituents. The Minister and the Government were obliged to respond and one response was tax relief on the installation of alarms.
The measure as initially proposed did not perhaps go far enough. I welcome the fact that the Government was big and brave enough to admit that more would have to be done. The tax relief on alarms will make it much more attractive for the elderly to have alarms installed in their homes. It is not the answer to the fear and threats faced by the elderly but it is a welcome step in the right direction.
I also welcome some of the improvements in stock relief for farmers and the regime of leasing of land. Section 10 increases the exemption for income derived from leases of farmland in certain circumstances. We must try to keep the maximum number of people employed on the land. It is extremely important to ensure the early transfer of farms from the more elderly farmers to younger, trained farmers.
A difficulty always arose due to the fact that leased income was taxed at such a high rate. Leased income, taken in conjunction with a farm retirement pension, often left the farmer who transferred the land paying a prohibitive amount of tax. By increasing the exemption, section 10 will make it more attractive for a number of elderly and retiring farmers to transfer their land to younger, better trained farmers. This is good for rural Ireland and the agricultural economy. It will also help to keep extra people on the land and in rural Ireland and I welcome it.
The changes in the stock relief regime are also welcome. These changes are needed, particularly by those taking over land or a farm under the farm retirement scheme. We must maximise the take up of the farm retirement scheme. One of the obstacles to the scheme was the difficulty with lease income and a second was stock relief. It was important that those are tackled in the Finance Bill and I welcome the fact that section 11 makes progress in that regard. I hope it will result in extra transfers of land to younger trained farmers.
Section 67 improves the situation of disabled drivers. The definition of a disabled driver or passenger is not addressed in the Bill and I would like to see the matter tackled. The definition is decided by the health boards in conjunction with the Department of Finance but it is extremely narrow. As public representatives we often have to deal with the cases of people who try to qualify under the disabled driver's scheme, people who are clearly disabled but who do not come within the limited scope of the scheme.
In conjunction with the Minister for Health, the Minister for Finance should review the regulations governing this scheme. The amount of money the State would have to forsake would be minimal if the definition was revised. A more generous definition would greatly alleviate the disadvantage faced by people who are genuinely disabled and would enable them to play a better role in society. I hope the Ministers for Finance and Health will liaise to see if improvements can be made in the classification of disabled drivers. The present definition is extremely restrictive.
In last year's budget an incentive scheme was announced for tourist resorts. It is a positive scheme and it will take time for its full impact to be felt. Youghal which is in my constituency in Cork East, was included in the scheme. There was a good degree of interest in the scheme and over the next few years I hope to see a significant investment and a regeneration of tourism in Youghal. Given the scheme is new I urge the Minister to be cautious in changing or restricting it. The scheme should have been left to operate for three years as originally intended before consideration was given to changing it. We should leave well enough alone. It is working well and has the potential to transform many of our seaside resorts and create many jobs. If the Minister deems it desirable to change the scheme I would be interested to know why the changes are necessary.
Cuireann sé áthas orm deis a bheith agam labhairt ar an mBille Airgeadais. In discussing this Bill it is important to consider the broad thrust of policy. The public is not impressed by consensus in this House if it thinks policy is wrong. One of the present dangers in politics is that one can get a bogus consensus whereby issues the public perceives to be important are not being tackled.
With regard to income tax, the views of the Department of Finance bureaucracy and the public are totally different. Is it right to publish the Social Welfare Bill and the Finance Bill separately when they are linked? An employee looks at the net take home wage whereas an employer looks at the gross cost of paying the wage. One deduction only should be taken from an employee's wage. Our goal should be to amalgamate levies, PRSI and income tax.
The attraction in this course of action is that we could close the gaps in the present system. The first step would be to combine the levies and PRSI as one deduction. Thus, we would not have the farcical situation whereby an increase in wages results in loss of the medical card or a decrease in income.
At present single people pay tax at 48 per cent rate on an income of £12,050. Most of these people also pay 7.75 per cent PRSI. More than half their modest income is taken by the State. It surprises me to hear the Progressive Democrats argue for a reduction in the income tax rates when what is needed is a widening of the tax bands. The exemption limits as set out in the Bill are £3,900 a year or £75 a week. It is farcical to have people with an income of less than £80 per week paying income tax.
Rather than reducing the 27 per cent rate by 2 per cent I favour a different approach. We should give everybody a decent tax free allowance. People earning less than £100 a week, or £5,000 a year, if they are single and double the amount if married, should not pay income tax. Taxing people who earn less is farcical. The advantage of the system I propose is that one would not tax those who cannot afford to pay and would take out of the system many people who should not be in it and who only clog it up with small tax returns. We also have to move to a regime whereby nobody earning under £20,000 a year would pay the higher rate of tax. It would be simpler to do this over a number of years than people imagine. Rather than reducing the 27 per cent rate, one would have to adjust the tax rates to ensure the target groups, the less well off, are net gainers in whatever changes are made. It appears that this Government is not willing to go down this route. It is not interested in fundamental reform.
We must also examine the situation of those on very low income but above the exemption rate of £3,900 per year. What is their tax rate? It is the commonly forgotten rate of 40 per cent. I cannot understand why that rate is not reduced to 35 or 33 per cent, for example, to make the system more gradual for those people on very low wages who wind up paying 40 per cent tax, on top of which they pay PRSI. I find that incredible. I have spoken about this often enough and my words always appear to fall on deaf ears.
I am fascinated with the changes in vehicle registration tax because they favour two car middle-class families but do not give any relief to those who cannot afford to buy new cars. The change being introduced refers to a married couple where one spouse has an old car, the other a new car, which is common where two people in a household are working. They can now trade in the older of the two cars and get the £1,000 relief. They can also trade in the newer of the two cars, get another second-hand car in place of the older car while using the £1,000 to buy a brand new car. This is handy for the well off but it does nothing for the majority of families who have only one car, cannot afford a new car and would in no way be trading in a ten-year-old car for a new one.
As I pointed out when the House discussed the budget previously, the measure is anti-rural because smaller cars are much more common in the city. The roads and type of use cars are put to in rural areas dictate that people need larger cars, but people in rural areas cannot afford to buy new cars and rely on the second-hand car market. The measure is also environmentally unfriendly. I ask the Minister to reconsider this scheme and replace it with one which would allow relief of £100 or £200 on all scrapped cars against the purchase of any car.
The Minister should also examine the problem of imported cars. One of the great causes of this problem is the fact that there is a lower VAT rate on cars on our neighbouring island. When one imports a car, one is not obliged to pay VAT, only VRT. It seems sensible to consider reducing the VAT on cars to the 12.5 per cent rate and compensate by increasing VRT. The net cost of the car to the purchaser could come down but in that situation there would be no attraction to import cars and the State would not lose a lot of revenue on cars by virtue of the fact that the VAT payment on imported second-hand cars is made to the state of original purchase. In that way, we could reduce the net cost of cars between VRT and VAT. It could be done in such a way so that the combined rate of VAT and VRT on a new car would be less than that which applies at present. I understand such a measure might be quite complicated. In simple terms, by ensuring it is more attractive to buy cars in this country we could make cars cheaper. The way to achieve this is to reduce the VAT rate on cars and compensate for some of it by increasing the VRT rate, leaving the total cost of cars lower than at present.
The increase on excise duty on diesel operates seriously against rural industry. It was introduced at the stroke of a pen and nobody seems to comment on it. A west of Ireland timber mill which processes about 100,000 tonnes of timber will pay about £150,000 per year in excise duties on diesel for haulage, which is a large amount of tax from a small company. There is pressure to reduce the allowable loading weights on trucks — and rightly so — and to insist on compliance with the law. I am in favour of this because the roads will not be able to withstand the type of battering they will get if the overloading of lorries continues. However, economic pressure due to the huge tax rates for people operating out of peripheral areas in particular is exercising huge economic pressures on hauliers to load up to whatever level they can get away with. It seems there is quite a simple approach to this problem.
We should impose strictly the weight limit. In doing so, we would save our roads and create quite a large amount of employment. Some mechanism would then be necessary to reduce the excise duty on haulage for those businesses which have a huge haulage content in the cost of the final product. It is often forgotten that haulage costs of timber can amount to 20 per cent of the cost of the final product. In the case of microchips, the figure might be 0.001 per cent. We must bear in mind that some of this country's major industries are resource based, such as agriculture, livestock, timber and fisheries where haulage forms a significant cost. The industries which thirve on the west coast and in peripheral areas to which so much lip service is paid tend to be those with a high haulage content. Such companies, which are competing with companies in Britain or on the Continent, are finding that haulage costs are making them uncompetitive.
How can this problem be tackled? One way would be to say that hauliers involved solely in transporting timber or raw materials of that type should be able to use green diesel or marked gas oil as long as their trucks do not leave the jurisdiction at any time and are used solely for the purposes of hauling timber, for example, to a timber mill. Another way to tackle the problem would be to create a third grade of oil, that is, a special commercial rate diesel oil which would be different from the marked gas oil used in agriculture but would also be different from that used in cars. It would give commercial hauliers some relief from the huge cost associated with the taxes on white diesel. Something must be done and I hope to see it done in the near future.
The tax relief on alarms for the elderly is incredible. Many people in my constituency will not be able to claim the relief because neither they nor any of their relatives have taxable incomes. I cannot understand why the measure which would have favoured the poorest section of our community, to which this Government gave so much lip service, was not realised. I cannot understand why a simply grant was not introduced for pensioners living alone to install alarms. The tax relief on alarms is not enough. That is not the answer to the problem. Unfortunately the Minister, Deputy De Rossa, failed to tackle one of the greatest causes of rural burglaries by not dealing in the Social Welfare Bill with means testing capital held by pensioners after a long life of hard work and frugal living.
Deputy Ring spoke about the islands but I was surprised he did not mention the special relief for island houses. I would remind Deputy Ring that a great deal of development has taken place on the islands over the last 20 to 30 years. Much remains to be done but the islanders and those of us who have been familiar with the islands since the 1960s, recognise the huge changes that have taken place during that time.
I remember going to Inis Meáin as a student when there was neither electricity nor an air service, the pier was totally inadequate and there was no public water supply. To make a phone call one had to crank a handle until ones arms were sore. Those and other services have been provided but I would not claim they are enough. It is untrue, however, to say that nothing was done for the islands. Every Government has done something. Since the 1960s Fianna Fáil Governments made significant progress in improving the lot of offshore islands. One only has to talk to the islanders to appreciate how the provision of electricity, water schemes, piers and telephone services has transformed their lives. Much more remains to be done and I hope we will see more action from the Government than the £1 million allocation proposed by the Minister which would not even build one island pier.
The tax break for providing houses on islands is an incredible provision and it is significant that it was announced after the Social Welfare Bill had been passed. We must encourage more people to live on the islands and make it easier for those who wish to live permanently on the islands to build houses there, but this proposal will not address that problem and many islanders feel sore about it. By linking this incentive to the tax system the Minister is favouring islanders with a taxable income but, more significantly he is favouring those with a taxable income on the mainland. The Minister is saying that if someone has enough money and is paying tax he can get relief if he buys an island site with a run down house and does it up. The person does not even have to let it to a dweller all year round. All he has to do is let it to someone who will take out a 12 month lease, which would be easy for rich holiday-home owners.
Did the Minister inquire whether the vast majority of islanders are taxpayers or, because of the lack of economic opportunity, social welfare recipients with no annual net tax liability? If I am right in thinking the vast majority of islanders do not fall into the tax paying category, then this measure will not create any economic opportunity for them.
Because of the Social Welfare Bill, we will now have a crazy situation whereby taxpayers on the mainland or the islands will get a tax break for building accommodation. However, if a person is on social welfare and happened to build a house ten or 15 years ago, and through his own hard labour can now renovate an old thatched cottage, the Democratic Left's Minister for Social Welfare, Deputy De Rossa, will inquire about the value of his house. If it is valued at £30,000 and he is in receipt of unemployment assistance, irrespective of whether he is earning £1,000 or £3,000 a year from the house, the Minister will reduce his social welfare payment by approximately £3,000 a year or £60 per week. Does this favour poor islanders or does it provide a tax break for those with huge incomes who can afford to become involved in speculation on the islands? If this is the Government's answer to the provision of island houses, then God help the islands.
Despite the fact that before this was proposed the social welfare recipient was at a major disadvantage vis-á-vis the taxpayer, this caring Government has unilaterally decided to further widen the gap between the haves and the havenots. It did so without referring to the islanders or giving them an option on social welfare relief so that an islander could let a second property. Instead of doing that, so islanders could have an income to live on, the Government made its decision without consultation and without giving the islanders proper choices.
This is one of the most incredible decisions from a so-called caring Government. I will be interested to hear what the Minister for Finance has to say on Committee Stage to explain this extraordinary provision which is not in the interests of the long-term development of the islands. Nobody has worked harder for the development of the islands than I have, but work must be done in such a way that the islanders control development. It must not be done in a way that is open to abuse. The objective must be to provide the maximum income for islanders so they can enjoy a proper standard of living.
The Minister for Finance did not check out the plans of counties with offshore islands, but when he does he will find a major problem with his proposal. Unco-ordinated development is taking place. We have just reviewed the Galway county plan and the county council will meet tomorrow to put its proposal on island development together for the interdepartmental committee. This proposal will look extraordinary when placed alongside the Galway county development plan which states who should get planning permission on islands and in what circumstances. It is an extraordinary situation.
I accept that I am in a small minority in the House, and probably in a minority within my party, in not favouring, as a general principle, schemes such as the resorts scheme. I do not favour BES schemes or schemes that seek wandering cash because they can create the most amazing distortions in an area. I am at sea as to the criteria used in selecting the resource to be developed.
If there was ever a town that needed redevelopment or a scheme such as this because of its run down character and an incentive to lift it into the next millennium, it is Clifden. It is a major tourist centre because of historical factors but it is in need of major development because some parts became run down during the bad times. It is extraordinary, and maybe it shows the lack of influence by local Deputies, that this town was not designated under the tourism development scheme. It appears that by the time it becomes a designated town the scheme will be so curtailed that it will not be of any advantage. I ask the Minister for Tourism and Trade, in consultation with the Minister for Finance, to designate that town this year to ensure it can benefit and will not be a loser because it does not happen to be in the Minister's county of Mayo, which already has two designated towns. That scheme should apply to the most peripheral seaside resorts and I hope this plea will be heard.
Ar deireadh, dáiríre, chaithfinn a rá nach bhfuil mórán airgead i gceist anseo, ach ar ndóigh, bhí fhios againn é sin ó lá na Cáinaisnéise. Níl mórán samhlaíochta á úsáid agus níl mórán athraithe á dhéanamh.
Ba dhuine mé a cheap nuair a thiocfadh an Daonlathas Clé i Rialtas go bhfeicfimis a dtionchar i leith na ndaoine mbochta agus i leith na ndaoine atá ar phá íseal. Ach is beag de sin atá le feiceáil sa gCáinaisnéis nó sa Bhille Airgeadais. Táimid fós ag caint ar leagan amach a thugann an buntáiste is mó faoin gcóras cánach dóibh siúd ar ioncaim ard agus a bhfuil fuíollach ioncaim le caitheamh acu. Creideann go leor daoine gurb é sin an t-aon bhealach amháin a éireoidh linn forbairt eacnamaíochta a chur chun cinn. Tá i bhfad níos mó muiníne agamsa taréis fiche bliana a chaitheamh ag obair leis an ngnáthphobal as an gnáth-phobal agus as cumas an ghnáth-phobail eacnamaíocht na tíre seo a ardú ná mar atá ag go leor eile. Bheadh súil agam fiú ag an am seo go dtiocfadh athrú intinn ar an Rialtas agus nuair a thiocfaidh Cáinaisnéis agus Bille Airgeadais na bliana seo chugainn go mbeidh athraithe bunúsacha ann lena chinntiú go mbeidh an buntáiste is mó ag an dream is ísle ioncaim sa tír seo.
(Carlow-Kilkenny): I wish to share time with Deputy Costello.
Tá sean-fhocal sa Ghaeilge a deir "ná déan nós is ná bris nós". Is iontach an sean-fhocal é sin mar tá ciall leis. Tá ciall faoi leith leis anseo sa Dáil mar ní dóigh liom go ndéanann muid nós nua agus ní bhrisimid aon nós atá againn le fada. Sin rud atá ag titim amach sa Dáil leis na blianta ó thaobh gach Cáinaisnéise a tugadh isteach ag gach Aire Airgeadais.
It is time to examine the procedure of presenting budgets in this House. The current practice might have been fine many decades ago but not for this modern age. While budget day is hyped up to be a major event, there are no very dramatic changes from one year to the next. Every Government will say their budget is one of the best and most radical ever while the Opposition will say there was nothing in it, it gives nothing to anybody, it is too little too late etc. All the standard slogans are heard on budget day.
The Minister must stand before the House and outline his proposals. His speech should be shortened, the hype surrounding budget day should cease and many of the arrangements should be announced beforehand. It is not proper use of Dáil time to spend weeks after the Budget Statement speaking for or against it. Most Members on the Government side will praise it while nearly all of the Opposition will find faults. That adversarial practice will continue irrespective of whatever system we have in place.
We will spend three days this week discussing the Finance Bill which implements the provisions of the budget. What will be achieved after the Budget Statement and this debate? What will change in the Bill? Could we not have begun Committee Stage immediately and broken with tradition? I do not think this will happen but is there anything wrong with avoiding Second Stage of this Bill and starting with Committee Stage, where the Opposition will table amendments and the Minister will do likewise? I am not sure the Minister is depending on our contributions to make any changes to the Bill and it will not help the Opposition if it criticises any part of the Bill on this Stage. We could be using our time in a more constructive way.
I welcome the many good points of this budget. Paying excessive amounts of income tax worries most workers and I hope next year's budget will make a definite attempt to give more money to them. Unions on all sides seem to be arguing for an increase in wages, but this is of little value if it is gobbled up in income tax. If Deputy McDowell, who specialises in this question, is to be believed, a reduction in tax would be the answer to everyone's problems. It might not be as simple as that; one must also look after the other issues. Having a one-theme message may not be enough. It would be far better for workers if there was a broadening of the tax bands and an increase in tax allowances so that one was left with all of one's pound earned. Giving a £3 a week wage increase if one is paying back 55 per cent of it to the Government is not a great stroke of ingenuity. Trade unions should switch their emphasis from wage increases to tax concessions. If a Government is forced to give money from taxes in wage increases, we will lose in the long term. We must target those on low wages, they exist even in the public sector. Their problems must be tackled but it would still be better for them to get more of what they currently earn than to receive a nominal wage increase and end up with almost nothing extra.
We are lucky that many workers are benefiting from its economic boom, even though we hear it is not being passed on. Because it is happening quietly, most people forget that mortgage rates are so good they are saving vast sums of money. However, if we damage the economy, increase inflation and as a result bank charges go up by 1 per cent, people with a £40,000 mortgage will pay £8 per week more. If they could receive a similar cut in income tax they would be delighted, yet we hear nothing about the reverse — they are currently saving on the mortgage. Similarly, if inflation increases, it is amazing how one can spend money. Unions should consider whether the country can afford to pay vast sums in increases while at the same time keeping inflation and bank charges as low as they are at present. It is not possible if it is not done carefully.
We can use tax breaks to encourage people. This budget introduces tax breaks to encourage farmers to lease land. If a tax break was introduced for people who improve their shop fronts, it would do much to brighten up and embellish our towns and cities. Tourists would see a vibrant townscape, done not with plastic but to the standards of olden times. The tax break for those on short-term work is also most valuable.
An Teachta Ó Cuív described the tax break for alarm systems as incredible but the only incredible thing is that his party spent seven years in Government and did nothing about alarms for the elderly. Unfortunately, not everyone can gain but that applies to any advantage introduced in the budget. Allowing relatives to claim has broadened the scheme; I admit that as originally announced it was not workable. I regret that some bachelors and single women, who may live alone with no close relatives, will not be able to avail of the provision but many people will gain. It is at least a start, with next year's budget still to come. If something had been done in the past ten years, it would be unnecessary for us to do this now.
As I have had dealings in this area, I welcome the advantage given to disabled drivers. Up to now, they had to spend 20 per cent of the pre-tax cost of a car on adjustments to qualify for exemption: the Minister has reduced this to 10 per cent. This is important because a disabled driver may not be able to afford to have his car adjusted.
One provision I disagree with is the reduction of taxes on alcoholic lemonade. I only became aware of this drink in the last few weeks but it should not be on sale. If it is lemonade, it should be called lemonade and if it is alcohol it should be called alcohol. The idea that young people were able to buy this in ordinary shops is incredible — here Deputy Ó Cuív's word is valid. It has been withdrawn from supermarkets but the concept of an alcoholic lemonade is a huge oxymoron — it is one or the other. I call on the Minister to raise the tax because I do not understand why he reduced it.
The Minister of State, Deputy Doyle, spoke earlier about the role of An Post. The company's claim that it makes 90 per cent of deliveries on the following day is the greatest piece of fiction since Santa Claus. Anyone in Dáil Éireann who rushes out letters can prove beyond question that this is not the case. Even when they are well addressed they may be sent all over the world — one of my letters went to Australia. An Post should stop making this claim and I am glad the Minister is taking on this issue.
Deputy O'Dea, in a contribution I enjoyed, mentioned the complex systems used in the Bill. There is one calculation which will give me nightmares, as it brings me back to studying honours maths:
In any case where subsection (2) (a) applies, a person's increase in stock value in the accounting period shall be determined for the purposes of section 122 by the formula:
a (c-O)
——
n.
This is the gobbledygook which ensures that people have to employ accountants. It might be no harm to break this tradition and introduce a new custom, despite what I said at the beginning.
I thank Deputy Browne for sharing his time. Like him I believe we could do without this extended debate, it should be tightened considerably. Almost six months elapses between budget day, the passing of the Finance Bill and the completion of departmental Estimates. It would be more appropriate to deal with these in a tigher timescale. The Minister for Finance has proposed an autumn budget, which would presumably be completed, debated, implemented and legislated for by Christmas, so that we would go into the new year with the parameters fully laid down.
Listening to Deputy Ó Cuív and previous speakers, it amazes me how the Opposition harped on about small issues and blew them out of all proportion. The example raised in virtually every contribution from the other side was the tax allowance for the installation of alarms by the elderly. This is the first time any budget has addressed the question of providing security through the provision of alarms, so to knock it as being the beginning and end of security for the elderly is ridiculous — a committee is also sitting to look at that issue. It is a welcome innovation. It does not reach some areas, but it is the beginning of a process of providing a State support mechanism to deal with people living in fear who can now benefit from an allowance to instal alarms.
I am delighted to have the opportunity to contribute to the debate today. In macro terms, since about 1990 we have been enjoying by far the best period of sustained growth in the history of the State. We are top of the list in terms of the European and OECD economies. The Minister for Finance is to be congratulated for his role in sustaining this growth. However, we are now at a crossroads. I draw the attention of the Members to an article written by the former Taoiseach, Dr. Garret FitzGerald, in The Irish Times of Saturday, 13 April 1996. The article is entitled “Unique opportunities exist to transform our country” and it details why we can expect improved living standards for a number of years. The reasons include a reduction in the dependency ratio, continued economic growth and increases in worker productivity.
Dr. FitzGerald questions whether these developments will be used to transform our society into a more inclusive and equal society. He says they could lead to a deeply divided society or, under wise leadership, could be turned to advantage by using the extra resources to improve the living conditions of the more disadvantaged sections of our society. The choice presented to us is whether the resources will be applied to deal with the disadvantaged sections of our society. What will divide political parties in future is whether the surplus profit and resources created by extra production are to be used for the benefit of the individual or of society. There are those who press for economic growth for growth's sake and those who argue that growth should serve the needs of the community.
This debate has concentrated on tax reductions. There seems to be a school of thought in this House that tax reduction is the only vehicle to secure economic growth. The reduction of the tax burden on the PAYE sector should continue and accelerate but should arise as much from an increase in the take from other sectors as from a reduction in income tax levels. Our tax is not exceptional by European standards. Furthermore, contrary to the view of many, we do not spend excessively on our social services by European standards. This seeming discrepancy is explained by the level of dependency largely due to demographic patterns. The bottom line is that while tax is central to economic performance, it is not the be all and end all of successful economic performance. Most successful economies in the world, such as the so-called Asian tigers, are based on high levels of social cohesion. Our task is to maintain that cohesion while addressing the issues in our tax codes which inhibit optimum economic performance.
Given the strong performance in the economy in recent years, one might expect a stronger "feel good" factor among the public. This, however, is not the case, because of the perception of the level of the tax burden and the message being sent out that there can be reductions in this burden without a consequent knock on effect to the social services. Other problems like drugs, crime and long-term unemployment, also contribute to this phenomenon. There is more to the "feel good" factor than money in the pocket.
I welcome the continued progress in tax reform in this Bill and the complementary measures in the Social Welfare legislation. Despite the Opposition's rhetoric, they represent the most concentrated attack on long-term unemployment to date. That is not to say there is not much more to be done.
New approaches need to be examined. I would like to see considerable tax incentives for companies to invest in economic blackspots. If we look at any budget or Finance Act that follows, we will see that a whole range of capital tax breaks are available right across the board. There are tax breaks for inner city development, for seaside resorts for offshore islands, for film making, for business expansion schemes, and for farmers. How do we provide tax breaks for the unemployed? That is an area where we have not had tax breaks; we have to look at that. We can use the tax system to encourage companies to invest in black spots, in areas of high economic depression and high unemployment. We should give sufficent tax breaks in those areas to attract business to them. We have not embarked on an approach whereby it is a condition of tax breaks that there be a level of employment in certain defined areas.
It is virtually impossible to get companies to locate in certain areas, such as Ballyfermot, Tallaght, Clondalkin, Ballymun, and parts of the inner city. They simply do not want to locate there because location is still the most important factor in establishing businesses. Where people are living and looking for employment the companies move to other areas. It is difficult to persuade companies to locate in areas where the greatest pool of labour exists, including the long and short-term unemployed. That is an area we should address in planning tax breaks. I would like the Minister for Finance to look at those areas where the cycle of deprivation currently exists and where the State can no longer directly create jobs. It is not certain if the State could ever properly do so, but we must seek to positively discriminate in favour of these areas. We would benefit the economy enormously by doing so because by creating more unemployment in areas of endemic unemployment we would raise the tax take and reduce the tax burden on the existing tax paying community. That has to be the focus of attention, given that unemployment per se has not increased since this or the previous Government came to power. Since 1992 the levels of unemployment have been roughly the same. In 1992 the expectation was that unemployment would exceed 300,000 but it has remained somewhat below the 280,000 mark. What is alarming, however, is that the percentage for long-term unemployment has continued to increase and long-term unemployed people are now a very significant proportion of the overall employment cohort. That is why we have to target the economic blackspots in this city and in other urban areas throughout the country. I suggest to the Minister that he examines it in those terms. Where the possibility exists to locate enterprise centres and industrial parks adjacent to high areas of employment, as proposed in Ballyfermot, the Government should respond with tax breaks to ensure that a large proportion of employees are from the local community.
A strong case can also be made for fundamental reform of the tax and social welfare systems to eliminate poverty and other traps which inhibit employment growth as a result of anomalies which are created. The case for basic family income or family tax credits should be examined carefully in this regard. We have made some progress in recent years in reducing employment traps but they can never be eliminated. Employment traps are directly related to poverty but poverty is not absolute, it is relative to the standard of living enjoyed by others in our community. It is damning to hear of the large, growing percentage of children living in poverty.
What constitutes an employment trap today may not endure if people's expectations of their living standards increase. If we embark on measures that further widen the gap between rich and poor, I envisage that the problems currently associated with poverty will be exacerbated. It appears the often unspoken view that the long-term unemployed should be forced into any type of work by reducing their unemployment payments underlies this view. I do not agree it will work and I could not support it.
The Bill contains a number of measures which will prove useful. The reduction in the level of corporation tax from 38 per cent to 30 per cent on the first £50,000 of profits is a worthy move when one considers that the tax rate for export related multinationals is 10 per cent. It comes on top of a series of measures in recent budgets to improve the employment potential of the small business sector. I also welcome the move to increase the amount of tax relief available to businesses for research and development. This type of move can generate long-term rather than short-term benefits to the economy and I congratulate the Minister for introducing it. I look forward to more progress in this area. I am also pleased with the increase in tax relief available to employ carers to look after people. The measures in the Bill represent an increase of 50 per cent in a year and I am sure they will be appreciated by all those involved.
A stark decision faces us in the remaining years of this decade. With a burgeoning economy and the creation of surplus value, we must ensure that these gains are distributed equally among the population. People who call only for tax reductions, and a consequent reduction in the social services which are provided, are being less than fair and honest. This is the real challenge facing any Minister for Finance. I am glad the Bill makes a start in that direction and I hope we will continue along that path.
I wish to share my time with Deputy Quill. In his first budget speech last year the Minister announced a new tax incentive to attract investment to traditional seaside resorts. Details of the tax concession were published in the subsequent Finance Bill and it was stated it was a three year pilot programme. However, people who took the Minister at his word and made plans based on the procedures laid out in last year's Bill were astonished to discover, when this year's Finance Bill was published, that there has been a major change in the terms of the tax concession available in designated areas in traditional seaside resorts. These were named in the Schedule to the Finance Act, 1995. I wish to query the Government's policy in relation to this matter.
How can a Minister for Finance expect people to accept his credibility regarding everything he says when he announces something on one occasion but withdraws part of the concession within 12 months when only a third of the term of the pilot project has expired? How does the Minister think this affects people who drew up plans and made investment commitments with regard to availing of the facilities? The position is unsatisfactory and extraordinary. It is shady practice for any Government to indulge in because it undermines the confidence of the business and investing community in a Government which takes such a step and makes such a major change.
Many investment decisions, which ultimately result in employment creation, are determined by people who seek to understand and study the Government's policies. These are most clearly and comprehensively set out each year in the Budget Statement and particularly in the Finance Bill. I wish to register my protest and serious concern about the reneging by the Minister for Finance and the Government on commitments they openly and public entered into in the House and in the Finance Act last year. They said this tax concession in the designated areas would be available for three years. This move is an extraordinary new twist in the cavalier way in which this Government treats the people.
Mrs. Maggie Thatcher once said that it is a funny old world. She was not the first person to say it, but it sticks particularly in one's memory because she said it at such a pivotal point in her career. Listening to contributions in the House today, that thought came strongly to mind. It is indeed a funny old world. For example, Deputy Costello said that perhaps our taxation system was not too severe after all and that the tax take in Ireland was not as high as that in other countries. That is the case because the tax take in other European countries is higher.
The majority.
One example is Denmark. The tax take is high, but the social services are so developed and good there that one cannot make a comparison. The level of public and social services in that country are so good that taxpayers get a much better return. Their services are much better than those we receive in Ireland. One cannot put forward one side of the argument without acknowledging the other side.
We should acknowledge that the biggest single problem facing this country is unemployment and that the biggest single challenge facing society and the Government is the creation of jobs. One must acknowledge that the annual budget and Finance Bill provide a major opportunity at least to attempt to create the conditions in which additional jobs can be created. Anybody who does not seek that objective in a budget and who does not try to put it in place is living in cloud-cuckoo-land. At present, there are 280,000 people on the live register. In addition, about 80,000 people involved in various schemes are without work but are excluded from the register for administrative reasons. This means that a total of 360,000 people are out of work. One person in four in the workforce cannot find a full-time, permanent job.
In these circumstances it is hardly surprising that solving the unemployment problem ought to be the priority of all political parties. What is surprising, however, is the manner in which we set about solving the problem. Instead of rewarding work, encouraging people to move into paid employment and encouraging investors to generate jobs we do the opposite. Through our taxation system we penalise people who want to enter employment and investors or employers who would, in other circumstances, be able to generate additional employment.
We impose no fewer than four taxes on earned income — income tax, employees' PRSI, the health levy and the training and employment levy. This means that the same income is taxed four times; we pay tax on tax. The combined effect of these impositions places an enormous burden on workers. Taking account of all levies, the real marginal rate is an incredible 56 per cent. It might not be so bad if this exorbitant rate were incurred only by the well off, but that is not the case. A single worker on PAYE is hit with the punitive 56 per cent rate as soon as his income exceeds £247 per week.
An ordinary worker on an average income is paying tax at 56 per cent. If that worker earns an additional £10 for overtime, the Government takes £5.58 leaving the worker with £4.42. That is how we tax work in this country. Under our crazy taxation system a single person on a relatively modest income of £300 per week pays a total of £93 per week in tax. Short of making work illegal, there is little more we could do to discourage people from taking a job.
The situation is compounded by the payroll tax, employers' PRSI, that is levied on all wages and salaries. This is effectively a tax on jobs and acts as a further disincentive to the creation of new employment. Let us take the case of the person earning £300 per week, to whom I referred earlier. That individual takes home £207 per week. However, it costs the employer £336 to give that employee £207 into his hand. In other words, the Government steps in and collects £129 from this single transaction. That is the scale of our taxation problem. Should the worker seek a pay rise, it would cost the employer £2.53 to put an extra £1 in take home pay into that worker's pocket.
Our taxation system is in urgent need of fundamental change, not change that fiddles around with the margins. If any country in Europe needs such change, it is ours and we need it now. A generation of young people is growing up. They will be wondering what kind of system we have in place that will enable them to get work in their own country. We must look at our taxation system. We need change in order to relieve the pressure on hard pressed workers, to create more jobs and to encourage investment, both domestic and external. We must encourage the type of investment that will generate enough jobs to meet at least some of the needs of the young generation.
Tax reform is the key to solving the problem. Deputy Costello did not agree with me in that regard. I am not saying that tax reform is the total solution, but if there is one single instrument at our disposal — we forge the taxation system and it is at our discretion to change it — which is not influenced by any outside factor, it is our taxation system. There are outside factors which sometimes militate against job creation. There are factors over which we have no control that can and do lead to job losses. There is little or nothing we can do about that but we have control of our taxation system. It is my earnest belief that tax reform is the major key to solving the unemployment problem.
The job creation agencies do the best they can but we must recognise that Governments do not create jobs. They create the conditions under which jobs can be created. If agencies, boards, committees and commissions were the answer to the unemployment problem, we would have had full employment in this country years ago. We do not have full employment and it is time we acknowledged that our approach is not working.
Official figures show that the economy is growing. They also show that employment is growing. Why is unemployment so high and why do so few people feel that they are participating in this much vaunted economic miracle? I believe the official statistics overstate the performance of the economy. Much of the growth is produced by transnational corporations who concentrate taxable profits in this jurisdiction and repatriate the money to their home countries. Last year they did so to the tune of £5 billion. That is one element that helps to give a false picture. The economy is growing but not as fast as we think and not fast enough to generate significant numbers of jobs.
What about the employment figures? The most recent detailed assessment of the employment situation is the labour force survey for April 1994. It is a pity we must work with data so out of date but it is the only data available. That survey showed that 67,000 jobs had been created in the previous three years. It also showed, however, that 45,000 of those jobs were part-time. In other words, two out of every three jobs created during that period were part-time. I am all in favour of part-time work and such job sharing ought to be encouraged. However, we must be careful when we use these statistics. If we are honest we must make a very clear distinction between part-time and full-time jobs. How can we plan the future if we do not have accurate statistics which give us the true picture, rather than statistics where a part-time job can be represented as full-time? That gives a false picture of how the economy is doing.
It may be leading the planners astray but it is not leading astray the people who know the situation on the ground. My constituents know how many full-time and part-time jobs are being created. It is very foolish not to acknowledge the nature of jobs when we are compiling the statistics. In supermarkets in my constituency jobs which were full-time six or seven years ago are now shared by three people. That is a feature of the retail trade at the moment. I prefer to see three people working but we ought to advert to that reality.
State sponsored employment schemes have become an integral feature of the economy. The number of people participating in these schemes now stands at 41,000, an increase of 25,000 over the last three years. I am not saying this work is not valuable or of benefit. Nevertheless, we ought not to delude ourselves that these are new full-time jobs because they are not.
In my constituency of Cork North Central an in-depth survey was carried out within the last two months which demonstrates that the level of unemployment has risen by 2 per cent in Cork North Central in the last 12 months. The survey was carried out by an independent and highly respected social researcher and is a detailed and painstaking report. Why is my constituency at variance with what is being promoted as the great national trend? What are we doing wrong in Cork North Central? Why is Cork North Central being left behind? I would love to pose these questions to the Minister for Enterprise and Employment if he were here to listen to me. There are very serious questions to be answered, particularly in respect of my constituency. I will raise this point again in a more structured way at Question Time and elsewhere.
If we exclude part-time jobs and positions on Government schemes, this country is not doing nearly as well as we would like to pretend. There is a great deal of the politics of pretence going on at the moment. My thesis is that the country will not do well until we dismantle our taxation system.
The Progressive Democrats put forward a clear and coherent strategy for taxation and tax reform in January this year. The main proposals in that strategy included reducing the basic rate of tax from 27 per cent to 20 per cent, reducing the top rate of tax from 48 per cent to 40 per cent, abolishing employees' PRSI and the health and employment levies, and cutting employers' PRSI from 12.2 per cent to 7.5 per cent. In addition, we proposed the standard rate of corporation tax should be reduced from 38 per cent to 25 per cent to encourage job creating investment in labour intensive service sector industries, particularly tourism. It is envisaged that all these measures would be phased in during the lifetime of one Government. We provided detailed projections to illustrate how these tax reductions would be funded. Essentially, we believe some of the fruits of economic growth should be applied to reducing the tax burden on workers and rewarding risk takers.
The tax changes I have outlined would transform the economics of work. In the case of a single worker earning £300 per week, the tax reduction would result in an extra £42 in take home pay per week. A worker earning £200 per week would be better off by £23 per week in take home pay. These tax breaks would give people a real reward for work and would provide an incentive to move off the dole and into paid employment. Compare these measures with the penny pinching ones in this year's budget which gave the average worker a tax cut worth less than the price of a pint per week. Low paid workers in the public service fared even worse. A clerical assistant in the Civil Service earning £190 per week gained the princely sum of 87p per week in the 1996 budget. That is just enough to buy a can of Coke and a Mars bar. We should not be too surprised that these people feel aggrieved and are engaged in an increasingly bitter dispute with the Government.
Is it realistic to think in terms of tax changes as radical as those I have proposed ? I think it is. The key to tax reform is prudent management of the public finances. We can generate the resources to fund tax reduction, provided we keep the rate of growth in public expenditure in line with inflation. The route to tax reform lies not in cutting public spending but in controlling it. For proof of this one need only look at the expenditure figure for the current year. Government spending this year will rise by about £650 million over the 1995 base level. If spending had been kept in line with inflation that would have released about £400 million to fund a reduction in personal taxation, enough to cut the basic rate of income tax from 27 per cent to 22 per cent in a single year.
It is possible to contain public spending and cut tax rates while still preserving, or even improving, the quality of services provided by the Government to the people. We, as a nation, and our Government have the choice. The choice is not between spending cuts and tax cuts but between a spendthrift approach to the public finances which will ruin us all in the long-term and a prudent approach to fiscal management which will reward work, reduce unemployment and restore social cohesion. The choice is in our hands. This is the battleground on which the next general election will be fought.
I wish to make some specific points in relation to the environment, for which I am my party's spokesperson. It was my hope that a number of taxation changes would have been made in the Bill which would have enabled some of the promises contained in the programme. A Government of Renewal to be implemented. This is the Minister's second budget and it is reasonable to expect that there will be one more budget — a third — from the Government.
The programme for renewal set out the policy basis of the Government. One promise contained in the programme was that a number of conservation measures would be made in the Government's budgets. These specifically included the promise to give effect to the principle that the polluter pays, which is the basis of the Waste Management Bill, one of the most important Bills that has passed through the House. However, there is no evidence in the Finance Bill to suggest that effect is being given to this principle.
The programme for renewal also promises that incentives and charges will be put in place to reduce the amount of hydrocarbon being used — a hydrocarbon tax was hinted at — and that something will be done to address the conservation element of energy. However, there is no evidence in any of the provisions of this Bill that any effect is being given to even the most incipient element of this promise.
There was also a promise to create incentive mechanisms to conserve listed buildings, which has received no mention in the Bill. The environmental promises, and the vision set out in the programme for renewal that a series of mechanisms would be in place not alone to promote a good, healthy green environment but also to protect the built environment, are not acknowledged, adverted to or incorporated in the Bill. This is very disappointing. If there is only one more budget to be introduced by this Government, how can it address the promise it held out in this area, a promise that gave a sense of anticipation and suggested that this was a sensitive Government determined to preserve the green environment and to do something practical and specific to preserve the built environment? There has been no effort in the two budgets introduced by the Government to give effect to this promise.
I ask the Minister of State to advise the Minister for Finance of my views on this because I do not see the fine targets set out in the programme for renewal being met in the one budget remaining to the Government. It is not possible to overturn procedures and practices that have been built up over almost a century in the context of one budget. However, if one commences the process in a given budget for any year and it is phased in over stages the chances are that real change will be effected in the lifetime of one Government.
This also applies to tax reform and tax reduction. No Government can achieve everything in the context of one budget, but any Government that does not attempt to do so in a serious way through every budget at its disposal is being negligent with regard to its obligations.
I propose to share my time with Deputy Bell. I welcome the opportunity to speak on this important Bill. The debate enables us to consider the Government's proposals over the coming 12 months. When the Bill is passed the statutory power of the Dáil is in place with regard to the taxation changes introduced by the Minister for Finance. I welcome these changes.
This is the Government's first full budget. Last year it took office half way during the term of the Dáil and half way through the budgetary preparations of the previous Government. We therefore inherited the bones of the previous budget and had to put flesh on it. Some of the Government's policies were included in that budget, but this year's budget contained the full thrust of the Government's policies for the remainder of the term of this Dáil. The budget next year will be a further step in this regard following which I look forward to a full five-year programme for the Government when it can complete the programme of work it has outlined.
I am very happy with the management of the country which the Government has provided, from the Taoiseach to all of the Ministers and Ministers of State. They have provided good management and leadership, which has been noted by the people. Confidence has been restored.
I have never seen so much activity across the economy. The yardstick of the development of any nation is its building industry. The building industry in this country is flying in every respect. I travel to this city three mornings a week and everywhere see the cranes in the sky like flags waving. Major construction developments begin every week. The refurbishment of retail outlets indicates that people in business are reinvesting, giving a face-lift to their business because they have confidence that their products have a market and that people are prepared to spend their money and buy them.
It is not only our cities which are in this state. It often angered me when I first started to come to Dublin regularly in 1987 to see the amount of development taking place around our capital city — roadworks, by-passes, ring roads — while rural Ireland was being neglected. I addressed the issue of road structures in rural Ireland, which were being neglected and devastated, while on the Opposition benches. Indeed, a Cheann Comhairle, you had reason to ask me to leave the House on a number of occasions. It was not because I wanted to be difficult but because the message was not being listened to.
However, I am glad this policy has been reversed and that the wealth of the nation has been spread equally all over the country. This is right and proper. No section of the people should be deprived of the benefits when the country is booming and when there is reasonable hope of progress and development. The people of rural Ireland are satisfied that their case is being listened to. Substantial improvement has taken place in road structures in the past 12 to 18 months and confidence has been restored. It is only necessary to take a drive any Sunday afternoon to any byroad or county road to observe the sites that are being developed. Fine two-storey houses are being built. People have confidence that rural Ireland is a place to which they can return to live. It is all about people living in an area and the developments, including businesses, that will ensue. I am happy to see it.
I am also happy that the Minister for Agriculture, Food and Forestry is so capable at a time of crisis and that, with the Government we have, the farmers will not be neglected during the beef crisis. Agriculture is one of our most important industries. It is still the bedrock of our economy.
Debate adjourned.