Private Members' Business. - Taxation System: Motion.

I move:

That Dáil Éireann recognises the urgent need for fundamental reform of our taxation system and, in particular, demands measures which would relieve the huge burden of taxation on PAYE workers on low to medium incomes; eliminate employees PRSI; reduce the penal levels of employers` PRSI; and that such measures would form an integral part of any successor to the Programme for Competitiveness and Work, and help to create a pro-jobs, pro-enterprise economy properly geared for the competitive challenges which face us in the new millennium.

This motion is not intended as another scrap of paper to be deposited on the intellectual rubbish tip of broken promises, false claims and shattered hopes which is the recent experience of the voting public in relation to tax reform. Tonight the Progressive Democtats Party will concentrate on the central issue in the next general election, the central plank of any Administration of which we will form a part between 1997-2002 and the core economic issue which we face, namely whether this country will be led by politicians who have the courage, vision and tenacity to bring about a revolution in the taxation system in the lifetime of one Government. Without using unduly complex or overweening analogies, in political terms the Progressive Democrats Party is tonight lighting the political equivalent of the Olympic flame. Tonight we will set forth the radical challenge to the old order which the fire on the Hill of Slane constituted 2,000 years ago and defiantly say to the political administrative establishment, "you have failed, you are failing and you will fail and you should prepare to stand aside for those who want to succeed".

I wish to begin by referring to the Packard plant. No one but a complete fool would fail to grasp that the workers in Tallaght were employed in a highly competitive, labour-intensive and utterly mobile enterprise. No one but a complete fool could fail to grasp that Ireland with its huge workforce needs to attract mobile labour-intensive investment to our shores. No one who looks at the real cause of the Packard debacle can deny that. In late 1994 and early 1995 the Minister for Finance, Deputy Quinn, and the Minister for Social Welfare, Proinsias De Rossa, presided over Departments which extracted from the Packard plant £5.5 million in payroll taxes from an annual wage bill of £15.5 million. The State, which taxes special savings accounts at 15 per cent and many business activities at 12.5 per cent, taxed the workers' payroll at Packard at 35 per cent. There has been much talk about the grants given to Packard but the annual take in terms of the payroll and PRSI exceeded the grants given to it in any given year.

When will we grasp the message from the Culliton report that the most important thing any Government can do is to change our anti-work and anti-enterprise tax system? This afternoon I listened to Peter Cassells, one of the members of the Culliton Review Group and one of the people who identified himself publicly with the report which was given such widespread acceptance at the time. It struck me forcefully that he had not lost his grasp of the central tenet of that report, which is that the most important thing any Government can do is to deliver reform on our anti-work and anti-employment tax system.

Why were 800 jobs in Packard so much less valuable than 800 jobs elsewhere in the public sector or the semi-State sector? Why were the jobs of the Packard workers taxed at 35 per cent of the payroll while £30 million in subsidies were poured into one company in the semi-State sector, £120 million into another company and £175 million into a third company? The answer is clear — political ideology. High taxes, high subsidies and State control, the intellectual thumb prints of the Labour Party, are all over the Tallaght debacle. Why do the Ministers, Deputies Quinn and De Rossa, take £5.57 out of every extra £10 earned by a worker earning well below the average industrial wage? The workers in Tallaght were in low-paid employment. Why did the State say to a worker in Tallaght who was offered £10 extra for over-time, for working on a Saturday, as payment for productivity or for taking a post of responsibility, "we want £5.75"? Why does the State say to such people that if they earn an extra £10 it needs more of that amount than they do? What socialist justification do these gentlemen have for saying to a single man or woman in Tallaght or elsewhere on below average industrial wages, "we need more of your extra earnings than you do"? If one says that to workers earning below the average industrial wage what message is one conveying to them?

Where is there even the tiniest bit of social justice in confiscating more than half of the marginal earnings of those earning below the average industrial wage? How do the parties of the left justify what I describe as social theft of that order? How does the Labour Party, in particular, which has been in office for 12 of the past 23 years, during which time the tax system was largely evolved and shaped, justify the existence of a tax system which has brought super taxes to single workers on below average wages?

When Labour went into Government in 1973 98 per cent of taxpayers paid tax at the standard rate. By 1987, after two disastrous periods of the Labour Party in office, 43 per cent of taxpayers paid tax at the higher rate, an increase from 1.7 per cent in 1973. At this time of massive increases in taxation the national debt was doubled during the second period in office from 1982-87. In case anyone ever suggests — I will not tire of saying this — that this was done by accident or inadvertently or because people took their eye off the ball, when in 1977 I asked a senior member of that Administration if it would not be a good idea to index link tax allowances and bands — the 1973 figure of less than 2 per cent of taxpayers paying above the standard rate had increased to 14 per cent — he said clearly that this would mean the end of all social progress. Anyone who thinks that inflation nibbled away unconsciously at the taxpayer's wage packet and was not directed by people who knew what they were about is wrong. Rather it was done consciously and deliberately and when one pointed out what was happening it was justified on the basis that to counteract inflation in the tax system would be to end social progress.

Since 1992, when the Labour Party was re-elected to office, tax reform has not merely stopped, but has been thrown into reverse. Apart from the infamous and short lived income levy which the Minister recently defended as a necessary measure to undo the damage done by the Progressive Democrats when in office and which had the effect of increasing taxes from 27 per cent to 29 per cent——

The Deputy did not deny the charge.

I did not have an opportunity to interrupt the Minister's speech which is what he is doing now. The Labour Party's legacy, as it limps to the end of yet another disastrous period in Government, is, yet again, a missed opportunity, a fumbled chance, some tinkering here and there at the edge of the tax system, but nothing of substance and, certainly, nothing radical. The people have paid a truly incredible high price for having the Labour Party in office for 12 of the past 23 years — huge borrowings, taxes, dole queues and political egos. That is the nightmare experience of the Labour Party at the helm.

Between 1989 and 1992 the top rate of tax of 58 per cent was abolished and the lower rate cut from 35 per cent to 27 per cent. If that Government had survived to introduce a budget in 1993, there would have been a standard rate of 25 per cent and a top rate of 44 per cent. All this was achieved because the programme of that Government set out clearly identifiable tax targets for tax reform.

I ask those who constantly chided the Progressive Democrats between 1985 and 1989 with peddling the policies of illusion and championing tax reform which was bogus, whether they would reverse what was done between 1989 and 1992. Would they slap up the top rate of tax for workers earning below the average industrial wage to 58 per cent on their taxable pound and reapply the 35 per cent rate rather than the existing rate of 27 per cent?

During that period the yield from income tax grew. In the period 1997 to 2002, if the Progressive Democrats are in office the lower rate of tax will be reduced to 20 per cent and the top rate no higher than 40 per cent. In addition, PRSI will be eliminated for employees and transferred into a single digit levy for employers. we have shown how this can be done.

Is the Minister listening? Time is running out for him.

The Deputy should stop heckling his colleague.

If Peter Cassells and his members want to see a party which is genuinely committed to radical action and cutting the dole queues for the have nots in society and those exciled in the economic gulag created by existing policies, which knows what it is doing about tax reform and has a proven track record, they should look no further than the Progressive Democrats and take their gaze off the parties which created and defend the existing tax system and do nothing to change it. Despite the most favourable economic circumstances in the last quarter of a century, they have failed to do anything about all the rhetoric on tax reform.

Did the Minister hear that?

Every word.

We have shown that this can be done and that, in Government, we deliver on our tax policies. We believe that lowering marginal tax rates yields greater revenue and economic growth. We point to the experience of other countries to prove that there is an alternative to the crazy economics of our tax system.

In New Zealand, whose economy is comparable to ours in many respects though different in many others, parties of both right and left abandoned the political orthodoxy which motivates the Labour Party in Ireland. They took the view that a radical change was needed, out went state control and regulation, subsidies, protectionism and labour market rigidities and in came privatisation, a slimmer and trimmer state sector, a real market economy with a system of Government unreservedly committed to enterprise.

Unemployment fell from 14 per cent to 6 per cent as these policies were implemented while taxes and welfare were changed to make it worth people's while to work. They were able, as a result, to reduce the standard rate of tax to 18 per cent and the top rate to 33 per cent. It has not become a society — despite all the rhetoric in Ireland — where people say that it is more unjust now than it was when in the grip of the social democrats, the social engineers, who had brought it to its knees. It has a healthy economy with good international credit ratings, a healthy economic heart and a great future.

When the former New Zealand Finance Minister, Ruth Richardson, appeared before the Select Committee on Finance and General Affairs recently she routed her Irish Labour Party critics by pointing out in the clearest and most convincing terms that it had chosen the path of high unemployment and welfare as its response to Ireland's economic problems.

I want to speak about social justice. I reject with contempt the politics of human set-aside which the Establishment, at the behest of the left, is pursuing. There is no social justice in a system which says to 280,000 workers and their families that they should live on the margins, keep out of the markets and not participate in the economic life of the country.

We live — I address this point particularly to those who consider themselves to be on the left in Irish politics — as part of the European Union economy. We cannot pursue the politics of Bevin and Keir Hardie in modern circumstances. We must accept, as the basic premise of our politics and economics, the market principle. In a society founded on that principle, like it or not, the first thing that must be delivered for the maximum number of people in terms of social justice is participation in its economic life. There is no social justice in creating an under-class dependent on distribution to maintain a meagre hand to mouth existence.

A society which is satisfied by increasing social welfare as an alternative to doing something about the economic plight of people whom society has failed will end up doing what Europe collectively has done and what Germany now sees as the price of that folly. If one constantly ratchets up social protective legislation and welfare provision at the expense of higher taxation, one will end up with a system, common across the European Union, including Ireland, where it is increasingly less worthwhile to participate in the economic life of the State and increasingly more difficult for those at the bottom of the social ladder to participate.

Europe is the sick man of the world in terms of job provision. Ireland is one of — but not the sickest — in the European Union in terms of the percentage unemployed. As a society and a member of the Union, we have gone nowhere towards a thoroughgoing analysis of what is wrong with Europe and how it can remedy the injustice which third generation unemployment spells out in terms of marginalisation, exclusion, a sense of hopelessness and the destructive corrosive principle at work at the heart of society.

The people who have created a system in which those at the bottom of the ladder who try to work harder have more than half of their extra earnings taken in taxes and levies have questions to answer. They have created a system in which many workers on £9,000 have more disposal income than their equivalents on £14,000. It is the left which is speaking in terms of giving, as a remedy, what I would call cement boots to the unemployed in the form of minimum wage to compound our anti-enterprise system.

I want to make one point about the job creation statistics. There has been a disparity between the live register and the labour force survey. Various explanations have been advanced for this. Those who sign on are people who receive real money. They are not phantoms; they take the money. Whether they are phantom unemployed is another question but I do not believe the vast majority of them are in that category. Many people are categorised in surveys as being employed because they are in part-time employment. Much of the job growth reported in labour report surveys in the last three or four years is really an exchange of full time employment for part-time employment. That is a more rational explanation for what has happened than the overblown claims of the Government that it is creating more and more jobs in the economy.

Instead of tackling the central issues of taxation, we have a more complex system with BES schemes where those with more money than judgment gamble their money rather than paying taxation. In this country if one is lucky enough to have money the best thing to do is invest it in bricks and mortar, especially domestic homes, put it into special accounts where it is taxed at 15 per cent or leave it in a building society account where one can get away with paying the standard rate of tax. What kind of social justice is there in a society which says to a single worker in Packard that if he or she earns an extra £10 it will take £5.70 in taxes and welfare payments but tells a person wth plenty of money to invest it in a film or a cast iron venture? What kind of society can say to people who work 40 hours a week and do their best for their families that what they do does not matter? The State charges them super tax on any extra money they earn. There are wealthy people in society — Deputy McCreevy spoke about them earlier — who boast about using tax breaks and who, by living off their capital or borrowing money, pay nothing to the Exchequer.

Hear, hear.

If such a tax system were imposed by parties of the right, if there were such in Ireland, there would be a revolution led by the parties of the left. If I said it was justifiable to take £5.70 out of every extra £10 earned by someone earning 80 per cent of the average industrial wage I would be castigated and rightly so. A party that was in office for 12 out of the last 23 years and which had an opportunity to change that did not do so. People earning £12,800 per annum, which amounts to £250 gross pay per week, less than £200 in take home pay per week, have more than half of every extra £10 they earn confiscated by the State. What kind of social justice underlies that state of affairs? None. It is about time that the Irish left began to be as radical as the New Zealand left, the Spanish left, the French left and even the British left in the form of the Labour Party which is proposing a 20 per cent standard rate income tax if it is elected at the next election. Why does the Government tax employment and single workers whose wages are below the average industrial wage at a rate which would make the reconstructed Communists seeking election in eastern Europe blush with embarrassment if anyone accused them of having plans along those lines?

In this country a businesman is crippled with tax if he succeeds and rewarded if he avoids risk and effort. Why do we have a system whereby a businessman who makes £50,000 profit in his company and decides to reinvest it in his own business is treated far worse than if he goes to the ICC or other agency peddling BES and avails of a tax break? Surely we should have a system which encourages a person running a successful business to make it more successful and not one which hammers those who reinvest their surplus money in their own businesses and rewards with tax breaks those who invest in some of the more doubtful BES ventures. How can that be justified? We have a country in which to invest to provide jobs for others in ordinary business requires idealism and patriotism.

We have a social partnership which excludes those in ISME who want to increase employment and instead includes organisations whose main concern is to shed jobs. Those who want to participate at the social partners' table and have an appetite to create jobs are excluded and the big players who want to get rid of jobs and are interested in industrial peace at any cost determine the outcome of the deliberations. It includes those who want to drive up the public sector pay bill but excludes those in the Irish National Organisation of the Unemployed who want a job of any kind.

There is a radical alternative which has been proved to work and that is to face up to the fact that the political establishment, the social partners, the jaded political generation which has brought us nothing but failure and disappointment and the grey faced bureaucratic mandarins who are comfortable with their present system of political failure are the problem and not the solution.

The next five years are a window of opportunity for this State. They will be decisive years. On the one hand we can muddle along with Labour led mediocrity and indecision and thereby squander the opportunity to effect an economic transformation in this State. That way we will fail to face the challenges that confront us. The alternative is to put in place a Government committed to the radical transformation of the economy in its lifetime, one that will face up boldly to the challenge of tax reform, set targets each year and deliver on them; face up courageously to the problems of the semi-State sector; one committed to making it more worth-while to work than not to work; that believes employing is better than sacking; leaves as much as possible of the wage packet in the hands of the employee; rewards risk-taking in employment creation; is committed to business, work and effort and to the inclusion of those whom present policies exclude.

The cornerstone of success must to twofold: the control of public spending and the transformation of the tax system. That in turn requires that any successor to the Programme for Competitiveness and Work must be negotiated by those who will implement it. This rainbow Government has no political mandate as anyone in the street will tell it. This Government came upon the people from nowhere; they did not chose it. Without being unfair, it had 16 per cent support for all its candidates in the Dublin west by-election. It has less than 35 per cent support nationally. It has no right to impose on its successor an ideological millstone in the form of an agreement between the priesthood of economic failure, the so-called social partners. The people of Ireland are weary of those who propagate a false consensus about policies that have failed and are failing — by-election results show that. We need a new Government with a new programme for radical change and we need to bring the people with that programme. The radical change we need will never be thrashed out by the existing social partners sitting around the same table at which they have, in the past ten years, constantly postponed all radical change.

The ballot box is where the people should make their decisions about the kind of country they want to create. The people are ready for radical choices and I am sure they know the futility of simply continuing as we are. I am convinced the next election will be a watershed, the point at which the people will be offered and will grasp a new deal. I am convinced they will elect to Government people who will deliver on a new deal, whose terms can be as radical and as challenging as they are feasible. When I speak about a new deal I speak about a programme which will do to Ireland what has been done in other countries, not just what was done by Roosevelt for post-depression America but what two Governments of left and right with radical intent did to New Zealand. I speak about a Government that will face up to the issues of the overweening, overbearing and stagnating role of the State in our economy.

We should put in place a dynamic, lean State which is an agency for change, a Government which will lead a public service apparatus which is performance driven in every sense of the word, in which civil and public servants can deliver of their tremendous potential in bringing about change, in which the ethos in the public service will not be conservatism or time-serving but rather "what can I do to change Ireland for the better", in which those who are in charge of the great organs of State, the Departments, semi-State agencies and other agencies of State will be appointed, rewarded and monitored on the basis of achievement and success. They will make contracts with the Government to deliver the service the State requires of them as efficiently and as well as possible. The officials of those agencies and Departments will be rewarded for doing their tasks well.

I view the Bord na Móna controversy with a good deal of misgiving. At the heart of it is a person who has made an effort, a person who is upbeat an working for his organisation, who has tried to bring about worth-while change in that organisation and is willing to ask radical questions about the organisation. Whatever about proper management controls and the proper implementation of remuneration and control of taxpayers' money — those are serious issues — I query whether we as a society will ever get to the stage where we will encourage those who hold the levers of power on our behalf to use their own initiative and trust their own judgment and whether we will reward them when they succeed and hold them accountable when they fail.

If we look at the history of the semi-State sector, has anyone ever suffered for making an appalling mess of matters? Has anybody who ran up a debt of £180 million in Nitrigin Éireann Teoranta ever been sacked? Has anybody who ran our shipping services into the shore paid the price for that? By the same token, have those who have done very well ever been properly rewarded? I doubt it. We as a society must face up to the fact that the Government and the State sector have an essential role in society, but it must be radically different in future. As a society we must face up to a future in which those who work on behalf of the people in public employment are expected to meet targets in terms of performance, accountability and so on and are given the opportunity to allow their talents to shine through. Above all what is needed is a public service in which, as is the case in the private sector, people are aware that when they succeed and do well they will share in the fruits of their success.

It is essential that the people get a new deal from the State for which they pay. For instance, in areas such as public expenditure we are entitled and ought to ask whether we are getting good value for money. People say that it is dangerous to speak about control of public spending, that it may endanger the quality of services people expect from the State. Let us consider a few issues relating to the past five years. Spending on the Garda Síochána has increased by 40 per cent, but have we got 40 per cent more from the criminal justice system? I am not blaming individual gardaí, I am simply asking the question. Has the performance of the Garda Síochána been 40 per cent better in the past five years? Few people, including members of the Garda Síochána, would agree that is the case. Spending on our prison system has increased by 50 per cent in the past five years, but the present system is in an unreconstructed shambles, in a state of crisis. Spending on the health services has increased by 65 per cent since 1990, but nobody believes that the system is two-thirds better than it was in 1990. I do not deny that some important improvements have been made in that time, but considering an increase in expenditure of 65 per cent over a five-year period we are entitled to demand a dramatically improved health service.

At present the economic climate is very favourable. Other countries are experiencing a downturn while Ireland, as the Minister recently pointed out, is sailing well through this squall and the economic fundamentals are good in terms of growth. We have survived the downturn in the economies of many other countries reasonably well. However, we receive, and will receive over the next few years, huge transfers from the European Union. During that period we have the opportunity not only to get things right and make the fundamental changes necessary if we are not merely to stagger into an European Monetary Union as cripples but to survive and prosper. We have a precious opportunity of five years when things will go well for us and if we do not avail of the opportunity to get things right we will be like the people in "The Gladiators"— I used this analogy before — who run up the travelator, literally fall through a paper screen at the end and are declared the winners. We will totter and fall into the European Monetary Union because as a society we will not have made the fundamental changes that are necessary. We will fail if we do not avail of the opportunities during the next five years. That period is not merely a window of opportunity but is a period of potential challenge, and if we do not face up to it we will be in very serious trouble.

Ireland needs this new deal and the electorate will demand it at the next election. We need a Government which has the courage to propose and deliver on a new deal. The present politics of the failed consensus are over. I note Deputy Ahern was quoted in the papers at the weekend as saying there might be ideological differences between Fianna Fáil and the Progressive Democrats. There may well be but I advise, in the most friendly way, those who think that the present State orthodox ideology is any way in which to transform this country to be very careful.

Deputy McCreevy cannot say he has not been warned.

The phoney war for the minds and hearts of the Irish people is over. If we believe in choice let us offer the people that choice, and make that choice. If something is radically wrong in our society, only something radical will put it right. The Irish people seek and deserve success. Politicians both inside and outside this House who understand that the will of the Irish people is to succeed, and who share their hunger for success, will themselves succeed when the people have an opportunity to express their point of view.

I move amendment No. 1:

To delete all words after "That" and substitute the following:

"Dáil Éireann welcomes the Government's firm and prudent management of the economy as reflected in the strong economic growth, increased employment, low interest rates and low inflation achieved over recent years; notes the control of public expdenditure and the sound fiscal stance adopted in accordance with the Maastricht Treaty guidelines; recognises the substantial progress in reform of the income tax and PRSI systems and the other significant measures to promote enterprise and employment in the 1995 and 1996 budgets; acknowledges the Government's continuing support for the less well-off members of our society; and recognises the contribution Government policy is making towards creating a pro-jobs and pro-enterprise economy conducive to achieving real increases in take-home pay, improving the incentive to work and the deepening of the social partnership based upon consensus and consultation which has given Ireland the best economic performance of any country in the OECD in 1995."

I wish to respond to the contribution made by Deputy Michael McDowell which could be accurately described as the sort of speech another Michael, Michael Portillo, or another John, John Redwood, might have offered in another House.

Or a speech Ruth Richardson might have offered in another House.

No, that is not correct because Deputy Michael McDowell was not telling the full story. The recipe is similar but much closer to home. In many respects we can see the effects across the water of low personal taxation, particularly of the higher rate, on the delivery of certain essential services such as health and education.

Deputy McDowell has made three speeches. He has made a naked party political broadcast which basically states: "Party for hire at the right price, provided we get into Government" and, 14 months at least from a general election, that is not an unreasonable pitch.

His second speech was an attack on the Labour Party as if we had been a majority party in Government for a number of years. He was curtailed in the amount of time he could give to that but the Sunday Independent, for which he must be virtually a House correspondent, regularly gives its Irish readership, of which there is a substantial number, a much more extensive diet of a similar critique.

It is awful the number of people who read it.

That newspaper performs in the marketplace like any other. The Deputy, along with his fellow correspondents and colleagues, frequently puts out the same type of material. In fact, there is a certain similarity, verging on a mantra-like repetition of certain points. The third part of the Deputy's speech, to which I wish to respond, was the serious economic analysis and sincerely held views in relation to what we should do over the next number of years, particularly with regard to another national agreement if there is to be one.

I thank Deputy McDowell for the opportunity to outline the importance of the consensus approach to pay determination and policy development adopted by all Governments before and since 1988. I compliment his party's role in those Governments because the personalities in his party who were in Government have between them, on my calculation, more than 20 years' experience of being in office if one takes the ministerial career of Deputies Molloy and O'Malley.

The consensus approach various Governments have adopted has made a major contribution to our economic development over recent years. However, the last three agreements have not been confined solely to pay and taxation changes. They covered a wide range of policy areas including care for the less well-off sections of our society and the need to increase employment. The Government's firm and prudent management of the economy has helped in achieving the goals of the consensus approach in line with the Programme for Competitiveness and Work and will facilitate the continuation of this approach in the future.

The last three centralised agreements have involved the Government, the main trade unions, employers and farmers since 1988. The current agreement, the Programme for Competitiveness and Work— 1994-96 — was agreed in early 1994 and seeks to build on the achievements of the Programme for National Recovery and the Programme for Economic and Social Progress. All three agreements represents a consensus-based approach to wage determination covering both the public and the private sectors. They have sought to improve the competitiveness of the economy through moderate pay increases in a framework in which fiscal and monetary policy are geared towards price stability. A national pay norm is set after negotiations between the social partners. Payment by firms of the increases is not automatic, however, but depends on their ability to pay. Accordingly, the national pay agreements have allowed for an element of flexibility which is vital for employment protection and growth.

The agreements also cover other areas of policy such as Government expenditure and taxation reform. Under this integrated approach pay increases are influenced by the Government's overall tax and expenditure plans. The agreements have also embodied the Government's medium-term economic strategy and, in particular, its commitment to respect requirements of the Maastricht Treaty. The Programme for National Recovery, the first of the agreements, sought to rectify imbalances in the public finances. The latest agreement, the Programme for Competitiveness and Work, in addition to pay restraint, includes a comprehensive package of measures designed to enhance the economy's productive capacity. These measures include plans for taxation reform, structural reform of the economy and investment plans, all of which are geared towards preparing the economy for the final stage of economic and monetary union. The Programme for Competitiveness and Work is monitored by a central review committee, comprising representatives of all the social partners.

The Irish economy in recent years has been characterised by consistency in budgetary, monetary and exchange rate policy which has provided coherence in overall economic strategy and credibility both domestically and internationally. The continued economic stability and moderate pay terms provided by the Programme for Competitiveness and Work, and its predecessor agreements, have enhanced the competitiveness of the economy and contributed to the excellent performance in terms of output and employment growth. Furthermore, fiscal policy in conjunction with monetary policy has maintained confidence in the exchange rate, contributed to securing low interest rates and underpinned non-inflationary output and employment growth. The consensus and social partnership achieved under the three national programmes have contributed enormously to this process.

Over the nine years 1987 to 1995, GDP growth in Ireland averaged approximately 5 per cent per annum. This was more than twice as fast as growth in the European Union as a whole which averaged 2.3 per cent during the same period. The corresponding figure for the United Kingdom was 2.1 per cent. It is very important to note our better growth performance did not give rise to undue inflationary pressures. Between 1987 and 1995, our inflation rate averaged 2.1 per cent compared with 2.7 per cent for the European Union as a whole and 4.2 per cent in the United Kingdom.

Nor was our good growth performance the result of excessive levels of Government borrowing. In fact it was quite the reverse. Our general Government deficit has averaged 3.2 per cent over the past nine years and it has been comfortably below the Maastricht Treaty reference figure of 3 per cent every year since 1988. By comparison, the average Government deficit for the EU as a whole was 4.3 per cent for the same period.

There are now clear signals that rapid economic growth is being translated into impressive increases in the number of people at work. There are more people at work here than in any time since the 1930s.

While our strong growth rates are by now fairly widely known, it is perhaps not so widely appreciated that Ireland's employment performance in recent years has also been significantly better than both the European Union average and that of the United Kingdom. Over the same nine year period from 1987 to 1995 to which I referred earlier, employment growth here averaged 1.3 per cent per year. This was more than three times as fast as annual employment growth in the European Union. Our unemployment rate has also fallen in recent years at a time when unemployment rates in the European Union generally have been on the increase.

In 1996, for the third year in succession, the Irish economy will be among the fastest growing if not actually the fastest growing in the OECD area. GDP this year is projected to expand by 5.75 per cent compared to a projected OECD area average of about 2.5 per cent. Our strong growth performance this year derives mainly from increased domestic demand in the form of increased payment investment and private consumption. As in 1994 and 1995, this strong growth performance is being translated into jobs. Employment, after increasing by 40,000 in 1994 and 45,000 last year, is again expected to increase rapidly this year by about 31,000 or 2.5 per cent. This is the second fastest rate of employment growth in the European Union, only Luxembourg has a faster rate. It is also about two and half times the projected rate of employment growth of 0.9 per cent in both the European Union and the OECD area.

Despite our very rapid rate of output and employment growth, inflation is expected to remain fairly moderate this year at around 2.25 per cent. This compares reasonably favourably with the projected inflation rate for both the European Union and the United Kingdom which, in both cases, is expected to be close to 3 per cent this year. However, having said this, it is vitally important that we keep cost increases in Ireland down to the absolute minimum and, if possible, well below those of our trading partners. This has indeed been our record over the last decade or so, but we must maintain this progress.

Irish interbank interest rates are at their lowest levels for decades and this is reflected in the low rates of interest currently available to people borrowing to invest in businesses, to those wishing to purchase their own homes, to those who are already repaying mortgages and to personal borrowers. The low level of interest rates currently enjoyed by the Irish economy is a symptom of success — success in maintaining a low level of inflation; success in maintaining a stable and credible currency, success in maintaining a strong balance of payments position and success in maintaining discipline in fiscal policy.

Economists, bankers, pension funds and insurance companies — managers of investments around the world — have looked at the Irish economy and have given it an unequivocal "thumbs up". This is reflected not only in the strong international participation in the Irish bond market but also in the willingness of investors to put their funds into Irish pounds.

The Government in its programme A Government of Renewal commits itself to continuing the process of tax reform. The programme stresses that reform should favour the incentive to work, tackle the poverty trap, aim to reduce the tax wedge and encourage enterprise development and growth. I reject the false impression being created by some that no progress is being made towards reducing the tax and PRSI burden on employment income. That is simply not the case. Over the past number of years successive Governments have been undertaking a programme of tax reform with a view of increasing competitiveness and growth and thereby contributing to the maintenance and creation of sustainable employment. In recent years we have made significant progress in this regard.

In line with A Government of Renewal, a central tenet of the last two budgets has been to reward work by increasing take home pay. The 1995 and 1996 budgets have confirmed this Government's policy to continue, within responsible budgetary parameters, the process of tax and PRSI changes as an important element in overall strategy. Over the two budgets combined, personal allowances have been increased by close to 13 per cent. The standard income tax band has been widened by £1,200 in the case of a single person and by £2,400 for a married couple. This is an increase of close to 15 per cent — an amount which more than compensates for the reduction in mortgage interest and VHI reliefs. These increases are significantly above the expected rate of inflation for the two year period of under 5 per cent.

The last two budgets also focused on the lower paid by increasing the general income exemption limits by 8.3 per cent, thereby taking a significant number of workers out of the income tax net altogether. A new PRSI free allowance was introduced in 1995 and increased to £80 per week this year for most employees. This measure, a unique new feature in the Irish social insurance system, means that in the case of most workers, the first £80 of their weekly wage is disregarded when calculating their PRSI contribution. This allowance is of particular benefit to those on lower pay as it gives valuable relief to those who are already exempted from income tax and who would not benefit from further increases in either the exemption limits or the personal allowances. Furthermore, the threshold for payment of the health and employment and training levies has been increased in line with pay increases.

The combined effect of these measures has been to increase take-home pay, especially in the case of lower paid workers, thereby making employment more attractive. Equally importantly, these measures will ensure that we continue the progress being made in reducing both the employees' average tax burden and the overall tax wedge. Let me illustrate this point with a number of examples.

In 1994-95 the average tax take, including income tax, PRSI and levies, for a married couple, one earner with two children, earning the average industrial wage, was over 23.4 per cent; in 1996-97 this figure is expected to fall to below 22.1 per cent. For a single person, on the same wage level, the average tax take in 1994-95 was 31.3 per cent; in 1996-97 this figure is expected to fall to 29.7 per cent. In 1994-95 the average tax wedge, including employers' PRSI, for a married couple, one earner with two children, earning the average industrial wage, was almost 31.8 per cent; in the tax year 1996-97, after allowing for wage increases, the tax wedge is expected to fall to around 30.4 per cent. For a single person on the same level of income, the average tax wedge is expected to fall from almost 38.8 per cent in 1994-95 to around 37.2 per cent in 1996-97.

If we look at the period of the Programme for Competitiveness and Work, the percentage increase in take home pay for a single industrial worker on gross pay of £9,000 in 1993 has increased by 14.6 per cent when the tax changes and the basic pay increases, of slightly over 8 per cent under the Programme for Competitiveness and Work, are taken into account. For a family with one earner and two children the corresponding percentage increase at £9,000 is 16 per cent. For those further up the earnings scale the corresponding increases are not less than 12 per cent. These increases are significantly ahead of expected inflation over this period of around 7.3 per cent. A very large proportion of the increase in real take home pay over the period of the Programme for Competitiveness and Work is due to the improvements introduced in the income tax and PRSI areas.

Also over the period of the Programme for Competitiveness and Work the threshold at which the top rate of income tax applies in the case of a single industrial worker has increased by £1,914 to £12,850, even after allowing for the non-renewal of the PRSI income tax allowance. In the case of a married couple, one earner, the threshold has increased by over £4,100 to £24,900. This represents increases in the single and married thresholds for the higher tax rate of 17.5 per cent and almost 20 per cent, respectively, which are well above twice the expected rate of inflation.

These figures give a clear indication of the progress being made in the income tax and PRSI areas and refute statements which have been made repeatedly in this House by those who seek to minimise or understate this Government's achievements. I hope to achieve greater progress and it is my goal to continue the progress which has been made in the past two years, but it is clearly wrong to complain about the absence of tax reform as some have done. If tax changes are to be pursued, it is best to do so on a sustained basis. A succession of seemingly moderate tax reductions from year to year can, over a relatively short period, make a substantial difference. That is what we are in the process of doing.

A further aim of this Government is to encourage the development of enterprise in order to generate and maintain employment. To this end the lower rate of employers' PRSI was reduced from 9 per cent to 8.5 per cent and the income threshold for the higher rate increased from £173 per week to £250 per week, that is, from £9,000 to £13,000 per annum. This represents an increase of around 45 per cent. In addition, the main rate of employer contribution was reduced from 12.2 per cent to 12 per cent. For an employer with 30 employees earning £13,000 per annum, this has resulted in a reduction of almost £14,500 per annum in employer PRSI costs. These reductions are, of course, of significant benefit to the services sector which, as the Deputy is aware, includes many labour-intensive activities.

For several years now, the policy of successive Governments in relation to corporation tax has been to reduce the standard rate and to facilitate this by broadening the base. This Government recognises that the corporation tax rate is a critical factor in creating a pro-enterprise environment and in determining the competitiveness of Irish industry in international markets. Therefore, in my first budget in 1995, I reduced the standard rate of corporation tax from 40 per cent to 38 per cent. This was a further significant step towards our securing a standard rate which is comparable with the rates that exist in competitor countries. Deputies will recall that I indicated at the time that it is this Government's firm intention to reduce the standard rate further in future years, as resources permit.

In this year's budget I introduced a new reduced rate of corporation tax which will apply to all businesses liable at the standard rate. The new rate of 30 per cent applies from 1 April 1996 to the first £50,000 of taxable income in an accounting year. While all companies will ultimately benefit from gradual reductions in the standard rate, this year's measure provides proportionately greater benefit to the small business sector. This is in recognition of the fact that the small business sector has shown the capacity to create substantial additional employment.

A reduced corporation tax rate will facilitate the retention of profits for reinvestment to build up business and create employment, particularly in small businesses. This gives a positive signal to entrepreneurs who are deciding to expand their business. I hope the companies concerned will respond to this measure and use the facility to expand their business with a view to creating further sustainable employment. Of course, all proposals for changes in relation to the taxation of business must be considered in the context of the overall reform of the corporation tax system.

If our aim is to reduce the tax rate, then we must be prepared to broaden the tax base and endure that the various reliefs, concessions and exemptions make a net contribution to the state of the economy. For this reason, I introduced measures to curtail abuses of certain tax reliefs and to refocus relief measures on the productive areas for which they were originally intended. Deputies are aware that I took such action in relation to the relief for patent royalty income. I was not prepared to tolerate a situation where a relief was being misused by certain taxpayers at a significant cost to the Exchequer without a tangible return in terms of increased R & D activity.

The changes which I am introducing will limit the scope of these costly abuses, while ensuring that the relief is still available for genuine R & D activity. Similarly, the Finance Bill measures on the BES and section 35 relief for film investment are aimed at curtailing unintended uses of these reliefs and refocusing them on productive employment enhancing ventures.

Economic growth is the key to achieving a better material society for all. Ultimately, we want continued improvement in living standards for all members of the community, not only those in employment or in business for themselves, but also those who are the least advantaged, namely, the unemployed, the sick, the elderly and families with dependent children. There must be an equitable sharing of the fruits of economic growth if we are to achieve progress in a socially cohesive manner. A sharing society is one that will, in the end, provide the necessary incentive to ensure that we continue to grow and prosper into the future.

The Government has, of course, made the achievement of greater social solidarity a key objective in its economic and budgetary strategy in the past two budgets. In pursuit of this objective, we have adopted a range of measures aimed at improving the real level of social welfare payments, particularly for families with dependent children, and encouraging those who are currently unemployed to actively seek and secure employment.

In round figures, about 27 per cent of social welfare spending goes to pensioners; 28 per cent goes to the unemployed; a further 28 per cent is spent on family income support; 5 per cent goes on administration and the balance on illness payments. Each group of beneficiaries has had its social welfare payments increased in the past two budgets. All weekly payments and all adult dependant allowances have been improved in real terms. Over the past two budgets these increases have been in excess of 5.5 per cent. This compares with an inflation rate in the period of under 5 per cent.

These improved rates will ensure that the real purchasing power of social welfare payments will show an increase over the two year period 1995-96. In terms of the Exchequer, they will cost an estimated £180 million in a full year. Members will agree that this is a very significant commitment. It is indicative of the Government's and, ultimately, the general taxpayer's willingness and desire to ensure that the more vulnerable people in our society continue to share in the "growth dividend".

The policy direction initiated in last year's budget with regard to financial support for children was continued and further developed in this year's budget. Following from the substantial increases of £7 per child given in the 1995 budget, child benefit this year is being increased by £2 per child per month from next September. This will bring the monthly payment to £29 for the first two children and to £34 for the third and subsequent children. Taking the last two budgets together, a 45 per cent increase has been provided in respect of the first two children and a 36 per cent increase for other children. This represents real support for families with dependent children.

Research shows that families with a number of dependent children tend to be most at risk of falling into poverty. This applies in particular to those families where the head of the household is unemployed. Over one million children and almost half a million families benefit from child benefit. It is of particular value to families on low incomes. Furthermore it is not withdrawn when an unemployed parent takes up employment. In this sense, it does not constitute a disincentive to taking up employment. It is estimated that when the full year effects of both this year's and last year's significant improvements have worked their way fully into the Exchequer accounts, child benefit will cost in the order of £390 million per annum.

It will be generally accepted that the Government has made significant progress in recent years in ensuring that the least advantaged members of our society have shared in the benefits flowing from our excellent economic performance. Social welfare payments have been improved in real terms and the position of families rearing children has been particularly well catered for. A range of well targeted pro-employment measures have also been adopted and enhanced with a view to getting increasing numbers of the unemployed back into the jobs market. In the long-term, I believe this approach represents the best way of tackling poverty in our society.

The calls of those who espouse fundamental tax reform are invariably linked with demands for increasingly stringent control of public expenditure. I fully acknowledge that firm control of public expenditure, as part of a prudent overall fiscal strategy, is essential if the necessary additional resources are to be released to allow scope for meaningful tax reform. In this context, I have no difficulty defending this Government's record on controlling public expenditure. The facts speak for themselves.

This Government has succeeded in keeping the growth in public spending to its lowest level since 1989. In the period 1991-94, the average real increase in day-to-day Government spending was 6 per cent. Since taking office, this Government has succeeded in not only containing but actually reversing this excessive growth trend. In 1995 the real increase in public expenditure was just over 3 per cent and in the 1996 budget I have provided for an increase of 2.5 per cent. Gross non-capital supply services spending as a share of national income is planned to be lower this year than in any year since 1990. These facts prove that this Government has succeeded in keeping public expenditure under firm control — something which previous Governments since 1990 did not manage to achieve. This Government is fully committed to maintaining its prudent stance on public spending. This is being done as a wider budget strategy designed principally to ensure that Ireland continues to be in a position to meet the Maastricht convergence criteria.

The Programme for Renewal limits the growth in gross current spending to an average annual rate of 2 per cent in real terms in 1996 and 1997 — the first time that a Government policy programme has given such specific targets for controlling public expenditure. In setting our public expenditure targets. the Government has taken a considered view about the appropriate level of spending growth given Ireland's social and economic development. The modest increase in current spending provided for under our targets allows sufficient scope to ensure that the benefits of economic growth can be used to improve essential public services, particularly for those in greatest need, while at the same time providing resources for significant tax reform, especially reform directed at removing the disincentives to job creation.

Further evidence of this Government's committed and innovative approach to overall public expenditure and budgetary management — if indeed such evidence is required — can be found in the planned move to a new system of multi-annual budgeting which I announced in my Budget Statement on 23 January 1996. The phased introduction of a multi-annual budgetary framework, with effect from the 1997 budget, will make an important contribution to the overall effort to maintain firm control on the growth in public expenditure. The multi-annual approach, involving three year benchmark projections for the budgetary aggregates, will facilitate a planned approach to the management of the public finances. The process will involve the establishment of baseline projections of expenditure for three years ahead which will be agreed by the Government. These projections will be costed on the technical assumption of a continuation of the existing level of programmes and services. While it will still be open to Departments to seek additional resources over and above the baseline projections, the existence of such Government approved projections will provide a valuable benchmark against which such demands may be more rationally assessed, and should serve as a restraining influence on expenditure generally.

Earlier, I set out the role of the Programme for Competitiveness and Work. The provisions of the Programme for Competitiveness and Work pay agreement are helping to control the level of increase in pay rates and deal with restructuring issues. Moderate increases, in accordance with the terms of the agreement, combined with the fact that no further cost increasing claims may be made or processed under the terms of the agreement, are helping to control public expenditure. This control is essential if we wish to make further progress on tax reform. Continued moderation and certainty in pay costs is also essential if we are to improve competitiveness and bring further growth to reduce unemployment.

As already stated, the Programme for Competitiveness and Work is due to conclude at the end of 1996 — though the public service pay agreement continues until the end of June 1997. I would see merit in a new programme to succeed the Programme for Competitiveness and Work in order to address the major challenges which our economy and society as a whole will face in the next number of years, including involvement in Economic and Monetary Union and continuing to tackle employment through flexibility and improvements in competitiveness. A new programme would allow the social partners to play their part in addressing the challenges ahead and would continue the consensus approach to the management of the economy which has served the country well in recent years.

Let me repeat the essential and incontrovertible facts. This Government's firm and prudent management of the economy, combined with the moderate Programme for Competitiveness and Work wage increases and the significant tax and PRSI changes introduced over recent years has contributed to real increases in take home pay for workers. They have also led to low inflation, low interest rates and strong economic growth which is now being converted into a rapid expansion in numbers at work.

The Government will continue the process of tax and PRSI reform as resources allow. The principles and priorities which will guide the Government in this regard will include targeting lower paid workers, widening the standard rate tax band, increasing personal allowances and exemption limits, reviewing the efficiency of tax expenditures, continuing the improvements in the tax collection system and strengthening the Revenue's audit capacity in the fight against tax evasion.

While we have much work to do, the process that we have adopted over successive Governments, in some of which the Progressive Democrats, but not Deputy McDowell, were members, have brought us to the point where our record in European terms and OECD terms is the envy of other countries including New Zealand. I do not doubt that there is much more work to be done but we will continue to do it with the same level of success which we achieved to date.

We had a fairly wide ranging address by both the proposer of the motion, Deputy McDowell, and by the Minister on this motion and on the economy. I will try to confine my remarks to a number of those areas.

This debate will go nowhere unless we explicitly state our assumptions. We could make speeches about tax reform, PRSI and a pro-jobs economy for the new millennium, but they will not achieve anything unless they are focused on the agenda now facing the Government. I assume the Government will start discussions about the successor to the Programme for Competitiveness and Work notwithstanding the ritualistic dancing which has to go on before every national agreement. It follows from that assumption that nothing said in the House should damage or dictate the Government's negotiating stance for those discussions. The discussions are a part of the Government's housekeeping tasks, the management of Government services.

Any Government will seek industrial peace and consensus on pay for its own servants. The Government is like any other employer. It must negotiate with its employees on the basis of its strengths and weaknesses. In the past, the Government has broadened the base of the discussions to include all employers so that marketplace realities might enter the equation and produce a better outcome for the Government that would have occurred in an in-house public service pay round, in other words, the commercial realities facing the exposed, competing private sector would act as a surrogate constraint on the Government's freedom of manoeuvre in public sector wages. As a quid pro quo, the Government always has the capacity to move the parties towards consensus by commitments on job creation or by tax or PRSI measures.

The Government has to realise that the private sector may be reluctant to be used again in this way. Many employers feel that a new wage round negotiated in a three party programme will produce an unacceptably high price for them because the Government appears to be suffering from an embarrassing surplus of revenue and, if the longer term consequences are ignored, can afford more generous wage increases to buy industrial peace.

The private sector cannot afford a wage round at this point. If competitiveness is to be maintained, particularly when the exchange rate is IR£103 or higher to £1 sterling and if more jobs are to come on stream, the scope for wage increases in the private sector is nil. That is what Deputy McDowell is saying, although not in so many words. He speaks on behalf of the private sector which wants the Government to fund the next round entirely through PRSI and PAYE tax cuts.

Fianna Fáil agrees that tax rates must be lowered, but the irresponsible spending levels achieved by this Government must be pruned back first. In some ways, it would make better sense for us to state our firm concerns about limiting Government expenditure than to call for tax handouts. The Government should be in a position to go to the negotiating table and tell all parties that their hands have been democratically tied by this House. The public sector wage bill is too high and cannot be allowed to get higher. At the same time, revenue growth or no revenue growth, we must continue to make inroads on the structural defect in public expenditure.

It would make sense for the Government to stand back from the negotiations and let the private sector negotiations set the levels of a new round based entirely on the commercial realities of the marketplace. I would go so far as to suggest that, instead of embarking on a new round of discussions, the Government could do worse than announce that public service employees would be guaranteed the same increases that are negotiated in private sector bargaining — no more and no less. The Government could even promise to backdate it. Who could possibly criticise that stance? It is the stance the public wants. It is what the taxpayer is crying out for because he or she knows that real tax reductions will only come about when Government spending is responsibly controlled. The wage levels in the economy must in future be those which the private sector can afford and not those which the public sector negotiates with itself.

Are we rapidly approaching the position of having two distinct labour markets? In the private sector we have seen a huge increase in the number of part-time workers, specific contract workers and even the self-employed on schedule D. I was amused to learn that the recent leading High Court decision on who is or is not an employee for tax purposes concerned a person appointed by the Minister for Social Welfare as branch manager of an employment office in Tullamore. He was held to be self-employed for tax purposes; even the public sector is changing. The point is nevertheless valid. The kind of lifelong secure and pensionable employment still available in the public sector is a thing of the past in the private sector because private sector employment is no longer immune from competition and cyclical shocks; even banks have to compete now.

I do not know whether reforms in the public sector manpower policy, about which we have read recently, will mean an abandonment of the traditional Civil Service job package in favour of some imitation of our private sector fixed term contract of service; perhaps so. It is what Devlin wanted; it is what MacSharry wanted. Clearly, there are areas of the public sector where the phasing out of the traditionally appointed Civil Service may be in order.

Other areas, however, must be specially considered. I speak of the labour intensive public services in nursing and health care, in education, in the Defence Forces, the Garda and the prison service. The public servants employed in these fields must be specially catered for because they are employed and skilled in particular tasks in which the Government has the monopoly. Accordingly, their opportunities for job switching are clearly limited and the rewards of a secure and pensionable employment should be theirs. Comparisons with the private sector are not altogether applicable.

I want to state Fianna Fáil's position on privatisation. You will not see Fianna Fáil privatising the prison service or the health service. You will not see privatisation of the Garda or schools. These services are for the public and the Government must guarantee their quality. You may, however, see privatisation of services that can be brought in by Government at a saving — for example, transport or revenue collection — provided the changeover does not mean that the private contractors are not achieving the cost saving by exploiting the workforce or skimping on the quality of the service delivered.

Contrary to the views of some commentators, Fianna Fáil believes that, by and large, the taxpayers get very good value for the public service; Fianna Fáil believes that the labourer is also worthy of his hire. However, the days of strict comparability between public sector and private sector pay rates are long gone and any new wage round should recognise that reality. Otherwise, one will be artificially high and the other artificially low, and that is a recipe for disaster all round.

We should compare the social partnership we have had since 1987 with the New Zealand experience with which Deputy McDowell, I and other members of the Select Committee on Finance and General Affairs are familiar, having had the pleasure of listening to and deliberating with former New Zealand Finance Minister, Ms Ruth Richardson. They started a process of reform in the mid-1980s. She inherited the process which was started by a Labour Government some years previously. I asked her what kind of reaction she got from the public sector unions and the answer was that they did not have any difficulty. However, at this stage of our economic development if one attempted to implement some of the New Zealand changes, one would have considerable difficulty with the public service unions for the following reason.

In 1987 social partnership became the norm under the then Fianna Fáil Government. It is a great credit to the Irish trade union movement that they saw, more than anybody else, and were prepared to accept that unless we changed our economic ways we were not just on the verge of fiscal and financial bankruptcy, we were bankrupt. There was no other explanation for it.

Deputy McDowell has given an interesting and fairly accurate account of how we arrived at that situation and I have also spoken about it in the past. The trade union movement, more than any other sector, was prepared to lead its members. The realisation was there and credit is due to them but if in 1996 one was to attempt the level of reforms implemented in New Zealand, they would not be quite as receptive because we have turned the corner.

My objection to Government expenditure policies is that we are passing up an opportunity that we will not see again. One need not be a great economist or mathematician to realise that we are probably at the height of the economic cycle in Ireland. The growth rates we experienced in the past number of years are unprecedented. However, one must be aware of future events.

By the end of the decade we will probably be participants in Economic and Monetary Union, which will constrain our movement in the future. We will not be allowed to have large current budget deficits or large Exchequer borrowing requirements. As the Minister pointed out in reply to a question from me today, if we do, our partners have made various proposals about tax, punishment fines and so on. With one European central bank, we will not have the same flexible control over financial policy.

One does not need to be Einstein to work out that, with more members joining the European Community from the east and the Community getting bigger, we will not enjoy the same proportionate level of funds which has been transferred to us from the rest of the Community for the past ten years or so. That is not to say we will not get some EU funding in the future; we will, but it cannot be of the same proportion. The purpose of European funding was to increase Irish economic income per capita.

We cannot just cut the major programmes now in place. The Exchequer will be expected to take up some of the slack and that will put a strain on our financial resources. All those things coming together at one time will result in an enormous strain and a prudent Government or Administration would be taking steps to take account of that now.

I, as much as anybody, recognise the exigencies of electoral politics. However, the Irish electorate has changed over the past 20 years. When the Minister, Deputy Quinn, and I first came into the House the Minister came in against the run of play while I came in on the tide of great disenchantment with the outgoing Government. The manifesto which my party put before the people has been rightly critcised, and by none more so than the present speaker. However, politics has changed dramatically.

People may think that trying to store up a load of goodies to hand out in tax reductions will result in electoral success in 1997. That is how Irish politicians thought traditionally. Most of those involved in grassroots politics will say that is the way to do things.

Not any more.

In my view that is no longer the way and it will not work.

I agree.

I know the Minister agrees but I do not know whether he can bring everyone in his political party, and his partners in Government, to the same thinking.

There are great myths about public spending. The Minister talks about real rates of increase, and we debated that before Christmas. I served in this House with the late Deputy John Callanan of Galway. He used to speak from the backbenches, he was a man of the most eminent and sound common sense. He came from a tradition in my party — and the Labour Party — of sound common sense. He called a spade a spade. The fact that he did not have formal university degrees did not mean he was not the most educated person, in the widest sense, I ever met in this House.

In our parliamentary party he argued against the idea of percentage wage increases which he said would prove to be a disaster. He said that someone on £100 a week getting a 10 per cent increase will have £110 but a person who is on £20 will only be £2 better off, in other words, the percentage wage increase widened the gap between these two workers. This seems to have been lost sight of in national wage agreements in recent years.

The argument can be applied to public spending. We have slowed down the rate of public spending in percentage terms but that is not to say it was not totally out of control. Any Government must recognise a few simple realities. Much of the time we spend fighting over the Estimates is a total nonsense. Let us say that gross Government spending this year is £14 billion. Nearly £4.5 billion of that goes to social welfare payments. They are man made schemes. If people get sick, we will pay them just as we pay the unemployed. We have no control over that element of expenditure. About £200 million more goes to repayments on the national debt. Nobody would be so foolish as to suggest that we renege on our national commitments. Nearly £5 billion goes on public pay and pensions. If one adds up those three figures alone, they come to £11 billion.

One must accept there are things that Government must do. We spend much of our time fiddling around looking for £2 million here, £3 million there and £5 million in the other place, but unless the Government is prepared to take some control over those three elements of spending, the rest is a waste of time.

I made a point to the Minister about social welfare, privately and publicly, during the debate on the Finance Bill and at other times for the benefit of his civil servants in the Department of Finance. Statements about the difference between the live register and Labour Force Survey are rubbish. There should be no difference. The people who sign on every week are real people with real names and addresses. The Department of Social Welfare spent millions of pounds computerising the system over the last 15 years. If the political will was there, at the press of a few buttons one could tell the number of people involved, what school they had attended, previous jobs, how many children they have and what masses they attended, if they went to mass.

To say a survey is more accurate than actually counting the people would be like standing at the top of Grafton Street and surveying people on how they will vote in the next election and deciding to publish that and not bothering to conduct an election at all. The electorate of somebody who suggested that would decide the person was not fit to be in the House.

They would not be.

I am aware the Minister and previous Ministers received that advice, but it is patent and palpable nonsense.

In the years ahead we will look back and say chances were wasted in the period 1993-97. I am aware the Members with whom I served in Government wish to do the right thing, but the exigencies of politics will dictate that, when we look back, we will say a great chance was wasted. Since entering Opposition, I have become increasingly convinced of this.

Debate adjourned.