Private Members' Business. - Finance Bill, 1997: Second Stage (Resumed).

Question again proposed: "That the Bill be now read a Second Time."

I listened as Deputy Cullen trotted out the old mantra which we have come to expect from Fianna Fáil regarding the incredible levels of public spending in recent years. Once again this evening we heard there has been a 20 per cent increase in public spending and only a 6 per cent rise in inflation. The so-called economists on the far side constantly draw this comparison between the inflation rate on the one hand and the levels of public expenditure on the other. However, in recent years, the growth in our economy has been truly spectacular. We have had cumulative growth rates of the order of 30-35 per cent which is unparalleled in Irish history. Is it not fair that a significant portion of that 30-35 per cent should be spent on our people, to reduce hospital waiting lists, to provide extra facilities for people with learning disability, and on education? Nobody in this Government will ever apologise for trying to do something about the terrible school buildings that served to accommodate primary and second level pupils over many years and about which Fianna Fáil Governments did nothing. We have increased public expenditure, particularly in health and education, and we do not apologise for it. Why should we? We have taken a relatively small portion out of the massive growth in the economy and applied it to useful developments for our people. Surely that is what a Government is for.

Deputies Cullen, McCreevy and others are, in Deputy Rabbitte's famous phrase, "the PD cuckoos in the Fianna Fáil nest." They are trying to create a situation whereby a "slash and burn" Fianna Fáil-Progressive Democrats Government will return us, as my party leader, Deputy Spring, said the other day, "to the misery years of 1989-92" when the social services were decimated by this harsh, conservative, relentless cost-cutting Government which left so many people — among them constituents and friends of mine — waiting for heart by-pass operations. Terrible damage was done during those years to our social infrastructure. There is no way we can allow our country to be returned to that, particularly after the wonderful progress we have made in recent years.

I commend the Minister for Finance, Deputy Quinn, on introducing his third Finance Bill. It is an historic development for the Labour Party and the left wing of Irish politics that at the helm of our financial affairs is a man steeped in the history and traditions of the Labour movement. Given his outstanding record he must be the best Finance Minister since the foundation of our State. It has to be hoped that he will be asked by the people to continue in this rainbow coalition after the forthcoming election, whether it happens sooner or later this year. Our overall growth rates are incredibly impressive. We have just passed out the United Kingdom in terms of income per capita, and our economists tell us that over the next four or five years, if we sustain this development, and I believe we will, we will approach German levels of GDP per capita.

There will be difficulties in the coming years in regard to the timetable for economic and monetary union. Members on the Opposition benches lamented how little we have done to prepare for it. However, Deputies get endless invitations to seminars organised by IBEC, the banks, ISME and other groups in the business area who are providing information in an effort to get people as ready as possible by 1 January in two years' time when the locking procedure will start to come into play. The Minister has led an important and general information drive throughout Irish business and the workforce to get us ready for this important development. It may well suit us best if, despite recent developments in the election campaign and despite what commentators say, a new Labour government does lead Britain into economic and monetary union beside us. It certainly would make things easier for our exporters, particularly those involved in the food area, some of whom I know will be concerned about the possibility of a deviation between our currency and the British currency.

In the early sections of this Bill the Minister has translated into effect a very responsible package of tax cutting measures. He has attempted in a very prudent way to redistribute, by way of taxation measures, the benefits of our economic growth and development to the broadest possible section of our people, particularly the lowest paid. Most people in this House would commend him for that and support him. The reduction in the standard rate of tax to 26 per cent is an important development as is the raising of exemption limits to £8,000 per annum for a married couple. At one stage in its history my party implemented a 20 per cent basic rate of income tax. As our growth continues we could look at keener rates of personal taxation. That is something we must keep in mind as time moves on. However, we cannot do it at the expense of devastating the social infrastructure. The Labour Party will never support such an approach. I commend the Minister for his moves on personal taxation.

Deputy Bertie Ahern referred earlier to an informal all-party committee which meets to deal with the problems of our senior citizens and which I had the honour to chair for a number of years. This committee, with the trade union retired workers' group, put forward a major programme of tax reform particularly for our senior citizens. I commend the Minister for listening to Mr. Mattie Merrigan and his friends on that committee, as he has done over the past three years. The doubling of the age allowance, which was static for many years under Fianna Fáil Governments, is a testament to his concern. I also welcome the moves to ease the taxation provisions in unemployment and disability benefit.

It is important that many of the measures introduced during the ill-fated 1989-92 Government, encapsulated in Deputy McCreevy famous dirty dozen cutbacks, are unravelled. I am heartened that in this Bill we have taken another step forward in doing so. This has also happened with the Social Welfare Bill where Deputy De Rossa introduced a sickness allowance. It is one of the most important reforms of the past four and a half years.

I welcome the moves by the Minister for Finance to assist second chance education at third level. In section 6 he introduces tax reliefs to assist people who wish to continue on to third level. As one who took advantage of second chance education through distance learning, I am heartened by this attempt to respond to older people who did not have a chance to complete second level education. I urge the Minister in subsequent budgets, over which I am sure he will preside, to develop this measure and assist mature students in terms of tax relief. It will give them encouragement and support in their studies.

The Minister's approach is responsible and prudent when contrasted with the erratic, greedy, crazy and ludicrous taxation proposals of the Progressive Democrats Party, especially in recent weeks. Not alone does its figures not add up, but it puts forward proposals to levy a new series of taxes. I was proud as leader of the Labour group on Dublin City Council over the years to staunchly and bitterly oppose the imposition of service charges. I introduced, with the assistance of the Minister who was on the council at the time, the last six budgets and did not include service charges. We did not agree with double taxation. We felt that working people who had paid for vital services should not be subjected to an additional charge. In Howth, Sutton and Baldoyle in my constituency, there has been a massive struggle against these vicious service charges imposed by Fingal County Council. The vast majority of people objected to the unfair nature of the tax. The Progressive Democrats Party demands that the people of Howth, Sutton and Baldoyle pay service charges. It is an appalling and disgraceful development and has to be condemned. That party is telling the people of Donaghmeade, Raheny, Kilbarrack, Airfield, Darndale-Belcamp, Priorswood, Bonnybrook and Coolock that they will also pay service charges. It wants to burden the working people with another new massive tax.

Over the past week, Fianna Fáil has been hiding behind the skirts of Deputy Harney. It should tell us whether it also agrees with the reimposition of such charges and tell people in rural areas whether the assistance which the Minister for the Environment, Deputy Howlin, has proposed with the support of the Government will be whipped away from them and whether it will go along with the Progressive Democrats Party in an unholy alliance to impose these dreadful charges. The campaign against service charges was led from urban areas, especially Dublin, but Deputy Howlin's recent moves tried to encompass the country's entire water supply. The Progressive Democrats Party is divided and it is remarkable how Deputy Molloy could possibly support the ludicrous and crazy proposals upon which Deputy Harney has embarked.

The people of Dublin and their public representatives will never agree to the reimposition of service charges. Recent debate has shown the real agenda of the Progressive Democrats, which is to privatise the water supply. The best model they use for comparison is the United Kingdom where a series of water supply systems were privatised. Key management teams received huge increases in salary and additional moneys, very little of which was translated into reinvestment in the water system. The result is that an average English family in the Midlands receives a bill for £1,000 per annum. In the north of England, there are water tankers on the streets, a ludicrous denouement of a crazy policy.

The Progressive Democrats Party is at least consistent in its taxation policy. It is clear increased development is part of its belief in low wage, non-unionised, socially divided societies with all public services privatised. When one reads the notorious document "Tax and Spend" drafted by Deputy McDowell, there is a gap of £2,000 million to be made up and this will be done through the sale of all public sector companies and the public service itself. It is no wonder the leader of the party eulogises about economies such as Hong Kong where people are low paid. This is the society Deputy Harney wants here, where workers would be on short-term contracts without trade union support. People would be on low pay and liable to be dismissed or hired at a moment's notice.

The document also refers to the New Zealand model where the Government introduced the type of reforms which Deputies McDowell and Harney wish to inflict on us. The fundamental development there has been the translation of that society from a high income economy with almost total employment to a low salary, insecure, service economy with the highest proportion of millionaires per capita in the world but where the New Zealand churches say that one-third of children live in poverty. While investment income rises steadily, wages have been cut by £2,000 billion since 1991 and its economy has the highest level of debt in the developed world. I hope that is not a road down which Fianna Fáil would want to lead this country in conjunction with the Progressive Democrats Party. It is a crazy, socially divisive road and one which will end with tears.

I welcome the Minister's moves to assist business, particularly small and medium sized enterprises. His cut in the levels of corporation tax in section 33 must be welcomed. It is part of an ongoing programme which he intends to pursue. His continuance of the 10 per cent rate of manufacturing corporation tax is also to be commended. I welcome the reduction from 30 to 28 per cent in the levels of corporation tax for those businesses with under £50,000 profit. Three years ago the Minister, Deputy Quinn, set out to strengthen enterprise and to create work and social partnership. The many interesting and innovative measures introduced in the Bill to assist business are typical of his policies. In drafting section 12 he listened carefully to the comments of business interests and trade unions regarding companies that need to restructure and, as a result, exempted from income tax lump sum payments made to employees in return for extra efficiency. In sections 19 and 21 he increased the thresholds for capital allowances.

One of the most important innovations in the Bill is contained in sections 7, 8 27 and 51. Those sections provide important reliefs for access to BES for DCM companies. I hope the Stock Exchange supports this move because up to now many small companies were unable to get assistance from the Stock Exchange. The Bill in an important development in that regard.

Sections 16 to 18 contain many important provisions for the farming community. The Minister listened carefully to the representations of farming interests so that he could make their enterprises more efficient. I welcome in particular section 23 which extends the deadline for the urban renewal scheme to 31 July 1998, with a specific extension to the Custom House Docks area. We are all aware of the great success of the IFSC in creating hi-tech jobs in the financial services area. The provisions in section 24 will be an important development to the north bank of the Liffey which, until recently, was one of the most deprived areas in Europe. It is now the nucleus of an important earning capacity for this economy and has contributed enormously to our success rate in recent years.

I was amused to hear Deputy Cullen refer to problems in the regions. FÁS recently published a report on regional trends in the labour market in the late 1980s and early 1990s, a fundamental conclusion of which is that the east region lost out heavily in terms of job creation up to 1996. While we did well in terms of services, we fared worse than other parts in terms of manufacturing. The east region is made up of Counties Dublin, Meath, Wicklow and Kildare. Up to 1996 the industrial base of that region increased by only 6.6 per cent compared to an average growth rate of 10.2 per cent across the country. In some areas, such as the west and the midlands, the overall growth rate in manufacturing was approximately 16.8 per cent. There has been a great deal of comment in the newspapers, particularly in the midlands and the west, about the number of jobs that have been created in the Dublin area. They have been created mainly on the northside and in the Blanchardstown area, which were starved of jobs for many years. The Government has tried to redress the imbalance in job creation. I welcome the findings of this report. While the east region is still not getting its just deserts, we are faring a little better in recent years.

I welcome the provisions in section 26 to assist the film industry. Even though nearly every time one visits an historical building in this city — such as Dublin Castle last Friday — a film is being made, the major developments of the past few years have slowed somewhat. The increases in the threshold for corporate investment from £7.5 million to £15 million and from £2 million to £3 million are welcome. Because of the success of our writers and film makers in recent years, the House should continue to give a lead in this area and, in this regard, the Minister has obviously listened to the Minister for Arts, Culture and the Gaeltacht and film industry.

I also welcome the Minister's move in section 57 in regard to excise charges and penalties for the sale of illegal cigarettes. The large scale sale of illegal cigarettes on our streets is very annoying when we know the Exchequer is being defrauded. Also, as evident from recent Garda reports, some of the people pushing the sale of these cigarettes have close connections with serious drug related crimes. I also welcome section 65 which empowers the Garda to seize those cigarettes.

Some time ago The Economist reported that the majority of illegal cigarette imports to Europe was produced by American tobacco companies, who are experiencing difficulties selling their product in America. Consequently, they are illegally pushing massive quantities of cigarettes into Europe. Is it possible for the Government to discuss this matter with the American Government? As evident from recent news reports from America, the American public is concerned about the hazards of smoking and is making life difficult for cigarette manufacturers who have lied repeatedly to the public about the danger to health of cigarette smoking. If the report in The Economist is correct, that problem is now being inflicted on us. The American Government should take some responsibility for the sale of this tobacco here.

I welcome the provision to reduce capital gains tax and the Minister's attempt in section 83 to clarify the position in regard to commercial child minding. He has made a fair attempt to exempt registered childminders and créches from VAT and that is to be commended.

I also welcome the Minister's attempt to close the loopholes which defrauded us of revenue in the past. I welcome in particular the provisions in sections 9 and 11 regarding scholarship payments and C2 and C45 certificates, respectively. However, he should re-examine the position regarding C2 certificates because many building workers are still not satisfied with the position. Section 22 deals with the abuse of capital allowances for hotels.

Section 101 finally abolishes the residential property tax, an unfair tax imposed primarily on Dublin householders. Deputy McDowell spoke about increases in stamp duty. Auctioneers have claimed that has had a dampening effect on the huge explosion in house prices but, unlike the residential property tax, it will not be ruthlessly applied. I am pleased the RPT has been abolished.

I welcome the Finance Bill and hope it is the third of many Bills the Minister delivers to the House. He has been a good steward and guardian of the nation's finances. I look forward to that continuing in this rainbow Government and I hope we do not go down the Progressive Democrats road which would destroy our economy and turn us into another New Zealand case, which would be detrimental to the interests of Irish workers.

I wish to share my time with Deputies Hugh Byrne and Cowen.

An Leas-Cheann Comhairle:

That is in order.

This Finance Bill gives legislative effect to most of the provisions in January's budget. That budget and its two predecessors are supposed to have made progress on the road to tax reform. Any objective observer of the scene would say the progress which has been made is minimal.

Consider the record of this Government on personal tax reform over the last three years. It has brought in three budgets at a time when the economic and fiscal climate was never more favourable since the foundation of the State. Low interest rates reduced the impact on the Exchequer of a steadily rising national debt. Low inflation reduced the upward pressure on public spending. Low increases in nominal pay rates, through national agreements, reduced upward pressure on the public pay bill.

All this, in the context of sustained economic growth on a par with the tiger economies of South East Asia, served to create the most favourable climate for reforming our personal taxation system, but that is not the way things turned out. In 1992 the present Tánaiste promised change, and very small change we got — just a penny off income tax in five years.

Compare this with the record of the 1989-92 coalition in which the Progressive Democrats participated with Fianna Fáil. Economic circumstances were by no means as favourable as they are now. For one thing, our major trading partner, the UK, was in the throes of a severe recession. Yet, remarkable progress was made on tax reform within a relatively short period.

In just three budgets that Government cut the basic rate of income tax from 32 per cent to 27 per cent, cut the higher rate of income tax from 56 per cent to 48 per cent, and increased bands and allowances significantly. Those tax cuts were strongly criticised at the time by the parties which are now on the opposite side of the House. Yet, does anybody believe we would be creating jobs at our present rate if those cuts had not been introduced? Does anybody believe we should turn the clock back and return to the very high rates we had in the late 1980s?

These questions are particularly relevant in the context of the higher rate of income tax. Both Labour and Democratic Left were trenchant in their opposition to the eight point cut in this rate which occurred between 1989 and 1992, but if that cut was such a bad idea why have they not sought to reverse it in Government? The left-wing parties still have an obsession with resisting any reduction in the higher rate. In fact, there has been no reduction in the higher rate in any of the five budgets since the Progressive Democrats left office.

This might make some sense in political or economic terms if the higher rate was paid only by some wealthy elite, or even if it was paid only by those on relatively high incomes, but this is not the case. More than half a million people pay tax at the top rate in this country — that is 40 per cent of the workforce. A single person becomes liable for the top rate of tax at an income of just £261.50 per week. In other words, the typical industrial worker faces a marginal tax rate, including PRSI and levies, of 55 per cent. How can it be right that, if a person earns an extra tenner, the State gets £5.50 while he or she only gets £4.50?

Labour has always resisted any cut in the top rate on the basis that what is really needed is a steep increase in the standard rate band. However, why is it that after five consecutive budgets under Labour Governments, a person on £261.50 is still paying tax at the top rate? We must apply at least some of the fruits of economic growth to reducing both the standard rate and the higher rate. If we do not, we run the risk of losing our international competitiveness.

Take the example of the United Kingdom. The Conservatives have given Britain a standard rate of 23 per cent and a top rate of 40 per cent. There was a time when an incoming Labour Government might have been expected to change that but not any more. Consider what the shadow Chancellor, Gordon Brown, has had to say about tax policy in the run up to the British general election. On the basic rate he has said: "A Labour Government will not increase the basic rate of income tax". On the top rate he has said: "It is because we understand the importance of work that there will be no return to penal marginal rates at the top. As a signal of the importance we attach to rewarding work, I want to make clear that I will not increase the top rate of tax".

Showing the extent to which the British Labour Party has modernised its outlook on economic issues, Mr. Brown went even further, saying: "My tax cutting ambition is to introduce a new lower starting rate of tax of 10p [in the pound] to encourage people to go back to work and help all hard-working families".

There is now something approaching a political consensus in Britain on the need for a low tax economy. All the indications are that Germany is beginning to move in the same direction. Chancellor Kohl's Government is now talking about bringing down its top rate of tax to 39 per cent in a bid to regain some of the competitive advantage which the German economy has lost in recent years.

Do we want a low wage economy in Ireland? If not, why do we insist on taxing well paid, and even modestly paid, jobs so highly? Does anyone believe we can sustain a 48 per cent rate indefinitely while the British have a 40 per cent rate and when the Germans are moving towards a 39 per cent rate?

Ireland has to compete for international investment in sectors such as financial services and computer software. These sectors produce high quality jobs, offering good earnings to well qualified specialists. We will not attract this kind of labour-intensive activity if our top rate of tax makes us uncompetitive in the international market. It is time we faced up to economic reality on the issue of personal taxation. We must use our current period of rapid economic growth to get our tax rates down and improve our international competitiveness.

I will refer briefly to an item I had hoped would be in the Bill but which, unfortunately, is not. That is the question of roll-over relief in capital gains tax for particular activities. That relief generally applies at the moment to agriculture and industry. It does not apply to a very limited number of activities, one of which concerns race courses. At present, Limerick Race Course is endeavouring to sell its property for the purpose of building a new course on a more suitable site some miles away. Its owners discovered recently that if they sell the property and if they reinvest the entire proceeds, as is their intention, in the development of the new course — the land for which they have already bought — they will be subject to capital gains tax on the entirety of the sale price of their existing property, even though they will get no benefit themselves from that.

They have had the property for years.

They have had it for 70 or 80 years, yes, but they are subject to the tax, unfortunately. If they were to get, for example, £2 million they would be liable for £800,000 in tax. This was confirmed recently by the Revenue Commissioners. It was pointed out that the roll over relief in these circumstances is available to virtually everybody and the Revenue Commissioners agreed. However, for some reason, through oversight or otherwise, the original legislation failed to apply it to a company of this nature. This important matter has been brought to the Minister's attention and I understand he is sympathetic to it. If this cannot be done, it may mean the end of racing in Limerick which would be a great tragedy.

I make this plea on behalf of that company on the day that its chairman and my friend, the late Mr. Hugh McMahon, was buried. It was one of his last wishes that this would happen. Nobody did more for racing in Ireland, particularly in Limerick, that he did. I hope the Minister will introduce an amendment on Committee Stage to deal with this issue. Nobody, not even the Labour Party, could object to it because it already applies to virtually every activity where assets are rolled over. It seems anomalous that it does not apply to a company which owns a racecourse. An amendment, which I understand has already been submitted to the Minister, would be sufficient. Perhaps the Minister will indicate in his reply that he will meet this reasonable request.

I make a plea on behalf of the economy to change our attitude to competitiveness. Allied to taxation, I cannot think of anything which will make a better contribution to the advancement of our economy than a competitive atmosphere, which we lack. Where competition has been introduced in many monopoly activities, particularly State-owned activities, it has been done thanks to the European Union forcing us, frequently against our will and with great reluctance by successive Governments, to do so. Within the past few days, Telecom Éireann, for example, announced its third reduction in 18 months or two years in overseas telephone charges. These reductions, 15 or 20 per cent in many cases, are confined to overseas calls because that is the only area Telecom Éireann is open to competition. There are no reductions in the extraordinarily high charges it levies for local calls and internal trunk calls.

Another State monopoly which operated in a cartel — an even more dangerous form of monopoly — in the mid 1980s was Aer Lingus. The average fare between Dublin and London in 1984, when I fought in this House for the introduction of competition, was £208. The average fare between Dublin and London 13 years later is £69 and it is possible to get fares as low as £49 return. We would now be paying approximately £300 on the Dublin-London route if it had not been for the introduction of competition. I was almost hounded out of this House for arguing for that. I was told that the national interest and the interest of Aer Lingus were synonymous. Within two years of the removal of that monopoly and the breaking up of that cartel, the number of passengers on the Dublin-London route increased by two million. If that is not in the national interest, I do not know what is.

If I had time, I could detail many other areas where that form of competition and the break-up of monopolies and cartels of State-owned companies must stop. It will stop, not unfortunately, because the Government wants it to stop, but because it will be forced on us against our will at times by the European Union. I wish the European Union would force these things on us more quickly because they are for our own good. When it stops, we will look back and ask how we put up with it for so long without changing it ourselves. We are penalising and depriving ourselves of tens of thousands of jobs by our failure to grasp that obvious truth.

I am delighted to have this opportunity to discuss national and local issues. There is a major crisis in farming. Evidence of this crisis has begun to reach the public consciousness in recent weeks but its effects will be more acute in the autumn when families involved in beef, dairying and cereal production begin to suffer. As times goes on, it will have further negative impacts on agribusiness generally, factory workers and the haulage industry. I am sure all Deputies, particularly those in rural areas, are aware of the problems because the IFA and other farming bodies contact us twice and three times a week. I tried to raise this issue in the Dáil over the past two days but I was deafened by the silence on the opposite side of the House. Perhaps the IFA felt it was a worthless exercise to contact the Government. I assure the Minister of State at the Department of Finance, Deputy Doyle, that we will raise this issue at every opportunity until we have a full debate on it.

People should compare Fianna Fáil's record on agriculture with that of the rainbow coalition. It has been suggested that the real Minister for Agriculture, Food and Forestry is Deputy De Rossa. Before we left office cattle prices were 107p per head; they are now 78p to 80p.

Did the Deputy hear about BSE and a few other problems along the way?

The Minister is aware of this because she has more than a passing interest in agriculture. Milk prices have dropped from between 110p and 125p per gallon to below 100p. We have lost the Egyptian and Libyan markets and the Russian market is closed to 40 per cent of beef exports. The Iranian market is closed to the Irish beef exporters because the Tánaiste, Deputy Spring, will not agree to a reconvening of the Irish-Iranian commission.

The Deputy should tell the House why that is the case.

We should not cod ourselves. The Minister knows there is a major problem concerning the beef industry in rural Wexford and other areas.

The Deputy should have more respect for the facts.

When I received a document, from the Minister for Agriculture, Food and Forestry, Deputy Yates, as I am sure the Minister of State and the 33,000 households in the county did, I thought it might respond to some of the problems we face.

Who paid for the document?

Did the Minister, the taxpayer or Ben Dunne pay for it? As the Minister of State, Deputy Doyle, is a close personal friend of the Minister, Deputy Yates, she might ask him who paid for it and let the county and the country know. I wonder about the close personal relationship between the three Fine Gael Deputies representing County Wexford. Despite reading carefully through this document, as if with a magnifying glass, I cannot see the names of the Minister of State, Deputy Doyle or Senator D'Arcy, but I am sure that was an oversight by the Minister, Deputy Yates.

He covers a fair period in the document as he has gone back ten years in claiming credit for various things that happened in the county and gone forward two years — 1999 is mentioned. During my 15 years as a public representative, I cannot recall the Minister, Deputy Yates, being involved in very much prior to the end of 1994. His record in office speaks for itself. This document was circulated to every house in County Wexford which is heavily dependent on agriculture and the word "agriculture" is not mentioned in it. That is a reflection on his ability.

He is Minister for Agriculture, Food and Forestry.

I am shocked and disappointed he did not mention the word "agriculture" and some of the problems affecting that sector.

I wish to raise the matter of personal assistants for the handicapped. Mr. Kenneth Kilduff wrote to me requesting that I ask the Minister of State to insist that the Ministers, Deputies Noonan and Quinn, provide personal assistants for the handicapped. His letter states that prior to 1995 he was very depressed, had a significant physical disability and was killing time in sheltered employment, but he has moved on since with the help of a personal assistant under a FÁS scheme, which I recommend to the Minister of State.

I am sure the Minister of State will favour the inclusion of Rosslare Strand in the tourism resort scheme. It is statistically proven that Wexford has less rainfall and more sunshine than any other part of the country and one million visitors pass through the county on the way to and from Rosslare Harbour. If merit were the criterion for inclusion in the scheme, Rosslare should have been included. Because of time constraints I cannot outline all the reasons.

I wish to refer to Bridgetown Vocational College which is close to the heart of the Minister of State. I understand the proposed extension which was due to proceed is now off the agenda. Why is that the case? That college which was built a few years ago to cater for 500 pupils now has 700. Although the baby boom seems to be over the numbers attending that college continue to increase. For that reason it is successful and we should be seen to support it. I ask the Minister of State to take a personal interest in this matter and to press for the approval of the college extension.

There is very limited time to debate the Bill due to the Government insisting that Second Stage should be dealt with in just two days, which is unprecedented in my experience as a Member of this House. The Finance Bill is the most important one to come before the House in any year. The arrogance of the Government in respect of this Parliament is evident to all. It is an arrogance that will not bring many political plaudits when its Members talk to the people, if they are not already doing so as we face into an election. One would have expected that even as motley a crew as this lot would show some sense of imagination on the basis that we are on the eve of an election.

I found this to be the most boring Finance Bill I have ever had the misfortune to read. There is very little in it. It should be used as an instrument not simply to implement the budget proposals. If there was any political cohesion in this Administration as to how we could improve the private sector to ensure the provision of more long-term jobs in the economy, one would have expected some assistance to the risk takers. The reason we do not see that is because we have a left wing Administration. The Minister for Finance and the Tánaiste are dictating the pace.

The Taoiseach's party, by his admission, has no policies as a separate and distinct party. Fine Gael came into this Administration for the purpose of saving its leader's political skin. Having hidden him in a wardrobe for the past two months, more and more people think he is doing a good job, but when he goes out on the hustings we will expose him for what he is.

The attempt being made by proponents and supporters of this Government who suggest this Administration is economically competent is galling. The thrust of this Administration is towards increased public spending by reason of its political composition and particularly where the power in it lies. It produces far more lax financial targets than the compromise proposals we had to produce in the Fianna Fáil-Labour Administration. They were more lax than if a Fianna Fáil Administration had been in office on its own. Unfortunately, the gains made since 1987 are being put at serious risk. There is considerable growth in the economy based on decisions made as far back as then which are now coming through in terms of the performance of the economy, but unfortunately we are whittling away the gains made over those years prior to this Administration coming into office. An objective criterion to determine if a Government is economically competent would be whether it is meeting its targets. Despite the laxness of the targets this Administration set itself, it has exceeded them fourfold on the expenditure side. That is an extraordinary performance. One would think it would be beyond the ability of this incompetent group to come up with as many ideas for spending taxpayers' money and seeking to bribe the public with their money. Not only are they doing that, but they continue to mortgage the future. The prospect of real tax reform and tax relief for workers in this economy is being put at risk because of the large increase in the budget base, which is not sustainable in the long-term. We saw in yesterday's Financial Times that even if our economic growth is reduced by 1 per cent between now and 1999 in terms of the projections built into the three multi-annual budget projections brought forward by the Minister for Finance, we may not meet the Maastricht criteria of staying within the 3 per cent current budget deficit. That is criminal. That is the result of three parties, which one would have thought had very little in common, coming together. Fine Gael is happy to be a partner in this Government because it does not have a distinct policy. The Taoiseach has said Government policy is Fine Gael policy so they make it up as they go along.

I heard the contributions of Deputy Broughan and other Labour Party Deputies during the debate. It is interesting to see Labour Party Deputies coming in to debate in this House because there have been many occasions in the recent past where they refused to come in because of their political embarrassments, but now people like Deputy Broughan, a graduate of the Mao Tse-tung school of economics, seek to take credit for the abolition of the ridiculous residential property tax which was imposed by the Labour Party under the previous Administration. Labour Party Deputies are now seeking to save their electoral faces having walked away from the middle class who elected them in the first place. Many people in urban and rural Ireland are waiting for Deputy Spring and his band of malcontents to give their judgment on who should run the country in the future.

It is extraordinary how quickly Democratic Left has taken to democratic Government like ducks to water. These reformed Marxists, who gave us the impression they had an alternative view of how the economy should be run along the lines of Deputy De Rossa's friends in North Korea and elsewhere, have become the best supporters of the Taoiseach in this Fine Gael led Administration. Of course they have been exposed as political careerists. While some of them may know the price of a pint, they are in the extraordinary situation in a western democracy where only a minority of their parliamentary party would know the price of a gallon of petrol since four of them are being driven around in State cars.

All this clearly dictates that nothing is being done for the small business sector in this Finance Bill. Fianna Fáil has set out in its policy document "Rewarding the Risk-takers" the many basic, practical steps which could be taken to improve that dynamic sector of the economy.

On agriculture, the Minister of State berated her constituency colleague. Will she ask the Minister Deputy Yates to undo the damage he has done by destroying the live export trade? Despite the fact that Ireland is the biggest exporter of cattle in the EU, it was the Irish live cattle exporters, such as the Purcells and the Horgans, and not the Department of Agriculture, Food and Forestry who went out and won markets in Egypt and Libya. They did so not on the basis of a telephone call from a politician in Merrion Street to President Mubarak or anybody else. An extraordinary situation now exists in Ireland as a result of a unilateral decision of the Minister, Deputy Yates, and this Government that Irish exporters of live cattle must fill the contracts they have gained in Egypt and elsewhere by buying and shipping cattle from Australia because they cannot get a shipper to take cattle from Ireland. The main reason cattle is 78p and 80p per pound is that exporters are the only ones in a position to buy cattle at the marts at present.

This is supposed to be an Administration which has some semblance of affinity to workers. The less imperialist elements of Democratic Left, the Labour Party and Fine Gael would claim to have some recognition of what a worker looks like but the workers have been sold down the river because of the excessive public spending in which this Government has engaged. Tax reform has been delayed and denied and we must wait for a change of Administration and a Fianna Fáil led Government to ensure workers get their deserved reward for bringing about the economic progress we have seen in recent years.

After that single, transferable rant by Deputy Cowen, the broad question which I, as Minister of State with responsibility for the customers of public services, would like to pose tonight is how does the public service reform programme contributes to the well being of the nation?

I could not be bothered to listen to that.

Ireland is going through a period of profound economic and social change. It is an independent and sovereign State working towards greater prosperity, increased affluence and a true and meaningful role in building a dynamic and economically secure future within the European Union. Crucial issues of administrative change and development, and the creation of greater responsibility and accountability within the institutions and systems of Government, loom large within this process.

The term "Celtic tiger" has frequently been applied to our recent economic performance. While this may seem something of a cliché, the recent successes of the Irish economy surely merit such superlatives. This is particularly true in light of our relatively poor performance during the 1980s. The rates of growth in output and employment achieved in recent years have surpassed all expectations and have not been bettered by any other European Union economy. At the same time the Government has consistently maintained a position of fiscal stability sufficient to ensure this country fully satisfies the Maastricht nominal convergence criteria.

The figures speak for themselves. During 1996, real gross national product rose by more than 6 per cent while the total numbers at work grew by about 50,000. The volume of consumer spending — a crucial measure of well-being in any economy — increased by 6 per cent while inflation was at a low of 1.6 per cent. On the Government finances, borrowing for current budget purposes was entirely eliminated: we actually recorded a current budget surplus of £292 million. Moreover, in absolute terms, the national debt fell by almost £300 million, the first such reduction in almost 40 years.

On the basis of the beneficial impact of the measures taken in this year's budget and with the new national programme, Partnership 2000, in place, the outlook for this year and the medium-term looks bright indeed. Gross national product is forecast to rise by about 5.5 per cent this year and employment is expected to rise by a further 45,000. Taking into account the pay provisions of the national programme, inflation is not expected to exceed the 2.25 per cent forecast at budget time. Indeed, on the basis of figures for the first two months of this year, some commentators believe inflation will be lower than that. Moreover, early returns on the public finances indicate a continuation of the good performance achieved in recent years.

However, this is a small open economy, which is more dependent on exports than even Japan or Korea, and we are operating in a more cut throat competitive world. We cannot, because of our EU obligations, give preference to home producers and, with the onset of European Monetary Union, we lose the cushion against economic shocks which can be provided by the devaluation option. The age structure of our population means we must produce a substantial number of new jobs each year even to hold unemployment at its current level.

In recent years we have been spectacularly successful — Europe's only "tiger" economy — but we cannot stand still. Hungry nations in Eastern Europe with lower popular expectations, lower wages but strong determination to make up for lost years are getting their acts together. Our markets are their targets and as the EU expands we face competition for EU resources from other poorer and largely agricultural nations. Competitiveness, and not just competitiveness in wages but the ability to anticipate, plan and get our produce there first, is the key to survival. Indeed, it has become fashionable in recent years to extol the virtues of the market economy and its ability to regulate human affairs. We, in Ireland, have always had a certain reluctance to fully embrace those Reaganite and Thatcherite dogmas.

The Great Famine of 150 years ago reminds us of the hollowness of the idea that the market on its own can solve the many human problems of a complex modern society. In America and the UK we are increasingly witnessing the costs of capitulating to a narrow and callous version of the primacy of the market. The costs include social disintegration, rising crime and drug dependency, a massive increase in homelessness and a sharply declining participation in democratic institutions. In essence, a focus on the market alone and expecting the market to solve the problems of society can allow a two-tier society to emerge.

We cannot allow the creation or institutionalisation of an economic underclass in Ireland — a division between the haves and the have nots. Our programmes of Government, our highly successful systems of social partnership and our commitment to welfare programmes all strive to ensure inclusiveness while not creating a dependency culture. As far as I am concerned, to truly create a just society is the essence of good government. What is the connection between this and public service reform? First, virtually every pound spent on or by the public service must be obtained by taxation, levies and borrowing which has to be paid back with interest. They are all charges on individual taxpayers or business concerns. Each charge increases the cost base of businesses and can damage, in some cases fatally, their competitiveness not just on the export market but on the home market, with consequent implications for job creation and job maintenance. We must ensure that money is not spent wastefully, that for every pound spent the community gets at least a pound's worth of value.

It is important to remind ourselves of the numbers involved. There are at present 192,380 people employed in the public service with a pay and pensions bill of £4,792 billion. Overall total Government expenditure, current and capital, accounts for some 38 per cent of GNP.

I mentioned taxation as a potential brake on business and its development but there is another, the abundance of regulations and endless form filling which usurp the time of management and workers, possibly to the detriment of more productive activities. As part of its overall reform of the public service this Government has initiated a systematic programme of regulatory reform. If regulations are unnecessary and serve no useful purpose they will go; if they are essential and ultimately helpful to the community, they will remain. Not all regulations are undesirable — some and their stringent enforcement are essential to protect the community. As we have discovered to our cost, laxity in the administration of others can cost lives, lose export markets and damage the good image which must be maintained by any exporting country if it is to have any success in developing fresh outlets for its products. In this regard the emphasis on quality in those parts of the public service which service or regulate key sectors of the economy is particularly important. I hope to announce shortly the arrangements the Government is currently putting in place to ensure that the quality of service provided by public employees measures up to the best in the private or public sectors anywhere in Europe.

We must remain competitive and achieve that balance between the private and public sector to ensure more jobs and enterprise. This means we must continue the task of reducing personal taxation to facilitate the abolition of poverty traps and give more of our citizens access to the benefits of economic growth.

Maintaining strong growth in output and employment with low inflation in a small open economy like Ireland is a complex business. Getting the right mix of macro-economic, monetary and fiscal policies makes demands on every sector of the economy and on all aspects of how we conduct business in the public service. The kinds of reforms in the structures of public administration provided for in the Public Service Management Bill — introduced in the Seanad today — are needed to ensure that our economy is well equipped to meet the challenges of the new millennium.

In the modern world there are no hiding places for structures and institutions not geared to delivering a top quality product, goods or services, in the public as well as the private sector. As in any modern mixed economy, the public services absorb resources produced in the market sectors of the economy — through the taxes and charges needed to fund them. The pay-back is seen in the services delivered by Government to the citizens — customers — whether security, economic, social or regulatory. Where the burden of financing these services outweighs the benefits delivered, an open economy can very quickly become mired in a vicious circle of mounting indebtedness and declining output and jobs. We saw this kind of problem all to clearly in the 1980s.

While much has changed over the last decade, there is no room for complacency. In Government, we have pushed forward the strategic management initiative precisely because we recognise the centrality of public service reform to the achievement of wider macro-economic objectives. The Public Service Management Bill represents a crucial phase in this continuous process. It is important to keep in mind the close connections between public service reform and the maintenance of high-growth, high-employment, low-inflation performance.

In any organisation not governed by the bottom line of commercial success or failure, there is a risk that managers and staff might lose consciousness of cost and value for money, which can and has already occurred within the public service. In response to that risk, we need to ensure that every civil servant who has control of a particular activity knows what it costs down to the last postage stamp. Those who spend public money must know what is expected of them and held accountable for success or failure. The provisions in the Public Service Management Bill will ensure that in each Department and office clarity and transparency will be brought to bear on these crucial issues.

The Great Famine was undoubtedly the single greatest catastrophe to affect our people. In commemorating the tragic events of 150 years ago we should always ascertain what we can learn from how people at that time coped and responded. It is true that when the Famine struck in 1845, there was very little that contemporaries could have done about its main underlying causes. Excessive population pressure on the land and natural resources, particularly in western seaboard areas, had been building up for generations. The reliance of a huge proportion of the poorest segment of the population on the potato as a staple food was not something that could have been changed quickly. Moreover, when the potato blight struck hardest, even the best agricultural scientists and most progressive farmers of the time could do nothing to prevent its spread. Where human failure was clearly seen to have had most impact — and where any culpability attaching to the Famine lies — was in the total inadequacy of the response of those in authority to the emerging crisis of hunger, disease, death and displacement.

Yet in truth, this failure was not simply the result of the contemptuous disinterest of a remote Government and a rapacious landlord class — although the attitude of the British Government of the day towards what they saw as a disruptive and unruly colony was certainly a factor. Many individuals — English as well as Irish — at all levels of Government at that time, both political and administrative, tried to respond as best they could and sought with the utmost dedication to ameliorate the effects of the calamity. Yet despite the best efforts of these dedicated individuals the failure of the structures and institutions of Government to respond adequately to our people's needs, the Famine was catastrophic, leaving an indelible mark on our society, economy and the psychology of our people to this day.

Why did they fail? One very important reason was the utter inadequacy of the institutions, structures and systems of government in Ireland in the face of this national disaster. In other regions of the then United Kingdom also badly affected by potato blight — such as Scotland — the efforts of local landlords helped to compensate for official indifference and incompetence. Ireland was not so lucky, where the Government failed to serve the public and people starved. No one was asked to explain why; no one was called to account to the people.

Somewhat ironically, this abject failure of public administration largely coincided with a period of significant and worthwhile reforms of government in this country initiated during the 1830s with the introduction of the poor law system. People recognised there were serious inadequacies in the structures of administration but the reforms brought forward were too little and too late to have any significant impact during the Famine. Lethargy, complacency and the dead hand of vested interest played their part in slowing down and preventing positive change. The lesson for us is obvious. Recognising the need for reform of the structures of public administration and promising change is one thing but delivering on that change is a different ball game.

One hundred and fifty years on from that dreadful time, Ireland is again going through a period of profound economic and social change. Happily, this time we are an independent and sovereign State. Now the people are working towards greater prosperity, increased affluence and a true and meaningful role in building a dynamic and economically secure future within the European Union. Coincidentally, the crucial issues of administrative change and development and the creation of greater responsibility and accountability within the institutions and systems of government again loom large. Of course this time administrative inefficiencies will not lead to miseries on the scale of those of the mid-19th century. We can say that with some comfort in Ireland and in Europe, perhaps in most of the developed world. However, the real lesson of the Irish Famine and the laissez-faire market-led economic system responsible for the lack of interference and provision for the people at the time of the Great Famine has not been learnt. In many parts of the developing world today, we of the developed world still extract cash crops from the people to repay international debt and monetary aid rather than allow them to grow food crops to feed their hungry millions. Little has changed in terms of the overall philosophy of the developed world towards the undeveloped world.

Even though the major risks of administrative inefficiencies should not lead to anything like the problems experienced here 150 years ago, we must not be complacent about the risks we would run if we left reform of the public services off the agenda. The kinds of reforms of the manner in which we conduct business in the public services are needed to ensure that our economy is well equipped to meet the challenges of the new millennium. Much has changed in the past decade. We are now the fastest growing economy in Europe and our debt ratio is not much above the EU average, yet there is no room for complacency. In Government we have pushed forward the public service management initiative precisely because we recognise the centrality of public service reform to the achievement of wider macro-economic objectives.

We have achieved much thus far, but much more remains to be done. Public service change is not something we can achieve overnight. It requires commitment, not alone from the public service and the Government of the day but also from the body politic as a whole. From my experience of the past two years I am satisfied this commitment exists and that the process of change is heading steadily in the right direction.

I appreciate the comments my colleague and friend, the Minister of State, made in her contribution to this debate. In the other House today she introduced the Second Stage of the Public Service Management (No. 2) Bill which will give effect to some of the matters to which she has referred in this House and for which she will have responsibility when it comes to this House.

We are coming to the close of Second Stage of the Finance Bill. I have a series of comments which have been carefully put together on the various points made by Deputies yesterday and today. I thank Deputies on all sides, particularly the Opposition parties, who have borne the brunt of the contributions and, by and large, for the constructive way in which they have dealt with this issue. In the course of my remarks I suspect I will not be able to deal with all the points raised.

We will have two and possibly three days of Committee Stage debate depending on what arrangements are made by the Whips. Whether it is two days or three days is immaterial to me. If we were to work another three hours on the Wednesday we would cover in two days what we had organised for three.

That would suit me, whatever about Deputy McDowell.

I have the same sense of urgency about life. Deputy McDowell is probably digging a hole.

He is off to Punchestown.

A number of points were raised which I wish to address. Much comment was made on tax reform. This theme was taken up in several contributions with calls for further, more extensive and radical reform. Some comments naturally sought to understate or minimise what has been achieved by the Government.

In relation to the general tax improvements provided for in this Bill, basic personal allowances are being increased by £250 for a single person and £500 for a married couple, which is the largest single increase in personal allowances since 1984. This represents an increase of over 9 per cent compared with an expected CPI increase of 2.2 per cent. The standard bands are being increased by £500 for a single person and £1,000 for a married couple, or by over 5 per cent. The standard income tax rate is being reduced by 1 per cent. This year employee's full PRSI contribution rate which is paid by over 70 per cent of PRSI contributors including public service and public sector workers, has also been reduced by 1 per cent. In real terms, 70 per cent of PAYE tax contributors are getting a 2 per cent reduction in income tax rates as most people regard PRSI as income tax.

It is important to set in context where tax policy has been heading in the past few years. Viewed in this light, there has been a significant reduction in the income tax and employee PRSI burden as a result of the measures introduced in the last three budgets. For example, over the last three budgets basic personal allowances have been increased by almost 23.5 per cent, compared to an estimated CPI increase over the period of around 6.5 per cent. This represents a real increase of about 16 per cent; the general tax exemption limits have been increased by 11 per cent and the standard bands have been increased by £1,700 for a single person and £3,400 for a married couple. This represents an increase of almost 21 per cent or over 13 per cent in real terms; both the standard income tax rate and the main rate of employee's PRSI has been reduced by 1 per cent and a new PRSI-free allowance was introduced in 1995 and increased to £80 per week for most employees in the 1996 budget. Given the changes made in the past couple of years one wonders where the Progressive Democrats have been. When one looks at the MORI opinion poll that ranked issues of priority in recent times, income tax is not where one would have thought given that thousands took to the streets in 1979 over the perceived PAYE burden.

Through these measures the tax and PRSI burden on employment is being reduced. For example, in 1994-95 the average tax burden, including employees' PRSI and levies, for a single employee earning the average industrial wage was 31.3 per cent, not 54p as stated by the Progressive Democrats. In the tax year 1997-98, after allowing for wage increases, the tax burden is expected to fall to just below 27.2 per cent. Let us contrast 1994-95 with 1997-98. In 1994-95 the average tax burden for a single employee earning the average industrial wage was 31.3 per cent. For that same person in the same circumstances this year, following the budget and this Bill, the tax burden has been reduced from 31.3 to 27.2 per cent.

For a married couple on the same level of income, the tax burden is expected to fall from 23.4 per cent in 1994-5 to 20 per cent in 1997-8. The propaganda put forward by Opposition spokespersons, not from the Fianna Fáil Party who is represented here but the Progressive Democrats who are not present, is not in accord with reality. That is not to say any of us like paying tax but by the same token we all like getting the services which our taxes pay for.

Deputy McDowell again called for the introduction of a tax credit system. In Partnership 2000 the social partners recognised the complex policy and other issues involved in any move to tax credits and standard rating of personal allowances and agreed the issue should be the subject of further examination before the end of September 1997. I would hope to get this process under way in the near future.

A number of Deputies questioned the Government's policy on public expenditure. This is not the time or the place to get into a detailed discussion on the history of public expenditure in Ireland. However, there are a number of comments I want to make in response. I was present to hear Deputy McCreevy's entire contribution in this regard. Anyone looking at the Government's record on spending will acknowledge it had to meet a number of exceptional and unavoidable spending pressures, for example, the court rulings with regard to equal treatment, hepatitis C compensation, the beef disallowances or fines and the very significant cost which arose last year following the BSE crisis. No Deputy would have said we should not have met our obligations. Consequently, these have all added significantly to spending in recent years.

Moreover, we must not lose sight of the fact that there are many economic and social priorities which must to be addressed. I am sure Members are aware of pressing needs which can only be met properly by Government intervention through such programmes as health, education and social welfare. As a Labour Minister for Finance and a member of a three party coalition which shares a common philosophy in most if not all of these areas, I make no apology for the action that we, as a Government, have taken to meet these priorities. If we have been the subject of criticism from the Opposition it is not to the effect that we have been doing too much rather that we have not done enough. There is an inherent contradiction which seems to be a genetic component of Opposition politics. Out of the same mouths come two contradictory messages: "Spend more but spend less". It is for the parties opposite to reconcile or resile themselves to this contradictory stance.

Despite the apparent free run of expenditure of which the Government is wrongly accused, dramatic improvements have been made in our overall economic performance. The 1997 general Government deficit will again be well below the 3 per cent level required for qualification for European Monetary Union. This will be the ninth consecutive year in which Ireland's fiscal performance has satisfied this criterion. I pay tribute to the minority Fianna Fáil Government, which held power from 1987 to 1989, the subsequent, Administrations of which the Progressive Democrats and the Labour Party were members and the present Administration for collectively changing the culture. That process of change was, nevertheless, put in place by Fianna Fáil and the parties that supported it during the period 1987 to 1989.

The kind of performance to which I refer could not have come about without a change of intellectual rationale among all parties. Tribute must be paid to the various political leaders who had the courage to make that change. I have no hesitation, sense of false modesty or any other inhibition in recognising that because decisions of that kind have enabled us to make collective progress.

To return to the season that is in it, the three most recent years——

Lest we forget. The Minister's generosity is running overflowing.

Lent has just ended and we are now on the road to Christmas.

Deputies McCreevy and Cullen will recognise that I have no hesitation in giving credit where it is due. However, I must focus on what is relevant today.

Is the Minister doing so in light of events soon to befall us?

I am not referring to Punchestown. The three most recent years have seen what can only be described as spectacular progress regarding our fiscal position, against a background of accusations of gross irresponsibility.

During the period to which I referred, and for which I retain some responsibility, Ireland's performance has ranked among the best in the EU with regard to the Maastricht budgetary criteria. From 1994 to 1996, I remind the House that the general Government deficit averaged 1.5 per cent of GDP, being reduced from 2.4 per cent of GDP in 1993 to 0.9 per cent in 1996. The debt to GDP ratio declined by almost 22 percentage points during the same three years. This maintained the good progress established in previous years. It is particularly worth noting that the general Government debt to GDP ratio, which was over 94 per cent in 1993, had, by the end of 1996, fallen below 73 per cent. It is now below the European Union average and is expected to continue to decline this year to approximately 69 per cent.

In my Budget Statement, I made it clear that public expenditure is a key element in the achievement of the Government's medium-term budgetary goals. I also acknowledged that we must improve our performance. Expenditure growth in recent years has not been constrained as effectively as I would wish. In that context, I accept much of the criticism made by Deputy McCreevy and others regarding my personal ability to restrain the increase in public expenditure. It is a fair point but the Deputy has received no support from any of his shadow Cabinet colleagues in respect of this matter.

My situation is similar to that of the Minister.

He has been surrounded by voracious if not addictive colleagues who demand additional increases in expenditure from all quarters. I have not yet referred to the Progressive Democrats in this regard who would be expenditure junkies if they were let loose in accordance with their demands for additional expenditure in a raft of areas. However, I take the Deputy's point and I made my defence in respect of it.

I believe I will be able to control them.

The Deputy did not do so in the past.

The Government has reduced the real increase in expenditure, when consecutive years are taken into account, but this is not good enough.

During his contribution, Deputy McCreevy made the observation that we are building a series of expenditure expectations into our cost base. He stated that, unless these are addressed in due course, it will all end in tears. Fianna Fáil was obliged to deal with such tears between 1987 and 1989. The party's then leader was not aware what caused tears to come to the eyes of the electorate in respect of problems that existed in the area of health at that time. We must learn from our experiences. While I reject the political criticism, I recognise the accuracy of the observations from the point of view of accountancy. I will make no further statement on the matter.

The recently published revised volume of Estimates included specific measures to offset the cost of the nurses' pay package. I made the point that the Government reluctantly accepted the Labour Court recommendation that the nurses' pay award was unique to their particular circumstance. Approximately £50 million in additional finance was required to finance the package above and beyond that provided in the PCW provisions. I obtained that money through a combination of savings. Given the upturn in labour market performance, approximately £25 million came from the Department of Social Welfare's live register and a further £25 million was obtained, on a pro rata basis, from every other Vote. That has been agreed and acceded to as part of the Book of Estimates.

The message being sent out in that particular exercise to my Cabinet colleagues, Members of both Houses and the wider community is that if people want increased pay they will receive it at the expense of the provision of services within the wider budgetary constraints. That message was accepted by my colleagues and it will also be reluctantly, perhaps silently, accepted by others.

As far as expenditure is concerned, the aim is to put in place a strategic planning framework under which there will be agreement on overall spending limits. Settling departmental financial allocations within such a multi-annual framework will allow Departments to plan and to manage their spending programmes more effectively than at present, with consequent improvements in efficiency and value for money. This year's budget saw the publication for the first time of a medium-term budget outlook. This will be extended and deepened in future budgets in line with the programme of financial reforms set out in Delivering Better Government, to which the Minister of State, Deputy Doyle, already referred. The intention is to publish, with the 1998 budget, expenditure projections for 1999 and 2000 disaggregated to Vote group level.

I will now deal with another matter to which the Minister of State, Deputy Doyle referred, namely the strategic management initiative. In doing so, I will refer to some points by Deputy McCreevy regarding my Department's recently published Statement of Strategy, to which he devoted a considerable part of his contribution. During yesterday's debate, the Deputy expressed concern that the statement may, in his opinion, have strayed into the political arena. In particular he cited objectives relating to taxation, the budget deficit and the control of numbers employed in the public service.

At the outset I must state that the Statement of Strategy is not a restatement of Government policy, rather it is a statement of what a Department sees itself doing in the process of implementing Governments policy. This is an important distinction. I agree with the Deputy that political matters ought to be settled by politicians and not by civil servants. However, it would not be satisfactory if, in setting out its objectives, my Department was merely to include, as suggested by Deputy McCreevy, a general statement that it is the job of the Department of Finance to carry out the Government's objectives. This would be of little help in showing how the Department goes about meeting its objectives.

The fine line between the political and the administrative is often very fine indeed, but I cannot accept, as the Deputy suggested, that it has been crossed by my Department in framing its SMI objectives in the strategy document. For example, the objective under "Expenditure Policy" on page 10 of the strategy statement states:

To ensure that Government policy in relation to control of numbers employed in the public service is implemented on a sector by sector basis by the responsible Departments.

This must be a central objective for my Department given its mandate. The Deputy was also critical of my Department's taxation objectives which are set out on page 9 of the strategy statement. However, these should be distinguished from the indicators of success which are set out on page 11. These indicators of success are necessary to show how well the Department is meeting its objectives. The Deputy would agree there is nothing political about my Department's taxation objectives.

In framing indicators of success a Department must have regard to prevailing Government policy and likely future directions in policy, including those likely to emerge from a change of Government. It should be remembered that the statements of strategy prepared by each Department are intended to operate broadly within a three year framework. It would be remiss of my Department if, in setting out its indicators of success for the three taxation objectives, it did not endeavour to give a realistic appraisal of the position in the light of the prevailing economic climate and future developments.

The three indicators of success which the Deputy regards as "political"— reduction of the tax burden on employment, reduction in the number of taxpayers on the higher income tax rate and broadening of the tax base are realistic and apolitical yardsticks of success. Hardly any party could find them either politically or administratively unacceptable. While they may have a political intent or seem to be driven from a political source of inspiration, I put it to the Deputy who is an experienced member of Government, that because of their shared support among all parties they can no longer be regarded as political in a partisan sense.

We all support a reduction in the number of taxpayers on the higher income tax rate — how one achieves that is open to discussion — and a broadening of the tax base. Reducing the tax burden on employment is also acceptable to most parties. The Green Party — our absent friends — would argue that the tax burden should be shifted from labour to energy and other environmental impact activities. The Progressive Democrats — our permanently absent friends; "when in doubt leave them out" I think was the phrase coined by one of Deputy McCreevy's colleagues — would argue that we should simply slash expenditure to reduce the tax burden. However, broadly speaking, there really is not a dispute on the objective.

After Deputy McCreevy's contribution I had a discussion with senior Department officials, who listen to what Members say. There was concern that a strategy statement could be seen as a partisan political statement rather than a management statement designed to implement a set of management objectives which reflected the shareholders interest, to use that analogy. I assure Deputy McCreevy that the strategy statement, to which I subscribed fully and which I did not feel was partisan — I would not have signed it had it been partisan in a party political sense — reflected from a management perspective the implementation of a set of broadly shared goals which are not owned by one political group or party.

Tere are other points made by Deputies which I may address in detail on Committee Stage. I thank Deputies for their constructive and helpful comments. I commend the Bill to the House.

Question put.
The Dáil divided: Tá, 77; Níl, 62.

  • Ahearn, Theresa.
  • Allen, Bernard.
  • Barrett, Seán.
  • Barry, Peter.
  • Bell, Michael.
  • Bhamjee, Moosajee.
  • Boylan, Andrew.
  • Bradford, Paul.
  • Bree, Declan.
  • Broughan, Thomas.
  • Browne, John (Carlow-Kilkenny).
  • Bruton, Richard.
  • Burke, Liam.
  • Burton, Joan.
  • Byrne, Eric.
  • Carey, Donal.
  • Connaughton, Paul.
  • Connor, John.
  • Costello, Joe.
  • Coveney, Hugh.
  • Crawford, Seymour.
  • Creed, Michael.
  • Crowley, Frank.
  • Currie, Austin.
  • De Rossa, Proinsias.
  • Deasy, Austin.
  • Deenihan, Jimmy.
  • Doyle, Avril.
  • Dukes, Alan.
  • Durkan, Bernard.
  • Ferris, Michael.
  • Finucane, Michael.
  • Fitzgerald, Brian.
  • Fitzgerald, Eithne.
  • Fitzgerald, Frances.
  • Flaherty, Mary.
  • Flanagan, Charles.
  • Gallagher, Pat (Laoighis-Offaly).
  • Gilmore, Eamon.
  • Higgins, Jim.
  • Higgins, Michael.
  • Hogan, Philip.
  • Kavanagh, Liam.
  • Kemmy, Jim.
  • Kenny, Seán.
  • Lowry, Michael.
  • Lynch, Kathleen.
  • McCormack, Pádraic.
  • McDowell, Derek.
  • McGahon, Brendan.
  • McGinley, Dinny.
  • McGrath, Paul.
  • McManus, Liz.
  • Mitchell, Gay.
  • Mitchell, Jim.
  • Moynihan-Cronin, Breeda.
  • Mulvihill, John.
  • Nealon, Ted.
  • Noonan, Michael (Limerick East).
  • O'Keeffe, Jim.
  • O'Shea, Brian.
  • O'Sullivan, Toddy.
  • Penrose, William.
  • Quinn, Ruairí.
  • Rabbitte, Pat.
  • Ring, Michael.
  • Ryan, Seán.
  • Shatter, Alan.
  • Sheehan, P.J.
  • Shortall, Róisín.
  • Spring, Dick.
  • Stagg, Emmet.
  • Taylor, Mervyn.
  • Timmins, Godfrey.
  • Upton, Pat.
  • Walsh, Éamon.
  • Yates, Ivan.


  • Ahern, Dermot.
  • Ahern, Michael.
  • Ahern, Noel.
  • Andrews, David.
  • Aylward, Liam.
  • Brennan, Matt.
  • Brennan, Séamus.
  • Briscoe, Ben.
  • Browne, John (Wexford).
  • Burke, Raphael.
  • Byrne, Hugh.
  • Callely, Ivor.
  • Coughlan, Mary.
  • Cowen, Brian.
  • Cullen, Martin.
  • Davern, Noel.
  • de Valera, Síle.
  • Dempsey, Noel.
  • Doherty, Seán.
  • Ellis, John.
  • Fitzgerald, Liam.
  • Flood, Chris.
  • Foley, Denis.
  • Fox, Mildred.
  • Haughey, Seán.
  • Keaveney, Cecilia.
  • Kenneally, Brendan.
  • Killeen, Tony.
  • Kirk, Séamus.
  • Kitt, Michael.
  • Kitt, Tom.
  • Lawlor, Liam.
  • Lenihan, Brian.
  • Leonard, Jimmy.
  • Martin, Micheál.
  • McCreevy, Charlie.
  • McDaid, James.
  • McDowell, Michael.
  • Moffatt, Tom.
  • Molloy, Robert.
  • Morley, P.J.
  • Moynihan, Donal.
  • Nolan, M.J.
  • Ó Cuív, Éamon.
  • O'Donnell, Liz.
  • O'Donoghue, John.
  • O'Hanlon, Rory.
  • O'Keeffe, Batt.
  • O'Keeffe, Ned.
  • O'Leary, John.
  • O'Malley, Desmond.
  • Power, Seán.
  • Quill, Máirín.
  • Ryan, Eoin.
  • Sargent, Trevor.
  • Smith, Brendan.
  • Smith, Michael.
  • Treacy, Noel.
  • Wallace, Dan.
  • Wallace, Mary.
  • Walsh, Joe.
  • Woods, Michael.
Tellers: Tá, Deputies J. Higgins and B. Fitzgerald; Níl, Deputies D. Ahern and Callely.