Deputy De Rossa is in possession and has 23 minutes remaining.
Financial Resolutions, 1998. - Financial Resolution No. 9: General (Resumed).
Debate resumed on the following motion:
THAT it is expedient to amend the law relating to inland revenue (including value-added tax and excise) and to make further provision in connection with finance.
—(Minister for Education and Science).
(Dublin West): Before Deputy De Rossa begins, I want to clarify a matter of procedure in regard to speaking on this matter over the next few days. I understand it is the prerogative of the Ceann Comhairle to call Members but in practice the Whips have an arrangement. Having approached the Whips and been refused ten minutes this week——
That is not true.
(Dublin West): That is what I was informed. I do not want to be disruptive. I am willing to take advice on the matter. I ask you, a Leas-Cheann Comhairle, to exert your prerogative and guarantee the democratic right of a Member to address the Dáil on an important issue.
It is a matter for the Chair as to which Member is called but there is a precedent that Deputies are called in rotation in proportion to the size of the various parties.
(Dublin West): I appreciate that but Independent Deputies are also entitled, in proportional terms, to a certain amount of time in a debate of this length.
I take the Deputy's point.
I am happy to give any remaining time in my slot to Deputy Higgins.
Before the debate was adjourned I said that the budget was the first real test of the economic and social priorities of the Government. While individual items in the budget are welcome, the overall response of most people has been one of disappointment. The budget was produced in unique circumstances and must be judged against this unique background. Never before has a Minister for Finance in his first budget inherited such a favourable financial situation from the previous Government. Never before had a Minister to prepare a budget when the Exchequer was awash with money nor had he so many easy decisions to make.
Over the past 12 months there has been an important debate on the direction taxation policy should take. The two alternative strategies advanced were to increase the allowances and widen the bands, as advocated by Democratic Left, or to cut the tax rates, as proposed by the Progressive Democrats. As the debate progressed a substantial consensus emerged supporting the approach advocated by Democratic Left, which included not just the parties in the rainbow Government but also the trade union movement, the Combat Poverty Agency, the INOU, CORI, NESF and even employer organisations such as IBEC, and the Small Firms' Association. However, the Minister has chosen to ignore this consensus and went instead for the narrow, sectional approach of cutting the nominal rates.
The problem with the tax system is not that the top rate is too high but that too many taxpayers start paying it too early and end up paying it on too high a proportion of their income. Increasing the allowances and widening the standard band increases the take home pay of all taxpayers, reduces the numbers paying at the higher 48 per cent rate, helps the lowest paid most and reduces the tax wedge. Every pound spent on increasing the tax allowance is five times more beneficial to a person on £100 per week than a pound spent cutting the tax rates. If the Minister had adopted this approach, those on low and middle incomes would have experienced real and substantial improvements in their take home pay. Instead, as we can see from any range of the tables produced, the benefits are going disproportionately to high earners. A single person earning £10,000 benefits to the tune of £233 per year, while a single person on £50,000 gains almost £1,050. A couple with one spouse working earning £10,000 gains £151, while a couple earning £50,000 gains £1,124. A married couple with one earner and four children earning £10,000 benefits to the tune of £286, while a similar couple on £50,000 gains £1,187. It is not just the amounts as all of the charts show that the percentage gain is invariably much greater for the higher earners.
The budget has been most disappointing for those on very low pay. The Minister has passed up the opportunity to remove many people from the tax net who should not be paying tax at all. While there are no PRSI contributions payable on the first £100, tax starts at £79 per week for a single person. A young single man or woman earning just £100 still pays nearly £6 in tax. If the Minister had increased the tax free allowance by £1,000 instead of lavishing his resources on the better off, the threshold for entry to tax would have been over £90 and the tax burden on a person earning £100 would have been reduced to £2.50. There will be real anger among workers that the Minister did not begin a process of closing the gap between the average tax paid by farmers and PAYE workers, particularly as that gap is widening.
It is extraordinary that the only group singled out for attack by the Minister were the nurses, a soft target for a Minister for Finance in the strongest ever financial position. The nurses were subjected to public abuse by the Minister for seeking a decent rate of pay for the job they do, while he not only had nothing to say about the failure of farmers to make a proportionate tax contribution to the Exchequer but lavished further goodies on them.
In 1989 the average tax paid by a PAYE worker was £3,122, while that for a farmer was £804. The 1989 tax take from a farmer represented 25.7 per cent of that of the PAYE worker and the gap between the two was £2,318. By 1996, the average tax paid by a PAYE worker had risen to £4,308 while that of a farmer was £1,028. In the intervening seven years the tax take from the PAYE worker increased by £1,186, while that from a farmer grew by only £224. The gap between the two payments increased in real terms to £3,280, while farmers' tax declined to 23.8 per cent of that of the PAYE worker.
These tax payments bear no relationship to the income levels of the two groups and demonstrate once again the disproportionate share of the tax burden carried by PAYE workers and others. Over the years the gap between PAYE workers and the self-employed has been virtually closed but nothing has been done to address the reasons the contributions from farmers remain so minuscule.
I accept that there are many farmers who earn very modest incomes. I also acknowledge that part time farmers who have other jobs pay on the same basis as PAYE workers, as do many members of their families. However, that does not explain the huge disparity in the tax take when the income from farming has increased consistently in recent years. According to the report of the European Court of Auditors agriculture received £1.5 billion in EU aid in 1996. However, this does not seem to have had any impact on the tax take. The most recent household budget survey undertaken by the CSO shows that the average farm household disposable income in 1994-5 was £302.07 compared to £292.73 in urban areas. According to the survey, farmers live in bigger, newer houses and own more cars and phones than their urban counterparts. In these circumstances, the failure of the Minister to take any steps to ensure a fairer tax contribution from the farming sector is almost beyond belief. Will the Minister explain why only 2,000 of the 100,000 farmers are registered for value added tax? This is active collusion by the Government in tax dodging by farmers.
While the social welfare package has a number of welcome aspects, like the tax package it is a missed opportunity. I welcome the continuity of the policy approach initiated by me in the family, child poverty, community development, pensions and poverty strategy areas. The Minister's package is biased against those on the lowest levels of social welfare and the £3 increase fails to bring the lowest rates — SWA and short-term unemployment assistance — even up to the levels recommended by the Commission on Social Welfare.
The £5 increase for old age pensioners is welcome and brings the contributory rate to almost 119 per cent of the commission target and the non-contributory rate to 104 per cent. The tragedy is that for just £10 million, or half the money given to the GAA, all of the lowest social welfare rates could have been brought up to 100 per cent of the commission's recommended levels.
The 3 per cent increase for qualified adults will mean fairly miserly amounts; for most it will mean about £1.20 per week. The effect is to reduce these allowances as a percentage of the full rate, whereas the aim should be to increase them progressively towards 100 per cent. They have fallen from 59 per cent to 58 per cent in most cases and from 65 per cent to 63 per cent in the case of old age pensioners. We must move to a fairer way of ensuring that people who have no option but to depend on social welfare income have a reasonable standard of income. Increases in social welfare should be linked to increases in average earnings and the review of the Commission on Social Welfare recommendations, initiated by me in Government, carried out by the ESRI and published last year, should be used as the appropriate reference point. Linking increases to average earnings instead of inflation shows that none of the current rates reaches the targets set in the ESRI report. There is still a long way to go before the living standards of all social welfare recipients can be said to have reached acceptable standards of adequacy.
The Minister is guilty of a three card trick in regard to social welfare payments in that he has increased by almost two months the gap between the announcement of the new rates and their delivery. The budget last year was at the end of January and the new payments came into operation in the first or second week of June. This year the budget is two months earlier, but the increases have been brought forward by only one or two weeks. Yet the increases in cigarettes and petrol come into effect immediately, or two months earlier than last year.
One of the achievements which I regarded as most important in my term of office in the Department of Social Welfare was the increase of almost 50 per cent in child benefit over three budgets. Unfortunately, the Government does not seem to acknowledge the importance of child benefit as a weapon for combating child poverty, and the result is that for most children the increase will be just 35p per week, enough, as one commentator remarked this morning, to buy a bar of chocolate. For those on social welfare the increase is barely enough to compensate for the freezing of the child dependant allowance element of their payment. The Minister failed to deliver on the promise contained in the programme for Government of a £2,000 tax allowance for married people who stay at home to mind children. Increased child benefit is a far better mechanism for helping parents to pay for child care or for compensating parents working full time in the home.
Many of those working in the home as carers will be very disappointed with the budget. There are more than 20,000 full time carers who do not, for a range of reasons, qualify for the allowance. Despite the commitment given in the programme for Government, nothing has been done to bring them into the system. In 1996 carers got an extra £5 over and above the general increase, and other major improvements were made in both 1996 and 1997. For £50 million, less than the cost of reducing the top rate of tax by 1 per cent, the Minister could have introduced a carer's benefit which would provide a social insurance payment in response to the growing need for full time care for older and incapacitated people.
I am glad the process I started of moving the calculation of family income supplement onto a net income basis has been completed. However, the fact that the thresholds have been increased by £7 per week, compared to £10 last year, means that many FIS recipients, who are not paying tax, will receive increases of only £4.20 per week, compared to £6 last year. That means those in the higher range of incomes will receive considerably more, and this of course is in line with the general thrust of the budget, that the better off get most and the worst off get least.
There is very little of significance in the budget on job creation and despite what he said last night, the Minister, Deputy McCreevy, clearly believes that the long-term unemployed should be left primarily to the mercies of the rising tide philosophy. I welcome the 5,000 extra places for the very successful back to work allowance scheme, but I regret there has been no similar increase in the number of community employment places. These are the two most successful schemes, probably because they provide the incentive to the worker rather than the employer. The Government does not seem to have learned this lesson because it is putting money into the less successful schemes such as the jobs initiative and even introducing double tax relief for employers who take on the long-term unemployed, a scheme wide open to abuse and scams by unscrupulous employers.
Another group who will feel very let down are the handicapped. The representatives of the physically handicapped who were invited to pose for pictures with the Minister for Finance will feel they were short-changed by the £3 million provided. At a time when there is so much money available, how can anyone possibly justify giving the mentally handicapped just £7 million, in view of the scale of the need for extra places and for respite care? The National Association for the Mentally Handicapped in Ireland estimates that the total number of additional residential or respite places required is 1,439 and the number of day places required is 1,036. The estimated cost is £63 million, of which £25 million is required in 1998.
What sort of a value system can give £20 million to the GAA and just £7 million for the families of those with a mental handicap? How does the Government justify giving an extra £20 million for the development of Croke Park? Is it just a happy coincidence that it is located in the Taoiseach's constituency? I am in favour of putting money into sport, but it should be put into the development of facilities for smaller clubs and for the benefit of players. If this £20 million of taxpayers' money was to ensure access to Croke Park for a greater number of ordinary fans and for participants in other sports, it would be a positive development, but the money will presumably go to the development of yet more corporate boxes and catering and entertainment facilities in a stadium which, as it grows larger, is used for fewer and fewer matches and becomes less accessible to ordinary fans. As I said on the Order of Business last Thursday, a reasonable quid pro quo from the GAA in return for such lavish support from the Exchequer would be the dropping of rule 21, which has been described so accurately by President McAleese as ‘sectarian’.
The budget will be seen as a major lost opportunity. It was an opportunity to ensure the benefits of economic progress were shared more fairly, to significantly ease the burden on low and middle earners and to take many on low pay out of the tax net. It was an opportunity to do something about the scandal of farmer taxation, to build on the work done by the previous Government in the social welfare area and particularly to continue to combat child poverty by a significant increase in child benefit. It was an opportunity to recognise the real need of the mentally and physically handicapped. The Minister chose to pass on those opportunities and instead to lavish much of the benefits of the economic boom on those who least need them. The end result of the efforts of the Taoiseach, the Tánaiste and the Minister for Finance is a budget which has disappointed most taxpayers, annoyed the trade union movement, seriously jeopardised social partnership and snubbed those working for the inclusion of people with disabilities, while leaving the poor waiting.
I am pleased to have the opportunity to contribute to the budget debate. The economy continues to enjoy unparalleled levels of growth, with economic growth this year forecast at 8 per cent. That growth results from the fact that people avail of a good education system, work hard and are professional in their approach to industry. There has been spectacular success in the marketing area — being a small country, we must do business outside the island with the most competitive economies worldwide. The outstanding performance in the past decade results essentially from the partnership role played by the social partners, workers, employers, trade unions and the Government. I particularly laud the farming organisations which, together with the other social partners, played a constructive role during the past decade.
The outlook for 1998 is promising, with inflation remaining at less than 2 per cent. It is critical that, in line with the spectacular growth rate of the past decade, inflation is retained at a low level. That should ensure another substantial increase in employment while allowing Ireland to comfortably qualify for entry into the EMU with an economy which is in a healthier condition than ever before. The low levels of inflation and interest rates which Ireland continues to enjoy are of enormous benefit to farmers who save millions of pounds in interest payments on their borrowings. The low rates of interest payable on loans is highly conducive to facilitating investment.
The CSO recently published advance figures which show that income from agriculture declined this year by 5.1 per cent, while there was a decline of 6 per cent in the value of gross agricultural output. I have just listened to a savage attack on farmers, but despite the healthy economy the farming sector has experienced a serious setback, particularly since the outbreak of BSE in March 1996, the repercussions of which are still evident. In its advance estimate the CSO announced that farm incomes declined across all sectors this year, with the beef sector being particularly badly hit. We are aware of the difficulties being experienced by exporters and Bord Bia in promoting Irish beef abroad following the closure of market segments worldwide. While the milk sector improved considerably during the year, overall it was not a particularly good year.
Direct payments are now an important part of farmers' incomes, but some people begrudge them this income supplement. It is compensation for cutbacks resulting from the supply-control philosophy that pertains in the EU. The Department of Agriculture and Food is in the process of issuing direct payments to farmers, which in l997 will amount to £940 million. Farmers are entitled to this payment, it is compensation for cutbacks in various quota regimes. This £940 million is unprecedented and plays a substantial role in mitigating the fall in farm incomes. Direct payments account for 40 per cent of their incomes.
As a result of the continuing recovery in consumption and reduced production, it is expected the serious imbalance in the EU beef market caused by the BSE crisis will be more or less corrected in l998. Beef consumption has recovered well from l996 levels while measures introduced in the wake of the crisis, most notably the calf slaughtering scheme and the UK cattle cull, will reduce production by 500,000 tonnes per annum. The recovery in EU and world markets should have a knock on effect on Irish cattle prices which have been showing a gradual improvement in recent weeks. The decline in intervention purchases, and their non-existence in continental member states for some time, is another positive signal. However, the large stock of intervention beef, which stands at approximately 600,000 tonnes, is a serious threat to market stability. That stock is overhanging the market and will have to be disposed of within GATT limits on subsidised exports.
While it should be possible to dispose of intervention stocks in the next few years, the market balance in l998 will not be sufficiently stable to enable any significant quantity to be sold without disturbing the market. The Commission's policy on intervention stock disposal will therefore be a crucial factor in l998. The Commission will need to be very careful and prudent regarding sales out of intervention, especially to third countries. In addition, its policy on export refunds, in circumstances where GATT limits on subsidised exports fall further, will also be critical in determining prices for the coming year. Prudent management of the EU market will be crucial for the period ahead. I will insist that the Commission does not make hasty decisions in response to the disposal of intervention stock.
The blockades at UK ports have caused serious problems for Irish beef exporters. It is unacceptable that problems facing UK producers and the difficulties they are experiencing with their Government's policies should be translated into blockading trade from Ireland. This view has been conveyed to the UK authorities at all levels, including at Prime Ministerial level. I met the UK Minister for Agriculture, Dr. Jack Cunningham, on Thursday last to discuss the developments. He assured me the behaviour of the producers in impeding Irish trade was illegal and unacceptable to his Government and that everything possible would be done to ensure the principles of the Single Market were upheld. I am hopeful that the strong views conveyed to the UK will result in the lifting of an illegal restriction on our trade.
We are entitled to unimpeded access to all parts of the EU for our products, which are of the highest standard. They are not under-priced. We have been trading with the UK in an orderly manner for generations and the balance of trade favours the UK. We purchase in excess of £6 billion worth of products per annum from the UK and export approximately £5.8 billion worth to it. The question of the blockades has been taken up at EU level with all the relevant commissioners and I hope the matter will be resolved soon to everyone's satisfaction.
By now both the UK authorities and the EU Commission should be fully aware of our position on the matter. I have also asked Bord Bia to continue its efforts to affirm and project the role of Irish beef in the UK market and the high quality status of our product. In a court in Luxembourg today the French authorities were chided for their ineffectiveness to ensure unimpeded trade between Spain and France. A similar position pertains in respect of our trade with the UK and I am sure the UK authorities will note today's court finding against France.
The outlook for 1998 in the dairy sector is positive. The indications are that strong commodity markets should be maintained into the early part of 1998. For the year as a whole, the performance will depend on a number of factors, including the extent of the Russian demand, competition from the main dairy exporting countries and currency developments. However, butter prices are unlikely to be maintained at the current very high levels as supply comes on stream later next year. Nevertheless, farmer incomes should stabilise as the benefits of the strong market are reflected in the milk price paid to producers. I am optimistic about the dairy sector for 1998.
The outlook for the sheep sector in 1998 is somewhat unclear at present. Although lamb prices were quite buoyant throughout most of 1997, they have declined in the past two months as a result of a diminishing of our traditional French export market and a backlog of lamb on the UK market which is now being disposed of at low prices. In addition, recent French lamb prices have also dropped. On the other hand, there is a possibility of reduced Irish production in 1998 and this could go some way towards maintaining prices.
The outlook for the pig sector for 1998 looks reasonable at this stage. The overall supply position is expected to be satisfactory. Prices are expected to remain stable in the short-term, but in the early part of 1998 some reduction could occur as those member states affected by classic swine fever are cleared of the disease and begin to get production back to normal, thereby increasing supply on the EU market.
In the cereals sector, the level of production in the EU and in other production regions of the world will have implications for price levels here. In addition, quality and quantity of production is weather related. However, with normal cropping conditions and a recovery in the quality of grain harvested there should be some improvement compared with 1997.
Looking towards the outlook for the longer term, the greatest force for change in the agri-food sector over the next few years will be the European Commission's Agenda 2000 proposals. In relation to CAP, Agenda 2000 proposes reductions in price support, compensated for by increased direct payments. It is proposed to reduce the support price by 30 per cent in the beef sector, by 20 per cent in the cereal sector and by 10 per cent in dairy sector.
The Agenda 2000 proposals presented by President Santer in July this year indicate the general direction and preferred policy options put forward by the Commission. However, very detailed negotiations will take place over the next year or two before any final decisions are agreed. Throughout this process, I will strive to ensure the interests of our farmers and rural communities are fully protected. This will involve ensuring full and permanent compensation for any price reductions, a fair and equitable compensation system that is vigorously defended in the next GATT round.
To help ensure that Ireland's position in the forthcoming negotiations reflects the interests involved, I am in the process of setting up four consultative groups — one each for beef, milk, cereals and rural development — on which I will be inviting farmers, processors and others with a direct interest, as well as academics, to serve. These groups will remain in existence for the duration of the negotiations and I expect an expert input from them so that the strongest possible case can be put in defence of Irish interests.
I am convinced that the 1998 budget will be of benefit to farmers, the rural community generally, and all sectors of society. This budget provides for cuts in personal tax worth £517 million, while also increasing social welfare benefits by £282 million and providing for new expenditure items of £214 million. It is remarkable that this is achieved while running a large current budget surplus and cutting debt as a percentage of our national income.
We are now projecting general Government surpluses for each year to 2000 and a fall in the general Government debt from 67 per cent of GDP this year to 58 per cent in the year 2000.
The budget is prudent in its treatment of the public finances, caring in its approach to the elderly and those on social welfare and provides the basis for continued strong growth in the economy. Our economy will grow by 8 per cent this year and next year, and employment will also grow by about 50,000 jobs per annum. This benefits us all, in particular rural communities which deserve to get their fair share of the good growth in the economy.
Many of the general taxation and social welfare changes in this year's budget will be of substantial benefit to farm families and rural dwellers and are worth highlighting. Farmers will, like others, share the benefits of the radical personal income tax package introduced in this budget. The 2 per cent cut in both the standard and higher rates of income tax, coupled with the increase in personal allowances, widening of tax bands and raising of the exemption limits will all contribute towards a substantial improvement in the after tax income of farmers this year.
I strongly dispute the savage attack made on the farming community today by Democratic
Left. Before the budget, Deputy Rabbitte called for a scourging of farmers in terms of taxation. Today, Deputy De Rossa stated, with some element of truth, that farmers were lavished with further goodies in the budget. He added, however, that farmers' taxation had declined and that nothing had been done to address the minuscule taxation paid by farmers or tax dodging by farmers. It is quite difficult to have to listen to such misinformed and uninformed comment. The facts are that both this year and last year there was a decline in farm incomes. While the Celtic tiger is performing extremely well, farmers are not participating in the general economic improvement to the extent that they should.
The reduction in the rate of capital gains tax to 20 from 40 per cent will be of benefit to those who are retiring from farming and disposing of their assets. Some farmers in co-op plc areas will particularly benefit from this improvement.
The real increase in the weekly payment rates for all welfare categories, and in particular the large increase in payments to the elderly, will assist the most vulnerable members of the farming and rural community. The substantial increase from 3.3 to 3.6 per cent in the farmer's flat-rate VAT will boost farm incomes by £8 million in a full year.
Agriculture, the food industry and rural areas have fared very well in this budget. Farmers and rural dwellers will, as I have said, benefit from the general reduction in personal and corporation tax rates and social welfare increases. The budget has, in fact, put in place a coherent set of targeted measures designed to aid the long-term competitiveness of the sector. This package of measures has three principal aims: accelerating the early transfer of farmland to younger farmers, protecting the rural environment and stimulating rural regeneration.
In relation to younger farmers, I believe that the ability of the agricultural sector to compete successfully in the more challenging and liberal trading environment of the future depends crucially on the continued improvements in farm structures. In recognition of the fact that the relatively high age profile of Irish farmers has been a persistent obstacle to structural change within the agricultural sector for many years, this budget has introduced some measures aimed specifically at the younger farming community. These measures should make a significant contribution to speeding up the transfer of land to a younger and more productive generation of farmers.
For example, in 1998 there will be an increase in funding for the farm retirement scheme of 17 per cent to over £71 million. This should ensure that the target of participants by the year end will be achieved.
As regards the scheme of installation aid for young farmers, I was glad that I was able to provide a budget allocation of £3.5 million to provide for all outstanding legitimate applications to be processed in 1997 and 1998. In addition, I will be starting discussions with the farming organisations very soon, with the aim of drawing up a new and tightly focused scheme of installation aid targeted towards smaller farmers. This will be financed from within the overall allocation approved by the Government for my Department.
Stock relief is an important mechanism in allowing farmers to direct scarce resources to productive on-farm investment in stock and facilities. Full stock relief for young trained farmers was introduced in 1995, but only allowed young farmers to avail of the full relief for two years after qualification. In this budget that has now been increased to four years.
Another new measure which has been introduced relates to capital gains tax retirement relief. This concession exempts farm disposals under £250,000 from capital gains tax (CGT). It is a central policy aim of my Department to encourage older farmers to avail of the early retirement scheme. The scheme is popular and being availed of in a major way. There was a difficulty, however, regarding leased land which led to a situation where, under capital gains tax law, they were not eligible to avail of retirement relief because of a requirement that they operate the farm for a ten-year period prior to retirement. Thus, they often found themselves facing hefty tax demands. I am pleased we were able to address that matter in the budget.
These new measures will complement other provisions already in place to encourage the earlier transfer of land to a younger generation of farmers, for example, the two thirds reduction in stamp duty allowed on farm transfers to younger farmers, the tax exemption allowable on leasing income, 90 per cent agricultural relief under capital acquisitions tax law, and a 30 per cent reduction in the amount payable in probate tax.
Provision has been made in the 1998 budget to increase the level of expenditure which can be written off under the special farm pollution control allowance against farming profits from £20,000 to £30,000. This will be extremely helpful in maintaining the environment in rural areas.
All these measures will contribute to more sustainable farming practices, increased efficiency, improved pasture and income effects. They will also indirectly benefit the agri-food industry, tourism and the economy generally through the reduction in water treatment costs as a result of reductions in pollution and fish kills.
The importance of the environment was, of course, recognised in the operational programme for agriculture, rural development and forestry, which established schemes for the control of farm pollution and dairy hygiene. These schemes, although unfortunately suspended by the previous Government due to lack of Structural Funds, have paid out £97 million and £18 million, respectively, to date. I assure the House that all applications on hand will be processed.
The REP scheme has also made a significant contribution to improving the rural environment. Currently over one million hectares of land are being farmed in accordance with the environmental conditions required by REPS. In 1998 a further £45 million will be made available towards REPS, bringing total expenditure to £145 million for the year. By the end of 1998 over 40,000 farmers will be participating in REPS. This exceeds the targets set when the scheme was announced. I am confident that the measures described above will help to make a significant and lasting contribution to the protection of our rural environment in the years ahead. In the area of rural regeneration we are carrying out a pilot scheme which hopefully will grow over the years.
One of the most important contributors to the maintenance of rural incomes is the headage payments scheme. As Deputies are aware, headage is funded under the Operational Programme for Agriculture, Rural Development and Forestry, which covers the period 1994 to 1999. The position on funding is that approximately 72 per cent of our overall allocation under the operational programme will be spent by the end of this year. On the headage side, expenditure will probably also be as high as 72 per cent of the amount allocated for that item by end of 1997, with the result that an inadequate provision of only £88 million was made available in the 1998 Estimates.
I am conscious that substantial cuts would have to be made to individual farmers, many with very low incomes, if we had to live with the funds available. I am equally aware, however, that several independent evaluations, including the recent evaluation carried out by the ESRI as part of the mid-term evaluation for the CSF for 1994-9, have pressed for some reductions in this type of income support and for a reallocation of such expenditure to more developed investment. I have to admit that the estimated overall expenditure in headage of £489 million by the end of December, for the 1994-7 period, is indeed very high as a proportion of the total Structural Funds expenditure available for agricultural purposes, that is, 60 per cent. I feel that both of these somewhat opposing aspects of the headage scheme can now be tackled. As already announced by the Minister for Finance, £23 million in extra funding has been provided to help plug the gap in the available funding for 1998. This will bring the total allocation for 1998 to approximately £111 million and, after certain provisions already agreed under Partnership 2000 have been effected which will enable the scheme to be targeted better at lower income farmers, the revised amount available should be adequate to meet all requirements under the headage scheme for 1998.
One of the provisions will provide a new ceiling of £3,024 on headage payments which will affect 4,000 farmers or 4.5 per cent of headage applicants. The vast majority of them are in receipt of payments under EU livestock premium schemes with average annual payments in excess of £12,000 each. The applicants involved each receive an average total payment of £15,702 in headage and premia grants. To restrict headage payment to £3,024 for this minority of farmers will entail an overall reduction of £659 or 4.2 per cent and they will still receive substantial other payments.
I am pleased to announce that I am arranging a top-up on 1997 sheep headage payments — which will particularly help mountain sheep farmers — valued at £2.6 million to 30,000 sheep farmers in disadvantaged areas who must eke out a living in most difficult circumstances. Payments will be made immediately and will raise the 1997 sheep headage rates to £11 for mountain breeding ewes and £12 for hogget ewes. This will provide welcome additional support for the sheep farmers in those most severely handicapped areas.
Leader groups have made an invaluable contribution towards encouraging local enterprise and community development over the past number of years. The 1998 allocation for Leader will increase from £11 million to almost £21 million, an increase of 84 per cent and it is well deserved.
The food industry, and agribusiness generally, will also benefit along with every other industrial sector from the general easing of the tax burden in this budget. The reduction in the standard rate of corporation tax from 36 per cent to 32 per cent and from 28 per cent to 25 per cent on the first £50,000 of company income will reduce tax on non-manufacturing activities. This reduction is the first step in the Government's move towards a single 12.5 per cent rate of corporation tax by the year 2005, or earlier.
Companies in this sector will also benefit from the large reduction in the tax wedge which will be achieved by the new income tax and PRSI rates for employees. A new initiative to help the long-term unemployed back to work was also launched in the budget and a double tax deduction for wages for employers who employ long-term unemployed persons was granted. This double deduction can last for up to three years and participants in the scheme can retain their secondary benefits. This will be of assistance to agri-food businesses as it will reduce significantly the cost of recruiting and employing people in their firms. The reduction in the rate of capital gains tax from 40 per cent to 20 per cent will also be of benefit to agribusiness, encouraging greater levels of investment in the economy. This will particularly benefit companies where farmers are members.
Additional incentives for investment, employment and enterprise provided in the budget should provide a significant boost for small, medium and large food companies. These companies are a key element of the rural economy and the incentives will therefore have widespread spin-off benefits throughout rural Ireland, particularly in the form of more jobs for rural young people.
I am convinced that the general and specific measures in the budget which I have just outlined will provide a major boost to the agri-food sector. They demonstrate the Government's strong commitment to the farming sector and to rural communities in general, many of whom are built around, and dependent upon, a vibrant farming sector.
Before analysing the budget I propose to make a few general introductory remarks. I am pleased to be able to comment on the budget but deeply disappointed with its content. On a radio programme last week, I heard Fr. Séan Healy of CORI describe it as the worst budget for 15 years and he is correct. His detailed analysis, a copy of which all Members have, makes that clear. He states:
As a result of budget '98 the take home pay of the better off will increase substantially. The tax payable by employers on their profits will be reduced. The tax burden will be moved away from profits in the long-term and the major resources in agriculture will continue going to the better off. There is something profoundly wrong with this society when it fails to give priority to tackling poverty, unemployment and exclusion. This Government could have targeted these three core issues. It chose instead to prioritise benefits for the better off. This may fatten the Celtic Tiger but it is not progress. Substantial resources exist, yet these resources were dissipated.
Other commentators have shown similarly dismissive reactions towards the budget. It was sad to see Mr. Clear, president of the Society of St. Vincent de Paul, come out so strongly against the failure of the Minister for Finance's first budget and he again drew attention to the fact that it has exacerbated social divisions in society, widened the gaps between segments of it and, in general, abused the massive resources which were there for the taking by a caring Government which would want to narrow such gaps.
One of my constituents, Sunday Business Post journalist, Emily O'Reilly, blamed it on the fact that the Labour Party unfortunately was not in Government with Fianna Fáil. Had it been in Government with the larger party, as was the case a number of years ago, this despicable Progressive Democrats Party agenda would not have emerged. Perhaps that is a simplistic view, and she has changed her mind about different issues over the years, but it reflects how many people on the street feel about it. Many other commentators, including my party's financial spokesperson, Deputy McDowell, described it as the most regressive budget in living memory.
There is a moral obligation on every Minister for Finance on budget day. He or she should analyse serious problems facing the country and attempt to the best of his or her ability to resolve them but on this key criteria the Minister failed dismally. On reflection, he did not even try to face that problem. I have seen Ministers for Finance in much more trying circumstances than those faced by Deputy McCreevy make a decent fist at producing a budget for all people. His error is that he inherited the best set of economic figures in the history of the State.
The Irish Independent is pleased and so it should be. My views on the vulgarity of its preelection editorial, “It's Payback Time” are well known. It has had its way and I hope it has the courage of its convictions next April when ordinary working people reading the rubbish of budget 1998 realise that the reality does not live up to the hype.
With the amount of money at the Minister's disposal it would have been impossible, even for him, not to get a few things right. I welcome the decision to increase the old age pension by £5, although the increase in dependant allowances is worse than in the previous budget. I welcome also the increase in the tax exemption limits for those over 65, an initiative begun by my party leader in January. A number of senior citizens who are under 65 but are retired and opt to be taxed at the marginal rate are bitterly disappointed with the sum of £100 which they received from the Minister. It seems as if he did not even consider those people and their circumstances. One told me that his net addition from the budget works out at less then £1 per week.
For all the bravado of the Taoiseach earlier in the debate, the child benefit package is dreadful and completely wrong. Child benefit has been identified as the best way of tackling family poverty since it is universal and untaxed. During the two periods in which the Labour Party was in Government, recently, with other parties, we wanted to boost child benefit. We had a target of approximately £20 per child per week as being what we should aim for. In a dismal reaction the Minister, Deputy McCreevy, was not prepared to develop that idea, except in relation to the small improvement for twins.
One of the problems with the social welfare system is the extent to which we rely on means tests. Means tests by definition create welfare and poverty traps. Child benefit is the one basic payment which bypasses this problem. The increase this year is about 6 per cent. Labour, in Government, increased this payment by almost 100 per cent.
It is precisely because of the problem of the interaction of our welfare and tax systems that I wish to return to the issue of tax. This is perhaps the most central difficulty facing our economy. It is partly responsible for confining a sizeable proportion of our people to relative poverty. It helps to perpetuate cycles of disadvantage, lack of opportunity and powerlessness. Its effect is communities deprived of life and energy, communities destroyed by drugs and crime. Despite all Fianna Fáil's rhetoric, neither of these issues was considered as important as the refurbishment of Croke Park to warrant a specific mention in the budget.
We have a moral duty to tackle the key problem of disadvantage in society. It will require us to undertake considerable programmes of investment to undo the damage done for over a generation. The budget contained little or nothing on this issue. Other important issues such as the quality of our training programmes — the real bridge between opportunity and lack of it — hardly warrant a mention.
As a starting point it is critical that our tax system does not act as an impediment to other measures we need to take. Some progress has been made in recent years but this year was the appropriate time to do something substantial in terms of allowances and it was not done. What would have been the reaction of our constituents if the Minister had the courage to use the £517 million to increase personal allowances? We know the impact that could have had, especially on the lower paid. That opportunity was not taken because Fianna Fáil cares more about staying in power with the Progressive Democrats than it does about much of its traditional support base. This will become clear in the forthcoming by-elections in Dublin North and Limerick East.
The decision not to substantially increase the standard tax rate band is similarly immoral. It has been said time and again that the issue is not that the middle income earner pays tax at 48 per cent or 46 per cent but that they pay tax at the top rate. A single person earning over £13,000 pays tax at the same rate as a millionaire. That is a central problem which the Minister did not bother to look at. The Government has not sought to do anything meaningful about that problem. This is an issue on which the previous Administration made substantial progress. This Government has chosen to ignore it and the effects are devastating as example 1 of the implications of this budget amply illustrates.
Put simply, this has been a terrible budget for middle income earners. Not only have they been discriminated against in the distribution of the tax dividend but the basic services on which they rely more than others, have suffered also.
Take for example the health system. The Estimate provides for a 10 per cent increase but most of this will go on the public service pay bill and the hepatitis C payments, both of which I fully support. Those aside, the increase for the supply of basic services is paltry. There were little additional moneys in the budget — the £36 million supplied represents only a 1 per cent in the Department's overall budget of over £3 billion. For the first time in years, there has been no specific allocation to tackle the waiting lists which have been growing in the past few months. Obviously the intention of the Minister for Health and Children, Deputy Cowen, to re-jig the waiting lists will be a comprehensive project and we await with interest what he tries to deliver as the waiting lists grow longer. This is an area to which I hope to return later in my speech.
I am deeply disappointed at this budget. In the mid-1980s, to dream of a society in which each citizen had an opportunity to live a meaningful and fulfilling life was often subjected to ridicule. That is no longer the case but rather to try to work to make that vision a reality the Government has chosen to reward those who are well off. It is a mindless decision it will regret.
In my introductory remarks on budget day, I referred to the Minister for Finance as a gambler, who had got his fundamental sums wrong. I said he was also a chartered accountant and that he knew the implications of the basic background budgetary arithmetic. He knew what he was doing when he took several significant payments from the 1998 financial year back to 1997. All my former colleagues in the teaching profession will be interested to know their January salaries are being paid out of the 1997 budget. The same was done with the higher education grants and across a range of measures. This Minister for Finance effectively fiddled the books.
On budget day the Minister talked about Government spending and the EBR increasing by 3.8 per cent, an EBR of £280 million, 0.7 per cent of GNP and the 1998 EBR of £89 million. This was all fantasy, figures were being plucked out of the air. If the Government was a large company and an accountancy firm examined the figures, there is no question but that they would have to be qualified. Somebody might have said the figures require explanation. Will our colleagues on the Committee of Public Accounts deem it necessary next year to look at the budget again?
There was a famous budget in the early 1980s when the Department of Finance got its background figures so hopelessly wrong that many commentators, in particular Vincent Browne, accused the then Taoiseach and Minister for Finance — who went on to become an MEP or a Commissioner in Europe — of cooking the books. Given the general projections for 1998-9 effectively that is what the Minister has done. In addition to doing that and not living up to the basic precepts of his own profession of accountancy, there is also the problem that he is gambling on the Celtic tiger. As one who did a study on and taught economics, it is interesting to read the projections by commentators in the 1970s and the 1980s which are so dreadfully wrong. In that context we have seen the situation in relation to the first dragons. Only the other day I was reading The Economist projections for 1993 which had a special article about the little tigers of southeast Asia. It showed how the Malaysians and the Indonesians were beginning to join the bigger tigers led by the great Japan itself. Problems have now emerged, some caused by nature, for example, the fires in parts of Indonesia and so on which drifted across Malaysia and caused different types of problems. Nobody can foretell what can happen in economic terms.
When we lock into the euro on 1 May there will be significant implications for domestic industry. As the Labour Party spokesperson on Enterprise, Trade and Employment I hope to tease out with the Minister, Deputy Harney, and the Minister of State, Deputy Kitt, what they propose to do to protect our domestic industry as we go into that regime, which will give us significantly less control over our affairs.
The Minister has gambled that the present trend will continue. He referred to a minor contingency fund. The interesting point was made at the Committee of Public Accounts that Government commitments should be insured because the cost of claims can be significant. I cite the equality payments, hepatitis C compensation payments and Army hearing claims as examples. In fiddling the figures the Minister has gambled with our future.
The Minister berated and lambasted public servants. Was he referring to clerical assistants, ushers or nurses who are on extremely modest rates of pay? I appreciate there are difficulties in implementing the strategic management initiative but one cannot encourage public servants to be ambitious and at the same time berate them in respect of the 6 per cent increase in the public service pay bill. It was the Labour Party that forced Fianna Fáil and the Progressive Democrats to honour the promises they made in their manifestos to public service pensioners. We were victorious in difficult circumstances.
The Minister made great play of the size of the overall social welfare budget in which provision was made for social inclusion measures. In throwing back at the Opposition its own Sunday trading Bill, in refusing to provide for the introduction of a minimum wage to which it is opposed in spite of the commitments given in the manifestos and in opposing trade union recognition and representation, the Government is endangering the concept of social partnership and Partnership 2000. I do not think our trade union colleagues, Bill Attley and Jimmy Somers of SIPTU who have spoken out about this matter, are bluffing. By flagrantly adopting the Progressive Democrats' programme Fianna Fáil may end up breaking the partnership. If that happens the Government will be opposed relentlessly by all the representatives of the labour movement. It is on shaky ground.
I welcome the steps taken by the Minister but the level of many payments, particularly the single rate of unemployment assistance paid to the long-term unemployed which currently stands at £67, is still too low. Those who will benefit from the reduction in capital gains tax by 50 per cent could spend more than the amount mentioned on a single meal. There is no point talking about the Commission on Social Welfare which reported ten years ago.
I welcome the increase granted to the elderly but the decision on child benefit was disgraceful. The increase is miserly. It broke the momentum generated by the Labour Party first with Fianna Fáil and later with Fine Gael and Democratic Left. According to The Economist, in an international comparison we have overtaken New Zealand on per capita income and the United Kingdom in some areas. Yet, the opportunity was squandered to help the 35 per cent to 40 per cent of the population dependent on social welfare who account for less than 10 per cent of the projected budget for next year.
The Minister was taken prisoner by the Progressive Democrats. There were rumours in the mid-1980s that he was about to join them. Perhaps he has the same mindset. The four Progressive Democrats Members have taken over the 76 Fianna Fáil Members which is remarkable. As the Minister of State, Deputy O'Keeffe, is aware this happens in business where small companies take over large ones. Former Member Michael McDowell berated the rainbow coalition Government and referred constantly to its tax and spend programme. Fianna Fáil has surrendered to him. His spirit hovers over it. He has won the battle and the ideological argument. The selfish agenda of the Progressive Democrats has won the day.
I am enraged at the carer's allowance provisions. Like all other Deputies, I have received representations about the means test. A constituent of mine has reared two sons with muscular dystrophy. She was in receipt of the old domiciliary allowance until they reached the age of 16 years. She has received nothing since even though she had to stay with them in school to bring them to the toilet and has seen them through college. The Government has effectively told her and the many other unpaid heroes and heroines to get lost for another year.
The health budget has been increased by 1 per cent. Constituents of mine were delighted to receive appointments in one of the major hospitals in Dublin in mid-1998 and early 1999. In an interesting report in The Sunday Tribune, I think by Martin Wall, it was indicated that in recent years people had died while awaiting urgent heart bypass surgery. The Minister for Health and Children, Deputy Cowen, cannot be happy. If it all ends in tears both he and the Minister for Finance may be rivals in a Fianna Fáil leadership contest. What has happened to the waiting list initiative for which millions of pounds are needed?
Last Wednesday we all wore yellow and blue ribbons, the colours of the Progressive Democrats, to mark national disability day. This was ironic given their impact on the budget. The Minister boasted about the types of measures he had taken in that regard. Certainly on the north side of the city there is enormous need for the provision of residential care and support services for adults with learning disabilities.
Formerly many of their parents, now senior citizens, struggled with the help of organisations such as St. Michael's House over some 20 to 25 years but they now experience great difficulty in coping with such disabilities, in respect of which the princely sum of £7 million is being provided. I am proud of what the preceding Government, of which my party was a member, did in that regard and its emphasis on catering for the disabled. During the general election I was asked by many members of the public why our Government had not implemented the recommendations of the report of the Commission on Disability. This budget does nothing whatever to advance the cause of the disabled. What is the point in establishing a national authority on disability if one is not prepared to invest appropriate amounts for that purpose, whether for those with learning disabilities, personal assistance for those with severe physical handicap or others?
I welcome the measures announced for the benefit of the long-term unemployed, particularly the additional tax allowance for employers who recruit people from that category. Nonetheless, it is a very small effort when viewed within the context of the huge overall problem of the unemployed. There is a miserly increase in the community employment provision within the Vote for the Department of Enterprise, Trade and Employment. The commitment of 50,000 places in community employment schemes under Partnership 2000 has been totally abandoned. The comments of the Minister for Finance in his Budget Statement on the Government reaching a social inclusion budget within two years rather than three were a load of rubbish. The rainbow Government promised the social partners to provide 50,000 places to help people back into full-time employment but nothing has been done about it.
The miserable increase of approximately 9 per cent in funding for health and safety measures within the Vote of the Department of Enterprise, Trade and Employment was also deplorable. Effectively the Minister acknowledged during Question Time today that many building sites in this city are not inspected before construction begins. We do not have safety plans but instead a very lethargic health and safety regime. Let us hope that that fact does not return to haunt this House, which is responsible through the Minister for Enterprise, Trade and Employment for the high level of injury and deaths, particularly on construction sites but in other areas also.
A few weeks ago I asked the Taoiseach what were his intentions in respect of the capital city for the forthcoming millennium. As the House will be aware, Dublin City Council, Fingal County Council, South Dublin County Council and Dun Laoghaire-Rathdown all have interesting plans on how to co-operate in celebrating the second millennium. I might remind the House that nearly 2000 years ago Ptolemy noted that Dublin existed, under the famous title of Eblana, but nothing has been provided in this budget for any such celebration.
However, there is a provision of £20 million for redevelopment of Croke Park, which will be to the benefit of those who play and follow Gaelic football, the only game I ever played with distinction and for which I retain a deep and abiding affection. Since it would appear the proposal is to build a national Olympic-type stadium on the north side of the city, our citizens competing at the highest levels should have access to its facilities. Without going into the boring history of the Gaelic Athletic Association and its relationship with other sports or sporting organisations, I might point out that, whereas the Taoiseach earlier indicated that such access would be made available, over the weekend we discovered that he had slipped in the figures, leaving the Minister for Tourism, Sport and Recreation embarrassed, since he was unaware of the fact and about the provision of £20 million for Croke Park. Yet he is supposed to be the Minister with responsibility for sport generally.
I had also requested the Taoiseach, as part of the millennium celebrations in respect of our parks and open spaces, with particular emphasis on the area which is the responsibility of Dublin Corporation, to draw up a major environmental plan for Dublin. This he has refused absolutely to date.
It is my belief that, on the matter of taxation, the Government followed the Progressive Democrats' agenda in reducing the prevailing rates of income tax rather than broadening the bands. I was very disappointed at the lack of any action on the overall matter of tax evasion, about which the Minister for Finance made a few perfunctory remarks. It would appear that a significant proportion of the increased taxation yield over recent years has been accounted for by the greater efficiency with which Mr. Cathal Mac-Dómhnaill, Chairman of the Revenue Commissioners, and his team work in Dublin Castle. Particularly in this, the year of the famous Ansbacher accounts and various other allegations about big business, I should have thought the Minister had greater scope and I would have expected more action on this matter.
I was also disappointed that the Minister for Finance saw fit to reduce corporation tax. He had an opportunity of helping smaller businesses, particularly through increasing the £50,000 limit, but instead he gave the huge players within our economy, especially the large banks, an enormous boost.
This budget was based on false figures and its provisions gamble with our future. It is a litany of missed opportunities and was rightly criticised by organisations such as CORI, the St. Vincent de Paul Society and others. I hope the missed opportunities of Wednesday last will not return to haunt this Government.
I am pleased to have an opportunity of participating in this debate. The total package of measures introduced by my colleague, the Minister for Finance, on Wednesday last undoubtedly will help to forge and sustain a coherent strategy for economic and social progress, creating as it does the right conditions for a continuance of our strong economic growth.
While not wishing to enter into argument with Deputy Broughan, he would need to check the record on hospital waiting lists. I must point out to him that we inherited a hospital waiting list from the Administration he is so proudly representing. That will take us into the next millennium——
I have no objection to a debate with the Minister of State.
——if we do not make an effort to correct it.
We got the numbers down to 24,000.
Deputy Broughan was not interrupted once in his contribution and he might afford the Minister the same courtesy.
We in Fianna Fáil always have been the party of care, understanding the hospital needs of our people, especially those most in need of care. This side of the House will not be found wanting over the next five years. As all parties do, we have presented a programme for Government, in co-operation of our partners in Government, which will take us into the next millennium, giving us a full five year tenure of office. Members opposite can be assured that they will remain lonely for quite some time to come.
Turning to the specifics of the personal taxation and social welfare provisions of this budget, they will go a long way towards reducing the tax burden on all taxpayers while protecting the most vulnerable sectors of our society. For example, the personal tax allowance of a single person was increased by £250 to £3,150 and that of a married couple by £500 to £6,300, and the income tax exemption limit raised by £100 to £4,100 in the case of a single person and by £200 to £8,200 in the case of a married couple under 65 years of age, with higher increases for those over that age. I have heard nobody complain about those provisions.
The Minister for Finance also announced significant reductions in both the standard and higher rates of income tax, the former being cut by 2 per cent to 24 per cent and the latter from 48 per cent to 46 per cent. Many taxpayers had waited many years for these cuts. The PAYE sector is more than delighted with this development.
In addition, the Minister proposed a reduction in capital gains tax from 40 per cent to 20 per cent which will benefit the housing market. Bearing in mind its present buoyant state, investors may be encouraged to dispose of their extra properties, incurring a lesser amount of capital gains tax in that process while the resultant increase in the housing stock will lead to price stabilisation in the market. This capital gains tax reduction may also act as a catalyst by increasing activity on the Dublin Stock Exchange, as henceforth investors may view capital gains tax as somewhat less of an inhibitor when considering investing in share capital.
Social welfare recipients will see an increase in the real value of their weekly payments. I am particularly pleased to note the large increases in payments to the elderly——
Which will allow for a pint.
In both cases, the increases outstrip the rate of inflation. These generous concessions will be of benefit to farmers and other rural dwellers as well as to the population as a whole.
I will turn now to the issue which concerns me most, that of agriculture.
I was waiting for the Minister of State to reach that.
With regard to agricultural income in 1997, as Minister Walsh indicated a short time ago, the first official estimate of income in 1997 was released by the Central Statistics Office yesterday. In that release, farm incomes are estimated to have declined by 5.1 per cent this year. Before going on to deal with some of the main issues arising from this estimate, it might be appropriate to put the current estimate for agricultural incomes in context by examining the growth of incomes over the past few years.
The Minister of State does not believe that.
In that regard, agricultural incomes increased each year from 1991 to 1996, with an overall increase of 36 per cent over the period, or 22 per cent in real terms. During this period farmers also benefited from the fall in interest rates which has led to a sharp fall in interest payments by farmers from £228 million in 1992 to £167 million last year. This saving of over £60 million per annum, which is not included in the CSO's income figures, will be maintained as interest rates remain low. EMU is also expected to deliver further benefits in this regard and will be very good for agriculture. We hope that day is coming.
If farmers can get their goods into Europe.
The Minister of State, without interruption.
This year, however, income in the agricultural sector has declined by 5.1 per cent, while gross agricultural output declined by 6 per cent in value. The decline was spread across all of the main commodities, and arose mainly as a result of reduced prices in 1997 as compared to 1996. The main factors involved in these output declines include world and EU market price developments and the impact of revaluation on export refunds and intervention prices, as well as actual cuts in export refund rates. They also included continuing BSE difficulties in the cattle sector, as many of our traditional export outlets either remained closed entirely or provided us with a greatly restricted market.
Farming remains vital to the economic and social well-being of rural communities, and to Ireland in general. The importance of this sector is acknowledged by special provisions in the budget in relation to my Department's expenditure for 1998, and by specific taxation measures targeted at farmers.
Following the budget, the gross Estimate for my Department for 1998 has increased by £13.5 million to £748 million — another record for expenditure on agriculture and food. Total expenditure, including FEOGA guarantee expenditure which is not included in the Vote, will be approximately £2 billion in 1998. This expenditure will be run on an administrative budget of under £120 million, that is approximately 6 per cent.
The headage scheme, as Deputies are aware, makes an important contribution to farm incomes in disadvantaged areas. The budget has provided an additional £23 million for headage payments in 1998. This is to supplement the earlier estimate of the Minister.
The budget provided an additional £3.5 million to meet existing commitments under the scheme of installation aid for young farmers. This should enable all outstanding legitimate applications to be processed. More importantly for the future, as Minister Walsh has already announced, we have secured the agreement of the Minister for Finance to draw up a revised scheme of installation aid which will be more tightly focused and targeted towards smaller farmers. Discussions with the farm organisations to design such a scheme will begin in the near future. Other key areas for expenditure in 1998 will be the beef assurance scheme, REPS, farm retirement and Leader.
A sum of £6.5 million is being provided for the beef assurance scheme. Our beef industry is worth in excess of £1 billion to our economy. It is vital, therefore, that we have a proper beef assurance scheme in place and that we can protect existing markets without fear or favour.
As the largest exporter of beef in the northern hemisphere, Irish beef is our flagship agricultural commodity. However, as witnessed last week, two major developments served to focus the attention of the public and the media on the role of beef in our daily lives. The first was an attack on our exports at British ports, due to the exemplary international reputation we hold as a beef producing country, which culminated in violent disruption of this trade by UK farmers. British farmers demanded justice and fair play concerning beef prices and stated that Irish farmers should not take their actions personally, but did they consider for one moment the livelihoods of our producers and hauliers? Many hauliers telephoned me to complain they were not allowed travel to France and had to turn back. That is unacceptable when we have all signed up to the free movement of trade.
The Minister of State should get the Minister for Foreign Affairs to do something.
We will have to get Deputy Spring back.
The second development was a statement by Dr. Jack Cunningham, the British Minister for Agriculture, responding to a report by SEAC, a British Government scientific agency, which showed that in some conditions BSE agents could exist in bone marrow and nerve endings inside the bones of BSE infected cattle. It must be stated again that BSE controls in Ireland, which involve the slaughter of complete herds in which a BSE case is found as well as the slaughter of cohort animals, are substantially different to those rules that apply in the UK. Consumer safety is the hallmark of Irish Government policy. The setting up of a Food Safety Authority is further testament to this fact. I compliment the Minister for Health and Children, Deputy Cowen, on his action last week in protecting the health and safety of Irish people.
We should draw a salutary lesson from last week's events, namely, that our beef is the best and we must support and protect the industry, thereby protecting farm incomes and maintaining consumer confidence.
Farmers could not get a pound for their beef last week.
We have 120,000 beef producers and their product is vital to the economy. Furthermore, we must put standards in place so as to afford consumers maximum confidence in their beef purchases. We are determined to do business on this side, and do it right. Accordingly, my Department shall undertake to implement a quality assurance scheme for beef that will marry the concepts of animal traceability and integrated standards applying to all parties in the industry. Notwithstanding the scale of this operation, and via legislation, officials at the Department will have this mandatory scheme up and running next year.
The sum of £6.5 million will enable the Department to create a fully computerised system for identification of cattle and monitoring of all cattle movements. This will enable the life history of the animal to be verified at slaughter. Work is advancing on this aspect of the scheme. It will enable it to conduct a full cattle census to act as a baseline for the above system; develop integrated production and processing protocols applicable to all parties involved in the production chain; enforce the protocols by introducing a national registration and approval process covering all parties in the production chain; and publicise and promote the benefits and obligations of the scheme.
The cattle and beef industry is of vital importance to the national economy. This scheme will underpin the safety of beef and beef products, provide further assurance to consumers and further restore consumer confidence in the wake of the BSE crisis, thereby enhancing the marketability of Irish beef at home and abroad.
I want to refer briefly to the food industry for which I have special responsibility. My colleague, the Minister for Agriculture and Food, Deputy Walsh, made the point at the Kerry Co-Op opening yesterday that good progress is being made under the current development strategy for the food industry. The strategy's aim is to maximise the industry's contribution to national wealth and employment. It covers the period 1994 to 1999 and the targets set are ambitious.
While all segments are contributing to the industry's growth, the performance of the value-added prepared consumer foods and ingredients sectors has been particularly encouraging. The value of output in the two sectors increased by 13 per cent and 11 per cent respectively in 1996. Both sectors have also contributed to the employment created in the food industry which has exceeded expectations. An estimated 7,500 gross jobs were created in the period 1994 to 1996 as against an annual average target of 2,000. In the case of exports, the outturn for 1996 was close to the previous year's level. The significant features were the decline in beef exports due to BSE problems and substantial increases in consumer foods and ingredients exports. At yesterday's meeting I commended the Minister who spoke about competitiveness in the dairy sector. He said we should not become over reliant on bulk commodities and we should move to more consumer orientated products in the dairy sector. That is the direction the industry must take and it is my job to drive it in that direction in the future.
I am pleased that 1997 has witnessed an improvement in the beef export trends and the overall results for the year should be very satisfactory. However, strategies cannot stand still. They must respond to changing circumstances. In the case of the food development strategy, I am satisfied that the changes made in the recent mid-term review of Structural Funds were correct. Those changes involved a redistribution of funding to areas such as farmyard pollution and a new research, technology and innovation measure which will benefit, either directly or indirectly, the food industry. They also place an increased emphasis on health and food safety while, in the area of human resources, they provide that programmes addressing world class manufacturing techniques and improvements in delivery to customers will receive priority.
The changes made in the mid-term review of Structural Funds recognise that innovation and a responsiveness to market needs will continue to be critical factors for the food industry. They also emphasise that future growth must be under-pinned by the highest health and food safety standards. These aspects will be borne in mind in developing the post-1999 strategy for the industry. Obviously, there will be many other influences such as the outcome of negotiations on future Structural Funds. My Department will continue its work with the industry and the relevant State agencies to ensure that the new plan maximises the contribution of the industry to the overall economy.
The budget contained a number of innovative measures which will be of great help to agri-business companies. The rates of corporation tax have been significantly cut. I understand my remaining time is to be shared with the Minister of State, Deputy Flood.
Is that agreed? Agreed.
Debate adjourned.