Seanad Éireann díospóireacht -
Tuesday, 28 Jul 1970

Vol. 68 No. 15

Finance Bill, 1970: [Certified Money Bill] Second Stage.

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

Minister for Finance (Mr. Colley)

Traditionally the Finance Bill gives the Seanad an opportunity to discuss the provision of the Budget. I propose, therefore, before coming to the specific provisions of the Bill, to indicate the main features of the Budget presented last April and the economic climate in which it was drawn up.

The background of this year's Budget was dominated by inflation. While inflation is not of course a phenomenon confined to Ireland its pace in this country is nevertheless becoming a cause for serious concern. The main reason for the recent acceleration of inflationary pressures in our economy has been the excessive income increases which have been spreading throughout the community since 1969. Increases in money incomes of this type, well above the growth in productivity, serve to push up prices because they outstrip the increase in the national product. In many instances, these income increases have been secured by strong organised groups as a result of a strike—or a threat of strike—without any regard for the interests of the community as a whole.

The general increase in prices brought about by these income developments was—and is—of serious concern to the Government for many reasons. In particular we are concerned about those groups in the community who are most severely affected by the resultant disimprovement in their standard of living. The people hardest hit are those who are least able to protect themselves, the old, the sick, the unemployed, pensioners and people on fixed incomes.

We were satisfied therefore that a major aim of this year's budgetary strategy should be to effect a redistribution of incomes by taking back some part of these excessive income increases and devoting it to protecting social welfare recipients and other vulnerable groups in the community from the worst consequences of those increases. Amongst those groups are persons on small incomes, on whom, because of the increase in money incomes in recent years, income tax had begun to bear increasingly heavily. We were satisfied that the time had come when some relief had to be afforded to them from the incidence of this tax. It was also, of course, necessary that the Budget should complement the monetary and credit measures which had already been taken by the Government to combat inflation and relieve the pressure on the balance of payments.

The additional taxation needed to give the necessary benefits and reliefs to the groups I have mentioned amounted to £20 million in total. The Government decided that the most equitable way for the community as a whole of securing revenue of this order was to increase the turnover tax by 2½ per cent, that is by 6d in the £ to bring it to a total of 1s in the £.

This increase in the turnover tax enabled income tax reliefs totalling £7.4 million, social welfare improvements costing £5.35 million, additional aid to agriculture of £5 million and increases in public service pensions of £1.16 million to be provided. As well a number of other measures which further reflect the social concern of the Government for the less fortunate in the community were introduced.

The substantial increases in social welfare benefits, the new schemes and the extensions to existing schemes, were fully described in this House when the legislation necessary to give effect to the measures was introduced here last week and I do not think it necessary for me to detail them again now. I should like, however, to make one point clear: it is that the increases in benefits which the social welfare beneficiaries will receive should more than offset any increase in the price of essentials resulting from the increase in the turnover tax.

The measures for farmers announced in the Budget were designed to bring about a better balance between farm and other incomes. They will bring the total Exchequer assistance to agriculture in the year to £96 million. The added reliefs will benefit producers of milk, beef, sheep and pigs and will also enable a number of existing grants to be increased and some new ones to be introduced.

Among the other new provisions in the Budget I should mention the extra money being made available to encourage local authorities and voluntary committees to continue their valuable efforts to settle itinerants in the community and educate their children. Voluntary organisations are also being assisted by a contribution of £150,000 in their very praiseworthy work in the care of the aged.

I now come to the income tax reliefs announced in the Budget for which the necessary legislative authority is being sought in the Finance Bill. These reliefs are designed primarily to benefit taxpayers on modest incomes and will as indicated cost the Exchequer £7.4 million this year.

The proposed reduction of one-third in the standard rate of income tax— from 7s to 4s 8d in the £—on the first £100 of taxable income, while of particular benefit to persons of low incomes, will represent a relief for all taxpayers and will enhance the graduated nature of the income tax code.

The minimum earned income relief of £125 for single and widowed persons and £225 for married couples is a new feature of the code which was introduced in the Budget. It will mean that

single taxpayers earning up to	£374
widowed taxpayers earning up to	£399
and
married taxpayers earning up to	£649

will be exempt from tax. Many thousands of persons will thereby be removed from the tax net and the burden on many others will be reduced.

The married woman's earned income relief is being increased in response to many claims that the present level of the relief discourages married women from returning to employment in industry and the professions. The combined personal allowances of a married couple who are working will now equal the personal allowances of two single taxpayers.

Further income tax provisions in the Bill secure additional relief for persons with small total incomes and for the aged whether their incomes are earned or unearned and increase the dependent relative income limit from £196 to £222 so as to enable taxpayers who maintain dependent relatives with no income other than the non-contributory old age pension to continue to receive the full tax allowance when that pension is increased next month.

Other income tax provisions will relieve industrial and provident societies of the obligation to declare particulars of interest paid without deduction of tax where this is less than £70 instead of the present figure of £5; will grant the industrial building allowance to the purchaser of the building rather than to the builder; will extend the relief applicable to certain securities of Irish companies.

The Bill contains a number of measures designed to counter avoidance and ensure the equity of the tax structure. I should like to draw attention to some of these. The first ensures that certain receipts coming in after a trade, profession or vocation is discontinued will in future be taxable.

The second relates to the practice of labour only sub-contracting, or "lumping" as it is commonly called, and warrants, I think, special explanation. This practice of "lumping" has become widespread in recent years in the building industry. Many "lumpers" never complete returns of income and often escape tax completely. Section 17 is designed to tackle this problem by providing, in the first instance, for a deduction, at the rate of 7s in the £, by contractors from all payments made under a building contract to sub-contractors. To protect the position of established sub-contractors, however, I am providing that a sub-contractor with an established place of business will be furnished with a certificate by the Revenue Commissioners which will enable him to be paid without any deduction, provided he has furnished or undertakes to furnish accounts of his business. In other cases, tax will be deducted, but a provision in the section will enable such sub-contractors to claim repayment on a monthly basis of the excess of the tax deducted over their proportionate tax liability for the year.

In the estate duty field, changes are being made to prevent avoidance of duty through the medium of family companies and by way of securities which are issued subject to the condition that they be exempt from taxation in the beneficial ownership of persons who are neither domiciled nor ordinarily resident in the State.

Complaints about the complexity of the tax code are frequently heard and I am glad therefore to say that the stamp duty provisions in this Bill represent a major rationalisation of the stamp duty rating structure involving abolition of no less than 27 heads of charges, reduction of rates under other heads, particularly a 20 per cent reduction in the rate of duty on cheques and other bills of exchange drawn within the State, and increases in duty in a few cases, the most notable of which is the duty on conveyances or transfers of property other than land. This latter increase secures that the rate of duty on all property will be the same. Apart from the need to rationalise the stamp duty rating system, this increase is necessary to halt the present practice of avoiding payment of the proper amount of duty by placing an inordinate value on property such as goodwill attaching to premises, patents, licences, trade marks and copyrights, which attract at present a lower rate of duty.

I should now like to refer to the turnover tax and sales taxes in general. There has been criticism of the choice of the turnover tax for the purpose of raising the revenue necessary to achieve the desirable social and other objectives of the Budget but no one has come up with an acceptable alternative. To obtain the necessary extra revenue from income tax would have involved an increase of about 1s 9d in the £. It is clear that an increase of that order was out of the question on many grounds.

We are already over-dependent on the taxes on drink, tobacco, petrol and oil and the move to the broader base of taxation provided by the turnover tax was necessary if only for this reason. There was however another very cogent reason for such a change. It was that greater reliance on the turnover tax would facilitate the changeover to the system of added-value tax required by membership of EEC and would avoid serious disruption of our taxation system at a later stage.

The EEC system of added-value tax makes special arrangements for agriculture under which virtually all farmers are excluded from the full application of the system and the element of tax on their purchases is taken into account by means of a credit which they pass on to the buyers of their produce. It is proposed to include broadly similar provisions in our system, and these should remove virtually all of the problems which might confront farmers under an added-value tax. The changeover will also affect certain business not hitherto required to register for the purposes of the existing taxes but whose activities will be within the scope of the new tax.

I am confident that the change will not involve any serious problems for traders generally; indeed, in many cases, the operation of the new system should prove to be simpler and more straightforward than at present. To ensure a minimum of disturbance in existing business procedures it is intended to have the fullest discussions beforehand with interested bodies, and their views will be fully taken into account in framing the new provisions.

This is the first Finance Bill of the 1970s. As a nation we have just emerged from a decade of considerable material progress and stand at the threshold of another that promises well for our continued prosperity provided we avoid the heedless pursuit of narrow sectional gains. If only to avoid intolerable tensions in our society in the future the fruits of our prosperity must be equitably shared amongst us all. This, I think, our sense of social justice as a people would anyhow demand. In this we need a sense of national purpose as much now as at any time in the past and I am satisfied that the measures in this year's Budget and in the Finance Bill are a significant contribution to achieving it.

I commend the Bill to the Seanad for a Second Reading. The detailed provisions of the Bill are summarised in the explanatory memorandum circulated earlier but if Senators wish for further information on any points I shall be glad to supply it.

As indicated in the Budget statement this year the system of sales taxation known as the added-value tax has been the subject of study by my Department for some time.

The added-value tax has been developed from the experience of the operation of the older forms of sales taxation existing in most European countries for many years. It is generally recognised as the best system for efficiency of operation and adaptation to varying circumstances and changing conditions. While the existing turnover tax and wholesale tax have worked well in this country, it is apparent that the added-value system would be a more flexible one to meet the requirements of technical progress in industry and agriculture in the years ahead. Also, as indicated, it is the system of sales taxation prescribed by the Council of the EEC for adoption by its members.

In these circumstances the Government have decided in principle that an added-value tax should be introduced next year in place of the existing turnover tax and wholesale tax.

I wish to stress that the change to an added-value system would basically involve no more than a change in the method of collection—under the new system tax would be payable in fractions over the various stages of production and distribution instead of at the wholesale or retail stage under our present system.

Mr. Alexis FitzGerald

I shall not detain the House very long. I have some general reflections to make on the situation which has led to the introduction of this Finance Bill.

The first observation I wish to make arises particularly from some articles which have appeared in Irish magazines and newspapers in recent months. It is necessary to observe that the internal purchasing power of the Irish pound has weakened greatly in the last two or three years. There is now a gap, which seems—so far as one can estimate from these figures—to be growing, between the internal purchasing power of our currency and its external purchasing power. The simple fact is that the Irish pound now will buy more abroad in terms of goods and services than it could buy at home. There are dangerous and threatening implications in this. Inflation is admitted by all commentators and has been referred to by the Minister today. It is partly a demand-pull inflation—excessive demand pulling up prices—and partly a cost-push inflation—excessive income requirements increasing costs and pushing up prices. It can be argued that at a certain stage of economic development a mild prices rise can actually be beneficial and can stimulate the utilisation of under-utilised capacity. We are not living through such a time. This is not the present position. This has not been the position in Ireland for some years.

Devaluation has been mentioned. Providing one does not make a fetish of it, it can be a justifiable financial technique to enable an economy to make, in certain circumstances, if it is strong enough, necessary adjustments. For us in Ireland to adopt this technique would be, I strongly urge, for us to put on the badge of failure, to make a confession of economic mismanagement and to create, as its immediate consequence, an almost irremovable obstacle to further progress. I think that any such declaration, that the Irish pound is worth less than the pound sterling at its worst time, would have a more than slightly damaging effect on the national confidence and on the reputation of our monetary system.

We must therefore as a people resolutely adopt all the measures necessary to avoid a crisis, or to give the word "crisis" its primary meaning as I understand it, judgment—judgment on our failure. I have personally never seen a theoretical argument in justification for devaluation which impressed me in the slightest degree in relation to the Irish pound, even if we are in a position to ignore the manifest practical disadvantages of having anything other than parity with that trading economy which is so close to us and the particularly grave consequences to which I have already referred in its effect on the inflow of foreign capital, without which the rate of our economic development could not have progressed as it did and without which the attendant balance of payments deficits on the current side could not have been financed. It is perhaps right to say at this point that we do not have a payments crisis. There is no payments crisis. One of the good things which must comfort the Minister taking office at this time is the continued and even surprising inflow of capital into the system. We would have a payments crisis if that capital did not flow in. It measures the necessity for us to maintain confidence in our ability to manage our affairs.

I want, in the most tactful way I possibly can, to refer very briefly to the Minister's predecessor. I feel I can make some reference to him because I spoke on the Appropriation Bill debate here on 2nd December last and I addressed myself in a degree of detail, in references of a kind I do not intend to reproduce today, arguing a case for action which was then ignored. The Minister's predecessor is a man of obvious capability, ability, cleverness and imagination and, at a certain level in the Department of Finance in relation to the actual administration of fiscal machinery he was particularly good. His name must be associated with estate duty reliefs which were given during his period in office. It must be associated with the existence of Irish investment trusts and with a number of other things, some of which attracted other people more than me. There was, for instance, the encouragement to artists to come and live here.

I must say, however, putting it as kindly as I can, that he was too brave a man to be Minister for Finance. He was prepared, overmuch, to live with risk and danger. This is an office which should be occupied by a man of different temperament where, frankly, caution should be the overwhelming note struck by the personality in question. I cannot fail to note, and this will be on record, that the name of the Minister's predecessor was never associated, to my recollection, with a single restraining measure. Even the modest budgetary restraint of the autumn of 1968 was not introduced by him, but, in his absence, by the Taoiseach.

The Minister whom we have in the House today and whom I wish to welcome in that position, has come to his present office having held a number of other offices of State. It used to be observed at other times that the Department of Finance was not a Department ever to be given to somebody who had never held another office because he would not have experienced what it was like to receive from the Department of Finance the treatment they mete out to other Departments. This observation was perhaps more true of other days than it is now. It was more true in the days when the Treasury spirit was more alive in that Department than it has been demonstrated to have been in recent years.

I think there never has been an occasion in the recent times when we in Ireland more needed a watch dog for the public than we do now. I would go further and say as a generality that it is at a time of economic expansion that the role of watch dog is most necessary, jealously to secure that for every £ charged and exacted from the taxpayer true value is obtained.

Therefore, it will be hard for the new Minister for Finance to turn away from the delights associated with the previous office he occupied and in which there must have been a special pleasure associated with establishing the new major concerns so very invigorating to the economy and so very desirable as most of them were. It will be difficult for the new Minister to turn to what I think should be the first task he has to make his mind up to; the calculations of all the special problems in regard to the state of our finances. I think he will find his first task will not be choosing between particular forms of taxation but rather more the task of reactivating in his Department its primary role, the elimination of waste.

We know that the Minister for Finance is not far removed from our people—that he knows the circumstances in which many of them have to live, more particularly, as somebody living in Dublin. We who live in certain circumstances get quite a surprise when we learn of those circumstances —no thick rich carpets on the floors of their houses. Our public cloth ought to be cut according to the measure of our neediest.

The present Minister for Finance has had no more to do with this Budget than arises from his membership of the Cabinet. It was not prepared by him, but he is burdened by a piece of anachronistic legal nonsense, the doctrine of collective responsibility. In fact, he is presenting and introducing the terms of a Finance Bill with whose preparation he had nothing to do. The doctrine of collective responsibility has been taken from unwritten British practice and the full significance of it has escaped me.

Since this Finance Bill was introduced we have not had a Minister for Finance who was free to think his own thoughts or his own mind with regard to the Budget. As I have said, he has been burdened by the doctrine of collective responsibility and this was illustrated during the Committee Stage in the Dáil. I think, therefore, it is his first duty to rethink the Budget in view of the desirability to combat inflationary features.

The economy, unfortunately this year, has received very little regulation save perhaps the rather obscene regulation of the cement strike and a feature which the Central Bank notes has been introduced to the banking public by the bank strike. I strongly urge the Minister and the House to pay heed to the various analyses of the economic situation which have been made by Dr. Michael Fogarty and other writers of the Economic and Social Research Institute. There was another statement by Córas Tráchtála, and above all, and on many occasions, by Dr. Whitaker. For myself, may I be allowed to say, in case the Minister may think he is listening to a narrowminded exponent of an out-of-date and obsolete orthodoxy, that I am as convinced a believer of Keynesian economics as I was 21 years ago when I had some slight association with the introduction of the system of capital budgeting. At that time, our critics said that a modern democracy would be pleased enough with definite financing but would not tolerate financing for a surplus. They may have had a point, yet I think the more our people are treated as prudent and mature, the more they are likely to behave prudently and maturely.

I must assert at this point my complete conviction of the correctness of the analyses to which I have referred. I am not going to strain the patience of the House by reading long quotations from them, which could well be done. I am sure the Minister has already read them and bears them largely in mind, and one sees the reflections of his consideration in the opening remarks that he addressed to us today. It is probably unnecessary to remind him that when he is listening to the views I referred to from Dr. Whitaker he is listening to the views of a man who was the author of the Programme for Economic Expansion, an expansion which, it is clear from the reports of the Central Bank, is now threatened unless inflationary forces are brought under control; an expansion which, as Dr. Fogarty has well demonstrated, has really been much less than it might have been had monetary incomes matched and not exceeded the growth in productivity. In this observation of the Minister I support him fully. Dr. Fogarty has demonstrated that, were it not for this cost-push inflation, the number of people now working in Ireland would not only enjoy the benefit of real incomes, but they would be working side by side with other countless thousands now emigrated.

While the Minister should take note of the favourable elements in the picture and that to which I have already referred — the continued inflow of foreign capital, the state of our reserves and the absence of any payments crisis —the Minister must close his ears to siren voices lulling him into inaction. I am reminded at this point of the words of the university president who reported to the governing body of his college: "Everything is going fine here. A spirit of pessimism prevails in all departments."

The Central Bank refers to three separate roles — monetary policy, fiscal policy and an incomes policy. It may be thought that the Central Bank will be true in its own administration to this policy. It will secure in due course a proper monetary restraint. Fiscal policy is entirely within the Government's control and in simple terms requires a combination of cutting or controlling expenditure with a system of disinflationary taxation. I think it necessary to say that they will have to kill some of their own darlings and retard some of them. It may be that in relation to favourite items of expenditure of the Minister himself—for example, grants to new factories and additional hotel accommodation with the aid of State grants—there will have to be cuts. There is need for a very close analysis of the benefits won for the community by certain developments in relation to the cost of them. I am thinking of the short term, of the term in which we are living and wishing to get the economy back to a situation where we can progress rapidly forward again.

I think I am correct in saying that the financial spokesmen of the party for whom I am speaking have said in the Dáil that a budgetary surplus should be our budgetary policy this year. That is only to speak of a budgetary surplus and leaving considerable sums to be borrowed to finance the capital programme. If this is the position politically no one can say that the parties in this State are behaving like the Greens and the Blues of Constantinople who in their hot party feuds disregarded the interests of that city. We do not disregard the interests of this country. We put it before the interests of our party and I think that our opponents, those who have charge of the Government at this time, should take note of that position.

The third policy element, that of an incomes policy, is the most difficult. We have all read the report on Prices and Incomes by the NIEC. I am sure that the various recommendations there are under consideration by the public Departments. I have been asking myself the question as to how should I set about the solution of this problem were I the Minister.

Frankly, I do not find an easy answer coming, but I think that I would proceed somewhat along these lines. First—and the Minister has indeed anticipated me in this—I would not evade an honest statement that the push on prices comes mainly from an excessive demand for remuneration. I should seek by the aid of modern communications to persuade the community of the truth of this proposition and the consequences of this truth in terms of the risk taken and of the costs actually incurred. What is the risk we take? The risk we take if we do not control an excessive monetary rise in income with no real advantage gained by the community, even in the short term, is of flopping back into the stagnation from which our economic expansion has taken us. The costs we have incurred is that our economic development has been less considerable than it might have been, our employment is less full, our emigration is unnecessarily high. Such developments as there has been has been to some degree at the expense of the fixed or nearly fixed income groups—the lower paid worker, the unprotected and unorganised worker—and also of the saver, who has lent his money to the Government for community purposes.

I would anxiously examine our whole system of Government, expenditure and taxation with a view to ensuring the establishment of social priorities that would be truly satisfying to the nation. It is obviously right to think of creating a social system that would seek to eliminate taxation anomalies wherever they are found to exist. I know that there are difficulties in this latter operation because of our overlapping economy and because of the desirability of attracting to our shores people with considerable incomes, but I thought myself to the position that we must be satisfied that we are not paying too high a price to attract this particular benefit. We may have developing here a two-nation situation, and the task of the statesman is to surmount that by a determined effort to sort out what it is that divides us and to strengthen the forces of unity by comprehension, patience, understanding and leadership.

What is needed above all at this time is an authoritative voice in Government which will carefully regather a trust which I do not think has been utterly lost but which has been greatly weakened. I think that the Minister should be able by a sustained effort to make people aware that through this excessive income push the historic Irish nation are being deprived of the sense of the enormous achievement which they could have, which would put us ranking high in the economic tables of the world.

I do not share the view, which I think ought to be vigorously rejected, that we Irish are incapable of that achievement. So far from being a people, to use the poet's words, "in love with easeful death" I think we are a people who, in fact, thrive on success. This has been demonstrated by our people's matchless vitality whenever they have gone broad. We sensed it here, too, in the earlier years of the economic expansion. Before a sense of sourness came upon us in the past few years, there was an enthusiasm generated by the very success we thought we were having. I do not think, however, that in this old European country we will have steady economic development unless we have a just society. The mere generation of affluence is not enough. In fact, the mere generation of affluence creates perhaps more problems than it solves. Materialist capitalism contradicts completely the values to which we have been historically committed. Partly because I value real liberty so much, I must conclude that in Ireland it is necessary to impose more social restraint than we have been imposing hitherto on the selfishness of free enterprise.

Imposing restraints is not to apply exclusive discipline. Neither is it to hand over the control of our people's resources to some impersonal central authority. Rather, it is to create an institutional system under which the free play of the market economy can operate so as to achieve the best possible management of the economic resources of our country.

I should like to conclude on the note that I have little doubt that, for the efficient management of our economic resources, there is nothing superior to free enterprise but free enterprise must work within, and subject to, institutions which have the concern of the people as their paramount purpose. I welcome the Minister to his new office and wish him every success.

Miss Owens

I should like to associate myself with the remarks of the last speaker in welcoming the Minister to his new office and to this House. As stated in his opening address, this is the first Budget of the seventies and, as such, should set a tone as to what way we may look and what we can expect in the seventies. Therefore, it was with particular disappointment I found in the second paragraph of the Minister's address that, again, the trade union movement was being held up as the repository of all that is evil in this country. These remarks are not in the least helpful, but it is popular nowadays that such remarks be uttered by the mass media and by politicians. They are not helpful to the trade union movement.

The Minister has stated that inflation is not generally confined to Ireland but that it is of serious concern. Indeed, it is of serious concern to all of us, not least the trade union movement. The main reason for inflation is inflationary pressure on our economy. This has been caused by excessive income increases spread throughout the community but, of course, there have been very valid reasons for income increases. However, income increases have hardly kept pace with the increases in prices. The incomes have been secured by strong organised groups as a result of strikes and threats of strikes.

Does the Minister maintain that all the right is on the side of the employers and all the wrong on the employees' side? If this is so, it does not augur very well for industrial relations in the seventies. This would be a disaster for the country. I reject completely this concept. At a time when we are endeavouring to embark on a prices and incomes policy, such a concept does not help the trade union movement because there is a strong volume of opinion within the movement that what we are about to embark on is an incomes policy rather than a prices and incomes policy. I shall say more about this later.

Turning, then, to the Bill generally, there are some aspects, especially in relation to income tax, which I welcome very much. A valuable effort has been made at redistribution and in helping people in the lower income bracket. I should like to make a general comment on the income tax code. It is that people have great difficulty in understanding the implementation of the present code of taxation. On the day after the Budget was announced, I saw a group of four people sitting around a table and endeavouring to work out the implications for them of the Budget, but each one of the four came up with a different answer. Perhaps the Revenue Commissioners might endeavour to do a little more in spelling out the code. They did publish a very useful explanation of a prices code, so perhaps they might do something similar in relation to income tax.

Section 9 of the Bill is the one relating to increases in tax free allowances for married women workers. Such relief has been advocated for years by the Irish Congress of Trade Unions and by many women's organisations throughout the country. I welcome this relief very much. I agree that it is right to allow a married couple the equivalent of two single people but I would ask the Minister to consider that they should both be allowed the single persons allowance rather than the man getting his own allowance plus a marriage allowance.

This relief has been introduced at a time where there is a severe shortage of women workers in the country. Had it been introduced five years earlier it would have been so much better because women would have been encouraged to go back to work whereas now they may consider the slight increase in allowance from £45 to £74 not to make it worth their while going back.

In regard to the main provisions of the Bill, one provision which has affected everybody in the community is the increase in turnover tax. When this tax was first introduced in 1963 it was met with considerable opposition from everywhere but people got used to it. Of course, this tax was followed immediately by considerable increase in prices and in the cost of living generally. It was also followed by a general increase in wages to the extent of 12 per cent. I cannot say whether these increases were for economic or political reasons. I would not be competent to say that.

In so far as I can see, what is happening since the 1st May is that prices have gone on a completely crazy spiral and nobody seems to know where. It will all end or, indeed, where it is happening. I have checked with the many women's organisations concerned with prices and as yet they have no positive results apart from the fact that every housewife in the city feels she is spending £2 more a week on her grocery bill — this includes general items, not merely groceries as such. This considerable increase affects very much the people whom the Minister, in his opening speech expressed particular, and I am sure genuine, concern for, namely the people on a small fixed income. The concessions made in social welfare benefits and income tax relief are not sufficient to meet these increased prices. The average increase appears to be between 5 and 6 per cent.

Confusion and chaos seem to reign in the implementation of turnover tax. Some traders and retailers absorbed the 2½ per cent whereas others did not do so. There does not seem to be any statistical evidence about who did and who did not absorb the turnover tax of 2½ per cent when it was introduced in 1963. What is added on in the supermarkets does not seem to resemble either 2½ per cent or 5 per cent. When I went to purchase an article of clothing costing £10 5s, turnover tax of 15s 6d was added on— which according to my mathematics is about 7½ per cent. I challenged this but I was told by the manager that they were allowed a certain leeway. I refused to buy the garment. This is absolutely wrong and gives little hope of our ever being able to achieve any sort of price control. This sort of thing affects housewives and workers alike and when one talks to workers about an incomes policy they say they are only just managing to keep pace with price increases and in many cases they have fallen behind.

We seem to be heading for a situation where a prices and incomes policy is going to be the cure for all our ills. It may well be, I am not in a position to say, but in other countries where it has been introduced it has worked to an extent in certain circumstances but only for a limited period. A prices and incomes policy is a short-term solution to get the country out of a particular difficulty — a difficulty we may very well be in. I do not know whether anyone would like to relate our situation to the situation which existed in Holland after the last war, but it is true the Dutch incomes policy lasted the longest of any prices and incomes policy and it seems to have worked out very well. They have experimented with a prices and incomes policy in Britain but one can hardly say it was an unqualified success. The Swedish prices and incomes policy was fairly satisfactory although it is not what we would term a prices and incomes policy. The American prices and incomes policy was a failure because they went about it in the wrong way and there was a lack of communication. This is what may be happening here. We are not clear what a prices and incomes policy will mean to the workers.

The other aspect of an incomes policy which has not been spelt out but which is of primary importance to the whole concept is the effect the Minister for Finance will have on it in his Budget each year. If the Minister adds a further 2½ per cent to what in future will be an added value tax and not a turnover tax this will put up prices again and incomes will continue to spiral. I do not know if the NIEC have gone into this in depth but if we are going to spell out income increases in a staged or gradual progression we must also spell out where the control in prices will be and where the fiscal policy will affect it. This is the only way to sell an incomes policy to the workers. With the introduction of this added value tax the trade unions will be even more reluctant to enter into long-term agreements. The present bank dispute has proved that trade unions are reluctant to sign agreements which will tie their members up for 18 or 21 months without having any knowledge as to what the effect on prices will be or whether when the 18 or 21 months have elapsed they will be better or worse off.

I was surprised to learn that next year we shall have an added value tax instead of a turnover tax. This means two things: (1) that the present Government will be with us and (2) that we shall be on our way into the EEC. I am not suggesting the Government are being presumptuous about our being on the road to the EEC. I wonder if the Minister when he is replying could tell me if, in relation to farmers there is a special arrangement whereby they are excluded from paying turnover tax in addition to being excluded from paying income tax? I may be completely wrong but that is my understanding of the position. In conclusion I would point out that the effects of the turnover tax have been far greater than perhaps even the Minister's predecessor anticipated. I welcome the new concessions in the income tax code.

Ruairí Brugha

Ba mhaith liom fáilte a chur roimh an Aire Airgeadais chun an Teach seo.

In welcoming the Minister I should like to compliment him for the great part he has played in our industrial progress. It is the only way we can get rapid expansion and employment.

There are many welcome provisions in the Finance Bill, especially the provisions relating to social welfare, agriculture and estate duty. In dealing with the estate duty, perhaps I am not altogether up to date with existing legislation but it seems to me that there is still an undesirable aspect of this duty. Duty starts at £5,000 and two points have been brought to my attention in relation to this: the first is that duty is chargeable on the entire amount once £5,000 has been reached; the second relates to a section of the community who may be suffering because of this duty. If a husband succeeds in paying off the mortgage on his house before he dies when the value of that house is added to whatever savings he may have it often means a high level of duty has to be paid whereas if he had not bought a house but had been a local authority tenant no duty would have been payable. If this is so, as has been said to me, I think it is a hardship on the people who have tried to make provision for their dependants.

There is another aspect of that question in relation to incentives for saving. We have heard a great deal about the Housing Bill here in the last few days. There is a side of it which has been brought to my attention consistently and that is that young people who are trying to save for a house before getting married are in the position, if they belong to the middle income bracket, that they cannot get the ordinary grants and yet they are on a taxation level which makes it hard for them to save. I am not making proposals but merely referring to the problem. The provision of housing is a great difficulty in our present economy. Capital costs are high. Another problem is the "overheating" due to expenditure.

As a State, we are not able to provide all the houses needed. It would seem that young people have decided in some instances to emigrate to where they can command larger incomes, in the hope of saving money and returning to buy a house here. We are running the risk of losing useful young people. Perhaps at some stage some form of saving incentive might be introduced here. If young people are willing and capable of saving money in order to invest in a house, some incentive should be provided for them, possibly through a system of investment bonds.

I welcome, as Senator Miss Owens did, the change in the married woman's allowances. This new provision reduces a great irritant. People are very vocal on this subject. It is hardly necessary to say that in our Christian society it is better that people should not be subjected to disadvantages on marrying.

The introduction of a certificate and a taxable charge on subcontractors is a good thing. This closes the door to a temptation to evade tax. The Minister referred to the equivalent between 2½ per cent turnover tax and 1s 9d in the £. We are all conscious of what would be the effect on incentives if there was an increase of 1s 9d in the £ in income tax. The eventual introduction of the added value tax in place of the turnover tax and the wholesale tax is something we should all welcome. Many of us have come up against difficulties in relation to these two taxes. These taxes have hit people in a small way of business, whereas the mammoth concerns have been able to absorb the turnover tax, or to appear to absorb it, in the retail price. Small shopkeepers have found themselves up against a monthly bill which they were not able to cope with.

I should like to compliment Senator Alexis FitzGerald on a very interesting speech. The Senator has said he would be against devaluation. We are all against devaluation. One asks what are the causes of the possible devaluation which we would all hate to see happen. It could only happen where we ourselves are not prepared to live within the means of our economy. Like Senator FitzGerald, I agree that there is nothing wrong with a mild increase in prices. This could be somewhat beneficial. We can have any sort of rise in prices so long as every other country doing similar business has a similar rise. We are coming up against the problem in our economy, which is reflected in today's report from Córas Tráchtála, that the increase in prices in goods exported by us is twice as great as that in the goods exported by Britain and in some cases three times as great as the increase in prices on goods exported from the EEC countries. This is a serious aspect of our entire economic situation.

Senator Miss Owens appeared to think that the second paragraph of the Minister's speech was directed against the trade union movement. When I was listening to the Minister I was not thinking, except in part, of the trade union movement. The speech refers to increases in incomes, not only those which have been secured by strong, organised sections but also those which have been obtained in the Public Service, in the semi-State area and in executive industrial categories.

I have had the experience of interviewing people seeking employment here. Some of these were young people. They had been abroad for two or three years. It was interesting to find how consistent they were in being prepared to accept a lower income in order to get employment here. These young Irish people have experienced what it is like to be abroad and they do not wish to have their children reared and educated in an atmosphere which they do not find satisfactory. They have learned to appreciate through enforced emigration that there is a quality of life in Ireland which they cannot find elsewhere.

To me it seems a great pity that many of those in our society at home —in industry, in State, semi-State, professional and trade union organisations—do not appreciate that many of us who have worked abroad do—that it is worthwhile, almost worth anything, to have the satisfaction of living and working in Ireland and of being able to educate our children in their own country. Perhaps this is one of the lessons we need to learn in relation to the entire problem of prices and incomes in Ireland.

Senator Owens referred to prices and income control and she seemed to suggest that this is the cure for all our ills. I have not yet seen how one can introduce prices and incomes control in any effective way. Senator Owens referred to Holland and Sweden. Without wishing in any way to be critical or to find fault with our trade union structure, there is an entirely different system in those countries, particularly in relation to trade unions. In both Holland and Sweden there is a disciplinary system which enables both employers and trade unions to carry through agreements which would enable wages to be increased side by side with expansion and growth.

It is in this aspect that our real problem exists and it is difficult to see how it can be solved, because unfortunately we have what has been talked about so often, this leapfrogging situation in which each one is trying to get ahead of the other and the tragic part of it is that no one is making progress.

A major part of the 2½ per cent increase in turnover tax is being directed towards helping those socially in need. Due to the inflationary situation that has developed, however, one begins to wonder whether the socially needy classes will gain anything from it because of increases in prices. To me it seems tragic that all of us—none can be excluded—by example or otherwise are responsible for increases in costs and in incomes and the consequential effects of those on the economy and on those who are most in need. We need to take a hard look at ourselves and to ask ourselves how far any of us is willing to go, in our jobs, in our trade unions, in our State and semi-State sectors, to make the sort of sacrifices that so many Irish people abroad are prepared to make, in order to continue to live in Ireland and to make a success of life in this country.

Professor Kelly

If I do not welcome the Minister for Finance on this occasion it is because I already did so—when he appeared here as Minister for Finance in a debate, of limited interest to most of the House, on the Coinage Regulations. On that occasion, I am sorry to say, his approach and attitude to points which we on this side were trying to put in relation to the decimal coinage were disappointing. In spite of that, I retain a childish and perhaps a pathetic faith that this Minister is accessible to points of view which I would not think it worth while to put forward to other members of his party.

I am not a fiscal or a financial expert and I will not bore the House with attempts to criticise, by way of praise or blame, the strictly financial provisions of the Budget. However, I want to say something about the psychology, as it seems to me, that lies behind the inflation which everybody complains about—the psychology, the widespread attitude which leads people in a small, poor country like ours, which has only just about pulled itself out of the bog, to seek a standard of living equal if not superior to that enjoyed by much richer countries. It is a sort of acquisitive frame of mind which everything in the official life of this country conspires to exacerbate.

I do not want to read to the House a lecture on the communications media and I do not think it will be necessary for me to say how important it is not to under-estimate the effects these media, particularly television, have on people's attitudes towards themselves, their lives and the satisfaction content of their lives and the potential of their lives. It should not be necessary for me to say that the kind of example Senator Brugha spoke about must start at the top.

Now, for the ordinary citizen or family, the main source of ideas of any kind, whether it can be classified as example, as preaching, as exhortation or anything else, is the television box in the sittingroom; and it seems to me that television, as it comes from Montrose, does everything in its power to strengthen and to promote this acquisitive and material influence which leads to the kind of attitudes everybody recognises are central to inflation. Senator Owens has left, but if she were here I would have hoped she would not think I am suggesting that the root of the trouble lies in unjustified demands being made by lower paid workers. Lower paid and other workers are confronted day in, day out, by the Irish television service which leads them to expect an undisturbed middle-class existence. I am not talking about the editorial content of Telefís Éireann but the revolting advertising being poured out day after day.

The effect of it is that one is a failure in life unless one is able to spend heavily on smoking, on drinking, on petrol, on every possible kind of commodity and convenience which may be necessary, and on which money must be spent, but not to the degree which television advertisements suggest.

I hope that it will not be thought that I am suggesting that the State should in some paternal way prevent commercial interests from trying to sell their goods. I am not suggesting that, and I do not think that any of us would like to see a sort of State in which advertising was suppressed, but I do suggest that it is wrong that commercial advertising, which so strongly stimulates the acquisitiveness I have been speaking of, should reign unchecked on our national television medium.

I think it quite wrong, for example, that when, as was explained in a book published at the end of last year, a programme designed to make sure that people in the lower income groups would be able to make the best possible use of their incomes was transmitted, the complaints from the commercial interests which felt this to be a threat to them were so strong that that television programme had to be killed. I think that that is an absolute disgrace. It is disgraceful that if Telefís Éireann puts on a programme like "Home Truths" which is designed to reach the perhaps defectively educated housewife in a family which at that time had an income of something like £15 a week or less, though it may be a bit more now—a programme designed to tell the housewife how to make the best use of her money, how to avoid buying rubbish, how to make a shilling go a bit further—a programme like that should have had to go because of the unbridled desire of the tobacco companies, the drink companies, the detergent companies and other companies to sell as much as they possibly could. I am aware that when I mention this I am stating only one side of the case and that maybe there is another side to it, so that I may be unfair, and if I am I apologise, but if there is any truth in the idea that the commercial interests with their alluring advertisements dominated Telefís Éireann to the extent that corrective programmes of this kind are impossible then I think it is a terrible disgrace, and it is something that deserves the attention not merely of the Minister for Posts and Telegraphs, who is the person most nearly concerned with the television service, but of the Minister for Finance and of the whole Government. I think that this is something which is entirely wrong, and which a television station in a simple republic like this ought not to have been guilty of.

Many years ago the present President of this country made a speech, which at the time was much derided and sneered at, in which he outlined in slightly poetic language his own concept of Ireland and of the Irish people. He outlined a system, a gospel of simplicity. I shall not try to recollect it from memory, and no doubt many Members of this House who are older than I will probably remember it much better. Let me say, if I may do so without impertinence or condescension, that the personal simplicity which the President in his years in politics preached and stood for was something for which I honoured him; and one of the reasons, if I may intrude a personal note into this debate, why I am in politics on the side on which I am, is that that note appears to have left his party since he left politics, and not only has it left that party, but that party seems to me to have allied itself, not perhaps formally, with the very interests that are giving the bad example of which Senator Brugha spoke. Whenever I find myself at any kind of official occasion on which a large number of rich people are present I tend to assume, perhaps wrongly, that they are Fianna Fáil supporters.

I am not trying to turn this debate into a farce. This is a very serious topic. Fianna Fáil have very successfully over the years got behind them people of very different backgrounds and origins, and one of the reasons why Fine Gael has not overtaken them is that we have not been so successful in doing that. But it is a success which generates its own tensions. It may be that that one party will for a time command the support of the man traditionally described as not having a seat to his breeches, as well as that of the millionaire with the £80,000 swimming pool, but it simply cannot do it indefinitely; and, in the meantime, that party in its thinking has left the principles of the perhaps, child-like notions of simplicity which the party's founder preached, and has surrendered to the interests which I have tried to describe.

Before I move on—I do not want to spend my time discussing the television service, which is not central to this debate—I think that the Minister for Finance—if he is seriously concerned with advertisements which lead people to expect to be able to consume more than they produce, to expect to be able to get money which they have not earned—if he is seriously concerned about that, let him open the Broadcasting Authority Act, in which he will find section 31 which entitles him, not directly but in effect through his colleague the Minister for Posts and Telegraphs, to require Telefís Éireann to broadcast material of a certain kind. If the Minister is seriously concerned about attitudes which lead to inflationary pressures he ought to consider whether or not, in a little country like this country we should have programmes, perhaps not on the "Home Truths" level but on a different level, designed to show people, without being schoolmasterish or fuddyduddy, what the realities of our economic situation are and how to counteract the pressures which that dreadful advertising, interjected every 12 minutes, builds up in the people, day in and day out. That is something which should be considered.

I hope that I will not be accused of suggesting that the State ought to use Telefís Éireann as a permanent platform of propaganda. I am not suggesting that at all, and I do not want to see the Minister delivering four-hour harangues on television like an Irish Castro. What I do think is that this medium ought to be employed by the Government, by any Government, in order to teach a national lesson, and I do not mean a party political lesson.

Furthermore, the State should use the power of example to make the people realise the amount of the resources at the State's disposal. I note and see with pleasure, because it is an aesthetic pleasure, that nothing is too good for the State in the matter, for example, of building; and, if it is only the printing of a semi-State body's report, nothing is too good for it. This report I have in front of me from Córas Tráchtála, a most excellent production but for the misspelling of an Irish word on the cover, cannot have cost less than several hundred pounds to produce. Again the famous pamphlet entitled “Ar nDaltai Uile” produced at the beginning of June, 1969, as a piece of Fianna Fáil propaganda by courtesy of the Irish people, and delivered to every house, and printed in three colours, cannot have cost less than between £8,000 and £10,000. Nobody wanted this luxury, and we would have been satisfied with something a good deal simpler from Córas Tráchtála. The State itself has some responsibility in regard to providing an example of the standards of existence of which Senator Brugha spoke.

The Minister at three or four places in his speech referred to the social concern of the Government and to the social targets the achievement of which the new Budget burdens were intended to facilitate. I do not want to bore the House with a lecture on social objectives and social concerns, but I want to say that this country enjoys relative social and civil peace. That is something rare enough in the modern world, and it is not the case two hours' drive north from Dublin. So long as it is the case we must press on with the task of trying to relieve the social inequalities which exist in our society, and we have to do that quickly.

Senator Brugha spoke about housing with an independence which I have admired previously in him. He is not reluctant to say something that may be embarrassing to his own side when the need to do so arises. In this case, he spoke about newly married couples and said that in order to get a house it was necessary for them to emigrate because they would not be provided with one in their own country.

Anyone doing even a small amount of political work in the city of Dublin will know the problem that housing presents. He will also know of the lack of proper health services. To my way of thinking, it is absolutely vital that the defects in these two matters should be remedied, not only to demonstrate our social concern; it is also politically vital that they should be remedied.

I hear people nowadays preaching revolution. They do not know what revolution is. They have never seen a shot fired in anger. People listen to them; but what surprises me is that more people do not listen, because of social conditions in this country. Conditions here are perhaps not as bad as might be found in some very poor parts of the rest of Europe and they are not nearly as bad as the conditions prevailing in, say, Africa or Asia, but there are conditions here of which I am ashamed. I suppose I had a rather sheltered existence until I started canvassing in by-elections a few years ago. I was surprised then at the conditions of some of the homes I visited. So much so that I was ashamed to ask the people to vote for the candidate for whom I was working, because their attitude was: "He is here today with a smile, but when the election is over, we shall not see him again."

I do not pretend to have any greater social concern than anybody else. Each one of us is limited in his capacity to interest himself generally in the problems of other people. However, I have seen the terrible conditions in which some people live and what amazes me is that the demonstrators at the GPO or in the Phoenix Park can still be counted in dozens; and there may come a time when they will be counted in thousands or tens of thousands. If that should happen the blame will lie with the Government that has been in office in a time of peace. When I say the Government, I do not mean exclusively Fianna Fáil. If they were out tomorrow, and we were in, the same responsibility would fall on us. We have a priceless opportunity now, before people reach the stage where they cannot accept these conditions any longer, to correct these conditions.

Let me say at this stage in case it be thought that I am going too far away from the question of finance, that I believe there are many people in this country in the middle and higher income group, who bear the burden of taxation on average, to a greater extent than others, but who would be prepared cheerfully to pay more taxation, or more rates, if they could rest easy in their minds as to the social conditions of others. I believe that I pay more tax than I would in my income bracket in any other country in western Europe; if anybody wishes to discover what I earn it will only be necessary for him to ascertain what is paid to us as professors in the university. However, I would cheerfully pay a lot more if I could be easy in my mind as to the social conditions around me, and therefore as to the political stability and future of this country. I am far from begging for more taxation, but this is a matter of political security just as much as a Christian duty. The days when revolutionaries could be laughed at are gone and we must realise this.

I wish to refer briefly to a topic adverted to by Senator Alexis FitzGerald a few moments ago when he spoke of uncontrolled private enterprise. I should like to make a brief plea to the Minister—I realise it does not fall primarily within his purview, but it must come within his influence— to have a look at the situation in relation to uncontrolled private enterprise in regard to supermarkets. It seems to me that, although supermarkets appear to be providing a service to the consumer by supplying them with goods at prices that are cheaper than they would get them in the traditional type of shop, they may well be encouraging inflation. This would need group-psychological analysis, but I believe that the way in which a supermarkets is designed does, in fact, encourage people to buy more than they intended buying at the time of leaving home. In addition to that, they present a serious threat to small family businesses of the traditional kind which constitute the business community in most of our small Irish towns and villages and even in the suburbs. It seems to me that something in the nature of control will have to be exercised over this form of private enterprise. I admit that it is a difficult problem. It was discussed in the Dáil and I do not think anybody put forward a solution for it. My own suggestion would be that there would be a system of licensing for business premises which have more than a certain square footage, and the onus should be on the applicant to show that the opening of his business will not be unduly detrimental to other businesses in the area.

I need hardly remind the House that there is a precedent for this in the liquor licensing laws, where an applicant must satisfy the court that the opening of his premises will not be unduly injurious to existing established businesses in the area. I do not see why that principle should be applied to a simple publican, and not to a person or company opening a business that will have a turnover of millions of pounds each year—a business that will push the small businessman out. I suggest to the Minister that, in so far as he has any influence in this regard, he should consider whether this form of uncontrolled private enterprise can be brought under control.

The second-last topic on which I wish to speak is strictly fiscal and, I hope, not untopical. I see that the Government have set up a unit within the Civil Service with a special interest in Northern Ireland affairs. As I do not wish to be cynical, I shall reserve the comments I should like to make in that regard for a different type of debate. However, this unit, so far as I can see, and judging from reports, will consider all aspects of north-south relations although I gather it will not have any policy-making function. It is my opinion that discussions about strengthening the links between north and south should now go beyond the talking stage and should really crystallise in proposals of a kind that will make an impression in the north of Ireland.

My suggestion to the Minister for Finance is that he should consider, or have this unit consider, whether we might introduce a system of tax concessions which would benefit people coming here on holidays or on business from the north of Ireland. The two concessions I have in mind are (1) a concession which would take the form of remission on petrol duty, so that a tourist from the north of Ireland would get some significant amount of reduction in the price of petrol on the amount that is attributable to what the State gets on the gallon and (2) that hotels should be given a remission on turnover or income tax in respect of accommodation provided by them for northern tourists. The remission could appear as a deduction from the bill, so that a tourist would see clearly from his receipt what he had got by way of concession from the State.

These are two concrete concessions which might be considered. There are no doubt other ones equally possible. I hope no one in this House is bored by this. We are always talking about promoting friendship, but one cannot promote friendship with people who have been persistently neglected for 50 years without taking a bit of trouble and making some sacrifices. Unless we are prepared to do this sort of thing we might just as well throw our hat at the north of Ireland. I hear the Taoiseach talking about our being at the brink of a great achievement but we are on the brink of nothing except a long, hard slog if we are ever to win these people over. The sooner we decide how this is to be achieved the better. I am willing to have my suggestions laughed out of court, but the person who laughs at them must put forward suggestions to replace mine.

If the Chair will permit me I want to say something about the way social benefits are distributed. When the Government put before the people a proposal to alter the voting system two years ago, the people were invited to look at it as a new dynamic in Irish politics and say, "Yes". Mr. Lenihan told us there was going to be more cut and thrust. The people did not want that kind of dynamic. But, I should like to point out a measure which would introduce a new dynamic not only into political life but into the life of every member of the community, that is, the abolition of political intervention in relation to the problems of individuals.

I should like the House to treat this suggestion as the utterance of somebody speaking his own mind. This system is like an animal who has his teeth sunk in the neck of the social welfare system. I regard it as backward, stupid and degrading to the last degree, that after 50 years as a Republic, when a person is looking for something to which he is entitled, the first thing he does is to run to a politician and ask him to get it for him. It is vital, if we are ever going to have a new dynamic in Irish politics, to kill that system.

I should like briefly to compute how many interventions with the administrative organs of the State are made annually by Deputies, Senators and county councillors. If the average Deputy writes 100 letters a week—and many Deputies and Minister write more than that—the average Senator writes 50 letters a week and the 800 county councillors each write five or ten letters a week, if that figure is totalled and divided by half, because obviously half of these letters will go to constituents, something like half a million letters a year are directed by elected representatives pestering the administrative organs of the State to give something which the people are entitled to have anyway.

An Cathaoirleach

The Senator will appreciate that administrative matters do not arise under this Bill.

Professor Kelly

I thought I might be permitted to make that point on account of the frequent references made by the Minister in his speech to the distribution of social welfare benefits. If the Government were to set up an advice bureau to which people could go to find out what they are entitled to, instead of crawling and begging politicians to get them what they are entitled to, social welfare benefits would look after themselves. It seems to me unspeakable that political power among a supposedly free people, at constituency level, and therefore at national level should depend on politicians' efficiency in cadging votes by getting things for people which are in fact nothing more than what they are entitled to.

I believe many of the objectives both social and political which the Minister has spoken of can be achieved by example and leadership and by enabling people to stand on their own feet. The mechanics of the fiscal system, compared with these objectives, are secondary.

Mr. Keery

The Minister may have wondered what sort of strange chamber he has strayed into. The debate has been singularly marked by its high moral tone. We have had voices which have sympathised with the sinner, despised the sinner and even confessed individual sins. The Minister has called for a sense of national purpose at this time and he seems to have struck a ready chord in this House. Many of the contributions in the Seanad debate on the NIEC report on full employment covered much the same type of ground as the Minister referred to in his opening speech today. The anxiety which so many of us feel for our community, about inflation and about economic and social developments, are not reflected in the community at large. When one looks at the long series of publications from Government sources, the series of programmes about economic development, the publication of documents like, "Work for All" and even the phrases repeated so readily in the reports of the Central Bank one feels we should have succeeded in getting across to every member of the community the contribution which that individual can play in the development of the community.

The Minister when talking about inflation in his Second Reading speech said that the main reason for the recent acceleration of inflationary pressures in our economy has been the excessive income increases which have spread throughout the community since 1969. The Minister was not getting at the trade unions; he was not getting at mysterious bodies manipulating everything behind the scenes; he was merely saying to every person working in the community that he or she was a contributor to inflation and it was up to each individual to decide if he or she was going to play a part in the fight against inflation and the fight to establish a thriving economic base here which would permit the type of social development we all required. I think Senator Owens was a little sensitive when she reacted so strongly and felt that the trade unions were being criticised.

I was struck by the recent statement of the Catholic hierarchy which dealt with the end to the ban on entry to Trinity College and also criticised the present trend in ostentatious living in our community. Naturally the long overdue announcement which affected a small proportion of our community received much more publicity than the criticism of ostentatious living which affects the whole community and is directly concerned with inflation to which the Minister has referred. This aspect of the hierarchy's statement got comparatively little publicity, perhaps because "the shoe pinched". Now is the time when all sections of the community, whether State, Church or trade union, can play a part in combating the effects of ostentatious living and inflation. I respect the trade union movement for the part which it has played in trying to achieve just wages for its members. I would also like to be able to say that I respect the trade unions for the great contribution which they make in relation to the education of their members in matters of productivity, co-operation and self-help. In my view the trade unions could play a major part in relating their efforts to achieve just wages for their members to a proper and full contribution to increased productivity and stability in the economy.

As we come now, I hope, to the end of the tragic bank strike, the repercussions of which, I hope, will not be too disastrous to our community, I would like to say to bank employees who will return to work with considerably increased wages that they should remember that in their everyday work they have a crucial role in the development of the economy. The inflation of which they have complained, and about which we are all concerned, may have been contributed to in a major way by themselves. It seems to me that bank managers by their attitude and approach to matters of overdraft and lending money may, in fact, act gravely against the interests of the community if they are over-generous to those who come to them for credit facilities. It is interesting to see that in the recent Central Bank Report it was mentioned that the growth in bank lending was greatest in the personal sector. I urge the banks to look at the personal loans and credit in a severe way in the interests of the whole community. Any credit given should be geared to productive purposes and to fields of activity which will not have a major inflationary tendency. I would like to see the banks providing special training courses for their managers in the field of credit control. I understand that in the non-associated banks, which have been making such an impact on this country, requests for credit are carefully considered and criteria are tightly related to possible productive value and return of enterprise. The criteria are not examined so closely in the associated banks which play such a dominant role in our community. This is another example of individual decisions by bank managers. In the banking industry there is great responsibility for the control of inflation.

In thinking of inflation, my first reaction is not to think of trade unionists but of professional men, auctioneers and the small group of landlords who, like a small group of land speculators and the construction industry, make exorbitant profits from social necessity. It is difficult for the Government agencies to control these interests or for the revenue authorities to challenge people in these sectors. We need a spirit of social purpose and of national responsibility among such people. I hope the requests of ourselves and of people like the hierarchy strike home to people like these.

When I obtained the Finance Bill, 1970, I examined it to see if there was any way in which it would help these people who have great responsibility to contribute to the well being of the country. Sections 18 and 53 may be the most important parts of the Bill. These sections deal with the new savings by instalments scheme. It is extremely important at this time, when people are receiving large increases, that they should, if at all possible, invest a proportion of these increases in their own future and in the future of the economy by way of saving and investment, particularly in Government media. In that way the increased wages would not immediately add to the inflationary spiral. The increased savings would help to provide the better social services which we would all like to see, and would also contribute to the greater productivity and prosperity of the economy. I welcome the introduction of the instalment savings scheme as announced in this Bill and in the Financial Statement. It provides people with an opportunity to save a certain amount of money each month. If such money is left on deposit for two years people will receive on each £12 a bonus of £3, or 25 per cent. This bonus, equivalent to 9 per cent per annum compound interest, is tax free. It is something new in the range of Government investment media. It is relatively short-term. One gets a bonus in two years' time and there is a high interest rate which is competitive with the other attractive sources of investment on the market. It is a form of investment which seems particularly suitable to the young people to whom Senator Brugha referred, who are trying to buy their own houses. In a period of two years with a 9 per cent interest rate their money would increase and this would help them to build up the deposit necessary when buying a house. I hope every effort will be made to get across to young people the attractions of this new savings medium.

Indeed, if in future the Minister is reviewing the progress of this new save-as-you-earn scheme, I wonder if he might see whether there is some way in which he could relate the scheme to the particular problem of housing, whether it might not be possible to give a development bonus to those who earmark their savings for investment in housing. It is important at a time when there may be some pessimism about save-as-you-earn—I do not think the scheme introduced in Britain was as successful as many had hoped—to say that this scheme here has a much greater simplicity than the scheme in Britain and for that reason I hope it will be so much the more effective.

Senator Kelly spoke about the impact of advertising and I would ask the Minister to devote all the resources he can to advertising and publicising this new savings medium. I do not mean he should do so by posters, by radio and television advertising but through every aspect of public relations that he can command. I hope all Members of the Oireachtas will play their part in promoting this idea of saving because I think it can make a great contribution to the economy. As an example of what seems to me to be the importance of publicity in promoting saving, there is a comment in the report of the Central Bank about the success of the building societies in attracting investors even though the investment market is all the time becoming more and more competitive. I suggest to the Minister that the effective advertising by the building societies has been a major factor in their gathering in funds, although I know this advertising comes under criticism as an expense. However, if there is some example which the State should follow in the promotion of savings, I hope the Minister will be prepared to follow the building societies.

I welcome the Bill, particularly its pinpointing of the need to save as a contribution to the development of the economy, and as a recognition that social development must be based on economic development. I think that appreciation of this fact represents the true national spirit the Minister spoke of and called for. It is also true republicanism, although there is nothing romantic about it because it is the requirement, the necessity to do a good job of work.

I should like in these times, when the climate of the country has been disturbed by events in the north, if more people would appreciate the basic fact that not only will this country develop but that its union or unity will be brought about by economic strength and by social development in this part of Ireland.

Miss Bourke

In opening the debate the Minister pointed out that Senators have this opportunity to discuss the Budget and its implementation under this Bill and under other legislation. Because of the time lag, Senators today had an opportunity of listening in to the opening of the Adjournment Debate in the other House, and one was struck by the fact that many of the statements made here by the Minister for Finance told us of the very problems which were mentioned by the Taoiseach in the Dáil. It seems these problems are not being met by the provisions to implement the Budget through the Finance Bill. The Taoiseach, in moving the Adjournment of the Dáil, stressed the problems of inflation and industrial relations.

An Cathaoirleach

Debates in the other House do not arise relevantly here.

Miss Bourke

I appreciate that. I will move on to the Finance Bill.

Mr. O'Higgins

On a point of order, may I inquire for the guidance of the House whether I am correct in saying that a statement by the Prime Minister, the Taoiseach, in the other House or in this House or in public is relevant to a discussion on the Finance Bill in this House?

An Cathaoirleach

Quotations might on occasion be in order but I think this type of discussion of a contemporary parallel debate is not in order.

Miss Bourke

It has been significant, walking from one House to the other today, to note that the problems to be met by this Bill obviously have not been met, according to the remarks of the Taoiseach. I will not comment further on that except to say that my understanding of it is that efforts being made to curb inflation do not appear to have been successful.

The Minister made a significant remark while speaking about increased social welfare benefits being provided in the Bill. Of course I welcome them but at the bottom of page two of the Minister's statement we read that the increases in benefits which social welfare beneficiaries will receive should more than offset new increases in the prices of essentials resulting from the turnover tax. This has not transpired. The increase in turnover tax and the resultant soaring prices—the report of the Central Bank put the increase at 7 per cent—have put many of those people in a far worse position than they were previously. The cause is a blanket increase in the cost of vital foodstuffs due to the turnover tax increase.

The Finance Bill has not met the real problem of inflation. In fact, prices have continued to rise and the vicious circle of demands continues in the various sectors. The Government have failed to face up to this.

A specific provision of the Bill to which I wish to refer is the married women's earned income relief. It is a welcome provision and has been conceded in response to a great deal of agitation surrounding the argument that the taxation of married women was such as to prevent women who might otherwise seek employment from doing so because it was not worth their while. They were discouraged by the effects of taxation and therefore this provision is most welcome.

The provision does not, however, meet the problem of married women getting employment. There are many areas still where married women cannot get work and even international companies operating here have been adapting to Irish conditions. This is a situation which we should not tolerate. The reason for it is that the Civil Service and the local government service do not give employment to married women. Therefore, this provision giving relief to married women fortunate enough to get employment is only a partial cure for this social problem. I feel sure the Commission on the Status of Women will deal with it but it is not sufficient to put it on the shelf pending the outcome of their findings. This only partially meets the problem.

The last comment I would like to make at this stage of the Finance Bill is that although it does redirect the resources of the community towards the weaker sectors, at the same time because of the increase in the turnover tax it has undoubtedly led to increased inflation and in increase in prices so that many whom it was sought to benefit are worse off now. We are speaking at a greater distance than those who were commenting in the other House on the Budget, but there are people worse off now than they were when the Budget was introduced. Therefore, I think there has been a failure to meet the real problem, and that is the situation that faces the community, which is more serious now than it was when the Financial Statement was made.

Mr. O'Higgins

I think that one of the most significant things about this debate is that everyone who speaks, rightly, is using phrases such as inflation, inflationary spiral, the ills of the system and so on. Any of us, regardless of whatever our particular political affiliations may be, who looks at the position in this country at present and for the last 12 months or so cannot fail to be struck by the fact that we seem one way or another to be beset by all sorts of ills. The fact that the cost of living has gone up and appears to be spiralling all the time will not, I think, be denied by the Minister or any supporter of the Government. The fact that there is inflation and that little or nothing has been done by the Government in their Budget proposals and in the proposals contained in this Bill will hardly be denied by the Minister or any of his supporters. The fact that unemployment figures stand now at something over 60,000 will not be denied by the Minister or any of his supporters. The fact that the value of the Irish £, the purchasing power of the £, has decreased, certainly dramatically over the lase decade and even over the last 12 months will hardly be disputed. We have had in this country in recent times, certainly within the last 12 months, two very serious strikes, one going on for about six months, the cement strike, and the other—I do not know whether I am correct in calling it a strike or not—the closure of the banks for some months past now and who knows what prospects there are of any immediate relief of that situation? I want to make the point that I think I am justified in making that when you have a situation such as that in the country the people of the country require to be properly led, require to have in office at a time like this a Government in which they can have some confidence. They require to have in office at a time like this the kind of Government about which the Taoiseach spoke at the last election. I want to invite the Minister and the House to answer the question as to whether or not that is the kind of Government we have.

Tomás Ó Maoláin

Of course it is.

Mr. O'Higgins

Do not jump your fences too quickly without seeing what happens to you when you do that—you are inclined to knock the top of the fences. At the last general election, certainly in the constituency which I was interested in at the time, the Taoiseach issued a message to the electors, and I think that it is relevant to recall in this situation the terms of that message and then to answer the question I posed. The Taoiseach's message at the last general election was in the following terms: "The years immediately ahead will be a period of great challenge and of great opportunity. On the domestic front and outside in our relations with other European countries and with the rest of the world problems and difficulties will arise for solution by Government and people alike", and he went on, "Only a united Government vigorously and resolutely pursuing clearly defined policies endorsed by the people and supported by a clear majority in Dáil Éireann can face those problems and overcome those difficulties". Then he staked the reputation of the party to which he belonged by saying: "Fianna Fáil can be relied upon by the people to provide that kind of Government and to take the decisions which the testing years ahead will demand. I confidently ask the voters in this election to renew their confidence in the Government and to give them a clear and decisive mandate".

A Senator

And we got it.

Mr. O'Higgins

They got it. It was on the basis of that message, on the basis of the propaganda contained in that message, on the basis of that platform, it was on the basis of the speeches made in support of the propaganda content in that message, that they got what they say, a clear and decisive mandate. They got a clear and decisive mandate for a united Government. Where is the unity in the Government today?

Mr. Colley

Never more united. We have never had a more united Government.

Mr. O'Higgins

We have had one Minister asked to resign, we have had two Ministers dismissed because they would not resign when they were asked to resign, we have had another Minister who resigned, and a junior Minister who resigned.

Mr. Colley

We never had a more united Government.

Tomás Ó Maoláin

If the Senator wants to continue along these lines I can assure Senator O'Higgins that I have tons of ammunition.

Mr. J. Fitzgerald

It was ammunition which caused the trouble.

An Cathaoirleach

This debate is restricted to the financial policy of the Government and I would ask the Senator to continue on those lines.

Mr. O'Higgins

I take it that I may go along the lines that I am going on.

An Cathaoirleach

On the lines laid down by the Chair and the Standing Orders.

Mr. O'Higgins

The point I am making—and I thought that I had set the form very clearly for the Minister who says that the Government was never more united and for the Senators supporting him—the context in which I am referring to this is the absolute need at the present time in the present financial position and in the present economic position to have the type of Government of which the Taoiseach spoke, and I am saying deliberately that in my view we have not got that and we have not got a Government in which the people of this country can have any reasonable degree of confidence. I think that that is what the Senators who support the Government and the Minister must be conscious of —how shallow and hollow-sounding must be those grand phrases used in the Taoiseach's message to the people at the last general election.

Mr. Colley

On the contrary, what the country has is precisely what the Taoiseach promised.

Mr. Crinion

And the public opinion polls are showing it.

Mr. O'Higgins

There is one public opinion poll which I suggest should be taken as quickly as possible, and that is the one which would follow a dissolution of the present Dáil.

Tomás Ó Maoláin

Do not worry. You may get a shock when it comes.

Mr. O'Higgins

Possibly I will, but I am long enough in politics to know that no one is indispensable and I think that the present Fianna Fáil Party are beginning to discover that now. After all it is less than four months since they had four other pillars propping up the Government who are gone now.

Tomás Ó Maoláin

If the Senator wishes to come back later——

Mr. O'Higgins

The Leader of the House has my full permission to use any ammunition that he is capable of using.

Tomás Ó Maoláin

That is a threat in case anybody has any doubts.

Mr. O'Higgins

We have a Government who have forfeited entirely the mandate which they obtained from the people little more than 12 months ago. They are endeavouring to grapple with their own political ills and because they have to grapple with these ills they are distracted and are unable to deal as they should with the economic and financial matters concerning the people of the country.

We have the inflation that Senator Keery referred to. There are over 60,000 people unemployed and we have a cost of living that must be as high as that of any country in the world. The Minister referred, quite rightly, to the manner in which that bears on people on fixed incomes and on those who receive social welfare benefit. I wonder if any of us realise how the increase in the cost of living and how the increase in taxation imposed by this press-button method adopted by Fianna Fáil by way of turnover tax affects people on fixed incomes. These are not people who can go on strike. They cannot mobilise the forces of a trade union to better their conditions. They suffer all the time and every time the cost of living goes up they, if they are to continue to exist, must cut down on something. These are not people who go away on expensive holidays or who have luxurious cars or, probably, second cars in their families. They are not people who are in a position to spend very much on the ordinary pleasures of life such as a drink and a smoke. They must use what money they have in order to keep body and soul together, to buy fuel, food and clothes, but when the Minister presses a button and doubles the turnover tax, how do these people meet the situation?

There is no expensive holiday that they can cut out. Because they have not a car they cannot decide, as others might, to keep a car for a second year instead of for one year. They must cut down on the necessaries of life. This is the sort of thing that we should be considering here. It is what the Government should be considering. The Government have lost the confidence of the people. There is no point in Senators shouting that this Government are more united than ever before. Those people who are living at subsistence level on fixed incomes know what the effect of all this is on them. I would not mind how distracted were the present Government by their internal ills so long as they did not allow that distraction to injure the people. As long as they are distracted as a Government, so long will they injure the people of the country. Let them go to the country; go into Opposition and settle their difficulties there so that this will be a better country for all of us to live in.

Mr. Crinion

Having listened to that speech, one would think that when the inter-Party Government were in office, everything in the garden was rosy. As far as I remember, Senator O'Higgins was a member of that Government in the mid-fifties. They did not even try to settle their difficulties but broke up in disorder and went to the country. Senator O'Higgins mentioned that unemployment stands at 60,000 but during the time of the inter-Party Government, it was 90,000.

An Cathaoirleach

The debate is confined to taxation, general expenditure and financial policy and such other matters as are thereto related in the present financial year.

Mr. Crinion

I am aware of that but I wish to put the record straight in relation to the last inter-Party Government.

An Cathaoirleach

Not on this Bill.

Mr. J. Fitzgerald

At the time, the Senator was supporting the inter-Party Government.

Mr. Crinion

No, I was then a member of the Meath County Committee of Agriculture.

Mr. J. Fitzgerald

The Senator was not on that committee for very long.

Mr. Crinion

Senator O'Higgins got away with a lot during his contribution.

An Cathaoirleach

Senator O'Higgins's remarks were related to the present day.

Tomás Ó Maoláin

We should bring them back to the young tigers of last year.

Mr. Crinion

Senator O'Higgins spoke about the effect of the turnover tax on old age pensioners but let us take a look at the increases that have been given in the Budget to the less well-off sections of the community. These increases are far in excess of anything ever given by any Government in this country. At one time it was considered very good to be able to grant an increase of 2s or 2s 6d per week to old age pensioners but we are now able to give them an increase of 10s a week. These increases could not be given if it were not for the good planning on the part of the Government. They are an indication that the economy is moving. Perhaps at this stage I might be permitted to say that at one time the Party across the floor reduced old age pensions by 1s a week.

Dr. Belton

That was some time ago. How far back are we going?

Mr. J. Fitzgerald

To 1690.

Mr. Crinion

It was not such a long time ago at all.

Dr. Belton

To which party did the Senator belong at that time?

Mr. Colley

Perhaps the Senator is talking about what would have happened if that party were in government now?

Mr. Crinion

That is so. Since the old age pensioners have been granted an increase of 10s, what they would buy would not be in excess of 10s because of the 6d in the £ increase in the turnover tax.

Mr. J. Fitzgerald

They have had to pay turnover tax since 1st May.

An Cathaoirleach

Senator Fitzgerald will have an opportunity of making his own speech.

Mr. Crinion

The Senator knows as well as I that before a Government can pay out money they must go through the process of putting a Finance Bill through the Dáil and Seanad. This time the increases which are not normally paid until the 1st January of the following year are being paid on 1st October next. This is a step in the right direction in cutting down the time lag. Since the foundation of the State the Finance Act has never been passed before August.

The turnover tax has again been criticised but not as much as it was criticised last year. The turnover tax means that the people who spend more pay more taxes and the people who spend less pay less taxes. In that way it is a very fair tax and as the Minister has said it comes very close to the added value tax. What has amazed me is that the wholesale tax has been increased and nothing has ever been said about that. It does not bring in as much to the Exchequer as the turnover tax. Where would the Government have been able to get the £20 million needed to pay these extra benefits? I have not heard of any alternative way of collecting this sum of money suggested by the Opposition either here or in the Dáil. When someone criticises a tax or a Bill one should be able to offer an alternative method. We have been told that income tax would have had to be increased by 1s 9d. I can well imagine the uproar that such an increase would have caused. It would also have had other detrimental effects on the economy. Income tax must be kept at roughly the same rate as that payable in other countries. If the rate is too high here people are inclined to emigrate to a country where income tax is not so high.

In the Dáil the Minister agreed to an amendment to the section with regard to "lumpers". This is most welcome because the section as originally drawn up meant that this tax would be deducted from a man's pay and he would then have to apply for a refund during the course of the year.

The Bill provides for economic growth and economic expansion and although it has been said that 60,000 people are unemployed the figure may well have been higher. It must be remembered that the cement strike and the bank strike have contributed to this figure.

The population has been rising constantly after 1963 after being on the decline for over 100 years. It is a fine record for any Government to have been able to turn the tide during their term of office. This could not have been achieved unless there had been the confidence in the future and in the Fianna Fáil Government that there has been in the last 13 years.

Dr. Belton

The Finance Bill is the main instrument bringing into our legislation the proposals outlined in the Budget. I note that it includes items not actually mentioned in the Budget. It is unreal to bring in a Finance Bill of this nature because the party in power at the time were not in a position to apply their own minds to the situation. In April or May of last year the then Minister for Finance warned the country that there was an inflationary cycle going through the country and he told us that we would all have to tighten our belts. Immediately afterwards he changed his tune and said the country was in a great position. A general election then followed. Senator Fitzgerald said that a particular Minister's production was the joint responsibility of the Cabinet and I agree with him. The present Minister was not in at the birth pains of either the Budget or the Finance Bill. I am not blaming the present Minister for Finance in any of the comments I propose to make about this Bill.

There is no doubt that we are in a dire inflationary trend. The Central Bank in their recent issue brought this point out very forcibly and so have other bodies. The Minister may have laboured one aspect of this inflation too much. He has emphasised the cash push for increases in incomes and wages. The Minister did not mention the other two reasons given by the Central Bank for the inflationary trend. The reasons were the excessive Government expenditure and the extent to which credit was given by the banks in this country. The Central Bank mentioned those three headings as conducive to the inflationary spiral.

The Government have not realised their responsibilities regarding the condition of the economy. They have been too absorbed with their own affairs to realise that the affairs of the nation are worth considering. The Finance Bill is the instrument which gives legislative force to the Budget proposals.

In my view it is time that the whole taxation system was revised. The whole taxation system has been based on an import from a government which we are inclined to decry at the present moment. It has been based on their system all along. There has been no attempt to devise a new taxation system for this State. All taxation has been built on previous taxation. There has been no new thinking on the subject. I do not want more thinking to result in the employment of more people to administer taxation. This would be entirely wrong. What would be gained from the taxation would then be absorbed in administration. Too many of the taxes which have been brought in in recent years have been ad hoc expediency measures, and to some extent political expediency taxation. Do not let anybody on the Fianna Fáil side say I am speaking politically; I am not decrying this completely. If I had several years in office I might devise an expedient system of taxation also. I do not think it should be subservient to the needs of the country. The expedient system of taxation should not be detrimental to the needs of the country.

I have mentioned the Central Bank Report. I was sorry that the Minister adverted to one cause only. There were two other causes also. This Government are inclined to mix up the meaning of rampant inflation and buoyancy of the economy. I am not sure that I understand exactly the difference between them myself. These terms are used frequently and loosely. The previous Minister did not tax certain things because of the buoyancy of the economy.

There is one aspect of the Central Bank Report which interests me particularly and that is the question of borrowing abroad. Borrowing abroad is a sign of a very weak economy. Borrowing abroad means, in effect, that the people who lend do not spend the money they get in interest in this country at any stage. They elude the taxation which must be imposed on profits, interest or dividends. For that reason it is a sign of a weak economy that we have to borrow abroad at all. It infers that we cannot borrow from our own people because they will not accept the terms of any loan we might introduce.

A Senator was talking about the inflow of capital and said that it was a good thing. It is a good thing up to a point, but it is something on which the economy of the State should not depend. There is no harm in seeking an inflow of capital, but one must frame the economy of the State carefully because if we depend too much on the inflow of capital our whole financial and economic structure may be undermined some day. Senator Alexis FitzGerald spoke about various financial theories. I am not clear as to whether the theories of John Maynard Keynes are practical or not nowadays because I am not an economist, but there is something which can be said about them where they stated that in boom periods one should extract something from the economy so as to use that extraction from the economy to boost a recession when a recession should come. I have a feeling that this theory was never tried out, that there was a recession before they ever tried to take any money out of a boom time. When a recession occurred they injected some money into the economy in order to get over that recession but the people who were following this practice had neglected, when the boom period was on, to take some money out of the economy for use during the recession.

Another aspect I should like the Minister to clarify for my information is in relation to the British Government's attempt to rectify the economy. They introduced what are known as regulators. I do not know if they are still in existence. Among the things the British Government could do through these regulators was by order or regulation to change hire purchase payments within a certain range.

Business suspended at 6 p.m. and resumed at 7.30 p.m.

Dr. Belton

Before we adjourned I had been speaking on various things, one of which was borrowing abroad, and I referred to the loan we got from Germany which I think was for £9 million, and the effect that that had on our economy. It would be true to say that it reflects badly on the economy of this country that we have to borrow abroad, for the reason I gave, that the profit made by way of interest or dividend would not be spent in this country. I also referred to the fact that it is not taxable in this country. It should surely be the prime interest of any Minister for Finance to ensure in the case of any loan this country raises that the beneficiaries should be enabled to spend their money in this country, and also that they should be taxable in this country. I think that generally that is a good principle.

I do not know to what extent, and the Minister may contradict me if I am wrong about this, but certain State bodies do the same and the benefit of the loan is going out by way of dividend or interest and used abroad. I would like to go on record as stating that certain State bodies do this. I know that Ministers deny having any responsibilities for certain State bodies, and this is why I will just make that comment at the present time.

Let me come now to speak about this Finance Bill in general and not in detail, because if I spoke in detail it would be more applicable to the Committee Stage, and I do not want to speak in detail. The first item in this Finance Bill is in Part I which deals with income tax and corporation profits tax. The first item I want to refer to is the first £100 that any income taxpayer is liable for. The principle in this Bill is that only two-thirds of the first £100 will be liable to tax. I think I am correct in saying that. If I am not perhaps the Minister will correct me at any stage. I do not mind the Minister interrupting me if I am incorrect.

The rate on the first £100 of taxable income will be abated to two-thirds. I rather feel in this connection that it might go a bit further, to one-third or that the tax on the first £100 of taxable income should be charged at 50 per cent instead of two-thirds. The main reason is that I think this is a very fair thing to do. There is also possibly another one. The Minister has made great play throughout this Bill of the need for various sections to prepare for the 15th February next, which is the day we enter the decimal currency era. This will be a holiday, for what reason I do not know, perhaps it is that England is doing so and we too must do it for that reason. But "two-thirds" does not fit the decimal currency era. I shall not go into this in too much detail, but I do just want to mention this fact.

Another aspect of income tax is the provision within this Bill that forces employers to forecast whether a person will earn £2,000 within the coming year. In other words employers have to forecast what a person will earn. This is a rather bad position to put employers in. Many employers are being used as tax gatherers. Now they are being asked not alone to act as tax gatherers but to forecast what the tax gathered will be, which seems to me to be a completely iniquitous situation.

Then there is the part referring to the married women's earned income allowance being raised from £45 to £74. As far as it goes I accept that it is an improvement, but it has been mentioned, I think by Senator Owens in her statement here this afternoon, that it would be much better if the full relief were given to two single separate individuals—the man who is the husband and the woman who is the wife— and that each would be allowed to have the full allowance. I think that is a very fair suggestion.

I read the Minister's introductory remarks in the Dáil but I am not able to say whether he laboured this particular point here, because one is inclined to get mixed up by whether these statements are made in the Dáil or in the Seanad; but he did advert very strongly to the fact that there is a lack of recruitment of female labour into industry or services in this country at the present moment. I do not think that the relief given here will alter in any way the recruitment of female labour as he anticipates by this concession. I will allow that it is an improvement, but I do not think it goes far enough to induce this female labour which he wishes to induce into either industry or services.

The Minister was here last week during the debate on the Social Welfare Bill. He was standing in for the Minister for Social Welfare who, unfortunately, could not be here. During that debate Senator Lyons made a point which may have been missed by everybody here. When speaking on Social Welfare Senator Lyons said that the allowances for children under social welfare should be reversed. In other words, that the allowance should increase for each succeeding child. As matters stand, the reverse is the position whereby there is so much for the first child, less for the second and so on. The relief being given under this Bill bears out Senator Lyons in his suggestion because under this Bill, children's allowances increase for each child whereas under the Social Welfare Bill the allowance depreciates for each succeeding child. I do not understand this anomaly.

I welcome the allowances for dependants up to, I think, £222. This is a necessary adjunct to any Finance Bill and is certainly necessary in any country that aspires to provide a proper social welfare service.

Reference was made in the Dáil to extra-statutory allowances. What are these allowances? This is known only to few people. It is known to the Revenue Commissioners, to the Minister and his staff. It is known also to experts on taxation and these experts deal with large companies or with wealthy people because it is only such companies or such people who can afford to employ experts on taxation. However, those who are not in the know in regard to these extra-statutory allowances are at a great disadvantage. I shall repeat now what somebody said in the Dáil and suggest that, as is done in Britain, these extra-statutory concessions should be published so that everyone would know what they were. They should not be confined to large companies or wealthy people who employ tax experts to advise them.

On the question of taxing exports, there should be some concession in this regard. I shall not be too critical of the Minister on this because I am a firm believer in the fact that any industry that sets up here solely for export can, at any time, fall down. It is the sine non qua of any industry that it must have a basis of a home market. Any other kind of structure is false. Also, any company or industry that is set up solely for export can either diddle us or fall down, maybe not through their own fault, whereas any company that has a broad basis of home consumption and some extra to export is, to my mind, a better company than any other kind. If a company set up here on the basis I have suggested, there should be some concession or relief in taxation on their exports over their home consumption.

Some new sections were introduced at Committee Stage of this Bill in the Dáil but I read only the Bill as introduced. However, I shall describe section 17 as it relates to some contractors. I appreciate that this was a difficult one for the Minister. There is avoidance of taxation in this regard but there are certain points that I should like to bring to the Minister's attention.

The Minister said that if they were genuine bona fide companies they would be known to the Revenue Commissioners, or words to that effect. I shall use the word “registered”. I use the word in that these companies would notify the Revenue Commissioners. The Minister has said in effect that any bona fide company who is registered need have no worry but let us consider those people whom the Minister is trying to catch in his net. I agree there are some such people and that there is tax evasion. I agree there is an avoidance of tax. This originated in the building industry and the term used for it was “lumping”. This is the system whereby tradesmen or skilled workers get together and carry out work under contract. In the Dáil the Minister was asked how much money he expects to collect from this new tax. Can the Minister give a figure to justify the introduction of this new tax?

Mr. Colley

I cannot give a figure for the same reason as I gave in the Dáil that one cannot estimate the amount of the evasion.

Dr. Belton

I appreciate the difficulty in estimating the amount of the evasion but I am entitled to say various things on the basis of that. There are genuine sub-contractors who carry out various jobs but it is not worthwhile embracing them in the tax net. This new tax will serve as a disincentive because when people are "lumping" they work harder than they have ever worked before. I accept the Minister is unable to estimate the amount of the evasion but once one is able to estimate who is evading one knows to what extent it is being done.

The Minister brought in two sections dealing with stamp duty. The first section was section 39 but I am not sure if that has been changed. There was a certain amount of discussion in the Dáil as to whether amendments should be put down on section 39 itself or on the First Schedule which sets out the rate of stamp duty.

Mr. Colley

It is now section 40.

Dr. Belton

This means we have two discussions, one on section 40 as it now is and the other on the First Schedule. If the House wants to deal with this Bill expeditiously I suggest we deal with it under the section.

An Cathaoirleach

This matter arises on the Committee Stage.

Dr. Belton

I accept that. The effect of the turnover tax on the economy is completely inflationary. In this Bill it is increased from 2½ per cent to 5 per cent. There are two reasons why it will not remain a 2½ per cent increase: the first is that when dealing with small denominations it is not possible to get exactly 2½ per cent; the second reason is that the 2½ per cent is already inflicted on retailers because of incidental expenses in the running of their business. The Minister said that the turnover tax will condition us for entry into the Common Market. He went on to say that the difference between the added value tax and the turnover tax is that the added value tax is payable at every section of the transaction whereas turnover tax is payable only at the retail end.

Mr. Colley

Would the Senator repeat that?

Dr. Belton

The Minister said that the added value tax applies at every transaction——

Mr. Colley

At every stage.

Dr. Belton

——and turnover tax applies only at the retail end.

Mr. Colley

That is correct.

Dr. Belton

I do not imagine we shall be able to control the level of the added value tax when we go into the EEC but it seems to me that the added value tax should be at a lower rate than the turnover tax because under the added value tax the whole thing is compounded.

Mr. Colley

It would be much smaller at each stage of the transaction.

Dr. Belton

Otherwise we would be compounding the whole thing. This is a point I want to bring out about taxation here. In 1963 when the 2½ per cent turnover tax was introduced the Government expected to get a return of £12 million per annum. In actual fact £20 million was received that year. Some time afterwards the wholesale tax was introduced. That produced £40 million. I think the wholesale tax was 16 per cent. There are so many figures in Finance Bills one can be excused for not remembering them all. The 5 per cent turnover tax should bring in £40 million. The whole range of this taxation, including wholesale tax and turnover tax, should produce £80 million at least. If the Government got £8 million more than was expected from the turnover tax in 1963 surely we ought to know exactly where this money has gone and why extra taxation is necessary?

I am not going to deal with any more sections of this Bill. I should like to advert to some statements which Senator Crinion made. The Senator said, when commenting about the Opposition, that they are willing to criticise but never give any solution to anything. I refer the Senator to what Deputy Seán Lemass said when he was in Opposition. Deputy Lemass said that it was not the function of the Opposition to frame the Budget or to frame the Finance Bill. That is a complete answer to Senator Crinion's statement. Senator Crinion also adverted very wrongly to the fact that 38 years ago someone took 1s off the old age pensions. Unfortunately Senator Crinion was a member of the party who took the shilling off the old age pensioners at that time. I would like him to know that.

I will not delay the House much longer. I do not know whether I posed any serious questions. I agree with the Minister in certain things he is attempting to do. I often wonder if what the Minister expects to get, especially from people who are legally avoiding tax and whom he wants to get within his net, is worth the cost of administration and whether it is worth the effort the Minister has put into doing all the things he proposes to do? Is the Minister creating another Parkinson's Law by increasing the staff necessary to collect these taxes? Is the Minister taking away the benefit of the work of the existing people in the Revenue Commissioners office and preventing them from doing work which they should be doing in collecting better and larger taxes?

Micheál Cranitch

Is main liom cur síos ar an mBille seo. Ní dhéanfaidh mé aon tagairt ach do cúpla poinntí Sé an céad rud a dhéanfaidh mé ná tagairt ar leathnach 6 agus 7 as an méid a dúirt an tAire.

I have a special interest in the Minister's speech and in particular in the parts found on pages 6 and 7. I must compliment the Minister on his speech. It was a masterly piece of work to get so much so clearly into so little space.

On page 6 there is reference to the increased turnover tax. I have heard complaints in various parts of the country in connection with this tax. People had no deep-rooted objection to an increase from 2½ per cent to 5 per cent, but unfortunately many people have found that the increase has not stopped at 5 per cent. The increase on the goods they buy has been more than 5 per cent. In some cases there has been an increase of 7½ per cent or 10 per cent. There are some reasons for this, such as rising costs, smaller sales, wage increases, increased cost of production, et cetera, with the result that the shopkeepers took the opportunity of making up for their losses. There could be a certain amount of covetousness on the part of certain traders who use the opportunity to take in more money. They had the excuse of the increase being due to the increased turnover tax. It is a pity that they should use this excuse so much. The Minister may have some ideas as to what can be done about this. It is very difficult to prevent people deceiving others. It is difficult to legislate adequately for dishonesty and deception. People have voiced criticism of the turnover tax. One Senator expressed disagreement with it and fulminated on it. The Minister said that it was needed because to obtain the necessary revenue from income tax would have involved an increase of 1s 9d in the pound. It is clear that an increase of that order was out of the question on many grounds. As the Minister has stated, nobody has come up with an acceptable alternative to the increase in the turnover tax. I am sure if there was one the Minister and his officials would be the first to have found it. So far in this debate we have not heard anybody with an adequate alternative.

There is another interesting point about the turnover tax but before I deal with it I will make a short reference to the general system of taxation here. It is broadly based on the British system, a point made earlier by Senator's Belton. We seem to be on the same wavelength as far as the Senator's speech is concerned. In Britain, as here, certain commodities are specifically taxed, the main one's being spirits, beer, tobacco and petrol, as well as various other luxury goods. Here they are very heavily taxed.

In the period 1965 to 1967 the actual taxation on a gallon of spirits in Ireland was £13 5s 6d as compared with £3 2s in the nearest continental country to us, France. Beer was taxed in Ireland at £17 19s 11d as compared with practically nothing in France. They are figures I picked out at random from the Public Administration Journal to illustrate the extraordinary level of taxation on these selected commodities in this country as compared with continental countries, particularly the EEC nations which have a broad sales tax, an added value tax varying between 12½ per cent to 20 per cent at the moment. It is not a question now of if we will enter the Common Market but when we will enter it and I think it is no harm that we should think of orienting ourselves towards that type of taxation. On page 7 of his opening statement, the Minister referred to it and stated:

I wish to stress that a change to an added-value system would basically involve no more than a change in the method of collection—under the new system tax would be payable in fractions over the various stages of production and distribution instead of at the wholesale or retail stage under our present system.

By and large, I personally favour that type of taxation because the taxing of particular items could have, and I am afraid is having, a bad effect on other aspects of our economy. For example, there is the tourist trade. People in various countries will go on holidays to other countries if there exists attractions such as cheaper petrol, tobacco and drink.

We must look at our taxing of these commodities. The big reason for the large tax on drink in this country is that the idea is there—I suppose there may be truth in it—that the Irish people cannot drink in a Christian way and we therefore decide to put on more taxes on the assumption that it will stop people drinking. Everybody knows that it will not. If the tax on drink were doubled the people would still drink as they are now doing.

Mr. Colley

That is good news for the Minister for Finance.

Micheál Cranitch

On the other hand, fewer and fewer people might be drinking——

Tomás Ó Maoláin

In a Christian way, I hope.

Micheál Cranitch

These are things being looked into by the Minister for Finance because he states elsewhere in his speech that he is having an examination made of the whole system of taxation. We look forward to hearing a report on that sooner or later.

Dr. Belton

Hear, hear!

Micheál Cranitch

I should like to refer for a little while to the question of income tax. It is a most penal form of taxation. For one thing, it bears most heavily on the man or woman who is on a fixed income or salary. Again, I suppose we are imitative of Britain. Britain is a big industrial country where millions of people are earning fixed wages or salaries, and income tax is deducted from them. A huge sum of money comes into the net. Here, however, we have not the same number of wage earners in industry or salary earners in the professions and therefore those who come into the net have to pay an extraordinary amount of taxation to make up the required amount of revenue. Furthermore, the present system of income tax inhibits or discourages people from working.

I have heard people remark: "What is the use of working overtime when the Government know exactly what I am earning and will collect one-third of it? If I have the reputation of earning £6 extra all I get is £4. Therefore, why do it?" It builds up a sense of frustration because those who work hard feel they are entitled to a just reward for their labour.

There is one specific point I should like to make at this stage. It has been brought to my attention that parents or guardians who have children attending centres of higher education, universities and so on, can get higher education grants. Children whose parents are below a certain income level get grants but a point comes at which parents' means will be above a certain figure and then no grant is awarded, although they may be only just above that figure. The point was put to me if it would be right and just that people in such circumstances would get some income tax allowance. I am just putting this to the Minister: he has probably thought about it and I am sure he will have the right answer.

I should like to refer to one other problem which is always with us, namely, inflation. There is no doubt it is one of the greatest enemies of our economy at the moment. It can completely neutralise all our endeavours, all our progress, and when we look for the causes we find they are various. Inflation is due to a multiplicity of reasons. First of all, there is the question of higher wages. There is nothing wrong with giving higher wages if there is an adequate return of work and if the money earned is wisely saved or wisely spent, but does not everyone of us know in his heart of hearts that in many sectors today there is not a proper return of work? There is not the same interest on the part of workers, be they white collar or otherwise, as there was in past generations. People took pride in their work and looked not so much for a monetary reward, as to having the satisfaction of knowing that they had done a good job. I think that spirit is going. We are getting very money conscious. We think of the things of this life and never think of the other things. Maybe it is due partially to high-powered advertising emphasising the things that appeal to the body rather than to the mind—eat, drink and make merry, for tomorrow we die; earn as much as you can and spend as much as you can. People regard these things as being the important object in this life. Senator Kelly referred to some of this earlier this evening, and I agree with everything he said on this point though not on other points he made. I shall not labour that point.

Another thing that leads to inflation, of course, is the reckless spending of money on leisure goods and consumer goods that people do not need. People earn very high wages and the money seems to burn in their pockets. They have to go out and spend it at all costs on goods that they do not want, very often made in foreign countries, and it is no wonder that we do have an adverse balance of payments.

Another point as far as inflation goes—and the Minister would not be able to correct it—it will take much more than that—is the proper use of the extra leisure time that people have now. They have a five-day week, and some have a four and a half day week, and all they are worried about is where they can go and how they can spend their money during the remaining two days of the week. The basic point is that the more money is in circulation the greater tendency there is for prices to go up. This is a big moral problem, if you like, not alone for the Government but for each and everyone of us, on this side and the other side of the House; it concerns all the churches in the country, it concerns the educational authorities and in fact everybody who can mould public opinion, who should educate people in the proper use of their leisure hours. This is a very big problem, and the Minister for Finance cannot hope to solve that problem on his own. This craze for spending is the result of high-powered advertising pressures on mass media.

One thing that people should do is to save. I was very glad to read in the Bill section 53 providing that the Minister for Finance has in mind a special scheme for encouraging saving which was mentioned in the Explanatory Memorandum. It may be that the Minister in his reply will give us some idea of how this scheme will work. Perhaps he has not the details worked out fully yet, but I highly commend it because, as I said earlier, if a person earns very large wages there is nothing wrong with that provided he does not spend it foolishly like the prodigal son long ago, because the result would be not one prodigal son but that the whole economy of this country can be disturbed and seriously damaged.

As the song said—some Members of the House may remember it—some years ago, "Money is the root of all evil". I mean that we cannot get on without it. No Government can run a country without money. No Government even, if I may say so, a Fianna Fáil Government, can run the country without money, and I think this Finance Bill is an honest, straightforward attempt to get the best value and the greatest number of reliefs for the smallest amount of taxation.

Mr. Horgan

The first thing I would like to do is to welcome the Minister for Finance to the House in his present capacity. He is somebody that I and many people have admired for his performance in other Ministries in the past, and we look forward to his performance in this position with considerable interest. It is not an office that I would wish on anybody, for reasons that I hope to make more plain later on, but I think we can take it that he will do the best he can in the job.

There is, I think, a particular responsibility and a big opportunity for a university Senator in speaking in a debate of this kind—in any debate, but especially in a debate of this kind. In a debate not so long ago Senator FitzGerald of the Fine Gael Party criticised myself and Senator Keery for being Senators who did not have to look for votes. I hope that I am not misquoting him. I will leave Senator Keery to fend for himself and will point out to Senator FitzGerald—in his absence, as he pointed out to me in my absence—that my constituency, while it may not be any more democratic than his, is 40 times its size. Anything I may say in a discussion like this can have two effects on the rather peculiar aggregation of people who form my constituency. Some of them may approve very much of some of the things that I say and I can see others of them who disagree very violently, but I conceive it as part of my responsibility to them and to the House too to say these things in the way that I must say them.

The first main point I want to make is in connection with the fact that we should be discussing a budget on an annual basis. The late Nye Bevan once criticised, quite validly, I think, the whole concept of a budgetary system on the ground that this was a very old-fashioned, agricultural and pastoral way of dealing with the problems of a society that was no longer geared exclusively to the four seasons. I think that there is a great deal of value and accuracy in what he said on that occasion. Furthermore, I believe that the accuracy of it has been borne out by the way in which we do our Parliamentary business today with regard to the established way we debate the Budget once a year. This generally is taken as the excuse for a large-scale wide-ranging debate on economic matters, but we also debate, almost every full year without fail Supplementary Estimates for many or even all the Departments of State, and it is very often in the context of these Supplementary Estimate debates that some of the most important decisions are taken, very often without the kind of full-scale review that they deserve, given their importance and the amount of public money involved.

In this context I would like to ask the Minister whether he can give some assurance that if there are to be supplementary Estimates this year we will get some opportunity of discussing them at the same level of importance as we are given to discuss the Budget.

An Cathaoirleach

Questions relating to Supplementary Estimates do not come to this House.

Mr. Horgan

It is a procedural matter, I take it. I accept the correction of the Chair, but the Chair will perhaps allow me to make a point on behalf of Members of the other House who may not have had an opportunity of making it who will be dealing with these Supplementary Estimates.

An Cathaoirelach

They may be discussed here in a general way only on the Appropriations Bill but not in detail.

Mr. Horgan

The point of the Budget in general and the Supplementary Estimates in particular is that they show the influences which bear on any Government in the formation of their financial policy. One of the things that I find extraordinary as a newcomer to the House is the faintly casual way in which the Government's financial policy is discussed as if it were the kind of thing that Moses brought down from the mountain engraven on two tablets of stone. There may or may not be a Mosaic element about the present Government, but I suspect that a degree of longevity may be one of them. I remember that Moses lived for 150 years, and while I would not wish the Government to live for 150 years they show every indication of doing so at the moment. We should not accept lightly the kind of cachét of authority and infallibility that surrounds a Government statement on financial policy to the Houses of the Oireachtas, and we should examine the statements of policy very closely to see the influence that have helped to mould them.

The first influence I see as moulding a Budget like this is the sociological influence which has its roots in the composition and in the nature of the Government party. It seems obvious sociologically that we are now in a position in this country where we have the Government of an increasingly industrialised and organised economy whose political base is equally increasingly in the agricultural side of our economy. This is a major determining factor in the formation of financial policy. This may not be a bad thing. There are all sorts of reasons why the industrial or urban sector of our economy should not be allowed to predominate and squeeze the already dwindling agricultural sector out of existence, but there is a stage at which one must say that the tail cannot wag the dog; that the decreasingly important influence and role of the agricultural sectors of the economy must not be allowed to dictate finance policy for the sake of votes and to the exclusion and the detriment of many people within the society as a whole.

There is another sociological element which is almost of equal importance here and this is the role of the Civil Service. Our Civil Service and, indeed, our whole population, is a rurally-orientated population. Many of our civil servants as, indeed, many of our legislators, many of our business-men and many of our city and business people are the sons, grandsons, and occasionally great-grandsons of people who worked for their living on the land of Ireland. This in itself is good but when we apply this sociological analysis to an organisation as important as the Civil Service, we can realise how difficult it is for that Civil Service to recommend or even to see the need for financial policy which may go against the kind of family and social structure in which they themselves have been brought up or of which they have some dim or sensitive memory.

Therefore, we have these two very important pressures, the first within the Government party based on the nature of their support, and the second within the Civil Service. Both tend to give us a finance policy that is decreasingly relevant to the needs of our society.

Coming more specifically to the Budget, I think we can say with some accuracy that the Budget typifies the kind of approach that has been characteristic of Budgets of the past couple of years in that it is a Budget which shows very plainly the inability of the Government to make unpopular decisions. Here again, I speak as one who has fewer votes to look for in the direct sense than has the Minister himself and, perhaps, than have many other Members of this House, but it is a fact of political life that Budgets which tend to be unpopular will not be brought in. This could be accepted up to a point, but when you reach the stage where the Government are not prepared to say anything that might offend anybody for fear of losing votes, we must ask ourselves whether we have strong government.

The Budget of this year seems to me to be an extraordinary kind of document. To my mind, it is capable of being assessed in three ways. The first of these assessments is one which we can assume would have been given by the former Minister for Finance, and it is that the economy would ride out the storm and that it would be buoyant enough to carry us forward into the future despite the apparently inflationary nature of the Budget. This assessment may be held honestly by the Minister for Finance.

The second possible explanation for the Budget is that it was created by a man who believed there was a general election around the corner—although this might seem extraordinary, since the country had only weathered a general election and there seemed to be no immediate prospect of another. Nevertheless, in the Budget there is every indication that it was an "election Budget".

The third explanation is one which reflects on what I said earlier about the Minister and his new office and it is that the Budget was written, drafted and created by somebody who wanted to make things bad for the former Finance Minister's successor. I speak without any knowledge of the interior working of the Government party but it does appear that the present Minister for Finance is faced with an almost impossible task. I do not see how he can bring in any kind of popular Budget for at least the next two years after this one.

Therefore, my third possible explanation for the nature of the Budget is that it was designed to discredit successive Ministers for Finance in their handling of the economy. This may seem a far-fetched explanation but we have learned enough in the past couple of months to know that however far-fetched something may seem it will not quite match up to the realities we have experienced.

I should like to speak briefly about the psychological aspects of the Budget. It may be true, as I suggested earlier, that the Budget itself is not important in the sense of its being once and for all an evaluation of the nation's economy which takes place every year. It is probably true to say that the evaluation of the nation's economy is a continuous process which goes on throughout the year. Nevertheless, the fact remains that for the ordinary person, the nature of the Budget is an important psychological pointer to the attitude that he considers should be adopted towards the country at large and its economic problems.

An easy Budget will not persuade the people that we are facing economic difficulties. While people will complain and grumble about a tough Budget, and may even vote in the other direction, it will bring home to them the fact that the country is facing some sort of problem. It is self-evident that the country is facing an economic problem at the moment. One of the failures of the Budget is a psychological failure. It fails to grasp the opportunity to tell the people that we are facing economic difficulties, and to ask them to tighten their belts and exercise restraint in order to make these economic difficulties, if not disappear, become less important. After a Budget like this it is almost impossible for a government with any degree of credibility to ask people to exercise restraint.

We in this country are in a most invidious position with regard to raising money by taxation because we have a high proportion of people who are either very old or very young and a relatively small proportion of people who are earners. The problem is that the people who are very young or very old do not have any capacity to pay tax but who at the same time are the people who consume most of the social welfare benefits and an enormous volume of the money derived by the Government through taxation. We can very rapidly reach the position where the taxable potential of our population is at the point of exhaustion. I wish, however, that the Government had gone a little bit further towards this point of exhaustion. I speak as a taxpayer and as one who does not want to pay any more tax than I have to but also as someone who believes that alternative forms of taxation available to this country even in its peculiar position have not been exploited in the current Budget and unfortunately, although I do not want to prejudge the Minister, show very little sign of being exploited by any future Minister of his party. At page 8 of his speech the Minister said:

As a nation we have just emerged from a decade of considerable material progress and stand at the threshold of another that promises well for our continued prosperity provided we avoid the heedless pursuit of narrow sectional gains.

I query this statement as an absolutely accurate statement of our economic position. We all hear Senator FitzGerald repeat the warnings of the Central Bank but there is another equally serious warning in the report of Córas Tráchtála published this morning. At page 8 of this report there is a group of figures giving details of export performance for 1968 to 1969 for a number of countries including our own and the Common Market countries. When we look at these figures we find that the percentage volume increase in exports from Ireland was 5 per cent for the year in question, which is less than half as large as that of our next nearest competitor, Great Britain. Not only was it less than half as large as that of Great Britain, but a greater part of this increase was accounted for, not by value, but by prices. The Government may derive some consolation from the fact that exports passed the magic £4,000 million mark. I do not know whether we would have passed this magic mark if the prices of our exports had not rocketed dangerously. When we remember that we live on our exports we realise we are facing a serious situation.

The only answer we have to this situation is the turnover tax. This has been travelled by other Senators and Deputies so I shall not waste the time of the House on it but I do want to analyse what the Minister said in defence of the turnover tax. At page 6 of his speech he said that, "No one has come up with an acceptable alternative". The first thing to do is criticise the nature of the turnover tax itself. This is a tax collected from certain sections of the population by the Government and redistributed by the Government to other sections of the population who spend it. It is, therefore, unavoidably, a tax which increases demand and whatever the Minister may say about the added value tax it is an inflationary tax. It is also a regressive tax which bears most heavily on the sections of the population least equipped to support it. This has been made well enough by other Senators.

I want to turn now to the word "acceptable" which the Minister used. He said that no one has come up with an acceptable alternative—acceptable to whom? I should like to believe there are all sorts of alternatives to the turnover tax which are acceptable to wide and numerically impressive groups of the population. I suspect, I hope I am wrong, that the word "acceptable" in this context does not mean acceptable to the plain people of the country but means acceptable to the Government party. In other words it means that here we have a tax which is going to lose them the least possible number of votes. This is a crude and ungenerous way of saying it but the point has to be made.

I should like to go briefly through a number of alternatives which I believe would be acceptable to a large number of people. The first is the whole question of direct taxation—income taxation. The Minister said that to obtain the necessary extra revenue from income tax would involve an increase of 1s 9d in the £. He went on to say that it was clear that an increase of that order was out of the question on many grounds. I should have liked to ask the Minister, and I think he should spell out in his reply, why any increase in income tax is out of the question on many grounds. We should like to hear a little bit more about these grounds so that we can evaluate them for ourselves.

The only ground I ever heard advanced for rejecting an increase in the rate of income tax is that it disencourages enterprise. We are told that we may not be able to get sufficient people at executive level to keep our industries, our public services and semiState bodies operating at the level of proficiency at which we expect them to operate. This is usually the argument which is produced against an increase in direct taxation through income tax. It is less an argument than a supposition, and one which has never been adequately put to the test. If there were to be an increase in direct taxation by way of income tax—and I am not suggesting that the whole 1s 9d is necessary—it would have many beneficial results. It would enable the Government and the country to save a little money. Senator Cranitch pointed out that one of the most important things for us to day was to save money. Our attitude in the present financial set-up is that we have a system where every penny raised by taxation is either sent straight back into the area of consumption via increased benefits—and I am not decrying increased benefits—or is carved up as a result of a kind of dog fight during the Supplementary Estimates, when Ministers look rather to the electoral situation than to the welfare of the country as a whole. The problem of budgeting for a surplus does not arise because we never have a surplus. If there is a little money, there is an incredible scrabble for it. This results in a mode of conduct which is not only politically reprehensible but nationally dangerous. If the Government were to increase income tax, as I think they should, I believe it would be enabled to budget for a surplus in a more realistic manner than has been done to date.

There may be many people who are not paying anything like the amount of income tax they should pay. I know this is something to which the Government have given thought. There is considerable difficulty in getting adequate staff for the Revenue Commissioners Office. I choose one area at considerable electoral peril to myself—that of medicine. It is a common assumption that many members of the medical profession are not as assidious as they might be with regard to income tax returns. I am a son of a country doctor and I know very well that many doctors in this country are casual about their income tax returns on a "rob Peter to pay Paul" basis. They are not returning the full amount of their incomes to the Revenue Commissioners for the simple reason that this enables them, in a completely honest way, to serve the community and to give free ad hoc medical and surgical service to people who would otherwise be without adequate medical treatment. This is an absolute fact. Many doctors in this country, especially in the rural areas, operate a one-man health service. I think this is good and necessary up to a point, but I do not think we should accept the situation as ideal. We will not accept it when the same system works in such a way as to ensure that doctors, especially in urban areas, are making considerable fortunes? The ordinary taxpayers would look on this with considerable interest.

There may be difficulties in collecting tax from people who are self-employed and who normally operate by means of cash payments. I suggest to the Minister a scheme for remedying this particular problem. It is one which would have an enormous appeal at least electorally and would have very beneficial effects generally. People should be allowed to claim medical expenses against the income tax they are paying. If this happened the whole matter could be handled by a single computer. If every patient who wanted to claim income tax relief on foot of his medical bill could send the bill to a central computer the incomes of a great many professional people could be assessed. People could send a receipt for an amount paid to a doctor. There are many people who do not fall within the confines of the health services at present who would be anxious to do this. A switch could be pressed in a computer in order to assess the payments made to a certain person in a certain area at a certain time. One would have an exact statement of a doctor's income for income tax purposes by using this method.

I hope it will not be thought that I have anything against the medical profession in particular. This is not so. I am trying to show that by working a system in this way the taxable potential of the more affluent people in our community could be more fully realised. This may not be good news to the more affluent people but it would be good news to everybody else. This is where we come back to the term "acceptable". I think that a gesture such as I have described would be eminently acceptable to the overwhelming majority of our people. I can see that a very vigorous movement of protest would be mounted against it, but I cannot see anything wrong with it, nor anything wrong with a protest. This is the kind of clash out of which the community will gradually establish its own sense of priorities in its own time and in its own way.

The whole question of capital gains should be examined. As long ago as 1962 a proposal in favour of a capital gains tax was put forward by a Minister of the Fianna Fáil Party, who was not then Minister for Finance, to the then Minister for Finance. There may have been some reasons, political as well as economic, for crushing the proposal. The fact remains that there are very few people in this country who would now object to at least a limited capital gains tax. An overall capital gains tax may not be possible to implement. It is probably not possible. One has to be selective. If the tax on the sale of land could be made subject to immediate Government legislation there would be strong reaction from the ordinary people. The trade union movement, most of whose members are trying to get enough money together to buy a house and who need everything they can get by way of Government grants and subsidies, would be overjoyed if they knew that the grants and subsidies were to be increased substantially as a result of the Government taking their fair share of the illgotten gains of the people who are speculating in land.

People who make money by dealing in land make money only because they have money already, and this is a spectacle which excites justifiable anger in the breasts of many Irish people. If the Government were to declare their intention to introduce a limited capital gains tax, say on capital gains made from the sale of land, I do not see how any party in this or the other House could in conscience oppose it. It was proposed by the Government as far back as 1962 and yet we have not had a word about it of any consequence to this day.

That is why I did not understand the Minister when he said that no one has come up with an alternative which would be acceptable. At least the two I have mentioned would be acceptable to a great number of people.

Mr. Colley

I assume one of the attributes of the Senator's acceptable alternative in this context would be that it would bring in £20 million.

Mr. Horgan

That is so. I am building up to my third point. I have spoken about a mixture of income tax changes and a capital gains tax which I suggest—I have not done the sum—would go at least some way to making up £20 million which would be necessary if we were to increase benefits at the rate at which the Budget increases them.

The third area in which changes should be made—it is an area more controversial than the other two put together—is in connection with farm incomes and subsidies. It is a well known economic fact that there are in this area positive and negative taxation—positive in the matter of taking money, and negative in the matter of giving subsidies. We have in this country, for reasons which I outlined earlier, a general cast of mind which favours the farming community in terms of taxation relief and direct subsidy, but which militates against the rest of the country. I am not saying we should approach the whole problem of farm incomes and subsidies on a strictly economic basis. Nobody with a knowledge of Ireland and the peculiar social problems of rural Ireland would advocate this for a moment, but I have a suspicion that in the area of agricultural finance or agricultural financial policy we are doing things that simply manifest an attempt to patch up as we go along and that we are not really thinking ahead.

We have, perhaps, over-emphasised the social importance of agriculture in our community. This social emphasis must be maintained, but I think political pressure both within the Government party and the Fine Gael Party, and probably also within a rurally-orientated Civil Service, has been such as to blind us to the need for an approach to farm incomes and subsidies, both of which are eligible for taxation in different ways, which would (a) have more direct relevance to our present economy and the sociological position of the country and (b) serve to establish our genuine underlying social priorities on the advent of our accession to the EEC. This is an incredibly important area.

I should like to think that when we go into the EEC we will have done this kind of thinking, but I would argue that the time available for such thinking is shrinking rapidly. Unless we start doing it now we may find ourselves, having defended this social structure for so long and so short-sightedly, forced to make changes so quickly that we will destroy the system we so long defended.

I have mentioned, then, a change of our income tax system, a capital gains tax on land sales, and our approach to farm incomes and subsidies. Such changes would lead us a great deal nearer towards getting benefits for the large proportion of our population who so need them.

The prospects which face us at the moment are very serious. The effects of the bank and cement strikes are pointing us in the direction of recession. The effects of the price rises and, I am afraid, of the turnover tax, are pointing us in the direction of inflation; and this combination of recession and inflation will, unless something radical is done in the near future, confront us with an explosive mixture of emigration and unemployment. That is what the Governor of the Central Bank is worried about. It is the sort of situation which could lead to devaluation.

It is very easy to talk about the rights and wrongs of devaluation, the possibility of devaluation, and whether it is useful in certain circumstances or not, but we must keep some freedom of manoeuvre. We must not find ourselves forced into a position in which devaluation will be the only possible way out. It is here that we come to the important question of the role of the trade unions.

If the present situation continues, if there is increasing recession and increasing inflation with more emigration and more unemployment, the unions will be faced with very difficult decisions. They may decide, and in the present circumstances one would find it relatively difficult to fault them for doing so, to maintain their share of an ever-dwindling cake. They may feel, on the other hand, that this is an opportunity for national restraint. There are already some trade union leaders who are making noises of this kind. I feel that there are many more trade union leaders who would make noises of this kind and would be prepared to give this kind of leadership to their followers if there were some indication, in terms of taxation changes of the kind that I have talked about, that they are not going to be the only ones to suffer. I cannot see any more graphic, direct or illustrative way of assuring trade unionists of this than taking the kind of taxation steps that I have outlined.

The final point I want to make comes right back to the very beginning. It is, to my mind, extraordinary that a Government should introduce such an unenterprising Budget at a time in which we are in some real economic danger. As I said, the reports of the Central Bank must necessarily be pessimistic, but even when one discounts their necessary pessimism we will acknowledge that they do raise a very real warning finger. The report of Córas Tráchtála which I have already quoted from is an even more graphic illustration of the incredible dangers facing us. In this context I feel—and I know that it is easy for somebody like me to say this—that in this situation it is absolutely incumbent on the Government to take unpopular decisions. If a Government is not going to take unpopular decisions, who on earth will?

Mr. McDonald

I should like to avail of this opportunity to make a few general comments on the Finance Bill this year and the fact that there has been a greater than usual reaction to the Government proposals. I should like to take issue with the Minister in his opening remarks when he told the House that this year the Government proposed to provide £96 million to aid directly or indirectly the agricultural industry. I have been glancing through the Estimates for the public services and I find that it is proposed to provide £65 million odd this year compared with £66½ million last year, that is a decrease of £1,620,000 on the 1969-70 figure. I was surprised further to find the particular items that the Minister for Agriculture and Fisheries earmarked for reduction. For instance, the grant-in-aid of dairy produce is down by over half a million pounds.

Acting Chairman (Mr. Sheldon)

No details of administration, please, Senator.

Mr. McDonald

With respect I am dealing mainly with the policy behind——

Acting Chairman

A discussion of the Estimates would be proper to the Appropriations Bill, not the Finance Bill.

Mr. McDonald

I bow to your ruling, Sir. Nevertheless it seems a difficult thing to understand the way the Government say one minute that they are increasing aid and have used the Finance Bill to gather in greater taxation for this purpose, but when we examine the records we find that this does not appear to be so. I also find the same true of Local Government. Last week we had this problem debated, and, I suppose, in anticipation of the passing of the two Bills we had before the House on the last day, the Government have provided £100,000 less towards providing grants to people to build private houses. This, I suppose, is a sign of the times with most costs rising and at the same time the cost of living going up.

I should like to bring to the notice of the Minister for Finance the position in Irish Shipping whereby, apparently, if a member of the crew of an Irish ship should be taken ill on the high seas—I was disappointed to hear that this happened on at least one of our ships—the captain and officers do not even bother, when putting that crew member ashore in a foreign country, to give the case history of the injured party to the hospital authorities, or even to indicate the man's religion. If our officers on these ships have not sufficient Christianity to look after a fellow Irishman in distress, then I think appropriate regulations should be written into the articles of association of Irish Shipping Limited. I do not want to deal any further with the matter. It is regrettable that it had to be brought to notice. Perhaps those citizens who have members of their families in the merchant navy would like to have some reassurance that something will be done in this regard.

At the present time the courts of justice have been in the news a lot, and I should like, in a fleeting reference, to mention the great disparity in the types of fines levied for, of course, different categories of offences. I read with disgust in one of the local papers this weekend that a young boy was fined £5 for swiping a bag of chips, while the same district justice deals most leniently with what one would consider almost criminal cases. Surely the Government should have some sort of uniformity and endeavour to fit the fines to the crimes and not allow these men to get up on their private hobby horse? I think that the public find great difficulty in being charitable to these people in high places.

Acting Chairman

The Senator is asking me to be very charitable, in my view of financial policy.

Mr. McDonald

The agricultural industry has been going through a rather difficult period. If I may again refer generally to the Minister's statement about Government aid to agriculture, I should like to remind the House that this week the price of pigs per cwt is down 5s, even though in his Budget Statement the Minister announced an increase of 10s per cwt dead weight for pigs. It is most disappointing to pig producers in general. Since the Minister's announcement that the price of pigs was to be increased by 10s per cwt the compounders and the people who provide the great bulk of the feeding stuffs have taken the opportunity of increasing the price of feeding stuffs that the farmer must buy to produce the pigs. Yet we find here in this week's papers that the price offered for pigs was at least 5s a cwt less.

I should like also to remind the House that, despite the establishment over the last few months of An Bord Olla, the price for wool this year has dropped significantly. I think it has dropped in the year from 3s 8d per lb last year to 2s 11d per lb, and this is a sizeable drop. Surely the Government must bear some responsibility? I should like to ask what this new board, which was set up to aid and operate this industry, are doing precisely, or how it is that the prices before these people came on the scene were greater than they are now?

Mr. Honan

Has the Senator some authority for saying there has been that drop?

Mr. McDonald

From 3s 8d to 2s 11d.

Mr. Honan

I must have misunderstood the Senator.

Mr. McDonald

At any rate, it is sizeable when one considers that housewives pay 1s 7d or 1s 8d per ounce and I should imagine that there is very little cost involved in changing the raw material to the commodity as purchased by the housewife.

I should like to refer to the very excellent work that has been done during the past ten or 12 years by An Foras Talúntais. This organisation have played a tremendous role in the Irish agricultural economy and Irish farmers have enjoyed the great assistance of these agricultural scientists in co-operation with the agricultural advisory service. In every part of the country and at all the centres a tremendous amount of goodwill has been built up. This is due perhaps to the dedication and effort of so many of the scientists and people employed by An Foras Talúntais during the past ten or 12 years.

I have always admired the director, Dr. Walsh. I have considered him to be a very strong man and, under him, the institute has flourished. When an organisation such as An Foras Talúntais are doing so much good work they must get all the encouragement and help that it is possible to give them. These people have earned for themselves a high place in the life of Irish agriculture.

Perhaps I am most conversant with the institute's centres nearest to me. These are the Bogland Research Centre at Lullymore in County Kildare and the Crops and Husbandry Division at Oakpark.

Mr. McElgunn

Is this related to the Finance Bill?

Mr. McDonald

Under the Finance Bill a sum of £2 million is being provided for this service. Therefore, I consider that I am entitled to ask how that money is being spent. The agricultural industry in general, however, have been disappointed during the past few weeks in relation to the adverse publicity that has been given to this wonderful institute. I wonder if, perhaps, the council have acted irresponsibly or hastily when they interfered and changed senior members of the staff.

Acting Chairman

The Senator is continuing to deal with details of administration. They are not appropriate to this measure which deals with the financial policy of the Government. Details of administration can be discussed on the Appropriation Bill that will come up later.

Mr. McDonald

I am not endeavouring to speak in detail but I am speaking generally of a national institute with which our major industry would be most interested at the present time.

Mr. Colley

How does it arise?

Mr. Honan

The Senator is referring to a dispute.

Mr. McDonald

I did not mention the word "dispute".

Mr. Honan

At least, the Senator inferred that there was disagreement.

Acting Chairman

The Senator should realise that we are discussing general financial policy and not details of administration.

Mr. McDonald

I am endeavouring to deal with Government policy as it relates to agriculture. As I see it, the Minister said he proposed this year to provide £96 million for Irish agriculture but, when one looks at the Estimates, he finds provision merely for £64 million.

Mr. Colley

Would the Senator care to read Table V issued with the Budget Statement? If he reads that, he will discover that a sum of £90,923,000 is provided for agriculture in the Estimate for 1970-71 and that an additional £5 million is provided in the Budget to bring the total to approximately £96 million.

Mr. McDonald

I have been reading the Government Estimates for Public Services for the year ending 31st March, 1971, and this is as I see it.

Mr. Colley

The Senator misread it.

Mr. McDonald

Possibly there are another few million here and there but they are not under the Vote for Agriculture. At any rate, although policy dictates that all this money is attributable to agriculture, other interests that could not be described as being wholly agricultural will benefit from this amount. It is not right for the Government to insist that they are paying a record sum towards agriculture when the aids to all the major centres of production are being cut. For instance, cereals are down by £505,000 or more than half a million. There are many other items which I shall not read because I might be accused of being irrelevant.

To get back to Government policy, I should like to ask the Minister if, in relation to the institute, he is satisfied with the working of the three representatives of the Minister for Agriculture and Fisheries on the Council of the Agricultural Institute?

Mr. Colley

As the Acting Chairman is aware I am not a member of this House. Consequently, I am not entirely familiar with its proceedings, so perhaps the Chair would enlighten me as to whether this kind of matter and the question being put to me is in order?

Acting Chairman

I have endeavoured to explain to Senator McDonald that he is not in order in dealing with detail, but in this House we do not like to use extreme measures to enforce the law.

Mr. McDonald

I am not touching detail; I am speaking about a huge institute that is an integral part of our major industry. Surely I am not going into detail in speaking on that subject.

Acting Chairman

When the Senator names one individual and mentions three others it certainly is detail and could not be more so. The Senator will have to come to taxation and general financial policy.

Mr. McGlinchey

He has no fault to find with taxation and must talk about something.

Mr. McDonald

I should like to mention briefly the grave difficulties being experienced by people in rural Ireland at the present time because of the imposition on them of an unfair share of taxation. The time has come when the Minister and the Government must speed up the report on the rating system. The rate burden is such that it is at the point where the last straw will break the camel's back. Many people say that the vast majority of the farming community pay no rates but this is not so. My main crib about the rating system is that it is antiquated and does not take into account the ability of the ratepayer to pay. I should like to know when we can expect the Commission now examining this vexed problem to furnish us with their report. I should also like to know when we can expect the Anderson Report to be available. I am sure if that report was out at the present time it would be quite controversial. The Minister may also be able to tell the House whether it is usual for organisations and semi-State bodies to adopt items and recommendations from these reports before they are actually published. I believe this is precisely what has happened to the Anderson Report.

Mr. Honan

The Senator must have had a little look at it himself.

Mr. McDonald

At what?

Mr. Honan

At the Anderson Report.

Mr. McDonald

It is not out yet.

An Cathaoirleach

Senator Honan will have an opportunity of speaking.

Mr. Russell

I hope the Senator will avail of it.

Mr. McDonald

The report to which I refer relates to An Foras Talúntais. I shall be interested to hear when I shall have an opportunity of reading that report, which I presume was prepared at the expense of the taxpayer. As a taxpayer, I feel I am entitled to my fair share of anything that is going.

I should like to refer to Government policy on arterial drainage.

An Cathaoirleach

This does not arise on this Bill; it arises on the Appropriation Bill.

Mr. McDonald

I wanted to make a point about ratepayers who have to pay rates on lands which are flooded and of utterly no use to them. This is a genuine taxation crib. People have to pay rates on property from which they can derive no income. There are a number of river basins which have not been drained to date.

An Cathaoirleach

This Bill relates to general Government taxation and financial policy; it does not cover local rates.

Mr. McDonald

Nevertheless, the Minister says, if his figure of £96,000 is correct, that he is including £20 million rate abatement in Vote 26. I feel I should be able to discuss that as the money is provided by the Minister in this Bill.

The Government have drastically changed from the old system of having tax collectors to collect taxes and instead merchants and shopkeepers collect taxes for them. This is an unfortunate change in Government policy and in Government administration. It lays the responsibility very heavily on the sector of the community least able to bear this type of burden. It is most unfair of the Government to double the turnover tax which places such a direct burden on small shopkeepers.

I should like to hear from the Minister whether it is acceptable to charge 5 per cent extra on all bills to the customer. I have noticed on hotel bills that there is a 12½ per cent service charge and then 5 per cent turnover tax is added on. I was in a hardware shop in town last week and I was charged either 15 per cent or 17 per cent on a purchase over and above the price of the wholesale tax. I wonder whether this practice is legal because I feel sure, if I am mixed up about the way these charges are made, so must many other people.

Mr. Colley

Was the Senator purchasing wholesale?

Mr. McDonald

No, retail. When I questioned the amount of tax I was told it was because I was buying a product of foreign manufacture. It is only a small matter but I should like to have clarification on it.

I very much regret that I have not had an opportunity to ask the Minister to bring a little bit of justice into An Foras Talúntais where so many people seem to be aggrieved at the present time.

Mr. Russell

I am sorry I was not here this afternoon when the Minister made his introductory speech. I have, however, had an opportunity of looking through a copy of his speech and it makes very interesting reading. I presume it is in order to refer to some of it. I should like to refer to page 1 of the Minister's speech. I think the Minister has hit the nail on the head. I have heard some of the discussion in this House and there seems to be a unanimous opinion among the Members on certain facets of the Budget this year. The Minister states:

The background of this year's Budget was dominated by inflation. While inflation is not of course a phenomenon confined to Ireland its pace in this country is nevertheless becoming a cause for serious concern. The main reason for the recent acceleration of inflationary pressures in our economy has been the excessive income increases that have been spreading throughout the community since 1969. Increases in money incomes of this type, well above the growth in productivity, serve to push up prices because they outstrip the increase in the national product. In many instances, these income increases have been secured by strong organised groups as a result of a strike—or a threat of strike—without any regard for the interests of the community as a whole.

The general increase in prices brought about by these income developments was—and is—of serious concern to the Government for many reasons. In particular we are concerned about those groups in the community who are most severely affected by the resultant disimprovement in their standard of living. The people hardest hit are those who are least able to protect themselves, the old, the sick, the unemployed, pensioners and people on fixed incomes.

Everybody would subscribe wholeheartedly to the sentiments expressed by the Minister. I certainly do. It is fair to ask what the present Budget does to alleviate that situation. I suggest it does nothing. I accept the fact that the present Minister did not introduce the Budget. Perhaps I am quite wrong in saying this, but I must say that I feel that, if the present Minister had been in a position to prepare the Budget for this year, he would not have introduced the same type of Budget.

This Budget is an accountant's Budget. It has two sets of figures. It adds up the total on the right hand side and the total on the left hand side and finds there is a difference of £20 million. Then the Minister looked round to see where he could get the extra money by taxation and the obvious method, and the quickest and cleanest method, was to increase the turnover tax from 2½ per cent to 5 per cent. The previous Minister for Finance did just that. It is a very neat operation. Looked at from the point of view of an accountant and an expert on figures, one would be tempted to find a similar solution. This Budget does absolutely nothing to remedy the underlying threat to the whole future of our economy. It does nothing to create a stable situation where prices are relatively stable and where income increases are given having regard to productivity. It contributes directly to the increase and the costs in price inflation from which this country has been suffering during the past two years.

This Government stand indicted for the fact that they have taken no steps in the past two years to underline the stabilisation in the economy. I am not an economist but a minor politician. I appreciate that one cannot wave a magic wand and put the financial circumstances of the country on an even keel. I realise that unpopular steps have to be taken. If the present situation is not going to continue into the 1970s, the Government will have to take their courage in their hands and take the necessary drastic steps to put the economy of the country on an even keel. I have sufficient confidence in the present Minister to believe that he can do this. I do not say that the Fianna Fáil Government are prepared to do it.

Assuming that there is no election in the immediate offing, the Government might take a chance and do this. Past Ministers for Finance have had to take unpopular steps. The late Deputy Gerard Sweetman had to take drastic steps on one occasion. He was castigated up and down the country for doing this, but his action put the economy of the country back on a sound foundation. The present Minister should take his courage in his hands and take the necessary steps, even though they may be unpopular. These steps will have to be taken to bring the economy under control. If they are not taken, it is certain that in the years ahead this country cannot hope to expand its economy.

I suggest that the Government Party are caught like rats in a trap and they cannot get out of that trap unless they are prepared to take certain drastic measures. These measures will make them unpopular but now is the time to do it. The tariffs are coming to an end under the terms of the Anglo-Irish Free Trade Area Agreement. We are talking about becoming members of the European Community and about competing with European and UK manufacturers. Very little is heard about the threat to our own economy if we do not put our house in order.

It is significant that the percentage of imports of industrial and consumer goods is increasing as the tariffs go down. One cannot blame the people for buying imported goods, although they are not being patriotic, nor answering the appeal of the Minister to buy Irish. If people can get good articles at a cheap price they will buy them unless we can produce goods of an acceptable standard at competitive prices. Irrespective of what appeals may be made by Ministers, politicians or Governments to buy Irish, it is certain that the importation of foreign-manufactured goods will increase in this country. The Minister would not disagree with that statement.

We all admire the way provision has been made in the Budget to ease the load of the weaker sections of the community. Everybody in this House, as was done in the Dáil, accepted the improvements given to the social welfare classes. I do not think any Government has neglected the weaker sections of the community. However, these reliefs are illusory unless we have a situation in which prices remain relatively stable.

I think I am correct in saying that since the Budget was introduced in April prices have continued to accelerate and that, in fact, the benefits given in it to the lower income groups, people on social welfare payments, has already been disimproved by increases in prices in the interim. Unless we can get back to square one again, which I believe the Minister wants to do—I hope he will exercise his independent judgment and do it—unless we provide stable conditions in regard to prices, any benefit given to the people in the social welfare classes will be completely illusory.

Inflation, which is very much in the news—it has become so serious that the ordinary man in the street is talking about it—is not of very recent origin. It has been building up during the past two years or more and it shows every sign of continuing unless firm and possibly unpopular steps are taken to control it. As I have already said, the Budget does nothing to remedy that situation. It accepts it but it does not get down to the fundamental of creating a situation in which increases in wages and salaries mean something.

The Opposition parties were criticised in the Dáil and to some extent here because they failed to produce an alternative policy or alternative proposals. I suggest it is the business of the Government to address themselves to a situation they have, in fact, created and to find a way out. It seems to be accepted policy when a Minister or the Government are criticised to ask for an alternative policy. I do not think it is the business of the Opposition parties to provide an alternative. The present situation has been created largely by the Government and it is up to the Government to deal with it. Senators have stated—and they have been supported in their statements by recent observations by the Central Bank, the NIEC and others—that a situation has been reached in this country in which costs are arising at a greater rate than in any other country in Europe. This means, in effect, that we are in danger of not only losing our competitive position in outside markets but at home as well.

We all appreciate that the Budget is not only a fiscal exercise in that it must endeavour to control a trend or possibly a future situation, but that it is also a political exercise. Any Minister bringing in a Budget must have regard to the future repercussions of the measures he introduces. Our present basis of taxation, to which the Minister referred in his statement, is vulnerable on several grounds, particularly in that 50 per cent of taxed revenue comes from two sources, customs and excise— approximately £190 million out of £380 million. I am sorry the Minister in his statement did not give some indication—he spoke at some length towards the end about an added value tax and the situation that probably would arise if we became members of the EEC—of what would be the position in regard to customs and excise taxation if and when we entered the Common Market.

I understand that the tax content of spirits, beer, tobacco and petrol in this country is among the highest in Europe. If I am correct in that statement and if we enter the Common Market, it will mean we will have to accept the rates of taxation at present applicable among the six countries. It will mean, in effect, that we will lose a large measure of our present income from taxation. Therefore, I am sorry the Minister did not give us some indication of how that loss of revenue would be made up if we were EEC members. Does it mean we would have higher direct taxation or would the added value tax which the Common Market countries apply make up the difference between the loss of taxation on tobacco, beer and spirits?

It would have been helpful to the House and to the country if that information were made available. It might be difficult for the Minister or his officials to do it, but it would be most helpful if he gave us a pro forma Budget to indicate how the comparable amount of taxation would be raised if we were members of the Common Market. Such information would not only be instructive to the House but enlightening to the Irish people. I am interested to find how it would work out, to know whether increases would be involved and where. This is relevant since we are so near to entry into the Common Market. It is not only possible but probable that we shall be members in the next three years. Therefore, the time to talk about what taxation, what price increases or price reductions will be involved, is now.

One of the inhibiting factors against any agreement on a prices and incomes policy, which I believe and I think other Senators believe and which certainly from statements made in the House would secure general acceptance, is that any hope of securing a relative stability in price can only be achieved if there is to be an incomes and prices policy. One of the inhibiting factors in this is the reluctance of trade unions to accept such a policy because they consider, wrongly in my view but with some justification, that price controls only relate to salaries and wages; they do not relate to other incomes— dividends, incomes from sales of properties or incomes of that type. One of the prerequisites to any acceptance by the trade unions of an incomes policy must be to demonstrate to them that the control of prices and incomes does not relate solely to salaries and wages but it relates to all forms of income from whatever source they arise. It is all very well to set up joint councils of employers and workers and having them issue informative reports, but in my experience and, perhaps, the Minister might agree with me in this— in a small country like ours far more progress is made when the Minister himself enters into general discussions with representatives of all classes of the community who are likely to be affected by any policy of control on prices and incomes.

I should like to suggest to the Minister that far more progress would be made in this direction if he himself was to take the initiative and have a meeting of representatives of all sectors in the community who might be affected by legislation to ensure that there would be no feeling on the side particularly of the representatives of the workers that the bosses, so to speak, or the employers, are being left out of any controls that may be introduced. If we are going to have an effective policy on prices and incomes, it cannot hope to work unless you have the full and active co-operation of the trade unions. If the Minister is really serious in tackling this growing threat of inflation, the only possible way of doing it is to introduce—hopefully, I would say, on a voluntary basis—effective control over prices, incomes, dividends, profits from sales of property or any other form of income. If you cannot succeed in doing this, I hold out no hope whatever of controlling inflation which surely will strangle this economy if something effective is not done about it.

We have seen the efforts of our neighbours, Great Britain, to bring in a prices and incomes policy and how it has completely failed. It failed because the trade unions did not accept the fact that control applied to the employers, to the capitalists if you like for the want of a better name, as it would surely apply to them, and this is one test and one field in which we in this country might be able to show an example to our larger neighbours. I hope that the Minister, Deputy Colley, will take this suggestion of mine seriously. We all know that there are difficulties involved in it, but I do not think that the Minister or any other Senator would disagree with me that unless you have the full active co-operation of the trade unions you are not going to introduce an effective prices and incomes policy.

Senator Horgan here tonight referred to the question of budgeting for a surplus. That would be a very desirable exercise if we could achieve it. A surplus above the line, so to speak, would be a very nice thing to achieve if it could be done so that capital would be available for investment in the economy. Indeed, again referring to our neighbours in Great Britain, they have succeeded in doing this in recent years, but our economy is very different from the British economy. We are a very much smaller economy. We are an open economy. We must of necessity levy high taxation on certain sections of the community. Other sections of the community do not pay direct taxation, and it would be very difficult, although I do agree with Senator Horgan that it would be very desirable if we could budget for a surplus above the line.

I think it would have a dynamic effect on our economy if we produced a surplus of £25 million or £50 million per year for investment in capital goods or capital projects. It would have an extraordinary effect. I do not think that any Minister for Finance would disagree with that, but there are certain difficulties involved. We have for years past been carrying along on a sort of hairline policy, achieving a balancing of the Budget by borrowing a couple of million pounds from the road fund here, and assuming that errors of estimation will provide a badly needed £2 million or £3 million to make up the difference. We have always been pulling the devil by the tail, so to speak. We have never been in the happy position of being able to budget for a surplus above the line. I do not remember—perhaps, the Minister will correct me—any year in which a surplus above the line was achieved. We have always been happy to be able to have a break even situation or else to have a very small surplus running into a few hundred thousand pounds. That is all right if everything is going well, if we do not have inflation or any difficulties, but if you run into difficulties and a situation arises in which, as has happened in the last year or two, you have rampant inflation your economy then is in serious trouble. That is why I suggest that the best thing that the Minister could do in his Budget this year was to increase taxation to balance the Budget.

There is one factor I should like to refer to. I do not think that the Minister referred to it in his statement but it is referred to in the Finance Bill and was referred to in the Dáil debates. That is the question of death duties. I suggest that the time has come, notwithstanding our very tight financial situation, when a very hard look should be taken at the present death duties in this country. Virtually on change has taken place in the rates of death duty over many years notwithstanding the depreciation in the value of all property over the past 30 or 40 years and, I think that the Minister would be doing not only a good turn but a turn in justice if he was to make some adjustment in the present rate of death duties. We all know that a pound today, or £10,000 or £50,000 is only a very small fraction of what it was 30 or 40 years ago, and in regard to death duties as applied to salaries or wages or profits or goods generally some consideration should be given to the fall in value of money over the years. Every one of us has had experience of what I will describe as near tragedies where comparatively small estates have had to be sold out— businesses or farms—to provide money to meet death duties.

I am not against the principle of death duties. I think that where large portions are amassed during the lifetime of one man, it is only right that the State should secure some return or some share of that when he goes to his eternal reward but I am absolutely opposed to the state of affairs where a family business or family farm has to be sold, or portion of it sold, to provide cash to pay death duties. I think that is the experience of every Senator— if he has not seen it personally he will have some knowledge of such cases over the years. Certainly, I have had it any way. The Minister would be doing a very equitable and very just thing if he would have a look at that particularly in regard to small estates.

We are a country as I hope we will continue to be for many years to come of small farmers, small businessmen and shopkeepers and I hope that we will always regard it as being good to preserve the family farm or the family business. Many of us have made speeches from time to time about preserving the family farm or the small business but I am afraid that these speeches are hollow if we do not do something practical to sustain these people. One practical way of helping them would be by ameliorating death duties to a substantial extent in regard to the smaller estates. Another way in which the Minister might look at this is to consider the groups profits tax paid by the small companies. Up to some years ago the rate of CPT was substantially lower than it is today. As far as I remember, it was a predecessor of the Minister, Dr. Ryan, who increased the rate of CPT very substantially and abolished the preferential rate which the small business making a small profit enjoyed in past years. There is much to be said for giving some preference to the small man whether he be a farmer or a shopkeeper and whether it is in regard to death duties or taxation, fundamentally, it is sound, social policy and very much in line with the policy advocated for many years by every party.

I would be grateful if the Minister would do something for these smaller businessmen in a future Budget. I doubt if he will do anything this year judging from the way we are rushing this Bill through. I believe the Minister has a good deal of sympathy with the small businessmen and that he realises such a man will find the going even more difficult if he must compete with other European countries in the future. I do not share the opinion, however, that the small man will be cut out of business if we join the EEC. By his hard work he should survive irrespective of what changes may come about. That has been proved by the experience of the United States which has the biggest business groups in the world but where there is still a place for the entrepreneur. I hope, then, that the Minister will take cognisance of these few points. I have no desire to widen the subject of this discussion on the Finance Bill except to ask the Minister to have regard to some of the points I have raised. As he himself is aware, the primary objective of any legislation at the present time, budgetary or otherwise, must be the containing of inflation. As I said at the outset, I do not see what contribution the present Budget makes towards that objective. It may even up the burden between the different classes. It takes £20 million extra in taxation and gives a certain amount to the social welfare classes as well as giving something to the farmers but, by and large, it does not tackle the basic problem of containing inflation. The position in this country might be sustainable if our rate of inflation was no greater than what it is in other European countries. In other words, if we all inflated together or we were a little behind the other inflators and, thereby, preserve our competitive position, it would not be too bad but the position is—there is documentary evidence to prove this and it was also borne out by the Minister in his speech—that we are literally pricing ourselves not only out of the European and British markets but out of our own home market and this situation will become worse unless the Minister and his Government take active steps to right it.

I do not propose a panacea. There is no such thing but this situation has been growing for the past two or three years. It is the duty of the Government and not the Opposition to take whatever steps are necessary even if they be politically unpopular to solve the problem. I hope the Minister will have sufficient courage to do that. If he has, he will have the support of the people of the country in the long run although he may be criticised in the short term. The Minister is a politician and I am sure his hide is sufficiently hardened to stand up to that but if he believes, as he must, that the present situation cannot continue, then it is up to him and to his Government to take the necessary steps and to take them very soon.

Professor Quinlan

This Bill provides an opportunity for us to consider Government policy as shown in the Budget but it provides also an opportunity to have a broader look at the whole Government financial policy and to where the country is heading. In this regard the report published yesterday by the Central Bank is a very sobering and almost frightening document. In the past, we have been used to warnings from bankers and economists and, generally, they erred on the side of being over-cautious or pessimistic but there is no mistaking the gravity of the tone of the present report.

There is no doubt but that there is a crisis and that crisis is economic. The principal enemy has now been recognised by all as being inflation— inflation by which we are rapidly pricing ourselves out of the markets abroad and even at this apparently early stage in the recognition of the seriousness of the situation, most Senators if they examine their own localities, could come up with examples of where this is already biting.

A case was brought to my notice recently of a small industry employing, I do not want to give the exact figure, around 116 people and paying them comparatively good wages. This company has been successful in exporting goods to Britain and Europe and in the last two or three years they had made considerable headway in the American market. Competition in the American market is tougher than in any other market, yet they were able to export to America. An analysis was recently done on costs. It showed that with the increase in labour costs and general overheads that had occurred during the past year the American market could not be held. The result is that 16 per cent of the labour force had to be laid off. This was done with the full knowledge of the trade union concerned. They were shown the figures and they had to recognise the fact that they were unable to sell products at this price. I give this as an example of what is bound to happen in the future unless we get a grip on inflation. The whole world has suffered from inflation and has been since the end of the second world war. A grave injustice is being done to those on fixed incomes and those who have to be supported by the State. The State makes an effort to aid such people by redistribution.

The figures given in the Central Bank report show clearly that non-agricultural employee incomes rose by 10½ per cent in 1968 and by 13½ per cent in 1969. The consumer price index rose by 4.7 per cent in 1968 and by 7.4 per cent in 1969. The result of this was that the unit wage cost in manufacturing industries rose by 12 per cent in 1969 with virtually no increase in output. The increase could have been borne if it had been compensated for by increases in employee productivity. The forecast for 1970 is worse than for 1969.

This Budget seems to be framed completely against the advice of all the economists, who called for a deflationary Budget. The general concensus is that this Budget is only aggravating the situation. It is one of the certainties of political life in this country that there will be a supplementary Budget in the Autumn. There has even been a hint from the Government that this may be the case. It will be caused by the level of the increases that have been obtained and by the worsening trade figures. The balance of payments deficit last year was over £60 million. Our external reserves are adequate to take a figure of that size for a couple of years if we are certain we can correct the imbalance but that does not in any way relieve the Government from the onus of taking corrective measures.

In 1954 a very serious situation developed due partly to the increased price of imports because of the closing of the Suez Canal and partly because of a depression in agricultural prices. It was not caused by the same factors causing today's inflation. It was caused by two factors which were to a great extent outside the Government's control, yet it caused grave hardship and unemployment. In hindsight the measures we took were too severe. A gambler would have gambled more on the future and hoped the external situations would have come through and the economy would have been less affected. There is no room for gambling in the present crisis because the factors are different. First, increases in incomes are outstripping corresponding increases in productivity and, secondly, there is the question of public finance. The Government are the main culprit here. Admittedly, we are all in the dock along with the Government because we are all pressing for more money. We want more capital for buildings and equipment and, obviously, we want better salaries and conditions in which to work.

The Government has yielded to these continued pressures. Government finance is one of the big causes of our present situation. The Government are now financing a good deal of their capital programme by bank borrowing and, worse still, by foreign loans. It is the last resort when you get the foreign loans. First of all, high interest rates must be paid and, secondly, all the interest is going directly out of the country. At least if that were interest which was paid on savings earned in the country there would be a certain benefit to the Exchequer on the taxation on it.

Debate adjourned.