Yesterday I started to speak about the problems of local government financing. Those of us who are involved in local government will have seen in the last 12 months the huge need for a fresh look to be taken at the structure and financing of local authorities. The problems of local authorities have not been created by themselves but rather have been created by central Government not giving, from an ever increasing tax take, the necessary moneys to run these authorities on a strong financial basis. For a number of years now we have seen, year in and year out, an increase in personal taxation and an increase in indirect taxation. We have seen the impact of indirect taxation taking from the effectiveness of local authorities.
One of the main ways in which we could give some extra financial help to local authorities is to change the VAT coding system which is at present in operation. It seems to me ludicrous that a local authority which has its own plant and employs its own people to operate that plant would have to pay a 23 per cent VAT rate for the materials that are used by the country council workers using county council plant, whereas if they bring in an outside contractor that outside contractor has only to pay a 5 per cent VAT rate on his material purchases.
In the last 12 months in Kilkenny County Council the VAT payment for direct purchases amounted to £1 million. When one considers the effect of this it means that when central Government say they give to local authorities £1,000 or £1 million or whatever, for every £1,000 worth of material they purchase they have to give back £230 to the Government. It is ludicrous to think that central Government should claim to be giving so much to local authorities when, in fact, they are clawing back 23 per cent on their material purchases.
There is a definite need for reform of local government finances, but I believe that the approach of the Government in reacting to problems on an ad hoc basis is not a proper one. I believe that local authority structures should be strengthened and that simultaneously with an imposition of local changes on taxes there should be a drop in the taxation take from the locality under the jurisdiction of the local authority which goes to central Government. If a properly structured financial arrangement could be made for local authorities much of the duplication at departmental and local government levels would be eliminated and we would have a much better managed public service scene. In the past number of years we have seen the movement of power and autonomy inwards towards the centre to the detriment of the nation. This loss of autonomy has led to weaknesses of local bodies. The Government should actively seek ways and means of delegating responsibility and accountability to the greatest possible extent to all bodies who are serving local needs or providing local services.
Power to raise finances locally should be a replacement of and not an addition to present methods of and taxation. This is where the debate has been going in the past number of months. The charges being levelled at local level for water, sewerage, refuse collection and other services provided by local authorities are seen as an addition to taxation and not, as it should be, a replacement for taxation at Government level. In local authorities throughout the country revolt is taking place against the imposition of these charges. I do not think these revolts would take place if the local charges were being imposed and if the tax take of the Government were lessened. The taxation base is too narrow and taxation levels are too high. There is an onus on the Government to create an environment where reward follows effort, and this incentive is completely lacking in this Finance Bill.
A good reward system can be effective in the public sector as well as in the private sector. The absence of a reward/penalty system invites inefficiencies and induces stricter and more costly control procedures. The gap between gross earnings and take-home pay is far too wide. Workers must be rewarded for effort, for only then can one hope to raise output and create wealth for the nation. In this context Government current expenditure must be curtailed to provide relief on taxes and to reintroduce the work incentive. The level of indirect taxes in the form of VAT encourages the expansion of the black economy to the detriment of those who contribute their fair share. The growth in the black economy, in turn, places a greater burden on the tax paying community. It is, therefore, vital that VAT levels be reduced to prevent this effect.
As one who is very close to the motor trade we have seen the black economy grow in that industry. We have seen the numbers employed fall. Of course, we do not hear very much about the reduction in numbers of people employed in the motor industry, because every job created in the motor industry was created by the industry itself without help from the State. If the number of jobs which have been lost were lost in manufacturing industry we would hear about them ad nauseum. Every one of the jobs that was lost in the manufacturing industry would have cost the taxpayer thousands of pounds whereas every job created in the motor industry was set up at no cost to the State. To give credit to Deputy Dukes as Minister he did, in the case of garage workshops, reduce the VAT rate from 23 per cent to 5 per cent. It has had an effect in stopping to a degree the drift of workers out into the black economy. On the other hand, because of the huge taxes and duties to be paid on motor vehicles, the motor industry is getting smaller and smaller.
When referring earlier to the absence of any effective job creation programme emerging as a result of this year's Finance Bill, I did not refer to the almost total lack of interest in the agri-business sector in the Bill. There is not doubt that with proper planning and financial incentives the potential for increasing output at farm level is enormous. Most of regions of the country could double or more the present output levels before hitting technical capacity constraints. Increases in output at farm level are, however, of little use if corresponding changes in processing and marketing are not brought about to obtain integrated development. The absence of a planned approach to the agri-sector leads to difficulties and failures. When we look at the agricultural training scene we see that in 1983 there were 20,000 people given industrial training at a cost of £90 million and only 6,000 got agricultural training at a cost of £6 million. The imbalance there is enormous. The potential we have in the agri-business sector is enormous.
When one looks at the importation of food, and not alone of food but of products other than food which could be produced here such as plants, horticultural products and so on, we can see that there is an enormous potential for growth. One of the features of the commercial sector throughout the country at present is the growth in the number of shops which are selling plants and flowers, shrubs and trees. You will find at least one in the smallest town. There has been an enormous growth in interest in that sector. The unfortunate thing is that the Irish growers have not yet emerged in numbers great enough to support the industry. There is a huge importation of the products which are sold in these outlets. On small acreage there is an enormous potential in that area. We do need Government help. This Bill is not giving the type of help which is necessary.
When workers pay an employment levy they need the assurance that they are getting value for money. This fund is being used more as an increase in general taxation rather than as a genuine means of giving more employment prospects to our unemployed. Unless a concerted effort is made soon to co-ordinate all the efforts of all the agencies who get support from this levy it will be of no benefit to the people for whom it was set up. I hope the Minister will undertake and analysis of all projects aided up to now and ensure that the money is used for genuine long term employment purposes rather than, as is happening at present, being used as a means to artificially keep unemployment figures down. There are a number of agencies in the training sector who are duplicating their efforts around the country. One sees what would appear to be useless work being done by well educated young people, on a six months temporary basis, and then they are thrown back, having supposedly got work experience for six months — work experience leaning on shovels and so on. I was looking at a group of young people recently and they had wire brushes which they were using to scrape the top of a bridge. I have never seen a worse use of anybody's time or money. That was the type of exercise we had in the Famine time here when the British made people build walls around fields on the tops of mountains. That type of useless exercise is going on now. The moneys that are being taken from the employment levy, the hard earned gross wage earnings of people, is a complete waste. This is creating an artifically low unemployment figure.
We must look equally at the role of the Department of Education in relation to employment and try and get the Department of Education to co-ordinate all training schemes in Ireland. We should not have, as is happening at present, agencies in the training and education area under different Ministers, the Department of Labour, the Department of Education, the Department of the Public Service. There are so many people involved in training under different headings now that there has to be duplication and there has to be a tremendous waste of money in it.
I will not go into detail on the main provisions of the Finance Bill. This will be done on Committee Stage. Suffice it to say that this Bill will do nothing to allay the feeling of depression around the country. There is not a Member of this House who would not stand up and give encouragement to a Finance Minister who would bring in a budget which was imaginative and innovative and which would embrace within it elements which would give encouragement to all, which would be reforming and create equity in our society. There is not a Member of this House who is not disappointed by the blandness of this budget or who feels that it will make any change except for the worse in our economic and social environment.