I welcome the opportunity to speak on the Second Stage of the Finance Bill and I also welcome some important positive economic indicators that appear to be emerging over the past few weeks. I hope the Government will find the resources to capitalise upon these. In welcoming the Bill, I should say it is not an entirely uncritical welcome but my criticism is intended to be both positive and helpful. There are certain specific sections, in particular in the Minister's speech, to which I wish to address myself.
Before I do so, however, I should like to say that I listened with great interest to Senator Fitzsimons' careful, considered and wide-ranging speech. There are a number of things on which I should like to support him, one of which might appear mildly frivolous, but Senator Fitzsimons dealt with it very well, that is, the employment of the horse as part of our national symbolism, which is very appropriate considering the place of the horse in our national economy. I certainly take very well his point that, in terms of tourism, some form of spectacle comparable to the Changing of the Guard, to which the Senator referred, would be a very considerable advantage. There was during the thirties a period when the Blue Dragoons were contemplated. They managed a little canter around the city. This kind of colour introduced into our life might well have some concealed economic benefit, so I would support the Senator on that.
I would also support him very strongly on something that has no question of frivolity about it, that is, the question of the disabled person's grant. I feel that cutbacks in this area really must be resisted if we are to consider ourselves a Christian and compassionate society. It would seem to me, without re-opening the whole health cut debate, which I think would be tedious, to be utterly wrong to move against the most vulnerable sections of our society.
In welcoming the Bill, I would like simply in my opening remarks to say that it is inevitable, of course, because it is a political matter, that we would be treated to some comments that are unnecessary because they are taken as read. I hope that we will get away from this notion of every successive Government blaming the previous Government, in a kind of Chinese box syndrome. We inherited huge economic and financial problems. I was not in this House during the debate on the last Finance Bill but I certainly heard that being spelt out and it seems to go on ad infinitum. Various Governments have inherited huge financial problems apparently from each other and I do not think the Irish people wish to hear a recital of this. They wish simply to see the Government getting down and tackling those problems.
References were made to the huge outflow of capital. This is, of course, a matter of great concern. I am very glad to say, because there has been some criticism, not all of it unjustified, of the university system, that it was a distinguished colleague of mine, Dr. Antoin Murphy who first of all detected the black hole. I am very glad that the Government are taking an interest in this.
I am a little bit concerned to recall that the Taoiseach, in very properly addressing this significant economic problem, appeared to suggest that one of the functions of his Government was attracting back this money. I worry a little bit about that because it seems to me that what passed out of the economy at this stage, through the black hole, could possibly be described as hot money. I should like to know if it is to be invited back into the country, will its temperature be taken so that we may know whether it is hot or not and, if it is hot, I would like to think that some of this heat might be drawn off to warm the colder sections of our economy, those sections which other moneys apparently are incapable of reaching.
The Minister refers to positive responses to decisions taken. There are some, and I welcome them. He mentioned the fact that the focus of attention has been largely on the downside effects such as the cutbacks in the public service. I should like to support the Minister in this observation. Although I am, by no means a Thatcherite, it seems to me that you cannot effectively absorb unemployment simply by expanding public sector employment. This is an ill-effective and dangerous method of tackling unemployment because it simply serves to distort the economy.
We have, in fact, putting it simple enough for even somebody so innumerate as myself to understand, a situation in which a smaller and smaller productive segment of the economy is carrying a larger and larger non-productive segment of the economy. It seems to me that is a very dangerous situation. The Government should be, and I hope they are, addressing the expansion of that productive sector by all the means at their disposal. Of course the Government include in their programme certain specific areas such as tourism and the development of financial services. I should like to return to these a little bit later. I believe tourism is a most important element of our economy. I am a little bit concerned on the question of financial services and, as I say, I will come back to that perhaps a little bit later.
The Minister says that the budget strategy is the basis for optimism in the recovery of the economy which has been in a depressed state for several years. I have to agree with him on this and, despite the fact that it is possible to get conflicting advice, conflicting information and a conflicting assessment of our eonomy and its future from economic experts, I certainly agree with what I see to be the Minister's feeling in this matter, that there is also an intangible political element, that is, the psychological atmosphere of the country and we must have a psychological atmosphere which is attuned to the possibility of growth.
This is an element in which the political leaders of our country can play a most important and significant role. I am rather glad in fact, although I may disagree with the two major, and as I would see them, conservative political parties in this country, to see them co-operating in economic matters. It seems to me that if, for example, there had been an unscheduled slip on a political banana skin yesterday, it should not have been beyond the imagination of our political leaders to form some type of Government of national unity or national reconstruction, the degree of consensus between them being clearly now so great.
This is, as I know, a possibility because I am a frequent visitor to the Middle East and I have witnessed a very remarkable coalition between Mr. Shamir and Mr. Perez who are at least as deadly rivals as any two political figures in this country could possibly be. I saw how, with a very determined programme, financially speaking, they managed to reduce the inflation rate from over 1,000 per cent down to single figures, if not to zero. It seems to me that the people of this country are entitled to this kind of leadership if what we are facing is the kind of crisis we, the general public, are continually being told it is.
I say this partly because there is a danger of political leaders crying wolf, of the warnings being delivered to the general public becoming clichéd. There are a number of clichés, and with the greatest respect, I am sure the Minister will not resent my saying this, in the text. There is also, I regret to say, at least one split infinitive, but I will confine myself to the clichés and respond to them with a few of my own, because this appears to be a valuable political language.
I will tell the Minister that I am prepared to tighten my belt, but only if there is, as Senator Fitzsimons mentioned, light at the end of the tunnel. Continuous tightening of the belt leads to a kind of domestic financial anorexia nervosa, from which I am sure the Minister would not wish the Irish public to suffer. If the Minister really wishes to encourage the Irish people into a positive economic frame of mind, greater climate for investment and so on, I believe he is quite correct in addressing the question of tax reform. However, I should like to see it addressed a little more directly.
The Minister remarked that there is a general recognition that reform must involve widening the tax base. I quite agree. Let us see this being done. Let us see it being widened. I was most impressed by the contribution of Senator Brendan Ryan and his very precise analysis of figures. I do not wish, because I am an urban dweller myself, to lay myself open to being characterised as a farmer basher. We have great reason to be grateful to farmers. They are a highly important section of our society. Many of them battle against the elements heroically. They do so on very thin, very volatile margins. But let us be under no illusions that there are large farmers, people who are extremely wealthy and who have unquestionably, and to the great irritation of both professional people and lower paid urban workers, managed to avoid their responsibilities in tax terms.
I would say, tax the big farmers. I believe the reason this is not being done is that there is political cynicism in the two major political parties. Even if you cannot get a Government of national unity, surely it should be possible to arrive at some consensus between the two principal political parties. I know it is political caution on the parts of successive Governments who are delicate, to say the least, timid and diffident in tackling this very important matter because they believe that the next incoming Government will overturn what they do or at least that the political party then in Opposition will say to the farmers: "We would not have done that"— a great rural backlash against the party in Government. I appeal to the Minister, since discussions are apparently possible across the party lines as was evidenced by the meeting between Deputy Dukes and the Taoiseach yesterday; why not follow this up with another meeting on this important point? I believe the Irish people would be grateful for responsible leadership in this matter.
I am glad the Minister acknowledges the need for tax reform and rational discussion. However, there has been quite a lot of that already. Discussion is a very good thing but, at the end of the day, action is even better. I look forward to some degree of assurance that there will be, on a phased basis, an implementation of the recommendations of the Commission on Taxation. That would be far more convincing than a general welcome for rational discussion. We have very good, very valuable and very rational discussion.
However, no reform of the tax structures, no alteration in the underlying factors of our economy, is ever going to bring us to full employment. This, unfortunately, is a complete chimera. I do not believe it is possible. I hope it will not be seen as heartless on my part to say this, but it is something we must face. Modern Western economies have become so sophisticated, particularly in terms of the market economy, that there are a number of structural causes of unemployment which are quite ineradicable. The idea of full employment in these situations, certainly as defined in our society, is an illusion. The Government have the opportunity to completely change their colours and become socialist and going for full employment. But if you espouse a free market economy you simply are not going to get it. There is no way. Politicians must look at what we mean by employment in order to find some means of introducing value into the lives of young people, introducing a sense of worth into the lives of young people on a basis that does not automatically include what we now understand as full time employment, i.e. a job.
In the continuation of his speech the Minister, speaking of tax, refers to the situation with the farmers. He says that there are farmers who still owe tax from last year and that there are outstanding arrears of health contributions and levies to be paid by the farmers. He says, quite rightly:
It is an understandable source of frustration to the general body of taxpayers that they are not being paid.
I agree with the Minister on this. It is even more frustrating for us to realise that, as a result of these measures, some of these taxes are only going to be paid once — and then they get off the hook. As I understand it, they just pay the taxes for last year and then this system is abolished. That is not very encouraging to people on PAYE. I do not know whether they are the hardy annuals or the perennials of taxation. Recently I lost contact with my garden, but I am sure the Minister will understand what I mean. Some people have to pay every year. For others to get away with a once-off payment like this is a great deal more frustrating than the Minister realises.
I welcome section 4 which abolishes, in relation to Irish people working abroad, the place of abode test for residents and so on, but I welcome it with reservations. I certainly know people, colleagues of mine in the university, people who went through the university with me, who went abroad, made a lot of money and come back from time to time, to touch base so to speak. In some ways we must be grateful that they patronise us with their wealth, and so on, but one must be aware of the fact that this is yet another provision for the wealthy. This is geared to attract the rich back. This may be necessary, but it should be balanced with a kind of sensitivity to the needs of the poor, about which both Senator Brendan Ryan yesterday and Senator Fitzsimons today spoke so eloquently and so movingly. It would be totally unacceptable to me that even friends and colleagues of mine should be allowed to come back and be given this kind of concession, simultaneously with the paring back of allowances for the disabled. I would find that conflict quite unsustainable.
I should also like to address myself to section 6 which implements the restriction on mortgage relief. This may be socially undesirable. I say this despite the fact that I have got up to the limit in mortgage relief. I accept that, in a crisis, it is necessary and moral that the burden should be shared as evenly as possible and that those who have the capacity to invest in an asset which will, we hope, increase in value are at a higher stage and need protection less than those who are the most disadvantged members of our society. However, I would sound one warning bell. A number of people who live on the margins, economically speaking, entered into contracts for the repayment of mortgages in the belief that this allowance would not be tampered with.
This provision smacks very much of retrospective legislation, which is against natural justice. People made commitments to repay. They arranged their domestic finances in such a way that they had made provision for this and now suddenly 10 per cent of it is taken away. I appeal to the Minister not to allow this to become his first bite at people who are already pretty severely bitten. It is something about which the Minister needs to be very careful. Some people on comparatively modest incomes wish to be good citizens and to use mortgage relief as an investment in their society, in their community and to provide home and shelter for their families and their children but they may find themselves in difficulties particularly in a situation where there is very tight income restraint.
I notice, of course, that the Minister does refer to the fact that interest rates are going down. I congratulate both himself and the previous Government because there has been a consistency of policy financially, at least for the past few months. I would say that, even as expressed by the Minister, it has something of the flavour of a conjuring trick — interest rates goes down but mortgage relief also goes down, so you actually do not ever pass "go" or collect your £200; you remain miserably in a financial jail. I look forward to the day when the Minister and his civil servants will be able to get us out of this unfortunate bottleneck.
I should like to welcome the Minister's provisions about the shipping industry and ask whether the Minister has considered any special provisions for the discarded employees of Irish Shipping, whose treatment, I believe, is a national scandal. These are people who served this country well during very difficult years. I think it is abominable that people, sometimes after 40 years' service, are fired out on the street with almost no consideration for them. I believe there is a moral debt owing from the people of this country to the employees of Irish Shipping. I look to the Minister to make at least some concession. These are people, some of them now advancing in age, who will have no protection against a destitute and decrepit old age unless some degree of consideration is given to them.
I notice that the Minister refers to the export side of tourism and the importance of the promotion of tourism through offices abroad. I hope the Minister will enter speedily into discussions with senior executives of Bord Fáilte from whom, I understand, there has been a very serious constriction in their budget particularly in this area. Having made economies of a very sizeable nature and expecting to be rewarded, in fact, the response was to close down several of our Bord Fáilte offices in North America. This is something that needs further negotiation with the senior executives of Bord Fáilte. I speak with some feeling on this because I did some unpaid work for Bord Fáilte in North America. I was greatly struck by the efficiency, vigour and determination of executives in the offices in New York, Washington, Chicago and all over the North America. If the Minister is correct in identifying this as a valuable energy on the part of Bord Fáilte, it should be supported to a greater extent. I recommend him to discuss this matter with the senior executives of Bord Fáilte.
The question of the new system of deducting tax revenue at source from professional services is a matter which has been addressed at some length by the Minister. He assures us or attempts to assure us that this is perfectly straightforward. I am not quite convinced, with great respect, that this is the case. He may have detected that I do not have an unqualified sympathy for the capitalist system but at the same time this is the system that we have in this country. One must be careful in tinkering with it unless we are going to attempt radical surgery. There is still the danger that what is being taxed is not profits but income, and that some small firms will experience difficulty in terms of fluidity and liquidity because of the nature of this kind of tax. This is particularly true of small businesses. Representations have been made to me by, for example, a small firm of consulting engineers and a firm of solicitors who have just established themselves. They feel that the removal of this proportion of their income will create serious cashflow problems for them. Perhaps the Minister will be kind enough to be sympathetic to representations from bodies such as this in the implementation of those clauses of his Bill.
I should like to turn with particular interest to the provisions in section 27 empowering the Minister for Finance to extend, by order, the definition of designated areas for urban renewal. The Minister says quite rightly that it is essential to provide attractive tax incentives to promote the proper redevelopment for inner urban areas. Hear, hear. Thank God we have people saying this. I may also say that this was said by the previous Administration. This is an area on which I should like to take some small amount of time to inform the Minister from what I would see as the cutting edge of this programme as to what some of the difficulties are.
Of course, I welcome these provisions wholeheartedly. They do not, however, address the full problem. They are directed principally at business. If, in terms of tourism, for example, one is thinking of a revitalisation of the inner city and the creation of specific areas of amenities of cultural, architectural and historic interest by using tax incentives so that the tourists who come to our once beautiful city will have something with which they can refresh themselves culturally, this is simply not addressed at all. It could be, quite simply. I respectfully and with whatever degree of humility my nature is capable of make some proposals to the Minister at this point.
I ask him to consider very carefully the use of tax incentives to encourage people on modest PAYE incomes back into the city of Dublin and to other cities around the country. It is not just Dublin. I would also speak of Limerick, Cork and Galway. Kilkenny seems to be doing pretty well, and I congratulate them on it. Waterford, of course I apologise to this noble city of Waterford. I believe what I am about to suggest might well be of assistance in all those areas. It is quite simple, so simple that I can just about explain it.
I would like to see for persons who take over a house in one of the designated areas and use it for occupation, either by themselves or by themselves with rental income accruing to them, provisions whereby the cost of refurbishment of houses in designated areas could be set off against not just rental income but also against the total income including the PAYE component. The reason I suggest this is that it is unquestionably the most efficient instrument for the revitalisation of urban areas. Why? Because, No. 1 you are not giving a tax incentive to a class of persons like farmers, dentists, doctors or lawyers. You are giving it to a group of people who are united by only one thing — that they have taken responsibilty for a house in what the authorities already acknowledge and recognise as an area of specific value. They are, in a sense on behalf of the State, refurbishing, restoring and returning to useful life, buildings which otherwise might be demolished or destroyed.
The people who do this do it on really very close margins. I speak from some bitter experience. I was prepared to do that. A number of my friends were prepared to do that. People in other cities in this country are prepared to do that, but it does mean sometimes doing without a motor car for three or four years, doing without holidays, and so on. Some people are prepared to do that for the joy, the advantages and the delight of living in the cities. They are the exceptions. If you want to revitalise the housing stock and if you want to attract people of a slightly lower level of motivation there must be an incentive.
May I give an example? Just around the corner from my own house there was a fine house with elaborate plaster work, four storeys over basement, available recently for £35,000. It is a very modest sum of money. It had vacant possession. If a PAYE worker, or even somebody on a more modest income of any kind, had the opportunity to take over that house and do as I and other people have done, live in a section of it, and let off the rest of it as flats and then discount that against their PAYE responsibility, it would be a very significant carrot. There would be no wastage. There is no tax administration involved in that. Money is transfused directly into the effort to save the city of Dublin, without administration cost, so you are getting a very good deal in that. I believe you would have those kind of houses taken up. I believe you would have life returning in the city.
I say this fully conscious of the fact that I am still in a way talking really about the PAYE sector and about people who have to stake in the society. You are moving lower down. You are giving people on a smaller income again the opportunity to join the ranks, though they are occasionally unfortunately characterised as effete and self-serving Georgian restorationists. You are also releasing a very considerable housing stock back to people who will come back into the city and revivify it. I strongly appeal to the Minister for consider these kind of proposals which could have a very remarkable effect on the redevelopment of the inner city.
If one turns to what the Minister says about the Custom House Docks site development again, of course, one welcomes this kind of redevelopment. I would, in welcoming this, say that it must be balanced. The building of new housing stock, of new office blocks, the creation of a new environment must be balanced by the cherishing of the old. The Minister, I am sure, is aware of some of the exciting proposals produced by the architectural students of University College, Dublin, or of Bolton Street, in which they represented proposals which had exactly this merit in that they opened up from the new developments vistas of the old and revealed to us once again some of the concealed beauties of this city of Dublin.
Reference is made to the establishment of an international financial services centre. While again I would welcome this, it is not something on which I am really particularly well versed. In attracting public support for ventures of this kind, the Government would be well advised to spell out exactly what they mean by this. It is not fully clear to me. I understand that part of it may deal with computerised financial services, with the drawing in of computer disc records, for example, of bills of various kinds for international conglomerates and so on, and processing them here. That is fine. We would all be a little bit careful about suggesting that there was a possibility of establishing on the Custom House Docks site anything that could be seen as rivaling, for example, the real financial markets of Tokyo or London. I do not believe this is credible. If it is, I will certainly be the first to eat my words. I would welcome greater public clarification on this issue.
I should like to turn now to the question of the amendment introduced by the Minister in the Dáil to provide a special incentive for investment in film making. I congratulate the Minister most sincerely on his foresight in so doing. This is an excellent proposal. We have many really talented people — frequently, unfortunately, unrecognised. One has only got to look at somebody younger even than myself, Neil Jordan, who has had such an extraordinary career in terms of film making. I should like to think that this kind of young talent can be nurtured as a result of the Minister's proposals not, inevitably, in Hollywood, but also here at home, giving employment to the excellent technicians we have.
I say this with some degree of authority. I have been involved in film making with technicians from RTE. I was very struck, having made one of two films made on the centenary of John McCormack, by the technical superiority of the RTE film crew in matters of benchwork and in matters of quite delicate professional judgment, over the BBC. I say this not I hope in any jingoistic way. There are many other film makers, such as Kieran Hickey, who appears to get funding and credit principally from abroad. I hope people like Kieran Hickey and Donald Taylor Black, who are among our great resources of talent, will be given the kind of encouragement I believe is necessary to establish a proper film industry, which is an important factor in our economy.
One has only got to look at the success of the Canadian and Australian Governments in fostering film industries in those countries to realise what potential we have here for following this lead. I should like to end on that note. It is a positive note. I will conclude by once again welcoming in general the Minister's speech and the provisions of the Bill that he has introduced and say that I hope in particular that he and his officials will take note of what I said about the inner city and that he will be assured that it is not from purely selfish motives. I now have very little to gain from this except that I would greatly welcome some new neighbours, particularly as one of my most distinguished neighbours informed me last night that, because of economic and other circumstances he, alas, will be pulling out of his great house in the inner city. I should like some moves from the Minister and the Department of Finance to encourage a resurgence of interest in the inner city which I believe is something that is in the interests of all the people, not just of this city but of many cities around the country.