Financial Resolutions, 1978: Financial Statement, Budget, 1978. - Conclusion

Wednesday, 1 February 1978

Dáil Eireann Debate
Vol. 303 No. 2

First Page Previous Page Page of 129 Next Page Last Page

The Government's aim over the remainder of the present decade is sustained growth of about 7 per cent a year accompanied by a progressive reduction in the numbers out of work. These are ambitious targets but the Government are prepared to accept this challenge. There can be unforeseen problems and there may be set-backs— that is why we will be reviewing our economic and social plans each year— but I think the best guarantee for the years ahead is what the Government have accomplished to date and what we can now look forward to doing in 1978.

It is fatally easy to adopt the attitude that we must trail along behind the large developed countries and wait for them to pull us out of our troubles. We can rationalise this by facile excuses, by saying that we are a small country, that our industries have a small home market, that our techniques in production and marketing are relatively unsophisticatetd and so on. Thankfully there are signs that this defeatist attitude is on the wane. Many home-based Irish organisations in both the private and public sectors responded to the difficulties of recent years with an abundance of initiative and drive. Some public sector companies are building up excellent reputations, particularly in developing countries where skills acquired here are being applied under much more difficult and challenging conditions.

Their success is ample evidence that we can respond exceptionally well to challenges which require the application of all our skills and energy. The Industrial Development Consortium [392] will provide a further valuable stimulus from the public sector side by identifying and tackling obstacles to growth.

Government policy during the past six months has been consistently directed at restoring the confidence lost during the past few years. This budget is providing £80 million worth of new, job-directed, expenditure and more than £150 million of tax concessions, inclusive of the abolition of domestic rates.

The first test of whether we as a nation are prepared to make the most of these opportunities will be found in the outcome of the present negotiations for a new national agreement. It is our responsibility as a Government to point out the path that should be chosen, and we have done all in our power in today's budget to encourage the social partners to follow this path. In return we are seeking, and are entitled to expect, the support of all the community for our proposals. To-day's budget will ensure the protection and expansion of purchasing power. It demonstrates that excessive wage demands are self-defeating—self-defeating not only for the economy but for the individual, in so far as the Government will take action to ensure that any excessive pay increases are recovered from those who secure them.

While the Government hope that everybody will play their part in making economic advance possible, they are entitled to expect that business will make the most of an environment favourable to growth. Competitive labour costs are not of themselves sufficient to ensure the success of our drive for greater industrial expansion. They are only one element and must be accompanied by others—by imagination in meeting the requirements of the market, by the development of new products, by energetic selling, by diligence in the maintenance of quality and continuity in supply and by investment in plant and equipment.

It is only right that profits should recover from the set-back experienced during the recession. But the community can justifiably expect that increased profits will be used in productive [393] investment and job-creation. Socially irresponsible waste and conspicuous consumption have no part in our economic strategy, any more than unproductive speculation.

The Government can only do so much. They cannot guarantee the creation in the private sector of that vital spark that leads to business growth. There is ample evidence in many prospering enterprises that there is business creativity in Ireland; we need far more of it if we are to solve our economic problems.

Our producers must grasp the opportunities which the Government's strategy is throwing open to them. They must exploit the advantages flowing from the enhanced competitiveness which moderate income increases will yield.

They must plough rising profits back into their businesses and raise investment and output. And it is imperative that they develop also a keen sense of responsibility in relation to the overriding need to create more jobs and reduce unemployment. In the coming years private sector investment decisions should always be directed at increasing employment to the maximum extent consistent with market conditions.

The opportunities being offered through today's budget must be grasped now. The temporary increase in the Exchequer borrowing requirement [394] for 1978 will be justified fully if the challenge is taken up by workers and employers alike. If it is not it will not be possible to repeat the prescription. A repetition of public borrowing of this year's proportions is unacceptable to the Government. We have made it clear in our manifesto and in the White Paper that, after this stage, stability will be restored to the Government's finances through revenue buoyancy and control of expenditure. For this a dynamic private sector contribution to the process of development is essential.

We have a mixed economy and both the private and public sectors have contributions to make to its development. We expect that the initiatives in the budget will receive a positive and energetic response from the private sector. Our basic purpose is the creation of a dynamic economy which will enable us to achieve our national and social objectives.

Our approach is a pragmatic one. It is not dictated by ideological dogma. If there is an inadequate response from either sector we shall take appropriate action in the interest of the whole community.

“Ní chothaíonn na briathra na bráithre” adeir an seanfhocal ach is léir ón méid atá déanta againn cheana féin agus arís san cháinfhaisnéis inniu nach ar bhriathra atá an Rialtas seo ag brath. Is mó i bhfad a oireann sean tréith na Féinne dúinn—“Beart de réir ár mbriathar”.

REVENUE £million EXPENDITURE
1. Tax Revenue 1,744.0 1. Debt service and other Central Fund Charges 450.0
2. Non-Tax Revenue 310.0 2. Supply services (non-capital) 1,868.8
2,054.0 2,318.8
3. Deduct: 3. Add:
Personal income tax Social Welfare
—Personal allowances 63.4 —increased rates of benefit 19.8
—Benefits-in-kind 2.0 —single women 1.6
—Other 0.1 —other 0.3
Tax on farm income 5.0 Employment Action Team 5.0
Tax on business Public service pay 40.0
—Stock relief 5.0 Labour intensive industries 5.0
—Other Corporation Tax reliefs 0.4 War of Independence veterans 0.1
Capital taxes 9.7 71.8
Excise duties
—duty-free facilities 5.0
—other 0.3 90.9
1,963.1
4. Deficit 405.0 4. Deduct:
Social Welfare savings 2.5
Estimated departmental balances 20.0 22.5 49.3
2,368.1 2,368.1

£million
REQUIREMENTS 1977 1978
Budget Estimate Provisional Outturn Estimate
1. Public Capital Programme 662 659 766
2. Non-Programme Outlays 235 233 429
of which: (a) Exchequer Financed
(i) Current Budget Deficit 220 201 405
(ii) Miscellaneous 5 31 21
(b) Non-Exchequer Financed 10 1 3
3. Total Requirements 897 892 1,195
RESOURCES
4. Non-Exchequer Resources of State Bodies and Local Authorities 246 261 258
of which: (a) State Bodies 234 246 242
(b) Local Authorities 12 15 16
5. Exchequer Internal Resources 67 78 99
of which: (a) Loan Repayments 27 31 45
(b) Sinking Funds 40 47 54
6. European Regional Development Fund 11 8 17
7. Exchequer Borrowing 573 545 821
of which: (a) Net Sales of Domestic Securities:
(i) to the Public 254
(ii) to Commercial Banks 154
(b) Small Savings 573 102 821
(c) Foreign Borrowing 86
(d) Change in Liquidity of Departmental Funds —51
8. Total Resources 897 892 1,195

[399][400] TABLE 1 (a). Summary of current and capital budgets 1977 according to the pre-1978 classification of current and capital expenditures

TABLE 1 (b). Summary of current and capital budgets 1977 according to the reclassification of current and capital expenditures introduced in 1978

TABLE 1 (c). Details of the reclassification of current and capital expenditure as it affects expenditure in 1977

TABLE 2. Main heads of current government expenditure

TABLE 3. Receipts and issues of Road Fund

TABLE 4. Certain receipts and expenditure of the Exchequer and of local authorities

TABLE 5. State expenditure in relation to agriculture.

Detailed tables relating to public capital expenditure will be found in the separate publication entitled “Public Capital Programme 1978”.

1977
Budget Estimate Provisional Outturn
£m. £m.
Current Budget
1. Expenditure
(i) Central Fund Services 400 361
(ii) Road Fund 21 18
(iii) Supply Services 1,608 1,587
2,029 1,966
2. Revenue
(i) Tax 1,534 1,482
(ii) Non-Tax 277 275
1,811 1,757
3. Current Budget Deficit 218 209
Capital Budget
4. Expenditure
(i) Public Capital Programme 664 651
(ii) Other (non-programme) 15 32
679 683
5. Resources
(i) Exchequer 78 86
(ii) Non-Exchequer 246 261
324 347
6. Exchequer Borrowing Requirement for Capital Purposes 355 336
7. Total Exchequer Borrowing Requirement (3+6) 573 545
8. Total Exchequer Borrowing Requirement as % of GNP (Estimated) 11.0% 10.2%

1977
Budget Estimate Provisional Outturn
£m. £m.
Current Budget
1. Expenditure
(i) Central Fund Services 400 361
(ii) Road Fund 14 15
(iii) Supply Services 1,617 1,582
2,031 1,958
2. Revenue
(i) Tax 1,534 1,482
(ii) Non-Tax 277 275
1,811 1,757
3. Current Budget Deficit 220 201
Capital Budget
4. Expenditure
(i) Public Capital Programme 662 659
(ii) Other (non-programme) 15 32
677 691
5. Resources
(i) Exchequer 78 86
(ii) Non-Exchequer 246 261
324 347
6. Exchequer Borrowing Requirement for Capital Purposes 353 344
7. Total Exchequer Borrowing Requirement (3+6) 573 545
8. Total Exchequer Borrowing Requirement as % of GNP (Estimated) 11.0% 10.2%

1977
Budget Estimate Provisional Outturn
£m. £m.
From non-capital to capital:
Road construction and improvement 16.27 18.83
University building (Agriculture) 2.95 2.43
Private water supply and sewerage grants 1.77 2.12
Payments to Special Regional Development Fund 0.23 0.23
21.22 23.61
From capital to non-capital
Bovine tuberculosis eradication 10.10 7.90
Brucellosis eradication 9.40 4.70
Phosphatic fertiliser subsidies 3.75 3.42
23.25 16.02
Net change from current to capital account (–) 2.03 (+) 7.59

1972/73 1973/74 Apr.-Dec. 1974 1975 1976 1977 Provisional 1978 Estimate
Service of Public Debt 127,295 151,522 146,102 241,533 337,043 403,319 497,051
Central Fund Services Interest 74,172 91,398 84,295 155,601 217,030 278,616 347,700
Sinking Fund etc. 35,117 34,456 29,382 39,002 61,239 55,475 57,000
Supply Services Interest 13,062 18,953 26,516 40,526 51,173 60,652 81,135
Sinking Fund etc. 4,944 6,715 5,909 6,404 7,601 8,576 11,216
Social Services 247,189 336,448 311,500 598,470 724,510 840,121 945,659
Social Welfare 92,382 129,964 118,400 210,156 246,948 274,487 309,083
Education 91,385 110,123 90,663 181,006 223,603 255,794 296,498
Health 63,422 96,361 102,437 207,308 253,959 309,840 340,078
Economic Services 140,532 128,001 107,184 171,544 198,793 217,384 236,056
Agriculture 102,382 82,539 64,978 94,927 107,289 110,118 118,717
Industry and Energy 12,168 14,505 12,110 23,944 29,481 38,530 48,627
Tourism and Transport 21,284 25,929 25,993 45,238 53,282 57,774 56,408
Forestry and Fisheries 4,698 5,028 4,103 7,435 8,741 19,962 12,304
General Services 109,483 130,511 122,285 218,978 260,883 294,815 338,332
Post Office 34,643 40,453 37,107 67,172 81,357 88,900 98,954
Defence 29,584 32,974 31,322 58,482 72,842 86,392 100,201
Justice, including Gardaí 24,232 31,377 30,984 57,171 59,812 65,745 79,308
Public Service Pensions 21,024 25,707 22,872 36,153 46,872 53,778 59,869
Other Expenditure 38,264 52,561 56,407 101,433 146,077 202,762 301,720
EEC Budget 1,172 5,972 4,216 10,777 14,598 24,710 42,400
June 1975 Consumer Subsidies 16,128 41,434 55,747 62,901
Department of Environment grant in relief of rates 17,500 80,750
Miscellaneous 37,092 46,589 52,191 74,528 90,045 104,805 115,669
TOTAL 662,763 799,043 743,478 1,331,958 1,667,306 1,958,401 2,318,818
Public service remuneration included above 200,154 253,129 237,450 448,885 530,428 606,106 676,346
Current Government Ex-
penditure as % of
GNP 29.1% 29.1% 24.8%(nine months) 36.1% 37.1% 36.6%

Note: The figures in this table have been revised to reflect the reclassification of expenditure introduced in 1978 (See Table 1(c) for details).

Some other changes have also been made: (a) expenditure on energy has been transferred from the former “Transport and Power” heading to a new heading “Industry and Energy” and (b) expenditure on tourism has been transferred from the former “Industry” heading to a new “Tourism and Transport” heading. The June 1975 consumer subsidies, hitherto included under “Agriculture”, “Industry” and “Transport and Power”, are now shown in a separate heading.

RECEIPTS ISSUES
1977 1977
£000 £000
1. Opening balance 1. Road improvement grants* 18,830
2. Motor taxation, etc. 18,280 2. Road maintenance grants 10,237
3. Exchequer grant 15,320 3. Administration, etc. 4,533
TOTAL 33,600 TOTAL 33,600

* See Table 1(c).

Exchequer Local Authorities (a)
Revenue Non-capital issues Expenditure from revenue State grants received Rates collected
(b)
£000 £000 £000 £000 £000
1959-60 129,856 128,682 55,104 24,480 21,412
1960-61 138,839 139,565 57,885 26,476 22,058
1961-62 151,686 152,393 64,165 28,792 23,203
1962-63 163,478 168,335 67,379 32,725 22,776
1963-64 184,419 186,638 71,323 34,871 24,466
1964-65 219,045 222,011 82,973 41,210 26,061
1965-66 240,761 248,542 90,588 46,465 29,761
1966-67 272,843 272,051 98,959 50,676 31,533
1967-68 305,409 305,621 107,430 57,472 34,702
1968-69 345,480 353,849 120,675 65,808 38,294
1969-70 411,012 411,550 144,540 76,927 42,953
1970-71 481,506 490,429 173,652 93,803 50,086
1971-72 569,402 571,602 196,359 115,473 59,753
1972-73 659,070 664,541 239,542 138,133 70,068
1973-74 792,913 803,339 297,661 182,610 71,335
April-Dec. 1974 651,407 743,712 292,086 189,785 61,327
1975 1,091,226 1,349,987 480,958 332,109 84,041
1976 1,470,197 1,671,638 571,381 (c) 409,133 (c) 106,800 (c)
1977 1,756,884 1,965,992 679,757 (c) 510,105 (c) 108,600 (c)
1978 2,054,000 (d) 2,318,818 (d) 772,882 (e) 627,205 (e) 71,000 (e)

NOTE:—(a) Local Authorities comprise County Councils, County Borough Corporations, Borough Corporations, Urban District Councils, Town Commissioners, Regional Health Boards, Vocational Education Committees and County Committees of Agriculture.

(b) The revenue of local authorities comprises rates, State grants (including payments on behalf of Health Boards to voluntary hospitals and homes in respect of general medical services) and other receipts e.g. rents, fees, etc.

(c) Approximate.

(d) Estimated—incorporating reclassification.

(e) Estimated.

Apr-Dec. 1974 1975 1976 1977 1978
£000 £000 £000 Provisional£000 Estimate£000
1. Aids reducing production and over head costs and production incentives
(b): Relief of rates on agricultural land 23,274 30,091 36,231 40,800 38,500
Lime and fertiliser subsidies 3,940 4,416 5,877 5,650 2,375
Reduction of land annuities 976 1,922 2,023 2,325 3,013
Beef cattle and sheep grants 12,016 6,759 2,455 675 425
Small farm incentive bonus 837 829 579 325 250
TOTAL 41,043 44,017 47,165 49,775 44,563
2. Schemes operated under EEC regulations and directives:
Farm modernisation 3,523 13,315 26,126 27,780
Farmers' retirement 38 1,247 1,708 2,072 2,528
Aids to farmers in less favoured areas 6,444 13,032 15,306 15,129
Dairy herds conversion 303 279 (-)79 (c) 117 48
Market intervention (d) (-)5,619 3,021 7,120 (-)2,930 1,000
Socio-economic advice and vocational training of farmers 43 125 114 126
Aids for orderly marketing of cattle 883 2,320 14 35
Grants for individual projects 8 9
Aids for horticultural producers' organisations 20 55
TOTAL (-)4,395 16,877 35,235 40,868 46,675
3. Education, research, advisory and inspection services:
Education 2,309 4,204 5,477 7,905 10,568
Research 3,682 6,203 7,180 8,213 8,781
Farm advisory services 1,536 3,000 3,924 4,079 4,357
Technical services 796 1,667 2,609 3,020 3,195
Inspection services 1,759 1,158
Rural organisations 58 82 109 104 114
TOTAL 8,381 15,156 19,299 25,080 28,173
4. Disease eradication:
Bovine T.B. 4,862 3,663 2,077 7,900 7,500
Brucellosis 4,565 6,100 3,539 4,100 11,500
Hardship Fund 1,000 600
TOTAL 9,427 9,763 6,616 12,600 19,000
5. Long term development aids (b):
Arterial drainage 1,455 2,606 2,884 4,195 5,200
Land project, farm buildings and water supplies 6,866 8,768 6,191 3,665 1,200
Improvement of cattle, pigs, horses, sheep and poultry 704 1,306 1,334 1,425 1,546
Rural electrification 834 1,741 1,886 2,040 2,205
Restructuring and improvement of holdings by Land Commission 1,817 2,962 3,412 3,328 3,648
Other rural improvement schemes and grants 1,261 1,911 1,490 1,681 1,903
TOTAL 12,937 19,294 17,197 16,334 15,702
[415][416]6. Marketing aids:
Dairy produce 75 25 25
Meat 475 539 482 530 604
Potatoes and cereals 1 1 19 2
TOTAL 476 615 526 557 604
7. Administration of acts, regulations and schemes:
1,415 2,847 3,319 (e) (e)
GRAND TOTAL 69,284 108,569 129,357 145,214 154,717

NOTES:—(a) The figures include both capital and non-capital expenditure and are net of appropriations-in-aid which include recoupments from EEC for schemes in section 2 above.

(b) Further aids of these kinds are given under EEC schemes—see section 2.

(c) Gross expenditure of £0.136m, less receipts of £0.215m received in 1976 in respect of 1975 expenditure.

(d) Expenditure and receipts for market intervention are as follows:—

1974(Apr.-Dec.) 1975 1976 1977Provisional 1978Estimate
£m £m £m £m £m
Expenditure 8.9 28.7 24.6 18.4 19.0
Receipts from EEC 14.5 25.7 17.5 21.3 18.0

(e) From 1977 these costs have been distributed under appropriate heads above.

(f) Agriculture also benefits from EEC aid under the Common Agricultural Policy (the figures include intervention receipts at (d) above):—

1974 (Apr.-Dec.) 1975 1976 1977Provisional 1978Estimate
£m £m £m £m £m
FEOGA GUARANTEE SECTION 63.8 102.1 102.0 250.0 300.0
FEOGA GUIDANCE SECTION
—individual project approvals 3.9 2.4 7.8 7.5 5.0
—Receipts for structural schemes 0.2 0.5 5.1 9.0

[417]Mr. P. Barry: Information on Peter Barry  Zoom on Peter Barry  Hearing that loud cheer for the budget from the Minister's backbenchers one can only wonder whether we are in a real world having regard to the fact that the Minister has managed to borrow 13 per cent of our GNP. This is hardly the sort of financial responsibility we were told we could expect on Fianna Fáil's return to office. Of the money being borrowed, 50 per cent is for the purpose of financing the current deficit.

I recall being told as a child that the catchcry of Fianna Fáil was that while we must suffer now good times are around the corner. We now have the reverse of that policy—the good times are here but we will suffer for them at the time of the next budget.

Deputies:  Hear, hear.

Mr. P. Barry: Information on Peter Barry  Zoom on Peter Barry  It is almost a year to the day that one of the Deputies then in Opposition stood up here and solemnly warned the then Minister for Finance, Deputy Ryan, that increasing current public expenditure which is financed by borrowing does not produce either growth or employment. Today that Deputy is the Minister for Health, part of a Government which is now proposing the exact opposite. One begins to wonder whether the Minister for Finance had the benefit of his advice in that regard. It would be unkind to the Minister for Economic Planning and Development——

An Leas-Cheann Comhairle: Information on Seán Browne  Zoom on Seán Browne  I am sorry to interrupt the Deputy but I would ask Deputies to leave the House quietly and give the speaker in possession an opportunity, please.

(Interruptions.)

An Leas-Cheann Comhairle: Information on Seán Browne  Zoom on Seán Browne  Deputy L'Estrange will have to keep quiet also.

Mr. P. Barry: Information on Peter Barry  Zoom on Peter Barry  He has been doing that for the past four years and today he is being given the opportunity to open up again.

It would be unkind to the Minister for Economic Planning and Development to remind him of his series of articles 18 months ago in Business and Finance in which he went to great [418] lengths to prove that the budget deficit could not be closed by any realistic estimate of future growth. After all, he has enough embarrassment in explaining to an increasingly doubting public how a former Trinity professor of economics does not know the difference between an increase in employment and a reduction in unemployment.

This budget is little more than the pay-off for the collection of political promises offered by the Fianna Fáil strategists to the public under the guise of what they alleged was a coherent strategy. In 1977 this economy grew at a rapid rate and it grew as fast as, if not faster than, we projected a year ago. At that time the Fianna Fáil Party were at great pains to show that there could be no growth, that inflation would accelerate and that workers should not accept the tax package offered to them in the pay deal. In the event the national wage agreement was accepted. It was accepted because through the tripartite conference the Government convinced the employers and the trade unions of their good faith. It was accepted because the Government offered a reasonable package of employment-creating expenditures and tax cuts. They also pledged—and they carried out that pledge in the spring with subsidies on dairy produce and town gas—to do all in their power to prevent price rises from eroding the after-tax increase in income. It is now virtually certain that the CPI figure for mid-February will show an annual inflation rate of less than 10 per cent and under the pay tax deal in 1977 most incomes rose by at least 10 per cent, so some real after-tax concessions were obtained. Our task in that budget 12 months ago was to maximise employment growth within the constraints imposed by the budgetary position.

In 1977 there was an increase in employment of 15,000, according to the Taoiseach's recent speech and much of this employment growth was soundly based in industries achieving rapid export growth and in the provision of services to a growing economy. Regrettably, unemployment did not come down at the same rate but we stressed that the relationship [419] between employment and unemployment was complex, that the end of emigration had meant that it was more difficult to hold unemployment constant, let alone reduce it, and that improvements in unemployment benefits had tended to increase the average length of stay by the short-term unemployed on the register and this increased the overall average.

The lesson from 1977 is now clear. If unemployment as measured by the live register is to be significantly reduced, policies will have to be precisely targeted to the group of unemployed. This was the thinking behind our proposal for a national manpower agency which would have the responsibility of providing some form of useful employment for those registered as unemployed, especially the long-term unemployed. The trend in registered unemployment was the only dark spot on the otherwise sunny horizon in 1977. Real gross national product is estimated to have risen last year by over 5 per cent, way in excess of any of our other partners in the EEC. This growth was not fuelled by an unsustainable rise in current Government spending. The Department of Finance estimate a rise of only 2 per cent in volume, compared to a real 12 per cent rise in the volume of exports, a 15 per cent rise in industrial investment and a 5 per cent rise in consumption. Nor was this growth achieved at the expense of the balance of payments. The deficit rose fractionally to £160 million, far less than the level of private capital inflows. Official external reserves rose by £245 million during 1977.

I might mention that between December 1972 and December 1977 our foreign currency reserves rose by £768.5 million. This almost matches the rise in external Government debt. Our net foreign position has not altered greatly over the past five years, in spite of the rise in oil prices which involved Ireland, like so many other countries, in foreign borrowing. The evidence is that in 1977, as in 1976, the overall balance of payments was in surplus, that is, that the current deficit was more than matched by the direct foreign capital inflows for investment, [420] much of this investment in Irish industry. There are few two-year periods in Irish economic history about which the same can be said.

We recovered well from the recession because we in Government did not lose our heads. We did not refuse to borrow abroad rather than cut expenditure severely or raise taxes unduly when circumstances required it; nor did we fail to recognise that borrowing when things get tough is justified only if we accept the need to conserve resources when times improve. In 1976 we recognised that Government accounts were in fundamental imbalance and we took the political risk of raising taxes. The result was that the borrowing requirement and the current deficit began to decline to more normal levels. Of course, there can be debate about strategy but higher capital spending on schools, roads and hospitals will invariably involve the hiring of more teachers, nurses and doctors and other personnel. There is not a simple distinction between current and capital expenditure in these areas. It made no sense in 1975 to lay off or fire public service workers, as the present Minister for Economic Planning and Development then suggested, in order to fund the building of more hospitals and schools which, of course, we would not have the personnel to run.

As the economy recovers there is a pressing need to redefine policy so that real growth in Government expenditure is reserved for essentials and to reduce current spending as a proportion of GNP and current borrowing as a proportion of total borrowing. This we did in 1976 and again in 1977 by maintaining the pace of economic growth, which is high by international standards. I think it is not widely appreciated that from 1975 to 1977 current Government spending as a proportion of GNP declined from 37.5 per cent in 1975 to 37.2 per cent in 1976 to 36.7 per cent in 1977. The direction was clear even if the amount was small. Excluding debt service charges the decline was more dramatic, from 30.7 per cent in 1975 to 29 per cent in 1977. Today the Minister has irresponsibly reversed this trend at the [421] cost of higher future taxation and cuts in expenditure. Current spending after this budget, even allowing for a 7 per cent real growth rate, will be 37.7 per cent, a rate in excess of 1975 when the economy was in a severe slump.

In the past two years we have also seen a steady shift away from borrowing to meet current expenditure. In 1975 43.1 per cent of the Government's borrowing requirement was accounted for by the current deficit. By 1977 it was down to 37 per cent and, if one includes funds devoted to implementing the Fianna Fáil manifesto, it would have been down this year to 33 per cent. Again, the direction was right and, again, Fianna Fáil have reversed it and today we learn—I think it must be a world record—that 50 per cent of Government borrowing is to go to pay for the current deficit. This far exceeds the highest proportion recorded in 1975 which was at that time subject indeed to a sustained attack by the then Deputies Colley and Haughey. The Minister for Economic Planning and Development, Deputy O'Donoghue, was not a Member of the Dáil then but the other two Deputies I have mentioned were.

Mr. Colley: Information on George Colley  Zoom on George Colley  Borrowing to create jobs is what we are doing.

Mr. P. Barry: Information on Peter Barry  Zoom on Peter Barry  I shall come to that in a moment. By implementing their manifesto promises which concentrated on current expenditure revenue Fianna Fáil have directed expenditure away from investment and employment towards current consumption. It is an irresponsible policy and one unsuited to the needs of the economy.

Let no one think this Government's promise, or threat, to reduce current spending in future years will be implemented painlessly. Between 1971 and 1977 non-debt current expenditure rose by 5.3 percentage points of GNP. Expenditure on health, education and social welfare accounted for 2.5 percentage points but, and I think this is the important thing to note, social welfare accounted for only 0.9 per cent of the rise. Going back to 1971, when social welfare levels were miserable, old age pensions were appalling and, in the assistance category, assistance [422] was not paid to those under 70 and unemployment levels were around 60,000, thanks to sustained emigration for a decade or more, we would still reduce current spending as a percentage of GNP by only 0.9 per cent, less than the amount by which Fianna Fáil have raised here today the share of GNP taken by current spending.

It is evident now that future cuts will have to be in health and education. Yet that is not the message the electorate got in June 1977 when the manifesto promised an expansion of these very services. Even in 1978, when the Minister has abdicated any fiscal responsibility, education in the Book of Estimates has only barely kept pace with the increased numbers while increased health costs and the fee increases being liberally offered by the Minister for Health will absorb the extra provision for the health services. Of course, this will be the last good year.

In 1977 the broad based expansion combined with Government restraint on current spending formed a firm basis—the words used by the Taoiseach in opening the Adjournment Debate before Christmas were “a firm foundation”—for growth in 1978. The Exchequer provision was improving and, without the implementation of the Fianna Fáil manifesto, the 1977 deficit would have been £177 million and might have been lower still if revenue growth had not mysteriously slumped in the last quarter of the year, a slump which the revenue estimates for 1978 indicate to be unique. It could be that the Minister strove hard to ensure that the 1977 deficit was as high as possible in order to make the 1978 proposals appear less outrageous.

Fianna Fáil are prepared to risk all and gamble all in one mad budget fling. The people should remember that it is not the Government's jobs or incomes which are being risked. The price of failure for them is, at worst, Ministers' pensions and seats on the backbenches. For many others, the ordinary people outside this House, the risk is their livelihoods, their prospect of even staying in Ireland and their real standard of living.

[423] This type of budget has been defended on a number of grounds. It will encourage pay restraint. I fail to understand how, by promising now to do something in future, anybody will be encouraged to adopt the straight and narrow path. It is a peculiar form of logic running right through the Fianna Fáil manifesto, their White Paper and their budget today.

Mr. Griffin: Information on Brendan Griffin  Zoom on Brendan Griffin  The new theology.

Mr. P. Barry: Information on Peter Barry  Zoom on Peter Barry  It has been defended on the grounds that it will encourage pay restraint, encourage confidence among investors, expand the economy and create jobs, and that it is only a temporary strategy, part of a wider plan. Now, if we examine all these arguments, we will find them to be hollow. There is no sign of pay moderation. The national wage talks have broken down and may never resume if the employers continue to offer 5 per cent maximum. Fianna Fáil have seriously upset the whole structure. It is a structure that has proved valuable in the past in pay bargaining by introducing with, of course, the maximum ambiguity pay proposals into a general election campaign. Trade unions and their members know that Fianna Fáil promises were made to the nation as a whole, to all workers, trade unionists or not, to the self-employed, to the widows, the old age pensioners, the farmers and every other category in the economy and cannot be rescinded because the Government have been unable to get ordinary trade unionists to accept a 5 per cent pay limit.

We now hear that the Minister will be coming back to the House if he does not get a pay deal of 5 per cent. We are not told, of course, what measures he will take. Will he cut the old age pensions? Will he take back £1 reduction in social welfare stamps? Will he restore rates even though ratepayers may, perhaps, have no say at all in the pay deal? It is outrageous of the Minister to come in here and threaten the people that he will, if necessary, ensure moderation through legislation if a national wage agreement is not achieved.

[424] The Government of course have themselves contributed greatly to the breakdown of the pay talks. The revenue estimates show a rise of income tax for 1977 of over £140 million. That will cost every income-tax payer about £4 a week and this budget offers them £1.70 a week back in a tax cut. What kind of a deal is that? How much encouragement does that give workers to accept a 5 per cent pay deal? The trade unions will have read the Government's White Paper and they see the current deficit and they, like us, say: “Do you remember the four years of Fianna Fáil tirades against current spending?” I think there is a fear, and it is a very real fear, amongst workers and others on low incomes that as soon as the ink is dry on the national pay agreement Fianna Fáil will abolish the food subsidies, children's allowances and so on with the explanation—not taking the blame themselves, blaming Brussels—that the EEC made them do it. Already in this budget they have abolished the October social welfare increases which we introduced to supplement the annual April increases and most Deputies and the majority of people outside this House remember the tirades by Opposition Deputies at that time when we sought to apply these increases selectively.

Fears over future policy are not, of course, confined to workers. Investors may have received some relief today in capital tax provisions but they too will be able to see the temporary nature of today's events. They know that in one year the Government will be desperate for revenue and they fear the requirements of political survival will force the Government to raise taxes all round and restore, perhaps, that favourite of Deputy Colley's, the 80 per cent top tax rate which was in operation when Fianna Fáil were last in Government. Anybody who has a worth-while project today has to ask himself what are the Government's future tax intentions. The answer from the budget today and the White Paper before Christmas is “silence”.

This budget is supposed to generate employment and expand activity. Where are the jobs? Where is the [425] expansion? In the last quarter of 1977 the expenditure on supply services was £435.9 million. This represents an annual rate of expenditure of £1,744 million if it were continued right through 1978. If we look at the supply services for 1978, excluding the £13 million cost of reducing the social welfare stamps and the £63 million cost of the abolition of the rates, we find that the expenditure for 1978 is £1,792.8 million. This is a rise of only 2.7 per cent over the last quarter of 1977 at an annual rate. It is not even enough to meet the expected rise in inflation on the Government's figures of 7 per cent between November, 1977 and November 1978. Where is the provision for jobs for teachers, nurses, doctors and gardaí promised in the manifesto? Similarly the public capital programme, to which this budget has added nothing, shows very little job potential.

Excluding allocations for housing the public capital programme shows only a 12 per cent rise in 1978. This is barely enough to keep pace with the inflation forecast by the Economic and Social Research Institute, at 10 per cent for investment goods. It also compares unfavourably with the 26.7 per cent rise between 1976 and 1977 which gave an actual volume increase of 7½ per cent. There will be very little job growth in the non-housing public capital programme. This leaves housing as the Government's main hope for employment growth. With the 40 per cent growth in expenditure it might appear here that prospects were good, but we know from the White Paper that the Government target is 27,000 houses this year. This represents only a 10 per cent increase on 1977. We know that by the end of the year local authorities will be cutting back on employment and construction. The £40 million increase will have gone to builders in higher prices. It will have replaced private savings in paying for houses and will replace building society loans. The effective cost of the Government's 2,000 extra houses built in 1978 will be £16,000 to £20,000 per house, and only a handful of jobs will be generated in the construction industry. Most of these have probably already occurred.

[426] We had a series of questions down today about the actual increase in employment in Government Departments in the second half of 1977 and according to the Government's figures the total came to 3,300, which is a far cry from the 5,000 promised. We should point out that most if not all of these jobs were provided with money provided by us in the 1977 budget. This Government are trying to claim credit for job creation that was approved in the 1977 budget.

Deputies:  Hear, hear.

Mr. P. Barry: Information on Peter Barry  Zoom on Peter Barry  The budget contains absolutely nothing for the job seeker. Young people were promised £20 million for jobs but have been palmed off with £5 million. We must presume that most of the balance will go to reduce the capital taxes. When they have had time to digest the contents of this sham budget a lot of young people will be asking themselves what kind of a country are we living in. As for the budget being part of an economic plan, all we can say is “what plan?” The White Paper was a dishonest attempt to get civil servants to approve of the manifesto, without much success, because the wretched June document is beyond redemption. We argued strongly that the Minister for Economic Planning and Development should be required to produce forecasts of revenue expenditure for the years ahead. He has not done so, so everybody is waiting for the axe to fall and is looking around to see how Fianna Fáil will get the money to finance this year's mad extravagance.

The changes announced by the Minister today are very minor in relation to the £3,000 million budget for which he is responsible. By concentrating on the provisions in today's announcement we might be in danger of losing sight of the total picture. The 1978 revenue estimates show a rise in tax revenue, excluding car taxes, of £275 million. This represents over £90 a year for every man, woman and child or about £5 per week for every person in employment. We are aware that the key words in this budget are “tax cuts”. Rates relief is worth £62 million, car [427] tax £25 million and the cut in the social welfare stamp by £1, £13 million and the measures announced here to-day are worth £90 million. In the manifesto we were told that the cut in the stamp for lower paid workers would be a great incentive to employment. This is another bit of the peculiar logic that has been running through Fianna Fáil thinking in the last couple of years. Offsetting all that, are increases in rates of £7 million to the farmers added to all the other burdens that are placed on them today. Overall, we have tax increases of £275 million and tax reductions including the rates of £83 million.

Thus net taxes will rise by £192 million or £3.50 per week for employed persons. We are asking the workers to accept a 5 per cent pay increase, and the net effect of the budget and the projections for the future is that they will be asked to pay back £1.75 in tax over the coming 12 months. That is not the juiciest looking carrot I every saw. The income tax relief offered by the Minister totals £63 million. In reply to a question today we discovered that to adjust the income tax code by the 11 per cent or so inflation over the past 12 months would cost £52 million—£29 million for allowances and £23 million for increases in the tax bands. Thus real tax cuts equal only £11 million. This is what we are asking the workers to accept instead of pay increases. When the present Minister for Finance was in opposition he continually pressed for the indexation of income tax. In Government the Minister has changed his tune and is trying to buy pay restraint not through real tax cuts but through notional cuts that leave taxpayers hardly any better off than they were a year ago.

I welcome the £5 per week to help those in the clothing, footwear and textile industries. It is tragic that this was not introduced five or six months ago when it became clear that the British were retaining their employment protection scheme for a longer period. As the Minister pointed out earlier, the money was available at that time in the employment incentive scheme [428] which we introduced in the 1977 budget, but was not taken up. At that stage the money could have been paid and could have removed at least the fear of unemployment. This is not employment creation. This is the prevention of people losing their jobs. It is for a limited time. The tone of voice the Minister used in drawing attention to it would make it appear very limited, and it is exactly 25 per cent of what is being given across the water. The rate in England is £20. Here we give £5 six months too late.

I cannot welcome the abolition of the wealth tax. We in Fine Gael have no hang up about the wealth tax but we do see its effectiveness in helping to achieve wage restraint and to bring about a wage agreement. The Minister has done a number of things that will make it virtually impossible for him to get a wage agreement of 5 per cent at this time, and a 5 per cent wage agreement is exceedingly important for the country at the moment. I suggest that by abolishing the wealth tax at this time the Minister is going to make that impossible. Maybe that is part of his strategy. Maybe he wants to make a wage agreement impossible to allow him to bring in legislation. He has said twice in his speech that the Government will take action here unless there is a wage agreement.

The wealth tax was a new tax, and I should remind the House of the circumstances under which it was brought in. It was brought in by us in Government with other capital taxes as a substitute for that most inequitable and unfair tax of estate duty on death. The wealthy were not caught by estate duty because they were able to make provision to see that their heirs avoided estate duty. It was the middling to small businessman and farmer who were caught and many of their farms were sold and many of their businesses went bankrupt and had to be sold up when the owners died. It was in substitution for that most unfair tax that we brought in the three capital taxes, as they are called. People will ask why the man who lives off his capital of £500,000 in a big house worth £250,000 and who is paying no rates should contribute nothing directly to the State, [429] while the average worker earning £70 per week with two children will have to pay some portion of his wages every month into the coffers. You are not setting the scene there for wage restraint nor can you expect a response from people who have to count every penny every day to live from week to week.

We in this party have absolutely no hang-up about the wealth tax. If there was a better way of devising a tax that would ensure that all sections of the community pay their fair share towards the services which we all enjoy from the Government we would have no hesitation at all about adopting it. The Minister would have been far wiser in this regard to adjust his thresholds and rates of inflation to make allowance for the anomalies that are undoubtedly in this new tax and which had become obvious after three years in operation. He would have our whole-hearted co-operation in that, but to abolish this tax at this time is dangerous and will have consequences not just in wage agreements but maybe in the very structure of our society.

I come to what will undoubtedly be the most controversial matter in this budget, the farm taxes. I can imagine the talk in the pubs of Ireland tonight. Can you imagine what they will be saying about you, a Leas-Cheann Comhairle, in Wexford after all you promised them last June? The Minister will be called “the farmers' friend”. Deputy Haughey carefully distanced himself over the last six months from any of this circus economics, saying in private that they must be crazy, saying nothing in public except that he wanted more money for his Department—speeding the caravan down the hill. The farmers little realised when they were offered the wonderful tax concessions at the time of the election that they would have to pay for them in another way. Farmers paid £14 million in income tax under the Coalition. Now Fianna Fáil have clawed back half as much as that again in the abolition of the rates relief. The average development farmer now faces substantial increased taxes. Under Fianna Fáil economics a tax cut this year turned out to be a tax increase [430] even if it was postponed for a year. The proposals have rightly been described by the President of the IFA as savage.

Mr. Colley: Information on George Colley  Zoom on George Colley  Would that be the Fine Gael view too?

Mr. P. Barry: Information on Peter Barry  Zoom on Peter Barry  No, the Fine Gael view is that we were absolutely candid with farmers in everything we did. We never deceived them. As I have said about the people who were affected by the wealth tax, every section of this community should pay their share to run this country because we all benefit from the services.

(Interruptions.)

An Leas-Cheann Comhairle: Information on Seán Browne  Zoom on Seán Browne  Deputy Barry should be allowed to finish his speech.

Mr. P. Barry: Information on Peter Barry  Zoom on Peter Barry  Within six months the Fianna Fáil knife is in the back of the farmers of Ireland.

Mr. L'Estrange: Information on Gerald L'Estrange  Zoom on Gerald L'Estrange  He only took it out——

An Leas-Cheann Comhairle: Information on Seán Browne  Zoom on Seán Browne  Deputy L'Estrange, let Deputy Barry finish his speech.

Mr. P. Barry: Information on Peter Barry  Zoom on Peter Barry  There is no need to dwell on the farm taxes. They speak for themselves and they will be the subject of debate in every rural public house tonight, and I am delighted.

Mr. Colley: Information on George Colley  Zoom on George Colley  The Opposition need a party leader to comment on that one. The Deputy should not commit himself unless he would like to tell us now what Fine Gael would like to do.

(Interruptions.)

Mr. P. Barry: Information on Peter Barry  Zoom on Peter Barry  There were to be only notional taxes and the farmers would apparently be allowed for everything. They were not told about increasing the multiplier and lowering the threshold. There was a glorious silence there.

Mr. L'Estrange: Information on Gerald L'Estrange  Zoom on Gerald L'Estrange  Fianna Fáil misled them. It was a confidence trick.

Mr. Colley: Information on George Colley  Zoom on George Colley  Is the Deputy against what we are doing?

[431]Mr. L'Estrange: Information on Gerald L'Estrange  Zoom on Gerald L'Estrange  Why did the Government not keep to what they promised before the election?

An Leas-Cheann Comhairle: Information on Seán Browne  Zoom on Seán Browne  There is a golden rule in this House that only one Deputy should speak at a time and Deputy Barry is in possession.

(Interruptions.)

Mr. P. Barry: Information on Peter Barry  Zoom on Peter Barry  I will say one thing about the social services and increases there. As most people know in this House and outside it, the children's allowances are the money used by the housewives of Ireland as one of the main means of running their households. They have not been increased. There is no question of the housewife getting any increase in what she regards as one of her main sources of income. That is another thing that will be noted, and there is no point in the Minister looking horrified when I draw these things to his attention. I can assure him that the people around the table trying to negotiate a new wage agreement will read the fine print in this budget. I can see by the look on the Minister's face that he thinks I am doing great harm to the wage agreement negotiations.

Mr. Colley: Information on George Colley  Zoom on George Colley  I do not think the Deputy will make any impact on them.

Mr. P. Barry: Information on Peter Barry  Zoom on Peter Barry  I wish I could say the same for the Minister. He has made a disastrous impact on these negotiations and on the economy of the country. He has introduced an irresponsible budget at exactly the wrong time, when the economy is beginning to improve. It is a gamble based on borrowing 13 per cent of GNP. The appalling thing is that the loudest cheers heard in the House during his speech came when the Minister announced with great pride that he would borrow 13 per cent of our GNP and that 50 per cent of that would go to meet the deficit on current borrowing. If he thinks this is financial responsibility, Deputy Colley has forgotten more in four years than I thought was possible. In three and a half of those four years he was preaching against borrowing.

Mr. Colley: Information on George Colley  Zoom on George Colley  Never.

[432]Mr. P. Barry: Information on Peter Barry  Zoom on Peter Barry  Yes, the Minister was.

Mr. Colley: Information on George Colley  Zoom on George Colley  I was preaching against unproductive borrowing which the Deputy's party have not learned about yet.

Mr. E. Collins: Information on Edward Collins  Zoom on Edward Collins  The Minister lectured us about borrowing. This is an irresponsible budget and the Minister knows it.

Mr. P. Barry: Information on Peter Barry  Zoom on Peter Barry  Perhaps it is in bad taste to remind the Minister that 13 is considered to be an unlucky number——

Mr. Colley: Information on George Colley  Zoom on George Colley  It was 16.3 per cent.

Mr. P. Barry: Information on Peter Barry  Zoom on Peter Barry  In a year of recession that is a much different thing.

Mr. Colley: Information on George Colley  Zoom on George Colley  The Deputy's party made no effort to create jobs.

Mr. L'Estrange: Information on Gerald L'Estrange  Zoom on Gerald L'Estrange  During the Minister's time there were 45,000 unemployed and 60,000 per annum going over to John Bull.

An Leas-Cheann Comhairle: Information on Seán Browne  Zoom on Seán Browne  : Deputy Barry knows that the debate on the budget will go on for weeks and all Deputies will have an opportunity to speak, including Deputy L'Estrange.

Mr. P. Barry: Information on Peter Barry  Zoom on Peter Barry  The debate on the budget will go on for weeks and the effects of the budget will be felt in the economy for years to come. It will not be paid for by anybody in this House but by the taxpayers.

Mr. E. Collins: Information on Edward Collins  Zoom on Edward Collins  Certainly the Tacateers will not pay.

Mr. P. Barry: Information on Peter Barry  Zoom on Peter Barry  Any concessions in the budget are being made in a mean manner. Reliefs will not be introduced until the autumn, three months before the end of the year.

Mr. Haughey: Information on Charles J. Haughey  Zoom on Charles J. Haughey  For purely administrative reasons.

Mr. P. Barry: Information on Peter Barry  Zoom on Peter Barry  That has always been the response of Fianna Fáil. When asked why they did not bring in social welfare improvements earlier they always told us it could not be done for administrative reasons. We went into [433] office in March and we were able to bring in improvements in June, and Fianna Fáil could do the same if they put their minds to it.

Will this budget be a great leap forward? The answer is that it will until the next budget. When will that come? We have already had four bites from the cherry: we have had the removal of the cheese subsidy, one budget; the cutting of farmers' rates relief, two budgets; the cutting of the gas subsidy and the removal of the fertiliser subsidy. By the end of this year God knows how many more budgets we will have seen.

Mr. M. O'Leary: Information on Michael O'Leary  Zoom on Michael O'Leary  Nothing that we have heard here today provides any firm basis for belief that job expansion on the scale required will occur in 1978 or the years thereafter. There was a Deputy some years ago who, after some good news had been given by Ministers of the day, used to say: “Wonderful things have happened in our day”. That Deputy bequeathed to his son a job as Minister of State. If that Deputy had been here this afternoon during the first outburst of applause from the Government benches he would have noted that it occurred when the Minister announced the abolition of the wealth tax. It tells us things about the composition of the Soldiers of Destiny in 1978, and I have no doubt that that Deputy would have said today: “Wonderful things have happened in our time”. He would have said that a time has come when the Legion of the Rearguard, the poor men whom Deputy Blaney evoked at an Ard Fheis some years ago, can cheer to a man, or a woman, when the announcement was made of the abolition of the wealth tax.

It is interesting that in a budget which puts in pawn so much of the country's future through foreign borrowings for very doubtful purposes, to the tune of £821 million, almost £10 million is being spent on the abolition of the wealth tax. It tells us a lot about their social priorities and their tax reform motivation. What-ever else can be said about the budget, it brings very good news for the 5,000 payers of wealth tax. Judging by the [434] applause from the Government benches when the announcement was made, Government Deputies at least have the interests of those 5,000 at heart.

Who are those 5,000 and what was the purpose of the wealth tax? As Deputy Barry has told us it was in lieu of death duties. It was chargeable at a single rate of 1 per cent with exemption thresholds to be at £100,000 for married people and £70,000 for single persons. The principal private residence and its contents, and live-stock in certain cases, were specifically exempt from the tax. They were the thresholds for the 5,000 people who paid roughly £8 million last year. They are the people who had first call on the attention of the Government this afternoon.

We all know there are many inequities in the tax system. Members of the previous administration were aware of these inequities but they ruled the country in very difficult times. Had we the opportunity given by the present growth in the economy to this Government, no doubt the abolition of the wealth tax would not have been a priority of ours. There were far more pressing reforms in the whole taxation area which called out for early attention.

As is to be anticipated from the level of borrowing which allowed the Minister to satisfy members of his party, perhaps in the short term, this budget will not meet with the condemnation it so richly deserves. If we could visualise the Minister as a chef, we could say that the pleasant repast he served up to his Deputies to-day may prove to be less pleasant in its after taste in 1979 and 1980. Questions like what does the budget do to sustain an improvement in the employment situation go unanswered. The overall budget strategy and the things mentioned in the White Paper leave one with little confidence that an early dent will be made in the numbers on the unemployment register.

My primary disappointment with this budget is the continued lack of evidence that the Government are [435] serious about tackling the present intolerable unemployment figure. There is no evidence that there will be productive employment which can be sustained on an expanding basis for our growing population. There is no provision which suggests any ability on the part of the Government to provide that. The question may be asked, and has been asked by Deputy Barry, how does the budget enhance the prospects of a national wage agreement, the achievement of which the Minister has said is of very serious significance for the success of the proposals in his budget?

Such measures as the abolition of the wealth tax cannot help us to reach the kind of consensus needed for a national wage agreement. The Minister made an ambiguous utterance such as he is fond of making about national wage agreements. He believes that historically he is the sole author of such agreements. He has often said in this House and elsewhere that the first agreement would not have been possible without the threat of force by him in 1970. He repeated that argument on somewhat similar lines in the final sentence of his speech here to-day. Obviously he considers agreement on 5 per cent in the wage talks to be extremely important.

Measures like the abolition of the wealth tax, capital gains tax, the other changes made, the very little real improvement in welfare payments —the absence of such an improvement, in fact—the total absence of any change in children's allowances, and the niggardly approach to the equalisation of the unemployment assistance rates between men and women will not achieve that agreement. If one accepts, as the Government do, the philosophy of borrowing abroad for current purposes, surely such matters as the equalisation of unemployment assistance rates between men and women should be treated with more despatch and haste rather than making the poor excuse that we have to wait until later in the year to do it.

The taxation reform in the budget does not do much to gain acceptance of the all-important national wage [436] agreement. It does little to provide a climate for the provision and expansion of productive employment. Some changes have been made in relation to the expansion of employment opportunities in the public service, but they are not as great as is suggested in the Minister's speech. He talks about the manifesto commitment to gaining 5,000 new jobs in 1977. It is not at all clear from his statement today that these have been achieved. From Dáil questions we are not satisfied that they have been achieved.

Mr. P. Barry: Information on Peter Barry  Zoom on Peter Barry  We heard today that 3,300 have been achieved.

Mr. M. O'Leary: Information on Michael O'Leary  Zoom on Michael O'Leary  The Minister talks about the posts which have been allocated and those which have been filled. Those filled amounted to about 2,000, and those allocated about 4,000. We will be going through the Minister's speech and his forecasts for the future with great care during this debate. On first reading there is no confidence for the belief that the unemployment register can be reduced by the figures mentioned in the manifesto last year.

No equity in the taxation system has been achieved. There is no real evidence of the Government's serious concern about the unemployment position. Criticisms of the provisions in the manifesto are valid when we consider the budget. The recent White Paper is the offspring of the manifesto, as is this budget. Electoral appeal rather than economic common sense dictated the terms of that manifesto. If immediate criticism of the budget is not offered, the point must be made to the public that the borrowing engaged in by this administration is a form of deferred taxation only. Already some of the interest on the borrowings the administration to which I belonged were forced into, a policy correctly adopted by us during a period of extreme recession, is already due. There is no doubt that some of the repayments on these increased borrowings will be due in the lifetime of this Dáil.

If increased taxation is not on the agenda this year, one cannot say the same about the years 1979, 1980 and [437] 1981 with confidence as a result of the measures taken here today which have been greeted with such rejoicing by Deputies on the other side of the House. The White Paper said the budget would underpin financially the policies outlined in the White Paper. We have now gone to the point of increasing our borrowings to 13 per cent of GNP from our figure of 11 per cent last year. There is a proviso in the White Paper that this will be rectified before 1980. If we are increasing our borrowing this year, this is to be rectified in an unspecified fashion in the years ahead. I the White Paper and in the budget there are ominous signs that the way this bill will be paid off may not be quite so popular with some Government Deputies when the time of reckoning comes.

In the White Paper we have a classical example of the stop-go policies which almost brought the British economy to bankruptcy and made Britain a mendicant at the World Bank. I am not against a properly managed expansion of the economy but it cannot be pretended that this is a properly managed expansion of the economy. The economy is expanding already; it expanded last year and it will continue on that course this year. To suggest that an open economy like ours can be primed further by borrowing without affecting the balance of payments will not be supported by many economists. The conclusion must be that the origins of that kind of economic course had little to do with economic wisdom or with the national interest but had more to do with election promises given in panic and in a desire to return to office.

Some time ago I categorised, perhaps innocently, the politics of the White Paper: in referring to the provisions in the manifesto I said that Fianna Fáil had engaged in “bingo” politics. Perhaps the manifesto was the evidence of intention on part of the Fianna Fáil Party to gamble massively at the time of the election with the future of the country. It could be said that Fianna Fáil entered the casino with the White Paper, that with today's budget the roulette wheel has begun to turn and a bet of almost [438] £821 million has been placed in a mad gamble by the Government. The real gamble for the people commences with today's budget.

Government Deputies may go away happy with the news they have learned today. One would not have to be wildly partisan to suggest that the description of the White Paper given by the Minister for Economic Development and Planning as a “gamble” is a literal description of the course embarked upon by the Minister for Finance and the Government. The point has been made that this was not always his attitude. He was very critical of the previous Government when they were forced to borrow in totally different circumstances, when it was correct to borrow. Obviously it is correct to borrow when consumption is at a low level, when there is no chance of a pick-up in the economy, but it is not correct when the economy is expanding rapidly, as is happening in our case now.

Of course questions will be asked. So far as we are concerned the area of most question will be with regard to job creation and there the Government are on very weak ground. The main thrust in their job creation proposals is the construction area. If one looks at the bulk of that public capital expansion occurring in the construction building area—an increase of almost £40 million—it is difficult to see that increase being carried forward in the whole construction and house building area. We will be asking the Minister for Finance how much of that increase in the construction area is summed up in the £1,000 grant.

It has been our sad experience so far that the £1,000 grant has not been a gain to the prospective house owner but has gone into the pocket of the builder. Anyone who has watched house prices in recent months will realise that they have gone up approximately by the same figure as that given in the grant. The only person one can call to book for that state of affairs is the Minister for the Environment who allowed it to happen. The grant has not been of benefit to the ordinary young house purchasing couple. The price of new houses has risen. [439] dramatically and the result has been an increase in the profits of the builders. Side by side with that, the building societies have reduced the amounts they are prepared to lend as a result of the availability of the £1,000 grant. Prior to this some building societies were prepared to give a 90 per cent mortgage for new houses but now they have reduced the proportion to 80 per cent. Thus they are frustrating the ostensible objective of the grant which was supposed to help people find a deposit for a new house. It would be interesting to know what proportion of the increase in the moneys allocated here is considered to be included in the £1,000 grant. I do not see many new jobs flowing from the public capital programme. There is no reliable estimate or forecast regarding the number of new jobs expected to be created as a result of the capital increase in building and construction.

In many areas of the budget very specific action is undertaken, especially in relation to capital gains. The Government's intentions are very clear. There is a completely unproven case that it will lead to job expansion. The Minister for Finance said that many people who found themselves liable for the tax fled the country. If they fled certainly there are 5,000 doughty survivors on 1 February 1978 who are paying the tax. One wonders at the veracity of the statement that they fled the country because they were asked to pay a small amount of wealth tax especially when one considers that that tax was introduced in substitution for death duties. One questions the priorities of a Government who could deal with such dispatch with such a matter when there are so many other inequities in the taxation system.

I do not think the PAYE wage and salary earners will be impressed by the allowances made to them in this budget. I do not think they will be struck by the fairness of the Government's actions here this afternoon. It is all very well to say it would cost more to do something for them, that it costs commensurately less for the 5,000 people affected by the wealth [440] tax. In all taxation matters it is the sense of justice that must not be outraged. I believe that sense of justice and fair play will be outraged when those affected by PAYE consider whose plight is the more grave, theirs with their families, or the plight of a tiny minority of 5,000 people. I cannot believe they will be satisfied, that they will consider it a necessary response to their situation. In the context of a budget that goes in for such heavy borrowing I do not think they will be satisfied that the Government have confined themselves to the allowances outlined in the manifesto. One must consider Dáil questions before Christmas. I do not think questions throughout this year will reveal any greater evidence of action.

One must wonder also about the fate of the Buy Irish Campaign expected to deliver 10,000 new jobs. Buy Irish campaigns have been engaged in by governments in the past with great enthusiasm but very little result. Nothing this Government have done so far convinces me that their present campaign will meet with a fate different from that of similar ones in the past.

It is interesting also to consider the gamble on which the Government are embarking in the context of what is happening in Britain. We are still linked to sterling. Despite the addition of a good deal of fresh economic talent in this Cabinet the view may persist there that the sterling to which we are linked is the same old sterling of the last few years, subject to periodic devaluation and that perhaps that may be depended on in the future to bale us out of certain difficulties that might otherwise occur.

Mr. Colley: Information on George Colley  Zoom on George Colley  No, the Deputy is mistaken. It was he and his colleagues who depended on that, not this Government.

Mr. M. O'Leary: Information on Michael O'Leary  Zoom on Michael O'Leary  Anyway I want to tell the Minister about the sterling of the British Labour Government, now hard currency and will be in the foreseeable future. Considering the interdependence of our trade with theirs it is interesting to ponder what happens [441] when we engage in economic strategy based on increased borrowing. On the assumption that the old situation no longer obtains in Britain we are linked to a hard currency, as good as any there is. It is not too fanciful to make a prediction that the logic of the course of massive borrowing, this extra priming of the economic pump, embarked on by the Government today reversing the downward trend of the previous Government, in times when the economy is expanding in the context of a British economy run on close monetarist lines, brings the possibility of a visit by a delegation of the IMF to Merrion Street in the next few years as they probe the weakness or otherwise of our currency in its link with that hard currency in Britain.

The view of what has been done in the budget today may not gain much support at present. This Government have at least four or five more budgets to go. After all, they have the inestimable advantage of a majority of 20. Obviously they cannot bolt from any economic mess by suggesting that they lack a political mandate; they have all the political mandate they want. There-fore, I suppose we can predict with safety that this Government will be here for almost their full term to carry out whatever economic salvaging may be necessary. Whilst those points may not gain much support or credence here today, obviously I hope—because we can get rid of this Government without the aid of the kind of apocalyptic situation I am describing—it does not happen, but certainly I believe that the risk of it happening is brought appreciably nearer by the kind of economic policy being embarked on by the Government today. It is all the more strange it is being embarked on by the Minister who spent so much of his time in opposition chastising the previous Government for their sins in relation to borrowing. I do not wish to chastise him on that score. That has been done far more authoritatively in the other House last week by Senator Whitaker.

Mr. Colley: Information on George Colley  Zoom on George Colley  Surely the Deputy got the message of what Senator Whitaker was saying.

An Leas-Cheann Comhairle: Information on Seán Browne  Zoom on Seán Browne  As a [442] rule we do not discuss what happens in the other House.

Mr. M. O'Leary: Information on Michael O'Leary  Zoom on Michael O'Leary  I do not wish to break any rules of protocol. Anyway that case has been made already. I hope what I fear here may not come to pass. If it comes near to taking place this budget of the Minister will be seen as the first step on that road. In a budget which went in for such heavy borrowing, devoted to defraying current deficits, it is miserable to note a 10 per cent increase for the single man and old age pensioner—£1.50. It is miserable to note that, even under the banner of reform, on an under-taking solemnly given to the women of Ireland, given to show their sincerity in contrast with the failure of the outgoing administration, unemployment assistance for women should not be made equal to that of men until 1 October.

Mr. Haughey: Information on Charles J. Haughey  Zoom on Charles J. Haughey  At least it is being done; the Deputy's administration did not do it.

Mr. M. O'Leary: Information on Michael O'Leary  Zoom on Michael O'Leary  We did. I shall leave it to Members opposite. With the full term of office that they have and with the benefit of their majority of 20, with the stronger economy bequeathed them, it will stand the test of time and I shall be glad to debate the matter with the Minister for Health if he is still in the Cabinet.

Mr. Haughey: Information on Charles J. Haughey  Zoom on Charles J. Haughey  We are doing it.

An Leas-Cheann Comhairle: Information on Seán Browne  Zoom on Seán Browne  Deputy M. O'Leary on the Financial Statement.

Mr. M. O'Leary: Information on Michael O'Leary  Zoom on Michael O'Leary  I will be glad to debate with him at the end of his term of office, measuring action with action, which did more for the women of Ireland in terms of equality legislation, the National Coalition or the present Administration?

Mr. Haughey: Information on Charles J. Haughey  Zoom on Charles J. Haughey  We are doing this.

Mr. M. O'Leary: Information on Michael O'Leary  Zoom on Michael O'Leary  They are doing this. I say they could do it in the economic situation prevailing, with the measures on which they have embarked, [443] but they could have done it with greater dispatch.

Mr. Haughey: Information on Charles J. Haughey  Zoom on Charles J. Haughey  We are doing it; the Deputy's administration did not.

Mr. Mitchell: Information on Jim Mitchell  Zoom on Jim Mitchell  We came out of a world crisis very well.

An Leas-Cheann Comhairle: Information on Seán Browne  Zoom on Seán Browne  Deputy O'Leary, please, without interruption.

Mr. M. O'Leary: Information on Michael O'Leary  Zoom on Michael O'Leary  We do not have these reliable estimates of the number of new jobs we can expect in the building industry; a good deal of the money provided may go into the builders' pockets; it already has.

The employment incentive scheme was extended recently to hotels, to the building industry. So far no figures have been given as to the probable expansion of jobs in these areas.

I said this budget did little to enhance the prospect of a National Wage Agreement. Some might even say that it militates against the possibilities of that agreement since it does so little to meet certain of the public requirements made by trade union leaders. Neither do I believe that the taxation measures undertaken will be regarded as sufficient. In an effort to gain agreement on a National Wage Agreement I cannot understand why the Government have not been more willing to listen to ideas on job creation from the trade union movement instead of rejecting out of hand, as they have through the Minister for Industry Commerce and Energy, the suggestion of a national development corporation. Instead we have had the consortium of semi-State bodies which, like the action committee on employment, seems to be expanding every day with yet an extra semi-State body representative attending. That committee met last week and it will be our job during this term to find out exactly what they discussed last week other than the weather.

It is strange that an idea of that sort cannot be accepted from the trade unions. Apparently the view is held by this Government that the trade unions are good enough to be lectured to on wage moderation and that there [444] can be no two-way traffic in ideas. The lecturing, the advice, all must come from the Government to the trade unions. If the trade unions respond, even in a sincere fashion, on some innovation—an institutional change that they think might be helpful—it is rejected, and that has been the fate of the National Development Corporation.

There is that last section of the Minister's speech in which he makes once more a thinly-veiled threat, before he breaks into Gaelic in his salute to the brothers, that this is not an ideological party, that if certain things do not happen there will be other consequences. As I say, in the past the Minister has duped himself on the origins of the present system of national wage agreements. I do not believe that this Government have engaged in sufficient preparation for a national wage agreement. I remember a period when the Ministers opposite sniped day in and day out, attacked and ambushed every week the possibility of agreement on a national wage agreement, sabotaged day after day in the Dáil. We do not propose to do that. I still hope for the signing of a national wage agreement because, having been involved in it, I know how important it is for the economy. We do not need a calamity to put the Government out of office. That will happen in its own good time. I do not believe that this Government worked hard enough to get a national wage agreement. First of all, in their eagerness—and it is relevant to mention the manifesto because the White Paper is the offspring of the manifesto as is this budget——

Mr. Colley: Information on George Colley  Zoom on George Colley  It is very relevant to mention the manifesto which was voted on by the people.

Mr. M. O'Leary: Information on Michael O'Leary  Zoom on Michael O'Leary  Yes, voted on by the people.

An Leas-Cheann Comhairle: Information on Seán Browne  Zoom on Seán Browne  Deputy O'Leary to conclude, please.

Mr. M. O'Leary: Information on Michael O'Leary  Zoom on Michael O'Leary  Am I limited in time?

An Leas-Cheann Comhairle: Information on Seán Browne  Zoom on Seán Browne  It was always understood that the statements [445] would be short but today we have allowed long statements from the two spokesmen. I would ask that we go on to the Financial Statement. We are developing something that can be fully developed in the debate that will follow in the next few weeks.

Mr. Colley: Information on George Colley  Zoom on George Colley  A Cheann Comhairle, would you make sure that he says something?

Mr. M. O'Leary: Information on Michael O'Leary  Zoom on Michael O'Leary  There is an old tradition in the Fianna Fáil Party of looking into your heart. It was a method favoured by their founder. When he wished to know what the common people thought, he looked into his heart. Whether the reading was always accurate is another matter. The provisions of this budget and of the White Paper were in the direct tradition of looking into their collective heart and they decided on a 5 per cent figure for this year. I am suggesting that at the very start, in their eagerness and for no more profound a reason than their desire to get back into office, they lifted that figure out of the air, as they have lifted the figure of 3 per cent leading to a switch in consumer spending on Irish goods. It fitted in with their other figure and they are now at this point, without adequate preparation or consultation with the trade unions, attempting to browbeat the trade unions into acceptance of a figure decided on by them without consultation.

I am suggesting that the taxation reforms brought forth by the Minister today will not be considered satisfactory by the trade unions. But I still say that whoever is responsible for contact with the social partners should meet without delay with the trade unions to see if a possibility exists for another national wage agreement. I think they will be facing hard and searching questions. They will be facing hard questions from this House within the next few days and they will certainly be facing them from the trade unions. Whatever the attractive features of this budget are, fuelled as it is by massive borrowing when our nearest trading partner is battening down the hatches, it will be questioned whether this profligacy on the part of [446] the Government at this time impairs the capacity of the State in 1979 and 1980 in engaging in a corrective course, if that is necessary. We do not have worries about the economy in 1978. Our worries are about the economy in 1979 and 1980. Today we seem to be depriving ourselves by the measures outlined in the budget. We seem to be going the wrong way about dealing with probable economic problems in the next few years if there is this downturn in the business cycle. If the world trading environment turns against us we will not be able to take corrective action because we have decided on this course today.

We would not be doing our duty if we refrained from pointing out these dangers in the stance adopted by this Government. Unemployment is still intolerably high. Even with the return of growth in all the major industrialised countries we see high unemployment. The question is whether it has more to do with structural problems in the economy itself. If that is the case, then the kind of priming of the building industry, in which this Government put their main faith for restoring employment levels, may not be the appropriate response. However, all has been decided in the manifesto and confirmed in the White Paper. We went to the casino and placed a bet of £821 million in the names of Deputy George Colley and the Ministers of this Government. The Opposition, particularly the Labour Party, will hold them accountable for the fate of that bet.


Last Updated: 14/09/2010 14:43:02 First Page Previous Page Page of 129 Next Page Last Page