Thursday, 17 April 1986
Dáil Eireann Debate
Mr. McGahon: I listened last evening to the lamentations of Deputy Lyons. I shall make my lamentations, too, but I shall not require two hours to do so. On the Adjournment last evening I was contrasting the lack of help given in the Border region with the help given to the Cork region. Nobody living along the Border doubts that we are the under-privileged area of this country and that we have been so for the past 17 years. We have borne the brunt of the Ulster troubles on behalf of the Irish nation and have had no compensation good, bad, or indifferent from any Government in the recent past, my own included.
The area I represent has virtually withered to economic extinction. It is a question of how much more we can take. The biggest town in Ireland, Dundalk, has practically ground to a halt. In the past 18 months we have had closure after closure. Dundalk was, for many years, the home of the footwear industry. At one time over 1,500 people were employed in this industry which is now virtually extinct. In 1985 we saw the closure of Clark's factory, an industry which has helped sustain Dundalk for over 40 years and which at one time employed 1,200 workers. Today there are less than 300 workers in the remnants of the footwear industry in Dundalk. That has been a terrible blow to the town, allied to the continuing demise of other industries in the town. Last year we lost a concern that had been in business in the town for at least 150 years. We had six  closures last year. The only people who are active in Dundalk are the receivers and their staffs who occupy the best hotels in the town. That has been the tale of woe that began with the Ulster troubles and was helped along by the dubbing of the name “El Paso” on my town by an irresponsible English journalist out to get a catchy headline.
The same could be said of most of the towns along the Border. Have the Government any policy in relation to the Border areas? These areas were clearly identified in the 1984 report of the European Economic and Social Council who identified the Border regions as being among the most under privileged in Europe. Something must be done to help those areas. One of our problems is the lack of a lobby, and a lack of involvement at cabinet level. We have not a high profile in the Border region and I believe that there is a tacit belief at Cabinet level that, because of the Ulster troubles, the Border region is expendable. Nobody has ever actually said that, but I believe that is the reality. If that is so, it is an awful indictment of successive Governments. The pendulum of deprivation that 20 years ago pointed in the direction of the west has today swung towards the northeast.
My county is the smallest county in Ireland with the two largest urban centres, Dundalk with a population of 30,000, and Drogheda with a population of 26,000. Those areas have borne the brunt of the Ulster troubles. We have lofty crusades carried out in the media and we have the Anglo-Irish Agreement which reads very well, but we have no practical help for an area that has been devastated by the awful atrocities that have happened in Ulster. My town has withered to economic extinction. There are over 4,000 people unemployed in Dundalk. In Ardee there are over 1,200 people unemployed, an even higher percentage per head of population. Nothing has been done.
Yesterday evening I had to listen to Deputy Lyons shedding tears on behalf of his area. I wonder did he ever come to the Border. Not many people do.  Nobody goes home through Dundalk. Therefore, the deprivation and economic hardship felt there is not seen on one's journey home. Whatever money is available, if it does not go to Dublin, it goes to Cork, Galway, Waterford or Limerick. The area which is in desperate need of help has been neglected shamefully over the past 17 years to such an extent that perhaps the people in the Border region might be better on the other side of it, given the economic advantages of living across the Border. Indeed, the moneys to bolster and help business people in their endeavours to create industry are available.
To give an example, this week I had a young man in Dublin seeking help to establish a hotel in the Border area. He was offered virtually peanuts by way of help from the Irish Government, while across the Border over £400,000, 33 per cent of his entire need, was available for him to build a hotel in the Six Counties. That is the scenario along the Border. Indeed, there is poaching from across the Border by Ledu and some of the other industries that have been set up to help create employment in the North. Inducements are being offered to South of Ireland business people living along the Border route to transfer their place of business to the North where the advantages as compared to here are unbelievable. We have the same situation in Dundalk and in other Border areas. South of Ireland retail businessmen are going across the Border to try to catch a share of the large harvest of South of Ireland trippers who are going across the Border daily. One County Louth firm has actually purchased a hotel in County Armagh. Several Dundalk shopkeepers have purchased shops in Newry because they cannot continue in the deprived and crippled town of Dundalk.
You may think, a Leas-Cheann Comhairle, that I am over-stating the problem. I am not. The scene in Dundalk beggars description. Until last Christmas the shopkeepers of Dundalk, some of whom could not pay the rates, have had to witness cavalcades of buses, cars, pony and  traps and so on going through the town of Dundalk on their way to the Border. We have had closure after closure of petrol stations. It is impossible to sell petrol in the Border region and two national companies engaged in the petrol business have closed down their outlets in the Border region. I have been told by many small petrol retailers that people ask for 50p worth of petrol to get them to the Border. How can business survive in that area?
In the townland of Carrigasticken, South Armagh, between Forkhill and Dundalk, a new village has emerged. In an area where there was not even one shop we now have three petrol stations, an off-licence, a shoe shop and a grocer's. This village has emerged in this quiet backwater as a result of this Government's policies and their crippling rates of excise and other duties. The business people in Dundalk are finding it impossible to remain in business because of unfair competition. Over the past few years tour operators have been running tours from every hamlet in Ireland, from as far away as Cork and Kerry to the North. Again, the Government stood idly by and did nothing.
We have no definite border policy. We do not have any policy which would bolster industry or economic activity during these very difficult years. We have borne the brunt of the troubles in the North of Ireland and no compensation was paid whereas across the Border the British Government have pumped money into the Border towns to alleviate the troubles. Community halls, leisure centres, a swimming pool in Newry, libraries and various other public amenities have been provided by the British Government which helped to cushion the effects of the atrocities perpetrated by the IRA and the UDA. There are buses leaving Dundalk to bring people to the swimming pool in Newry because we do not have such facilities in our town. We have sweet Fanny Adams.
I cannot help but contrast the help given to Cork in the recent past and the extent of their lobby in Dáil Éireann with what is happening in Dundalk. While  Cork people have had difficulties recently, over the past 20 years many new industries were set up there through sheer political expediency. It was a question of asking people in what part of Cork they wanted the factory built. This happened because of the powerful lobby in Cork, the fact that a previous Taoiseach and a present eminent man in this Government live in Cork, and that they returned ten Deputies. It is shameful for any Government to ignore what has happened in the Border regions.
Time is running out for the 24th Dáil. This is the fourth year I had to stand here and relate virtually the same story. The reality is that in Dundalk there are more people employed in the public sector than there are in manufacturing industry. That is a sad fact of life in 1986 when one remembers that in the last century Dundalk led the field in manufacturing activity. In the past four years I have itemised the need for help in that area, but I am beginning to despair that anyone will ever listen to me. Drogheda was promised money more than a year ago to help lift two wharves out of the river Boyne. Outside of the port of Dublin, Drogheda has the greatest freight activity and two wharves have subsided into the Boyne. This is a great impediment to trade. As I said, we were promised money more than a year ago but it has not materialised. Meanwhile the two wharves are still in the Boyne.
Clogher Head is the third most important fishing village in the country and people have been waiting for more than 100 years for a new harbour. There are 31 fishing vessels fishing out of Clogher Head, but there is only room to accommodate 17 vessels, with the result that 13 boats have to drop their catch in Howth and the catch is credited to the port they enter. The Red Sail fishing factory in Clogher Head employs more than 100 people and, if the long promised harbour was provided, they could double their workforce. Clogher Head has been visited by seven or eight Ministers. They have all come, looked around and come back to Dublin, but nothing was done. The existing harbour was built by the  British and it has subsided, with part of it lying in the sea. There is a crying need for help for Clogher Head and I call on the Government to do something for that area.
In Ardee, there is virtually no hope for the unemployed. Despite the efforts of the IDA, nobody has been willing to set up a business in that area where more than 1,200 people are unemployed. Recently a ray of hope was given to the people there. A local businessman bought the Castleguard factory which at one time employed many people. His plan is to open cluster units for skilled young entrepreneurs. I hope some State aid will be forthcoming for this venture.
Dundalk is the biggest town in Ireland, but there has been no economic movement of any kind there, and it is still not designated as a disadvantaged area. I find this incredible. Some years ago when the north Louth region was buoyant, the adjoining counties of Monaghan and Cavan were deservedly made disadvantaged areas. They took advantage of that, but now the pendulum has swung to such an extent that they have prospered through the creation of rural co-operative movements. In Cavan and Monaghan there are many buoyant, vibrant co-operative movements and yet my area has not been made a disadvantaged area. I find that almost impossible to believe.
Are the Government not aware of the deprivation in that area? Can they not see the advantages of making that an area for which a special task force could be created? In my four years here I have asked continually for the creation of a special task force for the Border region as was given to Cork. Within the IDA, Dundalk is the very last port of call for any visiting industrialist. Why should that be so? Why should visiting industrialists be taken to the more glamorous regions such as Galway and various cities and Dundalk be left last? At times industrialists are not even brought to Dundalk. That is incomprehensible.
I want to refer to what I regard as a shocking waste of public money in the Border region. Road blocks are part and  parcel of everyday life in Dundalk and other parts along the Border, but I want to refer specifically to Dundalk. We are very conscious and fearful in the Border region of the security threat posed to the Border areas by the continuing unrest and the new source of unrest in the North posed by the Protestant paramilitaries. We will probably be the first port of call. If a terrible event such as a bombing were to occur, it would be most likely be in Dundalk as happened in 1972. However, we must witness the spectacle of these road-blocks being set up on the Newry road and in the past six months the Irish Army have been withdrawn from these road-blocks and are nowhere to be seen. They have been replaced by the Garda Síochána. I am very thankful for a certain amount of surveillance in the area but I think it a shocking waste of money and of the resources of the Garda Síochána. The Irish Army are not over-burdened in their daily routine——
An Leas-Cheann Comhairle: I appreciate your concern for the financial side of this project but basically we are talking about the Finance Bill. That other matter would be for the Department of Defence. A passing reference only is the permissible.
Mr. McGahon: I want to refer to the desirability in an economic sense of bringing the gas pipeline to the Border area. The British Government pulled out of the proposed venture but, before they pulled out, they had committed and paid over to the Irish Exchequer the sum of £6 million. Some effort was made to recoup that, but I hope that the Irish Government do not give them back a penny because their departure from that scheme was in character with most of their other activities in this country. It is deplorable that, having embarked on a scheme of this nature which would benefit both sides of the Border, they pulled out at such short notice when the plans for bringing the gas grid to the Border area were very far advanced.
I call on the Government to continue with the plan to bring that gas pipeline to Dundalk to enable Dundalk to compete in the industrial area with the other areas which have benefited from the provision of the gas pipeline and will benefit in future. The Government have received a special subsidy of £23 million from the EC and that, allied to a previous subsidy of £8 million, plus the £6 million Britain have paid would mean that the Irish Government would have to provide only about £2 million to £3 million. It is highly desirable that those announcements should be made now and not in next year's budget, and that a pipeline be provided and brought to Dundalk and right across to Monaghan and Cavan. This can give fresh hope to the beleagured people  who are left in business in the Border region.
In recent times I have been asking that the port of Greenore be made a free port. Greenore is on one point at Carlingford Lough on the southern side. I suggest that some type of initiative involving a cross-Border venture with Warrenpoint on the other side of the Lough and Greenore on our side enjoying the international waters of Carlingford Lough and both sides enjoying free port status would be an apt and useful vehicle for a "hands across the Border" operation in the light of the success of the Anglo-Irish Agreement. If a submission of this nature was put to the EC it would receive favourable help. Ventures of this nature in cross-Border economic communications can help to bring peace to the area. The economic benefits of such a development would be a great help to the region. The Government have plans for Ringaskiddy, again County Cork, while my county gets sweet Fanny Adams.
On a national basis the twin problems that confront this country are taxation and unemployment. Despite the best efforts of every Government the unemployment figures continue to rise to the extent of 237,000 officially on the list today. I wonder how many of those people, while most are genuine social welfare recipients, are double jobbers. That brings me to the social welfare scenario and the amount of money being lost to the Exchequer through fraudulent claims. A recent series of articles in the Sunday Independent and in the Evening Herald last week——
An Leas-Cheann Comhairle: Again I appreciate your concern for money but again you are moving into another frontier, the Department of Social Welfare. I would appreciate your co-operation. I know of your concern for this question, but I ask you to confine yourself to the Finance Bill.
Mr. McGahon: I wish to mention ways in which that burden can be eased. Instead of closing hospitals and increasing the burden of taxation on PAYE workers, perhaps we could save money by eliminating the frauds to which I have referred which could be as high as £150 million, a shocking drain on the economy. The old stereotype methods of reducing unemployment figures by schemes run by various agencies are stopgap remedies and are basically 20th century relief schemes. Many of the children who take part in these schemes are totally frustrated because there is no con-tinuity——
Mr. McGahon: A radical re-appraisal of the measures which have been used up  to now to redress the problem of unemployment is needed. One method which would help would be the abolition of overtime and the promotion of job sharing. In some areas job sharing is virtually impossible because of the growth of technology and automation and, as they develop further, unemployment figures will continue to rise regardless of what Government are in office. That is why we must look at the possibility of job sharing, although it will be resisted by those who have jobs. The Government should also initiate an attractive tax free retirement scheme for those in the public service which would enable them to retire at 55 years of age. Jobs can be created in the public service and if those who have reared their families had the prospect of tax free inducements to allow them to retire early they would do so to make way for younger people. It is the only hope of employment in an automated world.
A total of 130,000 young people will sit for the leaving certificate this year. What hope is there for them? Deputy Lyons referred yesterday to the increasing number of people who are emigrating, some blindly, to London and other English cities.
The Government must do something positive for the Border regions. In my town a submission was made to the Government to help resuscitate the S & S company which foundered last year, dealing a crucial blow to Dundalk. The S & S was a subsidiary of an American company which went into receivership in Brooklyn although it was extremely viable in Dundalk. It was in existence in the town for 17 years and 15 of those years were profitable. The company employed 330 people, all male, many of them married. The collapse of the parent company in America brought an immediate closure which was a devastating psychological blow to Dundalk. Due to the efforts of two highly skilled businessmen in the area, a submission was put together  and an application made to the Government for help which, by today's standards, was petty cash. Tragically, that help was not forthcoming.
Last night I went to the Minister, Deputy Noonan, virtually on my knees asking for help for a company that I know to be viable. The proposals were to repay in a relatively short time any money which would be given to re-employ most of the 300 workers. I know the amount of money involved but I do not wish to divulge it in the House. However, it is incredible that the money was refused. If help is not given to my town and region I will not be standing at the next election. I came into politics in middle age. I am not over enamoured by it and I am disappointed, disillusioned and frustrated by the lack of help given to my county. It has no priority in the order of things here. It is shameful that a Border region has been neglected to such an extent and unless help is forthcoming I will not be standing in the next election. I will not do so because I consider I will have failed my region. Help should come for what I believe to be a very viable proposition. This is not a pie in the sky submission but a call for a definite plan for survival in that region. If the Irish Government refuse any longer to help the devastated and crippled region of Dundalk and north County Louth they will have to get another candidate for the next election.
Tomás Mac Giolla: My argument with the Chair yesterday concerned the calling of Deputy Lyons when I had been informed by the Chair earlier that I was to  be the next speaker. However, Deputy Lyons was called before me. Deputy McGahon followed Deputy Lyons and I expected to be called next.
An Leas-Cheann Comhairle: Wednesday was yesterday and today is Thursday and I was not involved in the difference of opinion the Deputy had with the Chair yesterday. As of now the Chair will be calling Deputy Hyland, Deputy Cosgrave and Deputy Mac Giolla in that order. I would be grateful if the Deputy would accept the ruling of the Chair on that.
An Leas-Cheann Comhairle: I cannot change my decision and I am sorry about that. If the Deputy has an appointment at 12.15 the Chair does not have any control over that. The Deputy should allow Deputy Hyland to commence and after he and Deputy Cosgrave have concluded I will call on him.
Mr. Hyland: I should like to preface my remarks by identifying the function and purpose of the budget debate and that on the subsequent Finance Bill. In my opinion those debates should be an exercise in stocktaking and a review of the performance of the economy over the previous 12 months. They should be an occasion for the taking of positive action to correct undesirable economic trends and, more important, planning for future positive development. Having re-read the Budget Statement of the previous Minister and listened attentively to the present Minister's speech on the Bill, I must say that the Minister went some of the way towards identifying some of our problems. However, they did not do very much by way of putting forward credible solutions. Some of the areas identified by the Minister will not improve. In fact,  they will deteriorate further as a result of the proposals in the Bill.
There is a growing sense of despondency on the part of our people at the inability of the Government to find any solution to our economic and social problems. Following the failures of the Government in the past three years, people looked forward to the 1986 budget in the hope that the Minister would take some positive steps to deal with the problems. The Government followed for three years an economic philosophy that was a total failure. The publicity surrounding the budget and the Finance Bill has died down and the public, and the House, have had time to analyse the effects of the budget and the contents of the Bill in 1986. We must realise that the Bill gives statutory effect to the provisions outlined in the budget. In the course of his budget speech the Minister outlined his three objectives for the economy in 1986 and put forward proposals to achieve those objectives. He said that the budget was one the economy required at this time, but it was on that point that his entire economic argument went astray. It is to be regretted that his analysis of the state of the economy, the plight of our people and his lack of understanding have, from the word go, clouded his vision of the remedies that are necessary but are not in the Bill.
I am inclined to believe that the skill of ministerial scriptwriters is more important than the exercise of factual analysis and sound economic projections which is what the budget and the Finance Bill should be about. In the course of this debate Members analyse the performance of the Government in the past three years. The Chair may remind me that the Finance Bill deals with proposals for 1986 but there is nothing in it that will give us a ray of hope for this year. Under all headings, unemployment, factory closures, recession in the construction industry, recession in the agricultural industry, closure of hospitals, the undermining of our education system and the sabotage of our health services, the Finance Bill should put forward proposals  but there is nothing in it to resolve the problems that exist in those areas.
That is what the Minister said in his Budget Statement on 29 January 1986 at column 932 of the Official Report to which the Finance Bill is the follow up. One would have expected that a Minister in a Government in what must surely be their last year in office——and that is not an optimistic forecast——would have brought forward a plan which not alone identified our social and economic problems but put forward realistic solutions by way of tackling them. The time has come at least to commence tackling the economy under the headings to which I have referred. There is absolutely no indication in the Finance Bill that any of the measures outlined by the Minister will do anything by way of seriously tackling those problems. The Minister's explanation for being unable to do what is necessary was lack of resources. He said that because of lack of resources it was not possible to embark on a more progressive development programme. That statement, of its very nature, is a condemnation of the Minister's and the Government's handling of the economy over a disastrous almost three and a half years.
One does not need to be an economic or political analyst to recognise that under almost every heading for which this Government have been responsible during that period, the result has been a disastrous failure. That failure is reflected not alone in Government statistics, with which they seem to be obsessed, but more tragically in the human misery of unemployment and declining living standards, the direct result of Government policy or  perhaps, more accurately, lack of Government policies.
Can any Member of this House recall when it was necessary for voluntary organisations like St. Vincent de Paul, Cherish, Alone. The Samaritans to go public expressing their concern about the human and social problems daily confronting them in their committed task with regards to community welfare? It is true that, in the Finance Bill, the Minister did go some little way in providing minimal assistance for some of those organisations. It is interesting to note that in the Minister's political motivation in giving token recognition to a number of these organisations, he chose to ignore the most pressed and certainly the most deserving. In doing so he turned his back on those who had fallen on hard times who, in many instances, are the victims of this Government's maladministration.
I put it to the Minister that, in his allocation of resources under this heading, there must and should be priorities in the allocation of public money. I give it as my view that the Government's insensitivity in this crucial area is an example and a symptom of Government isolation from the real problems of the day which have been reflected in their cold, monetarist policies over the past three and a half years. Many of these organisations depend solely on the generosity of our people. Public generosity in this area reflects public concern and long may it remain. It should also be an indication to the Government of the public support for these people and organisations. I do not know of any more accurate barometer for assessing public attitudes than when they put their hands in their pockets and contribute to the work of voluntary organisations.
Their generosity is positive proof that they would expect the national Government to respond in a similar way. We are extremely lucky that we still have people who are generous, who are willing to give of their time. I say that particularly at a time when, generally speaking, reward for work is measured in monetary terms. It is heartening that we still retain that commitment and dedication. My regret  and concern are that that level of commitment has not been reflected in the provisions of this Finance Bill by way of Government recognition of the contribution made by those people.
The second requirement to which the Minister referred was the need, as he put it, to reduce the current deficit. It is interesting to note that the former Minister for Finance made the same point in his budgetary statements over the past three years, when he blamed Fianna Fáil for the deficit, saying it had been inherited from the previous administration. One must ask: what deficit is the Minister speaking about in the Finance Bill we are now debating? He referred to a deficit, the highest and most damaging in the history of the State, which has been increasing by £2 billion annually since this Government assumed office three and a half years ago.
I sat in for part of the debate last evening when I heard some Government back-benchers shouting about the mess the Government had inherited from Fianna Fáil, when they made a lot of play about the extent of the deficit. Let it be clearly put on record that every year since this Government came into power that deficit increased by £2 billion. The time has come for the Government to face reality, to stop blaming Fianna Fáil, to face up to the promises given and the expectations built up in the minds of the electorate before the last general election.
We hear a lot of talk about credibility in the implementation of Government policies. It is not an unfair question for me to pose from this side of the House: where is the credibility in relation to the promises made before the last general election? Neither is it unfair to ask the Government: where are the plans and projections for the economic recovery promised and which we were led to believe would augur the commencement of economic development? They are absent. There is no provision in this Finance Bill which will do anything to redress the recession which has grown deeper since this Government assumed office. The Minister now in the House was not  present for the opening of my contribution but I listed approximately ten major areas of potential economic development in respect of which this Government have been a total failure.
All the Minister's attempted analyses and explanations ring hollow as those promises and hopes are buried in the debris of the Government's economic failures. It does not matter how many attempts the Minister may make to gloss over the Government's failures; the reality is reflected daily in the lives of our people. No amount of public relations on the part of the Government can cover their failures over a relatively long period in office.
The Government's PR machine is despicable particularly in their TV advertising campaign on which public money is being used night after night to give a false image to the Government's performance. Has the Minister for Finance any idea of the scorn and contempt with which their propaganda programmes are looked on by the people? Are they aware of the attitude of people who sit by their firesides, if they are lucky to have fires, looking at those programmes and knowing that work is impossible to find which would help them to provide some sort of living standards for their families. Our children are leaving schools with little hope of jobs.
We all acknowledge that to some extent there is still a European and perhaps world recession and that inevitably this is having its effect here. We appreciate that the recession slows down possibilities of foreign investment here, but why, even at this late stage, can we not make the most of the great natural resources we have? Why have we not developed our great agricultural industry, our forestry, food processing, horticulture and coal mining? Why are we not making provision for the develop ment of our vast resource in cutaway bogs to replace the successful Bord na Móna enterprise which has served the country for so long? Will we leave the development of our cutaway bogs until our peat resources have been exhausted within the next eight or nine years?
 We should have been finding alternative employment for the thousands of workers in Bord na Móna before our peat resources run out. However, the Government apparently have no plans to deal with the phasing out of Bord na Móna and the finding of alternative jobs for those who will become redundant as a result.
In these circumstances the development of our forestry becomes relevant. Many thousands of our people could be employed almost overnight in the development of our forestry which is low in capital requirements and high in employment content. As I have said, if there were the commitment and the political will to do it, many thousands of jobs could be created and developed in forestry, but we know that those who manage our affairs have no commitment to this obvious area for development.
To some extent I blame backbenchers, including me, for allowing this situation to continue. I have no hesitation in saying that the Government are against natural resource exploitation and against rural Ireland and I blame the backbenchers on the Government side for allowing this to continue. The thinking of this Government is urban oriented and this has become obvious in the past two or three years. The sooner Government Deputies make a case for the survival of our rural areas, the sooner we will get a resolution of the imbalance we are suffering from.
Acting Chairman (Mr. Carey): I am sympathetic to the rural areas but I would remind the Deputy that this is the Finance Bill, 1986, and that we should be dealing with taxation proposals and their effects.
Mr. Hyland: I accept that, but the Finance Bill makes provision for urban renewal, and the Minister referred to it in his introductory speech. I am making the case that urban renewal should not take place if it means neglecting rural development. Therefore, I consider that I am entitled to make these comments. I will give one example of this lack of  commitment to rural areas. It is the Government's unwillingness to make money available to local authorities for essential repair works. The Minister referred to local authorities and the lack of funding for them. One example of this Government's reckless and irresponsible disregard for national development is their lack of investment in infrastructure throughout the country. They have allowed the roads to deteriorate to the level of ten years ago. During 1986 roads will be closed to the public because they are not passable — they cannot be used by traffic. The Minister referred to the availability of resources for countrywide development but they ignore the most obvious areas of all, the local authorities.
Other speakers have said that our national investment in the road network over many years is being underminded and eroded because of our lack of financial commitment. Such behaviour is penny wise and pound foolish. Taxpayers contributed over a long time to build up the road network and the investment is being lost because of our failure to make available a minimal amount of money for road maintenance. Last year we had a by-election in my constituency of Laois-Offaly and the people would certainly welcome the return of the Government Ministers in their Mercedes cars who promised that money would be available to Laois County Council to bring the roads up to an acceptable standard. While they were in the constituency the difficulties of our people in relation to the road network were brought to their notice. We would welcome the return of those gentlemen to the county to witness the further deterioration of the roads.
Laois County Council will not tolerate the continuation of the situation where decent, hard working people are marooned in their homes, children must walk ankle-high through water on their way to schools, where milk cannot be collected from farms and doctors find it impossible to attend the sick. All this is happening at a time when council roadworkers are on short-time, public lighting has to be turned off and a Government Minister compels the council to apply  a level of service charges which is unrealistic and cannot be collected. The Minister referred to that aspect of local government administration.
The Minister decided in the budget to victimise those people further through increased motor taxation and dearer petrol, yet the people who have to pay these charges have not the benefit of a suitable road network. Is it the Minister's intention to make adequate funding available to all local authorites for the purpose of keeping roadworkers in full time employment, or are we to revert to the farcical situation which obtained in 1985 when we had no money to keep people in employment but another Minister in another Department had a seemingly endless source of money available to keep people unemployed? When will the Minister for Finance seriously tackle this very obvious area of economic management?
One Minister states that there is no money available for productive employment, yet the Minister for Social Welfare has the resources to pay unemployment benefit and assistance to people who cannot get employment. Anybody who has has even the remotest interest in economics or the smallest feeling for economic management must realise that this area of public funding must be tackled so that there is a transfer of money from the Department of Social Welfare to, for example, the Department of the Environment so that roadworkers could be kept in full, productive employment. For some strange reason, no Minister for Finance has yet tackled that problem.
I wish to refer to the plight of SDA mortgage holders, people who borrowed in good times to build a house and provide a home for their family. At that time the breadwinner and his wife were, perhaps, both in employment and they did not envisage any great difficulty in meeting their loan repayments. The Minister referred to this subject in his speech and I had hoped he would give some relief to these decent, hard working people who are humiliated and embarrassed because they cannot now meet their  housing loan repayments. I ask the Minister when replying to say something about this very serious matter. He should make some provision in the Bill for the allocation of funds to local authorities to be utilised to acquire some of those houses; alternatively, the borrowers should be transferred from the SDA scheme to the HFA loan scheme so that their repayments could be related to their income.
Acting Chairman: The same latitude is not allowed as on a budget debate. This Bill deals with the part of the budget which concerns taxation. The aspects with which you have been dealing are mainly concerned with the Department of the Environment and would be more properly debated on the Estimate for the Department. You are allowed a passing reference to such expenditure but this is not a debate on the Department of the Environment. I ask the Deputy to deal with taxation and related matters.
Mr. Hyland: I appreciate that. The Minister said he was broadening the scope of his speech to take other aspects of the economy into consideration. I appreciate that the Chair is being generous in his intepretation and I will keep as closely as I can to the guidelines.
Taxation on petrol has a direct bearing on employment and economic development generally. The Minister made much of the point that, since petrol prices are declining, he expects a boost to the economy. It should be borne in mind that VAT on petrol in the past three years, despite declining prices on the petrol market, has increased from 49 to 67 per cent. This has resulted in a falling off in petrol consumption and this means, as in other areas of taxation, that we have  reached the law of diminishing returns. It is very regrettable that the Government did not see fit to pass on to the consumer all of the benefit of the world price reduction in petrol, as happened in almost every other European economy. Part of the reduced price was taken up by way of increased taxation.
In his Budget Statement the Minister forecast the creation of 10,000 jobs in 1986. Obviously, we all welcome any assurance in the matter of job creation but how can we believe the Minister? Is there anything in the Finance Bill which will result in the creation of any job this year? In his contribution to the budget debate, the Taoiseach admitted that unemployment would increase further during the year so his statement is in direct contradiction to the statement of the Minister in this regard. Of course I should like to hope that the Minister's prediction is correct but so far I have not been given any reason for such optimism. We cannot but have regard to the promises made during the past three years in the matter of job creation. Are we to overlook the fact that during that time 100,000 people had emigrated? Neither can we lose sight of the fact that there is a decline in the number of people who have money to invest. Because of the insecure economic climate of recent years people were not prepared to invest their money in any kind of productive enterprise or development. Many took their money out of the country and invested it elsewhere.
The area of investment is an important barometer in assessing public reaction to Government policies. What has been happening in the past few years is that people who otherwise would have a commitment to national investment and to the expansion of our economy have decided either not to invest or to take their money elsewhere. One of the biggest factors in that situation has been our high level of taxation, the highest in the EC. This has been the case despite the fact that one of the Government's major platforms was a promise of a worthwhile reform of taxation. Yet in those dying  days of the Government there has been no major reform in this area.
The Minister dealt at considerable length with the variations in the tax code and claimed these would give some relief to the PAYE sector. That sector are entitled to have the burden of taxation spread more widely in the interest of enjoying some relief. When the Government reclaim by way of direct taxation up to half of a worker's wages, it is obvious that there is a pressing problem in this area.
I referred earlier to the Minister's intention, as expressed in his Budget Statement, to tax the income of charitable organisations. This is a despicable proposal having regard to the commitment of the people involved in those organisations. However, I am glad to say that due to the pressure of public opinion and the strong views expressed in this House that they have decided, to some extent at least, to redress that problem.
It is interesting to note that the only reference in the Minister's Budget Statement to agriculture, our greatest single industry, is a reference to farm tax. To refer to farm taxation in the context of the present state of the agricultural industry is nothing short of an insult. With the possible exception of dairying, all the agricultural enterprises are losing money in terms of income. I am a member of an ACOT committee and have always been interested in the development of that industry, not only from the point of view of the farmers but because of its potential to generate economic activity nationally. If the agricultural industry is expanding, the spinoff will reflect itself throughout the economy. It is not fully appreciated in this House — and I challenge any Member to say that I am misrepresenting the situation — that every farming enterprise, with the exception of dairying, is making a loss. Not enough is being said about that in this House and the Government are not taking enough action to face up to that serious situation.
As far as the dairy industry is concerned, because of an EC restriction on expansion in dairying there is no scope or  hope for any further development under that heading. I hope the Taoiseach will speak on this Bill, will recognise that there is a serious problem in agriculture and will spell out for us what kind of salvage plan will be introduced to save that valuable industry. Every backbencher knows, from his constant and regular contacts with the people in the agricultural industry, that they are now in a crisis. by way of passing reference, added to that, as the acting chairman knows, we are having an exceptionally late spring, with exceptionally slow growth, resulting in a serious fodder shortage. I am sad to have to say that a number of livestock are dying now from malnutrition. The unavailability of foodstuffs must be of great concern to us all. I say with the utmost sincerity that something should be done to try to find a solution to that problem.
There are others who want to contribute to this debate and I do not wish to dominate the scene. I referred initially to the importance of developing our national resources. The technological advances throughout the world in relation to development generally, welcome though these may be, have come at a great price in terms of job creation. I hold strong views that there is now scope for a serious return to the old Sinn Féin philosophy of developing what we have ourselves first. Somehow, we lost our way along the road and became blinded and bewildered by all the technological changes taking place around the world. We neglected our potential which should have been the base from which all other economic development evolved, the potential for the development of agriculture, of food processing. It is nothing short of a disgrace that in a country which has agriculture as its main base, we have failed to develop a food processing industry. By that failure we have also failed to capitalise on the potential of the agricultural industry generally for job creation. I express an ardent desire that this Government should at least commence to tackle the problem of food imports and develop our potential for the generation of employment.
 I shall conclude with these perhaps scattered remarks in relation to the future of our country and where we are going. It is extremely important at this time that we concentrate our efforts, in the first instance, mainly on economic activity which will create employment. There is no point in creating artificial employment. That is no better in the long term than paying unemployment assistance or unemployment benefit. A great commitment is expected and needed from consumers generally in relation to purchasing the produce of Irish workers. Without that commitment, no programme for economic development can succeed. That commitment is even more important in the context of our membership of the European Community.
Mr. L.T. Cosgrave: I should like to contribute briefly to this debate on the Finance Bill which gives effect to some of the measures announced last January in the budget. Some of the items have been added to and some changed in certain areas, and this is as it should be. In general, the budget points out roughly how the Government see various problems and gives the measures they are taking in relation to raising revenue giving incentives and so on.
Since January, we have seen improvements in certain areas. When this Bill is going through the House it is important that the momentum which we have already seen is maintained. We have also seen a fall in the price of petrol. I would ask the Minister to give these reductions back to the motorist. I was going to call motoring a hobby but it is not a hobby. Many people who drive a car have to and they have to take on the various costs of insurance, petrol, taxation and so on and, apart from providing food for a family or paying a mortgage, running a car is one of the most expensive items. I hope any further reduction in the price of petrol will be passed on to the motorist. I know petrol is one of the old reliables and probably goes some way towards making up the Minister's books, but motorists deserve some respite.
 We cannot examine any one area without having regard to the financial position of the country and the amount of money that goes back to servicing the debt which we have and which we cannot walk away from. We are going to have to live with that for some time to come. But within that framework we have to move further, hopefully faster, along the road to improving the taxation system and improving the lot of the taxpayer. I certainly agree with what the previous speaker said about employment. We must now look at other areas that we have not looked at before and develop them to their full potential. The IDA and other bodies should look more closely at the possibility of getting small numbers of people involved in various projects rather than trying to bring in various multinationals or conglomorates — they have and will continue to have an important role to play here but at times they have run into problems and have devastated some areas.
We cannot talk about the taxation system without remembering the difficulties that exist. If tax relief is to be given, taxes have to be raised in another area or cuts have to be made somewhere else. There is no magic wand that we can wave and suddenly come up with £100 million or £200 million. But the taxation measures introduced in the budget are a start down this road. The reduction down to 58 per cent may be what some people would consider a marginal reduction but at least it is a start. Over the next few years we have to try to get down to an attainable target of, possibly, 50 per cent maximum tax rate. We are all aware that 60 per cent plus PRSI and levies and so on, on not excessive incomes was punitive. In those circumstances it is easy to understand why people who get into difficulties wonder would it be more profitable not to work, to collect social welfare benefits and do so-called nixers, getting money into their back pocket and, possibly, do every it as well as if they continued working. If we do not give back to people quite a large amount of their take-home pay with at least the  option to spend it where they will, there will be no incentive to work.
The reality is that money circulates and people spend money in various areas. It would be a good thing if we could work towards a situation where middle income people, in particular, would be taking home a large percentage of their gross pay. We have to move and keep up the momentum in relation to the progress that we have made in the taxation system. Perhaps we have not moved quickly enough, but we must remember the financial situation that we have to live with. I am glad to say that certain progress has been made. The 1 per cent levy was abolished. I hope that next year we can go further down the road of progress in the taxation system.
Another item which caused quite a lot of talk was the deposit interest retention tax and the new procedures being applied to banks, building societies and other financial institutions. It was important to get a certain conformity between the various institutions. The problem is that in the effort to do this, to help to get extra revenue and ensure that people paid tax on moneys which otherwise might never be seen by the tax man, genuine accounts are being hit. I refer in particular to charities and senior citizens and people who would not normally be liable to tax. I am glad that the Minister has looked fully at this and decided that charities that have been prescribed by the Revenue Commissioners will now be able to get this money back. Many of these charities do very good work and therefore it is important that the money they raise should not be taxed.
I am also glad to see that certain provision has been made for our senior citizens. I hope this can be done in an efficient and effective manner and that the banks and the Revenue Commissioners will play their part in easing this procedure of reclaiming tax for our senior citizens because some of the forms involved are quite daunting for people who never had much dealings with them. I hope this form can be made quite simple and that there will be a separate area in the Revenue Commissioners to deal with  them. The situation in regard to the charities is probably quite simple because, while there are quite a number of them, they would have the manpower and the expertise and there is probably a definite list. But it is hard to estimate the number of people over 65 or people who, because of their incapacity, can reclaim this tax. Let us hope that the banks will be able to assist individuals and the Revenue Commissioners.
It will be in everybody's interest if there are discussions between the Revenue Commissioners and the financial institutions to ensure that people who are trying to reclaim this money are facilitated as much as possible. It would not be fair to have senior citizens queueing in tax offices or going from one tax office to another trying to reclaim their money. I hope this question will be looked at again. Perhaps a special section will be set up, or a few individuals in a tax office will deal specifically with this problem, that there will be a common form and a common approach between the banks, the building societies and others to ensure that these people will get their money back without having to get involved in a great deal of bureaucratic paper work.
The object of this Bill is to bring the banks and the building societies into line, but where does that leave the Post Office? Should there be a move to bring the Post Office into line? Do they have a fair or unfair advantage? I understand there are savings certificates which are tax free. It is important that all the financial institutions should be looked at in the same way because they are all competing for the same money. Obviously there must be certain rules and regulations, and also security is involved. In recent times one or two financial institutions got into difficulties and people who could not afford it lost money.
I want to deal now with inner city renewal. It is important that the areas which have been listed—particularly the dock area — and the areas within, say, the circumference of a mile in the centre city, should be able to benefit from the reliefs proposed in this Bill. The fact that an area is slightly outside that border  should not debar it from getting reliefs. We should work to ensure that the spirit of the inner city is brought back. This Bill refers to other cities besides Dublin, but I am speaking about the Dublin inner city because it is the area I know best.
It is unfortunate that there is an overabundance of fast food outlets and places with gaming machines and similar activities in certain areas. I am referring specifically to an area like O'Connell Street which has deteriorated slightly. I hope that, as a result of this Bill, areas in the city centre will be rebuilt to provide offices, factories and other developments. I also hope there will be an extension of the policy being pursued by Dublin Corporation in relation to some of the very good schemes in and around the city centre. Obviously this will take time, but it is important that there should be a blend between offices and houses. We should work towards this end.
I hope the schemes announced will go some way towards giving the building industry a boost and providing jobs. The home improvement grants scheme has been a success and had the double advantage of giving a boost to the construction industry and ensuring that registered contractors, not the people in the black economy, benefited from this extra work. I hope the scheme announced in this Bill will go some way towards providing extra jobs and, more importantly, will give a lift to the city centre. There are problems in that area due to robberies and vandalism and it is very difficult to get insurance. I hope the policy of deploying gardaí on the ground will go some way towards benefiting the city centre.
I welcome the reduction in VAT on meals. With the oncoming legislation to change the licensing laws, I hope this will go some way towards giving our tourist industry a further boost. The VAT on newspapers was reduced last year and this year this reduction was extended to fortnightly papers, but we have to look at the high price of magazines and the unfair advantage some imported magazines have over home produced magazines. While we may not necessarily like, agree or read all or some of these magazines,  the fact is they play a part in society and give employment to journalists and those employed in the printing industry. In my view a case can be made for the Government to look at the VAT rate on magazines.
The measures announced in this Bill back the Government's commitment to the provision of jobs, to the taxation system and to improvements. While many people would like more progress to be made in the area of taxation, we must turn our minds to our biggest problem, that is, the creation of jobs. We have to look more closely at areas where machines are replacing people. I welcome the improvements in the taxation system. More can and must be done but at least we have made a start down that road. The changes in relation to the retention tax are to be welcomed on behalf of charities and for senior citizens.
Mr. Dowling: I welcome the opportunity of endorsing to some extent what I said after the budget presentation on a couple of important areas. I will begin by looking at the state of the economy in the lead up to the Budget Statement to which this Bill will give statutory effect, and the provisions in the Bill.
The budget targeting since this Government came to office has remained reasonably close to what was projected initially, unlike some of the projections made by previous administrations who went way outside them by very large percentages. Some Opposition backbenchers tend to forget that. Nevertheless, I am not suggesting that we are in a healthy position; we are far from that. It is most alarming that we still have such a high level of borrowing requirements. The Exchequer borrowing requirement now runs at 13 per cent of GNP and has shown only a very moderate reduction and is well above what was indicated in the plan, Building on Reality 1985-1987. If we had stuck to that plan perhaps it would be three times lower than at present. The  public sector borrowing requirement, which I regard as a better indicator of how the economy is performing, is improving. It was 20 per cent of GNP in 1980-81 and is now being reduced to 15.75 per cent of GNP. That is still a very high level of public sector borrowing and the Government and politicians must take serious note of it. No matter what Government come into office over the next ten or 15 years they will have to grapple with that major problem.
The economy continues to suffer the consequences of the excessive Government expenditure and borrowing policies in the late seventies and early eighties. Public sector indebtedness and borrowing are still suffocating the private sector with a tax system that is destroying the incentive to work. People demand reductions in taxation but it is exceedingly difficult to achieve any worthwhile reduction in taxation as long as we have that massive debt hanging over our heads and the inability of Governments to make any real, worthwhile inroad into it. Even the budget which gave rise to this Finance Bill has succeeded only very slightly in modifying that.
Let us look at some aspects of it. The public sector borrowing requirement which measures the amount of borrowing by the Government and the semi-State companies can be reduced only from 15.75 per cent to 14.5 per cent of GNP. That is very modest reduction. Examining the various efforts at reducing it and the growing anxieties and objections from various sectors at the reductions in public expenditure because it affects them and they are assisted by politicians in Opposition, one can see that unless we can secure a worthwhile reduction in public expenditure we will never be able to reduce the taxation levels to the point that will assist the growth of employment. That is a very serious matter.
Even though the Opposition spokesman suggested that we have now a higher level of borrowing than at any stage over the last number of years, one must look at it in the context of percentages of GNP which constitute a really important indicator. There has been a considerable  reduction, from 20.3 per cent in 1981 to 15.7 per cent in 1985. Allowing that the progress is slow, one would hold the view that perhaps in 1986 we did not continue with what we set out to achieve in previous years.
This year the tax revenue bill is considerable. The intention under this budget is to raise about £6 billion in tax revenue and to borrow a further £2.4 billion for public sector borrowing requirement just to meet normal day to day commitments. One must say to any Government that borrowing is postdated taxation. What you borrow today you pay for at some stage in the future. While with a great deal of public support we set out policies which would achieve a much lower level of borrowing, implementing them has not been possible even though people feel that over the last three and a half or four years the Government have been very severe and mean in their various policies. The level of achievement has been so minute that I do not no know where the economy is going unless all politicians and interested parties make a real, determined effort to reduce this level of debt. The public sector borrowing requirement is of the order of 13 or 14 per cent, about six times the size it is in Great Britain, an economy which is having difficulty, and one can conceive the difficulties we will have in trying to create the level of employment necessary and that everybody wants to achieve for a growing population.
One of this Government's major achievements is the bringing of inflation under control. Perhaps comments from the press, the public and various parties do not assign the measure of praise that the Government deserve for achieving that. In the early eighties nobody wanted to invest in business because there was no profit in it. People invested in real estate and land, the prices of which were pushed up. That was not productive investment. That situation has changed because investment in estate and lands now does not yield a worthwhile return and people in an open economy are always motivated by what they can get from an investment. I hope that matters  will remain that way and that we will be able to face the future with more confidence in that we will be able to attract a much greater level of investment into the private area, into private industry, into manufacturing industry. This Finance Bill and the budget provide considerable incentives in that area.
While there has been a shift in taxation from one sector to another, nobody can deny that there has been an increase in the overall level of taxation which will have the effect of increasing unemployment. Because of the circumstances which control the economy, the Government have very little scope to do anything about it since day to day expenditure must be met. Our biggest problem is the level of taxation and five sixths of taxation go to meet payments on borrowing. The Finance Bill reflects an attempt by the Government and the Minister to stimulate industry by a resonable level of incentive in line with industrial policy which is commendable.
I should like to refer to the taxation measures proposed in the budget. The deposit interest retention tax has given rise to most comment. Over a period of time the banks have been crying out for a change in taxation which applied to various lending institutions but when the change was made it gave rise to a number of anomalies. Nobody wants to apportion taxation to those who are not liable as that would be a retrograde step. I had hoped that the Minister for Finance could have gone a stage further in meeting the demands of various interested groups. However, there was widespread abuse in the banking system in allowing a considerable number of deposits to evade taxation. That loophole has now been closed. It may be claimed that this is double taxation but, if there is to be equity in the taxation system, the burden must be shifted to some extent from the PAYE sector. There was always an obligation on people to disclose their interest on deposit accounts over a certain figure to the Revenue Commissioners and one could say that the Revenue Commissioners are admitting that they are unable  to follow up and collect these large chunks of taxation.
I am happy that the Minister has decided to exempt charitable institutions from this taxation, which is fair because local communities do exceptional work for charity and perhaps they invest money collected to provide necessary facilities within their community. Very often these moneys are collected on a voluntary basis and should not be subject to taxation.
I have had representations from a variety of voluntary organisations and the biggest of these is the Gaelic Athletic Association. I do not know if they are exempt from this taxation but they have levels of income invested in various institutions at different times of the year. Overall, however, they would not have any liability for taxation. That must be considered because these organisations play an enormous role in society and we should not interfere with that role. The exemption of this taxation as far as old age pensioners are concerned is very welcome. One would not like to be associated with a measure which would tax old people who had a small investment to provide for certain occasions.
Of course it presents problems for people who are not exempt. I have had representations from those who, for one reason or another, have been forced to liquidate their businesses and have invested their money in banks or other agencies to provide them with a monthly income. That investment will now be subject to a tax of 35p in the £ and will pose problems for people who are just existing on those investments. The Minister has allowed a loophole in the case of people who liquidated their businesses because of incapacity and they will be exempt. There are also other institutions which will not attract this tax. However, I support the general principle of this taxation and it will get in money which was not collected up to now.
This Bill has gone further along the road than any previous Bill in trying to relieve the burden on the PAYE sector. It has broadened the tax band but there is still considerable scope for a complete  examination of the whole taxation area. The Commission on Taxation made a variety of suggestions, some of which could not be implemented in present circumstances, but we must work towards a fair and equitable tax system.
The PRSI system is a form of taxation on gross incomes and no allowance is made for income tax purposes. It provides for various contingencies, of course, but people see it as money taken from their pay packets on a weekly or a monthly basis. There is a case to be made for a complete equalisation or abolition of PRSI and replacing it by another form of tax which would be much more progressive. I hope in the future that Ministers for Finance will look at the possibility of achieving this.
There are many tax incentives in the budget which should create more jobs. I hope the building societies, which up to now have paid a retention tax of 28 per cent, and the banks will not increase interest rates as a result of the retention tax provision in the budget. There is no reason why they should. Oil prices are lower now than they have been since the early seventies and that should have the effect of reducing interest rates. In fact, the benefit of the reduction in oil prices should be passed on to the consumer. All businesses and farmers will have less to pay for their energy costs and I hope that saving will be used to create more jobs.
The creation of jobs must remain the Government's single social and economic priority. That was the cornerstone of the Minister's budget speech. The Government, through the budget, their taxation policy and investment incentive policies, are attempting to create a better climate for job creation than heretofore. Unemployment is the greatest difficulty in our economy. Recently I read two proposals to confront the jobs crisis, one of which was issued by the Irish Congress of Trade Unions. That document contained many very useful suggestions. Congress outlined the different policy approaches of various interested groups and Governments. It is important in our economy that we get the proper mix. If  we adopt a different approach from other economies our efforts will not be successful. We must impress upon the EC the importance of the Community preparing a policy to achieve a greater level of job creation.
When we took office in 1981 the problem of unemployment was enormous and was increasing at the rate of 40,000 annually. What was the reason for that? Those who lost their jobs, those outside politics and the trade unions blamed the Government while the Government blamed the trade unions. However, there was little regard for the fact that interest rates and other factors were outside the control of the Government. The Government have succeeded in reducing considerably the upward spiral of unemployment. By careful and prudent management of our affairs we have reduced the level of inflation from 22 per cent, as it was in May 1982, to almost nil by the end of this year. There is no doubt that that will mean a better climate for job creation. The outlook on the international scene for this year is more favourable than it has been for a long time but we cannot leave this to chance. Many industries closed down in the past because they did not take account of market demands. They did not invest in research or seek new market opportunities. The provision in the Bill that will encourage that type of development is welcome. It may be a small step but it is a welcome one and is in line with the thinking of the Minister for Finance as outlined in the White Paper on Industrial Policy which has been supported by the IDA.
The fall in oil prices will have a very profound effect on job creation. It is important to highlight that those who invest up to £25,000 in project development can write that off against their other income. That should prove a major incentive and, hopefully, will have the effect of bringing back a level of investment in Irish industry which seemed to disappear in the sixties and seventies. In the course of his budget speech the Minister for Finance said that many company failures and redundancies here could be traced  directly, or indirectly, to a failure to develop new products in time. Markets are changing all the time and old products soon become obsolete. There is a need to keep aware of what consumers are interested in.
The Bill provides that the tax on dividend income from manufacturing companies will be reduced. That is welcome and it should have the effect of encouraging people to invest their money. There was a danger, because we have gone through a very difficult period, that people would consider it too risky to invest money in manufacturing industry but the provision in the Finance Bill, hopefully, will encourage people to invest again. Unless there is a greater level of investment we will not be able to create the jobs that are so urgently required. In the past people have tended to put their money into secure investments such as property and land. In the seventies that had the effect of increasing the price of land and, as a result farmers suffered. Now we have profit-sharing schemes, stock options, venture capital schemes and schemes to reduce capital gains tax and I have no doubt that they will result in a greater level of investment in manufacturing industries.
I welcome the incentives for inner city development. It is sad to see the decay in cities and it is time we took note of it. It was because of the demand for new housing and so on, some years ago, that the good soil on the periphery of cities was built on instead of areas in cities being used for such purposes. Inner city renewal is to be welcomed.
We have heard a lot about tax evasion and how we should deal with this problem. The black economy has grown at a very fast pace in the last ten or 15 years. The regulation in regard to the new house grants that insist on work being carried out by registered contractor is a useful step in trying to remove some of the abuses that are taking place. The budget also provided that, through the Minister for the Environment, it was proposed to introduce a similar scheme in regard to contract work. There has been  a lot of abuse of this. We have heard criticism of the black economy by the ICTU and the CII regard the black economy as one of the greatest evils in our society and must be eliminated.
I am interested in the provision to extend stamp duty relief on the transfer of agricultural property to young, trained farmers. I notice that the age limit has been reduced from 35 to 30 years. I note also that there is an extension of that provision to September next, and that the training period will be increased from 100 to 150 hours, which has been welcomed by farming organisations, particularly by young farmers and Macra na Feirme. Indeed, there are other provisions by way of assisting young farmers in getting their hands on land and using it more effectively.
I welcome the amendments made to the Finance Bill. Perhaps there will be others, to which I look forward with interest. They have constituted an honest attempt at securing a more equitable direct and indirect taxation system. While they do not constitute a formula for perfection they are a step in the right direction. It is essential that that policy be pursued in future years.
Tomás Mac Giolla: We are in somewhat of a difficulty this year with regard to the Finance Bill in that it is not merely a follow-up to the budget with some amendments; it is a second budget. In our budgetary submissions and statements afterwards we made very clear what were the general fiscal and economic policies of The Workers' Party. We laid emphasis on the whole question of tax equity, highlighted over the past six or seven years, but temporarily put in the background during the deliberations of the Commission on Taxation. As is usual in the case of commissions, they are an attempt to dampen rising discontent on the assumption that something will happen arising from their report or reports. I am not saying that I support all of their proposals. But after five reports we still have not achieved anything like the tax equity demanded by the trade  unions and by so many hundreds of thousands of people in the PAYE sector.
In our pre-budget submissions and in my remarks following the budget, I specifically emphasised the matter of full and fair collection of all taxes, not just income taxes but health levies, youth employment levies, income levies and so on. Rather than improving in recent years the position with regard to tax equity has deteriorated substantially because of embargoes on recruitment and lack of staff to undertake the appropriate inspections, prosecutions and whatever else is necessary in order to ensure collection of taxes. Neither the budget nor the Finance Bill tackles that matter in any decisive manner. There is no indication that collection procedures will be any better next year than they have been over the years or, indeed, that they will not deteriorate even more.
I laid great emphasis also at budget time on job creation. The major problem in our economy that has not been tackled is unemployment. I dealt with that in the context of a planned policy for the development and creation of jobs. The Government advocate in a completely different manner the creation of a better climate for investment. This appears to be the subject uppermost in the mind of the Minister for Finance. The Taoiseach has continuously pointed out that the Government do not take responsibility for creating jobs. Rather they accept responsibility for creating a better climate in which there will be greater development and resultant jobs. That is completely different from accepting responsibility for ensuring that citizens have a job.
An essential part of the responsibility of the Government is to look after the welfare of all citizens, not only with regard to health and education but also their security, their ability to develop themselves in work, to support families and so on. If a Government have any responsibility, that is the primary one. But this Government do not accept that as constituting part of their responsibility. They do not accept the creation of jobs as part of their responsibility. Certainly  the Minister for Finance does not accept that it is their responsibility. He talks about creating a better climate for investment.
In my remarks on the budget I attacked the further cut in the Public Capital Programme. The Public Capital Programme does not necessitate an enormous amount of economic planning but, for example, if one talks about jobs in the building industry, one must have some plan for investment by way of the public capital programme. This Government cut back on that programme, constituting a deliberate cutback on jobs. If a Government have any responsibility for planning for the creation of jobs, then surely the public capital programme constitutes the simplest, fastest vehicle for so doing. But the Government demonstrated their determination not to be involved in job creation through their cuts in the public capital programme.
The basic policy for economic development and job creation of our party was set out in a document published in 1982 entitled An End to the Crisis. The philosophy contained in that document was based on industrial development and consequential job creation using the natural resources available to us. An obvious objective would be the processing of agricultural and other foods, including fish, where tax incentives, grants and other State assistance for industrial development should be concentrated. Other areas include forestry and the proper use of our mineral resources, with assistance for the building of a smelter so that we would be able to make the finished product instead of having Finland doing the job — indeed, Finland has taken over Navan. In Norway, Sweden, France, all over Europe and throughout the world, Governments are developing their native resources and building and expanding industrially on that basis.
With the EC farming crisis, with beef and dairy produce being penalised, there is an indisputable need here for diversification in regard to farm production. That is the only way we can utilise our agricultural resource. For instance, we should be producing flax and concentrating on  wool rather than mutton. In Australia sheep production is done for the wool rather than the meat.
We have recommended that sort of policy rather than concentrating the taxpayers' money on getting multinationals to come in here. We welcome them, they provide 80,000 jobs, but that is only the icing. When we have our industry built on our own national resources we can think of bringing in the multinationals. That is how we can get full employment, and we are not getting that by concentrating our efforts on funding foreign companies coming in here.
That is the basis of our document, An End to the Crisis, and the Telesis report agreed. In turn, the IDA have agreed with that report and have altered their programme in line with it. They have set up a food section which is doing precisely what we recommended in regard to food processing, but this does not seem to have filtered through to ministerial thinking. People on the ground know that is the correct method because they realise that the basis and the bedrock of our economy now are the multinationals.
We cannot base our economy on them. We are delighted that we have persuaded Fianna Fail to drop The Way Forward and to take over some of the policies of An End to the Crisis. For months I have heard nothing from Fianna Fáil spokespersons but talk about developing our industrial base on our natural resources, with the emphasis on food processing. Of course, I am delighted that they are pursuing our policies because our objective is to see them implemented. However, I am disappointed that neither of the Government parties has any change of mind in this regard, they have stuck generally to discredited policies which they have taken from across the water — what Britain did two years ago we are doing now, particularly in regard to public finance. We have been picking up two years later what Britain has done.
This Finance Bill is only continuing such a laissez faire approach and this has raised the levels of the public debt and unemployment enormously. It was interesting to hear Deputy Molony speaking  yesterday about the dreadful way in which Dublin has expanded at the expense of the rest of the country, particularly in population. He described it as bad planning. He missed the whole point however, because lack of planning resulted in an economy of every man for himself, and this and previous Governments have pursued that — no demographic planning of any kind.
That is why the population of Dublin has grown progressively. Here, every man is allowed to do what he likes, where he likes and when he likes, and it does not matter whom he puts out of a job in the process: thousands can be put out of work by this system and nobody cares. Perhaps in that environment people will say they will not go to Dublin because there are too many there already. We have a concentration on the building of office blocks, and the banks will give you £30 million at any time to buy whole sections of the city, run them down, knock them down, leave them derelict for ten or 20 years, and then build your office blocks.
Deputy Molony ended his speech yesterday by saying that we should leave ideologies out of this and deal with the Finance Bill per se. The whole Bill is based on the right wing ideology which Deputy Molony has been supporting blindly. The Government still refuse to accept responsibility for job creation and for the planned expansion of Dublin. They will not accept responsibility for the wholesale collapse of the environment. All these things have to be done in a planned way, but the Government cannot bear that at all.
We have heard the Government screaming this year and previous years  about how bad the climate is for investment and we read in our newspapers every day that it is a dreadful climate for investment. Although the investment climate is “already very favourable”, the Minister is giving a further major impetus to investment. He has written a new budget in this Bill. He should, at least in his speech, have dealt at length with these new proposals, why he found it necessary now, three months after the budget, to make these changes in Minister Duke's original budget. He should have taken time to tell us the cost of these proposals, how much would be raised by various taxes, the purpose in raising that money and where money would be saved or spent. These were not spelled out to us.
Who would not agree with that? I said this at the time of the last budget. I went further and spelt out ways in which the tax burden could be spread more widely in the area of capital, property and wealth taxes and so forth. I asked for a reduction in the tax burden on the PAYE workers by expanding that tax more widely in other areas. That is what I have been saying since I became a Member of this House. The Minister says that all the economic arguments are in favour of that, yet he proceeds with a budget and a Finance Bill which do not spread the tax burden more widely. The DIRT was a welcome step in that direction, but the Minister, Deputy Bruton, is now attempting to reverse this by his concessions to the life assurance companies, his reduction in capital gains tax and his relief on tax on dividends, by giving increased car allowances and so forth. He did precisely the opposite to what he said should be done. He did not tell us how much the Exchequer would lose by these concessions. When telling us that he was reducing the 15 per cent on the life assurance companies to 9 per cent, he did not tell us why it was necessary to do so. We were told why it was necessary to impose this tax. We had to go to The Irish Times of 5 April 1986, to find in an article by Denis Coughlan that the cost of concessions to the insurance companies would amount to about £20 million this year. The Minister did not tell us that.
The DIRT is a good indication of a point that we were making over the last couple of years, that the PAYE system should be imposed in as many other areas of the self-employed as possible. It should not be confined simply to workers who have tax deducted from their wages. Other payments should be subject to the same tax deduction at source. That could be applied to farmers, other self-employed and so forth. The DIRT tax is, I would hope, only a welcome beginning in that direction of deducting tax at source. It cannot be called “Pay-As-You-Earn” because this is unearned income. It is a good development that tax is deducted at source from unearned income and I hope it will be applied in other ways to the self-employed. If too much is deducted, employees wait until the end of the year for their refund. There should not be any worries about an outcry from people saying that too much has been deducted. The Government are taking it every day of the week and holding it until the end of the year. The same principle could operate with regard to the self-employed, but when they scream everybody listens. Nobody listens when workers scream about too much money being deducted from their wages, which is happening every day.
With regard to DIRT, I welcome the Minister's concessions to charitable bodies, incapacitated persons and individuals aged 65 years and over. Charitable bodies should include sporting and cultural organisations. Most of all, those not liable to tax should be able to claim a refund. The Minister specifically dealt with that matter. He said:
Obviously, there will be a small number of individuals outside these categories who may be able to make a similar case. Wherever the line is drawn, however, there is the risk of genuine cases on the wrong side of it. Refunds for all non-liable persons  cannot be considered, however, because this would be far too costly.
For many reasons, that is a dreadful statement from a Minister for Finance when imposing taxes. He specifically sees an area of injustices here, but says that to correct it would be far too costly. This is a question of justice, not cost. It is totally unjust to put non-liable people into that tax net because of grounds of cost. I would agree with deducting at source from the beginning in all areas, but the Minister should accept refund claims from those who establish that they are not liable to tax and that should go through the normal process.
I agree that when making many exceptions in the actual deduction you are creating problems all around and huge areas of cost. I am not saying that this tax should not be deducted. From the point of view of simplicity and continuity in the system I agree that the tax should be deducted, but all those on very low incomes not liable for tax should be able to claim a refund. Some of them may have a couple of thousand pounds left over from redundancy payments, people of 40 or 50 years of age who will never again get a job and are now living on assistance. Such people should be allowed to claim a refund when the tax has been deducted.
The Minister recognises the injustice but simply writes off the possibility of a refund as being far too costly. He has not explained what the cost would be and it is a very dangerous, immoral statement for a Minister for Finance to make. I ask him to look again at that area on Committee Stage. All I ask is that refund claim forms be made available to those not liable to tax so that they can prove their non-liability and get a refund. I have mentioned the insurance companies and the reduction to 9 per cent. The Minister had no problem in changing 15 per cent to 9 per cent, although it cost the Exchequer £20 million. I do not believe that giving refunds to those who are not liable for tax would cost anything like that.
The question of covenants to those under the age of 18 has already been dealt  with. This is something which will add further to the huge anomaly, to use a mild term, with regard to third level education. According to a survey by the UCD student's union some time ago, only 0.57 per cent of students in that college came from an unskilled, manual working class background. That situation will get much worse as fees increase regularly. They are about to increase again this year unless we can appeal to the Minister to prevent it. Fees in the technological third level colleges in this city have increased by 600 per cent in the past few years. That level of increase in fees, without any increase in student grants, means that fewer and fewer students from the unskilled working class will get into third level education.
By the proposed covenanting system there will be a large proportion of people from the well-off sector going to university, at a loss to the Exchequer. There are various estimates of the amount of that loss, ranging from the estimate of £22 million by the Union of Students in Ireland to perhaps £14 million or £15 million. Whatever the actual figure, this is not an area where the Exchequer should be at a loss. There should be further increased grants to students who cannot afford third level education, rather than giving a covenanting system to those who can already well afford to give third level education to their children.
There are no estimates of the number of people who will avail of the covenanting system, but apparently over 65 per cent avail of it in Northern Ireland where there are much higher grants for students and in many cases much lower fees. I would estimate that over 90 per cent would avail of it here. Therefore, it would be quite costly to the Exchequer and create a further division in our community in the area of third level education.
The Minister emphasised the new optimism in the economy. I accept all this. In my speech last week at our Ard-Fheis I predicted a boom in the economy, although it did not get much reportage in the newspapers. It could very well be a  substantial boom in a year or two. I pointed out that, unlike previous booms, this is certainly not going to lift all boats. It will not lift any boats for the unemployed because unemployment will actually increase over this period and during this boom. It will not be of any great assistance in the area of education; there will be increased fees but no increased assistance. It will not help our health services either. Why is this? It is because things are substantially different now compared to the late sixties. At that time there was a fair level of planning. Lemass and Whitaker laid down certain plans and criteria and certain things they wanted done in the area of economic and industrial development. There was to be free education and more money was to be put into the system. It was recognised that more money would be required in the area of health.
While there was economic boom and expansion there was a plan for creaming off for development in the social and other fields. There was not a substantial level of planning but there was a level of planning to ensure that any economic expansion would give not only increased jobs but a system whereby the new wealth created would be put into education, health and various other areas. There were specific plans for the number of jobs that would be created.
This time there is no plan whatsoever for this expansion and development. This is coming despite the Government. The Government have no hand, act or part in it. It is as a result of factors outside the control of the Government. The Government are attempting to assist and bring this about more rapidly by various incentives to the very people who will benefit from this boom. The boom will be of great benefit to financiers, employers and speculators. The Minister has special words of praise for playing the Stock Exchange. It is supposed to be of great benefit to the economy, but it did not do the American economy much good in 1929.
That is the type of thinking. This boom will be of great benefit to a certain  number of people, perhaps even to one-third of the population, but there will be at least another third who will not benefit from it to any extent, people who will remain at the bottom of the ladder where they are stuck now. The Government must think of planning economically in regard to where the expansion should be and this should not be expansion in interests from outside, or a huge expansion in chemical industries that could disappear quickly or over which we would have no control and which would not be assisting in the expansion or development of the economy. We must know where our industrial development should be expanded and that expansion must be undertaken in a way that is permanent and regular.
In addition, we must have a plan for the development of our education system. The free education we talked about 25 years ago and which brought with it such great hopes and expectations is rapidly disappearing. Even at primary level parents are expected to fork out money at the beginning of the school year and then right through the year for various items such as books, heating, clothes and so on. There is no free education from primary level right through but we should be aiming for free education at all levels. In terms of an expansion of our economy we should be thinking of expanding for those very reasons. We should be thinking of being able to provide free education at all levels for all our children. We seem to have this idea that only a certain number of people are entitled to third level education or that some people solely because of their class, are either not interested in or are not capable of benefiting from third level education. I trust that if a boom is on the way that is the type of expansion the Government will be thinking of and that they will be considering also taxation levels and the needs in the area of the health services. If this is the case the economic boom will be very welcome. It would enable us to strengthen our economy for the possible recession that might come much quicker next time, perhaps within five or six years of the boom. If we plan properly we will  have a much stronger economy and a much stronger base for industrial development to enable us cope with another recession.
Mr. Yates: I should like to zone in on certain sections of the Bill on which I should like to make some detailed points. Sections 27 to 35 deal with retention tax. It is not often that I share the views of Deputy Mac Giolla on any subject but I endorse wholly his views on this tax. However, I welcome the exemption for charities, for disabled persons and for persons over 65 but there is a great point of equity and justice involved. I have had many representations already about this tax and these have come from people who have retired from small shops or farms and who are living on their savings. I urge strongly that such people should be allowed their tax free allowances. I do not know what the constitutional position is but when one thinks of the Murphy case and recalls that Mrs. Murphy was found to have a right to her own tax free allowance, one must conclude that the same right should apply in regard to this retention tax. It would be most unfair if a full tax free allowance were not to be allowed. That is not to say that I am not in favour of a retention tax. I am well aware that the associated banks, the trustee savings banks and other institutions sought an element of non-disclosure and sought equity and simplicity. These elements are contained in the provisions. I appreciate that there are seven million deposit accounts in the various financial institutions and that the current administrative system which requires people who earn interest of more than £50 on deposits to declare that interest for tax purposes, is not working. From an administration point of view that could not work. However, people should be entitled to their tax free allowances for the purposes of reclaiming any tax on deposit interest.
I am very concerned, too, regarding deposits that credit unions might have with the banks and the effect that the taxation of the interest on those moneys might have on the movement. Similarly, there are trade union funds, funds of  friendly societies and of the VHI that are on deposit. In those cases, too, the retention tax would have a negative effect. There is no need to throw the baby out with the bath water and at least we should allow people their tax free allowances. As well as the case of individuals, this should apply to non-profit making groups.
There appears to be a lack of charity regarding overseas non-resident accounts. If an amount in excess of 25 per cent is withdrawn from these accounts it must be declared because otherwise one would be prohibited from taking the money out of the country concerned, that is, if one does not wish to pay the retention tax. I should like to see an amnesty in line with this because there is no point in driving money out of the country willynily. The provision was retrospective to the day prior to the budget and that has caused difficulties. The only losers at the end of the day will be people anxious to arrange overdrafts or term loans with their banks but who will be unable to do so because of money being taken out of the country.
I was interested in Deputy Mac Giolla's point about the Minister being in favour of the speculator. I would remind the Deputy that it has been shown universally that the biggest problem of small firms is a lack of equity finance, that is, that their gearing ratio — the amount of money they put in by way of share capital versus the amount they borrow — runs in small businesses at ratios of between five and ten to one, whereas a good economic ratio would be 1:1. In other words, these businesses borrow from the bank to the extent of five to ten times more than is the level of their equity. This imposes a burden on small companies in terms of repaying loans. What has been discussed here is a situation of over-the-counter shares, a new development whereby small business stocks would be available to the stock exchange.
I would be very critical of the stock exchange in that in the past they did not have regard to the equity needs of small  businesses. I would take the opposite view from the view expressed by Deputy Mac Giolla and suggest that, in order to establish the capital gains tax and to ensure that it is successful and that the money is obtained from the safe and secure houses of life insurance, Government gilts and bonds and so on for investment in the productive sector and thereby in the creation of jobs, should be at the rate of 20 per cent in the initial period. If we are to have a new, indigenous generation of Irish manufacturing industrialists, who cannot move profits anywhere other than within the economy, we must provide some stimulus to this end. In that respect we must have a proper over-the-counter shares market as is the case in other countries. I welcome the Minister's decision to reduce the rate to 30 per cent but I submit that a rate of 20 to 25 per cent would be better. This would not be speculation because it is expected that the venture capital or the equity rate would be locked into the firm for three to five years. Any other attitude would not be in the interest of the small business sector.
I wish to raise some points too, in relation to the stamp duty exemption for agriculture. It was announced in the budget that this would not be extended but we hear now that there is an extension to 30 September, that there is a reduction in the age limit from 35 to 30 years and that instead of the stipulation of a 100 hour course, courses will have to be of 150 hours duration. This is a little niggardly because people will have embarked on the 100 hour ACOT EC/161 courses and it would be better for those people if the duration were to remain at 100 hours. Therefore, we should leave matters as they are until September and allow the installation premium and the other benefits for young farmers in the farm modernisation scheme take over. This would involve only a miniscule cost to the Exchequer, less than £100,000. All that is involved is a question of good faith. People who embarked on land transfers find that they are being cut off in terms of this stamp duty exemption because of having been caught by delays with the  Land Registry office in terms of administration.
I welcome sections 1 to 4 which deal with income tax. I have discussed some of these provisions during my budget contribution and it is not my intention to repeat my remarks in relation to the £121 million in tax relief. However, there are two areas relating to income tax changes that I should like the House to amend on Committee State. Regarding the provision of the increase in the PAYE allowance from £600 to £700 in section 3, there is an anomaly whereby sons or daughters of an employer cannot avail of the allowance despite their being taxed under the PAYE system and treated in all other respects in the same way as other employees. They are excluded from the PAYE allowance solely on the basis of being related to their employers. That is unfair. The allowance should apply only in cases where employees are in the same circumstances as any other employees. I am not trying to create any loophole for self-employed people to avoid tax. I am saying it is unfair where the circumstances are exactly the same.
The other situation which I feel is unfair concerns the dependent relatives allowance for incapacitated persons. We know the urgings the Minister has made in regard to community care which I thoroughly agree with, not just in the psychiatric sense but in the whole health service, to get people out of expensive institutional State hospitalisation, whether geriatric care or otherwise, and into the community, to reorientate the family responsibility to look after people. If we are going to do this we must increase the tax allowance for people who mind sick relatives at home and that would be a very constructive way of contributing to community care policy. Also, if we compare it on the basis of cost effectiveness, the minimum cost of State geriatric care is £120 a week and can go up to £400 a week. How much cheaper it would be to give an extra £500 of tax free allowance to someone who minds an incapacitated relative. I hope that will be taken up.
In relation to the changes in section  85 concerning the life insurance industry where the levy has been reduced from 15 to 9 per cent and the dates have been deferred to November and next June, the life insurance industry have had a difficulty because they had entered into guaranteed income bonds with people and this subverted that, and they are now unable to meet those commitments. However, it must be realised that the most profitable of the whole financial sector is life insurance. It is more profitable than the banks or the building societies. I feel quite strongly that those profits could have financed this levy.
More important, the life insurance benefits from one of the biggest tax breaks in this country which is allowing people to have any premiums paid to life insurance tax allowable. Therefore, they are the most profitable and they have one of the biggest tax perks. I do not think this mitigation of the levy was the right way to go. It would have been much better to say there is a crisis in non-life insurance and the 1 per cent levy which brings in a yield of £6 million needs to be addressed more urgently. In relation to employers' liability and public liability, premiums have gone up by 400 per cent over the past three years and employees are going to work without insurance cover. It is a massive problem and any small step that can be taken to remove the extra burdens that are there would be very welcome. The needs of the non-life sector are greater so to get the premiums down I would ask that, instead of this modification to the life insurance industry, we should drop the 1 per cent levy at a minimal cost of £6 million and let the profits of the life insurance industry pay for the levy.
I should like to turn to a very interesting section at the end of the Bill, section 105, which deals with interest rates on refunds of tax, income tax, corporation tax, CAT or CGT. We have the usual Department of Finance sleight of hand here. Covered away at the end of the Bill, without much discussion, is the provision whereby, if one pays one's tax late for whatever reason, one is charged 1¼ per cent per month interest on outstanding  taxes which is 15 per cent per annum. That was the situation in relation to delays of refunds of income tax or any other tax owed to the taxpayer through an over-deduction of taxation, through administrative error or whatever.
Now the Department of Finance are reducing the rate of interest applicable on delayed refunds from 1¼ per cent per month to 1 per cent per month, that is, from 15 per cent per annum to 12 per cent per annum without any corresponding drop in the interest charged for late tax payment. Therefore, de facto the Revenue Commissioners are acting as bankers with a 3 per cent margin in their favour. That is unfair and that is not their job. I suggest that, as interest rates are coming down and due to come down further, the reduction in interest rates on refunds should be reduced correspondingly on late payments to 1 per cent per month or 12 per cent per annum. In the context of the amnesty that was announced, of which I see no mention at all in the Finance Bill—perhaps the Minister when summing up at the end of the Second Stage debate could refer to this—it will not be effective because it is too rigid. What I would like to see is an amnesty devised on the basis of outstanding company related taxes prior to the tax year of 1982-83. We say to those people that, if they have outstanding VAT, PAYE, PRSI or corporation tax from 1982-83 or previously, we will given them 30 days to get in the principal of tax owing and waive the interest, but if they do not get it in we will take them to court for it.
It might be asked why we should give a tax break to people who have defaulted so much but, if one looks through the appropriation accounts, one will see the amount of money the Revenue Commissioners have had to write off without getting a smell of the principal simply because in many situations the reason why these tax areas arose was that people used their taxation as working capital when the banks would not provide it in the late seventies and early eighties when the recession was at its height. It would pay many of those companies to go into  liquidation, to go into receivership, because there is such a large amount of interest owing. Those companies go into receivership and liquidation and the Revenue Commissioners get nothing—they are lucky to get 5p in the £ because the companies make damn sure the last people to get paid are the Revenue Commissioners. I could quote chapter and verse on liquidations and judgments that the Revenue Commissioners have taken and have got nothing.
If they were to say that if companies came up with every penny of the principal in the month of July of this year they would waive the interest it would be expedient and it would get in more money. It would save an enormous amount of the time of the Revenue solicitor, the collector general's office, and so on, which could zone in on the 1983-84 onwards payments currently being processed and outstanding. I should like to see an amnesty just on the interest for a specific period of time so that we could get in the principal. Otherwise we will not get it at all and that is exactly what has been happening.
Let me make a few comments in relation to value-added tax. They are specific points concerning the proposed refund scheme for coach tour operators whereby they can obtain a refund of 15 per cent of the 25 per cent VAT paid on vehicles. A Ministerial order was announced earlier this month which deals with the terms of this. However, the height regulations, the length regulations, and the general body requirements for the vehicles are such as to be totally restrictive and exclusive to other than CIE vehicles which is most unfair and which I am sure was not the Minister's intention.
I know of a particular vehicle that has won Bord Fáilte awards as having a high standard of luxury which does not become eligible for this refund. I know of a number of coach tour operators who are not operating school buses, or bingo buses, or in any way doing other than increasing the quality of our tourism product here, who were going to buy coaches and who now cannot because of the terms of this order. I ask the Minister  to relax the terms of this statutory instrument or ministerial order in a minor way in relation to height and length requirements so that good quality coaches for tourism purposes exclusively will be eligible.
I should like the Minister to explain why if a punctured tyre is repaired in a garage, the VAT on labour is 10 per cent but if that puncture is repaired in a tyre station the VAT is at 23 per cent. I have come across a business dealing exclusively with tyres and they are paying £5,000 to £6,000 extra VAT on their two monthly returns because their labour element is charged at 23 per cent rather than 10 per cent. This is an anomaly because both firms deal with repairs. I would welcome the abolition of excise duties on tyres and spare parts.
Section 83 deals with the reduction of VAT on magazines from 23 per cent to 10 per cent. I understand this is principally to deal with imported magazines being charged a higher rate. While I fully accept the amendment to the existing VAT code, this makes the position even more anomalous. What will be the position with monthly or three weekly magazines? What will happen at Christmas or holiday times when companies may decide to publish two different issues? Will they be eligible to pay VAT at 10 per cent or 23 per cent? In my view, it would be much more sensible to include monthly periodicals and magazines at the lower VAT rate.
I notice there has been little or no progress to reduce the 10 per cent VAT on the construction industry. The most serious effect of this is that with one stroke of the pen we are cutting 5 per cent off the Public Capital Programme. In other words, if the Public Capital Programme is £X billion and if this is raised by 5 per cent, as happened in 1985, effectively the volume of work is cut by 5 per cent. There is a problem here in regard to house prices vis-à-vis new houses as against second hand houses. At present a person will get much better value if he buys a second-hand house because VAT is at 10 per cent while stamp duty is 3 per cent. This too is  an anomaly. We should have a broadly neutral policy in relation to taxation on second-hand houses as against green field house construction.
I welcome also the reduction of VAT on meals and accommodation and hope this will give an added boost to the tourist industry. The Government announced the PRSI exemption scheme last October and it was terminated on 5 April, having been extended from the end of March. I understand a review is taking place in employment exchanges across the country to ascertain the effectiveness of this move.
As a Deputy I was inundated with inquiries about this scheme during Holy Week. An employer had to take on employees before Holy Thursday and there was great confusion about this, although some of the restrictive conditions were lifted. I should like to see this tried for a full year, until April 1987. In other words, if an employer takes on an employee between now and 6 April 1987 he will pay no employer's PRSI. This would be a very beneficial move and would help to create employment. It must be remembered that PRSI is a payroll tax. The more people a man employs the more tax he has to pay. In particular sectors, such as textiles, construction and tourism it can represent up to 40 per cent of operating surpluses but that does not apply to industries which are capital intensive rather than labour intensive. We should remove every anomaly which prevents extra jobs being created.
I should like to refer now to the VAT thresholds. At present there is a threshold of £20,000 for sales, of £12,500 for services, and if a person exceeds those thresholds he is liable for VAT. We are talking about small corner stores, small paper shops in country areas, with a minimum level of business run by old people whose income is minimal. Because of inflation these threshold limits have been reduced. In other words, £20,000 four years ago would not have the same value today. It is not a case of letting people off the hook; this should be index linked so that the same people will be liable. I would like to see the threshold increased  from £20,000 to £25,000. There is a precedent for this because some years ago such a provision was not mentioned in the budget but was covered in the Finance Bill.
The Government should consider a proposal to levy PRSI on a firm rather than on an employee which a number of studies clearly indicate is a disincentive to employ extra people. I would like to see PRSI levied per firm and a social security tax of, say, 5 per cent as recommended by the Commission on Taxation, for other self-employed people, so that everybody pays.
Every year I refer to the restriction of 30 per cent capital allowances for capital expenditure on agriculture — machinery, buildings and drainage. This should be increased to 50 per cent. Since inflation and interest rates are coming down, there is a need to build on this climate. The only way to do this is by boosting investment in the productive sectors of the economy. It takes £1 billion or so to maintain the existing rate of growth in manufacturing output and, at the moment, investment is only running at £600 million per annum. This means that the level of growth in manufacturing will dissipate shortly and that will be reflected next year. We must find ways to make it more attractive for people to invest in the manufacturing and productive sectors of the economy.
There was very little mention in the budget of extending the business expansion scheme. I would like to see this scheme extended to cover trade and tourism. I would also like the legislation simplified. Companies should be allowed to purchase business expansion scheme shares. In Canada the first $1,000 of any interest income from equity investment is tax free. If we are tackling the financial institutions, the life assurance sector, and so on, we have to go that little bit further to boost investment in the productive sector.
We must realise that Ireland is a small economy in a free trading world and our little bottle bobs up and down in the seas of recession or the seas of good news. Our future is dependent on exports and we depend on our balance of trade. One  way we can increase exports, at minimal cost, is to give a tax incentive to executives who spend in excess of 30 days outside this country on the business of marketing, because the amount of revenue and jobs they create will have a very positive effect on the economy. If we have an extra 300 people on the continental or the United Kingdom markets selling handbags, soap, food products, or whatever, this will mean more jobs and more business for this country. Instead of watching with depression the brain drain of our most talented people we should bring about such an incentive to people to expand.
I welcome the decision in the budget to give special tax relief for research and development. However, in this context I would like to see a very simple change which perhaps the Department could consider. It has operated very successfully in the US. In order to get further funds into the productive sector of the economy the establishment of a small business bond might be considered. The bond could be in units of £500 and the amount could be easily restricted by the Revenue Commissioners. The tax relief could be the same as in the business expansion scheme. If you are being taxed at 60p in the £ you get that back for every £ you invest in a small business bond. The Exchequer could limit it to £10 million of tax relief per annum, the maximum per enterprise that could be invested in small business bonds could be £50,000 and the maximum per person £10,000. That would be a very simple way of getting debenture funds into small businesses. I think it has enormous potential.
The net effect of the tax changes in this budget will in some small part lift the burden of personal income tax and shift in a positive and progressive way the balance of VAT. What effect will it have on the service industries? It will enhance job creation while increasing taxes on certain luxury products. This Finance Bill provides a notable incentive to investment in the productive sector and at the same time closes certain loopholes that have been there for tax evasion. I support and  welcome this Bill. I hope that on Committee Stage the Minister can take up some of the points I have made and I will be speaking on them again on the appropriate sections. Overall we are on course but we need to address some of the issues I have mentioned in order to get greater equity and more fair play in the system.
Mr. J. Walsh: First, I welcome the appointment of the new Minister for Finance. He should bring a very welcome, positive attitude to business and to an environment which will create job opportunities. He had a very direct and honest approach to the Finance Bill and to the budget in his previous term. I hope that at this stage he will be sufficiently domesticated not to trip over any children's clothing or footwear or anything like that and that he will have some opportunity to see this Finance Bill through.
I was interested in the contribution of the Minister, Deputy Bruton, on the budget on 13 January 1986 where he said, “The fact is that the income tax burden was increased in real terms in every budget since 1980.” That is a fact, despite the fact that Ministers since then have always prefaced their comments about the budget by saying that they were glad to announce an improvement in the situation where the hard-pressed taxpayer benefited by the budget and the Finance Bill. Nothing could be further from the truth and this year again the hard-pressed taxpayer, the income tax payer, has to pay more money, to the tune of £217 million, than he paid last year. It is a scandal and an insult to the Commission on Taxation, to the outstanding personnel on that commission and the length of time they have studied and brought forward reports, five in all, on the tax situation, that we are no nearer to any kind of reform of the whole tax system. It is worse now than ever. It is in urgent need of a radical overhaul. It is a pity that such able, competent and diligent people as those on the Commission on Taxation should be insulted in the way they have been. It would not surprise me if, in the future, other commissions or  investigative commissions refuse to do that kind of work, because at least there should be some gesture towards their findings and if all of their findings could not be incorporated in the Bill, at least some of them could.
I had hoped that this Finance Bill would have addressed itself to the question of reforming the taxation system; unfortunately, it aggravates it. This Bill is larger and has greater content than any other Finance Bill in recent times. The vast bulk of the Finance Bill is made up of restrictions and impositions. Certain modifications are introduced and certain concessions made but they are tied up in so much red tape and so many constraints that the initial concessions are absolutely buried. No serious body of opinion at the moment favours the current system which is a hotch-potch of various taxes each superimposed on the other. It is beyond the comprehension of the ordinary person. I know, and I am sure other Deputies and public representatives will know, that the ordinary individual is absolutely bewildered with the application forms, never mind their content and implications. I spend a fair amount of each weekend helping people to complete their tax forms. I hope the Minister for Finance will have a positive attitude to opening up the economy andmodifying the tax system and that with amendments to this Finance Bill he will to a great degree simplify our whole tax system and find it possible to introduce and implement at least some of the recommendations of the Commission on Taxation.
Tax affects every person. It should be understood easily, but this year, for instance, we have a concession to industry towards money invested in research and development. No sooner have we read of the concession to research and development than we are landed with 20 pages of the Finance Bill constraining and tying up any investment made so that this concession, I suggest, will be stillborn and will never get off the ground. That is a pity because it has been recognised that, as an open economy needs research and development, we need  new products to be able to compete in world marketplaces. Certainly we need incentives in industry to put money into research and development modification of new products which the consumer will buy and which will make a profit for the industrialists, thereby creating jobs and maintaining competitiveness in Irish industry.
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