Finance Bill, 1988 (Certified Money Bill): Second Stage (Resumed).

Tuesday, 17 May 1988

Seanad Eireann Debate
Vol. 119 No. 12

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Question again proposed: “That the Bill be now read a Second Time.”

[1083]Mr. Ferris: Information on Michael Ferris  Zoom on Michael Ferris  I was dealing with the construction industry and their concern. I am not just representing the views of the industry because they are made available to all Members of the House, irrespective of party affiliation. I have listened to the ordinary contractor at constituency level. Those people in the past had been reasonably busy particularly with reconstruction grants initiated by the last Government and the new house grants and reconstruction grants which required the applicant to prove that a legitimate builder was being employed and that his VAT and tax payments were in order. This was a boost to the building industry, especially for the legitimate building industry. The abolition of those grants has done immense damage to the ordinary, small registered legitimate contractor and his enterprise. I listen to them on a daily basis admitting that they have to let people go because they have no work for them.

New house building seems to have slowed down particularly with the announcement by the Minister's colleague, Deputy Pádraig Flynn, of the new house purchase option available to local authority tenants. It is a great scheme for the local authority tenants and we all welcome it and wait with bated breath for the 1988 valuations which will be put on houses. Until those valuations are known, we will not know how generous or otherwise this new tenant purchase scheme will be. It has affected the building industry. Local authority tenants if at all possible availed of opportunities to better themselves particularly in the area of housing. The removal of the £5,000 special grant to move from a local authority house into either a secondhand house or a new house was an incentive for activity in the building sector that created employment for building industry workers.

There was a widespread belief that the Minister would reduce the VAT rate on the building industry to a level of 10 per cent. That might have made some contribution to the problem but, unfortunately, it did not happen and, as a result, the building industry is now in a [1084] dilemma and see no light at the end of the tunnel. They see nothing in this Finance Bill to stimulate employment; no local authority house building programme for the majority of our councils; some money to continue existing starts but very few, if any, new starts.

There has been an argument by various councils that they have a surplus of houses. I will accept that if that is so it may mean that one council could afford to wait until next year for a capital allocation but that is not true of all councils who still have long lists of people waiting to be rehoused; people who are entitled to be housed. Under the 1947 Labourers Cottages Act they are entitled to be considered by the local authority for housing because they are incapable of providing houses for themselves. I am sure Senator Brendan Ryan will deal with this issue and the whole question of homeless people and people who are in desperate need of having their housing conditions improved. These are the areas of the construction industry for which because of the capital programme reduction I see no prospect in the future unless something unforeseen happens.

I hope something will happen because it is an industry that has given a lot of employment in the past and whenever we as public representatives see building activity in any area, we recognise it as a vote of confidence in the area. We all welcome it no matter what the building is. Within the planning restrictions as laid down it is good to see things being produced and built whether they are houses, or factories, or whatever. The State has a major role in the national building programme, both in relation to roads and the production of houses, hospitals and other such public buildings.

The amnesty offered by the Minister for tax defaulters is a matter that I have dealt with briefly because I know that particular sector have been lackadaisical, to say the least, about how they treated their tax responsibility. Hopefully, the Minister's initiative will have the desired effect. If there are people out there who owe money and do not avail of this amnesty by the end of September they [1085] will be subject to considerable tax contributions to the State. Is it necessary for people to apply in the interim period to be considered? Is it expected that people will voluntarily apply or will they get a notice from the Revenue Commissioners referring to the announcement and saying: “This is your option: do you want to take it? Yes or no?”, or are they expected to contact the revenue officials? Many of these defaulters do not even accept that they owe the money in the first place. We will have to break down that barrier and if the move gets in money that is due, congratulations to the Minister because that money should have been paid just as PAYE moneys are always paid.

I have looked with interest at the financial centre the Government are producing on the docks site and I want to congratulate the Taoiseach on his recent efforts in the United States to trigger off further interest in that project which, from what we have been told, was beginning to lag. Somehow or another there was a lack of interest in spite of the tremendous incentives that obviously were being offered to the financial sector and institutions in this country and outside it. We would like to have an update on how things are going, whether it is coming on stream as expected and what contribution, apart from the investment in the area, the project will make to the overall economy of the country.

I have tremendous reservations about the designation of areas under the urban renewal programme. I now see that corporations who have made legitimate application to the Minister for the Environment for inclusion in these urban renewal programmes have been put on the back burner. They have been put on “hold” and, because of the incentive that is being given to some areas, other areas with legitimate urban renewal to carry out are suffering from the disadvantage of not having been in the favoured few at the beginning. If I talk about the favoured few I refer to the extension of this scheme to areas that could not to any extent be considered for urban renewal; they are urban development. To extend a scheme [1086] like that, which was a good scheme, into other areas for urban development was not providing the type of incentive I had hoped this scheme was about. I would love to see this scheme being used by genuine urban areas, local authorities like those in Clonmel and Carrick-on-Suir, who had specific projects in mind and where a small incentive like this would be a tremendous advantage. They have to compete with the chosen few who were included in the first bunch and with the additional ones announced by the Minister.

I was with the Minister recently when meeting one of these applicant local authorities. He indicated that he is now in such a state with the scheme that it is unlikely to be continued. It has really got out of control, because everybody now wants to get it. Suddenly you will find that Ireland — as we are seen in the Community — will be one designated area and that the whole lot of it needs to be renewed. A new look is needed at the way we are going, so that the favoured few will not always be the beneficiaries from Finance Bills or from successive Governments, or in any change in the tax structure which is a genuine effort to reorganise the whole tax code, as we understand it.

The sooner we start off the process of dialogue about this the better. The problem in Opposition and still almost in Government — which Fine Gael are — is that they have to get the agreement of the Government party who like to have control of the reins. They do not want to have to go back to all-party committees to have discussions about Government policy, but that is what a democracy is about. When you have a minority Government it is extremely difficult to govern it with any credibility. When you do come up with what is a popular suggestion about the reduction of the tax bands, the immediate response is from the PAYE sector who would love to feel that there was a hope in the future for a reduction to 25 per cent. With an educated electorate — the only way you can now get away with that type of suggestion is to put the total package together. You [1087] must be able to say: “This is where we would get the £500 million or £600 million that will be required to give this recompense to the PAYE sector,” which is, as everybody agrees, the over-taxed sector of our community.

All the demands for changes in the tax code have come from the other sector in the hope that, whatever else might be given, they somehow would be given the opportunity to pay less in the future. I have never once heard them express concern for the actual worker who had his tax removed from his pay before he ever sees it. I know the Minister will admit that that sector has been — to say the least — generous in the past with all Governments. Naturally, they had a right to question how the money was spent. They also had a right to ask questions when additional tax was demanded from them, as happened last year. In spite of that, the Minister curtailed the services to which they felt they were legitimately entitled. They had paid for them. Other legislation was brought in which even increased their contributions by way of health levies, health charges and hospital charges, all which have been covered previously under PRSI.

We have to be honest with people. We cannot do the three-card trick every day of the week. The PAYE sector have had about enough of it. They feel they have made a major contribution. They feel their services have been decimated because the Minister wants to do something with his balance of payments. In spite of all our efforts and the Minister's excellent figures he has to admit that we still borrowed more money this year. I saw a projection from his Department some years ago which showed that it will be about another four years, with our present trends, without any additional borrowing, before the repayments on existing commitments will be down. That is not just because the Minister did anything great last year or this year, or the fact that this Government took office.

This is happening because we were all realistic. We realised that we could not continue borrowing if we could not afford [1088] to pay it back. There are two ways of doing something. You can borrow — which most of us agree is the wrong way of doing it — or you can continue to give the service and make the sector who have not been contributing to the coffers help to pay for it. That is the realistic way to do it. It can be politically unpopular but, if we are being honest with ourselves in reaching a consensus, that is how it should be done. One way to do it is by at least doing something with the tax code.

The Commission on Taxation published two reports. The Minister's predecessor from his party and predecessors from other parties have always pointed to these Commission reports. It is popular to do that at public meetings. The reality is that we would be unable to implement any of the recommendations of the Commission on Taxation without a tremendous change in our whole attitude to tax and taxation. What is now exempt would be taxed in the future. Each Minister claims some little credit for little moves made in the tax area. They claim that such a move was mentioned in the report of the Commission on Taxation.

I accept the warning that the Minister voiced about 1992, the Single European Act and the integrated policy that is being talked about now by everybody. He is asked every day to explain to us what this will mean. I suppose he will assure us that, like joining the Community, things will not be any easier for any of us. Nothing will be cheaper than it is now, although various sectors will feel that, with a levelling off of all the taxes across all the boundaries, products that are twice as expensive here in comparison with Britain, Germany or France will all be the same price. I suppose, knowing the Minister, that he will make sure that his take for the State will be the same. Otherwise, there would be a loss to the Exchequer.

Usually when there is a loss to the Exchequer, the poor suffer most because their services are withdrawn, or the PAYE sector are expected to make up the difference. Until the Minister convinces me that other sectors will have to [1089] make their contribution to lighten the burden with the changes that will take place, I will fear that the situation will worsen for working people, poor people, people in need of work, and for hospitals, schools and for social welfare beneficiaries. The year 1992 could bring some tremendous changes. Our experience in the past has been that, when changes take place across the spectrum of taxation, such as border taxation and Customs and Excise levies, usually the people who suffer most are the people in the lower financial categories.

I hope the Minister will show some initiative in starting a debate, and also moving in Finance Bills between now and 1992, to take account of what will happen. The differences he itemised have been of the order of £400 million or £500 million. Many of us said this would happen. The Minister suggested in the Referendum debate one of the advantages would be doing away with all of these borders. They are not really there any more, but they are there from a taxation point of view. They are there for the traveller and for the tourist. They are there for the worker and for the emigrants.

This Government have a major responsibility. I do not see any evidence of it in the 1988 Finance Bill, except where the Minister refers to it briefly. That is my contribution at Second Stage. I will have some recommendations on Committee Stage, particularly in the area of increasing allowances within the existing bands in the whole area of taxation. I will be debating the various recommendations in further detail with the Minister and I hope I will not be too argumentative in the process.

Professor Hillery: Information on Brian J. Hillery  Zoom on Brian J. Hillery  The Finance Bill lends itself to detailed discussion on Committee Stage. On that Stage I propose to go into more detaile so I will be brief in what I have to say on Second Stage.

I want to focus on the success of the Government's economic strategy to date and to make some comment on the vexed area of taxation. One of the more encouraging developments in this country at [1090] present is the widespread understanding of the need for control of the public finances. I do not want to go over the sorry legacy left by the Coalition Government during their four years or so in office. Suffice to say that when Fianna Fáil took office a little over a year ago there was a crisis in the public finances, as the Minister underlined in his opening remarks. There were record taxation levels and a record level of national debt. To compound the problems facing the country, the economy was practically at a standstill and confidence, that important ephemeral quality so necessary for economic growth and success, was at a very low ebb and it meant that very little investment was made. The Government on taking office faced the challenge head on by taking charge of the management of the economy. The Minister for Finance, Deputy MacSharry characterised that courage and competence in tackling the issues facing the country. Confidence is vital for investment and economic growth.

The necessary cuts have been severe in places but there has been widespread support for the general thrust of Government policy. Some of the savings effected over the past year have been painful. Was there any realistic alternative? Nobody has come up with one. Senator Ferris referred to infamous cuts but did not offer any realistic alternative to them. The savings or cuts have been distributed across the board but there has been special attention given to the less well off people in the community. The Fianna Fáil Party have a history of caring and compassion in relation to the disadvantaged and the less well off. In very difficult circumstances this year, social welfare levels have been more than maintained and better than that for the longer term unemployed.

The basic question at this point, one year or so after the Government took office, is whether the tough and difficult decisions that have been taken were worth while. What is there to show for them? The unequivocal answer is “Yes” for the following reasons. The key yardstick of the level of borrowing has shown [1091] a drop as a consequence of Government control of public expenditure. Furthermore, the most recently published Exchequer returns in respect of the first quarter of 1988 indicate that the Government are fully on course to achieve the budget targets for this year. There is also some other encourging news and indicators. Gross national product in 1987, as the Minister pointed out, grew by 4 per cent. Exports were up by 15 per cent in volume terms and industrial production rose by 10 per cent.

The correction of the public finances on the economic front is a pre-requisite to developing further opportunities for job creation and improving services generally. Further proof of the correctness of the Government's approach in budgetary strategy is reflected explicitly in falling interest rates. Confidence in the domestic economy enabled the Central Bank to cut interest rates, which was followed by a reduction in the inter-bank and associated bank rates. Inflation and prices are dear to all our hearts. They are important to everybody. Our inflation rate is now below the European Community average and the projection of an inflation rate of 2.5 per cent for 1988 is particularly encouraging.

In addition to the economic measures, at times tough, that have been taken, there are incentives in this Bill for the construction industry. There are specific incentives for the Custom House development and so forth. The income tax concessions in the budget, together with lower interest and inflation rates provide the climate for a substantial increase in the volume of private investment. Senator Ferris referred to the profit motive being the dominant consideration for private industry. He is right. Why would they be in business otherwise? If they are profitable they contribute to economic growth and there is then that extra wealth available for distribution. Through increased wealth, there are more funds available for distribution among the services, like health, social welfare and education.

[1092] The budgetary strategy has led to tangible, desirable results but impressive as these results are, there is still quite a way to go. Our export performance is particularly encouraging which underlines the need to sell our goods and services abroad at even keener prices. There is cut throat competition in the trading of international goods and services and we have to be that bit more competitive and have that edge. The agreement on pay contained within the Programme for National Recovery is of central importance to budgetary strategy and in particular to competitiveness, not least because salaries and wages represent 80 per cent of gross national product. Furthermore, pay represents almost half of Exchequer expenditure. Vigilance is necessary to ensure that only the pay terms of the agreement are awarded. We have only to remind ourselves that public service pay for 1986 exceeded the target in the Coaltion Government proposals in Building on Reality by £127 million. This figure was largely responsible for the massive over-run on the current budget deficit in that year. The fact that the social partners have committed themselves to the pay agreement and the fact that inflation is now at a low level, together with the significant income tax reliefs in the Finance Bill, should mean that pay levels will remain within the limits agreed in the Programme for National Recovery.

As a PAYE taxpayer, in common with others I am concerned about take-home pay. Whatever about advocating, as I do, staying within the pay limits agreed in the Programme for National Recovery there is the question of taxation and its equity. There is general agreement that the rates of income tax in Ireland are too high, and that they are a source of disincentive. I should add that the Government have gone a considerable distance in this Finance Bill in respect of income tax. Senator Ferris referred to the very modest changes in tax in the Finance Bill but I would remind him that the undertaking on behalf of the Government in the agreed Programme for National Recovery this year was a tax relief of £30 million. The Finance Bill [1093] more than trebles that to a figure of £91 million. He talks about the token sums given by way of relief. The figures in the Finance Bill in a full year will cost £152 million. There is nothing token about that.

The taxation measures in the budget this year will bring 60 per cent of taxpayers on to the standard rate. The Government target is to bring 66? of taxpayers on to the standard rate, so considerable progress has been made there. It is an impressive achievement to go that far but nobody is denying that there is a long way to go in terms of tax reform. It is a very urgent problem and will get the undivided attention of the Government in the years ahead.

The Finance Bill for the first time for several years provides a reduction in tax for those on higher rates. The latest Fine Gael proposals on taxation propose to reduce tax rates to 40 per cent and 25 per cent. We would all agree with that, but it raises the question of where the money would come from. It would cost £600 million.

Senator Bulbulia referred to the begrudging attitude of other parties in relation to their policy proposals on taxation. It would be fair to say that in the Minister's opening address here today, and otherwise, he has been making a plea for realism rather than knocking the proposals for the sake of knocking them. There is a proposal that there should be an all-party committee on taxation but at the end of the day it is the Government's job to make taxation changes and they have the specific responsibility and they are expected by the people who elected them to take on that responsibility and to act on it. From the action that has been taken in this Finance Bill, an important start has been made and I hope it will be kept up.

The Government are on the right track but they cannot be deflected from the imperative of continuing to deal with the borrowing and debt problems. Indeed, the most recent Central Bank report calls for further cuts in Government expenditure. Nobody likes cuts, but in keeping on the essential course in the interests of [1094] the country, further cuts will be necessary. The Government recognise the need to reduce the levels of taxation as quickly as possible, so that initiative and enterprise will get a further boost which is obviously needed.

I share the view that significant progress is made through the Bill before us in respect of income tax, corporation tax and capital taxation. Furthermore, the Minister's reforming approach is also evident in tackling the problem of tax evasion, tax collection and enforcement.

I want to put on the record that I congratulate the Minister, Deputy MacSharry, on the courage and competence he has shown in the Finance portfolio. I would also like to congratulate the Government on the courage and determination they have shown in doing their duty for the country. This duty continues to require tough and difficult but fair decisions which must be taken in the national interest.

Mr. Doyle: Information on Joseph Doyle  Zoom on Joseph Doyle  Senator Fallon said that the Government were turning around the economy now after years of mismanagement. I hope he was including the years 1977 to 1981 because that was the real period of mismanagement when the problems were caused. I am surprised at Senator Hillery ignoring that point and saying that the Government faced a financial crisis. They did not. The Government that came into office in 1981 did face a financial crisis. The proof of that is that before they left Government the Administration of 1977 to 1981 rushed out a document, The Way Forward, to counteract that financial crisis. At that time the proportion of our debt borrowing in relation to gross national product was running at roughly 19 per cent. I admit that it is down now to roughly 8 per cent, and this year could be down to 6 per cent. That was the real crisis that faced this country at that time. That is the quagmire out of which we have been trying to pull ourselves ever since.

One of the ways in which monetary policies influence the real economy is through the impact of interest rates. The [1095] benefit of lower interest rates for the private and public sectors is very important, but there are other wider issues which must be taken into account. Interest rates must be kept at a level which maintains a flow of savings which are necessary to fund the financial needs of the economy, but at the same time they must be sufficient to protect the exchange rate. With the mobility of international capital, domestic interest rates have to be kept at the level of interest rates existing abroad. Interest rate reductions can only hold up if they have been earned through sound monetary policy.

I am sorry the Minister has left the House because I read recently in the financial columns of one of our papers that there is now a very good chance that agreement will be found on the free flow of capital between countries that are in the EC. I understand that this could take place by 6 June next. I would like to know what safeguards the Minister is seeking for our country and what financial impact this will have on our economy.

This country has suffered over the last number of years from borrowing, borrowing which has not been well spent. It has not been well spent for the benefit of the country. We have indulged in living standards which the economy could not afford. We must also bear in mind that we had to be build certain social structures over the last number of years due to an increase in population — schools, houses, etc., but the debt itself has left a very heavy burden in the form of taxation without conferring on the country any other real benefits, such as growth in employment. Indeed, it has had the opposite effect. It is undermining growth in employment. I understand that one-tenth of our national output is required each year to meet the national debt requirements. While improvements have been made — and we welcome these improvements — fiscal correction is not enough in itself. I agree with the Minister that we are not, therefore, concerned with solving the budgetary and debt problems merely for their own sake, as some [1096] kind of detached or clinical exercise in accounting. There must be initiatives in many other areas which will enhance employment prospects. There must be a removal of disincentives, especially in relation to income tax.

This country is now facing two types of emigration: one, people who emigrate out of necessity to seek employment, and the second, which has occurred over the last year or two, people who have good jobs here, are well paid, but are paying a very high rate of tax. They see the low rate of tax levied abroad, especially in our neighbouring country, and they emigrate for that reason. With the skills and education they have received here they are able to find employment in Great Britain at a much lower tax level than exists here. That must be a very expensive burden for the State to bear.

It is essential that we have tax reform. The Minister spoke about making available £152 million in this Finance Bill in order to reduce income tax which is hardly, he said, insignificant in our circumstances. I would like to point out to the House that in 1986 — probably in more difficult circumstances — the Government at the time made over £200 million available as a reduction in income tax, but it went unnoticed. People who received their pay packets on the following 5 April saw little or no reduction in their income tax liability. This was especially so in the case of single people. I am sure the same will apply here. There will be a reduction of £152 million, but when that is broken down it will make very little impact. We said that the tax reform that is necessary is a tax reform of a substantial size. We did not say that taxation should be reduced by adding to our present borrowing but that it should be sought by widening the tax net and widening the tax base.

I believe many people now acknowledge that there is a consensus between the three major parties in regard to tackling the national debt. They accept that. There is a maturity in politics in this country now that has been lacking for a long time. People recognise that. The [1097] national debt and its problems have been taken out of the political arena. I believe that people wish that tax and tax-related problems could be taken out of the political arena. That is what we are suggesting in our proposals — that an all-party committee should be set up to examine the proposals to see where we can widen the tax bases with agreement. The Minister said today he was open to dialogue but that seems strange when he would not consider setting up an all-party committee to examine the possibilities of reducing taxation substantially. There are ways and methods of doing so and those ways and methods are not election manifestos. It would have to be done over a period and the tax reductions would have to be so substantial that people would recognise them. It would have to make a total difference to their weekly pay package.

The Minister, in the Finance Bill, has brought back section 23 incentives. Anything that can be done for the construction industry is to be welcomed. Indeed, the present Administration promised they would do a lot more than they are doing for the construction industry. The development of private accommodation, especially in cities, is to be encouraged. I would like to see far more incentives being given to attract private rental accommodation to inner city areas, especially the city of Dublin where there are so many acres of dereliction. A slight change has been made in the incentives for designated areas. With the exception of the Customs House Docks site, there has not been much of an impact on other incentive areas in Dublin. I do not know the reason for that.

These incentives will have to be looked at if we are to have some revival in the city of Dublin. I ask the Minister to take into consideration again the proposal that the incentive areas in the city of Dublin should have the same financial benefits and incentives as the Custom House Docks site. It was a mistake to give special benefits to one area and not to others. Now that the Custom House Docks site has got off the ground, so to speak, the Government should grasp the [1098] nettle and give the same incentives to the other designated areas in Dublin so that they will be developed.

Senator Ferris mentioned one matter which I would like to refer to, that is, the internal market. The harmonisation of indirect taxes in the European Community, as part of the completion of the internal market by 1992, will have serious effects for Ireland. The Minister referred to this matter in his speech. I understand that he can seek compensation within the EC for the loss of revenue resulting from the harmonisation of indirect taxes. It is interesting to note that the West German Minister is proposing that the Commission should exempt food and other essential goods from VAT. The negotiations that will take place over the next few years on the harmonisation of taxes will be very important to this country because, as the Minister said, it involves £420 million in the first year and £350 million in the second year. We all wish the Minister well in these negotiations.

The entire market offers great prospects for this country. It offers great prospects for employment especially in the exporting industries. I regret that there are no incentives in the Finance Bill towards gearing people to prepare for the internal market. It is essential that we put that process into action straight away. I believe that this was one of the most attractive issues of the Single European Act. There will be benefits from the single market and I regret there was not more emphasis on it in the Minister's speech.

The Minister has made some changes from the initial budget speech which he made. I am glad that he has removed the proposed tax on bank cards. This was a very foolish step for the Minister to take because there is a problem with the movement of money in this country at the moment. Security is a real problem and the bank cards provide a form of security for people who can withdraw money from banks in that way. Anything that can increase security should be encouraged. The Minister has somewhat modified the once-off tax on pension funds and has exempted smaller pension [1099] funds, a matter about which I, and I am sure other Senators, received numerous representations. Very small pension funds would have been seriously affected by that tax if it was allowed to go ahead. I am glad the Minister had second thoughts and a change of heart on this matter.

In summary, the last year has been a good year and some progress has been made. It does not matter which side of the House we are on; we all want to see our country prosper. We want to see more employment and a better standard of living for our people. My party leader, in his Tallaght speech, stated clearly where we stand as a party. As long as the Government's economic policies are directed towards these issues which I have just named, they will have the support of the Fine Gael Party.

Mr. McGowan: Information on Paddy McGowan  Zoom on Paddy McGowan  I welcome the opportunity to make a few observations on the Finance Bill. First as somebody who comes from a rural part of Ireland, from the west, I would like to compliment the Minister for Finance on the tremendous job he is doing for the country. Indeed, I wonder how many people would be capable of carrying the burden he is carrying today. That is not a question I would care to answer. Most people, even those who are not involved in politics, are sufficiently concerned about the future to question our prospects of getting out of real financial difficulties. The Minister, Deputy MacSharry, has been seen even by those who oppose him politically, as a strong Minister for Finance. They recognise that this country would not turn the corner financially and would not sustain independence financially if we had not got people of the calibre of Deputy MacSharry. That is recognised right across the country.

Benefits are still to come from the corrective action that has been taken by the Minister for Finance. The first benefit will accrue largely to the city of Dublin. Therefore, it is imperative that those of us who represent rural areas should continue to encourage and offer support to him. There are already signs that the [1100] economy has turned the corner and that the prospects are not as gloomy as they were. We recognise that financing a small economy like ours is a major operation and that the overheads and the administration in relation to the population are far out of proportion. We recognised how necessary it was to bring in a redundancy package. I would like to see that redundancy package extended and multiplied many times to unload our heavy administrative burden. We should get rid of many of those people who have become complacent. It is very hard to recognise the necessity for many of our senior civil servants. It is important that the good work which has begun in removing some of the burden will continue because this is vital. Rural areas still have to get substantial support for the infrastructure that is so necessary to have equality for those who are living in less favoured areas.

The financing of local authorities is a major concern because they have not the machinery to raise sufficient finance themselves. The Minister for Finance will have to continue for a number of years to take very drastic corrective measures. When I drive through the city, from here to Stillorgan and on to Bray and see local authority workers planting flowers, attending to gardens and building cut stone walls and then think of the west and Donegal, I ask myself if I am in the same country at all. I am not a despondent or a gloomy person. We have an obligation to encourage the Minister for Finance to continue on course until all areas are provided for equally, from Burtonport to Dún Laoghaire. That is my simple message today to the Minister for Finance. He is doing a tremendous job but he has only started. I sincerely hope that he will be in office long enough to continue to deliver on the marathon task he has undertaken.

The Government have found it necessary to examine the areas where there is duplication of administration. They have found it necessary to abolish organisations, some of which I regret very much, such as the County Committees of Agriculture. They should have been reorganised on a personal basis. A lot of [1101] ground has to be made up in rural areas and the Minister has overall responsibility for this. I am glad the duplication of administration has been tackled and that this task will continue because we will only get results and achieve the objective if duplication and waste are eliminated. The Minister has set the right course. The Government are 100 per cent on course and the polls show that is so. That automatically brings a reaction from those who are affected. Everybody admires the Minister for Finance who has been rock solid.

We also admire the Minister for Justice who stood up to people who wanted up to £42,000 a year. I had no difficulty in telling the Minister to stand firm because, if he could not get people to work in the prison service for £42,000 a year, I could get him three people to work for the same amount and they would be very happy. People must stand up and say to individual Ministers and to the Government that they have only started their task and that the people living in rural Ireland expect them to continue regardless of whether it is popular or unpopular, regardless of whether they fail and are out-voted or whether they have to have a general election. I am not out on the streets calling for one.

There has to be a solid commitment and everybody has to accept and understand that the Government are not going to be deterred and are not going to turn back, that they are on the right course and the only course that can save this country from being totally sold out to somebody else. It is natural, when you start to dismantle Departments and to make people redundant, that you will have a fight on your hands. We have been so dependent on the few people who are working in this country at present that we could not have gone much further down the road without taking some corrective measures.

Over the last year I listened to various people who have easy and simple solutions to our problems. Everybody said we did not have to do it this way, we did not have to impose rod licences, we did not have to cut back on the teachers and [1102] we did not have to close any hospitals. Everybody has an answer and everybody thinks we could have tackled the problems differently. The Government have a responsibility and not a very popular responsibility. We cannot cut back and save without affecting and upsetting some people.

I am sure that most of us hear very simplistic answers on all affairs programmes. Everything seems so easy when you are looking at the television and you are far removed from the problems. Every weekend we hear from people who have singular minds and attitudes and have simplistic answers about how all the ills of the country can be cured. It is very amusing. It is so farfetched that the ordinary people do not believe any of the current affairs programmes that come up with simplistic answers. Many people, including quite a number of people from this House, appear on television and tell the country that we could tackle the problems in a simpler way, that we should not be taking such harsh measures and that we should be determined in our attitudes.

Recently I heard somebody say it was a tragedy that we supported industrialists who came into this country because now we find they are leaving the country and taking very substantial amounts of money with them. I do not think it is unreasonable for major companies that come here and invest money to take out that same money to meet the repayments on the money they borrowed in the first place to come in and set up industries. If there is a belief that those people are taking out profits at the expense of the worker and that jobs are disappearing, or jobs are not being created, that is a complete misconception. The industrialists who have come here from abroad have done a great job. They have encouraged Irish people to invest and to get involved in their own businesses and we should continue to support them. We should not allow it to go unchallenged that people are taking money out of this country. Industrialists who come here have a good record. The Government should challenge those who are saying that the money they earn in [1103] this country is going out and that we have not benefited. That has to be challenged and I suggest that we do so.

I am particularly interested in the development of the tourist industry. I welcome the initiative taken by the Government in setting up the task force and the recommendations that were made by it. The west, particularly County Donegal, has a potential to develop their tourist industry but they have not had a chance. The west has not had the opportunity to develop in the same way as have the city of Dublin and the south. At present there are many facilities in this city. There are many transport services — Dublin Airport, DART, the ferry services and seven or ten trains a day from here to Cork. The people of the west are right when they say they are not getting their fair share. The tourist industry is the one area which can help increase living standards in the west. I hope the Government will recognise the need for input to tourism development in the west. The area I come from has geographical disadvantages. We have no train service, no major airports and no major ports. I hope that, in improving the economy, those areas will be looked at. We will find jobs for our young people only if we develop the industries which have the potential to be developed.

When speaking about the tourism industry I want to say to the Minister, and I am totally convinced about this, that he must not turn back on the decision taken by the Government to impose a licence on rod fishing. There must not be any diversion from the consistent programme of funding the fishing industry. There is a great deal of pollution in our lakes and rivers and it takes money to solve that problem. Local authorities are faced with crises when rivers are polluted and they get the headlines. The Government and the local authorities are expected to respond quickly and to provide the necessary money. If there is no expenditure, no maintanence and no policing of rivers and lakes then the fishing industry is not worth anything to anybody. This is about the only country in [1104] Europe where fishing was free up to now. The people who are taking it on themselves to challenge the Government and who say, even today on the radio, that they would not negotiate until the proposals are withdrawn have to be met fairly and squarely. The Bill has been introduced and under no circumstances should the Minister withdraw the rod licensing regulation. I sincerely hope he will not do so.

It is important for the people in rural Ireland, especially in County Donegal, that the Government stay on course. Only a Government who correct our financial difficulties will have any chance of providing jobs for our young people. In County Donegal about 20,000 young people are hoping to get jobs. They will have no prospect of work in the future if the corrective measures are not taken by the Government and by those charged with responsibility.

I have a map, which I have used many times, which refers to the census of population taken in 1981. The black area along the Border, including County Donegal, shows the level of unemployed which has now reached 46 per cent. There is nowhere else in this country affected to the same extent. I have been a public representative in that area for 29 years. I am saying to the Government and to the Minister for Finance to keep on course and to correct the finances of this country. I hope they will recognise the need to spend money in that area. I am pleading with the Minister for Finance to recognise the need for economic development in the west, particularly in the Border counties, because if we are ever to get out of the difficulties that are created by the Border, we must have economic development. I believe the time is right because those difficulties are recognised in Europe and by our Government and a co-ordinated and an integrated development programme for the northwest, and particularly for the Border counties, is our only hope for the region.

I started by encouraging the Government to eliminate waste and duplication. I have noticed that many people holding [1105] senior jobs whether in a third level college or as a senior official in a Department, want to be involved in outside activities. They do not want to stay at the work they initially contracted to do. This practice is spreading like a disease and is reaching serious proportions.

I hope the Minister will continue to take corrective measures and will recognise areas where there are vast savings to be made. Somebody hinted the Minister might be appointed as a Commissioner but I hope he will stay here. He is recognised as a man with tremendous ability who is likely to be a success in his job. None of us is looking for a by-election or a general election. Anybody who cannot identify the Government's determination to pursue their policies, regardless of the consequences, would be foolish — and gambling that the Government will not go to the country. I am not in the forecasting business, but anybody who forecasts that the Government would not go to the country on an issue would lose his bet. That is my assessment. I strongly urge the Government to continue the tremendous job they are doing because confidence building is vital. It must be admitted that confidence needs a lot of building and correcting because the people have lost confidence in themselves and in the future. Restoring that confidence is a major undertaking.

We have only begun the task and I hope the Minister will stay long enough to see the benefits that can accrue from the corrective measures he has taken. We can all blame each other for our financial difficulties, but we were living in different times and in the past we were too kind to each other. We were all living in Utopia but today we are living in the real world. I sincerely hope the Minister, Deputy MacSharry, will stay long enough to benefit from his investment in the Irish people.

I am glad to have had this opportunity to say a few words of support for the Minister because there is a great deal at stake — the future of many young people, especially the 20,000 in my county.

Mr. Connor: Information on John Connor  Zoom on John Connor  The broader aspects of [1106] the budget have been covered by Senator Bulbulia and Senator Doyle. As I did last year when I was speaking on the budget, I will confine myself to my brief. Most of us have specific briefs on which we speak and I speak on agriculture. In this contribution, I will speak solely about agriculture in the Irish economy and the way, if any, it has been influenced for the better — I would say for the worse — by this budget.

Farm incomes will not grow significantly, if at all, in 1988. ACOT and AFT agree that the income growth in the farming sector this year could range from zero to 3 per cent if we are lucky with the weather. Any income, or any growth in income or output, will be the result of factors completely outside the influence of anything the Government have done or are doing, such as good weather. Even if we were to get a growth rate in income and output of, say, 3 per cent this year, we still would not reach the income levels, in real terms, which farmers enjoyed in 1984.

The greatest problem facing the industry is the fall in the size of the national beef herd. Since the introduction of milk quotas in 1984, dairy cow numbers have fallen by 115,000. The June census showed that they now stand at about 1,527,000. It is conservatively estimated that with present policies — which is no policy at all — the volume of beef production will be 150,000 fewer animals by 1991-92. That is the figure by which production will have fallen if we continue on the present course.

While all this has been taking place in the dairy sector, with the direct disastrous effects on cattle numbers, there has been only a very marginal increase in the traditional beef cow herd. We have had two kinds of cow herds, the dairy sector for milk production which naturally produces calves, and the beef cow herds which were purely for the production of calves alone and had no influence on milk production. All this represents the most awful threat to this most important sector of the agricultural industry and it is coming at a time when opportunities are being opened up to the beef industry [1107] which have not been there for several years.

Four years ago, supply was 10 per cent above the level of demand for beef on the Community market. During those years we had massive intervention and massive downward pressure on prices. This year, because of the fall of beef numbers in Europe, the market has come back to about equilibrium, that is, that the levels of demand and supply are about the same. Of course, the pressures on intervention and stocks of intervention have been greatly reduced. I am not quite sure what the figures are but at least they have come down by a factor of four on what they were about two years ago.

It is now envisaged that beef supplies in the Community will be well below the level of demand for several years to come because the trend is downward. Since we entered the Community 12 or 14 years ago, hardly ever has this kind of situation pertained. This will present us with tremendous opportunities if we are there to pick them up. Now, all we can do is imagine the amount of national income which has been lost because we did not take the opportunity offered to us by this new unique situation. It is sadder still that in this budget there is not a single measure which will help to rebuild the badly depleted beef stock herd. If the Government are serious about regaining lost national income in the beef sector, they must, as a matter of urgency, remove the restrictions on grants given towards expanding the beef cow sector.

At the moment, a farmer or his spouse who has an off-farm income of over £5,200 does not qualify for the beef cow scheme if he or she lives in the less severely handicapped areas. I might mention that that income ceiling was £6,400, but this Government reduced it to £5,200 last year. Farmers whose income from an off-farm activity represent anything more than 50 per cent of their total income — we are talking about all farmers — do not qualify for the suckler cow premium scheme, another scheme which is there to encourage the expansion of the beef [1108] herd. Farmers engaged in milk production — dairy farmers whose cows are there purely for the production of milk — cannot receive grants for the production of more calves under any of these aforementioned schemes. Our party would suggest that the Government should remove immediately the restrictions on the receipt of these grants under the cattle headage schemes and the beef cow schemes to farmers with an off-farm income in excess of £5,200. In effect, we are asking for the abolition of that off-farm income condition and that the restrictions on non full time farmers under the cow suckler premium scheme should be removed also.

We also propose that a limit of 30 livestock units for headage payments in the more severely handicapped areas should be increased to 45 livestock units, and that the current limit of 28 beef cows, which at present enjoy grant-aid under the beef cow scheme, should be increased to 42 cows. We also ask the Minister for Agriculture and Food to seek an increase in the suckler cow premium scheme which, incidentally, is fully funded by the EC. We are asking him at the Council of Ministers to seek a concession that would increase the payments out of this scheme from a little over £36 at present to £60 per cow outside the disadvantaged areas. Farmers with a milk quota of less than 30,000 gallons should be made eligible for beef cow grants, their cow numbers and their quota in 1987 should be fixed as the base, and any cows in excess of this number should be able to qualify for beef cow and suckler cow premium schemes. As I said, I am talking about farmers who have a milk quota of less than 30,000 gallons.

An Cathaoirleach: Information on Tras Honan  Zoom on Tras Honan  I presume all you are saying is related to taxation.

Mr. Connor: Information on John Connor  Zoom on John Connor  Of course. I will be more specific on taxation in a moment. We, in Fine Gael, believe that tax incentives should be used to encourage farmers to replenish this crucially important sector and that the stock relief clause for farmers' income tax should be used as this [1109] incentive. I will be moving a recommendation on Committee Stage that stock relief for beef or breeding cows should be extended from its present 110 per cent to 125 per cent. As of now, stock relief cannot be used to create a loss. Very often this means that unused relief is of no benefit to a tax paying farmer since it cannot be carried into the following year or years. This could often arise on a beef farm where the level of income is one of the lowest among the various farm enterprises relative to the value of stock carried on the farm. This can be especially significant for a farmer building up a suckler herd since the purchase of breeding stock can predate any profits from that stock by two to three years. I will also be proposing that unused stock relief can be carried forward for up to three years.

At the moment the clawback period for stock relief is ten years. In a business as risky and as low yielding in income as beef production, ten years is a very long period. I will be proposing on Committee Stage a more appropriate clawback period of seven years — that is, more appropriate to beef production. No doubt the Minister will say that all I have proposed here will cost the taxpayer. I do not deny that, but it will not cost the taxpayer a lot and, in the long term, it will not cost the country anything. It will be a positive earning for the country. To make the proper judgment we must look at the other side of the equation. If by these measures and others we could increase the national herd by 3,000 beef animals by 1992, we would generate £200 million worth of additional exports, we would create 1,000 additional jobs in the beef or meat processing industry, we would create continued viability for at least 25,000 family farms and we would have all the other benefits to the Exchequer, like PAYE, VAT, etc., which are very difficult to put figures on but would be positive benefits.

We must not forget that in recent years there has been a very large investment in beef processing. In the three years from 1983 to 1986, we know of £90 million of capital investment in the beef processing [1110] industry and there were IDA grants amounting to £20 million to back up that investment. It is little short of madness to stand idly by and allow the sector of the industry that provides the raw materials to the processing sector — and here we are talking about one of the most pivotal of national raw materials, that is, the beef cattle herd — to decline with all the ramifications for national disaster that holds, not to mention the nonsense it makes of the massive investment in extra capacity in the processing industry. A lot of that investment is provided by the State.

I do not want to go into the mistakes and, indeed, the fumbling of the Minister for Agriculture and Food over the past year and the latter half of 1987——

An Cathaoirleach: Information on Tras Honan  Zoom on Tras Honan  You will not be allowed to do so because we are on the Finance Bill.

Mr. Connor: Information on John Connor  Zoom on John Connor  It has financial implications I would suggest, a Chathaoirligh, and, therefore, I should be allowed comment on it, but because of your ruling I will not. All I have to say about the unhappy episode of that body, that rebulous organisation the Minister tried to set up, consisting of the banks, the farming organisations and so on, is that anybody with any sense would know it could not increase the beef herd.

An Cathaoirleach: Information on Tras Honan  Zoom on Tras Honan  We are dealing with the Finance Bill which deals with taxation. Would you come back to the Bill? You may make frivolous remarks about the Minister for Agriculture and Food another time.

Mr. Connor: Information on John Connor  Zoom on John Connor  I can assure you, there is nothing frivolous about my remarks, because what the Minister did had very serious income implications for the country.

An Cathaoirleach: Information on Tras Honan  Zoom on Tras Honan  Please get back to the Bill.

Mr. Connor: Information on John Connor  Zoom on John Connor  What the Minister did had very serious income implications for [1111] the country. That is the essence of what we are talking about. All that is behind us. The Minister has written it off and said that that initiative — if you could call it that — has been a failure. With that bad experience behind us, we hope the Minister will look at the positive proposals I am putting forward here today — most of them have been put forward by our spokesperson on agriculture in a very comprehensive document issued some time ago, and they were spoken about in the other House when the Bill was being drafted there.

Let us look at the pig industry briefly. We cannot, of course, look at the pig industry in relation to the budget because there is nothing in the budget that will help the pig industry. The pork and bacon industry, like the cattle industry, is in decline. Government policy over the last three years, under the aegis of the IDA, has expanded the capacity at factory level by one-third — from a capacity for two million slaughterings in 1984 to a capacity for three million slaughterings now. As on the bovine front, the production of pigs nationally is down by almost 10 per cent on what it was five years ago, and we have no policies to expand production to fill the additional capacity at factory level.

There is now on the horizon another problem for production. What will happen when the supplies of whey dry up, and dry up they will very soon because of the reduction in the production of milk? Whey is a very cheap source of pig feed. Someone recently said that we would need to be very cautious about expanding pig production because of difficult external market conditions, but this is defeatist nonsense. Look at Holland. The increased production in the Netherlands last year was greater than the total Irish production, and all this increased product was disposed of on the world and Community markets with good returns to Dutch producers, with no major problem on the wider pork and bacon market in the world or in the Community.

On the horticultural front, what is being done in the budget, or by way of [1112] Government policies, to expand field vegetable crops? Nothing. What is being done to introduce an effective grading scheme for potatoes? Nothing. We have An Bord Glas. Someone said to me the other day that An Bord Glas seem to consist of a series of “facilitators”.

An Cathaoirleach: Information on Tras Honan  Zoom on Tras Honan  I must interrupt you, which I dislike doing, although you might think otherwise. In fairness, I have no trouble allowing any Senator, including your good self, to make several passing references to agriculture and the worries you have in regard to the Department of Agriculture, but I wish you would get back to the Finance Bill. Listening to you as you go page by page through your notes I am convinced that they were prepared for another Bill, and I am a little bit concerned about that. I am only giving you my advice as a result of my long years' experience in the House.

Mr. Connor: Information on John Connor  Zoom on John Connor  Your fear and worry in that respect, my dear Cathaoirleach, may be well allayed.

An Cathaoirleach: Information on Tras Honan  Zoom on Tras Honan  Please come back to the Finance Bill, because I cannot find the section which is relevant to what you are saying and I am trying to do that.

Mr. Connor: Information on John Connor  Zoom on John Connor  I am talking about the budget. It has been the practice in this House to talk about not alone what is in the budget, but what should be in the budget.

An Cathaoirleach: Information on Tras Honan  Zoom on Tras Honan  I accept that. You are as entitled as anybody else to tell the Minister what should be in the budget but you are talking about agricultural policy.

Mr. Connor: Information on John Connor  Zoom on John Connor  I did say at the outset that I spoke on agriculture in this House, and that I would confine myself to the agricultural industry. The budget impinges — but impinges mightily — upon the agricultural sector. I think it is relevant and in order for me to make these points in this House on a budget debate.

An Cathaoirleach: Information on Tras Honan  Zoom on Tras Honan  You have to relate [1113] what you are saying to budgetary matters.

Mr. Connor: Information on John Connor  Zoom on John Connor  I mentioned An Bord Glas——

An Cathaoirleach: Information on Tras Honan  Zoom on Tras Honan  You mentioned it half an hour ago and I am still waiting for you to come back to it.

Mr. Connor: Information on John Connor  Zoom on John Connor  I am constantly being interrupted since I uttered the words “An Bord Glas”, and since An Bord Glas were set up last year with funding provided in the Finance Bill — there must obviously have been very little funding — I think it is only right and proper that I should be able to comment on it.

An Cathaoirleach: Information on Tras Honan  Zoom on Tras Honan  Directly to the Finance Bill, Senator.

Mr. Connor: Information on John Connor  Zoom on John Connor  I was talking about An Bord Glas, which I was saying do not seem to have any role in the horticultural industry, bearing in mind that they are funded from State funds provided under the Finance Bill and the budget. Somebody said to me the other day that An Bord Glas would appear to be comprised of a series of “facilitators”. A marvellous word in a way. These people cannot provide any direct assistance to the horticulture industry, including the vegetable industry. They have people who facilitate you by telling you there is a fellow in the Department of Industry and Commerce, or in the Department of Agriculture and Food, who can help you, and all he — the official — is doing is facilitating you by providing that information. That is where we get that type of animal we call a “facilitator”. An Bord Glas should be properly funded. They should have a dynamic role in the development of a proper horticultural industry. Until they have, then all the taxation that has gone into An Bord Glas, and all the taxation that is being continuously spent on their existence, is a waste of money.

I want to make a final point about the recent designation of areas under the EC Structural Fund. The first payments of [1114] the EC Structural Fund will come into effect this year. Since some of the payments will come out of taxation here, it is obviously a budgetary matter. Looking at the 11 areas which have been designated as pilot schemes under the structural fund, I cannot for the life of me understand what sense they make. Obviously they were put there for some geo-political reason. The essence of the rural integrated development programmes is to develop, in an integrated way, disadvantaged regions within the Community. That will be done by refunds from the EC through the Structural Fund, and an input of Exchequer taxation from the native country. We got off completely on the wrong foot because it would appear that for purely political reasons, areas around the coastline, from County Wexford along the south coast, in every county in Connacht except my own, Roscommon, got a pilot area. There is even a pilot area in the Cooley Peninsula, County Louth.

Going back to the essential principle and the essence of these schemes, they should be set up on a regional basis with proper regional-integrated programmes and policies for the development of disadvantaged regions, not pockets of parishes strewn in west Mayo, or somewhere between Galway and Clare, or between Meath and Westmeath or Longford and the Cooley Peninsula, and a portion of the coastline of County Wexford, areas that have no relationship with each other. It would make some sense if the total province of Connacht and the other three counties of Ulster were taken as a region for a pilot scheme. Let us test the scheme there and make the mistakes one has to make in the initiation of these schemes in a region like that. Only in an area where words “regional” and “integrated” would be meaningful, could we see anything meaningful or good coming out of it. We are going to spend taxpayers money on the setting up of this scheme this year. I ask the Minister to reconsider what has been done in this fragmented piecemal way for purely constituency political reasons.

[1115] I am sorry we had our problems a Chathaoirligh. If I have one message to give it is that the Minister should take very seriously what I have said about the expansion of the beef herd. We are storing up problems for ouselves as a result of a decline in the national herd. We have put forward positive proposals that will cost very little taxpayers' money but the effects on the national economy will be enormous.

An Cathlaoirleach: Information on Tras Honan  Zoom on Tras Honan  Senator Connor, I seem to be always hopping off you. I do not like interrupting you even though I give you the impression that I do. Quite a lot of what you are saying was relevant to the Appropriations Bill rather than the Finance Bill. It was an excellent contribution but a lot of it was more relevant to the Appropriations Bill. I do not get satisfaction out of interrupting you.

Mr. Connor: Information on John Connor  Zoom on John Connor  We will agree to differ.

Mr. Farrell: Information on Willie Farrell  Zoom on Willie Farrell  First, I congratulate the Minister and the Government on the magnificent work they are doing in getting the public finances on the right road. Interest and mortgage rates are dropping and 12 months ago people would have said it could not be done. We talk a lot about PAYE worker's taxation but we forget to say that the private sector also pay tax. The PAYE sector are householders and their mortgage rates have been reduced and the deductions from pay have been reduced with the changes in the tax system.

I welcome the £4 million given to the special task force on tourism. In the west tourism is very important. It was important to get in the experts and start a good tough selling campaign to bring in more tourists and more money to the economy, thus creating more jobs and making better use of the resources we have in abundance such as our golfing and fishing facilities. It is a pity the people who are opposing the £15 charge on the rod licence would not sit around the table and see sense and realise it is for their own good, for the good of tourism and of the [1116] country. They should be more patriotic. I appeal to them to look at it in a proper light because tourism is very important to this country. This Government have made the tourism industry an important portfolio. Up to this, it had been tagged on to something else. Tourism was treated like the summer holidays — to be looked at once a year or now and again — but the Minister for Finance, the Government and the Minister for Tourism and Transport have made it very important. They fully realise the job creation potential of tourism and they are doing a wonderful job. I am delighted they have allocated an extra £4 million on tourism.

We were told no tax was being collected from certain sectors but when the sheriffs went out we were told they were too severe. Why should they do it? They are doing it. The humane and compassionate Minister for Finance brought in an amnesty and anybody who pays up his taxes and has his books in order by next September will have all the surcharges and interest charges written off. In many cases the interest rates and charges were double and treble what the tax bill was. Cases went on for many years and assessments were made. Penalties were imposed on the assessment and not on the real amount due. I am pleased the Minister was compassionate and gave everybody a fair crack of the whip and a good chance to get their affairs in order. This has brought in a good deal of money and for the first time ever we are getting taxes on a proper basis. The self-assessment system will be terrific because, when the auditor does the books, he will tell you what to pay and it is up to you to pay that amount instead of having appeals and tax assessments out of all proportion. This is a real step forward and a great advantage.

With regard to the charges on cash cards the Government did not do a U-turn but made a very wise change. The banks put in electronic systems not only for the advantage of the customer but for their own advantage because they are business people. They also put them in to cut down on staff and working hours [1117] while, at the same time, providing a 24-hour service. The banks ensured that their institutions were working 24 hours a day with electronic equipment rather than paying staff to do it. It is right that they should be made to pay and that is what the Minister has done. He has taken the charge off the customer and put it on to the banker. It will yield the same amount of money.

I am sorry that the Disabled Drivers' Association acted rashly. They should have talked to the Minister about qualification for a disabled driver's allowance. I am a disabled driver but I do not qualify for an allowance. Unless your two legs are missing you do not qualify. A man with one leg does not qualify. The two legs must be disabled. That is not fair. There are many dwarfs who can walk but cannot drive a car because of their size and they do not qualify. The Minister had hoped to bring those people in. There are many other people with disabilities who need a car. A colleague of mine who had only half his shoulder had to struggle with an old banger to make a living selling insurance because he did not qualify. The Minister is trying to make the system work for disabled people because at present only the disabled in the narrowest sense qualify. That is a pity. I am told that some people who qualify buy limousines costing huge amounts of money, drive them for two years and sell them and make a profit, while other disabled people cannot qualify.

I appeal to the Disabled Drivers' Association to come back and talk to the Minister for Health and the Minister for Finance. I have worked with the disabled for a number of years and I believe there are many disabled people who should qualify for the disabled driver's allowance who do not qualify and they need it. A person who has two legs and can walk, with the aid of sticks does not qualify. A person must be completely disabled from the waist down to qualify for disabled driver's assistance. I am very disappointed that this was not discussed more fully and I appeal to all concerned to think of the other disabled people in [1118] our midst who cannot qualify because of the present wording of the Act.

I ask the Minister to re-enact his legislation and to get those people to talk. Some adopt the attitude that “I am all right Jack”, and do not think about others. We must think of our disabled brethren and do something to ensure that those people can gain some advantages from being members of the Disabled Drivers' Association, which will in some way alleviate their handicap. At present, the Minister with the best will in the world cannot assist them until the system is changed.

I am also very pleased with section 22 of the Bill. The purpose of this section is to exempt from tax, payments made under the enterprise allowance scheme, now called the enterprise scheme. In the absence of a specific provision of exempt taxation, this is a great thing because it is designed to try to give people who are on the dole and people who are in low paid jobs an opportunity to start their own business and create employment. There is a lot of good in this Bill. I have been asked not to spend more than ten minutes speaking in order to give other people a chance to speak. The Minister and the Government deserve our full congratulations. I wish to reiterate that I feel strongly that the section of the Bill dealing with disabled drivers should be widened to take in many more disabled people who are deserving and worthy of qualifying for some assistance.

Mr. Ross: Information on Shane Peter Nathaniel Ross  Zoom on Shane Peter Nathaniel Ross  I, too, will be brief. I believe there is a danger of being repetitive in making a speech about the budget or the Finance Bill this year. Many people have said very similar things to what they said last year, because the Government strategy as it stands this year, in the budget and the Finance Bill, are very similar to the thrust and the direction in which they are going. The details are different but the overall strategy is moving in the same direction and I would be the first to congratulate the Government on the particularly successful job they have done on the economy.

I was also the first to condemn the [1119] Fianna Fáil election manifesto and the Fianna Fáil policies prior to the last election but luckily those promises have not been fulfilled at this stage. Some of the wilder spending promises have been held back or withdrawn completely and the Government have embarked upon and are continuing a strategy which has a consensus support from most of the political parties in the Dáil and most of the political parties in this House. There is undoubtedly a minority who disagree, a vocal minority who disagree with this. The strategy is correct and ought to be receiving the support of the Members of this House.

We heard in the Minister's speech a certain amount, as is normal, of self-congratulation on the achievements of the Government during the past year. That is fair political game but when this Government, past Governments and all Governments congratulate themselves on the falls in interest rates, as the Minister did this afternoon, on inflation being down to below 3 per cent, or on a trade surplus and on many other things, we have to remember that these factors are not totally within our power. We are a small open economy and we are not masters of our on destiny in terms of this economy.

Inflation is to a large extent imported and, therefore, when it was at 17 to 20 per cent in this country it was not, conversely, completely the fault of the Government in power that inflation was running at that rate. It was an international problem and it runs as an international problem. Inflation is now down worldwide. Interest rates have been falling worldwide and we are, of course, as a small open economy, the beneficiary of those interest rates, but we follow. As interest rates fell this morning in the United Kingdom so they will fall here. To a certain extent we are certainly the victims of the world economy. Therefore, the rather extravagant claims, made by both Government and Opposition on criteria like inflation, unemployment and interest rates should be taken with a small pinch of salt because they are not matters for which the [1120] Government should take the full credit or the full blame.

I do not wish to talk about the details of the Finance Bill because we can discuss them on Committee Stage. Having said I am in favour of the broad thrust of the Bill, it is important that we should look at the sort of tax regime which we are running in this country. Whereas the Government are beginning to get the positive support of the business community — confidence is returning to the economy because they have, with great determination, tackled a very difficult problem — it is vital that the tax regime is changed and is changed fairly dramatically. I am not talking in terms of the Fine Gael proposals of last week, which I regard as quite unrealistic at this stage, but in terms of a gradual reduction in income tax and in capital gains tax so that the spirit of enterprise can be given its head.

Having said that, it is worth commenting briefly on the Custom House Docks site and the development of the international financial services centre. All people of good will welcome the idea and the proposal involved in the financial services centre. There is absolutely no doubt that were it to work as its creators hope, it will be of great benefit to this country, but it has come to my notice and to the notice of many other people that there is a certain amount of scepticism — and we saw this at the chartered accountants' dinner last Saturday when the president made his speech — about where this scheme is going from here following the initial welcome and the enormous good will which is attached to it.

We have had fairly few commitments so far and the big American banks and the Japanese corporations are holding back on this, none has announced a major commitment to this project. One of the principal reasons why the financial services centre is stalled to a certain extent is because of our tax regime. It is not enough to say that there is a 10 per cent corporation profits tax being applied to this as an incentive to bring them in, which is true — and there are other incentives being applied to bring them in —[1121] but there is also a general tax regime in this country which will make it very difficult to get people to work on this project. The Government must address themselves to how we can persuade people from the financial centres of the world to come and work here when they will be subject to prohibitive income tax rates, capital gains tax rates and exchange control. For example, in the UK the top rate of income tax was reduced to 40 per cent in the recent budget. It must be remembered that those people who are working in the financial services industry are extremely highly paid, rightly or wrongly, and for those a salarty of £100,000 is a moderate salary. You are asking them to come to work in Dublin on an initial reduction in net pay of £18,000, if they are getting the same salary. What you are going to say to them, in fact, is: “If you come here you pay more tax”. I suggest there is going to be a real difficulty unless tax concessions are given to the people working in this centre because they are simply not going to displace themselves from the environments in which they live, London, New York, Hong Kong, Japan and Tokyo, and all those places, for a reduction in salary. Indeed, they would want to be offered very significant tax incentives to come here on an individual basis and that they are not being offered.

Those firms which have been looking at this particular project are having serious difficulties initially in coming here simply because they do not think they are going to be able to persuade their best, young executives to come because the actual tax environment here is wrong for them. It is something which has got to be looked as if the Custom House Docks development is not to go off at half cock or is not to fulfit the expectations which we all hope for it. Having said that, I wish to comment on one or two very minor points.

I regard the levy on pension funds, as do others, with a certain amount of cynicism. We have a promise in the Minister's speech that it is a once-off tax. This, I think I remember reading in my history books, was the promise made about [1122] income tax when it was introduced, it was the promise made about the bank levy which is being raised this year from £25 million to £36 million. We have go to be realistic about the fact that if this is a large source of revenue and if it proves successful this tax is possibly here to stay. Once—off taxes very, very seldom prove to be so.

Finally, I would like to make another plea, as I did last year, about capital gains tax. I do not think there is any case for the abolition of capital gains tax but there is a case for its reduction from its 60 per cent high point. This was introduced by the Fianna Fáil Government in 1982 as a result of pressure from those on whom it was dependent in the Dáil, notably The Workers' Party. From the private conversations at the time I know that the 60 per cent capital gains tax was meant as a temporary expedient and part of the horse trading to get the budget through at the time. That is perfectly fair and realistic politics, but at this stage the Government should again look at this because a 60 per cent tax deters investment.

There is absolutely no question of the propriety of imposing a capital gains tax on short-term gains — I do not argue with that for one moment — but what I have seen in my professional career time and time again is people refusing to invest money in Irish companies and industry because if in the possible event of their making a profit they will have to pay 60 per cent of that in tax immediately. That is a disincentive to investment and I have seen many people leave money in unproductive areas because they are not inclined to risk the possibility of paying such a high tax by investing it elsewhere.

I ask the Minister to look again at capital gains tax and to extend the enlightened attitude which he has shown as regards unpaid taxes in the past, to the black economy in general. There is an enormous amount of money floating around in the black economy, some of which would find its way back into the Exchequer, first if the tax regime was reformed and, secondly, if a benign and [1123] gradual attitude was taken by the Government towards it.

Mrs. Fennell: Information on Nuala Fennell  Zoom on Nuala Fennell  The Finance Bill is another milestone in the process of the Government's management of the country's economy. It is here that the terms and the conditions of the budget are set down and it gives effect to changes and reforms already announced in the budget. The debate in the Dáil on this year's Finance Bill appeared to be agreeable and constructive and this reflected the general public awareness that times are bad, the national economy is still ailing and, indeed, we have just pulled back from the brink of disaster.

Surprisingly, there has been very little public anger or outrage this time round. It surprised me, indeed, that people are so passive about their situation. In many instances I feel they have cause to be angry. Indeed, it could be reflecting their sense of powerlessness and the degree of low morale there is abroad. People are concerned with the basic need to maintain themselves and their families as they watch their disposable incomes shrinking to ineffective levels. They are like survivors rescued from a cold sea but travelling in an open rowboat and everyone has to row. We will, it seems, be in that open row boat for a few more years, clinging on and hoping we are not buffeted by further storms, or that the boat itself does not spring a leak.

I cannot recall a time of such complete depression and despair as we have at the present. Many families are devastated by unemployment, particularly unemployment among the young, by redundancies, and having to cope also with the tragedy of emigration, seeing our lovely young boys and girls leaving in groups. Probably one of the most noticeable things of the eighties emigration, is that when a group is split up and one or two leave jobs or leave because they are unemployed, they seem to take with them their general circle of close friends or other relatives. Many of them leave very reluctantly.

[1124] Sometimes we may believe that emigration is a rather attractive alternative because far-away fields are greener and people have a notion that things are very good in Australia or in London, but it touches me deeply when I speak to young people who like Ireland very much and the social life and living conditions here and they very reluctantly leave to go abroad. It is very worrying to see the escalation of emigration. Quite recently I heard one personnel officer, who comes here regularly in the last year to recruit graduates, saying that what is happening is that not only are college graduates going to work in England, but people who are trained, and have had four or five years of training in a financial house or in a corporation here are going. She said: “Do you not realise that in ten years time this country will be a desert, it will merely be a training ground for economies abroad? Your educated young people will stay until they get training, and then the incentives of low tax and a better income abroad will attract them.”

It is a sick society. Those of us who are in middle age can recall both the deprivation and poverty of the forties and fifties followed by the expansion of the sixties and the greater enterprise and higher employment of the good days of the seventies and we should be asking some probing questions. How did we get into such a mess? The politicians and social planners over the past 20 years have ill served the country. We have an obligation now to realistically deal with the chronic financial state of affairs and to look for workable and honest proposals for the future.

By all means let us sort out our mess and for God's sake let us do it in a co-operative way. Let us put all the bills and the cheques upwards on the table. Others may have been responsible, one or other party in the past, through Houdini-type politics or giveaway election manifestos. The reality is before us and we must deal with it collectively and co-operatively, but not to such an obsessive degree that we ignore the longer term and see only the short term. The future, when the foreign debt is at management level and [1125] we are in a state of healthy growth, must be planned for now. Or, will we lose the head again?

How can this country make sure of steering a steady, buoyant course up to the turn of the century and into the year 2000? I am not convinced that some elements in Irish political life would not again indulage in the express train spending and cavalier politics of a few short years ago. We need to agree on proposals on a fired social and economic policy for the next 15 years. As it is, Fianna Fáil are only making headway now because of the responsible and balanced role played by Fine Gael in Opposition. Deputy Dukes and our party are putting this country, its young people and its resources before party interests. There is not another Opposition Irish politician who would adopt the leadership role that Deputy Dukes has espoused, and in doing so, given such an honourable lead. We know the reality but so too do other Opposition parties and they have a glorious notion it seems that there is a gold mine under Leinster House and money can continually be mainted.

The Minister spoke about the tax relief in the budget. He called it a significant start on the road to reform. It is costing £152 million but when it is distributed to PAYE workers it will scarcely buy an extra box of matches per person per week. It is a puny reduction and will not go very far on the way to putting some vitality into the jaded PAYE taxpayer. The staggering tax which is up to 65 per cent of income when PRSI payments are included is reducing people to the leavel of robots. They have little vitality about their jobs. Why would they work extra hard? Why would they do overtime? Although they know the Government are to blame for the level of tax they pay, it is the employer who reaps the results of their apathy and disinterest and production and quality inevitably suffer.

Our tax load is the greatest single disincentive to wanting to work or wanting to develop and expand. I do not agree with the Minister when he said that talk of an all-party committee is merely a recipe for fudging and indecision. An all-party [1126] approach to tax reform is the only way. Fianna Fáil do not have a monopoly on wisdom and neither do the officials who year in, year out, advise on and deal with the nation's finances. Dialogue about tax can evaporate if it is not part of a structured framework through an all-party organisation or committee.

In section 8 of the Bill there is a departure from the norm where it deals with VHI payments. It includes the extension of the deduction from certain fees paid to medical practitioners. In future the Bill provides that the health insurer will be required to pay the balance of the claims after deduction of the tax direct to the doctor rather than to the subscriber. This may overcome some problems for the Revenue Commissioners but it would be naïve to suggest that it will not create other problems for the insured person. No longer will the consumer pay the doctor's fee directly and be able to negotiate with him or her where the fee charged is in excess of that expected or that covered by the VHI scheme. There will also be administrative costs in this measure and I regret that the only people to lose will be the individual consumers. I am not happy with this arrangement and I am not happy that it is in the interests of the insured persons.

Still on the health theme, I would refer to my colleague, Deputy John Bruton, in his Second Stage speech in the Dáil who dealt with old age pensioners. There was no attempt in this budget to recognise the increasing problem of the old people living alone. There has been no change in the relative-assistance allowance, no generous move to bring about community care for the old and sick. As the Government career on, cutting health spending, closing hospitals and clinics, this vulnerable group, the old, who live alone, are most at risk. Many have no relatives to care for them. They live alone, often in very lonely country areas and can suffer great deprivation at the end of their days. Deputy Bruton proposed a very sensible solution. It was a scheme which was recommended at paragraph 353 in a report published by the National Council for the Aged. Old people who may need [1127] money, he proposed, should be able to negotiate with a life insurance company to get an income during their lifetime and on their death have the insurance company sell the house, take back their money and leave the remainder to be distributed in accordance with the intentions of the deceased person. It is a realistic proposal and a realistic scheme. It could work and it should be examined and developed.

I welcome section 22 which exempts from tax payments made under the enterprise allowance scheme. This assists people on the dole to set up businesses and it is good that this section is to apply to all payments made since the start of the scheme.

Finally, I welcome section 74 which applies to the taxes paid by children or people whose parents were not married to each other. This provisions at least does away with remaining discriminations against non-marital children. It is timely too as the Status of Children's Act will come into effect from June 15 next. This is a cause for celebration and I am glad it is included in legislation at this time.

Minister of State at the Department of Finance (Mr. N. Treacy): Information on Noel Treacy  Zoom on Noel Treacy  The Finance Bill has given an opportunity to Senators to express their views on the performance of the Government and their financial and economic strategy over the past year. When one takes into account the background to the financial situation when the Government came into office, where there was a national debt of £26 billion, where we had raging and uncontrolled unemployment, where interests rates were very high and where inflation also, although reasonably under check, was pretty high, the past year has seen the financial situation being managed very carefully by means of a very clear strategy by the Government. The strategy is that whatever moneys are made available in the budget are the finances which will be available for the running of the country. On that basis we have seen very stringent, careful and fair management of our financial affairs over the past year.

[1128] The people in the financial world, the employment world, the PAYE sector and everybody in the country can see that the Government are fully committed to managing our affairs on a very careful and professional basis. We cannot have a situation whereby Estimates are brought in ad lib when necessary as in the past. We must be able to manage our affairs. We have a small financial base in the country. We have a basically small population and there is no reason with a positive, responsible co-operative effort right across the board we cannot together in the interest of the country manage our financial affairs in a better way.

I am very proud to be serving with the Minister for Finance who is doing an excellent job and at this stage I will hand the House over to him.

Minister for Finance (Mr. MacSharry): Information on Raymond MacSharry  Zoom on Raymond MacSharry  I want to thank all the Senators who contributed to the debate. I must say that as far as I am concerned I thought there would be many more and therefore I would have more time. However——

Mr. Fallon: Information on Sean Fallon  Zoom on Sean Fallon  It is unique to have two Ministers replying.

Mr. MacSharry: Information on Raymond MacSharry  Zoom on Raymond MacSharry  Yes, I saw my esteemed colleague on the screen. I wondered was he being allowed to contribute as a Senator or as a Minister of State. I want to thank the Cathaoirleach and the House for being in such a liberal mood. The contributions were of the usual high standard which one comes to expect in this House. I will try to reply as best I can in the time available to the main points raised. Points relating to individual sections can, of course, be discussed in greater detail at Committee Stage.

While Senators for the most part approve the broad thrust of Government policy a number felt it did not go far enough. Senator Bulbulia claimed that the Government was concerned only with cost containment and that we lacked any vision or clear strategy to deal with the problems of unemployment and emigration. Senator Ferris also said that [1129] there was nothing in the Finance Bill that would tackle these problems. I fully agree that the problem of unemployment is the major problem and challenge facing this country. It is a problem of enormous economic, social and human dimensions. The question is how we can get the growth and investment which will create employment and achieve a lasting reduction in voluntary emigration. Clearly, we will not achieve these aims by throwing money at the problem. This was tried in the past and failed. That approach brought us to the dire straits we had reached at the end of 1986. It caused huge outflows of funds from the economy, pushed up interest rates to horrendous levels, pushed up taxes and undermined confidence in the future of the country. There was indeed a bleak future for growth and jobs against that background.

Government strategy to get growth and jobs is laid out clearly in the Programme for National Recovery. The various elements for that strategy kinit together. They are all directed at creating the conditions in which investment will increase and jobs will be created. As a result of the turnaround achieved since the Government took office many of the conditions needed are now coming right. We have low unstable prices, sharply reduced interest rates, a more competitive economy, improved exports, a surplus in the balance of payments and development plans for incentives and incentives for various sectors.

The growing confidence did not come about by accident. It has happened precisely because the Government have taken frim action to control the public finances and have restored credibility in the management of the economy. This is not just my view: all surveys of business opinion bear it out. There is a major change for the better in the climate for private investment. As I have said, private investment is the key to jobs. I would not be as pessimistic as Senator Ferris as regard the results. Significant progress has already been made in a short period of time. The experience of other small countries, such as Denmark, which have [1130] had to undertake severe programmes of fiscal adjustment is that the economy can be turned around in this way.

I agree, therefore, that it is important to have vision and to hold out hope and encouragement for the young. The way we were going would not have achieved this. The young will not thank us if, instead of a clear vision for the future, we revert to the double vision of the past. The Government are determined to stick to the task in hand and to tackle the problems of the public finances and unemployment within the overall startegy laid out in the Programme for National Recovery.

Senator a Bulbulia also referred to the need for a commitment to social equity in dealing with the economic problems of the country. In the Programme for National Recovery this Government stated their commitment to greater social equity and the protection of those who were less well off in our society. This commitment has been fully honoured. Last year the Government brought forward the annual increase in welfare allowances, from November to July, to protect fully the real value of all welfare payments. Likewise, from this July a general increase of 3 per cent in both personal and adult dependant rates will ensure that the value of welfare payments is fully protected over the coming 12 months. Furthermore, those on the lowest welfare payments will benefit from significantly higher increases from July next. Persons on long term unemployment assistance, for example, will receive an increase equivalent to over 11 per cent on personal rates also from next I want to thank Senators for acknowleding that contribution particularly for those on long term unemployment.

These increases along with the Government decision to continue equal treatment alleviating payments until the end of 1988 highlight the Government's determination to give particular attention to the needs of the less well off in our society. The continuation of Jobsearch in 1988 and the recent extensions of the part-time job incentive scheme nationwide [1131] further demonstrate this Government's awareness of the need to adopt flexible measures to meet the challange of continuously changing labour market conditions, to maximise employment opportunity in Ireland. The job incentive scheme, by providing a basic welfare payment to persons working up to so many hours a week, increases the flexibility of the system of welfare provision and recognises the trend towards part-time employment over the past few years.

I could not accept the comment made by a number of Senators that the Government did not do much for the PAYE sector and the low paid in particular in the income tax changes. As I pointed out, the income tax changes will cost an estimated £152 million in the current year. By any standard this is a generous provision for income tax relief in our current financial circumstances and everyone who pays income tax will benefit from it.

When one talks about tax concessions of the order of £91 million this year and £152 million in a full year and then looks at the difficulties created by an imposition of tax costing, whether it be £5, £10, £15 or £20 million and all the uproar that can follow such an introduction of tax, one must look at the relief of £152 million in a totally different context. It is not easy to provide or to find all the millions that would be required but the main point is that what we are doing is honouring the commitment in the Programme for National Recovery and our election commitment to bring two-thrids of the taxpayers on to the standard rate which is now nearly achieved. We have 63 per cent of taxpayers paying at the standard rate this year.

Senator Bulbulia asked me for assurances about further reductions in income tax. What I can say to her is that the Government will do their utmost and are determined to get rates down further as soon as possible. We have made a useful start and are determined to go further but I will not, and I cannot commit the Government to specific rates at this stage. [1132] There is no point in making such a commitment without saying how the reductions can be financed. This is what I object to in the Fine Gael approach which reveals the good news now about their planned tax reductions and Leaves it to someone else to worry about how they can be financed. I am very sceptical, therefore, about suggestions for all-party committees or other such devices to come up with the measures to finance the tax reform package. The very reluctance of Fine Gael in their proposals to say how they would finance the suggested measures is indicative of the difficulties and the lack of real substances in the so-called reform package. Our experience shows that it is only if the Government are prepared to take the initiative in putting forward painful adjustment measures that progress can be made.

I have spoken before on a few occasions since budget time about tax reform. I do not recall a budget in recent times that had as many reform measures in it as the budget of 1988, whether it be the tax concessions that have been made to the PAYE sector, the self-assessement, the extensions of PRSI to the self-employed and farmers and corporation tax changes, the incentives for the collection of taxes and the power of attachment — an enormous package of measures that I have to say were generally welcomed by the public at large and I must say, in general by most spokes-persons here and in the Dáil but one is inclined to forget all that has been done and to go on and say that while something was done this year, you forget about that, take it for granted, it costs nothing, and now that we are making a start, we must go the whole road.

It reminds me of when I began my public life. There were not too many telephone calls or telephone systems in rural parts. When you got a telephone for somebody on a particular road or in a particular half of a parish, every person in the whole parish wanted a telephone “tomorrow”. Everybody knew it was not possible to provide it tomorrow but that is the reality. If you did not put a telephone into the next parish, there were no [1133] problems. Perhaps during the term of office of a Coalition Government it is very easy for them after a year or so, because everybody knows they are not going to do anything and, therefore, nobody makes demands on them. Here we have a Government who, notwithstanding the difficulties that are around and all that we had to do in relation to exercising control in the public finances, are able to do things, even to the extent of tax reform to the tune of £152 million in the first year. That is a great achievement in a short period, whereas nothing like it was even dreamed of in the four and a half years before that.

Mrs. Bulbulia: Information on Katherine Bulbulia  Zoom on Katherine Bulbulia  The quality of the Opposition counts.

Mr. MacSharry: Information on Raymond MacSharry  Zoom on Raymond MacSharry  Yes, and perhaps I should have prefaced my remarks by saying that the quality of the Opposition is essential. You will remain the Opposition because it is essential to have a good Opposition.

Senator Bulbulia asked what was being done in the Finance Bill for the motor industry. I would like at this stage to agree with the sentiments she expressed in relation to the late Senator Jackie Daly who was a great man for the motor industry, not only in this House but outside it. In all the discussions we all had with him at different times, he was a lovely man and we will all miss him sadly.

The increase from £4,000 to £6,000 in the capital allowances and the deductions for running expenses for tax purposes are a very significant benefit which took effect from budget day. The cost of this concession is estimated at £14 million in 1990. It is very limited this year but it rises to £14 million in 1990 when it has full effect. I might mention to Senators that the new private car registrations in March showed a dramatic increase both over the previous month and over March 1987. The unadjusted total was 7,123, a 30 per cent rise over February and a 43 per cent increase over March 1987. Even allowing for seasonal adjustment, the increase was 27.5 per cent during the month. The cumulative year-on-year [1134] increase for the first quarter of 1988 is now 14 per cent.

Senators also raised the possibility of a change in the present arrangements for the benefit in kind charge on the employee in respect of the private use of a company car provided by his employer. This charge yields at present about £31 million per annum. I would not favour any reduction in it because of the loss to the Exchequer and because it would be unfair to other motorists who have to pay all the costs and expenses of obtaining and running a private car from their own resources.

There was quite a lot of discussion about section 23 and the associated reliefs and some detailed points were raised which I think are probably best left for reply on Committee Stage, in regard to numbers and statistics in relation to its previous implementation. With the Senators approval, we will take these on Committee Stage when perhaps we will be in a better position to have a question and answer session on those points.

Senator Bulbulia and a number of other Senators talked about the withholding tax deducted at source. The Revenue Commissioners have informed me that, while there were some initial difficulties, all valid claims are now paid within a month and most claims are dealt with in a shorter period. A recent survey in the district dealing with the professionals in the Dublin area showed that approximately 20 items per week relating to withholding tax are received. The number of items on hands represents about ten days' work. This suggests a turn-around time of less than two weeks up to 5 April 1988. A total of £2 million withholding tax has been repaid to Irish residents and a further sum of £50,000 has been set off against outstanding amounts of PAYE, PRSI and VAT. The above repayments and set-offs involve some 262 cases. More than one repayment was made in certain cases. In addition, repayments totalling £390,000 have been made to non-residents.

Senator Bulbulia made specific reference to the effect of the withholding tax on medical professionals, particularly [1135] doctors. I have met representatives of the medical profession to discuss the impact of the withholding tax and meetings have also been held at official level. In my discussions with representatives of the profession I have indicated that I would be prepared to have the working of the system examined in the light of any representative sample of cases which the profession might wish to submit and my Department have made a similar offer. I repeat this offer now. If the Senator has specific information about any particular case in which difficulties have arisen in the administration of the legislation, I will have the matter examined on receipt of the necessary details. Senator Bulbulia was also concerned about patient confidentiality under the new arrangements. I can assure the Senator that the Revenue Commissioners will receive no details as regards the patient who has incurred the treatment for which payment is made. The insurance company will simply deduct 35 per cent from the payments to the professional and remit this to Revenue.

Senator Bulbulia also raised the question of whether disclosure of payments by the VHI would meet the objective of this legislation. It would not. The withholding tax arrangement and disclosure are two completely different operations. The deduction system introduced last year, and now being extended to consultants, ensures that deductions are made on time in an administratively manageable way. Disclosure, on the other hand, at best provides potentially useful information leaving collection of tax on the basis of it as a completely different matter. For the information of Senator Ferris, I would like to stress that the patient will remain liable for any uninsured balance of the professional fee and a deduction at source system will not apply to this payment.

Senator Bulbulia and others also asked if any pension fund will be made insolvent by the levy on pension funds in section 53 of the Bill. The detailed arrangements for this levy were formulated after discussions were held with representatives [1136] of the pensions fund industry. These arrangements include the following provisions; a deduction from the amount charged to the level of pensions payments made in 1988; an exemption for the large number of non-group pension schemes run by life assurance companies; an exemption where the net amount chargeable is less than £5,000; and a deduction of any interest received net of retention tax.

As a result, it is estimated that only about 1,500 of the 25,000 pension funds approved by the Revenue Commissioners will actually pay the levy. For all these reasons, especially the deduction of pensions paid out, and because the levy is once-off, it is not expected that any pension fund will be made insolvent as a result of the levy. The recent report from the National Pensions Board on the tax treatment of occupational pension schemes acknowledged that a temporary tax is likely to have a lesser impact on the funds than a major or permanent change in their tax treatment. As regards the questions raised here and in the other House on the once—off nature of the tax, the Bill clearly provides that the charge is for the calendar year of 1988 only.

The other points raised can be dealt with on Committee Stage. The question of the Government's action and its impact on tourism was raised and I would like to make the following comments on this item. The Government organised the tourism forum last January in order to bring together various toruism interests with a view to generating new ideas for the development of tourism. Following the forum, the Tourism Task Force was set up and prepared a wide-ranging report. Implementation of the report's recommendation is being monitored on an ongoing basis. The opinion that lower access fares were vital in order to boost tourism numbers was expressed by both the forum and the task force. Progress to date in lowering access cost has been considerable and there are already indications that tourist numbers are rising as [1137] a result. It is hoped that further developments will be possible which will extend the benefits of lower fares to other routes.

Changes in the VAT rules governing coaches for tourists use were also recommended and these are under active consideration. We are not just dealing with the short-term problems. Efforts have already been made to develop a medium-term plan for tourism and work in this field is continuing. A successful tourism policy must cover a wide variety of areas including transport, the environment, staff and management training, marketing, the development of amenities, etc. The preparation of a worthwhile plan will take more time.

In conclusion, as Senators will recall, I undertook during our debate here on last year's Finance Bill to consider a recommendation made by Senator David Norris that provision should be made for income tax relief for renovation or reconstruction of listed buildings in designated areas. The purpose of the Senator's recommendation was to encourage people to come to live in inner city areas and restore buildings of artistic merit in such areas as, indeed, the Senator has done with such distinction. Senator Norris subsequently met officials of my Department to discuss the matter and they reported to me on the outcome of the meeting. Naturally, I have considerable sympathy with the Senator's views on this matter and, as I promised the House last year, I have given careful thought to the suggestions he put forward. However, I have to say I am not in a position to make a concession along the lines he proposes.

There is already very substantial tax-based Exchequer support for housing. As Senators will be aware, mortgage interest relief which is allowed on the interest on loans taken out for the purchase, repair, development or improvement of the borrower's sole or main residence will cost an estimated £160 million in the current tax year. In addition, section 19 of the Finance Act, 1982, provides for relief in respect of the cost of maintenance and repair of buildings which have been determined by the Commissioners of [1138] Public Works to be intrinsically of a significant architectural merit and to which reasonable access is provided to the public. Finally, section 44 of the Finance Act, 1986, provides for tax relief to owner occupiers in respect of the net cost of construction or refurbishment incurred on houses in designated areas. This relief, which amounts to 50 per cent of net expenditure spread over ten years, has been extended to 31 May, 1991, in the Bill now before the House.

I am sure that Senators will agree that these measures represent very substantial Exchequer aid for housing. While obviously they were not introduced specifically to cater for the circumstances outlined by the Senator in last year's debate, they can be of significant benefit to inner city owners of listed houses. In view of this and since in our current severe financial difficulties a tax concession for one group of taxpayers can only be granted at the expense of others, I am afraid I cannot agree to the introduction of relief along the lines suggested by the Senator.

I have come to this conclusion reluctantly. I appreciate Senator Norris's commitment to the renewal of the inner city and I fully realise the good intentions behind his suggestion. I accept that there can be certain difficulties in applying some of the reliefs which currently exist to listed buildings. However, I am sure Senators will understand that the current state of the Exchequer finances simply does not allow the introduction of a further tax relief on top of those I have already mentioned.

When Senator Ferris was speaking he also questioned the Government's decision of last year in terminating the reconstruction grants and said how small builders were coming to him every day concerned that they had no work because this grant was abolished. I have to tell him that as far as we are concerned we have ongoing commitments for payment of reconstruction grants even though they were abolished as and from March last year. We will pay substantial sums out this year and again next year so there is still a substantial amount of work to be [1139] done. Every day I meet constitutents of mine and get letters from constituents of all Deputies and Senators asking if they still have the approval. They say they got it in before 27 March 1987 but because they did not start the work they wonder if they will still get the grant. The answer is “yes”, they will. There is a substantial amount of work still to be done. Taking all of the other activities that the Government have been involved in, whether it is the decentralisation programme, the Custom House Docks financial services centre or the inner city and urban renewal schemes, I think the Construction Industry Federation admitted quite recently that for the first time in many years, rather than a continuing downturn, there is now an upturn in construction activity. Let us hope that will continue to be the case.

I think I have covered a good many of the points that were made. I am sure there are others I have omitted but we look forward to the debate on Committee [1140] Stage. I am sure we will go through it on a case-by-case basis, section by section, and any individual questions that are asked I will do my utmost, as usual, to try to reply to them. I thank the House.

Question put and agreed to.

An Leas-Chathaoirleach:  When does the House propose to take Committee Stage?

Mr. Lanigan: Information on Mick Lanigan  Zoom on Mick Lanigan  Tomorrow.

Committee Stage ordered for Wednesday, 18 May 1988.

Mrs. Bulbulia: Information on Katherine Bulbulia  Zoom on Katherine Bulbulia  What time tomorrow?

Mr. Lanigan: Information on Mick Lanigan  Zoom on Mick Lanigan  The House will sit at 10.30 a.m. tomorrow, and the Order of Business will be decided then.

The Seanad adjourned at 8.10 p.m. until 10.30 a.m. on Wednesday, 18 May 1988.


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