Wednesday, 7 May 1997
Seanad Éireann Debate
Minister of State at the Department of Finance (Mr. Coveney): I apologise for the absence of the Minister for Finance who is at a Cabinet meeting.  He will be here later and will respond to the debate.
I am pleased to put before the Seanad the Finance Bill, 1997. It will enable the Government to reward work, safeguard jobs, reduce business tax and stimulate enterprise. It gives effect to the single biggest set of personal and corporation tax reductions in the past 20 years or more and its passage will secure a substantial increase in after tax income for the tax paying public. It introduces a number of important new reliefs in the areas of education and training. As a recent ESRI report pointed out, investment in the past in the enhancement of skills and knowledge has paid substantial dividends by way of accelerated economic growth.
Naturally, as one would expect, this year's Bill also closes off a series of tax loopholes both in indirect and direct tax areas. It also includes a package of measures to further combat illegal tobacco sales, thus safeguarding a revenue source for the Exchequer and cutting off a revenue source for many criminal gangs, particularly in Dublin.
The Bill also contains a further series of preconsolidation provisions which prepare the way for the Taxes Consolidation Bill, the draft of which the Minister for Finance published on 16 April. The text runs to two hefty volumes containing over 1,100 sections and 29 Schedules and is a testimony to the Revenue Commissioners and their joint venture with the private sector in producing the Bill in line with the target set by the Minister in his first budget in 1995.
Sections 1 to 3 provide for the substantial increases in personal allowances and exemption limits provided for in the budget in addition to a reduction in the standard rate of income tax and the widening of the standard rate bands.
Section 4 meets a commitment in Partnership 2000 by exempting the first three weeks of disability benefit payments from income tax in the 1997-98 tax year and the first six weeks from the 1998-99 tax year onwards.
Section 5 and a number of later sections incorporate into the Bill the existing provisions on income tax, capital gains tax, capital acquisitions tax, probate tax and stamp duty contained in the Family Law Act, 1995, and the Family Law (Divorce) Act, 1996. This will ensure that these tax provisions will be found now in the Finance Acts for the guidance of taxpayers and practitioners.
Section 6 introduces a change in the tax procedures for employing a person in the home. At present, an employer is obliged to register and operate PAYE where payments in excess of £6 per week are made to an employee. The limit is £1 per week where the employee has another employment. These limits date from the 1960s. Section 6 increases these limits to £30 per week where an individual employs a person to work in a domestic capacity in the individual's private home and that person is the only person employed in that capacity. This will remove red  tape from certain domestic employment situations and make it easier to employ such domestic help. A simplified arrangement is also being provided for in respect of registration and payment of employers' PRSI for these domestic situations and the Revenue Commissioners and the Department of Social Welfare will be producing a leaflet on the new system in the near future. I hope this initiative will be welcomed by the House.
Section 7 relates to tax relief for third level fees for undergraduates and confirms that fees paid for qualifying part-time third level courses by non-earning spouses can be set against their earning spouses' taxable income. The section also allows for retention of tax relief for those progressing from certificates to diplomas to degrees within the same course. It also extends relief to those pursuing approved distance education courses provided in the State by colleges in another EU member state which meet certain codes of standards. Section 8 contains a new tax relief at the standard rate for those undertaking certain IT and foreign language courses in order to develop their employment skills.
Sections 9, 10, 31 and 75 give effect to the package of tax reliefs announced in the budget to encourage the newly established developing companies market. These reliefs cover access to the BES for DCM companies and a special increase in the investment limits on special portfolio investment accounts where DCM investments are concerned. This increase, which will be available for three years, is aimed to help the DCM get off the ground.
Section 11 will curb the use of long-standing tax relief for scholarship income as a means by which companies can provide tax free income to, for example, directors, under the guise of scholarship schemes for their children. There is no wish to interfere with genuine schemes or with the tax position of the recipient. For that reason, the section continues the current exemption in respect of the recipients of scholarship income. It provides, however, for the taxation of the income as a benefit-in-kind in the hands of the parent if the scheme under which the scholarship is provided does not disburse at least 75 per cent of the scholarship income to persons not connected to the employer providing the scholarship. The new rules apply to all new schemes from 26 March 1997 and to existing schemes from 6 April 1998.
Sections 12 and 13 are technical amendments to provisions dealing with the taxation of severance payments and to the withholding tax deduction system for sub-contractors. Section 14 introduces a new relief aimed at assisting certain firms to adapt to a change in their competitive environment. It provides that where a company restructures its operations by agreement with the workforce to secure its survival, income tax relief can be made available on certain lump sums paid by the company to employees to achieve and compensate for a substantial pay restructuring. The maximum lump  sum to be tax relieved is £6,000 plus £200 per year of service up to an overall maximum of £10,000. The pay cut involved must be at least 10 per cent of average pay for the previous two years and the reduction must remain in force for at least five years. The payment of normal general pay round increases and increments will not affect the availability of the relief. The proposed restructuring will have to be certified by the Minister for Enterprise and Employment, on advice from the Labour Relations Commission, as being necessary and effective to meet the new situation. The Minister has been conscious of the need to target this relief on the essential function of saving jobs and to minimise the tax planning aspects and is happy that this has been achieved.
Section 16 provides for tax relief on certain corporate and personal donations of £1,000 or more to publicly funded third level institutions. The donations must be in respect of defined projects in the areas of research, acquisition of capital equipment, infrastructural development in certain specified institutions and the provision of facilities to meet defined skills needs. Projects in these areas must be approved by the Minister for Education, following consultation with the Higher Education Authority on the basis of guidelines to be agreed with the Minister for Finance. The guidelines will deal with the approval process, the definition of skills needs and the specification of approved infrastructural developments. In addition, section 25 introduces a facility whereby tax relief can be provided for certain financing arrangements for the construction of third level facilities where the project is approved by the Ministers for Education and Finance and where at least half of the expenditure involved is met by private donations. This relief is being introduced on a pilot basis for three years and will operate where it can be shown there are benefits to the State by using such financing arrangements.
Section 17 provides for the extension of tax relief on expenditure on the repair, maintenance or restoration of approved heritage buildings and gardens. Relief will be given for aggregate expenditure of up to £5,000 per annum on alarms, public liability insurance and restoration of approved art contents on condition that the contents are kept on display for a minimum period of two years after restoration. It also provides that any qualifying expenditure which is unrelieved in any one year can be carried forward for up to two subsequent years. In addition, section 137 brings the current 90 days per year public access requirement for the purposes of the CAT relief down to 60 days per year and, thus, into line with the income tax access requirement. This is a sensible and useful simplification.
A number of sections deal with farmer taxation. Stock relief for farmers will continue at 25 per cent for a two year period from 6 April 1997 to 5 April 1999 by virtue of section 18. Section 19 provides that stock relief at a rate of 100 per cent will be available to farmers under 35 years of age who, between 6 April 1997 and 5 April 1999,  either qualify for the scheme of installation aid for young farmers or become chargeable for the first time to income tax in respect of profits or gains from farming and meet specific training requirements. This special relief will be available to qualifying farmers for two years.
Section 20 and the Fourth Schedule introduce a new ‘year one’ capital allowance of 50 per cent for expenditure incurred on necessary farm pollution control measures up to an expenditure limit of £20,000. The balance of expenditure will be written off over the following seven years in accordance with the normal wear and tear allowances. The scheme applies for three years from 6 April 1997 to 5 April 2000. The Fourth Schedule sets out the farm buildings and structures to which the allowances for pollution control will apply. Section 126 continues the two thirds stamp duty relief for young trained farmers in respect of agricultural land and buildings transferred to them for a further three years up to 31 December 1999.
Sections 21, 22 and 23 relate to the capital allowances regime for motor vehicles, rented accommodation, and the application of balancing charges in certain cases. Section 24 deals with an abuse of capital allowances for hotels. These allowances, which can be offset against all the income of investors, apply at the rate of 15 per cent of expenditure for the first six years and 10 per cent in year seven — 100 per cent in total. Under the scheme, the investors claim the capital allowances for the seven years and, at the end of the period, are each given ownership of a nominated suite in the “hotel”— in effect privately owned suites for private use located in what had been until then a hotel building. The section will deny capital allowances to investors in such cases with appropriate transitional arrangements for projects where contracts were signed or applications for planning permission were received by the local authority before 26 March 1997.
Section 26 extends the deadline for tax relief under the general urban renewal scheme from 31 July 1997 to 31 July 1998 subject to certain conditions. Section 26 also makes provision for the designation by order of areas immediately adjacent to seven regional airports as enterprise areas where a viable qualifying proposal has been put forward for location in these areas. The airports are at Cork, Donegal, Galway, Kerry, Knock, Sligo and Waterford. The designation order will be made by the Minister for Finance after consultation with the Minister for Transport, Energy and Communications. The section also provides for the designation of three new enterprise areas in Cherry Orchard-Gallanstown, Finglas and Rosslare Harbour as described in the Tenth Schedule.
Section 28 allows the Minister to extend by order the definition of the Custom House Docks area for the purposes of the IFSC tax regime. It is proposed to extend the area to include the block bounded by Commons Street, Mayor Street, Guild Street and the North Wall Quay, a block  of land immediately to the east of the original Custom House Docks area site which houses the IFSC. Sections 32, 36, 66, 67 and 74 deal with a number of IFSC tax issues to provide continued certainty beyond 2005 for the tax transparency of collective funds managed by certified IFSC and Shannon companies and the exemption of securities issued by such companies from withholding tax and to modify a number of provisions in relation to the tax treatment of certain life assurance policies issued by IFSC life assurance companies.
Section 29 provides for relief for pre-trading non-capital expenses which was announced in the budget. Expenses which are wholly and exclusively incurred for the purposes of a trade or profession not more than three years prior to the commencement of trading and which would have been allowed if incurred after trading commenced will be deductible. This important new relief will be available for new businesses, whether incorporated or not, which commence trading on or after 22 January 1997.
Section 30 amends the relief for investment in films which is known as “section 35” relief. It is proposed to increase the existing cap on “section 35” investment in any one film from £7.5 million to £15 million where at least 50 per cent of the “section 35” investment is made by corporate bodies. The section will also increase the current £6 million annual investment limit for corporate bodies to £8 million in total and the limit for corporate investment in any one film from £2 million to £3 million. In addition, it is proposed to allow an additional 10 per cent “section 35” finance for films in respect of which post-production, such as editing, dubbing or mixing, is carried out in the State. The section also provides for a number of changes to the film certification process operated by the Minister for Arts, Culture and the Gaeltacht. These are designed to strengthen his powers in this regard and to prevent abuse of the system by certain applicants for relief.
Sections 33 to 35 together with sections 69 and 161 of the Bill deal with strips of interest bearing securities. Strips are created when interest bearing securities are split into their component parts, individual yearly interest elements and final principal element, the rights to which can then be separately sold and traded in their own right as zero coupon securities. The introduction of such a facility for Government securities has been recommended by the NTMA as a necessary step in widening and deepening the market in Irish Government securities to match similar market developments in other countries. However, within the present tax code, the creation of strips could open up the possibility for tax deferral and avoidance in certain circumstances, especially in the case of individuals, non-trading corporates and life assurance companies. The Bill sets out tax rules to deal with the creation of, and transactions in, strips to minimise the risk of tax planning. This will involve taxing the growth in the value of these zero coupon securities on an  annual basis rather than when the gain or income is realised on redemption.
Section 39 deals with the tax treatment of share buybacks involving quoted companies. Under the new rules, such a buy-back will not be treated as a distribution of profits so that a tax credit will no longer apply to the payments made by the company to the shareholders concerned. Consequently, the sale of shares to the company by the shareholders will be regarded as falling within the capital gains tax provisions. This will protect the position of the Exchequer in such buy-back situations.
Section 40 exempts from tax employment grants which are made to employers by the National Rehabilitation Board under the employment support scheme and by the Rehab Group under the pilot programme for people with disabilities. Similar exemptions have been granted in previous years for employment grants in other areas.
Section 41 closes off a loophole in the operation of tax relief on employer contributions to occupational pension schemes to ensure that relief is only given where contributions are actually paid into the schemes and not where they are merely payable, as some tax advisers have sought to claim.
Sections 42 to 44 close off a gap in the capital gains tax legislation which allows certain Irish companies to avoid paying tax on capital gains on the disposal of assets by transferring the residence of the company abroad, usually to a tax haven, shortly before the disposal takes place. If left unchecked, this loophole could give rise to a significant loss of tax revenue. The provisions, however, will not apply to companies which are owned and controlled by non-resident shareholders from a country with which Ireland has a double tax treaty.
Section 50 makes a number of changes to existing approved profit sharing schemes, in particular the minimum period for individuals to hold shares in order to gain full income tax relief is reduced from five to three years, and part-time employees must in future be eligible to participate in such schemes on the same basis as fulltime employees.
Section 51 and the Third Schedule allow for the establishment of a new form of employee share ownership trust under which, subject to certain conditions, a company and its employees may set up a trust, whether controlled by the employees or otherwise, to enable the employees to build up a long-term holding in their employer company via the trust. The establishment of the trust is a matter for negotiation between an employer and employees and the section permits certain tax reliefs once the trust is established.
 Sections 49 and 52 to 58 deal with the Dublin Docklands Authority. Section 49 exempts the authority from corporation tax and capital gains tax. Section 128 exempts from stamp duty land purchases by the authority. Sections 52 to 58 provide for a scheme of tax reliefs for the development of the docklands area. The Minister announced in his budget that a package of reliefs would be put in place for the Dublin Docklands Authority when the consultants drawing up the draft master plan for the area finalised their report. While the report is not yet completed, there has been extensive consultation with both the consultants and the Department of the Environment on the appropriate structure and form of reliefs to be put in place for the development of the area and the proposals now put forward will be consistent with the report.
The Bill provides that the new Dublin Docklands Authority will recommend that the Minister for the Environment designate particular geographical sub-areas of the Dublin docklands area where one or more or all of the various tax incentives should apply. The Minister for the Environment and the Minister for Finance will then, if they agree with the recommendations, apply the various incentives by way of orders.
The menu of tax incentives in terms of capital allowances, rent and rates relief is broadly the same as those already applying in the Custom House Docks area. The tax package will apply initially for a period of three years, i.e., from 1 July 1997 to 30 June 2000. The Minister is confident that these reliefs will help reinvigorate the area in combination with other public and private sector projects and that we will see over the next 15 years a transformation of the area in terms of jobs, infrastructure and the provision of amenities for the benefit of the local population.
Section 59 reduces the standard rate of corporation tax from 38 per cent to 36 per cent while under section 60 the lower rate on the first £50,000 of taxable income is being reduced from 30 per cent to 28 per cent. The reduced rates apply from 1 April 1997. Provision is also being made in section 37 for a reduction in the tax credit on dividend payments to shareholders in line with these rate reductions. Section 60 also clears up a technical problem with the formula for the application of the 28 per cent rate of corporation tax which came to light some months ago and which has already been addressed by Revenue.
Section 61 provides for the removal of the VHI's exemption from corporation tax under section 80 of the Corporation Tax Act, 1976, with effect from 1 March 1997. This is necessary to ensure a common corporation tax regime for all health insurers operating in the Irish market.
Section 129 removes the £1 duty payable on non-life insurance policies from policies offered by authorised insurers in respect of health insurance business covered by section 2 of the Health Insurance Act, 1994.
Section 62 deals with the tax treatment of the profits of harbour authorities which have been  reconstituted as harbour companies under the Harbours Act, 1996. These companies are now being brought into the corporation tax net in line with the general policy of subjecting commercial State bodies to tax in the same way as private concerns. However, the Government has decided to afford the harbour companies an appropriate transitional period and not to apply full taxation until 2001 to allow the companies time to adapt to the new situation. A similar tax régime will be extended to privately owned ports in the transitional period 1997-2000, inclusive. Harbour authorities which are not vested as companies will retain their exemption from tax for the present. The harbour companies which are being brought into the tax net in this way currently handle over 90 per cent of commercial port traffic. Section 48 and the Fifth Schedule also provide that the transfer of assets from the former harbour authorities to the new harbour companies does not in itself trigger a tax charge.
Section 63 exempts the Irish Take-over Panel from corporation tax. Sections 64 and 65 extend the tax relief on corporate donations to First Step and to the Enterprise Trust until 31 December 1999 in both cases. This is in recognition of the contribution to enterprise development and employment made by both bodies and the commitment to continued relief in Partnership 2000 in the case of the Enterprise Trust.
Sections 70 to 78 deal with capital gains tax, principally the cut in the CGT reduced rate from 27 per cent to 26 per cent, a reduction to three years in the trading period for qualification for the reduced rate, the closing off of certain CGT loopholes, a relief from CGT on life interests in certain heritage houses and objects and the treatment of free shares on demutualisation of life companies. As I mentioned earlier, the application of exemption from CGT in certain family law cases and to the DCM is also dealt with here.
Section 77 provides for CGT roll-over relief on the disposal of development land which is an asset of an authorised racecourse once the proceeds of the sale are reinvested in the assets of such a racecourse. This relief will apply from 6 April 1995.
Sections 82 to 94 relate to excise matters. The sections firstly confirm the budget day excise changes on tobacco and road fuels. They also deal with a number of other technical items including a provision the effect of which will restrict a rebate of duty on recycled waste oil to such oil used for any purpose other than motor fuel. More importantly, sections 86 to 93, inclusive, provide considerably increased powers to support the increasingly more successful fight against illegal tobacco sales. The sections provide for increased penalties, new powers of arrest and detention, new offences aimed at illegal wholesaling as well as retail street vending of illicit tobacco products, improved seizure powers and more streamlined court arrangements in certain cases. These new powers were drawn up by the Revenue Commissioners  in consultation with the Garda Síochána and are an indication of the Government's determination to do all that is necessary to ensure that this problem is dealt with firmly and in an effective way. This is, of course, a Europe wide problem and with my agreement the Revenue Commissioners have taken up the issue at that level with a view to having all aspects of the matter examined. The Commission has now agreed with member states to establish a high level group for this purpose.
Sections 95 to 114 include a series of important changes to the VAT codes, particularly in the area of property and telecommunications. The purpose of these changes is to combat avoidance and to protect Exchequer resources. The provisions on telecommunications also ensure that there is a level playing field between EU and non-EU suppliers with regard to VAT.
The Explanatory Memorandum sets out in some detail the reasons for and the precise details of the new VAT regime in both property and telecommunications so I will not dwell at length on these aspects. However, some brief elaboration is required. With regard to VAT on property, the Bill seeks to ensure that the tax cannot be avoided by VAT exempt bodies such as banks and insurers. The amendment will close off loopholes which, over time, could cost significant amounts to the Exchequer. The manner in which these loopholes are to be closed partly involves an EU derogation for what is known as a reverse charge mechanism whereby the customer is responsible for the VAT charge. The Government has applied for this approval and the request is currently before the EU. When granted, the reverse charge will apply from the date of publication of the Finance Bill, 26 March 1997. The way the loopholes are being closed is explained in detail in the Explanatory Memorandum.
The telecommunications changes are aimed at eliminating a tax-based distortion of competition arising largely from the fact that non-EU suppliers of telecommunications services are not, at present, liable for VAT on services supplied within the EU. The Bill provides that, for purposes of VAT, the place of supply of international telecommunications services will, in general, be shifted to where the customer is located rather than from where the services are being supplied. A reverse charge mechanism will be introduced for business customers who will be obliged to account for VAT. Non-EU telecommunications operators who supply non-business customers in the State will be required to register and account for VAT on those supplies. The change, which has EU approval and is being implemented in all 15 member states, will come into operation in Ireland on 1 July 1997.
The Bill also addresses certain problems in the operation of the VAT refund retail export scheme. A number of agencies operate schemes whereby non-EU visitors may claim VAT refunds on purchases of goods which they take home.  Arising from a recent court case on the operation of one such scheme, the Bill will permit traders and agencies to zero rate goods sold to tourists only when certain conditions are fulfilled. These conditions concern, for example, the time limit for export of the goods, the exchange rate to be used when a repayment is being made and the information to be given to the visitor about fees or commissions being charged.
Section 101 requires that traders selling horticultural produce to final consumers must register for VAT once the standard VAT registration threshold of £40,000 in sales per annum is exceeded. This threshold is reduced to £20,000 if the trader is also providing agricultural services. Previously, certain traders had been using the farmer flat rate VAT mechanism to avoid registration. Section 113 reduces the VAT rate on certain horticultural products from 21 per cent to 12.5 per cent. These sections will have effect from a date specified by ministerial order.
Section 110 provides for an effective exemption from VAT for commercial childminding. This will be achieved in two ways. First, by applying the exemption to child care facilities covered by recent regulations made under the Childcare Act, 1991. Second, by clarifying that the exemption for educational services applies to children's and young persons' education generally, to cover facilities which might not be regarded as child care within the meaning of the Child Care Act. The exemption will be effective from 1 May 1997, the start of the current VAT period. It brings our treatment of child care into line with many other member states and will comply with EU VAT law as recently clarified for the Revenue Commissioners by the EU Commission.
The Bill deals with a number of technical VAT measures to close off certain minor loopholes in the system, to simplify the administration of the system and to comply with EU rulings in the Court of Justice.
Sections 115 to 122 enact the new stamp duty regime given effect in the budget whereby three new rates of stamp duty have been introduced in respect of residential property valued above £150,000. The budget measures provided for a transitional exemption from the new rates for contracts signed on or before budget day and executed before 1 April 1997. In response to representations this period has now been extended to 1 May 1997. Section 124 of the Bill confirms that relief from stamp duty for certain large new houses contained in section 112 of the Finance Act, 1990, does not extend to secondhand houses.
Section 125 extends the exemption from stamp duty, which American depositary receipts (ADRs) enjoy, to shares quoted on a recognised Canadian stock exchange. ADRs are a means of facilitating companies raising capital in the US and Canada. Furthermore, this section removes a barrier to offshore funds relocating to Ireland by exempting the transfer of certain financial instruments from stamp duty.
 Section 131 abolishes residential property tax with effect from 5 April 1997. The existing tax clearance arrangements in the case of sales of houses above a specified value threshold are, however, being maintained in order to assist in the collection of RPT arrears. Under the legislation, the specified value threshold for clearance purposes is the actual RPT value threshold, i.e. £101,000 in 1996. This threshold will continue to be adjusted annually by the increase in the Department of the Environment's new house price index. The new threshold, which applies to house sale contracts executed on or after 5 April 1997, is £115,000.
Sections 133 to 143 deal with various aspects of capital acquisitions taxation. Section 138 increases the relief from CAT in respect of the family house when transferred from one sibling to another from 60 per cent of the value of the house or £60,000, whichever is the lesser, to 60 per cent or £80,000, whichever is the lesser.
Sections 139 to 141 increase the rate of business relief for capital acquisitions tax purposes from 75 per cent to 90 per cent for all qualifying business assets, provided these assets are retained in the business for a period of ten years or more after the transfer. In line with this increase, the relief in respect of agricultural land, buildings, livestock and machinery transferred by gift or inheritance is also being increased to 90 per cent in section 134. Business relief is also being extended to situations involving the termination of a life interest in land, building, machinery or plant used for the purpose of a business but which have been held outside the business.
The CAT code currently exempts Government and other public sector securities from CAT in the hands of foreign beneficiaries subject, in certain cases, to a minimum holding period of three years prior to the gift or inheritance. The exemption is designed to encourage foreign investment in such securities. Section 135 closes off the unintended use of this exemption in certain cases to avoid CAT where property is transferred out of a trust after the death of a disponer or on the change of domicile, or ordinary residence, of the disponer. The other sections deal with family law issues and CAT which I referred to earlier.
Sections 144 to 156 contain extensive pre-consolidation provisions which are intended to rewrite, simplify and codify existing tax measures in certain areas in a comprehensible way prior to consolidation in the forthcoming Taxes Consolidation Bill. I wish to make clear that no substantive change is involved but, as the House will appreciate, it would not be unusual for some parts of the tax legislation to need a good spring clean before they can be incorporated in a consolidation Bill. Thus, in the case of mortgage interest relief and the Temple Bar reliefs, the existing legislation has become complex and convoluted as changes were made over the years. For example, in the case of mortgage interest relief the transitional provisions for standard rating the  relief are not needed in a consolidation Bill since full standard rating now applies.
The Finance Bill also includes numerous preconsolidation provisions to amend incorrect or out of date references, update the wording of particular reliefs, for example, for genderproofing reasons and to repeal redundant or spent provisions.
As I mentioned earlier, a draft of the Consolidated Bill was launched last month and it has been the Minister's policy to publish as much as possible of the consolidation measures in advance of the Bill and the Revenue Commissioners have hosted a number of information seminars for members of the Oireachtas and tax practitioners to acquaint them in advance with progress on this major undertaking.
Sections 157 to 160 deal with several tax administration measures. Section 158 relates to the publication of the names of tax defaulters. At present, the list of tax defaulters is published on an annual basis in the Revenue Commissioners' Annual Report. The list includes all those upon whom a fine or other penalty was imposed by a court and all those in whose case the Revenue Commissioners accepted a settlement in excess of £10,000. Settlements are not published where the amount is less than £10,000 or where the taxpayer has, in advance of any Revenue investigation, voluntarily furnished complete information relating to undisclosed tax liabilities. This section proposes to drop the requirement to publish in the Commissioners' Annual Report. Instead, the Commissioners will publish the lists on a quarterly basis. Quarterly publication will ensure more speedy and up to date information.
Section 162 enables the Minister for Finance to lend to the Post Office Savings Bank for the purpose of buying, holding or selling Government securities. This amendment will assist the NTMA in managing the market in such securities. Section 163 enables the NTMA to act as agent for the Minister for Agriculture, Food and Forestry in relation to the management of borrowing for the purposes of FEOGA schemes.
Mr. Roche: I thank the Minister of State for a comprehensive run through what is a complex, pedantic and dull Bill. There have been very few occasions when a Minister for Finance has had  the ball at his feet to the extent that the present Minister has, and if there was ever an occasion for adventurous legislation in the finance area, this was it. Unfortunately, although there are welcome changes which it would be churlish not to recognise, there is far too little innovation in the Bill.
The Bill was rightly described in the Dáil as somewhat unimaginative, rather uninspiring and a disappointing non-event. It is all of that. My conclusion, having read the Bill and listened to the Minister of State's admittedly excellent speech, is that the economy is on autopilot in some way and that we have handed over the nation's finances to technically competent and trustworthy public officials. However, the political zest one expects in a Finance Bill, especially when things are going well, is missing. With the exception of some amendments which were introduced late in the day, the Bill is dull, boring and lacks a sense of adventure.
It also seems to suggest a certain loss of direction on the economy. We are going through an extraordinary period that is widely recognised as unprecedented. All parties in both Houses can take some credit for that. Fianna Fáil, between 1987 and 1994, contributed in no small way to putting in place the foundations of current economic progress, and, in general, the Minister has prudently tried to keep to the path laid out prior to the changeover in Administrations.
However, there is slippage on a number of fronts and we are unlikely to have so many winds blowing in our favour again. That is why this Bill is disappointing. There are issues of public expenditure, the continued need to borrow, adventurous use of taxation and opportunities for tax reform which are not being addressed in the Bill. Despite the budget concessions, tax reform and reduction remain on the back boiler. The Minister of State is correct. There are some tax changes here which are very welcome, but one does not get the impression from the Bill or the contributions of various Ministers that we have a coherent long term strategy aimed at reducing the tax burden, especially that of personal tax.
What we are achieving in terms of tax reform in this Bill is minimalist. We have a long way to go before we can say we have an enterprise-oriented tax system or can make it worthwhile for people on benefit to come back into the labour market. Even with some welcome changes, we still have high marginal rates of taxation and the level of personal taxation is a disincentive to work.
The Bill is technical, as are all Finance Bills. There is, as the Minister of State said, much tidying up of the system to be done. Nevertheless, one does not get the sense that there was any political interest taken in the framing of this Bill. Excellent though the Bill is in putting change in place and tidying up certain matters, there seems to be little political input in it. It seems to be fundamentally a technocrat's Bill rather than a political one. One expects political input on the Finance  Bill and something other than housekeeping arrangements, which is what is in this Bill.
There are specific matters which are to be welcomed. Section 12, on the exemption of payments to employees under certain company restructuring arrangements, is very worthwhile. I also welcome the extension on the financial services side. The Irish Financial Services Centre has been a tremendous success and is a classic example of what I mean by political input in a Finance Bill. It was the creation of a political mind in 1987 and was not dreamt up in a Department. That is not to say that the Department of Finance and the Revenue Commissioners did not have a big role to play. The Centre's operation has been a tremendous success because we have good public servants who are technically adept. Nonetheless, when it comes to the Finance Bill, one expects political enthusiasm and we do not get that from this Bill to the extent that it existed in the Finance Bill, 1987.
The Minister of State mentioned tax breaks for educational contributions. It is a welcome change and one I have advocated for some time. I will return to the issue of tax incentives for charitable contributions, and we received an excellent submission today on this matter from the combined charities.
I welcome the airport measures and the measures for Rosslare and certain Dublin sites. A cynic might suggest that the late introduction of these measures was a matter of political expediency. I could not care less whether they were a matter of political expediency or not. If they work, they will be positive developments for the communities involved. Rather than score points, we should see how, in the days or hours remaining to this Administration, we can use the Finance Bill to create jobs and an enterprise climate.
I will not apologise for being parochial but having looked at section 26 and what happened in relation to the airports, the harbour at Rosslare and the Dublin sites, what has County Wicklow done to this Government? It is one of the few counties which has not had a break. The Minister of State did rather well in County Wexford and I take my hat off to the people there who are to be congratulated. Sadly, we have a number of silent priests in County Wicklow and, by the looks of things, they will never get a parish. Perhaps the situation will be different in the next Dáil and somebody who will put forward the arguments for County Wicklow more vociferously will be there. I will come back to that issue.
One might have expected the Finance Bill to give a long-term clear signal on what is happening with the 10 per cent corporation profit tax. There have been a series of promises on the long-term strategy statement but final clarification is needed. This point was made in the Dáil by several contributors and it is worthwhile reiterating it here. This is a reality we must face because of the success of our economy and because we must enter economic and monetary union. I have no  doubt Ireland will qualify and will be among the first entrants to economic and monetary union, but we will have some difficulties. It is time for a strategic long-term statement rather than incremental statements on CPT.
The Minister indicated that there will be changes in the film industry, which I welcome. The 1993 Finance Act had a positive and immediate impact on the film industry but there has been a degree of dithering since. Clawing back the incentives in 1996 was, as I said at the time, a major error, which was made for reasons I do not fully understand. I think they had more to do with the ideological imperatives of the Minister for Arts, Culture and the Gaeltacht than with advices which had come up as a result of the success of this tax incentive area. We made a bad move and I welcome the fact the Government is rowing back to some degree. Dithering on the issue of tax incentives for the film industry is not helpful in the long-term in creating confidence. What happened in 1996 was a bad blow and we now must reinvent Ireland as a location. I have no doubt we have the people who can do that, but a mistake was made. I welcome the changes in that regard but I caution against swinging backwards and forwards on this issue like a pendulum.
The Bill is almost silent on the business expansion scheme, although it is referred to in one of the Schedules. The business expansion scheme has been successful and has gone through a series of innovations since its introduction. The point of the BES is that there must be an element of risk and that it should not simply be a bolt-hole for tax avoidance. Nonetheless, we need to look at the scheme to see how it might be used more effectively. In the early years the scheme seemed to provide necessary injections of enterprise to specific areas. I suggest to the Minister and the officials in the Department that it might be time to consider targeting the BES to geographical areas. I would like to give a specific example. Initially, hotels were successfully covered by the BES but then it seemed the scheme has achieved all it had set out to accomplish. I remember panic in County Wicklow where some hotel schemes were going ahead.
I would like to use the case of County Wicklow to illustrate the point. Everyone accepts that County Wicklow has phenomenal potential as a tourism centre and that I am not simply making a parochial point. It has all the positives of County Kerry but it does not have significant hotel accommodation. Although the BES incentives were used rather successfully, we still do not have the type of investments coming forward. I suggest to the Minister and the Department that it might be worthwhile identifying areas where there are specific needs and allowing a geographical focus. If, for example, there was a proposition to build significant additional hotel accommodation in County Wicklow, it would be positive in terms of jobs and inward investments and warrant specific consideration. Because of the nature of the BES,  that type of targeting is not permissible under the scheme.
There has been a limited extension of the urban renewal scheme. Coming from County Wexford, the Minister of State will know this has been an extraordinarily successful scheme and has taken off in a number places. In some cases because the sites selected were not suitable or because there was an impediment on the sites, the scheme has not been too successful. After the last extension of urban renewal sites in County Wicklow, particularly in Bray, there was a failure to think through what was happening. With some adjustment of territories, the urban renewal scheme could be successful in the Albert Walk seafront area of Bray. At present the scheme is not winning any great takers. There is, therefore, a need to continuously monitor the urban renewal scheme. Rather than simply having a cut off date and hoping people will come in under the scheme, a section in the Department should actively look at how the scheme operates. If there are impediments, particularly impediments caused by the geographical focus of the scheme, they should be removed.
When the Government extended the urban renewal scheme areas in Bray, it did so in the hope that it would produce necessary investment in specific areas. As it turns out, one of the areas is not producing investment because it is too geographically focused. However, if one goes 150 yards down the road, one will see such investment. There needs to be a degree of flexibility in its operation.
With any of these tax schemes, we not only have to put the scheme in place, we must monitor any impediments to the scheme being taken up. In the case of the most recent urban renewal designation in Bray — an area around the station and along the Albert Walk to the sea front — if there had been some flexibility in the scheme whereby an entire block or half the surrounding block could have been designated, we would have had major investment. However, that has not happened because of a variety of factors. The urban renewal scheme is excellent and has tremendous potential but sometimes specific local factors operate as a brake and impede that potential being taken up. A degree of flexibility should be allowed. A renewal in 1998 might possibly be too late. It should be possible to have a continuous review of the scheme, perhaps by way of secondary legislation or ministerial regulation, to make slight amendments to include small additional territory, which would help.
On the issue of tax reform, the Bill must be labelled timid in the extreme. I make no apologies for blowing a political trumpet during the current climate but between 1989 and 1992, Ministers for Finance from my party, both alone and in partnership with the Progressive Democrats, cut the standard rate of income tax from 35 per cent to 27 per cent. The top rate of income tax was reduced from 58 per cent to 48 per cent. VAT also came down in that period from 25 per cent  to 21 per cent. There is no comparison in this Government's programme and I understand the reason. If it were left to the senior party in the Coalition, there is no doubt that type of tax cut would have been followed. However, the leading party in this Government finds itself lumbered with a number of big spending partners who are clearly in the way of real and radical tax reform. When we could be putting pounds back in the pockets of the PAYE taxpayer, we are still spending, incurring tax debts and mortgaging the future.
The Minister's multiannual budget tables show that Ireland continues to borrow up to £700 million to £900 million per year. Anyone with a sense of economics accepts that is wrong. We are lumbering the taxpayers of tomorrow with the debts of today with little effort being made to control the growth in public expenditure. Serious tax relief will come only when there is a commitment not to allow Government spending to overextend itself.
In the three year period of January 1995 to December 1997, the Government will increase net current spending by over 20 per cent while the cumulative level of inflation will be 6 per cent. While it is accepted that many good schemes are being introduced, there is no justifiable reason for Government expenditure increasing at a rate 3.5 times that of the cumulative rate of inflation. If we are to make any impact on the debt burden and create a situation where expectations of public services are more in line with our capacity to fund them, we cannot continue to operate in this manner. There has been a real failure of budgetary control and Ministers know that to be the case. Both the Culliton and Forfás reports argue that servicing the national debt is absorbing too much of the nation's tax resources. Last year, over half the direct taxes raised were spent on servicing the national debt. That is wrong, we cannot afford it and we need political leadership to change it.
When the Minister of State, Deputy Coveney, outlined the initial changes in the Bill, he referred specifically to section 7 which amends section 15 of the Finance Act, 1996. It deals with the general issue of tax relief on the fees of part-time undergraduates and third level fees generally. It provides that fees paid by non-earning spouses, or on their behalf by their spouses, qualify for tax relief. I was a night student and one of the great senses of injustice I had was that I could not set all my fees against tax or get a reasonable allowance to write off some of the cost of putting myself through third level education. That view is still shared by many students and demands attention.
The Government introduced a political element in section 26 during the latter stages of the Bill's consideration in the Dáil. I do not blame it for doing so but I blame it for rejecting a modest proposal for a tax break in part of County Wicklow. The Minister is aware that Bray was the first seaside resort in Ireland. Last year, I introduced a tax break for the town when debating  the Finance Act, 1996. I suggested there was no justification for ignoring the seaside resorts of Wicklow. The Minister of State present indicated at the time that there was no reason for ignoring the seaside resorts of Wexford and, to her credit, she managed to have an amendment accepted and got tax breaks for a number of them. To my credit, I got one for Arklow. I was told a tax break for the entire town of Bray was unattainable because the town was too big and I accepted that as a valid argument.
On Committee Stage of this Bill in the Dáil, Deputy McCreevy introduced on my behalf a modest proposition extending the seaside resorts tax break to the area of Bray between the railway line and the sea. This modest amendment was rejected by the Government, reintroduced on Report Stage in the Dáil and again rejected. We are losing inward investment in Bray because of that. There is a proposal to invest a significant amount of money in building a new hotel and upgrading a grotty area of the sea front. We are introducing politically sensible changes in the case of Rosslare port, Finglas, Gallanstown and Cherry Orchard in Dublin and the seven regional airports. What is it that we in County Wicklow have done that we cannot even get this minor level of designation? The county has five Deputies in the other House whose silence on this issue has been deafening. People are asking what we have done.
Mr. Roche: The Minister has introduced special designation for Rosslare Harbour which is a positive move and I fully support it. I have asked the Government to make a decision on the Forfás report requesting a new east coast roll on-roll off ferry. I pointed out that a private company in Arklow has a huge amount of land and a jetty already in place and is offering to be the centre of the innovation. However, I cannot get a decision. I will make a recommendation to this Bill that the tax break which has gone in the case of Rosslare should also be considered for a new roll on-roll off port to be built at Arklow. The blighted industrial lands around The Murrough in Wicklow town should also be examined as they could be easily designated and are part of a port complex. I am not seeking something other counties do not have. I am asking on behalf of my constituents for small concessions from Government. Why are we not getting them?
Section 28 extends the designation of the Irish Financial Services Centre which has been very successful. Rather than the incremental approach we are adopting, should we not decide the territory covered by it and resolve the issue?
I have already welcomed the provisions in section 30 relating to changes made in tax relief for film investment. Raising the limit from £7.5 million to £15 million, while welcome, is still relatively small. The cost of large budget films is considerable.  If people want to invest money, it is wrong to impose a limit of £15 million.
Bray has the only operational film studios in Ireland. A few years ago, when they fell on hard times, they were forced to sell a considerable portion of the backlot for housing development, which was a terrible tragedy. When making the place smaller, they were forced to dispose of a huge amount of material, such as props, which had been accumulated. There is need to create an Irish film archive which not only protects Irish films but also the material used in the production of such films. Some form of tax designation or break should be considered to prevent the film studios in future having to consider selling off or dismantling valuable properties simply because they do not have sufficient space to store them. That would produce real benefits.
Having been critical of some aspects of the Bill I wish to welcome a number of its provisions. The changes in section 40 which apply to the employment subsidy for people receiving assistance from the NRB, or Rehab, are welcome. Section 51 refers to the creation of employee share ownership trusts. That is a good innovation and it would be churlish of me not to recognise it. Section 131 abolishes the residential property tax. I can summarise my views on this by saying good riddance to bad tax. It is a lesson for all of us about hastily introduced taxes. However, I also wish to refer to stamp duties. As a result of the dramatic escalation in property prices, particularly in the greater Dublin, north Wicklow, Meath and Kildare areas, stamp duty is creating major problems for young people who wish to purchase older properties. A graded system of property tax must be introduced to deal with that.
The Irish Charities Tax Reform Group submitted excellent proposals for tax concessions for charitable donations, particularly for corporate donations to approved charities. Given that the Bill introduces a corporate tax break for money which is invested in third level education, it is surprising the same section was not used to concede a tax break for tax efficient corporate donations to charities. There were significant discussions between the Irish Charities Tax Reform Group and various programme managers and advisers before the introduction of the Finance Bill. Perhaps the proposals were made too late, but I intend to put down a recommendation in that regard on Committee Stage.
Mr. Burke: I welcome the Bill. It will enable the Government to reward work, safeguard jobs, reduce business tax and stimulate enterprise. The Bill gives effect to the single largest set of personal and corporation tax reductions in the past 20 years. Its passage will ensure a substantial increase in after tax income for the tax paying public.
Some time ago the Minister for Finance, Deputy Quinn, told the Dáil that the world is changing rapidly and that we must adjust to those  changes. We are part of the change within Europe, as was demonstrated by our successful Presidency of the European Union. I congratulate the Taoiseach and his Ministers on their handling of the Presidency. They were complimented throughout Europe on their efficiency and they displayed how well this country can operate in the European context. The Minister for Finance went on to tell the Dáil that we must move with Europe and endeavour to shape it in the coming years.
Partnership 2000 is a programme to accommodate change and growth which will take us to the start of the next century. However, we must look further ahead in order to manage the present and secure our future. Our needs in recent years have given us the experience and courage to embrace the future with confidence. In the budget he introduced three years ago, the Minister for Finance set out five goals to which this country could aspire and which we could plan to achieve by the year 2010. The first goal was for Ireland to achieve the average per capita income of the European Union; the second was to provide full employment for those seeking work; third, we should have the best managed and best preserved environment in the European Union; fourth, we should possess the most effective public administration in the EU and, fifth, be perceived outside Europe as the best place in which to invest and do business in Europe.
Since this Government took office the Minister for Finance has done great work and I take this opportunity to congratulate him. Some of the goals he outlined almost three years ago have been achieved. The nation has become richer. Real wealth is being created by our continuous economic growth, which is four times higher than the European average. If we achieve the ambitions which the Minister outlined for the next three years, we will be close to the EU average per capita income by the end of Partnership 2000. Our average per capita income now surpasses that of Britain for the first time in hundreds of years. All those involved in that achievement deserve our congratulations.
Employment figures show that 150,000 jobs have been created in the past two and a half years. For the first time in modern history we have seen a sustained net increase in jobs. This is the first Government to stop emigration. That is a wonderful development. Our young people are not only staying at home but advertisements are being placed in English and European newspapers to entice those who left the country in recent years to return to work in Ireland. We have experienced a huge economic boom in every industry and particularly in the building industry. Every person who has a trade in that sector is fully employed and the sector has seen unprecedented levels of work. This is a tribute to how the Government has handled the economy since it came into office.
The Minister of Finance also said our environment continues to present a challenge. We will  grow and prosper but policies are being put in place to protect and enhance our environment into the next century. A number of Bills have been introduced in the past 12 months which will assist the preservation of the environment and the Litter Pollution Bill was the most recent. I am delighted steps are being taken to ensure the protection of our environment. Any initiative taken in this regard is welcome.
The strategic management initiative provides the basis for the transformation of our public administration system. I wish to congratulate the Minister of State, Deputy Doyle, on her work on that initiative during the past two years and for introducing the Public Service Management (No. 2) Bill. This legislation will transform the public service for the next century, and that is welcome. Not long ago, this House debated the advantages of the legislation. Any legislation which streamlines the public service and removes red tape should be welcomed. I congratulate the Minister of State on the introduction of that legislation, which the Minister for Finance envisaged three and a half years ago. He also stated at that time that the IDA said Ireland was the number one location for US investment in Europe. We have seen the fruits of this in the past number of years with the creation of 150,000 jobs. The Minister showed foresight in what he said three years ago. He saw the direction in which the economy was heading and the manner in which he and the Government wanted to lead it into the next century. The Government is to be congratulated because the economy is on course. What the Minister said two and a half years ago when he introduced his first budget as the first Labour Minister for Finance has proved to be correct. We now have an economy which will prosper into the future and stand to us into the next century.
Senator Roche expressed his concerns about the Bill and the winds on our backs in relation to our economic performance in the past two and a half years. This Government has created its own forces because of the prudent manner in which it is looking after the economy. This is illustrated by lower interest rates, low inflation and the creation of 150,000 jobs. Interest rates have never been lower in the history of the State. There has been discussion recently about a small increase in interest rates, which is outside the control of this Government. A low interest rate is a real sign that the economy is progressing well. It enables young people to buy houses, business people to employ staff, and is the basis of a booming economy.
Inflation has never been lower — 2.6 per cent is an unprecedented level and is the lowest in Europe. This is due to the management of the economy. This Government is on target. When the election is called, perhaps in the not too distant future, the electorate will respond and return the present Government because of the manner in which it has handled the economy in the past two and a half years and because the country will be safe in its hands for another term.
 I welcome the recent announcement on the tax designated area for Knock International Airport and other regional airports. This is a significant move towards the development of the west. There are airports in Sligo, Donegal, Knock and Galway. The bishops' initiative “Developing the West Together” was formulated because of the decline in business, loss of jobs and depopulation in the rural areas of the west. In the past two and a half years the decline in population has ceased.
The designation of the airports is the answer to the bishops' initiative. I congratulate the Government on this because it opens avenues to industry and transportation companies to invest in these tax designated areas. Monsignor Horan showed foresight in developing Knock International Airport. It is an ideal location beside the north-south and east-west access route. This is one of the best initiatives to be introduced by any Government and will stop the decline of the west.
I recently attended the AGM of the islands' committee held in Westport. The islanders' biggest fear is that this Government will not be returned as it was the first Government to recognise their plight. Fianna Fáil recognised them recently and announced measures it would take if it enters Government. The islanders appreciate the present Government's contribution. This Government appointed a Minister of State with responsibility for Western Development, Deputy Carey. He has been complimented on doing a good job in his portfolio. The tax designation initiatives undertaken by the Government will play a significant role in the western regions.
The Government also introduced the £1,000 car scrappage scheme, which many people laughed at. However, it was one of the most successful initiatives introduced by any Government. It has played a significant role in helping the motor industry and an unprecedented number of new cars has been sold in the past two years, partly due to the scheme. I compliment the Minister on extending the scheme. Free third level education fees has affected the middle class population over the past number of years and I am delighted this Government introduced them. This initiative has been welcomed by people who appreciate what the Government has done for them.
Senator Roche said “good riddance” to the property tax. It was a penal tax in some cases. However, while I appreciate that wealthy people should pay, there is a large number of people earning a very modest living who may have houses which were valued at a higher price than they should have been. Dublin people in middle income wage brackets have seen the value of their properties increase significantly over the past number of years because of the economic boom in this country. These people were caught in the property tax trap and I am delighted the tax has been abolished. This Government is to be congratulated on that.
 The Government abolished domestic water charges and that was a significant step although everyone did not appreciate or agree with it. There was significant inequity in the level of water charges which applied throughout the country, from local authority charges to group water schemes. In my county water charges increased from £40 to £250 per household in some instances. It is not fair that one person should pay £40 and another £250. The Government should be given credit for abolishing that inequitable system.
I welcome the extension of the urban renewal scheme. The Bill stipulates that 15 per cent of the work under this scheme must be carried out before an appointed date in July. I appreciate the significance of that and that all of the work must be completed by July 1998. However, there are cases where, for one reason or another, it will not be possible to carry out 15 per cent of the work before the July 1997 deadline. Planning permission may be held up and appeals may be lodged with An Bord Pleanála. Family disputes may occur and problems may arise in relation to the acquisition or sale of properties. I agree with the July 1998 deadline but I would ask the Minister to be lenient in relation to the 15 per cent stipulation. Perhaps he could have a look at that prior to Committee Stage.
One of my hobby horses is VAT payments for small family businesses by which I mean businesses run by a husband and wife, their children and one or two employees. Such businesses would include small shops, public houses and so on. There are many such businesses and they provide employment in rural areas. Certain concessions should be made available to them with regard to VAT. The threshold for registration for VAT purposes should be increased to a level which would allow people to earn a reasonable income on which they could survive. Increasing the VAT threshold would prove to be a very significant step in the preservation of rural society and in ensuring that there are small shops, public houses and so on in remote and rural areas. No such incentives are available at present.
In past years we have seen a trend for people to move towards larger, urban areas. If the VAT registration threshold were increased to a level which would provide people with a reasonable income, small businesses would be in a position to survive in the most remote and rural parts of Ireland and a significant burden would be lifted from them. Perhaps the Minister could examine this issue in a future budget or a future Finance Bill.
The Minister should also consider insurance costs for young drivers, a matter which was raised by Senator McGowan on the Order of Business. Young drivers are severely penalised and, in most cases, the cost of insurance is prohibitive and greater than that of the car. I urge the Minister to do whatever he can to ensure that insurance costs for young drivers are reduced.
 I compliment everyone responsible for putting the Bill together. It is a very significant Bill which introduces many changes to the economy and will assist its prosperity and growth over the next 12 months. I welcome it.
Mr. Ross: Senator Burke made his speech with his usual eloquence. However, I have heard it all before. The Senator used the word “congratulate” 14 times before I lost count. That is symptomatic of this Government's attitude to the economy in that it is glowing and wallowing in self satisfaction while it really cannot believe its luck. Everything has been going well for the Government as far as the economy is concerned in the three years it has been in power. However, it is quite apparent that there is nobody in the Cabinet, the Government or in these Houses who can explain why this is so. I have asked many people the reasons for the growth and prosperity of the economy. It does not matter whether one asks a member of Fine Gael, the Labour Party, the independents, Fianna Fáil or whatever, one receives a different answer every time. Economists also answer the question differently. I am reminded of a group of drunken sailors bumbling towards a party without realising where they will end up but thanking God that they are where they are and taking all the credit for it.
The economy is showing outstanding growth rates and nearly all of the variables are right. However, the credit for this prosperity is not exclusively due to the Government any more than it is due to the previous Government. I need only remind Senator Burke, when he is offering congratulations, that this Government, the previous one and politicians in general are the first to claim credit for the economy when it is booming and are also the first to blame external forces when it is not. The Senator is correct in saying we have the lowest inflation levels in Europe. He claimed that the Government was responsible for this but it was the same complexion of Government, albeit with a less left wing hue, which in the 1983-7 period constantly blamed external forces for high inflation levels. It seems that low inflation is due to the Government while high inflation is imported.
The same argument has been used on interest rates and Senator Burke contradicted himself when he spoke about them. He stated that interest rates were low here due to good management of the economy but went on to point out that interest rates have been rising in the last few; days but that was not the fault of the Government. In this case it is due to external factors. Interest rates are only under the controls of the Government to a small extent. They are far higher here than in Germany.
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