Finance Bill, 1997 [Certified Money Bill]: Second Stage (Resumed).

Wednesday, 7 May 1997

Seanad Éireann Debate
Vol. 151 No. 8

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

An Cathaoirleach: Information on Sean Fallon  Zoom on Sean Fallon  I call on Senator Ross to resume his contribution and he has 27 minutes remaining.

Mr. Ross: Information on Shane Peter Nathaniel Ross  Zoom on Shane Peter Nathaniel Ross  I was wondering why so many Members were entering the House to listen to what I had to say. I realise there were matters of greater importance for discussion.

Senator Burke eloquently symbolises what is so wrong with the economy. He touched on it himself when he talked about Knock Airport. He was naturally delighted with the designation of Knock Airport and the surrounding area, but what really happened? I do not know but it appears that when designation was changed and this Bill was altered to facilitate special tax facilities at Knock, every Minister said that if Deputy Enda Kenny is going to get special designation for Knock, they would all look for it for their areas. I have lost count of how many Ministers and Deputies subdenly got tax designation as a result of an initiative targeted specifically at one area in Mayo. So drunk are the Cabinet, metaphorically speaking, and so drunk is the Government in throwing away money that when everybody else wants the same designation as Knock they get it and small areas in Dublin——

Mr. Burke: Information on Paddy Burke  Zoom on Paddy Burke  There is no money involved.

Mr. Ross: Information on Shane Peter Nathaniel Ross  Zoom on Shane Peter Nathaniel Ross  Of course there is money involved. If tax facilities and designation are given to one area, there has to be a loss of taxation elsewhere. We might as well give special tax designation to the whole country. Would there be no money involved then? Of course there would; massive amounts of money would be involved.

I rang the Department of Finance last week to ask them how much this generous tax exemption to every member of Fine Gael, the Labour Party and Democratic Left who sought it for their constituency would cost? They told me they did not know. They had not done any calculations on it because it was a sudden political decision made in the light of an immediate electoral future. Taxpayers' money is being thrown away like confetti and the economy is being disregarded and subordinated to political considerations.

[644] We are a well of economy but can we afford to behave in the way we are? While we may have the highest growth and fundamentals which look right at the moment, I put it to the House that the economy is the worst equipped in Europe for any downturn. I have not heard a single Minister or any of their puppets in the various organisations in which they have been placed, state what we are doing if there is a downturn in the world economy or a halt or slow down in growth. That is never considered.

We had an irresponsible ESRI report greeted by the Government saying growth was going to continue for ten years. According to the Government it is now fact that we have growth forever and that there is no need to consider the possibility of a downturn. This is a disastrous policy and I blame the Labour Party for it — not Senator Burke's party — and the Democratic Left. I date the danger to our economy to the day a Labour Party Deputy was first appointed Minister for Finance. The Minister for Finance is particularly able and aware — for a Labour Party Minister — of the dangers of having a socialist high spending Government in power. However, if we had not had a Labour Party Minister these high spending activities would not have happened.

Let us look at some of the doctrine behind the Programme for Government. It promised that spending would not exceed inflation plus 2 per cent. The fundamental tenet of the Programme for Government has been discarded and is dead. What happens when there is a downturn in the economy? What will be done about spending?

I have not heard anything about this from either side in the debate because to talk about spending cuts or anything pessimistic or to prepare for the day when things are not so prosperous is apparently political death. Therefore, we all have to go through the pretence that growth will continue forever, that the economy will boom forever and that we will all be congratulating each other for the next ten years in the way Senator Burke has congratulated every Minister.

This will not happen because one cannot predict the unexpected. It is as simple as that and the unexpected will happen and we will not be equipped for it. It is a disaster for us to take this attitude when we are in the middle of a growth boom. We have seen boom times before and we have always had the same people saying it would go on forever without a cloud on the horizon. However, they never lasted.

I do not know why the boom will continue, nor does anybody else. However, our spending targets are completely out of hand. The Government is well past its own targets. Let us examine the national debt which is a fair barometer of what is happening. People like to compare it with the percentage of GNP. They say it is only £30 billion, and as a percentage of GNP it is actually going down, which is true. However, Senator Roche eloquently pointed out that the amount of tax going to service the national debt is phenomenal [645]— about half the income tax take. It is far too high, but no effort has been made in this period of unprecedented prosperity to pay it off. Apparently, the national debt will somehow go away. At the end of last year the national debt did go down. At 31 December 1996 it was down a minute amount, from about £30 billion to £29.9 billion. That was trumpeted at a big press conference, as the NTMA always does, telling the world it had managed to do it. The reason for it was currencies had moved in the right direction at the time so technically it was down and we had not invested as heavily in the wrong currencies as we had done before.

The national debt went up last week but nobody heard anything about that. I cannot remember it being featured in any newspapers and no Minister told us about it. It went up because we were, and are, borrowing in the wrong currencies, and because the Irish pound went down 3 per cent one day and 5 per cent another day against other currencies. We do not hear the bad news, only the good news.

It demonstrates as nonsense the claims being made by Senator Burke and by the Minister of State, Deputy Coveney, that we are in charge of our economy, as well as the claim made in a virile way by the Taoiseach that we have now decoupled from Britain and are masters of our economy. We are not and never were because we are far too small. We are subject to Britain for our interest and inflation rates. That is where we stand so let us not hear these false claims. When we are fortunate enough to be doing very well — and maybe much of it is due to our own efforts — we should not make these idle boasts, which will come back to haunt us in bad times when we are doing badly. Those bad times will come.

There are areas where the Government has fallen down very badly but they are disguised by what we call “tax buoyancy”. Every year since this Government has been in power it has missed its targets but it has been very lucky its income has gone up so it has been able to spend more. All that indicates is that it is not master of its own destiny; it has been lucky. The income is coming in at a far greater rate than it expected so it can afford to bribe the electorate and that is what it has been doing.

Possibly the worst case of spending is in public service pay. Just a week before the last public service pay deal, which caused such an apparent problem within the Government, the Minister for Finance said he could not afford to pay it. The Minister was right, but behind his back while he was up in Dublin Castle, the Tánaiste agreed a public service pay deal with the unions. It was the most irresponsible public service pay deal that has ever been negotiated because it was one which a Labour Minister had said could not be afforded. The deal was done because an election was coming up, and it will form the basis of all public service pay deals in the years to come. We now hear the same old story from the same people — we cannot afford any more public service [646] pay deals of this sort. Yet, in the last few weeks we have seen every single lobby group beating down the doors of the Minister for Finance and getting what it wants.

If I could relive my life I would be a teacher because teachers have the best deal in the country. They are paid enormous sums of money, have large incomes and they got a £70 million deal which broke through the PCW a few months ago, although everybody pretends it did not. They set the tone and pace for the rest of the public service. They had a willing Government that gave in to them on that deal, though it pretended to resist for a very short time. These people have security of tenure for life and pensions. They work 167 days a year and receive other exemptions as well. They are getting larger rewards than the risk takers. They are secure and they are pushing at open doors with the Labour Party to get what they want from the Department of Education. It is absolutely disastrous for this country that the public service unions should have such enormous power.

Let us look at those who are enjoying the fruits of the economic boom because they have not filtered through to those who take the greatest risks. Those who take least risks are getting the greatest benefit, and that is wrong. These are people who will permanently benefit and for whom the State will have to pay.

I would refer also to those who picket the gates of Leinster House. It seems that one does not have to picket those gates for very long these days. They are picketing one day and get a cheque the next. It may be that we can afford to pay it today but we cannot afford to behave like that much longer or we will pay a terrible price.

Mr. Sherlock: Information on Joe Sherlock  Zoom on Joe Sherlock  Do not be so despondent.

Mr. Ross: Information on Shane Peter Nathaniel Ross  Zoom on Shane Peter Nathaniel Ross  One of the problems with this partnership Government is that it has created a new group of insiders. One of them is IBEC, the employers group, of which Senator Sherlock would have disapproved so strongly years ago. He would not have shared the same room as them but he is now in love with them. They are all together, looking after each other and scratching each other's backs, while the poor PAYE workers receive no benefits at all. However, they are being told they are happy by the union bosses, of whom I am sure Senator Sherlock approves, and by IBEC and many other little groups who form the social partnership and consensus, led, of course, by RTÉ, The Irish Times and the Labour Party.

Mr. Sherlock: Information on Joe Sherlock  Zoom on Joe Sherlock  Not everybody has two salaries. With two salaries, and substantial ones too, one can enjoy many things.

Mr. McGowan: Information on Paddy McGowan  Zoom on Paddy McGowan  Leave the Senator alone, he had the courage to get up and say it.

[647]Mr. Ross: Information on Shane Peter Nathaniel Ross  Zoom on Shane Peter Nathaniel Ross  The other people who are benefiting are those on social welfare whom Senator Sherlock champions so loudly, many of whom should not be receiving it. The difference, between the two registers was such that many of them must have been on the fiddle, although it was politically taboo to say that. One was should down in the House for saying it but it was proved to be true. They were fiddling the Exchequer with the connivance of politicians who did not have the guts to say so.

Stamp duty at 9 per cent is outrageous. This was meant to dampen the property boom but it has not done anything of the sort. Stamp duty is not that high anywhere else in Europe. It is 1 per cent in the UK, for example. That is the rate for properties over £150,000 but the way the property market is booming every house will be worth that much very shortly.

It is extraordinary that the State bank, ICC, which makes more money out of the BES than any other institution, does not have to reveal the fees it charges small businesses, to the investors or to anyone proposing to invest or to reveal in which companies it has invested or will invest. It is amazing that there is no transparency in this area which benefits the promoters more than the investors. A Labour Party Government is promoting a scheme which hides from small investors while purporting to save them tax, but the reality is that many of the promoters of this scheme are earning so much money they are ashamed to tell the investors.

Mr. F. Quinn: Information on Fergal Quinn  Zoom on Fergal Quinn  I congratulate the Government on some aspects of this Bill which will enable the Government to reward work, safeguard jobs, reduce business tax and stimulate enterprise. However, I am alarmed by some of the things which have happened on the economic front since this Bill was published. We are in danger of lowering our guard when victory is just over the horizon. We are beginning to behave as if we have reached the end of our journey when we are only part of the way there and, as a result, we run the risk of not getting there at all.

Costly promises are being thrown around like snuff at a wake because of the forthcoming election. Senator Ross was right when he said the demands of many lobby groups are being met. There seems to have been less responsibility in this regard in recent weeks. The sooner the election is called the better because the taxpayer cannot afford these auction prices.

Senator Burke referred to the recent ESRI report which is being used by some as a justification for higher spending. It is difficult to see the downside of what has been happening recently. The ESRI report is not short on warnings despite the bright picture it paints for the future. However, it does not justify the euphoria we have seen during the past couple of weeks.

I am concerned about the currency issue. Over the past four or five months the Irish pound has depreciated by over 10 per cent against sterling.

[648] That makes it easy to export goods but it will not be long before it shows in the prices our consumers must pay. Given that sterling is likely to remain strong — it survived the British general election — the Irish pound will have to depreciate more if we want it to compete with the deutschmark and other ERM currencies. That has grave implications for inflation and we have not helped matters by pushing up interest rates.

The margin for error in the Maastricht criteria is wafer thin. It would take little to miss the target for inflation as laid out in the Maastricht Treaty, which would mean our efforts to meet the public sector deficit criteria would be in vain. Leaving aside economic and monetary union, if our inflation is out of line there is no guarantee we would have the capacity to get it under control. We should prevent inflation because it is difficult and expensive to cure. The 3 per cent level is dangerous because if inflation rises above that figure, it could reach epidemic proportions. We are shutting our minds to this because it is an election year.

Despite the good forecast for world trade — we have seen good figures from the United States and around the world — and for strong future growth in Ireland, we can still mess things up. Many things could happen to blow us off course, such as the threat of imported inflation, the fact that the transition to a single currency might not be smooth or the temptation to loosen the constraints on public spending, about which Senator Ross spoke passionately, and we have given in to that temptation over the past few weeks.

When things are going well a prudent business does what it cannot do in times of crises, such as putting its house in order and strengthening its ability to cope with a rainy day. Senator Ross said this was the most ill-equipped nation for an economic downturn. We should equip ourselves for such an event when things are going well. We should not have a current deficit and we should face up to the reality that we cannot ride with one foot on the sterling horse and another on the deutschmark when the two horses are going in different directions. We do not have a proper strategy. Instead of putting our house in order, we are squandering every improvement in our finances. We listen only to the good news and close our minds to anything negative.

The Customs House Docks is a good example of the success of our tax designation policy. I have sympathy for Senator Roche who said that Bray is not a designated area but Rosslare is. Giving tax designation status to airports is a good idea because it will allow developments to take place there. Thirty years ago the then Government introduced two tax free allowances: one was for artists because successful artists were leaving this country, and the other was for people involved in mining, which created many jobs. I support our tax designation policy because it allows areas to develop which would not do so otherwise. Perhaps we could extend this scheme to other areas, but that would mean overcoming the disapproval [649] of the mandarins in, Merrion Street who are afraid of taking a risk. We should look for opportunities rather than closing the door as soon as difficulties arise. Section 14 recognises this need for change by making it easier for businesses to accept change.

We must look at long-term not short-term measures. A number of steps have already been taken in this regard and Senator Roche referred to one earlier when he spoke on section 51 and the Third Schedule which deals with employee share ownership and encourages people to take a long-term holding.

Another is the recognition of the family business and the family farm, to which Senator Burke also referred. However, there is a danger under section 101 in that benefits for small businesses may hinder growth. If one allows a benefit for small businesses or farms, one is saying “Whatever you do, do not grow because you will lose benefits”. It is important that we support small family businesses and farms but let us be careful not to create a disincentive to growth, although there is not much danger of that under this Bill.

I am delighted to see steps being taken to curb the illegal sale of tobacco but I do not know how quickly they will take effect. I walked down Henry Street recently and I was surprised at how much I was coaxed to buy tobacco by dozens of people. Such activity deprives the State of tax and gives the message that we do not enforce the law but allow flexibility. If we turn a blind eye to some aspects of the law, people will become accustomed to getting away with it.

I received correspondence from the Irish European Cross-Border Workers Association which referred to the unfair plight of those who live in the South but work north of the Border. I do not know how the Government can solve that problem but, when we live in a united Europe in which it is easy to work and transfer goods to another member state, it makes matters difficult if the tax regime in one member state is very different from that in another. When one compares Ireland to Britain, one finds that Ireland has a more beneficial tax on manufacturing of only 10 per cent but in other areas the British have many advantages. We are forced to compete with Britain and that competition is unfair to those living just south of the Border or businesses competing with British companies. We must work hard to make sure that the Irish tax system is never much out of line with that of our competitors. We must focus continually on that issue. It is not that it affects just those who live just south of the Border; it affects everybody who relies on a job in a competitive Irish market. Everybody is affected because we are in a competitive market nowadays.

Many of the firms which have been creating jobs in Ireland in recent years have been attracted by good tax incentives. That is part of the reason for the economic boom which we have enjoyed. Let us not lose sight of the fact that we have a [650] long way to go along the competitive road before we are able to compete equally in many other areas, such as on corporation and inheritance taxes. We must take steps to compete with those abroad and maintain the economic boom. We must keep our eye on the ball so that we do not lose sight of that objective.

I will risk the criticism of Senator Ross by congratulating the Minister on this Bill. If the election were held quickly, we would be on much sounder ground because, irrespective of who is in power, the spending promises which are made by all sides at the time of an election are dangerous to the economy. We must resist those temptations.

Mr. Calnan: Information on Michael Calnan  Zoom on Michael Calnan  I want to share time with Senator Sherlock.

An Cathaoirleach: Information on Sean Fallon  Zoom on Sean Fallon  Is that agreed? Agreed.

Mr. Calnan: Information on Michael Calnan  Zoom on Michael Calnan  I welcome the opportunity to speak on the Finance Bill and I compliment the Minister on the way he has handled matters since he took office. He has shown insight and ability in this year's budget. It was mentioned that it was a matter of luck. Nothing could be further from the truth. It was good management and sound financial work that led to that budget. I believe that the member of the Opposition who mentioned luck took his little does of anti-Labour/teacher medication this morning.

Some sweeping statements have been made about cutting expenditure and I ask the people involved to state publicly where expenditure will be cut. Few local authority houses were built in the late 1980s and early 1990s. In the course of cutting public spending, is it envisaged that no further houses will be built? Should there be hospital waiting lists? Should pay settlements not be made, thereby plunging the country into strike after strike? Incidentally, the recent pay settlements were agreed through the due process of labour relations. Partnership 2000 is on line and going well and all parts of it will be honoured by this Government.

The Minister has rewarded work, safeguarded jobs and stimulated enterprise. We have seen the introduction of the biggest personal and corporation tax reductions in 20 years and the wage packets of taxpayers have been increased substantially following sound management of the economy and good Government.

An accusation was levelled that the smaller parties in this coalition were telling the largest party what to do, and they were referred to as the big spending partners. The three parties in this Government have worked together in unison to produce this budget. If other parties find the concept of a functioning coalition alien to their culture, that is their problem. The coalition is working well and nobody is being bulldozed, as was the case in other coalitions.

The Minister of State at the Department of Finance, Deputy Coveney, mentioned personal [651] allowances and exemptions and reference was made to the plight of those in the 48 per cent tax band. People in that band benefited substantially in the budget because all the allowances benefited them just as much as those on lower income levels. It is better to give extra allowances to those in the lower bracket, take more people out of the tax net and give people on low wages more money in their pockets, as happened in this budget.

The age allowance is worth looking at because benefit can be given to old age pensioners who worked over the years and paid their taxes and PRSI. These people can benefit from the age allowance, which was doubled in this budget from £200 to £400 for single people and from £400 to £800 for a married couple. If that allowance could be increased substantially, it would be of benefit to those who have worked for the good of this country.

I welcome the measure to exempt the first three weeks of disability benefit payments from income tax and that this will be extended to six weeks from 1998-99 onward. These are minor points when considered in the overall context of the budget but they are important for individuals. By taking them together, the Minister saw a way to help small groups of people.

I welcome the provisions in respect of the employment of persons in the home. In the past if such people earned over £6 per week their employers were obliged to register and operate the PAYE system. Many people are involved in providing valuable home help. To accommodate them, section 6 increases the relevant 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. That is a welcome development because great work is being done by those involved in providing home help.

I welcome the tax reliefs provided in respect of third level graduates. Under section 7 fees paid for qualifying part-time third level courses by non-earning spouses can be set against their earning spouses' taxable income. Combined with the removal of fees in respect of third level education, this will be of tremendous benefit to those intent on furthering their education.

I am glad the Minister intends to curb the use of the 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. In the past, through the use of deeds of covenant, people were able to give sizeable amounts of money to their relatives and friends and obtain tax relief. This provided a means for the wealthy to obtain free education for their children while ordinary people could not do so. I welcome the fact that the Minister has closed this loophole.

I compliment the Minister for the action he has taken in respect of the film industry. Terrific [652] opportunities exist in Ireland in respect of film making and I compliment the Minister for Arts, Culture and the Gaeltacht, Deputy Higgins, for his work in this area. Filming motion pictures in coastal villages and inland towns in rural areas helps to create employment and provides other spin-off benefits. Films such as “Michael Collins”, “War of the Buttons”, “Broken Harvest” and another movie produced in Westhaven, County Cork, a number of years ago, were shot in part or entirely in the area where I live. This proved of major benefit to people who provided accommodation or obtained part-time employment. Members may be interested to know that the legendary Maureen O'Hara lives in west Cork. I compliment the Ministers involved for their work in promoting the film industry which will be of major benefit to people living in rural areas and the younger members of the community who have a great interest in motion pictures.

I will now refer to a number of items I intend to raise on Committee Stage. I welcome the provision of tax exemption for employment grants paid 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. The Minister is aware that providing help to the disabled is important. The Bill also provides for an effective exemption from VAT for commercial child minding. Parents incur major expenses in providing education and training for our young people. If VAT was charged for commercial child minding parents would eventually be obliged to foot the bill and the costs incurred by these valuable small facilities in towns and cities, which often help young people prior to their enrolment in national schools, would increase.

I compliment the Minister who will be remembered for introducing a budget which caters for people's needs. Despite the criticism levelled at him, Members on this side of the House know he is doing a good job. I am proud to be a member of the same party as the Minister for Finance.

Mr. Sherlock: Information on Joe Sherlock  Zoom on Joe Sherlock  I believe it was Rothschild who stated “Give me control of a country's finance and I do not care who makes the laws”. Anyone with control of the Department of Finance has great power because it is the focal point of government.

As previous speakers stated, the Finance Bill gives effect to the budget proposals. I am glad that, in matter years, people have become increasingly aware of what the Finance Bill entails. This is an educating process and it is good for the political system because people follow daily trends and judge the Government accordingly. I believe that any assessment by the public of the Government's performance on current issues would be very reasonable. In addition to the Social Welfare Bill, the Finance Bill gives effect to the changes announced in the budget. It will also address [653] some of the issues not tackled in the budget which have surfaced in the interim.

I welcome section 3 which increases tax allowances across the board. However, I would be critical of section 4, despite the fact that it was praised by other Members. Under the provisions of section 4, a person who is unemployed for a period and receives unemployment benefit will be issued with an amended tax allowance certificate to show that their tax allowance has been reduced by the amount they received on unemployment benefit. That is unfair and there should be a link with the social welfare code to ensure it does not happen. In certain instances, people who were prevented from working due to illness or were unemployed for a period have endured hardship because their tax allowances were reduced.

Under section 4, disability benefit payable for 18 days, or three weeks, in the tax year 1997-98 and 36 days, or six weeks, will be exempt from tax. It was also pointed out that the special exemption for unemployment benefit payable to certain systematic short-time workers will be continued for the year 1997-98. However, the section does not refer to the serious matter I raised about the taxation of unemployment benefit.

Will the Minister for Finance give consideration to the most vulnerable people in our society, namely, those on fixed incomes, such as widows and pensioners who do not qualify under current house improvement grant schemes? There is an urgent need to provide a home improvement grant for repairs to roofs, windows, doors, etc., to people who do not qualify under existing schemes. The housing aid for the elderly scheme was introduced in the early 1990s. The system devised was to be operated by local authorities and health boards but it is now operated exclusively by the health boards and the amounts being provided are not adequate.

For example, a person living alone will benefit substantially but two old age pensioners living in the same house, the windows of which require repairs, will be informed that only two of those windows can be repaired in the current year and the health board may give a commitment to see if further repairs can be carried out during the following year. That is not good enough. Widows relying on their pensions cannot obtain assistance because there is no home improvement grant available. I welcome the fact that local authorities provide assistance in respect of house improvement in lieu of rehousing. Will the Minister consider this matter and improve the amount of funding available under the housing aid for the elderly scheme? The health board say it is not effective because it must be spread so thinly.

Will the Minister introduce a new provision in the supplementary welfare allowance scheme? Community welfare officers quote the Social Welfare (Consolidation) Act, 1993, which limits the amount of supplementary welfare allowance that can be paid towards rent or mortgage; this information is being circulated in north Cork and it will impose hardship on people on fixed income [654] social welfare who are committed to high mortgage or rent repayments and I ask for flexibility on this.

There is a need to allow tax relief on charitable donations made by corporations. Charities perform a variety of vital functions, often plugging the gaps left by State services. At a time of buoyant tax receipts the Minister has an opportunity to make a gesture to charities. The Irish Charities Tax Reform Group made submissions to the Minister suggesting that tax relief be introduced on corporate donations from £100 to £1,000 and, according to its calculations, such an initiative could be introduced on an initial pilot basis and would increase donations to charities by around £7 million while costing the Exchequer only £3 million.

In the past year, I have come across cases where social welfare officers have disallowed people deemed to be cohabiting from any social welfare entitlement. They are told they are not entitled to unemployment assistance because they are cohabiting and their partner is working. The partner is given no tax allowance to provide for that and that creates hardship. Provision may have been made and if it has, I stand corrected.

Section 20 deals with pollution control. Although this is desirable, very often it is found that only those who can afford it will avail of it. Many small holders have problems and, unfortunately, find it very hard to implement these measures. Nevertheless, the Minister is introducing a new one year capital allowance at 50 per cent for expenditure incurred in necessary farm pollution control measures up to a limit of £20,000, which is a substantial outlay for many smallholders.

I welcome the VAT exemption for commercial child minding. That has been a prominent issue in recent times but it was addressed immediately. I welcome the Bill and ask the Minister to give consideration to the points I made.

Mr. McGowan: Information on Paddy McGowan  Zoom on Paddy McGowan  I congratulate Senators Ross and Quinn. While Senator Ross may be accused of having deserted the Government benches, Senator Quinn has voted with the Government many times. Their contributions provide a fair analysis of the debate on the Bill.

I hope to make a constructive contribution. My main area of concern is the neglect of funding for the Border region and I have consistently raised this issue. The six southern Border counties have been totally neglected as has the west. Senator Burke complimented the Minister of State. Deputy Carey, on the great work he was doing for the west. I accept that he has a brief for that region but it is a tragedy that he does not also have one for the six southern Border counties. It is an example of the neglect that the Government has not seen fit to appoint a Minister or Minister of State for ten counties including the southern Border counties. That has not happened to date and it cannot be said that people of the right calibre were not available because, as I pointed out [655] in the past, Deputy Harte, who held the portfolio for Post and Telegraphs, and Deputy Nealon, who was a Minister, were available and lived in this area.

During the Labour-Fine Gael Administration in 1983, the economic and social committee of the EU carried out a study of the Border counties. They published detailed recommendations, none of which was implemented. There is a consistent pattern to the total neglect of this area. David Trimble says we have nothing to do with the North and that we should not interfere. He told the Tánaiste he did not have time to meet him and said that when he did, he would not discuss the internal affairs of Northern Ireland. The Irish and British Governments agreed at a meeting of the Anglo-Irish Intergovernmental Conference on 21 October 1983 to initiate a study of the north-west of Ireland. It was stated:

Both Governments decided to press ahead with the study because they recognise the problems of the area are enormous and cannot be effectively tackled by either Government acting in isolation.

This was agreed yet the Tánaiste was told by David Trimble that it was none of his business and to keep out of the affairs of Northern Ireland. After John Bruton was appointed Taoiseach in 1995 he visited Letterkenny and told a cross-Border group that there would be no additionality to funding from the EU because we were trying to keep our finances in order with a view to joining economic and monetary union. The Minister for Finance visited Monaghan in December and in the presence of Commissioner Wolf Mathies stated that there would be additionality. He tried to recover the ground lost by the Taoiseach. Perhaps the Taoiseach was being honest or it was a slip of the tongue, but he clearly told us there would be no additionality. We get pious platitudes but no input or recognition, and the fact that we do not have a Minister of State for the southern Border counties is a clear message that this Government has no concern for that area.

Those of us who live close to the Border have to read headlines like “IDB Approves £26 million for Ardagarvan factory”; “£800,000 for Strabane factory” every day. I have many cuttings announcing funding for every type of project, large and small, on the northern side of the Border. However, it is no longer wise or prudent for a serious business concern to think of setting up on the southern side of the Border. This is borne out by the fact that less than three months ago the Minister for Enterprise and Employment in a reply to a parliamentary question by Deputy O'Hanlon confirmed — despite the boom in the economy mentioned by several Senators — that no new jobs have been provided by the IDA in any of the six southern Border counties or the west, except in Dundalk. It is obvious to business people that while the present Administration is in place there is no chance or opportunity of setting [656] up in the six southern Border counties or the west.

Senator Burke mentioned what was happening in the west. There is a simple explanation. Nearly three years ago the bishops initiative “Developing the West Together” was formulated but it got nowhere; it might have got some money to carry out a study but then the bishops formed a company which operated for about a year. Now, before the election, a commission is to be put in place which has been promised £2 million. I do not believe they will ever get a penny of that money. When members of the new commission to develop the west were being picked, a very prominent Fine Gael man from Buncrana, my county manager who is a very energetic, committed development officer, one of the best in the country, was selected. Yet, no matter how little progress is made he is not in a position to announce his dissatisfaction. He is a good, honest, hard working civil servant but he will not come back to Donegal saying no progress is being made and that he will not be part of the commission to develop the west which is going nowhere. That it is a charade. That will not happen. Why? Will somebody tell me why there is total neglect of the Border counties and the west? The pattern is consistent and starts with the neglect to appoint a Minister or Minister of State from ten counties. I do not understand that. I hope these politicians are not expecting an increase in votes or even reaching what they did in the last election because there is no way that will happen.

The Minister for the Environment recently abolished water charges but he forgot about the 5,600 group water schemes in rural Ireland. There are 200 such schemes in my county experiencing very serious problems. Most of those group water schemes started with 40 and 50 households connected but most of them extended to include 200 or 300 houses which had piping but no water. Not so long ago I raised a very serious concern about the use of asbestos pipes. I have a copy of a letter, which I will make available to the Minister should he wish to pursure it, dated 21 April 1997 which states:

Further to your recent inquiry regarding the length of above-mentioned pipes [asbestos pipes] in the county, the total is approximately 410 kilometres.

That is the length of asbestos piping carrying drinking water.

Deputy McDaid tabled a parliamentary question in the Dáil on this issue and the Minister dismissed him saying those asbestos pipes are now being lined with concrete. That was a clever answer. In reality, hundreds of kilometres of piping all over Ireland are not lined with concrete. We have failed to recognise the problems associated with the use of asbestos piping for carrying water.

Removing water charges is a cosmetic exercise which will help out locally but creates a bigger problem for group schemes. The Minister for the Environment talks about giving £15,000 to group [657] water schemes to help towards fixing the pipes; Deputy Molloy says it will cost £25,000 but my estimate is that the £260 million in motor tax being passed on to local authorities will not cover the cost. Many of these pipes are broken and cannot carry water. A real problem exists in rural Ireland and the Government has played Mickey Mouse with it and disrespected the local authorities to satisfy Democratic Left. I am sorry the Senator representing Democratic Left is not present because he knows if the Government could afford to tomorrow, it would throw him overboard as quickly as it would a rotten fish. The Government would not have him on board if it could do without him. He should know that. The dogs in the street know that.

An Cathaoirleach: Information on Sean Fallon  Zoom on Sean Fallon  I would ask the Senator to confine his remarks to the Finance Bill.

Mr. McGowan: Information on Paddy McGowan  Zoom on Paddy McGowan  I will make a copy of this letter available to the Minister. I will not mention the name of the official in my local authority who signed this letter informing me of the length of asbestos pipe in Donegal. This piping breaks nearly every time a vehicle passes over the mountain area and the asbestos pipe ends up on the side of the road. I will make the broken pipe, the letter or both available to the Minister of State in the hope that he will recognise that the problem is bigger than is acknowledged by the Minister for the Environment.

I have pleaded with the Leader of the House to invite the Minister for the Environment here to debate this issue. I was astonished that he could go on RTE and provide answers to questions he was unable to give here. Can the Minister tell me what my or most local authorities in rural Ireland will do? They will not be able to solve the problem with the £15 million suggested by the Minister for the Environment. That figure is an insult.

A number of agencies have been set up; we have a new one almost every day. One such agency is largely controlled by the Taoiseach's office. Every county enterprise board now has a strategy committee, which is largely controlled from the Taoiseach's office. We have since discovered they nearly eliminated representation by local authority members; we were 16 to four. Sixteen community groups had representation on strategy groups and county enterprise boards as opposed to four elected members. The Government has discovered that it is not politically expedient to exclude local authority members. A directive was issued by the Taoiseach's office in the last two months stating that elected representatives will comprise 50 per cent of strategy groups and county enterprise boards, including the Chairman. The Government is trying to recover lost ground. Any Senator from the Government side who will canvass a local authority member will be told that the Government has almost eliminated local authority representation.

[658]Mr. Cregan: Information on Denis Cregan  Zoom on Denis Cregan  We did not do that. That was Fianna Fáil and the Progressive Democrats. We did the opposite.

Mr. McGowan: Information on Paddy McGowan  Zoom on Paddy McGowan  The Government will meet the not so dumb elected county councillor whose vote it will be seeking. It will be told that it is a bit late in the day in recognising the value and input of local authority members. The directive states that local authorities and county councils will administer funding. That directive was issued within the last few weeks, too near the election. The Government went down that road until it could go no further. It got to a stage where local authority members did not consider it worthwhile attending county enterprise board or strategy group meetings.

The same can be said of regional tourism for which there is no funding. There is a single regional tourism organisation, based in Sligo, to administer tourism in the north-west. Bord Fáilte received INTERREG funding and spent it on building a new office in Sligo. The same organisation could not give one pound to buy a chimney pot. However, the staff have enough money to cover travelling expenses to go to festivals and be seen on the ground.

Tourism is one of our greatest potential sources of employment yet not a penny is available to people in rural Ireland who are energetic enough to open a guesthouse. When I raised this with the Minister he replied that soft loans were available from banks. However, these loans have already been oversubscribed. A few large players have benefited. I hope the Minister will prove me wrong. He should telephone Bord Fáilte. Not one pound is available for tourism development in rural Ireland. I do not know why we maintain regional tourism organisations. The staff in these organisations do not know why they are there. They have no function and nothing to administer. I do not know why we spent £2 million on a headquarters in Sligo.

It was unwise to abolish water charges so that the Government could win extra votes in parts of Dublin. This has caused problems for local authorities. Will everyone pay increased motor tax rather than water charges? I do not think anyone will be conned by this. It is similar to replacing residential property tax with stamp duty. The Minister should recognise that local authorities are strapped for cash and the removal of water charges has caused a serious problem. No alternative funding has been put in place. Senator Ross correctly stated that the day of reckoning is not far away.

Political flag waving will not achieve much. The House will go on but the people will recognise that this Government has been a disaster. I do not know if it is bending over backwards to facilitate Democratic Left. One or two Members of Government give the impression that they are in command. The Government has delivered nothing but disappointment to local authorities and rural dwellers. The Finance Bill is a disaster.

[659] I have consistently tried to raise the issue of spending by the National Roads Authority. The Leader of the House recognised this and commented that, as Leader of the Opposition, he tried to do likewise. The NRA published an elaborate brochure. However, I would not show the cover picture to someone who was trying to have a road on the side of a mountain in Donegal repaired. However, there is a story behind the picture. Seventy three per cent of the NRAs spending goes on Dublin city. Recently I spoke to a number of Dublin Corporation workers replacing shrubs on the island in the centre of the Stillorgan Road and I thought of the different type of public representative who recognises the importance of replacing the shrubs in the centre of the road. I am not criticising; I recognise it is important to keep our cities and towns looking good. However any public representative in rural Ireland must call the county engineers several times to get potholes fixed. The message I get from that is one of the total neglect of rural Ireland.

Need I say any more? Is anyone in control of the National Roads Authority? It would cost £30 million to put a railway line from Belfast to Dublin. What will that do for the people of rural Ireland? Has the Government lost its focus? Is there any place in rural Ireland for people or does the Government want to shove them into a concrete jungle where they will seek supplementary rent allowances of £100 per week? Does anyone know what is going on? People are being driven out of rural Ireland and into concrete jungles where they must be maintained with jobs or social welfare. Having coupled Senator Ross's contribution with my experience, I have a clear picture.

I have nothing personal to say to the Minister of State, but I have no confidence in this Finance Bill. Nobody cares at all. The people in rural Ireland will get an opportunity in the next four weeks to register the same protest that I am making. It is crystal clear that the Government has neglected the Border counties and the west of Ireland. Little organisations have been set up as a cosmetic exercise and we now have 74 of them, but those will not convince anybody. The Government will pay the price for their neglect.

Mr. Cregan: Information on Denis Cregan  Zoom on Denis Cregan  I am surprised at Senator McGowan's political statements on the Finance Bill. This debate obviously brings out the best and worst in Members. I hope I will be more constructive.

I am a member of the Cork Enterprise Board and am aware of the problems of those boards when they were created in 1992. The way some of them spent money did not improve their relationship with central Government. Regarding representation on these boards, Senator McGowan is right in saying that there was very little representation by public representatives, but those boards were set up by a Fianna Fáil-Progressive [660] Democrat Government, and the Senator should acknowledge that.

That structure is being changed by this Bill to recognise the work and ability of the public representative, and not just on the enterprise board. I am not blaming the Fianna Fáil-Progressive Democrat Government for this, but another Government should not be blamed and we should have our facts right in this regard. The Senator's point is constructive but it is not true that this Government did the damage. This Government is reversing the damage done then.

The Senator was right in his points about our second biggest industry, tourism. The Minister for Finance made strong points about this when introducing the Finance Bill and there is an emphasis on promotion of tourism in the Bill.

Mr. McGowan: Information on Paddy McGowan  Zoom on Paddy McGowan  But no money.

Mr. Cregan: Information on Denis Cregan  Zoom on Denis Cregan  Maybe there are not enough grants available——

Mr. McGowan: Information on Paddy McGowan  Zoom on Paddy McGowan  There is no money.

An Cathaoirleach: Information on Sean Fallon  Zoom on Sean Fallon  Senator Cregan without interruption.

Mr. Cregan: Information on Denis Cregan  Zoom on Denis Cregan  ——but the Minister is saying we need to foster and promote enterprise throughout society in the public and private sectors. We must encourage the growth of new companies, consolidate existing firms and ensure that family-run businesses can pass safely from one generation to another. “Consolidation” and “promotion” are key words.

There are grants available, as the Senator will be aware. Are there not Leader programmes in the west and north-west that can be availed of for tourism projects such as bed and breakfasts? Are there not 50 per cent grants?

Mr. McGowan: Information on Paddy McGowan  Zoom on Paddy McGowan  Up to £5,000.

Mr. Cregan: Information on Denis Cregan  Zoom on Denis Cregan  Let us be clear. Is there a 50 per cent grant available for improving bed and breakfasts? Is the Senator saying that a person cannot go to the Leader programme manager and discuss how to promote, consolidate and improve a business, getting a grant of 50 per cent? There are grants available in the private sector for the service area, and never before have we seen grants in the service area.

Mr. McGowan: Information on Paddy McGowan  Zoom on Paddy McGowan  A grant of £5,000 is made after one does a feasibility study.

An Leas-Chathaoirleach:  Senator Cregan must be allowed to speak.

Mr. McGowan: Information on Paddy McGowan  Zoom on Paddy McGowan  He is inviting comment.

Mr. Cregan: Information on Denis Cregan  Zoom on Denis Cregan  Whether I am inviting comment or not, I am stating facts, while the impression is being given that there are no grants available. I do not know or care what Government brought [661] in those measures. If there are grants of £5,000 available for people who wish to start up a bed and breakfast business who will be in direct opposition to someone else in the area——

Mr. McGowan: Information on Paddy McGowan  Zoom on Paddy McGowan  They are not applying for those grants.

Mr. Cregan: Information on Denis Cregan  Zoom on Denis Cregan  ——it is still giving people an opportunity. That is the promotion I referred to. I do not disagree entirely with Senator McGowan.

Mr. McGowan: Information on Paddy McGowan  Zoom on Paddy McGowan  The Senator would find it hard to do so.

An Leas-Chathaoirleach:  Senator McGowan should resist the temptation to respond.

Mr. Cregan: Information on Denis Cregan  Zoom on Denis Cregan  I am not saying everything Senator McGowan said is wrong. He is right about local government, where there are massive problems.

Mr. McGowan: Information on Paddy McGowan  Zoom on Paddy McGowan  I thank Senator Cregan for his courage in saying so.

Mr. Cregan: Information on Denis Cregan  Zoom on Denis Cregan  Nobody can say that those problems and those of infrastructural dilapidation were created by this Government since 1994. We should look at how local government is being funded, and the Minister of State should look at this matter. The budget looked at many relevant issues, but we must give a commitment that local government funding is provided in a block grant so that each local authority can work to its advantage. Some local authorities are doing better than others. A number of them believe there is no need for certain charges while others see a need for additional charges. Some local authorities are not working to their full potential, a fact we readily admit.

There are opportunities in this budget. I would be the first to say so if benefits were not being given to people to create a better future for themselves and their families. Opportunities have been created by various Governments, although probabaly not quickly enough. We should look at the reduction in income tax, the increase social welfare benefits and at the growth and inflation rates and make comparisons with other countries. For the first time in the history of this State, which is only 75 years old, our standard of living is better than that Britain, something of which we can be proud. The present growth is due to actions taken since 1987 when there was a Fianna Fáil Minister in office. Mr. MacSharry deserves great credit for the work he did in 1987. The Leader of the Opposition at that time also deserves credit because he readily admitted that we needed to take particular actions. Work done at that time has resulted in the present growth rate. Mr. MacSharry, Deputy Dukes, the Leader of the Opposition at the time, and others in Opposition deserve credit for the line they took.

There are benefits for those who wish to remain in the home, for example. Income tax has [662] been reduced from 27 per cent to 26 per cent and classes A, H and B PRSI contributions have been reduced by 1 per cent. These measures are needed to ensure people at work are better off. The personal allowance has also been increased for both single and married people. The personal allowance for widows, single parents and widowed parents has been increased by £250, which is badly needed. This need, however, has been recognised and an increase in the allowances was given. The personal allowance for single parents has also been increased.

Social welfare payments have been increased by double the rate of inflation. Two years ago the Opposition complained that we gave only a 2 per cent increase, but it was still 0.2 per cent higher than the rate of inflation. We have now increased payments by double the rate of inflation. I make no apology for saying people deserve more than the rate of inflation. I do not want to tell people on social welfare they are doing well as social welfare payments have been increased by double the rate of inflation, because they are not doing well enough. However, the opportunities created by this budget and Government will mean there will be fewer people on social welfare. The 50,000 extra people at work this years is proof that there are fewer people unemployed. People in Cork, Dublin and elsewhere are motivated and are no longer depressed by the economic situation. Irrespective of what Government was in power, people were depressed. We began to take action in 1987 and are progressing at such a pace that our European partners have said we are doing well. Young people are doing particularly well.

People working in the high technology area and those at third level are receiving benefits which are long overdue. People who believed they would not go on to third level education are able to do so at no cost. We must consider the savings to somebody earning less than £10,000 or £15,000 gross per annum. The primary education sector is not receiving enough money. We must ensure the less well off receive a primary education. While I know the Minister for Education recognises this, more money is needed at primary level. It is imperative that the less well off are given educational opportunities because when they are given opportunities, they do exceptionally well at third level. Industrialists coming to this country, including the Cork region, are very happy with our education system.

During debates on Social Welfare Bills I pushed hard to allow workers to become shareholders. Telecom Éireann has introduced a scheme which allows this to happen. In the private sector a Cork company, Musgraves, was to the fore in this regard. It was one of the first companies to allow employees to become shareholders and it has worked well. We must encourage this in the private and public sectors because it works well from the point of view of employees, pensions and investment. We need only to consider the uptake in Telecom Éireann and the [663] commitment given by the Minister for Transport, Energy and Communications.

There is no reason the scheme operating in Telecom Éireann should not be introduced in Aer Lingus, Aer Rianta or Bord Gáis Éireann, CIE or the ESB because everybody will benefit from such a scheme. Telecom Éireann is competing and will continue to compete with the best. Communications is a costly business and Governments have invested in it over the years. In 1973 Conor Cruise O'Brien, as Minister, invested £77 million in communications, yet everyone laughed at him. By 1977 we had one of the best communications system in the world and it has continued to improve. We are as forward thinking as the best in the world. This is something of which we can be proud.

Everything is not perfect, and I am particularly concerned about the primary education sector. We must recognise that some people in our society are not getting the same benefits as others. However, we are no longer housing people in two bedroomed apartments nor are we building “dives”, as we did in the 1960s and the early 1970s. We are not building high rise apartment blocks which we have to knock down and we will not consider such an option again.

There is no reason a less well-off person should live in a poorer area than a better off person. There is nothing wrong with a better social mix of people and, slowly but surely, this is happening because the Government has allowed local authorities to buy houses from the private sector. I campaigned strongly for this in Cork Corporation. I said for many years that it was cheaper to buy houses from the private sector than to build them. It rewards less well off people by allowing them to live in areas in which we never thought they would live. They deserve it because, with a little encouragement, they can go far. Over 200 such houses were bought in the past two years by Cork Corporation and each house was cheaper by £7,000 to £8,000 than it would cost to build them. The savings could have bought another five houses. The Government is providing the opportunity for and promoting the idea of self-sufficiency.

Although I do not speak on behalf of the farming community, I am aware of the opportunities given to young farmers to take over the running of farms from their elderly fathers. That commitment is given by the Government in this Bill but it should be expanded to businesses, especially small businesses. People should be given the opportunity to transfer their business to their family without being subject to capital gains tax. This would mean parents would not have to stay in business all their lives. There is no need for that. Also people should be encouraged to create at least one extra job in their own business.

When I was Lord Mayor of Cork, I spoke with an industrialist in the city at a time when there was concern about an industry on the north side of the city which was in difficulty. This was in [664] 1991-2 when the economy was starting to improve but was not in good shape and jobs were important, as they are today. We were deep in discussion and I was prepared to tell him I was so worried about the industry that I would gut him for one job. It is important to retain employment, especially in manufacturing. However, people need to know when they enter the workforce that they are needed. There is no point creating work just for the sake of it and employing people when they would be better off elsewhere.

I was in Kinsale for the long weekend and was out on Saturday night with some friends. The place we went to was short of catering staff. The proprietor told me he could get as many CERT trainees as he wanted between October and April but could only get one in May, although he may have three over summer. I find that very disturbing. This person was exceptionally busy and he did not have the trained staff.

Senator Kelly raised another point about which I am concerned which is low pay for employees in the catering and tourism sectors. I asked the person in Kinsale whether he was paying sufficient wages. He said he paid exceptionally well but he still could not get trained staff from CERT — waitresses, commis chefs and chefs. I find that disturbing, especially if we want to improve our tourism industry which we recognise will be our biggest industry in five years' time. The work it can create annually is massive and every year for the past five has proved that. Society is now more affluent and people have more leisure time. More properly trained and properly paid staff are required to service the leisure and tourism industries. I have too often heard of people working long hours in hotels for little money. I will not condone that but neither will I condone the situation I saw on Saturday night where an employer offering good pay was short of staff. It is not right that this should be so when people are working long hours for little pay. Staff should be properly paid, especially if good service is given and profits are made.

We can be proud of the service our young people give. They put an enormous amount of time and effort into jobs in which they are interested. They are much better than we were in the sixties, seventies or even the eighties. They are more motivated and interested in their work and it is only right they are recognised for that and are properly paid for the service they provide. The proof of the quality of this service is in the positive feedback from people who go to restaurants, etc. Everywhere I go I am conscious of the way young people treat me, how they like to do their work and how well they look. That is important. I would appreciate if the Minister would examine this area, especially the fact that insufficient numbers of people are being trained by CERT. Such people may not have the same ability or intelligence as others but everyone with ability has intelligence.

I wish to make specific points about provisions in the Bill relating to the elderly and the disabled. [665] We have now returned to the system where a person out sick does not pay tax on their disability benefit for the first three weeks; this will be increased to six weeks over the next two years. This is long overdue. This provision was abolished because the system was abused by people who did not want to work. Now things are different. If a person does not work, someone else will replace them. I appreciate that, despite past abuses, people who are genuinely sick will not suffer and will gain for the first three weeks. That is important because people need more money when they are sick. This is a fine measure introduced by the Minister for Social Welfare.

The Minister has also given increases in other areas. The increase in the carer's allowance was long overdue and has been a massive increase of 200 per cent. I am sure we did not believe we would ever see the day when fewer old people would need to go to nursing homes. Between 1987 and 1992, the growth in the number of nursing homes was phenomenal. I never liked nursing homes but I do not deny they are needed. There should not be too much emphasis on putting elderly people into institutions. The carer's allowance gives the message to families that we want them to look after their elderly. We can learn lessons in this regard from the way the Portuguese, Spaniards and Italians take care of their elders. They do not look upon them as old people but as the elders of their society and of their families. We are now telling people who wish to look after their elders at home that we support them in doing so. We are not demanding that they take care of them all the time if they are seriously ill. From the point of view of health, social welfare and society it is imperative that the elderly be properly looked after when they are sick. For too long we were inclined to put them in old people's homes. That should not happen.

I welcome the general increases in social welfare and the increases that will result from the tax provisions. Most importantly, I welcome the motivation of the Minister for Finance in his public pronouncements. However, I am concerned about what we say on our interest rates. Certain people claim our currency should be worth between 10 per cent and 15 per cent less than sterling. I disagree. We must be extraordinarily careful about our statements in this regard because they could cost ordinary people money.

Professor Lee: Information on Joe Lee  Zoom on Joe Lee  It must be an unusual challenge for a Minister for Finance to frame a budget in circumstances as benign and in an atmosphere as optimistic as pertain at present. This has been the case for the last couple of budgets. It is a welcome change from the long-term assumptions on which budgets were framed previously. It is probably too early to say if this is a good budget because only time will tell. However, we have an accomplished Minister for Finance even if his reputation will ultimately depend on what happens in years to come rather than what is happening now.

[666] It is worth remembering that this country has, in some respects, been in this situation previously but we managed to escape the possibility of sustained growth by mismanaging our public finances. In so far as our earlier success were followed by failure, we should not assume the automatic continuance of the current boom, despite the ESRI report. Senator Ross, in a spirited denunciation of our policies, said nobody knows why the current boom has occurred. In one way he is right, but in another way he is wrong. There is no mystery attached to why we have a growth rate trend of about 4 per cent. One need only look at the historic performance of the economy. The reason we did not experience that level of sustained growth for much of our history was we did the wrong things and it does not require genius to identify what we did wrong, even if it was not possible at the time to do things right. Achieving a growth rate of about 4 per cent does not require anything exceptional other than the avoidance of draft policies.

There is a challenge in explaining why the economy spurted to a 7 per cent growth rate in 1993 and has been sustained at that level since. Even the most optimistic projections assume that growth will reduce to about 5 per cent in the forthcoming decade. That is still above our historic trend but it is not mysterious. The circumstances surrounding the 7 per cent growth rate of the Celtic tiger are specific to a certain period of time when everything that could go right went right simultaneously and to policies which avoided the grosser absurdities that had created problems in earlier periods of success. We should not assume normalcy to be stagnation; it should be a growth rate of about 4 per cent barring extremely negative external circumstances.

The question is whether we might repeat earlier mistakes. Many of them were self inflicted and unnecessary. Nobody will forget the late 1970s and early 1980s. In the late 1960s and early 1970s we experienced a four year period in which total growth was almost the same as total growth for the past four years. That took place in less propitious circumstances. At the time Ireland was not a member of the European Union and did not have the massive surge in computer and pharmaceutical exports or the huge growth in the tourism sector. The latter three factors are the three key variables which have contributed to the boom of recent years. It is not necessarily true that something unprecedented has happened but the way in which it occurred is unprecedented.

After the 1968 to 1972 period, our economy was thrown off course, to an extent, by the oil crisis and it was further thrown off course by our response to it. The economy experienced another surge in the late 1970s but it was thrown off course by our consuming the seed corn before the crop was ripe. In other words, we failed to sustain a degree of discipline in terms of distribution of wealth creation and the continued investment that would have been necessary to sustain the rapid rates of growth for a longer period. We paid [667] the price for that. We lost almost ten years in the 1980s as a result of over-indulgence at the end of the 1970s.

It is fair to ask if we can blow it again now. If one wishes to take the malign scenario, there is no difficulty listing things that might go wrong. Some are within our control, particularly the rate of incomes growth, and some are beyond our control, such as what might happen in economic and monetary union.

I do not share Senator Ross's pessimism about the likelihood of everything going wrong simultaneously, although that could happen. I do not share his view, which was articulately expressed on this and other occasions, that we grossly overpay public sector workers, although I have an interest in this regard because I am a public sector worker in the education sector. We are not making grossly irresponsible settlements in that sector.

In order to sustain growth it is essential to have the type of consensus which was attempted during the past ten years. How one sustains that consensus depends on the community sense of fairness, and that cannot be quantified in strictly economic terms. It requires political leadership of a high order because it deals with intangibles. However, that sense of fairness must include the feeling that everybody who is deemed to be contributing towards growth is getting a return for it. If we believe health sector workers are contributing to improving life expectancy, which presumably they are, or if we believe teachers are contributing to the enhancement of the skills and knowledge that have paid substantial dividends by way of accelerating economic growth, how do we reasonably and fairly compensate those sectors for their contribution?

If one is a teacher one cannot take out share options in Ireland's future economic growth, which economists tell us is partly attributable to the contribution of the education sector. If one is involved in private business and wishes to look after oneself properly, one can make arrangements at managerial level to allow one to cash in massively on the success of the firm. Good luck to those who make such arrangements if they have contributed to that success. If one is in the public sector, however, regardless of whether one is a teacher, health worker or a civil servant, one cannot make that type of investment in a potential bonus.

I am not known as a sycophantic admirer of the Department of Finance. If most of our recent growth is due to high quality policy formation in the Department, the individuals involved will not receive the return they deserve on their contribution. They would earn more if they worked for a private firm where they would benefit from substantial profits — as many who have left the Department are doing. It is important we keep a sense of perspective and balance on what is fair recompense for those who broadly contribute to economic growth as it cannot be quantified narrowly. [668] The public realise it is only fair that those who have contributed to the rate of economic growth should gain recognition for doing so. We should not engage in the politics of sectoral jealousy and begrudgery which is easy to do if everything is considered constant. One sector is then isolated and it can be said they are getting more than they should or have jumped the queue.

Our thinking about income distribution is underdeveloped. We have lurched along in terms of relativities which were often established in different circumstances in the past. Many people would be able to make a stronger claim for their income if they cast it in terms of the contribution they are making as distinct from relativities which someone else, through trade union strength or whatever, has made. Perhaps trade union strength only allows groups of workers to acheive something close to what they would receive if we had any knowledge of fair income distribution.

I do not take the moral high ground in terms of what one sector ought to get. The question of income distribution, from an equity and efficiency point of view, is one of the grossly underdeveloped areas of socio-economic thought. In the real world, we must have rough and ready solutions. I hope that a unit somewhere is thinking about what distribution should be in terms of combining equity and efficiency. We are not on the verge of blowing it through excessively indulgent or irresponsible income settlements but we must remember it is not a bottomless pit. That is where the problem arises.

I am open to correction, but I believe the PCW was the first agreement of its type which was concluded on the eve of election psychosis. Other agreements were concluded shortly after the Government came to power or when an election was not due to be held. When an election is in the offing, it puts pressure on Government negotiators to concede what they may have struggled against more firmly. In this pre-election period there is, understandably, enormous pressure on Government to make concessions. Perhaps many of those concessions were objectively justified, if we are in a position to take an objective view of these matters. However, because of the timescale, the lobbying system and the fact that we do not have any clearly defined concept of fair income distribution it is inevitable there will be leapfrogging, lobbying and concessions made.

I hope — and this will be small confort to anyone — a stable, long-term Government emerges from the next election. I can envisage circumstances where we blow the fruits of recent years and jettison the lesson we learned painfully from the late 1970s and early 1980s. If we enter sustained option politics and there is no clear majority following the election, whatever Government is in power will inevitably be tempted to yield, beyond any economically justifiably level, to pressures which will continue to rain in thick and fast. It is important that the Government in power after the election has a clear working majority which will enable it plan for the long-term [669] rather than thinking “How many weeks to the next election?” This is beyond the control of any individual but is the type of trap into which we may fall and which could potentially undermine much of the great work done in recent years.

Mr. Burke: Information on Paddy Burke  Zoom on Paddy Burke  Is the Senator saying there should be no Independents?

Professor Lee: Information on Joe Lee  Zoom on Joe Lee  No. There should be responsible Independents who take a long-term view of the national interest, with the same balance of distribution and the capacity to improve legislation which the Seanad has been in a position to offer in recent times.

I agree with Senator Cregan on a number of matters. One of the more civilised developments in recent times has been the recognition of the nature of handicap imposed by disability. It is time we began to approach the challenge of disability in a way which recognises the problems the disabled face and the tremendous courage and character so many of them show in coping with that challenge. I hope the changes in disability benefits and the exemption from income tax will be the start of a sustained commitment to the disabled. It looks like a small provision on paper but it is an improvement.

Section 40 refers to REHAB. Any measure which improves developments in that direction should be warmly welcomed. The problems for charities in the voluntary sector are being looked at by the Minister for Finance and the Minister for Justice. The voluntary sector has a very strong claim to a positive response to its argument in terms of the objective desirability of what it is claiming and the importance of a vigorous voluntary sector in ensuring a stable and civilised society. I am not anti-Statist or ideological in that sense. However, people who are able and willing to give their energies and talents to foster the voluntary sector should be encouraged.

Senator Cregan was also correct in what he said about the carer's allowance. However, I am not as optimistic as he is, given the general direction of society, that this will solve the problems. There is an almost Sisyphean endeavour involved, although it is welcome. If one wants to get old in this country one should hurry because conditions for the elderly will deteriorate over time due to the value system we have chosen to embrace.

I welcome the tax reforms regarding adult and evening education. However, they do not go far enough. This issue was debated at length in this House. The reforms are a step in the right direction but they maintain discrimination. I do not see why it is for a non-earning spouse only. If someone makes an effort and commitment for several years — some people who attend my classes drive from Tralee to Cork, covering 150 miles in one night — the fact that they are earning an income should not be held against them. They should get some recognition for their effort. I know that is an extreme case but there are many [670] people in between who are contributing a lot of their energy and imagination and who are disrupting their lives to do so. They should receive some recognition and encouragement for this and not simply be dismissed as if they were doing nothing extra. Undergraduate fees have been abolished and there is something, though not enough, being provided for part-time adult education.

Am I correct in thinking that there is nothing in the Bill for the research student category? That category is growing rapidly. This kind of education is badly needed in the type of economy and society we are moving into and it is important that it continues to grow. As I understand it, research students still pay full fees and do not receive any tax concessions. I hope I am wrong about that. The entire research student sector — and I speak from personal experience — stands out as uniquely underprivileged and discriminated against in terms of the way in which tax relief for third level students is conceived. That should be a high priority for Government thinking in terms of ensuring fairness and efficiency. The research sector is very important and it is the highest quality students who proceed to this sector as there are very demanding entry requirements for entry to this level. These students will go into the research and development area. They were badly treated before and they are even worse treated now, in relative terms, than they formerly were. From the point of view of equity and efficiency and from a social and economic point of view their case needs serious attention.

I welcome the tax reliefs on corporate and personal donations to publicly funded third level institutions. That is a long overdue reform and it is a step in the right direction. It may need to be refined at a later stage as I can see certain possible pitfalls arising but I will not linger over those at the moment. I hope this measure will begin to create an atmosphere in which the private sector can contribute more effectively and efficiently to the fostering of research and development in general. There is public agreement in this country and in all of the reports published on this issue that research and development is grossly underfunded by any reasonable, comparative criteria. We have been remarkably lucky in some respects in getting this far given the lack of research and development which has taken place. As we become more high tech, it is essential that we become more research and development oriented.

I want to make a plea here for the recognition of the importance of basic research, strategic and applied. There are constant debates about the priorities in these areas. As somebody who stands outside science and technology in certain respects, I hope I am not too biased to say that industry and the development agencies will make the case for applied research in a very specific, narrow and focused way. It is very important to get the balance right for anything more than the shortest of short term thinking on research orientation. [671] That is not succumbing to some romantic notion about the importance of research or knowledge for the sake of it. I welcome the move; it has a lot of potential which I hope will be built upon in due course.

Senator Cregan spoke about the difficulty of getting specialist workers in the tourism sector. That sector is not “high tech” in the normal understanding of the word. Of course, there is a lot of high tech associated with it as technology applies across the board to the service as well as the industrial sector. Tourism is our most important indigenous growth industry. We are still disproportionately reliant on multinationals in the computer and pharmaceutical sector. It is interesting that we are discussing this at a time when Ryanair is in the headlines. Access transport costs to Ireland were reduced from the late eighties onwards and that made a colossal contribution to the opening up of the potential of the tourism market. While we must recognise the importance of high technology, we should be mindful of Senator Cregan's comments and avoid being swept away by the notion that everything is moving in that direction. Human factors are very important in the tourism sector and we must keep that dimension in mind constantly and seek to foster it.

I welcome the provision of tax reliefs for approved heritage buildings and gardens. I am not an expert in this area but it seems to me that we need to have a total tourism strategy in this country of which this is part. Even if a tourist never visited the country we should have some respect for our own concept of what constitutes an aesthetically acceptable environment. There is a sense of self respect associated with this as well as one of market opportunities.

My final point concerns the maintenance of discipline and provides a challenge to politicians. We blew it in the late seventies and early eighties partly because we raised peoples' expectations by proclaiming that we were experiencing a boom. One cannot expect people not to want part of an ever increasing cake and merely satisfy themselves with crumbs. It is understandable that politicians will take deliberate pleasure in the success of their stewardship but it is important to achieve a balance between talking legitimate credit and raising expectations beyond any reasonable level. That is a very difficult trick to pull off and it requires real statesmanship. Even with real statesmanship it may not be possible to achieve. It seems to me that we are in danger of undermining what we have achieved by talking up the Celtic tiger beyond any reasonable level. I would probably behave the same way myself in similar circumstances but I hope we will not hear the type of exaggerated rhetoric over the coming months which will raise expectations even further. If an unstable Government is elected, it will be left in an even worse lurch on entering office than it would have been if the expectations had not been raised so high.

[672]Mr. D. Kiely: Information on Daniel Kiely  Zoom on Daniel Kiely  I welcome the Minister to the House and I welcome the opportunity to discuss this Bill. There are many good things in the Bill but given the financial air of confidence in this country at the moment, I do not think enough has been done for many sections of society. The Government had an ideal opportunity to assist the needy and the less well off in this Bill.

There is an increase in moneys for roads and so on provided for in the Bill but some of the roads in this country, particularly the secondary primary routes, seem to receive no funding at all. I do not know why the National Roads Authority has a secondary primary route on its books at all. If priority is to be given to the primary routes in this country, the secondary primary routes should be taken off the books altogether. These roads seem to be in a limbo situation. Many of these routes are main arteries into counties and the Minister should make funding available for them.

There was not a big reduction in the income tax bands in the budget. There seems to be a new poor emerging in this country and this category seems to be a kind of middleman who always gets caught somewhere along the line. Such a person never seems to get help when in need. The economy has been growing but the PAYE worker who earns over a certain limit — approximately £23,000 — enters the higher tax band and seems to have to pay for everything, including school fees, mortgage, etc. He is put to the pin of his collar to survice.

Fianna Fáil promised a reduction in income tax and we delivered on that in Government. The upper rate was reduced from 60 per cent to 48 per cent, a drop of 12 per cent. There was an ideal opportunity for the Minister for Finance to reduce this rate further. However, he failed to do so. The lower rate of income tax was reduced from 35 per cent to 27 per cent under a Fianna Fáil led Administration, a drop of 8 per cent.

Everybody is talking about the healthy state of the economy. One must refer back to 1987 when things were much more difficult following a coalition Government from 1983-87. The national debt doubled in that period. Many cutbacks and tough decisions had to be made which were not easy for any public representative to take. However, Fianna Fáil in Government addressed them and we moved to a situation of low inflation and low interest rates. Everything was put in place for the development of a strong economy. The Maastricht Treaty was also agreed, subsequent to which billions of pounds started coming into the country. By 2000 this money will have completely run out and I do not believe the money is being properly invested. Many schemes are creating jobs that are not meaningful. Between now and 2000 better planning should be undertaken in order to create meaningful jobs for the future. The Minister for Finance had an ideal opportunity to address this issue in the Bill.

I am very concerned about what will happen when the EU money runs out, particularly if money is not invested properly before then. I am [673] looking for money for a scheme in north Kerry. Senator Cregan spoke about the boom that is being experienced everywhere. Unemployment in north Kerry is at its highest level since the foundation of the State. There are no jobs and no jobs are being created. There is no industry there. Four weeks ago a factory closed with the loss of 105 jobs. This may not mean much to the people in Dublin or the bigger cities, but the loss of 105 jobs in Listowel is a disaster. There is another industry there on the verge of closure with the loss of another 60 jobs. I cannot see where the boom and the jobs are. There are 2,000 people unemployed in the Listowel and north Kerry area with a further 3,500 or 4,000 unemployed in the Tralee area. This is the highest unemployment rate we have ever had in the region. If there is an economic boom it is not being felt in my part of the Kerry constituency, which is also the constituency of the Tánaiste and one Minister of State.

The Minister for Finance will have to do something to examine the different areas of rural Ireland. There is much talk about a tourist boom, which is evident and which we welcome. In the future we will have more tourists coming to Ireland and I do not believe enough is being done to cultivate this market.

Regarding unemployment, we are told that up to 50,000 jobs are being created annually. This is difficult to understand because emigration is still rampant, whether it is to the United States, England, etc. There is continuous mass emigration from Ireland. I was listening to a debate earlier today when it was mentioned that people are returning because of the better social welfare system and claiming housing benefits here. Perhaps this is so, but I do not see this happening on the ground.

I do not see how the billions of pounds made available to the economy is being invested. Starting various schemes in small towns and villages which create six or seven or eight jobs paid for from central Government funds is tantamount to having people on social welfare and getting handouts. When the European money runs out all of these people will return to the unemployment register.

I now wish to turn to the Government's policies regarding the elderly, the needy and the poor. An increase for an adult dependant of £1.17 per week on average on each of the three budgets introduced by this Government is miserable. It is an insult to provide an increase of £1.17 to an old person. If we are concerned about old people and the needy they should be helped. For widows the average increase per week was only £2.20 and for unemployed and those on disability allowance the increase was only £2.17 per week. In a time of economic growth these are the sectors that should be helped most. It was interesting to listen to some Senators saying these were large increases when in fact they were not.

The 1 per cent reduction in taxation for PAYE workers was small and was a great disappointment.

[674] The Minister for Finance said that the issues of crime and drugs would be handled by other Departments. However, it comes back to the Minister for Finance to put enough money aside to tackle the crisis we have at the moment. The Minister failed badly by not putting money aside to address these problems. We have to provide for renewal in areas affected by crime and drugs, and financial incentives have to be provided for those who are trying to develop such areas.

Growth in the economy must be shared by all and I think the Finance Bill fails to provide the necessary leadership in this area.

Minister for Finance (Mr. R. Quinn): Information on Ruairí Quinn  Zoom on Ruairí Quinn  I thank Senators for their contributions, which we have monitored. Due to other commitments I was unable to be here at the outset. I would have preferred to have delivered my own speech. However, I understand that my friend and colleague, the Minister of State, Deputy Coveney, has been able to facilitate me in that respect.

I want to thank Senators for their contributions. I do not propose to go into a long and comprehensive debate in reply to all the points that have been made. We will have ample time to go through them on Committee Stage tomorrow. I thank the House for the constructive and cooperative way in which it has dealt with this issue.

Question put and agreed to.

Acting Chairman (Mr. R. Kiely): Information on Rory Kiely  Zoom on Rory Kiely  When is it proposed to take Committee Stage?

Mr. Cregan: Information on Denis Cregan  Zoom on Denis Cregan  Tomorrow.

Acting Chairman:  Is that agreed? Agreed.

Committee Stage ordered for Thursday, 8 May 1997.

Sitting suspended at 6 p.m. and resumed at 7 p.m.


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