Friday, 13 February 1998
Seanad Éireann Debate
I am glad to have the opportunity to address the Seanad on this motion on the Appropriation Act, 1997. The Act gives statutory effect to the departmental Estimates, including Supplementary Estimates, voted by the Daáil for that year and is simply giving legal effect to decisions already taken by the Daáil. It does not contain any policy proposals or initiatives.
The policy implications of the Estimates allocations for 1997 were examined when the individual Estimates were being considered and approved by the Dáil last year. The 1997 departmental Estimates given legal effect in the Appropriation Act, 1997, and which are the subject of the motion now before the House, are, of course, those introduced by the previous Government.
Traditionally, the passage of the Appropriation Bill through the Oireachtas has been used as an opportunity to review the Government's policy on public expenditure within the wider context of its general economic and budgetary policies. When the Appropriation Bill was going through the Seanad last December, my colleague the Minister for State at the Department for Enterprise, Trade and Employment, Deputy Kitt, gave a broad outline of this Government's policy on public spending.
It is worth recalling the most significant elements of that policy which is being framed within the overriding objective as stated in An Action Programme for the Millennium of limiting the growth in net current spending to 4 per cent and capital spending growth to 5 per cent on average up to 1999 and reducing overall Government spending as a share of national output. The Government approach to public spending is one of balance and equity.
It is acutely aware that maintaining the great strides which have been made in the economic  and social life of this country over the last ten years or so is crucially dependent on continued progress in sustaining investment and addressing the many problems of disadvantage and inequality which, unfortunately, still exist in society.
Significant additional resources are being provided to improve essential public services for the benefit of the most deprived members of the community. The Government recognises also, however, that there must be a prudent limit on the amount of resources we can commit to doing this. Controlling public expenditure is not an end in itself but is one of the key priorities which the Government has identified as part of its overall objective for tighter management of the economy so as to maximise the long-term potential for growth, jobs, social inclusion and improved living standards for all.
The Government's commitment to expenditure control is underlined by the fact that net current expenditure in 1998 is estimated to increase by 2.6 per cent and by an annual average of 3.4 per cent on a no policy change basis in the period 1998-2000. There is a strong economic case for a policy of restraint in public spending. Ireland should, when economic conditions are good, as they are now, run overall budgetary surpluses so that we can reduce debt levels and face the future from a position of financial strength. We must also ensure that the overall budgetary position allows the Government to pursue the reductions in personal and corporate taxes that are so crucial to securing continued social consensus and enhanced competitiveness, and to meet the future priority investment needs of the expanding economy. These three objectives — reducing debt, cutting taxes to underpin continued social consensus and planning for future investment needs — all require that firm control of current Government spending is maintained now and over the medium term.
The Government's objective of limiting the growth in current expenditure to 4 per cent on average will ensure that the three broad budgetary goals which I have mentioned can be achieved. At the same time, however, it will allow the Government to commit significant additional resources to meeting the many pressing economic and social priorities which must be addressed.
As well as considering public expenditure issues, this debate also allows the House another chance to discuss the Government's overall approach to the management of the economy. I am glad, therefore, to be able to give the House an updated report on what is one of the most remarkable international economic success stories this decade.
The Irish economy has witnessed remarkable progress in the past decade. Whereas economic growth, as measured by gross domestic product, was less than 3 per cent in all but one year in the 1980s prior to 1987, the situation changed fundamentally  thereafter. Growth rose to an annual average of about 5 per cent in the following three years. In the 1990s it has risen to 6 per cent on average, reaching a high of almost 10.5 per cent in 1995. Economic growth since 1994 has been unprecedented at almost 40 per cent.
The grounds for this exceptional performance have been well analysed and documented. Policy makers in many countries are interested in finding out the secret of our remarkable success. One thing is clear. It has not occurred by accident. It is the result of deliberate policies begun in the latter half of the 1980s.
There are a number of factors which have contributed to this. The initial and primary one was the attack on Government borrowing, with the consequential alleviation of the burden of national debt. The general Government deficit was over 12 per cent of GDP before 1987 — this was reduced to less than 1 per cent in 1997. Correspondingly, the general Government debt, which had reached a high of 119 per cent of GDP in 1986, had been relentlessly cut back and stood at 67 per cent by 1997. This transformation of the public finances laid the foundation for the country's economic success principally through its impact on lowering interest rates and increasing investor and consumer confidence.
Fundamental also to this revival was the co-operation between the trades union, employers, farmers and Government — the social partnership. This social consensus, which has been continued with the Partnership 2000 agreement, has provided security to employers as regards their wage costs and industrial peace, while securing reasonable pay rises for employees. By reducing personal taxation, successive Governments have also helped to improve living standards. The agreement also provides for public resources to be targeted at the most needy members of our community through social inclusion measures.
The consensus approach has ensured the maintenance of our competitive position at home and abroad. Irish industry has been experiencing very healthy growth. Manufacturing output grew by an annual average rate of almost 10 per cent in the period 1987 to 1996. The picture for 1997 shows output rising between January and October by over 17 per cent compared to the corresponding period of 1996. This underlines the competitiveness of Irish industry, especially in the leading sectors of computer hardware and software, and pharmaceuticals. Our export trade position also reflects this robust performance.
This industrial development is also related to the sustained investment programme of the Government. This has been underpinned by the provision of EU Structural Funds since 1989. The investment in education and training has provided our workforce with the necessary skills to meet the demands of the booming high technology sector. This has been given significant further impetus by the Government's decision to introduce a £250 million education technology investment fund to address emerging skills shortages.  The availability of hi-tech personnel has been an essential feature of the attractiveness of our foreign direct investment package promoted so successfully by the Industrial Development Authority.
A number of initiatives are also in place which will assist particularly the long-term unemployed to return to work. The most important of these are the community employment and back to work allowance schemes. In addition, the recent budget introduced a further initiative of tax concessions focused specifically on the long-term unemployed. These concessions, which should have a significant effect, come into operation from April.
The outlook for the foreseeable future remains positive. Overall GDP growth is forecast to increase by 8 per cent this year and by an annual average of 6.5 per cent for the following two years. Consumer demand remains buoyant, while investment is expected to rise by over 11 per cent, which follows increases of almost 16 per cent in each of the last two years.
Despite this strong growth, Ireland has enjoyed remarkably moderate levels of inflation in recent years. The latest figures from the Central Statistics Office for inflation show a year-on-year rise of 1.8 per cent in the consumer price index for the 12 months to January. The EU harmonised index of consumer prices rose 1.2 per cent in the same period.
The wholesale price index for the home sales component of manufacturing industries rose by a modest 0.2 per cent in January. We must maintain discipline in the management of the economy and public finances so that the success of recent years is continued into the future. Unrealistic demands for wage increases or improvements in public services must be avoided. Otherwise we could put at risk the gains of recent years and undermine our successful participation in Economic and Monetary Union.
There is scope for considerable extra development in the years ahead along with an improvement in the various services. We must, however, keep our eye on the management of the economy and the public finances, which underpins their successful development into the future.
EMU is one of the most significant developments since the foundation of the State. We face into EMU from a position of economic strength, strong growth, rapid employment creation, low inflation, a budget close to balance and a rapidly declining debt ratio. The launch of the euro presents us with an historic opportunity to build on the economic and social progress we have achieved over recent years by promoting accelerated economic convergence and integration of the Irish economy with our EU partners.
 The establishment of the euro will yield significant benefits for the economy, as part of the wider European economy. A permanently fixed exchange rate will consolidate gains already achieved through the Single Market. It will enhance overall economic efficiency within the euro area, boosting the sustainable rate of output and employment growth over the medium term.
The broad national consensus on economic and social policy has underpinned our competitiveness. In turn, sound fiscal policies have allowed the Government to reduce taxation and increase spending on key social programmes. It is that social consensus which people in other countries envy because it has clearly underpinned the developments which have taken place here in recent years. It is essential that budgetary policy remains on track, the consensus remains strong and that a significant investment is made to support Ireland's future development. I assure the House that the Government's expenditure and general fiscal policy will maintain that sound approach.
Reference was made on the Order of Business to the Finance Bill which was published yesterday. It was suggested there will be a discussion on it in the context of the Appropriation Act. Credit unions play an important part in helping people to manage their money properly. They are important for pensioners, social welfare recipients and thousands of employees. They play an important part in helping people to solve their financial problems with dignity and in tackling the problem of money-lenders. As a former Minister for Social Welfare, I worked closely with them when the MABS was set up to tax money-lenders. Great credit is due to the credit unions for the work they did in that regard. That is why the Minister for Finance has renewed their exemption from corporation profits tax which is a major financial benefit.
The Minister has also introduced a number of other measures following discussions with the credit unions. He has stated clearly that he will look again at the reporting requirements of the Revenue Commissioners. The Minister has made it clear that he will consider our ongoing strategy on Second and Committee Stages.
There are various other issues to be dealt with on Committee Stage, including a measure for seafarers in which I, as Minister for the Marine and Natural Resources, have a special interest. It is particularly important for employment in that sector. Another measure which will be included in the Bill is a 50 per cent write off in the first year for the white fish fleet. I notice RTÉ did not show an interest in that although it was the second or third item mentioned by the Minister. I am glad the local radios carried the story extensively because it is a valuable measure which affects the livelihoods of the coastal communities. Many such issues will be discussed in the context of the Finance Bill. The Minister has said he is willing to look again at the issue of reporting.
Mrs. Ridge: I welcome the Minister to the House. I hope he meant it when he said he looked forward to hearing the views of Senators. While the Minister was courteous and pleasant, I am disappointed I do not have the opportunity to address the Minister for Finance. I listened to his interview this morning during which he said he will consider changing his mind, which takes courage.
I speak on behalf of the socially excluded people I represent. The decision on credit unions is unthinking and unwise. The Fianna Fáil slogan could now be “Wealthy People Before Politics”. The Minister for Finance, Deputy McCreevy, was very lucky to ask the Minister to take his place in the House today but he was equally lucky in the timing of his appearance on “The Late Late Show”. He would not receive the same adulatory response if he appeared on the programme tonight. Deputy McCreevy is known to be a lucky man. I do not know whether he spoke to the Taoiseach but I take him at his word when he said that he will reconsider this proposal. He must be deaf if he does not do something very quickly — U-turns are sometimes necessary.
The Minister present, Deputy Woods, made some of the points I wished to make on the role of credit unions. He addressed the issue of social exclusion and spoke about significant additional resources being provided to improve essential public services for the benefit of the most deprived members of the community. There is to be a welcome increase in expenditure on the money advice and budgeting service. However, the problem with social exclusion is a feeling of not belonging to a community. Credit unions are not anonymous financial institutions. They are manned by local volunteers who become experts. These people are friends who keep confidences and draw the socially excluded from the degrading, unjustifiable interest rates charged by money-lenders. The encouraging of thrift by credit unions brought a different ethos to those living in areas called disadvantaged or marginalised. Unfortunately, columnists sometimes refer to these areas as “ghettos”. The Minister has served that electorate well and we must acknowledge the positive initiatives introduced by various Governments. However, interfering with credit unions is similar to taxing the widow's mite. It is a stupid thing to do.
I wish to speak about the lack of provisions for the socially excluded. There is a housing problem in urban areas, particularly in greater Dublin. The financial difficulties faced by people is a bomb waiting to explode. I hope the Minister will pass on these comments to the Minister for the Environment and Local Government and the Minister for Finance. I am annoyed about the decision on credit unions in the context of the decrease in  capital gains tax from 40 per cent. This helps those who invested in the housing sector. Rents are increasing at such a rate in Dublin that I believe we will begin to see a northern climate equivalent of tent city here in the near future. Our council has 1,700 people on its housing list whose incomes, which I have examined in detail, range from £4,000 to £14,000. There is no way those people can provide for themselves.
Young people interested in entering into private house ownership can no longer afford the deposit for a house and do not have the ghost of a chance of paying up to £900 per month on mortgage repayments. I appreciate local authorities will rezone more land and that should lead to some kind of price decrease. However, the greed factor is winning out completely in this situation.
We should avoid creating further social exclusion. The Minister stated that significant additional resources would be provided to the most deprived members of society. He also referred to the fact that the Government programme provides for public resources to be targeted at the most needy members of the community through social inclusion measures.
If we do not take action on the housing problem in the greater Dublin area, we will see more Darndales, west Tallaghts, north Clondalkins and Blanchardstowns springing up, although I am not suggesting there is anything wrong with any of those geographic areas. When we got to the stage where there was a huge demand for housing our only response was to build houses to accommodate that need. Houses were built and people were displaced. No infrastructure was put in place in some of those areas, aside from national schools and churches, for up to 15 years in some cases.
An entire generation has grown up experiencing a sense of alienation and having no sense of community. We should hear the warning bells now. Price controls must be put on houses. One hundred and five housing starts have been allocated to our council for the coming year when our the list is almost at 1,700. We are creating a monster here. Population levels will not fall in the Dublin area as that is where two thirds of the country's jobs are located. Cognisance must be taken of that fact.
Low income people resent the Minister's generosity to the wealthy. The reduction in capital gains tax is reflected in the outrageous prices now being paid for private rented accommodation, new houses and the fact that we cannot accommodate the people on housing lists. I did not think those bad old days would return. Capital gain is one thing but social gain is also important and is referred to throughout the Government's Action Programme for the Millennium, although I do not think we are witnessing it in regard to this matter.
I believe there is a lack of financial commitment on the part of this Government to the socially excluded. I am speaking as a native Dubliner  living in an area where housing needs were accommodated and where a spiral of dreadful social need was started as a result. We did not act in time then but we now have an opportunity to take action. Why keep boasting about the Celtic tiger when only its head and shoulders are growing? The people at the bottom of the ladder are being trampled underfoot.
I suspect we are so carried away by headlines of growth and prosperity that we have forgotten to observe and talk to ordinary people. It would be of value to the Minister to check the rate of applications for housing in the greater Dublin area. For example, the year before last, sometimes there were 24 applications a month and sometimes there were 40. For the whole of 1997 there were over 100 per month. Discussion of these matters is relevant to the budget and the financing of this State.
I represent what I believe to be the views of Dubliners generally, because I believe there is an anti-urban and anti-Dublin slant to what has been happening. The ordinary person who follows the Dubs or who, like me, is a native of this great city, has not been getting a look in. We have not seen the Celtic tiger running or jumping by. It is fine for the Minister to make speeches, but I would like to see the measures he mentioned put to greater effect than was apparent in his speech. A figure is not stated for the allocation towards voluntary and community services.
I have never met the Minister for Finance, Deputy McCreevy, and I was looking forward to him dodging some of the points I raised. He sent in a very good lieutenant instead. However, Fianna Fáil will have to change its slogan to: “Wealthy people before politics”, unless there is a rapid change in the treatment of ordinary people. Members will remember the character in Dublin Opinion, Seán Citizen. Seán and Shauna Citizen are fed up at this stage.
The Appropriation Bill was passed by the Seanad on 19 December and it gave effect to the budget. I said on that occasion that we were in a unique situation in that it was the first time in the history of the State we were dealing with an Appropriation Bill and a budget which had been passed in 1997 but which took effect in 1998. It was to bring us into line with Europe and to streamline the budget.
Reflecting on ten years ago, and it is important we do, the then minority Fianna Fáil Government took decisions which brought us to where we are today. At the time creditors were at the door and people with vision and determination took decisions which were responsible for the situation in which we now find ourselves. They played an important part at an important time in the history  of the State in that they put the finances of this country in proper order and they prepared the country and the economy for the different stages of European integration, including the one at which we are now, monetary union. If those decisions had not been taken at the time, we would not be in the enviable position of being able to join the single currency at the first opportunity which presents itself, 1 January 1999. I pay tribute to that Fianna Fáil minority Government. That conflicts with Senator Ridge's negative comments concerning the wealthy and the poor. It is important to refer on the record to those who had the foresight and economic sense to take the decisions which have brought us to where we are today.
Many other decisions were also important, one of which was the attitude of successive Governments towards education. Investment in education since that minority Fianna Fáil Administration, including the £250 million being invested this year — a more substantial sum than previously — is bearing fruit today. We are in a position to take up the type of employment opportunities which are coming on stream in the electronics, pharmaceutical and computer industries. Reasonably good jobs in these sectors are being provided. We would not be in a position to take up these jobs if decisions had not been taken effecting education. I compliment those who had the foresight to invest in the education of our young people.
Ireland joined the EEC in the 1970s and has moved through the Single Market into the next phase, namely, monetary union. There are major opportunities available for the economy and the people. Figures for 1997 show that an extra 50,000 people are in employment, approximately 17,000 of whom are from the category of long-term unemployed. It is estimated that an additional 50,000 jobs will be created in 1998. These are positive signs in the economy.
The advent of monetary union will exclude the problems relating to exchange rates. It will also maintain interest rates at a low level. Our inflation rate is and has been one of the lowest in Europe over the past number of years. The economy is moving in a structured manner into a new phase of opportunity for its people. It is important to maintain the discipline that is necessary to provide good opportunities for the people in future.
The Minister said we are working within certain criteria and guidelines, including the boundary of a 4 per cent increase in current spending and a 5 per cent increase in capital spending. These are the type of decisions the people and industry want to hear. The industrial sector must feel that the economy is in safe hands and that investment can be made here for the benefit of those in the sector, their families and the public in the context of jobs and opportunities.
The economy is being looked after extremely well by the Minister for Finance and the Government. Some economists in particular have warned  about the dangers of Ireland entering EMU while Britain remains outside. There may be some upsets. Looking back at the ESRI report I remember there were indications of possible job losses but a steady hand is still being maintained as regards our economy. Again, economists have been proved very wrong in recent months. Some people would say they are the last people we should consult to speculate on the economy because they are inclined to go overboard and have done so on many occasions.
There are a few areas to which I would like to draw the Government's attention. Rural decline is an area which has not been fully addressed by the Government. Previous Governments have indicated that they support rural renewal and schemes to keep people in rural areas but they have not taken the necessary decisions. One of the decisions necessary today to maintain people in the regions is to provide job opportunities for them. I looked at the reports of the job creation agencies and it is very depressing as regards what is happening there. It appears that the major centres such as the east, south and west coasts are picking up all the job opportunities. There is only a small number of new jobs reaching isolated rural towns and villages. The Government should address this issue and realise there is a big area of our countryside crying out for job opportunities. Farms today no longer provide rural families with a good livelihood. The rural population must be supplemented with job opportunities in county towns and villages. I hope this matter will be addressed over the lifetime of this Government.
I note from the Finance Bill published yesterday that the Shannon corridor has not been included in it. The corridor in the region of the upper Shannon was proposed by the local authorities from the midlands region when they asked that special tax incentives be given to job creating developments, tourism orientated projects and others. I understood this proposal was received favourably in the Department of Finance and discussed at length, but unfortunately it does not seem to be included in the Bill. I ask that this proposal, which was researched by senior officials in local authorities along the Shannon, be brought back onstream. I would like the Minister for Finance to realise that there will be deep disappointment if the proposal is not included in the Finance Bill. I hope the issue will be dealt with during its debate and that a further proposal or amendment will be made at a further legislative stage of the Finance Bill.
The issue of credit unions has already been mentioned. First, I want to compliment and pay tribute to the credit union movement. They have done a wonderful job for people in rural and urban areas. I remember when my party was in Opposition we had a submission from the credit union movement in early 1997. They wanted the opportunity to expand and modernise the services they provide. That is part of an ongoing debate and legislative programme. They will have  to meet new criteria if they expand their financial services, but it would unfortunate if we were to undermine the credit union movement. It has a major role to play and we should encourage it to the maximum extent possible.
I welcome the Minister for Finance's statement this morning and the Minister, Deputy Woods's, statement in the House that the area of conflict between the credit union movement and any legislative proposals in the Finance Bill is open for discussion. Debate, negotiation and, possibly, amendment will take place.
I agree to an extent with Senator Ridge on the problem of housing. I am aware of it at local authority level and Members of this House would probably have more experience of it than Deputies. Buying a property is becoming a remote possibility for young couples unless they are in high paying employment. At the other end of the scale is the local authority housing system. We traditionally have the highest rate of home ownership in Europe. If we do not maintain the possibility for young couples to acquire a home of their own they will either move into the local authority or the rented accommodation sectors. The trend in Europe is toward the rented sector and perhaps we need a change in mindset. However, if we are to move toward the rented sector I do not want to see landlords becoming millionaires. To move in the other direction would overload the local authority system and that is equally undesirable. I hope we can return to a climate in which young couples can afford to build or buy their own homes.
Incentives aimed at maintaining a balance were provided by previous Governments, such as the Small Dwellings Acquisition Act, 1957, and the provision of serviced sites by local authorities. They may not be the appropriate mechanisms for today's circumstances and other approaches may be needed. This matter should be researched. We should not allow a divide to be created whereby only the wealthy can buy houses and others must either rent or be housed by the local authority. The middle class has played an important role in society and we must be conscious of its housing needs.
I was disappointed with the findings of the NESC report. A number of counties, including County Roscommon, were discriminated against, so to speak, in terms of their return from Structural and Cohesion Funds. They were also at the bottom of the pile in terms of economic development and did not benefit from the Celtic tiger to the extent which would be expected.
This brings me back to my earlier point, that the regions must be addressed. In the late 1980s and early 1990s I worked for three years with the consultative council of the European Commission and at that time the biggest debate in Europe was about the regions, particularly the bottom-up approach, providing opportunities for part-time employment to maintain the rural fabric and not to overload urban centres where any extra services would have to be provided at enormous  cost. If those resources were redirected towards providing job opportunities in rural regions, the country would have a more balanced spread of population and the fabric of rural Ireland would be maintained — Garda stations, local schools, community centres and other services necessary for a community to survive could be kept going.
This should be addressed over the life of this Government and not least in the year to which the current budget and Appropriation Act apply. The Government should take this key strategic decision. Halting rural decline and starting rural renewal should be a hallmark of the next 12 months. If we are all alive in 1999, we should see a smooth transition to the single currency, when we will have set ourselves on a new path to prosperity.
Mr. O'Toole: I welcome the Minister. The burning issue today is the credit unions. It is fine to have debates about Isle of Man or Ansbacher accounts but when people were unable to get money from banks to send their children on a school tour, to buy a fridge or fix a leak in the roof, it was the credit unions who helped them. They are part of the culture of our society and are based on equity, justice and thrift, the philosophy of the co-operative movement. I am a founder member of a credit union and some 16 years ago I attended the three month training course, so I have a good understanding of what makes the movement tick.
More important is the story of Mrs. Nora Herlihy, who taught in one of the most deprived areas of the city, in Basin Lane school, in the early 1950s. She studied the credit union movement as it existed in the US and worked hard to introduce it here. She founded Donore Avenue Credit Union, the first in Ireland, begun in a national school by a teacher. The movement developed from there. As I said earlier, successive Governments, especially the Minister's party, have supported the movement and its philosophy. His former party leader, the late Éamon de Valera, was the President who signed the legislation on credit unions into law in 1966. Some 30 years before President Robinson did something similar, he insisted that Mrs. Herlihy should be present in Áras an Uachtaráin when he signed the Act and presented her with the first copy.
I want the Minister to know, beyond the shadow of a doubt, that in my capacity as general secretary of a teachers' trade union and as a member of the executive council of the ICTU I will leave no stone unturned to ensure this madness is reversed. I am sure he received representations from his local credit union when he was in Opposition last year, as I did. I had numerous meetings with them and I discussed it with the then Minister of State, Deputy Rabbitte. He was not completely enthusiastic about all the amendments but he accepted most of them. We finally arrived at a Bill with which, as far as I can recall, we all agreed. Credit unions in the US are not  subject to the tax on shares proposed in the Finance Bill.
I wish to ask a question for the record which I am sure the Minister's advisers will be able to answer. I am always interested in the operation of the Ministers and Secretaries Act and how decisions are taken. Too often I have queries about how decisions were taken. Was this proposal to tax the capital of credit union shareholders in a Cabinet memo? Was it a Cabinet decision or was the Minister unaware of the decision until yesterday? It is important to know the answer to that. I am worried about decisions such as this being taken when the Government has not been appraised of them. I cannot believe the Minister, who is a member of the Cabinet, was aware this change was about to take place. I am worried this was buried on page 75 of a 150 page document. This was either a Government decision or else someone must be answerable for doing something which was not Government policy. I want to be absolutely clear about that.
I wish to turn to a related matter which is part of the Finance Bill, the Appropriation Act and the concept of mutuality. Nora Herlihy, the founder of the Irish League of Credit Unions, died ten years ago this week. Sixty years ago this week in a corner of the Teachers' Club, a group of INTO members established another mutual society, the Educational Building Society, which is now the largest mutual building society. I am worried about this or any other Government eroding the concept of mutuality to the point where building societies might find themselves making money for their shareholders rather than those who invest in them through deposits or borrow from them through mortgages.
We have already seen, two or three years after the push to move away from mutual status, that the building societies which have changed from their mutual status cannot compete with those which retained that status. It is extraordinary that they cannot compete with the EBS and other mutual building societies for the simple reason they do not have to rake off profits for shareholders, which goes against the concept of building societies.
I recall wanting to speak on this matter in the House in 1992 when Senator Manning and I were joined in total anger at the contemptuous way in which the then Fianna Fáil Government tried to push through two crucially important Bills on the Central Bank and buildings societies in one sitting between the adjournment of the Dáil and the calling of an election. Those Bills never received proper attention but, in as much they are now part of the law, we must insist there is no erosion.
The building societies are the banks of the small people. Senator Finneran made a long and impassioned speech about the erosion of the rural infrastructure and I agree with much of what he said. Credit unions are very much part of that infrastructure. Often the credit union building is the focal point of and the most attractive structure in a village or a town. Peoples' money is  being reinvested in their own town or village. It would be disgraceful if anything were to happen to that and if people allowed anything to happen to the service provided by building societies. It would be disgraceful if we put shareholders of building societies into the same category as people who can afford to have Ansbacher accounts, accounts in the Isle of Man or off shore accounts and obtain the help and advice of accountants on tax breaks. These are ordinary people who we are supposed to represent. I ask every trade unionist to fight against any change in this regard. Before the Minister concludes today, I ask him to grasp this nettle. He said these matters are open for further consideration, which I welcome. However, let us take this a step further and say we will reverse this daft proposal. I would welcome a commitment from the Minister when he concludes the debate. This draconian measure has been found unnecessary in the United States, the largest economy in which such institutions function.
I now turn to the budget. The Appropriation Bill is dependent on the income and revenue accounts as determined by the implementation of the Finance Bill and the budgetary proposals. Many people believe the changes in the budget in relation to capital gains tax and other areas give more to the well off than the less well off. Taxation measures were developmental and progressive and those on higher salaries got the best deal out of it. I ask the Minister to take to Cabinet a simple proposal that the thrust of the next budget will be towards those on lower incomes and that we will focus on the lower tax bracket and level.
We should also look at PRSI, an issue on which this Minister more than any other member of Cabinet is well informed. I ask the Minister to consider reducing the A rate of PRSI by at least 1 per cent in the next budget. Efforts to increase the first tax band and the point at which people fall into the tax net and to raise the point at which people progress from the first to the second tax bands in conjunction with a 1 per cent reduction in the A rate of PRSI would be a welcome indication of Government's concern for the less well off in society. It would also help to negate the bad vibes being sent by Government on the publication of the Finance Bill yesterday.
I refer to EMU which the Minister tied into the fundamentals in the economy. I am sure the Department of Finance is as aware as anybody else that the fundamentals concerning taxation, inflation, the debt GNP ratio, etc. , were perfect in the Asian tiger economies. There was no indication from any of those fundamentals that they were going to run into trouble, but they did. Will the Minister ask his Cabinet colleagues, when speaking about the economy in the future, to keep that in mind and not to fool people into believing that because these fundamentals are right nothing will go wrong? Things can and do go wrong. Economics are inevitably cyclical. It is  boom or bust and is a matter only of how long between each because we are never certain. Will the Government and the Department of Finance learn this lesson from the Asian economies that even when the economic fundamentals appear perfect, they can still go wrong? The lesson to be learned is that fundamentals such as the inflation rate, the debt GNP ratio and growth are important when they are not right, but once we get them right we must look to other things, such as employment.
Trends in employment over the next ten years are predictable. Which Minister will explain the inevitable closure of Fruit of the Loom? There will be no major fibre industry in this country in ten years although there may be an indigenous industry based on natural products, such as wool, cotton and leather.
Western Europe looks to the emerging economies of south-east Asia, especially China, as a new market. It sees the recovery in Japan and the changes in Hong Kong opening up all kinds of new possibilities. However, the currencies of the countries in this region have been effectively devalued over the past four months and they are now far more competitive than us. This means that it is no longer as attractive a market for our exports as it appeared six months ago and that the expanding home market which was very attractive to the manufacturers and suppliers in industry in those markets, is collapsing. They will seek new markets, which are easily found in the western developed world with its booming economies. Not only will we not be selling to them but they will be selling to us. This will create huge problems for us through job losses in the fibre industry, the non-qualified areas of the computer industry and the call centres, which have been established throughout the country and which will be moved to the next country whose workforce can speak reasonably good English or the language of an emerging market.
The Minister should recognise that the only way to deal with this is to ensure that people have qualifications. Only when we have enough qualified people who have the flexibility to adapt to new jobs will we be able to maintain our present levels of economic growth because we can then postpone or divert the inevitable economic downturn.
The Minister said that the economy is expected to grow by 8 per cent this year. It is an extraordinary figure, one with which I have difficulty coping. It will, for example, ensure that our debt-GDP ratio will fall towards 60 per cent, in line with the Maastricht Treaty convergence criteria, without us having to pay an additional penny towards the debt repayment.
Senator Finneran referred to the belt tightening which became necessary in 1988. That is ongoing in many areas. For example, earlier this week I outlined how it continues to apply in primary education. It is also happening in housing  and with elements of the tax system, which many believe to be unfair.
It is time to spread the benefits of our economic growth more widely. In this regard, the budget was not egalitarian enough. In saying this, I do not intend to sound like an old Marxist. The budget must include a social aspect and an element of wealth redistribution in the fairest and wisest way.
The Minister's points about EMU did not touch on some of the practical problems. It is appalling that European Governments have allowed three full years from 1 January 1999 for the printing of money and minting of coins. The lock-in rate to the euro will be determined in two months. This rate will be established on 1 January 1999, which is only ten months away, but Europe has yet to make a decision or issue a directive on dual pricing. When people go into shops this time next year, it is not clear whether there will be euro and IR£ price tags on every item or if there will be four different standards comprising euro and IR£ price tags and metric and imperial measurements. It is time to put this nonsense behind us.
There is no further need for imperial measurements in Ireland and we should move away from them. However, there will not be an easy changeover if consumer rights are not established between now and the end of this year. It should be our right as citizens to state that this time next year we want everything priced in euros and IR£s. There is also confusion about the position of banks in this area. This time next year, when euro cashless transactions can take place, the issue of commission should not arise because there is no physical change from IR£s to euros. I should be able to do business with a trader in Paris without paying commission in terms of the transfer of cash. If I want to buy something which costs £100 and 130 euro, the French person will consider the price 1,000 French francs or 130 euro. He or she and I should be able to business on the basis of 130 euro without commission costs. Banks must not try to exploit the position because it would be illegal to charge commission between local currencies and the euro in that three year period. When the euro comes into operation fully on 1 January 2002, commission should only be charged on transactions involving changing sterling to euros or euros to dollars.
I understand the establishment of the euro will effectively subsume the ECU. However, some Scandinavian countries, Britain and Greece are part of the ECU basket of currencies but will not be part of the euro. I understand the ECU will continue to exist. Will the Minister explain how that will work? Why will the ECU exist? Does this mean European Social Fund moneys will be priced in euros and ECUs and there will be an exchange rate between them? What is the position? There is total confusion.
I fully approve of and support the Minister for Finance's decision not to talk about the lock-in currency rate and whether it will be DM 2.41, DM  2.50 or DM 2.60 in terms of the IR£'s rate against the deutschmark on 2 May. The Minister is correct not to discuss it because everything he said or hinted would cause problems. However, it would be helpful if Governments indicated the factors which are important in this matter. People should recognise a number of aspects. The Government will not decide the lock-in rate on its own. It will be decided by consensus in Europe. The difference between DM 2.40 and DM 2.50 or between DM 2.50 and DM 2.60 is approximately 3.5 per cent. This is less than the movement between IR£ and sterling in the last fortnight. Many people are focusing on this exchange rate. It is important but it is not the most important issue. I want the Minister to indicate in his response the issues the Government will take into consideration when coming to their decision on what the best point at which the exchange should take place. The European consensus figure is DM2.41. That would be disastrously low. It would be taking money out of the pockets of Irish workers. I would prefer a figure of around DM2.50, given the available information on the economy.
I agree with Senator Finneran's point about the Shannon corridor. For too long the midlands have been ignored. There is talent and energy there to be unlocked. It needs a catalyst. The concept was pushed very strongly by the Fianna Fáil Party while in opposition. I note the Minister's proposal for a north channel corridor, north of Carrick-on-Shannon. There is no reason for stopping at Carrick-on-Shannon, there is every reason for going further south. It does not make social sense otherwise. I would like the Minister to explain the difference between Hartley's Bridge and Roosky. What are the differences between Newtowncashel, Lough Ree and Drumshanbo? Why can they not all be part of a Shannon corridor if they can come forward with projects?
The problem with the tax efficient designated areas is it uses a sledge hammer to crack a nut. In many cases it has put the buying of sites and building of houses out of the reach of ordinary people. I ask for the corridor be extended to the whole Shannon area and that it be directed and targeted at projects and proposals rather than just an area. I do not want to see people rushing over from Dublin to buy every midlands site available. I guarantee that will get rid of the indigenous population.
There was an extraordinary proposal for hotels along the Border in the budget speech. That was a brilliant piece of politicking. I can see why Leitrim would need support in building hotels but I would be interested in finding out why Donegal needs resources to build more hotels. It is not as if they are short of them there. I do not begrudge them but I do not think it was a targeted resource. It had more to do with an independent in the other House than with progressive economic thinking.
 Ridge did not develop the point she made about the rural — urban divide. She seemed to be reinforcing that divide. Rural groups have seen disadvantage in the country and in the city. There are different problems but disadvantage is disadvantage. It means it is difficult to put bread on the table, to get a job, to enjoy a decent quality of life. It may not be as obvious in rural areas as in cities because it is more spread out.
I asked recently for a debate on the railway infrastructure. That is the single greatest problem in rural areas. This is the only country in Europe where somebody living a mere 150 miles from a university city would have to change lock, stock and barrel in order to get to college every day.
If the Minister wishes to halt rural decline he should allow people to commute to third level institutions. Somebody who lives in Castlebar should be able to take the train every morning at 7 a.m. and be in Dublin less than two hours later. After attending lectures and so forth, he or she should be able to return to Castlebar by train that evening. That would facilitate the student doing four hours study each day. If that sounds extraordinary, that travelling time is about half the pace of the TGV in France. The TGV, with its average speed of 120 miles per hour, would travel from Dublin to Castlebar or Sligo in one and one-quarter hours if suitable rail track were available.
People leave rural Ireland when they finish their post-primary education. They make their new friends in a conurbation which contains a third level institution and that is where they wish to remain. It is important to recognise that the Sligo-Dublin rail line could have been upgraded for the cost of the Athlone bypass. I support the comments about the Shannon corridor and rural decline.
I do not have time to discuss issues regarding national agreements. However, in view of the partnership process of the past ten years, the belt tightening and the discipline of workers and trade unionists, it is not easy for the trade union leadership to explain why people should earn £17 million per year and have a £40 million stake in a company whose establishment was facilitated by the Minister's party taking routes such Munich, Liverpool and Stansted from Aer Lingus in order to get that company up and running. The company was quick enough to listen to Government in those days. It should now be kicked into the Labour Court to do its business like every other company when it encounters a problem.
Mr. Glynn: I welcome the opportunity to speak on this Act. In previous years the public finances have been out of control as a result of high levels of public borrowing. It is important to note there will be no public borrowing by the Exchequer in 1998.
 Tax rates are being reduced and I am confident they will continue to be reduced in years to come. There has been much drum beating by Opposition parties about tax reductions. The Minister for Finance, Deputy McCreevy, took the unique step of reducing taxation by 2 per cent. Everybody is agreed that if a worker works one hour overtime he or she will be obliged to give away a substantial part of his or her earnings.
The Government's policy on expenditure as outlined in the “Action Programme for the Millennium” is to limit net current spending growth to 4 per cent and capital spending growth to 5 per cent up to 1999 and reduce overall Government spending as a share of national output. That does not justify talk of belt tightening.
I agree with Senator Finneran that previous Ministers for Finance, former Deputy Ray MacSharry, Deputy Albert Reynolds and the current Taoiseach, can take great credit for the present position of this country. The Minister who is present, Deputy Woods, in his capacity as Minister for Social Welfare, also played a part by eliminating to a large extent social welfare fraud. This made finance available to devote to people who were more in need than the tricksters who were ripping off the State. Indeed, Minister Woods and his successor were chided that there was no need for a social welfare fraud squad. However, in the fullness of time it was necessary to reintroduce it.
I am pleased to say that, in the last budget, the problems of the deprived were addressed. We must acknowledge the role of voluntary organisations in helping the socially deprived. I commend the Minister for his recognition of the Society of St. Vincent de Paul by providing funding. The society owns a number of houses in my town which are used to alleviate the short-term housing difficulties of certain people.
The Government has recognised the role played by nurses. Glowing tributes are often paid to the nursing profession, serving and retired, for the excellent service they have given to the health service and to the State. The Government has granted parity to retired nurses and I acknowledge the gratitude of retired nurses to the Government for this recognition.
Senator Finneran is correct in drawing attention to the imbalance between the east coast and the rest of the country. I live in the large and growing town of Mullingar and I would welcome the decentralisation of a Department to Mullingar. Not everyone can live in a town or city. I recall growing up in Grehanstown, Killucan about nine miles from Mullingar at a time when most farmers employed at least one man and many employed two or three. It would be difficult to find such a situation today. I regret to say that in one part of my county 50 per cent of the land is owned by bachelor farmers and the land is not being used to the optimum benefit of the land-owner or society.
The social partners have also played a pivotal role in the economic boom. As a trade unionist I acknowledge the restrained and responsible role  trade unions have played in this country, especially since the mid-1980s. I hope this will continue and that the concept of social partnership will live into the next millennium.
In my county we are considering areas for urban renewal designation. Urban renewal is playing a vital part in the revitalisation of run-down areas. However, if there is urban renewal, there must also be rural renewal. I agree with Senator Finneran and Senator O'Toole that in many parts of the country we have witnessed the positive evidence of the flight from the countryside.
I called for a debate on the lack of rail infrastructure. It is a nonsense that if I want to travel from Mullingar to Galway, I must drive 30 miles to Athlone because the rail track between Athlone and Mullingar is closed, and this is at a time when all European states have invested substantially in their rail infrastructure. I welcome the announcement by the Minister for Public Enterprise, Deputy O'Rourke, of an investment of £4 million in the Sligo line.
Last night I attended a meeting in a rural area where the station was closed — north Westmeath, the only part of the county which has suffered a decline in population in the past number of years. Eight drivers leave that area every morning to go to work in Dublin. I do not know the numbers leaving every centre of population but it would be more sensible if stations were reopened so people could travel by rail.
Is Iarnród Eireann providing a service? I would love to travel by rail — I often do. However, as Senator Bonner said, Donegal has no rail network. If we are to have rural development, we must have rural infrastructure. We must develop and invest in sewerage and water schemes and the rail network to encourage people to move back to rural areas.
Recently we had an excellent debate on homelessness. More use should be made of co-operatives. As someone who organised a co-operative, I am pleased to tell the House that we constructed 14 houses for people who otherwise would not have been housed. There are good incentives but housing co-operatives should be more fully developed. Perhaps the Minister will convey this to the Minister for the Environment and Local Government, Deputy Dempsey, and the Minister of State, Deputy Molloy, who announced an excellent number of house starts this year.
Mr. Glynn: To return to housing co-operatives, many debates have taken place in the past in respect of social housing. In the context of rural development, local authorities should take a more flexible approach to the construction of isolated houses. Many people have an affinity with certain areas and parishes in which they would like to live. However, a number of local authorities operate on the basis that it is counter-productive to build one or two houses in isolated areas because of the necessity to provide services vis-á-vis public lighting, footpaths, sewerage schemes, etc. I do not accept that. It is nonsense.
I welcome the statement by the Minister for Finance, Deputy McCreevy, that he is prepared to reconsider the issues surrounding credit unions. Nothing is cast in stone. Senator Ridge, who referred to taxing the widow's mite, seems to suffer from the age old malaise of convenient amnesia.
Mr. Glynn: She must remember it is not long since her party leader mooted the idea of placing a tax on children's footwear. I am not stating that children might not have had a foot to stand on, but they might not have had a shoe to wear. The Senator should be careful about the statements she makes.
We must consider a number of important areas. The number of people unemployed is decreasing but there is a need for further action in respect of youth employment. When students complete second or third level education they should not be placed on the live register. If they do not secure employment, special schemes should be organised for them because people in receipt of unemployment assistance admit that their incentive to find work subsides.
One of the disadvantages of speaking fourth or fifth in line is that most of the points you want to make have already been made. I thank the Leas-Chathaoirleach for his indulgence and I trust my points will be conveyed to the relevant Ministers.
Mr. Dardis: Given the circumstances of this morning's controversy on radio, this debate is likely to be elevated to a discussion on the Finance Bill rather than the Appropriation Act. However, there is wide latitude to discuss many issues in connection with the Act.
I commend the Minister for the Marine and Natural Resources, Deputy Woods, on his contribution. I welcome his references to growth, the control of public spending, etc. The Minister catalogued a number of achievements in respect of growth since the late 1980s and early 1990s. He pointed out that since 1994 there has been a cumulative of growth of 40 per cent. Successive Governments can take credit for that. However,  a number of key decisions contributed to growth not least of which was the decision by the then Minister for Finance and current Taoiseach to devalue the currency. That had a significant impact in terms of growth.
The Maastricht Treaty has had a beneficial impact. When Deputy Quinn was Minister for Finance, I pointed out to him that one of the benefits of the Maastricht Treaty, in terms of the convergence criteria for EMU, would be that it will impose discipline on us in terms of how we manage our economy. He agreed with that point. We must concede that, in the context of the convergence criteria, the adoption of the Maastricht Treaty ensured that successive Governments would not misbehave in terms of their management of the economy. That has been beneficial.
The Minister and Senator O'Toole referred to the inclusion of the social partners in economic planning and development which has also been beneficial. Stability, whether in industrial relations or other areas of public life, leads to the conditions which allow people to make good investment and commercial decisions. The caveat in the rosy picture is the question of control of the national debt, which was one of the criteria imposed on us in terms of achieving accession to EMU. While we have fulfilled the criterion in a broad sense in that the trend has been downwards — the figure stands at 66 per cent — it is, nevertheless, an area of disquiet. The main benefit of EMU and the single currency is likely to be a reduction in interest rates towards the German level. If they do not reach that level, they will probably settle in between and that has a beneficial effect in terms of servicing the national debt because, unquestionably, if interest rates were to rise it would cause serious problems and put a significant dent in growth.
One of the canards that has been repeatedly trotted out about the budget and which must be rejected is that in some way it was a benefit for the wealthy and other sections of society were excluded. That is not the case because a large proportion of taxpayers will now fall into the 46 per cent tax bracket, many of whom could not be regarded as wealthy. In respect of those who do not pay tax and depend on social welfare, there was a £5 increase in the old age pension which was more significant than any increase introduced by the previous Government. The level of general social welfare increases was above that of the previous Government as a consequence of which more disadvantaged people were looked after in the budget and it is wrong to suggest otherwise.
Of course, there are inequalities and deficiencies as always and it is the objective of this and every Government to try to eliminate them. We must accept there are inequalities and gaps which must be closed. I am sure it is the intention of the Government over its lifetime to achieve that. Family income support and long-term unemployment measures received little attention and it seems to be the case that one can trot out a perception  which in turn becomes the reality, yet there is no basis for the perception. It then becomes a propaganda battle rather than one waged on facts. On budget day I was in the RTÉ studios with Deputy Coveney and he conceded this and pointed to benefits he saw in the budget.
Several correct references were made in terms of agriculture and the farming sector to the question of the so-called Celtic tiger and people falling out of the net and not reaping the benefits. If one looks at figures as opposed to the perception, such as quarterly reports from the Central Bank or ESRI reports, it is evident farming is falling behind in terms of growth, output, exports, employment and all other parameters under which one would measure economic welfare relative to other sectors within the economy. Consequently, rural areas are among the areas most extremely affected by poverty. One of the sad facts is that it is not a very vocal poverty. It is a dignified and silent poverty, but it is real non-etheless.
To those driving through the countryside, some people might appear to be living in relative comfort and they may be quite wealthy in terms of assets — I suppose they will feature in the wills' columns of the Irish Independent— but in terms of income, and that on which they are trying to survive, they are very poor indeed. There is a marked reluctance within rural society to discuss those issues in public or to even accept that those difficulties exist there, but they do exist there just as much as in urban areas. There is a unity in society in that respect. There are pockets of real poverty in rural and urban areas, and the urban-rural divide is no respector of that poverty.
With regard to what should be done, we must look at the next round of structural funds. Last night the Mid-East Regional Authority was asked to engage consultants to prepare proposals for the next round of stuctural and cohesion funds. That is a futile exercise. The sum of £50,000 was allocated to the regional authority to appoint consultants. I understand, incidentally, that in one recent case the consultants appointed sub-consultants, which seems to me to involve a commission for doing nothing. My point is that, however worthy the consultants and excellent their reports, we do not operate a system of subsidiarity in this country. These decisions are made by the Department of Finance. The national plan which will be submitted to Brussels will be the product of the Department of Finance and central Government. It will not be the product of the regions and it is less the product of the county councils. That is not the way it should be. Of course priorities must be established — it is important that they would be — but, as far as I am aware, this system of submitting the national plan is unique. In other words, the degree of subsidiarity which should exist does not exist.
The question then arises as to how we will suffer because we have reached the threshold where we no longer qualify for Objective One status. We can expect a diminution in the level of structural  and cohesion funds. It would be wrong for anybody to suggest that these funds will be cut off overnight. I do not think the EU wants to do that because at a recent meeting in Brussels the Commission President, Mr. Jacques Santer, made the point — not specifically to an Irish audience but to a European audience of which Ireland's representatives formed only a small part — that the two glowing examples of how these funds should be used well were Ireland and Portugal and that neither country should be penalised in the next round as a result of the successful effective use of those moneys.
Unquestionably, we are faced with a diminution in the level of funding. The proposal has been made that the country should be divided into sub-regions — in other words, that the wealthier east should be excluded — and if one were to treat the west as a separate region it would qualify for Objective One status and there would be a continuation of the greatest level of funding for the west. I know that Mr. John Hume, for one, has suggested in the past that the Derry area and the west of Ireland should be treated as one European region. However, the reality is likely to be that the whole country will continue to be a single region and we will have certain difficulties in maintaining the level of funding - Objective One in transition is the technical term which is being used. Nevertheless, we will face difficulties there and we must confront them now. The regional authority was set a target of the end of May for the submission of proposals. I wonder what is the deadline for the submission of the national plan to Brussels. It is something to which we must give serious consideration in the near future.
The ECOFIN Council meets in May when it will fix the rates. On 1 January 1999 the euro will come into existence — not in a physical sense with euro notes in circulation, but with Government figures being expressed in euros. Settlements will be made in euros and there will also be an option for big companies to use the euro as a unit of currency and exchange. In three years time euro banknotes will appear and other national currencies will gradually be withdrawn.
I share the puzzlement about the lead in time of three years. It has been suggested it will take that length of time to print all the banknotes but, while I know there is much money in circulation in Europe, it will not take three years to print all the notes.
An added difficulty for us is the proposal to make the sharp transition, on 1 January, from the optional to compulsorily introducing the euro. That is a particularly unfortunate time for Irish business because of the amount of money in circulation over the Christmas period and the fact that much of it cannot possibly go through the banking stage in time. I understand, however, that the Government is making efforts to have that date changed, though it is questionable if it will succeed.
 The big worry concerns sterling which, with a few other currencies, will remain outside EMU. Because so much of our trade is with the United Kingdom, we will obviously be vulnerable to a unilateral devaluation of sterling against the punt or the euro, which is a matter of serious concern. This has been exercising the minds of the Government and trade associations, but we must accept it is a real possibility. The chances of resisting an assault will diminish significantly, however, because the European Central Bank - not our Central Bank, although it will be one component — will defend the currency. In particular, when the euro becomes the currency of most EU countries and sterling is outside, it will be even easier to resist an assault that might be made on the euro because of the fact that it represents an amalgam of several countries. I cannot imagine the Germans, in particular, standing back and allowing sterling to go its own merry way.
It is also a worry for many business people, particularly those who have significant trading links with the United Kingdom. We saw the difficulties that arose in the past when we had to introduce special schemes to protect the mushroom industry, for example, because of a reasonably significant movement in sterling against the punt.
The introduction of a 20 per cent capital gains tax rate in the budget has been referred to on several occasions as another charter for the wealthy. The reality, of course, is that in development land and several other areas there has been no change in the rate, which remains at 40 per cent. If a uniform level of capital gains, income and general tax rates is brought about, it will likely release funds into the economy where they are required rather than having locked assets which just appreciate without benefiting anyone other than the asset holders. It is good to see assets being liquidated and money put into the economy, which can only be beneficial.
Coming back to the question of inequalities and those whom one could regard as not benefiting appropriately from the economic growth, if I were to single out one particular area and make a plea about it, it would be that of physical and mental handicap. While there were welcome measures in the budget, more can be done. I would like the commitments in An Action Programme for the Millennium to be delivered on as speedily and effectively as possible.
One other area where commitments have been given which need to be delivered on is the funding of primary education to close the gap on a per capita basis between primary and secondary education. Secondary education is more expensive than primary education but the intervention at primary level is of critical importance in terms of the future well being of students. That is something which must be addressed.
We should go back to the Credit Union Act, 1996, when discussing the measures in the Finance Bill relating to credit unions. Everyone trots out the platitudes about how wonderful the credit  unions are and what they do for people. It is a tremendous movement which has achieved an immense amount. It is one of the great examples of a self-help organisation and it is part of the co-operative movement. In County Kildare approximately 53,000 people are members of the credit union. That is a high proportion of the population. They have a large amount of money, approximately £54 million, invested in the movement.
This morning on the radio the Minister for Finance said he was prepared to look at the provisions in the Finance Bill and to amend them if necessary. It is worth recording that when the Credit Union Bill, 1996, was going through the Houses of the Oireachtas during the lifetime of the Fine Gael, Labour and Democratic Left Government it was substantially amended. Senator Quill, who was then a Deputy, can take a significant amount of credit for several of the major amendments made to that Bill. Her contribution was recognised in the newsletters circulated subsequently by the credit unions.
A major lobbying exercise was carried out by the credit union movement which was successful and amendments were taken on board. It is worth recording that during the debate in this House on the Credit Union Bill, 1996, on 17 April 1997 the then Minister of State at the Department of Enterprise and Employment, Deputy Rabbitte, said:
Senators will be aware that the financial limits for savings and loans have attracted a lot of attention since the Bill was published. However, the limits in the Bill have been changed since publication in response to various representations I received from the credit union movement.
The business of any Government is to respond to representations and to make amendments where appropriate. I welcome the fact that the Minister for Finance said that certain aspects of the Finance Bill might require to be amended.
Moneys which are salted away by people who are extremely wealthy to evade paying income tax must be pursued and recovered for the State. I am not suggesting that the magnitude of those moneys in any way bears comparison to the savings lodged with credit unions. I know the credit unions would not tolerate a situation where they were being used by any of their depositers or shareholders to evade tax. There is conclusive proof that those people will be pursued. The Minister for Enterprise, Trade and Employment has initiated her own inquiries into the Ansbacher and other offshore accounts. It is also the case, and it was pointed out by Mr. Justice McCracken in his report on the Dunnes Stores payments to politicians tribunal, that there can be legitimate reasons money is held offshore and it can be legal to do so. However, the report rightly concluded that in some cases these accounts were there to evade income tax and that this was not  acceptable. No Government could regard it as acceptable that moneys properly due to the State should not be paid. It is the responsibility of the Revenue Commissioners to ensure that this does not happen. I welcome and endorse the Minister's comments.
Mr. Costello: We were looking forward to seeing the Minister for Finance in the House. That is not to diminish the importance of Deputy Woods but we would have welcomed the opportunity of having a word with Deputy McCreevy about the matter which is the subject of so much discussion and speculation. Can I take it that Senator Dardis' comments are a nod and a wink that the Minister is considering amending the Bill to take cognisance of the complaints of the Irish League of Credit Unions and those who clogged up the airwaves on this issue?
Mr. Costello: This measure sends out the wrong message. The Minister for Finance will be left in no doubt that this extension of DIRT tax puts an onus on savers in credit unions. This contrasts badly with the apparent reluctance to seek out those who hold offshore accounts. Some of these accounts may be valid and legal. However, some comments suggest that quite a number of them, including the Ansbacher accounts, exist for the express purpose of evading tax. However, the account more recently reported on is perhaps a more serious problem. These reports suggest that the International Financial Services Centre is being used by various account holders as a means of processing money sourced in countries such as Russia whereby the authorities in other jurisdictions believe that it is being taxed in Ireland. However, the Revenue Commissioners believe that these are bona fide accounts in others countries and so they are not subject to Irish tax. At the other end, these accounts are regarded as Irish sourced, so the funds can be moved around the world as clean money. We must ensure that our large financial institutions are above reproach. This places the emphasis in the Finance Act on taxing the savings of small investors in a bad light.
The credit union movement is the great financial co-operative movement in this country. It operates in every town and village throughout the country and is the bulwark of many small communities in urban and rural Ireland. People may save for tractors in rural areas and house extensions in urban areas or for such events as weddings and holy communions. The credit union is the small person's savings bank and we must be careful not to give the impression that the Government is concerned with ensuring that every loophole and every break that a small saver can get is closed but is seen reluctant to tackle the loopholes which exist for the big speculator or investor.  The Taoiseach apparently ordered the Minister for Finance to go on the airwaves to make a retraction. I would have thought something as important as the Finance Bill would have been a collective Cabinet decision and that the Taoiseach of the day would have known precisely what were the essential elements of the Bill. This is not an issue which could have passed the Taoiseach by; it is something of which anybody with any knowledge of politics would be aware. I take the suggestion that the Taoiseach is rapping the Minister for Finance on the knuckles with a large pinch of salt. It seems the Taoiseach is trying to avoid criticism and is passing the buck to the Minister for Finance.
The Appropriation Act, 1997, which we are discussing belatedly, has repercussions for us throughout the financial year. There is much on which to commend and congratulate successive Governments. In 1987, Fianna Fáil did a very good job under the then Minister for Finance, former Deputy Ray MacSharry, in making some difficult decisions which bore fruit in the following years and upon which successive Governments have built. We have had ten years of bloom and boom as Ray MacSharry said we would. We still have all the right economic indicators as we move towards the end of this decade in terms of low inflation and interest rates, high productivity and strong manufacturing and export markets. Above all else we have a partnership arrangement underpinning our prosperity. That is what has produced the Celtic tiger and without that model of partnership and agreement between the trade union movement, the farming and business communities and the Government, I do not believe our economic success would be as strong or lasting.
The worker and the representative of the trade union movement have been a fundamental element of that partnership and we must assess whether they have received the benefits of the fruits of the economic outturn. I am concerned that workers have lost out in comparison to other groups. The business sector has done remarkably well, as has the farming sector, although it did experience some hiccoughs in recent years in regard to BSE and low prices. However, overall, remarkable progress has been made in the farming community.
Mr. T. Fitzgerald: The Minister has a function to attend and we wish to accommodate him. With the agreement of the House, if we are not finished by 1.30 p.m., there will be a sos between then and 2.30 p.m. when the debate will be resumed.
Mr. Costello: I am concerned the people at the fulcrum of our economic stability and progress - trade unions and the people they represent - have not benefited to the same extent as other sectors. It looks very bad when capital gains tax is slashed by half, when those at the top rate of tax receive the benefit of reductions and when, as evidenced by the credit unions measure, the small person's investment is taxed further. The Minister is going in the wrong direction by saying he will grant tax concessions for restructuring. This is giving business the nod to restructure and reduce wage margins for which the Government will pick up the tab. That is unacceptable because too many companies already benefit from low wages in the economy and this must be examined.
There is a dispute in Ryanair over union recognition. It is an extraordinarily profitable company and the substantial increase in its pre-tax profits was announced today. Its managing director has already made his fortune in the space of a few short years. However, the company will not negotiate with the representatives of its workforce. The Government must take a must stronger stance and show it supports a democratic representation in the workforce and better wages across the board. If it does not do that, we will have a crisis partnership rather than a stable one because the key element will refuse to participate in an unequal partnership, such as is developing at present.
The Government must get on top of the issue of house prices, because they are spiralling out of control. It is impossible for newlyweds or young people seeking to raise a family to try to buy their first house. They cannot do it because the market is overrun with speculators and property is being bought for renting to make fast profits. Tax concessions enable that to take place. I am concerned about the direction in which our economy and country is heading and about the message being given by this Government and especially by the Minister for Finance.
I suggest to the Minister it is high time we asked the business community to become involved in the wider community. Other countries have a procedure whereby a percentage of profits or shareholder dividends is put into a common business in the community fund from which desirable projects are funded in co-operation with local government and business. By becoming involved in a practical way in supporting and stabilising communities, the business sector can show it cares and that its interests are not purely in making money. However, there are still areas of huge disadvantage.
Parallelling areas of boom and bloom are areas where we find the opposite. This is one way in  which we can have a new type of partnership. The business community should be specifically asked on a statutory basis to give a certain percentage in such support. The percentage may be small, but even 0.5 per cent of annual profits can be significant in the case of companies such as Bank of Ireland or AIB and it would not be long building up in the context of, for example, companies involved in the IFSC. The businesses could then have a say in how the money is spent. I offer this proposal to the Minister.
A very welcome development has taken place in local authorities in relation to area action plans. These are one of the ways forward in terms of community development and should be targeted specifically with tax incentives and, more importantly, by reintroducing an element of loans, as distinct from tax breaks, for private owners in disadvantaged areas who are elderly or on small salaries. Tax breaks only benefit those who pay substantial taxes and who wish to write off tax liabilities. I am talking about indigenous private residents in areas who cannot benefit from such breaks. These people are being run out of areas, their property being bought by those benefiting from the current structure of tax incentives. I ask the Government to examine the scheme introduced in the 1980s which gave certain loans towards property refurbishment. A new scheme would have to be carefully conditioned and regulated, but it could be a wonderful base from which to build up new communities in disadvantaged areas and for avoiding a situation where property developers come in, get rid of indigenous populations and establish office complexes or new residential units for a commuter community with little roots in the area.
Mr. Chambers: I am delighted to have an opportunity to contribute to this debate. When one looks at this Appropriation Act one sees the enormous extent of State expenditure on the services it offers and functions it carries out. One sees this in the context of our membership of the EU, the improvements which have taken place on a national basis, particularly in the past few years and, in particular, the drawing up of the national plan for economic development. Huge structural adjustments have taken place. In 1960, 37 per cent of the people were employed in agriculture, forestry and fishing. In 1995 the number employed in these sectors amounted to just 11 per cent of the workforce. This indicates a huge structural change in the employment capacity of the country.
In hindsight we must compliment the IDA as there was tremendous criticism of it because of its planned inward investment into this country and our over dependence in the past. While the deliverance of jobs throughout the smaller towns and villages can be criticised, the plan in principle has helped to develop job creation along with our investment in education. The IDA inward investment plan is the envy of other developing countries  which did not approach their own development in the same way.
With regards the NESC report, setting up of the second national plan with EC support and the negotiations taking place in relation to Structural and Cohesion Funds, there will be a certain element of criticism of the amount of funds paid direct to the agricultural sector. This is the way the plan was devised at the time. I believe the groups involved, such as the farming sector, etc. , are prepared to look at adjustments to that area so that it can be approached in a different way while sustaining the long-term rural development and structures of family units, particularly along the western seaboard.
The national economic and social document, which has analysed some of the failings and very positive developments that have taken place, criticises the fact that some counties have not improved and were left out of the overall planned policy. It is recommended that these areas receive special funding to redress the imbalance. The people in the west are critical of the lack of direct infrastructural development in their area. I believe that this Government, and any Government, is duty bound to treat all its people equally. People with Objective One status have a lower income than the national average and should, therefore, receive the necessary support in a structured and cohesive way.
It is important to point out that there are shortcomings in the devolution and development of local government, particularly the partnership boards, in the counties most affected. It should be part of the second stage of the national plan to direct sources towards these counties in a managed and structured way to do something to adjust the divergence and social exclusion that has taken place in these counties.
Social exclusion can be found in cities not just in the west. It is obvious to all who work here that there are sections of this city and parts of the country that are not being treated in a reasonable and fair way when it comes to State investment. Specific decisions must be taken to change this.
I believe the Minister for the Marine and Natural Resources is duty bound to redress the situation, particularly in the western seaboard, in relation to jobs and the white fishing fleet. It is interesting to note that, in the last allocation of £3.5 million the Minister made to the white fishing fleet, County Mayo only received £21,000. I would like to see that addressed in the future.
There was great emphasis in the past in rural areas on building houses on farms. Decisions taken to allow financial institutions to lend money to young people, especially in this time of economic boom, has allowed the financial institutions to dominate the business. Growing towns have provided the serviced sites and the young people are gravitating towards those centres. In the past they could get a local authority loan and get a reasonable grant relative to the cost of housing at the time. Young people were in a position to build reasonably cheap housing for themselves.  If we are to address the imbalance in population decline which affects schools, churches and communities, more flexibility should be given to young people to build their own homes on family farms.
Senator Dardis referred to the negotiations on the national plan and that they might be approached on the basis of a transient Objective One status. The people of the west are anxious that Objective One status will be maintained there. The grants which arise from that status are important to try to redress the difficulties in the region. I welcome the Appropriation Act, 1997.
Minister for the Marine and Natural Resources (Dr. Woods): This has been a wide ranging debate on the economy, the public finances and the measures taken by successive Governments. There are many issues to be addressed from this relevant and searching debate, but time will permit me to address only a number of them.
With regard to social inclusion, it is the Government's policy to develop the measures to tackle social exclusion and thereby promote social inclusion. The resources provided so far over the first two years of Partnership 2000 will exceed those promised over the three years of the programme. I do not say that it is enough but we are well ahead on the spending targets in Partnership 2000. How exactly the money is spent to achieve social inclusion is always a matter for argument but resources are being and will continue to be applied to that area.
With regard to the social housing programme, there is a significant 25 per cent increase in the funds allocated this year for the local authority social housing programmes, that is a total sum of £224 million. I recognise the points made by Senators about the difficulties with regard to housing, which could themselves be the subject of a full discussion.
Senator O'Toole raised the issue of the rate at which we will enter the single currency. The Minister for Finance has indicated repeatedly that the decision on the entry point will be taken at the appropriate time and at a rate which best serves the needs of the economy. Senator O'Toole congratulated the Minister for the way he handled this matter. He wanted to know the criteria - the Minister for Finance said it would be a rate which would best serve the needs of the economy at that time. He is not prepared to go further for the reasons mentioned by Senator O'Toole.
There are other issues but the one which was raised all through the debate was the credit union movement. What I said at the outset was repeated by many speakers — both this House and the Lower House have a high regard for the work of the credit unions and recognise their importance in our society. The Minister for Finance has worked hard on the needs of the credit unions. That will become clear on the Second Stage of the Finance Bill in the Dáil next week — Committee Stage will take place the week after that. He put a lot of time and attention into  the changing requirements of the credit unions and has made clear that he will look again at the reporting requirement. He has arranged to meet the Irish League of Credit Unions next week, when he will openly debate this issue. That is the normal procedure on a Bill.
This section shall, with any necessary modifications, apply in relation to a dividend paid in respect of shares in a credit union as if it were interest paid or credited by the credit union in respect of money received or retained by it.
The Senator may not be much wiser having read the provision because he would have to return to the Taxes Consolidation Act to discover what it means. This is the reporting requirement which brings dividends from shareholdings within the terms of the Revenue statement of practice for third party returns. I mention that because it is essentially a matter for Committee Stage and the provision will receive full discussion between now and then. The Minister has said he is quite open to re-examining it.
Because of the importance of credit unions to local communities, the Minister has provided them with a concessionary DIRT tax treatment. Credit union shareholdings will not be liable for that tax and some 90 per cent of their members have shares. That is a major advantage for credit union shareholders in this Bill. Also, credit union deposits will only be liable for DIRT at a concessionary rate of 20 per cent. Between 9 and 10 per cent of credit union members have deposits. Further, the corporation tax exemption for credit unions has been retained. That was the primary requirement of credit unions in their discussions with the Minister, with good reason. Estimates of the value of this exemption vary between £15 million and £20 million. The retention of this requirement is clearly of considerable benefit. According to the ILCU only 9 per cent of credit union members' savings are in deposits while 91 per cent are in shareholdings. The average savings of credit union members is £1,300.
Under the reporting requirement in the Bill, credit unions would have to make returns to the Revenue on dividends in excess of £500 received by a shareholder. This means they would have to have more than £10,000 worth of shares. The argument is about that section.
Dr. Woods: That is another debate which it would take us longer to go into. As some Senators have pointed out, it appears some of the accounts are held by those with bona fide money as well as those who might be avoiding tax. It  takes a little time to sort those matters out but presumably they will be sorted out shortly.
The bottom line is that there is a great deal of good in what the Minister for Finance was doing in relation to credit unions. The credit unions will know that because they had long discussions with him beforehand. He is prepared to re-examine and return to this issue, which is a matter for Committee Stage.
I thank Senators for their contributions, which covered a large amount of ground. It has been a very useful debate. I would like to convey the clear message that the economy is enjoying unprecedented growth, with record levels of unemployment and very healthy public finances. We should enjoy our success but we should not  allow ourselves to become complacent in these exceptional circumstances. The Government knows there are still many problems to be addressed in society, problems of disadvantage and marginalisation which demand active intervention by the State. We are in a better position now to make those interventions. I assure the House we are giving our full attention and energy to addressing these problems.
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