Dáil Éireann - Volume 418 - 29 April, 1992

Finance Bill, 1992: Second Stage (Resumed).

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

Mr. Finucane: Before the break I was talking about those taxation measures in the Finance Bill which will have a negative effect on employment. Taxation has been discussed at length over the past two days. There has been minimal effort at serious tax reform. While the reduction in tax rates is desirable we still have a prohibitive tax regime. Single people particularly pay high taxes on low incomes. My colleague, Deputy Noonan, has already elaborated on the obsession of the Progressive Democrats with lowering tax rates but that has only a minimal effect when the personal allowances remain unchanged.

[2019] I sympathise with those people who are earning £8,000 to £10,000 per annum especially married men. Because of the erosion of their income by tax and PRSI it can be more advantageous for them to be on social welfare benefit. Because of increases in social welfare benefits, in the past few years, an unintentional poverty trap has been created. Many Deputies from rural constituencies are aware of companies in which the basic trade union wage is between £140 and £160 a week. The married men who work in those companies are heroes when one considers our social welfare regime.

The system of self-assessment still needs to be improved. Last year Deputy Rabbitte pointed out that the Tax Officers' Association in relation to the audit under the self-assessment system said that if they were to proceed with the number of workers they had at that time, a person would only be audited every 260 years. I hope things have improved in the past year. In the area of self assessment and taxation there is scope for improvement. The system needs to be monitored more effectively. If extra manpower is provided in that section, there will be a great return to the Exchequer.

I am glad that the Minister did not bow to the wishes of the Progressive Democrats in relation to the abolition of mortgage interest relief. Over the past few years there has been a drastic reduction in the public housing programme and many young couples have to resort to private builders for housing. Many of these people do not have a high income and place great reliance on mortage interest relief. This relief is a positive incentive to many couples to buy their own homes. Since it was introduced the relief was reduced from £4,000 to £3,200 for a married couple. As I said, I am glad that the Minister has not succumbed to the Progressive Democrats demands for the abolition of this relief.

I am glad also that the VHI is still intact. It has encouraged many people to protect themselves. The hospitals and the health care system cannot meet the demands without extra resources. Under [2020] last year's budget many people were offered full free service in public hospitals. Many people will not avail of this service because with the VHI they have a better chance of getting treatment at least in private hospitals.

The Programme for Government stated that a systematic curtailment of the vast range of exemptions, shelters, allowances and concessionary rates on a phased basis was required. While this is a desirable objective, the Minister should be cautious and selective. It would be wrong to over-react to the series of scandals we had in the famous golden circle saga by making sweeping changes without analysing the consequences of those changes. The Minister in the budget and in amendments to the Finance Bill has recognised that although, it might be idealistic to make sweeping changes, the practicalities and their effectiveness have to be questioned.

I am glad that in section 17 the Minister has reconsidered his decision to abolish the revenue approved share schemes which were introduced in 1982 which allowed shares to the value of £5,000 to be given, tax free, annually to employees. The abolition of this scheme was contrary to the spirit of the Programme for Economic and Social Progress and the encouragement given by successive Governments to workers to participate in their companies. This type of incentive is given in other European countries. It is ironic that the Minister should be out of step with these countries. The foreign companies based in Ireland must have been amazed that what was acceptable in their own countries was not acceptable here.

Successive Governments have encouraged the concept of workers investing in their companies, leading to the necessity for an incentive of this nature. The present Minister for Finance, formerly Minister for Labour, should have fully recognised the merits of this scheme since in his former portfolio, he would have been in close contact with many of those companies. However, he has allowed this concession on a reduced [2021] basis with a ceiling of £2,000 which is to be welcomed. I am pleased the Minister recognised the genuine lobby for its restoration albeit at a reduced level. Since, it would appear, he has now recognised the importance of these schemes, surely he should have left the ceiling of £5,000? One may well question the amount of revenue yield for the Exchequer as a result of these changes.

There are very few references in the Finance Bill, as there were in the budget, to farming. However, I welcome the proposal for the claw-back of stock relief being increased from two to three years under the provision of section 20, which is as it should be. Many of us will be aware of farmers on whom animal disease eradication had a dramatic effect and who no doubt, will welcome the Minister's proposals in relation to the claw-back of stock relief. I endeavour to be positive and, on occasions, complimentary to the Minister because, as I said earlier, there tends to be too much romancing with history and not sufficient positive thinking for the future. We can all talk of excesses engaged in relation to taxation generally on the part of previous Governments.

The Minister's original budgetary proposals vis-á-vis company cars caused many private sector employees with company cars understandable anxiety. The Minister has now amended those proposals because the road he had intended travelling would have led to many sales representatives reconsidering the value of a company car, might have encouraged them to replace such company cars with a generous mileage allowance from their employers similar to the tax-free mileage of public servants, in turn, leading to a consequential loss of revenue. I doubt that the Minister was endeavouring to encourage such conversion in his original proposals but there was indeed that inherent danger.

It would appear that the intensive lobbying forced the Minister to realise that the sweeping changes he proposed making in that area were not desirable. He has introduced certain modifications of those original proposals for which he [2022] must be applauded. However, I doubt whether those modifications go far enough but, on Committee Stage, we will be afforded another opportunity to consider them.

The Minister's budgetary decision to tax co-operatives at the corporation tax rate of 40 per cent led to an understandable furore among co-operatives because many of them had been exempt from corporation profits tax. Naturally, when one introduces an amendment to impose a 40 per cent tax rather than a zero rating there will be much ill feeling. We are all aware that co-operatives made a huge contribution to many rural economies, in areas to which it would be extremely difficult to attract alternative industry or activity. They now employ in excess of 16,000 people, playing a vital role in rural areas and the national economy.

Looking at recent high profit returns of £10 million or more on the part of some of those co-operatives, no doubt the Minister said to himself this is an area that will have to be examined, which is understandable, but in recent times much of the income and profits of those co-operatives has been pumped into desirable research and development involving millions of pounds. Such research and development is vital for those co-operatives since everybody encourages them to diversify and expand their activities abroad. There are many successful examples, now household names, such as Kerry Foods, Golden Vale, Kerrygold and so on, whose success probably was achieved as a result of the relaxation in corporation profits tax which has obtained for a long time and which allowed those co-operatives to expand and diversify.

One should always remember that inevitably the boards of directors of such co-operatives will be comprised mainly of farmers whose contribution over many years must be applauded, but there is the danger, in imposing an excessive amount of corporation profits tax on those co-operatives, the Minister may detract them from the true spirit of the co-operative of the past, when profits were reinvested [2023] in research and development. Henceforth there may be a tendency for them to depress their profit margins, possibly giving the farmers an extra few pence per gallon of milk, which may well be a temptation for the board of directors comprised mainly of farmers. We look forward to exploring on Committee Stage Deputy Noonan's suggestion of another method that would yield the tax revenue required.

It would appear the Minister has given some recognition to the importance of co-operatives in this Bill in that he proposes that their taxation be based on one-third of their trading profits this year, two-thirds next year and then on to the full rate. The recent decision of such co-operatives as Dairygold and Avonmore to diversify into other areas of activity and their take-over of the UMP plants is very welcome. We wish them well. We hope that saga will be sorted out very soon vis-à-vis the receiver, examiner, farmers and hauliers and the payments they should receive, especially recoupment of expenses incurred during the examiner and pre-examiner period. We want to see those co-operatives revitalised, those beef plants improved and the numbers of their employees increased. I predict those co-operatives will render those beef plants successful.

We are all aware of excesses engaged in by those plants in the past, witness to which is given in the current Tribunal of Inquiry into the Beef Processing Industry. Everybody in rural areas will welcome the natural diversification of the activities of those co-operatives in taking over those beef plants and wish them well. In the past Kerry Foods were responsible for approximately 10 per cent of beef production nationwide but, as a result of this takeover, 40 per cent of such production will remain in the hands of the co-operatives; a move that is much to be desired. We are all aware that the monopoly which had prevailed in the past among a small number of companies led to certain excesses and the wrong type of approach, to the detriment of our reputation as a green country.

[2024] Every rural Deputy will be aware of the change in the pub licence being based on the rateable valuation. That publicans resisted that change was understandable in that the Minister was treating all publicans equally on the basis of possession of a licence, based on a multiplier of seven of the rateable valuation. Some years ago when singing pubs were the craze many publicans extended their premises. Usually when one submits an application to a planning authority for the extension of premises the people first notified will be the Valuation Office one of whose officers will revalue such premises and naturally the valuation will be increased. Because of the times we live in and with approximately 270,000 people unemployed and taking into account the price of a pint, the owners of many pubs had to improve their premises. This is understandable because consumers will no longer tolerate shoddy premises, particularly if they have to pay £1.60 and more for a pint which in many cases, they can ill-afford. Pub owners have upgraded their premises for many reasons but recently they have been talking about the profitability of the pubs decreasing.

I am sure the Minister for Finance who is Dublin based frequents Dublin hostelries. As we all know from our visits to Dublin it is almost impossible to get a pint. The position in Dublin is much different from that in the rest of the country. I am sure the Minister of State, Deputy O'Rourke, knows the position in her constituency——

Mrs. O'Rourke: I visit hostelries too.

Mr. Finucane: I know that. I was saying the Minister probably knows the position in Castlepollard and other areas where there are small pubs. I am sure that like me the Minister has heard publicans say that times are tough.

I think there are about 700 licences in the Dublin area catering for two-thirds of the population, whereas there are 10,000 licences catering for one-third of the population. One does not have to be a mathematical genius to know where the money is — in the pubs in Dublin. I [2025] represent a rural constituency and it is understandable that there would be reaction to the Minister's proposal. The mandarins in the Department of Finance probably frequent Dublin hostelries because in drafting the proposal and advising the Minister, they seem to have shown no sensitivity to rural Ireland, from where they probably came orignially.

The Minister has taken into consideration the lobbying in this regard. Like everyone else, I was concerned about this issue as I had received many deputations on it. The Minister has proposed a suitable modification so that in future the licence fee will be based on turnover. This is the desirable way to approach the issue. I hope this change will prove successful. I know reservations have been expressed in regard to the amount the Minister hopes to raise from this change, and this will be the subject of further discussions on Committee Stage.

In this Bill, the Minister has made appropriate changes to the proposals put forward in the budget. I compliment him on some of the changes and look forward to further discussion on many issues on Committee Stage. As I said, this is a very weighty document and I believe much of it has been influenced by EC regulations, etc. We need the Minister to explain in more detail certain aspects of the Bill. I presume this will be done on Committee Stage.

I compliment some of the previous speakers on their constructive contributions. As I said earlier, there is no point in looking back; we have to look forward. We also have to give recognition to the climate which exists in the business world. Times are difficult for many businesses, particularly small businesses. I am concerned that we will get carried away with the excesses of the scandals, golden circles, etc. — sagas which we all want to leave behind us — and brand businessmen as being cute and trying to evade taxation. Many of these people work extremely hard providing valuable jobs and need encouragement. In this Bill we need to achieve a balance and recognise those busineses. Hopefully [2026] these aspects will be taken into account in the Finance Bill.

Mr. Leonard: I congratulate the Minister on the Finance Bill. I compliment him for having met various groups since the budget was introduced to discuss the various proposals. As previous speakers said, he has modified some of the proposals in the budget to good effect. In introducing the Finance Bill this year the Minister was faced with the onerous task of further harmonising our VAT and income tax rates with those of other member states. I compliment the Minister on what he has done in this area.

In his speech the Minister dealt with the dismantling of frontiers of custom control for tax purposes by the end of 1992. This is an issue of great concern to the region I represent. County Monaghan and County Donegal have the longest stretches of border with the North and, as a result, there are more Custom and Excise officials in these counties than in other Border counties. Many of these officials will be affected by the changes — there will be a surplus of 52 Customs and Excise officers in County Monaghan and a surplus of 16 Customs and Excise officers in County Cavan. These officers will have to be accommodated in other areas.

Even though the Revenue Commissioners promised to get jobs for the surplus personnel as near as possible to where they live at present, very few jobs have been identified to date. This is a matter of grave concern to public representatives from the area. The only realistic solution to this problem is to transfer a section of the Department to the premises which will become vacant. Submissions to this effect have already been made. A request has been made to transfer the collection of motor vehicle excise duties to the Customs and Excise officials and to locate the central office in the Cavan-Monaghan region. I believe other areas have made similar requests but I doubt if any of them could make a better case than the area I represent. I hope this work will be divided so that [2027] these officials will not have to leave the area.

It has also been suggested that the Agriculture staff who commute between Dublin and Cavan should be relocated in Dublin and replaced by the surplus Customs and Excise staff in the area. It has also been suggested that personnel in the mobile patrols who will become redundant could be utilised to combat drugs, and VAT fraud.

Over the past two years in particular a considerable amount of money has been spent installing new computer facilities in the centres in Castleblayney, Monaghan, Clones and Swanlinbar. These offices will now become vacant. I hope that work will be allocated to these areas which could be carried out by the surplus Customs and Excise officers. A great deal of trauma will be caused to the families of these officers if they are transferred to other areas.

Section 8 deals with the urban renewal scheme and the change in legislation to close loopholes in the double rent allowances. However, I am more concerned about the designation of the urban renewal scheme. I think the Cavan-Monaghan area holds the record for not having had any urban renewal schemes designated to it. This area has suffered greatly in an economic sense over the past decade.

Mr. Durkan: It is not the only area which is left out.

Mr. Leonard: It is one of the more important ones. I hope this will be rectified in the designating of schemes in future. It may be a political decision, but my constituency seems to get the wrong end of the stick from all Governments and that does not endear one to any political party. The mapping office was decentralised to six different centres and our request for one of those offices was ignored. That was regrettable.

The Minister said the creation of jobs will continue to be the biggest task facing the Government. The manufacturing and food processing industries are making [2028] great efforts to create jobs but there is a limit to what they can do particularly in regard to exports. In the food processing industry in my area expansion plans have been considerably curtailed because there is not as great a demand for products. I welcome the recommendation in the Culliton report that there should be a national food plan. That would help us capitalise on our low production costs. Certain industries must be examined, for example, poultry and meat production, with a view to engaging in more downstream processing. There are problems of seasonality with food production in that at certain times of the year there is an excess of products. This problem must be tackled if we are to be competitive in the export market. We should ensure that our products are available all year.

The Culliton report must give cause for concern from an educational and training point of view. It states:

Despite its enviable academic standards, the Irish education and training system has serious gaps when it comes to technical and vocational education and providing for the intermediate production skills that are crucial to industrial productivity. Management training is also underused. The shortcomings in this area are so pervasive that the existence of skill deficiencies are often not recognised by management until a direct comparison is made with best practice in other European countries.

That is a reflection on our preparations for the Single Market.

The Culliton report is critical of the role of FÁS in training. In that respect it states:

Much of what it does falls better into the category of support for the unemployed than training. With the notable exception of its apprenticeship programmes, a good deal of what FÁS does is seen to be of little relevance by industry. Major institutional reforms seem necessary here.

Again, this is a serious indictment of our training system and does little to help us [2029] in our efforts to secure finance from the EC Social Fund. That will have to be tackled very quickly. The report suggests that a new agency be established for the development of indigenous Irish-managed industry to bring together, in a more integrated way, the developmental and support services provided at present on a separate basis by the IDA, An Bord Tráchtála, and Eolas in particular. It states that such an agency should provide a new impetus and focus for promoting the development of locally-based industry. It is time those agencies were amalgamated. There is need for streamlining in other areas also. From my experience as a member of a health board, I am aware that much streamlining is needed in the health services and at Department level. Agencies such as those I mentioned, provide substantial assistance and in future they will have to make a more indepth study of markets, requirements and projections before proceeding with projects.

I welcome the reduction in VAT on technical assistance services and farm relief schemes to 12.5 per cent. The farm relief schemes provides an essential service, especially for those working alone or those who are out of work through sickness, injury or for some social reason. Under the scheme employment is also created for many young farmers who do not have full time work on the farm and for young people who would otherwise be unemployed. These people receive very good training. The scheme is very effective. I also welcome the Minister's decision not to tax the artificial insemination service. This full time very important service is aimed at improving the national herd and the quality of our stock, which is essential at a time of tight profit margins for many producers.

Previous speakers referred to the fact that co-operatives have been brought into the tax net. I would favour the exemption of a number of small co-operatives. I am not talking about the large plc's and those who are making substantial profits but the small co-operatives in country areas. I know of six or seven such co-operatives in my constituency [2030] who provide a very good service. Any profit they make goes towards improving the service for the farmer. With the introduction of the LEADER programme those co-operatives will play a major role in ensuring that the programme will be a success.

When Deputy Séamus Brennan was Minister for Tourism, Transport and Communications he launched a tourism task force, consisting of representatives of banks, hotels, accommodation providers, unions and marketing sectors, to examine the potential of the tourism industry. I understand that following discussions proposals will be put forward on this issue. I hope a tourism plan will be devised for the country, with special recognition for areas with potential which historically have not been tourist centres. They would require that bit extra by way of help to ensure they are not left behind and that those counties with a stronger tradition in terms of tourism do not get most of the funding.

We hear reference regularly to alternative farm enterprises. We need to put in place a farm plan which will examine every area which has potential for generating jobs. Some of the projects mentioned are flax, seed potatoes, horses, deer and rabbits but it is unlikely that any of those would generate sufficient employment to employ all those without jobs. I hope this problem will be attended to in the Department as quickly as possible.

The Minister for Finance has responded reasonably well to our suggestions and to the points we raised. I am glad he responded to the representations from publicans and did not proceed with the proposal to base a publican's annual licence on a multiplier of seven of the rateable valuation of the premises. To do so would have had a devastating effect on those publicans who expanded their premises in the belief they would attract the level of business they are failing to attract at present.

Mr. Durkan: I listened with interest to the contributions of Members on both sides of the House. I was amused when [2031] Deputy John Dennehy, looking across the Floor with a somewhat jaundiced eye, said that Members on this side of the House were giving a less than positive welcome to the Finance Bill. At the risk of incurring the wrath of the Deputy I have to go down that road a little further. Perhaps it is symptomatic of parties in Opposition that they do not see the budget or the Finance Bill in the same light as the Government or the Government backbenchers. However, when I was sitting on the side opposite, we had to listen to the then Opposition's loud crys of “bookeepers”, “Thatcherism”, “accountancy” speeches and so on. I am afraid such slogans still fit because it can certainly be said that the Finance Bill is not innovative. There is no flair to it. It is simply a bookeeper's Bill, a statutory instrument which gives legislative effect to a budget which also had little flair.

Because of the high number of unemployed, people were looking for inspiration from some quarter to alleviate the burden on those who are still at work and to alleviate the plight of those who cannot get work. Everybody was disappointed. The Finance Bill which has come in the wake of the budget is equally disappointing. I mean no disrespect to the Minister of State, or the Members sitting opposite but that is the position. If budgets produced in the four years prior to 1987 were regarded as “Thatcherite”, monetarist and so on, I am sorry to have to say that this year's budget was likewise except that it was even more bland than anything ever produced before. It attempts to do very little and it is not innovative.

I will not delay the House very long but I wish to make a number of points. First I refer to the taxation of co-operatives. If there is one area which has much potential for employment generation, it is the area of food production, an activity for which this country is well suited. It is remarkable that there should be any move to increase the burden on that sector. This was referred to by the previous speaker from the Government benches. What is being proposed may be [2032] good from a bookeeper's or a financier's point of view — some colleagues may point out that certain loopholes are being closed off in that area — but we must remember that this is the area on which our economy relies to a large extent, first for food we require and, second, for the jobs that this area can provide. Anything that impedes that process is not in the best interests of the country.

The Minister for Finance will not be remembered favourably for what he is proposing in this Bill in relation to the food sector. I cannot understand where the suggestion came from in the first instance. Colleagues from Munster and Ulster who are sitting opposite, in whose areas there is a strong labour force in the co-operatives, must readily concede that while this proposal may be a means of raising money for the Exchequer — that may seem laudable but it depends on the use to which the money is put — it is difficult to understand why we should be extracting funds from the co-operatives when they have the potential to reinvest those moneys for the benefit of the economy generally. I cannot understand how the Minister can do this or how the Cabinet supported such a decision. I only hope that this was a temporary lapse of concentration so far as both the Minister and the Cabinet are concerned but I am surprised that the backbenchers from the Government parties did not express more consternation because of the likely impact of this measure on such a positive industry. I hope we will hear more about this at some stage in the future.

This country depends very largely on the co-operatives. We depend on them to create employment opportunities and particularly in regard to what will happen after the Common Agricultural Policy and GATT reforms.

It was a political objective of the Progressive Democrats when in Opposition to bring about a tax rate of 25 per cent, and to have a single band or two at most. They have exceeded all expectations because their partners in Government have assisted them in ensuring there will be in effect only one band — that is the marginal tax band at 48 per cent. That [2033] may be further reduced to 45 per cent within a few years but by virtue of the nipping and tucking that takes place at budget time or in the Finance Bill, only those on social welfare or whose income is so low as to be untaxable will be taxable at rates lower than the upper rate.

The theory in Government circles is that this is a very fine and positive effort to introduce a system that removes a number of people from the tax net. So it is, but these people would no longer be in the tax net anyway because their incomes would be below what was regarded as taxable income. It is the recorrection at budget time which threatens to bring them back into the tax net. It is no credit to the Minister or any combination of Ministers of either party in Government that we are moving to a 25 per cent income tax rate because the number of people who will benefit at the end of the day will be insignificant and the bulk of the taxation will be gleaned from those in the higher band.

I note the Minister has made some modifications to his earlier proposals in regard to benefit-in-kind. The original proposals were heavy handed because they were produced in a hurry and without sufficient consultation with the various interested parties and so on. I can understand the reaction of these unfortunate people who have the benefit of a company car but who have to spend a great deal of time, at great inconvenience to themselves and their families travelling from one end of the country to the other. I can understand how they found it incomprehensible that a microscope should again pass over their area. Incidentally, these people are the driving force in the economy in that they are involved in sales teams, promotions and all the things we said we should be doing more of in this country — promoting ourselves, our economy, our goods, etc.

As a result the Minister for Finance, first in the budget, and then in the Finance Bill decided to have a closer look at them with a view to determining how he could take a little more from them in taxation. I realise he has modified his budget proposal in the Finance Bill, but, [2034] nevertheless, a particular category was examined with a view to extracting more revenue and not with a view to making that group more efficient so that they could do their job more efficiently or that they could improve the economy or employment levels. Whether at local or national level when a proposal arises the sole purpose of which is to raise money the impact can only be negative on the people on whom it falls. If the proposal has a positive side and raises money and encourages something else of a positive nature, fine, that usually works but at local authority level as those of us who have served on local authorities know, whenever there is a proposal to impose tax solely for the purpose of extracting extra revenue, therein lies a problem, and many of us have received submissions from our constituents about benefits-in-kind, and understandably so.

I hope the lapse the Minister suffered on this occasion and the unfortunate advice he took from some quarter will not recur; I also hope that in future he will have a more positive regard to the role being played by these people and the necessity to encourage people who work unsocial hours to make a greater contribution to the economy by being the driving force within it.

I have often said before, and I have no hesitation in saying again, that one feature we should have in a Finance Bill would be the emergence of a positive tax regime. I should like to devote a few moments to that issue. Our economic position vis-á-vis our European partners and the members of the EFTA countries who are thinking seriously about joining us at present must be of some concern to the Minister for Finance, the Cabinet and both parties in Government because we are in a serious economic situation with particular reference to unemployment. The purpose of a budget and Finance Bill should be steered in the direction of creating a positive atmosphere which would ensure that it is more attractive to an employer to employ extra people, that it is equally attractive to a person who is unemployed to seek employment and, by combining the first two, we will arrive at [2035] a situation where this country will be a far better place in which to live.

I should like to refer to the burden of unemployment on the employed group and the necessity to correct this imbalance in the near future. I have said before — and it has been said by many others — it is about time we saw manifested in the Finance Bill that the number of people who are unemployed vis-á-vis the number of people who are employed is unsustainable — the number unemployed is almost 21 per cent. It is unbelievable that we can expect to sustain this pressure on our economy from within for the foreseeable future. If we cannot resolve that within the next three to four years, our problem will become worse. There is no sense in waiting for the demographic trends to resolve the problem for us; there is no sense in waiting for population numbers to drop and the problem will resolve itself. That has been talked about in the past but it does not always work because there are other trends such as migration and other economies which can disrupt that.

I implore the Minister for Finance when next he is preparing a budget — if he ever does and I wish him no ill feeling when I suggest he might not — to give more time and energy to looking at ways and means of ensuring, by introducing financial inducements in the Finance Bill, that will make it worthwhile for employers to take on more employees and reduce their overheads in a positive way, without necessarily losing vast amounts of revenue. It is generally accepted that the cost of providing jobs in this country is way above what it should be and what the country can afford. Perhaps we should look at how we run things; we have all made mistakes in the past.

I listened with interest to Deputy Quinn. I see a consensus emerging in this House where all political parties have a duty and a role to play in dealing with our major national problem of unemployment. I strongly disagree with suggestions from any quarter that Fine Gael, the party I represent, have been [2036] other than positive in dealing with this issue. Members will recall Fine Gael were the first party to look for a jobs forum. A jobs forum has a meaning which we all know about, but what we have been offered is a jobs committee, and there is a vast difference. We had the New Ireland Forum which was successful and dealt broadly with a series of issues relating to a vital national issue. It set out a framework and structures which could be followed at a later date. How can one compare that with a committee of backbenchers — and I mean no disrespect to backbenchers who obviously will be well qualified to do their job and so on? The two should never be confused. I would hope Members on the opposite side of the House will not try to confuse that issue because, while the problems of this country in relation to job creation may be assisted by a forum, they certainly will not be resolved by a committee. This is an area that the Minister for Finance could have addressed positively but he has not done so. Apart from a quick example I will not go into details on the cost of jobs etc. Let us take the example of a person who is unemployed, qualifies for various benefits and has a medical card etc. That person would need to be paid about £50 a week more in employment to achieve the same standard of living, and that is without the assistance of a medical card. There is obviously a serious problem here.

There is not much reference in the Bill to taxation and the repatriation of profits which has been referred to many times in this House. In the present economic climate I cannot understand why so much time is spent wondering why multinational corporations repatriate their profits and thinking up taxation systems to prevent them from doing so. Let us, by all means, provide inducements to encourage them to reinvest in the country. That would be positive and could result in the employment of more people. Let us not introduce penalties that further encourage them to repatriate their profits. Our first priority must be to try to reduce the numbers unemployed, not to figure out how the people who will [2037] provide these jobs are going to repatriate their profits. It would be of greater benefit to the economy to have lower rates of tax, in return for which one could expect a greater degree of multinational investment in the country.

We have approximately 100,000 jobs based on foreign investment at the moment. We need double that and we need it in a hurry because all the other jobs likely to be created in indigenous industry will be created in the wake of such investment. There is room for positive taxation measures in that area to encourage foreign investment and the retention of profits in the country afterwards, contributing to continuing employment and reducing the burden on those who are employed by reducing the number unemployed. It is a simple equation.

Here, I must become a little parochial. It behoves every one of us to be so now and again even Ministers from Wexford. Urban renewal has been a bone of contention in County Kildare. It has registered the fastest population growth in the entire country but has consistently failed to gain anything whatsoever from the urban renewal programme. I do not understand why the Minister has consistently passed it by and why nothing can be done even at this stage to extend the facility to County Kildare. It is very important to do so for the reason that some of our towns and villages were built to cater for a much smaller population than they have at present. Many of the older buildings, warehouses and so on, are due for renewal and would present very interesting openings for people with entrepreneurial spirit and flair and some investment capital. Unfortunately, nothing like this has happened in County Kildare because we were passed by. It is a sad reflection that in the case of a town that has shown the kind of population growth I have mentioned and that has seen a huge amount of new development, the Government did not see fit to set aside a sum of money for urban renewal which would balance the new development that has taken place and bring about the kind of development in the older [2038] areas that would be in keeping with the aesthetics of the area.

There are one or two other issues that I wish to discuss. One is in relation to valuations. We all know the likely impact in both rural and urban areas of the Minister's proposals in relation to pub licences in the context of square footage and so on. I note that the Minister has revised his stance. I also note that he has left thresholds and bands to his own discreation in the future. I would ask the Minister to be dissuaded from that course because the tendency in the future will be to try to raise money in this area without any regard to the negative impact of such action, which is that the cost would be passed on to the customer at best, and at worst a number of people would go out of business. I do not see what benefit that would be to the economy. I therefore thank the Minister for reconsidering it, but give him no thanks for not going the whole way and departing from his earlier intentions. Obviously his intention was to raise revenue rather than improve the industry, and that is a pity.

He has made some improvements in response to the promptings of my colleagues, Deputy Noonan and others. I would think there were some promptings from the backbenchers on that side of the House also, because I am sure they all have first-hand knowledge of the hostelries in their constituencies where they would no doubt have been updated on the dangerous developments the Minister was indicating in the budget.

Mr. J. Browne (Wexford): We are claiming all the credit for it.

Mr. Durkan: It would not be the first time they claimed all the credit but I am not so sure that they would be so anxious to claim credit for some of the issues being discussed in this House by the time they are implemented.

There is an aspect of valuations I am concerned about. I am not sure if it applies everywhere but I have become very much aware of it in my own constituency. If people improve their premises [2039] by adding an extension, for example, they immediately get a new valuation and in the same post a note from some consultant telling them how they can have their valuations reduced. It is a huge burden on people to have to face the threat, year after year, or having a new valuation put on their premises. This does not always follow on an increase in the square footage of the premises. They might just have put on a new roof and the result is that their premises is revalued. Also taken into account is the potential volume of business, the geographical location vis-à-vis the market, the position on a main street, whether it is in a mall, etc. I find it difficult to understand why all the other taxation systems that are in place are not sufficient and why it is not possible to collect an equitable and just amount of taxation from the people in those premises.

I recall that 25 to 30 years ago most shops in ours towns and villages were owned by the people running them. However, during the past ten to 15 years there has been a tendency to either lease or rent property with the result that the turnover, in terms of wastage, is colossal. If one takes a two year period in any town or village the majority of shopping units seem to change hands for a number of reasons.

In the old days it was necessary for the owner of the premises to put his business on a sound financial footing whereas now it is easier to get into business, which is a good thing, but it is much easier to get out or be pushed out. The wastage in such units is huge. The local authorities take the first shot at them by way of rates because they have no money and commercial rates are the only means open to them to raise money. Therefore there is a tendency to value these units at the highest rate and to let the persons concerned protest later when the local authority can either reduce or increase the valuation.

The other group who move in on the tenants are the owners who will probably increase the rent. There is now competition [2040] between the local authority and the owners of the premises to see who can extract most revenue. Unfortunately, they are killing the towns and villages involved. Indeed the nearer one gets to a large city the worse the position becomes. Within 40 to 50 miles of Dublin, the pull of the city supersedes everything else with the result that a great deal of competition is created for the small shopkeeper. I am sure the same applies in Cork.

The point is no one seems to be doing anything about this and unless something is done soon, the commercial areas in those towns and villages will either disappear or have no significance for the rest of the population. The enthusiasm with which valuations in the commercial sector are pursued contrasts with the manner in which valuations are pursued in the residential sector. If valuations in the residential sector are to be increased and updated, it will be necessary for the Minister for Finance and the Minister for the Environment to ensure that the rates support grant is commensurate with the revised and updated valuations. The Minister is not well disposed to this idea and, as a result, the local authorities do it for him.

The final point I would like to make relates to stamp duty. There are a number of references to stamp duty in the Bill. The time has come for us to recognise that stamp duty on housing accommodation for first time buyers, in particular of second hand houses, is prohibitive. While the proportion of stamp duty vis-à-vis the total cost is the same, because the value of property is on the increase the amount of stamp duty raised is also on the increase. Five or six years ago it was relatively easy for a young couple who visited us at our clinics to buy a house but property values have risen in the meantime and an increased amount of stamp duty is sought and requested, legally. Unfortunately, as a result, young people are being dissuaded from buying houses, in particular second-hand houses.

This matter should be looked at. I have asked questions in the House and I am [2041] aware that there would be revenue implications, but it is not a positive way of raising revenue as it does not encourage anybody to do anything. All it does is take money out of people's pockets when buying property. What I am asking the Minister to do is to raise the limits, if possible. While I am aware that some modifications have been made, the time has come for us to do something more positive, in particular at the lower end of the scale.

I had hoped the Minister would have been more positive and would have shown more flair in the Finance Bill this year as against last year, but then again he could not as it followed on on a budget which was anything but positive. As I said, it reflects the criticism hurled at previous Ministers for Finance from this side of the House by the then Opposition. It never ceases to amuse me that when Deputies move from Opposition to Government benches they never seem to show the same foresight and vision. I might never get the opportunity to sit on the other side of the House——

Mr. Browne (Wexford): The Deputy's party did the same.

Mr. Durkan: ——but hope springs eternal and if I do get that opportunity I will try to retain some of the foresight and vision that I allegedly showed when on this side of the House and use it to good effect.

Mr. Lyons: Ag labhairt dom ar an mBille Airgeadais, 1992, ní mór dom béim a chur ar an bhfostaíocht agus ar an dífhostaíocht, mar is iad siúd na príomh ábhair atá ar ár n-aigne go léir. Tá a fhios againn go bhfuil gá leis an reachtaíocht seo chun forálacha na cáinaisnéise agus chun na hathruithe a shocraigh an tAire a dhéanamh de bharr na díospóireachta ar an cháinaisnéis a chur i bhfeidhm. Molaim an tAire as ucht an méid a bhí le rá aige sna 43 leathnach dá óráid inné agus é ag tosnú Dara Céim den Bhille. Ní thuigim go mbeadh sé le rá ag Comhalta ar aon taobh den Teach nach bhfuil gach rud curtha isteach aige go soiléir. [2042] Is léir go bhfuil an mhuinín ag an Aire leanúint leis an sáir obair a tosnaíodh i 1987 agus a cuireadh ar aghaidh ag an dá Rialtas a bhí ann ó shin i leith.

Overall, this Finance Bill marks a further stage in the Government's economic strategy of tax reform as set out in the Programme for Economic and Social Progress and the Programme for Government and provides a statutory basis for the taxation measures introduced in the budget on 29 January. It is also the legislative measure which outlines the provisions in the budget and other tax policy measures which the Government now consider necessary in preparation for the internal market.

The simple objective of the budget was to support the fight against unemployment by a combination of soundly based public finances which are essential to sustainable growth and structural reforms aimed at ensuring that we get the best possible employment return from that growth. My Opposition colleague referred to employment and unemployment towards the end of his contribution and he reminded the House of the jobs forum. The attitude adopted by the Leader of the Fine Gael Party and permeating the thinking of Deputies— including the Deputy present — was because they did not get their way, they felt the committee being set up to address this very serious problem was not something in which they could be involved, despite their continual posturings about unemployment. Their credibility, low as it has been in the polls, will be further damaged by their inability to take part in the committee on employment set up by the Dáil. They will regret their unfortunate error.

Mr. Durkan: Credibility on that side of the House has taken a bashing.

Mr. Lyons: I liked the reference by my Opposition colleague to the slogans used when we were on opposite sides in the Chamber.

Mr. Durkan: The slogans said that [2043] health cuts hurt the old, the sick and the handicapped.

Mr. Lyons: I am glad I contributed to them, they were not slogans, they were facts. One which remains with me is the performance of the Opposition when in Government from 1982 to 1987 because they had the unique distinction of doubling the national debt from £12 billion to £24 billion.

Mr. Durkan: After it had trebled over the previous four years.

Mr. Lyons: That is the hallmark of their tenure in Government during those years and if the Deputy has forgotten it I have not and, more importantly, the people will not forget it. It is the one underlying memory which people have of that administration.

Mr. Durkan: The Deputy's party also said there was a better way.

Mr. Lyons: The Deputy's party had remedies for our economic difficulties and problems but they were a bit like the stallions in the National Bloodstock Agency, they did not have what it took to remedy the problem. I will not explain that any further, they did not have whatever it took to do the job.

I also heard a Deputy say today that we should not refer to the past. I take inspiration from the past, profit by mistakes made in the past and put the experience to good use in the future. The mistakes made by the administration in 1982-87 perhaps should be forgotten by them, that is their prerogative. However, the restoration of confidence and the strength of the economy was made possible by the reduction of our dependence on borrowing, the control of spending and the easing of the tax burden.

Mr. Durkan: The Deputy should tell that to the taxpayers.

Mr. Lyons: We took the decisions which might have seemed to impinge [2044] unfairly on areas of activity, people or sectors but we courageously took them to put our economy on a sound footing. It is evident that we have been able to weather the storm of current difficulties in the international economy with much less damage than during similar experiences in the past. It is essential that the overhang of debt must be reduced as rapidly as possible so that we can free more of our natural resources for our greater needs. Having public finances in order is central to providing the proper climate for the creation of sustainable employment.

Despite the general economic slowdown, Ireland's performance—last year in particular — was satisfactory. A growth rate of 2 per cent was, in any language, a good performance when put in the context of the world growth of 1 per cent and a recession in the economies of some of our trading partners. Despite all the difficulties we faced, employment in larger industrial establishments in the first three-quarters of 1991 was up by over 1,000 on average compared with the corresponding period in 1990.

I should like to deal briefly with an area in which I was involved in recent times, that of tourism. In 1987 we realised that it was an area of great potential for the creation of jobs and generating extra revenue. We set ourselves targets, many people said they were ambitious and unattainable; they were ambitious but they were also attainable. A recent independent survey commissioned by the Irish Tourist Industry Federation showed that Irish tourism grew twice as fast as the national economy in the past five years, contributing almost three-quarters of a percentage point each year to the national growth rate and increasing its share of GNP to almost 7 per cent. I am convinced that tourism is Ireland's principal internationally traded service. It accounts for about 60 per cent of our total export of services and contributed more than £400 million — or about half the surplus on the overall balance of payments — in 1991.

Tourism has been responsible for one in every three jobs created in the economy [2045] between 1986 and 1990 and it now supports one in every eight jobs in the service sector. As I indicated, it is now five years since Fianna Fáil published their ideas of putting growth back into tourism. In that document we committed ourselves to revitalising tourism as a top national priority. We have done this and it was a privilege for me to have been part of that effort for five years. Since then annual tourism numbers have gone up by 66 per cent, from 1.8 million to an estimated three million and foreign revenue from £650 million to £1.2 billion last year. During that time considerable improvements have been made in our product range and there has been greater co-ordination in our marketing efforts, both of which have been central to the achievement.

At this stage I should like to talk about the major EC investment in tourism. That investment is largely attributable to the implementation of the EC operational programme for tourism for the years 1989 to 1993. That programme, involving more than £118 million from the European Regional Development Fund and more than £28 million from the European Social Fund, is concerned with the development and marketing of tourism and tourism amenities in Ireland to meet the demand from identified segments of the international tourist market, thereby enabling achievement of five-year sectoral targets for job creation and foreign revenue. Total investment from national and EC sources under the programme will exceed £300 million by the end of 1993. So far, 300 or more projects have been approved for assistance, involving more than £270 million, of which £85 million is being provided by the EC. The administering agencies of SFADCo and Bord Fáilte are still assessing and evaluating applications. I hope that in the near future there will be further announcements approving more projects.

In addition to enhancing Ireland's appeal to overseas markets, the improvements already outlined provide an added boost to the thriving home holiday market, which is now worth about £360 [2046] million annually and for which I had special responsibility in recent times.

The 1991 tourism performance deserves attention in that 1991 was a difficult year for the Irish industry because of the recession in our main markets of the United States and the United Kingdom and particularly because of the Gulf Crisis. Instead of whingeing about such things, we in Government last year sought to counteract the problems by introducing several measures, including the allocation in the 1991 budget of an additional £1 million to Bord Fáilte for promotional marketing in the United Kingdom and continental Europe. A further £1.25 million was also made available from the European Regional Development Fund at a special 75 per cent intervention rate for marketing campaigns in the United States and mainland Europe. Those measures, together with the decision of Bord Fáilte to step up their marketing in continental Europe, ensured that the downturn forecast at the beginning of the year was more or less avoided. Overseas numbers for the full year were within 2 per cent of the 1990 all-time record performance, and revenue for the first nine months was up by almost 7 per cent on the corresponding period in 1990.

For 1992 we should aim to return to the double-digit figure gross. All efforts are being concentrated to that end. The tourism sector has proved its economic worth in recent years. It has shown clearly the way in which it can contribute to wealth and job creation. With that in mind, as pointed out by my colleague Deputy Leonard, a task force was again put in place this year. That task force is similar to the task force established in 1987. The task force are being asked to plan a strategy that builds on the achievements attained, maintaining vibrancy and growth into the 21st century.

While I am on the subject of tourism, where we have been, where we are at and our hopes for the future, I should mention Expo '92 in Seville. The Government decided to participate in the international exhibition in Seville this year, principally to continue to raise Ireland's [2047] profile on the world map as a tourist destination and as an ideal location for industry, with the focus on our young, well-educated population. The Government have committed £3.5 million of national lottery funds towards that objective. The event, which runs from April until October, has been billed as one of the most important attractions before we enter the new millennium. Lest there be any misunderstanding, I should point out that Expo '92 is not merely a trade fair, it is a major cultural event and it will be a showcase for the best of Irish products, talents and culture. The cultural programme will reflect the uniqueness, the variety and the creative quality of Irish talent and will include performances to support that from Siamsa Tíre, the Gate Theatre, De Danann and the Chieftains, to name a few. All in all, 1992 should be an exciting year for Irish tourism.

All the achievements I mentioned were brought about by the co-ordinated activities and efforts of all sectors and players in the tourism industry. Big and small, all sectors are being asked again this year to row in behind the national effort so that we may return to the double digit figures in 1992. I acknowledge the contribution by those connected directly and indirectly with the success attained in the creation of badly needed jobs and in the generation of extra revenue.

While acknowledging that employment in the construction industry decreased, it must also be noted that in the same period employment in the financial services such as banking, insurance and building societies, was well above 1990 levels. While details of the way the economy is performing this year are not available, there are hopeful signs. Exports were good in January, as was our industrial output. Seasonally adjusted trade surpluses are almost the best on record, and consumer spending and building investment have shown a modest improvement in recent months. It would be dangerous to become complacent following our success in controlling inflation but some satisfaction can be gleaned from the fact that Ireland has remained below [2048] EC levels on that score, despite the increase to 3.7 per cent in the year to February. Wholesale price increase over that period, at 3 per cent, could be said to be modest.

There is no doubt that the international economic outlook for 1992 remains uncertain. At the end of last year both the OECD and the EC Commission forecast slow international recovery, with growth picking up by between 2 per cent and 4 per cent from last year's 1 per cent. Developments so far in the US, the German, the UK and the Japanese economies suggest that international economic recovery may be slower than envisaged. The prospect of international economic recovery combined with the useful increases in the volume of public capital spending suggests some growth in investment.

In the budget a number of steps were taken to combat raising unemployment, for instance, reductions in direct taxes which will improve incentives to work. This is the reward for enterprise and effort. We have an agreement with the EC on the provision of substantial funds for a new development subsidy scheme and in company training. I acknowledge the support of the FIE, other employer organisations and the ICTU for these schemes. I add my voice to the appeal of the Minister to employers to participate fully in these schemes.

There are area partnerships envisaged in the Programme for Economic and Social Progress to combat long-term unemployment through training, education and enterprise development. These partnerships are now in place in 12 pilot areas. The estimated cost to the Exchequer is in the region of £16 million in 1992. We have a committee of Ministers assisted by a working party of officials and people from the private sector examining recommendations of the Industrial Policy Review Group and the Task Force on Unemployment. It is accepted that there is only so much any Government can do.

The Government have made a key contribution by ensuring that their broad policy stance is conducive to employment [2049] growth. Government policy minimises any disincentive effect on enterprise. It provides leadership and growth oriented policies, but in the final analysis progress will be determined by how the private sector deal with the opportunities created. It has been proved that, given the right conditions, a significant number of jobs can be created. The key to greater employment creation in the private sector is stronger investment and expansion.

I am glad the Minister for Finance decided to review his proposals for the licensed trade in his budget, and that the suggestion that the liquor licence would be charged on the basis of rateable valuation has been modified. The Minister is now providing for a turnover based system. That is welcomed by all concerned. On foot of representations made to him on this issue the Minister accepted that his original proposal was inequitable. I am glad that as far as possible, holders of liquor licences will be treated fairly having regard to the conditions for the various types of licences involved. Section 135 of the Bill deals extensively with this matter. I am sure this section will be welcomed generally by the trade.

With regard to the licensed trade, I will refer also to the hours of trading. A few years ago we extended the hours of trading for licensed premises. It was indicated that this was to benefit tourists. I always argued that tourists do not partake in late night drinking. They prefer to retire early and rise early to move on to the next destination or, if they are remaining in one place, they prefer to be up and about to savour the leisure or other activities of the day. The extension of the licensing hours encouraged patrons to go later to the local. That was not to the advantage of the trade.

Because there is so much employment in this area, we should consider eliminating hours of trading from the licensing laws. It would probably take from five to ten years for the consumer, the publican and the trade to adjust. It is not right that all pubs and licensed premises should close at the same time. That contributes to traffic hazards. I make this [2050] point in the light of experience. The industry and the Minister for Justice, or whoever has responsibility for this area, should commence discussions on a sensible approach to the licensing laws.

There are many anomalies in those laws. For instance, one of the better restaurants on the road from Cork to Dublin could not serve meals on the premises to truckers on Good Friday because it is a licensed premises. The restauranteur had to erect a marquee in the car park to serve meals. That is just one example of the problems which arise because of the licensing laws.

There is confusion and bad feeling about bar extensions. There have been confrontations between clubs, hotels, pubs and discos because of these extensions. It is fair to say that ours is a drink culture that needs to be examined. I attended a seminar recently at which drugs were debated when an eminent contributor, much to the surprise of many paticipants, to put it mildly, indicated that our greatest drugs problem was alcoholism. I am not saying whether I agree or disagree with this contention. I merely draw the attention of the House to the fact that that statement was made at a recent seminar on the use-misuse of drugs. Abroad the trade and the individual dictate the hours of trading; this step might be contemplated here. I do not envisage that change will be effected over-night but the time has come for all concerned to take a close look at the present position.

Since the main theme of my contribution is employment-unemployment we should take note of the many people, willing to work, who cannot obtain employment and those who are unable to work because of illness or disability of whatever form. In order to cater for those people we must continue to be mindful of them and provide for them as we have been doing. There are budgetary changes relating to the social welfare payments on which a significant proportion of those people depend.

The principal element of the social welfare changes in this year's budget is a general 4 per cent increase in all weekly [2051] social welfare payments; a special increase to £53 for all short-term payments, including disability benefit, unemployment benefit, short-term unemployment assistance and the carer's allowance, constituting an increase of 6 per cent. Because of the level of unemployment and the strain it imposes on families, especially with young school-going children, it is only right that the back to school clothing and footwear allowance be increased by £10 per child, bringing the full payment to £50 for each child attending second level school and to £35 for each child attending primary school.

There is the introduction of an adoptive benefit scheme for women in employment; further improvements in the family income supplement scheme to help those at work on low pay from which it is predicted 7,200 families and 29,000 children will benefit. Then there is the introduction, on a phased basis, commencing this year, of measures to give effect to an EC Court of Justice ruling on equal treatment which will be readily acknowledged has been around for quite a while. It is to be welcomed that the Department have established a special group to devote attention to that matter this year.

It is further proposed that the age of eligibility for the preretirement allowance be reduced from 58 to 55, with a special increase in the adult dependant allowance payable with the old age non-contributory pension to remove an anomaly. There is also the extension of the free travel companion pass to certain pensioners and the extension of the over-80 allowance to invalidity pensioners with effect from April, giving them an extra £4.20 per week.

I note also that, as a result of a recent change in the social welfare legislation, pensioners over 66 years of age will have the option of moving into accommodation more suited to their needs with the security of knowing they will retain their pensions. Many elderly people live in houses that have been their homes for many years but which are no longer suited to their needs and which, in many [2052] cases, they are no longer in a position to maintain. To date, such people faced the dilemma that, were they to sell their homes, they would lose all or part of their pensions because the capital realised from such sale was taken into account in means testing their pensions. Faced with that dilemma many elderly people retain their homes often ending up in institutional care instead of living out their lives in comfortable circumstances in the community. It will readily be appreciated that that recent change in social welfare legislation is to be welcomed particularly for our senior citizens.

It would be remiss of me not to be somewhat parochial and refer to matters affecting the constituency which has elected me to this House in the past five general elections. One of my colleagues mentioned the amount of money being expended on road infrastructure in Cork. For some time past public pronouncements on the part of publicly elected representatives, aided and abetted by some elements of the media, have continually informed the public that the Cork city area in particular was being denied — to quote some of their phrases — a fair share of the national cake. With the turnabout in some of the comments of those elements of the media about which I speak, one would think that all the infrastructure and decisions relating to the Cork area occurred recently or that they had just awoken to that fact. We have a good airport in Cork. From the day its foundations were laid by the late Seán Lemass some 25 years ago there had been no other improvement generally in the Cork area. However, in recent years, a huge amount of money has been spent on Cork Airport. We have a fine terminal building, comparable with any other airport, with features that will not be seen elsewhere. The runway has been extended, with landing and lighting equipment making it safer and reducing the number of diversions to other airports.

There was a vociferous debate recently about the decentralisation issue, which decision was taken many months ago. It was left to the local authority to submit [2053] suggestions for sitings, locations or size in the case of the building to house the civil servants of the Central Statistics Office being transferred to Cork.

The commitment of the Government since 1987 to ensuring the continuance of a ferry link between Cork and Swansea ought to be acknowledged positively by everybody. Last week an historical building in Cork was officially opened. Five years ago this building was an empty shell, a concrete structure, with no funding left to refurbish it or complete the work. Because a few of us saw a wider purpose for such a building than that for which it was originally constructed we were able to have it refurbished with £500,000 of EC funds for tourism and the help of FÁS trainees, with the approval of the local trade unions.

I referred earlier to the allocation of funds from the European Regional Development Fund and ESF to various projects throughout the country. I want to put it on the record that the largest single grant allocation under those programmes by the Department with which I was previously involved went to the very deserving heritage project in Cobh. Naturally I wish that project well. I am sure that in a very short time when all the elements of the jigsaw puzzle are in place we will have the distinction of having an under-water tunnel. Such a project has been in the offing since 1980 when the committee, of which I was chairman, decided that the best economic and aesthetical way to cross the River Lee at that point was by means of a submersible tunnel. Due to indecision and shelving of the project from 1980 to 1987 — people tend to forget about those years — this project was not proceeded with. Suddenly this project was placed on the shopping list of requirements for the area. Due to the positive commitment of local representatives we have progressed to the stage where work on a downstream crossing under the river will commence shortly. This will be an added attraction to the Cobh project, Shandon and the Blarney Stone.

Molaim an tAire Airgeadais as ucht an sár-obair atá á déanamh aige agus as ucht [2054] cur leis an méid atá déanta ag an Rialtas seo agus ag an Rialtas roimhe sin chun tairbhe eacnamaíochta na tíre ó 1987.

Mr. Rabbitte: First, I should like to question fundamentally the usefulness of the annual budget circus with its obsessive secrecy and the subsequent Finance Bill ritual. This ritual is a pale imitation which we have inherited from 19th century British-style administration and it is time to ditch it. The attempts by Ministers to plan by incrementalism is pathetic. It shows a grave contempt of the people's intelligence with all its hype which in reality makes little difference to most people's lives.

In modern society where even children have spreadsheets, the whole apparatus of the State, the highly competent civil servants and academic economists should be able to plan out multi-annual rolling income and expenditure programmes. I ask the Minister for Finance to reply to this point and to promise to get advice from the universities — as distinct from the supposed independent economists who, in effect, are stockbroker economists — from his own officials, and begin to construct a strategic plan for the economy which must include tax reforms. Even small fish firms have strategic plans. They plan out sales and investment over five-year periods. Surely it is time the largest enterprise in the country, that is, the State, with its budget which is approaching a staggering £10 billion, began to use 20th century methods of accounting, planning and business expertise. We should end the circus of secrecy, the artificial hype and the infighting in Cabinet for increases in favoured Ministers' Departments.

The Government have correctly insisted that companies produce proper accounts. It is time that the Government did the same. The main financial indicator, the budget deficit, which mixes current and capital spending, should be reformed. A company would write off capital investments over a number of years. Surely the Government should do the same.

I am also highly critical of the very [2055] definitions of “capital” and “current”. For example, is teachers' pay not capital spending, as it is investment in human capital? Education pushes up future incomes and thus tax revenue. Perhaps it is because too many educated Irish people are forced to emigrate that it is not appropriate to treat this as capital investment in Ireland. Many countries, including Ireland, have cut their capital investment in the past decade. Therefore, the network of the public sector has fallen in recent years. New investment has not been sufficient to maintain the value of our capital stocks. While this fall-off in Exchequer-funded investment has been mitigated, the drive to cut spending has regrettably led to the largest cuts in investment. This is a major contributor to our high level of unemployment.

Another area which the Government should face up to, if they decide to introduce 20th century methods into Government financing, is the inclusion of the capitalised value of future State pensions and social welfare benefits. These rise as the population ages, and Ireland's population is suddenly no longer as young as it was a few years ago. Furthermore, with our uniquely high mass emigration we are losing many of our young people. In a normal economy these people would work, pay tax and contribute to these payments. It is more important in our case to bring into effect good budgetary practice. Therefore, our budget should be replaced with five year rolling plans. Proper account should be taken of real investment such as education. There should be depreciation of investment over a period of years rather than in the first year and proper account should be taken of the real cost of privatisation through the loss of the future profit streams and loss of future capital gains. Proper account should be taken of the real cost of future pension and welfare costs, particularly with the loss of so many of our young people through emigration due to the failed economic policies [2056] of successive Governments since independence.

The size of this year's Finance Bill, amounting to 232 sections and seven Schedules, spread over 246 pages, highlights the dreadfully inadequate way in which the House is asked to deal with vital legislation such as this and is eloquent testimony of the need for fundamental Dáil reform. The Finance Bill ought to be one of the most important Bills to be processed by the Dáil each year. Certainly, it is the one which has the most direct impact on the money in the pockets and purses of the electorate. Even for a normal sized Finance Bill the time usually allocated is inadequate — normally three days for Second Stage, two or three days or parts of days for Committee Stage and one day for Report Stage. The result is that every year without fail many sections, sometimes whole chapters of the Finance Bill, are never discussed because of the use of the parliamentary guillotine. The Minister for Finance frequently introduces substantial amendments, often new sections, on Committee Stage which are never given consideration by the Dáil.

The Dáil is failing to fulfil its constitutional obligations to consider legislation. What results is in effect legislation by ministerial decree. As a result of the amendments made in the Appropriation Bill before Christmas, which did not receive adequate consideration, the timetable for completion of the Finance Bill was tightened even further. Second Stage must now be passed within five days of the resumption of the Dáil after the Easter recess. The whole legislative process has to be completed in the Dáil and Seanad to allow the Bill to be signed by the President within four calendar months of the budget. If the time allocated in previous years is repeated this year even less of this Bill will receive proper consideration due to its exceptional length.

By lunch time on the second day of the Second Stage debate, the second Opposition speaker was still in possession. Therefore, it is clear that even fewer Deputies will have an opportunity to contribute [2057] to the Finance Bill than was the case in previous years. The whole position is being reduced to the level of a not very funny farce. If the Dáil is not to be reduced to even greater irrelevancy we must review the manner in which we conduct our business, especially in regard to the Finance Bill. We accept that the Finance Bill is complex, but one must ask — I would like the Minister to deal with this — why it takes so long for the Department of Finance to draft the Bill. I understand that in Westminster the Finance Bill is published simultaneously with the budget. If we cannot achieve simultaneous publication why can we not move towards the objective of at least reducing the time lag between the budget and the publication of the Bill? This would ensure that there is proper time for full consideration of an important Bill.

The period between budget day and publication of the Finance Bill has become a password for negotiations between the Minister for Finance of the day and powerful vested interests in the economy. There has been an accelerating trend in recent years which has seen the budget reduce to a mere bargaining counter between the Minister and his advisers on the one hand and powerful lobbyists and their expensive specialist advisers on the other.

Whatever we may think of the Finance Bill, 1992, it is only fair to record that on this occasion the provisions of the Bill more or less faithfully reflect budget day announcements. However, there are some exceptions and I will deal with them later. On the substantive changes the Minister has appeared to resist the high paid lobbyists, and I unequivocally welcome that. Unlike other Opposition speakers I welcome the apparent arresting of the trend because significant concessions by successive Ministers for Finance to powerful lobby groups are fundamentally anti-democratic and are to be deplored for a number of reasons. These concessions were invariably to the powerful and the wealthy who could command political or commercial clout and could afford the best professional advice. Concessions were never given to the [2058] weak, the marginalised and those in the poverty trap. Whatever they were promised on budget day was what they got. For the weak and poor in society writ on budget day was immutable, but for those who had the money to retain expensive advice in the past they used the hiatus between budget day and publication of the Finance Bill to negotiate substantial concessions from the Minister of the day.

The effect of the concessions has almost always been to perpetrate some inequity in fiscal policy, which meant the unfair sharing of the tax burden. It is an abdication of responsibility by Government to effectively hand over the framing of fiscal policy to powerful vested interests who have no obligation to the public good but who may have made hefty financial contributions to party political coffers at election time.

Last year's Finance Bill was a very good example of this. On budget day the then Minister for Finance criticised the extent of abuse of certain tax reliefs. Most trenchantly, he criticised the operation of the business expansion scheme, but by budget day he was forced to back off and substantially water down his announced intentions. In this debate so far the same old arguments have been revised about the curtailment of the operation of the business expansion scheme. It is instructive to examine again the criticism of the operation of the scheme by the then Minister for Finance, Deputy Albert Reynolds, when he said on budget day, 30 January 1991 in referring to the business expansion scheme: “It is estimated to have cost around £40 million in tax foregone by the Exchequer in the 1989-90 tax year and it will cost a similar amount in the present tax year if action is not taken”. The then Minister for Finance quite correctly concluded that the BES as it was then operating was creating an unacceptable tax shelter.

Those of us who are members of the Committee of Public Accounts are aware, from examining the relevant accounting officers on the special audit of the BES carried out by the office of the Comptroller and Auditor General, that it was admitted that it was difficult [2059] to precisely measure the loss to the Exchequer in terms of tax foregone but that the figure was likely to be not less than £100 million. It is wrong and misleading for Deputies to go on pretending that there is no real loss to the Exchequer because the investment would never have taken place were it not for the business expansion scheme.

The fact remains that real tax is foregone in this instance — this is income on which, because of the business expansion scheme, they do not pay tax which they would otherwise be required to pay, and there is a real loss to the Exchequer. It is disingenuous for some Opposition Deputies to come here and argue that if the BES were not there, the investment would not have taken place and the Exchequer would not be losing out. That is not a proper understanding of the business expansion scheme.

Those of us who believe in real tax reform realise that that means broadening the tax base and we cannot come in here and oppose new measures which are designed — however inadequately — to achieve that effect. Many of these reliefs and tax shelters blatantly benefit the rich, the powerful, the better off, and penalise those who work for a wage. They often act as incentives not to promote economic activity or generate wealth but to facilitate easy profits for the kind of sedentary activities deplored by Deputy Noonan last night.

While I have some major criticisms of this Finance Bill and the economic policy complacency it reflects, I cannot agree with other Opposition spokespersons who have engaged with varying emphasis in special pleading in opposing the provisions designed to abolish or restrict tax reliefs and incentives. Those of us who have consistently rejected the Progressive Democrats' policy for tax reductions and who have argued for tax reform since before the Progressive Democrats were a twinkle in the Minister for Industry and Commerce, Mr. O'Malley's eye, ought to welcome progress towards genuine tax reform when it happens. I am not saying that the burden of [2060] taxation has been shifted off the shoulders of the PAYE sector in this Finance Bill, because that has not happened to any appreciable extent, but there are measures in this Bill designed to broaden the tax base. One cannot have genuine tax reform without broadening the tax base. It is wrong, therefore, to indulge in special pleadings for various interest groups who must invariably be impacted upon if the reform measures are genuine.

Since budget day we have been treated to the customary high profile denuciations of some of the measures proposed. The louder some of these interest groups squeal, the more hopeful I am that at last we are making some real progress towards tax equity. Even the most partisan financial commentators, not to mention business itself, acknowledge that over the years a plethora of so-called incentives, tax reliefs and tax avoidance schemes have grown up to enable profits to be sheltered from the taxman. As long ago as the report of the Commission on Taxation, it was recommended that the broadening of the tax base be brought about through the treatment of all forms of wealth, capital gains and income as equally taxable. The commitment to real tax reform of those who would now oppose the modest steps taken in this Bill must be suspect.

The steps taken in the Bill to reform tax are essentially modest, but I welcome them nonetheless. Anybody who purports to have argued in the past for the cause of the PAYE sector and the disproportionate burden of tax they bear or who have argued the cause of the trade union movement should now welcome these modest steps forward as the genuine beginning of tax reforms. Real tax reforms is a question of distribution. Ideally you must broaden the tax base and reduce the burden on those tax compliant citizens who are predominantly but not exclusively in the PAYE sector who have borne such an unequal burden for so long.

Those on PAYE have received only minimal relief in this Bill and then such relief as is being given is going disproportionately to higher earners. For [2061] instance, the income tax changes will mean an extra £2,600 per annum for a married couple, with two children, earning £75,000 — and you, a Leas Cheann Comhairle and I know a small number of privileged people earning that amount and more who would seek to use methods outside this House to improve their annual earnings — but a married couple with two children, earning £10,000 per annum will receive a net gain of £100 per annum. That is unequal and unfair.

My colleague Deputy Byrne has pointed out that this Bill represents another instalment in the Government's assault on the insurance based social welfare system. The recent Social Welfare Bill reduced the value of many benefits and restricted access for many claimants and now, with this Finance Bill, both unemployment and disability benefits will be subject to taxation. Some people will ask why not? While unemployment and disability benefits are threatened with a tax net, the same Bill provides for the opening up for the first time of special savings accounts. These special savings accounts are designed for the filthy rich to facilitate the return of hot money from abroad and will be subject only to 10 per cent tax on interest earned and sheltered from scrutiny thereafter. In effect this is another amnesty for the tax cheats. However, if the genuine small saver has a few bob in a bank or building society, the interest earned remains liable for deposit interest retention tax at the rate of the taxpayer's final liability for income tax on interest earned. In other words, the couple who can afford to exploit fully the innovation in these so-called special saving accounts and can utilise it to the full by investing £100,000 will have a tax liability of 10 per cent on the interest earned. No questions will be asked concerning the origins of the money and whether it attracted the normal rate of tax at the stage it was being accumulated, but one's life savings, on which full income tax was paid at the time the money was earned, in a bank or building society will remain liable for DIRT at 27 per cent. This is, I submit, a disgraceful inequity.

[2062] On the question of income tax and tax reform I agree with the approach set out by the Minister for Finance in his introductory speech:

It was never expected and never intended by the advocates of tax reform that widening the tax base and reducing tax rates would produce a lower tax bill for everyone. On the contrary: it was always inherent in this strategy that there would be trade-offs between, on the one hand, improvements in the mainstream income tax regime and, on the other, curtailment of reliefs which benefit limited groups or sectors. This was common ground among the proponents of tax reform, and was explicitly stated by, for example, the Commission on Taxation. As the Commission said in its first report: “tax reform is a collection of measures, each of which affects some individuals adversely and others favourably. Those who will not benefit are those who are over favourably treated under the existing system”.

If that is a genuine statement of the policy approach which the Minister for Finance intends to pursue, and I hope at a more accelerated rate in the next budget, it sums up the attitude of my party to tax reform.

The Minister is correct not only in quoting the Commission on Taxation, but he could quote the Irish Congress of Trade Unions. The thrust of the campaign which brought 750,000 people onto the streets for tax reform was not to diminish everybody's tax liability but to bring equity into the system, to broaden the tax base, to get those who had wealth and capacity to pay their fair share; it was not to run down the public services or to limit the money available for spending on education and health. That is something I have not heard articulated by an Opposition spokesperson so far in this debate.

Unfortunately I am not convinced that the Minister has embarked on the first step of a coherent and consistent plan of reform. The special arrangement to which I have referred for hot money and [2063] big time savers betrays the old vulnerability to powerful vested interests.

The Minister portrays a schizophrenic approach in seeking to marry the irreconcilables of genuine tax reform and the Progressive Democrats petulant demands for tax reductions for a privileged constituency. The Progressive Democrats neurosis for twin tax rates of 25 per cent and 40 per cent have either infected the Minister or he feels compelled to nod in their direction. The Minister should relax in the conviction that the public are no longer fooled by the simple equation that lower tax rates necessarily mean lower taxes. People whose incomes mean that in equity, they should not be in the tax net or people who have been paying a grossly disproportionate share of their income in tax, are not so much interested in the tax rates as in the amount of tax they pay, how early they enter the tax net, how much of their income is subject to the standard rate of tax and at what point in their earnings do they become liable to the marginal rate? It is absurd that a single adult becomes liable to income tax after earning just over £70 per week.

There is no evidence I can find either inside or outside the country to support the Progressive Democrats notion that, if we implement the two-tier tax structure at either 25 per cent and 44 per cent or 25 per cent and 40 per cent, jobs would automatically follow. Where is the evidence that job prospects will be enhanced? It did not happen in Thatcher's Britain, it is not happening in John Major's Britain and following a pattern of regular tax rates reductions in Ireland over the past three years, it has not happened here. In fact, the situation has got progressively worse.

The Minister for Finance, Deputy B. Ahern, has made a start in beginning to treat all income the same for tax purposes. If he can be seen in the next budget to continue in that direction, it will be a significant boost to morale of the PAYE sector and other tax compliant citizens. Most PAYE workers recognise the necessity for good quality public services [2064] and they are prepared to pay for these services with their taxes provided they can be assured the burden is being shared in accordance with capacity to pay. The Progressive Democrats formula will mean substantial savings for higher earners and the continued rundown of our public services. I reject the jobs argument advanced by the Progressive Democrats as spurious and I argue that our economic well being will, instead, be determined by the competitive strength of the traded sector of the economy.

Clearly the manufacturing sector is the most important focus in the traded sector. We should not be misled by growth figures and industrial output which derive largely from the enclave of foreign owned companies. In Single Market conditions our competitive capacity will be tested and found wanting in many areas: one such critical factor, for example, remains the quality of our training for those in employment. The attitude of many industrialists towards training, and the extent of investment in training, are inadequate. An environment conditioned by the current focus of FÁS and dependent on grants and handouts will not enable us to meet Single Market conditions or create a genuinely competitive economy.'

I do not think the debate on the Finance Bill should be permitted to glance over the significance of the Minister's commitment to introduce another Finance Bill in autumn or later in the year. It may seem that this is required only for reasons preparatory to the Single Market conditions; however, the deathly depressing unemployment figures which appear inexorably to be heading for 300,000 by the end of this year suggest that a mini budget may well be necessary.

In addition I would draw the attention of the House to the Minister's casual remark where he assured Deputies that he is equally committed to maintaining discipline this year and will not be found wanting should the need arise. This is a reference to what the Minister called the corrective action that he so decisively took last year. I am afraid, and especially in post-Maastricht conditions, that that [2065] has an ominous ring to it. It would be folly for anybody to believe that a mini budget holds out anything but the prospect of further cuts for those least able to bear them, the weakest in our society.

Having criticised earlier those who came in here and indulged in special pleading, and having praised the Minister beyond the wildest expectations of the Minister of State, Deputy Kitt, I should like to engage in some special pleading in a few limited areas. However, it is not special pleading on behalf of the rich, powerful and vested interest groups in our society but I should like to refer to one of the changes the Minister made in respect of benefit-in-kind for people who have the use of company cars.

Where a car has become the tool of the trade for so many people, a necessary tool for presenting themselves at work not to mention commercial travellers and sales person who have to rely on the car, the concessions the Minister advanced are sufficient. The tapering off relief concept which he has adopted does not have due regard to the imposition that this will be on a commercial traveller who is making his or her living using the car. The Minister should have made some effort to draw a distinction between the company car as a perk and the company car as a tool of the trade. For the highly paid executive who drives into Mount Merrion and parks the car in a specially provided car park, and then drives home in the evening, the Minister's measures are fair enough but for somebody who chalks up inordinate mileage at considerable risk to themselves and who depends on the car to make a living, the tapering relief is inadequate. I should like the Minister to consider examining that issue on Committee Stage.

It is my intention, if it is feasible, to draft an amendment that would take account of people who depend on the car for their livelihood. The Minister of State, Deputy O'Dea apparently thinks that is not possible. I should have thought he had sufficient to occupy him in his own Department to leave the Finance area to those of us who are dealing with it. Let him concentrate on the referendum and [2066] we will see if we can come up with something on company cars.

Mr. O'Dea: I shall read the Deputy's amendment with interest.

Mr. Rabbitte: Thank you.

I would like to welcome the change introduced by the Minister in respect of profit-sharing schemes. I attacked this on budget night when we discussed the Financial Resolutions because I thought the original idea behind the concept of profit sharing schemes in terms of improving competitiveness, of enhancing industrial relations and so on, in companies was basically a good one and I think the proposed abolition was the wrong step for the Minister to take. The Minister has now reduced the annual value of any shares per employee to £2,000. That has got the balance about right because, notwithstanding the strong protestations made by the Irish Congress of Trade Unions, for example, to have this result achieved — and they probably would admit that the Ministers concession goes some considerable way towards meeting their complaints — the facts are that for whatever reason the schemes have not exactly been an unqualified success. That is really why I support the £2,000 rather than the £5,000 ceiling.

These schemes were used by those for whom they were never intended, and those for whom they were intended, i.e., the average worker, took them up only to a very limited extent. I would not like to see the incentive removed; hopefully the take-up might be better in the future. However, I shed no tears because the higher ceiling has been removed and the fact that higher paid executives, who contrive to minimise their tax liability will no longer have access to this at the same rate.

Let me refer to a different question of shares. Section 14 deals with the income tax relief on interest on loans to acquire shares in a quoted company. I welcome the Minister's decision in this regard. This relief was unfair, inequitable, exploited and abused. The general anti-avoidance [2067] provision in this section in terms of the relief on interest on loans for the purchase of shares would seem to be in keeping with the overall thrust I mentioned earlier of clamping down on this type of tax shelter. Yesterday the Minister said:

Quoted companies have access to the stock market for capital and should not need the assistance provided by this relief in raising it. In addition, quoted shares in general are valuable, tradeable assets and it is difficult to justify to ordinary taxpayers why they should provide a subsidy for their acquisition. This is especially so, when, as the House is aware, interest relief for most people is confined to mortgage interest and is significantly restricted even for that purpose.

I could not agree more heartily. That exactly is the view of ordinary taxpayers who strive to meet their tax liability. This kind of subsidy, which is what it was, is not justifiable. Indeed, the whole business of share options that people only come to exercise in the event of it being very profitable years hence was unquestionably a boon for those on the inside track and those with the money to avail of such perks.

I welcome too the further restriction on section 84 loans. I am very dubious about the traditional use of many of the section 84 loans. The idea might have been that the advantage was passed on to the borrowing company by the banks thereby making capital available at a cheaper rate than would normally be the case, however, my view is that that kind of subsidy is not desirable in the context of industrial policy generally, and the recent Culliton report broadly supports that position. I think the banks used it expertly to minimise their own tax liability. The further restriction here is welcome.

The increase in the rate of tax chargeable on pension refunds is harsh. I do not think it is comparable with the other areas in which I have referred where the Minister has engaged in restictions or [2068] abolitions. The increase in the rate of tax chargeable from 10 per cent to 25 per cent for pension refunds is harsh. The Minister will argue that tax was not paid at the time but, what we are talking about here is an employee who has been paying into a pension scheme for all his or her working life, and that payment would be matched by the employer. However, the employee leaves that employment, he is entitled to a refund of his own contributions. There is a major inequity here and we are away behind the practice in some of the more advanced European countries where a portion, if not all, of the employers' contribution is also provided for. In the absence of portability in many of the schemes, the Minister's action is especially harsh and in the absence of the ability to transfer from one scheme to another it is particularly severe. There is no set of circumstances I know of where one can reinstate oneself in the position one was in by merely using a refund of one's contributions and seeking to purchase a new pension plan. The total refund would only purchase a fraction of the benefits one had under the orginal scheme. For many workers in present day conditions who find themselves unemployed for reasons not of their own making, or indeed even where people leave employment, this will be a barrier and a further penalty which is unfair. The Minister should look at this again.

In relation to the new pensions Bill, when the measures promised mature, if they ever do, there will be provision for indexation for the future which is a very valuable consideration but until this happens this is a rather mean-spirited decision to gain a small amount of revenue.

As a Minister from the Limerick area is in the House I feel I should make some reference to the following matter. I do not know which section of the Department is responsible but I wish to refer to export sales relief and the Shannon arrangement. I am glad the Minister has held his ground on this issue. At what stage do we concede to the bullying we saw in this case? The innocents abroad, [2069] when they saw a report in their Sunday papers three or four weeks ago, may have believed it was accidental. There was a prominent report in every newspaper which referred to a particular gentleman who had to go into tax exile because of the harsh measures threatened by the Minister in the budget.

I do not know, when the rest of us have to pay tax on every pound we earn and having regard to the inordinate benefits that gentleman and his company received over the years, whether we should kowtow to that kind of economic blackmail. I do not think we should nor do I think that the innocents abroad are aware that every reputable financial journalist in Dublin was rounded up, flown to Shannon and given the treatment before this appeared in the Sunday newspapers. The average punter who pays tax probably thinks it was a matter of such moment that all these journalists were moved on the same day to write the same report, but that is not the way it happened.

I am pleased the Minister has held his ground because I do not think someone like me can argue that the tax base should be broadened, on the one hand, and, when something like this is done, oppose that kind of measure. I do not believe I can do that. I welcome what has taken place and do not think it will damage the Shannon enterprise.

As one would expect Deputy Noonan, having regard to the fact it is in his own back yard, made a trenchant defence last night of the status quo. He pointed to the job target of 1,500 which are in the process of being created at present, which are badly needed and which will be much welcomed. He went on to say that the sky was the limit, that if we could continue as we were we would create 10,000 jobs in the same enterprise.

We should take a look at poor beseiged Aer Lingus who, without any of these concessions, created more jobs in the TEAM project than this gentleman created in this enterprise in Shannon, that is without taking into account the position on the Naas Road at both Airmotive and Pratt and Whitney. I do not know what the number is as I have not [2070] checked it but close to 1,000 jobs have been created in the TEAM project and between 600 and 700 jobs at Airmotive and I am aware that the plant I visited. Pratt and Whitney, which is a joint venture, is at the leading edge of technology in this area. It is hoped to employ 300 or more there. This amounts to an outstanding contribution by Aer Lingus without the benefit of the extraordinary tax shelters made available at Shannon.

In The Sunday Press of 26 April, the financial editor, Des Crowley, commented as follows:

GPA Chief Tony Ryan has once again outmanoeuvred the tax authorities by getting future dividends paid in advance to the tune of over £23 million. This is behind the payout announced to shareholders in a recent GPA document.

As pointed out previously in these columns, as a result of going public, Ryan was threatened with a reduction in his tax-free dividend, which is around double that of ordinary shareholders. In addition, Bertie Ahern announced that he was going to start taxing these Shannon tax-free dividends.

To head off both eventualities, Tony Ryan has managed to get the company to pay three years' dividends (discounted) before the tax and public offering deadlines.

To invite me to cry for Mr. Ryan and his enterprise at Shannon on the basis of that information is unfair as one is either going to argue that all wealth, capital gains and income should be taxed alike or not. While I welcome the generation of that wealth at Shannon — neither I nor any other body is qualified to say how much of it is being reinvested in Ireland — I do not think we should structure our tax code in order to continue the tax shelter enjoyed there over the years.

What I am saying is that I cannot agree with the denunciation of the Finance Bill as anti-risk, anti-enterprise and anti-employment — these charges have been made in the House — by virtue of the fact that a Minister for Finance has finally [2071] taken some modest steps to close off this plethora of incentives, tax avoidance schemes and tax shelters which have formed part of the tax code for so long and which have enabled those with commercial clout to employ expert tax advice and other professional expertise to minimise their tax liability while the rest of us have to pay for the maintenance of public services.

I regret the Minister did not go further because if he had done so this would have been in perfect keeping with the report of the Culliton review team which looked at this matter in the context of industrial policy and job creation. They argued in favour of refocusing the money we are spending under industrial policy and came out against many of these tax shelters, hidden subsidies, relief and various schemes. The Government seem to have taken the broad thrust of that report on board as have the Opposition parties. When this happens it should be welcomed for what it is.

I also welcome section 18 which deals with the question of restrictive covenants. It is interesting to note the difficulties these covenants caused in the case of Greencore. Even when they are perfectly legally deployed there is the inequity which is referred to and I am happy they are gone.

The major defect in the budget, from the point of view of people who look to it — and all the hype surrounding it — with an expectation of some improvement in their own conditions, is the failure of any specific measures to stimulate employment. I do not know how any Government, in the face of the endemic unemployment crisis, can continue to argue that if only we get the climate right jobs will come. That theory has been tested but jobs have not come. The Progressive Democrats, admittedly, are more vocal in arguing that all you have to do is to get the tax rates right and jobs will be created. As I pointed out, that did not happen in Thatcher's Britain and it is not happening in John Major's Britain. After three years of a pattern of reductions in the tax rates here, the situation [2072] is getting worse, in fact we are climbing inexorably — not to the figure of 282,000 people which the Minister mentioned in his speech — but to the figure of 300,000 people unemployed, which is a catastrophe.

To continue to argue that this problem is due to the recession in the United Kingdom and the United States is an excuse rather than an explanation or a policy to tackle it. There seems to be a complacency engendered by orthodox economists — who have been wrong so many times before — that, if we wait until the end of the decade, the young people coming on to the labour force will have greatly diminished, the population bulge, demogaphically speaking, will have diminished, and in the interim the recession will have lifted in Britain and the United States, making it possible for us to get rid of some of our surplus labour. That seems to be the hope and I do not believe that a Government of any hue can provide for 300,000 people unemployed and for the total number of social welfare recipients for whom we must provide in this small economy and, at the same time, make any improvements in or even maintain the level of public services.

How could any Minister bring in a satisfactory budget if almost 300,000 people are unemployed and one million people are living at or below the poverty line, dependent on social welfare of one kind or another? Given our present demographic structure, the number of old people and the number of young people at school and our limited workage population in between, 300,000 unemployed makes balancing the books virtually impossible. We must balance the books because, as has been said — and the matter will be debated at greater length next week — little or no reference has been made by any Government spokesperson to the fiscal regime which we will have to implement here next year. The disciplines imposed by the Maastricht Treaty will inevitably mean further cutbacks in public spending. Already the Exchequer borrowing requirement has risen for the first time since the mid-eighties [2073] but that situation will not be allowed to continue.

The budget was an opportunity for the Government to introduce some innovative measures to put some of our people back to work so that they could contribute their share of taxation. It has not happened, which I greatly regret.

Mr. Nolan: I welcome the opportunity to speak on one of the biggest Finance Bills ever to come before the Houses of the Oireachtas. The Minister for Finance has an unenviable task ahead of him in trying to bring in two Finance Bills this year in order to incorporate the obligations which are thrust upon him and us as a result of the Maastricht Treaty.

The Minister on Second Stage outlined his proposal to introduce a second Finance Bill in the autumn as a result of the various decisions which will be made by Heads of Government and Ministers at future Heads of Government meetings. It is important to outline some of the history on which the current Finance Bill is based and to look at the economic prospects for this year which would have shaped the Bill.

The international economic outlook for 1992 remains somewhat uncertain. Last December the OECD and the EC Commission forecast a slow and modest international recovery with growth picking up to 2 per cent or more from about 1 per cent last year. Developments so far this year in the major economies — the US, Germany, the UK and Japan — suggest that international economic recovery may be somewhat slower and more modest than earlier envisaged. Most economic commentators now agree that perhaps the forecasts in December was a little wide of the mark and too ambitious. Information on how the economy is performing so far this year domestically is still scarce but there are some hopeful signs. Exports turned in another strong performance in January and the same applies to industrial output. The seasonally adjusted trade surplus was one of the best on record. Consumer spending and building investment indicators for [2074] the recent few months show some tentative signs of a modest improvement.

While we cannot allow ourselves to become complacent about inflation, which rose to 3.7 per cent in the year to February last, it is some consolation to note that it is still one of the lowest levels in the EC and that wholesale price increases have been somewhat more modest over this period, at approximately 3 per cent. Tax returns and employment levy receipts for the first quarter of 1992 point to employment holding up reasonably well; PAYE receipts for the first quarter were almost 10 per cent ahead of the first quarter for 1991; training and employment levy receipts up to early April were over 10 per cent ahead of the same period last year. Both these figures suggest that the continuing rise in unemployment reflect a growing labour force rather than falling employment.

Previous speakers mentioned the obligations and disciplines which the Maastricht Treaty will place on us. The Government are fortunate in so far as the corrective measures taken since 1987 make their job and that of the Minister for Finance somewhat easier. The year 1991 saw further general improvement in real incomes but weaker confidence internationally and continuing high interest rates, although much of this translated into higher savings rather than higher spending. The knock-on effect is that VAT receipts were somewhat constrained by the fact that the public thought it better to save than spend. Despite all the difficulties we faced, employment in large industrial establishments in the first three quarters of 1991 was up by over 1,000 on average compared with the corresponding period the previous year. While we are doing relatively well in regard to employment creation, one of the major problems we will have to face is that of unemployment. The Government have put unemployment at the top of their agenda.

Debate adjourned.