Seanad Éireann - Volume 78 - 26 July, 1974
Finance Bill, 1974 ( Certified Money Bill ): Second Stage (Resumed).
Question again proposed: “That the Bill be now read a Second Time.”
Mr. McCartin Mr. McCartin
Mr. McCartin: I wish to be very brief, because I think I covered most of the field yesterday. When the House adjourned I was discussing the question of the new measure in connection with taxation of farms. Generally, listening to speakers on this Bill, one gets the impression that all the economic ills of this country, all the economic problems the we have before us in the everyday life of every citizen, are influenced entirely by the measures that the Minister for Finance introduces. In fact, I have often heard it said that politics only influences or takes over what the financiers leave after them. I believe there is a very large element of truth in this. Naturally enough in modern democracy the Government and politicians are moving more towards greater control over the destinies of a country. Still in connection with the whole agricultural problem I would like to point out that I notice in the report from the Central Bank that the Associated Banks contributed to Irish agriculture in 1974 a figure of £130 million. This was only a small increase of £18 million on borrowings, in February, 1973. At the same time, their lending to personal borrowers  amounted to a figure of £158.3 million. In the last year they increased that by £24 million, whereas lending to agriculture by the Associated Banks in the same period was increased by only £18 million.
I say this to make the point that while the Minister for Finance can with his different legislation make readjustments on our economy and redirect it, I think that the banks and people in their position have a much greater influence on the trend of our economy than, perhaps, we realise. The agricultural sector in the most recent past has not been treated with the consideration that it deserves from banking interests in this country. Unfortunately we have our banks which pay much lip service to the cause of agricultural expansion and, indeed, industrial expansion. Particularly in agriculture, I find the average bank manager when approached by a farmer is much more influenced by what is commonly said in the circles of gossip, in the newspaper columns from day to day by individual reporters, who very often do not have all the facts, than by sound economic considerations and by detailed examination of what the problem is. I have seen bank managers turn down farmers for loans because of what some columnist said in the paper a few days before.
Banks, dealing on a national scale with an agricultural industry that is so important, employ a very small number of agricultural advisers, men whose sole job is to put up some sort of a window show for the agricultural industry; men who will go around to functions and be employed as public relations officers. They are not in such numbers that they can study the agricultural problem of the individual farmer, not to mind being in a position to advise the bank on the broader national policy. I feel that the sooner our banking institutions take the agricultural industry seriously the better it will be.
Farmers have a grievance with the Agricultural Credit Corporation. If they feel they have been wronged and that they have not got what they were entitled to, they can go to their  public representative or to the local representative of the ACC. They can have their case clarified and find out the reason for refusal. They can meet the people who make the decision. Farmers in the past year have been severely pressured by banks. They have found themselves in a most difficult position and have no recourse to anybody. As always, the decisions were made by the faceless people who are completely out of the reach of the farmer or the farmer's representative.
I think this is an important point and, regardless of what our Minister for Finance may do, these people in banking institutions have so much control that it is imperative that much more notice be taken of what exactly they are doing, and that there should be much more liaison and, if necessary, control over their workings, especially in times of crisis such as we have experienced in the past year.
Finally, I would like to say that this whole question of taxation on farmers is a new measure. It must be regarded only as a temporary measure. It is only the introduction of an idea. Before taxation on the farming community becomes the sort of reality that it must become in the future, future Ministers will have to take a new look at the subject. They will have to look at the whole question of rating taxation on agricultural land. They will have to take into consideration the special problem of the agricultural community in times of crisis and fluctuation of prices. The Minister has introduced a new idea. I do not think that what he has done will reduce the capacity of the agricultural industry to progress and expand. The amount of money which will be taken out of circulation will be minimal as a result of this legislation.
No doubt as a result of the experience gained by the Department of Finance over the next few years in dealing with the agricultural community in relation to this legislation, new measures will be introduced. This must be done in consultation with the agricultural community. Some farm spokesmen have said that this legislation  is a stab in the back to the farming community which is experiencing difficulties at present. These people, like politicians, are seeking to make the headlines in order to enhance their own public image as guardians of justice for the agricultural community. They are not being very realistic in their outlook on this particular subject as to what the true situation will be as a result of this legislation. It is understandable that at such a time they would seek to enhance their own reputations. The vast majority of farmers will not find anything obnoxious about the legislation which has been introduced.
Mr. McGlinchey Mr. McGlinchey
Mr. McGlinchey: Last night I listened to Senator McCartin refer to the moaning and groaning which was going on on this side of the House on this Bill. A moment ago he referred to it again. I sat on the other side of this House for 12 years and listened to many debates on this Bill. I would recommend, that for his spiritual reading, Senator McCartin should go to the Library and read the speeches made over the years by the then Senator Gerry L'Estrange and in latters years, the present Parliamentary Secretary to the Taoiseach and the then Senator John Kelly. If I were to take the trouble of reading Senator L'Estrange's speeches on the Finance Bill I would be provided with ample material with which to speak on this subject this morning.
It is now 17 months since the Irish people, for reasons which many of them will never understand, elected this Coalition Government. In studying the Finance Bill, 1974, we are given a golden opportunity of studying the record of this Government in the past and their plans for the future, whether that be short or long. We were led to believe that this was a Government interested in a just society. On numerous occasions we were told they were a Government of tremendous talent. If this Government had the talent they claim to have, then the Bill before this House would be very much better than it is. It is now becoming very clear to many people that while members of this Government may be talented in their  own particular spheres, they have not yet mastered the art of governing.
A plasterer or a painter does not learn his trade by reading books. He must have a natural gift, very often handed down from father to son or from another member of the trade. The same could be said about politics. When one studies the state of this nation today and considers what has happened in this country in the last few months and what might happen in the next few, one must realise that while the Cabinet may consist of sound academics, good solicitors, good teachers, they simply have not got, and would appear not to be in a position to get, the knowledge of how to govern this country.
Never since the foundation of the State has this House taken part in a debate on a Finance Bill at a time when the outlook in this country was more bleak than it is today. Yet, the public relations exercise is such that many people have been given the impression that it was never so good in this land. If we examine Department after Department, we find that they are in a state of chaos. The Minister, in the course of his speech, tried to give the impression that the oil problem was responsible for all our ills. I remember 1957 when the then Coalition Government fell, they blamed the Suez Canal, and in 1951 when the first Coalition Government fell they blamed the mother-and-child scheme. Listening to Senator McCartin and others it would appear that Members opposite are prepared to blame everything and everybody except themselves. It is true to say that oil and other outside sources are responsible for 50 per cent of the inflationary increases in this country in the last 12 months, but it is also true to say that this Government, through their own incompetence are responsible for the other 50 per cent.
Housing is probably the greatest example of this incompetence and inefficiency. I know that the Minister is quoted as having stated that sometime today he will make an announcement and, according to yesterday's Evening Herald, he promised good news for  house purchasers and bad news for Fianna Fáil. If the Minister really used these words I would like to know what he means by bad news for Fianna Fáil, because if the Minister makes an announcement that will ease this situation, that will improve the lot of people trying to purchase their own homes, that will retain at least some of the building workers in their jobs, then the Fianna Fáil Party, as a responsible Opposition, will naturally welcome it. If the Minister really wants to give good news to the housing industry at this stage, he must inject no less than £40 million into that industry. I do not think that he or his Government should have waited until today, should have waited until the building industry was at its last gasp before making such an announcement.
I read where the Minister said that there was no gold in Merrion Square. There was no gold in Merrion Square when Fianna Fáil were in office, but we never had such a problem in the building industry since the spring of 1957, when the last Coalition Government were in office. I remember being told by people in the building industry 17 months ago, when this Government took office, that the first major crisis would be a housing one because the National Coalition Government simply did not know how to handle the housing situation in this land. When one reads yesterday's Evening Herald one understands how serious and how critical the situation is. I should like to read a short extract from yesterday's Evening Herald. It states that:
Hundreds of building workers throughout the country will be laid off next week as the biggest recession ever felt in the home building trade begins to bite. It is feared that it may be the start of a situation warned of by the Construction Industry Federation which forecast as many as 5,000 redundancies. The men are being laid off by the giant Gallagher and McInerney companies as part of a running-down operation ordered after a dramatic sales slump in new homes. They will receive their last wage packets as they go on holidays on Friday week  and will be told that they will not be needed again until the industry picks up. The Gallagher Group are laying off 500 men on sites in Galway, Waterford and Dublin. For the past six weeks there have been minor lay-offs but last week sales chiefs in the Gallagher Group ordered a big redundancy after studying new homes sales. On the Templeogue site, run by the Gallagher Group, about 150 workers have already been laid off and a further 100 will be made redundant on Friday. The sales staff of the group has been drastically cut and after the official holidays the six Gallagher sites in Dublin will operate—on skeleton staff only. Official spokesmen for the building trades are blaming the Minister for Local Government, Mr. Tully, for the forced lay-offs. They say that if the Minister raised the level of local authority loans, they could get business moving again. They point to sales figures of new houses during the last four months to back up their arguments.
On one estate of 150 houses a home has not been sold since 1st April. The houses, almost completed, are lying idle as hopeful buyers cannot raise the full price. In another area deposits for 150 houses were taken but only 50 people got their homes. A spokesman for the building group involved said today that they were being crippled by the Minister's refusal to raise the amount of the SDA Loan.
It is possible that the Minister later today may announce an increase in the SDA loan and if he does we will naturally welcome it. However the question that we would ask is: “Why, why, why wait until now?” Why wait until the building industry is experiencing one of the greatest crises or the greatest crisis since the last National Coalition Government took office?
At the same time, the Minister for Local Government has been boasting that in 1973 there was a record number  of houses built. That is quite true. There was a record number of houses built in 1973-74. Apparently this Government believe that if they repeat this statement often enough the people will not take into consideration that Fianna Fáil were in office until 14th March, 1973, and that the plans and the money for most of these houses must have been provided when the Fianna Fáil Government were still there.
Listening to the Minister, one would get the impression that on 15th March last he waved the magic wand and that suddenly 5,000 or 6,000 houses appeared throughout this country. It is natural that in 1973-74 there should have been a record number of houses built as a result of good planning by the last Government. Halfway through that year it was obvious that plans for 1974-75 would be delayed. We now have a very serious housing crisis. In this Bill the Minister should have injected at least a further £40 million into the housing industry.
In the Dáil the Minister refused to accept an amendment from Fianna Fáil to help the building societies to provide tax-free interest, up to a maximum of £5,000, to encourage people to invest. This would have provided a tremendous incentive to people to put their money in the building industry. However the have-nots who are supporters of the Coalition—and particularly in the Labour Party—would not allow anyone to make money. The whole policy of this Government as enshrined in this Bill is that this should be a nation of poor people. Five years ago when the building industry was thriving, we continuously listened to the builders being lambasted by Fine Gael and Labour. They were called Fianna Fáil hacks. Everywhere we went we listened to charges about Taca and we were told that all the builders in the country were Tacamen. It was quite obvious that supporters of the present Government deeply resented the fact that there were builders in Ireland who made money. We should never allow ourselves to forget that when builders are making money there is employment  being provided for our people, and that the money these builders are making is ploughed back into Irish industry.
I always got the impression, listening to members of the Fine Gael and Labour parties speaking on this subject, that they would have been far more content if the builders of Ireland were not making money. Apparently their wish is now being granted, whether by design or through the incompetence and ineptitude of the Government. It would appear that for at least this year builders will not make money, and so we have reached the situation of a certain 5,000 redundancies and hundreds of houses lying unsold. If the building industry collapses it is the duty and responsibility of the Government to put it on a firm footing again because this industry is one of the most important we have. At the moment the maximum SDA loan is £4,500. Only a few years ago it was £1,600. At that time, in rural Ireland at any rate, houses cost from £2,000 to £2,500. The borrower had only to find from £400 to £900. Today houses are costing anything from £7,000 to £10,000. It should be obvious to everyone that it is virtually impossible for most people to raise on their own initiative from £3,000 to £4,000.
The Minister for Finance must realise there is no money available in this city at the present time. I do not believe that even the Minister for Finance himself, if he wanted £5,000 to build a home, could get it in this city this morning. Assuming that the Government decide to increase the SDA loans to a maximum of £7,000, we face another major problem as far as the borrower is concerned. A borrower must pay £8.50 per month on every £1,000 borrowed over 30 years at 9½ per cent interest. That was the last interest rate that money was lent at, in Donegal at any rate. If a person were able to borrow £7,000 through an SDA loan, it would cost him £59.50 a month, or around £15 per week. This is an astronomical sum for the average borrower to pay.
We must remember that many of the people in rural Ireland who avail  of these loans could wait and insist on being housed by the housing authority. Instead many of them use their own initiative and house themselves with the help of these loans. I feel that more people would use their own initiative if they were given the proper encouragement by way of grants and loans. It is not enough to say the loan should be subsidised, and heavily subsidised, by the State. A man whose income is such that he qualifies for an SDA loan should be charged more than 3 per cent for that loan. If that man does not build his own home and waits for the local authority to house him it will cost the State a lot more than 3 per cent to provide him with a home. We are reaching the stage when it will be impossible for young married men in particular to repay these loans. Many of these men will decide that it is the responsibility of the State to house them; but if the Government were to subsidise this loan in the same way as they subsidise housing in general, it would be an incentive to these young men to provide their own homes.
I cannot understand what I read in speeches from Government Deputies and their supporters and Senators about the great work that this Government have done in the field of housing. I can only conclude that they believe that if you say a thing often enough some people might believe it. In this field in particular the Government have failed dramatically in the last 12 months.
The agricultural industry is also going through a major crisis. Senator McCartin summed it up well when he stated that the level of farm incomes was so low that farmers have nothing to worry about so far as the tax proposals are concerned. I remember meeting a few farmers a month or so ago and I reminded them of the march to Dublin when Fianna Fáil were in office. I reminded them of the long hot days when they lay in Merrion Street. I asked them why were they not doing this now. They told me they could not afford to do so, that they have not the money to come to Dublin now and that they realise that under Fianna Fáil they were well off and well treated. Now they realise that when problems arise  in the agricultural industry we have a Government with little or no interest in one of our most important industries. A study of the membership of the Cabinet reveals clearly that the Taoiseach did not know that there were any farmers in Ireland when he was picking his team.
Apart from the Parliamentary Secretary who is present, he must have thought that the west was asleep. I have no doubt that the Parliamentary Secretary will keep the west awake. I cannot understand that in the year when farming is at its lowest ebb, when the farmers are losing money hand over fist, when farmers are dejected and discouraged, that is the year the Government decide to tax them. While we are told that it is only the big farmers who are being taxed it should be obvious to everyone that this is the thin end of the wedge. Once this proposal is carried it will be very easy for the Minister to reduce the valuation limits as each year goes on. Indeed, I feel that Senator McCartin was feeling the same when he was advocating a new look at the rates question before there is an advancement in any wider sense than what is in this Bill. The only wider sense, as far as taxing the farmers is concerned, would be to reduce the valuation limits.
I would not disagree with taxing farmers provided this whole question of valuations was revised. Rates are a major problem for many farmers despite improvements brought in by Fianna Fáil. In Donegal the land along the River Swilly is very heavily rated in comparison with land further away from it and I presume similar situations obtain throughout the country. I think there is some historical reason for this. Nevertheless this situation exists.
Up to now, farmers had to pay this demand on their lands whether they were making money or not. Naturally it is disturbing for them to realise that they may now be faced with a demand for income tax on top of these excessive rates demands. I strongly disagree with the proposal in this Bill to impose tax on one year's working and not being able to carry losses in a  particular year over to the next year. It is natural and understandable that the farmers caught in a tax net should justly claim that they should be taxed over a three-year period. If investments they make in this financial year do not show a loss until two years' time, it is possible they would have great difficulty with the Revenue Commissioners.
I presume that in order to tax the farmers their holdings, stock and machinery, would have to be valued, or at least that their valuations would have to be checked. Who will carry out these checks? Will it be a civil servant born and reared in Foxrock or Rathgar, who would not know the difference between a heifer and a bullock? Or will it be someone qualified in this field? I raise this matter because of some experience I have had of the health boards' assessments of farmers' incomes. As Senator McCartin may recall, I tried to change the procedure at one stage under which this assessment is made. When I rang officials of the health board concerned for an explanation why a small farmer with ten or 12 cattle was refused a medical card, I was stunned to discover that the official concerned did not seem to realise that these cattle had to be bought and fed and indeed to be sold at a loss. These officials simply looked at the newspaper and got the valuations of these cattle and decided that a small farmer on 40 acres of Donegal land with ten or 12 bullocks was so wealthy that he did not need or deserve a medical card. If the same small farmer was in full-time employment he could earn for the number of children he had up to £28 per week and qualify for this card. I got the impression that officials of the health board did not understand how to assess the incomes of small farmers and that is why I am wondering how the Revenue Commissioners will tackle this problem. Perhaps the IFA should encourage more sons of farmers to go into the Civil Service, particularly the Revenue Commissioners.
Since this Government were elected we have been reminded of our interest  in the poorer sections of this community. Indeed, reading some of the speeches on this very Bill in the Dáil one would think that Fianna Fáil did absolutely nothing for the poorer sections of this community. I submit to this House that this Bill is not doing enough. When one considers the inflationary increases, this Bill has left the pensioners worse-off than they were 12 months ago. The Minister and the Parliamentary Secretary can produce statistics, percentages and figures of one kind or another to suggest that this Government were the only Government to tackle the problem of social welfare recipients in a just manner but the pensioners have been treated most unjustly and many of them can barely exist on what they are being paid today.
We have been told that in this Bill there is a 19 per cent increase in pensions. The contributory old age pensioner, for example, has had his pension raised from £7.30 to £8.50 a week, an increase of 19 per cent. The average inflationary increase has been estimated at 16.2 per cent. Bread has increased by 20 per cent and biscuits have increased by 40 per cent. Bread is the basic foodstuff most commonly used by the pensioner. In the last 18 months the price of meat has leapfrogged time and again. Does the Minister really believe that a pensioner living in a rented house could possibly exist on the princely sum of £8.50 per week?
There is no point in his replying that that pension has been increased in this Bill by £1.20 and that under Fianna Fáil it was increased by 50p. Indeed, it did increase by £1 in one year. As a result of the price increases the old age pensioner would have required an increase of at least £2.50 per week to compensate for the alarming increase in the cost of living.
When I spoke to pensioners living in local authority houses, particularly during the local elections, I realised that the greatest social contribution made to the lot of pensioners was that which was made by Fianna Fáil when they introduced the rates exemption scheme. As a result of that  scheme many pensioners were saved over £1 per week in rates. Not only were Fianna Fáil able to provide a scheme which saved the pensioners the £1 per week, but at the same time they increased their pensions from 50p to £1. Therefore we could justly describe this incease as a miserable pittance. When I listen to some supporters of the present Government boasting about their great achievement in this field I think they are very much out of touch with the poor sections of this community.
If one took the figure of £8.50 per week and priced the essential commodities required by the old age pensioner, one would realise that in 1974 a pension of £8.50 per week is an insult to those people who served this country well in days gone by. The figures for poverty are alarming. It is not enough for the Government to say that their increase in any one year is a record. When Fianna Fáil were in office they introduced tremendous benefits for these people—free travel, free television licences, free electricity, the rates exemption scheme, the pay related scheme, improved health services and so forth. This was in addition to their pensions and increases.
The only thing this Government are good at is public relations, selling their product, no matter how it is packed. If they can in any one year have a figure higher than Fianna Fáil, they hope the people will forget all the very useful schemes introduced by us when in office. Considering Fianna Fáil's record in the social field, this Government of the Just Society and the so-called talents have failed miserably in this Finance Bill to stand by the pensioners, the recipients of disability allowances and so on. At the same time they continue to shout loud and clear what they have done. This Government must accept responsibility for at least 50 per cent of the price increases which have taken place. They have demonstrated clearly in this Bill that their intention in the future is to make the rich poor. The economy would be in a much stronger position if this was not the policy of the Government. It is bad enough  to make the rich poor but worse when it is also the obvious policy of this Government to make the poor poorer.
Mr. Brosnan Mr. Brosnan
Mr. Brosnan: I promise to be very brief and to confine myself solely to the provisions of section 59, the section which seeks to give powers to the Revenue Commissioners to obtain certain information about certain matters by compelling solicitors to disclose information they receive about their clients' affairs in the course of their professional duties. As a layman, I regard this proposal as objectionable and, as a lawyer, I regard it as obnoxious because it is a blatant attempt to undermine one of the most basic fundamental principles of our law. The Minister—who, unfortunately, is not with us at present—is well aware of the principle to which I am referring. It is a principle which has been long-established and time-honoured and one which recognises the uniquely confidential relationship that exists between a solicitor and his client. The principle has been established over the centuries and it has been accepted, respected and practised by the members of the Minister's own profession.
In this proposal the Minister attempts to breach this basic principle which goes to the roots of the practice and procedure of law in this country. All communications between a solicitor and his client are privileged and protected by this unique relationship. Never, except on very, very rare occasions, if any—I am open to correction in this—is a solicitor entitled, without his client's permission, to disclose any matter which he came by in the course of his professional dealings with his client. There may be one exception that I can visualise and that is in the case of a solicitor acting for two parties in an action where the subject matter of the dispute was applicable to both the plaintiff and defendant. Perhaps, in a case like that, the solicitor could be compelled to disclose information received by him in relation to the particular dispute. The Minister, through his advisers, or my  colleagues Senator Robinson or Senator Eoin Ryan, may be able to assist me in that. This relationship is sacred, much more so than even the relationship between husband and wife, between a doctor and his client and even between a priest and a penitent, because in all these cases, so far as I am aware, one party in many instances is compellable and competent to give evidence without the permission of the other party in a court of law. That applies in the case of a doctor. So far as I know, a doctor can be compelled to disclose matters relative to his patients. In the case of a priest, if not in this country certainly in England, a priest can be compelled by law to disclose matters and information which he received in the confessional. Only in the case of a solicitor in relation to his client is this very, very vital and important principle completely privileged and protected.
I hope I am reading the part of the section I am concerned about correctly. At subsection (3) of the relevant section the word “compellable” is used—I do not want to read the whole section because I am concerned only about the word “compellable”—and I wonder if it is being used in the strictly legal sense because, if it is, it means that a solicitor can be compelled in law—he can be brought before the courts by way of subpoena—to give evidence in any of the matters mentioned in this section in relation to revenue prosecutions. Perhaps the Minister would inform me whether or not I am correct in construing the word “compellable” in that sense. Having regard to that, it is not surprising that this proposal has caused such alarm, not alone in legal circles but among the general public. I am sure the Minister is aware of the opposition of the Incorporated Law Society, of which he was a member, to this proposal and of their expressed determination to resist the implementation of this proposal.
Another point which occurs to me about this section is the fact that there is no penalty provided for the failure of a solicitor or banker to comply with the provisions of this section. I should  like to know from the Minister how he proposes to deal with a solicitor who refuses to make these disclosures to the Revenue Commissioners. I am sure there will be many who will refuse to make disclosures. How does he intend to deal with them? Does he intend to compel them by subpoena to attend the court and put them into the witness box to answer questions? If they refuse to answer questions, how will they be treated? Will they be treated as hostile witnesses or will they be committed to prison for contempt?
These are matters about which I and many others, including the legal profession and members of the public, would like to hear more. It is because the Minister knows well that this provision is frowned upon that has failed to provide any penalty or any sanctions for failure to comply with this provision? Is he afraid that the courts would be reluctant or incapable of implementing the provisions?
In his budget speech, in his introductory speech on this Bill and on many other occasions, the Minister has promised fair and equitable tax reform. The proposal in this section is neither fair nor equitable. It is certainly not a reform. It is a retrograde step and a very, very dangerous precedent. I would ask the Minister to reconsider this. Members on this side of the House will put down amendments to the section.
Mr. Moynihan Mr. Moynihan
Mr. Moynihan: The provisions in this Bill are of the utmost importance to the country and to the community as a whole. For the first time in our history, legislation is endeavouring to make income the criterion and the yardstick by which direct taxation should be measured. It was regrettable to hear Senator after Senator and Members of the other House saying we should continue to keep a privileged class of wealthy farmers out of the tax net. Let us be clear without any semblance of ambiguity what this Finance Bill says in relation to farmer and agricultural community taxation. It clearly and unmistakably specifies farmers whose valuation is in excess of £100. It is quite reasonable  to assume that such people have, with some exceptions, a profit income in the main substantially in excess of vast numbers who have been subjected, and continue to be subjected, to income tax. It is only realistic and it is elementary justice for any responsible Minister for Finance, or any responsible Government to close such escape loopholes in our tax legislation.
The speakers in both Houses have clearly and unmistakably said that, in their opinion, these people should continue to remain outside the tax net. They are entitled to argue in that fashion; it is their right. But let there be no mistake about it: in our opinion it would be unjust and quite wrong to continue committing the ordinary wage- and salary-earner to carrying the main burden of income taxation, while people with incomes very substantially above these are continued in a privileged class. The Minister and the Government have a responsibility to see that not only is justice done in this very important field of national taxation but that it is clearly seen to be done by ensuring that the yardstick is applied equally to all citizens.
I have a good knowledge of the difficulties and problems of farmers. I come from a farming area and I have a farming background. I know there are many thousands of farmers who will, because of income limitations, never come within the tax net but that is no reason why those who have the income and are within the range should continue exempt from their elementary duty to contribute to the national Exchequer.
The Minister is to be congratulated on this simplification of the tax code. Clear-cut figures are set out in respect of single people, married people, children, the housekeeper and the handicapped. Up to this it required all the energies and intelligence of a legal man to decipher the taxation laws. The change is to be commended. It was essential that every citizen should know clearly what the allowances were and what their rights were under the income tax code.
Senator McGlinchey, while attacking  the method of collection in so far as it rambled into the wealthy farmer situation, said that there should be a revaluation of land. I wonder how enthusiastic are the small farmers in the west about revaluation of their holdings. Through hard work and persistent effort over the years much land has been won from bog and mountain, but the valuation has not been changed. I can assure Senator McGlinchey that, if there were an effort now or at any time to carry out a revaluation of this land, it would be very seriously and vigourously resented.
Senator McGlinchey went on to complain of the inadequacies of the social services. Nobody in the present Government has said that the social services are as adequate as they would like them to be but, at least, let us accept that within their short period of office, the Government have made a genuine effort to reform completely the inadequate social services, which had resulted in a situation in which a substantial number of people, mainly those in the social welfare recipient classes, were living below the poverty line. Not only have the allowances now been increased but there has been a relatively wide expansion in the categories of people for whom provision is now made.
Senator McGlinchey also said that the new pension rate of £8.50 for a non-contributor was entirely inadequate, but he failed to mention that that £8.50 has been, under this Bill increased by a further £3.80 where the wife of the pensioner is less than 68 years of age. This is an important improvement in our social services. Furthermore that £8.50 is now available at the age of 68 years whereas under the Fianna Fáil Government the recipient would have had to attain the age of 70 in order to qualify.
During the period of the Fianna Fáil Government many efforts were made to have the 70 years qualifying age reduced and we were repeatedly told that this could not be done. Within a year-and-a-half of the present Administration the 70 years  has been reduced by two years to the immense benefit of a number coming within that category.
The deserted wives, heretofore committed to the unfortunate principle of home assistance, and the unmarried mothers are now legitimately accepted as people in need and have the dignity and independence of receiving proper and reasonably improved social welfare benefits. The parents of handicapped children have been brought into the social welfare code with an allowance of £25 per month in respect of each child. These expansions and improvements are but a start in social reform, a social reform requiring substantial additional moneys from taxation. It is against that background, this expansion and this development, that we have had speaker after speaker in this House, and in the other House, advocating that the wealthier farmers in excess of £100 valuation should still remain a privileged class by being exempt from the normal direct taxation that the farm labourers have had to meet down through the years. Any situation where the labourer is committed to a taxation system while his employer is exempt is indefensible in 1974. I congratulate the Minister for the start he has made in this Finance Bill in broadening the scope of the tax code and simultaneously amplifying it.
Mrs. Robinson Mrs. Robinson
Mrs. Robinson: The annual Finance Bill is the framework in which we decide each year the size of the national cake, where the ingredients come from and how it will be divided. In doing this we must examine the Bill in the light of the overall economic context. I do not propose to echo the extravagant style of that eloquent profit of doom—Senator McGlinchey— but I think that all of us must realise that the various indications are gloomy. They call for a responsibility both on the side of the Government and among the Members of the Oireachtas to come to grips with the economic situation and to try to put forward proposals and reforms of the taxation code as part of the overall strategy necessary to  resolve the problems which will face this country over the next few years.
The Minister, in introducing the Bill pointed to the fact that his budget this year had been based on an expansionary strategy. He then went on to say:
The further disimprovement in the interval in the external situation, the unfavourable developments in the agricultural sector and the reduction in domestic purchasing power attributable to the increases in the price of oil and oil-based products will make the achievement of the target growth rate of 4¾ per cent then set for the economy in this calendar year difficult to attain and will make the somewhat lower growth rate— of the order of 4 per cent— more probable.
In fact, I think that this is an optimistic forecast of our growth rate over the next year but it is somewhat at odds with other assessments. For example, the June commentary of the Economic and Social Research Institute report opens, first of all, on a very gloomy note by saying:
The picture emerging in relation to developments in the economy in 1974 now appear to be quite unfavourable. The year is likely to experience a low rate of growth of real output, a very high balance of payments of deficit and a high rate of price inflation. These have been accompanied by little increase in non-agricultural employment and a rising level of unemployment. It is important that this position be acknowledged so that expectations out of touch with reality are not generated which would considerably worsen the situation.
Then the report goes on to assess the predictable growth rate:
Recent trends in consumer prices indicate that inflation in 1974 will be of the order of 16 per cent. Increases in prices in the beginning of the year were probably largely due to the very rapid rise in import prices. The concentration of wage and salary increases under the National Pay Agreement in the  second half of the year suggests that prices will continue to rise substantially throughout the next six months of the year. The one consoling feature of the present inflation is that our price rises are by no means exceptional by international standards so that the loss of external competitiveness is not likely to be great. However, it does have its own internal implications. The need to reduce the present rate of inflation is just as great as ever. Terms of trade movement are also likely to be adverse in 1974. Export prices are forecast to rise by 11¾ per cent with import prices rising by 30 per cent. The relatively small increase in export prices is mainly due to the climbing cattle prices. Thus, though the volume of real output produced in the economy might rise by 2¾ per cent, real living standards seem likely to fall. The trading loss this year will be equivalent to nearly 6 per cent GNP in 1973 so that adjusted GNP in 1974 will probably fall by 3¼ per cent. Probably the most serious developments have been those in relation to external transactions. Exports of goods and services are forecast to grow by 25½ per cent while imports of goods and services should grow by 40 per cent. The results of these developments is that the balance of payments deficit on current account is likely to be of the order of £250 to £300 million.
The major problems facing us now are the staggering rate of inflation and the crisis posed by the sharp rise in oil prices, aggravating the already existing balance of payments deficit calling into question the ability of a democratic country such as ours to respond with sufficient urgency and imagination to such problems.
The first matter which must be resolved is where the responsibility lies for the dramatic rise in inflation. The Government have tended to point too much to external factors and to try to explain the sharp rise in prices here by pointing to world inflation, the energy crisis and the consequent sharp rise in oil prices. It was salutary to see the Central Bank putting the responsibility  back on the Government in saying that the inflation is not due entirely to external factors but that we also have sharp domestic inflation caused within our own island by factors which could be under our control. I quote from the Central Bank report at page 7:
It is a fallacy, even for the open Irish economy, that inflation is due more to external than to internal causes and that it is beyond our power to curb or control it. If this were true, and the only armoury a country had against a mainly imported inflation was price control, the situation would be a sorry one. Price control, as is obvious, can prevent only “unjustifiable” price increases: those justified by increased costs of imports or of home products and services it can do nothing about.
The fact is, however, that even during 1973, when basic commodity and energy prices soared spectacularly, and food prices continued to rise, imported inflation accounted directly for no more than half the rise in Irish retail prices. Domestic causes, not beyond the community's capacity to influence, remained important. The most powerful of these, as for many years past, was the much faster rate of increase in money incomes than in national productivity. In its Spring Bulletin the Central Bank analysed this domestic source of inflation, emphasised the need to curb it relative to EEC trends if full employment is to be a realistic national aim, and suggested a broad approach to this difficult problem. The moderation required is of monetary rather than real standards, since improvements in living standards are finally determined by the community's productive effort and not by illusory increases in money incomes.
This is the economic context in which we must examine the provisions of this Finance Bill. There are difficult problems to be resolved and the decisions which the Government will have to make will be hard decisions. As we know from recent documentation and reporting, the distribution of wealth in  this country is not as fair or as equitable as it should be. We know the horrifying statistic that 25 per cent of the population are below the poverty belt. We know there has been and continues to be a good deal of tax evasion by those in a position to contribute more to the national welfare.
There remains the question of the capacity and determination of the Government to insist upon a more equitable tax system and to have the courage to bring in and enforce the tax provisions which will result in a fairer distribution of wealth and national income. I welcome the provisions of this Bill which rationalise the personal income tax provisions; secondly, I support the introduction of taxation for farmers who are at a level to support such taxation. I will come back to this point later. I should like to reinforce the Minister, to encourage him, in his intention to bring in a wealth tax at a later stage and to ask him not to water down these provisions: not to back down in the face of what is a very interesting collection of forces trying to persuade the Government and the Minister in particular not to bring in the tax proposals which he has promised. It is an interesting indication that there are more financial barons in Ireland than we had anticipated. This should encourage the Minister to go ahead with the necessary, fair and equitable proposals which will introduce a fundamental morality which is a much broader concept than the way in which we usually talk about morality —when we confine it to the narrowness of sexual morality. It will introduce a morality which is based on the dignity of citizens and gives them the prospect of a decent life and a decent old age, and a pension when they become ill or fall on hard times.
There is a real responsibility on the Government to grasp the significance of the economic indicators I have referred to. The Coalition Government have been in office for 18 months. They have got used to being in office and have got over the period of being able to either blame the previous Administration or claim it is too soon to implement their own particular  policies. They are now long enough in office to be responsible for the management of the economy and for the running of the country.
Indeed, the Coalition Government are probably at their strongest point at this stage. The Constituencies Bill, which was introduced by the Minister for Local Government to suit the Government in office and not as a result of a report by a boundary commission where the redrawing of constituencies would have been seen to be fairer and more equitable has ensured the likelihood, unless there is a very significant change in the overall political situation, of a return to office of the present Administration for a further term.
Consequently, the Government are in a strong position to implement unpopular economic reforms and to take the economic decisions which must be taken if we are not to see further aggravated the very serious factors undermining the standard of living of our people, particularly the more vulnerable sections of the community. There is a serious responsibility on the Government to decide on their priorities; to act as a coherent and collective authority in coping with them and to have the courage to be honest with the people about the situation facing us. They must be open and positive about the steps necessary to resolve these problems.
I should now like to consider the question of the tax provisions in this Bill affecting farmers, as this has been the subject of much discussion. I believe it is not the particular provisions in the Bill itself—which affects farmers who are in what most people would regard as the wealthy bracket, with farms of £100 valuation or more —that are in dispute. Rather, the outcry is an indication of the unease and lack of confidence in the farming community generally at present. I think the particular provisions of this Bill were conceived and worked out in a different context to that which is facing the farming community at this period. It is particularly unfortunate that at a time of such deep  crisis and lack of confidence in the whole sector they find themselves for the first time included in the general tax net.
Undoubtedly, it is fair in an over all context that the more wealthy farmers should be included on the basis of their ability to pay. However, I believe the Government must and ought to show much more positive concern for the general farming community and a much greater flexibility and awareness of the real need for support and backup during this particularly difficult period. Farmers need help in planning to cope with the particular cycles whether it be a beef mountain or whatever, and the individual small farmer who depends on cash flow must be assisted to cope with his particular financial problems at the moment. This type of concern has not been evident at Government level. As a result, I believe the attempt to bring the wealthier farmers within the tax net has evoked very sharp and bitter resentment. This is a focus for a much broader and deeper bitterness resulting from lack of confidence generated by new types of problems for which the farming community have not been prepared or equipped to cope.
Looking at the general situation in relation to agricultural incomes it is relevant to quote from the June commentary of the Economic and Social Research Institute, at page 18:
The prospects for agricultural incomes in 1974 are now considerably less bright than at the time of writing the March commentary. The main causes for these diminished prospects are (i) the continued depressed state of the market for cattle and beef and (ii) the dramatic upsurge in the number of cows being slaughtered which will reduce the level of cattle output in 1974.
... An interesting feature of the current situation in regard to cattle prices is the failure of the EEC intervention system to maintain actual cattle prices at or above the intervention price.
This is an area where there has not  been evidence of a responsible Government attitude. To say the least of it, the Government have been either half-hearted or uncertain as to what exactly our approach should be at the European Community level in meetings of the Council of Ministers on questions of agriculture. The impression is given that the Minister for Agriculture and Fisheries is saying things at the meeting of the Council of Ministers intended for domestic consumption back here in Ireland, which he knows will not be acceptable and which he may not even wish to be acceptable. There is a good deal of window-dressing which is not really trying to redress the fundamental problems facing the farming community at the moment. A much more concerted attempt to re-examine the whole intervention price system and if necessary, the whole framework of the common agricultural policy itself would be more productive.
At the time when the Treaty of Accession was being negotiated, this particular matter of intervention prices was not argued or examined very extensively because the problems did not exist at that time. There was no prediction of the particular beef crisis which faces us in 1974. Therefore, these particular problems were not worked out, and there were no detailed provision drawn up as there were in relation to dairy produce. The Government should be examining the extent to which it might be possible to change and improve the intervention system in order for it to be of more real assistance to the farming community during what is regarded as a cyclical period; a period where the farmers are in danger of doing the worst possible thing by disposing of cattle for uneconomic prices because they need to have ready cash available.
There would have been much less resentment of the legitimate attempt to bring wealthier farmers within the tax net if the Government were discharging an overall responsibility in relation to the farming community. If their critical problems were better understood, and if there was better  information available to individual farmers to enable them to cope with the immediate problems they would accept the present provisions without protest. There is far too much panic in the farming community that this is a long-term trend rather than a cyclical matter, and they are not being sufficiently helped or advised in coping with it.
I would also like to refer to the position of those receiving social benefits. In his introductory speech, the Minister, with some justification, pointed to the Government record in this area where he said:
In the period since this Government took office Exchequer expenditure on social welfare has all but doubled. Further, the work will continue of extending the scope of the social welfare services and generally improving them by, for example, easing means tests and lowering qualifying ages.
We have at last realised our responsibility towards the more vulnerable sections of the community which is evidenced by our greater awareness of the need for improving our social welfare benefits. Commendable measures have been taken in the last 18 months to introduce the necessary reforms. However, to a very large extent the real significance of these social benefits is being completely eroded, at the moment, by the high cost of energy and by inflation. People who are in receipt of what look like better social benefits find that they cannot meet the quite staggering increases in electricity, gas, and the cost of the basic commodities, and particularly food. Some are worse off than they were a couple of years ago.
This prompts me to develop the idea of the necessity for flexibility by the Government in relation to the problem of higher energy costs and increases in the price of basic commodities such as food. We must be more imaginative in devising ways of preventing these price increases from hitting the weaker sections of the community as substantially as they hit the general community. We must devise ways of  ensuring that the real standard of living of the people in receipt of social welfare benefits continues to rise, and that wherever the cost is met it is met by other sectors of the public. This is an important social problem which must be faced with a good deal more imagination and flexibility by the Government.
In emphasing the very serious economic situation facing this country the June Report of the Economic and Social Research Institute concludes in the summary of its provisions:
In the short-term problems of inflation, current account balance of payments deficit, and possible unemployment, are acute. It is thus necessary to convince the public that total real income will be lower than last year. In the medium term things could be very much different. It is unlikely that the developed world will allow a period of prolonged deflation and a reversal of present policies can be expected. The long term outlook for cattle remains favourable despite the apparent difficulties. Industrial and mining potential continues to grow. Above all there is the probability of significant offshore oil and gas. Knowledge, it is precise knowledge that is lacking, that in five to ten years Ireland could perhaps be a net exporter of oil and gas, would reduce the necessity for short-term action to protect the balance of payments and allow a period of very rapid growth in the future.
I think that this is a key passage in the report. At the moment we are in a rather unpredictable period. In the short term all the economic indications are gloomy and the resultant problems are very real. There will be a hard time ahead in an economic sense, and that means a hard time politically. It is not easy for any democratic government to take hard decisions. In appreciating this, I shall repeat the point that if ever the Coalition Government were in a position to give leadership it is now when they are long enough in office to know what government is about  and when they have the likelihood of a second term ahead of them so that they ought to face up to their real responsibilities in the matter.
There must be a great deal more study of and information about the longer term potential in this country; and much more evidence of coherent long term planning. We could well be mistaken in taking certain steps now with a short term perspective in an attempt to meet particular political problems, without having a longer term framework. We could even create unnecessary difficulties, or prevent the possibility of reaping the full advantage to be gained if and when the resources of oil, gas and mineral wealth are fully known. We must be prepared to take more initiative ourselves in encouraging the necessary research and exploitation of our natural resources within a time scale which would allow us to plan over the next few years in the knowledge that the particular balance of payments problem will be resolved in time by the use that can be made of our latest natural resources.
Although we are a small country with quite substantial economic problems and with a very harsh inflation rate, we must realise that in a world context we are one of the developed countries in that we are a member of the European Community which is one of the wealthy power blocks in the world. At this time the world itself faces one of the most serious periods of real crisis, in human terms, with the possibility of mass starvation on an enormous scale particularly in the developing countries which have no natural resources— what are now called the fourth world countries to distinguish them from the OPEC and mineral producing countries.
We must not allow our own internal problems to prevent us both from assuming our own share of the moral responsibility for a redistribution of world income and of world capacity. We should speak with a strong and clear voice in encouraging the other members of the European Community, and the countries of the western world in general, to act with  much more urgency and endeavour both in the immediate terms called for by the World Bank in its attempt to establish an emergency fund for concessionary grants to these developing countries and also in evolving new structures in international co-operation which will eliminate the totally immoral, unjustifiable and unsupportable situation where you have mass starvation in some countries of the world and over production in others.
Therefore, I conclude by reminding us that this particular Finance Bill is about the distribution of the wealth of the country in a domestic framework. However, it must be examined not only in relation to short-term domestic economic problems, but to our long term potential and also bearing in mind our capacity to meet our international obligations. I would like to see more evidence that the economic situation is first on the order of priorities of the Government at the moment. Coping with inflation should be their real priority, and not discussion on other matters where there is no political will to bring about a solution.
I would like to ask the Minister whether in view of the very serious economic situation he is prepared to set about achieving a consensus—or a social contract—for the introduction of a prices and incomes policy? This is something which he should try to achieve over the next few months as a crucial part of the essential framework within which we can continue to have a reasonable society and continue to have a community which accept without friction the necessary drop in real income and real standards of living over the next few years.
Mr. Dolan Mr. Dolan
Mr. Dolan: The Finance Bill gives the House an opportunity of discussing the state of the economy. From my point of view, I am particularly interested in sections 13 to 25. These, as Senators are aware, deal in the main with methods which will be employed to ensure that the farmers will pay income tax. Let me say at the outset that I would be one of the first to concede that all citizens should in equity and in fairness pay their just share of  taxation. I am well aware that if a large number escape the income tax net it will leave a greater amount to be paid by other people. Certainly it will mean that many people who are already carrying heavy weights and doing it voluntarily in so far as social services and so on are concerned, are also being forced to carry the extra burden of income tax for people who are well able to pay it and who for many years, through various devices of their own, have been able to elude it.
Business suspended at 1 p.m. and resumed at 2.30 p.m.
Seanad Éireann 78 Finance Bill, 1974 ( Certified Money Bill ): Second Stage (Resumed).