Dáil Éireann - Volume 474 - 30 January, 1997

Financial Resolutions, 1997. - Financial Resolution No. 5: General (Resumed).

Debate resumed on the following motion:

THAT it is expedient to amend the law relating to customs and inland revenue (including excise) and to make further provision in connection with finance.

—(The Taoiseach).

Minister of State at the Department of the Environment (Ms McManus): When the debate adjourned yesterday I was speaking about the good work being done by the ministerial task force on measures to reduce the demand for drugs. The State improvement scheme delivered as a result of the work of the task force will focus on priority areas in Dublin, both city and county and in the cities of Cork and Limerick. It will help to eliminate aspects of design and layout of estates which encourage anti-social behaviour, carry out improvement work to enhance the living environment for tenants and establish improved estate management arrangements. The implementation of the programme also presents local authorities with a further opportunity to develop partnerships and build bridges with local communities, and I hope local authorities will avail of this opportunity.

Other initiatives relate to improving the housing management performance of local authorities. In 1995 I introduced a housing management initiatives grants scheme under which more than £200,000 has been allocated to date. The grants are part of an overall strategy designed to ensure better housing management, including estate management. Significantly, the majority of projects [247] approved under the scheme refer to tenant training in estate management. The 1997 provision of £200,000 — double that of 1996 — will ensure the progress achieved in 1995 and 1996 is consolidated and further developed.

Funding for accommodation of the homeless has, and will continue to have, a high priority. Under the new Dublin homelessness initiative, new administrative arrangements and structures involving co-operation between statutory agencies and the voluntary sector are expected to achieve more efficient delivery of services for the homeless in the Dublin region in 1997.

I am also keen to encourage the very significant contribution of the voluntary sector in the provision of housing for the socially excluded. I will provide more than £41 million for the voluntary housing capital assistance and rental subsidy schemes. This will allow for 1,200 starts this year in the voluntary sector. Much of the expenditure under the capital assistance scheme is used to provide accommodation for the homeless. The many good examples of those using this scheme include Focus Point, the Salvation Army and the St. Vincent de Paul. The rental subsidy scheme, whose main focus is on providing accommodation for families, has also been used to fund transitional or second stage accommodation for homeless people.

On the urban renewal front, there have been a number of significant developments over the past 12 months. The consultants' study on the urban renewal schemes which have operated since 1986 was completed and published. It concluded that the schemes have been highly successful as a mechanism for encouraging private sector investment in areas of dereliction and decline. Nevertheless, it also concluded that the future requires a more focused, integrated and strategic approach, which is a view I concur with. After the study's publication late last year, I initiated a process of public consultation. Before concluding this process, I will hold a conference to draw together the various strands of opinion. Following that, I intend to submit to the Government proposals for future urban renewal policy.

What is clear at this stage is that future policy will be based on a more targeted and integrated approach. This is something for which all involved will require time to prepare. A preparatory period of about 12 months will be required after details of any new urban renewal scheme are announced.

I was pleased to announce earlier this month that the Minister for Finance has agreed to extend the deadline under the current urban renewal scheme for one year to 31 July, 1998. This extension will ensure that urban renewal activity continues during the preparatory period for the next phase of urban renewal. It will also facilitate the completion of many projects which are currently in planning or in progress. I am determined to ensure that full advantage is taken of this extension. I do not want the extra year to [248] simply encourage people to sit back and put the completion of developments on the long finger. This extension is subject, therefore, to a very important qualification.

If a project is to avail of the extra 12 months, at least 15 per cent of expenditure on it will have to be incurred by 31 July this year, the date on which the scheme would have expired had there been no extension. The timing of the announcement has given developers ample advance notice to get their projects under way and comply with the expenditure requirement. It will be up to them to ensure they meet the conditions if they want to avail of the one year extension. Extending the current scheme on a transitional arrangements, is to move towards a more strategic and integrated approach to urban renewal in the future.

I look forward to hearing the views of all the interested parties in framing that approach. We must aim for an approach to urban renewal which yields results more in line with the requirements of the closing years of the 20th century. I am determined to ensure we achieve that aim.

This is a good budget, from the point of view of social solidarity and partnership. It also helps employment creation and prudently provides a sound basis for continued economic growth in 1997 and beyond. When the electors make their choice this year they will look at the record of this Government. Although the cracks already show in the proposed union between Fianna Fáil and the Progressive Democrats before they even reach the altar rails, I have no doubt that in their desperation for power, the two Opposition parties will do their best to paper over them. However, the jibe from an unnamed Progressive Democrats member about Deputy Bertie Ahern's deficiency in the statemanship department hardly encourages the groom. Deputy Dermot Ahern's macho assertion that in a future Government Fianna Fail will be firmly in the driving seat is hardly a sound basis for a modern Irish relationship.

This budget and this Government shows that true partnership can be developed in Government. Partnership must continue to be built across communities, between old and young, rich and poor, if we are to meet the reality of today's world.

Mr. Ring: I am glad of the opportunity to say a few words on the budget which was introduced last week by the Minister for Finance, Deputy Quinn. I knew this was not a bad budget when I heard the response of Deputy McCreevy who did not have much to say. I also heard other Fianna Fáil Members say the budget was good because when their party was in Government it took the right decisions for the country. Then I heard the Progressive Democrats say that tax changes would not have taken place but for them. Having heard that, I was happy the budget was a good one and that people were satisfied with it because it meets their needs.

[249] Some Members of the House do not think people on social welfare should be looked after but such people must be assisted, although no one who is working should get social welfare under false pretences. I would not support that, but there are people in society who have to be supported and assisted by the social welfare system. I welcome the increases in this budget for them. If some people were not claiming social welfare under false pretences others who need it would receive more. The Progressive Democrats may not like to see people getting any kind of social welfare but people depend on it, particularly in rural areas where there are few employment opportunities.

This is the third budget I have witnessed since becoming a Member of the Dáil. While having a regard for the national interest, I must also look at the interests of County Mayo which has developed in the last three or four years. Following the introduction of the pilot scheme announced three years ago for Westport, the town has developed in an unbelievable way. Mulrany has also benefited from a seaside pilot scheme. The Minister of State, Deputy McManus, should introduce urban renewal schemes for towns such as Swinford, Kiltimagh and Ballinrobe, which need uplifting. People are prepared to invest but they need an incentive to do so. I hope the Minister of State will examine that matter.

While I broadly welcome the budget, there are a few aspects of it with which I am dissatisfied, and I raised them with the Taoiseach on budget day. For example, if a young couple buys a first home that is under 1,400 sq. ft. they receive a £3,000 grant. That is very good but if they buy a second-hand house they do not receive a first time buyer's grant. In addition, they must pay stamp duty on their house which is an annoying penalty. The Taoiseach should reintroduce a measure in the Finance Bill whereby if someone buys a new first home they will get the £3,000 grant, but if it is a second-hand home they should not have to pay stamp duty on it. That is only fair. They are entitled to that if it is their first home.

I am not talking about people who are buying ten or 11 houses — there are already plenty of tax breaks for them — but why should a young couple or person starting out in life have to pay stamp duty on their first home? The Government should look at this because it is wrong.

I was disappointed about another category of person that was not looked after in the budget, although a small change was made for them. They are people who look after the elderly at home. In rural areas there is a high population of old people and it is a tradition that a son or daughter will care for their elderly relatives at home. They take them on board and look after them. While I welcome the increase if there are two carers in one house, most elderly people are looked after by only one individual. Some old people are very sick and need much care and attention. There is [250] a problem, however, if their son or daughter is working because in some cases they may have to give up employment to look after an elderly parent or other relative.

If a husband or wife caring for an elderly person are working, the carer's allowance is means tested. Last year in the Dáil I made a suggestion which would save the State money. It was that the first £50 of a carer's allowance should not be means tested, but any amount above that should be. Carers are saving the State a great deal of money because, without them, elderly people would be put into homes or hospitals where nurses and doctors would have to be paid to look after them. I do not see why the first £50 of the carer's allowance must be means tested. The Government should re-examine that simple suggestion which would not cost much money. People looking after the elderly at home are entitled to be paid for doing so, and to get some assistance.

A recent health board survey revealed the massive amount of money it costs to look after a person in hospital. The Government should look at this proposal along with removing stamp duty for first-time house buyers. There are many tax breaks for those who are well off and some people in this House have an agenda to look after people who are well able to look after themselves.

People on low incomes in council or other houses that require repair, constitute another category for whom no grants are available. They may, for example, need to re-roof their homes or replace windows but cannot afford to do so. There are no grants for doing such repairs so the Government should introduce a grant scheme for this type of work. It is not necessary to introduce a grant scheme to which everyone, including doctors, solicitors, barristers and judges, is entitled to apply. Such people applied for these grants because they were available even though they could afford to pay for the repairs themselves.

It would be a simple matter to reintroduce house grants for people earning less than £10,000 or £12,000 a year. They would then be able to afford to repair their homes without always having to depend on the council or the State to do it for them.

As regards the pilot scheme I mentioned in Westport, people came from all over the country to buy houses there and that, in turn, put pressure on the local economy. People born and reared in Westport cannot buy a house there because they are competing with millionaires from Dublin and Cork who want to buy summer houses. They are no good to the local economy.

I spoke to a man in Achill last week who told me about the pilot scheme in Mayo. He said that while it was a great scheme it did not revitalise the area. He cited the example of a scheme of 20 houses which were bought up within a few hours of being put on the market. He said that on Christmas night there was not one light on in any [251] of the houses because they had been purchased for use as summer holiday homes. The houses will be occupied for the 12 weeks of summer when people want to spend their holidays in Achill, but that is no use to the local economy. It is far better to give people grants to entice them to live and work in an area and try to develop it.

I have already raised the question of people with disabilities. A person in my area, Mr. Michael Corbett, has set up a group called Personal Assistants. This year it asked the Government to set up a fund. I have seen how the personal assistants worked under FÁS schemes but these schemes will not last forever. They now want to set up a fund and have asked the Government for assistance. Some £500,000 was provided in the budget for people with disability, but that sum will be spent by the Civil Service on administration so it will not reach the people who need it.

The Personal Assistants group sought help from five Departments dealing with this matter, including the Departments of Equality and Law Reform, Health, and Transport, Energy and Communications. The Government should reconsider this request. Each Department should give them £100,000 that would make available a further £500,000 to set up this fund so that these people will not depend on the State all the time. They want to have their personal assistants and to be independent. I have seen how this system has worked in the context of the FÁS scheme and the independence it has given to people with disabilities. We are well able to look after people who can fight for themselves, who are able to march outside the Dáil, by giving them tax breaks. We should look after those who are not able to look after themselves.

A report entitled, “Towards an Independent Future” contained over 400 recommendations which the Government accepted. Given that, I cannot understand why there was no funding in the budget. I welcome the allocation of £10 million for the mentally handicapped, people who must be looked after.

The budget was welcomed by most sectors in society. I was surprised that the publicans increased the price of a pint. For three years in succession there has been no increase in the duty on alcohol. If the Government had levied an increase the Licensed Vintners Association would have complained, but when the Government did not do it they saw fit to increase the price of a pint by 5p. Perhaps the Minister of State at the Department of Enterprise and Employment, Deputy Rabbitte, will look into that to see if what they did was right. I would also ask him to investigate the price of soft drinks which is a scandal — publicans can charge between £1.20 and £1.30 for a coke or an orange and make a big profit. The Government should consider bringing back price restrictions. Perhaps the publicans and shopkeepers should have to apply to the Government for price increases. We have seen what the supermarkets [252] are doing in the context of the price wars and Sunday trading. As soon as there is any leniency, they abuse the system. The publicans are the very people who would be complaining if the Government increased excise duty on the pint. In the past three years that has not happened. The working man is entitled to a pint at a reasonable price, and I am disappointed that the publicans have increased the price. The economy is doing well, and there was no need to increase the price on this occasion.

In general I welcome the budget. I would like the Government to look again at the carer's allowance, to re-examine stamp duty and to put in place funding for Independent Living.

Mr. Andrews: I wish to share my time with my friend and colleague, Deputy Michael Smith.

On this day 25 years ago, I was Parliamentary Secretary to the former Taoiseach, Mr. Jack Lynch. Two or three days later, as Parliamentary Secretary to the Taoiseach — the designation “Minister of State” had yet to be created — I attended the Derry funerals. More than any other single episode, the events of 31 January 1972 led Northern Ireland to 25 years of murder and violence. Although at the time I welcomed the setting up of an inquiry under the Lord Chief Justice at the time, Lord Widgery, I soon became aware of the limits of that exercise. Sadly, what several Ulster men and Ulster women have told me over the years now appears to be borne out by the new evidence unearthed by Dr. Dermot Walsh and Don Mullan: that the Widgery inquiry was totally inadequate, irresponsibly conducted and careless in the way it went about its business.

This is all the sadder for those of us who have spent our lives urging people to have faith in the institutions of law and democratic government. It is now clear that the whitewash of the Widgery inquiry and the resurrection of the IRA are inextricably linked.

As democratic politicians try to salvage the peace process, it is incumbent on us all to prove that the rule of law and the ways and institutions of democratic politics must be seen to be thorough, impartial and above reproach. The Widgery inquiry was none of those things.

The Government, through the medium of the Anglo-Irish Conference as well as through contact between Heads of Government, should actively support the establishment of a new inquiry. The interests of justice demand no less. In that regard I would like to strongly support my party leader Deputy Bertie Ahern when he called on the Government to invite the British Ambassador to the Department of Foreign Affairs to give added urgency to the strong feeling here on the need for a reinvestigation into what happened this time 25 years ago. I support him strongly and believe his proposition would give added force to what appears to be all-party consensus on the need for the reopening of an inquiry into this tragic period of our history. As I said on Tuesday, and as the Taoiseach repeated [253] today, it is a human rights issue falling into the same category as the cases of the Birmingham Six, the Guilford Four and the Maguire family which were travesties and glaring miscarriages of justice. I strongly support this call for an immediacy in this matter and hope that the British take seriously what the democratic politicians on this island want.

Another matter that concerns me is the all-party petition presumably produced by Mr. John Hume. It seems extraordinary that the British House of Commons can produce a petition of this nature and it does not appear that there is any mechanism in this House for an all-party petition on a matter of this nature to indicate all-party concern about the problem. I will leave it at that. I am grateful to the Chair for his indulgence in allowing me to speak on this in what, after all, is a budget debate.

Time was, a Cheann Comhairle, when the budget set the agenda, not just for fiscal policy, but for the development of the country's broader economic, industrial and social policy. In arriving at its decisions, the Government of the day consulted across a wide range of organisations, public and private. Then, on budget day, it removed the veil of secrecy and mystery that surrounded the whole process.

These days, however, the lead-in to, and the presentation of the budget is an altogether different affair. Not only were details of this year's budget leaked ahead of time in a series of well spaced press releases but, to all intents and purposes, it is clear that the Government has admitted the social partners as governing partners as well.

Something may be said in favour of removing, or at least easing, the secrecy that has surrounded the budget in the past. Secrecy is not vital to all areas of the process. However, the mystery remains, the mystery as to where the role of the Government stops, and that of the social partners begins.

I wish to stress that I am not criticising the concept of partnership. It was pioneered by Fianna Fáil and, in particular, by my party leader, Deputy Ahern, when he was Minister for Labour. However, as the concept of a national agreement has been developed by the Government, it is clear that the Minister for Finance has confused the function of a budget with his negotiated pay deal. Therefore, it came as no surprise to me that almost all the major commentators on the budget framed their initial reactions in terms of Partnership 2000. One said that the Minister for Finance had delivered on what had been agreed to in Dublin Castle last December. That is all very well. I congratulate the Minister on concluding a pay deal, but it is precisely because the Minister has his eye on a pay deal and not on presenting an overall framework for the development of the economy that this year's budget is a very limited document indeed. As a framework for economic development, it is neither coherent nor strategic.

In regard to tourism, this is an unfortunate and [254] fruitless road on which to embark. Here we have an area which is crying out for a more realistic and integrated commitment from Government. It is one thing for the budget to exclude concessions to tackle long-term unemployment and it is another to compound that failure by refusing even the slightest incentive to an industry where the costs of job creation are minimal when contrasted with other sectors. If the tourism industry achieves its targets for job creation, as listed in the operational programme, it will not be as a result of any interest that this Government has in the industry.

Two years ago, when the present Minister presented a budget that was largely drawn from the previous Fianna Fáil/Labour Programme for Government, the Minister proposed incentives to develop seaside resorts. I am sorry that nothing of the like has been developed since. It may be that the Minister believes his largesse is so great that our resorts do not need any further help. However, even if that were the case, which I do not accept, similar schemes could be applied to niche areas within the tourism industry. We use these kinds of incentives to develop our film industry. Why not apply them to promote the construction of theme holiday villages? The concept of the designated area can be developed to encourage a product or an idea. Such incentives would not only help these niche areas to develop and mature but would have a ripple effect on the industry as a whole. It is time to recognise that the tourism industry is not just about Americans visiting Ireland, it is an industry which is undergoing a great internal transition in product development and the tax regime should recognise this.

It is also time to recognise that the tourism industry is not a mere appendage to what passes for the Government's policy on enterprise and employment. It is central to those policies and vital not just to our economic health and success but to the integrity of our communities and, in particular, to those rural communities that are being affected by rural decline, unemployment and emigration.

The development of the relatively new area of tourism can only happen if the private and public spheres work together. However, as the tax regimes currently stand, there are no incentives to go down that road but I will allow that the Minister has made a start with the changes in corporation profits tax and employers PRSI. However, these changes are preliminary and they do not address the central point, as pointed out by the ITIC last December, that the net earnings for lower paid persons in the industry must be relieved or subvented to ensure there is an incentive to work even at lower incomes.

The employment schemes could also be used to enhance the industry. These schemes exclude seasonal tourism enterprises at present. As some of those involved in the tourism industry have suggested, a case could be made for extending the schemes to include such enterprises and thus [255] ensure that what has been applied to other areas of the economy can be applied here also.

As in the case of tourism, the Department of Tourism and Trade is concerned with marketing and, to a lesser extent, is conscious of product development. One cannot be enhanced without the other. If both are not nurtured in tandem, our efforts will fall between two stools. The development of a marketing strategy for any business is costly, as is evident from the experience of the current tourism brand. This explains why, for example, the chairwoman of the Small Firms Association saw the budget as providing no reward for a sector which, like tourism, is universally acknowledged to be central to job creation. There are no incentives to develop or expand the market. The Minister is content merely to recite the facts and figures of the sector and, in so far as the tax regime is concerned, let the sector fend for itself.

At a time when our financial position is strong, this Government has squandered an opportunity to use our strength and apply it to funding and directing, in an overall and comprehensive way, an integrated policy of renewal and development. If the budget is anything to go by, this Government's future is already well in the past.

Mr. M. Smith: With your indulgence, a Leas-Cheann Comhairle, I join my colleague, Deputy Andrews, and our party leader, Deputy Bertie Ahern, in calling on the Government to persuade the British Government to set up a new inquiry into the tragic killings of Bloody Sunday 25 years ago today. For those of us who then served in this House and travelled to Derry for the funerals of the fourteen men slaughtered on that occasion, it has left an indelible mark on our memory. The fact that their names have not been cleared and nobody was brought to justice for those events is a terrible blotch on our history.

The onus is now on the British Government, in the light of new information, to make sure that we put an end once and for all to the notion that any one of those men was involved in violent efforts and that it was not a peaceful march. We, on this side of the House, are extremely anxious that the Government should treat the matter with new urgency, and that the Taoiseach and the Tánaiste and Minister for Foreign Affairs should spare no effort to make sure that inquiry takes place.

Normally when a budget is to be introduced we hear and read statements which indicate that it will be a great budget, and that was the case this year. The Taoiseach intervened on the day prior to the budget to tell the people that it would be the best budget ever. It must, therefore, be quite disheartening for Government members to find that questions are still being raised and there is public disquiet about many of the provisions in the aftermath of that so-called great budget. It was clear from a poll that a great majority did not find the budget held the kind of advantage for [256] them which earlier statements by Government members, and particularly the Taoiseach, had indicated.

We need to examine some of the other decisions taken prior to the budget which were dealt with to some extent in the budget provisions. As one who worked hard as Minister for the Environment to try to make sure there was an equitable system of service charges across the country and who took some action to help bed down these charges, I want to deal briefly with the present mess in local authorities which arises from an ill-conceived decision by the Government and particularly the Minister for the Environment.

The amount raised by service charges represented about one third of the maintenance costs of water supply systems but provided no funds towards the capital costs. The cost of these schemes runs into billions of pounds. Many areas still have poor water supplies and there is a great need, notwithstanding Structural and Cohesion Funds, to raise new funds to deal with this problem. Due to the growth in industrial demand and hygiene requirements in rural areas, there must be continual investment in these schemes.

There are four types of arrangements for the provision of water supply. Public water supply schemes are provided by the local authorities and funded in the main by the Department of the Environment with the help of Structural and Cohesion Funds. There are then a range of group water schemes, some of which are provided from sources of public water supply while others are totally private. There are private supplies to farms and, of course, a great number of houses still have no piped water supply. The 1991 census showed there were in excess of 12,000 homes without any piped water supply and this is an indictment on our system. When one is taking a decision to make fundamental changes it is important that there is equity and that everybody is given a fair chance to have this important and most basic requirement in the management of a household, farm or business.

In Dublin city millions of gallons of water are leaking from a creaking system. Pipelines put underground over 100 years ago are pounded by heavy vehicular traffic. The local authority is almost incapable of dealing with the matter. This city faces a crisis in relation to the provision of a water supply and pollution in Dublin Bay. It is said that the Ringsend sewerage scheme will receive only secondary treatment and that a tertiary treatment system will not be provided due to lack of funds. Was this caused by a panic stricken Government anxious to buy votes, that did not care about the national interest or was it another way of trying to pretend one does not have to pay, that somehow it is possible to have a free lunch, that one can invest billions of pounds in water and sewerage schemes without providing for maintenance costs?

It is one thing to decide that for political or other reasons certain systems should be changed. [257] We live in a democracy and every Government must have the right to do that I am not getting into the rights and wrongs of whether there should be service charges. What I am saying is that before something is changed one should know what will be put in its place. What was decided on this occasion was anti-rural.

People who live in rural areas and travel to Dublin for sporting and recreational events, to visit hospitals and the airport; hauliers who haul goods to the airports and seaports and those who have to drive to work have now been asked to pay for their own water supplies and to carry the additional burden of paying for other areas where people refuse to pay.

The total value of excise duties on petrol and diesel in one year represents £40 million. The extra 6 per cent which will be added to motor tax in the next couple of years will yield an additional £12 million. If the £40 million and the £12 million are added together the total amounts to roughly what the water service charges yield. Therefore water service charges have not been abolished but directly transferred onto motorists, hauliers, agricultural contractors and those who need these services to run their business. Is that fair?

On the one hand, the Minister is making some changes in income tax which will help lower paid workers and others while, on the other hand, if one happens to live away from the major centre of population one will have to pay more than anybody else.

I wish to refer to another matter which has caused consternation in many rural areas. Perhaps it is not known, though it is well known in the Department of the Environment and by the Minister, that there are 5,545 group water schemes in the country. All have tried to provide their own supply, all have put their hands deep into their pockets to set up those schemes and all have set up units to collect the maintenance charge every year. They serve 150,000 households, nearly half of whom are being told today, notwithstanding the fact that they provided the capital to set up the scheme, they must now pay the annual maintenance. On top of that they must pay an additional tax on their motor cars, lorries and tractors to service other areas.

It is no wonder there is anger and disquiet in so many of those areas where nearly half of the schemes are provided from private systems and not from public water schemes. Given that a decision has been taken to abolish service charges and the Government has put the onus on the motoring public to pay the full cost, I beseech the Minister for the Environment to do something about the matter. Those who try to make an effort are always penalised and those who do not make the effort seem to get praise and help. I plead with the Minister of State at the Department of Agriculture to convey that message. I am not anxious about the politics of it or who wants to vote for whom but I am concerned about fair play now that a decision has been taken so far as other communities are concerned.

[258] In a democracy the public representative should not be the first line of defence and the State should not have to do all that has to be done, thus creating a dependency culture. Two of my colleagues in the House representing rural constituencies know what I am talking about. When one makes the effort, one should be encouraged, not deprived or discriminated against as happened in this case.

I wish to refer to the 12,000 households that have no water supply. When I was Minister I had no fear in standing up to pressure from any group that did not want to pay. I wanted to ensure people had adequate sanitary facilities in their homes. It was unfair to women in the home trying to look after young children not to have such basic requirements. I was prepared to fight to ensure there were funds to reach those communities. I plead with the Government to ensure the funds are made available to serve as many of those households as possible through whatever schemes are in place or need to be put in place.

Some elements of the budget are welcome, such as VAT refunds and tax concessions. It is time to restore the control of farmyard pollution scheme. I live in north Tipperary where there are problems with eutrofication in the Lough Derg area. A number of schemes and tertiary treatment schemes are now on course and there is a problem in relation to intensive agriculture and pollution arising therefrom. We will not be able to provide tourism, angling and recreational facilities along this great natural water resource if we do not deal with domestic and industrial pollution and the problems created by peat silt and intensive agricultural production. It is time a commitment was given to restore those schemes as it is inordinately expensive to meet all the criteria in the context of dairy management and in-wintering facilities for cattle.

There is no point lauding the few pounds increase in old age pensions. The increases of £1.80, £2.20 and £3 over the past three years give a total increase of £7 over three budgets. This is equivalent to an increase of between 20p and 30p a day over that period. It is important to remember that old age pensioners lived through the economic war and worked under very different conditions — they had practically no time off during the week and most of them never had a holiday. We should do everything possible to find increases for them, regardless of who else has to do without. Increases in some areas could be done without and it would have been no harm if the Government had made the break in the budget and increased the old age pension by £5 per week. One could not boast about such an increase, as old age pensioners deserve the very best after a lifetime of struggle.

Minister of State at the Department of Agriculture, Food and Forestry (Mr. Deenihan): I wish to share my time with Deputy Hogan.

[259] An Leas-Cheann Comhairle: Is that agreed? Agreed.

Mr. Deenihan: The economy has never been in a better shape or more buoyant. This buoyancy is based on sound economic management and sustainable growth. Unlike the buoyancy and growth in development we experienced at the end of the 1970s, this buoyancy will not lead to a depressed economy in the future.

The economy continues to expand rapidly, underpinned by strong growth in consumer demand. This demand has been fuelled to a great extent by continued low inflation and very favourable interest rates, which have remained at historically low levels for some time. Mortgage interest rates are at an all time low and this has been of considerable help to families with large mortgages. The growth of more than 7 per cent in output last year compares favourably with growth of only 2.5 per cent in the OECD as a whole. The benefits of growth are clearly evident in the substantial increase of 50,000 in the numbers employed. Ireland's GDP per head increased from 76 per cent of the EU average in 1991 to approximately 100 per cent last year. I accept that previous Government's laid the foundations for this great performance but this Government deserves credit for its good management of the economy.

The outlook for this year is for further strong growth, sustained by moderate inflation and interest rates, and substantial growth in employment. Gross domestic product is forecast to increase by more than 6 per cent, slightly lower than in 1996. Clearly, the economy is in good shape in the run up to economic and monetary union and the Government is totally committed to fulfilling the criteria for membership.

Partnership 2000 laid the foundations for many of the concessions in the budget. The main thrust of the commitments in the agri-food section of Partnership 2000 is the need to create the conditions for improved competitiveness across the farming and food sector. The commitments in Partnership 2000 and the tax concessions arising from some of these will greatly assist farmers in improving competitiveness in the years ahead.

The advance Central Statistics Office estimate of agricultural incomes shows an increase of 0.1 per cent in agricultural incomes in 1996. This follows on the record increase in farm incomes in 1995. Aggregate incomes at well above the £2 billion mark are at record levels. This is a very good performance given the difficulties experienced by the beef sector as a result of the BSE crisis. There were outstanding performances in the pig and sheep sectors and good increases in the cereals sector, while output and income levels in the milk sector remained on a part with last year's buoyant figures.

Mr. M. Smith: What will happen to the price of milk?

[260] Mr. Deenihan: Direct payments to farmers have increased dramatically in recent years and total payments this year are estimated to exceed a record £870 million, which represents more than 42 per cent of aggregate farm income.

To give total assurance to consumers in every market, a comprehensive series of new controls was initiated during 1996. This included rigid new regulations on meat and bonemeal exclusion, a specified offal ban, total depopulation of herds and cohort animals and their removal from the food chain. New measures have also been introduced which will ensure local authorities live up to their legal obligations on meat inspection. As Minister with responsibility for this area, I am relieved progress has at last been made in the implementation of the provisions of the Abattoirs Act. New regulations have also been introduced on the control of knackeries.

Substantial progress has been made in recent months in the establishment of full traceability of animals. The new animal location file is in place and the necessary facilities are being rapidly introduced to ensure total traceability. Discussions on the new quality assurance scheme are at an advanced stage.

The measures taken by my Department last year, together with recent successful prosecutions, have resulted in a welcome reduction in the use of illegal substances. I compliment the farm organisations, particularly the IFA, on their decision to expel members convicted of this abhorrent crime. I know the Minister, Deputy Yates and I can depend on the continued support of farm organisations in the battle to finally eliminate the use of illegal substances. I hope offending farmers will realise that their actions will not go unpunished and the use of illegal substances and the misuse and overuse of legal substances is doing considerable damage to the integrity and credibility of the national and international image of our beef product.

Consumers can no longer be expected to accept without question the integrity and safety of the food they eat. They are increasingly concerned about aspects of food production, safety and hygiene. Food scares, breaches of hygiene regulations and the use of illegal substances, all of which have been the subject of recent comment in the press and on television, highlight the absolute need to restore confidence in the food chain. The Government responded swiftly to this need by announcing its intention to establish the independent Food Safety Authority of Ireland, whose interim board has already been appointed. The preparation of legislation to give the authority a statutory basis is one of the Government's main priorities. I am confident the authority, through the exercise of its primary function of ensuring that standards relating to the safety and hygiene of food are properly observed, will play a very important role in giving the consumers the assurances to which they are entitled.

It is important to stress that our food safety arrangements have been satisfactory overall in [261] protecting both public and animal health. We have not experienced any complaints of major control problems arising from external inspections and this is significant in the context of a country which exports 85 per cent of our beef and 80 per cent of our dairy products. While there is strong evidence, including international endorsement, of the effectiveness of our existing controls, we are determined to press on so as to improve existing standards and develop new standards in accordance with technological development.

My Department is particularly concerned with the perceived and understandable concerns about the safety of beef in the aftermath of the BSE crisis. The issue of traceability has been given an even higher priority than heretofore and the Department is currently concluding its examination of the elements necessary to develop a statutory national beef assurance scheme. The scheme will be based on adherence by farmers, factories, compounders, dealers and marts — all the links in the food chain — to strict standards which will be validated, monitored and controlled independently. A computerised movement monitoring system will underpin the control of animal movement and identification and will be developed in a compatible format with emerging EU requirements. I am satisfied these measures will secure the support of all the industry's main players and will be endorsed by consumers as an effective and transparent means of assuring consumers of the safety of the beef we eat.

The ability of the agricultural sector to compete successfully in the more challenging environment of the future will depend, among other factors, on continued improvements in farm structures. The agricultural sector continues to be characterised by small farm size and a relatively high age profile. These structural defects are impeding the development of a more competitive sector. The early retirement scheme, along with the installation scheme for young farmers, are two of the measures currently in place to encourage land mobility. In addition, changes to the taxation regime for farmers over a number of years are also contributing to land mobility across the sector.

I wish to refer briefly to a land policy document I hope to publish in the near future. In the past, the Land Commission controlled our land policy and concerned itself with the division of large estates. As the number of estates declined, however, the role of the Land Commission became less relevant and, with the agreement of all parties in the House, it was dissolved. This left a void, however, and necessitated a review of land policy. Over the past year and a half I had widespread consultations with the farming organisations and other interested bodies and received their views on the direction we should go on land policy in the future. I hope my land policy document will reflect those views which were reflected both in last year's and this year's budgets. We [262] have made progress already on the direction we are going with regard to land policy.

In the future land mobility will be driven by tax incentives, encouraging young farmers to take over the running of farms from their parents at an earlier age and through the enlargement clause contained in the early retirement scheme and other such measures. The provisions for leasing and the incentives under the social welfare and finance codes will hopefully encourage more elderly farmers to pass on their farms either to family members or people not related to them.

In addition to this new approach we intend to stress the need for more environmentally friendly farming practices. That is currently expounded through schemes such as the REPS which will lead to a new direction in land policy. I am sure the new land policy will be welcomed by all those involved in the land.

The following are some of the main incentives in the tax area to encourage the early and orderly transfer of land: a dramatic improvement in capital acquisition tax — the 1997 budget raised the flat rate relief from 75 per cent to 90 per cent for gifts and inheritance of certain agricultural property; the special stamp duty relief for transfers of agricultural land and buildings to young trained farmers has been renewed for a further three years. This concession will save young farmers £4.5 million in a full year and will continue to act as an important incentive to early transfer and thus structural change within the farming sector. That is part of our new direction in land policy. There was also significant improvement in the tax exemption for long-term leasing under the 1996 Finance Act which has acted as a strong incentive for early transfer. To encourage new entrants into farming it is also vitally important that the investment requirements of those starting up in the business of farming are recognised. The agreement, in the context of Partnership 2000, to consider the issue of the special 100 per cent stock relief for young trained farmers demonstrated this Government's commitment to supporting on-farm investment. The decision to renew the 100 per cent stock relief for young trained farmers for a further two years will be of enormous benefit to new entrants who have to invest heavily in building up stock numbers. I welcome the announcement that the 25 per cent stock relief will continue to be available to all farmers for a further two years. This measure should act as a positive incentive for farmers to reinvest in productive on-farm investment.

It is accepted that the sector has a high requirement for investment in productive and, in particular, non-productive investment necessary to comply with more stringent environmental standards required by the EU and demanded by the consumer. The importance of environmental measures to farmers is clearly evident in the strong participation in the control of farm pollution scheme and the rural environmental protection scheme. The whole aspect of environmentally friendly farming and the thrust towards [263] extensification will be dealt with in the land policy I intend to publish shortly.

The commitment in Partnership 2000 to improve the existing generous capital allowances available to farmers has been honoured. The budget has provided for a special year 1 allowance of 50 per cent of the expenditure incurred on necessary pollution control measures up to an expenditure limit of £20,000, with the balance of expenditure written off over the following seven years. This concession is unparalleled in any other domestic sector of the economy and it will act as a strong incentive for those undertaking necessary pollution control works on farms. This measure was sought by the Opposition spokesperson on agriculture and by the farming organisations and it is the way to proceed in the future. We must encourage more investment in farming by way of incentives through the tax system.

The other provisions of the budget in the area of income tax will also have a positive impact on the farming community. The 1 per cent reduction in the standard rate from 27 per cent to 26 per cent combined with the widening of the bands, increased personal allowances and the increase in the income tax exemption limit is to be welcomed. The improvement in corporation tax should help considerably the food agri-sector and the agri-services sector. This was a positive budget for the farming community which will give more incentives to young farmers in particular. It should be welcomed.

Mr. Hogan: I thank my colleague, the Minister of State, Deputy Deenihan, for sharing his time with me.

The political stability of this Government has resulted in low interest rates and sound economic management. Gone are the days of internal fighting between parties in a coalition Government. Gone are the days when the party chairman of the Progressive Democrats shouts from the sidelines at his colleagues in Government and does everything possible to upset the work of the Government. Gone are the days when a Progressive Democrats Minister lectures his Fianna Fáil colleagues on a weekly basis about the economy. Political stability and a Government that gets on with the job of running the country is the key to prudent economic management in any country.

The economic outlook under which the Minister for Finance introduced the budget is unprecedented. For the first time the Government has planned for a current budget surplus. Growth is expected to continue over the next three years, with GDP expected to increase by 6.5 per cent this year and 5.5 per cent in the next two years. Employment is expected to increase by 114,000 over the next three years, with 45,000 more people expected to be in employment by the end of 1997. The general Government deficit is forecast to remain well within the Maastricht criteria for the next three years. Exports which increased by 10.5 per cent in 1996 are expected to increase [264] by almost 12 per cent in 1997 and by just under 10 per cent in the following two years. Inflation is projected to remain low at approximately 2 per cent and mortgage interest rates are at their lowest level in 30 years. Consequently, families have real disposable income and a retail boom was evident in every village, town and city over the Christmas period. Economic projections include the provision of £1 billion in tax cuts as part of the commitment in Partnership 2000, £245 million of which will provide for the adoption of social inclusion measures. Any fair-minded person examining those statistics would have to admit the Government is managing the economy well and that it is on the right track.

The budget has benefited a large number of people. PAYE workers, particularly the low paid, will get a net £6 or £7 per week into their pockets, the largest increase in approximately ten years. It is particularly significant that they will get this increase at a time of low inflation and low mortgage interest rates. Furthermore, there will be a greater incentive for the business community to take on additional employees, particularly those long-term unemployed. It is important that we break the cycle of long-term unemployment. The Government has committed additional resources, particularly under the back to work and other schemes, to get people back to the workplace. Corporation tax and the low rate of employees' PRSI have been reduced. In the case of employers, the threshold below which the 8.5 per cent rate applies, which is of considerable benefit to labour intensive industries, has been increased from £13,000 to £13,500 per annum. This will solve many of the difficulties in the sheltered sectors of our economy as well as in the exposed sectors, such as the textiles industry, where there has been great pressure in the marketplace, particularly in respect of foreign markets and competition from the Far East.

The Government is encouraging employment. Tax bands have been widened, the standard rate has been lowered, personal allowances and exemption limits have been increased and low income families have been given an additional £6 per week under the family income supplement, which is assessed on net rather than gross pay. As a result of the budget there will be a greater incentive to work rather than remain on social welfare. The solution to poverty and poverty traps is to encourage people to take up employment. It should not be more attractive to remain on social welfare.

The Minister of State at the Department of Agriculture, Food and Forestry outlined positive developments in agriculture. I welcome the allowances introduced under the control of farmyard pollution scheme which had to be abolished some time ago because the national plan negotiated by the leader of Fianna Fáil, as Minister for Finance, did not provide enough money for it. He provided for 3,500 applicants, but 18,500 applied. The Minister for Agriculture, Food and Forestry was faced with the problem of bringing forward [265] money from 1997, 1998 and 1999 to meet the enormous demand for the scheme in earlier years of the plan. The tax incentive in the budget will encourage farmers to proceed with important environmental protection work. As farmers want to adhere to high environmental standards, the incentives in the budget will go some way towards meeting the expense incurred in complying with the regulations set down by local authorities and the Environmental Protection Agency.

I welcome in particular the increase in relief under capital acquisitions tax which will benefit farmers and business people when transferring property or businesses. The current 75 per cent rate has been increased to a flat rate of 90 per cent for the majority of transfers. This will be appreciated by the agricultural and business communities. Farming stock reliefs will be retained at 25 per cent and extended for a two year period and the special stock relief of 100 per cent for young farmers is also being retained. The stamp duty relief for transfer of assets to young farmers will be extended for a further three years. These are important measures in terms of land mobility.

There have also been generous increases in other areas. The tax reliefs and increases in social welfare provisions have been introduced in the context of the Maastricht criteria and following considerable debate about current spending levels.

Mr. B. O'Keeffe: I am glad the Deputy mentioned that; it has increased by 21 per cent.

Mr. Hogan: Spending must be kept under control to maintain stability in interest rates. The Minister for Finance indicated that he will take steps to ensure spending is kept under control.

Mr. B. O'Keeffe: After three budgets, it is about time.

Mr. Hogan: I remind Deputy O'Keeffe and others in Fianna Fáil and the Progressive Democrats that this is not the only Government which has had current spending level difficulties. In referring to the period when Fianna Fáil and the Progressive Democrats were in Government from 1990-2, no less an authority than Dr. Garret FitzGerald stated in The Irish Times on 25 January 1997:

This period was marked by a significant rise in current spending as a proportion of GNP. Almost two-thirds of this increase was due to the growth of Public Service pay. During these three years this rose by more than 19 per cent in real terms — reflecting an annual increase of almost 2 per cent in numbers and more than 4 per cent in the rate of real pay.

Also, in these three years, the volume of current non-pay spending also rose as a percentage of GNP.

[266] He went on to state:

How was the increase in public spending as a proportion of GNP ...paid for? Taxation was not increased — it remained at just less than 33.2 per cent of GNP. It was paid for by Exchequer borrowing.

Mr. B. O'Keeffe: Was he talking about 1982 to 1987?

Mr. Hogan: I know this is a sensitive matter for the Deputy. As Dr. FitzGerald stated: “This increased the rate of Exchequer borrowing to the highest level experienced between 1988 and today.” That is the record of Fianna Fáil and the Progressive Democrats on spending. They should hang their heads in shame.

Mr. B. O'Keeffe: Give me a lesson on 1982 to 1987.

Mr. Hogan: The Opposition parties may criticise the Government or accuse it of being a centre left Government because it removed the residential property tax — a tax extended by the Fianna Fáil and Progressive Democrats Government which in turn did nothing to alleviate the hardship and double taxation about which it pontificated so much. They may accuse the Government of stopping emigration and bringing people back to work; increasing employment by 100,000 in the last three years and reducing unemployment by 30,000; presiding over a level of investment which has increased by 30 per cent; increasing child benefit by 50 per cent in the last three years; giving free access to universities and third level colleges; presiding over a real increase in consumer spending of 10 per cent and the first reduction in the national debt in 40 years. They may do so if they wish. I am proud of this Government which has achieved an enormous amount in three years and has done so in an atmosphere of political stability, cohesion and cooperation, rather than the bickering and infighting of previous years.

Mr. B. O'Keeffe: Is that why the Minister for Finance wanted to resign?

Miss de Valera: I wish to share my time with Deputy Batt O'Keeffe.

An Leas-Cheann Comhairle: That is agreed.

Miss de Valera: I listened with amusement to Deputy Hogan.

Mr. Hogan: It is not amusing.

Miss de Valera: He referred to political stability as the reason for the sound economy. He must have been asleep for the last ten years, and particularly last week when we heard interesting stories about the Minister for Finance having particular difficulty with the budget, having been [267] gazumped on certain issues by the leader of his party. I would not call that “cohesiveness”. When such arguments come to light in the newspapers one can imagine that relations are not as happy as Deputy Hogan and others might like to portray.

I was also amused when the Deputy referred to Dr. FitzGerald's economic analysis in one of the newspapers. Dr. FitzGerald is an eminent personality but he now writes as a journalist, not as Taoiseach. Perhaps if he had taken some of his own advice he might still be Taoiseach and Leader of Fine Gael.

The budget is a grave disappointment for the electorate, particularly the disadvantaged in the community. It has neither helped the disadvantaged nor attempted to keep the economy on an even keel. Rather, the Government has attempted to squander the fruits of an economy which was producing growth and engendering confidence thanks to the responsible economic policies of the Fianna Fáil Party in Government over the last ten years.

It is irritating for those of us on this side on the House to hear members of the Government parties claiming the credit for the economy's good performance. They inherited a healthy economy thanks to Fianna Fáil's approach to the economy since 1987.

Mr. Coveney: We have freely acknowledged that.

Miss de Valera: I have not heard it. Deputy Hogan tried to claim that the soundness of the economy was due to the Government's political strategy. He neglected to say that the Government inherited a healthy economy which has been growing since 1987. The initiative cannot be claimed by the Government.

The Government has demonstrated a lack of financial prudence regarding public expenditure which has been evident over its lifetime. The budget could have been a wonderful opportunity if targeted correctly. Instead, it is all over the place — a cynical exercise with the sole aim of garnering votes from the electorate. As Deputy McCreevy pointed out, this was an SOS budget, a “Save Our Skins” budget. Although it allows us to make good political points, it is a shame for the country and its healthy economy when the many opportunities available to the Government have been squandered.

For example, a pensioner will get only an extra 40p per day. The Minister for Social Welfare's boast that there has been an increase in benefits over the last three budgets which has amounted to £7 per week is hollow. This £7 would not buy a bag of coal. The 60p per week increase in the supplementary allowance payable to blind pensioners is derisory. There is a further tax on motorists through an extra tax on petrol which will add to the cost of living across the board. This tax dilutes our present competitive advantage [268] over Britain rather than trying to maintain it.

The last Fine Gael and Labour Party Government doubled the national debt while in office and this pattern is emerging once again. Even when the economy is strong the Minister for Finance plans to add another £2 billion to the debt by 1999 — that is, of course, if he is returned to Government and is in a position to carry out the proposed policies.

I am disappointed that cultural life has been dismissed by the Government in this budget. Money was available and provision could have been made for the arts and heritage sector but the opportunity was missed. No provision was made for the millennium which is only 1,000 days away. Unless projects are put in place Ireland will be the only EU country without a vision and purpose for the new century. The British Government has put forward plans for the millennium and many of our European neighbours also have plans. Yet the Government has made no statement on its plans. I have raised the issue with the Minister for Arts, Culture and the Gaeltacht on many occasions, in the House and elsewhere, and asked him what plans are in train and what resources will be available to him. The Minister could only inform me that a list of suggested projects had been submitted by different lobby groups and interested individuals but no decision had been made regarding staffing or funding. That is very remiss of the Government.

There are a number of ideas that could be presented and carried through as millennium projects and these would have lasting effect and not merely hold people's interest during the year 2000. Such projects could be used by the cultural community and those interested in the area of culture and arts for many years. I put forward a number of suggestions, one of which proposed the establishment of a music conservatoire. This proposal was also recommended in the PIANO report and I believe we could widen it to incorporate the entire area of the performing arts. The Minister has not issued a reply to this suggestion but Fianna Fáil would like to see the project, which received a favourable response from the cultural sector, carried through.

No provision was made in the budget to establish a film commission which the film industry called for to promote Ireland internationally as a location. Such a commission is necessary to address the current downturn in film production in this country. Fianna Fáil recently published a position paper in respect of the film industry and we support the establishment of a film commission because it is necessary for the long-term benefit of the industry. I am sorry that the Minister for Arts, Culture and the Gaeltacht has not taken up this Fianna Fáil proposal. There are also no tax provisions in respect of film script development. None of the proposals in the budget alluded to tax provisions which would help the film industry. In the budgets introduced by the Government, there was only one negative proposal [269] — in the 1996 budget — in respect of the film industry which downgraded section 35.

There are inadequate provisions in the budget to address the crisis in our national cultural institutions, particularly the National Archives and the National Library. According to the budget, the archives are expected to develop without funding. Everyone is aware of the serious debate about the National Library and its need for funding. The director of the National Library, Dr. Pat Donlon, who is retiring from her position — I pay tribute to the work she carried out — yesterday outlined the difficulties experienced by the library over a number of years. I raised this matter on previous occasions with the Minister for Arts, Culture and the Gaeltacht, particularly on a specific adjournment debate. Fianna Fáil is very concerned about the lack of funding for the library. The Minister will argue that there has been a percentage increase but that does not amount to much when one considers the figures. The percentage increase is calculated on a very low base. We should consider comparable institutions in Scotland and Wales and ensure that the National Library receives adequate funding for its work.

In the Cultural Institutions Bill, which has passed Second Stage, reference is made to the National Library and the improvements it requires. Unfortunately, however, the Bill focuses on structures and makes little or no specific reference regarding how the National Library will continue, even with new structures. It is fine to discuss new structures but these will be useless if adequate funding is not provided. Members are aware that the work carried out in the National Library in connection with cataloguing, etc., is labour intensive. The Government must realise that we have entered the information age and recognise the need to provide funding for new technologies to deal with prized items of culture and heritage contained in the National Library.

No provision was made in the budget for Arts Council funding toward the arts plan. Everyone has heard of, and was very encouraged on reading, the famous arts plan. It was published with great flourish and the Minister for Arts, Culture and the Gaeltacht made many statements about his plans and the way they would be initiated. However, it soon emerged that what had been a three-year plan had become a five-year plan due to the fact that promised funding from Government was not forthcoming. The Government used a combined figure in the budget for the period 1994-96 to disguise the £12 million shortfall in the arts plan. This is a cynical accounting exercise which attempts to cloud the true situation regarding the arts plan. Those working closely with the arts plan, those who took the trouble to send in submissions and those looking forward to a new era with the publication of the plan have become very disillusioned. Some believe that the publication of the arts plan was one thing but, if funding is not forthcoming, then the Government is playing a rather cynical role.

[270] No provision was made in the budget regarding compensation to or consultation with farmers in respect of the designation of special protection areas and special areas of conservation, despite the fact that these are to come into force next month. I was interested to hear proposals made by the Minister of State at the Department of Agriculture, Food and Forestry, Deputy Deenihan, regarding the Government's land policy. I would be interested to read those proposals because worthwhile information has not been forthcoming from the Department of Arts, Culture and Gaeltacht on the proposed national heritage areas and special areas of conservation. Members who live in rural constituencies are aware of the great concern expressed by farming and other organisations about proposals to deal with the habitat directive which is to be signed in February.

I and my colleagues in Fianna Fáil tabled parliamentary questions to the Minister for Arts, Culture and the Gaeltacht asking him to come clean on this matter, discuss the issues and provide an update on his consultation with the social partners, either during a plenary session of the House or at a meeting of one of the committees. The Minister has prevaricated on this issue and I understand that the signing of the directive is imminent. However, even though the Minister was invited to address the Select Committee on Social Affairs, it seems that the proposed date does not suit him. I hope he will find the courage to come before the House to outline the current position before the directive is signed.

Paltry provision was made in the budget to protect built heritage, despite the Minister's promises. A number of platitudes have been expressed in respect of the necessity to protect that heritage. This matter was discussed by the House on many occasions. However, despite sympathetic mutterings from the Minister and the Government, there has been no follow through. The budget presented another opportunity to provide substantial funding to deal with this issue but again we have been disappointed.

Mr. B. O'Keeffe: I acknowledge my two constituency colleagues on the opposite side of the House. While I will make some harsh statements, I intend no personal slight because they are two fine colleagues in Cork South-Central.

Mr. Coveney: I thank the Deputy. We will continue to have two representatives in the constituency.

Miss de Valera: These Cork people are very clean cut.

Mr. B. O'Keeffe: When I deal with issues concerning Cork, I am sure the Minister of State will not rest as easy.

Mr. Coveney: We would not expect anything less of the Deputy.

[271] Mr. B. O'Keeffe: The budget has been described in Government circles as a good budget, a budget for the future, but economic writers call it a budget for inflation. That is worth thinking about because there is a real danger that as a result of many of the provisions in the budget inflation will rise. I will deal with that matter later. Squandermania has been the hallmark of the Government since coming to power, particularly in the spending targets it set itself. There has been an increase in current day-to-day spending of approximately 20 per cent as against total inflation in the same period of about 6.5 per cent.

Mr. Broughan: What about the growth rate?

Mr. B. O'Keeffe: When a Government sets targets it is important that it meets them. In money terms we are talking about an increase of £2 billion in day-to-day spending, which can be classed only as economic lunacy of an unprecedented level.

When the Government was asked about its commitment to the programme of renewal we were told that money was spent well and wisely, but in many instances the public are asking whether this is a repeat of the 1982-7 period when Labour and Fine Gael were in Government. Deputy Hogan mentioned spending under Fianna Fáil and the Progressive Democrats, but I would refer him to the fact that Deputy Bertie Ahern brought in the first balanced budget in 17 years. Under Labour and Fine Gael the national debt was doubled, from £13 billion to £26 billion, and it is now £30 billion.

Mr. Broughan: What is the national income level?

Mr. B. O'Keeffe: Under the parameters set down in the programme for Government the national debt will be increased by a further £1 billion by 1998. The old adage “live now and pay later” seems still to be part and parcel of the policies of Labour and Fine Gael. As David Quinn stated:

So reality has forced Labour to practice the financial equivalent of safe sex. Alas, like the fictional character, the Steppen Wolf, beneath the civilised exterior lurks a wild man struggling to break free. What goes for Labour goes doubly for the Democratic Left, except in the case of the DL the beast is already loose and it takes all the energy of Fine Gael and Labour to restrain it.

Not a good job has been done to date on this issue.

If we look at the current Estimates we will see that there is lack of control. For example, in the Department of Transport, Energy and Communications, £4.5 million was spent on consultancy services, an increase of £1.1 million; in the Department of Arts, Culture and the Gaeltacht there was an increase of 75 per cent and in the Department of the Taoiseach there was an increase of [272] 14 per cent. Administration costs in the Department of Transport, Energy and Communications have increased by 20 per cent and in the Department of Arts, Culture and the Gaeltacht by 17 per cent. That does not smack of the type of control we would like to see.

I note this morning the consternation of the Minister of State, Deputy Rabbitte, who called in the vintners because he is concerned at the price increase of 5p in the pint. Those who warned against the dangers of inflation probably see that the first sector has recognised there is additional spending power and is capitalising on it by increasing prices. That will result in an increase in inflation, which could have detrimental effects on our targets in terms of the economic and monetary union. That is what we have always been afraid of.

I understand the difficulties experienced by the Minister for Finance with Programme 2000, particularly public sector pay and the fact that the Government has exceeded day-to-day spending, but it is a pity his leader did not pay more attention to him. With Democratic Left in Government there are difficulties and the old adage “if you lie down with dogs you get up with fleas” is true.

Mr. Broughan: In that case Fianna Fáil should avoid the Progressive Democrats.

Mr. B. O'Keeffe: I hope a fumigation process will begin soon and that the people who can manage the economy well, the Fianna Fáil Party, will be returned to its rightful position.

Mr. Coveney: And the Progressive Democrats.

Mr. B. O'Keeffe: There are two Cork Ministers in the House and it would be remiss of me not to mention a couple of Cork issues — they would be disappointed if I did not do so. The decision of the Minister for Education to take the unprecedented step of upgrading Waterford regional technical college to institute of technology status without setting down criteria or parameters was naive in the extreme. It caused embarrassment for Cork Deputies on the Government side and has led to a position where everybody wants to join the bandwagon. The two Ministers present share my views on this issue.

A review group is being set up to deal with this matter. Yesterday Athlone regional technical college officials met the Minister's programme manager and an official from the Department of Education and it was clearly stated that the Department is not in favour of putting a time limit on the report of the review group. It was suggested that it could report in three months' time, but that is not acceptable. It should be suggested to the Minister for Education that the review group be given a two week remit to examine the position in Cork. If we look at Cork regional technical college in terms of the diversity of courses, quality of personnel, quality control [273] and points of entry to the college, not alone does it equate with Waterford but it is better in many respects.

Since examinations will be held in May, thankfully the students in Cork have gone back to class, but they have given a two week deadline for the matter to be resolved. I exhort the Ministers present in the strongest possible manner to bring to the attention of the Minister for Education that Cork regional technical college must be granted institute of technology status within that two week period.

Mr. Coveney: It is much too serious an issue to put a deadline of two weeks on it. We are as interested in this issue as the Deputy.

Mr. B. O'Keeffe: Given that Waterford regional technical college has been granted institute of technology status, the college in Cork, which is well ahead of that in Waterford, should be granted similar status.

Mr. Coveney: That may be the case but two weeks would be insufficient time to deal with the matter.

Mr. B. O'Keeffe: It is quite likely that there will be an election within three months and it is unacceptable that it would take that long to compile a report. There are 1,809 students from Cork South-Central registered at Cork regional technical college, 695 from Cork North-Central, 1,409 from Cork East——

Mr. Broughan: Has the Deputy written to all of them?

Mr. B. O'Keeffe: ——895 from Cork NorthWest and 1,100 from Cork South-West. Taking into account the parents and families of all those students, that is a major bloc that is incensed by the present position.

This week I heard of two cases of people who are comatose and cannot gain access to University Hospital Cork because the accident and emergency department is inadequate. An obstetrics unit is also needed there. Since massive amounts of money are spent on these buildings, will the Department of Finance consider a build, lease and buy-back programme such as that successfully operated by the IDA in the development sector? Such a programme could be a runner. Rather than the Government committing itself to major spending perhaps arrangements could be made to bring such a programme on stream to ensure a top level service is provided in the Cork area. The two Ministers of State present are aware it is badly needed. The introduction of such a programme would be a way out of the Exchequer having to find large sums of money that would need to be spent immediately. It is a concept well worth considering and I urge the Ministers of State to consider it.

The nurses' strike is one close to our hearts but it was not handled well, given that the Government [274] had three bites of the cherry in an attempt to settle it and the cost of it continues to escalate. Some initiative, imagination and goodwill would go a long way towards resolving the problem.

Has the Government a policy on employment? What type of graduates do we produce? Is there a link between the universities sector and the demands of our economy? Those demands are to fill high tech jobs in the pharmaceutical, health care, electronic and computer sectors. We do not produce enough graduates to meet the demand in those sectors. We advertise for skilled workers and there is a dearth of courses for apprentices. Much of the blame must be attached to the Construction Industry Federation because it decided to employ subcontractors and did not take any responsibility for training. We are now in a dilemma and are trying to entice people to return home from abroad. It is good to see people coming home, but we have a dearth of skilled people and that problem must be addressed. Thirty four per cent of students in University College Cork graduated in the arts compared to 6 per cent in engineering. Something must be done about that imbalance as the graduates coming on stream are not meeting the needs of our economy. Surely there is a relationship between the university sector and the demands of our economy.

The Horgan Quay site will be a major election issue in Cork. People there are still incensed and enraged that 800 jobs were lost to Cork.

Mr. O'Sullivan: Who is enraged? I have yet to meet one person who is enraged.

Mr. B. O'Keeffe: I passed the site the other day and saw weeds growing out over the 10 foot high walls.

Mr. O'Sullivan: Is the Deputy suggesting there are no alternative sites? What about Ringas-kiddy? Cork County Council has parks all over the place.

Mr. B. O'Keeffe: That project was lost to the people of Cork. The man who bought that site has a track record. In the past when he said he would produce so many jobs, he produced them. The Minister of State should get himself out of a tricky situation. The people of Cork will not spare him come election time. They will remind him of the dastardly treatment of Cork during the Lowry affair concerning the Horgan Quay site. The election will be held very soon. I have outlined the issues and the Minister of State has an opportunity to address them in the best interest of the electorate in Cork.

Mr. D. McDowell: I would like to share my time with Deputy Broughan.

Acting Chairman (Mr. Kirk): The sharing arrangement is agreed.

[275] Mr. D. McDowell: The fraternal spirit of the Cork Deputies is to be admired and, perhaps, we in Dublin could learn something from it.

This is the third budget introduced by my party colleague, the Minister for Finance, Deputy Quinn. In many ways he is a man to envy these days. He is the Labour Party's first Minister for Finance, but he is also the only social democratic or socialist Minister for Finance in the European Union who is in a position to simultaneously reduce taxes on income while spending more on the essential services on which so many of our people depend, on what Deputy Quinn, as quoted by Deputy O'Keeffe, termed “safe sex”.

Mr. B. O'Keeffe: I used the term “illicit sex”.

Mr. D. McDowell: I am in favour of safe sex. Many people will be surprised to hear Fianna Fáil advocating virginity or chastity.

Mr. B. O'Keeffe: What does the Labour Party advocate?

Mr. D. McDowell: Safe sex.

The financial statement is not just an economic budget it is also a statement of our aims and priorities as a community. Our community comprises not only a record number of people at work but also a record number of people who depend on those at work, be they old age pensioners or people who depend on social welfare. The budget is not only a budget for those at work but for those who depend on them.

Much of the focus of the pre-budget speculation centred on the need for so-called continuing tax reform. In this context the phrase “tax reform” is a misnomer. What commentators really mean is a reduction in income tax or any other tax which they happen to pay. They do not mean reform in any serious sense of that word. I for one find that unfortunate.

The residential property tax did not serve the purpose for which it was intended. It did not contain house price inflation, it did not channel investment into more productive sectors of the economy and, most importantly, it did not bring in much money. The tax fell foul of that most important of taxation maxims, it failed to command public acceptance. It had to go and no doubt few will shed many tears over it. Its going also represents a significant failure. It represents our failure once again to devise an acceptable way of taxing something other than income or consumer spending.

As the Minister of State, Deputy Rabbitte, pointed out yesterday, the overall take from taxation is not high by European Union standards, but the take from income tax is among the highest. Inevitably this will continue to be so for as long as the political establishment and the social partners refuse to countenance any broadening of the base. In these days of high economic growth this is probably a matter of little consequence. However, as the Opposition is keen to point out, [276] high growth cannot be expected to continue for ever. Sooner or later we must grasp the nettle of broadening the base. We should use the opportunity now to give serious consideration to introducing carbon and energy taxes. We should reconsider capital taxes, particularly capital acquisitions tax. The lessons learned from the introduction of RPT are powerful and must not be forgotten, but they must not frighten us off the medium-term aim to broaden the base and thereby reduce considerably the level of income tax currently extracted from the PAYE sector.

All parties in the House are apparently agreed on the need to reduce taxes on income. The Minister has made considerable progress in his three budgets since 1995. The standard income tax band has been widened by £1,700 in the case of a single person and by £3,400 for a married couple. That is an increase of more than 20 per cent, an amount which more than compensates for the reduction in mortgage interest and VHI reliefs. Those increases are significantly ahead of the cumulative inflation rate over that three year period which runs at approximately 7 per cent. Personal allowances have also been increased well beyond the level of inflation as has the general exemption limit as a result of which many thousands of workers and pensioners have been taken out of the tax net.

There may be general agreement in this House on the desirability of reducing income tax, however, I suspect there is little agreement on the rationale behind tax cuts and the means of implementing them. The prime purpose of tax cuts must be to promote employment. The primary way of doing that is by eliminating the poverty and unemployment traps in the tax system. It is not good enough that somebody could be worse off by virtue of taking a job or by earning more. This has implications beyond the tax system.

In terms of the income tax system, if we accept the need to reduce the impact of such traps, inevitably we will be driven to focus the benefit of taxation reductions on those on low or moderate pay. In fairness to the Minister, he has sought to do that. He has reduced the lower rate of tax and raised personal allowances, but the Minister and the Government need to do more to deal with this issue. Last year the Government published a report of the commission charged with recommending ways to integrate the tax and social welfare systems. The commission provided a useful analysis of the anomalies in the existing systems. It dealt at some length with issues such as basic income, provision for children and support for workers on low income. It also made detailed short-term proposals. It suggested the gap between personal allowances and exemption limits should be progressively closed. It also suggested that provision be made for the retention of secondary allowances in certain circumstances. The Minister has made significant progress in this direction but I am sure he will agree that more needs to be done.

[277] The other main reason to reduce income tax is to contain wage inflation, while adequately rewarding workers at a time of economic growth. This aim was central to the Minister's thinking in negotiating the Partnership 2000 programme which is likely to be accepted by ICTU today. I strongly support the notion of social consensus and partnership. It is important to involve the social partners in determining how economic growth is to be sustained and how the fruits of that growth should be distributed. Many other groups were given an opportunity to express their views as to what the programme should include. I endorse not just the contents of the agreement but also the process which brought it about. It is important that we do not take it for granted.

In that context the Fianna Fáil Leader, Deputy Bertie Ahern, is to be commended for initiating the process when Minister for Finance. He would do well, however, to read the report of the proceedings of the Select Committee on Finance and General Affairs in March 1996 when it heard an extraordinary and forceful presentation by the former Minister for Finance in New Zealand, Ms Ruth Richardson. During the course of her presentation she viciously attacked the concept of social partnership and all that goes with it. Her exposition was one of the most ideologically right wing presentations which I have heard in the confines of this House in recent years. She derided any concept of social consensus, national accord and most of the values on which European society, post-World War II, have been constructed.

Following this exposition from the Honourable Ms Richardson, the Progressive Democrats spokesperson on Finance, Deputy Michael McDowell, said: “I support what you said with a heart and a half”. Last week the same Deputy endorsed, in principle, the provisions of the Partnership 2000 programme. As Deputies will remember, this is not the first issue on which he has recently changed position.

In their 1995 statement on the economy the Progressive Democrats made it explicitly clear that they favoured the privatisation of most, if not all, of the public utilities during the next five years. This commitment, too, appears to have been watered down, or has it? In the not too distant past the Progressive Democrats explicitly supported a property tax. I wonder if they still do. I also understood that the Progressive Democrats agreed with the standardisation of tax reliefs. This was less than clear, however, from the contributions made to this debate last week by Deputies Harney and Michael McDowell.

The confusion, if that is what it is, in the Progressive Democrats policy is nothing by comparison to the bogus duplicity of the Fianna Fáil position. Deputies McCreevy and Harney have made it clear that they think the Minister is spending too much. Deputy Ahern has explicitly committed Fianna Fáil to eliminating borrowing altogether by 1999. He has said that the national debt [278] should be frozen at a level under £30 billion. Since the national debt currently stands at £29.9 billion, this would effectively freeze borrowing almost immediately.

Equally, Deputies Ahern and McCreevy have demanded that deeper and more expensive tax cuts be made, again with immediate effect. The effect of this in this year's budget would have been to reduce spending by a sum in excess of £1 billion, yet Fianna Fáil speakers in this debate have consistently demanded increased spending on a range of areas. Yesterday, Deputy O'Donoghue demanded an increase in the social welfare provision for old age pensioners, while Deputy de Valera demanded considerably increased spending on the arts. Each of Fianna Fáil's spokespersons outlined a litany of projects for which they want funding. Rarely does a week go by without Deputy Martin making further demands for increased resources in education provision. All of these demands are inconsistent with that party's rhetoric on the budget.

The truth is simple, one cannot improve social services without spending money. If one wants to cut spending one must cut services. Fianna Fáil is looking to take £1 billion out of this year's budget. This amounts to almost 10 per cent of total net current spending. This cannot be done without significant cuts in essential services. It is high time this was spelled out to the public.

We are told that the Minister is spending too much, that he has been profligate and, even, promiscuous with the public finances. This allegation deserves study. This is the first time in decades that a Minister for Finance has set out to return a surplus on the current budget, and not just a small or technical surplus. The Minister has provided for a current budget surplus of no less than £192 million. For the first time in living memory the national debt fell last year. The debt-GDP ratio is significantly lower than it was when the Labour Party came to power in 1992 in partnership with Fianna Fáil. It is well within the criteria set out in the Maastricht Treaty.

Those who argue for reduced spending often point to public service pay as being the core of the problem. In a sense, they are right, the public service pay bill is rising beyond the rate of inflation. There is more than a little evidence of what is euphemistically called grade drift within the system. Numbers in the public service generally have increased in recent years but not by very much. Almost all of the increase is accounted for by the areas of health and education, areas which have been specifically exempted from any cuts a Fianna Fáil-Progressive Democrats Government might introduce.

The Progressive Democrats have informed us that they will cut 3,750 jobs in the Civil Service. We, and more particularly Civil Service workers, need to know where and when the axe will fall. Perhaps Deputy McCreevy will tell us if Fianna Fáil is committed to a similar reduction in numbers. People deserve to be told before the axe [279] falls so that they can make a sensible and informed choice.

Those who attack the public service pay bill need to tell us where the fat is to be found. Is it, for example, at clerical assistant grade where an entrant will earn £155 per week rising to £230 per week after 11 years or is it at clerical officer grade where an entrant will earn £156 per week rising to £280 per week after 15 years? If Fianna Fáil or the Progressive Democrats think that these figures are excessive, they should say so and let us have a debate but perhaps the fat is at the higher grades. Higher grade civil servants have received pay increases significantly ahead of inflation in recent years but the bald fact is that most of these people are still paid far less than they could reasonably hope to command in the private sector.

Perhaps we should look outside the Civil Service altogether. Are the Opposition parties saying that teachers, nurses or Army personnel are paid too much? Are they saying that we have too many teachers, nurses or Army personnel and that they will reduce the numbers? It is not good enough to say that bureaucracy would be reduced. We must be told how and when that will be done.

I am not attempting to say that all is rosy in the civil and public service. There are unquestionably management and other deficiencies in the service which we have been too slow in addressing. The way in which budgets are managed, for example, leaves much to be desired. There is far too much inflexibility. Most of all, there is a stream of accountability and a culture of secrecy which is utterly unsuited to the information age at the end of the 20th century.

On public spending, I am willing to ask if we should be doing more to improve public services, although I fully accept that we should be slow to incur recurring costs in the system. I am not making that argument but we could do more in terms of once off spending. I cite hospital waiting lists as an example. The Minister has continued the initiative started some years ago by the Minister for the Environment, Deputy Howlin, when Minister for Health, of targeting moneys at reducing specific hospital waiting lists. This initiative has been very successful in reducing waiting lists by almost a half but I acknowledge that more needs to be done. Would it be possible to provide additional moneys on a once off basis to continue this initiative?

The Minister for Education has provided funding for a programme to reduce the number of substandard schools. Again, this is once off expenditure. I wonder, however, whether we should take the opportunity to do all the work that needs to be done now, although I acknowledge that much has been done. Last week the Minister provided £250,000 to upgrade the heating system in schools in the Kilmore west area in my constituency.

There has been much discussion about the fact [280] that the marginal rate of taxation was not altered in the budget and claims have been made that there is nothing in the budget for higher earners. This is completely untrue. Even if we discount the fact that RPT has been abolished and third level fees eliminated, both of which are more likely to affect higher earners, there is a great deal within the budget which is of direct benefit to those who pay the 48 per cent marginal rate.

A reduction in the standard rate benefits everyone, not just those who pay all their tax at the 26 per cent rate. By contrast, a reduction in the higher rate benefits only higher earners. Surely it is a more equitable use of resources to introduce changes which will benefit the maximum number of people. It makes one wonder why the Opposition parties are so anxious to reduce the top rate. It could be a matter of political opportunism to buy the votes of higher earners. However, since this possibility is so awful perhaps we should leave it aside in the spirit of charity and look at the economic arguments.

The argument traditionally advanced is that if the well-off are given an incentive there will be a knock-on effect on less well paid workers and on job creation. This is what Bill Clinton famously called the “trickle down” effect and what George Bush earlier referred to as “voodoo” economics. The truth is that trickle down does not work. The experience of Nigel Lawson in the UK is instructive. He certainly managed to multiply the number of champagne swilling yuppies in the city. He also overheated the British economy which ultimately led to inflation and a current budget deficit, the likes of which we have not had in this country for some years now. Does anyone seriously believe that at this point in the economic cycle we need more money swirling around in our economy? It amazes me that commentators who normally scream loudly at the risk of inflation or overheating seem to have little or no difficulty with injecting money into the economy through tax cuts.

Does anybody believe that cutting the higher rate of tax will increase job creation? It may encourage people to do more overtime and take a part-time job in addition to their existing one. It will scarcely create more jobs, particularly for those who are long-term unemployed. I concede that the marginal rate kicks in far too early but Deputy Quinn has made significant progress in that regard and we can now at least say that a married couple with a mortgage and one person earning will not pay a higher rate of tax until they earn in excess of £30,000.

This is a good budget which does not stand on its own but falls into the pattern of the budgets previously introduced by the Minister, Deputy Quinn, and the 1992-94 Labour-Fianna Fáil Government. I hope the Minister will be in a position to continue the progress in years to come.

Mr. Broughan: The various reactions of Fianna Fáil and the Progressive Democrats to this year's [281] budget were among the most interesting things about it. Fianna Fáil essentially tried to have it both ways. They were envious of the fact that a Minister could come in with a prudent, balanced and socially responsible budget, implemented against a background of a national pay and partnership agreement, and secure the economy for the next three years. There was envy on the Fianna Fáil benches because they could not partake in such a development. The mantra was repeated by Deputy Batt O'Keeffe that public spending is out of control and that this Government has been spending, spending, spending. We have spent on the crucial areas of primary education, health and the housing programme and we do not apologise to anyone for doing this.

Deputy Séamus Brennan and I participated in a discussion on Dublin local radio last Sunday morning. He accused us, as Deputy O'Keeffe has done, of increasing spending by 20 per cent over three years. I made the point, and Colm McCarthy also reminded us, that in that period the growth in the economy has been in the order of a cumulative 33 or 34 per cent. The economy has grown by a massive one third and we have increased spending by 20 per cent. It is a reasonably fair deal that the people, particularly the poor and lower paid, should get a fairer share of the fruits of that economy, which has not been happening. Fianna Fáil needs to decide where it stands on this matter.

Deputy Batt O'Keeffe made the extraordinary proposal to privatise the major hospital in Cork. What will his Cork constituents think if that message reaches home from Dáil Éireann this evening?

We have seen the Progressive Democrats alternative budget, which proposes to take almost £3 billion out of this economy and out of public expenditure. We know, as we saw before in the “end tax and spend” documents, that, despite the protestations of their finance spokesperson, this could only be done by massive privatisation. The Labour Party backbench Deputies met Aer Lingus and TEAM representatives last night about current conditions in that industry. The message must go out from this House that a future Fianna Fáil-Progressive Democrats Government will introduce massive privatisation of our national airline, Telecom, CIE, of each jewel in the crown of public enterprise, and as Deputy Derek McDowell said, of the State service itself. We are faced with that daunting prospect from a future “slash and burn” Fianna Fáil and Progressive Democrats Government.

We also had the ludicrous spectacle last week of a Progressive Democrats Deputy invoking Mr. Tony Blair, the leader of the British Labour Party, regarding the performance of the Irish Labour Party. He does not seem to know that the development of the Irish Labour Party, its successful doubling and its most powerful influence on this House over the last four years, was achieved because our party leader, Deputy Spring, travelled the new Labour road of reorganising [282] our party long before Tony Blair did with the British Labour Party.

It could be said that the British finance spokesperson, Gordon Brown, would be delighted to introduce the kind of budget which Deputy Quinn introduced. The British Labour Party is committed to keeping Government spending as a percentage of GDP constant. If it succeeds, its figures will compare favourably with our own. The Progressive Democrats' mantra that spending is out of control and the invocation of Tony Blair and the British Labour Party as a stick to beat us with is completely inane.

In the last few budgets, we have tried to concentrate our tax reform measures to take those on middle and lower incomes out of existing employment and poverty traps. Gordon Brown's proposal to introduce a 10 per cent initial tax rate is a different way of doing exactly the same thing. It is nothing to do with Progressive Democrats efforts to destroy basic social services, to the benefit of the already well-off. It was a Labour-Fine Gael Government who, in the 1970s, introduced a 20 per cent tax rate. Tony Blair believes in communities, investment, a well-run education system and in ending social division. If we looked at the Thatcherite wasteland caused by 18 years of Conservative rule, at New Zealand, at the low-paid job market in the United States and at the pursuance of catholic, progressive democratic politics in Britain, we can see the prospects which face our constituents if a Progressive Democrats-Fianna Fáil Government is elected to this House. That prospect is a totally dismal one and has to be opposed at every turn.

I commend my colleague, Deputy Quinn, for his performance in his third budget. He is not alone the first Labour Minister for Finance but also perhaps the best one. It is ironic that Deputy Bertie Ahern's former colleague, George Colley, was the last Minister for Finance to bring a current budget surplus and a balanced current budget into this House. After that, Fianna Fáil went through its mid-1970s spendthrift phase when a huge proportion of the population deliberately did not pay tax, which resulted in public debt. The Minister is to be commended for getting the numbers right in relation to growth, inflation and exports, and for using some of those accruing benefits in the poorer communities through increased spending on education and health.

The constant refrain we heard from Opposition speakers last week about levels of taxation is nonsense. According to the taxation league table of the 15 Eropean Union countries published in Eurostat and the OECD's statistics, Ireland is fourth lowest with only the UK, Spain and Portugal below us. Our tax to GDP ratio is 37.5 per cent and falling, and compares favourably with the Benelux countries whose ratios are all around the mid-40 per cent, as well as to the Scandinavian states whose tax to GDP ratios are 50 per cent plus.

[283] The consistent problem, for which conservative parties in this House are responsible, is that over the years segments of the community have not paid their fair share of tax. At the Committee of Public Accounts last week I demanded that the Chairman of the Revenue Commissioners should carry out a study on the so-called black economy. The Comptroller and Auditor General will also insist that the study be carried out for that committee, and I am repeating the call in the House today. We must examine and investigate the size of the black economy. It may be that there was always much more money to redistribute and spend on vital services such as health, but for various reasons it was not collected.

We recently saw the collapse of a large insurance investment company where 15 or 20 people who invested large sums of money did not even report it to the Garda. That is because it may be hot money and cannot be reported as no taxation was paid on it. Those people have robbed the taxpayer and the Exchequer.

I welcome the abolition of local service charges which were a crippling burden on my constituents in Dublin's northside. Fianna Fáil had the opportunity many times to get rid of this measure, which was a form of double taxation on householders, but refused to do so. I also welcome the abolition of residential property tax which was fundamentally a tax on the Dublin area where over 70 per cent of it was collected. The measures relating to stamp duty on the sale and purchase of large value houses is a fairer way of collecting taxation formerly collected through RPT.

I welcome the moves which the Minister, Deputy Quinn, has made on a responsible policy of tax cutting for personal taxation and for his attempt to remove some of the anomalies in that area. In particular, I welcome the doubling of the age allowance which had not been increased for about a decade. The Minister for Finance, together with the Minister for Social Welfare, Deputy De Rossa, are to be commended for refusing to allow the social insurance fund to be dismantled and raided. After all, almost half the basic social welfare budget is provided through the social insurance fund. The Progressive Democrats essentially want that fund to be dismantled and smashed. I wonder if Fianna Fáil is prepared to go along with that because, if it is, we will have a situation such as that in Germany and Holland where a pensions time bomb is hanging over the State. Going back to the 1920s and 1930s, we have always tried to have a responsible attitude to this and the Government will rightly reject any attempt to destroy it. I hope my constituency colleague, the former Minister for Social Welfare, Deputy Woods, who liked to wax eloquent on the social insurance fund, will also take that view.

I welcome all the measures the Minister has taken in the business area. He is a progressive Minister for Finance and has slashed corporation tax to 28 per cent for the business sector along with introducing the developing companies market. [284] In addition he has implemented a master plan for the Dublin region. I welcome all the measures on social solidarity in relation to social welfare.

I look forward to the Minister's fourth budget later this year which will continue his outstanding performance in this Department.

Mr. Jacob: This time slot is that of my colleague, Deputy Séamus Brennan, who has generously allowed me to share it for a few minutes.

Acting Chairman: Is that agreed? Agreed.

Mr. Jacob: Deputy Brennan holds an important portfolio so I will not encroach on his time too much. In this important debate on taxation, expenditure and financial policy I will, in the few minutes available to me, address but two issues which are relevant to my constituency of Wicklow. The urban renewal scheme has been a major success. Towns throughout the country fortunate enough to have been so designated have been upgraded and transformed. In my constituency the towns of Bray and Wicklow have been fortunate. As one who has pressed vigorously for the inclusion of these towns, I derive great personal satisfaction from the improvements brought about there through the urban renewal mechanism. However, this satisfaction is sadly countered by my total dissatisfaction, dismay and disappointment that the town of Arklow was not deemed worthy of inclusion in the scheme.

For years I have been making the case for Arklow which has been devastated by unemployment due to the running down of traditional industry over the years. I would now make yet another plea to the Minister and to the Government to designate Arklow for inclusion in the scheme. Its case is meritorious and has already been well made. The Government should not let the economic boom pass Arklow and its south Wicklow hinterland by.

In view of the success of the urban renewal schemes generally, I can see no logical reason to exclude smaller towns in my own consistency such as Greystones, Enniskerry, Kilcoole, Rathdrum and, in the western part of the county, Blessington, Dunlavin and Baltinglass, Tinahealy and Carnew in addition to Hacketstown and Rathvilly in the newly arrived part of my constituency in County Carlow. These towns and others would get a new lease of life by being thus designated. Perhaps a tax incentive scheme akin to the urban renewal scheme already in situ could be considered while the economic situation is as it is.

As an example of what I am saying regarding these smaller towns, I know of businessmen who would be ready, willing and able to undertake substantial investment in my home town of Rathdrum if the appropriate tax incentives were put in place. I am sure that also goes for such towns throughout the country. Let us take advantage of the affluence that is currently in our midst. I appeal for this matter to be urgently addressed [285] while the economic climate is right. The economic boom should not be allowed to pass County Wicklow by.

I also wish to address the question of the infrastructure necessary to allow such economic development to proceed. Water and sewerage facilities are seriously deficient in many areas of my constituency. The western area of County Wicklow is without a proper, modern and quality water supply. This is totally unacceptable in the late 1990s and is tantamount to a national disgrace. With the coffers brim full surely now is the time to give the people of west Wicklow their basic right to a decent water supply. In north Carlow the people of Hacketstown have a water system that was built in the 1930s. On 25 July last I tabled a parliamentary question to the Minister for the Environment asking if he knew of the hardships being experienced by the people of Hacketstown because of the poor quality and supply of water and if he would make provision for the installation of a new plant and instruct his Department to issue the necessary approval to Carlow County Council to proceed with the site investigation in relation to this proposed scheme. The extension of the north regional water supply scheme from Rathvilly to Hacketstown is the relevant scheme. The Minister replied indicating that although Carlow County Council had submitted proposals, given the high level of commitments under the water and sewerage programme he could not say when it would be possible to approve them. Most respectfully, and as strenuously as words will allow, I ask the Minister to address that matter during this affluent time, to alleviate the hardship being suffered by these people and allow the town to develop to bring it into the late 1990s.

In the eastern part of Wicklow are towns such as Newtownmountkennedy, Newcastle, Kilcoole, Ashford, Rathnew, Glenealy and Rathdrum which are currently rendered sterile from the point of view of development because of the lack of adequate facilities, particularly sewerage services. Investors and developers are queuing up to build houses, to upgrade the area and to engage in the general development for which these areas are crying out. Their aspirations are totally frustrated because the planning department of the local authority, Wicklow County Council, cannot grant planning permission in the absence of basic services. This is scandalous. Now is the time to put these facilities in place — while the interest and the enthusiasm of investors is there. I fear greatly that the economic boom will pass my constituency by. There is an onus on all of us, and particularly on the powers that be, now or postelection, to ensure that this does not happen. I again ask that my plea be heard and acted upon now. I thank the Chair for facilitating me.

Mr. S. Brennan: I have three problems with this budget. First, it is the wrong economic strategy; second, it has all the hallmarks of a bookkeeper's budget and, third, it does not address the issue of [286] the single currency in any sensible way, but ignores the fact that it will be in operation fairly soon. These are three fairly fundamental objections.

Let me comment first on the aspect of the single currency. During its Presidency and again in this budget, the Government has missed the opportunity to deal with the single currency and European Monetary Union, to which we agreed in the Maastricht Treaty and with which I have no difficulty in principle. I am disappointed that the Government has not attempted to build conditions into our participation in that currency so as to assist Ireland. Specifically, there is need to establish a compensatory fund, a type of fiscal federalism, which would assist countries that cannot keep up when things get rough or who get caught in the crossfire of competitive devaluations in the years ahead. A number of leading economists and international commentators in the international financial press have also supported this view. I want to use the opportunity of this budget debate to ask the Taoiseach and the Cabinet, and particularly the Minister for Finance, to join the forces at EU level which are now seeking the establishment of such a single currency compensatory fund.

It is critical from the point of view that after 1999 our own funds from the EU will start to taper off and largely dry up. A statistic which I had to double-check because it seemed high but which is accurate is that after we join the single currency — in the event that Britain does not, which is now likely — 60 per cent of our trade will still be in currencies other than the euro; we will still be trading in sterling, in dollars and in other international currencies. That means that only 40 per cent of our business will be in the euro which leaves us extremely open and vulnerable, particularly if one accepts the view of the German finance minister and the Bundesbank that once a country joins this currency it is on its own, that it has no safe haven if its economy gets into difficulty and its exports cannot keep up because of competitive devaluations, and that there will be no mechanism to move funds around inside the system to help individual countries.

When the United States launched the dollar a number of states were behind, but it was clear that a central fund would have to be established. A federal fund was established to assist individual states in the United States to keep up with the currency and to even out the turbulence which took place as some states emerged into the new dollar regime. I am extremely angry at the lack of appreciation of this point.

The Taoiseach has been rather short tempered with me on this issue in that whenever I seek to raise this matter he reminds me that we voted for the Maastricht Treaty and that there is no other way to go. I have no difficulty with that. I am a supporter of the single currency, but I am not a supporter of not seeking to mould the kind of single currency with which we can live. In signing the Maastricht Treaty we did not agree to enter [287] the single currency and that the Germans could make the rules. We said we would enter the single currency and European Monetary Union. My intention at that time was that we would take part in moulding the conditions and mechanisms around which that currency would operate. To join the single currency without demanding, and getting in place, a federal type of compensatory mechanism to assist individual countries out of difficulties, after 1999 in particular, would be absolutely reckless of the financial members, the economic members particularly, of the Cabinet and the Government as a whole.

A second aspect of that, of course, is that the Government was silent on these issues. There is no word either from the Government on the question of the Bundesbank's control of this new currency. In an article in the financial pages of today's Irish Independent entitled, ECB blast by Tietmeyer, we are warned that the central bank of Europe will be totally independent and not in any way subject to political pressure. Has the Government inquired about the nature of this central bank? Is it, in effect, a souped-up Bundesbank dominated by German financial planners and economics or is it a genuine European central bank in which Ireland will have a strong say? Will Ireland have a veto at its board table? The Government is silent on that issue.

It is silent on another single currency issue, the question of Northern Ireland, and I regard that as extremely reckless. There is no discussion about how Ireland will operate in a new single currency regime if Northern Ireland remains outside that currency. That will establish yet another economic border. There has been no preparation. There are no cross-Border fora or discussions. The Taoiseach, as I understand it, has not raised the matter with the British Prime Minister even though John Major did not rule out a dual or parallel currency, where the new and old currencies would operate side by side, for Northern Ireland in a speech some years ago. The Government seems to take no account of that and every time I raise this issue with the Taoiseach he regards me as somehow unpatriotic for questioning the sovereign decision to join a single currency. I agree that joining a single currency is a good decision but the Government must try to manage the transition and it must get assurances on these issues. Most of all, there must be more debate in the House on this issue.

Everybody knows that trade with Britain is central to Ireland's economic health yet there is no demand from this Government to establish a new ERM where the new currency would operate within an agreed band with currencies which do not join the single currency. In other words, why has the Taoiseach not had discussions with other Prime Ministers and Mr. John Major, in particular, in regard to whether the policy of the British Government will be to keep sterling in a relationship with the new currency in an expansion of the existing ERM band, which is about 15 per cent, [288] or whether he intends to let it float freely? Will the EU allow one of its members states to behave in such a way that it can devalue at will and mess up the other economies? Will the EU tell that member state that it cannot do so and that sterling must join in a new relationship with the new currency? In the latter case, we would at least know the size of the jump, we would be able to protect ourselves against competitive devaluations of sterling and that would be a much safer situation for Ireland.

The four points, the compensatory fund, the control by the Bundesbank, the question of Northern Ireland and the link with sterling, are important issues in managing the transition to the new currency and yet I have not heard any comment from the Government on these issues not do I see any political will from the Government to resolve these issues to our satisfaction. This is in exactly the same league as if Ireland did not speak up and demand the establishment of the CAP, the Social Fund or the Cohesion Fund. We did; we were to the forefront of demanding the establishment of these funds yet there is no voice on the Government side of the House demanding the establishment of a similar fund to deal with the management of the new currency. The Department of Finance should comment on these issues. Unfortunately, the Minister does not seem to have addressed any of them in the budget.

The second area in which I have real difficulty with the budget is on the Government's economic strategy. I called it a bookkeeper's budget already and that is what it is. It involves 50p here, £2 or £3 there and tax reductions of 1 penny. It involves nit-picking and small money. It works out at 40p per week for some pensioners. Nobody even got the price of a daily newspaper from it so it is very much a bookkeeper's approach. There is no vision in it.

The budget contains no developmental strategies, such as those which gave us the IFSC and export tax relief or which attracted all the multinational companies. There is also no indication of how we will fund the capital programme after 1999. There is no sign of any buzz or sparkle in terms of economic planning and only a dull, bookkeeping strategy of “one for everybody in the audience” which, it is hoped, will get the Government past the general election. That is a pity because I know Deputy Quinn would have been capable of much better than that were his hands not tied by his political allies because I worked with him in the Department of Enterprise and Employment.

He knows as well as I do that approaching the budget from just a bookkeeping point of view was not what was required by the economy at this time. He is adding to demand in good times and not allowing himself the luxury of running a deficity when the bad times come. I do not know of any economist who would recommend a strategy which boosts an economy when it is doing well, as this Government seems to be doing. It is inflationary. The Government is still borrowing [289] some £700 million per year when there is economic growth.

When Deputy Broughan spoke about the extent of economic growth, he mentioned a figure which I want to challange. He said that in three years there had been accumulative economic growth of 33 per cent and, therefore, there was no problem in increasing public spending by 20 per cent. By my calculations, there was, at most, economic growth of 15 per cent in three years. If that is the case and Government spending has increased by 20 per cent, the Government is clearly spending at a rate five percentage points above the rate of economic growth.

We, on this side of the House, have been challenged for complaining about the 20 per cent increase in spending over three years. I know Deputy Quinn had not planned to do that as he made some fine speeches which I support fully. He talked about holding spending to the rate of inflation and about holding spending to the rate of inflation plus 2 per cent. They were his policies, so what happened to Deputy Quinn in the past two or three years? What happened to the man who made those speeches? He must have received a mauling at Cabinet which moved him from those stated positions which were correct.

To his credit, he produced a three year budget and looked at matters with a five year view. If one examines the public spending profile for the five year period, the Minister is committing himself to increased spending of 33 per cent at a time when combined inflation will be running at about 9 per cent. That is quite horrific and Deputy Quinn knows it because that is what he said. He promised to spend at the rate of inflation plus 2 per cent and he spent at a rate of inflation plus 7 per cent, plus 9 per cent, plus 8 per cent. Every time we on this side of the House complain about the Government missing its targets somebody asks where we would make the cuts. That is what I too would do if I were on the Government side. If the Minister, Deputy Quinn, had maintained his policy of holding spending to the rate of inflation — plus, perhaps, 1 per cent or 2 per cent — he would have £1.5 billion in the Exchequer. If 20 per cent is added to our current and capital spending it amounts to almost £2 billion. The Minister has spent between £1.5 billion and £2 billion above what he committed to spend in his three budgets. It is not a matter of asking me where we would make the cuts. If the Minister had said no — as a former Minister, Mr. MacSharry, did many times — and held the line at inflation plus 1 per cent or 2 per cent and told his partners in Government to back off, he would have £1.5 billion stored up over three years.

To put that in perspective, I telephoned the Department of Finance this morning to ask what it would cost to reduce the top rate of tax by 1p and was kindly informed it would cost £50 million. How many £50 millions are there in £1.5 billion? There are 30. I am not recommending that it would all be applied in that way. The bottom line is that had the Minister kept spending to [290] the rate of inflation for three years he would now have enough money to cut the 48 per cent tax rate to 30p in the pound. The profligate spending was not necessary. It has been paid for directly out of taxation which was increased by £364 million in one year. The economic strategy of the budget amounts to economic and financial madness. What has been done was extremely reckless. In its editorial on 23 January 1997 The Irish Times stated:

The bottom line however is that he has not brought spending under control as this Government promised. And as a consequence, borrowing will rise significantly this year and higher still next year. Not even a natinal debt of £30 billion, it seems, can diminish the urge to live now and let the next generation pay.

This is not just being said by Deputy Seamus Brennan of Fianna Fáil. The Irish Times takes the same view in what I regard as an objective editorial.

Clearly this budget is the wrong economic strategy. The tax rate of 48p in the pound could have been reduced by 5p or 6p at least, as well as the bottom rate, had the Minister kept to his own policies. We do not need cuts in public expenditure but a sensible hold on the rise in public spending.

Given that there has been no planning for the single currency and that this is basically a bookkeeper's budget, with a few bob for everybody but nothing real, my side of the House opposes this budget.

Notice taken that 20 Members were not present; House counted and 20 Members being present,

Mr. E. Byrne: I wish to share my time with my colleague, Deputy Sheehan.

An Leas-Cheann Comhairle: I am sure that is satisfactory and agreed.

Mr. E. Byrne: The budget which was presented by the Minister, Deputy Quinn, last week was not an election budget. Instead it was the logical culmination of the social and economic policies which have been pursued ably by the Government since assuming office in December 1994. However, it was a budget in an election year and, as such, this allows us to take stock of the clear choices which will confront the electorate. That choice will be between the continuation of the present arrangement which has guaranteed both political and economic stability or a return of the ill-fated Progressive Democrats-Fianna Fáil experiment of the 1989-92 period. That experiment, of which we have vivid memories, saw an extra 56,000 people signing on, mortgage interest rates were at a crippling 15 per cent and the hard pressed taxpayers were being squeezed by a phenomenal extra 17 per cent.

We have disturbing memories of that Government which was rent by internal bickering and [291] external divisions. In the past week we witnessed echoes of that dissension when Deputy Dermot Ahern gave what could be deemed a fine rendition of Banquo's ghost, lugubrious and full of foreboding. These sentiments have not been expressed so openly by other members of Fianna Fáil but they have been expressed privately in the corridors of the House. This is understandable as Fianna Fáil's experience of the Progressive Democrats during the period 1989-92 was not an entirely happy one. Sadly, it was also not a happy experience for the country. The consequences of that temporary little arrangement were anything but temporary. It is important to put on the record that the effects of Deputy McCreevy's infamous dirty dozen social welfare cuts have only finally been reversed in this budget.

Later this year the electorate will be asked whether it wants to return to the days of Fianna Fáil-Progressive Democrats mismanagement or continue on the steady course being pursued by the Government. This course has seen the creation of a phenomenal 100,000 new jobs, a reduction in interest rates to their lowest level ever, a near doubling of child benefit, an increase in social welfare payments to a level approaching the minimum rate recommended by the Commission on Social Welfare and the creation of a climate of economic and investor confidence and a feel good factor. The electorate will probably decide to continue along the path being pursued by the Government.

I am pleased that for the first time the next Government will be determined not by ancestral political allegiances but by modern political realities. The choice voters will be asked to make later this year is a clear one between a centre right or a centre left Government; a choice between the sweatshop economics of the McDowell, Harney and McCreevy troika or the sharing vision of Deputies De Rossa, Bruton and Spring. I use the term “sweatshop” advisedly as Deputy Harney makes frequent laudatory references to the ostensible success of the south-east Asian economies which have been built on the basis of low wages and minimal social protection. These economies are in danger of crumbling under the burden of social divisions, as evidenced by the recent unrest in South Korea. People who visit pound shops will see the fruits of sweatshop economics. Goods sold here for £1 have clearly been produced by the Asian tigers for just a few pence.

A society with low wages, few health and safety regulations and no social insurance only works for the wealthy. It is also a vision which consigns countless thousands to poverty while they are working and to destitution when their days of useful labour are over. That is the horror choice facing the electorate later this year. The sooner the election campaign starts and we are able to expose the differences between a centre left and a centre right Government the better.

Deputy Harney is on record as asserting that [292] low paid Hong Kong workers are not rich but they are happy. That line would not be out of place if it was uttered by an east end factory owner in some 3p Victorian novelette. I envy Deputy Harney's insight into the lives and aspirations of Hong Kong workers. I do not think Irish workers would choose to be the guinea pigs in the Progressive Democrats attempts to reproduce Hong Kong conditions here. The “I'm all right Jack” creed of social selfishness of the Progressive Democrats has no place in the European Union of the 1990s. However, given her statements on EMU it seems Deputy Harney's commitment to European integration is in some doubt.

There is a better choice. During the past two years the Government demonstrated that increased levels of social protection and economic confidence are not mutually exclusive. Deputies McCreevy and McDowell, together with their private sector echoers in the SFA and ISME, would have us believe small firms are competing with the social welfare and tax systems for workers. Their rationale is simple and cock-eyed. Many small employers pay little more than starvation wages equivalent to social welfare payments. According to them, increases in social welfare provide a disincentive to people to take up jobs. The solution to this dilemma presented in the code, of which Deputies McDowell and McCreevy are past masters, is a form of work fare. At no point have Deputies McDowell and McCreevy, who represent the twin scourges of social cohesion, addressed the crux of the problem, that is the need for employers to raise wages to a minimum acceptable level which enables workers to support their families in a dignified manner and which makes working a more attractive option than not working.

The budget is worker and family friendly. It deliberately targets two sectors of the population. It targets families with children who are most likely to live in poverty and who have witnessed unprecedented increases in child benefit as well as changes in the criteria for eligibility for child dependant allowances since the Government entered office. It also targets people on low pay, the working poor, not only through changes in taxation and increases in personal allowances but also through improvements in the family income supplement and the method of assessment for the adult dependant allowance. These measures will not only alleviate the position of low pay workers but will encourage those without work to make the transition from the dole queue to employment. The State should not be in the business in the long-term of effectively subsidising low pay. In this context, Democratic Left has long argued for an expansion of the Joint Labour Council and Joint Industrial Council agreements to cover all sectors where low pay is a problem, thus moving eventually towards an effective minimum wage.

During the past ten days we have heard much rhetoric from the Fianna Fáil and Progressive Democrats benches. Their job in Opposition is to [293] oppose the Government and there is no better platform on which to do this than on the budget platform. Their rhetoric has been largely devoid of content and the main complaint is that (i) the tax changes and social welfare increases were insufficient and (b) in making these changes and giving more people more money in their pocket the economy is in danger of overheating. I wish the Deputies opposite would make up their minds about the measures on which they wish to criticise us. I am not sure how they reconcile the two complaints, but I am sure that the fiscally prudent course being pursued by the Government will result in a continued climate of economic confidence where investment will continue to flow in and jobs will continue to be created.

What mainly irks the Progressive Democrats and the PD wing of Fianna Fáil is that the Government has decided to target the low paid rather than reduce the top rate of tax, the rate paid by PD constituents. The Government does not represent PD constituencies. High earners in this country are not overtaxed compared to our European Union counterparts; that is evident from the figures presented to the House yesterday by my colleague, the Minister of State, Deputy Rabbitte.

The Progressive Democrats would have us believe that economic salvation begins and ends with tax cuts but what this Government has set out to do, and what Democratic Left has consistently advocated as tax reform rather than simple tax reduction, namely, an increase in personal allowances and the other complementary measures announced in the budget, benefits all earners while ensuring that the maximum benefit is derived by those on low incomes. Unfortunately the PD Members are not in the Chamber to hear this critique despite the fact that they constantly tell us they participate in all debates; I hope they are watching their monitors.

The view of taxation propounded by the Progressive Democrats has blinded them to the economic picture as a whole. Tax reductions, even on the scale envisaged by the Progressive Democrats, are of little use to mortgage holders who are crippled by 15 per cent interest rates. They are largely irrelevant to those without jobs such as the 56,000 unfortunate people to whom I referred earlier who were added to the live register between 1989 and 1992 during the Fianna Fáil-Progressive Democrats Coalition Government.

Last week's budget was the third in a package of three presented by this Government. During that time poverty traps have been eliminated, the effects of the “dirty dozen” welfare cuts imposed by Fianna Fáil and the Progressive Democrats have been reversed, an unprecedented number of jobs have been created and mortgage rates are at their lowest ever level. The real impact of this budget will be felt in people's pockets as they benefit not only from increased welfare payments and lower taxes but also as they make the transition from the dole to work. That is the challenge [294] to which the Government rose two years ago and which it happily met head-on.

Mr. Sheehan: I congratulate the Government and the Minister for Finance, Deputy Quinn, on introducing what could be described as the most progressive budget since the foundation of the State. It is a budget that meets the Fine Gael principle of shaping a more prosperous and inclusive Ireland for the 21st century. The average PAYE worker will benefit by between £500 and £700 as a result of this progressive budget.

Three years of prudent management of the economy by the Government has ensured that it pays to take a job and to make a job. A pro-enterprise strategy of low inflation and low interest rates has fuelled the engine of the economy and earned Ireland the reputation of being a “Celtic Tiger”. Approximately 100,000 jobs have been created and unemployment has fallen by more than 30,000. As a result of this budget 10,000 low income earners will be taken out of the tax net by caring and intelligent reforms. The Government's pro-enterprise and pro-jobs drive has not been achieved at the expense of the disadvantaged in our society. The budget provides for social welfare increases of between 4 per cent and 7 per cent with the lowest of those increases at almost twice the rate of inflation.

In its three previous budgets the Government has increased the child benefit allowance by 50 per cent for the first and second child and by 60 per cent for all subsequent children. The carer's allowance has been increased by 50 per cent to persons caring for more than one incapacitated person, and old age pensions have been increased substantially. Maternity and adoptive benefit has been increased also to £82.30 per week and will be extended to the self-employed. The number of yearly social insurance contributions needed to qualify for a pro-rata old age pension has been reduced from 20 to ten, provided the claimant has 260 paid contributions. The period for which arrears are payable in respect of late claims for retirement pension, old age contributory pension and widow's contributory pension has been extended from six to 12 months from the date of claim.

The conditions appertaining to free electricity and free telephone rental allowances are being streamlined from June 1997. I welcome the Minister's decision to extend the free telephone rental allowance to pensioners in cases where constant care and attention is being provided by another member of the household or by another person resident with the pensioner, including recipients of the carer's allowance. In regard to applicants for the free telephone rental allowance, I welcome also the Minister's decision to extend the age limit for dependent children from 18 to 22 years for those in full-time education and resident with the recipient.

The Minister's decision to allow all pensioners over the age of 75 to qualify for the free electricity and free telephone rental allowances [295] regardless of their household circumstances is to be welcomed. That is a major breakthrough for the underprivileged and elderly section of our community. The Minister has also provided an additional £2 million towards the cost of security for the elderly, a measure first introduced in the 1996 Budget. That is essential because many elderly pensioners live in isolated rural areas miles away from their nearest neighbour. Those people must have direct access to an alarm system because there are too many cowboys plundering the homes of decent, elderly people. Action must be taken by the Government to put an end to these crimes. People in isolated rural areas have the right to live the remainder of their lives in peace and happiness.

I congratulate the Minister on the manner in which he comprehensively dealt with the social and economic problems appertaining to the underprivileged section of our community. Our economy has performed exceptionally well in recent years. Growth rates are several times greater than the European Union average and employment rates have outstripped the EU average. Unemployment levels have continued to decrease since this Government assumed the reins of office. European Commission data have conceded that our GDP per head of population increased from 76 per cent of the EU average in 1991 to approximately 100 per cent in 1996, a tremendous achievement for a coalition Government that was not supposed to last six months. I guarantee Members opposite the Government will run its full term. It will continue to ensure the ship of State is guided in the right direction.

Stability has been maintained for the past three years. We have a moderate inflationary rate, Government borrowing has been consistently below the EU average and, for the first time in more than a generation, our national debt has taken a downward plunge by a figure of more than £300,000 this year. This is a step in the right direction and it must be maintained in the years ahead. The good housekeeping of this Government and the Minister for Finance has led to lower interest rates and increased investor and consumer confidence in the economy. The steady approach in successive agreements between the social partners has resulted in moderate nominal pay increases creating industrial peace and maintaining competitiveness. With the strong growth evident in foreign direct investment and the contribution of EU structural and cohesion funds, which have considerably improved the infrastructure and productive capacity of this economy, the barometer is set for a continuation of strong non-inflationary economic growth in the next few years. With a recovery evident in Europe our GNP is expected to increase by approximately 5.5 per cent this year and by approximately 4.5 per cent in 1998 and 1999, with the creation of 38,000 new jobs per annum over the next three years. Partnership 2000 is intended to increase further [296] the economy's capacity for high employment and outward growth as we approach the year 2000.

It is paramount that the Government maintains our borrowing capacity comfortably within the Maastricht budget criteria and it is also essential that cost increases are minimised. That is vital not only to maintain competitiveness and safeguard employment, but also to ensure we fulfil the inflation criteria for EMU membership.

I compliment the Minister on reducing the standard rate of tax by 1 per cent. I hope this trend is continued in future budgets. However, those caught in the 48 per cent tax net should also be considered and there are other anomalies the Minister should tackle. The Minister for Social Welfare should consider extending the pro-rata pensions for people with a yearly average of between ten and 20 PRSI contributions for old age pension purposes to those in the survivor's pension category. He should also consider increasing the winter fuel allowance to the price of a hundred weight of coal. When that allowance was introduced some years ago it covered the cost of approximately 100 weight of coal per week, but the current rate would buy only a half hundred weight. Surely the Minister knows that heat is important for our elderly citizens. There is nothing more cheery than a glowing coal fire on a dull dismal winter's day or night. Perhaps the Minister will see fit to increase the winter fuel allowance to £10 per week next year, which would enable old age pensioners to maintain a decent level of heat in their homes during the winter months.

When the public assess the unfounded criticisms levelled at the budget by Fianna Fáil and the Progressive Democrats, it will hear the hollow ring of two parties who failed abysmally when in Government together. This Government is working, not standing idly by.

I compliment the Minister on abolishing water charges and residential property tax. I urge him to extend the coastal resort scheme to Kinsale, Bandon, Skibbereen, Bantry and Castletownbere. I also compliment him on not increasing excise duty on spirits, wines, beer, stout and cider. The proposal by the Licensed Vintners' Association to increase the pint by 5 pence in some Dublin pubs is deplorable. I congratulate the Minister of State, Deputy Rabbitte, on requesting the representatives of that association to explain why they are trying to siphon a further 5 pence from the public, while licensed premises in this city are making up to £4 million when put on the market.

I congratulate the Minister and his Ministers on their magnificent performance during the Presidency of the EU. The Government was saddled with problems it did not create. It inherited the BSE and the hepatitis C crises which have put a severe strain on the economy. I hope those problems are resolved quickly.

I compliment the Minister for Finance on introducing a budget with vision, capacity, courage [297] and determination to steer us into the next millennium.

Mr. Haughey: I wish to share time with Deputy O'Rourke.

Debate adjourned.