Seanad Éireann - Volume 111 - 23 January, 1986
Appropriation Act, 1985: Motion.
Debate resumed on the following motion:
That Seanad Éireann notes the supply services and purposes to which sums have been appropriated in the Appropriation Act, 1985.
Mr. Fallon Mr. Fallon
 Mr. Fallon: Before concluding yesterday evening I referred to a number of areas of Government and the problems that existed. In particular I referred to very real problems and cut-backs and so on in the area of health. I referred to the problem that existed for many people and the concern that many old people in particular had expressed to me and to many other Senators in regard to the law and order situation. I referred briefly to the county roads scene. It has weakened to such an extent that it must be of concern to all of us and there must be hope for increased financial contributions to alleviate that situation.
I was about to refer to the position of the insurance industry and the problems that they are now encountering and to the problems of many people wishing to secure employers' liability insurance and public liability insurance. A high premium is the order of the day at the moment but it is difficult to arrange that particular insurance at all. I had given examples of premiums which had increased by as much as tenfold over 12 months. That is the scene in the insurance industry today. I know that insurance companies are often criticised for the increases they put on their various portfolios but they, like any other business, like to make a profit. Their approach is that insurance companies should be run as businesses, that they should be allowed make a profit whether that profit be on the underwriting side or the side of investment, and they are in a situation where if a portfolio is not making money because of huge awards against them then they are entitled to increase their premiums the same as any other business. That they are doing. We all know that they are monitored by the Department of Industry, Trade, Commerce and Tourism. So they are paying out huge awards, and in order to balance their books they are forced to charge high premiums. Until the jury system is abolished that situation will continue because as we know, awards are astronomical and for realistic premiums to pertain the Jury Bill is of paramount importance.
I would like to refer to the problem  that we on this side of the House and I am sure on the other side of the House consider the biggest single problem facing this country, that is, unemployment. The economic and fiscal policies of the Government have given us what we now know to be a figure of almost 300,000 people out of work. That figure may well have slowed down somewhat but, if it has, it is due to the re-emergence in some way of emigration. It is due to the fact that so many young people who should normally be at work are continuing education. It is due also to a very large range of training and temporary employment schemes, the value of which, is extremely doubtful. There are nearly 40,000 young people either on an AnCO training programme or in one of the temporary job schemes. I am aware that the NESC report highlighted concern in this area.
It is most unfair and, indeed, heartless for the Government or for any Government to attempt to disguise the reality of the dismal situation in regard to youth unemployment. Since October of 1982 registered youth unemployment has increased from 48,000 to over 70,000. The Youth Employment Agency magazine, FOCUS, points out that the improvement in young peoples' employment which had been anticipated for 1985 has not yet occurred and that this reflects trends in the economy where growth in 1985 was slower than expected and overall employment continued to fall. It also points out that much of the increase in training and employment schemes for 1985 took place in school based programmes which have relatively little impact on the registered unemployment. Almost one-half of the young people had been out of work for more than six months and one-quarter for over a year. This depressing situation is the unfortunate explanation of the wide level of alienation and of concern that exists among so many young people. We were told that unemployment would peak at the end of 1984 but that has not been the case. In the light of emigration and in the light of the temporary measures I have referred to it  is clear that the real rise in unemployment has not slowed down at all. The Taoiseach last year indicated that employment would begin to rise again for 1986. Hopefully, that will be the case. We all know the concern that this problem is causing to so many people, families and young people in particular. The unfortunate situation is that there are many thousands of people with no jobs, with no prospects. They feel robbed of their dignity and of their self-respect because they are not able to make their contribution to society.
It seems that fiscal rectitude has turned into a monster for this Government. It was to be the centre piece of the economic and fiscal plans. Instead, we have massive unemployment and people crucified with taxation. Generally it can be said a depressing state has been created for all concerned. I am referring again to the problem of jobs. We hope the Government will take positive action to get many people to work. I read that for every 90 people at work, 27 are out of work. Clearly, drastic action is needed if we are to remedy the jobs crisis. It is a major social crime. Probably the greatest social wrong is a denial by society of a person's right to work. Our failure to organise and to co-ordiante our human material and financial resources to bring together the work that needs to be done has brought about this situation. We all know the financial cost of unemployment; that it can be measured; that we can get facts and figures from various Government Departments. I am sure this year the cost will be close on £1 billion in unemployment benefit and in loss of tax revenue to the Government. How can we measure the anguish and the worry, the mental pain the frustration, the total demoralisation that is the other side of the coin?
The latest figures on the economy have staged a fight against the problem we have at the moment of teachers' pay and public service pay. Next week the Minister for Finance will have to find an extra £250 million just to stand still. The figures that have been produced are figures that we never contemplated and the Government  did not contemplate. Yet recently the Taoiseach described our economy as among the healthiest in Europe. If this is health, Heaven protect us from any form of sickness. I share the concern of many people. I know times are tough generally but it is hard to have sympathy with the Government on this issue. They have inflicted all sorts of woes on the country in the pursuit of financial rectitude. I have referred to them. Unemployment has soared; the industrial base has been damaged; vital services have been cut. The litany is endless. We have suffered in 1985. Nobody likes to suffer but suffering in vain is something few of us can stomach. We have achieved nothing. When this fact comes home to the minds of the electorate, whether the election is this year or next year, it will be reflected in the ballot box. I have no doubt it will sweep the Government out of office.
Mr. Ferris Mr. Ferris
Mr. Ferris: This debate on the Appropriation Act, 1985, gives the Members of this House an opportunity to look at the economic activity of the Government in the area of public expenditure last year. It allows an opportunity to have a cautious look forward to 1986. The Estimate figure submitted by the Department of £5,698 million in the non-capital area is an increase of 4 per cent over 1985, or £292,000. Capital expenditure for 1986 is projected at £648 million, which is an increase of 9 per cent over the 1985 figure. This brings the total estimated public expenditure for 1986 to £6,346 million — a considerable amount of money. With this huge amount of expenditure if the outturn is not as projected, no matter how small the fraction in percentage terms, one can easily over-budget or under-budget. In spite of what has been said to the contrary, the Minister managed to achieve many of his budget projections. The Minister has been accused of everything by everybody. He has been accused of being a Thatcherite, if that is acceptable terminology in a parliamentary assembly. He has been accused of monetarist policies, of book-balancing and of disregarding the consequences of all this on the underprivileged. The books  of this Government are open to examination by anybody and on examination one will find that the opposite to what is being said in the country is true. The Minister yesterday said that the budget deficit was now running at £1,234 million which is a £50 million increase in the estimated deficit. Some people regard this as a failure. I heard these accusations from the other side of the House yesterday. Senator Fallon insinuated this morning that this is the problem when there is this kind of deficit. This theory is espoused daily in the media by politicians of all parties and by politicians from the Government side of the House who are able to state their case quite well. Indeed, I have heard it from newly formed political units.
The stark economic reality is that if this budget deficit did not exist, the first people to suffer would be the weaker sections of our community — the old, poor, sick and unemployed. I am not ashamed to say that as a Labour representative I am quite confident that because there is a Labour presence in the Cabinet these exposed sectors are protected. This is one of the few ways that have been available to the Government to protect the underprivileged. The budget deficit has to be controlled but not to the extent that was promised before the last election by the two major political parties. If their economics had been followed, the economic consequences for the poorer sections of the community would have been disastrous. They are a section of the community we have a particular regard for in the Labour Party. They may not always vote for us but that is irrelevant. This section of the community must be protected during periods of economic difficulty. It is a fact that this Government over the past three years have managed to achieve in this area levels of payments that no other European Government have managed to achieve, even Governments with total socialist control.
There is rampant economic crisis throughout the western world and we have not been insulated from it. We have a record in this area which has not been surpassed. Even then, there are people like myself and the Minister of State at  the Department of Industry, Trade, Commerce and Tourism, Deputy Moynihan, who is present, who feel that we have an ongoing responsibility in this area. I hope that in next week's budget this will be proved when the figures are announced. This is the area of society we must look at with particular concern. It greatly concerns me and, indeed, many other members in my party that during periods of economic difficulties, public opinion favours fiscal rectitude or, if you use other terminology, “back bashing” the poor and underprivileged. This is what fiscal rectitude can do. The weaker sections are the first to suffer.
There are 240,000 persons unemployed. This is an unacceptable figure, representing one-sixth of the total number avilable for work. All of us agree that there are some people in that area who are guilty of “nixers” as they are commonly known. There are people who sign for unemployment benefit and we are satisfied that they are working. This is particularly true in the case of the building industry. Steps have been taken and have been supported by all of us to ensure that this will not continue. Apart from that, I am confident that the vast majority of unemployed persons are genuinely seeking gainful employment.
Senator Smith said yesterday that people are being paid who do not work. I do not think this is what the Senator actually meant but those are the words that would be on the record of the House. People in this area are being paid only if they cannot get work and are available for work. It is up to the system to ensure that those conditions are complied with. We will not have it being said that people are paid not to work. Of course, this is not true. People who I meet regularly at my clinics in the constituency genuinely want to get gainful employment. Every effort should be made by Government to grapple with this problem which is one of the main scourges of our economic situation.
I accept that the scourge of unemployment is not an Irish problem but an international  one. I know that within the Community, itself, the levels of unemployment are still increasing to figures like 13 million. What most concerns me is the 240,000 who are unemployed here and I would like to ensure that every effort is made to secure some type of employment for them. Otherwise, I am afraid young people will grow cynical and disillusioned with political structures and may be left with no alternative but to turn to crime and vandalism. There is evidence of this in the country already. It is a major challenge to any Government and every conceivable step should be taken to ensure that this lengthening dole queue is shortened in some way and that schemes, innovations and incentives are used and taxpayers' money should be available for that purpose.
In this regard I would like to compliment the Minister for Labour, Deputy Ruairí Quinn, and his Department for the various schemes they announced during the year. The Minister has addressed himself personally to these problems and has set up training schemes through AnCO, the Youth Employment Agency, to ensure that, when children leave school at secondary level who cannot go on to third level education, they at least have additional skills taught to them so that they can meet the challenge of the new technological era which demands so much of our younger generation.
The Department of the Environment, through its Minister, Liam Kavanagh, made major innovative changes recently in the reconstruction grants which the Minister referred to yesterday. I am sure that the impact of that in many areas will be considerable, particularly in the State sector, the semi-State sector and the local authority areas where productive employment can be created.
There is a feeling abroad, outside the walls of this House, that in some way employment in the public service is not productive. As a local councillor and one involved in local politics, I do not accept that view. I know of very much needed work that can be done which would better  the environment and the community by people working in the public sector provided there was a commitment from the taxpayers to fund such schemes. I am sure the Department of Labour social employment scheme is one such scheme.
I know there are enough brains in this Government to ensure that other initiatives can be brought forward which would help in this areas. It is because of this philosophy that I hold that I am asking taxpayers and representatives of taxpayers, whether they are trade unionists or not, who continually call for tax cuts, to realise that this is the only source of income that a Government has outside of borrowing that can be used in the area of public expenditure. If this work is to be created, tax money will be needed to do it. I know that one of the major vehicles for the creation of employment could be the National Development Corporation which we, as a Labour Party, have fought for for so long and thankfully will be law in the very near future as it has passed the other House and will be before us in the month of February. When the National Development Corporation is in place, I am quite sure that the type of schemes that could be available to create employment with the assistance of the public sector and the private sector could make a major difference to the unemployment figures that we are at present faced with.
In an economy like ours, which is a mixed economy, the private sector also carries a major responsibility. In spite of some of yesterday's Opposition contributions in this area, this Government have assisted the private sector to a very large extent. It has given them incentives by way of corporation tax incentives; it has given them cash payments towards the employment of people from the live register. It has, under pressure from all of us, offered PRSI exemptions, it has offered tax relief for venture capital investments and through the IDA we have offered generous grants to people for the installation of machinery and new technology, the building of advance factories and adopted many other methods  of selling Ireland as a tax haven for multinationals, all within the private sector. We did it at a cost of £750 million last year.
Although Senator Cassidy said yesterday that this private sector was the only hope for recovery, I must be honest with myself and say that as far as I am concerned their performance in the area of the creation of employment has been disappointing with some notable exceptions. There are exceptions to every rule. In this area of the private sector there has been tremendous advancement, in the pharmaceutical world and in the area of technology and high technology. There have been tremendous breakthroughs in this country in the creation of employment but these newer type industries and the employment opportunities created in them have not been able to match the decimation of employment in traditional industries which have suffered from our membership of the Community.
It would be remiss of me if I did not put on record my welcome for the fact that for the first time in 45 years there is a trade surplus for this country in the region of £300 million. That is to be welcomed. If that type of trade surplus was continued and Ireland became a net exporter of its products instead of importing a lot of what it could do itself the national economy would be all the better for it.
Another area in the private sector which has come in for much criticism from many sides, trade union sides, ourselves and from the people involved in it, is the agricultural sector. The agricultural sector, as we all know, is of considerable economic importance in trading terms. I would like to say a few words in the area of agriculture, which is the brief that I hold for my party. Anybody who has attuned his mind to the problems in agriculture realises that the industry itself is coming into a very very difficult period within the Community. Since the signing of the Treaty of Rome and the inability of successive national Governments through the Exchequer to support the agricultural industry as they were expected to do in pre-EC days, the future  of agriculture must lie within the Community and it is there that the changes are obviously taking place.
It is a little over a decade since we became a member of the Community. In that time we have seen agricultural development in Ireland which has been overwhelmingly influenced by the activities of the Common Agricultural Policy. In recent months this policy has come in for heavy criticism, particularly since people have become aware of the large quantities of foodstuffs which are in intervention at some considerable cost to the taxpayer, while there are other areas in Ethiopia and Sudan and other parts of Africa which are devastated with famine. It is important to remember that the original intention of CAP was widely welcomed by all parties in the Community during its years of successful operation. In particular, and we often have been criticised, the socialist members of the Community have been steadfast in their support of CAP. They have been willing, able and capable of suggesting changes in CAP that would streamline it and make it more efficient. They have said, and I quote:
CAP must contribute to the protection and the creation of jobs in rural areas through concerted action by the agricultural, social and regional funds. It must direct Community expenses more towards structural improvement, social well being and regional equilibrium. The CAP must achieve a greater degree of fairness in the support of agricultural income in favour of small and medium sized producers, family farmers and agricultural workers through a better planning of production in order to avoid structural surpluses.
The socialist defence of CAP is on record and was part of their manifesto in the last European elections. It arose following a concern expressed by the Council of Ministers looking for changes in CAP. This concern, of course, is warranted because of the total Community expenditure  in support of CAP over the year, which was rising faster than the Community's own resources.
From 1974 to 1979 expenditure in the Community was growing at about 23 per cent a year, which was double the rate of the Community's resources. After a short stabilising spell in 1981 and 1982 there was an increase again of almost 30 per cent in 1983 which necessitated an increase in the Community's own resources which, of course, makes a charge on the Irish Exchequer and has a bearing on overall Government expenditure.
If we look at how important CAP is to the Community and in particular to Irish agriculture, we must also look at what has happened to Irish agriculture even through the implementation of CAP. Employment in agriculture has dropped from 17 million people in 1960 to eight million in 1983. That is a halving of the total number of people involved in agriculture. The worrying thing from the agricultural point of view is that, whereas in 1970 Europe was still largely dependent on overseas supplies outside of the Community for their basic foodstuffs, in 1983 the Community had become self-sufficient in most major agricultural products, which means that the Irish agricultural producer is now faced with a dilemma in that the Community in which it is producing is self-sufficient and unless there are major changes in the areas of direction in agricultural production and unless production is diversified into areas in which there seems to be a future, Irish farmers could be facing a crisis situation over the next few years.
The famine in Ethiopia has brought fervent criticism of the considerable food mountains that exist by people who do not realise that the kind of food that is in intervention and cold storage could not be used in Ethiopia because it would deteriorate overnight. Nevertheless, in 1985 the EC had 775,000 tons of surplus wheat and 991,000 tons of surplus butter. These are official figures. It is a major problem for the Community and for the funding of the Community if the Irish Exchequer has to contribute towards the maintenance of this type of policy. I know  it is important for the Irish farmer. What I am saying is that agriculture will be facing major problems in the area of financial assistance in spite of the fact that the Government have been generous with them, and rightly so.
In last year's Appropriation Bill the financial aid available from the State amounted to £383 million. That would include a figure of £101 million EC refunds and a figure of £135 million non-Exchequer investment from commercial State bodies. It is still a considerable amount of money, and rightly so, because agriculture is an important sector of our economy. It is disappointing in its generation of employment but it is important to keep people in rural areas engaged in agricultural production in the knowledge that it is an economic activity that any Government must have responsibility for.
Last year's figures included an increase of 25 per cent in disease eradication programmes, an increase of 99 per cent in input and production aids and an increase of 37 per cent in market intervention. These figures, which were planned, programmed, agreed and spent, have now come in for some critical analysis. In the Estimates for the Public Service as published for 1986 in the area of agriculture I look with some concern at the decreases which are shown on page 47, Vote 39, in the area of livestock improvements and eradication of disease. The figure in 1985 was £22 million for bovine tuberculosis eradication. That is reduced by 14 per cent, to £19 million. In respect of brucellosis eradication the figure is reduced from £4.7 million to £4.2 million, a reduction of 10 per cent. I accept that we have made some progress in eradication of brucellosis, which would allow possible reduction of expenditure under that heading.
I would be concerned about the projected reduction in the area of bovine tuberculosis. I know the scheme has been criticised. It is a scheme into which the taxpayer has put approximately £1 billion in today's terms.
I must consider it from the point of view that it is money that is used for the  protection of the national herd. If we do not have a national herd, then we will not have a national economy. So, it is important to ensure that the scheme is operated in the knowledge that it will protect the national herd.
I am awaiting a meeting of the Animal Health Council, of which I am a member, to discover the reasons for this projected reduction. I have no doubt that the economic situation requires that all areas will trim their sails and be conscious of economic activity. I am sure veterinary advice available to the Department of Agriculture through their officials has been transmitted to the Department of Finance for the purposes of the allocation for this heading. My colleagues and I in the Animal Health Council will try to discover the reason for the projected reduction of payments in this area and whether that will have any consequential impact on the progress of the scheme which had improved in the past 12 months.
I have no axe to grind for vested interests. If it was a vested interest that was involved in this, the consequences would not worry me because there are vested interests in the country that ignore the overall national economic situation but have regard to their own bailiwick, so to speak. I do not hold a brief for the veterinary profession or anybody else in this area but I have to have a responsibility for what I know the scheme entails. It is only when I am given the information at the Animal Health Council that I can make a judgment but I must express concern at the moment. I am not aware of the reasons for this projected reduction in expenditure. A three year programme was agreed with some difficulty but it was agreed, nevertheless, in which it was envisaged an expenditure of a certain level was required over three years if we were to come to grips with this problem. I hope the necessary information will be available for me to make a value judgment on the figures that have been published in the Estimates for the Public Service.
In trying to justify any increased expenditure of taxpayers' money we must  have regard also to other problems. The next problem, of course, that is faced by the Government is the burden on the PAYE sector. In the agricultural sector public money is required, but it is appropriate that that sector should make a fair contribution to the tax revenue. The agricultural sector cannot have their hand out and not expect to give. I have been vocal in regard to this matter for some ten years since I advocated that the farming sector should pay a fair share of taxation. I know it is an unpopular subject for farmers particularly after an extremely bad year like they had last year but, again, the Government came to their rescue.
It is important, having regard to the attitude that is built into the continuous rhetoric that we hear from farm leaders in this area, that when the chips are down if they do not make their contribution to public tax there is no way that the public sector can be expected to fund their industry. I have no doubt that if the new land tax which has been welcomed generally by farmers were finally in place and the money began to flow from it, there would be less criticism from the farming sector about paying tax: they have always had a problem coming to grips with the documentation and so on involved with taxation.
The PAYE sector, unlike the private sector, have no way of escaping from the tax net so we must in all equity try to spread this load of taxation across the board to all areas, not just to other areas but to all areas, whether it is banking, agriculture, the private sector, the corporate sector or whatever. If this country is to be run efficiently and have money available to it, there is a national responsibility on people to pay their fair share and to have some regard for efforts that are made to bring in systems suitable for various types of activity.
In a submission to the Government in 1985, the Congress of Trade Unions pointed out that there is approximately £620 million remaining in outstanding collectable tax. If that figure stands up to any critical analysis, this could be one of  the reasons that the budget deficit is as it is. If there is £620 million in collectable tax outstanding — I take it that these are figures that have either been agreed or assessed or are in the pipeline but have not come into the tax compass — then I have to look upon it as collectable tax and within that £620 million is a figure of £334 million from self-employed.
Of course, within the self-employed there is the farming community, so there is a major responsibility on the self-employed sector to ensure that whatever tax is due from them must be paid; otherwise we are on a no-win situation. For areas that are overtaxed it is little comfort to them to realise that there are sections of the community that at least appear and are seen by the public to be able to get away with it although this Government have taken some active steps to try to streamline the collection of tax. They have taken the public odium of publicising offenders in this area, names of which surprise all of us, in the professions and elsewhere, people who have large amounts of money outstanding by way of tax debts. These tax dodgers have to be dealt with strictly — fairly but strictly — and during a period of economic crisis, when people can afford to pay their tax but are bloody minded about it, then the Government have a responsibility to take action. This Government have done that.
For the first time in the history of the State we have approached the sector that in the past has been able to get away with it. When the cost of running the country was much less there was less of an effort being made by previous Governments to approach this private sector who were, of course, the political support of any Government in a majority situation. As we know from the polls at any given time 80 per cent of the electorate are the people who are privileged and want to maintain that and keep it for themselves and criticise the less well off section and want them to cut back and tighten their belts. When the figures are disclosed about the amount of taxation outstanding from that sector it makes one wonder about the whole philosophy of socialism  — you would be accused of robbing Peter to pay Paul when, in fact, Paul is the one that should have had it all the time and was probably the instrument that was used to give it to Peter in the beginning.
Until we come to full grips with the problem of private taxation or capital taxation or any other kind of taxation outside the PAYE sector, the Government should possibly consider the whole area of the principle of self-assessment. I know this is being used in other countries successfully. I do not know whether it would suit the Irish mentality or not because from my experience of trying to collect money from people you have to almost go and ask them before they will give it to you. They are used to that type of system, particularly in the agricultural sector where they are used to the rate collector calling in to them, talking to them, arranging when they will have money from selling cattle or wheat or whatever and he will come back to collect the money on that day. They do not respond to bills in other words, so possibly on a trial basis the Government should respond and go into the whole principle of self-assessment and see if it will improve the cash flow from the private sector.
The building industry has been referred to by various speakers from all sides and rightly so because it is an important industry. It has suffered over the past four or five years. The Government have been blamed for some of this. They have certainly been blamed by the industry itself and they have been blamed by the Opposition. Senator Cassidy said that when Fianna Fáil are in power the building industry booms and when the Coalition are in power the building industry collapses. If it was as simple as that we would know what the issue was. We would know that builders did not want to build for a Coalition Government but they wanted to build for a Fianna Fáil Government and vice versa.
I do not accept for a moment that that is the reason. There must be economic reasons why the building industry is up or down and I would hasten to add that  the activities of this Government, particularly in the area of public capital expenditure, has never been surpassed even by a Fianna Fáil Government, so the building industry in the public sector has been booming. The building industry has had more work to do under this Government because the capital investment in 1985 was £1,696 million so there is a continuing investment by the State in the area of capital projects and included in the area of capital projects is local authority housing, school building programmes, hospital building and other Government constructions.
If there are any problems in the construction industry it is certainly confined to the private sector. All us as, including the Minister, yesterday accepted that there was a deflated demand within the private sector in the building industry. I suppose this can be attributed in some way to the difficult economic situation, to the deflated demand for office building or house building but can we hope that there would be an improvement in this area in view of what the Minister said yesterday? Can we hope for that following the reduction in the inflation rate to below 5 per cent in 1985 for the first time in many years? It dropped from 8.6 per cent in 1984, from 16 per cent four years before that to below 5 per cent in 1985.
Apparently one of the factors in the construction industry is the inflation rate. Lower interest rates have been a continuing factor in this country up to quite recently. It is only in the past couple of days that interest rates began to flutter again and I suppose “flutter” is the word to use because our interest rates seem somehow to be dominated by the relationship between the punt and the pound sterling. If something difficult happens to sterling — because it is outside the EMS system, obviously it has a bearing on the relationship of the currencies to each other — pressure is put on the pound and then on interest rates in England followed by pressure on interest rates here, with the building societies looking for mortgage increases. This fluttering within the money market without regard for the inflation rate can  have a profound effect on ordinary people and I hope it will be short lived.
During most of this year there was an easing in interest rates. There are various loans available from the local authorities, SDA loans, the Housing Finance Agency loans, and special category loans for local authority tenants. There is also the £5,000 grant for local authority tenants who hand over their keys when they buy or build a house of their own. I do not know what other incentives the Government can give to the private building sector. The Government have put millions into the public building sector, and rightly so, because this is an important part of our infrastructure. All the new grants available now should stimulate activity in the building area and should create employment. Now that we are asking builders to submit their tax numbers and VAT numbers, maybe their employees will be legitimate employees. The building industry has been dogged by employers who were employing people whom they allowed to claim social welfare to make up for below rate wages, and legitimate builders with legitimate employees paying PAYE were not able to compete. When the Government stimulate the building industry they should ensure that the people who are awarded contracts are legitimate with legitimate employees. Only in that way can we protect employees when companies go bankrupt under the 1985 legislation which gives retrospection to 1984. These are the kinds of protection necessary for workers and companies in the event of problems arising. I hope that the incentives to the private building sector will give improved levels of employment. There are people who could work productively in building throughout the country. I hope that the cost of site development land has not been too high or that profit margins have not been too high. If we could get movement in the private sector of the building industry, I have no doubt that unemployment figures could be reduced. The building industry is a major labour intensive industry and that is why I am trying to ensure its success.
 A major roads plan involving major road works, including national primary roads, by-passes and so on, was announced by the Minister. My constituency will benefit under this scheme. However, I share the concern of other Senators about county roads. In the past the cost of maintaining county roads was met from the local rating system. We were in a position to strike a rate which always provided sufficient funds to maintain county roads. The abolition of the rates left the Government in a dilemma. They could either take up the slack by way of support grants or ask councils to raise taxation at local level. That system of funding is not sufficient to tackle the problem on county roads. We have a national responsibility as well as a local challenge to protect the public investment that has gone into county roads. I am calling for a co-operative effort between the central Exchequer and local authorities to overcome this dilemma of the scandal of county roads.
People have referred to potholes. Potholes occur because of bad weather and additional heavy traffic, for which the roads were never designed. County roads are deteriorating and funds do not seem to be earmarked to remedy the situation. I hope the co-operation I seek between the central Exchequer and local authorities will be forthcoming.
Health, which was referred to by Senator Fallon, is a major social expenditure. The progress report from the Department of Health, 1985, states that non-capital expenditure in the health services amounted to £1,168 million and that this massive outlay represents 20 per cent of the entire Exchequer provision for non-capital public services; that the health services employ approximately 58,000 people and provide a wide and sophisticated range of services. It says that the present serious constraints on the public expenditure programme have brought disproportionate attention to the adjustments necessary in the areas of public expenditure such as the health service. It says this is understandable given the legacy of inflated expectations arising from the major growth which occurred in the range and scope of services over the  last 15 years. In 1982, the non-capital expenditure in the health services was £948 million and capital expenditure was £49 million. In 1985, non-capital expenditure had risen to £1,168 million, an increase of £78 million, and in the capital expenditure area to £57 million.
Senator Fallon talked about health board cutbacks and so on. I served on a health board and at times I was almost convinced about the cutbacks. The reality is that health boards look for amounts which they consider they could use wisely. When the Department, in their overall budgeting, gives them a lesser amount, that is looked upon as a cutback, whereas in reality it is an increase, or taking inflation into account it is at least a holding situation. There were neither job losses nor ward closures in my health board area. We always had a problem trying to meet the final deficit, which was approximately £750,000 but we were owed £1½ million from farmer contributions. The health board were told that if they made an effort to collect the money due, the Government would add what was proved short. Some health boards could not prove what the deficit was. Our local authority was in a position to do so. Only then was an effort made through the legal process to collect money from people, and something like £1 million was paid in farmer health contributions in the past year.
The damning thing about it was that many farmers had never got a bill. The first notice some of them had got, was from a solicitor saying they had not paid their bills, and that if they did not pay up, they would go to jail or legal action would be taken. There is a lack of efficiency about collecting money that is legitimately due. Farming organisations are questioning how they are assessed. They confuse health board levies with income tax. Although it was a levy based on a level of income; it had nothing to do with income tax on taxable income. I convened meetings, as chairman of the board, with the farming organisations to try to explain the situation and to ask them to pay money on account to try to ensure that the health board were able to  continue to give the service demanded of them. I found the anomaly of people wanting to pay but who had not got a bill and people who had got bills who did not want to pay and paid only when they went to hospital. Health boards have got a lot of money. Obviously there is some problem in ensuring that that money is spent as wisely as possible and that the service is delivered to the patient. If streamlining the health boards, or abolition of the health boards, is necessary to ensure that efficiency is improved, there is sufficient money there to give a health service which is as good as, if not better than that provided in other countries. Our health service matches and at times outpaces England's where they have a free public health service for everybody.
An Leas-Chathaoirleach An Leas-Chathaoirleach
An Leas-Chathaoirleach: If it is not all run from Dublin.
Mr. Ferris Mr. Ferris
Mr. Ferris: If it was not all run from Dublin, I agree. Centralisation is not a good thing. One cannot deliver a community service better than in the community. That goes for the community health services as well although it may not necessarily go for the hospital services which could not be run at parish level.
Senator Fallon referred to the withdrawal of medical cards in his area. There should not be a withdrawal of medical cards from people who are entitled to them. The CEO is given some discretion in deciding whether or not a person can have a medical card. It is not always determined on income. It can be determined on medical grounds and hardship created for the family. The guidelines for medical cards have been changed nationally to take into account the cost of living. A person who had a medical card last year should have one this year unless there has been a significant increase in income. The income levels applying to the medical card are: £66.50 for a single person; £56.50 for a person living with a family; £95.50 for a married couple plus £10.50 for each child, plus the allowances for being over 80. This gives the cost of living improvements over last year. In my county almost half the population have medical cards because they meet the  requirements of the scheme. It is not fair to say there is widespread withdrawal of medical cards unless there are facts to prove it. I would suggest to Senator Fallon that if there is widespread withdrawal of medical cards, he should get in touch with the health boards.
Public expenditure on health could be justified provided that the service is delivered to the patient when required.
Expenditure in regard to unemployment runs to £680 million. That includes unemployment assistance, smallholders, unemployment benefit and pay related benefit. The figures are significant because of the numbers unemployed. The sooner we get people back to work the sooner the figure will drop to the benefit of all. I would defend people in need but the Government and the private sector have a responsibility to take people off the unemployment register and put them into productive employment.
The family supplement was our idea. People with family commitments with incomes lower than the national average, and in some cases lower than people on unemployment benefit, needed a scheme of family income supplement payments. I was disappointed at the rate of application for this scheme from sectors who complained bitterly about how badly off they were. There was a huge promotion of this scheme but we still had a very disappointing application rate. I look forward to an increased awareness of this scheme by people in the lower income area with large families who have difficulties, and who have to be supported by food subsidies for survival.
I would hope that the new child benefit scheme will come on stream quickly in spite of administrative problems. There would be a major direct payment to the mother in the home. It would be held against her husband by way of declaration of income for tax purposes. That does not mean that the payment would be taxed, but if the husband was in the tax net it would be taken as income. We all agree with the principle of a child benefit scheme.
 We must have a good look at expenditure. We must not overlook our social responsibility to protect the weaker sectors. Social expenditure to date has proved a positive commitment to ensure protection of the weaker sections. In the context of total expenditure in social welfare, a 1 per cent increase would cost the State something like £20 million. It gives an idea of the responsibility on the Government when trying to come to grips with the improvements we want in this area to stay in line with the cost of living and inflation rates.
I will refrain from commenting on the teachers' pay dispute as it is inappropriate to discuss the pros and cons of it while the process of discussion is likely to continue. I know that the talks have broken down but I would ask the teachers' unions to come back to the negotiating table and talk to the Minister about improved offers he might be able to make to them. I would also ask the Minister to have a high regard for the principle of conciliation and arbitration. It has been a long, tortuous method of having one's rights established and if the Government accept that principle, they should have regard to the consequences. I know that they have responsibility to look at the overall Exchequer consequences but they should not lightly set aside the whole machinery. Certainly, the machinery needs to be streamlined. Even the unions and the teachers agree with that, but while they are using the old machinery, the findings of the old machinery should not be set aside easily or quickly. I know that nobody has yet reneged on it and that the process of discussion and negotiation can still go on. The teachers are a very important sector and because of that I am asking them to come back to the negotiating table, talk this out and if all fails, we will have to address ourselves to the problems that may arise. I got a brief this morning on the dispute, the complications, the possible offers and the fact that other sections have agreed, but having regard to all of that, the negotiations could still go on. I am asking the people involved to carry on with the negotiations.
 The Minister mentioned additional allocations in the area of energy, yesterday. In spite of what has been said about the Minister's recent action of keeping unto himself for us the benefits that accrue to the State from recent reductions in energy costs, from listening to trade unions and so on, I feel that somehow indirect taxation is more painless than direct taxation. Provided the £1 million saved between then and budget day and the £15 million saved during the year are earmarked for something specific in the area of helping the underprivileged the privileged people who use cars will not begrudge it.
In relation to energy, I welcome the fact that Bord Gáis Éireann has been given an additional capital investment of £31 million and I would call on An Bord Gáis to reach agreement in the next day or two on that spurline which will supply Limerick and Waterford. This agreement includes Clonmel Corporation and Clonmel Gas which have invested up to £1 million in infrastructural development. Out of this funding from the Department, it should be ensured that the town of Clonmel has access to natural gas which is literally on its doorstep and for which the corporation have taken steps to have a proper pipeline laid. I hope with the additional money available in the Estimate that funding will be forthcoming.
I also hope that the Ballingarry mines which have been the subject of a lot of controversy and media attention will be brought to production. The parties in dispute are not workers, but moneyed people in dispute about the lease or the mortgage. The Government have a responsibility because of the £30 million underground value of the coal in Ballingarry in the Sliabh Ardagh area. The State cannot stand by and allow natural resources to remain undeveloped underground when workers are idle and are out there waiting and capable of developing them. That is a national responsibility. The Tánaiste has been actively addressing this problem.
From what people are saying I think the budget is going to be difficult. The  Minister was not too optimistic yesterday about it when he was teasing the Leas-Chathaoirleach about being the sort of person who might coax him into indiscretions. The Minister obviously was not disclosing anything but if he had anything nice to say he would have said it at that moment. So I take it that next week's budget will be difficult. If it is difficult I hope that the public will understand it and try to accept it.
It is very easy for a Government to bring in a popular budget and wreck the economy for short term political gain. This Government have not acted in that way. On the contrary, they have acted at times with too much regard for the country and the national interest and with little regard for their own political future. However, that is the responsibility they took upon themselves. I hope the public will accept and will be able to understand the reasons for the difficult financial situation in which this country has found itself. The financial situation certainly was not the making of this Government. Time has already shown that and the crisis they faced and tried to address is generally known. The books will show that they have shown concern in the areas about which I was worried. I know of the commitment of all the Cabinet Members. We have discussions with four of them on a regular basis, and over the past six days they have been trying to grapple with the economy. This country needs that kind of commitment from any Government.
We all have a responsibility to ensure that future Irish Governments will be the masters of their own destiny without threat from international moneylenders to whom we have had to turn at times for money. It would be a tragedy if they came into this country and told us how we should run our economy. For that reason, the public will have to have regard to the responsibilities we have taken upon ourselves. At the end of the day when the records of this Government are written they will be shown to have been as caring as possible having regard to the economic crisis that they faced, and that they have managed to turn the economy  around and to keep the country from going bankrupt.
Professor Hillery Professor Hillery
Professor Hillery: This debate permits a wide-ranging discussion of economic and social issues. However, for my part, I wish to focus specifically on the commercial State-sponsored bodies which account for substantial Government expenditure and, therefore, are of direct relevance to the matter before us. As a member of the Joint Committee on Commercial State-sponsored Bodies I have a particular interest in these bodies. There are 26 such bodies listed for examination by the joint committee and these are sponsored by nine Government Departments. They employ more than 80,000 people and are a very substantial part of the national economy. The commercial semi-State sector has made an invaluable contribution to the development of the economy. This sector covers a very wide range of economic activities such as electricity supply, oil, gas, peat production, financial services, sugar, steel, fertilisers, radio, television and so on. It follows that in examining these companies we must be concerned with their efficiency to ensure that the State, i.e. the taxpayer, gets value for money.
The National Planning Board had this to say of the State-sponsored commercial bodies, and I quote:
The State-sponsored commercial bodies are owned by the State and controlled by the Government but it is tax payers who must provide the money to finance their losses. Some of them have undertaken highly risky investments because they have not been subject to financial discipline. Bad investment decisions have been approved by “sponsoring” Ministers in Departments who are subject to even weaker sanctions than the board of management which proposed and supported them. In many cases, customers are dissatisfied but have no alternative  source of supply and no effective redress if the service provided is unsatisfactory. Boards of management feel frustrated, hounded and abused.
These observations by an official body, The Planning Board, demand attention and action so that the shortcomings and the deficiencies of these bodies will be taken in a serious way and we hope remedied. What I want to put to the Minister is based on my experience as a member of the Joint Committee on State-sponsored Bodies and as one who had worked for several years in State-sponsored bodies before joining the staff of UCD. So I have a number of specific suggestions to put to the Minister for the improvement of the performance of these State-sponsored commercial bodies.
The first point I want to make is that there must be a clear statement of the objectives of these bodies. It seems that there is little point in analysing their expenditure unless their objectives are clear and their expenditure is justified as measured against specific targets set by them. I would urge, therefore, that the annual reports of these bodies should spell out their objectives, show a summary of their corporate plans and should specify their key result areas and their strategy for achieving these results. All too often the information in the annual reports and accounts of these bodies is far short of what is necessary for an adequate analysis of them. As far as the joint committee is concerned we feel that the corporate plans of the various bodies should be made available to us on request so that we can see where these bodies plan to go. When we were examing Irish Shipping, for example, just before its liquidation, we requested the company's five year plan but the Department of Communications declined to supply it to us. This situation must be changed.
The second point I would like to refer to is the quality of the profits of these commercial bodies which arise obviously out of the expenditures that they have made, among other things. The limited disclosure of information to which I have already referred, applies particularly to  subsidiary companies in those bodies that have diversified leaves one in the position that one cannot isolate which subsidiary is making profit and which is not. The degree of cross-subsidisation, where it occurs between the holding company and the subsidiary companies should be disclosed. Otherwise it could prove very difficult properly to evaluate the performance of these bodies. In the case of Irish Shipping, for example, the accounts did not disclose the detailed breakdown of the various subsidiaries. In fact, of course, what was happening, as we now know, is that the deep sea end of their activities was loss-making and the sale of the ships was actually making up for these losses contributing to an overall profit for the company as a whole. Now, if this detailed information was available — and I am urging that these bodies should be required to provide it — it would highlight whether certain activities were justified.
The third suggestion I want to put to the Minister is that I believe there is a need for commercial expertise among civil servants. Various commercial State-sponsored bodies put commercial proposals to the relevant Government Departments and I feel that from time to time the senior civil servants are not equipped to evaluate these commercial propositions or indeed to evaluate the commercial performance of the bodies. The Government's White Paper, for example, on industrial policy says that the Department of Industry did not have the people to monitor the progress of industrial policy which presumably included the State-sponsored bodies under the political control of that Department, namely, Irish Steel — and there have been Bills before this House for that company — NET, and Ceimicí Teoranta.
I should put it on the record that I have the highest regard for the civil servants. They have a record of ability, of probity, of honesty and of integrity over the years. The point I am getting at is that the proposals put to them by these commercial State-sponsored bodies are of a highly complex nature. They have to be evaluated realistically if funds from the  Exchequer, and therefore the taxpayer, are given to these bodies. My suggestion is this, that these senior civil servants should be encouraged to obtain practical commercial experience and if that means absence from the Civil Service on a sabbatical basis, then the Government should provide such encouragement and the neccessary support for such practical training outside the Civil Service for limited periods.
My fourth suggestion relates to the salaries of chief executives of State-sponsored bodies. I hold the view that the Devlin restrictions for senior public servants in that category should be abolished. Their salaries and indeed their remuneration packages as a whole should be based on performance and on results. At present senior executives are placed on a set, predictable salary scale. Whether the organisations make money or not, they still get their salaries. That is not designed surely to produce incentive. Chief executives, I would urge, should be paid competitive salaries and be appointed, not for life, but for limited contracts of, say, five years. The contracts could be renewed if their performances justify it. There should also be bonus and share options schemes designed to motivate the chief executives and for that matter the senior management, many of whom are also subject to the Devlin restrictions, in order to achieve maximum performance and results. After all, we know that in the private sector the acid test of profit applies and the test of performance has a direct bearing on the future of chief executives in industry and on what they are paid.
The fifth suggestion I wish to make refers to the selection of board members by Governments. There is considerable room for improvement in the selection process. The idea obviously should be to attract the best possible people to serve on the boards of these commercial State-sponsored bodies. It seems that certain things must be done. Only those with appropriate expertise should be appointed. I referred to the necessity for expertise among civil servants to evaluate the complex proposals that are put to  them by the State-sponsored bodies but equally, of course, the boards of these bodies have to evaluate the same complex proposals before submitting them to Government for consideration. With regard to board appointments, there is scope for improvement by all political parties in the selection process so that only those with expertise and of appropriate calibre should be appointed. Furthermore, it seems that the directors of these State-sponsored bodies, many of whom are extremely busy people in their own full time occupations, are paid a pittance for serving these bodies. I would urge that realistic fees be paid to them to encourage them to give to these boards the time and commitment necessary.
My sixth suggestion relates to State guarantees for borrowings. The National Planning Board again points out that the borrowing by the commercial State-sponsored bodies to finance new investment, current losses and some part of replacement investment, constitutes a significant proportion of the public sector borrowing required. It goes without saying that a reduction in the public sector borrowing requirement is of key importance in improving the national finances. Up to quite recently — and I have to give credit to the Government for terminating this practice — letters of comfort were provided for some borrowings made by State-sponsored bodies. Thankfully, those letters of comfort have now been abolished and indeed I must say that as a member of the joint committee with my Fianna Fáil colleagues, I joined with the members of other parties to urge the abolition of these letters of comfort.
That is not the end of the story. Many millions of pounds in borrowings by the State-sponsored bodies are still guaranteed by the State. The State guarantee is naturally used by the lending institutions like the banks as being cast iron. I wonder do banks, for example, lend on the basis of Government guarantee without applying the same rigorous evaluation that they would apply, say, to a loan application from a private sector  company. The easy way out is to accept the State guarantee and not apply the same rigorous commercial criteria that people in the private sector have to justify when seeking finance from lending institutions.
It seems to me that where possible the State should disengage from guarantees and let the loan applications by the State-sponsored bodies stand on their own merits. Short of that, I would urge that if a State guarantee is sought by a bank, the reasons for the guarantee requirement should be submitted to the relevant Department for their consideration. If the Department feel that a guarantee should be given, then it should be for a specific period only. There should be a time limit on the guarantee.
I said that I would be brief and that I would refer specifically to the State-sponsored body sector. In that context, there are a few points I would like to make which are directly relevant to the role of the Joint Committee on State-sponsored Bodies. It is evident from the reports that have been published by the Committee that their scope and content could make a valuable input into policy decisions on these bodies. We see the publication of these reports and their availability to the Government as an important policy input when Governments are making decisions on these bodies. Where the Joint Committee on State-sponsored Bodies have already completed reports or may be in the process of doing so, I would urge that the Government in discussing significant developments with the company should consult the joint committee before making a decision. The joint committee, which is an all-party committee, would be only too glad to contribute to the policy-making process when issues relating to these commercial State-sponsored bodies are under consideration by the relevant sponsoring Departments.
My next point in relation to the role of the committee is that none of the reports of the Joint Committee on State-sponsored Bodies has ever been discussed by the Dáil. This is a shame. My feeling is shared by all the members of all parties in  the joint committee. It raises, of course, a serious question mark over the Government's commitment to the work of the joint committee system despite the high profile and general publicity they gave to the initiative of increasing the number of joint committees. As far as the Seanad is concerned, however, I am glad to record that two reports of the committee on Ostlanna Iompair Éireann, the former CIE group of hotels, and on Irish Shipping — albeit after the liquidation — were debated in this House.
In the case of Irish Shipping, however, I wish to record my keen disappointment that although we had almost completed our report after several months work, just before the liquidation decision, we were never consulted at all before the policy decision was made to liquidate it. The committee at that time in that specific case could have made a valuable input into the Government's policy decision on whether to liquidate that company.
As far as the OIE Group are concerned, the Minister for Labour in this House, while we were debating the report on that company, agreed in principle with all the recommendations contained in the report. This the joint committee found heartening. To the Minister present, I would like to make a further plea that time for a debate on the joint committee reports be allocated in the Dáil.
My final point in relation to the role of the joint committee is that I share the view of the committee that when reports are published on a State-sponsored body, the body concerned and the sponsoring Department should be required to issue a response to the recommendations in the report within a specific period, say, six months.
In conclusion, the suggestions I have made could and should be implemented without stifling the commercial freedom and initiative of these commercial bodies. All members of the joint committee devote a considerable amount of time to the work of the committee. Our reports should be taken much more seriously by the Government. For that reason, I look  forward to the Minister's response to the suggestions I have made.
Mr. Hourigan Mr. Hourigan
Mr. Hourigan: In appraising the performance of the Government over the last 12 months, it is very encouraging and gratifying to see very positive and definite improvements in the economy. Perhaps some of those improvements might not be as quantifiable as we would like at this point in time but they are quite evident. They are indications that there is a better scene in the economy.
In the first instance, as has already been mentioned during this debate, inflation has dropped to a level of 5 per cent which is one quarter of what it was in 1981. This, in itself, is probably one of the most telling features of all, that an inflation rate can be brought successfully to that level. The only regrettable feature in that context is that it is not being joined by a corresponding reduction in interest rates. Frankly, inflation rates and interest rates are generally recognised as ingredients for the industrial development of any economy.
We are aware that there are certain reasons why interest rates are, at least temporarily not coming to the sort of level at which we would like to see them. In fact, in recent days we have seen an increase in interest rates but this, of course, has been due entirely to positive and very correct policies vis-a-vis borrowing in the home market when there is a certain amount of uncertainty within the EMS and the whole realignment of currencies, devaluations and so on.
If in the not too distant future we could strive hard towards bringing our interest rates to a realistic level, coupled with our present inflation rate of 5 per cent — which indeed has all the indications of coming down to a level of less than 4 per cent within the next 12 months — then we would have a positive and definite foundation for a turnabout in a real sense in the economy.
The low inflation rate not alone benefits the individual directly in the whole area of the cost of living but it also has a very direct input into the cost of  production. Therefore, it helps the productive sector enormously. In that way, it helps our competitiveness in a very positive fashion. If we do not have the inflation rate at the correct level, there is no way we can become competitive. Indeed the whole development of our economy, be it in agriculture, industry, tourism and so on, is influenced and governed by the inflation rate. It is something in my view which could not be over-emphasised because it has an influence right across the various strands of the economy and indeed a reduction in inflation itself gives rise to a reduction in inflationary expectations. This has the important effect of encouraging everybody involved in the economy to act in a way that will consolidate or confirm the level of inflation and peg it at that point.
During 1985, apart from the inflation situation, significant progress was made in the entire trading area. In the early eighties there was an unsustainable trade deficit of £1,800 million which represented 15 per cent of gross national product. It is encouraging that there is a trade surplus for the year 1985, as has been stated. It is something that we must be very pleased to know exists. It is noteworthy that we did not have that kind of situation, in other words a favourable trade balance since the early forties. That is encouraging for all of us. Leaving party politics aside, as citizens we should all be very pleased at the kind of scenario that is now emerging. The continued efforts of Government over the last three years have brought about that situation. There are signs and indications that the good, solid, hard input by Government over the last number of years is paying off.
The year 1985 was a good year nationally for tourism, as is clearly reflected in the balance of payments position. The overall deficit narrowed from 5 per cent of gross domestic product in 1984 to under 3 per cent of gross domestic product in 1985. Tourism has been referred to by other speakers some of whom said that in particular areas tourism was bad. Nationally, tourism was significantly better in 1985 than in previous years.  Unfortunately, we were not favoured with good weather in 1985, which had some adverse effects on tourist activity in various parts of the country but by and large it was a good year for tourism. We hope that with an improved economic situation and better weather, we will have an even better position in 1986.
While there is no excess money in the hands of people, they have had more to spend in the last couple of years. When I say more I am not talking about large amounts but there is an improvement in that regard. There is improved spending power. This is a very welcome development. It is correct to acknowledge that expenditure on supply services during 1985 was in line with figures budgeted. This result has been achieved by the Minister for Finance each year since he assumed office. It is a good achievement, on which the Minister should be complimented. A continuance of that trend would be very healthy. However, due to revenue shortfalls the current deficit in the budget is larger than anticipated but this is partly offset by savings on the total Exchequer borrowing situation. One vital thing emerges from the Government's performance, that is, that credibility has been restored in regard to the whole budget process. It is very important that people can now have credence in the budget and a sense of confidence for the future in what is being projected and budgeted for. This is meaningful, not a pointless exercise. Since 1981, last year was the first in which both consumer spending and fixed investment increased. The rate of growth in exports was down but the rate of imports also was down, giving a trade balance which has not been matched for more than 40 years.
There are two major areas of difficulty as I see it, unemployment and taxation. These are twin problems that require positive and definite handling both in the short and longer term. Taxation policies must be evolved both in the shorter and longer terms. The same applies to unemployment.
Tied in with unemployment and taxation there are circumstances that have  not been referred to in the last few days. I am purposely referring to it now. It is the whole question of the black economy. This is a problem that people tend to shy away from, to refrain from mentioning but it is real and cannot be ignored. I refer to the black economy mainly in the context of that sector of the economy policed by the Revenue Commissioners and a sector comprising a large number of persons who are unemployed, as far as official statistics are concerned but who would appear to engage in profitable moonlighting activities from second or third jobs, and ghosts, who do not show up on any records at all, in other words, persons employed who are not recorded. There are persons involved in other activities that are not officially recorded in any context.
One might ask what is the extent of this black economy. That is a very good question. Estimates of the black economy are very hard to come by. In the United Kingdom estimates have varied from 3 per cent of the national income to as much as 22 per cent in the early 1970s and, more recently, between 5 per cent and 15 per cent of gross national product. Evidence given to the House of Commons Expenditure Committee by the Inland Revenue in 1979 was to the effect that tax evasion was in the order of 7.5 per cent of national income. Although some commentators have suggested that if one wished to be cynical one could suggest that this figure was set sufficiently high to allow further manpower to be allocated for investigatory purposes but sufficiently low to ensure that the revenue did not give the impression that they were not doing their job.
That is the position as it would be perceived to exist in the United Kingdom. Coming nearer to the local scene, a fairly informed view in this country would suggest that the black economy may be of the order of £2 billion per annum. In other words, we are talking about £2 billion that does not get laundered going through the system and that is a substantial amount of money. Indeed the figure could be higher or lower; it is not totally and utterly scientifically based but it is  from fairly informed sources. It is further suggested that perhaps as many as 100,000 persons of those listed as unemployed are, in fact, gainfully employed. The estimated cost per person on social welfare is £2,500 per annum giving an estimated total of £250 million. If these 100,000 people were liable to tax the estimated receipts would be somewhere between £125 million and £250 million. That is the kind of scenario you have on one side and there are other aspects of that to which I will refer in a moment. Whether these figures are accurate can be questioned. What I would suggest to this House and to the Minister is that there is a dimension here not very far removed from the sort of proportions I have talked about.
There seems to be general agreement that the main areas where the black economy thrives are the building and construction industry, especially in cases of sub-contracting, motor works and garages, the self-employed, farmers and the provision of personal services. However, it is my view that the problem extends beyond these sectors so that many workers as well as the unemployed tend to get caught up in a situation where they are either providing or buying services in respect of which no tax is paid. People are involved in tax evasion and perhaps in many instances totally unaware of that involvement. It is my view that there is a very big problem indeed and examples abound of the wealth of ingenuity of people who fiddle the system by transferring from full time employment to part time employment and from part time employment to full time employment, enhancing their financial positions all along the way always at the expense of a benign State and a long-suffering taxpayer.
It is extremely important that there should be an acknowledgment of this whole area because it very adversely impinges upon the sort of improvements we are all asking the Minister for Finance and the Government to achieve in the areas of taxation and employment which, as I said earlier, are absolutely related.  One might ask why has this black economy evolved. I suggest that people who engage in black economy activities might be motivated by greed or survival and that is a very natural instinct. If people want to survive it is a very basic and understandable thing and their particular participation may be an indication of the rewards on the one hand as against the chances of being caught and the penalties involved on the other. The black economy is a result of high taxation coupled with bureaucratic inefficiency and restraints. Undoubtedly high taxation which was 42 per cent of the national income in 1983 as against 32 per cent five years earlier, is by far the greatest cause of the problem. It is only by means of a decisive assault on this that the problem can be solved.
There are a number of examples on the lack of incentive inherent in the tax system. I am convinced that people are quite prepared to pay their fair share of tax and it is the system that needs reforming so that the man in the street perceives that it is a fair system and that it works. If rules are enacted which when followed produce a ridiculous result it brings the law into disrespect. We must not overlook that. We talk about the black economy and we condemn people engaged in it but we must ask ourselves why, and in some cases the reason is, as I indicated, dire need. In other instances it is greed.
The incentive to work in Ireland has been eroded and it is now more beneficial to obtain a capital sum from having been made redundant and from after tax savings. That from an industrial stability point of view is very serious because it leads to a situation where people are aspiring to a redundancy situation rather than being satisfied to continue working. Between 1978 and 1984 the difference between earnings from work and from social welfare narrowed by 25 per cent. A single person's take home pay fell by 12.8 per cent and his flat rate unemployment benefit rose by 12.4 per cent.
As regards bureaucratic inefficiency and restraints, these militate against the  entrepreneur who is innovative, flexible, creative and seeks an incentive and a decent return for his labours but is hindered by red tape. We must be very mindful of the fact that persons with incentive, with initiative, with drive, with motivation and all the rest are not sufficiently recognised and indeed one could relate that back to what Senator Hillery was saying earlier in regard to managers of semi-State bodies whose salary levels are pegged at a certain point and they are not rewarded for any greater achievement or they are not penalised for any greater inefficiencies that they preside over.
Our official statistics at present show Ireland as having one of the highest levels of unemployment in the EC. It is to be regretted that we now stand at a figure of approximately 17 per cent of persons unemployed. In other words, we are talking about one person out of six in the work force. That is a very high percentage. This is notwithstanding the fact that we have on our Statute Book a great deal of employment protection legislation. It is my view that this legislation which was enacted for all the right reasons has created all the wrong results. The legislation is designed to protect employment but the proper environment does not exist and profits are not made and no amount of protective legislation will correct that imbalance. Employment legislation as it currently exists while protecting existing employees acts as a deterrent to employers creating new employment.
Greater flexibility is needed here. In the United Kingdom numerous proposals were made for bureaucratic restraints on everything from employment protection law to planning restraints in an attempt to create a new and more favourable climate for growth. We ask ourselves what have other countries done about this dilemma and this major problem of the black economy. The United States of America and the United Kingdom have attempted to avoid the creation of a black economy by encouraging a very positive white economy. Policies have been adopted or proposed whereby taxes have been lowered to encourage wealth generation and the creation of employment.  Attempts have been made to reduce the size of Government and public sectors by privatisation, by reducing the amount of regulatory red tape and by encouraging service industries such as the provision of financial services and tourism.
One could go on and on as to what is happening and not happening in various countries but I would like to say, on what I regard as this extremely important matter, that we as a country and our Government as a Government must recognise positively the existence of this situation and endeavour to tackle it in the most appropriate way possible. I want to stress that I am not condemning out of hand the persons who might be engaged in activities in the black economy which are irregular but I am condemning the combination of participation in the black economy and the circumstances that have in fact given rise to this situation in the first instance. So, I would urge the Minister and the Government to take on board this very difficult question, which is hard to quantify but which exists in fairly large proportions. It should be tackled. Action in this regard will have a very positive input in resolving what we have all been talking about quite frequently in this House, namely, the problems of taxation and unemployment.
Taxation is to the forefront of everyone's concern, as we know from attending meetings throughout the country. Closely allied to it is the question of unemployment. There is frustration developing on both sides. People are earning substantial amounts of money in gross terms but after paying their tax contributions they receive perhaps around 50 per cent of their gross earnings. That of course will depend on salary levels and the particular circumstances and so on of the individual but they will pay roughly 50 per cent of their earnings in PAYE and PRSI contributions. That is not a situation in which the vast proportion of our population should be placed. Equally, I feel very strongly about unemployment. It is desperate to see the young people leaving school, whether first level education, second level or third level. There are droves of people leaving all  these levels of education with the appropriate qualifications and they cannot get employment. That is an extremely sad situation.
The Government must be complimented for the great number of jobs they have created in 1985. In particular, the Minister for Industry, Trade, Commerce and Tourism, Deputy Bruton, has succeeded in his portfolio in creating a great number of new jobs. In fact, in Limerick many jobs have been created recently. There are new extensions to existing bodies that have given rise to 50 and 60 extra persons employed. I know that the Minister is now engaged in further job creation in the Limerick area. The Government as a whole, as well as the Minister for Industry, Trade, Commerce and Tourism, are to be complimented on their efforts in this regard but unfortunately their efforts have not been sufficient to match the loss of jobs. We have gained X number of jobs but, unfortunately, have lost a greater number. This problem must be pursued vigorously. The potential for creating jobs has to be exploited. Unfortunately, all the indicators are that we are going to lose more jobs. For that reason, job creation is essential.
Extra jobs can be established by diversification in the food processing sector. The food processing sector can do two things: with diversification and a greater range of products more acceptable products can be offered to the consumer and the balance of payments deficit can be reduced by as much as £300 million per annum. We can reduce the total food import bill of approximately £800 million — that is food in the broad sense for human consumption and for animal feed — by at least £300 million by producing what the consumer wants. That is very sizeable in the context of improving our balance of payments situation but also in the context of creating jobs.
There is the question of added value, which has indeed been referred to before — I personally have talked about it. We have talked a great deal about added value but we have not exploited its potential to anything like the full. If we take  the beef sector we are exporting sides of beef on a large scale whereas we ought to be selling that beef in a finely processed state, ready for consumption on the housewife's table in Bonn, Cologne, Paris, Rome or wherever else. Selling sides of beef is just a short step removed from selling live animals. That is not to say that we should not have the export of live animals also in operation, which means that we retain an element of competition in the entire trading process which is absolutely vital for the producer. For that reason we must avoid monopolies and must make certain that the various activities are allowed to continue.
We have fallen down badly in not producing for the market-place what the market actually wants. Over the years we have continued to produce a certain commodity and have vigorously tried to sell it without having researched the market sufficiently to ascertain precisely what the consumer wants. We must aim to produce for the market-place and not to try to market what we produce. There is a distinct difference. We must make sure we do that.
Taxpayers are being overloaded but, if one is to particularise, the PAYE sector are carrying an extremely heavy burden. The remedy is not easy and cannot be found in the short term. A combination of a short term solution and long term programming will bring about a resolution. There is no point in a piecemeal approach. A short term remedy, a sort of fire brigade action, coupled with a long term overall taxation policy will bring about the results we are all looking for.
It was not a good year for Irish farmers. A major contributory factor was one over which nobody had control, except the good Lord, that is, the weather. The weather in 1985 was excessively bad, excessively wet. It affected various aspects of agriculture. We hope we will not have a continuation of that during 1986. At present there is a great element of uncertainty among the farming community. This is quite understandable with the sort of rumours and rumblings that  are emanating from the Brussels scene about the future of beef, milk and so on. The Minister for Agriculture and the Government must take note that this country cannot survive as an island on the periphery of the mainland of Europe without getting special consideration in the context of EC membership. We successfully established a precedent in that regard in 1984 with the acceptance by our EC partners that there was a special case why we should have 1981 as a base year and should have an increase of 4.6 per cent on that base year while the other members of the EC were restricted to 1983 as their base year and had to reduce their milk supply while we were able to move forward 20 per cent. We needed that. As an underdeveloped economy that has been disadvantaged for many hundreds of years as against our partners in the EC there is no hope that we could survive without special treatment in the agricultural sector. Equally that obtains in the whole area of industrial development and in the context of the Regional Fund and Social Fund we must get special measures. I do not think this is out of accord with the philosophy and general thinking of the Treaty of Rome.
Another very important matter in the context of agriculture is arterial drainage. I would respectfully suggest to the Minister for Finance, the Office of Public Works and the Minister of State in charge of Public Works that arterial drainage needs an impetus because it is one area that is crying out for assistance. There are vast areas in this country which need to be drained. There is an area in the Limerick/Tipperary region that is draining into the Mulcaire and there are thousands of acres of land that require not necessarily drainage but a main water course which would give significant results very quickly. Arterial drainage must be continued. There is no reason why it should not be regarded as a very good investment when we are talking about good land where there has been serious flooding. The Mulcaire catchment area is one clear example.
 Sitting suspended at 1 p.m. and resumed at 2 p.m.
Mr. Hourigan Mr. Hourigan
Mr. Hourigan: Prior to lunch I had covered most of the area I propose to deal with. During most of 1985 mortgage rates were at a very realistic level and people gained a lot of advantage. That realistic level of mortgage repayment regrettably has altered in recent days but we hope it will not be of long duration. The same is the case with the bank interest rates which I dealt with in the context of industrial development. We hope that this will not stay with us for too long because if we can succeed in having our impressive inflation rate joined by a realistic interest rate, it will provide us with an effective framework for industrial development in the months and years ahead. That includes the entire spectrum of agriculture, tourism and industry.
I spoke about agriculture before lunch and I stressed the urgency and need for further attention to arterial drainage. I am glad that the Minister of State is with us. I will reiterate a few of the points I made, since we have the benefit of his presence with us. In my view arterial drainage is a very good investment for the Government. I am aware of the absolute stringency that exists with regard to the availability of finance but nevertheless drainage of rivers like the Mulcaire which is the one I am concerned with — dealing with Tipperary and Limerick and covering thousands of acres — would yield quick results if the main rivers and arteries going into it were opened. It would not necessitate field drainage to any appreciable degree. I would urge the Minister to continue his efforts to get it into motion. There are other areas of the country as well but the Mulcaire river is one clear example where results would follow quickly. There are areas of the country where drainage was carried out and where the results were not apparent and the project seemed not to be a good one. I would submit to the Minister that areas like the Mulcaire catchment would be worth while.
 In 1985 we had a disastrous year of bad weather. Farmers did not have a good year. During that year the Minister for Agriculture, Deputy Deasy, and the Government succeeded in coming to the rescue of farmers to the tune of £52 million. That was made up of national aid and EC aid. That was a very substantial figure having regard to the scarcity of funds. It covered cereal farmers and livestock producers as well. The Government is to be commended on the way it tackled the problem and the way it helped people in dire straits. Dire straits is the only way I would describe the position the farmers were in in 1985 if they had not got assistance. It did not cover the losses sustained by farmers but it helped. When one is in dire need any measure of help is important. In Brussels during the same year the Minister for Agriculture succeeded in negotiating very effectively on behalf of beef and dairy producers an additional £50 million for milk producers, which represented 3p a gallon, and £9 million for beef producers.
Another matter that was very significant in 1985 was the Anglo-Irish Agreement which has economic connotations as well as other aspects. We had a debate in this House on it. Once again the Taoiseach and the Minister for Foreign Affairs and the Government are to be congratulated on such a magnificent breakthrough. The Anglo-Irish Agreement does not contain all that we would like it to contain but at least it is a beginning. It gives us a say in affairs and gives us an opportunity of knowing what is going on and influencing and correcting the injustices in the area of law and order that exist in that part of our island.
Under difficult circumstances in 1985 the Minister for Finance and his colleagues in Government and the Taoiseach did an extremely good job and I hope that this time 12 months we will be able to report greater progress than is apparent now. A lot has been achieved. Many of the achievements are not manifesting themselves this far but they are in the pipeline and I believe that in the not too distant future there will be greater signs  of positive achievement which results from hard effort on the part of the Government over the last two years.
Mr. Lynch Mr. Lynch
Mr. Lynch: I could not endorse this motion. I could not endorse the mentality and attitude of the present Government especially in the areas of industry and agriculture. I could not justifiably endorse the spending of public money to keep 200,000 people unemployed in the country. I could not endorse the policies of a Government that would aggravate the situation and have aggravated it to the extent it is today.
Senator Hourigan mentioned the Minister for Industry, Trade, Commerce and Tourism. The Minister comes from County Meath. I have a high regard for him but he was given a special task by Government to generate employment. Employment in County Meath, especially in industry, is at an all time low and this is a result of the philosophy and mentality of Government. The policy endorsed by Government has led to this situation.
There are factories closing constantly. Navan, which was once a hive of industry and the hub of County Meath, has been affected by the closure of factory after factory and nothing has been done about it. There is no apparent effort to rectify the situation. In North Meath we have been quite lucky so far. With the help of the local county council and councillors people with enterprise and determination have established industries of small type units, which I have always commended as the proper type of industry for this country. They were established at a time when there was little help from the IDA and such bodies and they have proved their worth. The work force are glad to have jobs and glad to have them locally and make every effort to hold on to them. We should encourage this type of industries and enlarge those that exist. I am proud to be a member of an Oireachtas Joint Committee that was specially selected to examine the question of small businesses which would employ from one  to 100 persons. So far we have found there are so many Government Departments involved, there is so much red tape, as to discourage would-be entrepreneurs. There needs to be restructuring of Government Departments. There should be one body with a local base in each county if possible to operate the system from there and give it some clout. County development officers, as I see them, are just messenger boys for the IDA. That is wrong. They are the people on the ground who operate from a base and who know the problems which exist in an area. They know the potential that is there. The usual criteria used to knock many good projects on the head is that the area is over-developed or that there are enough of these particular type of businesses at the moment. The IDA will not give financial assistance to an entrepreneur who may be starting up in furniture and bedding. In pursuing that type of policy they are protecting a section of the community who have established themselves. They are protecting people who may not be running their business properly. They are keeping out the entrepreneur who might do twice as good or maybe ten times better. I know instances where this has happened. The Minister, apparently, was unable to act as he might like. This prompts the question, who is running the country?
Senator Hourigan mentioned the Board of Works. I certainly would like to pay tribute to the Board of Works, especially when the Minister is here, for the work they have done. They did a tremendous job in north Meath. Having said that, I regret very much that the Boyne drainage scheme is being wound down at present and 270 people are to lose their jobs.
At the same time, we as public representatives know that there are large tracts of land, especially in north Meath, that urgently need to be drained. The reason put forward by the Department is that it is not financially viable to do so, that the financial costs would not justify the results. That is the criterion they are using. It is to be regretted that there is no special section in the Department of  Finance that would be willing to finance that type of work to alleviate the problem of severe and constant flooding of farms in areas like north Meath. If the Board of Works pull out of that area and leave the work uncompleted, there is no financial security for the small farmers. These are farmers with 30 or 40 acres of land, and sometimes less than 30 acres, with families to rear, and they see no hope or no future for themselves or their children.
In the long-term it would more than pay for itself had the Board of Works maintained the 270 workers instead of paying them redundancy money and pay-related benefit and putting them on the dole queue. It would make more sense to me if that scheme had been kept going for another 12 months. I am not blaming the present Minister for this. He has received a deputation. He has outlined the problems and until the Act is changed there is nothing he can do, but we should have another look at that Act and change it to suit the areas because North Meath by right should be declared an under-developed area.
There is no difference between North Meath and Cavan except in the roads where they have developed their roads because of the EC social fund. When we drive across the potholed county roads and by-roads of north Meath, as I do, and hit the main Dublin-Cavan road in County Cavan and drive through places better lit than County Dublin I ask myself what is the justification or what is the criterion which says that Cavan is an under-developed area and north Meath is not. Government is all about people and the fact that a border runs around the back of my yard in Oldcastle which says that it is County Cavan should not give anybody the right to say that Cavan should be under-developed and north Meath should not.
Every speaker has mentioned the state of the roads. I sincerely hope that sooner rather than later a comprehensive policy will be initiated by some Minister and some Government which will tackle the problem of county roads and lanes. I see no justification whatsoever for spending £4 million or £5 million, as happens in my  county, on a bypass or a ring road in a town like Navan in a short space of one and a half to two years and at the same time, starving the county councils of funds to provide necessary, ordinary maintenance for county roads and lanes.
Most of us have canvassed in our time and a major problem we find walking up through to houses out the country is the state of the roads. When are you going to do something about it? These are the people who use the roads maybe 20 times a day. They are being sacrificed to provide fast motorways to carry the heavy container traffic. The users of the main roads should have more of an input into financing and the companies involved in providing finance for these bypasses. I do not think it should be the duty of any public representative to endorse a policy that would provide finance for one section of the community at the expense of another. So I hope that some Government and some Minister will have the guts and the courage to tackle the problem of rural Ireland, because the roads at the present time are turning into dirt tracks. Only an imbecile, if he had the money, would contemplate buying a new car at the present time because anybody who has to travel county roads or lanes he would wreck it in a few months.
Our major problem in this country is unemployment coupled with the high level of taxation. I am sure it has been mentioned often enough during this discussion. For as long as the dole queues grow longer high taxation will continue.
I mentioned the Boyne drainage earlier on. I find that we will now be moving on to maintenance of the Boyne. We have 1,000 ratepayers in County Meath. Meath County Council are now saddled with a bill of almost £750,000 to provide for the maintenance of the Boyne in 1986. We have not got that money and there is no way that we can saddle the commercial sector, which is struggling to survive, with the extra poundage to cover the cost of maintenance of the Boyne. I know that Kildare County Council have a similar problem to Westmeath but their's is not as great a burden as we have to face.
I am asking the Minister here today to  bring it to the attention of the Minister for Finance that we are bad enough in Meath County Council trying to keep the service going as it is with the financial cutbacks and the drop in rates support grant. We cannot afford to pay the bill. It would be very unjust to ask the commercial sector to provide finance for this particular sector, the Board of Works, to carry out maintenance at a cost of almost £750,000. The commercial sector certainly did not benefit from drainage. I know we should have been aware of the problem when the drainage programme was initiated but we are glad to see that so much good work has been done by the Board of Works with their drainage programme. We are sorry to see it closing down and now shocked to find that the county council is saddled with this demand for an exorbitant sum for maintenance.
Our county council put in a motion in late 1986 which I tabled — it was supported by all the members of the county council — requesting the Minister to provide this money from central funds. If he provides an extra £750,000 in the rates support grant and states specifically that it is for maintenance, then I will be quite happy. Other Members of this House will find themselves in the same position as we now find ourselves in when their drainage programmes are complete.
As a member of a local authority, I have found, especially over the past number of years since the abolition of rates, when we as a council would make a decision to spend money in a certain area and had the courage to adopt a rate to cover that expenditure, that at least at the end of the year the job was done and while the farmer and the commercial sector may have had their cribs when we struck the rate, at the end of the year they had got a return.
Now at the end of the year we find ourselves worse than we were at the beginning of the year. People are asking what are we doing about it. There is little we can do about it because in nine cases out of ten we have no say as local authority members as to how this money is spent.  When we get a rate support grant, it is decided in the Department of the Environment which roads that money is to be spent on. We get a small pittance then to go towards maintenance of county roads and lanes. The only area where we can spend money on our own initiative is the cul de sacs, whatever money we take in on charges.
This Government talked about local government reform and I have been hearing it now for the past three years. What reform have we had? We had the change in the constituency boundaries for the local elections. There were not too many people happy with that. That is the only local government reform. I always maintain that elected members of a local authority, who are elected by the local people, irrespective of the party they belong to, are the people on the ground. They are the people who know best where this money should and can be spent. If an emergency situation arises with regard to a collapse or near collapse of a road or a road breaks up and the local authority want to provide an estimate, which happened in my own area two years ago, they have to get sanction from the Department to carry out this work. That is wrong and I am sure of it.
I hope that some Minister will have the guts and the courage to initiate a programme to bring some shape and form back into our county roads and put in a proper drainage system and give employment. Each local authority, including my own, see our work force dwindling year after year. People who go out sick and cannot come back are not being replaced. It is sad. I always thought there is nothing as attractive as a nicely trimmed road, the water-cut open and taking the surplus water off the road. This is not happening any more. The tar is not on the road; it is the foundation which is the road and the tar is only the seal on it. The fact that our roads are breaking up at present is due to the fact that proper drainage is not being carried out. I live close to the historic area of Sliabh na Coille. A road leads to it. One end of it is almost inaccessible, so steep, it is 960 feet above sea level. The other end is about a mile long,  and is totally inaccessible. There are bad turns, potholes and there are drains running alongside. It is dangerous and we are thinking of putting up a notice asking tour operators not to drive their buses on it. This is regrettable as professors from as far away as India come to view the megalithic remains of Sliabh na Coille. One person mentioned to me that he would prefer to go there than to Newgrange. We are in the position that we cannot even provide a decent road surface for foreign visitors. Special grants should be made available to county councils for areas such as this.
The Government promised to bring in local government reform and as yet nothing has happened. Many statutory bodies have given tremendous service down through the years and played a big part in developing services. Local authority members have found that their powers have been taken away and when we question certain matters we are told that it is a managerial function. Vocational education committees give a tremendous service and have a great input into the educational system. They are threatened with oblivion by the Minister for Education. If we are to believe what we read in the papers, the Minister for Health is now threatening to abolish the health boards and to replace them with a body, An Bord Sláinte, appointed by himself. Is it appropriate to have a Dublin based board running the health affairs of places such as Kerry, Clare, Galway, Mayo or Meath for that matter?
It is in an atmosphere of depression that we are discussing this motion. The health service is in a terrible state. The Minister who told us that we must now direct our attention more towards community care, has effected a complete reversal of the programme that was adopted in 1970. We would gladly accept the Minister's suggestion. The Minister is right to develop community care and relieve the burden on our hospitals as much as possible, but he has not provided finance to carry that out. A service cannot be provided if finance is not available.
The underprivileged find the going  much rougher each day. Irrespective of what we hear about supplementary welfare allowance, it is much more difficult to get a medical card than ever before. A person working, rearing three or four children, and trying to pay off his mortgage will find that he would be better off to give up his job and live off the State. It worries me that we have come to this stage. If we continue to pursue these policies we will deepen the air of depression. The policies of the Government are wrong and the figures in the Appropriation Bill prove that fact.
Mr. Browne Mr. Browne
Mr. Browne: Tá an-áthas orm éirí anseo agus labhairt ar an moladh seo agus a rá go bhfuil a lán rudaí maithe déanta ag an Rialtas i rith na bliana atá caite. Tuigim go maith nach bhfuil gach rud mar ba chóir ach tá sé an-fhurasta ar fad an milleán a chur ar an Aire agus a rá go bhfuil an milleán go léir air. Is dócha gur féidir le go leor daoine a lán á rá faoi na rudaí atá mícheart agus na lochtanna atá ann. Tá daoine ag caint faoi dhrochchaighdeán agus faoi easpa chumais i measc na bpolaiteóirí, daoine a bhí ann cheana agus go bhfuil taithí acu a rá cad ba chóir a bheith á dhéanamh ag an Rialtas. Tá daoine ag rá go mba chóir go mbeadh airgead breise le fáil do gach sórt rud agus ag iarraidh ar an Aire anseo, fiú amháin, airgead a thabhairt do Chontae na Mí, faoi mar a dúirt Seanadóir eile. Tá gach éinne ag gearán freisin go bhfuil an iomarca cánach le díol ag daoine. Ní féidir an dá rud dul ar aghaidh ag an am céanna. Ní féidir linn bheith ag gearán go bhfuil an iomarca cánach le díol agus, ar an lámh eile, nach bhfuil a dhóthain airgid ag an Rialtas le tabhairt dos na daoine atá á lorg.
Nuair a bhí mé ar scoil, mar a bhí gach éinne eile, d'fhóghlaim mé dán “Aoibhinn Beatha an Scoláire”. Níor chreid mé ag an am sin go raibh saol aoibhinn ag scoláire ar bith agus ní dóigh liom go bhfuil fós ach ceapann na daoine fásta go bhfuil. Déarfainn go bhfuil casadh eile ar an dán sin agus déarfainn nach aoibhinn beatha an Aire Airgeadais mar is cuma cén rud a tharlaíonn sa tír cuireann daoine an milleán air. Ní dóigh liom go  bhfuil cothrom na Féinne le fáil ag Aire Airgeadais ar bith. Tá Aire Airgeadais againn faoi láthair go bhfuil an-chaigh-deán aige, go bhfuil an-intleacht aige agus ba mhaith liom é a mholadh ó thaobh an chaighdeáin aird a thaispeánann sé i n-díospóireacht ar bith is cuma pé ar an teilifís nó ar an raidió nó sa Dáil nó sa Seanad.
Muna raibh an tír i gcruachás ó thaobh eacnamaíochta, déarfainn go mbeadh sé i bhfad níos fearr ná éinne a tháinig roimhe sa tír seo.
Having listened to quite a lot of the Opposition debate, I cannot help thinking of another poem I learned some years ago which said “We'll all be ruined, says Hanrahan, before the year is out”. It looks very much as if we will all be ruined before this Dáil is out because there does not seem to be any glimmer of hope at all in the Opposition benches. They are saying what they say only for the sake of debate. While I realise that things could be a little better, things are not as bad as that at all. I am getting tired of newspaper reporters, budding politicians, experienced politicians and a lot of people who seem to think that by saying things are bad they will improve them. Unemployment figures are far too high but when I hear a colleague adding 50,000 on to the actual number, making it 300,000, it worries me. If one takes into account the number of people who have retired and those who are going to school one could come up with a figure of 750,000 to make it sound worse, but what is achieved by doing this? As politicians, we must give some hope to people.
It is understandable for a person uninvolved in politics to ask for certain things without weighing the overall position. I can ask either the Minister for Finance or some other Minister to do something that will only cost so much, but at least I realise that I am one of about 100 people asking that things be done. If the Minister accedes to all requests for money for projects he will have spent hundreds of millions of pounds before he knows where he is. As politicians, we should realise that. We hear criticisms and that  more money should be provided for drainage. I am sure the Minister of State, Deputy Bermingham, is a very wealthy man as are all politicians, but I am quite sure that he does not feel compelled in the slightest, to send his own private money up to me. The only place from which he can get the money is through taxes. We cannot talk about taxes being too high and yet look for more and more money.
We are talking now about the potholes in the roads. My maiden speech referred to roads. In error I used statistics for 1979 instead of 1980. It goes back to what we got in those years. I was in the council at the time and the engineer told me then that in three years time the roads would break up because of inadequate funding. The engineer's prediction was perfectly true. We happened to come into power when the effect of inadequate maintenance began to show. The impression was given in those days that people did not have to pay car tax, that it was a grant society; that one could drive over roads and that the roads would look after themselves. We have not recovered from that. People never recover from feeling that they do not have to pay for things. That mistaken attitude has built up problems for us.
I campaigned during the local election and people asked me what I would do for them as the previous canvasser has said that if they voted for him, they would not have to pay any water rates. I said that there was no option at the moment, if we wanted to keep going. Now we have people in councils who said we do not have to pay water charges, but the money has to come from somewhere. They have not stopped looking for more facilities and for more work to be done, even though they were for cutting off the supply of money to the county council for what was needed. We will have a new era at county council level as to how responsible we are going to be for keeping things moving.
I compliment the Minister for Education for her forward thinking in having reviews done on the curriculum and the VECs. In a successful business, one has  to review what is going on and see what is good and what is bad. A lot of money was paid out last year for higher education grants. We hear a lot about there being no working class children in the universities or in third level education. We will have fewer middle class children in third level education because it is becoming impossible for middle class people, who are the people who pay for everything. They pay tax to the hilt and the only facility for which they are eligible is dental treatment. For many people this is not available and it is infuriating, since it is the only thing to which they are entitled. Many of these so-called middle class people have to borrow money to send their children to universities. They do not get tax relief on it. We owe it to people who are paying so much tax to give them some break, if they have the initiative to send their children to third level education.
The grading for higher Government grants is unfair. It is unfair that somebody with four B's or four A's in the leaving certificate who is ineligible for a grant cannot avail of third level education through lack of finance. We should review, the whole question of third level education.
I compliment the Minister, Deputy Creed, on his genuine concern for the mentally handicapped. Whatever else we cut back on, we should not cut back on those who are mentally handicapped when it comes to education. I was surprised and angry a few weeks ago when a bus for a special school was taken away. I am glad that commonsense prevailed eventually and it has come back on the route, and I hope it will stay there. The public would take a cut back on a normal bus service in order to provide for mentally handicapped children. One could expect a 12 year old boy in complete health to cycle four miles to school but one cannot ask somebody who is handicapped to go even half a mile to school. The Minister has assured me that whatever cutbacks come will not be in that area and knowing him and his concern I believe him. I will support him all the way. If it comes to cuts, I will defend the  cuts if it is to give facilities to those who are handicapped in any way.
I have been surprised at Aer Lingus charges. One family of four had to rush back from London for a funeral and were shocked at the cost. It costs roughly £187 for a return flight from London to Dublin. We have so many people over there who would use Aer Lingus much more if there was a reasonable price. I must compliment Aer Lingus on having come into profit. It is a difficult cut-throat business but London to Dublin is a very important route. It costs about £50 to go over land, although it takes longer. If it were cheaper many people would avail of a quick flight to London for business and family purposes. I knew of a person who wanted to go over to London and to be back that night, so he flew, although he could have saved over £100 by going by boat. There are many Irish people in England who would come by air if the fare was cheaper.
In relation to the milk cessation scheme the EC mentioned that they are prepared to buy out a percentage of our milk. In no circumstances should we let our milk quota be reduced. We should use our quotas and make sure that the young farmers who want to get into dairying, many of whom have been trained at special courses, have every facility for efficient production. I hope the installation premium for young farmers will also be available shortly to encourage them, as our hope lies with the young farmers. They have skills that the older farmers did not get a chance to learn.
The beet quota in sugar production is a problem, and I hope we do not lose but if anything gain somewhat. Farming has come to a stage now where one can no longer say to a person: “if you work hard and produce more you will gain more.” We have reached so many quotas at the moment, that it is very difficult for the efficient farmer to make progress.
A great deal of money has been spent on roads; the national primaries in particular. The county roads carry most of the traffic. While it is very important, from an industrial point of view, to have good national primaries, our county roads should be better maintained. It is  very important to keep the county roads in good repair. At the moment, the road workers are often put to working on national primary roads, simply because the money is there for them. I hope any extra money available will be directed towards the county roads.
We have spent over £2 billion on social welfare. One could take the cynical view that half the people unemployed, should not be receiving benefit because they are probably doing nixers. In general, the people in difficulty are genuine. It is like those who are sick. A person who has fallen from 15 ft. and hurt his back is often declared fit for work, whereas somebody who has not worked for years can have a pain in his back all the time and get away with it. We are our own worst enemies. As a race, we spend our time planning how we can get something out of any scheme introduced. We have an onus to look after the poor and the sick. While it is costing a lot of money, maybe we could have a check put on it and see who is abusing the system. It is not easy. It costs a lot of money to catch people who are working and claiming benefit or who say they have a pain in their back when they have not got it. However, the vast majority of people who get into unemployment trouble are very genuine.
The Department of Labour have introduced a lot of schemes. They have been criticised for duplication and maybe there is a certain amount of validity in that criticism. At the same time many people have got the experience of working. We are in a vicious circle where people who apply for jobs are expected to have experience. If they have no work they cannot have experience, if they have not got the experience they cannot get the job. Many of these schemes afford people some experience of being at work and should be a help to them.
The Department of Labour have also tried to deal with labour relations and with trade union rationalisation. It is very important that trade unions come together. We have far too many groups of unions who seem to be rivals trying to  increase their memberships. The trade unions could do with rationalisation. Their members are getting fewer because people are losing jobs. Factories are closing down and I would not blame workers for factories closing down but sometimes the line taken by the workers does not help.
Lest anyone might think I am just blaming the workers, sometimes the management have made very poor efforts to treat the workers in the right way. We need strikes at the moment the same as we need a nuclear explosion. Anything that could be done to improve our labour/ employer relationships should be done. If we all pull together, including politicians of all shades and realise that if we want more services and money for everything that is going, then we will have to pay taxes in some way. There is no doubt that we have got to the stage where the taxpayer feels that he or she is carrying far too much. However we cannot cut back completely on tax because we have to provide services. Somebody has to pay, so the more services we demand the more taxes we will need. We have to get the balance right. When things improve we should gradually improve along the line with cuts in taxes and better services, but it is difficult to have the two going together.
Mr. Ellis Mr. Ellis
Mr. Ellis: It is foolish to debate money that is already spent, but I suppose we are not going to see any great change. In future this Bill should be brought before us earlier in the year than the weeks running up to Christmas when Government legislation must be cleared prior to the recess. Last year I mentioned this too.
It is fair to review 1985, from the point of view of the country. It is important that we as Senators should look back and see what has been achieved or what has not been achieved in the past 12 months. We should look at how the moneys were spent and see what became of moneys which were allocated and which was not spent in the past year. I would ask the Minister for Finance, as the Minister responsible for the financial affairs of this  Government, what has become of the promises he and his Government made on coming to office with regard to the finances of the country. They promised reductions in State borrowings yet in 1985 we had the highest ever borrowings by any Government here in any one year. The Minister, as he prepares for his budget next week, should now look to see where the policy that he proposed and did not carry out has landed him and the country in the past 12 months.
I would like to deal with three or four specific points. First, I would ask the Minister for Agriculture how he managed to have left over in his Department at the end of the year almost £30 million in unspent funds, yet his Department was not in the position to provide finance for the farmers who suffered during 1985 due to unprecedented weather conditions. I ask him why his Department who said they had not got the funds when they were asked to provide money, were able to return almost £30 million to the Exchequer.
I would also like to ask the Minister why the promises which were made to us with regard to legislation were not fulfilled. I raised this morning on the Order of Business the question of a Land Authority Bill which has been promised to this House for two years but which has not yet come. We must ask the Minister to take some action to stop the speculation which is taking place from one end of the country to the other as far as farming and farm land are concerned. Does he want the land of this country to be taken over by the financial institutions who feel that it might be more profitable if it were to be put under forestry which will not give the nation the same job opportunities as direct agriculture, sheep production, dairy production, beef production or horticulture?
I would also like to ask the Minister why the farm modernisation scheme which we were told would be introduced was not reintroduced in 1985. Why also was the scheme of aids which is available through the EC for young farmers in this  country not taken up by the Government? Why have the Government cut the amount of money being made available to agriculture by 70 per cent in the past three years? The reductions — and we hear of more reductions this morning with regard to the bovine TB eradication scheme — are reductions which are going to affect the economy and the outturn of the agricultural sector.
Down through the years we have complained about the cost of energy, yet when energy prices have now started to decline the reductions are being taken up by the Minister for Finance. I would appeal to the Minister not to carry out any more of his stroke-of-the-pen collection of tax from the hard-pressed motorists of this country because if we reduce energy costs we might be heading towards reducing the general costs of running businesses and so on.
In 1985 we had no developments with regard to the natural resources of our country by way of any attempt to fully explore or exploit the reserves of oil we are told we have off our coasts. Also in 1985 no action was taken regarding the use of our other natural resources in some of our power plants. I am referring especially to coal. The coal which is available from the mines, especially in my own area of the north-west, should be used in Moneypoint rather than very expensive coal which is being imported at the moment. It will be interesting to see what damage will be caused by the acid rain which appears at the moment to be coming from the Moneypoint project.
It was interesting to hear Senator Browne state that we must protect the less well-off in our community because I feel that we are now heading for the position that we will soon not be able to pay social welfare due to the numbers of people who are receiving social welfare benefits. There are now 240,000 people unemployed, the highest ever number of unemployed in the history of the State. Not alone that; how many thousands of people have we lost, especially young people in the past 12 months due to emigration? Let nobody be under any illusions. The Government have failed to  provide the climate for employment to keep those people in jobs at home.
We must also look at some of the other changes which took place in the social welfare system in the past 12 months and I would like to refer to what is known as unemployment assistance or farmers' dole paid to smallholders in the west of Ireland. The means assessments on many of those people who have been reassessed by pension officers in the past 12 months have been ridiculous. The amount of income they have been assessed as having from some of those small farms is away beyond the production capacity of the best land in the country and nothing like their real income from the marginal land which many of them farm.
Indeed, also, it is time that the disability system was looked at with regard to medical referees. As public representatives, we have all had cases brought to our notice where people who were genuinely sick have been disqualified by medical referees. We find that when they were re-examined they were either allowed from the date of re-examination or that the medical evidence which might be available directly from their doctors or from the hospitals which they attend was not taken into consideration at the time of those examinations. There should be some type of arbitration board made up of independent medical personnel attached to some of our regional hospitals or elsewhere who would be in a position to act as mediators in those cases.
We all know of cases where people have been passed as fit by the medical referee and some of those people were not around when the appeal came up. In one case I know of, the illness had been terminal. Despite the medical evidence available to the medical referee at the time he disqualified the person from getting his disability benefit. That is the sort of hardship that should not be inflicted on sick people. If there are people who are abusing the system why are we not in a position to catch those people and allow those who are genuinely sick to be paid their benefits without some of the harassment they have to suffer?
 There were also cuts in our health services during the past 12 months and a reduction regarding the planned development of the health facilities available in different parts of the country. Here in Dublin, we have a new hospital in Beaumont for which the Minister is not in a position to provide the finance necessary to run it. In my own area in the general hospital in Sligo people are forced to lie in beds in corridors because the Minister for Health has not provided the necessary finance for an extension to that hospital. I have also seen European Social Fund money lost in my own area for Manorhamilton hospital where a rheumatology wing was to be provided but the Department of Health have failed to give the go-ahead for this extension.
In education we have seen something happen which we never thought could happen. We have had teacher strikes in 1985 and more promised for 1986. I am not here to push the teachers' case but anybody who agrees to go to arbitration should at all times be prepared to accept the arbitrator's decision. It appears that the Minister for the Public Service is not prepared to accept it. In 1985 our school leavers found that their opportunities were very limited. Indeed the number of them now in employment is very small. We have had a number of temporary youth employment schemes from the Department of Labour and the latest one is the social employment scheme. If people are expected to work in the social employment scheme they should at least be allowed the full rate of PRSI contribution which would mean that their week's work would be regarded for social welfare purposes as being a genuine week's rate, which is not the case at the moment.
We must also look at the local authorities to see the situation we have with regard to minor county roads throughout the country. Our road network at the moment is being developed on five or six national primary routes and the major portion of Government expenditure is going on those roads. The allocation for the county in toto should be made available to the local authority and they  should be allowed to spend it as they wish rather than having the present situation where much of the money is earmarked for expenditure on certain sections of roads. We will soon have a situation where roads will revert to the condition they were in 25 years ago and money that was spent black-topping roads will be lost because the roads have been allowed to deteriorate to such an extent that they will not be repairable except by expenditure of large amounts of money.
The only scheme that is deserving of note and which possibly may be productive is the house improvement grants scheme. The Minister for the Environment accepted a motion which was put down by Fianna Fáil with regard to an increase in the reconstruction grants. I hope he will see an opportunity to have the conditions relaxed somewhat for persons who wish personally to carry out work on their own houses. It is important that the Minister re-examine the position where somebody is in a position to carry out the work himself. A reduced grant, perhaps, would be made available, in that case, if the labour content of the work were excluded.
It is time for politicians and Government to take stock of the state of the nation, to consider what steps they will take to arrest the decline which we have had in Ireland for the past number of years. If they are not in a position to do something about it, would they step aside and give a party that is prepared to do it the opportunity?
Mr. FitzGerald Mr. FitzGerald
Mr. FitzGerald: With those final brave words from Senator Ellis——
An Cathaoirleach An Cathaoirleach
An Cathaoirleach: The Senator should not comment on them.
Mr. FitzGerald Mr. FitzGerald
Mr. FitzGerald: I do not think I should encourage him to proceed down that path, particularly today of all days. This debate gives an opportunity to the Members of the House to have an annual review of the State's expenditure. In the Appropriation Bill the expenditure runs over 49 headings from 49 separate Votes  and deals with a wide range of public spending policy. It is not possible for me or anybody else to cover each of these separate areas or to deal adequately with them. I hope to concentrate on a couple of areas in which I have an interest and where I believe my contribution could be useful at this time of the year.
First, 1985 was marked not by what Senator Ellis talked about as the largest level of borrowing entered into by this State since its foundation — which is incorrect, if examined properly through the normal methods of assessing these things and if the index linking of the borrowing is taken into account — but as a year in which the Government achieved a considerable improvement in our inflation rate. It was the lowest annual inflation rate achieved since 1968, bringing the figure down from 8.6 per cent in 1984 to 5.4 per cent in 1985. Any of us who took to the streets during the shopping spell before Christmas could see evidence of the increase in consumer spending, especially in Dublin. Investor confidence is sustained and improved by the economic growth that is already beginning to occur and will occur even more strongly in 1986.
It is crucially important when dealing with the level of unemployment which is so severe — it was 240,000 at the end of December 1985 — that our economy is not stagnant, that there is consumer and investor demand. These are the ways in which the country will be set on course and which will give the unemployed the best hope for the future.
Senator Ellis spoke about the increase that was given by the Minister for the Environment in October for house improvement grants. That package was not just an improvement in the amount of capital available for home improvement but was a real policy change by the Department of the Environment and the Government towards recognising the importance of improving the existing housing stock and encouraging people to rehabilitate older property. It was recognised that older property had more potential than had been appreciated by successive Governments for decades.  This real policy change is different because it will bring in its wake the growth in the number of units available through the rehabilitating of property. Hopefully the Department of the Environment will recognise that the State will not depend on new house building as the sole area for motivation in the building industry. It is very important that that scheme was introduced. It is already evoking tremendous public interest. The applications pouring in to the Department of the Environment are evidence of this. This scheme will be very important to Ireland, to the appearance of towns and the confidence of people who have an interest in seeing that the existing housing stock is given recognition which it has not got up to now from the Department of the Environment.
I have particular interest in the area of the Department of Health. The hospital development programme has been moving ahead but perhaps not with the level of balance required. I want to refer to the Comhairle na nOspidéal report of November 1974 dealing with development of the role of the smaller hospitals. Section 1.4 states:
In the future situation, where acute medical and surgical services will be concentrated into fewer and larger hospital centres with a full range of supporting facilities, it is essential that the maximum utilisation of such expensive resources should be achieved. It is most important that patients should be accommodated in these centres only for such periods as they require the extensive facilities available there. Coupled with this consideration is the desirability of reducing as much as possible the inconvenience, to both patients and relatives, inherent in the provision of fewer centres. In meeting these requirements, the Comhairle considers that the smaller hospitals have an important positive role in a reorganised hospital system.
The document goes on to deal with the role of the smaller hospital. It is quite clear on the very valuable role the smaller  hospital could play. It describes the smaller hospital as a community hospital — I think for the first time — and says it
... should be thought of as essentially providing acute medical care, nevertheless, a proportion of beds for the elderly chronic sick might be provided in such hospitals. Patients who might appropriately be transferred to a community hospital after assessment in the general hospital include:
(a) those needing treatment and rehabilitation as inpatients but who no longer require direct access to the full diagnostic and treatment facilities of a general hospital;
(b) those who have not responded or are unable to respond to efforts at rehabilitation and who need continuing medical treatment or nursing care beyond that which the family, helped by the community care services, or a welfare home can normally be expected to provide;
(c) patients normally cared for at home who require short-term hospital care in order to give temporary relief to their families.
At a later stage it goes on to say:
By assuming a more positive role, appropriate to its facilities, the smaller hospital could significantly reduce inconvenience to patients and relatives, provide a more personal service locally, and at the same time ease the pressure which would otherwise fall on the general hospital. This positive role must involve distinct improvements in existing services and facilities at the smaller hospitals. The best use of highly expensive hospital resources could be achieved by general hospitals and community hospitals functioning in a complementary manner in close liaison with the community care services.
What I wanted to highlight out of those quotations from a document almost 12 years old from Comhairle na nOspidéal is the fact that in the Dublin region particularly  the Department of Health is engaged in financing the completion of six acute general hospitals which are at various stages of completion. The development of Beaumont has been completed. It is now ready for final agreement between the consultants and staff before being occupied. We have the large extension to the Mater Hospital. In addition, there is a very new construction programme under way at St. James's which will make that hospital the largest in the country. Simultaneously, there are negotiations going on with a view to increasing the size of St. Vincent's. We are at planning stage in Tallaght and planning for the James Connolly Memorial Hospital in Blanchardstown is under way.
In the wake of the building of these hospitals seven other hospitals within the city will close. We already have had the closure of Mercers' Hospital. It is projected that Baggot Street and Sir Patrick Dun's will close with the completion of the project at St. James's. There are plans for St. Laurence's or the Richmond and Jervis Street to close with the opening of Beaumont and it is planned that the Meath Hospital and the Adelaide Hospital will close on the opening of the new hospital in Tallaght.
The scale of these acute hospital facilities is too big. We are not catering sufficiently for the many demands on the hospital system that could be catered for in the community if the facilities were there. It is accepted that 30 per cent of acute hospital beds are occupied by the elderly. If one adds to that the numbers of people who go into acute hospital beds for tests on a diagnostic level and who, having had treatment, remain there for a period of recuperation, it is clear that a sizeable number of patients in these very expensive hospital beds are remaining there much longer than is necessary. What the document deals with in very unequivocal terms is that the development of these community hospitals could ensure that some of the smaller hospitals could be retained — say two of them — in a supporting capacity to the major acute hospitals, giving the acute hospitals a  backup service that is urgently needed for tests, for those requiring rehabilitation, for the elderly and for those who do not require the extent of consultant cover and high ratio of staffing that exist in the acute hospitals.
There could be a major saving if this problem was faced in time and not allowed to develop into a larger one by continuing with a programme of hospital development which does not take account of many of the financial implications and human considerations involved in having a very large complex that is envisaged as the only hospital system that will be there for many generations to come. I hope that the Minister for Health, in the coming year, will review the programme of spending on hospital development and come up with a plan that would relate more to the use of the acute facilities that is going on at the moment and the anxiety that exists amongst the medical and nursing profession and others that something should be done about the crisis facing so many families when a bed is required in an acute hospital and a supporting service is not available for them.
Mr. Daly Mr. Daly
Mr. Daly: At this time of year when we have a sort of housekeeping Bill that deals principally with administration, there are a few things I want to speak about. I refer to the car industry. In last year's budget the Minister for Finance changed the rate of VAT from 5 per cent to 10 per cent on car repairs. He was involved in rationalisation of VAT and rounding up the figures but he compensated the motor trade by reducing the excise duty on parts. He brought that down from 25 per cent to 10 per cent, for which I thank him.
I would ask the Minister to abolish the 10 per cent and then we would be compensated for what we lost in VAT. It would also be of benefit to the country because people go to the North and buy motor parts there where there is a cheaper rate of VAT on parts, and do not pay duty. We have to import parts. Personal imports up to £200 are allowed, with any one part not costing more than £65. A lot  of the business which could be held here at home is going to the North. The State is losing a lot of revenue. I would appeal to the Minister to abolish the 10 per cent and give us a clean sheet and help the motor industry and the Exchequer. It would cut out the smuggler and the legal entitlement to import a part for use on one's own car. In that way we would all be better off.
We have another problem with car hire. Car hire contributes greatly to our tourist business. A car which costs £8,000 here costs about £5,000 in the North. Motor insurance runs at around £900 here for a self-drive car and at about £150 a year in the North. People coming here on holiday, particularly Americans, are hiring cars in the North. They are hiring the cars at a cheaper rate because the people in the business there are buying their cars cheaper and they have cheaper insurance and they have a lower rate of VAT. The result is that another big chunk of the business is going there.
We have the same difficulty with coaches. A coach which would cost £80,000 in this country can be bought for £42,000 in the North or in the UK. The result is that the tour operators who are coming into this country are coming in with luxury coaches while many of our coaches are barely roadworthy as it costs so much to repair them and so much to replace them. I would like the Minister to take a look at that. If he could do something about that it would be helpful to the industry, it would be helpful to the Exchequer and in the long term more money would accrue to us.
Another problem in the motor industry is capital allowances. Capital allowances in this country are based on values of ten years ago. Ten years ago the capital allowance was £3,500, which was the price of a high class car at that time, the equivalent of a Ford Granada; a car of that size today is £19,000 and still the capital allowance is only £3,500. The Minister would want to look at that because the companies are not buying cars. They would have to pay a high tax if they had a new car so they are carrying  cars and do 25,000 miles a year do not have to pay any benefit in kind. A representative from a Dublin company who is working in Munster or Connacht will be able to do 25,000 miles a year, he can use the car for the weekends, and rightly so, but the man who works as hard in the city and who is doing as good a job for his company but is not putting up the mileage will lose the right to be free of the benefit in kind and he can pay £600 to £900 a year for the use of that car to drive home at the weekends. That is unfair and I would like the Minister to look at it.
There is the question of motor taxation. Motor taxation as a result of a previous Government's decision——
An Cathaoirleach An Cathaoirleach
An Cathaoirleach: I do not like to interrupt, but it is expenditure the Senator should be talking about, not taxation.
Mr. Daly Mr. Daly
Mr. Daly: I understood the Bill was an administration——
An Cathaoirleach An Cathaoirleach
An Cathaoirleach: It deals with money that was spent last year, not with taxation.
Mr. Daly Mr. Daly
Mr. Daly: I know the money was spent. I met the Minister today and he asked me why I was talking about money that was already spent. I agree with that but I am talking about the money that is spent and the value we are getting for administration. I am also talking about our next budget and trying to see if we could have corrections in it.
We have put a lot of money into the telephone system but I am sorry to say that with all the money spent by successive Governments on the most modern equipment we are not getting the service from the telephone company. If one rings Dublin 10 during the day one might get it after ten or 15 minutes but if one rings Dublin 10 after 7 p.m. one might as well be ringing Nelson Pillar. If you want to make a trans-Atlantic call or a call that needs a manual exchange you just cannot get it. With all the money that has been spent that is very bad. Telefax has been  used in the United States for the past five years. It is a very fast, efficient and cheap way of transmission. Telecom Éireann ran a series of advertisements in the newspapers in the past few months publicising the advantages of the new telex machines. They said they were like a whisper and that you would not hear them but that great telex machine has a rental of £1,400 a year whereas telefax has no rental. Telefax is more efficient and cheaper because if you sent an A.4 to the United States by telefax it costs 90p and if you send an A.4 on a telex it costs £4.50. Furthermore, you have to have a typist for your telex but you do not have to have an operator for the telefax machine. There is some argument going on between An Post and An Bord Telecom. One says it is a postal service and the other says it is a telecommunications service and they are arguing as to who should be doing it. And, of course, like Rome burning while Nero fiddled, we are suffering as a business community while these people are arguing out these things. I would like this to be looked at in the New Year.
Mr. O'Leary Mr. O'Leary
Mr. O'Leary: Like Senator Daly, I would find considerable difficult in examining the position in which we find ourselves and relating it exclusively to public expenditure without considering at least in a passing way the problem of taxation to which it is now totally linked.
An Cathaoirleach An Cathaoirleach
An Cathaoirleach: You are justified in making a comment on it. I can appreciate that.
Mr. O'Leary Mr. O'Leary
Mr. O'Leary: The Minister at the beginning of this debate spoke about a debate on the management of the economy generally in the last 12 months. First of all, I would like to say a few positive things about the Minister and about the performance of the Government in this area before saying in what way I disagree — in so far as I disagree at all — with the public policy which has been pursued by successive Governments in the area of public expenditure. In doing that I am not attaching any particular blame to this  Government but I am indicating that it was my hope and expectation that this Government, recognising the depth of the problem which they inherited, would have tackled the problem even more vigorously than they did.
The scale of the crisis which the Minister inherited has receded somewhat. It has receded for a number of reasons. It has receded because whatever about the failure or otherwise of this Government to get public expenditure under control and to balance public expenditure and public income, there can be little or no doubt that during the period of office of this Government the escalation which was taking place over many years — and certainly since 1977 — in the current budget deficit and, indeed, in the general borrowing of the country, has been arrested. That should not be taken to mean that the amount of money borrowed at the end of this year will be less than the amount of money borrowed at the end of last year, because that is not possible. Programmes have been put into operation which leave a perpetual shortfall. Of course the borrowing of the previous year, and previous years have themselves to be financed each year, adding a greater strain on the capacity of the public finances to get into the long term balance which they must inevitably achieve.
The escalating crisis has been brought under control by what the Minister describes as resolute action. The action has been somewhat resolute and the results have been somewhat satisfactory. Undoubtedly there is a perception that the Government have tackled public expenditure in a very tough way but that is a measure of the misinformation which the general public have on the scale of over-spending in the country rather than a realistic assessment of the position which obtains in Ireland at the start of 1986. The scale of over-spending in the country is indeed frightening. Programmes are in place that lead to an inevitable shortfall in the budget each year. There is over-expenditure and under-collection of taxation. That position is, indeed, a very serious and worrying one. It requires  a commitment to a correction of the public finances which is absent from all political parties, but there are some political parties, of course, in which it is absent to a greater degree than in others. It is almost totally absent or has been almost totally absent from the Opposition party while they were in Government, not only indeed under their present leader but under their former leader as well. By implementing programmes which had a repeat expenditure obligation, they committed themselves to a series of escalating budget deficits. There is no indication in Opposition that that party under its present leadership or, indeed, under any alternate leader that would be available, is prepared to change its mind in that regard. Indeed all the indications are that the improvement in the public finances which this Government have brought about would under another Fianna Fáil Administration be reversed and we would find ourselves going at an ever increasing headlong speed towards another financial crisis.
Mr. Fitzsimons Mr. Fitzsimons
Mr. Fitzsimons: Can the Senator tell us where the improvements are?
Mr. O'Leary Mr. O'Leary
Mr. O'Leary: As we go along we will do the best we can. The rate at which the Opposition party are promising to implement programmes of public expenditure while at the same time indicating a willingness and a desire and a policy for reducing taxation, leads any student of the situation to the inevitable conclusion that they alone in the country believe our budget deficits are inadequate and that the position of the country can be improved if the budget deficit is increased. I have no objection to the increasing of a budget deficit if it is done in a planned way with the ultimate objective of bringing public finances into balance. What I object to is the introduction by this Government or any Government — and in this way the Fianna Fáil Government are to be particularly condemned — of programmes that require financing every year without adequate provision being made for the collection of  the taxation which should be a necessary prerequisite for their existence. The time has come when we in this country will have to give serious consideration to an initiative of a legislative or constitutional nature such as has recently been mooted in the United States of America. We cannot allow the situation to develop where changes of Government can be helped and a situation can be created where slow and tedious work of a previous Government to resolve a problem can be set at nought by an election campaign fought with little thought for the future welfare of the public finances. While the exact nature of the constitutional or legislative change that would be necessary in this country might be thought about, it is an approach to public financing particularly, an approach towards the long term elimination of our current budget deficit, which would protect us against the more vicious excesses of the squandermania which the Opposition engage in the pursuit of power and in an attempt to retain that power which should be considered.
There does not appear to be any indication from the new political party that has emerged that they seriously want to tackle public expenditure. They appear to be in favour of reduced taxation. I think they have supporters on all sides of this House, and I am sure of the other House, in that regard. They have been very slow to indicate in what way they intend to tackle public expenditure and what exactly their proposals are in that regard.
It will be with considerable interest that I will see the way in which their local representatives will express their views on the burning issue at local level of service charges. We will see which way their policy will lead them in that regard. I suspect they will find themselves aligned with the political party of which they are the pup rather than with the political party which has the most realistic assessment of the Irish financial situation, that is, the Fine Gael Party. In that regard the new party are a great disappointment because the intellectual calibre of the people involved would lead one to hope  that they would adopt Fine Gael policies in this regard which ultimately are the best guarantee of the long term economic prosperity of the country.
It is true that the Fine Gael Party, because of the fact that it has not got an overall majority in this House or, indeed, in the other House, where it is even more important, has to make certain adjustments of what its own natural position would be. In saying what I am saying here, I certainly have no authority to speak on behalf of the Fine Gael Party, I am speaking only on my own behalf. I would claim that I am speaking on behalf of quite a number of people within the Fine Gael party and quite a number of people, indeed, within the Fianna Fáil Party and hopefully within the new party as well. As to whether I would be speaking on behalf of anybody within the Labour Party is something the Labour Party themselves will have to judge.
We have a duty for the future prosperity of the country to reduce public expenditure. I do not believe we should reduce public expenditure in the way of sending masses of people out of work or anything like that. I do not think that is necessary. In that regard this Government have been right. You have to do these things fairly gradually. That really is the advantage of the American system, where they intend to phase out their deficit over a period of years. It does not really matter how long the period of years is as long as there is an approach which will stick and which will continue irrespective of changes in Government. As to the way in which public expenditure can be reduced, I can certainly make a number of suggestions. The time has come when we must stop any increase in the public sector total pay bill. That is not to say that I am not in favour of increases for public servants but we have got to limit the public servants in number so that, instead of having large numbers of people paid medium to well, we would have a slightly smaller number of people paid well. It is in their interest and it is in the country's interest that that would come about. The concession of any special pay awards in the present climate is gross  irresponsibility. It certainly does not have my support. I am in favour of a highly paid but reduced size public sector. It is in the area of public pay that substantial savings can be made.
The second area we have to tackle is social welfare. I am not suggesting that we should reduce social welfare payments to any category or indeed necessarily abolish any category even though there are certain types of categories — for example, children's allowance — where some people who are getting it do not need it at all. But administratively a change like that is very difficult. One thing we should determine with regard to social welfare is that we should not increase the level of social welfare faster than the level of wages in the country. I do not see any reason why that should be done. Over the few years since 1981 this has been the tendency. Certainly the level of increases in social welfare have exceeded the level of remuneration in private non-public employment. I do not think this makes any sense. It is contrary to public policy that this should be the case. While I am all in favour of increases in social welfare, they must have some connection with reality. The reality of the market-place is amply demonstrated by the level of wage increases which have been agreed over the last few years. In talking of the level of wage increases I am not speaking only of the published level of increases but about the actual position on the ground. I am not talking about the fancy figures issued by the Irish Congress of Trade Unions saying that 75 firms have agreed to 12½ per cent over the next 15 months. Of course, this fails to take into account that very many firms are going out of business and very many are giving no increase at all. I am talking about the real average increase. There is a lot of sense in restricting social welfare increases to that as a maximum. Indeed, in certain categories of social welfare it might well pay us to reduce it below that.
The third way in which public expenditure can be controlled is by doing something which is a sleight of hand, if you like, but it is something which has a useful part to play in this period of time when a  lot of our current budget deficit is not in respect of this year's expenditure but in respect of paying back for previous years' borrowing. Almost alone in western Europe we are failing to sell any public assets. I do not agree with that. The time has long passed when we should be brave enough and have enough confidence in our own ideological purity to buy or to sell any public asset as it suits us. I have no ideological hang-ups about our owning manufacturing companies, owning service companies or doing anything else. Neither do I have any ideological hang-ups about our selling the assets or the companies themselves. Almost alone in western Europe, including the French socialists, we are failing to cash in on the privatisation of public assets. It is not necessary to do what Mrs. Thatcher is doing. There was a suggestion floated in the last 12 months, that, for example, in the area of forestry there was a considerable amount of income available to the Government by selling trees. I do not consider trees growing in the ground any more of an asset in the sense of a building being an asset than the wheat in the field. It is just something that has taken a longer time to grow. The idea that it should be contrary to public policy to sell these assets as they mature for the full value to people who want them is, in my opinion, a grotesque ideological nonsense. In that regard the Opposition party have not even begun to grasp the significance of this. I am afraid our partners in Government are allowing their ideological hang-ups to overcome their economic sense.
We, in the Fine Gael Party, have to put forward this as a constructive proposal to help in reducing the total level of our borrowing over the next few years, to give us a breathing space with regard to the question of reducing our public expenditure. I do not see any reason why really substantial proportions of our forestry could not be sold. Up to £3 million, £4 million or £5 million could be made available. I would not see anything wrong with the Minister taking into account, say, £120 million, £130 million, £140 million for each of the next three or four  years. This could be used as a way of reducing the current budget deficit. This is precisely what is being done in the United Kingdom. It is there to be used and not as a monument to the foresight of our predecessors. It is there to be used when we need it and we need it now.
There are many other areas in which public expenditure could be tackled. For example, there are grants to IDA sponsored bodies and there are certain grants to the building industry which are no longer serving any useful purpose. Serious consideration should be given to the restructuring of the grant structure within the building industry so as to take into account and maybe offset a reduction of VAT with a reduction of grant. This might not only be in the long term interest of the country; it could also be in the short term interest of those who are seeking to buy a home at present.
In addition, the public expenditure we have must be monitored to ensure that at present it is put into schemes with a high employment content. I am not suggesting that it should be wasted. For example, in the city in which I have the honour to live there is a main drainage scheme which is employing, ten to 13 people and costing millions of pounds. Technology is very advanced as all the work is done by machines. I know it is a laudable project but the same amount of money used in a different way would be more beneficial to the public purse because of the increased contributions which those employed would make and it would be more beneficial in the long term to the economic health of the country.
In conclusion, I would like to congratulate the Minister on overcoming the crisis which he inherited. I would like to encourage him to continue the struggle to ensure that public expenditure is kept under control. Finally, I would like him to consider that the time is long overdue when we should be open to the idea of selling some of our public assets for the benefit of the people of the country. In doing so we would be doing a good ——
Mr. Fitzsimons Mr. Fitzsimons
Mr. Fitzsimons: You did not tell us of  any great changes for the better in the State finances that you spoke about. You congratulated the Government on their success in the area of fiscal rectitude and State affairs. List a number of them for us.
Mr. O'Leary Mr. O'Leary
Mr. O'Leary: I do not have them here now but I will try to facilitate you.
Professor Dooge Professor Dooge
Professor Dooge: We could start with the balance of payments.
Mr. O'Leary Mr. O'Leary
Mr. O'Leary: If I could I would. For example, in 1982, which was the last period of Government of the party of which you have the temporary honour of being a member — the party is temporary not the Senator — the total Exchequer borrowing was £1,945 million. The total Exchequer borrowing necessary for 1985 was £2,015 million. That is an increase of about £45 million, or about 3 per cent or 4 per cent, at a time when inflation would have been about 23 per cent or 24 per cent. Do you understand?
Mr. Fitzsimons Mr. Fitzsimons
Mr. Fitzsimons: Tell us more ——
Mr. O'Leary Mr. O'Leary
Mr. O'Leary: That was done in spite of the opposition from yourselves.
Acting Chairman (Séamus de Brún) Acting Chairman (Séamus de Brún)
Acting Chairman (Séamus de Brún): Senator O'Leary to continue without interruption, please.
Mr. O'Leary Mr. O'Leary
Mr. O'Leary: I am enjoying this because it gave me an opportunity to make a political point that I would not dream of making otherwise ——
Mr. Fitzsimons Mr. Fitzsimons
Mr. Fitzsimons: I would enjoy getting a few more reasons.
Mr. O'Leary Mr. O'Leary
Mr. O'Leary: Is that good enough? Let me use the American expression. Is that not the bottom line? That is what we are talking about.
Acting Chairman Acting Chairman
Acting Chairman: Senator O'Leary to continue without interruption.
Mr. O'Leary Mr. O'Leary
Mr. O'Leary: That is what we are talking about. The problem is that we are  borrowing too much. In admitting, as I did at the start, that the Government have not solved the problem, never let us think that the total borrowing requirement by the Exchequer has, in fact, not risen at all and has reduced substantially in real terms. The Government have tackled the problem. It adds weight to the point I made.
I can assure the Senator opposite that instead of it being £2,015 million if it was £1,500 million as a result of their efforts, I would be more than delighted. I cannot claim that but I can certainly claim that the disastrous trend which the Senator's party started has been halted and has been reversed in real terms. I am hoping, by expressing myself in a moderate way, to encourage the Minister to go even further and as well as showing a real reduction in the level of public expenditure to bring about a situation where there will be an actual reduction in pound terms in public expenditure or in the total Exchequer borrowing on a year by year basis. That is what I hope. I would hope that in that regard I would have the support of the very intelligent Senator on the other side. If I do not have his support, then I understand that we are talking from different stand points. If I do have his support, then our argument is futile.
In all these circumstances I would like to conclude by congratulating the Minister on one hand and hopefully steeling his resolve to resist the temptations from weak-kneed politicians of all parties to give in to the inevitable clamour for taking the soft option, not recognising that in taking that soft option, they are placing not only your future and my future at risk but the future of our children which, after all, is the most precious duty we have to perform as public representatives.
Mr. Fitzsimons Mr. Fitzsimons
Mr. Fitzsimons: If Senator O'Leary were logical he would be condemning the Government, not congratulating them.
Mr. O'Leary Mr. O'Leary
Mr. O'Leary: I can only compare them to what was there. They are saints when you compare them to what was there. I  certainly would not think that this Minister for Finance is doing a good job as I do, but he may be politically a little wiser than I am.
Minister for Finance (Mr. Dukes) Alan Dukes
Minister for Finance (Mr. Dukes): It just struck me to wonder if this, if I may use the expression, is not a rather dangerous place to come. Yesterday we talked about various kinds of temptation. Today Senator O'Leary is talking about resisting temptation and referring to saints. I do not know where I stand in all of that. I am certainly no saint.
Mr. O'Leary Mr. O'Leary
Mr. O'Leary: You would be a venerable——
Acting Chairman Acting Chairman
Acting Chairman: No interruptions or comments please.
Mr. Dukes Mr. Dukes
Mr. Dukes: I thank Senator O'Leary for a passing opportunity to put a discussion on the public finances into its proper theological context. I think there is more than a little confusion and inconsistency in the way the debate is conducted by many of those who get involved in it. Before I say anything specific about the debate, I would like to thank Members of the House for the comments they have made on a very wide range of issues which properly come up during the debate on the Appropriation Bill which in itself covers the totality of expenditure in a given year. I intend to address most of those issues on the way. There may be some that I will miss but if I miss them it will be out of concern, as I said yesterday, not to anticipate things I will be saying next Wednesday in another place.
A major theme running through the debate over the past two days has been the unemployment situation and what is being done about it. It is a major concern to all of us. Senator Cassidy had difficulty in accepting my statement that the increase in unemployment was slowing down. He referred to the current level of 240,000. I would like to put on record for the Senator's benefit that the figures for the year on year increases in the live  register bear out my comment. The year on year increase from 1981 to 1982 was 38,000; from 1982 to 1983, 28,100; 1983 to 1984, 17,400 and 1984 to 1985, 14,500. That is a clearly declining trend in the increase in unemployment. We have made it clear in the national plan that tackling this problem is a priority of both economic and social policies. In that plan we set out two approaches to the problem which take account of the situation at home and abroad and which are aimed at moving us along a path to cope with the problem; I will not say to resolve it in any short period, certainly not, but to make headway against it because of our real concern with the fate of those people who make up the statistics.
Mr. Fitzsimons Mr. Fitzsimons
Mr. Fitzsimons: To keep the figure under 200,000.
Mr. Dukes Mr. Dukes
Mr. Dukes: Firstly, the plan sets out the broad framework in which real economic growth can be achieved in the light of domestic factors such as the constraints on public finances and in the light of the international realities that face us at a time of recession. It is only through growth in the real level of output in the economy that we can sustain extra permanent employment in this country. If we do not generate the resources ourselves, the alternative road to growth, a snare and a delusion is to continue to borrow money abroad at an ever-increasing rate, money which itself must eventually be paid back at whatever the interest rates happen to be at the time with, in effect, repayments becoming a first charge on whatever resources we produce ourselves. We have a small economy with a small home market. We are critically dependent, therefore, on foreign trade to achieve the economic growth that we require. Growth to the real level of activity is the only way we can sustain expanded employment.
We must ensure that industry is competitive on the larger foreign markets. We cannot ignore the international situation nor can we wish away the obstacles that are in our way or even attempt to wish them away by creating the illusion  that by borrowing more we are actually adding to our wealth. We are not. We recognise that something must be done to meet the immediate problems faced by the unemployed and, accordingly, the second line of approach set out in the plan involves an expansion of existing schemes for the unemployed, the establishment of new schemes such as the social employment scheme launched in February of last year and the alternate scheme run by AnCO.
Within the restrictions on the public finances these schemes are designed to give unemployed persons the skills and the motivation to secure employment. We consider that these programmes represent a very substantial initiative towards helping the unemployed and they bear comparison with anything that is being done to deal with this same problem elsewhere in the European Community. On average, it is estimated that some 38,000 people took part last year in the employment and training schemes operated under the aegis of the Department of Labour. It now appears that we will have an increase above that level during the course of this year.
The social employment scheme had 5,500 participants at the end of last year and it is expected that more people will come into the scheme this year. The enterprise allowance scheme had an average participation of over 5,000 last year. That is the scheme which is designed to help the unemployed who wish to start their own business. All of those combined show that we are as a community devoting a substantial amount of resources not simply to dealing with the immediate income problem of those who are unemployed but also in many ways to the more fundamental question of facilitating them, helping them, equipping them to get back to work.
There are other things, of course, that can be done. I will mention them in another context later on. Public expenditure, both current and capital, must be distributed in ways that actually expand the amount of employment derived from the expenditure. Senator O'Leary mentioned one particular project which does  not give employment at the level that he would like to see and, of course, I take his point. We have consistently over the past three years given particular attention to that aspect of the public capital programme. There are different employment levels per million pounds of expenditure in different uses and we try, of course, to maximise the total amount of employment. I would just point out to Senator O'Leary that there is obviously a limit to the extent to which one can do that because, obviously, it would be indefensible to expand very substantially the expenditure on one particular type of programme to the detriment of all other programmes if we were looking only at the employment content. It would seem, for example, that it would not be particularly wise to take out of the public capital programme all of the high technology type investments that exist. That would be far too short-term a view to take and it would be a dangerous road to embark on.
During the course of the debate Senator Kirwan expressed doubts about the link between the control of inflation, wage moderation and employment creation. International experience in recent years has shown that there is very good evidence, indeed, of a relationship between lower inflation and stronger employment growth. Over the period between 1973 and 1982, when consumer prices in the European Community rose on average by 11 per cent a year, there was no increase in employment in the Community. In the same period in the United States, where inflation was considerably less, employment increased by an average of 1.8 per cent a year. Over the same period Japan's rate of inflation was also significantly lower than in the Community but higher than in the USA. It was between the two. Employment increased there by an average of 1 per cent a year. Inflation in the European Community itself has been falling for some years and in 1984 the decline in employment in the Community was reversed. Employment began to increase and the rate of increase accelerated last year and recent forecasts by the  Commission of the European Communities show that that trend is likely to continue through this year.
It is clear that inflation is only one of a number of elements which affect employment and the relationship between the two is complex, changeable, subject to time lags and for those reasons it is impossible to predict the amount by which employment will change or even when it will change in response to any given change in the rate of inflation. I would hold that there is no room for doubt that there is a direct relationship between inflation rates and employment levels. I would add in passing that that is particularly the case for a very open economy like ours.
Equally, there can be little doubt that price stability produces an environment which is far more conducive to investment than one in which inflation is raising rapidly. It may take entrepreneurs some time to react to the situation to base their investment decisions on the new climate. As and when the people who make investment decisions, which are ultimately employment decisions, perceive that high levels of inflation are not going to return, it will affect their approach to investment. We should pay some attention to the fact that expectations in relation to inflation are probably almost as important as the level of inflation itself. We have arrived at the point where in each of the past three years we have seen a substantial reduction in the rate of inflation. We have begun to create a frame of mind where people do not expect inflation to accelerate and that in itself helps to develop the kind of behaviour on both sides of the social partnership that will ensure that inflation does not accelerate.
Senator Fallon suggested that the reduction in the rate of growth of unemployment might have been caused in part by increased emigration. Reliable information on the size and direction of migration flows is available only for the periods between successive censuses of population. This is because there is no comprehensive procedure in existence to ascertain the movement of persons into  and out of the State, which would give the actual number of inward and outward migrants. For non-census years the CSO prepares population estimates which naturally imply an estimate of net migration over the previous years. These estimates are very tentative and are subject to revision which can be substantial in the light of a subsequent census of population. The CSO, therefore, considers that an average over several years provides a better, although still tentative indication of migration trends, than do estimates for single years. For the four years to 1985 the implied annual average net outflow was 8,000. That figure itself is in the middle of the range of the migration assumptions for the period 1981-86, underlying the population and labour force projections which were published in April, 1985 and prepared by the group on population projections. There is no evidence to suggest that net emigration accelerated in 1985 and there is, therefore, no evidence to suggest that the slow-down in the rate of growth in the live register in that year was due in any part to such an acceleration. The slow-down in the live register was due to an improvement in the labour market. Clear evidence for this is provided by the fall of almost 9,000 in the number of redundancies notified in 1985, fihe first fall since 1979.
Senator Fitzsimons suggested that we should put more emphasis on the expansion of productive employment and I would agree. The primary objectives of our industrial policies set out in the White Paper on industrial policy are, in fact, designed to do just that. We have developed a number of policy instruments to achieve those objectives and I list the principal ones: the national linkage programme which sets out to develop a successful sub-supply in industry, a sub-supply industrial base; the company development approach which is aimed at building up strong indigenous companies. Over 100 companies participated in this process which is designed to encourage overall planning by companies and putting the financial and the non-financial resources of the various State agencies  behind them. We have regionalised the small industry programme. That process was completed last June and one-stop shops are being set up in all of the regions. CTT as part of the overall industrial policy, has engaged in a number of marketing initiatives to assist exporters to develop necessary expertise. The most innovative of these schemes is the market entry and development scheme which is designed specifically to help exporters with the various expenses incurred in breaking into new markets or undertaking major developments of existing markets.
We also have the scheme which I brought in to encourage the provision of venture capital. The business expansion scheme as it is called most popularly, provides for individuals who purchase shares in manufacturing companies or international service companies to have the ability to write off up to £25,000 per annum against their taxable income. Last year that scheme resulted in almost £5 million of new investment in industry during that tax year from almost 570 investors.
I will mention later the role of the National Development Corporation which, again, gives an extra dimension to industrial policy and, finally, I will refer to the technology acquisition grants which provide assistance towards the cost of acquiring new product or processed technology. Those schemes do not necessarily in themselves represent the last word in what can be done in this area but they certainly represent a very clear reorientation of industrial policy to bring about the kind of result that Senator Fitzsimons wanted to see.
Senator McDonald inquired about the strengthening of the IDA small industries programme and Senator Loughrey made what is, in fact, a related point on the need to eliminate red tape in business start-up positions. The IDA, in fact, give specifically tailored assistance to small companies through the small industries programme. That programme has been completely regionalised since last June with staff assigned on small industry boards in each region. In 1985, 3,700 new  jobs came through that system and 680 small Irish companies agreed investment proposals with the IDA. That in itself was an increase of 25 per cent on the previous year's levels.
I have mentioned the setting up of the one stop shops which are designed in part to save time, to avoid confusion and to cut out red tape. In these centres the industrialist can meet in one place with the various relevant State agencies. By linking large and small industries through the national linkage programme the IDA can assist many small companies in finding new markets for their products and in some cases they are actually finding new products that they themselves can manufacture. The new Industrial Development Bill will permit small companies to receive one-third of research and development grants in advance and it also provides grants of up to 50 per cent for technology acquisition.
Senator McDonald raised another question which I am sure many of us are familiar with. He suggested that equipment in factories that have closed down should be passed on to small firms. The IDA's policy, of course, is not to give grant aid for the acquisition of secondhand equipment because of the likelihood that such equipment has been grantaided in the past. It would be a wasteful direction of public expenditure to accumulate grants in several phases on the same item of machinery which would mean, in fact, that public resources would be used not to increase the total productive capacity but merely to finance a transfer of ownership. Of course, any manufacturer, small or large, is at liberty to buy himself secondhand machinery in the event that suitable equipment becomes available.
Senator Hillery raised a number of points to which he wanted to have specific replies concerning particularly the affairs of commercial State bodies. He began by suggesting that each one of them should have a clear statement of objectives. I agree entirely with that and that is one of the main purposes of the corporate planning process now under way among the commercial State bodies. He then  suggested that annual reports of these bodies should indicate the objectives of the bodies to summarise corporate plans and specify key results and also suggested that the corporate plans should be made available publicly.
I agree that the annual reports should indicate objectives and key results. In many cases reports do this, in some they do not and I have under review at the moment the format of reports with a view to ensuring that a certain number of items will be included in all reports and with a view also to ensuring that for each specific body the information and results made available are the ones that are most useful and most relevant in allowing both the Legislature and the general public to assess what is being done in each of the bodies and to measure their progress.
I would not agree with the suggestion that the corporate plans should be published. They are confidential documents and are being prepared on that basis. In that I have taken a position that would keep the semi-State bodies in a situation which is analogous to that in the private sector. Senator Hillery then suggested that the information given in the reports and accounts of commercial State bodies on subsidiaries is unsatisfactory. That is a matter to which I am giving attention in the context of the review of the format of reports which I mentioned a moment ago.
He suggested that there is a need for greater commercial expertise in the Civil Service. That need is recognised by the Government and we are taking a number of steps to give effect to the implicit objective there. We have arranged a considerable number of courses for civil servants with a view to providing them with financial and accountancy skills and techniques and every encouragement is given to civil servants who wish to obtain formal qualifications in these areas. In addition to that, a number of Departments have accountants on secondment to the private sector with a view to obtaining professional advice in the analysis of the finances of commercial State bodies and that is a very positive line of action which  has other spin-off benefits both for the Civil Service Departments in which these people work and, indeed, for their own home corporations or companies.
The Senator then went on to suggest that State guarantees of borrowings of commercial State bodies should be granted sparingly. The House will be aware that the Government are very insistent that capital expenditure projects by commercial State bodies should be initiated only if adequate returns on the investment are to be achieved. We would expect commercial lenders to examine proposed projects rigorously and on a commercial basis, and our own examination of the question as to whether guarantees should be given is conducted in that same framework and with the same rigour.
Another suggestion made by the Senator was that views of Departments on reports by the Committee on State-sponsored Bodies should be provided within a specified time limit. I would share this view with the Senator and would be anxious that Departments furnish the committee with views on their reports at the earliest possible moment. In the nature of things, however, the reports vary. Some are a good deal more detailed than others and it would be unrealistic to lay down one specific time limit but I accept the point that it is desirable that the reactions be given as quickly as possible but also that they should not be given so quickly that they are not properly thought out.
Senator Ferris among others referred to the burden of taxation on the PAYE sector and stressed the need for better tax collection and enforcement procedures. The Taoiseach announced a series of initiatives in that regard on 23 October last which are being put into effect as quickly as they can be operated.
Senator Smith asked what had happened to the decentralisation programme. The Official Report contains an account of what happened but perhaps I should elaborate a little on it now. In December 1982 the Government decided, in the context of the 1983 Estimates campaign, that the programme  should be cancelled. This decision was announced in the principal features section of the budget booklet of that year. We took that decision for a number of reasons. One of the reasons was that it was likely that public business would have been conducted less efficiently and at greater cost as a result of decentralisation. Administration of a Department in several different centres could be slow and inefficient and the public would have reduced access to services. In addition, it was not clear that the investment in the decentralisation programme would have made any appreciable difference in terms of the impact on the regions or would have yielded any overall benefit to the State. No new permanent jobs would have been created. What we would have done would have been to redistribute a given amount of employment around the country at some cost. It is obvious that if one is going to decentralise with the same amount of staff resources and spread them over different centres one has the cost of moving them and the cost of providing accommodation for no gain in either the amount of resources or the amount of work that can be done. Many of those who continue to advocate decentralisation on this basis are missing the basic arithmetic of the operation.
Senator Smith also referred to pension funds of certain firms being depleted. Under the terms of the Companies Amendment Bill, 1985, which is before the Dáil at present and which will implement the EC Fourth Directive on Company Law, information on pensions paid and payable will have to be appended to the annual profit and loss accounts of companies.
Senator Loughrey took the view that the GMS system encourages overprescribing and that the health board system is administratively very costly. GMS costs are as a result of the number of medical card holders and of the visiting and prescribing rates of doctors. Attempts are being made to control costs by regular review of medical card numbers and by tightening the procedure for determining eligibility. Additionally, where a GP's visiting or prescribing rates are above  average, having regard to the constitution of the panel, this is brought to that doctor's attention by the GMS payments board and the situation is examined to see if there is an objective explanation. The Department of Health are currently engaged in negotiations with representatives of the profession about a possible modified payments system which would result in savings to the Exchequer on drugs expenditure, which currently represents nearly 70 per cent of the cost of the scheme.
Senator Cassidy raised what I would describe as an old chestnut when he suggested that this country might not be availing to the full of EC aid for infrastructural development. That is not the case. The European Regional Development Fund is the main source of funds provided by the EC for infrastructural development of this kind. It is allocated to member states on a quota basis. Since the fund was established in 1975 Ireland has always drawn down its full entitlement for each year. I can assure the House that I do not have any great deal of difficulty in presenting a proper and sufficient set of qualifying projects to draw down our full quota allocation from the fund. While I am on that subject I would like if Members of the House would demolish the myth that in any case where one can find a new project — not perhaps in the public capital programme, which would qualify under the Regional Fund — one has only to put it forward to Brussels and we would get money for it. That is not the case. Once we have presented qualifying projects in sufficient numbers to draw down our full quota, we could have more qualifying projects to beat the band and not a single penny extra would be available.
Mr. O'Leary Mr. O'Leary
Mr. O'Leary: Does Brussels not give that impression?
Mr. Dukes Mr. Dukes
Mr. Dukes: There may be an element of that in it, but some of us are conspiring in fostering that myth.
A number of Senators referred to what they regard as the poor state of county roads. Capital expenditure on roads has  increased substantially in recent years — from £80 million in 1982 to £125 million last year. The Road Plan published recently puts emphasis on primary and secondary roads and minor roads have to be catered for within the limits of available resources. Resources, by definition, must be concentrated in the areas of greatest need. The maintenance of county roads is a charge on each local authority's own revenue; the matter is within their hands. If members of local authorities made more sensible decisions about the resources that they raise in their own areas we could make a lot more progress on the question of county roads. There is no point in comspiring to deprive a local authority of revenue and then coming along to complain about the state of the maintenance of county roads.
Senator O'Leary covered a number of areas only some of which I will mention. Senator O'Leary is unhappy about our failure to sell public assets. I would assure Senator O'Leary and the House that I share this total lack of ideological hangup on the issue. Equally, I share with him a refusal even to contemplate selling any asset for less than its value. For some assets what we are selling is not simply the asset as it stands at the moment one looks at it; one is also selling a stream of income into the future and any price one would require for that would have to take account of the fact that that stream of income is also being sold. I do not see any reason why there should be a great objection to that. The taxpayer has paid the interest on borrowed funds in order to acquire or create these assets, so the taxpayer is entitled to expect the benefit. The taxpayer is also entitled to expect that those who manage the financial affairs of this country will make commercial decisions that will take account of the benefit to accrue to the taxpayer from the assets we control on the taxpayer's behalf.
I am very glad that Senator O'Leary mentioned his particular concern in this connection when he suggested that were there to be sales of assets — and we are speaking hypothetically for the moment  — the proceeds of those sales should be used to cater for his and my theological concern with the level of the current deficit and the borrowing requirement. It would be folly to suggest that were we in a position of selling assets the proceeds should be used either to start, support or provoke expenditure programmes that would continue long after we had used up the proceeds of the sale.
Senator O'Leary, more eloquently than I, expounded on why one wants to reduce the current deficit and reduce the borrowing requirement. Most of the criticism of action in these directions seems to start off from the false presumption that the action is being undertaken in order to get a tidy set of books, or from some dogmatic concern with the level of the deficit requirement. The second of those is a consideration, but why? In any year, the current budget deficit and the Exchequer borrowing requirement represent taxation in some future year. If one adds £100 million on to either one of them one has added £100 million on to the commitments that engage the taxpayer. Because, at the end of the day, the taxpayer is the only person who can provide any funds that are required to run a public expenditure programme of any kind.
We have acquired the belief over a period of time that if one borrows one has added something. One may have added something in the short term on the positive side, but one has also added, an undertaking, an engagement to repay, a liability on the other side. If more of the debate about current deficits and Exchequer borrowing requirements were conducted in those terms we would have a more sensible debate, and many of the people who engage in the debate would suddenly find themselves taking a more consistent line throughout the course of a debate on public expenditure.
I regret that we were not in a position to have this debate at the time we were considering the Appropriation Bill. The Parliamentary timetable in the Dáil made that extremely difficult, and I am grateful to the House for their indulgence in adopting the procedure, adopted before Christmas, in arranging to have this  debate for the last two days.
Question put and agreed to.
Acting Chairman Acting Chairman
Acting Chairman: When is it proposed to sit again?
Professor Dooge Professor Dooge
Professor Dooge: It is proposed to sit again at 2.30 p.m. on Wednesday, 5 February.
Seanad Éireann 111 Appropriation Act, 1985: Motion.