Seanad Éireann - Volume 157 - 18 December, 1998

Appropriation Bill, 1998 [Certified Money Bill]: Second Stage.

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

Minister of State at the Department of Finance (Mr. Cullen): I am glad to return to the Seanad and I hope we have an interesting debate. The purpose of the annual Appropriation Bill is to give statutory effect to the departmental Estimates for the supply services, both non-capital and capital, including all Supplementary Estimates which were approved by the Dáil since the last Appropriation Act.

Section 1 appropriates the various services listed in the Schedule — the net sum of £13,217,471,000. This total comprises the original net Estimates of £12,871,364,000 set out in the revised post-budget Book of Estimates 1998, and net Supplementary Estimates totalling £346,107,000. Following normal practice, the Bill also seeks approval for the use of certain departmental receipts, or appropriations-in-aid, amounting to £1,280,227,000 as appropriations-in-aid.

Before dealing with the implications of these figures for the Government's general policy on expenditure, I wish to explain how and where the additional spending for which Supplementary [1328] Estimates, totalling £346 million and approved by the Dáil, arose. Four Departments and Offices accounted for the most significant of them.

The main factors which gave rise to additional allocations in these areas are as follows. The Office of Public Works accounted for £76 million. The bulk of these funds have been provided to enable the office to pursue cost savings which can be achieved by paying off amounts outstanding on a series of contracts under which decentralised offices were built and financed. The Department of Justice, Equality and Law Reform accounted for £81 million. This was largely to cover the Garda pay agreement and additional overtime for both gardaí and prison officers.

The Department of Education and Science was allocated £105 million for first and second level education, the main elements of which were a £30 million additional provision in the scientific and technological education investment fund to cater for the recently announced third level research and development initiative, £23.7 million additional schools capital and £20 million arising from technical difficulties in implementing fortnightly pay for second level teachers. The Department of Agriculture and Food was allocated £36 million primarily because of the package of measures approved by the Government to support farmers.

In An Action Programme for the Millennium the Government defined its spending policy in terms of a limit on the growth in net current spending of 4 per cent. Greater flexibility was envisaged in relation to capital spending where the annual average growth rate was set at 5 per cent. Underlying these targets is the need to ensure that Government spending does not contribute to inflationary pressures and that expenditure commitments are not allowed to become established in a period of economic and revenue growth which could not be sustained if an economic downturn should emerge at some point in the future.

In the 1998 Estimates, the Minister for Finance budgeted for a net increase in non-capital spending of 3.7 per cent over the likely outturn for 1997. The Government is committed to maintaining its annual current spending target of 4 per cent and the pattern of firm compliance which has been established since 1997 is maintained in the post budget spending position for 1999.

Expenditure policy is, of course, only part of the Government's approach to economic management which has been so successful over the past few years. The Irish economy has performed particularly strongly in 1998. Real GNP is estimated to have increased by about 8.5 per cent, employment increased by 65,000 and the unemployment rate now stands at about 7 per cent, the lowest level in two decades and one of the lowest in Europe. Inflation remains low.

By international standards our economic performance remains exceptional. Ireland's growth in 1999 is still expected to be well over three times the OECD average and Ireland is set to top [1329] the OECD growth league in 1999 for the fifth year in a row. The Government intends to ensure that this exceptional performance can continue. The budget, which was one of the most radical reforming budgets in recent Irish history, encapsulates the main elements of its approach to achieve this objective. In the next few minutes, I wish to mention some of the issues which lie at the heart of our budgetary strategy rather than go into the intricacies of the budget tax changes themselves.

First, I will deal with the international context. The Irish economy does not operate in isolation from the rest of the world. It can hardly come as a surprise that the budget was framed against the backdrop of a highly uncertain international economic environment. There is little doubt that there has been a slowdown in large areas of the world economy. The most obvious slowdown is in those parts of Asia which face very serious economic and financial problems.

Growth has been slowing in major markets accounting for almost 80 per cent of our exports. In the UK, which is still our single most important export market, the consensus is that growth in 1999 will be below 1 per cent. The euro area may be immune from the international downturn elsewhere. The position in the US is similar although the US economy has strong trading and other economic links with Asia. The often rollercoaster behaviour of international stock markets reflects the pervasive sense of international economic uncertainty. This is the economic backdrop to the 1999 budget, a world economy where we face possibly a year or two of weak global growth with an uncertain future after that.

As a small open economy heavily dependent on external trade and inward investment, Ireland is highly influenced by the international economic environment. Our economic success in 1998 and indeed over the 1990s has been built on and driven by the exceptional performance of the exporting sector of the economy. The capacity to deliver this has been patiently built up over the past decade by the partnership between business, trade unions and other social partners and the Government. The key consideration in seeking to ensure that this can continue is the competitiveness of the Irish economy.

A second major focus in the budget on 2 December was the pressing need to progress the reform of our income tax system. This is essential to ensure that the Irish economy achieves its growth potential in the coming years and to copperfasten social progress and equity. As recently published CSO figures have illustrated, we have been creating jobs in the economy over recent years at a record rate. The level of employment has expanded by one quarter. Last April there were almost 300,000 more people in work than five years ago. This represents a major transformation in the economic fortunes of hundreds of thousands of households in our society. We need to continue on this path.

[1330] Employment creation based on firm foundations is the key to our economic success. The central objective of the budget was to maintain this momentum. The strong expansion of the enterprise sector of the economy is continuing to generate tens of thousands of job opportunities. However, the constant refrain we hear from business is that it cannot find the people to fill the jobs. This problem threatens our economic performance which has provided us with the resources to tackle the still pressing problems of poverty and social exclusion in Irish society.

The fundamental restructuring of the Irish taxation system initiated in this Government's first budget last year by cuts in both the standard and top tax rates was accelerated in the budget on 2 December by the measures announced to further transform the income tax system. These measures will remove more than 80,000 taxpayers from the tax net but, even more significantly, will improve the incentive to work for the 200,000 people still on the live register and also for the large number of people who are not currently in the labour force but who are interested in taking up a job.

The tax changes introduced in the budget will help motivate the unemployed and those now outside the labour force to take up the tens of thousands of unfilled vacancies which now exist in the Irish economy. For those who, for social or economic reasons, cannot be part of the labour force, the budget also contained a substantial social exclusion package to ensure that the benefits of economic growth are spread throughout all sections of society.

The taxation policy initiatives reflected in the budget will, therefore, tackle a variety of problems. The personal taxation reductions will enhance competitiveness of the economy, encourage more entrants to the workforce and strengthen social partnership by concentrating significant tax reductions on the lower paid. By so doing, they will make a vital contribution to securing Ireland's economic performance into the first half of the next century. The reform will improve the lot of the lower paid and, by sustaining our current economic performance, will generate the resources we will require to ensure that the standards of public provision in the Irish economy in health, education, infrastructure, care for the elderly and tackling poverty are at least maintained and preferably improved as far as possible.

In current circumstances where we are benefiting from such strong economic growth with correspondingly strong revenue flows and where, in the nature of things, the economic future cannot be certain, common sense dictates that the benefits of our remarkable economic performance in 1999 should not just be confined to the issues which have been tackled — investing in the economy's infrastructure, looking after social needs and reforming the taxation system. We must also follow the example of every prudent household by seeking to put something by for the rainy day. The national debt is expected to fall this year. Reduction in the burden of debt will position the [1331] country better to sustain growth and enable us to respond more fully in the event of adverse economic developments.

I have laid some stress on the vital contribution which the partnership approach has played in underpinning and sustaining our recent economic performance. In the past two years, however, an undesirable trend in pay developments has emerged. The Exchequer pay and pensions bill has shown substantial increases of over 10 per cent in 1997 and an estimated 9 per cent in 1998. The budget forecast shows a further increase of over 6 per cent in 1999. This has been occurring against the backdrop of inflation rates of less than 3 per cent per year.

A major factor in the public service pay increases in the past two years has been the effect of local bargaining pay settlements under the PCW. The PCW local bargaining clause has ended up costing public service employers far more than was envisaged at the time the PCW was agreed. At this stage, the PCW local bargaining process in the public service has, to all intents and purposes, drawn to a close.

As we move forward from here, the Government is determined that the terms of the Partnership 2000 pay agreement will be fully adhered to. The 1999 Estimates make provision for the payment of the terms of the Partnership 2000 pay agreement, including the 2 per cent local bargaining clause, but no more. The Taoiseach has spoken of the need for new arrangements for public service pay in the period beyond Partnership 2000, which link pay more closely with performance while maintaining the unavoidable limits on public spending. Discussions with the Irish Congress of Trade Unions on this matter will commence shortly. All sides recognise the problems of the existing system and it is in everyone's interest to work towards a new system to address those problems.

Another major plank in building on the capacity of the country to sustain continued economic growth is the National Development Plan 2000-2006. This will seek to consolidate and build on our progress in economic and social cohesion through an investment programme which will seek to maximise our economic potential, contribute to the continuing growth in sustainable employment and to tackling social inclusion and achieve a better spatial distribution of economic activity throughout the country.

Preparations for the National Development Plan, which is being developed in partnership with regional authorities and the social partners, are well under way. The ESRI have been engaged to carry out an ex-ante evaluation of investment priorities for the next round of Structural Funds. They will be expected to quantify the levels of investment required to close the gap in key areas of infrastructure relative to more developed regions of the community and to review international and other developments which might be [1332] critical to Ireland's economic growth in the 2000-6 period.

Actual drafting of the National Development Plan will not commence in earnest until the outcome of the external evaluator has been received and the consultation process is complete. The plan will not be finalised until the outcome of the negotiations on the financial framework for the next round and the amount of Ireland's Structural Funds allocation are known, probably around the end of spring 1999.

Section 2 of the Bill is intended to ensure compliance with certain constitutional requirements which come into play due to the fact that the budget timetable has been brought forward, with the budget now being taken in December of the year preceding that to which it relates rather than in January of the same year. Article 17.1.2 requires that the financial resolutions of each financial year must be enacted into law by the end of that year, i.e., by 31 December 1998 in the case of the financial resolutions passed on budget night, 2 December 1998. However, Article 17.1.2 also allows the 31 December deadline to be deferred if an Act to that effect is passed before the end of 1998.

Section 2 makes provision for the deferment option to be invoked. The alternative would be to seek to rush through the Dáil and Seanad, in the period between the budget and the Christmas recess, detailed tax legislation which could at times be complex. The approach provided for in this section of the Bill, which was also adopted last year, will maintain the normal statutory deadlines for passing budget measures into law, 84 days for the completion of the Second Stage and four months for enactment of the Finance Bill.

We have made excellent economic and social progress in recent years, particularly the past two years. This progress has been built on prudent economic and budgetary management and the social partnership which has been established. The budget seeks to foster and strengthen that partnership approach. It also seeks to maintain the measured rate of expansion in Government spending which has regard to the capacity of the economy, in terms of revenue generation implications in future years to sustain it, and to absorb the spending envisaged without fostering higher rates of inflation. I commend the Bill to the House.

I wish to take this opportunity to convey to the Cathaoirleach, his fellow Senators and the staff of the House the compliments of the season.

Mrs. A. Doyle: I wish the Minister a happy and peaceful Christmas and all the best for the new year. The Department of Finance will be even busier and more important than it has been heretofore in the year ahead as we face Y2K compliance and the changeover to the euro, to mention but two issues on the huge menu of concerns of the Department.

The Minister mentioned that this Bill gives statutory effect to £13,217,471,000. If I contended [1333] that the correct figure was £13,217,481,000, could the Minister prove me wrong? The figures are put to us and we have no way to verify them. We take a great deal on trust.

Mr. Cullen: They are published Estimates.

Mrs. A. Doyle: I accept that but behind those Estimates which of us has the resources, even as public representatives, to do the tot and check the figures? We take a great deal on trust. There is much concern about recent apparent disagreements between the National Treasury Management Agency and the Department of Finance in relation to Exchequer surplus figures. Can I trust that these figures are more accurate than the NTMA considers them to be?

Mr. Cullen: As we are both from the south-east, I think we can trust each other.

Mrs. A. Doyle: The Minister and I can cosy up on this but the public would like to know which figures are correct.

Mr. Cullen: These are the correct figures.

Mrs. A. Doyle: These are the correct figures whereas the Exchequer surplus return figures are not. A couple of billion was left to spend in December. That explains the discrepancy.

Mr. Finneran: That was discussed on Wednesday evening.

Mrs. A. Doyle: There was not acceptance on all sides that the method of publication of the Exchequer returns for the year in question was agreed. That was not accepted. The fact the Minister, Deputy McCreevy, kept a couple of billion under the table to spend quietly in December without telling us, before the NTMA could question the figures, causes concern. I accept these figures at face value as I cannot prove otherwise. That is what the Appropriation Bill is about, a system which has worked well over the years. The integrity of those behind the figures is not in question.

The Minister should be congratulated on the good financial returns for the year. We have had five successive years of growth, low inflation and increases in employment. The challenge is to ensure it continues as we join the euro, and that, as part of a stronger economic group, we will be able to ride the waves of various currency crises in the global economy.

The whole issue of equality before the law and might is right in terms of payment of tax has been exercising the minds of the public. Apparently, as my leader and colleague, Deputy John Bruton, said in the Dáil last night, if one is powerful enough in this country, ultimately one does not have to pay tax. That is the clear message of the decision of the tax appeal commissioner on Mr. Haughey's business. If you are powerful enough and have sufficient money to use the appeals system [1334] to the end, you will not have to pay tax. If you are in a position to receive money circuitously through an offshore company, you do not have to pay tax. The message which that sends out to the powerful and wealthy in this country on how to evade and avoid tax has huge implications for the social contract which underpins the governance of our country — the acceptance that we all pay an equitable share of taxes to run our country for the common good. Why should I pay tax on my PAYE salary from these Houses? No one saw anyone give it to me. Why should anyone pay tax if they have the resources to challenge the system right through the tax appeals commissioner, through the courts, to the top? If you can afford to challenge, you will probably get away with it.

As my colleague Deputy John Bruton, stated last night, the decision of the appeals commissioner is demonstrably wrong. It is not in line with the decisions taken in and on the record of this House in 1975 when the relevant legislation was being debated. This makes the lack of an explanation for the judgment on Mr. Haughey's business all the more unacceptable. It would appear to the most informed and fairest in our land that it goes completely contrary to the legislation in question.

Sections 2 and 35 of that Act indicate that whether a disposition is made directly or indirectly, either the receiver or the donor is liable for tax. Either Mr. Haughey or Mr. Dunne is liable for the capital taxes on the money in question. Apparently the tax appeals commissioner has decided this is not so and we are not entitled to an explanation. I do not accept that because it flies in the face of the legislation and the expressed opinion of the Minister for Finance at the time in response to questions in the House on that issue. My colleague, Deputy Enright, asked if the owner of a large estate who lives in Ireland gives a gift of shares in a foreign company or property or land in a country outside the State, would that be liable for tax because the recipient was domiciled in Ireland. The answer given by the Minister for Finance was a definite “yes”.

That was the clear understanding of the legislation. However, now the tax appeals commissioner has decided that does not apply in this case. We are entitled to an explanation because behind the specific judgment is a general application of the law which is extremely important for compliant taxpayers to understand. Without a clear understanding of why Mr. Haughey is not required to pay tax on the gifts of money he has received, and admitted to receiving, there is a recipe for anarchy. I expect the Minister to be able to clarify that this morning. I understand he would have expected questions on this matter to be raised here this morning.

We do not want to meddle in an individual's tax affairs, but the business of the individual in question has made front page headlines for some time now. The importance of the general application behind the judgment indicates to me that [1335] we are entitled to know the basis on which the judgment was made.

I ask the Minister for an answer to a specific question on this issue when he is replying. Was there a written judgment on this case before the tax appeals commissioner? I have reason to believe we are dealing with stuff on the back of the envelopes. If there is a written judgment, can it be made public? Will the Minister pursue this matter to ensure the fears and concerns of compliant taxpayers — that is those who have accepted the implied social contract that we all contribute fairly to the running of this country — on this decision and its impact can be allayed?

I will not go into the business of a close relative — a brother-in-law — being made a tax appeals commissioner, but that man was put in an invidious position when asked to singlehandedly decide on an appeal by a former Fianna Fáil Taoiseach given he is a brother-in-law of the present Fianna Fáil Taoiseach. He should not have been put in that position. It was unfair to do so.

Mr. Finneran: Is the Senator questioning his integrity?

Mrs. A. Doyle: No more than the Senator did on the Order of Business, quite disgracefully might I say, but that is for another day. I would like the Minister to explain why both tax appeals commissioners did not sit in judgment on this important case, as they are entitled to do for important cases. That might help us understand the events of recent days. To be fair to the tax appeals commissioner, the two commissioners should have sat in judgment. The obvious conflict of interests, perceived or real, could have been removed if that had been done.

Could the Minister comment on how the planning for Y2K in his Department is going? I commend the special interest group and its work on Y2K. The objective of the group was to ensure all Civil Service infrastructure and systems are Year 2000 compliant by January 1999; that is two weeks away. Are all Civil Service infrastructure and systems Y2K compliant as we face into January 1999? Could the Minister please elaborate on the different areas such as health, energy, water and services? I do not have time to list them all.

I raised an area of major concern last week when debating the British nuclear fuel industry. I am extremely concerned about Y2K compliance and the British nuclear industry. We all know about the cavalier treatment by the UK authorities of our concerns about their nuclear installations on their least populated west coast in close proximity to our most populated east coast. I was alarmed to read in the Sunday newspapers a week or two ago that the World Health Organisation views with alarm the problem of Y2K computer failure and the nuclear industry. It has issued instructions to all governments, including the Irish Government, of the need to stockpile potassium iodide tablets for children for use in the [1336] event of a computer malfunction in Sellafield or any nuclear installation as we approach the year 2000. Do we have a system or have we put in place a systematic process for examining the implications of this matter? Who is representing our concerns in Ireland? Who is in consultation with the British authorities in relation to their Y2K preparedness and their nuclear industry?

The east coast of Ireland is downwind of 12 nuclear installations on the British west coast. As a sovereign independent country, we are entitled to know exactly the preparedness of BNFL and the UK authorities in relation to possible Y2K computer failure and the serious implications for this country. We do not need or want to be alarmist. However, I would like specific assurances in this House today, or as soon as possible from the Government, that it has overseen the Y2K preparedness of the British nuclear industry. Without those assurances, there are serious concerns in this country about the threat of major failure of any nuclear installation with the Y2K problem.

I need say no more. If the WHO sees fit to instruct our Government to stockpile potassium iodide for our children in the event of a major catastrophe because of Y2K failure, we are entitled to ask these questions and the people of Ireland are entitled to the answers from this Government regarding what is being done to ensure we will not face such a major disaster.

Mr. Finneran: I wish to share my time with Senator Maurice Hayes.

An Cathaoirleach: Is that agreed? Agreed.

Mr. Finneran: Facing into the Christmas period we can rejoice that the financial position of this country is the best in the history of the State. I compliment everybody involved, including successive Governments and the Minister representing the Department of Finance, on the appropriate way the country's finances have been handled over the past two years. In 1987, Mr. Ray MacSharry as Minister for Finance, took on the responsibility — with the advice of the Department of Finance — of getting everything in order for the year 2000. We are joining the new currency as equal partners with 11 others. I am certain that if the decisions taken in 1987 and since were not taken we would not be in that position.

This Bill gives statutory effect to the spending of £13.5 billion for the year. The Department of Finance's work in handling the public finances for the last few years, and the past 12 months in particular, is a cause of joy and appreciation. We are in a stronger position now than ever before in the history of the State. There is falling unemployment and rising employment. The GNP has increased by 8.5 per cent. It is the healthiest situation we could hope for, and it is our actual position. We are the envy of our EU colleagues, but our success may punish us in our Agenda 2000 negotiations. The European Commission and our European partners may be less generous in allocating [1337] the next round of Structural and Cohesion Funds.

The country has come a long way under successive Governments and Ministers for Finance. While there is a dispute between the National Treasury Management Agency and the Department of Finance, it is a healthy debate. I welcome the fact that Dr. Somers has spoken out. That is in everyone's interests. The expertise in that agency could be used in other areas that the Department of Finance deals with. It is hard for any Department to hand over control of anything, and the Department of Finance has held control of every Department over the decades. Only in recent times have Secretaries General of other Departments had a say. Someone recently said that years ago biros could not be bought for a Department without the clearance of the Department of Finance. Matters are not that extreme today, but the Department of Finance still has a lot of control. If Departments are to move forward a certain amount of expenditure should be available. The controls should not be as tight once the expenditure is agreed.

Mrs. A. Doyle: It has changed.

Mr. Finneran: We know that there is great expertise in the National Treasury Management Agency, as shown by what has happened to the national debt in recent years. That expertise should be used in other areas. Dr. Somers, the head of that agency, told the Joint Committee on Finance and the Public Service that if the privatisation of Telecom was given to that agency it could do the job. He felt that the expertise was there to do it.

Mr. O'Toole: There are two chances of the Department of Finance giving that to them — very slim and none.

An Cathaoirleach: Senator O'Toole will have a chance to speak later.

Mr. Finneran: There may be other opportunities to use that expertise. The current controversy has helped by opening our minds to debate on the matter. The Minister for Finance may decide there are further opportunities for this agency, and, if it is in the national interest, I am sure the Department of Finance would co-operate. We would not want the dispute to lead to the shutters being pulled down.

I am sincere about the points I have raised, particularly on the Order of Business.

Mrs. A. Doyle: It was not the time or the place.

The man is not cold.

Mr. Finneran: Is there not a time or a place to have it discussed at all?

Mrs. A. Doyle: That is a matter for the Chair, but I agree with the Senator on that.

[1338] An Leas-Chathaoirleach: Senator Finneran, without interruption.

Mrs. A. Doyle: Senator Finneran raised it.

Mr. Finneran: The budget as we once knew used to impose price increases of 2p on cigarettes, 3p on drink and so on, but the budget today is more to do with organising the finances of the country and managing development and control. Tax reform, which has been the hallmark of this Government, is very welcome. Last year's budget lowered the tax rates by several percentage points, and this budget removed 80,000 from the tax net altogether. That is a very important step in getting across to people that there is a plus if they go to work. There are still 200,000 people out of work, yet we are told that employers must seek workers from outside the country.

I was in a hotel in Roscommon recently and the first three people I met from reception to the bar were from Dublin, Wicklow and Australia. I asked the proprietor if that was an unusual situation, and he indicated that it was no longer as easy to get local people. This is a very healthy sign, yet there are still 200,000 people unemployed. This year the Government should address that. There may be people getting unemployment assistance who fear leaving that system. They need safeguards, advice and training. I compliment the Minister, the Department and all successive Governments who have contributed to our financial position. We are joining a new currency on 1 January with 11 other nations. We will be part of a currency which will I hope compete favourably with the other two major currencies in the world — the dollar and the yen. This is a major step forward for us as a nation. It is a great time to be in politics and a great time to be young. When we join the new currency on 1 January, I hope our horizon will be expanded further.

Dr. M. Hayes: I am grateful to Senator Finneran for sharing his time. I reciprocate the Minister's Christmas wishes. I congratulate him and the Government on the state of the national finances. I hope we do not let it go to our heads and that we maintain the discipline, particularly on public expenditure, which will be needed in what could well be a bleak world economic climate in the coming year.

As regards appropriations, I refer to the work of the Department of Foreign Affairs in the past year which should not go unnoticed and unrecognised by this House, particularly the negotiations which brought about the British-Irish Agreement. The Taoiseach, the Ministers in the Department and a dedicated, skilled and able group of officials played an enormous part in that.

I am particularly anxious to speak on this matter today as we have reached an important milestone in the process. At 4 o'clock this morning it was announced that the parties had agreed to the number of positions in the executive and the arrangements for the North-South bodies. This is a huge achievement and a major breakthrough. I [1339] hope it is reciprocated by breakthroughs in other areas. Some measure of decommissioning or disarmament would advance the process. It is not a matter of pre-conditions or stalling. It is a matter of political pragmatism. The wider community, particularly Unionists, need to be secure in the knowledge that those with whom they are dealing are for real. I appeal to the republican movement to make some symbolic gesture in that direction.

This position would not have been reached without the extremely hard work of officials in the Department of Foreign Affairs. We express our gratitude to them and our congratulations to the leaders of all the parties in Northern Ireland who slowly and painfully, but nevertheless, triumphantly — on the eve of Christmas, a wonderfully symbolic time to do so — arrived at an accommodation which I hope is the beginning of better times for Northern Ireland and a better and happier period for us all.

Mr. O'Toole: There is consensus that the nation's finances are in their healthiest state ever. It is a tribute to all parties and groups involved. When the history of the past 12 years comes to be written, it will show that no group has been found wanting in its approach to setting the nation's finances on the straight and narrow.

However, it is time to look at our structures and the way we work. I am concerned about the comments of Dr. Somers, the head of the NTMA. He has raised issues about which all of us should be concerned, about the relationship between the Department of Finance and various other bodies. These comments are long overdue. They reflect views many of us have held for years.

Unfortunately I was not at the recent joint committee meeting. However, Dr. Somers said he is concerned the Department of Finance may in some way be acting ultra vires, beyond its remit, or perhaps even unconstitutionally, in its relationship with and control and constraint of other Departments. I raised this issue here on many occasions. I have seen Governments agree on spending money in a particular way. This is then approved by a Department which then has to argue with the Department of Finance to implement spending which has already been approved by Government. This happens time and again.

I do not expect the Minister to give me a detailed legal answer. However, I would like to hear his response to this issue. It needs to be clarified in the context of the Constitution, the Ministers and Secretaries Act and proper budgetary and accountability practice, whether the interference of the Department of Finance in the operation of other arms of the State is proper and correct.

The head of the NTMA raised three other issues in recent weeks — one of which is the state of the revenue. I heard the various answers and explanations which have been given and I accept there are two sides to the argument. However, nonetheless, we must have trust and confidence [1340] in those who manage our revenue. Who is right? Why are the figures incorrect? Why is there confusion among those dealing with our money? There should not be. If my bank manager and assistant bank manager argued about how much was in my account, I would not be too happy about staying with that bank. This is what it amounts to in simple terms, for ordinary people.

We need to compile statistics more efficiently. We are suffering from the Department of Finance's attraction to the opaque elements of accounting. It feels it is not good for the country to know that at times we are better off than we think or that it is not good for pressure groups to know there is more than they think in the till. The Department is creating an element of confusion for which we are now paying the price. We must agree on the method and dates of measurement so this confusion will not arise again.

There is also the question of the times for brokering Government bonds and whether they are integrated into the Central Bank. I happen to be one of the defenders of the Central Bank and I have great admiration for the Governor, Maurice O'Connell, who is doing an excellent job. However, the Central Bank needs to extend its empire. Much of its function will be overtaken after 1 January and developmentally in the next few years, with the European Central Bank taking more control over areas which were traditionally the responsibility of the Central Bank. There are other areas in which it can have a clear role — for example, monitoring the checks and balances, which it is good at. It should be given more responsibility in this area which should be widened legislatively.

Dr. Somers said the Central Bank is not cooperating in extending the hours for trading of Government bonds. The Central Bank is saying the opposite. This should be straightened out. We will be in some trouble after 1 January when European traders will be able to buy bonds which are backed by what they may consider a more stable economic situation in Germany. I do not know why they might think this, but that is their sentiment and we know that sentiment drives prices up and down. I am worried the Irish bond market might dry up through lack of interest and time in the new year. It should be deregulated and opened up as quickly as possible, something the NTMA has been saying for a number of years. The need to open the market has been raised time and again.

Another issue is the fact that the NTMA should be consulted on the disposal of State assets. I recall the discussion when the legislation was going through the House — Deputy Albert Reynolds was Minister for Finance. At a time when privatisation, nationalisation and competition were being discussed, it was felt the NTMA could have a co-ordinating or full role in this issue. At that time the legislation allowed for consultation to take place. However, it did not take place in the case of Telecom Éireann or other [1341] sales. The position of the ICC and the ACC is now being examined. The law does not require consultation, but it was always intended that consultation would take place. The response of the Department of Finance during the week was that it did not, and was not required to, consult with the NTMA. It was a bald statement and a classic example of why people do not trust the Department of Finance. The Department does not care once the law is on its side. It gives the fingers to the rest of us in saying the law did not require it to undertake consultation, that therefore it did not do so and that we should be off about our own business. This response is objectionable and contemptuous. If the Department said it gave the matter some consideration and examined what was being done and the experience of NTMA, but decided the NTMA's experience would not be useful on this occasion, we would get the impression it had given consideration to the need for consultation. However, this was not done and is never done, something which constantly bothers us.

There is much in the Bill about which I could speak, but this is not possible in the time allotted. I notice an additional amount of money is provided under appropriations for the Department of Education and Science for a number of things, including technical difficulties arising from changing to fortnightly pay for post-primary teachers. This has to do with the pay date falling in one fiscal year rather than another.

I wish to raise a related matter which I am sure will find some sympathy with the Minister. Retired public servants also require fortnightly pay, the majority of whom are not paid in this manner. In terms of the way in which they organise their lives, it is much more difficult for pensioners to organise themselves on a monthly than a two-weekly basis. I think the Minister was incorrect in his speech and post-primary teachers are paid every two weeks rather than fortnightly. It matters very little: the difference is between being paid 26 or 24 times per year. The extension of two-weekly payments to pensioners would be welcome and is often raised with Members on both sides of the House by public service pensioners. I am not whinging when I ask for this matter to be examined because it was difficult to introduce such a system up to now as not all sectors from which pensioners retired were paid in this manner. However, post-primary teachers are the last group to come into the two-weekly payment system, which means the system can be extended to pensioners with no additional infrastructural costs in terms of computerisation. As I understand it, it is just a matter of writing a new programme.

I wish to raise a related matter. The Minister correctly said that unemployment is at an historically low level of 7 per cent, the lowest for two decades and one of the lowest rates in Europe. It is a tribute to everybody that this is so. However, I wish to strike a note of caution in terms of where we are going. There are two huge problems, one of which is a lack of skilled people in [1342] the workforce. In Senator Costello's constituency there is significant building being undertaken at the IFSC. Almost all the workers there are from Northern Ireland. There is nothing wrong with this — they are not moonlighters or breaking the law, but are legitimately working there and are properly registered. However, the reason they are there is that we have run short of skilled people, particularly in the trades sector. The reason for this is as follows. In 1987-8, when there were high levels of unemployment, new forms of apprenticeships and training were set up. FÁS was very progressive in this regard. In order to get industry interested FÁS said it would take responsibility for the first year of payment of a person training as a hairdresser, carpenter, etc. This was a very good idea which allowed employers take on an apprentice and have the first year paid for by FÁS. At the same time the number of years for apprenticeships was reduced which allowed people to be trained in three or four years. However, at the end of one year many employers to their shame got rid of the person they took on for one year and who was paid for by FÁS and employed another person for one year. Because of this people never got a second year. This happened throughout the State and we are now paying the price in terms of people who do not have even basic elements of experience. I was recently speaking to an industrialist and I asked him the skills which were in short supply in his sector. He named ones which are quite predictable, but finished by adding forklift drivers. His business could not recruit them. We are not just talking about high skilled technological jobs, but skills at every level. Unthinkingly we say, as I did, that a forklift driver could be trained in a couple of days. However, this is not possible as skills need to be developed and it takes time. It is also necessary for someone to ask people if they want to be trained as forklift drivers and to get a trainer to spend a month showing people the ins and outs of it. There are extraordinary shortages in other areas.

People have spoken about the need for professional qualifications and training — we have discussed this matter many times in the House. We have not spent as much time discussing the trade and craft sectors, and even the semi-skilled sector, which are hugely important. There are now shortages in the semi-skilled area.

Unemployment is down to 7 per cent. There are people with serious difficulties in terms of basic education. I would like the State to consider a major project on literacy. I speak as general secretary of the INTO which must take responsibility for our end. We should be doing something about people who are leaving school with a reading or numeracy problem. A major literacy project should begin by establishing the levels of literacy in society and then establishing the levels for those leaving primary school and the long term unemployed. We would then see exactly the extent of the problem.

Up to half of the 7 per cent who are unemployed could have serious literacy or numeracy [1343] problems. These people are becoming almost unemployable. Fifty years ago they could have found menial, repetitive jobs which we have now exported to the Far East and which no longer exist here. Part of our moving forward in terms of developing the economy should include investment in reskilling, up-skilling and providing people with basic skills. Part of the movement forward to develop the economy should be through investment in re-training, improving existing skills and providing basic skills. I will finish with a word of thanks to the Department of Finance because I have been very critical in what I said. It tends on balance, and more than any other group in our society, to get the figures right.

Mr. Costello: I welcome the Minister of State and the Bill. The figures, as outlined by him and as seen in the budget, are extremely healthy. It is great to be able to come into the House at the end of the year and congratulate him on the excellent Exchequer returns and pay tribute to previous Ministers who prudently organised and managed the finances over the years.

Senator O'Toole's last point on adult education and literacy is very valid. According to figures provided by the Minister of State at the Department of Education and Science, Deputy O'Dea, at least 648,000 people between the ages of 25 and 65 years are functionally illiterate. That is a huge number of people, some of whom are holding down jobs, although they are probably not very skilled jobs. Many would not be able to go into the employment market because they are simply incapable of working in any type of skilled area.

Yesterday I looked at some figures from the City of Dublin Vocational Education Committee showing a considerable increase in the number on literacy courses throughout the city. The City of Dublin VEC is the largest provider of those courses which are operated on shoestring. The budget was, however, doubled this year from £2 million to £4 million but it indicates the peanuts being spent on this important area of education.

The figures showed that a hugely disproportionate number of women attend literacy classes. The number is growing rapidly with the extra resources and courses provided and centres obtained. There is huge potential in terms of this untapped workforce. Many of the women attending those literacy classes do not necessarily go on to employment. Although they would be able to work in the morning when their children are at school, difficulties would arise in the afternoon. We need to achieve greater flexibility and target people who are not in the workforce at present. We should do so now because the numbers are small enough. We need to identify the needs in terms of skills, literacy and other hurdles. The absence of a créche system, certainly in an area like Dublin, is scandalous. Many people would be able to return to education and work if such facilities were available. Much work [1344] needs to be done to open up that potential workforce.

I refer to the Supplementary Estimate of £346 million. There is a substantial overrun of £81 million in the Department of Justice, Equality and Law Reform, largely to cover the Garda pay agreement and an additional overtime for both gardaí and prison officers. Is the Minister aware of the report published in The Irish Times during the week which was obtained under the Freedom of Information Act? The report was compiled by prison governors and showed that prison staff who were out sick were still in receipt of overtime. The mind boggles at that.

Mr. Finneran: It is obviously a misprint.

Mr. Costello: Obviously, they are well in control of their work if they can get overtime while they are at home. That is an issue at which we need to look. There is a massive overtime bill and I wonder about the returns in that area.

My second question, which was blithely passed over by Senator O'Toole, relates to education. Being a secondary school teacher, I should not really question it. A figure of £20 million has arisen because of technical difficulties in implementing fortnightly pay for second level teachers. Since there are only 20,000 second level teachers, the cost of those technical difficulties works out at £1,000 per teacher. How in God's name was that figure arrived at? Senator O'Toole said it had something to do with the different years merging or the transfer from one year to another, but he was not very clear in his explanation. Perhaps the Minister of State will give us details on how £20 million was spent on technical difficulties arising from the implementation of fortnightly pay. It involves only a second cheque and envelope each month.

Mr. Cullen: The Senator is doing very well.

Mr. Finneran: The Senator has Merrion Street on their toes with those two questions.

Mr. Costello: Unless an extra cheque was put in the envelope for Christmas, this figure is incomprehensible and I will be delighted to hear the explanation for it. Pensioners should also have the option of being paid every two weeks. I see no reason those who worked in the public service should be paid monthly. Virtually all pensioners would prefer to be paid fortnightly.

The good figures which the Minister of State reported are due in large measure to the partnership between the various social partners in the past decade. One can see the strength and stability of the economy is within those parameters and it has became much more cohesive between the years 1989 to 1998. Great work has been done in that respect.

Much has been delivered by each of the partners and we will shortly enter into negotiations on the successor to Partnership 2000. There are a few issues which the Minister for Finance, Deputy [1345] McCreevy, did not take on board in the budget. One issue is child care and this touches on what I said about adult education and parents being able to come back in the workforce or the education system. The lack of child care is a major impediment to many people becoming involved in a meaningful way in the workforce. It must be addressed on a national basis, both for those who are unemployed and taxpayers. Créche facilities are most important and, if provided, the parent who would not normally go out to work would be free to do so.

The question of pre-school education must also be addressed. That is another inhibitor in terms of the parent and the educational potential of the child being realised. We have no national pre-school education system. What happens to children between the ages of two and five years? A child must start to attend primary school between the ages of four and six years because that is the interpretation of the constitutional requirement. What happens to the child before that, particularly in disadvantaged areas where there are no facilities for pre-school education or resources? Such children lose out. That is the area which most of all should be targeted. When they enter formal education, they are behind their peers at primary level, gradually lose ground and drop out. A huge proportion do not go on to second level and almost none to third level. That area has not been addressed. Despite the funding allocated to it by the Minister for Education and Science, there has been no structural change in the key areas which are proving deficient at present. I would like to see those addressed in both budgetary and partnership terms.

A great deal of work needs to be done with the long-term unemployed. If the introduction of the minimum wage could be brought forward, it would be very welcome because it would be a further encouragement to people to go out and work. One encouragement is the increase in the threshold of tax exemption, and it is welcome that 80,000 more people will be exempted from tax. The introduction of the minimum wage would be a great boost towards ensuring people receive a decent amount in their wage packets. It is well known that absolutely appalling wages are being paid at present in the retail and services sector. The norm is £2, £3 or £4 an hour; £4.40, £4.60 or the £5 an hour which the trade union movement wanted is the exception in most of the service area. Huge profits are being made because it is a booming and expanding area. It is also the area from which the Revenue Commissioners have the most problems in obtaining tax. The sector is exploiting to a considerable degree semi-skilled or unskilled employees on the one hand and is trying to withhold as much tax as possible from the Exchequer on the other. Some work can be done on that.

Over 50 per cent of the unemployed are long-term unemployed and the percentage is growing rapidly because the economy and the workforce is expanding. The former Taoiseach, Jack Lynch, said in 1977 that any Taoiseach in power when [1346] the number of unemployed rose above 100,000 should resign and, when it exceeded that figure in 1979, he was forced to resign. At the time, only 8 per cent of the unemployed were long-term whereas it is now 53 to 54 per cent. There is a stubborn level of long-term unemployed people whose needs are not being addressed to allow them re-enter the workforce.

In an interview in today's edition of The Irish Times, John Kenneth Galbraith states that recession is about to come upon us again because the same developments are occurring now which occurred before the 1929 crash. If that is the case and we are about to experience a serious recession as the global economy contracts — it is contracting in some areas at present but is doing so erratically by expanding and then contracting — it will have major implications for us because over 50 per cent of exporters in Ireland are multinationals. We are especially exposed to the winds of change on the global market and to any worldwide recession. A full discussion is needed to debate the steps being taken to develop indigenous exporters in the areas currently served by multinational companies which have been invited and retained here through attractive tax incentives.

There are many issues on which I am sure the Leas-Chathaoirleach would love to hear me expound, but I will have to deprive him of the pleasure. I am delighted to see the fifth successive year of record growth and strong Exchequer figures. I hope the missing £1 billion is found before Christmas Day so that we can have a decent Christmas box.

Minister of State at the Department of Finance (Mr. Cullen): I enjoyed the debate. The contributions of Senators were important because their analysis was interesting and apt in the case of many issues of concern to us all. Senators touched on a number of key issues with which the Government is dealing. It is a rolling process in many cases and they cannot be resolved overnight. The Government is determined that, after five years in office, we will be in a radically different position to that from which we started.

Senators raised a number of issues to which I will refer. Senator Costello's concluding point was raised by every Senator. I do not wish to rehash the issue between the Minister and Dr. Somers because there was a Joint Oireachtas Committee meeting on it during the week, except to say that the position is clear and there is no dispute. Dr. Somers was reported last week as saying that the national debt would be £28.3 billion at the end of the year, which seemed to be lower than the Department's end of year forecast of approximately £29.7 billion. Dr. Somers's figure is the level of the national debt on 7 December 1998, not an end of year forecast. At the meeting on Wednesday, he said his estimate of the debt at the end of the year would be “about £29.8 billion”. When asked if this was almost the same as the Department of Finance's estimate, Dr. Somers said, “I have no dispute [1347] with the Department's estimate”. That issue has been resolved and I am sorry to disappoint people who thought billions were hidden away.

A range of issues was raised by Senator Finneran and others on departmental and budgetary responsibility. Under the Ministers and Secretaries Act, 1924, the Minister for Finance is explicitly responsible to the Oireachtas for all public revenue and expenditure. To fulfil these general responsibilities, the Minister sanctions expenditure by other Ministers and Departments. As the Minister has often said, taxpayers would be badly served if the Department of Finance was to adopt a laissez-faire approach to the expenditure of their money. It would be unthinkable.

Senator O'Toole mentioned the comments of Dr. Somers that there was unnecessary interference by the Department of Finance in the past. This does not take account of the substantial developments and changes which have taken place in the management of the public finances. Senator Avril Doyle was in the Department when much of this began and matters have progressed from the approach described by Dr. Somers. The introduction of administrative budgets in the early 1990s has made a huge difference to the manner in which Departments manage their affairs. Under these arrangements, Departments are responsible for their pay costs and other administrative expenditures. In addition, the introduction of multi-annual budgeting will give Departments greater control over their programme expenditure. With this new approach, the Government will allocate resources to Departments over the medium term. In his 1999 Budget Statement, the Minister for Finance announced significant further steps in the introduction of the new multi-annual system. All Members wanted that system to be put in place.

A number of Senators referred to Y2K compliance which is an important issue. Following a Government decision in 1997, every Department is responsible for ensuring that they and any agencies under their control are Y2K compliant. Ministers must be satisfied that programmes are in place to ensure that this is the case. A working group is currently investigating this issue and the Minister for Finance allocated an additional £40 million in 1999 to ensure that problems relating to this issue are resolved.

An analysis was carried out in respect of Y2K compliance throughout Europe — I am not sure who was responsible for it — and it was found that Ireland and Holland rated highest in this area.

Mrs. A. Doyle: What is the position with the UK's nuclear industry?

Mr. Cullen: The Senator will be aware that I do not have in my possession specific information on the UK's nuclear industry. Nevertheless, Members of both Houses are conscious of people's concern about that matter. Successive Governments have carefully monitored activities [1348] in that industry and it is vital that those involved in the UK's nuclear fuel industry ensure that it is Y2K compliant.

A number of Senators referred to the high numbers of people on long-term unemployment assistance. In the past two budgets the Government invested enormous resources in the Departments of Education and Science, Social, Community and Family Affairs and Health and Children to ensure that unemployed people can move more easily into employment via training programmes, etc. This year's budget was specifically aimed at maximising the amount of take home pay available to those working in the less well paid areas of the economy. Unemployed people can now consider taking up employment because the first £100 of their earnings will not be liable to tax. That is a significant move forward and it was welcomed by the majority of Members and parties in both Houses. The move to introduce a tax credits system will ensure that the tax burden is more evenly spread and it will be of enormous advantage to those on low and medium incomes. These developments must be seen as providing significant encouragement to unemployed people and those involved in the black economy to enter legitimate employment. The radical and significant initiatives introduced in the budget have been widely welcomed.

Senator O'Toole referred to forklift drivers as an example of an occupation where there is a shortage of skilled operators. I recently discovered that driving a forklift today is not as easy as it was many years ago. One would need a degree in computer technology to operate the systems on forklift trucks. What was a highly labour intensive occupation is now mainly skills oriented. I had believed it would be relatively simple to select people to drive forklifts but I discovered that anyone taking up a career in this area, which involves many different aspects, would have to be reasonably computer literate.

The child care issue was raised by Members. As the Minister and myself stated in the Lower House, this is an important and fundamental issue in terms of social inclusion, expanding the workforce and allowing more women to enter the workforce. Child care provision, which is central to the Government's planning, is a complex and sensitive issue and it involves a wide range of bodies and groups. Senators will be aware that there has been a great deal of discussion between the Government and the various groups involved in the area. The Government is anxious to ensure that this area will be dealt with in the future.

The budget contained two specific measures in respect of child care, namely, that certain créche facilities provided by employers will not be subject to a charge to income tax in the hands of employees as a benefit-in-kind and that capital allowances will be made available to allow employers to allow for the write-off of capital expenditure incurred in connection with the provision of general child care facilities. I admit these are only the first steps, but they are important ones. We must move the issue of child care into [1349] a central position and begin to debate relating to pre-school facilities, créches, etc., and ensure fair access to these for everyone. Access to child care facilities should not be based on one's income; everyone should be given access to those facilities. The Government is committed to taking action on child care provision and we will continue to monitor progress in this area.

I agree that a number of issues have arisen in respect of the world economy and the threat of recession. I specifically referred to that matter in my initial contribution and the Minister for Finance also referred to it at other fora. Ireland has one of the most open economies in the world and it is wrong to suggest we are not aware of events in the other two major international economies, namely, the United States and Asia. We take great interest in events in those economies and our budgetary strategy and fiscal policy take account of the threat of an economic downturn, a recession or a slowdown in the growth our economy has enjoyed in recent years. The Minister for Finance was wise and prudent in ensuring that such matters were taken into account in this strategy. No one knows what will happen in the future but we are well positioned to deal with any shocks which may arise in this area.

The final issue raised by Senator Avril Doyle involved the matters which have arisen in the past week. I do not want to retread the ground covered by the Senator. However, as far as the Government is concerned, every citizen, without fear or favour, is equal under the law.

Mrs. A. Doyle: Not if they have enough money to allow them to circumvent it.

Mr. Cullen: Since the Government took office it has agreed to any reasonable requests made by Members in both Houses or by outside agencies to strengthen legislation to ensure full tax compliance and to allow the Revenue Commissioners and others to tackle certain issues. There is no question that the Government is not committed to ensuring that all citizens comply with the law by paying their tax.

Mrs. A. Doyle: Will the Minister of State explain the judgment of the appeals commissioner on that basis?

Mr. Cullen: I am not in a position to comment specifically on a particular case. Neither I nor the Minister for Finance are aware of the specific issues involved here. As has been stated elsewhere, however, the judgment is only the first step on what will clearly be a detailed process involving the Revenue Commissioners, whose stated policy is to pursue, to the furthest extent possible under the law, any individual or company with a tax liability to ensure that they fully discharge that liability. I have no doubt that is the position and intent of the Revenue Commissioners. It is extremely wrong of any Member to use either House to impugn the integrity of any individual who is not in a position to defend [1350] himself in these Houses. There has been much of this during the week and it is extremely regrettable that such attempts were made, particularly as there is an independent commentary by that person's peers to affirm the high integrity, honesty and professional skills he has brought to the position. It is also worth pointing out that the appeals commissioners are independent and have independent discharge of their functions. I have no doubt people charged with those responsibilities act in the finest manner and have always demonstrated this. It is important that I repeat this today.

Mrs. A. Doyle: Justice must be done and be seen to be done — to Mr. Kelly, Mr. Haughey and the compliant taxpayer.

Mr. Cullen: I agree.

An Cathaoirleach: The Minister should be allowed to reply without interruption.

Mrs. Cullen: Justice must be done and that is the business of those charged with those responsibilities. As the Taoiseach and the Minister for Finance stated yesterday in the Dáil, if there are reasonable further requests from the Revenue Commissioners in terms of legislation required for them to carry out their functions, they will be examined immediately by the Government. The legislation will not cause a blockage, it will provide all the tools necessary under law to ensure the matters are dealt with. The Senator and I, as taxpayers and as guardians of the citizens, are charged with those responsibilities as legislators. Our Government is committed to them also and has amply demonstrated that over the past 18 months.

I thank Senators for their contributions to an interesting debate and I commend the Bill.

Question put and agreed to.