Committee on Finance. - Financial Resolution No. 3: General (Resumed).

Thursday, 20 April 1972

Dáil Eireann Debate
Vol. 260 No. 5

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Debate resumed on the following motion:

That it is expedient to amend the law relating to customs and inland [775] revenue (including excise) and to make further provision in connection with finance.

Mr. Ryan: Information on Richie Ryan  Zoom on Richie Ryan  In very few budget debates do we omit to refer to the relatively higher level of expenditure in Northern Ireland on social welfare compared with the Republic and this year's debate is no exception. In the last three to four years this matter has become one of immense significance in relation to our belief that all Irishmen and women would be happier in the long run if this country was to be united. There are, however, a number of misconceptions about the position and I think it would be very proper that at least some of them should be removed.

The gap in nominal social welfare payments has been closing and it is very proper that this should be recognised. Nevertheless, the overall expenditure on what might be called welfare matters, including social welfare relief, education, health and housing is double per head of the population in the North compared with what it is in the South. This is attributable to a number of causes and they should not always be regarded as to the discredit of this Republic. For instance, where you have, as you have in the North of Ireland, some areas of male unemployment reaching as high as 45 per cent of the local males you must inevitably have a massive contribution in respect of unemployment benefit. This occurs, of course, in those areas of the North which have been deliberately discriminated against on religious and political grounds.

I am not for one moment suggesting that we do not need to have a massive improvement in our whole welfare code, that we do not need to have here a more just distribution of wealth. I have always argued for that. The Fine Gael Party is entirely committed to it and we would wish to be in Government for the purpose of bringing about this much needed social reform. However, we will only be misleading our people in all parts of this island if we do not properly identify at least some of the reasons why we have [776] what seems to be such a much greater expenditure on social matters in the North of Ireland. It is not entirely due to the perhaps relatively greater difficulty which we may have as a society to fund social benefits compared with the United Kingdom of Great Britain and Ireland which has behind it all the massive wealth of her old Empire, much of it perhaps improperly accumulated, and also has the massive technological and productive capacity particularly as we know concentrated in the south and south east of England itself. It is nevertheless there as a reality which we must face. There must, therefore, be a fundamental shift in our social and economic thinking. There is very little evidence of that in this year's budget.

I do not join with some people in quoting a statistic which has been misused recently and that is the statistic that has been produced by Dr. Lyons of Trinity College where he has suggested that 5 per cent of the people of this State own 71 per cent of the wealth. Wealth ownership is a rather negative way of assessing the welfare of a community. What does matter is the relative expenditure of different sections of the community. Ultimately it does not matter who owns wealth, what does matter is who distributes it, how is it distributed and whether everybody has a fair amount of wealth in order to obtain for himself and his dependents a decent living. When people in this country laud the socialist governments of Scandinavia they seem to omit, perhaps through ignorance but I would on some occasions believe through deliberate intention to deceive, an essential truth of the Scandinavian countries and that is that they value this right to wealth and they value the incentive which mankind, from earliest days, because of his nature, gets from the right to possess wealth. What they do insist upon and what our society must insist upon and what our society is failing to do and what our political institutions are so far failing to do is to discharge the obligation of controlling wealth in such a way that nobody can acquire an improper amount of it and by so doing deprive others of sufficient wealth to give them an adequate living. [777] By an adequate living I mean a right to all that this world has to offer in what is worthwhile and that includes not merely the essentials of food, shelter and clothing but also a right to an education and to equality of opportunity and a decent standard of living.

One very significant statement has been made by the British Prime Minister since the political initiatives were introduced last month which I think must be taken up by our Government, immediately challenged not merely on the plane of Anglo-Irish relations but, if necessary, before some international tribunal. Mr. Heath has gone on record in a statement which he made to some group of Young Conservatives as saying that he did not think it likely in the foreseeable future that the North of Ireland would in a plebiscite unite with the South because, he said, the level of the financial contribution from Britain was such that the people of the North of Ireland would not give up the subvention which they were getting from Britain. I regard this as a statement, an unabashed confession, by the British Prime Minister that the North of Ireland is today being bought by the deliberate subvention which is being paid for by British taxpayers, although most of them are unaware of it.

So let us not have a feeling of inferiority when we come to compare the amount which the State is spending upon social matters in the North and in the South. What is being spent on social matters in the North is not coming from within the North, it is coming because Britain has wrongly orientated her social, economic and military thinking and because she continues to support what she knows is insupportable. The payment of this massive subsidy, now running economically and socially at a rate of £160 million a year, is a significant factor in maintaining the will of some people in the North to stay apart from the South.

This matter, which is costing Britain in military involvement and more, over £30 million a year, which is costing us in the repercussions from the travail there anything in the region of £40 [778] million to £50 million if you are to calculate not merely the loss of tourism but other disadvantages as well, is all caused by reason of this artificial subvention. One wonders whether or not it is ethical internationally for any entity to make such a financial contribution to another area, to maintain that area more in its grip than it would if it tried to enforce a military discipline upon it.

I do not think the British Government or the British people want, in fact, to impose a military discipline up on the North of Ireland. They do not want to retain it by force. They want, in fact, to get rid of it. It is high time they got their social and economic thinking correct. The way to do it is for our Government to make very effective representations direct to Britain and, we also believe, on a world plain, so that the world's conscience and Britain's conscience may be adequately disturbed in this matter so that the situation may be rectified.

Having said that, I also want to say that Ireland, and the North of Ireland in particular, will need that economic and social subvention for many years to come. So much harm has been done to the North of Ireland by these wrong policies that it will need the crutch to lean upon before it can walk again. What must be changed is the purpose for which the money is paid and it must be paid, not as Mr. Heath smugly boasted to the Young Conservatives recently, to keep people within the United Kingdom; it must be paid for the good of the people of the North of Ireland themselves and that can only be through a system of the government of Ireland by the Irish people which would give fair rights to all communities without discrimination and which would also ensure that the burden of supporting the North of Ireland at the level to which it has been accustomed would not fall on the South of Ireland which is blameless for the condition of affairs which exists there at present.

This is terribly relevant to our budgetary outlook because it is an essential part of the burden which we will have to undertake in order to bring happiness to the people of this [779] island in the years that are ahead. But, let Britain, that did so much harm, perhaps not internationally, contribute her share. There are a very large number of public representatives in Britain who acknowledge this and who would much prefer to see Britain subsidising a united Ireland to the tune of £150 million a year for a decade or longer rather than have the openended commitment to an impossible situation, which it has at the present time. At present, the subvention which it gives on social and economic grounds may get the people to vote against their own interests in a plebiscite in the North of Ireland. Let the money be more productively used and let us not feel in any way inferior by urging Britain to make this social and economic subvention to the North. It would save her immediately, I believe, if it had the consequences which I believe it would have, embarrassment and expense in relation to military involvement and it would bring about a lasting cure to the stresses and strains in the communities in this island and in these islands on the western fringe of Europe.

Briefly I should like to return to a few specific matters in this year's budget. The Minister has increased the death duties exemption which formerly applied to estates of £5,000 to estates of £7,500. This is totally inadequate. The level of £5,000 was fixed in 1962, ten years ago, and now the Minister makes an increase of only 50 per cent to bring it up to £7,500. In the intervening ten years the price of house property has increased by 125 to 130 per cent. That is house property. What has been the increase in the value of agricultural land? It has increased enormously and is continuing to increase in anticipation of the EEC and is likely to increase again within the EEC. In many cases a different assessment of values applies to agricultural land, if it is Land Registry land but speaking within the domain of my own constituency I know that the slight alteration which has been made in estates exempted from estate duty is totally inadequate to meet the increase in property values.

Some of the newspapers from time [780] to time publish what they call wills of persons and give the names and addresses of persons and set out the property they leave after them. I would urge quite sincerely that this practice cease. It is as unfair to give details in papers of the small estates left by some people as it would be to proceed to give details in newspapers of people's current incomes. It give a wrong sense of values to many people.

Many people, partly due to their family circumstances, sometimes due to their social background, do not acquire property during their lifetime. They do not save; they do not reinvest; but many of them spend as much, and indeed more than people who may acquire a home and thereby leave an estate which requires a grant of administration and processing through the Estate Duty Office.

In heaven's name, is a person today who dies leaving an estate of £10,000 a rich person? I think not. In most cases such an estate represents a house the market value of which may be £5,000 to £6,000 and that would not be a sumptuous house. It would represent, perhaps, an insurance policy of £2,000 or £2,500. It would represent furniture, a car and a few other bits and pieces. I have known of cases where people deemed others to be extremely wealthy and to be beyond need of assistance because they were seen to have their estates published in the newspapers. It is this kind of thing which leads to unnecessary discontent, to an unnecessary sense of deprivation by people who have not in fact saved.

A community is a healthier community if people are encouraged to save. I do not see any grounds for the lines of attack on private property which some people seem inclined to make in these modern days. Private property as such has no intrinsic value. There is no intrinsic right attaching to private property but there is an intrinsic right for an individual to save to keep his own property and if the person desires to keep it instead of spending it he is deserving of praise and not condemnation.

The attitude of the State, I am afraid, in recent times is such as to [781] suggest the giving in to the noisy minority, most of whom have, perhaps, spending power far beyond what they require and darn few of them are disposed to spend it on any dependents because they do not have them. As a society we need to encourage people to save, to invest, to acquire a reasonable amount of property and as a society we must do what we significantly fail to do and that is, ensure an adequate distribution of property, universal equality of opportunity and adequate control of wealth so that nobody suffers because of improper and undue and unnecessary acquisition of excessive wealth by any particular people.

I hope that if there be now a relaxation of the purse strings the Government will give priority to the building of schools. I know schools are badly needed throughout Ireland and I know that Deputies in the different areas will be able to make their local cases. I want to make mine about Dublin Central.

It is a constituency of which a large part is in the southern and south western suburbs. I had the privilege to represent this area for many years with Deputy Lemass, the Parliamentary Secretary, who knows the area intimately. I know that his old area of Dublin south west suffers from the kind of problems that are now afflicting all of the suburbs of Dublin, areas in which new housing is being built, in which there are large numbers of young people and in which the number of available schools is totally and sinfully inadequate.

The population of Dublin is increasing on a massive scale and it is unfortunate that you have a kind of what I would term fire brigade relief being offered as a solution to the need for additional educational facilities, the kind of assistance the Leader of the Opposition referred to earlier today. It is not sufficient to be putting up mobile classrooms, temporary structures, glorified caravans, and calling them schools. We seem to be believing that the provision of them for a decade or 20 years is socially and morally justifiable. What do we [782] do when we do that? We condemn at least one, if not two, generations of schoolchildren to be educated in buildings which would not have been acceptable 50 years ago, and we are also building up a massive need to replace these structures with potentially more expensive structures in a few decades.

We have an appalling accumulation of temporary schools in the Dublin area and throughout the country. If there is a desire now on the part of the State to release more money for capital works, then it should be done with speed and we should get many of the long-delayed schools under way. Even as the State has after years of delay given the green light and has promised capital in recent times, it has only done it in stages so that we often end up with the position that the estimated cost of the building multiplies by more than 70 or 80 per cent before a school is built. By this the State is multiplying the difficulties in the educational sphere and I would hope there would be a very rapid improvement. If our children are to be educated to the standards required and to which they are entitled and if the country is to have sufficient skills available to profit by the increased investment and expansion which will flow from the EEC, we will need to be a great deal more radical and courageous in our school-building programme.

Finally, I wish to say a few words on horticulture. I do not know why the Minister bothered to contribute a mere £100,000 to horticulture. Horticulture will suffer considerable competition in the EEC. It will suffer even greater difficulties if we stay outside the EEC and a once only grant of £100,000 to give benefits to some particular horticulturists is not the kind of assistance the industry needs. We have every reason to be proud that there are many people in the horticulture industry who are already competing in the EEC countries even with tariffs and barriers against them but there are also some who are suffering difficulties.

I have been at some loss to understand why the Minister for Finance has not made available to the horticulture industry remissions on oil and other [783] fuels which are made available in some of the EEC countries. There has been a suggestion in Government sources that international obligations and pending responsibilities in the EEC would not permit of such remissions and incentives being given, but the EEC countries are doing this. I know there has been a complaint about Holland in respect of assistance they are giving. We think the Government should be more courageous in this field. It is one which provides considerable employment, which is going through temporary difficulties, but unless the aid is given now it will be impossible to resurrect the industry or the victims in the industry when the opportunities of the EEC come their way. I would, therefore, urge the Minister to take another look at the matter and give more substantial, significant and long-term assistance to this important industry if he can.

Mr. Keating: Information on Justin Keating  Zoom on Justin Keating  I start by welcoming some of the provisions in this budget. I think it is fair, in welcoming these provisions, to criticise not the Government party or the Minister for Finance but the whole of what one might call the political establishment here because a number of the things which were given in the budget and which are extremely welcome are also things which are surely long overdue, matters of fundamental social justice, things which on the one hand while the Government should have been anxious to grant them, on the other hand, in respect of which the Opposition should have been vociferous in their demand. I think we are all fairly to be criticised because we have not done these things in the past.

For example, I think everyone welcomes the movement in the direction of tying all sorts of public service pensions to the cost of living. In a period when we have seen not just in Ireland but in many parts of the developed world a raging inflation and which has continued in spite of all sorts of efforts to abate it, this is long overdue. It is right to welcome this move and it is right to accept that in the past we have not been nearly as vigorous in defence of these sections [784] of the community whose incomes were being so eroded by inflation. Inflation bears in an uneven way on the different sections of the community. It bears hardly at all on those who through vigorous trade union organisations or those who have been able to put prices up and who can therefore, shift the burden on to somebody else.

Another overdue and welcome reform is a tiny thing but I think we should extend praise here for it regardless of political affiliations. It is not of immense budgetary importance that the inheritance law should be changed in regard to illegitimate children. Making this change is not a big item in any balance sheet either way but it is surely something that is of a basically humane and decent kind. Again, it is something that is long overdue. What were we thinking of in this peculiarly evolved civilised society that for so many years we could have permitted the maintenance of a form of discrimination of a very unpleasant kind against defenceless offspring? Its abolition is welcome not because it is important in a balanced sheet sense but because it is important in a human sense.

In the matter of income tax also we see recognition of the effects of inflation because the raising of the allowance is, let me say clearly agian, welcome but if you have fixed allowances and if you have rapid inflation and if you have related to the rapid inflation rapid increases in wages, then your income tax net on fixed allowances catches more and more people every year. If one does not continuously adjust the allowances, correlate them with inflation and rising wages, then one catches more and more people, inevitably, from year to year. The figure is not in the budget. I could find it but I have not got it here and I do not know it therefore.

It would be interesting to know of the 50,000 people who will be excluded from payment of income tax, how many of them in fact, due to fixed allowances and rising wages, have come into the orbit of having to pay income tax within the last year, two years or three years. While this is a welcome measure, if we are to have inflation of the order of 10 per cent [785] a year and if we are to have wage rises a little more rapid than that then we need to build in a mechanism by which we have a continous adjustment of allowances. If we do not have this we let 50,000 people out this year but during the next 12 months a number of them will be back in if they get more money. If you do not make a mechanism for adapting the allowances as inflation continues and wages rise then you get a circumstances where you can present as a concession with a great flourish an action which merely restores the status quo of a few years previously. I have said all the benevolent things I want to say.

Mr. Ryan: Information on Richie Ryan  Zoom on Richie Ryan  The Deputy is not talking long.

Mr. Keating: Information on Justin Keating  Zoom on Justin Keating  It did not take very long. There was a great deal of restoring the status quo in the budget accompanied by great beating of drums, largely I may say done by the newspapers who had not done their homework very carefully. I do not want to criticise the press but their criticism was very shallow. Let us look now at the welfare benefits. The improvements in benefits that have been widely granted—a little for everybody —are very welcome. It looks magnificent and you can dress it up in a very pleasing way. People remember headlines and forget about the small print. If one were to characterise this budget in a single phrase, in my view it is a cosmetic budget because it tarts up prettily a situation which underneath is very disgusting. This is the third year of economic stagnation with more than 8 per cent unemployed. That is the reality in the economic life of this country.

This budget is a pretty bit of cosmetic surgery until you look closely. When you look closely at what is being thrown away to each category of social welfare recipients you find that very little is given. I have not done a real average of what is given because it is necessary to know the number of recipients in each category and the change in each one. It looks as if on a very crude sort of average the increases will come out across the board at somewhere around 12 per cent. That [786] sounds marvellous but if the cost of living has risen by 10 per cent it is hardly distinguishable from a restoration of what existed a year ago. There may perhaps be a tiny gain for this year. It is simply a restoration of the position of 12 months ago.

In most countries the cost of living indices are prepared by civil servants with the greatest probity, proud of their job and trying to tell the truth, but also subject to pressures. The design of the cost of living indices is a complicated matter and the people collecting them are in a subordinate position to and not too far from the wielders of political power. The cost of living indices tend all over the developed world to underestimate the real growth in the cost of living. The second thing to be said about them is that population is not homogenous, that people spend very different sectors of their income, percentage-wise, in different ways, depending on how rich they are.

The obvious example in this regard is that the poorer you are the more that goes on food and clothing and keeping warm in the winter. Not alone are the cost of living indices understating the total position but they also conceal the way in which rapid rises in prices bear so extremely heavily on those who are least able to stand that sort of reduction in their income. I am not arguing from one particular month to another month. I am not saying whether it was 8 per cent, 9 per cent or 10 per cent this year. It depends on which 12 months back you want to compare the figures with. That is a slight understatement of the real position and it is a considerable understatement when you come to look at the position of the poorest people who have the least economic defences in the country. Those are the people in receipt of social welfare benefits.

My conclusion is that all that has been done is to put those people back to where they were 12 months ago. There has been no real gain but the beauty is that we are facing a referendum and that this budget has been dressed up for that. If we had a system by which cost of living adjustments [787] were built in automatically into welfare benefits then what the social welfare recipients got in this budget would have been as of right rather than as a concession. What is striking in this budget are the omissions. It is a cosmetic budget for the referendum.

I have been looking hard at budgets for only a little longer than the time I have been in this Dáil, that is, for the last four or five budgets. It seems to me that, just as there is a lot of truth in the saying. “Generals are always fighting the last war”, in my experience this budget is very appropriate to the economic situation of 12 months ago. It is a year late. This would have been a fairly good budget on budget day, 1971. It does not diagnose today's situation. I want to quote what I said on 11th May, 1971, when speaking about the 1971 budget:

Last year's error was to fail to recognise the central importance of fighting inflation.

I was referring to the year 1970 then, I set out the mistake of 1971 12 months ago, when I said:

I want to record the conviction that our need over the next 12 months will be to begin to reflate the economy, to get more jobs and to get more investment, above all of a productive sort.

At that time I said:

I think that the inflationary threat has receded a little, is vastly less dangerous than it was 12 months ago and it is recession that is the danger now. Therefore, I want to record the conviction and offer it as a hostage that for the second time in 12 months the basic strategy of the budget has been a mistaken one.

I also pointed out that significant markets would falter during the next 12 months and that the 3 per cent rise in output which the Minister for Finance spoke about was, in my view, a bit optimistic. The Minister was wrong, because it was optimistic. Whether the Minister's forecast was wrong by 100 per cent or only by two-thirds does not matter now. At any [788] rate, the rate was significantly less than 3 per cent.

What the Minister did then was to fail to inject some reflation into the economy so that we would be able to counteract the rise in unemployment that has taken place. Unemployment was not as high then as it is now, but if serious reflationary action had been taken 12 months ago, rather than waiting until now, unemployment need not have been so high. We could have been utilising some of the capacity which is now spare.

It is a very serious critique of an economy that for three years running it has been stagnant. Very little real growth has taken place in the last three years. Unemployment is at a high level; inflation is at a high level. The word “stagflation” has been used throughout the world and our economy in the past three years is a good example of this—inflation has been raging and production has not been rising significantly in the industrial sector.

In budgets there is always a little ritual genuflection in the direction of an analysis of the economic situation but there is little of that this year. This year the budget was wordy, but there was no real matter in it. There was no commitment to any sort of strategy for the development of our economy. If I concede for the sake of argument that on 1st January, 1973, we will become members of the EEC—I do not know if this will be so but I am merely postulating it for the sake of argument —we will be doing this in circumstances of three years of stagnation and high unemployment. Not only does that stagnation fail to provide for rising living standards but it fails to provide for the utilisation of capacity in industry which would furnish the profits necessary to re-equip in order to be competitive.

This is a bad and dangerous preparation for the rigours of full market membership. I have argued elsewhere that I think membership of the EEC will be bad for industry anyway. I do not think there is any way to escape this, but it will be worse because of the kind of preparation we have had in the last three years. In fact, to call [789] it a preparation is to misuse the word. What we have had is the absence of preparation for membership of the Community, for facing industrial competition of more evolved, sophisticated and competitive economies.

The assessment was wrong in 1970 and 1971 but each time we have had a budget appropriate for 12 months previously. Let us try to find out where the direction indicators are pointing to now, not in regard to Ireland's economy, because it is hopeless to look only at our economy. One of the fictions in the speeches of Ministers for Finance on budget day is that just as this is a sovereign, independent country, we have a sovereign, independent economy. It is a fiction that the punters enjoy because you cannot be a republican party unless you believe in these great shibboleths. You have to pretend they exist even though you know they do not. It is reckoned impolite to emphasise that we do not have this kind of economy.

In fact, we are such a tiny and open economy that if you decide to run it without a strong public sector, if you decide to run it in a laissez faire way as we have been doing, there is little you can do in regard to most of the significant features regarding competitiveness and inflation. It is conventional wisdom to blame the trade unions who look for more money for the rate of inflation, but if they were to stop tomorrow and if the British and other importers did not stop putting up their prices it would not make the slightest difference to the rate of inflation because we import so much of what we use and have no control over the cost of imports. We may say that if prices rise by more than 5 per cent in a year we will not buy the goods; in that way we have the control of foregoing the consumption of certain things, but we have no other control.

Where are the pointers in Britain, which is our financial master totally from the point of view of the sterling link, and our economic master in many other ways? Where are the pointers in the United States, the most powerful country of the [790] capitalist world? We should consider this matter now that we have decided in favour of deficit budgeting and going for growth.

In his speech the Minister said that the indicators did not point to an increase in inflation. Twelve months ago inflation was raging but it died away a little six months ago. Tremendous efforts were made in a number of countries to contain inflation. In the middle of last year in Britain and later in the United States there was an abandonment by the British Tories and the American Republicans of traditional attitudes. In both cases they went for growth in ways that did violence to their own professed economic beliefs. The effort to get growth required the injection of very large amounts of money into the economy with the inevitable danger of stoking up the inflation that was dying a little. Both the British and the Americans decided it would have to be growth first and not to worry about inflation because there was nothing much they could do about it.

I think the Minister indicated that inflation was not increasing, but the evidence of recent economic indicators is to the contrary. One would expect inflation to be increasing in view of the economic policies of the United States and Britain. However, to expect it to be so and for it actually to be so is not necessarily the same thing.

There are various indices which one can find, and the Minister's economic experts certainly have access to indices and the expertise which I do not possess. In today's Financial Times there is a table of retail prices headed “UK Economic Indicators” on page 14. They give retail prices, with an index figure of 100 in January, 1962, for January, February and December of last year, and for January and February of this year. If they indicate anything, they certainly do not indicate a diminution in the rate of inflation over that 12 month period. If anything, they indicate a slight rise. There was certainly a diminution in the rate of inflation six, eight or ten months ago but, taking it from spring, 1971, to [791] now, we are back at the same rate. It is of the order of 10 per cent.

That was for the UK. By chance it was necessary only to bring in one newspaper because in the same paper on page 5 under the heading “American News” it is stated: “US Growth Rate Slows After Sharp Price Rises”. There is one sentence which is worth reading into the Official Report. In August of last year President Nixon declared himself a Keynesian and threw away all the sacred economic tenets of the Republican Party. He was determined to get the economy going as hard as he could in terms of growth largely, probably, for the sake of re-election. To everybody's surprise, he also had a pretty tough price freeze. It is necessary to say that as background to the sentence I want to read. I quote:

A bulge in prices at the end of the freeze had been predicted by the Administration and thus, to some extent, the pattern of the first quarter growth was to be expected. However, there is little doubt that the price rise has proved both faster and more sustained than generally anticipated...

That is what is coming out of the United States at the moment—a faster and more sustained price rise than the economic pundits had been anticipating six or eight months ago.

Coming out of Britain as a result of numerous reflationary packages— not just the one of the recent budget because you would not expect the British budget to show through yet; reflationary packages started as long ago as last summer and there have been persistent efforts to reflate the British economy—there is an acceleration in inflation as well. At the same time in Britain, there has been an evolution in the balance of payments.

We spend a lot of time in our budget debate talking about—and I want to say something about it in a minute— expenditure of the order of £100,000, but we spend no time at all discussing the sort of economic evolution which will have the most profound bearing on the options before us, and the possibilities for our economy. What I [792] am saying is not what you might call the small print of constituency politics, but it seems to me to be a great deal more important to the real economic options before us than most internal considerations.

Having talked about the evidence that inflation is increasing again in places which will have a profound bearing on us, I want to turn now to look at the British balance of payments. One of our great economic problems, which should have been determining all of our economic strategy, is the fact that we are so much in Britain's shadow, and that Britain has been performing so extraordinarily badly economically in the past few decades. She has suffered in a very acute way from a phenomenon of stopping and going, of getting some growth going and running smack into a balance of payments crisis, and having to shut it down vigorously and move towards recession. She has oscillated backwards and forwards in a way damaging for herself and also very damaging for us.

Last year Britain was running a balance of payments surplus both on visible trade and added buoyant invisibles of enormous proportions on a scale which was not anticipated two or three years before. In the same set of “UK Economic Indicators” for the first quarter in today's Financial Times there are figures for imports and exports up to last month and figures for a visible balance of trade. There is no effort to make an estimate of invisibles or to add them in. I think they are worthy of comment. Last March—and this makes the compaprison easy over the 12 months from March, 1971, to March, 1972—by accident the value of British imports and exports was an identical figure and therefore the balance on invisibles was zero. It was £752 million for exports and imports in March, 1971.

By this March, imports had risen to £800 million, a rise of £48 million. On the other hand exports—apart from applying any inflator effect, to talk about export volume in terms even of money—had declined by £32 million. Imports were up by £48 million and exports were down by £32 [793] million. That was an adverse movement in Britain's balance of payments of £80 million. The visible trade balance in March of this year is minus £80 million, which is higher than the January or February figures. There may be some distortion of this due to the peculiar circumstances of the past few months in Britain, but the sharply deteriorating trend in Britain's balance of payments is there.

There was the consolation in the earlier months of this year that, while there was a negative balance of visible trade, if you then added in invisibles at what people were guessing them to be, about £50 million a month, you were still overall in positive balance. If you add £50 million to the £80 million negative balance on the visible trade of March, you are still £30 million in deficit in the month of March of this year, overall, visibles plus invisibles. If you extend that over a year you are getting to the level of £400 million or so negative balance, which is the way Britain was when she was heading into her last economic crisis.

If this negative balance continues, it seems inescapable that you must either have restrictive measures on imports to try to restore the balance, and you must try to deflate your economy, or else you must devalue, or both. A very distinguished ex-British senior civil servant who is now Professor of Economics in Yale, Professor Cooper, has recently come up with the opinion which is an extremely expert opinion—he is as much as a heavyweight as you can find in the economic world—that Britain will have to devalue more than once or have one good devaluation if she is to benefit from full membership of the EEC.

That is an economic perspective. Very nearly 12 months ago, and certainly nine months ago, the British and the Americans started turning on all the taps to get economic growth if they could. The response they got was less than they expected in Britain and possibly less in America—that has not emerged yet. We will know over the next few months but it is not clear at this moment. Britain's response was less than expected. I will [794] not put the figures into the record now but the deterioration in Britain's trade —not just in value but in volume— has been very striking in recent months. Therefore, it is at least possible that Britain will have to sharply deflate or sharply cool her economy in the near future.

I now return to why I said this budget was a year late, after having spoken a little about Britain's and America's economy. Had we got the growth package of this budget, such as it is, a year ago—it is a pretty feeble growth package in my view and could not be described as a powerful one; it is nice to have newspaper headlines telling us that the Minister for Finance is going for growth, but he is not going for growth very hard—then we would have been counteracting the stagnation in our economy, the unemployment and we would have had the past 12 months during all of which a reflationary package was needed. We now have the reflationary package: we need it this month; we need it next month but it is very much open to question whether we shall be able to continue it for the whole 12-month period.

The trouble about making a speech like this, especially when one is not a professtional, is that you get things on record which may look not just wrong but ridiculous 12 months later; we shall see; but I am expressing the opinion that we may have to shut down, in other words, that the reflation came late. We needed it badly 12 months ago and we do needed it now. I entirely agree with that. If I am asked: “Could you argue against reflation now in April even though you may run into great troubles of one kind or another in six or eight months?” I could not argue against it; I think it is right now. I think the deficit is right although it adds to the dangers but the problem remains, and it is a problem again that I can only try to express and which I do not possess sufficient expertise to answer fully. Let me say, in passing, that I wish there was more discussion of the strategy of managing an economy like ours in a budget speech. It must contain the details of precisely what [795] is being done but surely we can have an adult, rational discussion of the options before us, which are few in any case, and on the way in which an economy like ours can be managed. It seems to me that the economists have done this to a very small extent; they have disdained communicating with the public to a great extent. There are now one or two people doing serious, well-informed, professional, economic articles and talking to the public as if the public were entitled to have an opinion and were able to understand what they are talking about. A man who, to my regret, has now ceased working for Trinity College and has gone to a job in England, Professor Tate, had been contributing usefully to this sort of discussion. We did not get any of that in the Minister's budget speech and I am trying to inject it now and, perhaps, we might have a reply to what I might describe as these economic strategic thoughts at the conclusion of the debate.

The question is: “What do you do now? At this moment you need to get unemployment down and the growth up; you need to reflate a little. Yet, dangers which were not to be seen 12 months ago in the United Kingdom and the United States economics are now very much in evidence. What you do depends on your political viewpoint. I believe we must strengthen the public sector in many ways. This is the only way that a small and open economy can possibly survive the buffeting of the economic future we face inside or outside the EEC. The strengthening of the public sector, which I do not intend to tease out now, is something I should like to hear discussed by the Minister, with the experts at his disposal, and also the options and economic strategy and not have the duties of economic planning passed to some people in Brussels with the thought that you cannot do it anyway.

There was a time in official economic circles when planning was fashionable. We made some good shots at it. Then we had some that came unstuck and we abandoned it altogether. We had [796] serious thoughts about full employment at a period which now seems not just a few years ago but an infinity away. Nobody talks about it any more. It is a dirty word? The sort of efforts at planning and at trying to direct and organise growth in our economy and to move towards fuller employment that were respectable in the early sixties now seem totally abandoned and we seem to be responding to the shortest of short-term situations and to have no strategy and no planning at all. In the budgets I have heard while I have been a Member of the House I have always found it depressing that nobody wanted to talk about these things.

I think therefore, there are economic dangers. I do not want to paraphrase the Minister incorrectly but I think he said we were going for growth rather than security. That is probably the right thing but the threats to security now are much greater than they were 12 months ago. If we enter the EEC, it is not the case of an on-and-on-andon and up-and-up-and-up in regard to economic growth it could have been said to be five years ago. We had the post-war boom which went on for nearly 20 years, something nobody expected. But it stopped towards the end of the sixties and in many parts of the EEC now there is little or no growth. There is a profound economic crisis in Italy and one cannot call it anything else. There is a pretty severe situation in Germany and in Britain. There are the predictions of Professor Cooper and many others about the flight of capital and the need to devalue the British economy. When you have this loss of growth in the EEC economics, taking them separately, you have an intense sharpening of competition and it is to the EEC loss of growth and sharpened competition that we propose to expose ourselves in five annual steps in terms of free trade.

Time will tell whether our industry will be able to withstand this free trade. Personally, I am happy to be in the position of having been with others who oppose full membership of the Community and of having been one of those who sounded warning signals on this issue. My regret is that [797] the public memory is so short because I believe the leaders of political and economic thought who declare us to be a developed economy, capable of withstanding this kind of free trade, will look very foolish, indeed, in five years time. But we are preparing to face this kind of free trade. We are predicting great growth in agricultural output, at the same time as we are preparing not just to have free movement of capital into the sterling area but when we are anticipating the abolition of those limits which sterling has built around itself and when there is grave danger of the outflow of British capital into the EEC.

An economist in TCD, Mr. Bristow, recently discussed interestingly the agricultural growth that people are thinking of. Of course, this is something we cannot achieve without a lot of capital investment. If there is the sort of capital outflow that Professor Cooper fears in respect of Britain, where will the necessary capital come from? These are all unanswered and undiscussed questions. They are questions that the people, bowing down before the prospects of full membership as something that will solve all our problems, have not faced, much less endeavoured to answer. Those questions are relevant to this budget because it leaves our economic development at the mercy of market forces. There is no strategy of the public sector. It leaves it at the mercy of market forces in a way that is entirely consistent with the budgets of the last few years but which is an abandonment of the movement towards planning that was visible ten years ago and which contributed significantly to some of the industrial growth of the mid-1960s.

We are faced now with the danger that Britain may have to apply all her economic brakes within 12 months. There is no protection against that danger. We have decided to go for growth, for an extension of the amount of money we have to spend to service our debt which is now in the order of £100 million a year and for a fairly sizeable deficit. We have decided to begin doing courageous growth-orientated things. We have decided on this course of action now and not 12 [798] months ago but it is at this time that there is real danger involved in such action. If we are spared, we shall be back here in another year to discuss another budget but this one seems to me to be dangerous. I do not wish to use the word “irresponsible” because that word is slightly abusive and this is no time for abuse but it is not a responsible budget because it is towards the responsible role of the economic management of the economy—the economy managing aspect of the budget has become the most important aspect—it should be moving with strategic planning in strengthening our defence position economically, as an open and fragile economy. It should be moving towards strengthening the public sector. It should be moving towards planning and towards the utilisation of planning to attain full employment. It should be trying, while the power to do so remains with us, to strengthen our industry in the face of competition. Even if there is not the will in the Government or in the main Opposition party to establish a separate financial system, it would be well to see the strengthening of our financial institutions so that we could erect some barriers to the outflow of capital regardless of how much Brussels might disapprove of them and however temporary they might be.

This budget is a passive and neutral one. It does not do any of those things. It ensures that enough money is gathered to pay for the capital budget and to pay people's salaries. It ensures that there is a little gravy for everybody facing a referendum in three weeks time. It ensures that the effects of inflation are neturalised. There is no real gain for any sector but there is a replacement of what has been lost through inflation. It does not stimulate growth very actively but it removes some of the growth barriers that were erected a few years ago.

Therefore, the defects of this budget are defects of omission. There is the defect of a total absence of strategy. We will have to abdicate financially if we become full members of the EEC and this will happen soon because the nature and level of our taxation will not be our decision. Of course, we will [799] be able to decide nationally to add extra taxes to the basic level of the European taxes in the same way as an American State can add its local taxes to federal taxes but such a course would result in penalising our own population and in penalising industrial development within the country. We will lose the power of fundamental economic decision in the way this economy has developed if we became full members of the Community but that is no reason to begin abdicating before we need to do so. The contrary is the case. In the years when power remains to us we should be using that power to erect defences against the very real threats both in terms of competition, which, in my view, we are not able to withstand, and also in relation to the outflow of capital which will take away the moneys which, if invested here, would enable us to dserive some benefits from the enlarged agricultural markets.

Therefore, this is a classic politicians' cosmetic laissez faire budget. It is doing nothing very wrong. It is one to which it is difficult to object but yet when looked at in toto it is absolutely inadequate. It is an abdication of the power of Government and of the responsibility of the Minister for Finance to use the power that becomes greater every year as the role of the State in the economy becomes greater to try to determine the way our economy goes. It is a total absence of any effort to erect defences. It seems to me that such is the rush to abdicate nationally and to transfer responsibilities to Brussels that we are surrendering powers of economic planning and influencing the economy through our budget before it is necessary for us to do so.

It may be that the conclusion of the Government and those who advise them is that there is nothing that can be done, that this economy is not viable. An effort could be made to prevent a burst-up until such time as some other agency comes along. The thinking of the Government may be that budgeting is not important and all that it is necessary to do is to ensure there is not too big a deficit, that [800] inflation does not esclate too much and that growth does not stop. Even by the standards of the United States or Britain, both of which are now in the hands of conservative governments, this thinking is very old-fashioned. The economic developments of the past 30 or 40 years might not have taken place if this had been all that budgeting had consisted of.

Although it looks all right to the voters and while some of its provisions are welcome, in essence it is a budget of abidcation, of lack of thought, lack of courage and lack of strategy. Finally, it indicates the lack of any conviction on the part of “the Republican party” that this country is one that ought to govern itself and which ought to be responsible for its own future.

Mr. Hogan: Information on Patrick Hogan  Zoom on Patrick Hogan  We have listened to a very interesting contribution from Deputy Keating in which he discussed in a rather philosophical fashion our general economy and pleaded that we should have, in a highly objective fashion, more contributions dealing with the economy. The Deputy deplored the fact that we have not had that type of contribution from the Government side of the House, particularly from Government Ministers. That is quite true. The Minister for Finance gave us the usual battery of statistics carefully prepared for him by his Department. There was a strange lack of any worthwhile attempt to give us the Government thinking on our present economic situation. I do not suppose it will be the last budget before we enter the Common Market, but it may be the last annual budget of the type to which we have been accustomed for years. In our present political circumstances I regard it as a “mark time” type of budget in which the Minister has decided to do a bit of economic freewheeling.

We have had over the past couple of years some peculiar approaches in budgetary policy. I can never quite understand economists. Economics must be the most difficult science, because economists never seem to agree on anything. The profession to which I belong has difficulty in making [801] prognostications, but we are occasionally successful. However,the economists rarely seem to be successful. Looking back on our position here over the past two years, we note that the Taoiseach introduced the budget in 1970 in place of Deputy Haughey. At that time the main contribution made was to double the turnover tax, which was introduced in 1964 by the late Deputy Lemass. At that time it was calculated to being in £12 million a year. Turnover tax now brings in £50 million per year in this year 1972. In the meantime, wholesale tax has been introduced which, in the present year, has brought in £30 million. These taxes total £80 million. That is a rare jump in taxation from 1964 to date in one field alone.

In 1970, when turnover tax was doubled, we were passing through an era of inflation. That is what Deputy Keating was criticising. We seem to adopt the wrong type of policies. Our timing seems wrong. I mentioned last year the risk of piling on taxation during the height of an inflationary period. Politically, it may seem right to take money out of people's pockets so that they have not too much to play about with. On the other hand, if one had to meet the increased prices immediately after increased taxation and then increased demands from trade unionists the hole in the bucket would soon appear and one would merely have secured a short breathing space in which to pay bills. This is what happened in 1970. It might seem at first sight that there was a lot of money about and that it should be taken into the Exchequer, thereby cooling the economy. That would work if we had a dictatorship or a closed economy, but our economy is very open and is subject to national influences. We operate as a democracy. We are a trade-unionised country. We have a mobile labour force. We have a petty price adjustment mechanism here. That was proved once we introduced decimalisation.

Deputy Cosgravce spoke about a price explosion. We have an extremely flexible mechanism in our society when it comes to matters of this nature. What happened after the 1970 budget? [802] The next thing that happened was that Deputy Colley, the Minister for Finance, introduced an increase in corporation profits tax from 50 per cent to 58 per cent. We had wholesale tax for selected luxury products which was increased from 15 to 20 per cent. There was also a 25 per cent extra imposed in motor taxation. This extra 25 per cent did not go back to the Road Fund. It was passed directly into the Exchequer. Although it was collected by each local authority it did not appear as anything extra for the various local authorities up and down the country who had collected it. In fact, the new figure circulated to us yesterday in respect of that particular tax in the current budget statement, shows an anticipated skimming off for the coming year of about £4 million. That is another old, hackneyed story in this House in respect of the rates and the Road Fund.

Last year's budget did not do apparently what it should have done. According to Deputy Keating we should have made an effort last year to reflate the economy. The Deputy made the point that in 1971 recession was our real danger. Notwithstanding last year's budget it was necessary for the Minister to come back in the autumn and inject £20 million into the economy, a clear indication that he accepted that we were passing into a state of economic stagnation. That does not seem to have worked. In this early spring we have the highest number of unemployed people for many years, and this position is not likely to improve. Most people believe that this time 12 months, I think we shall still have the unemployment problem we have experienced up to now. To be sure, if there is any small upsurge or expansion in the British economy it may relieve our difficulties, but the general impression is that our employment situation will not improve.

In this little booklet issued to us annually there is a table, table 10, page 89, which indicates from 1956 onwards the total number of people at work. This is presumably prepared by the Statistics Office and is an objective summary of the position. It is a very disappointing position indeed. In April, 1956, the number employed was [803] 1,125,000, and at mid-April 1970, that fell to 1,066,000. At mid-April last year it stood at 1,071,000. In other words, 12 months ago there were 54,000 fewer jobs available than in 1956. This is a dismal record in a society where, I understand, in order to keep employment on an even keel if we are to try to contain our population, we would need to provide an extra 10,000 jobs per year at least.

When I say there are 54,000 fewer jobs now than in 1956 I am speaking about last year. I have not the figures for the present year, the number of the labour force at work at mid-April, 1972. I do not know whether these figures are available as yet, but judging by the number of unemployed and the number of redundancies we have at present, I am quite sure the position will be much more serious. Admittedly, some of the trouble arises from the fact that in the past year we have had little or no emigration. When the safety valve of emigration is closed down and when our own number of job opportunities begins to fall, we shall have a very ominous figure appearing before us.

On this question of employment and unemployment and the various programmes which we have written here, one cynical Deputy remarked in the House on one occasion that the only target that was ever reached in any of our programmes was the target of unemployment, and that was always exceeded. The Third Programme mentioned that we should be able to increase the number of new jobs very substantially, that we should be able to reach, the figure of 9,000 new jobs. In the event I understand the figure is around 3,000 new jobs. If that is the position it is a very poor progress indeed. Fianna Fáil leaders down through the years have said that the yardstick by which you could measure the efficiency of a political party or a Government was that of employment, what they did in providing job opportunities. It seems now that by the very yardstick which they most prized they are now to be most condemned. The whole question of employment here makes very disappointing reading when [804] we come to examine the position over the last two or three years.

I should like now to say a word or two about housing. When one reads the review, that part of it dealing with housing, one gets a superficial impression that this is really a dynamic Department and listening to Government speakers one would imagine we were making tremendous progress in housing. There has been some improvement in the last 12 months. In my own local authority there has been an improvement over the last two or three years but this improvement will need to be speeded up to meet the backlog created over a number of years. In one year in South Tipperary we built one local authority house. In another year we built none. Over a decade the average of new local authority houses would not meet the normal obsolescence rate.

When dealing with housing we should always make a clear distinction between two types of houses we have. We have houses built by local authorities for those who cannot build houses for themselves, for people who can get a roof over their heads only by paying for a house on the basis of rent. The other type of house is the grant-aided house built by a person from his own resources or with the help of an insurance company, a building society, a bank and so forth. There has been an unhappy tendency on the part of Government speakers to lump the two together and produce a statistic without drawing a clear distinction as between one and the other. This has important social implications. It has important policy implications.

Let us take the calendar year 1950 in which we built over 77,000 local authority houses. We were less well off then than we are now. Twenty years later we have built half that number of local authority houses. In that 20 years our gross national product, which we use as the yardstick of our economic wellbeing, has doubled. We are, therefore, twice as well off now than we were then, but the Fianna Fáil sense of social justice has become so blunted towards the less well-off sections of the community we are now able to build only half the number of [805] local authority houses that we built in 1950, and that was a time when we were paying £10 million per annum in food subsidies.

The temptation is always there for a Government to opt to support private house-building because in private house-building we are obliged to give a grant ranging from only £100 to £450. It is a much bigger burden to pay a two-thirds annuity to a local authority spread over 50 years. The public should be clearly aware of the fundamental difference. There is nothing in this budget to give us any hope that the present trend will improve. The review mentions very imposing figures. In the capital programme for housing for 1970-71 there was £39 million and the figure for total housing is the best we have had so far; it stood at 15,000. The best we had before that was in 1950-51 when we had 14,000 houses. The fundamental difference is that on that occasion the majority of the houses built were built for the less well-off section of the community whereas now only one-third are available for the less well-off.

In Northern Ireland, where there is a population half our population, they are building the same number of houses every year and two-thirds is available for renting; one-third is private housing. That would seem to suggest that there is a better social approach there than there is here. The same holds true in the case of Scotland and England. The argument has been advanced that, because we are moving into an affluent society and our people are better off, they are now able to afford this kind of expense. It must be remembered that we are a very highly taxed community and our per capita income is lower compared with England, Scotland and Northern Ireland. A higher proportion of our people with a lower per capita income are expected to put their hands deep down into their pockets, to mortgage their future to a bank or insurance company and, in some way, to put the money together to provide themselves with a house. I would suggest that this is not a just approach and that a policy of “Rent a House now, buy it Later”[806] would be socially more just if we had in the meantime a good system of house purchase.

Another matter I regard as of some importance and, as time is running out, perhaps of some urgency because it affects in a very acute way our present campaign as regards entry to EEC, is the absence of a land policy. There was no mention in the Minister's speech of this important matter. There is a general fear among the farming community—I think it is less than it was—that with our entry to EEC the rights of farmers to hold on to their land and their security of tensure will be in some way undermined, that they will be at the mercy of well-healed, continental entrepreneurs who will buy out property here as an investment, as a holiday resort or something like that. We have been experiencing in recent times some movements in that direction under the cover of setting up racing stables, stock breeding or horse breeding.

It is open to us, and I have urged the Minister for Lands by parliamentary questions to do so, to introduce legislation setting out land policy and safeguarding the interests of Irish farmers. It is quite simple to devise legislation of this nature and, in fact, this approach is even encouraged by the EEC. I accept that under EEC conditions the fears expressed that Irish land would pass into the hand of nonnationals is ill-founded. I am satisfied with that, but it would be prudent at this stage and I would urge the Government to consider the introduction immediately of a land policy setting out certain priorities, priorities as regards distance from where land becomes available, perhaps keeping the land entirely for farmers and those engaged in farming, preventing professional people from going out to buy agricultural land, perhaps giving a certain edge to the less well off or smaller farmers to prevent them being out-bid by the very large farmers.

There can be no discrimination under EEC conditions but if you say, for example, that land must be limited to a three mile radius you cannot have a continental in every three mile circle all over the country and without [807] exercising discrimination you can, by introducing a land policy on these lines, protect the interests of our own people. A simple Bill on these lines could and should have been introduced before the referendum. It would have made many votes which are now perhaps dicey quite safe. It need not be elaborate. It could be introduced and passed through the House very quickly and it would give tremendous reassurance to many small farmers who at present are convinced that they will not alone be made economically nonviable under EEC conditions but that they are open to be bought out and displaced.

One other feature which was not developed in the Minister's speech was the important question of regional development. My personal belief is that regional development ranks second in importance to the question of a [808] guaranteed market and guaranteed prices for our agricultural products. It may even ultimately be more important. We have failed so far to evolve a proper comprehensive regional policy. This matter seems to suffer from the same malaise as the matter of environmental pollution. There are so many Departments and so many agencies paying attention to it that it has become nobody's business. There are about ten different agencies at present interested in regional development. I do not know whether An Foras Forbartha have come into it as yet but they have been in everything up to this. We have had several reports. We had the famous opening report by Buchanan.

Progress reported; Committee to sit again.

The Dáil adjourned at 5 p.m. until 3 p.m. on Tuesday, 25th April, 1972.


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