Ceisteanna—Questions. Oral Answers. - Irish Pound Parity.

Tuesday, 16 December 1980

Dáil Eireann Debate
Vol. 325 No. 7

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[1182]28.

Mr. P. Barry: Information on Peter Barry  Zoom on Peter Barry  asked the Minister for Finance if the maintenance of the present parity of the Irish pound within the EMS is Government policy; and, if so, the measures the Government propose to take to ensure the adequacy of the external reserves of the Central Bank for this purpose.

Mr. O'Kennedy: Information on Michael O'Kennedy  Zoom on Michael O'Kennedy  The Government have made it quite clear that it is our firm policy to maintain the parity of the Irish pound within the EMS. The external reserves are at an adequate level for this purpose. As at end November 1980 the reserves amounted to £1,165 million, an increase of £190 million since the end of last year. It is official policy to continue to maintain the reserves at an adequate level.

Mr. P. Barry: Information on Peter Barry  Zoom on Peter Barry  Is it not true that the reserves are now at two and a half months imports as against four months two years ago?

Mr. O'Kennedy: Information on Michael O'Kennedy  Zoom on Michael O'Kennedy  They are over two and a half months.

Mr. P. Barry: Information on Peter Barry  Zoom on Peter Barry  They are barely over it, and four months two and a half years ago. Does the Minister call that adequately maintaining the reserves?

Mr. O'Kennedy: Information on Michael O'Kennedy  Zoom on Michael O'Kennedy  The Central Bank and other independent commentators report that 2½ months' imports is adequate. There has been a significant improvement in the state of reserves and in the balance of payments.

Mr. P. Barry: Information on Peter Barry  Zoom on Peter Barry  Is it true that the reserves were four months' imports two years ago?

Mr. O'Kennedy: Information on Michael O'Kennedy  Zoom on Michael O'Kennedy  I was not asked about two years ago.

Mr. P. Barry: Information on Peter Barry  Zoom on Peter Barry  Is it not also true that the reason the reserves have improved recently is because of the extent of Government borrowing?

Mr. O'Kennedy: Information on Michael O'Kennedy  Zoom on Michael O'Kennedy  That is not true.

[1183]Mr. P. Barry: Information on Peter Barry  Zoom on Peter Barry  It is.

Mr. O'Kennedy: Information on Michael O'Kennedy  Zoom on Michael O'Kennedy  I have mentioned already——

Dr. FitzGerald: Information on Garrett Fitzgerald  Zoom on Garrett Fitzgerald  Would the Minister like to develop that statement that it is not true?

Mr. O'Kennedy: Information on Michael O'Kennedy  Zoom on Michael O'Kennedy  I have already mentioned the growth in our exports and Deputy Dr. FitzGerald should know that there are a number of factors which influence the reserves, not just borrowing. As the Deputy will know the buoyancy in our exports to which I referred, which is running way ahead of what the Government originally anticipated, is making a major contribution in that area.

An Ceann Comhairle: Information on Padraig Faulkner  Zoom on Padraig Faulkner  A final supplementary from Deputy FitzGerald.

Dr. FitzGerald: Information on Garrett Fitzgerald  Zoom on Garrett Fitzgerald  Will the Minister say what has been the amount of foreign borrowing in the period in question, and what has been the improvement in the reserves? Will the Minister give us a straight answer?

Mr. O'Kennedy: Information on Michael O'Kennedy  Zoom on Michael O'Kennedy  I was not asked anything about ——

Dr. FitzGerald: Information on Garrett Fitzgerald  Zoom on Garrett Fitzgerald  Could we have a straight answer just this once before the Minister goes?

Mr. O'Kennedy: Information on Michael O'Kennedy  Zoom on Michael O'Kennedy  ——a period in question. There was no reference in this question to a period in question.

An Ceann Comhairle: Information on Padraig Faulkner  Zoom on Padraig Faulkner  Question No. 29.

Mr. O'Kennedy: Information on Michael O'Kennedy  Zoom on Michael O'Kennedy  I was asked about the current position.

(Interruptions.)

Mr. Kelly: Information on John M. Kelly  Zoom on John M. Kelly  This stuff should be at the Minister's fingertips.

(Interruptions.)

[1184]Mr. P. Barry: Information on Peter Barry  Zoom on Peter Barry  Is it not true that the ratio of reserves to borrowing is now one to one and two years ago it was two to two?

An Ceann Comhairle: Information on Padraig Faulkner  Zoom on Padraig Faulkner  I have called Question No. 29.

(Interruptions.)

An Ceann Comhairle: Information on Padraig Faulkner  Zoom on Padraig Faulkner  I have allowed numerous supplementaries. I have called Question No. 29. Will the Minister please reply to Question No. 29?

Mr. O'Kennedy: Information on Michael O'Kennedy  Zoom on Michael O'Kennedy  Yesterday I came from the Finance Ministers' meeting of the EEC where it was agreed that the performance of the Irish Government and economy is exceptionally good. That is a fact.

An Ceann Comhairle: Information on Padraig Faulkner  Zoom on Padraig Faulkner  Question No. 29.

Mr. P. Barry: Information on Peter Barry  Zoom on Peter Barry  Why did they say that they are seriously worried about our economy so?

(Interruptions.)

Mr. O'Kennedy: Information on Michael O'Kennedy  Zoom on Michael O'Kennedy  The Exchequer borrowed £1,763 million from 1 June 1973 to 31 May 1977 and £3,075 million from 1 June 1977 to 30 September 1980. The Government proposals in relation to the level of future borrowing will be set out in the forthcoming 1981 Budget. If these borrowing figures were all expressed in the context of 1973 prices the results would be a borrowing from 1 June 1973 to 31 May 1977 of £1,339 million and a borrowing of £1,435 million from 1 June 1977 to 30 September 1980.

Mr. L'Estrange: Information on Gerald L'Estrange  Zoom on Gerald L'Estrange  Is it not true that our borrowing has doubled since 1977 and is it not also true that the manifesto promised that borrowing would be only 8 per cent of GNP and that our borrowing is nearer to 13 or 14 per cent?

Mr. O'Keeffe: Information on Jim O'Keeffe  Zoom on Jim O'Keeffe  The Deputy should deal in constant figures when making comparisons. The Deputy will see from the figures I gave at the end that far from [1185] doubling, there was only a marginal increase in the level of borrowing in the period concerned.

Dr. FitzGerald: Information on Garrett Fitzgerald  Zoom on Garrett Fitzgerald  The second period is shorter than the first.

Mr. O'Kennedy: Information on Michael O'Kennedy  Zoom on Michael O'Kennedy  Because of the level of activity in the economy, particularly in infrastructural development programmes there has been borrowing for public capital programme purposes. It is the Government's intention to maintain the appropriate balance in this area.

Mr. L'Estrange: Information on Gerald L'Estrange  Zoom on Gerald L'Estrange  Is it not true that in the manifesto and even last year in the budget the Minister stated that it was the intention to borrow only 8 per cent of GNP and is it not true that the Government have now borrowed 13 to 14 per cent? Is it not time to stop this rate's progress? Is it not true that the Government are also printing confetti money at present to get the country ready for a general election?

An Ceann Comhairle: Information on Padraig Faulkner  Zoom on Padraig Faulkner  This is becoming an argument.

Mr. O'Kennedy: Information on Michael O'Kennedy  Zoom on Michael O'Kennedy  When I hear played back what I said I wonder are we listening to different records. The Deputy said that I said 8 per cent but what I said was 10½ per cent at the beginning of the year.

Mr. O'Keeffe: Information on Jim O'Keeffe  Zoom on Jim O'Keeffe  It is 8 per cent in the manifesto. The Minister said 10½ per cent in the budget but 8 per cent in the manifesto.

Mr. O'Kennedy: Information on Michael O'Kennedy  Zoom on Michael O'Kennedy  The borrowing requirement is only one indicator in terms of economic management. There are other indicators.

Dr. FitzGerald: Information on Garrett Fitzgerald  Zoom on Garrett Fitzgerald  Inflation and unemployment.

Mr. O'Kennedy: Information on Michael O'Kennedy  Zoom on Michael O'Kennedy  Yes, and also balance of payments which, as I said in my budget statement, is the major element in determining our borrowing requirement. Because our balance of payments, consequently, has significantly improved, we [1186] are the only European country, apart from Britain, to have an appreciable improvement over last year.

Mr. P. Barry: Information on Peter Barry  Zoom on Peter Barry  For the wrong reasons.

Mr. O'Kennedy: Information on Michael O'Kennedy  Zoom on Michael O'Kennedy  Not for the wrong reasons. It has been possible for the Government to maintain a flexible approach to enable us to keep up a level of economic activity here.

Dr. FitzGerald: Information on Garrett Fitzgerald  Zoom on Garrett Fitzgerald  Would the Minister not agree that the present figure would be doubled but for the selling off of cattle stocks, including breeding stocks. and the 7 per cent drop in the volume of imports?

Mr. O'Kennedy: Information on Michael O'Kennedy  Zoom on Michael O'Kennedy  No, I do not accept that.

Dr. FitzGerald: Information on Garrett Fitzgerald  Zoom on Garrett Fitzgerald  Secondly, would the Minister not agree that in the budget speech he said that if the provision he had made in respect of the public service pay had to be increased, he was determined that we would not have a recurrence of last year's experience whereby such excess expenditure was added to borrowing? Has he not totally failed to carry out what he said in the budget speech?

Mr. O'Kennedy: Information on Michael O'Kennedy  Zoom on Michael O'Kennedy  No. I want to assure the Deputy that if he locks at the budget statement in full he will see the fact that——

Mr. O'Keeffe: Information on Jim O'Keeffe  Zoom on Jim O'Keeffe  Totality.

Mr. O'Kennedy: Information on Michael O'Kennedy  Zoom on Michael O'Kennedy  Yes, and if I had the particular page I could refer the Deputies to it. I said that very deliberately then. The borrowing requirement was significant, not in itself but when seen against matters such as the balance of payments and the purposes for which the money was used. At that time our expectation was, in view of the downturn in the national economy, that his year's balance of payments would be of the order of 7 per cent.

An Ceann Comhairle: Information on Padraig Faulkner  Zoom on Padraig Faulkner  A final supplementary [1187] question from Deputy L'Estrange.

Mr. O'Kennedy: Information on Michael O'Kennedy  Zoom on Michael O'Kennedy  It will be considerably better than that, which enabled the Government to cushion the effects of international recession by borrowing somewhat more for capital infrastructural development programmes.

Mr. O'Keeffe: Information on Jim O'Keeffe  Zoom on Jim O'Keeffe  The Minister did a U turn.

An Ceann Comhairle: Information on Padraig Faulkner  Zoom on Padraig Faulkner  A final supplementary from Deputy L'Estrange. I have called Deputy L'Estrange.

Mr. L'Estrange: Information on Gerald L'Estrange  Zoom on Gerald L'Estrange  Would the Minister please inform this House and this country where the increased economic activity is, bearing in mind that we have 115,000 unemployed, 60,000 school children, 156,000 people on short time——

An Ceann Comhairle: Information on Padraig Faulkner  Zoom on Padraig Faulkner  This is argument.

Mr. L'Estrange: Information on Gerald L'Estrange  Zoom on Gerald L'Estrange  —— and factories closing by the new time? Will the Minister tell us and the country where is the increased economic activity?

Mr. O'Kennedy: Information on Michael O'Kennedy  Zoom on Michael O'Kennedy  Even if I told the Deputy, he would not hear it, but over and above that, I want to let the Deputy know clearly——

Mr. L'Estrange: Information on Gerald L'Estrange  Zoom on Gerald L'Estrange  Tell the country, then. Never mind me.

Mr. O'Kennedy: Information on Michael O'Kennedy  Zoom on Michael O'Kennedy  Because of the level of development in the private sector and the Public Capital Programme——

Mr. L'Estrange: Information on Gerald L'Estrange  Zoom on Gerald L'Estrange  And the farmers starving.

Mr. O'Kennedy: Information on Michael O'Kennedy  Zoom on Michael O'Kennedy  —— the number of new jobs created will be a record this year. Secondly, for the first time in very many years, immigration will certainly be not less than 20 million. That must be taken account of in unemployment figures.

[1188]Mr. Enright: Information on Tom Enright  Zoom on Tom Enright  The Minister means 20,000.

Mr. O'Kennedy: Information on Michael O'Kennedy  Zoom on Michael O'Kennedy  Twenty thousand. Thirdly, the huge growth in the employment market due to the huge growth in population. Finally, our performance in this area against any objective criteria, again in other countries, is very remarkable, which is by complete comparison with the experience that this country had——

Mr. Begley: Information on Michael Begley  Zoom on Michael Begley  Remarkable as regards what?

Mr. L'Estrange: Information on Gerald L'Estrange  Zoom on Gerald L'Estrange  The record number of unemployed.

An Ceann Comhairle: Information on Padraig Faulkner  Zoom on Padraig Faulkner  Question No. 29 is for written reply. Question No. 30.


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