I appreciate that. When I have completed my speech, I hope the Tánaiste will consider I have not been unobjective in my presentation or even unduly selective, which I think a politician is entitled to be. First, let us review the situation and, having reviewed the position we are in, let us consider why we are in this position, who is to blame, what can be done about it and whether the Government's proposals bear any relationship to the needs of the situation. It is in that form I propose to construct my remarks.
The situation is one of a fairly prolonged period of stagnation. In 1970 national output rose by 1½ per cent and last year by 2½ per cent. In passing, it is worth noting that in each of these cases the forecasts of the Government and, indeed, of other economic commentators have had to be pared down.
As I recall it, in 1970 the original hopes were for at or above 2 per cent. It turned out to be a growth rate of 1½ per cent. Until quite recently and, indeed, until yesterday in figures given by the Director of the Economic and Social Research Institute addressing the CII Conference, the figure for 1971 had been spoken of as a 3 per cent growth. Earlier it was hoped that it would be more than that. He has now said that it will be only 2½ per cent.
Talking of this constant process of revising performance downwards I notice also that in the table Dr. Kennedy produced for next year, he shows a lower growth rate than that which had hitherto been forecast: 3½ per cent as against the slightly higher figure hitherto mentioned. We can see here a constant process of things never turning out to be as good as they were expected to be, or even as they were thought to be in the immediate aftermath of the period in question.
It is worth mentioning here, and this is a point to which not enough attention has been drawn, that one of the reasons for slow growth—and it is, in fact, only part of the reason; I think it accounts for roughly one-quarter to one-fifth of the total disparity between the growth we have had in these years and normal growth rate in this country over the past decade—is the impact of events in Northern Ireland and also of inflation at home upon our tourist industry.
It has been stated recently by an economic observer—and my own calculations based on the GNP figures confirmed this—that the growth of national output in recent years has been at about ½ per cent less than the figures would have been at had we secured the normal growth in tourist activities. Over the four years, 1969 to 1972, this means that by the end of the year the living standards of people in this part of Ireland will be 2 per cent lower. The average worker with his, say, £35 a week will find himself with 10s less purchasing power than he would have had, had it not been for the developments in Northern Ireland and the inflationary pressures on the tourist industry. That accounts for only between one-quarter or one-fifth of the slowing down of growth. The bulk of it is accounted for by the Government's stop-go policies.
Let us consider the impact on industry. In the industrial sector we had a growth of about 3 per cent in 1970. We have no firm figure for 1971. I thought that the figure might be over 6 per cent but I notice that Dr. Kennedy has again discouraged us a bit here by referring to evidence suggesting a further slowing-down of industrial growth in the second half of 1971 in which case my picture of a 6 to 6½ per cent growth in industry is probably on the high side. That means that over two years industries' growth will be no more than 4 per cent as compared with 10 per cent in the two previous years—a dramatic deceleration in the performance of this vital sector.
Wherever we look we find this evidence of a slowing-down which has been a very important factor—I will suggest later perhaps the primary factor—in the growth of redundancy in Irish industry. This has been accompanied by and, indeed, caused to a large degree by the inflation which Government policies have released and aggravated. In this connection I commend to the Tánaiste's attention the table in Dr. Kennedy's paper published yesterday showing a number of key growth rates, including the growth rate year by year of the Government's capital expenditure, a table which shows how extraordinarily erratic the Government's performance has been in this respect.
The Government have been jerking the economy forward far faster than it could afford to go, and pulling it back far slower than it could afford to go, and they have created a chaotic situation. In 1962 the capital programme in real terms was up by just under 9 per cent. In the next two years there was a 17 per cent growth. In the next two years it was minus two and minus 4½. Then it went up to nine, 24 and 16 and then down to 6 and down to the figure which, if it had been maintained, would be another minus for this year.
This is an extraordinary system of anti-planning. You could not even call it non-planning because they plan to spend the money. They take some decisions about it in advance and decide to spend it. This anti-planning on the Government side, with colossal oscillations in the public capital programme, is an important part of the cause of the troubles we are now facing. Like the incomes growth to which the Tánaiste referred rather exclusively, it has contributed to this inflation which for three successive years has pushed up consumer prices in a gradually increasing spiral: 7½ per cent, 8 per cent, 9 per cent.
I thought I heard the Taoiseach talking of a slowing down in the price rise last year. If I caught him aright, this will be the third time within nine months that the Taoiseach or his Ministers told us about this slowing down, in defiance of the statistics which persistently showed an acceleration. The last figures I looked at were those for the latest six month period in 1971 which showed that in six months prices had risen by 4¾ per cent at an annual rate of 9½ per cent. To me 9½ per cent is an acceleration of 9 per cent which is an acceleration of 8 per cent which is an acceleration of 7½ per cent. All I can see is evidence of a continuing further spiralling of prices.
The consequence then of Government policy has been unemployment, unemployment which has a number of different causes. I accept, as the Taoiseach said, that a significant proportion of the present level of unemployment is due to the fact that people have not been emigrating. It strikes me, as it struck Deputy O'Higgins, as a rather curious approach by the Taoiseach of an Irish Government to be complaining that people would not get out fast enough and were hanging around at home cluttering up the unemployment exchanges. It does not suggest a very responsible attitude on the part of the Government. It seems to me that if employment conditions in other countries discourage people from Ireland from going there, we should welcome the opportunity that gives us to put them to work at home, and make some concrete attempts to do so, instead of complaining that they are still hanging around and encouraging them to get out as quickly as possible. The fact is that that is a substantial factor in the present high level of unemployment.
In the Taoiseach's speech on unemployment he was not concerned with the human problems. He was not concerned with alleviating them or finding solutions. He was concerned—not to explain the problem which I would accept, and which is what I am trying to do, but to explain it away. He told us about the old, the married women, and so on, who are always with us in the unemployment figures and are no more with us today than normally. Although he was trying in a half-hearted way to pretend that he was suggesting it, I do not think he was suggesting that the figures had been increased in some way by increases in these categories.
He told us about the seasonal pattern. We all know about that. What we are concerned about in unemployment is the fact that, discounting the seasonal pattern, it has been rising very sharply. Let me give the House the true position. While I was waiting to speak I spent a few minutes calculating out seasonally adjusted unemployment figures under two series to show what is the underlying trend when you remove the seasonal element which the Taoiseach is apparently not capable of doing for himself.
Let me take the figures for those on unemployment benefit, a crucial group because they are the only group with whom fair comparisons can be made backward over time because of the Government's constant fiddling with people on and off the dole. In the first quarter of last year the figure was 35,900; in the second quarter, 35,300; in the third quarter 39,900; in the fourth quarter 42,000. In nine months, unemployment seasonally adjusted, rose by 22½ per cent, an annual rate of growth of 30 per cent in unemployment with the seasonal adjustment removed.
A slightly smaller figure is indicated by the figure for the percentage of unemployed rising from 6.7 to 6.8 to 7.3 and finally in the last quarter as far as I can calculate—and I have had to put in one estimated figure and I put it in at a very cautiously low level —to 7.85. Again in nine months that is a 17½ per cent increase, a 25 per cent annual rate of increase, in the percentage figure for unemployment, the two figures being calculated on a somewhat different basis. Whether it is a 25 per cent or 30 per cent annual rate of increase in unemployment, that is what the Taoiseach should be concerning himself with instead of trying to explain it away with spurious statistics.
May I mention a fact which has not been sufficiently highlighted? In the latter months of last year, during October and November, the level of unemployment as measured by the unemployment benefit figure, the only valid comparison, was higher than at any time that I could find since the 1930s. It was higher even than in the 1956-57 period to which Fianna Fáil for so long have tended to refer in any discussion on unemployment, or emigration, or economic problems.
What about the causes of this? I mention first of all unemployment in the UK and indeed it must be said in Canada and the US, the alternative markets for our labour surplus. This is a major problem, a major cause, but it is not the only one. There is also free trade. I have to differ from the Labour Party in this respect, not because I think it is important we should not fool ourselves into thinking that the unemployment we have now and the redundancies have been caused yet by the Free Trade Area Agreement. I believe there will be significant redundancy caused by that agreement before being compensated by any of the gains which will come from EEC membership. Those have not yet come and it is foolish for us to be talking as if we have already suffered much or most of the Free Trade Area Agreement effects when we have not begun to suffer the effects.
In the article referred to by the Tánaiste, I calculated as best I could in that fairly thorough analysis—it was by no means as deep as could be done by somebody with more time and more competence—that there may well have been up to this point a diversion of business to British firms of the order of about £12 million, involving 3,000 to 3,500 jobs, but in fairness it must be said that the single significant benefit from that disastrous agreement, the removal of the synthetic fibre duty in Britain, will have given to us during the period something approaching £12 million in extra exports and something like 2,000 extra jobs. Therefore, from that point of view, the effects of the agreement to date have not been very significant. From now on the accelerated adverse effects will far outweigh the slow process by which exports containing synthetic fibres will tend to arise. From now on the net disadvantage will become extremely clearer, but I think it would be wrong to attribute too much to free trade at this point. Indeed, we should be hiding from ourselves the truth about what has yet to come under this heading and we may not therefore be seeing clearly the causes of the present situation.
I think the main cause of unemployment in Ireland at the moment, leaving aside the people not emigrating—I put the word "problem" in inverted commas, unlike the Taoiseach—is the effect of economic stagnation, this stop-go policy, this boom-slump policy of the Government which is so marked in our planning about the capital programme. This has had the effect since 1964 of creating a sense of confusion in industry, industry having to increase its output sharply in the boom periods, with a certain lag, building up to employment only to find the Government creating a slump, with too many workers having to be released, and then another boom coming along with not enough workers to do the work and industry having hastily to employ a vast number of additional workers only to find—this has gone right on since 1963—another slump and industry having once again hastily to disemploy workers.
The growth rate in employment fluctuated very widely between 1967 and 1971. It is as follows: 1 per cent, 3½ per cent, 5 per cent, 2 per cent and 1 per cent. The kind of cycle that creates excess demand for labour for a certain period and for certain skills, is inflationary, as the Tánaiste will well know. It sparks off wage demands from particular groups in short supply which then spreads to other groups in the economy thereby generating wage inflation. We get wage inflation from Government policies of booms and then we get redundancies and employment with consequent deflation. This happens when we find growth in employment in industry dropping back to a mere 1 per cent. If there is a 1 per cent growth in industry it is about a ½ per cent in services and of course it is always about minus 3 per cent in agriculture.
The net effect of that, as the Tánaiste and the Taoiseach know, is that employment in the country is declining. The Taoiseach put it very nicely today when he said there was not much change in employment last year. If there had been any change upwards he would have told us. If he says there is not much change it means it is downwards, but he did not say how much. We all know employment fell last year because of stagnation in industry.
This is the main problem, but associated with it, and this is where we come to the specific question of redundancy, has been a fair amount of redundancy of workers due to technological change and due to the impact of this coming at the end of a period of stagnation—the failure of the Government in recent years to get industry into a posture of being prepared for free trade and for technological change, which has been happening with or without free trade. That failure of the Government has built up a backlog of potential redundancy in industry never quite pushed to the point of actually occurring, and the Government's only way of dealing with this seems to be to have a prolonged period of stagnation during which this accumulation of technological redundancy is building up and is suddenly pushed on the market so that it is most difficult for the people concerned to find jobs.
This is not planning—it has nothing to do with economic planning. It is muddling along and the Tánaiste well knows it. I think that the extra factor we have to face in Ireland, as in other countries—and here the Tánaiste is right—is that this problem of technological change has been inadequately faced up to by industry and has consequently caused a problem of redundancy. This can be suppressed for a while by Government inaction, and at great human cost it gets on top because of unchallenged and untackled technological change.
This seems to me to be the explanation of our present problems. When we come to ask who is responsible, where the blame lies, let us leave at one side the blame which the Government seem to place at the foot of the British Government for daring to have unemployment to such an extent that the British economy is no longer taking our surplus workers: how dare they embarrass the Taoiseach and the Tánaiste? Let us look at the blame that rests at home. These speeches that tell us all about other countries and about their problems and how they are in difficulties too do not comfort the people who are unemployed and offer no hope that the Government know how to tackle the problem.
Where, then, does the responsibility lie? It lies, first of all, with the stop-go Government policies. I need not dwell further on them. It lies, secondly, with the failure to get industry ready in time for free trade, to get it efficient. Here it is not enough—the Tánaiste must be made to understand this—for Ministers to go around making platitudinous speeches about the need to prepare. It is not enough to send officials to meet different groups and to report back to Ministers by way of some written report. I know enough about this to be able to say how it goes. I have been at dinners of various kinds where Ministers have come along to make speeches and I have seen everybody at the back of the room counting how many clichés have yet to come and placing bets on the number of platitudes that will be uttered by the Minister before he has finished. That is the level of respect in which these Ministerial speeches are held.
How often do we hear a Ministerial speech that contains anything concrete, anything factual, anything helpful? Whether it is the civil servants who write the Ministers' speeches, the platitudes, I do not know, but it is the Ministers who utter them. As well, everybody in industry is thoroughly dissatisfied with the way the Government carry on their business, leaving all the work to the civil servants and contenting themselves with making speeches. How often have Ministers gone to meet the people in industry to discuss their problems with them and to force them to face the issues and to hammer out procedures? That is not what happens. I was through all these consultations. I was present at every consultation on the Second Programme with every industry and subsequently at the reviews for the first couple of years. There was not a sign of a Minister anywhere. It was all left to the civil servants and there was no evidence that the Minister knew what was going on or that he cared. That is the way that sector was treated and the same happened in every other sector. How often did the Minister for Education concern himself directly with the problems of his Department and how often did he leave it to the civil servants to do the work for him while he sat in his office, going out occasionally to make a dinner speech?
Finally I must come to the question of free trade and the Free Trade Area Agreement. I insist that the bulk of our problems are not yet due to it but there is one thing to be said about it. The agreement itself was a bad one from which the losses to Ireland by 1975 will exceed the gains twice over. I made that point in the Irish Times at that time and nobody ever dared to contradict any of the figures I gave.
Quite apart from that basic weakness, there is the way in which it was negotiated and the spirit in which the Government went into negotiations. There was also the timing. It was wrong. Such an agreement, planning free trade over a period up to 1975, was bound to create the main problems in the period 1971 to 1974: because of the high level of our tariffs it was at the end of the period of the free trade that the problems would arise. I do not think anybody in the Government at that time could have thought that the progress of our EEC negotiations would be such that the gains from EEC membership to be secured during the last two-thirds of the transitional period and thereafter would be accruing to this country by 1971, 1972, 1973, 1974. If anybody in the Government thought that his judgment was not only wrong but it was out of line with informed judgment in this country and elsewhere.
Therefore, in signing an agreement which committed us to the adverse effects of free trade in the years before on any reasonable assumption there would be compensating benefits from EEC membership, the Government condemned the country to very serious economic circumstances, with persistent redundancy and unemployment in the early 1970s. That problem could be dealt with. We could have, should have, but, as far as I can see, have not negotiated with the British Government in the context of EEC membership, a rephasing of the freeing of trade with Britain to line it up with the freeing of trade with the EEC. Within the EEC the transition period is so designed that the losses on the industrial side and the gains from agriculture are phased simultaneously so that the benefits come with the disadvantages, so that we can avoid being hit before we can get the advantages. That is the purpose of this arrangement. Why did the Government then not seek, as they should have sought and could, I believe, have got from the British Government, in conjunction with the discussions with other EEC members, a rephasing of the agreement so that instead of phasing out our tariffs with Britain by July, 1975, this would be done by 1977? Those extra two years could be vital and would, I think, have saved us possibly two-thirds of the adverse effects in the form of redundancy likely to hit us in the next three years. The Government as far as I know did not even attempt to do that. They never even mentioned the subject. It has never even been hinted that there was any possibility of doing this. Whether they never even thought of it or whether they did not care enough or whether they did not try hard enough I do not know because their silence on the subject is so vital.
If they did not do that they still have a card to play. They still have the power, under the terms of this agreement, when the country is faced with problems of unemployment, to take action and in the Fine Gael motion there is a section 5 which calls on the Government to invoke the provisions of Article 19 of the Anglo-Irish Free Trade Area Agreement and the wording of our motion takes exactly the words of the agreement. The Minister for Industry and Commerce has now come in. I am glad he has come in at this moment. He missed a few remarks relative to him but he will get a few yet. The wording here is exactly the wording in the agreement. We should invoke the provisions which enable us to impose temporary restrictions on imports of goods where increased imports have reduced internal demand for domestic products and have thus brought about an appreciable rise in unemployment.
While I have said that the main problems of redundancy are not the free trade area agreement, part of it is the agreement and undoubtedly especially in the clothing and footwear trades the effects have been significant by any standards. There has been a diversion to the British manufacturers of £5 million, £6 million or £7 million worth of clothing and footwear. That has definitely involved several thousand jobs and it will involve in the period immediately ahead many more thousands of jobs if the Government do not do something to remedy their failure to seek a rephasing of the tariff cuts in the context of the EEC and do not at least try to make up for that failure by implementing Article 19 and thereby imposing the necessary restriction on the freeing of trade so as to postpone this process until it can be compensated for by the favourable impact of EEC membership through the agricultural sector.
I would ask the Minister to deal with this when he is replying. I was astonished that the Taoiseach made no reference to it. The Taoiseach's silence, indeed, on virtually all the constructive proposals in our motion was very significant. I hope that neither he nor the Government are so petty as not to take the necessary action because Fine Gael suggested it. This is the kind of action that is needed at this stage and failure to take this action before, failure to negotiate an agreement likely on any reasonable assumption, to fit in well with EEC membership, failure to seek a rephasing of the tariffs and the failure up to this point, except in the case of the hosiery and knitwear industry, to use Article 19, do account for a significant fraction of the problems now being created and the unemployment now being created. They are not a major factor yet but they will be so in the months and years immediately ahead if the Government do not do something about it.
How free are we to take some action to deal with the problems now facing us? Very often a country finds itself in the position of facing serious economic difficulties but being constrained by economic forces so that it cannot take the necessary action. An Opposition can criticise but the Government cannot really take action and the Opposition's criticisms can be, perhaps, at times unfair. Is this the case now? Are we seeking from the Government a course of action which is not open to them because of economic constraint? It is fair that that question should be asked and that the Opposition should face it. Let me examine the position taking item by item what the constraints might be. The first constraint is the balance of payments. The balance of payments deficit is by traditional past standards relatively high. The jumbo jets are a once and for all transaction and are not going to affect the balance of payments in the years immediately ahead. Obviously, if we take that distorting factor out, it is a £62 million deficit estimated for this year. It may be somewhat more. I thought the December trade returns which we got this morning were extraordinarily favourable. I doubt if they were anticipated by either economists or Government and it may well be that the external deficit, adjusting for the jumbo jets, may be below £60 million, a high figure by past standards although if one allows for changes in money values not so very high.
Then let us consider that deficit in the context of the reserve situation and the capital flow situation. Our reserves are at this point enormous partly admittedly because of Government borrowing, the fact that the Government have decided it is proper to borrow and as a result the reserves have been increased. In the 12 months between November, 1970, and November, 1971, our reserves rose from £309 million to £402 million, an increase of one-third. What this reflects, an increase in reserves of this magnitude achieved during a period when there was an external deficit of a significant character, is a capital inflow of an incredible magnitude, £180 million. It is only a year or two since we talked of the £30 million or £40 million inflow with rather bated breath and wondered could it last. Then it pushed up to £60 million or £70 million and we all said it was the bank strike. Then it went up a bit higher and we said it was because the bank strike was over.
At this stage the fact is that the capital inflow last year was £180 million. As far as I can make it out, something like £40 million of that was a once and for all effect of the bank strike, deposits returning. Of the remaining £140 million, £60 million or something of that order is accounted for by Government and State bodies borrowing including the £20 million for the jumbo jets. That still leaves an autonomous private capital inflow, net, of £80 million, a very substantial figure and while it is never wise to count on the whole of this I think it is clear, and I think the Government and the Central Bank and so on must be satisfied on this, that our capital inflow position has improved greatly and that we are in a position today with reserves at a very high level, with a capital inflow which although there are abnormal features in it even when you discount them is nonetheless by any reasonable standards at a high level. We are in a position where I believe if other circumstances permit we could legitimately take action to reflate the economy even at the cost of a significant increase in the external deficit above the basic figure of around £60 million which it was at last year allowing for the jumbo jets.
Does the external situation permit it? If we were facing at this moment external difficulties, the prospect of exports being cut back, of imports rising sharply, if we were facing a deterioration in the balance of payments, quite separately from what I am talking about, then one would hesitate. I do not think we are. I think, and the Government must surely see this, that we face a very favourable situation in export markets next year. Britain still takes two-thirds of our exports and the British economy is now in a position where it can look forward to a growth in output of over 4 per cent while securing an external surplus of £1,000 million. I shall not dwell on the question of how they have got into that position after the experience of the 1960s and even the 1950s. Perhaps there is a bit of a British economic miracle. Perhaps we can learn something from it. That is the position anyway. That Britain should get to the point of being able to look a 4 per cent growth rate straight in the face while having £1,000 million about to be tucked away in the form of an external surplus is a remarkable situation but it does mean that the British economy is being reflated pretty fast. This will involve not only an increase in imports to match consumption but because of the condition of the British economy considerable restocking and, therefore, the growth in imports in the year ahead will be disproportionate to the growth in consumption. We can look forward to a year in which our exporters will face very favourable conditions in the British market.
A country which is in the position of having its reserves up by one-third, having a capital inflow of a magnitude which we never foresaw as possible but a proportion of which is sufficiently stable to permit one to count on it, whose export prospects are abnormally good, is a country which should not be facing massive unemployment and be feeling incapable of tackling it. There are no constraints at this point that should prevent this Government from tackling this problem. I do not think any economist would advise the Government at this stage that they cannot safely reflate. I know there are always risks in this. I know we face the problem of the wage round and its magnitude but I think the Government are more likely to get a more favourable reaction on this wage round from the trade unions if they act to deal with unemployment than if they do not. As I judge it if they show no signs of caring about the unemployment situation, if the Government show that they are not concerned, there will be very bloody-minded workers next June, and who could blame them? If, on the other hand, the Government take the necessary action and show that they are dealing with the problem, and go to the workers and say, either directly or indirectly, "Look what we are trying to do, help us to do it by not endangering our work of creating employment at this stage by an excessive wage round," they are likely to get co-operation.
Sometimes economic advisers to Governments fail to appreciate the psychological points. They sit in their backrooms and may well calculate that they can reflate but only if wage rounds are all right. However, one cannot adopt a wait and see attitude in these conditions because such an attitude changes conditions and changes for the worse people's psychological attitudes. There is a chance now to make a double breakthrough, a breakthrough in reflating the economy, in bringing down unemployment and creating favourable conditions for economic growth next year, while at the same time putting oneself into the position of getting across to the unions and the workers the need for the necessary measure of restraint. The opportunity is there; but if there was anybody on the opposite benches, which there is not, as usual, could he say that, having listened to the Taoiseach, he could look forward to something of that kind occurring within the next few months?
There is full evidence of the Government's attitude to the position in the Taoiseach's speech and in the speech of the Tánaiste. Having made these suggestions, but not holding out any hope that anything will be done about them, it is open to the Government to take more action. The constraints are not there now and, economically, they have freedom of action. Politically, a Government should wish to do something about unemployment, but this Government is so mesmerised by their problems and are so incapable of applying their minds to them at this stage that they prefer to drift along and not attempt to tackle the problems, regardless of the fate that will await them for having adopted that stance of inertia in the crisis.
Many of the solutions to the problems facing us are set out in the Fine Gael motion, to which Government speakers have not referred. First, there is the immediate problem of redundancy to be tackled and this can be done, as proposed by us, by ensuring that people receive at least one month's notice of redundancy. A Government capable of acting as the Minister for Education acted a couple of months ago, when he sacked a couple of teachers in his direct employment at three days notice but told the House that they received a week's notice, is not a Government who will be concerned about one month's notice of redundancy. That would be too much to hope for. Secondly, as we propose in the first part of our motion, the Government should initiate discussions immediately with employers and trade unions to secure a postponement of any further redundancies for a sufficient period to make it possible to investigate the possibilities of maintaining employment. If I understood the Taoiseach correctly, something of the kind is being done. He was so downcast in what he said and so unimpressive that I do not know how seriously I should take him. However, he did say something—and I hope that some other Minister will tell us in concrete terms what exactly is meant and what are the proposals. If the Taoiseach, as I understand from his speech, has accepted the first of the Fine Gael proposals, I am glad to hear so, but I would like to be more sure before congratulating him or any other member of the Government on so doing.
The other point that we made is a more long-term one, but since it relates to redundancy I shall deal with it now: that is, the need to look ahead so that we might foresee where redundancy is likely to occur and endeavour to get new industries into these places. I am tired of referring to this matter in the House. As the Minister's advisers know, it was put forward—and, I thought, accepted in principle—in the CIE hall in 1961 that the assessments being made of industries by the research teams would be reported confidentially to the Department and that they would identify individual firms likely to face redundancy. Most of us knew which firms these were although we were never given information on individual firms. The suggestion was that these places would be pinpointed geographically so that the IDA could encourage industries to locate in these various places. However, nothing was done in that regard, although the job would not have been a very difficult one. Somebody could have kept a map for the IDA so that they might plan industrial locations from then on but the policy of the Government, which the IDA had to follow, was: "We must not try to locate industry anywhere in particular because if that is done all the pressures from other towns would be against us; we must be neutral in this affair so that we cannot lose votes in other places." That policy still persists in the failure of the Government to deal with the Buchanan Report. Our proposal was made without much confidence because the Government have neglected to do anything about the proposal since it was first made ten years ago, although not made by us at that time. It is only right that we should put forward publicly this particular proposal.
The next problem with which I shall deal is one that arises in one particular industry at the moment, that is the problem of bridging the gap between now and EEC membership. There is nothing more stupid, tragic or absurd than the spectacle of largescale redundancies occurring in an industry which, of all industries, is the one that is certain to benefit in the immediate future from EEC membership. If there is one question that is not challenged by the anti-Common Market people—and in this respect I look vaguely at the Labour benches— it is that the beef industry must benefit from EEC membership. Some people may say it is not the right industry to benefit but everybody is aware that it will benefit. However, there are redundancies in the industry at this stage. It is in this industry that thousands of extra workers will be needed but we have redundancy because of some technical defect in the relationship between Irish and British subsidies and the failure of the Irish Government to tackle the problem. The subsidies are working now in such a way as to encourage store cattle at the expense of beef, that is, the British at the expense of the Irish economy. What did the Government do? Nothing. They would have every justification in acting and the problem is one that could be dealt with. That is why we have put it down as one of the problems to be disposed of but, like most of our other suggestions, it has met with silence from the Taoiseach.
Next, there is the problem of trying to create employment directly by Government action. Politically, this is a popular line and one that is always brought forward and I would not be satisfied to endorse it were I not happy, first, that the programme we are putting forward is a much broader and more constructive one and that, secondly, in the particular circumstances of the moment there is justification for this. I am not talking of public works for the sake of public works. What we are putting forward in item 9 of our programme is that the kind of works that have been held up and in which there has been a cutting back—for instance, schools and hospitals and the housing programme—should be stepped up. These facilities are needed both socially and economically, but in respect of them, the Government have had to impose cutbacks because of the mess they have got into. These are facilities that can be extended in terms of finance available and also in terms of the labour force available. Workers who are now redundant could be absorbed into this type of employment. It is an important part of any programme at this stage, although I would not rely on it as the sole part of a programme of reflation at this point of time.
I must comment at this stage, as Deputy O'Higgins commented, on the spurious way in which the Taoiseach tackled this matter. Mumbling along, he said that the capital programme was increased by £20 million last November and, apparently, by a further £6 million since then. But by some process of arithmetic that is lost to me, £20 million plus £6 million became £30 million so that there was a total increase of £30 million. The Taoiseach said then that the total increase for next year would be £50 million more than the original for this year. If the figure of £30 million is right there will be a £20 million bigger capital programme in 1972-73 than the actual one for 1971-72. However, what he did not tell us was that the actual programme as increased for 1971-72 would amount to £223 million and that £20 million on £223 million is only about 9 per cent and that on any reckoning of inflation, 9 per cent is about the amount of inflation. What the Taoiseach was telling the House in concrete terms, but hidden carefully in figures, was: "We do not propose to increase the capital programme next year no matter how bad the situation. We will keep it at the same level. We will give enough money to prevent it dropping but not to increase it."
If the Taoiseach was right in saying that the authority is being given to spend some of next year's money during this year and if that is done on any scale at all, the actual increase in next year's spending over this year's would be reduced correspondingly by that transfer and there would be a drop in the level of next year's programme by comparison with this year's. If even £3 or £4 million is brought back to be spent this year, and so it should be, the restriction which the Taoiseach has placed on next year's capital programme, a restriction appropriate to periods of deflation rather than reflation, there will be involved an actual drop in capital spending in real terms. That was the prospect held out to us in the guise of an increase. That particular dishonesty was unworthy of the Taoiseach.
The other things we have put down here relate to the question of interest rates. This is important. It puzzles me that we have got into the position we are in in regard to interest rates on capital. In December, 1969 the Central Bank discount rate which is the dominant interest rate in this country, was 8¼ per cent. The deposit rates were 4½ per cent and 6 per cent for under and over £25,000. The overdraft rate was 9½ per cent. During the period December, 1969, to March, 1971, which is roughly the period of the bank strike, the discount rate fell by 1 per cent from 8¼ to 7¼ per cent. The overdraft and deposit rates showed no reduction although there could have been a reduction.
Between March and November, 1971, the discount rate fell from 7¼ to 4.94 per cent, a 40 per cent drop in interest rates in eight months. What happened to the rates charged by the banks? Deposit rates have not fallen proportionately. They have fallen by 33 per cent. Over this period from December, 1969 to November, 1971 the deposit rates have not fallen as sharply although they could have done so, because the true interest rate level is governed by the discount rate. It is not clear why the deposit rate has not been reduced proportionately to the discount rates. The overdraft rates have not been reduced proportionately to the deposit rates. The overdraft rate was 9½ per cent in March. Since then it has been reduced to a range of from 7¾ to 9¼ per cent. Those who are getting money at 7¾ per cent are getting a reduction of 18 per cent in the overdraft rate. Those with 9¼ per cent are getting a reduction of 2½ per cent. Why are the banks not reducing the overdraft rates proportionately? The profit margin of the banks has been vastly increased. I do not see what this is in aid of. The interest rates charged at the moment are beyond what is necessary.
As we know from the figures we have got for the actual deposits and advances of banks, the liquidity has been sharply improved. The advance deposit ratio has gone from 68 to 65 per cent. Taking private borrowing only, the ratio has gone from 59 to 54 per cent. In the period April to November, 1971, deposits have gone up by 5½ per cent and advances down by 4 per cent. In other words, the banks are keeping their interest rates for deposits high. Lending is going down. It is no wonder that this is so because the interest rates are high.