I move:
That Dáil Éireann at its rising on the 18th December 1980, do adjourn for the Christmas Recess.
The year now drawing to a close will long figure in the economic history of the world. Economic growth dried up throughout the Western developed economies. Most of the developing countries suffered a serious set-back to their solvency as the increasing cost of oil absorbed their limited resources. Unemployment on a scale not seen since the second World War has re-appeared in countries which had come to regard full employment for all as permanently assured.
We in Ireland have suffered severely from the effects of this world recession largely because the oil-price increases, which are at the root of the recession, took away a greater share of our resources than in other less oil-dependent countries. The fact that we have come through the year not only without damage to the underlying strength of our economy but with significant improvements to its capacity has been due in large measure to the approach and the policies of the Government.
As I stated in the budget debate at the beginning of the year, and on several occasions since, the Government do not believe that drastic deflationary policies are appropriate to a country like ours with its young and increasing population.
That is not to say that we can manage our economy without prudent limitations on expenditure, both domestic and external, and without regard to the discipline demanded by the trend in external deficits and internal prices. But the essence of good economic management in times of economic difficulty, is to maintain intact the ability of our economy to provide acceptable standards of living while improving, as much as possible, its basic capacity so that it can seize the new opportunities rapidly and effectively when the world economic climate improves.
It is this economic commonsense which has enabled our economy this year to grow at a rate which is above the Community and OECD averages; to maintain levels of investment which are among the highest in the Community and OECD area; to expand our exports at a rate above the Community and OECD averages; to achieve record levels of new job approvals in modern competitive high-technology industry; to not only maintain but to increase marginally the volume of agricultural output; to reduce our external deficit; to bring down the rate of inflation from a peak of 20 per cent to the current annualised rate of 12-13 per cent; to reverse the trend in interest rates and bring them down to their current level of being the third lowest in the Community; and to have had the lowest number of days lost through industrial stoppages since 1977.
The performance of our economy generally this year compares more than favourably with the general Community and OECD performance. Furthermore, we are aware from our discussions with the trade union movement that the economic policies being urged by me in the European Council have the support of the trade union movement throughout the Community because they give priority to the maintenance and provision of employment. Unemployment has now reached nearly 7½ million persons in the European Community and the projections are that it is likely to increase further next year. This is a sombre prospect unless the necessary measures are taken to give the protection and provision of employment the highest priority in economic management.
The European Commission has now urged that the solution to unemployment is in a package of short-term and medium-term measures designed to strengthen competitiveness and to help achieve more effective adjustment of the structures of the economies of member states in order to rebuild the foundations for more sustained growth. The Commission has also stressed that deflation must be ruled out as an instrument for restoring external equilibrium. The Commission considers that, while member states must endeavour to reduce gradually their external deficits caused by the oil price increases, these deficits are due to an imbalance in relationships with the OPEC countries which can be rectified only in the course of time. The Commission, therefore, recommends that these oil-induced deficits be tolerated at least for the time being. In this context, it is relevant to note that 40 per cent of our external deficit this year is due to the increase in the cost of oil imports alone.
These recommendations are a firm endorsement by the Commission of the policies we have been pursuing here. The Presidency conclusions of the recent European Council gave further support to these policies by stressing the need, in current economic and social circumstances, for increased investment and for improvement in infrastructure.
I think the recommendations of the Commission and the conclusions of the European Council are convincing evidence that the Government were correct in their economic judgment to increase during the year, as the need became evident, the provision for investment in the economy even though this involved a higher Exchequer borrowing requirement than was originally envisaged. The Government had made clear, at the time of the budget, that additional expenditure would be incurred if this was considered necessary to sustain economic activity and employment.
As I explained in moving the motion of confidence in the Government's economic policies in October last, the level of the Exchequer borrowing requirement is one that must be determined not by any dogmatic formula but with due regard to the general economic circumstances and to the composition of the expenditure involved. Our economy needs exceptionally high levels of investment for a period if it is to become a productive, competitive and efficient economy. That is why, as a deliberate act of policy by the Government, gross domestic fixed capital investment is running this year at about 30 per cent of gross national product as compared with only 22 per cent in 1975 at the height of the last recession.
An analysis of the present state of the Irish economy and the population trends point clearly to the lines along which economic policy should be directed in the period immediately ahead. We need to achieve a massive improvement in our infrastructure of services by a major programme of productive investment. At the same time we must restrain current expenditure so as to achieve a reduction in the current budget deficit in order to free as much of our resources as possible for this investment and as a contribution to reducing the rate of inflation.
The deficiencies in our infrastructure are clear. The growth of our industrial and commercial activity and our general competitiveness and productivity are hampered by lack of capacity and efficiency in the communication services so vital in a modern trading economy such as telephones, telex, roads, harbours and airports. The rate and pace of growth of our industrial sector is dependent on greater investment in industrial buildings, equipment, installations and services. We have shown the capacity to develop a modern competitive high-technology industrial sector, and we plan to accelerate the growth of this sector by increased investment next year.
An economy developing from our state of development requires a faster growth of energy consumption than a more developed economy. We are faced with the need to increase our energy production by half as much again by the end of this decade if we are to maintain the momentum of our economy.
Increased output and productivity in agriculture are also directly linked to investment. Our fast growing population — both because of natural increase and because our people are returning in large numbers from abroad — requires increased investment in essential social capital. Our economic and social progress is reflected in growing urbanisation, and this demands increased provision of the necessary sanitary services to keep down the unacceptable rise in the cost of building land.
Our general objective through increased investment must be to create an efficient and expanding economic structure with the same standards of efficient services as our trading competitors. Only in this way can we hope to maintain and improve our living standards in an increasingly competitive trading world.
As a corollary to increased investment we must restrain consumption. In terms of the public finances, that means that we must start reducing the current budget deficit. The practice which prevailed throughout the seventies of financing a current budget deficit by borrowing must be brought to an end. Borrowing for investment is justified in that it will, directly or indirectly, provide economic activity, jobs, new production and revenue. The adjustment over time to a decreasing current budget deficit will be restrictive but it is unavoidable.
The Government are currently examining in careful and critical detail the Estimates for 1981. This is a difficult and demanding exercise so that we can strike the right balance between restraining expenditure and avoiding hardship and unemployment. We are, therefore, reviewing meticulously each item of proposed expenditure so that the fairest balance of economic and social advantage possible in present circumstances can be found.
It is because of our conviction that an efficient and adequate infrastructure based on increased productive investment must be the corner-stone of economic policy for the future that the Government will publish early in the New Year an investment plan for the economy. This plan will outline our proposals to develop and improve the basic framework in which the economy functions in order to make it more efficient and productive. It will be based on the principle that we must have the highest possible level of productive investment consistent with our resources. We must mobilise all available resources for this investment plan, which will provide the context in which new and accelerated growth in the economy can be achieved.
To ensure the maximum utilisation of resources we intend to mobilise private sector resources to supplement the resources in the public sector. In the new investment plan, therefore, we will start a process of providing opportunities to the private sector to invest in public facilities and services which have in the main been financed, heretofore, by Exchequer borrowing. In my speech at Ennis earlier this year I outlined my belief that in a mixed economy such as ours we must provide scope for mobilising private sector financial resources to make long-term growth investments in the future of our economy. I note, incidentally, that the journal The Economist recently made exactly the same suggestion in relation to the United Kingdom economy. We know from our discussions with financial institutions that substantial funds are available in the private sector for new productive investment and that there is clear goodwill to use these funds to supplement public sector investment in many areas.
The Government's emphasis on increased investment accords with the recent recommendations of the National Economic and Social Council in their report Economic and Social Policy, 1980-83; Aims and Recommendations that the Public Capital Programme should give greater weight to productive capital projects including related infrastructural projects. The council envisaged an integrated policy package which, through an adjustment in the current budget deficit and the current balance of payments deficit, would enable productive public expenditure to increase in real terms, on a selective basis, so as to improve the capacity of the economy to take advantage of increased world economic activity when it develops. In this way, output and employment can rise as the world economy moves out of recession.
The major objective in increasing investment is so to expand and improve the structure of our economy that it will generate higher employment. The sharp rise this year in the number on the Live Register of unemployed is a symptom of the lack of sufficient investment in the past to generate the level of jobs necessary to absorb our rapidly growing labour force.
This rapid growth in our labour force is a new factor of great economic and social significance. Up to recently it was thought that the labour force was increasing by perhaps 10,000 per year at most. The results of the 1979 Census of Population suggest that the actual labour force increase this year could be over double those estimates. We will shortly have the results of the 1979 Labour Force Survey and these will enable us to determine more precisely the growth in our labour force and, even more important, in our employment. New industrial job approvals are running at record levels. This year over 35,000 new industrial jobs have been approved. The magnitude of this achievement is clear when we realise that in 1975, at the height of the last recession, new industrial job approvals amounted to only 14,000. It is clear that we now have the capacity to provide at least 30,000 to 40,000 new jobs annually. Unfortunately, these are being largely offset this year by heavy job losses particularly in the older traditional industries affected by reduced demand because of the current world economic recession. As these job losses abate, and as the record level of new job approvals is translated into actual jobs, we will be able to offer to our growing labour force a wide range of highly-skilled and rewarding jobs in manufacturing industry and in services.
Part of the additional investment funds provided under the second national understanding are designed to accelerate the translation into actual jobs of the record levels of new industrial job approvals. Under the new investment plan we will continue this acceleration so that the new jobs are provided as quickly as possible after the formal approval has been given. In this way we intend to offset job losses in older industries.
Because of our underlying strength to provide new jobs not only in manufacturing industry but also in the services which have been growing rapidly in recent years, we should be able to maintain and even increase our non-agricultural employment this year. This is in spite of the rise in the Live Register which is now reflecting the overall growth in our labour force.
The 1979 census showed that our population was greater than we had heretofore estimated, including in rural areas throughout the west. This suggests that the assumptions made in recent years about the decline in the agricultural labour force may have been too pessimistic. In any event, much of the so-called job losses in agriculture are due to retirement and death and do not represent labour force vacancies in the same way as in the other sectors.
We must all recognise, however, that the farming industry has had two difficult years. I think that 1980 in particular will be remembered as the year which underlines for us the basic fact that the other economic sectors depend greatly on a prosperous and progressive agriculture.
The economic difficulties of the farming industry this year have been of special concern to the Government. I myself met the farm leaders on six occasions this year to discuss the problems of the industry, and the Ministers for Agriculture and Finance have also met the farm leaders on other occasions. Arising from these meetings a series of new measures were taken which it was agreed between the Government and the farm leaders would give substantial material help to farmers in coping with their financial difficulties. I also held several meetings with the representatives of the associated banks to discuss the special credit problems of farmers and in these meetings arrangements were made which helped to alleviate the repayment problems of individual farmers suffering financial hardship. The Government intervened with local authorities to waive the second moiety of this year's rates for farmers in the £40 to £60 valuation category and to ensure that no farmers would be pressed to pay rates this year, if he could not afford to pay because of temporary financial difficulties, and that he would pay no interest on the debt incurred.
This important series of meetings between the farm leaders and representatives of the Government and the measures taken as a result clearly show our deep concern as a Government about the problems of the industry and our determination to act positively to alleviate them. There can be no doubt, however, but that the problems of the farming industry in this country and in other Community countries cannot be solved at national level alone. The basic problem of the industry is the heavy loss of real income it has suffered this year and last year due to the gap between production costs and Community-fixed prices. This loss is widespread throughout the Community though our farmers have suffered most because of the higher input costs in our exceptionally open and heavily oil-dependent economy. The solution can only be found in the realisation at Community level that farm prices must be fixed at levels which ensure the fair standard of living for the agricultural community which the Treaty of Rome envisages.
I raised this issue at the recent European Council and I believe there is now a growing realisation of the economic and social importance of the Community's farm industry which employs eight million people and ensures the security of Community food supplies and the stability of Community balance of payments. In particular we must promote the view that in considering the evolution of the Community budget and its impact on the Common Agricultural Policy, the special position of regions like Ireland heavily dependent on agriculture which makes relatively small demands on the Community Budget must have special consideration.
This is the background to the case the Minister for Agriculture has now presented to the European Commission for additional assistance to the farming industry in Ireland. The Presidency Conclusions of the December Luxembourg Council stress the necessity to ensure that Community instruments are used to improve the economic situation in the less-favoured rural regions. The Treaty of Rome itself recognises that the Common Agricultural Policy must have regard to structural and natural disparities between the agricultural regions of the Community. The relatively high proportion of our population which depend on agriculture for their livelihood, and the basic importance of the agricultural industry to our overall economic performance make it mandatory on the Government to fight determinedly in Brussels to protect and promote its interests. I would ask that the other sectors support the Government in whatever measures it urges at Community level or takes at national level to sustain the agriculture industry on which over 40 per cent of our exports are based.
In this context we award top priority to the need to make adequate resources available in the Community budget to finance existing Community policies including the demands created by the enlargement of the Community.
I have referred to the intensive series of meetings I held during the year with the farm leaders. These meetings have been paralleled by similar meetings with representatives of the other economic sectors. The complexity and sectoral interdependence of a mixed economy such as ours which is in course of rapid transformation requires, in my view, close dialogue and discussion between the Government and these representatives. Our economic and social objectives can be achieved more rapidly and more completely if we work together in close consultation and common accord than if we dissipate our energies on sectional conflicts and dissensions. It is my intention to discuss the forthcoming investment plan to the extent that opportunity permits with the interests most directly involved in the achievement of economic progress.
Apart from increased productive investment, the other special focus of economic effort next year must be to achieve higher standards of efficiency and competitiveness throughout the economy. We know from research studies that our general level of productivity is much lower than that of our trading competitors in the Community. While this is a matter to cause us concern, it is also a challenge. There is no reason, if we put our minds and our wills to it, why we cannot achieve the same levels of productivity as workers and management have achieved in other countries. The fact that they have been able to do it shows that it is possible for us to achieve comparable levels of efficiency by using known methods of organisation, management, marketing and technology. Increased efficiency is not necessarily a question of working harder; it is a matter of working in a more organised and rewarding way.
I have asked the social partners to consider urgently how we might best improve our efficiency and competitiveness and to bring forward proposals and recommendations as quickly as possible. These will form the basis of new efforts to do what employers and trade unions in other countries have shown is possible. Industrial peace and reduction in absenteeism can greatly help to increase our efficiency and competitiveness.
I appealed at the beginning of this year for industrial peace in 1980 and, in the event, the hours lost this year through industrial action are the lowest since 1977. Nevertheless, we must try to do better in 1981. In particular, the high incidence of unofficial stoppages cannot be considered justified when we have a strong and skilled trade union movement well able to defend amd promote the interests of their members. To undermine and bring into question the competence and authority of that movement is to damage gravely not only the general economic interests of our society but the best interests of trade-unionists themselves. I think the dangers inherent in unofficial stoppages are becoming apparent to the vast bulk of trade union members and I am hopeful that we may see a new spirit in 1981 and a new support by members of their union leaders.
I have outlined the main features and prospects of our economy. But we must not forget that we are not an economic unit only. In the most profound sense of our human condition we are a social unit. That is why during the year the Government have given the highest priority, in spite of our economic difficulties, to maintaining and advancing our social provision for the needy and disadvantaged. We brought about a real increase this year in social welfare benefits and have undertaken in the second national understanding to continue to increase social welfare payments at least in line with the cost of living. This concern with social welfare recipients is also reflected in the double payment of long-term benefits this month.
We have also undertaken to widen the scope of our social services by introducing paid maternity leave and increasing the statutory health eligibility limit. The introduction of full income-splitting for tax purposes was another important social advance during the year.
We will publish later today a White Paper on Education which will reflect the thought the Government have been giving to the further development of our educational system. The transformation of our economy to higher levels of output and productivity is closely linked to the capacity of our educational system to provide the necessary education and training which will assure our young people of a rewarding role in the life of our economy. This White Paper will provide the focus for discussion and debate so that all necessary action can be taken to improve the capacity and content of our educational system.
I have also stressed several times during the year the importance from a social viewpoint of ensuring that our economic growth benefits all regions. One of our important social objectives must be to ensure that people are given satisfactory opportunities to live and work in their own regions and localities. In my view, this will multiply and release the talents and energies of local communities to improve their economic and social environment. Our investment policies, therefore, have sought to ensure that all regions receive their due share of investment resources and projects. This policy will also lessen demand for new social capital caused by excessive concentration of population and economic activity in a limited number of areas. Our recent decision to decentralise over 3,000 government posts to regional centres is a clear example of our commitment to regional growth and development.
Tourism has a very significant contribution to make, not only to national growth, but also to regional development. Our tourism industry is now beginning to grow again following some difficult years. We must, in particular, seek to obtain maximum benefit from the competitive currency advantage we now enjoy with the United Kingdom and United States, and we must in particular concentrate on the services and facilities we offer to touring visitors of modest means.
I believe that there is now a widespread understanding throughout our community of the depth and extent of the present world recession and the serious difficulties it poses for us. These difficulties can only be increased by the further increase in price of oil which is on the way. By any criteria we wish to apply, 1981 will be a difficult year. However, we must not be pessimistic about the future. There are many hopeful and encouraging aspects. Our economy is basically sound and has enormous potential for growth. There are indications, tentative admittedly, that the deepest point of the world recession may have passed and that an upturn can be expected during 1981. In our particular case, we can look forward with a reasonable degree of optimism to finding oil and further gas reserves off our coast which would have a profound impact on the growth and capacity of our economy. It is also legitimate for us to look forward to the successful conclusion of the Law of the Sea Conference which will open up for us the full possibility of exploring and exploiting our continental shelf and its waters. This can lead to exciting new prospects not only for hydrocarbons but for other physical and biological resources.
We have come through a dangerous and difficult year with our capacity for continued economic and social progress intact. We face into 1981 with economic and social policies which should enable us to improve further our productive capacity and to increase our levels of social justice and welfare. We have a wide range of attainable economic and social objectives to achieve as a nation. We do not underestimate the problems of 1981 but we will face them with confidence in our policies, belief in our objectives and faith in the capacity and enterprise of our people to grasp every opportunity for continued economic and social progress.