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Seanad Éireann debate -
Thursday, 21 Jan 1982

Vol. 97 No. 3

Appropriation Act, 1981: Motion (Resumed).

Debate resumed on the following motion:
That Seanad Éireann notes the supply services and purposes to which sums have been appropriated in the Appropriation Act, 1981.
—(Senator G. Hussey.)

To give a little bit of the economic background to the Appropriation Bill, it is well to bear in mind the out-turn of spending and taxation for 1981. The main thing that concerns people at present is the fact that our current deficit is 8¼ per cent of gross national product. That is up 50 per cent on the previous year in money terms. The seriousness of that situation would have been far worse were it not for the July budget. In fact, it would have come out at about 10 per cent of GNP. Our basic problem in the economy at present stems from our very high reliance on foreign credit for economic activity. Last year about 14 per cent of all our spending was funded by foreign borrowing, that is, both public and private. Three-quarters of that was in the public sector and that is why the problem of the current deficit being run by the Government is so acute. We are effectively drawing on foreign resources to finance our current deficit.

The other point to bear in mind about our foreign borrowing performance is that it is a relatively recent phenomenon. In the past four years our reliance on foreign credit for our ordinary spending averaged 10 per cent of GNP. Back in the late fifties when Senator Whitaker was at the helm of the economy, at least on the public service side, even 3 per cent reliance on foreign borrowing was regarded as of crisis proportions. We really have slipped in terms of our financial performance since then. I do not believe that foreign borrowing should be avoided if we were confident that the resources were being used properly, but the size of the current deficit obviously points to the fact that we are using foreign resources in such a way that we will not be able to service the growing debt in the coming years.

I believe our problems now do not lie so much on our ability to continue borrowing abroad. In terms of the importance of public borrowing in Ireland, at least the importance of public debt as it stands now, compared to other countries, we are reasonably well placed. About one-third of our annual income is accounted for by foreign debt. That I do not believe is excessively high. But the worrying feature is that so much of that has been incurred in the past four or five years. Heretofore we did not rely at all on foreign borrowing. Therefore, we are rushing, headlong, along a dangerous road and in the coming budget we must take action to stop it.

I do not intend to try to attribute blame for introducing the practice of using borrowing to finance day-to-day spending. As Senator E. Ryan pointed out yesterday, it started in earnest under the Coalition in 1973 to 1975. Let me point out that, at that time, all of the economists were urging the Government to do precisely that. It was said that, in the wake of an oil crisis, the Arabs had vast resources with which they could do nothing else but lend. Therefore the Government at that time were advised that it would be folly not to borrow. For that reason it is a bit hollow to hear the economic commentators now berating all politicians, of all shades, for their borrowing practices because it was the enthusiasm with which politicians took up the original economic advice that has us in our present position. Given that encouragement, the Government in 1973 to 1977, realised, mid-way through their term, that it was a practice that had to be stopped. Their success, within two years, in reducing the then borrowing for current purposes from 7 per cent to 3½ per cent — halving it in effect — was a remarkable achievement. The incoming Government, in deciding on a policy of borrowing to launch the economy — as they then said — on a path of sustained growth and rising employment, were profoundly misguided. They did so at a time when the economy was recovering anyhow and the capacity to meet the extra boost in demand that they put in by borrowing was not there. Effectively the extra demand that they boosted was diverted into buying goods abroad. It did not do the economy the lasting good they had hoped. It has also undermined our room for manoeuvre now at a period when we are in economic recession. In principle it would be very desirable for a Government to be leaning very hard on new projects, investing new money in the economy now when unemployment is rising. But ability to do that has been undermined by three or four years of misguided use of foreign exchange.

The other worrying feature about our present dependence on foreign borrowing to offset our balance of payments deficit is that it seems now to be much more fundamental than it was in the mid-seventies. In 1975 we succeeded in eliminating entirely our foreign borrowing on the balance of payments although in 1973 the Arabs had put it into serious deficit with their oil price increases. It has been proven in the last two years that we have no longer the capacity to reverse our dependence on foreign borrowing in the way we were then able to do. The reason for that fundamental change in our position is that the deficit is now founded on unrealistic expectations built up over the last three years. I believe that the Government have a very hard task ahead of them in turning around people's expectations as regards the living standards that can be supported for the amount of work done. That is the economic background to our present spending situation.

At the public level — where we are dealing with public spending and public taxation — there is a deep cause for our present situation. That is the failure of the man in the street, the Oireachtas and indeed Ministers, to link spending with taxation. As regards the man in the street it will be discovered that there are very strong lobbies that build up in support of all sorts of spending proposals. But there is not at all the same strong lobby in favour of keeping down taxation. The people who are interested in reducing taxation tend to be much more scattered and weaker in their ability to muster public support whereas the people who are backing spending can always point to the true needs of extra spending in specific areas. That tendency in the mind of the man in the street is being reinforced by the way in which we consider our spending in this House. The spending estimates are completely divorced from the taxation proposals. The tax seems to be entirely the responsibility of the Minister for Finance. It is imposed in one fell swoop at the budget when everyone is prepared to say what a deplorable thing it is to be increasing taxes. On the other side, the spending proposals are farmed out among individual Ministers whose interest it is to maximise their spending to try to maximise the way they cater for their particular responsibility. I do not believe that that approach to spending and taxation — which we pursue in this House — does anything by way of improving the man in the street's ability to see why taxation is necessary and what value he is getting for that taxation.

Another matter that has encouraged our reliance on borrowing in recent years was pointed out by Dr. Kieran Kennedy, Director of the Economic and Social Research Institute recently. That is, that there have been hidden victims of our borrowing policies. He took an instance of someone who lent £99 in 1962 to support a national loan. He estimated that in real terms the value of that £99 that person lent in 1962 is, in 1981, £10. That performance, whereby people who — out of a commitment to the national economy — sank their savings into investment in the future of the economy means in effect that those people have been robbed of nine-tenths of the money they invested. That is a disappointing situation in many regards and has encouraged our use of borrowing in a way that has not been giving proper value for money.

The "Late Late Show" last Saturday threw down a clear political challenge to us to tackle the present financial problems, to tackle the problem of getting value for State money and for pulling the economy back from the very high level of unemployment now involved. The fact that we squander public money is undermining our ability to provide jobs. I believe we can tackle this problem along four distinct paths. One is to establish clearer controls and standards for the various sectors of public spending. Another is to explicitly link public spending and public taxation. A third is to look at the distribution effects of various schemes which have been introduced which, to my mind, have been largely hidden from public view. The final one — which would draw the others together to some extent — is to introduce an explicit plan for the public sector, not an ambitious one setting targets for the whole economy but a plan for public spending itself. We might not always be able to meet what we plan to do, but at least we would have clear guidance on where we go.

I should like to deal briefly with each one of those paths. On the question of practical standards and controls, it is very important that public representatives be given a means whereby they can judge the performance of various schemes in operation and debate them each year in both Houses. That to my mind does not exist at present in the system of presenting Estimates. In this House we do not even get to look at the Estimates. The Appropriation Bill provides our only opportunity to compare the performances of different areas of public spending.

As regards semi-State bodies, one way to have more effective practical controls would be to set cash limits for the contribution from the general taxpayer. In the long term, the level of contribution by the general taxpayer would be set on the basis of social objectives. In the case of CIE, there are definite social reasons for running services that are not economic, but there should be a fixed contribution from the general taxpayer for that sort of service and it should not be allowed to grow unchecked and unaccounted for.

Secondly, we should have the courage of our convictions. We have set up the semi-State bodies as independent bodies to administer certain areas of spending. We should, therefore, give them flexibility of operation and free them from political intervention in their operations. In particular, we should give them freedom in the area of pricing. In the past, there have been several efforts to prevent public semi-State agencies from implementing price increases that they believed should be brought in in order to protect the public money invested in their companies. Politicians on occasions have tried to stand in their way. That is not why we set them up as independent bodies, with independent boards.

The other area in which we should give them freedom is in their investment decisions, their decisions on policy. In return for freedom of operation and flexibility we should demand from them the same sort of responsibility for their actions as would be demanded of an executive and a board in a private company. In relation to capital spending proposals in particular, they should present their reason for choosing a particular investment over other possible alternatives and show that it is a worthwhile investment. They should publish detailed costings for its implementation and, should there be an overrun on that spending, it should be clearly available and visible in the Estimates. The executives of those companies should have clear responsibility for that overrun in much the same way as in a private company. In semi-State bodies, executives must stake their reputations on the proposals they put up and take the consequences if they deviate from them without proper explanation.

In relation to the annual operation of semi-State bodies, I would like to see the Joint Committee on State-Sponsored Bodies devise simple criteria of performance that would be available to public representatives each year, to see how they are performing in line with economic standards. We have already had a debate on Fóir Teoranta. I suggested in that case that possible criteria would be to look at the proportion of their lending which they write off each year and at the proportion of the commercial return on the public money recouped from the companies which they assisted. That would, at least give public representatives an idea of whether Fóir Teoranta were improving or deteriorating in their performance. Our Joint Committee on State-Sponsored Bodies should set about devising measures which every year would give politicians a way of looking at how these agencies are doing and not make them wait until the joint committee have got around again to having a look at that particular semi-State body.

A second way in which we could have more effective control and let the taxpayer see what is happening to his or her money would be to charge the interest on borrowing. If the Minister for Finance borrows in order to finance an agency, the loan interest on the money borrowed should be explicitly in their accounts. At present several agencies and Departments are receiving loans from the Minister for Finance without explicitly showing how much interest they ought to be paying and how much of that interest falls on the taxpayer. It would give a clearer view to public representatives and the public of what these agencies are costing the taxpayer and whether we are getting a valuable return. In the case of the IDA, they give out capital grants every year and it is never clear to the public what that means in cost to the taxpayer. There is a build-up in debt for each year they give out capital grants. It would be valuable for the public to know about this build-up.

A third effective control in getting better value for State money would be that, where grants are given there should be in all cases a now and an after element in them, the after element being conditional on the receiver of that grant having lived up to the performance asked of him. Again, in the case of IDA grants people who apply for grants do so on the basis that they are going to provide a certain number of jobs. An element of that grant should be held back to ensure that the company in question meet the standards previously outlined by them. Similarly in the case of borrowing for agricultural purposes, when farmers borrow for building, part of the grant should be paid in the beginning and part later on when they have achieved the increases in stock numbers which they intended.

On the question of how we might link spending with taxation, one way of doing this is by each new programme giving, in simple terms, the tax cost involved. It could be set out in such terms that we could see exactly what was involved. Another item which we should consider is that when we enter into an agreement with the public sector on pay, should that be exceeded by special claims in the course of the year there should be special tax measures brought in at once to recoup that amount for the Exchequer. That would strengthen the Government's resolve to resist unreasonable fresh claims. The taxpayer would also see the real cost to him or her of higher public service claims. That would be a very worthwhile link between spending and taxation.

Another suggested change to try to give the public a better view of what is happening to their tax money would be each year to publish the tax yield that would have been provided if tax bands and thresholds had been index-linked. Too often the Minister for Finance gets away with saying, "I am taking people out of the tax net by certain proposals," when in fact in the course of the previous year the process of inflation has been bringing far more people into the tax net. The taxpayer is entitled to see that in a clear way. I do not propose index-linking in the way it has been done in some of the Scandinavian economies because, in the long term, that fuelled inflation. The taxpayer is entitled to see what is happening to his or her tax and what is the real effect of tax changes.

Another area I feel strongly about in our failure to link spending with taxation is that public service pensions which are index-linked and cover a growing number of people in the public sector are in no way being funded annually by the taxpayer. In effect there is an enormous liability outstanding in the future on our tax resources and we are not making allowance for that in the way the private sector would fund a pension fund. That is something that should be seriously looked at in our approach to public spending because the problem in that area is going to get more and more serious as the large numbers of people who are recruited into the public sector in recent years move on towards retirement.

The final point I would like to make about linking spending with tax is that I am strongly in favour of introducing charges over a much wider range of services. It is not just in order to bring in extra finance although that is probably a welcome side of it. It also ensures that there is a public interest in the performance of the various schemes involved. In my local authority area the services that the public come to me most often complaining about are the ones that they pay a certain contribution to, namely, water in our area. It concentrates the minds of people administering those schemes if the public have that sort of first-hand interest in how efficient the service is. On that question of the linking of taxing with spending, I very much approve of the two recent major schemes brought in by the Government, namely, the Youth Employment Agency and the Housing Agency. Both of those have been self-financing in a way that should be done in the public sector. There is an explicit tax providing the resources for the Youth Employment Agency, and the Housing Agency is going to be a self-financing one also. They are very worthwhile improvements in our approach to public spending.

I will be very brief on the question of the distributional aspects of State spending. We have not looked at all at what is happening to social fairness in our spending in recent years. In previous contributions in this House I dwelt at some length on the effects of our spending on education, housing and on various sections of the community. The conclusion that I have drawn is that there is a clear bias in favour of the better off in those schemes. Similarly, in the area of taxation, there are several places where the tax system is achieving results that are not desirable on distributional grounds. In particular, the position of large families has deteriorated in recent years. That is something that, as public representatives, we should have information about so that we can make clear decisions about them.

Finally, I would like to turn to the question of economic planning over the longer term. In the past it was an error to try to introduce economic planning that involved very broad targets for the sectors that were not in direct Government control. No actual policies were proposed that would allow the Government to achieve those targets but they were published. What we need now is for the Government to concentrate on their own public spending. There are three goals in mind on public spending. One is to achieve efficiency, a second is to achieve a fair distribution and a third is to stabilise the economy in times of recession. These have not been adequately tackled and addressed individually, in particular in relation to allocation. There has been a complete failure, particularly on the part of the Department of the Environment, to plan in any systematic way. The county councils go through a very elaborate planning process whereby they draw five-year plans for their whole county and for individual towns within it. Those plans set out the sort of objectives they want to fulfil, for example, introducing a water or sewerage scheme in a particular area up to a certain capacity and allowing housing over the coming five years to live up to the capacity of their sewerage schemes. What happens then is that the Department of the Environment do not appear to put any financial planning into backing up those plans by the local authorities.

In my area of Meath, which is so influenced by the growth of the Dublin population, towns that we had hoped would be planned on a rational basis have not been sanctioned for the essential services that are needed in those towns. For example in east Meath, a very large section consisting of Laytown, Ashbourne and so on, we had plans for an extra water supply for that whole area. At present we are forced to try to put a stop to development and cut off water several times every year, several times over this Christmas, because we have not got the financial backing for our plans to expand the water supply in that area. That is the sort of practical approach to planning in the public sector that is needed to back up what is being done in the local authorities.

I will not delay the House any longer as I know that time is limited on this debate. I thank the House for its attention.

The present motion gives us an opportunity for an interim assessment of, among other things, Government policy on a wide range of issues. I would like to touch in a small way on one or two and to make a more substantial point on the economy.

With respect to the Government's performance in general, it strikes me that it is an extraordinary mixture of reforming zeal and ineptitude. That makes a pleasant change from ineptitude per se. The ineptitude of course is demonstrated quite clearly in the topic which gave rise to some controversy on the Order of Business, the raising of the school entry age. Incidentally, since Senator O'Rourke spoke at length about this yesterday in the House and was apparently allowed to do so, it seems to me that the point of the Leader of the House that it would be somehow injudicious to allow debate on a substantive motion is hardly valid. What I want to say, however, is that when the motion comes up I will certainly give it my wholehearted support. The decision to raise the school entry age was educationally highly dubious; it was bureaucratic and arrogant to do so. It was something of a nonsense from the financial point of view as well since perforce the Minister had to concede that he would compensate by providing some money for pre-entry nursery schools. Given the storm of opposition it has raised and, in practical politics, given the considerable clout of the INTO, the Minister would be extremely wise to beat a hasty and graceful retreat on this issue. On the other hand, I must say that I welcomed warmly the rapid decision to set up a curricular and examinations board. We debated this at length in the House. That is an instance of the Government's genuine reforming zeal. To complete a brief point on education I wish that the Government would devote some attention to finding a better way to distribute resources available for third level education. I accept in the present circumstances that it is not possible to increase grants and that there is a cutback in real terms. There is dissatisfaction that the way in which money is being distributed is not achieving the ends of social justice.

I am not one of those who believe that students should live in the lap of luxury. Their cost to the taxpayer is extremely high per capita. They are a privileged class and so I never subscribe to demands that they should have elaborate sports complexes and so on. It is important that they should have adequate if frugal housing and subsistence while they are attending college and in many cases they have not. The main worry about financing our education is that the whole system of grants for higher education was meant to further the objective of equality of opportunity. It is not doing that as well as it should. Many students are now coming to college who could not have afforded to come in the days of total fee paying but equally certainly there is no evidence that people from the less privileged sectors of society are making any impact at all on the wall surrounding third level education. This is a matter which does not necessarily involve finance. It is more about how this distribution could be more effectively organised.

Under the general headings of the Departments of the Taoiseach and Foreign Affairs I should like to say that although 1981 has been a difficult year for Anglo-Irish relations nevertheless we should be thankful for the level of relations being as good as it is. Above all there are signs of grounds for modest optimism in Northern Ireland as a result of what seems to be the genuinely imaginative thinking and policies that are now coming out of the Northern Ireland Office.

In general terms of foreign affairs, it is a great pity that the year which saw Ireland becoming a member of the United Nations Security Council and thereby having her status greatly enhanced in the international community, should see a continuation of the erosion of our independent foreign policy because of pressures emanating from the European Community. We had an argument in the Dáil and in this House about the relative responsibility of the present Minister for Foreign Affairs and the previous Minister on the question of the discussions on European Political Cooperation and the extent to which our neutrality policy is being eroded. There was a lot of shadow boxing between this administration and the last on that matter because the truth is that neither Fianna Fáil nor Fine Gael are serious in their commitment to our military neutrality. I do not believe either of them when they assert that they are committed to this principle. I do not mean that they are consciously telling lies but I mean that they are guilty of a form of self-deception. The fact is that while we should be grateful that our country is not a base for nuclear weaponry and that we are not a member of any military pact, our so-called neutrality is illusory. It is a phoney neutrality. All it means is that for the moment we are not a member of a military pact but that membership is inevitable and implicit in our continued participation in the European Political Cooperation talks and in the harmonisation of foreign policy which is an increasing tendency in the Community. I wish our Government were more honest in this regard. At least if they admitted openly to the people, "You may have cherished neutrality in the past but it is incompatible with our membership of the European Community", that would be more honest than the present deception.

I want to draw attention to something that involves foreign affairs and Irish-American relations and therefore North-South relations eventually. This is a matter for which no Department are directly responsible but which involves semi-State bodies as well as RTE. I refer to what seemed at first sight a very imaginative decision whereby a package television programme was to be distributed to American TV cable companies. RTE would put together a two hour weekly package that would be aimed at American audiences and would include a cross-section of events in Ireland and various features of Irish life. The idea was that it would attract an ethnic audience and following the ethnic audience would be business. Trade follows the ethnic audience. The IDA and so on would exploit the new potential that there was as a result of an awakened American interest in Ireland. This seemed an excellent idea but just before Christmas there was a modification made to the programme which was deplorable and which should be investigated. It was decided that the news and current affairs element in the package should be dropped, apparently at the instigation of the semi-State companies who were sponsors of the idea in the first place. The thinking was that we would not get American companies to invest in Ireland if as part of what they saw was news about kidnappings, ransoms, bombings and so on. A decision has been taken to exclude the news and current affairs aspect from the package. This is a deplorable decision for a number of reasons. First of all, from a purely pragmatic point of view it seems that the hypothetical American investment will not be interested in Ireland unless it has the full truth about the country and if it is lured under false pretences to a sunny land of shamrocks and then discovers that there is a lot of harsh reality about life in Ireland that is a fraud. More important, it is vitally essential and our kith and kin in the United States should continue to be properly informed about what is happening in Ireland and not be allowed to see us through the green tinted spectacles which they have worn for over 100 years and which has such disastrous practical results in their attitude to bodies such as the Provisional IRA. It is very important that a realistic image of Ireland should continue to be projected, that we should be seen, warts and all. This matter should be investigated.

With regard to the economy, I would like to do something which is now almost going out of fashion. I would like to quote Wolfe Tone, this time none of the hackneyed quotations but an opinion which applies quite appropriately to the state of the economy at the moment. Wolfe Tone once said: "We are able enough to take care of ourselves if we were once afloat or, if not, we deserve to sink." I think that that opinion would be shared by the great majority of Irish nationalists from Tone's time onwards. Perhaps Irish nationalists like Tone were too naive and optimistic in assuming, as they did, that Ireland free would be Ireland prosperous. They would certainly be startled at the state we are now in. If we are not exactly sinking, in Tone's phrase, there is an urgent need for us to swim more vigorously.

Some of our problems are agreed to be those of bad national housekeeping and improvident borrowing, and of course no voice is more eloquent and authoritative in this Chamber and outside it in that respect than that of Senator Whitaker, who, Cassandra-like, has been uttering dire predictions here for the last four years. You will remember that it was the fate of that unfortunate daughter of Prim and Hecuba that not only were her predictions true but that she was never believed. With great respect to Senator Whitaker and other conservative economists, while we accept their warnings and while there is bad or irresponsible national housekeeping, the problems go much deeper than that. It is very doubtful, to come back to Tone's metaphor, whether we were ever properly afloat to begin with since independence. In other words, the considerable natural resources of this country have never been properly exploited in the public interest. There has been mismanagement, waste and neglect of our resources and that is a fact of our economic life for the last 20 years at least. Ever since the economy began to take off it has been mismanaged. There has been private rape of the economy. Even a more sombre reflection than the state of our public finances is the thought that there has been this chronic mismanagement, waste and private exploitation. This also implies the hope that we still have the potential — even the gloomiest economists will concede that this country has the potential but it has to be under a radically different economic philosophy — to put the country afloat once more and to keep it afloat.

Meanwhile, the immediate pressing problems must be solved. Caithfear an gad is gaire don scórnach a ghearradh. There is now a public awareness for the first time — I think Senator O'Leary suggested this yesterday — of the gravity of the financial situation. People are ready, perhaps for the first time, to accept the gravity of the situation and the severity of the measures needed to correct it. There are signs that the electorate will not fool themselves any more by listening to the politics of promise. One hopes that the politics of promise is a thing of the past. That kind of dishonesty and hypocrisy did not begin today or yesterday, nor is it the exclusive property of any one party. The Fianna Fáil election manifesto of 1977, of course, reached new heights in this regard with its colourful bags of Smarties dangled cynically before a young electorate, but that differs only in degree from the facile promises made by Fine Gael in the last election.

Both main parties stand indicted in the ludicrous proposal to build an international airport at Knock. If County Mayo needed money and investment, and indeed it does, it could have been invested in many more realistic ways. At least this Government, prodded by the Minister of State at the Department of Finance, plucked up the courage to reverse their fatuous decision in this case. Equally ludicrous, increasingly so as the months go on, and another example of a bag of Smarties, is the £9.60 something-for-nothing proposal. By the time, if ever, it is paid, its real value will be down to about £7.60. Given the wasteful administrative publicity costs involved in the scheme, God only knows the eventual cost to the taxpayer. The real beneficiaries of the scheme, apart from Peter being robbed to pay Paula, will be relatively few. Again, like the Knock airport proposal, if money had to be given or needed to be given to housewives who needed the money, surely it could have been done in a more efficient way.

If the politics of promise is to be ended it will require a mature electorate and honest leadership. People will accept that severe measures have to be enacted if they see an equitable distribution of the burden and that the broadest and fattest backs are made to carry the heaviest burden. However, if governments are sincere in trying to correct our economic problems, people will expect governments to exercise maximum control of these economic problems. I mean that people will be asking, I hope, why the Government do not establish the maximum control over our economic and financial resources in the public interest. Various groups of ordinary workers who are hard pressed to pay their household bills and meet mortgage commitments, are beginning to be tired of being told that they are holding the country up to ransom if they seek pay increases partly to meet rising inflation if they have to run very hard to stay in the same place. They are becoming tired of being lectured on their greed and materialism and on holding the country up to ransom. They resent these constant accusations because they know that the real avarice, the big-time avarice and the big-time materialism, the real holding the country to ransom, come from those who control the sources of our credit, who determine the rates of our interest. Was it not James Fintan Lalor who said, in an insight unusual for Irish nationalists of his time, that he did not care who made the country's laws provided he had control over the land? In today's circumstances he would undoubtedly see that the crunch control is the control exercised by faceless and ruthless financial institutions. If we are to survive, let alone prosper, in this country there has to be a radical economic overhaul. In that overhaul Government control, which is public control, must be established over the means of exchange as over the means of production.

I am not talking anarchy or far-out radical economics. All we have to do is to take a leaf out of the book of our Community colleagues in France. No-one can accuse M. Mitterrand and his government of being visionaries or anarchists or Bolshies, yet they are courageously embarking on a programme of public control of private banks to provide the wherewithal to reflate the economy and to increase public spending in housing and transport.

In the present financial crisis with all the reams of print that have gone into the discussion about our financial problems, there has been very little challenging of some absolutely basic points. For example, everyone seems to accept that the high rates of interest and the private determination of credit are unchallengable facts of nature, acts of God. It is about time we realised that a substantial part of our problems, from the agricultural crisis to inflation, unemployment and poverty, is due to the way in which financial interests operate, to the fact that profit is the sole criterion and that the loyalty of these institutions is not to this country, or the community at large, but to a small group of shareholders and to the international big brothers of these institutions. The attitude of these financial institutions in the present crisis is clearly reflected in the brazen memorandum recently circulated to Members of the Oireachtas from the Irish Banks Federation. This memorandum, in effect, threatens dire international retribution if a modest levy is imposed on the vast profits of the banks.

It is about time that we began to think in terms not simply of levies but of public control. If money talks, then the strongest voice must be that of the community in general, not a plutocratic network of bank directors whose interests extend not only to many areas of the private sector but who are encroaching as well on semi-State bodies.

In this connection it is also high time that we knew precisely what are the financial interests of each Member of the Oireachtas. Only by a frank disclosure of their involvement in financial matters can public representatives assure the electorate that there is no conflict between the private and the public interests.

If this really is a reforming and a courageous Government, if they are prepared to take harsh measures to deal with the public finances and if they still hope for public support for that resurgence and turnabout in our whole economy and psychology, then the Government must demonstrate, even if it means a dramatic confrontation with the gnomes of God-knows-where, that they mean to be economic masters in their own house.

An Leas-Chathaoirleach

I wish to remind the House that the Minister is to get in at 12 o'clock.

I thought it was to be 12 o'clock tomorrow. I will be as brief as I possibly can in the hope that I will leave some time for anybody else who wishes to make a contribution. When we are talking about the Estimates, we naturally have to look back and ask ourselves what were the circumstances following the January budget. When the new Government took office they found that the housekeeping exercise had not been done. The position was that there was a total imbalance. The whole question of the housekeeping had gone wrong and whoever did the figures was responsible. There was no real care taken to assess what would be needed in the public interest. In order to redeem that situation it was necessary to bring in the July budget which was the subject of a very great deal of controversy and criticism.

It was hard to understand why a Government with a 20-seat majority could not have brought in a very strong budget with no deficiencies in the Estimates for the year. It is hard to understand why they did not do that. They need not have gone to the country for another eight or twelve months. They knew that if they were returned to office they would have to walk a very similar line to that which the present Government walked when they took over the administration. Despite that, when the tough measures were taken the Opposition argued that they would not have had to take that course of action. It is generally accepted now that they would have had to do so unless they continued borrowing abroad for non-productive purposes as they had been doing.

It is necessary for me to make that point because we are talking about the Estimates for the year. When the new administration took over they discovered that there was no money available from the 1981 Estimates to pay for essential services. The budget seemed to be a deliberate disguise to make the people believe that most of the needs could be met, but it fell very far short indeed. In the long run it was discovered that there would be no money for some areas, for example, social welfare and the defence forces. Money for the Garda would have run out in September. Whether this was deliberate or due to fault is irrelevant now. We cannot have such a situation under the present Estimates. It was irresponsible to leave essential services so desperately in need of assistance that the new administration had to introduce this emergency budget.

The under provision in the Social Welfare Vote is criminal. I speak as a working class person knowing the effects on people who depend on unemployment benefit etc. Even in regard to agriculture there was a shortfall. Posts and Telegraphs would have had a shortfall of about £19 million, Transport and Energy a shortfall of £87 million and Environment £35 million. All of these very essential services had not been catered for.

By not estimating correctly we were dealing with a £740 million deficit. That is the origin of the other budget. The essential services had to be provided and it was necessary to take tough measures. As Senator Murphy said, people are beginning to realise that these steps are necessary and they are now settling down to the fact that the new Estimates will have to take care of such matters.

Faulty estimating in the case of agriculture is very serious. Very often working class people are accused of not understanding the farm situation. I do not claim to understand it but I try to do so. Farmers had been going through a very bad time from 1978 onwards, with the real effects hitting them in 1979. Apart from the weather problems, they had the very small rise in farm prices of 5.8 per cent, when their actual input needs were about 13 per cent. When their output prices rose by only 3 per cent and their actual input prices increased by 15 per cent, they were in difficulties.

The Fianna Fáil Party, who claim to be very concerned about agriculture, did an injustice to agriculture in the sense that they had not looked ahead to this situation and they left the farmers with a shortfall. This was criminal at a time when farming families had experienced a decline of about 50 per cent in their incomes during 1979-80. At a time when loan interest rates were beginning to bite, they were allowed to suffer this burden. It was a question then of whether the other administration, if they got back into power, could save the situation.

In this developing crisis people have tried to lay the blame at the door of the present administration, but we deny that. When we come to the 2 per cent levy, the disease levies and so on, that was done by Fianna Fáil. It certainly did not do anything to help the people in agriculture who were in that critical situation. I am not saying that the present Estimates will solve the problem, but I think that the Minister for Agriculture is doing his best to arrest the decline. The 5 per cent subsidy for the developing farmers and the similar assistance he is introducing for the farmers who are not in that category will be very helpful. Also helpful have been the discussions he has been having with the lending institutions in relation to having the loan repayments eased. In addition, there has been a £70 million increase in expenditure in about a five-month period. These are all signs of the concern felt by the Government about agriculture. Fianna Fáil also expressed concern when they were in office, but I do not think they measured up to it.

When it is necessary to tighten the belt somewhere, at least the Government on this occasion have had the good sense to look upon agriculture as a very vital part of the economy and to ensure that, even though it may be necessary to cut back in other ways, there is development and progress in this area. The level of sheep headage payments was increased. VAT refund levels have increased. Work is being done to bring about an increase in the numbers of livestock. Those engaged in agriculture have to be encouraged to improve husbandry and to start cutting back on expenditure.

We could not pay too much attention to youth unemployment. More than half of our population are in the youth category and these are the people we will have to deal with. The setting up of the Youth Employment Agency has been very encouraging. I believe a lot remains to be done in the coming year. We cannot just leave it at that. Our youth constitute the largest group in our society. They are the people who have the right to work and the right to fight for work. If we do not provide for the youth of the country they are not bound to accept the standards society lays down, especially if society cannot produce the goods for them or show them some hope for the future. Why should any youth not being assisted in a proper way to advance himself feel he owes anything to society? I suggest he owes society something, but in these circumstances we cannot expect him to live up to the standards of society. It is imperative that the right of youth to work be given top priority. For years the Labour Party have been very concerned about a youth employment agency. Now, after going into Coalition, we see it in existence. I do not think the Youth Employment Agency is the answer to the whole problem, but it is a major contribution. I believe it will do a good job for us. However, I would like it borne in mind what the mentality of the youth is liable to be if we do not keep trying to resolve this problem and making more progress than we are making at the moment. The youth cannot be blamed for their despair and indifference. They are experiencing great frustration. This is brought about by long spells of inactivity. It is our problem and we have to look seriously at it again.

On the question of local government reform, there have been dozens of occasions when we made estimates in regard to this. One of the factors in relation to local government reform is the question of whether anybody has seriously looked at the possibility of more autonomy for local government. Local government operations are much closer to the people than those of central government. Instead of talking about building new offices in Castlebar, Killarney and so on, why can we not get down to the question of examining what could be handed over to local government to administer in their own areas? Is it necessary for everyone to contact or to come to Dublin to get something done in relation to questions of social welfare, health and so on?

I believe there is plenty of room in the area of local government for further reform and autonomy. Local government is subject to much more critical comment than central government because it is closer to the people. The financing of local government current and capital proposals is of paramount importance. I know that the finance is not available and it is something we have to think very seriously about. There is urgency in regard to the question of local government autonomy. I urge that in the lifetime of this Government they should see what other functions can be given to local government to meet the people's requirements. If we could examine questions such as that rather than talking about erecting new buildings, we would be doing something more useful.

There is great scope there to have local government funded in a different way, or to consider the whole question of how it is structured. We have an obligation in this respect.

I have to laugh when I hear people in the private sector talking about the creation of full employment. They cannot create full employment. They never could and they never will. Throughout Europe there are close on 14 million people unemployed. This is very serious because there is a great deal of poverty running parallel with affluence. We keep going the old way, employing the same methods and the old ideas. If somebody comes up with an idea that might be a bit revolutionary, he is branded a communist — reds under the bed. This is galling. Since I was a boy living in the inner city of Dublin, I have been listening to Governments talking about creating full employment. I did not see it in my home or in any other home around me, and I do not expect to see it in my lifetime. I do not believe private enterprise can create full employment.

We work on a system of "propping up". We talk about private enterprise providing jobs, but do they? Most of the money spent by the Government for the creation of jobs in industry clearly indicates that there is no such thing as the private sector supplying jobs. The Government are supplying the jobs by the backup rescue organisations — the IDA, Fóir Teoranta and so on. If there was a full examination of that situation we might have a very interesting debate and see exactly what value the country gets for money spent by the Government in this area and how much private industrialists are providing to create jobs. I am sure the figure for jobs created by the private sector from their own resources would be very low indeed against the amount spent by the State. It is a misnomer to talk about the private sector creating jobs.

This morning on the Order of Business it was announced that we will reconvene at 2 o'clock. I have a message from the Minister for Defence, who cannot be here until 2.30 p.m. By agreement, could we reconvene at 2.30 p.m.?

Does the Minister want to reply to this debate at 12 o'clock?

As the Minister for Defence will not be available until 2.30 p.m, would Senators agree to reconvene at 2.30 p.m. instead of 2 p.m.?

An Leas-Chathaoirleach

Is that agreed?

Rescue operations are necessary when businesses get into difficulties. We should tell the people the private sector are not providing all these jobs. It is the taxpayers who are providing the jobs. If they got a fairer return — if they had more control over those industries — it might be more understandable. In my view these rescue agencies are not the answer.

Detailed economic planning has been missing for a long time. On the question of maintaining employment, it is not enough to introduce Bills from time to time seeking a few extra million pounds to save 1,000 jobs or 100 jobs or to bail somebody out. That does not work. It never has and it never will. Chronic underdevelopment is very evident on the industrial scene. This is an indictment of private enterprise. It has proved a failure particularly in the area of industrial development. I am not suggesting that I have all the answers, but I seriously suggest that when large companies fail, instead of getting involved in rescue operations, the State should consider either part or full ownership, particularly in the industrial area where they have a very small investment at the moment.

Instead of handing out grants, dole and so on, the State should get directly involved and make sure they will have a say in further developments. State involvement should not be confined only to rescue operations. Is there any clear evidence that these rescue operations in the final analysis turn out to be self-sustaining? Is there any clear evidence that the people who have been rescued do not come back?

For example, I was talking to people in Galway where an industry was going out of existence. Those people were being retrained in a fourth skill. This makes people think about rescue operations and whether we are tackling the subject the right way. Our efforts in this area are very feeble. It is time we got a bit revolutionary and faced up to the real problems, that is, getting into socialist, detailed economic planning. No matter how distasteful it might be, we will have to face up to radical shakeups. If these trends continue, we could be talking about 180,000 jobless — 14 million in the EEC, and we are not going to get much help from them. The question of money expected from the EEC is another area that is going to affect employment. Men with ideas get money and the men with money but no ideas do not seem to be investing at home. This is a pity.

Agriculture and youth employment are in a very serious situation, but I am delighted to see agriculture is taking a turn for the better. On the question of youth employment, no matter what Government are in power unless they come up with very good proposals many of our youth will be asking: what do I owe the State? That can only lead to an increase in crime.

An Leas-Chathaoirleach

Before I call Senator Cranitch, is the Minister willing to forego a few minutes?

I want to thank everybody concerned for making five or ten minutes available to me. It is a pity that the debate has to be curtailed at all because this is the one chance we get in Seanad Éireann of dealing with various aspects of the economy. I thank everybody concerned for making these few minutes available to me.

First, I wish to commend the Minister on his excellent introductory speech. It is short, concise and it says a lot in a few words, multum in parvo. I was particularly impressed by his statement regarding the colossal expenditure of £4,370 million where he says that the question we must ask ourselves is whether we can afford this level of spending and whether all our public programmes are cost effective. When I read that I immediately thought of the answer Johnny gave to his mother when he had done his first public examination. Johnny was not a very good scholar. He did not study what he should have studied. His mother asked him if the questions were very hard, if he was able to read them. His answer was that he could read the questions quite well, that he knew what they meant but that the only difficulty was that he did not have the answers. That is the sort of problem facing our State at the moment. The economic plight is very serious. I am not going into the various details. They have been gone through in the past 24 hours. Inflation was mentioned.

Unemployment got an honourable mention but perhaps some other desperate problems were not emphasised. I am referring now to the malaise that seems to hang over our people at the moment. They are pursuing a life of selfishness, pleasure seeking, meanness, trying to dodge out of this, that and the other, have all the pleasure and goodies possible, but pay no entertainment tax. What we want in the State is a crusade, not like the infamous crusade that was attempted a short time ago but which was stillborn before it got off the ground at all, but a real crusade to bring people back to the full understanding that we are a small country with limited resources, that we must cut our cloth according to our measure. One of the first things that was inculcated in me and in all my neighbours by our parents when we were growing up was that if you cannot afford something, you do without it. If the Minister of State at the Department of Education had been here, I intended putting this point to him. I will mention it now as the present Minister may be able to get it across to somebody, that is, that our educational programmes, formal and informal, should be tailored to try to get people back to a realisation of the facts, to inculcate in them a sense of independence and to give them a vision of the greatness we can achieve by being independent and hardworking. I remember the textbooks we had when we were going to national school. We had books on nation building, industries, thrift, progress and saving. All these virtues were extolled. Unfortunately I do not think you have that in the present-day textbooks.

The greatest educator we have apart from the formal system is RTE. That is the great moulder of opinion. It could be used and harnessed to try to give the people a picture of their land, of what their forefathers have done. Instead of presenting the people with a picture of what they should be doing, they are presented with a false picture. I have had many complaints from constituents and from people all over the country regarding the type of programme we get from RTE, more than I have got about any other Department. People are being given a false impression. I have to say that there seems to be an attempt made by various people to undermine our christian values. Complaints are constantly coming in. I do not have that much time to see television programmes or to listen to radio programmes, but I have got innumerable complaints and I wonder what can be done about this situation. When the second channel was being brought in, it was strongly suggested that we take the material from the BBC. I worked very hard to see that that would not happen. However, looking back, I wonder if I did the right thing because there are programmes on the home channels in which the Holy Name is used. Some programmes are almost blasphemous. A picture of pagan living is presented to us as an ideal. It is something which should be examined, because the radio and television are very powerful and could be used to very good effect in bringing us back to reality.

Something that is giving the whole Irish-speaking population in various parts of the country cause for grave anxiety is the present position so far as the Irish language is concerned. Foilsíodh an ráiteas seo le déanaí ó Ghael-Linn. Is é Todhchaí na Gaeilge sa chóras Oideachais i bPoblacht na hÉireann agus sa chéad alt deirtear:

Ó bhunú an Stáit i leith ní raibh seasamh na Gaeilge sa chóras oideachais riamh chomh lag agus atá sé le roinnt blianta anuas — agus é sin ag tráth nuair atá sé léirithe arís agus arís eile go bhfuil bá chroíúil ag an bpobal leis an nGaeilge. Tráfaidh an bhá sin go tapa mura mbíonn inniúlacht réasúnta sa Ghaeilge ag an aos scoile feasta, rud nach bhfuil á fháil ag cuid mhór díobh faoi láthair.

That is a very serious statement and one with which I entirely agree. Should there be anybody in the House at the moment who does not understand what it means I will repeat it in English. It is:

Since the Foundation of the State the position of Irish in the educational system has never been weaker than it has been in the last few years. The position is still deteriorating in spite of the fact that it has been demonstrated again and again that there is a great fund of public goodwill for the language. This goodwill will soon disappear if the present school going generation does not achieve reasonable competence in Irish, a situation which is not so in the case of a great number of students today.

That is the factual position I entirely agree with. I have seen this decline taking place in the past four to eight years. It is time to take stock of it.

I will not go into all the reasons why we should save our language, promote it and see that it takes its rightful place in the life of the nation. That would take a long time. You probably all know the arguments in any case. I will confine myself to saying that we have the oldest vernacular in northern Europe, apart from Latin and Greek. It is something we can be very proud of. It is a beautiful language, a language in which we can really express ourselves. It is worth the reviving and speaking of it if for nothing else than for the wealth of knowledge and the wisdom and philosophy we have in our seanfhocail. It is worth doing it for that alone. I hope that cognisance will be taken of this by the appropriate Department. I hope the Minister will convey these views. We are very perturbed about the situation. There is much that could be done to improve matters. There are several recommendations made in this pamphlet from Gael Linn and there are many recommendations also in the White Paper on Educational Development publised at the end of 1981. They are all there and they should be implemented. I will not pursue the matter further with regard to the state of the language. The recommendations are well worth a trial.

Another pertinent point concerns Gaeilge and Radio Telefís Éireann. Announcers should take the greatest care to see that their pronounciation is faultless. I am not finding fault with anyone trying to learn a language and whose pronunciation is not perfect, but when it comes from a supposedly authoritative person, whether newsreader or otherwise, pronunciation should be perfect. As far as Italian, French or German are concerned pronunciations are invariably correct but when it comes to our own language announcers are careless and slovenly. We had a glaring example a few mornings ago. I will not mention what programme it was because I do not wish to indentify any particular person on it.

After all those grumblings, I congratulate the Garda and the Army for the wonderful work they always do, and particularly during the recent blizzard. They are a credit to the country. I had intended to speak at length on their service; when all is said and done maybe God was very wise in sending the blizzard because it might bring people back to the reality of life and the fact that "nuair atá an gad cóngarach don scórnach" everybody must get up and fend for himself.

I thank Senators for their contributions to the debate on this motion. I shall endeavour to deal with as many points as possible, bearing in mind that time is fairly short.

Senator Honan raised the question of the Youth Employment Agency. In 1982 £41 million will be provided for employment and training of young persons. The scheme will be entirely self-financing, which is to be welcomed. This is a substantial increase over the level of expenditure last year which was only £19 million and it is envisaged that about 37,000 young persons will be involved in employment and training schemes this year compared with 21,000 in 1981. This will require a great deal of organisation in the coming 11 months by the new board of the employment agency. I stress that the youth employment levy will only come into effect at the beginning of the tax year — 6 April 1982. Accordingly, in 1983 and in subsequent years the yield from the levy will be much greater than the £41 million I have mentioned for 1982.

Senator Honan expressed concern at the level of existing commitment to the services for the disabled and in relation to the longer term planning in this area. I am sure the Senator — who has a particular interest in this area — will recall the report of the working party on services for the mentally handicapped which was published in 1980. That report sets out the basis for future development of the services for mentally handicapped people. The report received a general welcome. It is appropriate to point out at this stage that the Minister for Health hopes to publish shortly a Green Paper on the services for the disabled. At present that paper is at the final editing stage.

The paper will review in a comprehensive fashion the whole range of relevant services, including income maintenance, residential care, employment and education for the disabled. I believe that Members will generally welcome the decision here, as a further commitment in a concrete form to the services now, rather than just planning for the future. I instance as an example of this Government's concern that, despite the overall very difficult financial situation, we are prepared to introduce a welcome extension to the disabled persons' maintenance allowance scheme which should assist in the general area.

Senator Honan and Senator Hussey raised aspects of land transactions, namely Senator Honan's comment about the legal costs involved in the purchase of a house. I share her views on this matter. I have conveyed my views to the Minister for the Environment and I understand that the Minister and the Department are actively looking into the matter. I know that sounds like a trite public service phrase but I am assured that they are looking into this matter with a view to taking some action on the legal costs involved in the purchase of dwellings. I regard the situation as intolerable and unnecessary.

Senator Hussey correctly expressed concern about excessive profits accruing to individuals involved in land speculation deals. The Government share this concern. Last September we issued a statement declaring our intention to introduce legislation which would have the effect of precluding the making of unjustified profits as a result of land rezoning decisions in areas of urban expansion or where services are provided by the public authorities. With the imminence of the budget I am sure Members can appreciate that that is about all I can say on that issue at this stage.

The seriousness of an inflation rate of 20.4 per cent for the calendar year or the four quarters of this year is hard to over-state. But it is fair to point out that the figure for the full calendar year of 1981 is not 23 per cent or 24 per cent; that was the quarter for the 12 months to mid-November last and it included the figure of 23 per cent or 24 per cent and some large reassessment items. Therefore, the best method of gauging the average rise in the consumer price index is obtained by taking the outcome for the four quarters of 1981: that gives an average of 20.4 per cent. That is intolerably and unnecessarily high in many respects but it is not as high as Senator Kiely and Senator Fallon alleged. With a view to endeavouring to hold back prices during the period to March 1983 the Government, as part of their anti-inflation programme, will, during this period, subsidise key foodstuffs such as bread, milk butter and margarine. This will help to mitigate the rise in the inflation rate.

We should also bear in mind that our position was exacerbated by the appreciation of both sterling and the dollar in the first half of 1981. This contributed to the general rise of import prices in the last three years and was responsible for the rise from 13½ per cent in 1979, to 18 per cent in 1980 and 19½ per cent in 1981. It has had a fairly significant impact on our present rate of inflation.

A comment was also made about the £9.60 tax credit to home-working wives. There were criticisms expressed and the only comment I would make is that the number of applications to date has been 42,000. It is a reasonable response to a completely new scheme and it is not possible at this stage to give a breakdown of the applications but it would be interesting to do so later on. You will appreciate that it is a very small percentage of the total number of persons entitled to apply.

I was very pleased to note that Senators welcomed the initiative taken by the Minister for Finance in proposing a review of financial procedures. A discussion paper entitled "A Better Way to Plan the Nation's Finances" has been circulated. I suggest that the subject matter of that paper is of great importance and demands careful consideration. To this end the Minister for Finance has initiated a wide-ranging consultation procedure and, indeed, was engaged yesterday in a seminar with the heads of Government Departments, with semi-State bodies and with industries on this issue.

When this consultation is completed — and I will draw the Minister's attention to the high degree of interest expressed by Senators in this debate — the issue will be debated in Dáil Eireann. At that stage it will be possible to take decisions on further procedures. It is hoped that part of the discussion paper will be implemented this year in relation to 1983 expenditure. This will make the debate in 1983 more relevant by having consideration of public finance business when it counts, before the event rather than having a formal review as we have been doing here over the past two days when, on a post-dated basis, it was extremely difficult to exert any real influence over public expenditure.

An area of reform on which I place particular emphasis is a review by the Dáil of existing expenditure schemes to ascertain if each of them still gives value for money and answers the needs of a modern republic. I hope the Seanad will be able to join in that review. Central to the proposal is the possible establishment of a Dáil public expenditure review committee. In the context of considering how a committee might be supported, consideration is also being given to the possible expansion of the role of the Comptroller and Auditor General or, alternatively, the establishment of a new office of public expenditure commissioner. This goes some way along the road advocated by a number of Senators, in particular Senator Quinn, who called for a cost-benefit analysis of all major projects to be considered by the Oireachtas in advance. That is essential. I am not sure if, in the long run, that work can stop some of the more ill-advised projects, but nevertheless it will be a major addition to the work of the Houses of the Oireachtas and will be generally welcomed.

Senators have rightly acknowledged the need to restrain public expenditure but it is ironic that, throughout the whole debate, despite that acknowledgment, time and again there were repeated proposals from Senators for more expenditure on particular projects, whether on Tralee hospital, or in Ballyforan, or on Wexford hospital, to take different sides of the House. There is an unending stream of demand for public expenditure without taking the necessary steps to fund that expenditure either from taxation or from growth. Inevitably all of us suffer from this contradiction, this dichotomy. It underlines the relevance of the proposals we intend to make in relation to a cost-benefit analysis of public expenditure.

The question of government borrowing loomed large in this debate. I should like to give a few examples. In 1981, interest payments on the Exchequer's debt came to £947 million. The Exchequer statement at the end of the year showed that income tax receipts for 1981 were £1,243 million. This means that 76p in every £ of income tax revenue in 1981 was used to pay interest on our national debt. To put it in even starker terms, which are quite staggering, almost 87p in every £ of income tax paid by the PAYE sector alone was absorbed by interest payments. Of that 87p, 23p went straight out of the country to foreigners, which was even more staggering.

The problem is getting worse. The extra amount paid in income tax by PAYE workers in 1981 over what they paid in 1980, which was roughly an extra £215 million, was not sufficient to pay the increase in the bill for interest on our borrowings in 1981 as compared with 1980. It is no secret that the interest payments on our foreign debt will rise substantially again in 1982. I think I have said enough to highlight the fact that this is an extremely serious problem, perhaps the most serious of the many problems facing the Government. The only way in which we as a community can repay our borrowings is by investing in productive assets which will generate a return sufficient to cover the costs of repayment of the principal and the interest on the loans.

Unfortunately, much of the borrowing in recent years has been to finance day-to-day spending. What was invested was often invested in projects of quite dubious value. I say that as an advocate of public expenditure, as one who wants to see the public sector expand. Therefore it is essential that the practice of borrowing to finance current budget deficits should be eliminated as quickly as possible, and that we should cast a very cold eye on some areas of public investment on which the return would appear to be zero. I want to stress that the Government's freedom to manage the economy is being very seriously threatened by the ever-increasing burden of interest and principal repayments on our loans. Every increase in revenue is being gobbled up, rather than being made available to finance socially desirable expenditure.

The balance of payments position, which is serious enough without adding to our problems, is being exacerbated by the ever-increasing payments on our foreign debt. As recently as 1979, foreign interest payments amounted to over £100 million. This year the figure will be a multiple of that. Therefore, the overall picture is quite clear; we simply cannot continue to live beyond our means. Last year's budget was the first step towards rectifying a dire situation and we intend to continue along that road. It would be quite irresponsible to turn our backs on that major problem. As a social democrat I maintain that is not monetarism; it is not Thatcherism by any manner of means. It is simply a recognition of the harsh reality which confronts 3,500,000 people in the context of running our own affairs.

Senator E. Ryan made a rather tongue-in-cheek defence here. I have the greatest personal regard for Senator Ryan who is much underestimated in many respects in terms of his business acumen. He said no Government had ever succeeded in keeping current expenditure to planned levels. That might be so. I would not necessarily dispute that, but I do not think any Government in the history of the State underestimated expenditure requirements to the extent Fianna Fáil did in 1981. Last year the total amount of Supplementary Estimates needed for current supply services amounted to £588 million, or over 18 per cent of the original provision. An underestimation of 18 per cent is colossal.

Senator Ryan also stated that borrowing for current purposes was initiated in a very big way by a Coalition Government. He went on to say that all through the Coalition period of office in 1973 to 1977 such borrowing continued to grow and that, by the end of the period, it was a very firmly established practice. On a television programme last Saturday night it was again inferred that the Coalition Government were the first to start the practice of having a current budget deficit. But it was deliberately planned in 1972-73. That was before the Coalition Government came into office. It is true that when the oil crisis struck in 1973-74 the Government then deliberately borrowed for current purposes in order to sustain economic activity. It is relevant to note that that action was in accordance with the advice of international organisations to Governments at that time. I remember being in Government then and it was generally accepted by the OECD and from EEC general advice on the economic front that there was a case to be made — in 1973, 1974 and 1975 — for some level of budget deficiting. But when we saw the budget deficits were not greatly helping economic activity at the time we took action to narrow the gap between current revenue and expenditure. We saw also that it was gravely affecting the balance of payment deficit and we took action, evidenced by the fact that, as a percentage of GNP, the current budget deficit was reduced from almost 7 per cent in 1975 to less than 5 per cent in 1976 and below 4 per cent in 1977.

Unfortunately, we decided to go to the country immediately after doing so and not wait until 1978 when the benefits accrued back. Through miserable political strategy at the time the Government found themselves out of office. But they had done the right thing. Coalition Governments tend to have the habit of doing the right thing and getting little thanks for so doing. Therefore the trend in 1975, 1976 and 1977 was sharply downwards. That was needlessly reversed to my absolute dismay at the time. I can barely attempt to forgive my constituency colleague, Deputy Martin O'Donoghue, for advocating that kind of reversal of policy which was outrageous and totally unnecessary. It was needlessly reversed by the new Fianna Fáil Government. Thus the seeds of our present difficulties were sown.

We had a budget deficit of approximately 3½ per cent of GNP in 1977. That was relaxed into one of double that amount in 1979 and would have reached 9¼ per cent of GNP in 1981 had we not had the July budget. Even with the odium we incurred in July last the budget deficit of 8 per cent of GNP last year was the highest recorded in the history of the State. Therefore even taking into account our corrective measures we still had the highest level ever recorded in the history of the State.

I want to deal with some particular points raised. Senator Mullooly suggested that there is to be a postponement of the briquette factory at Ballyforan and the ESB generating station at Arigna. We had better look at these projects quite specifically. He contended that the Government had abandoned the development of the west — of course, the last refuge of a politician, when hard up, is to start encouraging regional rivalries, county by county rivalries. I am not suggesting that Senator Mullooly has descended to that level, but it is wrong to suggest that the Government have decided to postpone Bord na Móna's proposed new briquette factory at Ballyforan. As far as the briquette factory is concerned the Government have never given any indication that they are not prepared to provide money for the project. The delay arises from difficulties which Bord na Móna themselves are experiencing in securing finance from the European Investment Bank for the project. It is as simple as that. The board now expect that these problems will be resolved satisfactorily very shortly and that the construction of the factory will start on schedule. I should put that on record.

As regards the Arigna generating station — and one must take into account the views of State bodies conveyed to Government — the ESB consider that the commissioning of this station should be deferred owing to the fact — and Senators should swallow hard when they hear the reality — that the ESB currently have 40 per cent excess generating capacity and this is going to increase. These are the realities, not the west versus Cork or Moneypoint or Tarbert versus Dublin or anything else like that. We should bear in mind, and place also on record, that the previous Government gave full approval to the ESB and they are currently investing £650 million in a new coal-fired power station in Moneypoint, County Clare. That station is due to come into operation in 1985. This project is testimony to the Government's commitment to the west. That will be a major coal-fired power station costing £650 million. I do not think Senators can ignore these facts.

There has also been a suggestion, not necessarily from Senators but from some Deputies and public representatives in the west, that I in particular and other Deputies who allegedly live in Donnybrook — even though we do not — are all out to do down the west. This is merely political posturing which demeans politics. We should take into account the scale of transfers of State resources to the west. In 1979, the latest year for which I have detailed information, national expenditure of social welfare, health and education came to £1,538 million. That represented £456 per head of population for the whole country. But in the west of Ireland it represented £523 per head of population. Admittedly there are certain aspects of employment involved, but it is not true to say, by any stretch of the imagination, no matter what Department Vote one takes, whether it is social welfare, or health, for example, that the west is being done down or allocated a disproportionate share of State resources.

Total expenditure on agriculture and industry was £367 million in 1979, which represented £109 per head of population, but in the west it represented £136 per head of population. Taking just a few Votes, social welfare, health, agriculture and industry together that gives us £565 per head nationally and £659 per head in the west. Therefore, to suggest that the west has been treated less favourably by successive Governments is to indulge in what I might call selective whining journalism which appears twice a week in The Irish Times, in particular by one columnist, and merely ignores the realities in that area.

Allegations are also being made that the west is being abandoned on the employment front. It is a regrettable fact that throughout the country, including the west, unemployment has increased substantially. However, in the period July to December 1981 it is of interest to note that in the west, the north-west and in the Donegal planning regions, the increase in registered unemployed was 5.83 per cent while the increase in the State as a whole was 10.2 per cent. Admittedly there has been a particular situation, say in the Galway region, with recent redundancies and so on but it is quite untrue to say that unemployment has hit the west more heavily than the rest of the country. In fact Dublin, Cork and Waterford in particular, to take three cities, have had a major impact on the employment situation. In fact, Dublin, Cork and Waterford have had a very considerable unemployment problem. Generally the west of Ireland has benefited as much as any other area, and in fact has benefited to a greater degree than many, in respect of State expenditure and some of the highly selective politicising that has been conducted regarding Government action in the west of Ireland has not been true.

The matter of aircraft facility for the Garda Síochána was raised during the debate. This brings us back to the question of public expenditure. The previous Minister for Justice announced there would be a major helicopter and light aircraft facility for the Garda Síochána but a cost-benefit analysis was not carried out. He did not even seek a detailed report from the Commissioner regarding the cost. If the Garda are to have their own aerial capability with the necessary back-up facilities, it is obvious that the Department of Justice, the Department of Finance and the Garda Commissioner must have a detailed analysis of the cost effectiveness of alternative methods of dealing with the needs of the Garda in this regard. Because of the magnitude of the project it was obvious we should not take a decision until a full evaluation had been made of various options and the decision has been deferred pending a full and detailed report to the Government. Simply because someone suggests that every Garda division should have helicopter and light aircraft facilities it is outrageous to suggest that automatically the Government should agree to that without carrying out an examination.

As I pointed out, we spent £333 million in 1981 in respect of security measures. We tend to forget that in the past ten years we have spent £500 million because of the continuing Border security situation. Of the £333 million spent last year a sum of £90 million was directly attributable to a massive period of overtime in respect of Border duties by our Defence Forces. We could have built 3,000 houses for that amount. We could have wiped out the unemployment problem in Cork and Waterford. At the current rate of IDA expenditure it costs approximately £7,000 to provide a new job. Waterford has 3,000 people unemployed, the number in Cork is 7,000 and the amount of money we had to spend on security in the Border areas would have cleared the unemployment problem in those places. The £500 million spent on security measures along the Border would have produced 100,000 jobs or would have paid for 25,000 houses. The Provisional IRA have carried out a campaign of genocide among our people; all of us have deplored this and Senator Murphy, in particular, has been eloquent and more than courageous on this issue. Apart entirely from the genocide campaign of the Provisional IRA, their activities have meant loss of jobs and almost a loss of sovereignty, because we have had to borrow to meet current public expenditure. We have suffered a loss of exports and a dramatic reduction in investment because our Border security situation appears in every investment analysis of every bank here and abroad. We tend to be blasé, to forget about it and to become coarsened in accepting the situation; but an investment analyst in America, Japan, France and elsewhere will be very aware of it and will not forget it when it comes to making a decision about investment. The Provisional IRA have not just wreaked havoc on the Irish people; they have wreaked havoc also on our economy. The lowering standards of living that we suffered in 1980 and 1981 and which we will suffer in 1982, despite efforts to maintain them, can be attributed directly to the genocide campaign carried out by the Provisional IRA.

Senator Carroll raised the question of economic and social planning. We will definitely publish a national economic and social plan by mid-year. It will include not just the ordered management of public finances but also the employment dimension. That plan is in the course of preparation. Rather than having, as we have had in recent years, ad hoc publications from the Department of Finance it is far better that there be an ordered general development. There will be the budget in January, the national economic and social plan will be available in mid-year, the Estimates will appear in November at the latest, there will be a public debate on the Estimates and then we will have the budget. The economic and social plan will feature strongly.

I should like to quote from a statement made yesterday by Senator Whitaker when he spoke to the United States Chamber of Commerce in Ireland. He said:

Unless, however we recognise in our attitudes to incomes, productivity, value for money and the public finances, the need to do more to earn our present standard of living, and the impossibility of continuing to live beyond our means, external deficits and the borrowing they involve will overwhelm us and destroy our capacity to manage our economic affairs.

Against the background I have outlined today, anybody who would advocate a continuation of Government borrowing on its present scale must be seen to be disgracefully irresponsible.

Our parliamentary colleague is not given to strong language but I share his view that it would be irresponsible to advocate such a course of action in our situation.

I will conclude by not being as gloomy as I was in the earlier part of my speech. When reporting on our economy last year the EEC Commission said that the longer-term prospects for our economy were significantly brighter than the short-term outlook. I share that sentiment. Our economy has many potential strengths and, if they are exploited properly, they can make that possibility a reality. There is no doubt that there has been some recovery. It has been slow but it is there and there are clear signs evident in many of the indices for the first three-quarters of 1981. It is a tribute to the 50,000 Irish workers who are now exporting to the international markets on a profitable basis. There is a very solid industrial base for exports and recovery has been confirmed by external trade indices and in terms of industrial exports which have performed very well, despite the persistance of recession in our main markets. Some of the more recent business surveys available from the Central Statistics Office indicate that there is a mild recovery. It will be well into the middle of 1982 before this is reasonably evident. It certainly will be the end of 1982 before it will have any impact on employment because, such is the over-capacity in industry that there is at least six months time lag before the effect is felt on the manpower vacancy situation.

I am not pessimistic. The International Monetary Fund very nearly intruded into our economy within a fortnight of our taking office. I can say that because I was aware of the situation. If getting a reasonable balance in the nation's finances does not involve a situation whereby foreign banks and domestic banks would take a decision to refuse to lend money to the Irish Government — as was immiment in a certain situation — if that can be avoided, as it has now been avoided, and our creditworthiness restored in terms of more external reserves, which now are at least the equivalent of two-and-a-half months of export earnings, as commented on by Senator Whitaker in the past 24 hours, we can face the prospect of a full economic recovery.

It is not enough to put the nation's finances right. It is not enough to restore rational criteria in public expenditure and in taxation. One also has the problem of industrial production, industrial recovery, industrial investment. The Government must set a time limit to enable an upturn to occur. By the middle of 1982, we will have succeeded in doing that, with the National Development Corporation under way. The corporation will not be a panacea for all the problems but will assist in that development. With the Youth Employment Agency also in full operation and with sanity prevailing on the taxation front, I am quite convinced that we can provide employment for the thousands of young school leavers in 1982 and in the years ahead.

I thank the Senators for their contributions to this debate and will advise my colleague, the Minister for Finance, and the Government of the views of Members of this House on the Appropriation Act, 1981.

Question put and agreed to.

It is proposed to adjourn until 2.30 p.m.

Sitting suspended at 12.55 p.m. and resumed at 2.30 p.m.
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