Before the adjournment I made a brief statement on the financial situation in connection with the Estimates of Receipts and Expenditure for 1923-24, which had then been laid before the Dáil. Deputies will, no doubt, welcome a somewhat fuller statement on this occasion in explanation of the circumstances in which I have to propose the taxing resolutions which will presently come under consideration.
Since my last statement the financial year 1922-23 has terminated, and it is now possible to consider the position with definite knowledge of the transactions of the Exchequer for the year ended on the 31st March. As Deputies are aware the Ministry of Finance publish regularly every Tuesday in the "Irish Oifigiuil" a statement of Exchequer transactions up to the close of business on the previous Saturday, and the issue of the 3rd of April contains the statement for the full year up to Saturday, 31st March. I propose to summarise the salient points of that statement so that Deputies may understand clearly what is the position from which we start on the 1st April of this year.
RESULTS OF YEAR 1922-23.
The Revenue received into the Exchequer in the year just ended amounted to the total of £27,863,000. On the other hand issues which had to be made out of the Exchequer to maintain the public services amounted to the total of £30,197,000. The difference between these two amounts, that is £2,334,000, had to be found by borrowing. The total amount borrowed up to the close of business on 31st March last was greater than this figure by £197,112 which is the amount of the Exchequer balance carried forward into the new year. The position, therefore, is that we have ended the year 1922-23 with a debt of £2,531,000, and with an Exchequer balance of £197,112 in hand.
There are a few points in relation to these figures on which I desire to make some comment. I have quoted the figure of £27,863,030 for the year's Revenue. It is, I think, well understood by this time that the revenue paid in the first instance into our Exchequer during 1922-23 is not true revenue of Saorstát Eireann. We have in fact collected here certain taxes which really belong to Great Britain, and, on the other hand, the British Government have collected in their area some taxes which really belong to us. The full adjustments between the two Governments which are necessary on this account have not yet been effected, and consequently our revenue figures must be regarded as subject to considerable modification.
Some adjustment has indeed been effected. At the end of March we received from the British Government a payment of £1,250,000 in respect of Inland Revenue collected by them and belonging to us. This payment is included in the total revenue receipt I have mentioned. At the same time we paid them an equivalent amount in respect of Customs and Excise collected by us, but belonging to them. This item is included in our expenditure as a Central Fund service.
The adjustment still remaining to be made threatens to be very substantial in amount, and, unfortunately, altogether against us. According to the British claim, which, however, is still subject to investigation, the adjustment remaining to be made involves a payment from the Exchequer of Saorstát Eireann to that of Great Britain of an amount approximating to one and three quarter millions. This amount, subject to verification, must be regarded as a liability of the current financial year, and has been so treated in the Estimate of Receipts and Expenditure circulated before the adjournment.
On the other side of the account it is right to mention that issues out of the Exchequer must not be regarded as a final or exact indication of actual expenditure of the year. For practical purposes they give a reasonably close approximation to actual expenditure, but, in fact, they represent only issues to various departmental accounts and not disbursements to ultimate payees. The real expenditure will, of course, not be available until detailed accounts have been prepared and audited.
Before passing from the year 1922-23, I ought, perhaps, to mention how the actual results compare with the forecast which I made in my statement of the 6th October last in this Dáil. I then hoped that our total real revenue for the year would be about £27,000,000. In fact, according to the figures which I have now given, it proves to have been only £25,000,000. The main reason for the unfavourable result is that at the time of my former statement revenue forecasts had necessarily to be made to a considerable extent by reference to the basis of computation adopted in the old White Papers of the British Treasury. Improved machinery set up during the last financial year has, during the interval, provided new information and, as matters stand, this information goes to show that the White Paper arrangement tended to overstate the revenue of Saorstát Eireann.
As regards expenditure of 1922-23, the chief point requiring notice is that the expenditure on Supply Services has been substantially short of the total amount of the Estimates laid before the Dáil. In the Estimate of Receipts and Expenditure recently circulated it is shown that of the total amount of £38,744,000 granted by the Dáil savings were anticipated amounting to £10,500,000 showing a probable net total expenditure on Supply Services of £28,244,000. The actual Exchequer issues showed a further reduction of one million and a quarter, and amounted to the aggregate sum of £27,000,000. This large difference between Estimates and results is due very largely—namely to the extent of £9,000,000—to compensation awards not having matured for payment as early as had been hoped when the original Estimates were prepared.
YEAR 1923-24.
I pass now to the Financial Year 1923-24, which commenced on the 1st of this month, and propose to refer first to the expenditure, then to the extent to which it is contemplated that it can be met from revenue, and finally to the arrangements necessary for the finding of that revenue.
EXPENDITURE 1923-24.
The Estimate already circulated gives particulars of the estimated expenditure. For the purpose immediately before the Dáil I do not suppose that any elaborate survey of those particulars is necessary. An opportunity for considering the several Estimates in detail will arise very shortly when Votes for the various Services are being taken in the Committee on Finance.
The estimated expenditure falls under three main heads—namely:—
|
£
|
|
Central Fund Services
|
3,671,556
|
|
Supply Services
|
42,278,408
|
|
Capital Issues
|
691,700
|
The Central Fund Services consisted chiefly of the four main items, Local Taxation Grants, Payments to the Road Fund, Service of Debt, and the payment of a million and three quarters to the British Government for the revenue adjustment which I have already mentioned.
The Capital Issues, which are small in comparison with the other figures, consist of sums required for Telephone Capital and for advances to the Unemployment Fund to enable it to meet its liabilities.
The main expenditure is for Supply Services, and amounts, as I have said, to the estimated net total of about fortytwo and a quarter millions. Of this total the Army requires £10,664,500, and Compensation charges require £10,985,550, these two together representing half of the entire expenditure on Supply Services.
As regards the estimated expenditure on Supply Services, Deputies will understand that the preparation of such Estimates is a very laborious work which in all countries has to be initiated at a date a good deal earlier than the commencement of the year to which they relate. Besides this common difficulty, a further difficulty has inevitably hampered the Government of Saorstát Eireann in this work during the past year through the continuous process of change in administrative arrangements which has been a necessary consequence of the introduction of a new system of Government. One result of these conditions is that the Estimates, as submitted, will not represent the final conclusions of the Executive Council on matters of detail to the same extent as would be possible if administration were being conducted on a settled basis. It is in fact hoped in a number of cases to effect economies in the net amount of the Estimates as already published, and the fact that the Dáil is being asked in any case to vote a particular amount is altogether without prejudice to further steps being taken by the Executive Council to curtail expenditure. It may be of interest to Deputies to learn in this connection that the Ministry of Finance circularised all public departments a month ago for the purpose of having immediate and earnest consideration given to the whole field of administration with the object of exploring every feasible means of effecting economies. Preliminary reports are to be made in the first instance on more important matters, leaving details and minor matters to be examined subsequently.
The total figures of Expenditure which I have given do not make provision for any Supplementary Estimates. It is the desire of the Executive Council, as far as possible, to avoid Supplementary Estimates, but in the event of any such Estimates being necessitated, as a result of legislation or otherwise, it may not be unreasonable to hope that the amount involved can be met by savings to be effected on the main Estimates by the adoption of economies in the course of the year.
REVENUE, 1923-24.
The Estimate which has been circulated indicates generally how it is proposed to meet the total expenditure of over forty-six and a half millions. It is proposed to find twenty-six millions of this total from revenue, made up of 20½ millions from tax revenue and 5½ millions from non-tax revenue.
NON-TAX REVENUE.
Little comment seems necessary to explain the details of non-tax revenue which are given in Paragraph B of the first page of the Estimate. It will be noticed that of the total of 5½ millions, 3 millions is the estimated British contribution during the year towards compensation or pre-Truce damage to property. The miscellaneous item forming part of the non-tax revenue consists chiefly of instalments in repayment of local loans, the amount of which under present arrangements is afterwards transferable to the British Government out of the Vote for local loans. I should mention in this connection that the published figures do not show, either on the receipt or expenditure side, the collection of Land Purchase annuities and subsequent transfer thereof to the British Government. An arrangement for this purpose will, however, need to be made, but as it should affect each side of the Budget account to the same extent, it does not alter the margin between revenue and expenditure as shown in the published Paper.
TAX REVENUE.
The tax revenue for the year is estimated, as I have said, at 20½ millions. A Paper giving an explanation of that has been issued. The corresponding figure for 1922-23 shown in the printed Estimate is £25,849,000, but as this is an unadjusted figure, the real comparative figure for 1922-23 should be taken as approximately 23 millions. Thus a decline of 2½ millions in the tax yield is anticipated.
The general principle on which our taxing proposals are based is that existing taxes should be continued as far as possible for 1923-24, according to the same rates and conditions as have applied in 1922-23. We have taken over as from the beginning of this month an elaborate fiscal system and a complex code of law that governs it, and, in undertaking the heavy burden which this involves, are necessarily precluded from making that full investigation of all the details of the system which would be an essential preliminary to any reform of policy such as the special circumstances of Saorstát Eireann might, perhaps, require.
The general state of our finances makes it plain that reduction of taxation is out of the question at the present moment. Largely because of the campaign of destruction which has been waged in the country during the past year, borrowing to a great extent will be necessary during the current financial year. The credit of the State, and the conditions on which borrowing on such a scale will be found feasible, are matters on which it is not yet possible to frame definite conclusions, and it is, therefore, important that we should not depend more than we can help upon having resort to borrowing.
To explain the composition of the total figure of 20½ millions, a statement has to-day been circulated to Deputies showing the estimated yield of the several main taxes under the same heads as are adopted in the weekly Exchequer statement.
It will be appreciated that the preparation of a Revenue Estimate for 1923-24 is very much a matter of conjecture in present circumstances. The revenue of this year is being collected under new conditions which have never previously operated. The Free State has become an independent fiscal entity, and its taxes are being collected by its own officers, without need for adjustment, such as the temporary arrangement of last year required. This being the case, the Estimate has necessarily to be framed without the assistance that is normally provided by data collected under conditions generally similar to those of the period to which the Estimate relates.
While I am bound to put forward these reservations, and to ask that they be specially borne in mind in considering the detailed allocation of the total revenue, I do not think that the total estimate itself should be regarded as otherwise than as a reasonable effort to anticipate the actual result.
As regards the figures for the several heads, it will be observed that a total of £7,300,000 is given for Customs, which is in marked contrast with the actual Customs receipt of about 2½ millions in 1922-23. This is, of course, the direct consequence of our collecting this year all our own Customs, instead of having some of it collected for us as heretofore in Great Britain. For example, tea coming to the Free State will no longer pay duty in London, but will pay it on landing at a Free State port or on the Border.
Excise, on the other hand, is shown as £8,000,000 for 1923-24, whereas we received £16,488,000 in the year just closed. This result is due to the fact that dutiable commodities, such as beer made in the Free State and sent to Great Britain, will cease to pay Excise duty here, as occurred last year, and will have to pay Customs on entry into Great Britain.
Motor vehicle duties are expected to show an increase from £126,000 to £250,000. This is due, of course, to the fact that the past year was abnormal, and that the gradual restoration of order and of compliance with the law will favourably affect this head of tax.
The remaining items do not appear to require any special comment.
In the case of income tax, it is possible to say definitely that the yield will be affected adversely by the general economic conditions which have prevailed in the country for some time past, and especially by the fact that where the tax is reckoned over an average of years, the favourable year 1919-20 will fall out of the reckoning and be replaced by the unfavourable year just ended.
I now come to the question of preferential rates of duty. I have already explained the grounds on which we are recommending to the Dáil a continuance of the existing basis of taxation for this year. For the same reasons we feel that it is desirable to continue the preferential rates of duty where these already exist. As Deputies, know, the preference takes the form of a reduction of one-sixth of the duty in the case of certain commodities of consumption (e.g., tea and sugar), and one-third of the duty in the case of certain manufactured goods (e.g., motor cars) grown or produced in the various Dominions—i.e., Canada, Australia, India, etc. The abolition of the preferential rates, as Deputy Johnson has already explained in the course of a previous debate in the Dáil, would involve an immediate increase in the price of tea of nearly twopence in the lb., an increase which would be felt in every household in Ireland, but particularly amongst the working classes, and although the continuance of the rates represents a considerable loss to the Exchequer, we do not think that the present is an opportune time to ask the public to face the dislocation of trade and the possible hardship which this abolition would involve. We therefore propose to continue the preferential rates, which will apply also to goods from Great Britain, for the present year, during which the whole preference question will be fully investigated.
Assuming that the estimated sum of £1,700,000 already referred to is correct —that is the figure which refers to the adjustment between Great Britain and Saorstát Eireann—the financial year just terminated winds up with a deficit of £4,000,000. It could not be described as a normal year. From its beginning the political situation exercised an unfavourable business effect. Disturbances of many kinds were the order of the day or night. Property was insecure. Motor cars were the sport of every man with a gun who had a desire for cheap travelling. Houses were commandeered at the point of the revolver. Barracks just occupied by the National Army were the subject of attack, and posts occupied by the National troops were seized by the Irregulars, sometimes by a ruse, other times by deceit and treachery. The public conscience was appalled by the fact that the men who were entrusted with arms, and who gave assurances to hold them and defend their posts, were found to be in a conspiracy against those who trusted them. Continually we were being questioned: "Can you depend on your men?" Such were the conditions prevailing in the first three months of the financial year just closed, and I bring that period under review now to show that ordinary business activity could not be prosperous under such conditions. The three months following were still worse as major military operations were taking place all over the country. In practically every city in the Saorstát there have been major military operations. From the beginning it was evident that military operations were a secondary consideration with the Irregulars, and the main attack was in the economic sphere.
The railroads were singled out for special attention, and for a long period it was in doubt whether destruction or construction would win. There is no doubt now. At this moment there is only one serious dislocation, and that is in course of being remedied.
The Post Office, which might be said to constitute the nerves of the business body, suffered innumerable onslaughts, but it has survived the attack, and is in excellent working order to-day.
A further development of an offensive on the credit of the country began in December—namely, the destruction of house property. This form of attack is a heritage from what is called the Black and Tan period. It failed then, it has failed now, but, of course, it has left its economic aftermath.
An examination of Banking returns shows that there has been a contraction in discounts and advances by Banks, both movements being symptomatic of reduced business activity. All these events must be considered in relation to the two items of the balance sheet—namely, receipts and expenditure. The balance on the wrong side is £4,000,000 maximum. On the expenditure side there are two items considerable in amount—namely, Army, £7,500,000; Compensation, £1,250,000. If there are still people in the ranks of those engaged in hostilities against the State, who have hoped for an economic strain beyond the resources of the State, the publication of these figures will show clearly that the policy of destruction has failed. If the military situation be reviewed it will be found that we have an Army of over 50,000 men, better disciplined, more efficient and with a better morale than at any period in our history. In the same way the civil administration has been extended gradually, systematically and surely.
CONCLUSION.
In conclusion, without wishing to deprecate the need of progress and improvement in our financial administration in the future, I think it is a matter of some satisfaction that we have passed through the troubled year just ended without serious embarrassment.
The anticipated deficit for the coming year is, no doubt, serious, but it is not such as to cause any misgiving as to the financial future of the Free State and the credit of the country. A large amount of the expenditure is non-recurring, and it is quite clear that on the arrival of settled conditions the revenue of the country will be ample to cover all commitments. We have been engaged in a war involving not merely the abnormal expenditure of warlike measures, but also the loss entailed by a system of organised sabotage—an organised attack on the industry and trade of the country. In their attacks on trade and industry the Irregular forces have attempted to bring economic pressure on the Free State, and they have failed. We are now emerging from a period of trial, and we are entering on more stable conditions, in which it can safely be predicted that there will be no appreciable increase of our existing commitments.
For the future, the prosperity of the country and the credit of the State depend on the support which the people render to the Government of the day. After the stormy events of the last fifteen months we are entitled to ask for that support, not for the individuals who form the Government, but for the Government machine. The persons forming the Government are immaterial. It was not for any particular Government or for any particular Ministry that we entered on this struggle, the last phase of which is now being enacted. No; it was for the fundamental principle of ordered government itself. In asserting that principle we were prepared to exhaust the resources of the State. It has not been necessary to do so. The cost of the defence of the people's liberty is well within our resources, and there is no danger of its crippling the prosperous development of the country
When ordered conditions are restored and normal life prevalent, we can safely anticipate a marked improvement in the economic condition of the country. To repair the losses sustained we shall have to ask for the most cordial co-operation of every section. The nation is capable of greater efforts. We want harder work; we want greater industry—concentration by every citizen on his proper task, on his due share of the daily labour ahead of all of us in a united effort for the uplifting of our nation. Given these things, we have great prospects. We can wipe out national dishonour, we can improve the conditions of our people, we can reconstruct our economic fabric, and we can vindicate the great dead who died that we might live.
As matters stand, it is manifestly essential to undertake some burden of debt, and the Government will very soon appeal with confidence to those who have the interests of the country at heart to serve their own interests as well as those of the State by taking up that debt by internal subscription.
