The statement which I am now about to make to the Dáil has in view primarily the proposals which, subject to the approval of the Dáil, it is intended in due course to embody in the Finance Bill. These proposals will be concerned essentially with the taxation to be borne by the country during the coming year, but in order that they may be seen in their proper perspective it will be necessary to look at them in the light of the general financial situation. That situation I will consequently touch upon in the first instance, and I will begin with a brief survey of the finances of the State during the year ended on the 31st of last month.
At the opening of the financial year 1923-24 there was a cash balance in the Exchequer amounting to £197,000, and there was a total State debt of £2,531,000. At the close of that year and the opening of the present financial year the Exchequer balance was £3,395,000 and the State debt had grown to £13,912,000. At the end of the year, therefore, as compared with the beginning the cash balance had increased by £3,198,000, and the debt had increased by £11,381,000.
The total revenue received into the Exchequer during the year was £31,414,000. The corresponding figure in the original Budget estimate put forward a year ago was £26,096,230. As was explained at that time by the President, who was then Minister for Finance, Saorstát Eireann had not previously been administered as a separate fiscal unit, and exact data on which to base reliable estimates of revenue were not in existence. In the light of later information I was able to indicate to the Dáil in my statement of the 2nd November last that the tax revenue of the year would substantially exceed the first Budget estimate, and this has, in fact, occurred. The actual increase of tax revenue beyond the figure given in the original estimate is £4,765,500. Income tax, owing largely to the efforts made to collect arrears, is two millions in excess of the estimate of a year ago. The Excise duty on beer shows an excess of £1,600,000. The greater part of the latter is in the nature of a windfall, attributable to the fact that drawback on exports in this case did not commence to be payable until some time after the beginning of the financial year. This has been an advantage of a kind that cannot occur again.
The Excise duty on home-made spirits was £330,000 below the Estimate. Customs duties, taken as a whole, have produced over £900,000 beyond the original Estimate, the main increases being—Tobacco, £512,000; New Import Duties (including Customs duty on Motor Cars), £258,000, and Imported Wine and Spirits, £386,000. The Customs duty on Sugar was £300,000 below the Estimate and on Tea £158,000 below the Estimate. The Motor Vehicle Duties, the equivalent of which is payable to the Road Fund, exceeding anticipations by £145,000. Miscellaneous Revenue in the aggregate, although affected by some disturbing factors as regards details, was approximately in accordance with the Estimate. On the whole, and especially in view of the conditions through which the country has passed, there is every reason for satisfaction with the proceeds of the revenue in the year in question.
Turning now to expenditure, the Estimates passed by the Dáil for the year 1923-24, both original and supplementary, covered a net total amount of £45,750,817. This amount is over ten millions in excess of the sum which it actually became necessary to issue from the Exchequer to meet corresponding expenditure. In general the Exchequer issues have approximated fairly closely to the estimated requirements, and the unused balance of ten millions is attributable largely to two Votes in which the course of events could not have been foreseen. These Votes were Property Losses Compensation and Land Purchase Annuities. In the case of the Compensation Vote the hearing of applications under the Damage to Property (Compensation) Act did not begin as early as was expected when the Estimate was prepared, and in consequence the awards under that Act, except to a small extent, did not mature for payment within the year 1923-24.
Also the awards made by the Compensation Commission in dealing with pre-Truce damage did not involve such large payments as was at one time expected, while in cases where payment is due only on fulfilment of a building condition applicants have been slow in taking steps to carry out this condition. There has in consequence been a margin of £6,380,000 on the Compensation Vote of the year. In the case of Land Purchase Annuities the law in force at the commencement of the year contemplated that the annuities would come into the Exchequer as revenue and be issued through a Vote to the appropriate Land Purchase fund. The provision of new machinery by the Land Act passed during the year has removed the need for this Vote, and caused the greater part (about £2,000,000) of the money provided in the Vote to remain unissued. Next to these two principal items the chief saving was £300,000 in the Vote for Local Government, owing to grants for Housing Schemes not falling due for payment to the full extent within the year. Besides Exchequer issues of £35,413,156 for Supply Services there were payments of £3,226,199 for Central Fund Services. The latter figure is approximately in accord with the original estimate after allowance is made for the fact that the payment to Great Britain in respect of the attributable revenue of 1922-23 was £300,000 less than the original British claim.
Taking Supply Services and Central Fund Services together, and leaving aside capital issues for the Telegraph Acts, the Unemployment Fund or repayment of debt, the total expenditure of 1923-24 may be taken as £38,639,355.
I have stated that the revenue of 1923-24 was about £31,414,000 and that the expenditure was about £38,639,000. These figures reveal a deficit of £7,225,000 on the services to which they relate. The whole of this deficit is less than the net issues during the year for compensation and for what may be regarded as the abnormal fraction of the Army charge. This is a result which I am sure the Dáil will regard as satisfactory and tending to confirm the favourable estimate, which has steadily been growing in responsible quarters, of the financial position of this country.
In using this result, however, for testing the true budgetary position for the present and the future, it is necessary to beware of drawing conclusions which might be unduly optimistic. The revenue figures which I have given for 1923-24, although quite accurate in every respect, have been abnormally inflated from various causes, some of which I have indicated, and they do not afford a reliable indication of the probable revenue of 1924-25. This will be seen to be reflected in the Estimates of Revenue for 1924-25, already published. Moreover, on the expenditure side the annual charge in respect of borrowing, which will be substantial in 1924-25, and later years, had not yet begun to be an appreciable burden in 1923-24.
I come now to the debt position during 1923-24. At the beginning of that year the total debt of the State amounted to £2,531,000, of which over £2,000,000 was in the form of Irish Free State Bills. A further amount of £385,500 was in the form of Ways and Means Advances, so that we may be said to have had almost entirely a floating debt at that time. The problem of borrowing to finance Exchequer requirements was the leading financial question which the Government had to face during the year. It is not necessary for me now to dwell upon the manner in which the problem was met. It is sufficient to note that the succesful flotation within the country of a National Loan of £10,000,000 on terms at least as favourable to the State as those enjoyed by several long-established Governments of good financial repute, was an event which deeply impressed financial circles throughout the world, and placed the credit of this country on an impregnable basis. The full amount of the loan at 95 per cent. was received into the Exchequer during the year.
Before the issue of the National Loan steps had been taken to raise funds by the issue of Savings Certificates. These Certificates began to be issued during July, and had brought in the substantial subscription of £950,000 by the end of the financial year.
Apart from borrowing to meet the cash requirements of the Exchequer, a beginning has been made with the creation of debt in the form of 5 per cent. Compensation Stock, which is issued in part discharge of awards under the Damage to Property (Compensation) Act. That is awards in respect of furniture, fittings and things other than the actual buildings.
The details of the total debt of £13,912,000 outstanding on 31st March last are as follows:
|
£ |
|
|
Irish Free State Bills |
814,000 |
|
Ways and Means Advances (Public Departments) |
1,991,500 |
|
Annuities under Telegraph Acts |
134,500 |
|
Savings Certificates |
924,500 |
|
5 p.c. National Loan 1935-45 |
10,000,000 |
|
5 p.c. Compensation Stock |
47,650 |
|
Total |
£13,912,150* |
*Against this debt may be set off an asset of £877,700, representing advances which the Unemployment Fund is liable to repay to the Exchequer.
I will now turn to the figures for 1924-25, which were circulated before the adjournment. There is little to be said by way of comment upon the published Estimates of the probable Revenue of 1924-25, except to observe that they have been prepared upon the basis of existing taxes, and have taken no account of the proposals which it will be my duty to lay before the Dáil in the later part of my statement. So far, however, as this point is concerned I may perhaps anticipate matters by stating that, while the existing basis of taxation will be modified by these proposals as regards the distribution of duties under their several heads, yet in the aggregate the result of the new proposals will be such as to leave the total published Estimate of Tax Revenue substantially unaltered.
The published figures represent the best attempt which can be made to forecast the situation during the current year after making full use of the data yielded by the experience of the past year, and allowing for such factors as general observation of the economic position appeared to require.
The total tax revenue is expected to amount to £22,543,000. The non-tax revenue has been reckoned at £5,144,300 —both heads of revenue together yielding a total of £27,687,300.
The estimates of expenditure which have been circulated indicate a need for providing £31,873,791 in respect of Supply Services, and £4,472,482 in respect of Central Fund Services—that is, a total under the two heads of £36,346,273. This is not the occasion for the review of the estimates of expenditure, but I think it well to mention that the provision for the Army in 1924-25 is about £4,000,000—that is, six-and-a-half million less than in 1923-24, and that the provision for Property Compensation is reduced by three millions. The expenditure on Central Fund Services includes full provision for the Sinking Fund on the National Loan.
For determining the relation between revenue and expenditure in 1924-25 the two main figures are the revenue of £27,687,000 and the expenditure of £36,346,000. These indicate a cash de ficit for the services concerned amounting to £8,659,000. If the entire charge for Personal and Property Compensation and the abnormal part of the Army charges are set-off against this figure there would remain only a deficit of about £500,000. This, so far as it goes, tends to indicate that the Budget position is not unsatisfactory in a certain sense. As, however, I indicated earlier, when speaking of 1923-24, great caution must be exercised about drawing inferences from these figures. On the revenue side the income-tax collectable still includes a large amount of arrears, and there is reason to fear that the productivity of taxes generally may be adversely affected for some time to come by the prevailing depression. The Excise duty on beer, which is one of the most important sources of revenue, has already begun to show signs of a trend of this kind.
Again, on the expenditure side, the debt charge has not yet reached its full development, and in particular a substantial addition to the burden under this head may be expected through the creation of Compensation Stock in settlement of awards under the Damage to Property (Compensation) Act. That Stock will be redeemed in ten years by annual drawings. Again, no allowance has been made in the figures I have given for inevitable additions to expenditure by reason of supplementary estimates and for new charges likely to result from legislation now going through, or soon likely to be introduced. On a fair view of the whole situation it is, I think, permissible to claim that with a little further progress such as it should be quite feasible to attain in administrative economies, the Budget would be brought within measurable distance of equilibrium. Even this, however, with a distinct gain from the purely financial point of view, is not, in the opinion of the Executive Council, the ultimate goal to be aimed at. It is further necessary in the economic interest of the country to reach a stage at which the present excessive burden of taxation can be eased, and the productive industries of the country thereby afforded a fair opportunity of developing at home, and competing on level terms with rivals in outside markets. Retrenchment is the only means that at present promises a fair prospect of bringing relief from the weight of taxation that now presses on the country.
It is plain that in the present circumstances it is not possible to remove any of the existing burden of taxation. The Executive Council have, however, given anxious consideration to the question how far they could, consistently with this general attitude, assist the economic interests of the country by readjustment of the existing fiscal system, and they have determined to propose to the Dáil certain measures designed to that end.
As stated by the late Minister for Industry and Commerce in a debate which arose out of the reports presented by the Fiscal Inquiry Committee, the Government takes up no doctrinaire attitude on the question of Free Trade and Protection. It regards the matter as one of expediency which may be variously decided in different circumstances. During the past year it has been incessantly urged upon the Executive Council that a large number of protective duties, amounting, in fact, to a general tariff, should be imposed for the purpose of supporting the many industries in the Saorstát which are suffering acute depression, and of relieving the widespread unemployment which exists. The Executive Council is convinced that the matter is one on which the country should feel its way. We are not prepared, on the one hand, to recommend anything approaching a general tariff, with the substantial rise in the cost of living which would inevitably follow, bringing other and serious economic problems in its train. Neither are we prepared to let the industrial drift continue, and content ourselves with preaching efficiency and the virtues.
After careful consideration we have decided, as the best means of dealing with the situation which exists, to recommend to the Dáil the imposition of certain duties which will give us a limited but sufficient experiment in the use of a tariff for the stimulation of Irish industry. By the end of a year we will have a clearer idea of the efficacy and all the reactions of protection as applied to Irish conditions than could ever be obtained by mere discussion and speculation. Actual experience will teach us what fiscal policy is suited to our conditions. We propose to deal with only five categories of goods. We think the number is sufficient for a trial. We have a Customs staff which was organised only a year ago, and only a portion of that staff consists of experienced men. A number of others have very little experience. Practically no Customs work was done in this country until last year. The men who have been administering that service have been working at high pressure all the time, and they have been working without leave. These proposals that we make now will cast a very heavy burden upon them, because, even with the recruitment of staff, it will be some time before new men are efficient and are able to relieve those who have been continuously working, carrying on under great difficulties, and working extremely hard since the inception of our own Customs system. It would be impossible to have a greater number of new duties than are now proposed collected without grave delays, dissatisfaction, and dislocation of business. I think at this point I should say that the Customs staff during the past year have done very good service to the State by the way in which they carried on under the difficult circumstances that existed.
We have selected as the main case for the proposed experiment the Boot and Shoe Industry. This industry is one which should flourish in the Saorstát; and if it were strongly developed should lead to the resurrection of an important tanning industry which would link it with the main agricultural industry of the country. At present the manufacture of boots and shoes is carried on to some extent in the Saorstát, but about fourteen-fifteenths of our requirements are imported, the annual value being over £2,000,000. The proposal I have to make to the Dáil in this case is that there should be imposed a Customs duty of 15 p.c. ad valorem. It will be readily seen that with the limited capacity of Irish boot factories there can hardly be any great diminution of the importation of boots and shoes in the present financial year. A considerable time must elapse before Irish factories can extend their plant and increase their output, or before British boot firms, which might desire (like British tobacco firms) to retain Irish trade, will find it possible to acquire sites and erect factories and plant and begin to produce on any considerable scale. Consequently, it must be anticipated that the duty will yield a large revenue in the present year, and must even continue to yield substantially for a further period. It is proposed, therefore, that the possibility of an increased burden on the taxpayer should be obviated by a reduction of the duty on another necessary commodity which is already taxed. In addition to the tax on foot-wear it is intended to impose protective duties on (1) confectionery, (2) soap and candles, (3) glass bottles, that is, black or green bottles, (4) commercial motor bodies.
It is proposed that sugar confectionery should be subject to Customs duty at a flat rate of 3 3-5d. per lb., and that preparations made from or containing cocoa or chocolate in any form should be subject to Customs duty at a flat rate of 6d. per lb. As confectionery is largely a luxury commodity, this tax is one which is not open to objection from any angle. It will, moreover, relieve the Revenue Authorities of a great deal of troublesome work which was thrown on them when confectionery was taxed on its sugar or cocoa contents. Even if no experiment in Protection had been determined upon it is possible that some such tax as this might have been proposed for convenience of collection. The new tax will give a measure of protection ranging from ½d. to 1¾d. in the case of sugar confectionery and from 2d. to 3 2-5d. in the case of cocoa preparations, that is, allowing for the tax on the raw materials. Deputies are, of course, aware that confectionery is already manufactured to a considerable extent in the Saorstát, but the imports are nevertheless large, and it is hoped that with the assistance of the duty now proposed firms already engaged in the industry here will expand their business and that outside manufacturers may possibly deem it advisable to establish factories within the country, so that an appreciable increase in employment may be provided.
It is proposed that the duty on soap and candles should be ten per cent. ad valorem. If manufacturers and workers are prepared to give a square deal to the general public practically all the soap and candles required in the Saorstát should be supplied from home factories at no added cost to the consumer. The value of these commodities imported annually is something like £340,000 to £350,000.
The duty on black and green bottles will be 33? per cent ad valorem. Bottle-making is a very old Irish industry which, because of the present unfair competition from certain foreign countries, seems to be on the verge of extinction. The Executive Council felt that in this limited trial of Protection the bottle-making industry might fairly be given an opportunity of getting on its feet again and perhaps extending its scope, especially as the duty now proposed will not afford any justification to retailers for increasing the price of porter or stout in such bottles.
The tax on motor bodies will be 33? per cent. Chassis and vehicles designed for use in commerce or husbandry will be free of tax, as heretofore. The tax will be on the body and parts of the body solely.
The total amount of the revenue likely to be derived from the protective duties which I have outlined, is difficult to estimate, as apart from other considerations, the statistics of past imports of the commodities in question are not available in a sufficiently concise form on which to base calculations. In no case, except that of boots and shoes, from which perhaps £250,000 might be expected this year, is the revenue likely to be substantial. Next to boots and shoes, the Confectionery Duty should produce the largest yield, and the amount in that case might be something in the neighbourhood of £40,000. In the aggregate not more than £300,000 to £350,000 can safely be anticipated, and this figure should, of course, undergo much contraction if the duties realise their protective object. Having regard, however, to the possible immediate effect of the duties, the Executive Council have thought it right to afford relief from existing taxation by reducing the Tea Duty from 8d. to 5d. per lb., which, allowing for Imperial preference, means that most tea will be 4?d. less than pre-war, when it was 5d. As tea is a valuable source of revenue, and particularly suitable to be the subject of indirect taxation, I am bound to put it on record at this point that, in the event of the new duties leading to any cessation of import of the commodities affected, and a consequent loss of revenue, it may become necessary at some future time, on budgetary grounds, to restore part, at least, of the tea duty which is now being remitted. However, that is a matter for the future.
